<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 10, 1994
REGISTRATION NO. 33-53343
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
EMPIRE GAS CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MISSOURI 5984 43-1494323
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
P.O. BOX 303
(1700 SOUTH JEFFERSON STREET)
LEBANON, MISSOURI 65536
(417) 532-3101
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
--------------------------
See table of additional registrants.
--------------------------
Paul S. Lindsey, Jr.
Chief Operating Officer
Empire Gas Corporation
P.O. Box 303
Lebanon, Missouri 65536
(417) 532-3101
(Name and address, including zip code, and telephone number, including area
code,
of agent for service)
--------------------------
COPIES TO:
<TABLE>
<S> <C>
Richard W. Cass, Esq. Joseph A. Coco, Esq.
Wilmer, Cutler & Pickering Skadden, Arps, Slate, Meagher & Flom
2445 M Street, N.W. 919 Third Avenue
Washington, D.C. 20037-1420 New York, New York 10022
(202) 663-6000 (212) 735-3000
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS POSSIBLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box: /X/
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING PRICE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT (2) FEE
<S> <C> <C> <C> <C>
Units (each unit consisting of $
principal amount of % Senior Secured
Notes due 2004 and Warrants to
purchase Common Stock)................... (1) (1) $100,000,000 $34,483
Guarantee of the % Senior Secured Notes
due 2004 by subsidiaries of the
Registrant (3)........................... (1) -- -- --
Common Stock, par value $.001 per share
(4)...................................... shares -- -- --
<FN>
(1) The amount to be registered and proposed maximum offering price of the
Senior Secured Notes will be calculated to result in a maximum aggregate
offering price to the public of $100,000,000.
(2) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457.
(3) The guarantors listed on the attached table will jointly and severally
issue full and unconditional guarantees of the payment of the Senior
Secured Notes. No separate consideration will be received for the
guarantees.
(4) Issuable upon exercise of the Warrants offered hereunder. An indeterminate
number of additional shares of Common Stock is registered hereunder, which
may be issued pursuant to the anti-dilution provisions of the Warrants. No
additional registration fee is included for such shares.
</TABLE>
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
ADDRESS,
INCLUDING ZIP
CODE AND
PRIMARY TELEPHONE NUMBER,
STANDARD INCLUDING AREA
STATE OR OTHER INDUSTRIAL I.R.S. EMPLOYER CODE, OF
JURISDICTION OF CLASSIFICATION IDENTIFICATION PRINCIPAL
NAME INCORPORATION CODE NUMBER NUMBER EXECUTIVE OFFICES
- --------------------------------------------------- ----------------- --------------- ---------------- -----------------
<S> <C> <C> <C> <C>
EMPIRE TANK LEASING CORPORATION.................... DELAWARE 5984 43-0909092 (1)
EMPIREGAS EQUIPMENT CORPORATION.................... CALIFORNIA 5984 43-0966160 (1)
EMPIRE UNDERGROUND STORAGE, INC.................... KANSAS 5984 43-1034230 (1)
EMPIRE INDUSTRIAL SALES OKLAHOMA
CORPORATION....................................... 5984 43-0898527 (1)
UTILITY COLLECTION CORPORATION..................... DELAWARE 5984 43-0796108 (1)
EMPIREGAS TRANSPORTS, INC. (MISSOURI).............. DELAWARE 5984 43-0794408 (1)
EMPIRE AVIATION CORPORATION........................ DELAWARE 5984 43-1405593 (1)
EMPIREGAS TRANSPORTS, INC. -- OR................... OREGON 5984 43-1623931 (1)
EMPIREGAS INC. OF CLINTON (MISSOURI)............... DELAWARE 5984 43-1222571 (1)
EMPIREGAS INC. OF KANSAS CITY...................... DELAWARE 5984 43-0815037 (1)
EMPIREGAS INC. OF ALBANY........................... OREGON 5984 43-1526762 (1)
EMPIREGAS INC. OF AIKEN............................ SOUTH CAROLINA 5984 43-1113382 (1)
EMPIREGAS OF ARMA, INC............................. KANSAS 5984 43-0797739 (1)
EMPIREGAS INC. OF ARNAULDVILLE..................... LOUISIANA 5984 43-0969880 (1)
EMPIREGAS INC. OF AUBURN........................... WASHINGTON 5984 43-1547484 (1)
EMPIREGAS INC. OF BIG RAPIDS....................... MICHIGAN 5984 43-0991732 (1)
EMPIREGAS INC. OF BOLIVAR.......................... DELAWARE 5984 43-0794420 (1)
EMPIREGAS INC. OF BOISE............................ IDAHO 5984 82-0456341 (1)
EMPIREGAS INC. OF BOULDER.......................... COLORADO 5984 43-0910833 (1)
EMPIREGAS INC. OF BOWLING GREEN.................... DELAWARE 5984 43-0813526 (1)
EMPIREGAS INC. OF BRANDON.......................... IOWA 5984 43-0961168 (1)
EMPIREGAS INC. OF BREMERTON........................ WASHINGTON 5984 43-1655742 (1)
EMPIREGAS OF BRISTOW, INC.......................... OKLAHOMA 5984 43-0864361 (1)
EMPIREGAS INC. OF BUFFALO.......................... DELAWARE 5984 43-0896236 (1)
EMPIREGAS INC. OF ADRIAN........................... DELAWARE 5984 43-0914797 (1)
EMPIREGAS INC. OF CAMDENTON........................ DELAWARE 5984 43-0897842 (1)
EMPIREGAS INC. OF CANON CITY....................... COLORADO 5984 43-0911108 (1)
EMPIREGAS INC. OF CANTON........................... TEXAS 5984 43-1124489 (1)
EMPIREGAS INC. OF CARTHAGE......................... DELAWARE 5984 43-1024249 (1)
EMPIREGAS INC. OF CASTLE ROCK...................... COLORADO 5984 43-0961711 (1)
EMPIREGAS INC. OF CENTERVILLE...................... IOWA 5984 43-0831405 (1)
EMPIREGAS INC. OF CHARLOTTE........................ MICHIGAN 5984 43-0991735 (1)
EMPIREGAS INC. OF CHASSEL.......................... MICHIGAN 5984 43-0994501 (1)
EMPIREGAS INC. OF CHEHALIS......................... WASHINGTON 5984 43-1521611 (1)
EMPIREGAS INC. OF CLINTON, ILLINOIS................ DELAWARE 5984 43-0813524 (1)
EMPIREGAS OF COLCORD, INC.......................... OKLAHOMA 5984 43-0893108 (1)
EMPIREGAS INC. OF COLE CAMP........................ DELAWARE 5984 43-1519473 (1)
EMPIREGAS INC. OF COLEMAN.......................... MICHIGAN 5984 43-0991731 (1)
EMPIREGAS INC. OF COLORADO SPRINGS................. COLORADO 5984 43-0914812 (1)
EMPIREGAS INC. OF COQUILLE......................... OREGON 5984 43-0961770 (1)
EMPIREGAS INC. OF CUBA............................. DELAWARE 5984 43-0810587 (1)
EMPIREGAS INC. OF CHETEK........................... WISCONSIN 5984 43-0957058 (1)
EMPIREGAS INC. OF DENVER........................... COLORADO 5984 43-0910829 (1)
EMPIREGAS INC. OF DOVER............................ DELAWARE 5984 43-0908483 (1)
EMPIREGAS INC. OF DURAND........................... MICHIGAN 5984 43-0998704 (1)
EMPIREGAS INC. OF EL DORADO SPRINGS................ DELAWARE 5984 43-1180992 (1)
EMPIREGAS INC. OF ELSBERRY......................... DELAWARE 5984 43-0911111 (1)
EMPIREGAS INC. OF ELSINORE......................... CALIFORNIA 5984 43-0962196 (1)
EMPIREGAS INC. OF ESCONDIDO........................ CALIFORNIA 5984 43-0962188 (1)
EMPIREGAS INC. OF EUNICE........................... DELAWARE 5984 43-1175673 (1)
EMPIREGAS INC. OF EVERGREEN........................ COLORADO 5984 43-0914820 (1)
SALGAS INC. OF FAIRPLAY............................ COLORADO 5984 43-0911113 (1)
EMPIREGAS INC. OF EAU CLAIRE....................... WISCONSIN 5984 43-0957057 (1)
EMPIREGAS INC. OF FORT COLLINS..................... COLORADO 5984 43-0910828 (1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ADDRESS,
INCLUDING ZIP
CODE AND
PRIMARY TELEPHONE NUMBER,
STANDARD INCLUDING AREA
STATE OR OTHER INDUSTRIAL I.R.S. EMPLOYER CODE, OF
JURISDICTION OF CLASSIFICATION IDENTIFICATION PRINCIPAL
NAME INCORPORATION CODE NUMBER NUMBER EXECUTIVE OFFICES
- ------------------------------------------------ ----------------- --------------- ---------------- -----------------
<S> <C> <C> <C> <C>
EMPIREGAS INC. OF FOWLER........................ COLORADO 5984 43-0911116 (1)
EMPIREGAS INC. OF MID-MISSOURI.................. DELAWARE 5984 43-0831431 (1)
EMPIREGAS INC. OF GALVESTON..................... TEXAS 5984 43-0968240 (1)
EMPIREGAS INC. OF GALVA......................... DELAWARE 5984 43-1078190 (1)
EMPIREGAS INC. OF GAYLORD....................... MICHIGAN 5984 43-1617313 (1)
EMPIREGAS INC. OF GLOBE......................... ARIZONA 5984 43-1080630 (1)
EMPIREGAS INC. OF GOOSE CREEK................... SOUTH CAROLINA 5984 43-1116503 (1)
EMPIREGAS INC. OF GREELEY....................... COLORADO 5984 74-1622653 (1)
EMPIREGAS INC. OF GRAND JUNCTION................ COLORADO 5984 43-0961675 (1)
EMPIREGAS OF GROVE, INC......................... OKLAHOMA 5984 43-0815874 (1)
EMPIREGAS INC. OF HERMISTON..................... OREGON 5984 43-1559568 (1)
EMPIREGAS INC. OF HERMITAGE..................... DELAWARE 5984 43-0897840 (1)
EMPIREGAS INC. OF HIAWASSEE..................... DELAWARE 5984 96-3748077 (1)
EMPIREGAS INC. OF HIGGINSVILLE.................. MISSOURI 5984 43-1648250 (1)
EMPIREGAS OF HITICHITA, INC..................... OKLAHOMA 5984 43-0887746 (1)
EMPIREGAS INC. OF HOOPESTON..................... DELAWARE 5984 43-0976128 (1)
EMPIREGAS INC. OF HORNICK....................... IOWA 5984 43-0961106 (1)
EMPIREGAS INC. OF HUMANSVILLE................... DELAWARE 5984 43-0797681 (1)
EMPIREGAS INC. OF JACKSONVILLE.................. DELAWARE 5984 43-0976132 (1)
EMPIREGAS INC. OF JACKSON, MI................... MICHIGAN 5984 36-3657583 (1)
EMPIREGAS INC. OF KALAMAZOO..................... MICHIGAN 5984 43-1438800 (1)
EMPIREGAS INC. OF KIRKSVILLE.................... DELAWARE 5984 43-0810527 (1)
EMPIREGAS INC. OF LAFAYETTE..................... LOUISIANA 5984 43-0914806 (1)
EMPIREGAS INC. OF LAKE CHARLES.................. LOUISIANA 5984 43-0914807 (1)
EMPIREGAS INC. OF LAKE PROVIDENCE............... LOUISIANA 5984 43-0914808 (1)
EMPIREGAS INC. OF LAURIE........................ DELAWARE 5984 43-1073506 (1)
EMPIREGAS OF LE SUEUR, INC...................... MINNESOTA 5984 43-0992082 (1)
EMPIREGAS INC. OF LINCOLN....................... ARKANSAS 5984 43-0820385 (1)
EMPIREGAS INC. OF LONGMONT...................... COLORADO 5984 43-0910827 (1)
EMPIREGAS INC. OF LOS ANGELES................... CALIFORNIA 5984 43-0962195 (1)
EMPIREGAS INC. OF LOVELAND...................... COLORADO 5984 43-0914809 (1)
EMPIREGAS INC. OF MARQUETTE..................... MICHIGAN 5984 43-0971920 (1)
EMPIREGAS INC. OF MARSHALL...................... MISSOURI 5984 43-0813522 (1)
EMPIREGAS INC. OF MEDFORD....................... OREGON 5984 43-1559569 (1)
EMPIREGAS INC. OF MENOMONIE..................... WISCONSIN 5984 39-1135410 (1)
EMPIREGAS INC. OF MERILLAN...................... WISCONSIN 5984 43-0957846 (1)
EMPIREGAS INC. OF MILLER........................ DELAWARE 5984 43-0796054 (1)
EMPIREGAS INC. OF MODESTO....................... CALIFORNIA 5984 43-0962187 (1)
EMPIREGAS INC. OF MONTE VISTA................... COLORADO 5984 43-0971965 (1)
EMPIREGAS INC. OF MOUNT VERNON.................. OHIO 5984 43-1078168 (1)
EMPIREGAS INC. OF MUNISING...................... MICHIGAN 5984 43-0971911 (1)
EMPIREGAS INC. OF MURPHY........................ NORTH CAROLINA 5984 43-1584673 (1)
THRIF-T-GAS INC. OF BLACKWATER.................. DELAWARE 5984 43-0914888 (1)
EMPIREGAS INC. OF NORTH BEND.................... OREGON 5984 43-0961772 (1)
EMPIREGAS INC. OF NORTH MYRTLE BEACH, INC....... OKLAHOMA 5984 43-0815797 (1)
EMPIREGAS INC. OF OAK GROVE..................... LOUISIANA 5984 43-0914896 (1)
EMPIREGAS INC. OF ONAWA......................... IOWA 5984 43-0961040 (1)
EMPIREGAS INC. OF ORANGEBURG.................... SOUTH CAROLINA 5984 43-1107825 (1)
EMPIREGAS INC. OF OWENSVILLE.................... DELAWARE 5984 43-0911121 (1)
EMPIREGAS INC. OF SANTA PAULA................... CALIFORNIA 5984 43-0962185 (1)
EMPIREGAS INC. OF PADUCAH....................... TEXAS 5984 43-1208276 (1)
EMPIREGAS INC. OF PALMYRA....................... DELAWARE 5984 43-0890013 (1)
EMPIREGAS INC. OF PLACERVILLE................... CALIFORNIA 5984 43-0962190 (1)
EMPIREGAS INC. OF POMONA........................ CALIFORNIA 5984 43-0962191 (1)
EMPIREGAS INC. OF POTOSI........................ DELAWARE 5984 43-0898220 (1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ADDRESS,
INCLUDING ZIP
CODE AND
PRIMARY TELEPHONE NUMBER,
STANDARD INCLUDING AREA
STATE OR OTHER INDUSTRIAL I.R.S. EMPLOYER CODE, OF
JURISDICTION OF CLASSIFICATION IDENTIFICATION PRINCIPAL
NAME INCORPORATION CODE NUMBER NUMBER EXECUTIVE OFFICES
- ------------------------------------------------ ----------------- --------------- ---------------- -----------------
<S> <C> <C> <C> <C>
EMPIREGAS INC. OF PUEBLO........................ COLORADO 5984 43-0914833 (1)
EMPIREGAS INC. OF REEDSPORT..................... OREGON 5984 43-0961774 (1)
EMPIREGAS INC. OF RICHLAND...................... DELAWARE 5984 43-0897850 (1)
EMPIREGAS INC. OF ROLLA......................... DELAWARE 5984 43-0911115 (1)
EMPIREGAS INC. OF SACRAMENTO.................... CALIFORNIA 5984 43-0962193 (1)
EMPIREGAS INC. OF SANDY......................... DELAWARE 5984 43-0964734 (1)
EMPIREGAS INC. OF SHELL LAKE.................... WISCONSIN 5984 43-0957054 (1)
EMPIREGAS INC. OF SILOAM SPRINGS................ ARKANSAS 5984 43-0820384 (1)
EMPIREGAS OF STIGLER, INC....................... OKLAHOMA 5984 43-0836428 (1)
EMPIREGAS INC. OF SUSANVILLE.................... CALIFORNIA 5984 43-1618791 (1)
EMPIREGAS INC. OF SUNNYSIDE..................... WASHINGTON 5984 43-0961777 (1)
EMPIREGAS INC. OF ROCKY MOUNT................... NORTH CAROLINA 5984 43-0985116 (1)
EMPIREGAS INC. OF THE DALLES.................... OREGON 5984 43-1559567 (1)
EMPIREGAS INC. OF TIPTON (IOWA)................. IOWA 5984 43-0961124 (1)
EMPIREGAS INC. OF TRAVERSE CITY................. MICHIGAN 5984 43-1616711 (1)
EMPIREGAS INC. OF VANDALIA...................... DELAWARE 5984 43-1025019 (1)
EMPIREGAS INC. OF VASSAR........................ MICHIGAN 5984 43-0991734 (1)
EMPIREGAS INC. OF VINITA, INC................... OKLAHOMA 5984 43-0865345 (1)
EMPIREGAS INC. OF WARREN........................ ARKANSAS 5984 43-1062386 (1)
EMPIREGAS INC. OF WARSAW (MISSOURI)............. DELAWARE 5984 43-0897849 (1)
EMPIREGAS INC. OF WASHINGTON.................... NORTH CAROLINA 5984 43-0976108 (1)
EMPIREGAS INC. OF WAUKON........................ IOWA 5984 43-0961125 (1)
EMPIREGAS INC. OF WAYNESVILLE................... DELAWARE 5984 43-0914835 (1)
EMPIREGAS INC. OF WAYNESVILLE, NC............... NORTH CAROLINA 5984 43-1136713 (1)
EMPIREGAS INC. OF WENATCHEE..................... WASHINGTON 5984 43-0961776 (1)
EMPIREGAS INC. OF WENTZVILLE.................... DELAWARE 5984 43-0828895 (1)
EMPIREGAS OF WESTVILLE, INC..................... OKLAHOMA 5984 43-0820386 (1)
EMPIREGAS INC. OF WILLS POINT................... TEXAS 5984 43-1124487 (1)
EMPIREGAS INC. OF WILMINGTON.................... NORTH CAROLINA 5984 43-0986459 (1)
EMPIREGAS INC. OF WILSON........................ NORTH CAROLINA 5984 43-1009657 (1)
EMPIREGAS INC. OF WOODLAND PARK................. COLORADO 5984 43-0910830 (1)
EMPIREGAS INC. OF YAKIMA........................ WASHINGTON 5984 43-0961778 (1)
EMPIREGAS INC. OF YUCCA VALLEY.................. CALIFORNIA 5984 43-0962194 (1)
EMPIREGAS INC. OF ZEBULON....................... NORTH CAROLINA 5984 43-1009658 (1)
EMPIREGAS INC. OF COLUMBIANA.................... OHIO 5984 43-1208278 (1)
EMPIREGAS OF ZUMBRO FALLS, INC.................. MINNESOTA 5984 43-0989945 (1)
GINCO GAS COMPANY, INC.......................... COLORADO 5984 36-3943352 (1)
EMPIREGAS INC. OF ORANGE COUNTY................. TEXAS 5984 43-1118050 (1)
EMPIREGAS INC. OF MORGAN COUNTY................. DELAWARE 5984 43-1183774 (1)
EMPIREGAS INC. OF LAKE OZARK.................... DELAWARE 5984 43-0900202 (1)
EMPIREGAS INC. OF WACO.......................... TEXAS 5984 43-1113582 (1)
EMPIREGAS INC. OF PARIS, TX..................... TEXAS 5984 43-1117378 (1)
EMPIREGAS INC. OF DALLAS, TX.................... TEXAS 5984 43-1050035 (1)
EMPIREGAS INC. OF KEMP.......................... TEXAS 5984 43-1107542 (1)
EMPIREGAS INC. OF SAN ANTONIO................... TEXAS 5984 43-1118053 (1)
THRIFT-T-GAS CO., INC........................... DELAWARE 5984 43-1030760 (1)
EMPIREGAS INC. OF PARIS, MO..................... DELAWARE 5984 43-0830813 (1)
SALIDA GAS CO., INC............................. DELAWARE 5984 43-1078187 (1)
SALGAS INC. OF GUNNISON......................... COLORADO 5984 43-0815009 (1)
EMPIREGAS INC. OF TOLEDO........................ OHIO 5984 APPLIED FOR (1)
EMPIREGAS INC. OF WILKESBORO.................... NORTH CAROLINA 5984 APPLIED FOR (1)
EMPIREGAS INC. OF HENDERSVILLE.................. NORTH CAROLINA 5984 APPLIED FOR (1)
EMPIREGAS INC. OF NORTH CAROLINA................ NORTH CAROLINA 5984 APPLIED FOR (1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ADDRESS,
INCLUDING ZIP
CODE AND
PRIMARY TELEPHONE NUMBER,
STANDARD INCLUDING AREA
STATE OR OTHER INDUSTRIAL I.R.S. EMPLOYER CODE, OF
JURISDICTION OF CLASSIFICATION IDENTIFICATION PRINCIPAL
NAME INCORPORATION CODE NUMBER NUMBER EXECUTIVE OFFICES
- ------------------------------------------------ ----------------- --------------- ---------------- -----------------
<S> <C> <C> <C> <C>
EMPIREGAS INC. OF CARTHAGE...................... NORTH CAROLINA 5984 APPLIED FOR (1)
EMPIREGAS INC. OF APEX.......................... NORTH CAROLINA 5984 APPLIED FOR (1)
EMPIREGAS INC. OF DURHAM........................ NORTH CAROLINA 5984 APPLIED FOR (1)
EMPIREGAS INC. OF WARRENTON..................... NORTH CAROLINA 5984 APPLIED FOR (1)
<FN>
- ------------
(1) P.O. BOX 303 (1700 SOUTH JEFFERSON STREET), LEBANON, MISSOURI 65536, (417)
532-3101.
</TABLE>
<PAGE>
EMPIRE GAS CORPORATION
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM AND HEADING PROSPECTUS CAPTION
- ------------------------------------------------------------- --------------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus................... Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Page of
Prospectus....................................... Inside Front and Outside Back Cover Pages of Prospectus;
Available Information
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................ Prospectus Summary; Risk Factors; Selected Consolidated
Financial and Other Data for the Company Prior to the
Transaction; Pro Forma Consolidated Financial and Other
Data; Selected Consolidated Financial and Other Data
4. Use of Proceeds................................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price................... Not Applicable
6. Dilution.......................................... Not Applicable
7. Selling Security Holders.......................... Not Applicable
8. Plan of Distribution.............................. Outside Front Cover Page of Prospectus; The Underwriter
9. Description of Securities to be Registered........ Outside Front Cover Page of Prospectus; Description of
the Units; Description of Senior Secured Notes;
Description of the Warrants; Description of Capital
Stock
10. Interests of Named Experts and Counsel............ Legal Matters; Experts
11. Information with Respect to the Registrant........ Outside and Inside Front Cover Page of Prospectus;
Prospectus Summary; Risk Factors; The Transaction;
Capitalization; Selected Consolidated Financial and
Other Data for the Company Prior to the Transaction;
Pro Forma Consolidated Financial and Other Data;
Selected Consolidated Financial and Other Data;
Management's Discussion and Analysis of Financial
Condition and Results of Operations; Business;
Management; Certain Relationships and Related
Transactions; Description of the Units; Description of
Senior Secured Notes; Description of the Warrants;
Description of Capital Stock; Description of Other
Indebtedness; Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities... Not Applicable
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED JUNE 10, 1994
EMPIRE GAS CORPORATION
$ REPRESENTING UNITS,
EACH UNIT CONSISTING OF % SENIOR SECURED NOTES DUE 2004
AND WARRANTS TO PURCHASE COMMON STOCK
-----------------
INTEREST PAYABLE AND
-------------------
CASH INTEREST ON THE SENIOR SECURED NOTES WILL BE PAYABLE AT THE RATE OF %
PER ANNUM OF THEIR PRINCIPAL AMOUNT AT MATURITY THROUGH AND
INCLUDING , 1999, AND AFTER SUCH DATE WILL BE PAYABLE AT THE
RATE OF % PER ANNUM OF THEIR PRINCIPAL AMOUNT AT MATURITY. THE
SENIOR SECURED NOTES WILL BE ISSUED AT A SUBSTANTIAL DISCOUNT FROM
THEIR PRINCIPAL AMOUNT AT MATURITY. SEE "CERTAIN FEDERAL INCOME
TAX CONSIDERATIONS." THE PRICE TO PUBLIC OF THE SENIOR SECURED
NOTES SHOWN BELOW REPRESENTS A YIELD TO MATURITY OF
% PER ANNUM, COMPUTED ON THE BASIS OF SEMIANNUAL
COMPOUNDING.
------------------------
THE SENIOR SECURED NOTES WILL BE REDEEMABLE AT THE OPTION OF THE COMPANY, IN
WHOLE OR IN PART, AT ANY TIME ON OR AFTER , 1999, INITIALLY AT %
OF THEIR ACCRETED VALUE, PLUS ACCRUED INTEREST, DECLINING TO 100% OF THEIR
ACCRETED VALUE PLUS ACCRUED INTEREST, ON OR AFTER , 2001. IN
ADDITION, UP TO $ MILLION AGGREGATE PRINCIPAL AMOUNT AT MATURITY (35%)
OF THE SENIOR SECURED NOTES WILL BE REDEEMABLE, IN WHOLE OR IN PART, AT
THE OPTION OF THE COMPANY, FROM THE PROCEEDS OF ONE OR MORE PUBLIC
EQUITY OFFERINGS (AS DEFINED HEREIN) FOLLOWING WHICH THERE IS A
PUBLIC MARKET (AS DEFINED HEREIN), AT THE REDEMPTION PRICES SET
FORTH HEREIN, PLUS ACCRUED INTEREST.
------------------------
EACH WARRANT ENTITLES THE HOLDER THEREOF TO PURCHASE ONE SHARE OF THE COMPANY'S
COMMON STOCK AT A PRICE OF $7.00 PER SHARE, SUBJECT TO ADJUSTMENT. THE
WARRANTS OFFERED HEREBY ENTITLE THE HOLDERS THEREOF TO PURCHASE, IN
THE AGGREGATE, APPROXIMATELY 10% OF THE COMPANY'S OUTSTANDING
COMMON STOCK (AFTER GIVING EFFECT TO THE EXERCISE OF THE
WARRANTS). THE WARRANTS WILL BE EXERCISABLE ON OR
AFTER , 1994 AND EXPIRE ON ,
2004.
------------------------
THE SENIOR SECURED NOTES WILL BE SENIOR OBLIGATIONS OF THE COMPANY SECURED
BY A PLEDGE OF ALL OF THE CAPITAL
STOCK OF THE COMPANY'S PRESENT AND FUTURE SUBSIDIARIES. THE SENIOR SECURED NOTES
WILL RANK PARI PASSU WITH ALL EXISTING AND FUTURE SENIOR INDEBTEDNESS OF THE
COMPANY. THE SENIOR SECURED NOTES WILL BE GUARANTEED BY ALL WHOLLY-OWNED
SUBSIDIARIES OF THE COMPANY, WHICH CARRY ON THE RETAIL BUSINESS OF THE COMPANY
(COLLECTIVELY, THE "SUBSIDIARY GUARANTORS"). ON A PRO FORMA BASIS, AS OF MARCH
31, 1994, AFTER GIVING EFFECT TO THE TRANSACTION (AS DEFINED HEREIN), THE
OFFERING AND THE APPLICATION OF THE NET PROCEEDS THEREFROM, THE COMPANY WOULD
HAVE HAD NO SENIOR INDEBTEDNESS OUTSTANDING, EXCLUDING THE SENIOR SECURED NOTES.
THE COMPANY IS A HOLDING COMPANY, AND ACCORDINGLY, THE SENIOR SECURED NOTES WILL
BE EFFECTIVELY SUBORDINATED TO ALL EXISTING AND FUTURE LIABILITIES OF THE
COMPANY'S SUBSIDIARIES (EXCEPT TO THE EXTENT THAT THE GUARANTEES REPRESENT
DIRECT CLAIMS AGAINST SUCH SUBSIDIARIES). ON A PRO FORMA BASIS, AS OF MARCH 31,
1994, AFTER GIVING EFFECT TO THE TRANSACTION, THE OFFERING AND THE APPLICATION
OF THE NET PROCEEDS THEREFROM, THE COMPANY'S SUBSIDIARIES WOULD HAVE HAD
APPROXIMATELY $530,000 OF OUTSTANDING LIABILITIES (EXCLUDING GUARANTEES),
INCLUDING TRADE PAYABLES AND ACCRUED EXPENSES AND TAXES PAYABLE.
-------------------
SEE "RISK FACTORS" FOR INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-------------------
PRICE $ A UNIT AND ACCRUED INTEREST
-----------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC (1) COMMISSIONS (2) COMPANY (1)(3)
----------------------- ----------------------- -----------------------
<S> <C> <C> <C>
PER UNIT.................................... % % %
TOTAL....................................... $ $ $
<FN>
- ---------
(1) PLUS ACCRUED INTEREST ON THE SENIOR SECURED NOTES FROM ,
1994.
(2) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITER AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. SEE "THE UNDERWRITER."
(3) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT
$ .
</TABLE>
THE UNITS ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF ACCEPTED BY
THE UNDERWRITER AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS BY SKADDEN,
ARPS, SLATE, MEAGHER & FLOM, COUNSEL FOR THE UNDERWRITER. IT IS EXPECTED THAT
THE DELIVERY OF THE UNITS WILL BE MADE ON OR ABOUT , 1994, AT THE
OFFICE OF MORGAN STANLEY & CO. INCORPORATED, NEW YORK, NEW YORK, AGAINST PAYMENT
THEREFOR IN NEW YORK FUNDS.
-------------------
MORGAN STANLEY & CO.
INCORPORATED
JUNE , 1994
<PAGE>
[GRAPHIC]
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE UNITS OFFERED
HEREBY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
UNTIL , 1994 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary......................................................................................... 4
Risk Factors............................................................................................... 10
The Transaction............................................................................................ 16
Use of Proceeds............................................................................................ 17
Capitalization............................................................................................. 18
Selected Consolidated Financial and Other Data For the Company Prior to the Transaction.................... 19
Pro Forma Consolidated Financial and Other Data............................................................ 21
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 29
Business................................................................................................... 37
Management................................................................................................. 44
Principal Shareholders..................................................................................... 50
Certain Relationships and Related Transactions............................................................. 51
Description of the Units................................................................................... 54
Description of the Senior Secured Notes.................................................................... 57
Description of the Warrants................................................................................ 84
Description of Capital Stock............................................................................... 87
Certain Federal Income Tax Considerations.................................................................. 88
Description of Other Indebtedness.......................................................................... 92
The Underwriter............................................................................................ 93
Legal Matters.............................................................................................. 94
Experts.................................................................................................... 94
Available Information...................................................................................... 94
Index to Financial Statements.............................................................................. F-1
</TABLE>
-------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SENIOR SECURED
NOTES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE CONSOLIDATED FINANCIAL STATEMENTS APPEARING ELSEWHERE IN
THIS PROSPECTUS. AS USED HEREIN, UNLESS THE CONTEXT REQUIRES OTHERWISE, THE
TERMS "EMPIRE GAS" AND THE "COMPANY" REFER TO EMPIRE GAS CORPORATION AND ITS
SUBSIDIARIES ASSUMING CONSUMMATION OF THE TRANSACTION, WHICH WILL OCCUR
SIMULTANEOUSLY WITH THIS OFFERING. ALL REFERENCES IN THE PROSPECTUS TO FISCAL
YEARS ARE TO THE COMPANY'S FISCAL YEAR WHICH ENDS ON JUNE 30.
THE COMPANY
Empire Gas is one of the largest retail distributors of propane in the
United States and, through its subsidiaries, has been engaged in the retail
distribution of propane since 1963. During the fiscal year ended June 30, 1993,
without giving effect to the Transaction, Empire Gas supplied propane to
approximately 200,000 customers in 27 states from 284 retail service centers and
sold approximately 142.1 million gallons of propane, accounting for
approximately 91.4% of its operating revenue. The Company also sells related
gas-burning appliances and equipment and rents customer storage tanks.
The Company will implement a change in ownership and management
contemporaneously with this Offering by repurchasing shares of its common stock
from its controlling shareholder, Mr. Robert W. Plaster, and certain other
departing officers (the "Stock Purchase") in exchange for all of the shares of
common stock of a subsidiary that owns 133 retail service centers located
primarily in the Southeast. Mr. Paul S. Lindsey, Jr., who has been with the
Company for 26 years and currently serves as the Company's Chief Operating
Officer and Vice Chairman of the Board, will become the Company's controlling
shareholder, Chief Executive Officer, and President. The change in ownership and
management will enable the Company to pursue a growth strategy focused on
acquiring propane operating companies. Contemporaneously with the Offering, the
Company will acquire the assets of PSNC Propane Corporation, a company located
in North Carolina that has six retail service centers and five additional bulk
storage facilities with annual volume of approximately 9.5 million gallons (the
"Acquisition," and together with the Stock Purchase, the "Transaction"), for an
aggregate purchase price of approximately $14.0 million (which includes payment
for inventory and accounts receivable). The Company also recently completed the
acquisition of a retail propane company in Colorado with annual volume of
approximately 700,000 gallons, and has entered into a contract to purchase a
retail propane company in Missouri with annual volume of approximately 690,000
gallons.
Following the Transaction, Empire Gas' operations will consist of 158 retail
service centers with 22 additional bulk storage facilities. During the fiscal
year ended June 30, 1993, Empire Gas, after giving effect to the Transaction,
sold approximately 84.8 million gallons of propane (approximately 40% less than
prior to the Transaction) to approximately 112,000 customers in 20 states, which
(based on retail gallons sold) makes it one of the 11 largest retail
distributors of propane in the United States. The impact on the Company's
operations of weather fluctuations in a particular region will be reduced as a
result of the substantial geographic diversification of the Company after the
Transaction, with operations in the west, the southwest, Colorado, the upper
midwest, the Mississippi Valley and the southeast.
Propane, a hydrocarbon with properties similar to natural gas, is separated
from natural gas at gas processing plants and refined from crude oil at
refineries. It is stored and transported in a liquid state and vaporizes into a
clean-burning energy source that is used for a variety of residential,
commercial, and agricultural purposes. Residential and commercial uses include
heating, cooking, water heating, refrigeration, clothes drying, and
incineration. Commercial uses also include metal cutting, drying, container
pressurization, and charring, as well as use as a fuel for internal combustion
engines. As of December 31, 1991, the propane industry had grown, as measured by
the gallons of retail residential/commercial propane sold, at the rate of 3.7%
per annum since 1984.
The Company believes the highly fragmented retail propane market presents
substantial opportunities for growth through consolidation. As of December 31,
1991, there were approximately 8,000 propane retail marketing companies in the
continental United States with approximately 13,500 retail distribution points.
In addition, Empire Gas believes growth can be achieved by the conversion to
propane of homes that
4
<PAGE>
currently use either electricity or fuel oil products because of the price
advantage propane has over electricity and because propane is a cleaner source
of energy than fuel oil products. As of December 31, 1990, there were
approximately 23.7 million homes that used electricity for heating, water
heating, cooking and other household purposes, approximately 11.2 million homes
that used fuel oil products, and approximately 5.7 million homes that used
propane for such purposes.
Empire Gas focuses on propane distribution to retail customers, including
residential, commercial, and agricultural users, emphasizing, in particular,
sales to residential customers, a stable segment of the retail propane market
that traditionally has generated higher gross margins per gallon than other
retail segments. Sales to residential customers, giving effect to the
Transaction, accounted for approximately 65.5% of the Company's aggregate
propane sales revenue and 74.3% of its aggregate gross margin from propane sales
in fiscal year 1993.
Empire Gas attracts and retains its residential customers by supplying them
storage tanks, by offering them superior service and by strategically locating
visible and accessible retail service centers on or near major highways. Empire
Gas focuses its operations on sales to customers to which it also leases tanks,
as sales to this segment of the retail propane market tend to be more stable and
typically provide higher gross margins than sales to customers who own tanks.
After the Transaction, Empire Gas will own approximately 109,000 storage tanks
that it leases to approximately 96% of its customers. Empire Gas' residential
customer base is relatively stable, because (i) fire safety regulations and
state container laws restrict the filling of a leased tank solely to the propane
supplier that leases the tank, (ii) rental agreements for its tanks restrict the
customers from using any other supplier, and (iii) the cost and inconvenience of
switching tanks minimizes a customer's tendency to change suppliers.
Historically, the Company has retained 90% of all its customers from year to
year, with the average customer remaining with Empire Gas for approximately 10
years.
The change in ownership and management of the Company will enable it to
pursue a business strategy to increase its revenues and profitability through
(i) expansion by acquisitions and start-ups, (ii) expansion of its existing
residential customer base, and (iii) geographic rationalization and the
reduction of operating expenses. Empire Gas will seek opportunities to acquire
retail service centers in areas where it already has a strong presence and to
develop new retail service centers in new markets. Efforts to expand the
existing residential customer base will focus primarily on conversion of
customers currently using electricity for heating, conversion of customers
currently using fuel oil and wood due to environmental impact, and soliciting
customers created by the new home construction market in growth areas. Empire
Gas intends to dispose of a limited number of retail service centers that are
located in markets in which it does not have, and does not desire to develop, a
strong presence or that do not have the potential for long-term growth. Empire
Gas believes it will be able to reduce its operating expenses through a program
of consolidating a number of retail service centers where such consolidations
will yield operating efficiencies.
The Company's principal executive offices are located at 1700 South
Jefferson Street, Lebanon, Missouri 65536. The Company's telephone number is
(417) 532-3101.
THE OFFERING
THE UNITS
<TABLE>
<S> <C>
Securities Offered................ Units (the "Units") consisting of % Senior Secured
Notes due 2004 (the "Senior Secured Notes"), each
having an initial accreted value of $ , and
Warrants. Each Warrant entitles the holder thereof
to purchase one share of Common Stock , par value
$.001 per share, of the Company (the "Common Stock")
at an exercise price of $7.00 per share. See
"Description of the Units."
Separability...................... The Senior Secured Notes and the Warrants will become
separately transferrable on , 1994 (the
"Separation Date").
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
THE SENIOR SECURED NOTES
<S> <C>
Notes Offered..................... $ estimated aggregate principal amount
($100,000,000 initial accreted value) of % Senior
Secured Notes due 2004. See "Description of the Senior
Secured Notes."
Maturity Date..................... , 2004
Interest.......................... Cash interest on the Senior Secured Notes will be
payable at the rate of % per annum of their principal
amount at maturity through and including ,
1999, and after such date will be payable at the rate
of % per annum of their principal amount at
maturity. See "Original Issue Discount" below. In-
terest on the Senior Secured Notes is payable
semiannually on and ,
commencing , 1994. The price to the public
of the Senior Secured Notes represents a yield to
maturity of % per annum, computed on the basis of
semiannual compounding.
Optional Redemption............... The Senior Secured Notes will be redeemable at the
option of the Company, in whole or in part, on or after
, 1999 at the redemption prices set forth
herein, plus accrued interest. In addition, up to
$ million aggregate principal amount at maturity
(35%) of the Senior Secured Notes are redeemable, in
whole or in part, at the option of the Company, from
the proceeds of one or more Public Equity Offerings
following which there is a Public Market, at the
redemption prices set forth herein, plus accrued
interest.
Change of Control................. Upon a Change of Control (as defined herein), holders of
the Senior Secured Notes will have the right to require
the Company to purchase the Senior Secured Notes at a
purchase price of 101% of the accreted value thereof,
plus accrued and unpaid interest, if any, to the date
of purchase. The Company may not have sufficient funds
or the financing to satisfy its obligations to
repurchase the Senior Secured Notes and other debt
that may come due upon a Change of Control.
Security.......................... The Senior Secured Notes will be secured by a pledge of
all of the capital stock of the Company's present and
future subsidiaries, subject to certain exceptions.
Subsidiary Guarantees............. The Senior Secured Notes will be guaranteed (each a
"Subsidiary Guarantee") by all of the wholly owned
subsidiaries of the Company, which carry on the retail
business of the Company (collectively, the "Subsidiary
Guarantors"). The Subsidiary Guarantees will be senior
indebtedness of the respective Subsidiary Guarantors
and will rank PARI PASSU with the guarantees by the
Subsidiary Guarantors of other senior indebtedness,
including indebtedness under the New Credit Facility
(as hereinafter defined).
Ranking........................... The Senior Secured Notes will be senior obligations of
the Company and will rank PARI PASSU in right of payment
with the Company's existing and future senior
indebtedness. On a pro forma basis as of March 31,
1994, after giving effect to the application of the
net proceeds of the Offering and the Transaction, the
Company would have had no senior indebtedness
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
outstanding, excluding the Senior Secured Notes. In
addition, because the Company is a holding company,
the Senior Secured Notes will be effectively
subordinated to all existing and future liabilities of
the Company's subsidiaries (except to the extent the
Subsidiary Guarantees represent direct claims against
such subsidiaries). On a pro forma basis as of March
31, 1994, after giving effect to the application of
the net proceeds of the Offering and the Transaction,
the aggregate liabilities (excluding guarantees) of
the Company's subsidiaries would have been
approximately $530,000, including trade payables,
accrued expenses, and taxes payable.
Certain Covenants................. The Indenture governing the Senior Secured Notes (the
"Indenture") will contain covenants, including, but not
limited to, covenants with respect to the following
matters: (i) limitations on the incurrence of
additional indebtedness; (ii) limitations on
restricted payments; (iii) limitations on incurrence
of additional indebtedness by subsidiaries; (iv)
limitations on the sale and issuance of capital stock
by subsidiaries; (v) limitations on dividends and
other payments; (vi) limitations on transactions with
affiliates; (vii) limitations on liens; (viii)
limitations on mergers, consolidations, or asset
sales; and (ix) limitations on subsidiary investments.
Events of Default................. Events of default under the Senior Secured Notes
include: (i) non-payment of interest for 30 days; (ii)
non-payment of principal when due or failure to redeem
when required; (iii) default in performance of other
covenants or agreements for 30 days after written
notice to the Company; (iv) default on other
indebtedness of the Company or its subsidiaries having
a principal amount of $2,000,000 singly or $5,000,000
in the aggregate; (v) a final judgment or order for
the payment of money in the amount of $2,000,000
singly or $5,000,000 in the aggregate that is not
discharged or appealed within 30 days; (vi) certain
events of bankruptcy, insolvency and reorganization of
the Company; (vii) except as permitted by the Inden-
ture, the Trustee's failure to have a perfected
security interest in the Collateral; and (viii) except
as permitted by the Indenture and the Senior Secured
Notes, the cessation of effectiveness of any
Subsidiary Guarantee as against any Subsidiary
Guarantor.
Actions by Noteholders............ Holders of the Senior Secured Notes may not pursue any
remedy with respect to the Indenture (except actions for
payment of overdue principal or interest) unless: (i)
the Holder has given notice to the Trustee of a
continuing Event of Default: (ii) Holders of at least
25% in principal amount of the Senior Secured Notes
have made a written request to the Trustee to pursue
such remedy and offered the Trustee security or indem-
nity reasonably satisfactory to the Trustee; (iii) the
Trustee has not complied with such request within 60
days; and (iv) the Holders of a majority in principal
amount of the Senior Secured Notes have not given the
Trustee an inconsistent direction during such 60-day
period.
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Original Issue Discount........... The Senior Secured Notes are being issued with original
issue discount. For Federal income tax purposes, holders
of the Senior Secured Notes will be required to
include amounts in gross income in advance of receipt
of cash to which the income is attributable. See
"Certain Federal Income Tax Considerations."
Use of Proceeds................... The net proceeds to the Company from this Offering will
be used to repay certain indebtedness of the Company, to
complete the Acquisition, to repay certain amounts due
in connection with the Stock Purchase, and for general
corporate purposes.
Governing Law..................... State of New York.
<CAPTION>
THE WARRANTS
<S> <C>
Warrants Offered.................. Warrants to purchase Common Stock. The aggregate number
of shares of Common Stock issuable upon exercise of
the Warrants is equal to approximately 10% of the
outstanding shares of Common Stock on a fully diluted
basis, subject to certain exceptions. See "Description
of the Warrants."
Exercise Price.................... Each Warrant entitles the holder thereof to purchase one
share of Company Common Stock at the exercise price of
$7.00 per share, subject to adjustment.
Exercise.......................... The Warrants may be exercised at any time after
, 1994 and prior to , 2004.
Warrants that are not exercised by such date will
expire. A Warrant does not entitle the holder thereof
to receive any dividends paid on the Common Stock.
Repurchase Offer.................. Following the occurrence of a Repurchase Event, the
Company must offer to repurchase all of the outstanding
Warrants. A Repurchase Event will occur upon the
merger or consolidation of the Company with or into,
or the sale by the Company of all or substantially all
of its assets to, another person, if the consid-
eration for such transaction does not consist solely
of cash or if the transaction is entered into with
certain entities.
Repurchase Price.................. The repurchase of Warrants following a Repurchase Event
will be: (i) at the average of the closing sales prices
of the Common Stock for the 20 days prior to such
Repurchase Event if the Common Stock is registered
under the Securities Exchange Act of 1934, as amended;
or (ii) if the Common Stock is not so registered or
the value cannot be computed under clause (i), at the
value, as determined by an independent financial
expert, of the shares of Common Stock or other
securities issuable upon exercise of the Warrants less
the exercise price thereof.
</TABLE>
RISK FACTORS
An investment in the Units involves a high degree of risk. Each prospective
purchaser of the Units should consider carefully the specific factors set forth
under "Risk Factors," as well as the other information set forth in this
Prospectus, before purchasing the Units offered by this Prospectus.
8
<PAGE>
SUMMARY PRO FORMA FINANCIAL AND OTHER DATA
The following table presents selected summary pro forma financial and other
data of the subsidiaries that will be retained by the Company following the
consummation of the Stock Purchase and PSNC Propane Corporation (the "PSNC
Operations") for the year ended June 30, 1993, and for the nine and twelve
months ended March 31, 1994. The pro forma financial operating and other data
for the year ended June 30, 1993 and for the nine and twelve months ended March
31, 1994 give effect to the Offering and the Transaction, as if these
transactions had occurred on July 1, 1992. Due to the seasonal nature of the
Company's business, the majority of the Company's revenues are earned in its
second and third fiscal quarters. Accordingly, the results of operations for the
nine months ended March 31, 1994 are not indicative of the results of operations
to be expected for the full year. Data for the twelve months ended March 31,
1994 have been set forth to provide recent data covering a full year's
operations. The financial data set forth below should be read in conjunction
with the Company's consolidated financial statements and related notes,
"Selected Consolidated Financial and Other Data for the Company Prior to the
Transaction," "Pro Forma Financial and Other Data," and "Management's Discussion
and Analysis of Results of Operations and Financial Condition," all contained
elsewhere in this Prospectus. See "Selected Consolidated and Other Financial
Data for the Company Prior to the Transaction" for a presentation of the
Company's historical consolidated financial data.
<TABLE>
<CAPTION>
PRO FORMA FOR THE
TRANSACTION AND OFFERING(1)
----------------------------------------------------
YEAR ENDED
JUNE 30, NINE MONTHS ENDED TWELVE MONTHS ENDED
1993 MARCH 31, 1994 MARCH 31, 1994
---------- ----------------- -------------------
(IN THOUSANDS, EXCEPT RATIOS AND GROSS PROFIT
PER GALLON DATA)
<S> <C> <C> <C>
OPERATING DATA:
Operating revenue............................... $ 76,931 $ 64,997 $ 76,463
Gross profit (2)................................ 41,243 34,931 41,951
Operating expenses.............................. 23,825 18,617 24,304
Depreciation and amortization................... 6,722 4,980 6,332
Operating income................................ 10,696 11,334 11,315
Interest expense:
Cash interest................................. 10,167 7,375 9,808
Amortization of debt discount and expense..... 4,344 3,324 4,446
Total interest expense...................... 14,501 10,699 14,254
Net income (loss)............................... (2,733) 2 (2,410)
OTHER OPERATING DATA AND FINANCIAL RATIOS:
Capital expenditures:
Existing operations........................... 1,905 1,834 2,358
Start-up of new retail service centers........ 729 453 664
Acquisitions.................................. -- 444 444
---------- ------- -------
Total capital expenditures.................. 2,634 2,731 3,466
Cash from sale of retail service centers and
other assets................................... 145 228 948
EBITDA (3)...................................... 17,418 16,314 17,647
EBITDA (3) to interest expense.................. 1.20x 1.52x 1.24x
EBITDA (3) to cash interest..................... 1.71x 2.21x 1.80x
Retail gallons sold............................. 84,840 72,021 83,980
Weighted average gross profit per gallon........ .429 .435 .442
<FN>
- ------------
(1) For an explanation of adjustments to arrive at pro forma data, see
"Capitalization," and "Pro Forma Consolidated Financial and Other Data."
(2) Represents operating revenue less the cost of products sold.
(3) EBITDA consists of earnings before depreciation, amortization, interest,
income taxes, and other non-recurring expenses. EBITDA is presented here
because it is a widely accepted financial indicator of a highly leveraged
company's ability to service and/ or incur indebtedness. However, EBITDA
should not be construed as an alternative either (i) to operating income
(determined in accordance with generally accepted accounting principles) or
(ii) to cash flows from operating activities (determined in accordance with
generally accepted accounting principles).
</TABLE>
9
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, PROSPECTIVE
PURCHASERS OF THE UNITS SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS IN
EVALUATING AN INVESTMENT IN THE UNITS.
HIGH LEVERAGE AND ABILITY TO SERVICE DEBT
As of March 31, 1994, on a pro forma basis after giving effect to the
application of the proceeds of this Offering as set forth in "Use of Proceeds,"
and the Transaction, the Company would have had approximately $107.2 million
aggregate outstanding principal amount (in the case of the Senior Secured Notes,
such amount being the accreted value) of indebtedness on a consolidated basis,
and a stockholders' deficit of approximately $27.8 million. See
"Capitalization."
On a pro forma basis, after giving effect to the application of the proceeds
of this Offering and the Transaction, earnings would have been inadequate to
cover fixed charges by $4.4 million for fiscal year 1993 and by $4.4 million for
the twelve months ended March 31, 1994, resulting in the reporting of losses of
$2.7 million and $2.4 million, respectively, for these periods. See
"Capitalization"; "Selected Consolidated Financial and Other Data for the
Company Prior to the Transaction;" and "Pro Forma Consolidated Financial and
Other Data." The Company expects earnings to be inadequate to cover fixed
charges for fiscal year 1994, resulting in the reporting of a loss for that
period.
The Company's high degree of leverage will make it vulnerable to adverse
changes in the weather and may limit its ability to respond to market
conditions, to capitalize on business opportunities, and to meet its contractual
and financial obligations. Fluctuations in interest rates will affect the
Company's financial condition inasmuch as the credit facility the Company will
enter into simultaneously with this Offering (the "New Credit Facility") will
bear interest at a floating rate.
The Company will be required to use a significant portion of its cash flow
from operations to meet its debt service obligations, which through fiscal year
1997 are expected to consist primarily of interest, including interest on the
Senior Secured Notes. On a pro forma basis, after giving effect to the Offering
and the Transaction, debt service obligations (which consist of interest expense
and mortgage principal payments) would have been $10.4 million for the fiscal
year ended June 30, 1993 and $7.5 million for the nine months ended March 31,
1994, and earnings before interest, taxes, depreciation and amortization
(EBITDA) would have been $17.4 million and $16.3 million, respectively. The
ability of the Company to meet its debt service obligations, including the
increase in the cash interest rate on the Senior Secured Notes to % in
fiscal year 1999, and to reduce its total debt, will be dependent upon the
future performance of the Company and its subsidiaries, which, in turn, will be
subject to general economic conditions and to financial, business, weather, and
other factors, including factors beyond the Company's control. The Company
believes that, based on current levels of operations and assuming winter weather
with heating degree days that are not substantially abnormal compared to the
historical average, it will be able to fund these debt service obligations from
funds generated from operations, proceeds of the sales of service centers
pursuant to the Company's consolidation strategy and, if necessary, funds
available under the New Credit Facility. If the Company and its subsidiaries are
unable to comply with the terms of their debt agreements and fail to generate
sufficient cash flow from operations in the future, they may be required to
refinance all or a portion of their existing debt or to obtain additional
financing. There can be no assurance that any such refinancing would be possible
or that any additional financing could be obtained, particularly in view of the
Company's anticipated high levels of debt, the fact that a significant portion
of the Company's consolidated current assets will be given as collateral to
secure indebtedness under the New Credit Facility and all of the capital stock
of the Company's present and future subsidiaries will be pledged to secure the
Senior Secured Notes, and the debt incurrence restrictions under existing debt
agreements. If no such refinancing or additional financing were available, the
Company could be forced to default on its respective debt obligations and, as an
ultimate remedy, seek protection under the federal bankruptcy laws.
RESTRICTIONS IN FINANCING AGREEMENTS
The Indenture contains provisions that will limit, among other things, (a)
the ability of the Company and its subsidiaries to incur additional
indebtedness, (b) certain restricted payments and investments, (c) the
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<PAGE>
sale and issuance of capital stock by subsidiaries, (d) dividend and other
payments, (e) transactions with affiliates, (f) the creation of liens, (g) the
types of mergers, consolidations, or asset sales in which the Company may
participate, and (h) subsidiary investments. The Indenture also contains
provisions which require the Company, in the event of a Change in Control, to
make an offer to purchase the Senior Secured Notes. A Change in Control is
defined in the Indenture to include: (i) the acquisition of over 30% of the
voting shares of the Company in certain circumstances; (ii) certain changes in
the Board of Directors of the Company; (iii) a sale of all or substantially all
of the assets of the Company; (iv) a reduction in the percentage of voting
shares of the Company held by certain members of management below 50%; or (v)
the failure of the Board of Directors to have at least two independent members,
to have an audit committee consisting solely of independent members or to have
fewer than eight members. See "Description of the Senior Secured Notes --
Certain Definitions (Change of Control)." There can be no assurance that the
Company will have the financial resources necessary to purchase the Senior
Secured Notes upon a Change in Control. See "Description of the Senior Secured
Notes -- Covenants."
The New Credit Facility will contain provisions similar to the provisions in
the Indenture, as well as certain financial maintenance tests. Any failure of
the Company to comply with these or other covenants contained in these
agreements could result in a default thereunder, which, in turn, could cause
such indebtedness (and by reason of cross-default provisions, the Senior Secured
Notes) to be declared immediately due and payable. The ability of the Company to
comply with these provisions may be affected by events beyond its control. See
"Description of Other Indebtedness -- New Credit Facility."
EFFECTIVE RANKING OF SENIOR SECURED NOTES
The Senior Secured Notes will be senior secured obligations of the Company
and will rank PARI PASSU with all other existing and future senior indebtedness
of the Company. Pursuant to the Indenture, the Company may incur up to $15.0
million of senior secured indebtedness under the New Credit Facility and may,
subject to certain limitations, incur other secured indebtedness. In the event
of a bankruptcy, liquidation or similar proceeding affecting the Company, the
other secured creditors of the Company would be entitled to repayment in full
from the proceeds of any collateral subject to their security interests before
any payment therefrom could be made to holders of the Senior Secured Notes. See
"Description of Senior Secured Notes -- General" and "Description of Other
Indebtedness."
The Company is a holding company that conducts its operations through its
subsidiaries (the vast majority of which are retail service centers) and has no
material assets other than its interests in its subsidiaries. As a result of the
Company's holding company structure, except to the extent that the Senior
Secured Notes (and the Subsidiary Guarantees) constitute recognized creditor
claims against the assets and earnings of the Company's subsidiaries, claims of
creditors of the Company's subsidiaries (including lenders under the New Credit
Facility which will also be guaranteed by subsidiaries of the Company) will have
priority with respect to the assets and earnings of such subsidiaries over the
claims of creditors of the Company, including holders of the Senior Secured
Notes, even though such subsidiary obligations do not constitute senior
indebtedness. On a pro forma basis as of March 31, 1994, after giving effect to
the application of the proceeds of the Offering and the Transaction, the
obligations of the Company's subsidiaries, other than their respective
guarantees of Empire Gas' obligations under the Senior Secured Notes and the New
Credit Facility, would have consisted of total payables of approximately
$530,000 including trade payables, accrued expenses and taxes payable. The New
Credit Facility and the Indenture will restrict the subsidiaries' ability to
incur additional indebtedness other than in limited circumstances, including to
fund acquisitions. See "Description of the Senior Secured Notes."
SECURITY FOR THE SENIOR SECURED NOTES
The Senior Secured Notes will be secured by a pledge of all of the capital
stock of the Company's present and future subsidiaries. Currently there is no
market for such stock. There can be no assurance that the proceeds from the sale
or sales of all such collateral would be sufficient to satisfy the amounts due
on the Senior Secured Notes in the event of a default. If such proceeds are not
sufficient to repay all such amounts due on the Senior Secured Notes, then
Holders of the Senior Secured Notes (to the extent not repaid from the proceeds
of the sale of the collateral) would have only an unsecured claim against the
Company's
11
<PAGE>
remaining assets (together with a claim against the Subsidiary Guarantors
pursuant to the Subsidiary Guarantees). In addition, the ability of the Holders
of the Senior Secured Notes to rely upon the collateral (or upon the Subsidiary
Guarantees) for fulfillment of the Company's obligations under the Indenture may
be subject to certain bankruptcy law limitations in the event of a bankruptcy.
PAYMENTS DUE ON INDEBTEDNESS PRIOR TO MATURITY OF SENIOR SECURED NOTES
The Company intends to refinance or replace some portion of its New Credit
Facility prior to its maturity on or about July 1997. There can be no assurance
that any such refinancing will be possible, or that any additional financing in
the future can be obtained, particularly in view of the Company's anticipated
high levels of debt, and the restrictions on the Company's ability to incur
additional debt under the New Credit Facility and the Indenture. If no such
refinancing or additional financing is available or possible, as the case may
be, the Company could be forced to default on its debt obligations and, as an
ultimate remedy, seek protection under the federal bankruptcy laws.
TAX CONSEQUENCES OF THE OFFERING
The Senior Secured Notes will be issued at a substantial discount from their
principal amount. Consequently, purchasers of Units generally will be required
to include amounts in gross income for Federal income tax purposes in advance of
their receipt of the cash payments to which the income is attributable. If the
Senior Secured Notes are "applicable high yield discount obligations," the
Company's federal income tax deductions with respect to the original issue
discount on the Senior Secured Notes will be deferred until the Company makes
the related payments and possibly, in part, disallowed. See "Certain Federal
Income Tax Considerations -- Certain Federal Income Tax Consequences to the
Company and to Corporate Holders."
BANKRUPTCY CONSIDERATIONS
If a bankruptcy case is commenced by or against the Company under the
Bankruptcy Code after the issuance of the Senior Secured Notes, the claim of a
holder of Senior Secured Notes may be limited to an amount equal to the sum of
(i) the initial public offering price of the Senior Secured Notes (which may
exclude amounts attributable to the value of the Warrants) and (ii) that portion
of original issue discount which is not deemed to constitute "unmatured
interest" for purposes of the Bankruptcy Code. Any original issue discount that
was not amortized as of the date of any such bankruptcy filing would constitute
"unmatured interest."
WEATHER
Weather conditions have a substantial impact on the demand for propane,
particularly by retail customers, with peak sales typically occurring during the
winter months. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations." Warmer than normal winter weather in fiscal years
1991 and 1992 had a material adverse effect on the Company's operating income in
each of those years. Warmer than normal weather in the future could have a
material adverse effect on the Company's operating income and could affect its
ability to fulfill its debt service obligations. While the fiscal year 1993
winter was a nearly normal winter, there can be no assurance that average
temperatures in future years will be closer to the historical average.
PROPANE COST VOLATILITY
The cost of propane purchased by the Company can fluctuate dramatically over
a short period of time due to a variety of factors, including severe cold
weather and product transportation difficulties. In general, the Company's
supply contracts permit its suppliers to charge posted prices at the time of
delivery, less any negotiated discount. The Company has generally been able to
pass any cost increases on to its customers; however, there can be no assurance
that the Company will be able to pass on such cost increases in the future.
COMPETITION
Empire Gas encounters competition from a number of other propane
distributors in each geographic region in which it operates and competes for
customers against suppliers of other energy sources. For residential and
commercial customers, Empire Gas competes primarily with suppliers of
electricity and
12
<PAGE>
propane. The Company currently enjoys, and historically has enjoyed, a
competitive advantage over suppliers of electricity because of the higher cost
of electricity. The Company believes that fuel oil does not present a
significant competitive threat in the Company's primary service areas because:
(i) propane is a residue-free, cleaner energy source, (ii) environmental
concerns make fuel oil relatively unattractive, and (iii) fuel oil appliances
are not as efficient as propane appliances. Empire Gas generally does not
attempt to sell propane in areas served by natural gas distribution systems,
except sales for specialized industrial applications and for motor fuel, because
the price per equivalent energy unit of propane is, and has historically been,
higher than that of natural gas. To use natural gas, however, a retail customer
must be connected to a distribution system provided by a local utility. Because
of the costs involved in building or connecting to a natural gas distribution
system, natural gas is not expected to create significant competition for the
Company in areas that are not currently served by natural gas distribution
systems.
CONSERVATION AND IMPROVED EFFICIENCY OF GAS APPLIANCES
Retail customers primarily use propane for heating, water heating, and
cooking. Conservation measures or technological advances, including the
development of more efficient gas appliances, could slow the growth of demand
for propane by retail propane customers. The Company believes that decreases in
oil and gas prices in recent years have decreased the incentive to conserve and
that the gas appliances used today are already operating at high levels of
efficiency. The Company cannot predict the impact of future conservation
measures. Nor is the Company able to predict the effect that any technological
advances might have on the Company's operations.
OPERATING RISKS
The Company's propane operations are subject to all operating hazards and
risks normally incident to handling, storing and transporting combustible
liquids, such as the risk of personal injury and property damage caused by fire.
Empire Gas maintains insurance policies with insurers in such amounts and with
such coverages and deductibles as management of the Company believes is
reasonable and prudent. Empire Gas' current automobile liability policy provides
coverage for losses of up to $101.0 million per occurrence with a $500,000
deductible per occurrence. Empire Gas' general liability policy has a $500,000
deductible per occurrence (subject to an aggregate deductible of $1.0 million
per policy period) with total coverage of $101.0 million. Current workers
compensation coverage also has a $500,000 deductible per incident. Current
liability insurance coverage substantially exceeds any liability Empire Gas has
previously incurred, though the $500,000 deductible on each of the policies
means that the Company is effectively self-insured for liability up to these
deductibles. The occurrence of an event not fully covered by insurance could
have a material adverse effect on the Company's financial condition and results.
See "Business of the Company -- Propane Operations -- Risks of Business."
REORGANIZATION OF THE COMPANY
Prior to the Offering, the Company consisted of 284 retail outlets operating
in 27 states. As a result of the Transaction, the number of retail outlets will
be reduced to 158 operating in 20 states (resulting in a decrease of
approximately 40% based on gallons sold during the fiscal year ended June 30,
1993). In addition, new management of the Company after the Offering intends to
pursue a strategy of acquisitions and start-ups, expansion of the Company's
existing residential customer base, geographic rationalization and reduction of
operating expenses, which differs in some regards from the strategy of current
management. See "Business -- Business Strategy." The operations of the Company
after the Offering will therefore differ from the operations prior to the
Offering in terms of the size, geographical scope, management and leverage of
the Company and there is no assurance that new management's business strategy
will be carried out effectively. Accordingly, operations of the Company prior to
the Offering are not indicative of expected operations of the Company after the
Offering.
POTENTIAL ACQUISITIONS AND DEVELOPMENT OF NEW RETAIL SERVICE CENTERS
The Company intends to consider and evaluate opportunities for growth in its
industry through acquisitions and the development of new retail propane service
centers. While the Company recently completed an acquisition of one retail
service center in Colorado, has signed an agreement to purchase a small retail
propane company in Missouri, and will complete the Acquisition contemporaneously
with this
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<PAGE>
Offering, there can be no assurance that the Company will continue to find
attractive acquisition opportunities, or to the extent such opportunities or
opportunities to develop new retail service centers are identified, that the
Company will be able to consummate the acquisitions or develop such centers or
will be able to obtain financing for any such acquisitions or projects. In
addition, the Company's ability to undertake acquisitions will be limited in
certain geographic areas by the non-competition agreement (the "Non-Competition
Agreement") entered into by the Company and Empire Energy Corporation
("Energy"), whose stock will be transferred to Mr. Plaster and certain other
departing officers as part of the Transaction. Subject to an exception for
multi-state acquisitions, the Non-Competition Agreement restricts the Company
from making acquisitions in seven states (Alabama, Florida, Georgia, Indiana,
Kentucky, Mississippi and Tennessee) and certain territories in five states
(southeastern Missouri, northern Arkansas, western Virginia, western West
Virginia and an area within a 50-mile radius of an existing Energy operation in
Illinois) (the "Energy Territories") for a period of three years from the date
the Stock Purchase is consummated (the "Effective Date"). The Non-Competition
Agreement also requires the Company not to disclose secret information it may
have regarding Energy, not to solicit Energy customers or employees, and to
grant Energy an option to purchase from the Company (on terms substantially
equivalent to the terms on which the Company acquired the business) any business
the Company acquires in violation of the Non-Competition Agreement. The same
restrictions apply to Energy under the Non-Competition Agreement. See "The
Transaction" and "Certain Relationships and Related Transactions -- The
Transaction." No assurance can be given as to the extent to which acquisitions
or new retail service centers will contribute to the Company's cash flows or
results of operations.
DEPENDENCE ON CONTROLLING SHAREHOLDER AND CONFLICT OF INTERESTS
Upon consummation of the Transaction, Empire Gas will be dependent on the
efforts of Paul S. Lindsey, Jr. who will serve as the Company's Chief Executive
Officer, President, and Chairman of the Board. Mr. Lindsey and his wife, Kristin
L. Lindsey, will hold approximately 96% of the Company's Common Stock and
generally will be able to control the Company's operations. Although the Company
will purchase a key man life insurance policy in the amount of $30 million, the
loss of Mr. Lindsey's services could have a material adverse effect on the
business of the Company. As the holder of a majority of the Company's
outstanding Common Stock, Mr. Lindsey may have interests different from those of
holders of the Units. In case of such a conflict of interests, there can be no
assurance that the Company will take actions in the best interests of the
holders of the Units.
FRAUDULENT TRANSFER CONSIDERATIONS ASSOCIATED WITH THE STOCK REPURCHASE AND DEBT
REFINANCING
Under fraudulent transfer provisions of the Bankruptcy Code or comparable
provisions of state fraudulent transfer law, a transfer of property made within
a year before a bankruptcy filing (or within the applicable state law period)
can be avoided if a company or a subsidiary thereof (a) made such transfer with
the intent of hindering, delaying, or defrauding current or future creditors, or
(b)(i) received less than reasonably equivalent value or fair consideration
therefor and (ii) at the time of such transfer (A) was insolvent or was rendered
insolvent by such transfer, (B) was engaged or was about to engage in a business
or transaction for which its remaining assets constituted unreasonably small
capital to carry on such business, or (C) intended to incur, or believed that it
would incur, debts beyond its ability to pay such debts as they mature.
If a court were to find that, in substance, the Senior Secured Notes were
issued to repurchase the Common Stock of Mr. Plaster and the departing officers,
the court could find that the Company did not receive fair consideration or
reasonably equivalent value for the issuance of the Senior Secured Notes. In
addition, to the extent the proceeds are being used to repay (i) the Company's
12% Senior Subordinated Debentures due 2002 (the "12% Senior Subordinated
Debentures") which were incurred in repaying certain indebtedness incurred in
the 1983 leveraged buy-out of Empire Gas Corporation (the "LBO"), and (ii) $13.7
million principal amount of the Company's 9% Subordinated Debentures due 2007
(the "2007 9% Subordinated Debentures"), which were incurred in the LBO, of
which $4.7 million principal amount will be purchased from Mr. Plaster, a court
could find that the Company did not receive fair consideration or reasonably
equivalent value for the issuance of the Senior Secured Notes. If a court found
a lack of fair consideration for the Senior Secured Notes and also concluded
that one or more of the financial conditions
14
<PAGE>
described above was satisfied at the time Empire Gas incurred the debt to the
holders of the Senior Secured Notes, or if the court found that the transaction
was entered into with the intent of hindering, delaying, or defrauding
creditors, the court could set aside the transaction as a fraudulent transfer
and void the Senior Secured Notes and order the return of any payments of
principal and interest made on the Senior Secured Notes. To the extent any
Senior Secured Note was avoided as a fraudulent transfer, the holder of that
Senior Secured Note would cease to have any claim in respect of the Company. In
addition, the avoidance of the Senior Secured Notes could result in an event of
default with respect to the other indebtedness of the Company and could result
in the acceleration of such indebtedness, a change in control of the Company, or
otherwise adversely affect the Company.
The obligations of the Company's existing subsidiaries to guarantee the
Company's obligations under the Senior Secured Notes pursuant to the Subsidiary
Guarantees may also be avoidable as fraudulent transfers. In the event that a
court finds that (a) any such subsidiary did not receive reasonably equivalent
value or fair consideration in exchange for such subsidiary's incurrence of the
obligations under its respective Subsidiary Guaranty, and (b) that such
subsidiary was insolvent or rendered insolvent by such Subsidiary Guaranty, had
unreasonably small capital, or intended to or believed that it would incur debt
beyond its ability to repay, such Subsidiary Guaranty could be avoided. The
Subsidiary Guarantees could also be subject to avoidance as a fraudulent
transfer if a court finds that such obligations were incurred with actual intent
to delay, hinder or defraud any of the subsidiaries' creditors.
The measures of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any such proceeding. Generally, however,
a company will be considered insolvent if the sum of its debts, including
estimated contingent liabilities, was greater than all of its assets at a fair
valuation or if the present fair saleable value of its assets is less than the
amount that would be required to pay its probable liability on its existing
debts, including estimated contingent liabilities, as they become absolute and
mature.
The Company believes that the indebtedness represented by the Senior Secured
Notes and the Subsidiary Guarantees is being incurred for proper purposes and in
good faith, and without any actual intent to delay, hinder, or defraud the
Company's creditors. Furthermore, the Company believes, based on analyses of
internal cash flow, that it (i) will not be considered insolvent, at the time of
or as a result of the issuance of the Senior Secured Notes, under any of the
foregoing standards, (ii) will have sufficient capital to meet the needs of the
business in which it is engaged, and (iii) will not have incurred debts beyond
its ability to pay such debts as they mature. Furthermore, as a condition to the
consummation of the Stock Purchase, the Company will receive a solvency opinion
that the Stock Purchase and this Offering will not render the Company insolvent,
leave the Company with inadequate or unreasonably small capital or result in the
Company incurring indebtedness beyond its ability to repay such indebtedness as
it matures. There can be no assurance, however, that a court passing on such
questions would agree with the Company.
ABSENCE OF PUBLIC MARKET
There is currently no established trading market for the Units, the Senior
Secured Notes, the Warrants or shares of Common Stock and the Company does not
intend to have the Units, the Senior Secured Notes, the Warrants or the shares
of Common Stock listed for trading on any securities exchange or on any
automated dealer quotation system. The Underwriter has advised the Company that
it presently intends to make a market in the Units, the Senior Secured Notes and
the Warrants, but the Underwriter is not obligated to make such markets and any
such market making may be discontinued at any time at the sole discretion of the
Underwriter. Accordingly, no assurance can be given as to the prices or
liquidity of, or trading markets for, the Units, the Senior Secured Notes, the
Warrants or shares of Common Stock. The liquidity of any market for the Units,
the Senior Secured Notes, the Warrants or shares of Common Stock will depend
upon the number of holders of such securities, the interest of securities
dealers in making a market in such securities, and other factors. The absence of
an active market for the Units, the Senior Secured Notes, the Warrants or shares
of Common Stock would adversely affect the liquidity of such securities. The
liquidity of, and trading markets for, the Senior Secured Notes may also be
adversely affected by the liquidity of, and market for high yield securities
generally. Such a decline may adversely affect the liquidity of, and trading
markets for, the Senior Secured Notes, independent of the financial performance
of, and prospects for, the Company.
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THE TRANSACTION
The Company will implement a change in ownership and management
contemporaneously with this Offering by repurchasing shares of its common stock
from its controlling shareholder, Mr. Robert W. Plaster, and certain other
departing officers in exchange for all of the shares of a subsidiary that owns
133 retail service centers located primarily in the Southeast. Mr. Paul S.
Lindsey, Jr., who has been with the Company for 26 years and currently serves as
the Company's Chief Operating Officer and Vice Chairman of the Board, will
become the Company's controlling shareholder, Chief Executive Officer, and
President. The change in ownership and management will enable the Company to
pursue a growth strategy focusing on acquiring propane operating companies.
Contemporaneously with the Offering, the Company will acquire the assets of PSNC
Propane Corporation, a company located in North Carolina that has six retail
service centers and five additional bulk storage facilities with annual volume
of approximately 9.5 million gallons, for an aggregate purchase price of
approximately $14.0 million (which includes payment for inventory and accounts
receivable). The Company also recently completed the acquisition of a retail
propane company in Colorado with annual volume of approximately 700,000 gallons,
and has entered into a contract to purchase a retail propane company in Missouri
with annual volume of approximately 690,000 gallons.
Pursuant to the Stock Purchase, the Company will transfer 100% of the common
stock of its subsidiary, Energy ("Energy Common Stock"), to Mr. Robert W.
Plaster and certain departing directors, officers and employees in exchange for
12,004,430 of their shares of Common Stock. Certain of the departing officers
and employees will receive $7.00 per share for the remaining 346,220 of shares
of Common Stock that they hold. Energy owns the common stock of approximately
136 subsidiaries, 133 of which are retail service centers located in ten states,
primarily in the Southeast, and certain other assets. Empire Gas will retain
ownership of 158 retail service centers located in 20 states and 8 nonretail
subsidiaries that provide services related to the Company's retail propane
business. Following the Transaction, Mr. Lindsey and his wife Kristin Lindsey
will beneficially own approximately 96% of the approximately 2,400,000 shares of
the Company's Common Stock remaining outstanding and Mr. Lindsey will become the
Company's Chief Executive Officer and President.
In connection with the Stock Purchase, Mr. Plaster will terminate his
positions with the Company as Chief Executive Officer and Chairman of the Board
of Directors. Mr. Plaster's employment contract with the Company will be
terminated. See "Management -- Employment Agreement." Similarly, the departing
directors, officers and employees will terminate their positions with the
Company and its subsidiaries.
In connection with the Stock Purchase, certain lease and use agreements
between the Company and Mr. Plaster, or entities controlled by Mr. Plaster, will
be terminated. The Company has also entered into certain agreements that will
become effective on the Effective Date, including the Non-Competition Agreement,
a lease for the Company's headquarters, and a services agreement pursuant to
which Empire Service Corporation ("Service Corp."), a subsidiary of Energy, will
provide data processing, management information and other services to the
Company (the "Service Agreement"). See "Certain Relationships and Related
Transactions."
The Company has requested a private letter ruling from the Internal Revenue
Service concerning the federal income tax consequences of the Stock Purchase.
The consummation of the Transaction is conditioned upon the receipt of rulings
from the IRS that provide, among other things, that, based on certain
representations contained in the rulings, neither income nor gain for federal
income tax purposes will be recognized by the Company as a result of the Stock
Purchase.
The obligations of the parties to consummate the Stock Purchase are also
subject to certain other conditions, including the receipt of a solvency opinion
that the consummation of the Stock Purchase and this Offering will not render
the Company insolvent, leave the Company with inadequate or unreasonably small
capital or result in the Company incurring indebtedness beyond its ability to
repay such indebtedness as it matures.
Simultaneously with this Offering, the Company will consummate the
acquisition of PSNC Propane Corporation, a company that has six retail service
centers and an additional five bulk storage facilities
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<PAGE>
located in North Carolina, an area in which the Company desires to strengthen
its presence. The Company will use approximately $12.0 million of the proceeds
towards the $14.0 million aggregate purchase price. Approximately $1.5 million
of the remaining purchase price will be funded by borrowings on the Company's
New Credit Facility. The remaining $500,000 will be paid by the Company over
five years. See "Use of Proceeds." During 1993, PSNC Propane Corporation sold
approximately 9.5 million gallons, 70% of which were higher margin sales to
residential customers.
The Company will use a portion of the proceeds to repay certain of its
existing indebtedness that have earlier maturity dates or that carry a higher
effective interest rate. The Company will enter into the $15.0 million New
Credit Facility.
Immediately prior to the consummation of the Offering, the Company's
subsidiary, Empire Gas Operating Corporation ("EGOC"), which owns the
outstanding capital stock of the Company's retail service centers and certain
nonretail subsidiaries, and certain other assets, will merge into the Company.
USE OF PROCEEDS
The net proceeds to the Company from the issuance and sale of the Units
offered hereby will be approximately $95.0 million. The Company intends to use
approximately $72.1 million of the net proceeds to retire existing indebtedness.
Approximately $22.3 million will be used to redeem the Company's 12% Senior
Subordinated Debentures due 2002, which currently have an annual sinking fund
requirement of $690,000. Approximately $20.0 million will be used to redeem the
Company's 9% Convertible Subordinated Debentures due 1998, which currently have
an annual sinking fund requirement of $1.25 million. Approximately $16.1 million
will be used to repay the term loan (currently accruing interest at 6.125% per
annum) under the existing credit facility (the "Term Loan"), which matures June
30, 1998 and which currently has a quarterly sinking fund requirement of
$650,000. Approximately $13.7 million will be used to repurchase $13.7 million
principal amount of 2007 9% Subordinated Debentures, $4.7 principal amount of
which will be purchased from Mr. Robert W. Plaster. See "Certain Relationships
and Related Transactions." The purchase of the 2007 9% Subordinated Debentures
will satisfy the Company's $1.37 million annual sinking fund requirement through
the maturity date of the Senior Secured Notes. Approximately $12.0 million of
the remaining net proceeds will be used by the Company to complete the
Acquisition, which has an aggregate purchase price of $14.0 million (which
includes payment for inventory and accounts receivable). See "The Transaction"
and "Business -- Business Strategy -- Growth through acquisition of retail
service centers." Approximately $2.6 million of the net proceeds will be used to
repurchase, at $7.00 per share, approximately 346,220 shares of Common Stock
held by the departing directors, officers and employees, and approximately
31,640 shares of Common Stock held by other shareholders. The Company will use
approximately $4.1 million of the net proceeds to make a payment to Energy in
connection with the Stock Purchase, reduced to the extent Energy may be required
to make a payment to the Company based on the balance, as of the Effective Date,
of certain of the Company's liabilities net of certain of its assets. See
"Certain Relationships and Related Transactions -- The Transaction." Any
remaining net proceeds (estimated to be $4.2 million) will be used by the
Company for general corporate purposes which could include payment of accrued
interest, repayment of the existing credit facility and future acquisitions.
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CAPITALIZATION
The following table sets forth, as of March 31, 1994, the historical
capitalization of the Company and the pro forma capitalization of the Company as
adjusted to give effect to the Transaction and the application of the proceeds
of the Offering as described in "Use of Proceeds". This table should be read in
conjunction with the Company's consolidated financial statements and the pro
forma financial statements, including the notes thereto, included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1994
-----------------------------
HISTORICAL AS ADJUSTED
------------- -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Current maturities of long-term debt.............. $ 6,135 $ 329
------------- -------------
------------- -------------
Long-term debt (excluding current portion of
long-term debt):
Existing Credit Facility:
Term Loan....................................... $ 13,450 $ --
$22 million revolving credit facility........... 3,500 --
New Credit Facility:
$15 million revolving credit facility........... --
% Senior Secured Notes due 2004................. 99,360(2)
9% Convertible Subordinated Debentures due
1998............................................. 15,875 --
9% Subordinated Debentures due 2007.............. 14,731 6,415(1)
12% Senior Subordinated Debentures due 2002....... 18,201 --
Purchase contract obligations..................... 939 1,101
------------- -------------
Total long-term debt............................ 66,696 106,876
------------- -------------
Stockholders' equity (deficit):
Common stock...................................... 14 14
Common stock purchase warrants.................... -- 640(2)
Additional paid-in capital........................ 27,088 27,088
Retained earnings................................. 5,899 32,393
------------- -------------
33,001 60,135
Less: Treasury stock.............................. (1,299) (87,975)
------------- -------------
Total stockholders' equity (deficit)............ 31,702 (27,840)
------------- -------------
Total capitalization.......................... $ 98,398 $ 79,036
------------- -------------
------------- -------------
<FN>
- ---------
(1) Face amount $12.3 million.
(2) Reflects estimated $100 million of gross proceeds of the Units offered
hereby, including $99.4 million of allocated value to the Senior Secured
Notes and $.6 million of allocated value to the warrants.
</TABLE>
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
FOR THE COMPANY PRIOR TO THE TRANSACTION
The following table presents selected consolidated operating and balance
sheet data of Empire Gas, prior to the consummation of the Transaction, as of
and for each of the years in the five-year period ended June 30, 1993, as of and
for the nine months ended March 31, 1993 and 1994, and for the twelve months
ended March 31, 1994. The financial data of the Company as of and for each of
the years in the five-year period ended June 30, 1993 were derived from the
Company's audited consolidated financial statements. The financial data for the
Company as of and for the nine months ended March 31, 1993 and 1994, were
derived from the Company's unaudited consolidated financial statements which, in
the opinion of the Company, reflect all adjustments, of a normal and recurring
nature, necessary for a fair presentation of the results for the unaudited
periods. Due to the seasonal nature of the Company's business, the majority of
the Company's revenues are earned in its second and third fiscal quarters.
Accordingly, the results of operations for the nine months ended March 31, 1994
are not indicative of the results of operations to be expected for the full
year. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations." Data for the twelve months ended March 31, 1994 have
been set forth to provide recent data concerning a full year's operations. The
financial and other data set forth below should be read in conjunction with the
Company's consolidated financial statements, including the notes thereto,
included elsewhere in this Prospectus. Because these data do not take into
account the effects of the Transaction on the Company's results and financial
condition, management does not believe they are indicative of the results of the
Company that can be expected after the Transaction and Offering.
<TABLE>
<CAPTION>
EMPIRE GAS BEFORE THE TRANSACTION AND OFFERING
------------------------------------------------------------------------------------
NINE MONTHS ENDED TWELVE MONTHS
YEAR ENDED JUNE 30, MARCH 31, ENDED
------------------------------------------------ ------------------ MARCH 31,
1989 (1) 1990 1991 1992 1993 1993 1994 1994
-------- -------- -------- -------- -------- -------- -------- --------------
(IN THOUSANDS EXCEPT RATIOS AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating data:
Operating revenue..................... $108,389 $123,153 $121,758 $112,080 $128,401 $111,332 $110,108 $127,177
Gross profit (2)...................... 61,995 64,962 61,787 61,107 68,199 58,525 59,338 69,012
Operating expenses.................... 36,438 39,062 44,772 40,052 41,845 31,986 33,109 42,968
Depreciation and amortization......... 8,194 9,334 9,552 10,062 10,351 7,672 7,494 10,173
Operating income...................... 17,363 16,566 7,463 10,993 16,003 18,867 18,735 15,871
Interest expense:
Cash interest....................... 12,288 11,437 12,038 10,721 9,826 7,541 6,446 8,731
Amortization of debt discount and
expenses........................... 1,469 1,147 890 1,006 1,686 1,167 1,396 1,915
-------- -------- -------- -------- -------- -------- -------- --------------
Total interest expense............ 13,757 12,584 12,928 11,727 11,512 8,708 7,842 10,646
Net income (loss) (3)................. 857 1,216 (4,557) (1,474) 2,228 5,929 5,789 2,088
Other operating data:
Ratio of earnings to fixed
charges (4).......................... 1.16x 1.23x -- -- 1.36x 2.14x 2.27x 1.39x
Deficiency in earnings available to
cover fixed charges (4).............. -- -- $ (6,167) $ (1,184) -- -- -- --
Capital expenditures:
Existing operations................. 4,310 3,993 4,148 4,048 2,964 1,839 3,429 4,554
Acquisitions........................ 2,863 260 1,708 225 -- -- 444 444
Start up of new retail service
centers............................ 450 1,987 2,957 2,430 1,394 1,259 848 983
-------- -------- -------- -------- -------- -------- -------- --------------
Total capital expenditures.......... 7,623 6,240 8,813 6,703 4,358 3,098 4,721 5,981
Cash from sale of retail service
centers and other assets............. 1,301 430 497 3,062 1,088 360 153 881
EBITDA (5)............................ 25,557 25,399 17,015 21,055 26,354 26,539 26,229 26,044
Income (loss) per share............... $ .05 $ .04 $ (.33) $ (.11) $ .16 $ .41 $ .40 $ .14
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
---------------------------------------------------------------------------------- MARCH 31, 1994
1989 1990 1991 1992 1993 --------------
-------------- -------------- -------------- -------------- -------------- (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance sheet data:
Total assets................ $ 161,727 $ 157,858 $156,613 $ 150,946 $ 147,445 $152,193
Long-term debt (including
current maturities)........ 77,775 79,666 84,289 78,958 79,249 72,831
Stockholders' equity........ 29,418 29,960 25,416 23,879 24,891 31,702
<FN>
- ------------
(1) The operating data for 1989 include the operating results of the Company's
predecessor, which was also named Empire Gas Corporation ("Old Empire"),
for the period ended October 28, 1988. The Company was formed in September
1988 to acquire Old Empire.
(2) Represents operating revenue less the cost of products sold.
(3) Empire Gas did not declare or pay dividends on its common stock during the
five-year period ending June 30, 1993 or during the nine-month period
ending March 31, 1994.
(4) For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" represents net income before income taxes, plus "fixed charges"
and the amortization of capitalized interest, less interest capitalized.
"Fixed charges" consist of interest (including amortization of debt
issuance costs) and amortization of discount on indebtedness.
(5) EBITDA consists of earnings before depreciation, amortization, interest,
income taxes, and other non-recurring expenses. EBITDA is presented here
because it is a widely accepted financial indicator of a highly leveraged
company's ability to service and/ or incur indebtedness. However, EBITDA
should not be construed as an alternative either (i) to operating income
(determined in accordance with generally accepted accounting principles)
or (ii) to cash flows from operating activities (determined in accordance
with generally accepted accounting principles).
</TABLE>
20
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL AND OTHER DATA
The following unaudited pro forma consolidated statements of operations have
been derived from the consolidated statement of operations of the Company for
the fiscal year ended June 30, 1993 and the consolidated statement of operations
for the nine months and twelve months ended March 31, 1994 and adjust such
information to give effect to the Offering and the Transaction as if they had
been consummated on July 1, 1992. The unaudited pro forma consolidated balance
sheet has been derived from the consolidated balance sheet of the Company and
adjusts such information to give effect to the Offering and the Transaction as
if they had been consummated on March 31, 1994. The Pro Forma Consolidated
Financial and Other Data and accompanying notes should be read in conjunction
with the consolidated financial statements and related notes thereto appearing
elsewhere in this Prospectus. The Pro Forma Consolidated Financial and Other
Data is presented for informational purposes only and does not purport to
represent what the results of operations would actually have been if the
Offering and the Transaction had occurred on July 1, 1992, or what the Company's
financial position would actually have been if the Offering and the Transaction
had occurred on March 31, 1994, or to project the Company's results of
operations or financial position at any future date or for any future period.
The Transaction is being accounted for as a treasury stock transaction using the
fair value of the assets conveyed to repurchase the Company's stock.
21
<PAGE>
EMPIRE GAS CORPORATION
PRO FORMA STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT RATIOS AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1993
----------------------------------------------------------------
ADJUSTMENTS EFFECTS OF
EMPIRE TO EXCLUDE PSNC EFFECTS OF
GAS ENERGY ACQUISITION* OFFERING PRO FORMA
-------- ------------ ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUE....................... $128,401 $(61,057)(1) $ 9,587 $ $ 76,931
COST OF PRODUCT SOLD.................... 60,202 (29,157)(1) 4,643 35,688
-------- ------------ ------------ ---------
GROSS PROFIT............................ 68,199 (31,900) 4,944 41,243
-------- ------------ ------------ ---------
OPERATING COSTS AND EXPENSES
Provision for doubtful accounts....... 958 (442)(1) 30 546
General and administrative............ 40,437 (19,852)(2) 2,619 23,204
Rent expense to related party......... 450 (375)(2) 75
Depreciation and amortization......... 10,351 (4,687)(3) 1,058 6,722
-------- ------------ ------------ ---------
52,196 (25,356) 3,707 30,547
-------- ------------ ------------ ---------
OPERATING INCOME........................ 16,003 (6,544) 1,237 10,696
-------- ------------ ------------ ---------
OTHER EXPENSE
Interest expense...................... (8,877) 271(4) (1,064) (497) (6) (10,167)
Interest expense to related party..... (949) 94(4) 855(6)
Amortization of debt discount and
expense.............................. (1,686) (423) (2,235) (7) (4,344)
Restructuring proposal costs.......... (223) 105(2) (118)
-------- ------------ ------------ ----------- ---------
(11,735) 470 (1,487) (1,877) (14,629)
-------- ------------ ------------ ----------- ---------
INCOME (LOSS) BEFORE INCOME TAXES....... 4,268 (6,074) (250) (1,877) (3,933)
PROVISION (CREDIT) FOR INCOME TAXES 2,040 (2,433)(5) (100) (707) (8) (1,200)
-------- ------------ ------------ ----------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM................................... $ 2,228 $ (3,641) $ (150) $(1,170) (9) $ (2,733)
-------- ------------ ------------ ----------- ---------
-------- ------------ ------------ ----------- ---------
INCOME (LOSS) PER SHARE BEFORE
EXTRAORDINARY ITEM..................... $ .16 -- -- -- $ (1.73)
-------- ---------
-------- ---------
OTHER OPERATING DATA AND FINANCIAL
RATIOS
Ratio of earnings to fixed charges.... 1.36x -- -- -- --
--------
--------
Deficiency in earnings to cover fixed
charges.............................. -- -- -- -- $ (4,352)
---------
---------
EBITDA**.............................. $ 26,354 -- -- -- $ 17,418
EBITDA to total interest expense...... 2.29x -- -- -- 1.20x
EBITDA to cash interest............... 2.68x -- -- -- 1.71x
<FN>
- ------------
* For adjustments from actual PSNC results see Pro Forma Financial
Statements of PSNC elsewhere in this Prospectus.
** EBITDA consists of earnings before depreciation, amortization, interest,
income taxes, and other non-recurring expenses. EBITDA is presented here
because it is a widely accepted financial indicator of a highly leveraged
company's ability to service and/ or incur indebtedness. However, EBITDA
should not be construed as an alternative either (i) to operating income
(determined in accordance with generally accepted accounting principles)
or (ii) to cash flows from operating activities (determined in accordance
with generally accepted accounting principles).
</TABLE>
22
<PAGE>
EMPIRE GAS CORPORATION
PRO FORMA STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT RATIOS AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31, 1994
----------------------------------------------------------------
ADJUSTMENTS EFFECTS OF
EMPIRE TO EXCLUDE PSNC EFFECTS OF
GAS ENERGY ACQUISITION* OFFERING PRO FORMA
-------- ------------ ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUE....................... $110,108 $(54,638)(1) $ 9,526 $ $ 64,996
COST OF PRODUCT SOLD.................... 50,770 (25,368)(1) 4,663 30,065
-------- ------------ ------------ ----------- ---------
GROSS PROFIT............................ 59,338 (29,270) 4,863 34,931
OPERATING COSTS AND EXPENSES
Provision for doubtful accounts 413 (215)(1) 34 232
General and administrative............ 32,359 (15,925)(2) 1,894 18,328
Rent expense to related party 337 (280)(2) 57
Depreciation and amortization......... 7,494 (3,292)(3) 778 4,980
-------- ------------ ------------ ---------
40,603 (19,712) 2,706 23,597
-------- ------------ ------------ ---------
OPERATING INCOME........................ 18,735 (9,558) 2,157 11,334
-------- ------------ ------------ ---------
OTHER EXPENSE
Interest expense...................... (6,446) 105(4) (801) (233)(6) (7,375)
Amortization of debt discount and
expense.............................. (1,396) (353) (1,575)(7) (3,324)
Restructuring proposal costs.......... (674) 321(2) (353)
-------- ------------ ------------ ----------- ---------
(8,516) 426 (1,154) (1,808) (11,052)
-------- ------------ ------------ ----------- ---------
INCOME BEFORE INCOME TAXES.............. 10,219 (9,132) 1,003 (1,808) 282
PROVISION FOR INCOME TAXES 4,430 (3,717)(5) 390 (823)(8) 280
-------- ------------ ------------ ----------- ---------
NET INCOME.............................. $ 5,789 $ (5,415) $ 613 $ (985) $ 2
-------- ------------ ------------ ----------- ---------
-------- ------------ ------------ ----------- ---------
INCOME PER SHARE........................ $ .40 -- -- -- $ .00
-------- ---------
-------- ---------
OTHER OPERATING DATA AND FINANCIAL
RATIOS
Ratio of earnings to fixed charges.... 2.27x -- -- --
--------
--------
Deficiency in earnings to cover fixed
charges.............................. -- -- -- -- (2,215)
---------
---------
EBITDA**.............................. $ 26,229 -- -- -- $ 16,314
EBITDA to total interest expense...... 3.34x -- -- -- 1.52x
EBITDA to cash interest............... 4.07x -- -- -- 2.21x
<FN>
- ------------
* For adjustments from actual PSNC results see Pro Forma Financial Statements
of PSNC elsewhere in this Prospectus.
** EBITDA consists of earnings before depreciation, amortization, interest,
income taxes, and other non-recurring expenses. EBITDA is presented here
because it is a widely accepted financial indicator of a highly leveraged
company's ability to service and/ or incur indebtedness. However, EBITDA
should not be construed as an alternative either (i) to operating income
(determined in accordance with generally accepted accounting principles) or
(ii) to cash flows from operating activities (determined in accordance with
generally accepted accounting principles).
</TABLE>
23
<PAGE>
EMPIRE GAS CORPORATION
PRO FORMA STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT RATIOS AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED MARCH 31, 1994
------------------------------------------------------------------
ADJUSTMENTS EFFECTS OF
EMPIRE TO EXCLUDE PSNC EFFECTS OF
GAS ENERGY ACQUISITION* OFFERING PRO FORMA
--------- ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUE....................... $ 127,177 $(61,319)(1) $ 10,605 $ $ 76,463
COST OF PRODUCT SOLD.................... 58,165 (28,817)(1) 5,164 34,512
--------- ------------ ------------ ---------
GROSS PROFIT............................ 69,012 (32,502) 5,441 41,951
--------- ------------ ------------ ---------
OPERATING COSTS AND EXPENSES
Provision for doubtful accounts....... 1,073 (512)(1) 40 601
General and administrative............ 41,445 (20,308)(2) 2,491 23,628
Rent expense to related party......... 450 (375)(2) 75
Depreciation and amortization......... 10,173 (4,880)(3) 1,039 6,332
--------- ------------ ------------ ---------
53,141 (26,075) 3,570 30,636
--------- ------------ ------------ ---------
OPERATING INCOME........................ 15,871 (6,427) 1,871 11,315
--------- ------------ ------------ ---------
OTHER EXPENSE
Interest expense...................... (8,450) 85(4) (1,060) (383)(6) (9,808)
Interest expense to related party..... (281) 94(4) 187(6) --
Amortization of debt discount and
expense.............................. (1,915) (462) (2,069)(7) (4,446)
Restructuring proposal costs.......... (897) 426(2) (471)
--------- ------------ ------------ ------------ ---------
(11,543) 605 (1,522) (2,265) (14,725)
--------- ------------ ------------ ------------ ---------
INCOME (LOSS) BEFORE INCOME TAXES....... 4,328 (5,822) 349 (2,265) (3,410)
PROVISION (CREDIT) FOR INCOME TAXES..... 2,240 (2,500)(5) 130 (870)(8) (1,000)
--------- ------------ ------------ ------------ ---------
NET INCOME (LOSS)....................... $ 2,088 $ (3,322) $ 219 $ (1,395) $ (2,410)
--------- ------------ ------------ ------------ ---------
--------- ------------ ------------ ------------ ---------
INCOME (LOSS) PER SHARE................. $ .14 $ (1.53)
--------- ---------
--------- ---------
OTHER OPERATING DATA AND FINANCIAL
RATIOS
Ratio of earnings to fixed charges.... 1.39x
---------
---------
Deficiency in earnings to cover fixed
charges.............................. $ $ (4,407)
---------
---------
EBITDA**.............................. $ 26,044 $ 17,647
EBITDA to total interest expense...... 2.45x 1.24x
EBITDA to cash interest............... 2.98x 1.80x
Total Long-term debt (including
current portion) to EBITDA........... 2.80x 6.07x
<FN>
- ------------
* For adjustments from actual PSNC results see Pro Forma Financial
Statements of PSNC elsewhere in this Prospectus.
** EBITDA consists of earnings before depreciation, amortization, interest,
income taxes, and other non-recurring expenses. EBITDA is presented here
because it is a widely accepted financial indicator of a highly leveraged
company's ability to service and/ or incur indebtedness. However, EBITDA
should not be construed as an alternative either (i) to operating income
(determined in accordance with generally accepted accounting principles)
or (ii) to cash flows from operating activities (determined in accordance
with generally accepted accounting principles).
</TABLE>
24
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENTS OF EMPIRE GAS
CORPORATION (EGC)
FOR THE YEAR ENDED JUNE 30, 1993, NINE MONTHS ENDED MARCH 31, 1994,
AND TWELVE MONTHS ENDED MARCH 31, 1994.
The pro forma consolidated income statement amounts are based on the
estimated pro forma effects of the consolidated balance sheet adjustments
assuming the transactions were consummated on July 1, 1992. The basis for the
allocation of income and expenses between the Company and Energy is described in
detail below. The amounts presented reflect actual operations of the retail
subsidiaries while certain non-retail general and administrative expenses have
been allocated on the bases set forth below to the extent they were not
otherwise related to specific subsidiaries. The consolidated statement of
operations amounts after the Transaction closes may differ from the pro forma
statements because of changes in the consolidated balance sheet between July 1,
1992 and the actual consummation date.
(1) The revenues and expenses of the retail subsidiaries of Energy were
excluded. These subsidiaries represent substantially all the Operating
Revenue, Cost of Product Sold and the Provision for Doubtful Accounts
excluded on the pro forma statement of operations.
(2) The general and administrative expenses of Energy retail subsidiaries were
excluded. Exclusions of Energy non-retail general and administrative
expenses were determined as follows:
The amounts related to the salaries and related expenses of the
departing officers and certain agreements between the Company and
Mr. Plaster, or entities controlled by him, being terminated were
estimated as follows and eliminated:
<TABLE>
<S> <C>
Year Ended June 30, 1993.................. $2,556,100
Nine Months Ended March 31, 1994.......... $1,740,425
Twelve Months Ended March 31, 1994........ $2,320,567
</TABLE>
Expenses related to maintenance and management of specific energy
non-retail assets were identified and eliminated.
All remaining non-retail expenses were assigned 52.3% to the
Company and 47.7% to Energy based on the respective proportions of
consolidated retail revenues.
(3) Depreciation and amortization of the assets of Energy retail subsidiaries
and non-retail subsidiaries were excluded.
(4) Interest expense and amortization of debt acquisition costs related to (a)
amounts directly related to liabilities of Energy retail subsidiaries and
(b) the revolving bank debt and related party note borrowings applicable to
Energy were excluded.
(5) Income tax expenses were based on the proportion of Energy taxable income to
the consolidated EGC taxable income.
(6) To (a) recognize additional interest expense assuming interest paid at 7% on
face value $107,844,000 (which represents 88% of the total $122,550,000) of
Senior Secured Note borrowings (the remaining $14,706,000 of Senior Secured
borrowings are included in the pro forma statements reflecting the
Acquisition), (b) eliminate interest expense on the repaid term credit
facility, 9% Convertible Subordinated Debentures due 1998 and the 12% Senior
Subordinated Debentures due 2002, the reduced amount of the 9% Subordinated
Debentures due 2007, and related party note borrowings and (c) reduce
interest expense on the revolving credit facility to reflect the reduction
due to the proceeds of this Offering.
(7) To (a) recognize amortization of new debt acquisition costs being amortized
over 10 years, (b) recognize amortization of new original issue discount on
new Senior Secured Secured Notes to bring the effective rate of the new debt
(excluding the amount included in the PSNC purchase accounting adjustments)
to 12% using the effective interest method, (c) eliminate amortization of
the discount on the 9% Convertible Subordinated Debentures due 1998 and the
12% Senior Subordinated Debentures due 2002, (d) reduce the amortization of
the discount that will result from the reduction of 9% Subordinated
Debentures due 2007 outstanding as a result of the Offering, and (e)
eliminate amortization of debt acquisition costs related to Bank of Boston
term credit facility and revolving credit facility being repaid.
25
<PAGE>
(8) To record the increased estimated income tax credit provision, computed at
an effective rate of 38%, associated with the additional deductible expense
as a result of the operations after the Offering.
(9) The foregoing pro forma consolidated income statement does not give effect
to the gain of approximately $37.2 million resulting from the excess of the
fair value of EGC Common Stock received in exchange for Energy ($84.0
million) over the book value of the assets transferred in the transaction
($46.8 million) and the extraordinary expense of $8.6 million (net of
estimated income tax effect of $4.2 million) for the remaining unamortized
debt discount related to the 9% Convertible Subordinated Debentures due 1998
and the 12% Senior Subordinated Debentures due 2002 and the reduction of the
9% Subordinated Debentures due 2007 that will be recognized as a result of
use of proceeds of the Offering. The gain on disposition of Energy has been
assumed to be non-taxable. If any portion of the gain is deemed to be
taxable, such liability would be accrued and payable by the Company.
26
<PAGE>
EMPIRE GAS CORPORATION
PRO FORMA BALANCE SHEET
MARCH 31, 1994
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS EFFECTS OF
EMPIRE TO EXCLUDE PSNC EFFECTS OF
GAS ENERGY ACQUISITION* OFFERING PRO FORMA
--------- ------------ ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash.................................. $ 183 $ (454)(1) $ $ (239)(5) $ 1,591
(2,645)(8)
4,746(10)
Trade Receivables..................... 15,072 (7,351)(1) 1,180 8,901
Inventories........................... 9,313 (4,506)(1) 700 5,507
Prepaid Expenses...................... 299 (110)(1) 189
Due from Energy....................... 3,886(2) (3,886)(5)
Deferred Income taxes................. 408 (350)(1) 287(6) 345
--------- ------------ ----------- ------------ ---------
Total current assets................ 25,275 (8,885) 1,880 (1,737) 16,533
--------- ------------ ----------- ------------ ---------
PROPERTY AND EQUIPMENT
At cost, net of accumulated
depreciation......................... 107,838 (51,174)(1) 12,000 68,664
--------- ------------ ----------- ---------
OTHER ASSETS
Debt acquisition, costs, net of
amortization......................... 446 4,554(7) 5,000
Excess of cost over fair value of net
assets acquired, at amortized cost... 17,870 (3,567)(3) 14,303
Other................................. 764 (275)(1) 500 (250)(11) 739
--------- ------------ ----------- ------------ ---------
19,080 (3,842) 500 4,304 20,042
--------- ------------ ----------- ------------ ---------
$ 152,193 $(63,901) $ 14,380 $ 2,567 $105,239
--------- ------------ ----------- ------------ ---------
--------- ------------ ----------- ------------ ---------
CURRENT LIABILITIES
Due to Energy......................... $ $ 4,125(2) $ $ (4,125)(5) $
Current maturities of long-term
debt................................. 6,135 (76)(1) 100 (5,830)(10) 329
Accounts payable and accrued
expenses............................. 14,407 (2,463)(1) 250 (1,126)(10) 10,818
(250)(11)
--------- ------------ ----------- ------------ ---------
Total current liabilities........... 20,542 1,586 350 (11,331) 11,147
--------- ------------ ----------- ------------ ---------
LONG-TERM DEBT.......................... 66,696 (162)(1) 12,000 87,360(9)
400 (71,298)(10)
1,630 10,250(6)
106,876
--------- ------------ ----------- ------------ ---------
DEFERRED INCOME TAXES................... 31,214 (13,921)(1) (3,313)(6) 13,980
--------- ------------ ------------ ---------
ACCRUED SELF INSURANCE LIABILITY........ 2,039 (963)(1) 1,076
--------- ------------ ---------
STOCKHOLDERS' EQUITY (DEFICIT)
Capital stock
Common stock.......................... 14 14
Common stock purchase warrants........ 640(9) 640
Additional paid-in capital............ 27,088 27,088
Retained earnings..................... 5,899 33,590(4) (7,096)(6) 32,393
--------- ------------ ------------ ---------
33,001 33,590 (6,456) 60,135
Treasury Stock at cost................ (1,299) (84,031)(4) (2,645)(8) (87,975)
--------- ------------ ------------ ---------
31,702 (50,441) (9,101) (27,840)
--------- ------------ ----------- ------------ ---------
$ 152,193 $(63,901) $ 14,380 $ 2,567 $105,239
--------- ------------ ----------- ------------ ---------
--------- ------------ ----------- ------------ ---------
<FN>
- ------------
* For adjustments from actual PSNC results see Pro Forma Financial
Statements of PSNC elsewhere in this Prospectus.
</TABLE>
27
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET OF EMPIRE GAS
CORPORATION (EGC) AS OF MARCH 31, 1994
The pro forma consolidated balance sheet amounts assume the transactions
described below were consummated on March 31, 1994. The allocation of assets and
liabilities between the Company and Energy is based on the allocation in the
Stock Redemption Agreement. The actual consolidated amounts may differ
substantially because of changes in the financial position of the Company,
Energy and PSNC Propane Corporation as of the actual consummation date.
(1) The assets and liabilities of the retail distribution subsidiaries and
certain non-retail assets of Energy (principally administrative office and
data processing equipment, vehicles, airplanes, and home office parts
inventories) were excluded.
(2) The amount of $3,886,000 due from Energy was accrued under the provisions
of the Stock Redemption Agreement pertaining to certain non-retail assets
retained and liabilities assumed by the Company. The amount due to Energy
of $4,125,000 was accrued under the provisions of the Stock Redemption
Agreement.
(3) The historical unamortized excess of cost over fair value of net assets
acquired for Energy retail subsidiaries was excluded.
(4) The fair value ($84,031,000) of 12,004,430 shares of EGC common stock
received in exchange for Energy was charged to Treasury Stock and the
resulting gain on the exchange of $33,590,000 was credited to retained
earnings. The gain on disposition of Energy has been assumed to be
non-taxable. If any portion of the gain is deemed to be taxable, such
liability would be accrued and payable by the Company. The fair value is
based on the valuation methods used by stockholders of the Company,
including Mr. Plaster, to establish the relative values of the parts of the
business being retained versus those included in Energy. The valuation
method is based principally on gallons of retail sales and operating cash
flows, and, in management's view, is consistent with valuation methods
generally used in valuing propane distribution companies.
(5) To record the net payment due to Energy at the closing date of the
Transaction.
(6) To (a) eliminate the unamortized discount from face value of the 9%
Convertible Subordinated Debentures due 1998 and the 12% Senior
Subordinated Debentures due 2002 and the unamortized discount from face
value related to the paid 9% Subordinated Debentures due 2007 and (b)
record the tax benefit from the deductions related to the discounts.
(7) To (a) record $5,000,000 of debt acquisition costs paid in arranging the
financing which will be amortized on a straight-line basis over the term of
the new debt of 120 months and (b) eliminate the remaining unamortized debt
issuance costs of $446,000 for Bank of Boston term credit facility and
revolving credit facility.
(8) To record $2,645,000 for the purchase of 346,220 shares of Common Stock
from departing officers, directors and employees and 31,640 shares of
Common Stock from employees who are remaining with the Company.
(9) To record the estimated gross proceeds from the Units offered hereby, which
include $640,000 of assumed value of Warrants with the remainder consisting
of the initial accreted value of the Senior Secured Notes. For pro forma
purposes, the Warrants are valued using Black-Scholes methodology with an
assumed annualized volatility of the underlying Common Stock and without
any liquidity discount. No assurance can be given that this valuation is
indicative of the price at which the Warrants may actually trade.
(10) To (a) record repayment of $55,948,000 face value of existing debentures,
(b) record repayment of $16,050,000 of the term credit facility, (c) record
reduction of $5,130,000 of the revolving credit facility, (d) payment of
$1,126,000 of accrued interest and (e) excess proceeds of $4,746,000.
(11) To eliminate in consolidation of the financial statements a $250,000
deposit made for the Acquisition.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's results of
operations, financial condition and liquidity should be read in conjunction with
the "Selected Consolidated Financial and Other Data," the "Consolidated Pro
Forma Financial and Other Data" and the historical consolidated financial
statements of Empire Gas and the notes thereto included in this Prospectus. Pro
forma results reflect completion of the Transaction and the Offering. The
Company believes that the pro forma results are most indicative of the past
performance of the business of the Company as constituted after the Transaction
and Offering. Historical results and percentage relationships set forth in
"Selected Consolidated Financial Information," "Consolidated Pro Forma Financial
and Other Data" and the financial statements of Empire Gas should not be taken
as indicative of future operations of the Company.
RESULTS OF OPERATIONS
GENERAL
Empire Gas' primary source of revenue is retail propane sales, which
accounted for approximately 91.4% (90.4% on a pro forma basis taking account of
the Transaction) of its revenue in fiscal year 1993. Other sources of revenue
include sales of gas appliances and rental of customer tanks.
The Company's operating revenue is subject to both price and volume
fluctuations. Price fluctuations are generally caused by changes in the
wholesale cost of propane. The Company is not materially affected by these price
fluctuations, inasmuch as it can generally recover any cost increase through a
corresponding increase in retail prices. Consequently, the Company's gross
profit per retail gallon is relatively stable from year to year within each
customer class. Volume fluctuations from year to year are generally caused by
variations in the winter weather from year to year. Because a substantial amount
of the propane sold by the Company to residential and commercial customers is
used for heating, the severity of the weather will affect the volume sold.
Volume fluctuations do materially affect the Company's operations because lower
volume produces less revenue to cover the Company's fixed costs, including any
debt service costs. Because a substantial amount of the propane sold to
residential and commercial customers is used for heating, the Company's business
is seasonal with approximately 60% (62% on a pro forma basis) of Empire Gas'
sales occurring during the five months of November through March.
The Company's expenses consist primarily of cost of products sold, general
and administrative expenses and, to a much lesser extent, depreciation and
amortization and interest expense. Purchases of propane inventory account for
the vast majority of the cost of products sold. Historically, the Company has
purchased approximately 75% of its propane under supply contracts with major oil
companies. The Company purchases propane on the spot market to satisfy its
remaining propane requirements. The typical supply contract is for a one-year
term and requires the Company to purchase propane at the supplier's daily posted
price or at a negotiated discount. The Company believes that it will continue to
purchase inventory in this manner. While the cost of propane may fluctuate
considerably from year to year, as discussed above, these fluctuations do not
generally affect the Company's operating income because of corresponding changes
in the Company's retail price. See "Risk Factors -- Propane Cost Volatility" and
"Risk Factors -- Operating Risks." The Company has not experienced any
difficulty in obtaining propane in recent years and believes that domestic
sources of propane will continue to meet its needs.
The Company's general and administrative expenses consist mainly of salaries
and related employee benefits, vehicle expenses, and insurance.
The Company's interest expense has consisted primarily of interest on its
existing credit facility, 12% Senior Subordinated Debentures, 1998 9%
Subordinated Debentures, and 2007 9% Subordinated Debentures. While the Company
will use a portion of the proceeds of this Offering or the New Credit Facility
to repay all of its existing indebtedness except a portion of its 2007 9%
Subordinated Debentures (see "Use of Proceeds"), the Company's interest expense
will increase substantially as a result of the issuance of the Senior Secured
Notes. Through 1999 a significant portion of the increase will be non-cash
interest expense.
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PRO FORMA OPERATIONS
GENERAL. Operating revenue of the Company on a pro forma basis is less than
actual operating revenue for each period because of a decrease in operating
revenue of approximately $61.1 million for the year ended June 30, 1993 and
$54.6 million for the nine months ended March 31, 1994 from the exclusion of the
sales from the 133 retail service centers that are being transferred in the
Transaction. This decrease will be partially offset by an increase of
approximately $9.6 million for the year ended June 30, 1993 and $9.5 million for
the nine months ended March 31, 1994 from the inclusion of sales from service
centers acquired in the Acquisition. On a pro forma basis, the Company reported
a loss of approximately $2.7 million for the fiscal year ended June 30, 1993 and
income of $2,000 for the nine months ended March 31, 1994. These compare to
income of $2.2 million and $5.8 million for the respective historical periods.
The changes from historical results are caused by an increase in interest
expense after the Transaction and by the fact that the Company will bear all of
the interest expense even though approximately 40% of the Company (based on
retail gallons sold) will be divested in the Transaction.
Changes between actual and pro forma results for most other operating
results (cost of products sold, gross profit, provisions for doubtful accounts
and depreciation and amortization) are roughly equivalent (on a percentage
basis) to changes in operating revenue. Other than for general and
administrative expenses and interest expense (discussed further below), the
Company does not currently foresee any changes in operating results resulting
from the Transaction that are not roughly proportional to changes in operating
revenue resulting from the disposition of centers and the Acquisition.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expenses on
a pro forma basis are $14.5 million less for the nine months ended March 31,
1994, and $18.0 million less for the year ended June 30, 1993, than the
respective historical amounts. The reduction represents the elimination of
salaries and related expenses of the departing officers, the termination of
certain agreements between the Company and Mr. Plaster or entities controlled by
him, and the elimination of costs related to service centers that will not be
part of the Company after the Transaction. This reduction will be partially
offset by an increase in costs of $1.9 million and $2.6 million for the nine
months ended March 31, 1994 and the year ended June 30, 1993, respectively,
related to the operations acquired in the Acquisition. The expenses of the
operations acquired in the Acquisition were, however, reduced by approximately
$1.2 million for the fiscal year ended June 30, 1993, reflecting elimination of
the costs of duplicative personnel and certain other items. The Company believes
that it will realize additional reductions in operating expenses (which are not
reflected in the pro forma financial information) through the consolidation of a
number of existing retail service centers.
INTEREST EXPENSE. Pro forma interest expense (plus amortization of debt
discount and expense) was $10.7 million and $14.5 million for the nine months
ended March 31, 1994 and the fiscal year ended June 30, 1993, respectively, an
increase of approximately 36% and 26%, respectively, over the actual amounts.
The overall increase results from a $30.3 million increase in total indebtedness
of the Company offset by a small reduction in the weighted average effective
interest rate from 12.8% (as of March 31, 1994) to 12.2%. The reduction in the
effective interest rate results from the repayment of all of the Company's
currently outstanding debt (other than approximately $12.3 million principal
amount of the 2007 9% Subordinated Indentures) in connection with the Offering,
and the replacement of that indebtedness with the Senior Secured Notes and the
New Credit Facility, which will carry a lower effective interest rate.
INCOME TAXES. The effective rate for pro forma income taxes varies from the
historical rate because of the increase in the nondeductible excess of cost over
fair value of net assets acquired as a result of the Transaction.
NINE MONTHS ENDED MARCH 31, 1994 AND MARCH 31, 1993
OPERATING REVENUE. Operating revenue decreased by approximately $1.2
million, or 1.1%, from $111.3 million for the nine months ended March 31, 1993
to $110.1 million for the nine months ended March 31, 1994. This decrease was
due to a decrease in propane sales of approximately $1.8 million offset by an
increase in parts and appliances sales of approximately $.6 million. The
decrease in propane sales was due to an approximate $.006 decrease in the
average net sales price per gallon combined with a 1% decrease in gallons sold.
The increase in parts and appliance sales was due to increased sales efforts by
the Company.
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COST OF PRODUCTS SOLD. Cost of products sold decreased by approximately
$2.0 million, or 3.8%, from $52.8 million for the nine months ended March 31,
1993 to $50.8 million for the nine months ended March 31, 1994. This decrease
was due to a decrease of approximately $2.5 million in the cost of propane
offset by an increase of approximately $.5 million in the cost of parts and
appliances. The decrease in the cost of propane was due to a $.016 decrease in
the average net cost per gallon combined with a 1% decrease in gallons sold. The
increase in the cost of parts and appliances was due to the increased sales
activity.
GROSS PROFIT. The Company's gross profit increased by approximately
$800,000 (or 1.4%) from $58.5 million for the nine months ended March 31, 1993
to $59.3 million for the nine months ended March 31, 1994. The Company's gross
profit per gallon increased from $.422 for the nine months ended March 31, 1993
to $.434 for the nine months ended March 31, 1994.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expenses for
the nine months ended March 31, 1994, increased approximately $1.1 million due
to increases of $700,000 in insurance and liability claims expense, $500,000 in
salaries and commissions, and $200,000 in payroll taxes and employee benefits.
These increases were offset by decreases of $100,000 each in vehicle fuel and
maintenance, rent and maintenance, and travel and entertainment. The increase in
insurance and liability claims was due primarily to increased claims. The
increase in salaries and commissions was due to normal pay increases combined
with a slight increase in the total number of employees. The increase in payroll
taxes and employee benefits was due to the increase in taxes related to the
increased payroll and the increase in health insurance expenses. The decrease in
vehicle fuel and maintenance was due to reduced vehicle maintenance as a result
of the purchase of new vehicles to replace older vehicles.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization remained
relatively constant, decreasing by approximately $200,000 or 3% from $7.7
million for the nine months ended March 31, 1993 to $7.5 million for the nine
months ended March 31, 1994.
INTEREST EXPENSE. Interest expense and amortization of debt discount and
expense decreased approximately $800,000 or 9%, from $8.7 million for the nine
months ended March 31, 1993 to $7.9 million for the nine months ended March 31,
1994. This decrease was the result of lower interest rates and reduced borrowing
levels as compared to the comparable period for the prior year.
INCOME TAXES. The effective income tax rate for the nine months ended March
31, 1994 was essentially unchanged from the effective rate for the nine months
ended March 31, 1993.
TRANSACTION PROPOSAL COSTS. Transaction proposal costs of $674,000 for the
nine months ended March 31, 1994 consisted of legal and accounting expenses
incurred in connection with a proposed restructuring of the Company's debt and
equity that resulted in the Transaction described herein.
FISCAL YEARS ENDED JUNE 30, 1993 AND JUNE 30, 1992
OPERATING REVENUE. Operating revenue increased $16.3 million, or 14.5%,
from $112.1 million in fiscal year 1992 to $128.4 million in fiscal year 1993.
This increase was the result of a $15.9 million increase in propane sales and
$800,000 increase in sales of parts and gas appliances, offset by a $400,000
decrease in other revenues. The increase in propane sales was caused by a 12.1%
increase in gallons sold and a 2% increase in the average gross sales price per
gallon. The increased volume reflects the results of a winter heating season
that was considered nearly normal based on historical standards as compared to a
warmer winter heating season in fiscal year 1992. There were approximately 12.7%
more weighted average heating degree days in fiscal year 1993 than in fiscal
year 1992. Other revenues decreased by $400,000 primarily due to a decrease in
fixed asset sales.
COST OF PRODUCTS SOLD. Cost of products sold increased $9.2 million, or
18%, from $51.0 million in fiscal year 1992 to $60.2 million in fiscal year
1993. The increase resulted from the 12.1% increase in gallons sold, which
reflects the increase in weighted average heating degree days, and a 4% increase
in the wholesale cost of propane.
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GROSS PROFIT. The Company's gross profit for the year increased $7.1
million, or 11.6%. The increase was caused by a 14.5% increase in operating
revenue offset by an 18% increase in cost of products sold. The Company's gross
profit per gallon was relatively constant at $.429 in fiscal year 1993 and $.425
in fiscal year 1992.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expenses
increased $1.0 million, or 2.5%, from $39.4 million in fiscal year 1992 to $40.4
million in fiscal year 1993. The increase was due primarily to increases of
$800,000 in salaries and commissions and $600,000 in insurance and liability
claims, offset by a decrease of $200,000 in professional fees. The increase in
salaries and commissions reflects an increase in the commissions earned due to
the increased sales activity. The increase in insurance costs is primarily due
to higher worker compensation insurance premiums. The decrease in professional
fees is due to reduced legal fees primarily related to federal income tax
matters that have been settled.
PROVISION FOR DOUBTFUL ACCOUNTS. The provision for doubtful accounts
increased $760,000 from $200,000 in fiscal year 1992 to $960,000 in fiscal year
1993. This increase reflects the adjustment of the Company's annual provision to
a level that the Company believes will be indicative of normal provisions for
future years. The provision for fiscal year 1992 was much lower because the
Company had significantly increased its provision in fiscal year 1991 due to
concerns about the effect of the Persian Gulf crisis and the economy on its
operations. The provision for fiscal year 1991 was more than adequate due, in
part, to certain measures the Company implemented in fiscal year 1992 that
improved the monitoring of its accounts receivable. Accordingly, a relatively
small provision was required for fiscal year 1992. See "Fiscal Years Ended June
30, 1992 and June 30, 1991."
DEPRECIATION AND AMORTIZATION. Depreciation and amortization remained
relatively constant, increasing by $300,000 or 3%, from $10.1 million in 1992 to
$10.4 million in 1993.
INTEREST EXPENSE. Cash interest expense decreased by approximately $900,000
or 8.4%, from $10.7 million in fiscal year 1992 to $9.8 million in fiscal year
1993. This decrease was primarily attributable to lower interest rates in fiscal
year 1993. Amortization of debt discount and expense increased $700,000 or 70%
from $1.0 million in 1992 to $1.7 million in 1993. This increase related to
increased amortization of the discounts on the Company's 1998 9% Subordinated
Debentures, 2007 9% Subordinated Debentures, and 12% Senior Subordinated
Debentures, as well as amortization of expenses related to the Company's
Existing Credit Facility.
RECAPITALIZATION COSTS. During fiscal year 1993, the Company incurred
$200,000 in expenses relating to a proposed recapitalization that the Company
later decided not to pursue.
INCOME TAXES. The effective tax rate for the fiscal year ended June 30,
1993 was 47.8% compared to 24.5% for the fiscal year ended June 30, 1992. The
increase was the result of the Company's reporting an income in the 1993 period
compared to a loss in the 1992 period. The Company had a positive effective tax
rate in 1992 despite its reported loss primarily because of state taxes imposed
on operations that were profitable in individual states and because of the
effective tax resulting from the amortization of the excess of cost over fair
value of assets sold.
FISCAL YEARS ENDED JUNE 30, 1992 AND JUNE 30, 1991
OPERATING REVENUE. Operating revenue decreased $9.7 million, or 8%, from
$121.8 million in 1991 to $112.1 million in 1992. The decrease was the result of
a $10.2 million decrease in propane sales offset by a $500,000 increase in other
revenues. The decrease in retail sales was the result of a 8.8% decrease in the
average gross sales price per gallon offset by a 1% increase in gallons sold.
The decrease in selling price was primarily attributable to the general trend of
a reduction in petroleum prices following the end of the Persian Gulf crisis.
Volume did not fluctuate significantly inasmuch as the weighted average degree
days decreased by less than 1% from fiscal year 1991 to 1992. Other revenues
increased $500,000 primarily due to gains on the sale of surplus real estate.
COST OF PRODUCTS SOLD. Cost of products sold decreased by $9.0 million, or
15%, from $60.0 million in fiscal year 1991 to $51.0 million in fiscal year
1992. The decrease in cost of products sold resulted from a
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15.7% decrease in the wholesale cost of propane offset by the 1% increase in
gallons sold. As discussed above, this cost decrease related to the general
trend of a reduction in petroleum prices following the end of the Persian Gulf
crisis.
GROSS PROFIT. The gross profit for the year decreased by $700,000, or 1.1%.
This decrease was caused by the 8% decrease in operating revenue offset by a
decrease of 15% in the cost of products sold. The Company's gross profit per
gallon decreased from $.441 in fiscal year 1991 to $.425 in fiscal year 1992.
The gross profit per gallon in 1991 was abnormally high as a result of the
Persian Gulf war.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expenses
decreased $2.1 million, or 5%, from $41.5 million in 1991 to $39.4 million in
1992. The decrease was due to decreases of $800,000 in transportation expense,
$600,000 in insurance and liability claims, $400,000 in rent and maintenance,
and $300,000 in employee benefits. The decrease in transportation expense
primarily reflects the decrease in the cost of propane fuel used in the
transportation equipment. Insurance and liability claims expense decreased due
to a reduction in claims expense as the result of fewer claims. Maintenance
expense decreased primarily due to lower maintenance costs for the underground
storage facility and reduced purchases of paint for painting storage tanks.
Employee benefits decreased due to the reduction of the Company's costs for
employee health insurance claims due to an increase in the premiums charged to
employees which partially offset the cost of providing this insurance.
PROVISION FOR DOUBTFUL ACCOUNTS. The provision for doubtful accounts
decreased $2.6 million, or 92.9%, from $2.8 million in 1991 to $200,000 in 1992.
In fiscal year 1991 the Company reevaluated its reserve for doubtful accounts
and significantly increased its reserve because of concerns about the collection
of accounts due to the increase in retail propane prices caused by the Persian
Gulf Crisis and general concerns about the economy. Historically the Company's
provision had been approximately $1.2 million per year. During fiscal year 1992,
the Company completed the installation of computers in all of its retail service
centers, which enabled it to improve its monitoring of accounts receivable.
Because the Company's collection of accounts receivable relating to fiscal year
1991 was better than anticipated and because the Company improved its collection
process through the installation of the computers, a much smaller provision for
doubtful accounts was required for fiscal year 1992.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
$500,000, or 5.2%, from $9.6 million in fiscal year 1991 to $10.1 million in
fiscal year 1992. This was primarily attributable to increased capital
expenditures.
INTEREST EXPENSE. Interest expense decreased $1.3 million, or 10.8%, from
$12.0 million in 1991 to $10.7 million in 1992. This decrease was primarily
attributable to decreased borrowing levels and lower interest rates in 1992 as
compared to 1991. Amortization of debt discount and expense increased $110,000
or 12.3% from $890,000 in 1991 to $1.0 million in 1992. This increase relates
primarily to increased amortization of the discounts on the Company's 1998 9%
Subordinated Debentures, 2007 9% Subordinated Debentures, and 12% Senior
Subordinated Debentures.
MERGER PROPOSAL COSTS. During fiscal year 1992, the Company recorded
expenses of $450,000 related to a proposed acquisition of a large competitor.
The Company incurred these costs in performing due diligence related to the
acquisition. The acquisition was later abandoned with the related costs being
expensed.
CRESTED BUTTE LITIGATION EXPENSE. During 1991, the Company incurred
approximately $700,000 in litigation losses related to a matter that was
concluded in fiscal year 1993. No further costs will be incurred.
INCOME TAXES. The effective tax rate for the fiscal year ended June 30,
1992 was approximately 24.5% compared to a tax benefit of 26.1% in the prior
year. Although the Company reported a loss for both periods, the loss was
greater in the fiscal year ended June 30, 1991 and taxes on earnings in
individual states where operations were profitable, plus the effect of
amortization of excess of costs over fair value of net assets acquired, resulted
in a net positive tax rate in the 1992 period.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements have arisen primarily from funding its
working capital needs, capital expenditures and debt service obligations.
Historically, the Company has met these requirements from cash flow generated by
operations and from borrowings under its revolving credit line.
OPERATING ACTIVITIES. Cash flow provided from operating activities was $6.2
million in fiscal year 1993 as compared to $10.0 million in fiscal year 1992.
Cash flow from operations for fiscal year 1993 does not fully reflect the
beneficial impact that the first nearly normal winter since fiscal year 1988 had
on the Company's operations. As discussed above, the Company's operating revenue
and gross profit increased approximately $16.3 million and $7.1 million,
respectively, due primarily to increased sales of propane as a result of the
increase in weighted average heating degree days for fiscal year 1993. See
"Results of Operations -- Fiscal Years Ended June 30, 1993 and June 30, 1992."
EBITDA also increased, from $21.1 million for fiscal year 1992 to $26.4 million
for fiscal year 1993. Cash flow from operations did not experience a similar
increase due to the following factors: (i) the Company used approximately $2.4
million during fiscal year 1993 for a non-recurring payment of accrued interest
on federal income taxes, (ii) the Company used approximately $3.5 million during
fiscal year 1993 to pay the current year's income taxes, a substantial increase
from the prior year's income tax payment, (iii) the Company used approximately
$1.5 million during fiscal year 1993 to reduce its accounts payables and accrued
expenses, and (iv) accounts receivable at the end of fiscal year 1993 increased
as a result of the increased sales activity.
Cash flow provided from operating activities was $12.3 million for the nine
months ended March 31, 1994, compared to $4.6 million for the same period in
1993. The increase in cash flow resulted primarily from an increase in payables
and a smaller increase in receivables compared to the prior period.
EBITDA of the Company on a pro forma basis for the fiscal year ended June
30, 1993 and for the nine months ended March 31, 1994 is $8.9 million and $9.9
million lower than the respective historical levels as a result of the
disposition of service centers in the Stock Purchase (resulting in reductions of
$11.2 million and $12.8 million for the respective periods), partially offset by
an increase (of $2.3 million and $2.9 million in the respective periods)
resulting from EBITDA contributed by the centers acquired in the Acquisition.
The Company intends to increase its EBITDA by reducing operating expenses by
consolidating a number of retail service centers, and by increasing its
operating revenue through acquisitions (including the Acquisition) of retail
service centers, development of new retail service centers, and expansion of the
Company's existing residential customer base. There can be no assurance that the
foregoing increases in cash flow can be realized.
The seasonal nature of the Company's business will require it to rely on
borrowings under the $15.0 million New Credit Facility as well as cash from
operations particularly during the summer and fall months when the Company is
building its inventory in preparation for the winter heating season. While
approximately 62% of the Company's operating revenue (on a pro forma basis) is
earned in the second and third quarters, certain expense items such as general
and administrative expense are recognized on a more annualized basis. Interest
expense also tends to be higher during the summer and fall months because the
Company relies in part on increased borrowings on its revolving credit line to
finance inventory purchases in preparation for the Company's winter heating
season.
CAPITAL EXPENDITURES. The Company's capital expenditures consist of routine
expenditures for existing operations as well as non-recurring expenditures,
purchases of assets for the start-up of new retail service centers, and
acquisition costs (including costs of acquiring retail service centers). Routine
expenditures usually consist of expenditures relating to the Company's bulk
delivery trucks, customer tanks, and costs associated with the installation of
new tanks. The Company believes that capital expenditures will increase as the
Company more actively pursues acquisitions. See "Business -- Business Strategy."
The Company's capital expenditures totalled $4.4 million in fiscal year 1993
and $6.7 million in fiscal year 1992. These capital expenditures were offset by
proceeds from the sale of retail service centers and surplus real estate
totalling $1.1 million in fiscal year 1993 and $3.1 million in fiscal year 1992.
Of these amounts, approximately $2.5 million in fiscal year 1993 and $3.4
million in fiscal year 1992 were for routine
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capital expenditures for existing operations. The Company incurred relocation
expenditures of $225,000 in fiscal year 1992, relating to the relocation of the
Company's retail service centers to locations on or near major highways. The
Company incurred nonrecurring expenditures of $336,000 in fiscal year 1993 and
$268,000 in fiscal year 1992. These expenditures related to the development of a
new program to build dispensing stations and expenditures for the jet used by
the Company, which the Company is disposing of in connection with the
Transaction. The Company started 10 new retail service centers in fiscal year
1993, and 11 new retail service centers in fiscal year 1992, incurring costs of
approximately $1.4 million and $2.4 million, respectively. No expenditures were
made for acquisitions during fiscal year 1993, and acquisition costs of
approximately $225,000 were incurred in fiscal year 1992.
The Company believes that capital expenditures for routine expenditures
after the Transaction will be approximately $2.0 million per year, and that
capital expenditures for the start-up of new retail service centers will not
exceed $1.0 million per year. The Company anticipates that capital expenditures
in fiscal year 1994 will be significantly larger than 1993, primarily due to an
increase in acquisition activity. The Company will use approximately $12.0
million of the proceeds of this Offering to fund the majority of the $14.0
million Acquisition purchase price, with approximately $1.5 million being funded
through the Company's New Credit Facility. The remaining $500,000 will be funded
with cash from operations over a five-year period. The Company acquired a
service center in Colorado in March, 1994, at a cost of approximately $473,000,
of which $273,000 was paid in cash, with the remaining amount financed through
the issuance of two five-year notes to the seller, one for $100,000 bearing
interest at 7% and the other for $100,000 bearing no interest. The Company has
entered into an agreement to purchase another service center in Missouri at a
cost of $325,000, of which $210,000 will be paid in cash at closing and the
remaining amount will be financed through the issuance of two ten-year notes to
the seller, one for $90,000 bearing interest at 7% and the other for $25,000
bearing no interest. For future acquisitions, the Company intends to fund
acquisitions with seller financing, to the extent feasible, and with cash from
operations or bank financing. The Company intends to fund its routine capital
expenditures and the purchases of assets for new retail service centers with
cash from operations, borrowings on the New Credit Facility, or other bank
financing. The Company is currently in the process of opening two new service
centers at an expected initial cost of $150,000 each. The Company does not
currently have any material commitments for any capital expenditures other than
the agreements for the pending acquisitions and the new service centers
discussed above. The Company is also exploring the possibility of making
modifications to its underground storage facility, which will require additional
capital expenditures. The Company has not yet determined the amount that it
would need to spend to make such modifications, or whether such modifications
will in fact be made. See "Business -- Propane Operations (Distribution)." Any
acquisitions or purchases of assets will be subject to the restrictions on
investments and debt incurrence contained in the New Credit Facility and the
Indenture as well as the restrictions contained in the Non-Competition
Agreement. See "Financing Activities"; "Description of Senior Secured Notes";
"Description of Other Indebtedness"; "Certain Relationships and Related
Transactions -- The Transaction."
FINANCING ACTIVITIES. During fiscal year 1993, the Company replaced its old
term loan and its Old Working Capital Facility with the Company's current
existing credit facility. The Company also made non-recurring expenditures of
approximately $2.1 million in connection with the termination of two employee
benefit plans.
Upon consummation of the Offering and application of the net proceeds
therefrom, the Company will have substantial debt service obligations. While the
net proceeds will be used to retire all the Company's existing indebtedness and
approximately $13.7 million principal amount 2007 9% Subordinated Debentures,
the Company will carry a significant amount of debt and will be required to use
a substantial portion of its cash flow to make interest payments. On a pro forma
basis, after giving effect to the consummation of this Offering and the
application of the net proceeds therefrom, for the year ended June 30, 1993, the
Company's cash interest expense would have been approximately $8.4 million.
Because the New Credit Facility will bear interest at a floating rate, the
Company's financial condition will be affected by fluctuations in interest
rates. See "Description of Other Indebtedness -- New Credit Facility."
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<PAGE>
The Company's $15.0 million New Credit Facility will mature on or about
July, 1997, at which time the Company will have to refinance or replace some
portion of the facility and may be required to pay some portion of any
outstanding balance. There can be no assurance that the Company will be able to
refinance or replace the New Credit Facility, or the terms upon which any such
financing may occur. Beginning in fiscal year 1999, the cash interest rate on
the Senior Secured Notes will increase to %. The Company believes cash from
operations will be sufficient to meet the increased interest payments. See "Risk
Factors -- Payment on Indebtedness Prior to Maturity of Senior Secured Notes."
The Company's New Credit Facility and the Indenture will impose restrictions
on the Company's ability to incur additional indebtedness. Such restrictions,
together with the highly leveraged position of the Company, could restrict
corporate activities, including the Company's ability to respond to market
conditions, to provide funds for capital expenditures, to refinance its debt, if
desired, or to take advantage of business opportunities. After consummation of
the Offering, the Company's ability to borrow will be very limited.
The Company believes that based on current levels of operations and assuming
normal winter weather, cash flow from operations together with borrowings under
the New Credit Facility will be adequate to fund the Company's operating needs,
anticipated capital expenditures, and debt service obligations until the New
Credit Facility expires in 1997. The Company believes that earnings before
interest, taxes, depreciation and amortization will exceed debt service
requirements and that seasonal needs for cash can be met through borrowings
under the New Credit Facility. The Company believes that it will have sufficient
capitalization and cash flow to refinance the New Credit Facility when it
expires, but there can be no assurance of this. In particular, there can be no
assurance that the Company's current level of operations will continue or that
the Company will experience normal winter weather (based on deviation from the
50-year average of heating degree days). The Company's revenues and operating
income could decrease as a result of substantially abnormal winter weather to a
level that could adversely affect the Company's ability to service its debt from
EBITDA. Furthermore, a substantial increase in interest rates could result in an
increase in interest expense under the New Credit Facility that could similarly
endanger the Company's ability to service its debt. If the Company were unable
to meet its debt service obligations or obtain refinancing or additional
financing, it could be forced to default on its respective debt obligations and,
as an ultimate remedy, seek protection under the federal bankruptcy laws. See
"Risk Factors -- High Leverage and Ability to Service Debt."
EFFECTS OF INFLATION AND CHANGING PRICES
General inflation does not have a material effect upon Company operations.
Prices of propane will change materially from time to time due to either the
combined or individual effects of weather and available supplies of petroleum
products. Such changes may have differing effects on revenues and costs of
products sold depending upon the inventory levels when such changes occur.
Generally, increases in the cost of propane do not substantially affect the
Company's gross margin, inasmuch as these cost increases are usually recovered
through a corresponding increase in the Company's retail price.
FUTURE CHANGES IN ACCOUNTING PRINCIPLE
Effective July 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). As a result of this change, there was no material effect upon the
Company's financial statements.
SFAS 109 requires recognition of deferred tax liabilities and assets for the
difference between the financial statement and tax basis of assets and
liabilities. Under this new standard, a valuation allowance is established to
reduce deferred tax assets if it is more likely than not that a deferred tax
asset will not be realized.
Prior to fiscal year 1994, deferred taxes were determined using the
Statement of Financial Accounting Standards No. 96.
36
<PAGE>
BUSINESS
GENERAL
Empire Gas is one of the largest retail distributors of propane in the
United States and, through its subsidiaries, has been engaged in the retail
distribution of propane since 1963. During the fiscal year ended June 30, 1993,
without giving effect to the Transaction, Empire Gas supplied propane to
approximately 200,000 customers in 27 states from 284 retail service centers and
sold approximately 142.1 million gallons of propane, accounting for
approximately 91.4% of its operating revenue. The Company also sells related
gas-burning appliances and equipment and rents customer storage tanks.
The Company will implement a change in ownership and management
contemporaneously with this Offering by repurchasing shares of its common stock
from its controlling shareholder, Mr. Robert W. Plaster, and certain other
departing officers in exchange for all of the shares of common stock of a
subsidiary that owns 133 retail service centers located primarily in the
Southeast. Mr. Paul S. Lindsey, Jr., who has been with the Company for 26 years
and currently serves as the Company's Chief Operating Officer and Vice Chairman
of the Board, will become the Company's controlling shareholder, Chief Executive
Officer, and President. The change in ownership and management will enable the
Company to pursue a growth strategy focussed on acquiring independent propane
operating companies. Contemporaneously with the Offering, the Company will
acquire the assets of PSNC Propane Corporation, a company located in North
Carolina that has six retail service centers and five additional bulk storage
facilities with annual volume of approximately 9.5 million gallons for an
aggregate purchase price of approximately $14.0 million (which includes payment
for inventory and accounts receivable). The Company also recently completed the
acquisition of a retail propane company in Colorado with annual volume of
approximately 700,000 gallons and has entered into a contract to purchase a
retail propane company in Missouri with annual volume of approximately 690,000
gallons.
Following the Transaction, Empire Gas' operations will consist of 158 retail
service centers with 22 additional bulk storage facilities. During the fiscal
year ended June 30, 1993, Empire Gas, after giving effect to the Transaction,
sold approximately 84.8 million gallons of propane (approximately 40% less than
prior to the Transaction) to approximately 112,000 customers in 20 states, which
(based on retail gallons sold) makes it one of the 11 largest retail
distributors of propane in the United States. The impact on the Company's
operations of weather fluctuations in a particular region will be reduced as a
result of the substantial geographic diversification of the Company after the
Transaction, with operations in the west, the southwest, Colorado, the upper
midwest, the Mississippi Valley and the southeast.
Propane, a hydrocarbon with properties similar to natural gas, is separated
from natural gas at gas processing plants and refined from crude oil at
refineries. It is stored and transported in a liquid state and vaporizes into a
clean-burning energy source that is used for a variety of residential,
commercial, and agricultural purposes. Residential and commercial uses include
heating, cooking, water heating, refrigeration, clothes drying, and
incineration. Commercial uses also include metal cutting, drying, container
pressurization, and charring, as well as use as a fuel for internal combustion
engines. As of December 31, 1991, the propane industry had grown, as measured by
the gallons of retail residential/commercial propane sold, at the rate of 3.7%
per annum since 1984.
The Company believes the highly fragmented retail propane market presents
substantial opportunities for growth through consolidation. As of December 31,
1991, there were approximately 8,000 propane retail marketing companies in the
continental United States with approximately 13,500 retail distribution points.
In addition, Empire Gas believes growth can be achieved by the conversion to
propane of homes that currently use either electricity or fuel oil products
because of the price advantage propane has over electricity and because propane
is a cleaner source of energy than fuel oil products. As of December 31, 1990,
there were approximately 23.7 million homes that used electricity for heating,
water heating, cooking and other household purposes, approximately 11.2 million
homes that used fuel oil products, and approximately 5.7 million homes that used
propane for such purposes.
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Empire Gas focuses on propane distribution to retail customers, including
residential, commercial, and agricultural users, emphasizing, in particular,
sales to residential customers, a stable segment of the retail propane market
that traditionally has generated higher gross margins per gallon than other
retail segments. Sales to residential customers, giving effect to the
Transaction, accounted for approximately 65.5% of the Company's aggregate
propane sales revenue and 74.3% of its aggregate gross margin from propane sales
in fiscal year 1993.
Empire Gas attracts and retains its residential customers by supplying
storage tanks, by offering superior service and by strategically locating
visible and accessible retail service centers on or near major highways. Empire
Gas focuses its operations on sales to customers to which it also leases tanks,
as sales to this segment of the retail propane market tend to be more stable and
typically provide higher gross margins than sales to customers who own tanks.
After the Transaction, Empire Gas will own approximately 109,000 storage tanks
that it leases to approximately 96% of its customers. Empire Gas' residential
customer base is relatively stable, because (i) fire safety regulations and
state container laws restrict the filling of a leased tank solely to the propane
supplier that leases the tank, (ii) rental agreements for its tanks restrict the
customers from using any other supplier, and (iii) the cost and inconvenience of
switching tanks minimizes a customer's tendency to change suppliers.
Historically, the Company has retained 90% of all its customers from year to
year, with the average customer remaining with Empire Gas for approximately 10
years.
BUSINESS STRATEGY
The change in ownership and management of the Company will enable it to
pursue a business strategy to increase its revenues and profitability through
(i) expansion by acquisitions and start-ups, (ii) expansion of its existing
residential customer base, and (iii) geographic rationalization and the
reduction of operating expenses. Empire Gas will seek opportunities to acquire
retail service centers in areas where it already has a strong presence and to
develop new retail service centers in new markets. Efforts to expand the
existing residential customer base will focus primarily on conversion of
customers currently using electricity for heating, conversion of customers
currently using fuel oil and wood due to environmental impact, and soliciting
customers created by the new home construction market in growth areas. Empire
Gas intends to dispose of a limited number of retail service centers that are
located in markets in which it does not have, and does not desire to develop, a
strong presence or that do not have the potential for long-term growth. Empire
Gas believes it will be able to reduce its operating expenses through a program
of consolidating a number of retail service centers where such consolidations
will yield operating efficiencies.
GROWTH THROUGH ACQUISITION OF RETAIL SERVICE CENTERS. Historically, the
acquisition of other retail service centers has been viewed by the industry as
one of the primary means of growth and much of the Company's growth over the
past thirty years has been attributable to acquisitions. As of December 31,
1991, there were substantially in excess of 8,000 retail marketing companies in
the continental United States with at least 13,500 distribution points. The
Company intends to focus its acquisition efforts on candidates that meet certain
criteria, including minimum cash flow requirements and location in areas of
economic growth or areas in which the Company currently has a market position
which it desires to strengthen.
The Company has not engaged in significant acquisition activity over the
past several years. With the change in ownership and management, the new
management, under the leadership of Mr. Lindsey, will emphasize achieving growth
through acquisitions. The Company has entered into an agreement which provides
that, contemporaneously with this Offering, the Company will complete the
acquisition of the assets of PSNC Propane Corporation, a company that has six
retail service centers with five additional bulk storage facilities located in
North Carolina, an area the Company has targeted because of its high economic
growth. The aggregate purchase price of the Acquisition will be approximately
$14.0 million (which includes payment for inventory and accounts receivable),
which consists of $12.0 million for certain assets, primarily customer and
storage tanks, approximately $1.5 million for accounts receivable and inventory,
and $500,000 for a non-compete agreement with the seller. The Company will fund
$12.0 million of the purchase price with the proceeds of this Offering and will
fund the $1.5 million for the purchase of the accounts receivable and inventory
through the Company's New Credit Facility. The purchase price for the
non-compete agreement will be paid out over five years with cash flow from
operations.
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<PAGE>
The Acquisition will enable the Company to expand its geographic market, to
increase its high margin residential customer base and to improve its operating
results and cash flow. The Company currently has only limited operations in
North Carolina, and all of the operations to be acquired from PSNC in the
Acquisition are out of the Company's current service territory. Based on the
gallons sold by the acquired operations in 1993, the Company believes this
acquisition will increase its annual propane sales by approximately 9.5 million
gallons, approximately 64% of which will be for sales to residential customers
with generally higher margins than sales to industrial and agricultural
customers. Empire Gas believes it will be able to improve PSNC Propane
Corporation's operating results and cash flow through the integration of its
operations into the Company's operations and the elimination of certain
administrative personnel as well as the elimination of certain other general and
administrative costs. See "Pro Forma Financial and Other Data." There can be no
assurance that the anticipated cash flows will be indicative of the actual cash
flows realized by the Company.
In March of 1994, the Company completed the acquisition of a retail service
center in Colorado with annual propane volume of approximately 700,000 gallons
and in April of 1994 signed a contract for the acquisition of a retail service
center in Missouri with annual propane volume of approximately 690,000 gallons.
The Colorado acquisition was completed at a cost of approximately $473,000, of
which $273,000 was paid in cash, with the remaining amount financed through the
issuance of two five-year notes to the sellers, one for $100,000 bearing
interest at 7% and the other for $100,000 bearing no interest. The Missouri
center will be purchased for a total cost of $325,000, of which $210,000 will be
paid in cash at closing, with the remaining amount financed through the issuance
of two ten-year notes to the seller, one for $90,000 bearing interest at 7% and
the other for $25,000 bearing no interest. The Company does not currently have
any material commitments for any acquisitions other than the agreements for the
pending acquisitions discussed above. The Company will continue to seek
additional opportunities to acquire retail service centers and intends to
finance such acquisitions, to the extent possible, through seller financing. The
Company will also rely on internally generated cash flow and bank financing,
including borrowing under the New Credit Facility, to meet any remaining
financing requirements. See "Risk Factors -- Potential Acquisitions and
Development of New Retail Service Centers." Any acquisitions will be subject to
the restrictions on investments and debt incurrence contained in the New Credit
Facility and the Indenture as well as the restrictions contained in the
Non-Competition Agreement. See "Description of the Senior Secured Notes";
"Description of Other Indebtedness"; "Certain Relationships and Related
Transactions -- The Transaction."
GROWTH THROUGH DEVELOPMENT OF NEW RETAIL SERVICE CENTERS IN NEW
MARKETS. The Company believes opportunities exist to increase the size and
profitability of its operations by starting new retail service centers in new
markets. The Company generally looks for opportunities in areas experiencing
economic growth. Indicators of this growth include the relocation of businesses
to an area or an increase in the population in the area. The Company started
three new retail service centers in fiscal year 1992 that will remain with the
Company after the Transaction (at an aggregate cost of $502,000) and four such
centers in fiscal year 1993 (at an aggregate cost of $453,000), and has started
three new retail service centers to date during fiscal year 1994 (at an
aggregate cost of $75,000 to date).
The Company continues to look for opportunities to purchase land and assets
to start new retail service centers. It is currently in the process of opening
new centers in Toledo, Ohio and Wilkesboro, North Carolina. Although the Company
expects to open additional centers, it has not yet begun opening any additional
centers and there can be no assurance additional centers will be open. Because
minimal capital expenditures (approximately $150,000 per center) are required to
cover first-year start up costs of a new retail service center, the Company
intends to rely primarily on internally generated cash flow to fund this
activity, with any remaining financing needs being met by bank financing. In
addition, the Company currently owns excess propane storage tanks that it will
be able to use to supply storage tanks needed in opening new service centers and
to reduce the cost of starting a new retail service center.
EXPANSION OF THE COMPANY'S EXISTING RESIDENTIAL RETAIL CUSTOMER
BASE. Empire Gas will also look for opportunities to expand its existing
residential customer retail base other than through acquisitions or the
development of new retail service centers. The Company believes there are
several factors that will enable it
39
<PAGE>
to expand its residential customer base including (i) the Company's ability to
supply storage tanks to its customers, (ii) the Company's reputation for quality
service, and (iii) the accessibility and visibility of the Company's retail
service centers, many of which are located on or near highways. The Company's
ability to expand its residential customer base other than through acquisitions
or the development of new retail service centers in new markets may be limited
by the relative stability of this market.
In addition to the foregoing, Empire Gas will look for growth opportunities
including opportunities to expand its commercial customer base and opportunities
presented from developments in the industry, including the potential for the
growth in the use of propane in the alternative motor fuel market or in
cogeneration plants. Any acquisitions or purchases of assets will be subject to
the restrictions on investments and debt incurrence contained in the New Credit
Facility and the Indenture. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital Resources
- -- Financing Activities"; "Description of Senior Secured Notes"; "Description of
Other Indebtedness -- New Credit Facility." Any acquisitions or start-ups of
retail service centers will also be subject to the restrictions in the
Non-Competition Agreement. See "The Transaction" and "Certain Relationships and
Related Transactions."
GEOGRAPHIC RATIONALIZATION AND REDUCTION OF OPERATING EXPENSES. The Company
believes that it can increase the efficiency with which it serves its customers
by consolidating a number of retail service centers, thereby reducing its
operating expenses. The Company has selected 16 service centers (two in
Missouri, six in Oklahoma and the remaining eight in Colorado, California,
Louisiana and Oregon) that can be consolidated into 8 service centers. The
Company consolidated several of these service centers in May of this year and
the remainder will be consolidated in June and July. The Company will continue
to evaluate opportunities to consolidate additional retail outlets. The
consolidation of companies will result in reduced operating expense due to
reduced general and administrative expenses and operating costs without a
corresponding reduction in revenue.
There can be no assurance as to the extent to which the implementation of
the Company's business strategy will contribute to the Company's operating
efficiencies, results of operations, or cash flow. See "Risk Factors --
Potential Acquisitions and Development of New Retail Service Centers."
PROPANE OPERATIONS
Propane is used for residential, commercial, and agricultural purposes.
Residential and commercial uses include heating, cooking, water heating,
refrigeration, clothes drying, and incineration. Commercial uses also include
metal cutting, drying, container pressurization, and charring, as well as use as
a fuel for internal combustion engines. Agricultural uses include brooder
heating, stock tank heating, crop drying, and weed control, as well as use as a
motor fuel for farm equipment and vehicles. Propane is also used for a number of
other purposes.
Sales of propane to residential and commercial customers, which account for
the vast majority of the Company's revenue, have provided a relatively stable
source of revenue for the Company. Sales to residential customers accounted for
65.5% of the Company's propane sales revenue and 74.3% of its gross margin (on a
pro forma basis after giving effect to the Transaction) in fiscal year 1993.
Historically, this market has provided higher margins than other retail propane
sales. Based on fiscal year 1993 propane sales revenue, the remaining customer
base consisted of 22.1% commercial and 12.4% agricultural and other customers.
While commercial propane sales are generally less profitable than residential
retail sales, the Company has traditionally relied on this customer base to
provide a steady, noncyclical source of revenues. No single customer accounts
for more than 2.1% of sales. On a pro forma basis, the Company's operations will
have substantial geographic diversification reducing the potential impact of
fluctuations of weather in a particular region.
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The following table sets forth, for the five years ending June 30, 1993,
selected aggregate operating data for the retail service centers of the Company
that will be retained after the Transaction and for the retail service centers
the Company is acquiring in the Acquisition.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------
1989 1990 1991 1992 1993
--------- --------- --------- --------- ---------
(IN THOUSANDS EXCEPT PERCENTAGES, DEGREE DAYS AND PER
GALLON DATA)
<S> <C> <C> <C> <C> <C>
Operating revenue.......................................... $ 65,469 $ 75,342 $ 75,250 $ 69,216 $ 76,931
Gross profit (1)........................................... $ 36,838 $ 39,455 $ 37,799 $ 38,031 $ 41,243
Retail gallons sold........................................ 87,852 82,180 74,278 76,167 84,840
Weighted average gross profit per gallon................... $ .360 $ .418 $ .441 $ .426 $ .429
Actual weighted average heating degree days (2)............ 8,191 7,872 7,303 7,321 8,265
Deviation from normal weighted average heating degree days
(2)....................................................... 150 (193) (749) (715) 100
Percent deviation from normal average heating degree
days...................................................... 1.9% (2.4%) (9.3%) (8.9%) 1.2%
<FN>
- ---------
(1) Represents operating revenue less the cost of product sold.
(2) Actual weighted average heating degree days represents the average heating
degree days in the Company's market areas for November through March of
each year weighted to reflect the retail gallons sold in each area.
Heating degree days represent the summation of the amount by which a 65
degree Fahrenheit base amount exceeds the mean daily temperature (average
of daily maximum and minimum temperatures) at various locations in the
United States and are calculated by the National Weather Service. Normal
weighted average heating degree days are determined based on a 50-year
moving average. The increase in actual weighted average heating degree
days for fiscal year 1993 was due primarily to a change in the markets in
which the Company did business.
</TABLE>
SOURCES OF SUPPLY. Propane is derived from the refining of crude oil or is
extracted in the processing of natural gas. The Company obtains its supply of
propane primarily from oil refineries and natural gas plants located in the
South, West and Midwest. Most of the Company's propane inventory is purchased
under supply contracts with major oil companies which typically have a one-year
term, at the suppliers' daily posted prices or a negotiated discount. During
fiscal 1993, contract suppliers sold nearly 75% of the propane purchased by the
Company (including the centers that are being transferred in the Transaction),
and the two largest suppliers sold 21.2% and 18.5%, respectively, of the total
volume purchased by Empire Gas. The Company has established relationships with a
number of suppliers over the past few years and believes it would have ample
sources of supply under comparable terms to draw upon to meet its propane
requirements if it were to discontinue purchasing propane from its two largest
suppliers. The Company takes advantage of the spot market as appropriate. The
Company has not experienced a shortage that has prevented it from satisfying its
customer's needs and does not foresee any significant shortage in the supply of
propane.
DISTRIBUTION. The Company purchases propane at refineries, gas processing
plants, underground storage facilities and pipeline terminals and transports the
propane by railroad tank cars and tank trailer trucks to the Company's retail
service centers, each of which has bulk storage capacity ranging from 16,000 to
180,000 gallons. After the Transaction, the Company will have retail service
centers with an aggregate storage capacity of approximately 8.7 million gallons
of propane, and each service center will have equipment for transferring the gas
into and from the bulk storage tanks. The Company operates 15 over-the-road
tractors and 37 transport trailers to deliver propane to its retail service
centers and also relies on common carriers to deliver propane to its retail
service centers. The Company also maintains an underground storage capacity of
approximately 120 million gallons. This facility is not currently being used and
cannot be used until a new disposal well is constructed, and the system is
tested and brought up to industry standards. The Company can meet its storage
needs from existing capacity and third-party sources, but is considering
41
<PAGE>
making the necessary modifications to provide storage that it may use for its
own purposes or lease to third parties. The Company has not yet determined the
amount that it would need to spend to make such modifications, or whether such
modifications will in fact be made.
Deliveries to customers are made by means of 325 bulk delivery tank trucks
owned by the Company. Propane is stored by the customers on their premises in
stationary steel tanks generally ranging in capacity from 25 to 1,000 gallons,
with large users having tanks with a capacity of up to 30,000 gallons.
Approximately 96% of the propane storage tanks used by the Company's residential
and commercial customers are owned by the Company and leased, rented, or loaned
to customers.
PROPANE GAS FROM SOURCE TO CUSTOMER
[GRAPHIC]
OPERATIONS. The Company has organized its operations in a manner that the
Company believes enables it to provide superior service to its customers and to
achieve maximum operating efficiencies. The Company's retail propane
distribution business is organized into eight regions: West Coast (North); West
Coast (South); Colorado; Midwest (North); Midwest (South); Midwest (Central);
North and South Carolina; and Mideast. Each region is supervised by a regional
manager. The regions are grouped into three divisions and the regional managers
report to their respective divisional vice president. Personnel located at the
retail service centers in the various regions are primarily responsible for
customer service and sales.
A number of functions are centralized at the Company's corporate
headquarters in order to achieve certain operating efficiencies as well as to
enable the personnel located in the retail service centers to focus on customer
service and sales. The Company makes centralized purchases of propane through
its corporate headquarters for resale to the retail service centers enabling the
Company to achieve certain advantages, including price advantages, because of
its status as a large volume buyer. The functions of cash management,
accounting, taxes, payroll, permits, licensing, asset control, employee
benefits, human resources, and strategic planning are also performed on a
centralized basis.
The corporate headquarters and the retail service centers are linked via a
computer system. Each of the Company's primary retail service centers is
equipped with a computer that is connected to a central data processing
department in the Company's corporate headquarters. Following the Transaction,
this central data processing department will be owned and operated by Service
Corp, which will be an affiliate of Energy. Service Corp. will provide data
processing and management information services to the Company pursuant to the
Services Agreement. See "Certain Relationships and Related Transactions." This
computer network system provides retail company personnel with accurate and
timely information on pricing, inventory, and customer accounts. In addition,
this system enables management to monitor pricing, sales, delivery and the
general operations of its numerous retail service centers and plan accordingly
to improve the operations of the Company as a whole.
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<PAGE>
FACTORS INFLUENCING DEMAND. Because a substantial amount of propane is sold
for heating purposes, the severity of winter weather and resulting residential
and commercial heating usage have an important impact on the Company's earnings.
Approximately 62% of the Company's retail propane sales (on a pro forma basis)
usually occur during the five months of November through March. Sales and
profits are subject to variation from month to month and from year to year,
depending on temperature fluctuations. See "Risk Factors -- Weather."
COMPETITION. The Company encounters competition from a number of other
propane distributors in each geographic region in which it operates. The Company
competes with these distributors primarily on the basis of service, stability of
supply, availability of consumer storage equipment, and price. The propane
distribution industry is composed of two types of participants: larger
multi-state marketers, including the Company, and smaller intrastate marketers.
Most of the Company's retail service centers face competition from a number of
other marketers.
Empire Gas also competes with suppliers of other energy sources. The Company
competes with suppliers of electricity for sales to residential and commercial
customers. The Company currently enjoys, and historically has enjoyed, a
competitive advantage because of the higher cost of electricity. Fuel oil does
not present a significant competitive threat in Empire Gas' primary service
areas due to the following factors: (i) propane is a residue-free, cleaner
energy source, (ii) environmental concerns make fuel oil relatively
unattractive, and (iii) fuel oil appliances are not as efficient as propane
appliances.
Empire Gas generally does not attempt to sell propane in areas served by
natural gas distribution systems, except sales for specialized industrial
applications, because the price per equivalent energy unit of propane is, and
has historically been, higher than that of natural gas. To use natural gas,
however, a retail customer must be connected to a distribution system provided
by a local utility. Because of the costs involved in building or connecting to a
natural gas distribution system, natural gas does not create significant
competition for the Company in areas that are not currently served by natural
gas distribution systems. In each of the past five years, the Company has lost
fewer than 0.5% of its customers to natural gas distributors.
The Company's ability to compete through acquisitions will be limited in
certain geographic areas as a result of the Non-Competition Agreement. Subject
to an exception for multi-state acquisitions, the Non-Competition Agreement
restricts the Company from making acquisitions in seven states (Alabama,
Florida, Georgia, Indiana, Kentucky and Tennessee) and certain territories in
five other states (southeastern Missouri, northern Arkansas, western Virginia,
western West Virginia and an area within a 50-mile radius of an existing Energy
operation in Illinois) for a period of three years from the date the Stock
Purchase Agreement is consummated. The Non-Competition Agreement also requires
the Company not to disclose secret information it may have regarding Energy, not
to solicit Energy customers or employees, and to grant Energy an option to
purchase from the Company (on terms substantially equivalent to the terms on
which the Company acquired the business) any business the Company acquires in
violation of the Non-Competition Agreement. The same restrictions apply to
Energy under the Non-Competition Agreement. See "The Transaction" and "Certain
Relationships and Related Transactions -- The Transaction."
RISKS OF BUSINESS. The Company's propane operations are subject to all the
operating hazards and risks normally incident to handling, storing, and
transporting combustible liquids, such as the risk of personal injury and
property damages caused by accident or fire. The Company's current automobile
liability policy provides coverage for losses of up to $101.0 million with a
$500,000 deductible per occurrence. The Company's general liability policy
provides coverage for losses of up to $101.0 million per occurrence with a
$500,000 deductible per occurrence subject to an aggregate deductible of $1.0
million for any policy period. Current workers compensation coverage also has a
$500,000 deductible per incident. The deductibles mean that the Company is
effectively self-insured for liability up to these deductibles.
REGULATION
The Company's operations are subject to various federal, state, and local
laws governing the transportation, storage and distribution of propane,
occupational health and safety, and other matters. All states in which the
Company operates have adopted fire safety codes that regulate the storage and
distribution of
43
<PAGE>
propane. In some states these laws are administered by state agencies, and in
others they are administered on a municipal level. Certain municipalities
prohibit the below ground installation of propane furnaces and appliances, and
certain states are considering the adoption of similar regulations. The Company
cannot predict the extent to which any such regulations might affect the
Company, but does not believe that any such effect would be material. It is not
anticipated that the Company will be required to expend material amounts by
reason of environmental and safety laws and regulations, but inasmuch as such
laws and regulations are constantly being changed, the Company is unable to
predict the ultimate cost to the Company of complying with environmental and
safety laws and regulations.
Empire Gas currently meets and exceeds Federal regulations requiring that
all persons employed in the handling of propane gas be trained in proper
handling and operating procedures. All employees have participated, or will
participate within 90 days of their employment date, in the National Propane Gas
Association's ("NPGA") Certified Employee Training Program. The Company has
established ongoing training programs in all phases of product knowledge and
safety.
EMPLOYEES
As of June 1, 1994, the Company had approximately 1,075 employees, none of
whom was represented by unions. Upon consummation of the Transaction, the
Company will have approximately 600 employees. The Company has never experienced
any significant work stoppage or other significant labor problems and believes
it has good relations with its employees.
LEGAL PROCEEDINGS
The Company and its subsidiaries are defendants in various routine
litigation incident to its business, none of which is expected to have a
material adverse effect on the Company's financial position or results of
operations.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Upon consummation of the Transaction, the directors and executive officers
of the Company will be as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------ --- ---------------------------------------------
<S> <C> <C>
Paul S. Lindsey, Jr. 49 Chairman of the Board, Chief Executive
Officer, and President
Douglas A. Brown 33 Director
Kristin L. Lindsey 46 Director/Vice President
Bruce M. Withers, Jr. 67 Director
Jim J. Shoemake 56 Director
Mark W. Buettner 51 Divisional Vice President
Kenneth J. DePrinzio 46 Divisional Vice President
Robert C. Heagerty 46 Divisional Vice President
James E. Acreman 56 Vice President/Treasurer
Valeria Schall 39 Vice President/Corporate Secretary
Willis D. Green 56 Controller
</TABLE>
The directors will serve for a term ending on the date of the Company's next
annual meeting in October 1994, or until their successors are elected or
qualified. Officers of the Company are elected by the Board of Directors of the
Company and will serve at the discretion of the Board. As required by the
Indenture, immediately following this Offering, an audit committee will be
formed consisting of two independent directors. See "Description of the Senior
Secured Notes -- Covenants."
BOARD OF DIRECTORS
Upon consummation of the Offering, the Company's directors will be as
follows:
PAUL S. LINDSEY, JR. Mr. Lindsey will serve as Chairman of the Board, Chief
Executive Officer, and President of the Company. Mr. Lindsey currently serves as
Vice Chairman of the Board and Chief Operating
44
<PAGE>
Officer of the Company, positions he has held since February 1987 and March
1988, respectively. Mr. Lindsey joined the Company in 1967 when the company by
which he was employed, a subsidiary of Gulf Oil Company, was acquired by the
Company. He has a total of 29 years of experience in the oil and gas industry,
26 of which are with the Company. After serving in various administrative
positions with the Company, including the position of Vice President of Finance,
Mr. Lindsey assumed responsibility for operation of the Company's retail service
centers and, essentially, all other operational functions of the Company. Mr.
Lindsey has been a Director of the NPGA, the industry's leading association,
since February 1991, and has served on the Governmental Affairs Committee of the
NGPA since May 1987. He was recently elected to NPGA's executive committee.
DOUGLAS A. BROWN. Mr. Brown will serve as a director of the Company. Since
1989, Mr. Brown has been a member of Holding Capital Group, Inc. an equity
investment group specializing in the acquisition of and investment in privately
held, middle market businesses. Holding Capital Group has performed certain
investment services for Empire Gas. See "Certain Relationships and Related
Transactions."
KRISTIN L. LINDSEY. Mrs. Lindsey will serve as a director and Vice
President of the Company. Mrs. Lindsey is the wife of Paul S. Lindsey, Jr., (see
above). For the past five years, Mrs. Lindsey has been pursuing charitable and
other personal interests. Ms. Lindsey has 11 years of experience in the LP gas
industry, all of these with the Company. Her experience is primarily in the area
of LP gas supply and distribution. In her capacity as Vice President, Mrs.
Lindsey will be involved in the Company's propane supply and distribution
activities.
BRUCE M. WITHERS, JR. Mr. Withers will serve as a director of the Company.
Mr. Withers is Chairman and Chief Executive Officer of Trident NGL Holding,
Inc., a major fully-integrated natural gas liquids company, a position he has
held since August, 1991. For the previous 18 years, Mr. Withers was President of
the Transmission & Processing Division of Mitchell Energy Corporation and, prior
to that, Mr. Withers was associated with Tenneco Oil & Gas.
JIM J. SHOEMAKE. Mr. Shoemake will serve as a Director of the Company. Mr.
Shoemake is lead litigation partner of Guilfoil, Petzall & Shoemake, located in
St. Louis, Missouri, where he has been since 1976. Mr. Shoemake was Assistant
U.S. Attorney of the Eastern District of Missouri from 1967 to 1970 and was with
the U.S. Dept of Justice for one year prior to that time.
EXECUTIVE OFFICERS
Upon consummation of the Transaction, the individuals listed below will
serve as the Company's executive officers. These individuals have an average of
20 years of experience in the LP gas industry and have been with the Company an
average of 12 years.
PAUL S. LINDSEY, JR. Chairman of the Board, Chief Executive Officer and
President. See description under "Board of Directors."
MARK W. BUETTNER. Mr. Buettner will serve the Company as a Divisional Vice
President, a position he has held with the Company since mid-1993. Mr. Buettner
has also held the positions of Regional Vice President and Regional Manager
during his five years with the Company. Mr. Buettner began his career in the LP
gas industry in a family-owned business and has a total of 39 years experience
in the LP gas industry. As Divisional Vice President of the Company, Mr.
Buettner is responsible for the Company's retail operations on the West Coast
and in Arizona, Colorado, and Idaho.
KENNETH J. DEPRINZIO. Mr. DePrinzio will serve the Company as a Divisional
Vice President, a position he has held with the Company since mid-1993. Mr.
DePrinzio joined the Company in May 1992 as a Regional Manager. From 1990 to
1991, Mr. DePrinzio was a Vice President of Star Gas Corporation. For the prior
17 years, Mr. DePrinzio worked with Petrolane, Inc., serving as an Area Vice
President during part of his tenure. From 1991 to 1992, he owned and operated a
restaurant. As Divisional Vice President of the Company, Mr. DePrinzio is
responsible for the Company's retail operations in Michigan, Ohio, South
Carolina, and North Carolina.
ROBERT C. HEAGERTY. Mr. Heagerty will serve the Company as a Divisional
Vice President, a position he has held with the Company since mid-1993. Mr.
Heagerty has also held the positions of Regional Manager
45
<PAGE>
and Regional Vice President during his seven years with the Company. He has 15
years of experience in the LP gas industry and joined the Company when it
acquired D&H Propane. At the time of the acquisition, Mr. Heagerty was President
of D&H Propane. As Divisional Vice President of the Company, Mr. Heagerty is
responsible for the Company's retail operations in Oklahoma, Kansas, Missouri,
Arkansas, Texas, Louisiana, Iowa, Minnesota, Wisconsin, and Illinois.
JAMES E. ACREMAN. Mr. Acreman will serve the Company as Vice President and
Treasurer. Mr. Acreman has held the position of Senior Vice President of the
Company since 1989. Mr. Acreman has 16 years of experience in the LP gas
industry, all of those with the the Company. During that time he has held the
positions of Regional Vice President, Regional Manager, and Retail Manager. As
Senior Vice President of the Company, Mr. Acreman has been responsible for
various areas including expense control and human resources.
VALERIA SCHALL. Ms. Schall will serve the Company as Vice President,
Corporate Secretary, and Assistant to the Chairman of the Board of Directors.
She has held the position of Vice President of Empire Gas since December 1992,
and those of Corporate Secretary and Assistant to the Vice Chairman of the Board
of Directors since September 1985, and February 1987, respectively. Ms. Schall
has 13 years of experience in the LP gas industry, all of those with the
Company. During that time she has had various administrative and accounting
responsibilities. Ms. Schall is responsible for federal compliance filings,
acquisitions, divestitures, real estate closings, control of certain corporate
assets, internal audit, risk management, and communications with employees
through various corporate handbooks and manuals, and acting as a liaison with
legal counsel.
KRISTIN L. LINDSEY. Director and Vice President. See description under
"Board of Directors."
WILLIS D. GREEN. Mr. Green will serve as Controller of the Company, a
position he has held with the Company since July 1989. Mr. Green has 22 years of
experience in the LP gas industry. He joined the Company in 1979 and during his
tenure has had responsibility for various administrative and accounting
functions. Prior thereto, he was an internal auditor and systems analyst with
Phillips Petroleum Co. for nine years. Mr. Green is a Certified Public
Accountant and is responsible for the corporate financial control of the
Company.
The individuals currently serving as directors and executive officers of
Empire Gas are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------- --- --------------------------------------------------
<S> <C> <C>
Chairman of the Board and Chief Executive
Robert W. Plaster* 63 Officer (1)
Vice Chairman of the Board and Chief Operating
Paul S. Lindsey, Jr. 49 Officer
Stephen R. Plaster* 35 Director and President (2)
Robert L. Wooldridge* 63 Executive Vice President -- Marketing (3)
James E. Acreman 56 Senior Vice President
Valeria Schall 39 Vice President/Corporate Secretary
Willis D. Green 56 Vice President/Controller
<FN>
- ---------
* These individuals will terminate their employment with Empire Gas upon
consummation of the Transaction.
(1) Mr. Plaster has served as the Chairman of the Board and Chief Executive
Officer of the Company since 1963. Mr. Plaster established the Company in
1963 and has been involved in the propane industry since the early 1960s.
(2) Mr. Stephen Plaster has served as a director and President of the Company
since 1988. Prior thereto, Mr. Plaster served the Company in various
positions. Mr. Plaster is the son of Mr. Robert W. Plaster, the Chairman of
the Board, Chief Executive Officer and President of the Company.
</TABLE>
46
<PAGE>
<TABLE>
<S> <C>
(3) Mr. Wooldridge has served the Company as Executive Vice President --
Marketing since April 1992. Prior thereto, he held the position of Senior
Vice President -- Marketing at the Company.
</TABLE>
EXECUTIVE COMPENSATION
The following table provides compensation information for each of the years
ended June 30, 1993, 1992, and 1991 for Empire Gas' Chief Executive Officer and
the four other most highly compensated executive officers of Empire Gas for
services rendered to the Company during each of those years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------- ALL
OTHER OTHER
FISCAL ANNUAL COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (1) (1) (2)
- --------------------------------------------- ------ ---------- ------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Robert W. Plaster(3) 1993 $1,000,000 -- $ 100,000(4) $ 1,648
Chief Executive Officer 1992 1,000,000 -- -- --
and Chairman of the Board 1991 947,916 -- -- --
Paul S. Lindsey, Jr. 1993 230,000 $ 5,000 -- 1,648
Chief Operating Officer and 1992 230,000 -- -- --
Vice Chairman of the Board 1991 230,000 -- -- --
Stephen R. Plaster(3) 1993 100,000 50,000 -- 927
President and Director 1992 75,000 50,000 -- --
1991 75,000 50,000 -- --
Robert L. Wooldridge(3) 1993 90,000 69,222 -- 970
Executive Vice President -- 1992 85,000 45,663 -- --
Marketing 1991 85,000 45,000 -- --
James E. Acreman 1993 70,000 34,794 -- 464
Senior Vice President 1992 40,000 22,664 -- --
1991 40,000 27,866 -- --
<FN>
- ---------
(1) In accordance with the transitional provisions applicable to the revised
rules on executive officer and director compensation disclosures adopted by
the Securities and Exchange Commission, amounts of Other Annual
Compensation and All Other Compensation for Empire Gas' 1992 and 1991
fiscal years are excluded.
(2) This amount includes the allocation of a portion of the forfeitures under
the Company's profit sharing plan (the "Profit Sharing Plan") to each of
the named officers in the following amounts: Mr. R. Plaster -- $1,296, Mr.
Lindsey -- $1,296, Mr. S. Plaster -- $198, Mr. Wooldridge -- $207, and Mr.
Acreman -- $99. This amount also includes the allocation of a portion of
the forfeitures under the Company's stock bonus plan (the "Stock Bonus
Plan") to each of the named officers in the following amounts: Mr. R.
Plaster -- $352, Mr. Lindsey -- $352, Mr. S. Plaster -- $729, Mr.
Wooldridge -- $763, and Mr. Acreman -- $365. The Company made no
contributions to either plan in fiscal year 1993. In September 1992, the
Company terminated both plans and filed with the Internal Revenue Service
("IRS") for determination that the plans were qualified at termination. The
IRS issued favorable determination letters for both plans in December 1992.
The Company liquidated the assets of both plans and paid out the plan
accounts to participants on March 31, 1993.
(3) Upon consummation of the Transaction, these individuals will no longer
serve as executive officers of the Company.
(4) Includes $75,000 to meet the requirements for a new car each year for Mr.
Plaster and $25,000 for services provided by the Company, free of charge,
to Empire Ranch, Inc., a corporation wholly owned by Mr. Plaster and
members of his family. These perquisites were provided to Mr. Plaster in
accordance
</TABLE>
47
<PAGE>
<TABLE>
<S> <C>
with the terms of his employment agreement with the Company. See "--
Employment Agreements." This amount does not include amounts paid to a
corporation owned by Mr. Plaster to lease the jet aircraft used by Mr.
Plaster. Nor does it include amounts paid to Empire Ranch, Inc. pursuant to
an agreement between the Company and Empire Ranch, Inc. See "Certain
Relationships and Related Transactions -- Past Transactions and
Relationships."
</TABLE>
EMPLOYMENT AGREEMENTS
Upon consummation of the Transaction, Mr. Lindsey will enter into an
employment agreement with the Company. The agreement will have a five-year term
and will provide for the payment of an annual salary of $350,000 and
reimbursement for reasonable travel and business expenses. The agreement will
require Mr. Lindsey to devote substantially all of his time to the Company's
business.
The Company has an employment agreement with Mr. Robert W. Plaster that will
be terminated, at no cost to the Company, in connection with the Transaction.
The agreement provides for payment of an annual salary of at least $1.0 million,
reimbursement of all expenses incurred pursuant to his employment and certain
fringe benefits, including but not limited to, a new car each year, the
provision of certain services free of charge to Empire Ranch, Inc., a
corporation owned by Mr. Plaster and members of his family, and the use of the
jet aircraft leased by the Company. See "Certain Relationships and Related
Transactions." Under the agreement, if Mr. Plaster dies or becomes permanently
incapacitated during its term, the agreement provides that the Company will make
a one-time payment, in an amount equal to Mr. Plaster's annual salary, to the
Robert W. Plaster Trust established December 31, 1988.
INCENTIVE STOCK OPTION PLAN
Pursuant to the Company's Incentive Stock Option Plan (the "Stock Option
Plan"), the Company grants options to its employees for the purchase of its
Common Stock. Options granted pursuant to the Stock Option Plan are exercisable
at the end of the first month following the date of grant at 6.7% of the total
number of shares subject to options and for each month thereafter, at the rate
of 1.7% of the total number of shares subject to options. The options expire ten
years from their grant. Stock issued under the Plan is subject to restrictions
on transfer including a right of first refusal exercisable by the Company in the
event an employee terminates his employment with the Company or wishes to
transfer his shares. During fiscal year 1993 no options were granted pursuant to
this Plan. Prior to the consummation of the Offering, all of the 129,250
outstanding options, all of which are exercisable, must be exercised. See
"Certain Relationships and Related Transactions."
The following table sets forth certain information concerning options
exercised during fiscal year 1993 and unexercised options held as of that date
by each of the individuals named in the Summary Compensation Table:
AGGREGATED OPTION EXERCISES IN THE FISCAL YEAR ENDED JUNE 30, 1993
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED JUNE 30, 1993 JUNE 30, 1993(1)
ON VALUE ----------------------------- -----------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- --------- ----------- ---------- ----------------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Plaster.......... -- -- -- -- -- --
Paul S. Lindsey, Jr........ -- -- -- -- -- --
Stephen R. Plaster......... 19,500 $ 112,313 -- -- -- --
Robert L. Wooldridge....... 72,467 479,898 40,000 -- $ 220,000
James E. Acreman........... 13,250 87,755 8,000 -- 44,000 --
<FN>
- ---------
(1) Calculated based on the estimated fair market value of the Company's common
stock at the exercise date or year-end, as the case may be, minus the
exercise price. The Company has estimated the fair market value of the
stock as of these dates to be $7.00, the price per share to be received by
certain officers, directors, and employees in connection with the
Transaction.
</TABLE>
48
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not have a compensation committee. Mr. Lindsey, the Vice
Chairman of the Board and Chief Operating Officer of the Company, makes the
initial decision concerning executive compensation for the executive officers of
the Company, other than decisions concerning his own and his wife's
compensation, which are then approved by the Board of Directors of the Company.
Upon consummation of the Transaction, the Company will not have a compensation
committee, and all decisions concerning compensation, other than decisions
concerning his own and his wife's compensation, will be made by Mr. Lindsey,
subject to approval by the Company's Board of Directors. The independent
directors will determine the compensation of Mr. Lindsey and his wife.
DIRECTOR COMPENSATION
The directors of Empire Gas do not receive any compensation for their
services. Directors of a subsidiary of Empire Gas, other than Mr. Lindsey and
Mr. Stephen Plaster, receive an annual fee of $25,000, payable quarterly, for
their services. Following the Transaction, all directors of Empire Gas will
receive an annual fee of $25,000, payable quarterly.
49
<PAGE>
PRINCIPAL SHAREHOLDERS
EMPIRE GAS
The table below sets forth the following information with respect to the
beneficial ownership of Empire Gas as of April 1, 1994, and on a pro forma
basis, upon consummation of the Transaction and this Offering and the
application of net proceeds therefrom, by persons owning more than five percent
of any class, by all directors of the Company, by the individuals named in the
Summary Compensation Table, and by all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
PRO FORMA FOR THE
AS OF APRIL 1, 1994 TRANSACTION
---------------------------- --------------------------
NUMBER OF SHARES NUMBER OF SHARES
NAME OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED PERCENT BENEFICIALLY OWNED PERCENT
- ---------------------------------------- ------------------ -------- --------------------------
<S> <C> <C> <C> <C>
Robert W. Plaster(2).................... 10,974,103 79.3% -- --
Paul S. Lindsey, Jr.(3)................. 1,507,610 10.9 1,507,610 95.5%
Kristin L. Lindsey(3)................... 753,805 5.4 753,805 47.7
Stephen R. Plaster(4)................... 619,888 4.5 -- --
Robert L. Wooldridge(5)................. 260,500 1.9 -- --
James E. Acreman(6)..................... 21,550 .2 17,701 1.1
Douglas A. Brown........................ -- -- -- --
Bruce M. Withers, Jr.................... -- -- -- --
Jim J. Shoemake......................... -- -- -- --
All directors and executive officers as
a group
(3 persons, 8 persons on a pro forma
basis)(7).............................. 13,411,554 96.6 1,554,170 98.4
<FN>
- ---------
(1) The address of each of the beneficial owners is c/o Empire Gas
Corporation, P.O. Box 303, 1700 South Jefferson Street, Lebanon, Missouri
65536.
(2) Prior to the Transaction, Mr. Plaster's shares consist of 10,515,103
shares owned by the Robert W. Plaster Trust established December 13, 1988
and 459,000 shares owned by four trusts for the benefit of three of Mr.
Plaster's daughters, the Tammy Jane Plaster Trust established July 30,
1984, the Dolly Francine Plaster Trust established July 30, 1984, the
Cheryl Jean Plaster Schaefer Trust dated October 30, 1988 and the Cheryl
Jean Plaster Schaefer Trust dated July 30, 1984.
(3) Mr. Lindsey's shares consist of 753,805 shares owned by the Paul S.
Lindsey, Jr. Trust established January 24, 1992 and 753,805 shares owned
by the Kristin L. Lindsey Trust established January 24, 1992. Mr. Lindsey
has the power to vote and to dispose of the shares held in the Kristin L.
Lindsey Trust. Mrs. Lindsey's shares consist of the shares owned by the
Kristin L. Lindsey Trust. Mrs. Lindsey disclaims beneficial ownership of
the shares held by her husband in the Paul S. Lindsey, Jr. Trust.
(4) Mr. Stephen Plaster's shares are owned by the Stephen Robert Plaster Trust
established October 30, 1988 and the Stephen Robert Plaster Trust
established July 30, 1984.
(5) Includes 40,000 shares Mr. Wooldridge may acquire upon exercise of options
that are currently exercisable. Mr. Wooldridge will be required to
exercise these options prior to the Effective Date. See "Management --
Incentive Stock Option Plan."
(6) Includes 8,000 shares Mr. Acreman may acquire upon exercise of options
that are currently exercisable. Mr. Acreman will be required to exercise
these options prior to the Effective Date. See "Management -- Incentive
Stock Option Plan."
(7) The amount shown as of April 1, 1994, includes the shares beneficially
owned by Messrs. R. Plaster, Lindsey, S. Plaster, Wooldridge, and Acreman
as set forth above, and 236,903 shares owned by other executive officers,
including 15,000 shares those officers may acquire upon exercise of
options that are currently exercisable. The options must be exercised
prior to the Effective Date. See "Management --
</TABLE>
50
<PAGE>
<TABLE>
<S> <C>
Incentive Stock Option Plan." The amounts shown immediately after the
Transaction include the shares beneficially owned by Messrs. Lindsey and
Acreman, and Mrs. Lindsey as set forth above, and 28,859 shares owned by
other executive officers.
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THE TRANSACTION
The following will occur in connection with the Transaction:
Pursuant to the terms of the Stock Redemption Agreement, the Company will
repurchase the shares of Common Stock held by Mr. Robert W. Plaster, and trusts
for the benefit of Mr. Plaster, Mr. Stephen Plaster, and certain of their
relatives by exchanging one share of Energy Common Stock for each share of
Common Stock. The Stock Redemption Agreement also obligates the Company to
repurchase the shares of Common Stock held by Mr. Robert L. Wooldridge, an
executive officer of the Company, and Mr. S. A. Spencer, a director of a
subsidiary of the Company. Mr. Wooldridge and Mr. Spencer will receive $7.00 per
share for a portion of their shares of Common Stock and one share of Energy
Common Stock for their remaining shares of Common Stock. The aggregate amount of
shares of Common Stock held by these individuals and the consideration to be
received for the shares is as set forth below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
NUMBER OF SHARES OF ENERGY COMMON
NAME OF COMMON STOCK STOCK CASH
- ---------------------------------- ---------------- ---------------- --------
<S> <C> <C> <C>
Mr. Robert W. Plaster............. 10,974,103(1) 10,974,103 --
Mr. Stephen R. Plaster............ 619,888(2) 619,888 --
Mr. Wooldridge.................... 260,500(3) 163,686 $677,698
Mr. S.A. Spencer.................. 125,000 100,000 175,000
<FN>
- ---------
(1) Includes 459,000 shares held in four trusts for Mr. Plaster's daughters.
(2) These shares are held in two trusts for Mr. S. Plaster.
(3) Includes 40,000 options Mr. Wooldridge is required to exercise prior to
the Effective Date.
</TABLE>
Following the Transaction, Mr. Plaster will be the controlling shareholder of
Energy, which will own approximately 133 retail services centers located in ten
states. See "The Transaction."
Upon consummation of the Transaction, Mr. Plaster will resign from his
positions as Chairman of the Board and as Chief Executive Officer of the Company
and from his positions with the Company's subsidiaries. Messrs. S. Plaster,
Wooldridge, and Spencer will also resign from their positions with the Company
and its subsidiaries. Energy and Messrs. Plaster and S. Plaster have entered
into the Non-Competition Agreement which restricts them and their affiliates
from competing with the Company, Mr. Lindsey and their affiliates in the
territories in which the Company is doing business immediately following the
Stock Purchase. Similarly, Empire Gas, Mr. Lindsey, and their affiliates are
restricted from competing with Energy, Messrs. Plaster and S. Plaster and their
affiliates in seven states and certain areas within five states. The Non-
Competition Agreement is for a term of three years from the Effective Date.
Certain relatives of Mr. Plaster and Mr. Lindsey, and the officers of Energy and
the Company must enter into a substantially similar non-competition agreement.
See "The Transaction."
The Stock Redemption Agreement also provides for: (i) a payment to be made
by either the Company or Energy based on the balance of certain liabilities net
of certain assets as of the Effective Date; (ii) a payment of approximately $4.1
million to be made by the Company to Energy; (iii) an agreement regarding use of
the Empire Gas name and logo; and (iv) the allocation, between the Company and
Energy, of the responsibility for litigation relating to matters or events
occurring prior to the Effective Date (most of which is related to liability
within the Company's deductibles under its insurance policies), and the
responsibility for any costs related to any such litigation. The Company and
Energy have also entered into a tax indemnity agreement allocating liability for
taxes incurred prior to the Transaction.
51
<PAGE>
Pursuant to the terms of the Stock Redemption Agreement, the Company will
repurchase, at face value, $4.7 million principal amount of the Company's 2007
9% Subordinated Debentures from Robert W. Plaster and will purchase, at face
value, $300,000 principal amount of the Company's 2007 9% Subordinated
Debentures from certain departing officers and employees of the Company. See
"Use of Proceeds." The Company is required to redeem approximately $1.37 million
principal amount of the debentures in December of each year through the year
2006. As a result of this transaction and the purchase by the Company of an
additional $8.7 million principal amount of the 2007 9% Subordinated Debentures
from unaffiliated noteholders, the Company will not be required to purchase
additional 2007 9% Subordinated Debentures to meet sinking fund requirements
until after the maturity of the Senior Secured Notes.
ONGOING TRANSACTIONS AND RELATIONSHIPS
The following discussion describes ongoing transactions that will occur in
connection with the Transaction, and existing transactions and relationships
that are expected to continue following the Transaction.
The Company and Empire Service Corp. ("Service Corp."), a wholly owned
subsidiary of Energy that will be controlled by Mr. Robert W. Plaster following
the Transaction, have entered into the Service Agreement pursuant to which
Service Corp. will provide to the Company certain data processing, management
information, receptionist and switchboard services. The Company will perform its
own accounting and bookkeeping functions. The Company shall pay a monthly fee
equal to (i) its proportionate share of the actual costs incurred by Service
Corp. in providing these services to the Company and to Energy, less
approximately $2,500 for services provided to two other entities controlled by
Mr. Plaster, and (ii) the actual cost incurred for certain telephone and postal
costs and for the maintenance contract for the computer terminals used by the
Company in its operations. At any time after June 30, 1998, the Company may
terminate the Service Agreement in the event of a change in its business
circumstances, such as an acquisition. In the event the Service Agreement is
terminated by the Company prior to its expiration date, the Company will
continue to be obligated to pay, for the remainder of the original term, a
monthly payment equal to the amount paid by the Company for the last full month
for which services were rendered. The Service Agreement is for a term expiring
June 30, 2001, subject to earlier termination if the Company's new lease for its
headquarters expires or if there is a change in control of the Company.
The Company leases its headquarters in Lebanon, Missouri from a corporation
controlled by Mr. Robert W. Plaster, under a lease agreement effective June 30,
1991 for an initial term ending June 30, 2001. The Company made annual lease
payments of $200,000 in fiscal years 1991, 1992, and 1993. The Company also paid
the utilities, taxes and maintenance costs during each of those years. This
lease will be terminated and a new lease will become effective upon consummation
of the Transaction. The new lease provides the Company the right to use
approximately 8,020 square feet of office space in the Lebanon location as well
as the use of the parking facilities for a term expiring June 30, 2001. The
Company will pay monthly rent of $6,250 and will be responsible for its
proportionate share of utilities and taxes and for the payment of certain
repairs and maintenance costs. The lease is subject to earlier termination, at
the option of the lessor, in the event of a change in control of the Company. At
any time after June 30, 1998, the Company may terminate the lease in the event
of a change in its business circumstances, such as an acquisition. In the event
the Company terminates the lease prior to its expiration date, the Company will
continue to be obligated to pay, for the remainder of the original term, the
monthly rent payment; provided, however, that the lessor shall use its best
efforts to re-let the premises.
Pursuant to the Aircraft Facility Agreement, the Company leased a jet
aircraft and an airport hangar from a corporation owned by Mr. Robert W. Plaster
during the last quarter of fiscal year 1992 and all of fiscal year 1993. Under
the terms of this agreement, the Company was responsible for direct lease
payments and operating costs, including insurance, of the aircraft and the
hangar. The Company paid direct rent of $25,000 in fiscal year 1992 and $100,000
in fiscal year 1993. The Company also paid operating expenses relating to the
lease of $385,000 in fiscal year 1992 and $276,000 in fiscal year 1993. This jet
had been purchased by Mr. Plaster from the Company on June 30, 1991, when he
exercised an option to purchase the jet at its depreciated net book value of
$32,399, an amount the Company believes was substantially less than its fair
market value at that date. This option had been granted to Mr. Plaster pursuant
to an employment
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agreement, negotiated in 1983 between Mr. Plaster and the then-controlling
shareholders of the Company in connection with a leveraged buy-out and merger
involving the Company. In connection with the Transaction, the Aircraft Facility
Agreement will be terminated; however, pursuant to the Stock Redemption
Agreement, the Company may use the hangar, at no cost, for storage and
maintenance of the Company's two turbo prop aircraft for a term that coincides
with the Company's new lease for its headquarters.
Mrs. Kristin L. Lindsey, who beneficially owns approximately 5.4% of the
Company's outstanding common stock and who will become a director of the Company
upon consummation of the Transaction, is the majority stockholder in a company
that supplies paint to the Company. The Company's purchases of paint from this
company totalled $117,000 in fiscal year 1992 and $125,000 in fiscal year 1993.
During fiscal year 1993, the Company received certain financial advisory
services in connection with the negotiation of the existing credit facility from
Mr. Douglas A. Brown and Holding Capital Group, Inc. ("HCGI"), who received
$125,000 as compensation for these services. Mr. Brown, who will become a
director of the Company upon consummation of the Transaction and Mr. S.A.
Spencer, a director of a subsidiary of the Company, are affiliated with HCGI.
Mr. Brown and HCGI have been engaged to provide certain financial advisory
services in connection with the negotiation of the New Credit Facility and the
structuring and execution of this Offering, and will receive $500,000 for these
services.
The Company has entered into an agreement with each of its current
shareholders (all of whom are directors or employees of the Company) providing
that the Company has a right of first refusal with respect to the sale of any
shares by such shareholders. In addition, the Company has the right to purchase
from such shareholders all shares they hold at the time of their termination of
employment with the Company at the then current fair market value of the shares.
The fair market value is determined in the first instance by the Board of
Directors and by an independent appraisal (the cost of which is split between
the Company and the departing shareholder) if the departing shareholder disputes
the board's determination.
PAST TRANSACTIONS AND RELATIONSHIPS
The following discussion describes transactions that have occurred during
the past three fiscal years that are not expected to continue following the
Transaction.
During fiscal years 1991, 1992, and 1993, pursuant to the terms of the Ranch
Agreement, the Company paid $150,000 annually and provided services each year at
a cost of approximately $25,000 to a wildlife preserve owned by Empire Ranch,
Inc. The Company used the facilities at the preserve for meetings with Company
employees and business guests. In connection with the Transaction, the Ranch
Agreement is being terminated.
Mr. Robert W. Plaster and trusts or entities controlled by Mr. Plaster have
provided demand loans to the Company over the past three years. The maximum
amount loaned to the Company during fiscal year 1991, 1992, and 1993 was
$5,928,000, $5,753,000, and $3,000,000, respectively. These loans were fully
repaid by June 30, 1993. The interest rate on these loans was equal to or below
the average rates available to the Company through its bank lines of credit in
effect during each of those years. The Company incurred total interest expense
of $583,000, $315,000, and $200,000 for fiscal years 1991, 1992, and 1993,
respectively.
The Company provides bookkeeping, data processing, and accounting services
to two corporations controlled by Mr. Robert W. Plaster for an annual fee of
$84,000. The Company received an annual fee of $84,000 in fiscal year 1991,
1992, and 1993 for providing these services. Following the Transaction, the
Company will no longer provide these services to the two corporations. See "--
Ongoing Transactions and Relationships"
Mr. Paul W. Zeller, a director of a subsidiary of the Company during fiscal
year 1991 and 1992, was an officer of Reliance Insurance Company, the Company's
lender on its Old Term Loan. The maximum outstanding balance on the Old Term
Loan was $20 million during fiscal year 1991 and $13.25 million during fiscal
year 1992. The Company paid interest of $2.9 million, $2.4 million, and $710,000
on the Old Term Loan during fiscal years 1991, 1992, and 1993, respectively. In
November 1992, the Old Term Loan (which was accruing interest at 14.5% per
annum) was repaid with funds provided by a $13.25 million loan from Mr.
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Robert W. Plaster, through the Robert W. Plaster Trust established December 13,
1988. This loan was secured by substantially all of the assets of the Company
and its subsidiaries on a PARI PASSU basis with the Company's Old Working
Capital Facility. The loan bore interest at 10% per annum and was repaid in June
1993 with the proceeds from the Term Loan. The Company incurred interest expense
of $749,000 during fiscal year 1993 for this loan.
DESCRIPTION OF THE UNITS
Each Unit consists of Senior Secured Notes, each such Senior
Secured Note having a principal amount at maturity of $1,000 and
Warrants each to purchase one share of the Company's Common Stock at a price of
$7.00 per share, subject to adjustment. The Senior Secured Notes and the
Warrants will become separately transferable at the close of business on
, 1994 (the "Separation Date"). See "Description of the Senior
Secured Notes" and "Description of the Warrants" for further information
concerning the Senior Secured Notes and Warrants, respectively. In addition, see
"Description of Capital Stock" for additional information relating to the Common
Stock issuable upon exercise of the Warrants.
FORM, DENOMINATION AND REGISTRATION
The Senior Secured Notes will be issued in the form of a fully registered
Global Note (the "Global Note") and the Warrants will be issued in the form of a
fully registered Global Warrant (the "Global Certificate" and together with the
Global Note, the "Global Securities"), each of which will be deposited with, or
on behalf of, The Depository Trust Company (the "Depositary") and registered in
the name of a nominee of the Depositary. The Depositary has provided the Company
and the Underwriter with the information set forth below.
The Depositary will act as securities depositary for the Global Securities.
The Global Securities will be issued as fully-registered securities in the name
of Cede & Co. (the Depositary's partnership nominee).
The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The Depositary holds securities that its participants (the "Participants")
deposit with the Depositary. The Depositary also facilitates the settlement
among Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations. The Depositary is owned by a number of its Direct Participants
and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and
the National Association of Securities Dealers, Inc. Access to the Depositary
system is also available to others such as securities brokers and dealers,
banks, and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to the Depositary and its Participants are
on file with the Commission.
Purchases of Senior Secured Notes or Warrants under the Depositary system
must be made by or through Direct Participants, which will receive a credit for
the Senior Secured Notes or Warrants on the Depositary's records. The ownership
interest of each actual purchaser of each Senior Secured Note or Warrant (the
"Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from the Depositary of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Senior Secured Notes or Warrants are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners.
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Beneficial Owners will not receive certificates representing their ownership
interests in Senior Secured Notes or Warrants, except in the event that use of
the book-entry system for the Senior Secured Notes or the Warrants is
discontinued.
To facilitate subsequent transfers, all Senior Secured Notes and Warrants
deposited by Participants with the Depositary are registered in the name of the
Depositary's partnership nominee, Cede & Co. The deposit of Senior Secured Notes
or Warrants with the Depositary and their registration in the name of Cede & Co.
effect no change in beneficial ownership. The Depositary has no knowledge of the
actual Beneficial Owners of the Senior Secured Notes or the Warrants. The
Depositary's records reflect only the identity of the Direct Participants to
whose accounts such Senior Secured Notes or Warrants are credited, which may or
may not be the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. if less than all of the
Senior Secured Notes within an issue are being redeemed. The Depositary's
practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
Neither the Depositary nor Cede & Co. will consent or vote with respect to
the Senior Secured Notes. Under its usual procedures, the Depositary made an
Omnibus Proxy to the Company as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Senior Secured Notes are credited on the
record date identified in a listing attached to the Omnibus Proxy.
Principal and interest payments on the Senior Secured Notes will be made to
the Depositary. The Depositary's practice is to credit Direct Participants'
accounts on the payment date in accordance with their respective holdings shown
on the Depositary's records unless the Depositary has reason to believe that it
will not receive payment on such date. Payments by Participants to Beneficial
Owners will be governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such Participant
and not of the Depositary, the Agent, or the Company, subject to any statutory
or regulatory requirements as may be in effect from time to time. Payment of
principal and interest to the Depositary is the responsibility of the Company or
the Agent, disbursement of such payments to Direct Participants shall be the
responsibility of the Depositary, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
So long as the Depositary, or its nominee, is the registered owner of the
Global Securities, the Depositary or its nominee, as the case may be, will be
considered the record owner (the "Holder") of the Senior Secured Notes
represented by the Global Note or the Warrants represented by the Global
Certificate, as the case may be, for all purposes under the Indenture governing
such Senior Secured Notes and under the Warrant Agreement governing such
Warrants. Except as set forth below, owners of beneficial interests in such
Global Securities will not be entitled to have Senior Secured Notes represented
by the Global Note or Warrants represented by the Global Certificate registered
in their names, will not receive or be entitled to receive physical delivery of
Senior Secured Notes or Warrants, as the case may be, in definitive form and
will not be considered the owners or Holders thereof under the Indenture or the
Warrant Agreement, as the case may be. Accordingly, each person owning a
beneficial interest in a Global Security must rely on the procedures of the
Depositary and, if such person is not a Participant, those of the Participant
through which such person owns its interests, in order to exercise any rights of
a Holder under the Indenture or the Senior Secured Notes, or the Warrant
Agreement or the Warrant, as the case may be.
The Indenture provides that the Depositary, as a Holder, may appoint agents
and otherwise authorize Participants to give or take any request, demand,
authorization, direction, notice, consent, waiver or other
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action which a Holder is entitled to give or take under the Indenture or the
Warrant Agreement, including the right to sue for payment of principal or
interest pursuant to Section 316(b) of the Trust Indenture Act of 1939, as
amended. The Company understands that under existing industry practices, when
the Company requests an action of Holders or when a Beneficial Owner desires to
give or take any action which a Holder is entitled to give or take under the
Indenture or the Warrant Agreement, as the case may be, the Depositary generally
will give or take such action, or authorize the relevant Participants to give or
take such action, and such Participants would authorize Beneficial Owners
through such Participants to give or take such action or would otherwise act
upon the instructions of Beneficial Owners owning through them.
The Company has been informed by the Depositary that the Depositary will
assist its Participants and their customers (Beneficial Owners) in taking any
action a Holder is entitled to take under the Indenture or the Warrant
Agreement, as the case may be, or exercise any rights available to Cede & Co.,
as the holder of record of the Senior Secured Notes or the Warrants, as the case
may be, including the right to demand acceleration upon an event of default as
defined under the Indenture or to institute suit for the enforcement of payment
of principal or interest pursuant to Section 316(b) of the Trust Indenture Act
of 1939, as amended. The Depositary has advised the Company that it will act
with respect to such matters upon written instructions from a Participant to
whose account with the Depositary the relevant beneficial ownership in the
Senior Secured Notes or the Warrants is credited. The Company understands that a
Participant will deliver such written instructions to the Depositary upon itself
receiving similar written instructions from either Indirect Participants or
Beneficial Owners, as the case may be. Under Rule 6 of the rules and procedures
filed by the Depositary with the Securities and Exchange Commission pursuant to
Section 17 of the Securities Exchange Act of 1934, as amended, Participants are
required to indemnify the Depositary against all liability the Depositary may
sustain without fault on the part of the Depositary or its nominee, as a result
of any action they may take pursuant to the instructions of the Participant in
exercising any such rights.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such limits and
such laws may impair the ability to transfer beneficial interests in Global
Securities.
Payments of principal, premium, if any, and interest on Senior Secured Notes
and payments made with respect to the Warrants registered in the name of or held
by the Depositary or its nominee will be made to the Depositary or its nominee,
as the case may be, as the registered owner or the Holder of the Global
Securities representing such Senior Secured Notes or Warrants. Neither the
Company nor the Trustee will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests in a Global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
If the Depositary is at any time unwilling, unable or ineligible to continue
as depositary, or if the Company determines to discontinue use of the system of
book-entry transfers through the Depositary, and a successor depositary is not
appointed by the Company within sixty days (and with respect to the Senior
Secured Notes, if an Event of Default under the Indenture has occurred and is
continuing), the Company will issue Senior Secured Notes or Warrants in
definitive registered form, in exchange for the Global Security representing
such Senior Secured Notes or Warrants. In addition, the Company may at any time
and in its sole discretion determine not to have any Senior Secured Notes or
Warrants in registered form represented by the Global Securities and, in such
event, will issue Senior Secured Notes or Warrants in definitive registered form
in exchange for the Global Securities representing such Senior Secured Notes or
Warrants. In any such instance, an owner of a beneficial interest in Global
Securities will be entitled to physical delivery in definitive form of Senior
Secured Notes or Warrants represented by such Global Securities equal in
principal amount to such beneficial interest and to have such Senior Secured
Notes or Warrants registered in its name.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Company
and the Underwriter believe to be reliable, but the Company and the Underwriter
take no responsibility for the accuracy thereof.
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DESCRIPTION OF THE SENIOR SECURED NOTES
GENERAL
The Senior Secured Notes are to be issued under an Indenture (the
"Indenture") to be dated as of , 1994, among the Company, the Subsidiary
Guarantors (as defined herein) and Shawmut Bank Connecticut, National
Association, as trustee (the "Trustee"). A copy of the proposed form of the
Indenture has been filed as an exhibit to the Registration Statement, of which
this Prospectus is a part. See "Available Information."
The following summary of certain provisions of the Indenture and the
Subsidiary Guarantees does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the Indenture,
including the definitions of certain terms therein.
The Senior Secured Notes will be issued in fully registered form only,
without coupons, in denominations of $1,000 or integral multiples thereof.
The Senior Secured Notes are transferable and exchangeable at the office of
the Registrar. Principal, premium, if any, and interest are payable at the
office of the Paying Agent, but at the option of the Company, interest may be
paid by check mailed to the registered holders at their registered addresses.
The Company has initially appointed the Trustee as the Paying Agent and the
Registrar under the Indenture.
The Company has no sinking fund or mandatory redemption obligations with
respect to the Senior Secured Notes.
The Company is subject to the informational reporting requirements of
Sections 13 and 15(d) under the Exchange Act and, in accordance therewith, will
file certain reports and other information with the Commission. See "Available
Information." In addition, if Sections 13 and 15(d) cease to apply to the
Company, the Company will covenant in the Indenture to file such reports and
information with the Trustee and the Commission, and mail such reports and
information to Noteholders at their registered addresses, for so long as any
Senior Secured Notes remain outstanding.
The Company conducts substantially all of its operations through its
subsidiaries. Creditors of its subsidiaries, including trade creditors, would
have a claim on the subsidiaries' assets that would (except to the extent that
the Subsidiary Guarantees represent direct claims against such subsidiaries) be
prior to the claims of the holders of the Senior Secured Notes. See "Risk
Factors -- Effective Ranking of Senior Secured Notes."
The Senior Secured Notes will be issued in the form of a fully registered
Global Note and will be deposited with, or on behalf of, The Depository Trust
Company and registered in the name of a nominee of the Depositary. Except as set
forth in "Description of the Units -- Form, Denomination and Registration"
above, owners of beneficial interests in such Global Note will not be entitled
to have Senior Secured Notes registered in their names, will not receive or be
entitled to receive physical delivery of Senior Secured Notes in definitive form
and will not be considered the owners or Holders thereof under the Indenture.
See "Description of the Units -- Form, Denomination and Registration." No
service charge will be made for any registration of transfer or exchange of
Senior Secured Notes, but the Company may require payment of a sum sufficient to
cover any transfer tax or other similar governmental charge payable in
connection therewith.
SUBSIDIARY GUARANTEE
The Senior Secured Notes will be unconditionally guaranteed as to the
payment of principal, premium, if any, and interest by the Subsidiary Guarantors
pursuant to the Subsidiary Guarantees. See "-- Certain Definitions -- Subsidiary
Guarantees."
Upon the redesignation by the Company of a Subsidiary Guarantor from
Restricted Subsidiary to an Unrestricted Subsidiary in compliance with the
provisions of the Indenture, such Subsidiary shall cease to be a Subsidiary
Guarantor and shall be released from all of the obligations of a Subsidiary
Guarantor under its Subsidiary Guarantee.
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Upon the sale or disposition (by merger or otherwise) of any Subsidiary
Guarantor by the Company or any Subsidiary of the Company to any entity that is
not a Subsidiary of the Company and which sale or disposition is otherwise in
compliance with the terms of the Indenture, each such Subsidiary Guarantor shall
automatically be released from all obligations under its Subsidiary Guarantee,
PROVIDED, that each such Subsidiary Guarantor is sold or disposed of for fair
market value (evidenced by a board resolution and set forth in an Officers'
Certificate delivered to the Trustee).
TERMS OF THE SENIOR SECURED NOTES
The Senior Secured Notes will be senior obligations of the Company. The
Senior Secured Notes will mature on , 2004. Prior to , 1999,
interest will accrue on the Senior Secured Notes from , 1994, or from the
most recent Interest Payment Date to which interest has been paid or provided
for, and will be payable in cash semiannually at the rate of % per annum of
the principal amount at maturity of the Senior Secured Notes (to Holders of
record at the close of business on the or immediately preceding
the Interest Payment Date) on and of each year, commencing
, 1994. In addition, prior to , 1999, original issue discount will
accrete on the Senior Secured Notes such that the yield to maturity will be %
per annum, compounded on the basis of semiannual compounding. From and after
, 1999, interest on the Senior Secured Notes will accrue and be payable
in cash semiannually at the rate of % per annum of the principal amount at
maturity of the Senior Secured Notes (to Holders of record at the close of
business on the or immediately preceding the Interest Payment
Date) on and of each year, commencing , 1999.
For federal income tax purposes, Holders of Senior Secured Notes will be
required to recognize interest income in respect of the Senior Secured Notes in
the form of original issue discount in advance of the receipt of the cash
payments to which such income is attributable. See "Certain Federal Income Tax
Considerations" for information concerning certain federal income tax
considerations associated with the Senior Secured Notes.
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Company may not redeem
the Senior Secured Notes prior to , 1999. On and after such date, the
Company may redeem the Senior Secured Notes at any time as a whole, or from time
to time in part, at the following redemption prices (expressed in percentages of
Accreted Value), plus accrued interest to the redemption date, if redeemed
during the 12-month period beginning :
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ----------------------------------- ----------------
<S> <C>
1999............................... %
2000............................... %
2001 and thereafter................ 100.00 %
</TABLE>
The Company may redeem up to $ million principal amount at maturity (35%)
of Senior Secured Notes with the proceeds of one or more Public Equity Offerings
following which there is a Public Market, at any time as a whole or from time to
time in part, at a redemption price (expressed as a percentage of Accreted
Value), plus accrued interest to the redemption date, of % if redeemed at any
time prior to , 1997.
SELECTION FOR REDEMPTION
In the case of any partial redemption, selection of the Senior Secured Notes
for redemption will be made by the Trustee on a pro rata basis, by lot or by
such other method that complies with applicable legal and securities exchange
requirements, if any, and that the Trustee in its sole discretion shall deem to
be fair and appropriate; provided that no Senior Secured Note of $1,000 in
principal amount at maturity or less shall be redeemed in part. If any Senior
Secured Note is to be redeemed in part only, the notice of redemption relating
to such Senior Secured Note shall state the portion of the principal amount
thereof to be redeemed. A Senior Secured Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Senior Secured Note.
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RANKING
The Indebtedness evidenced by the Senior Secured Notes constitutes Senior
Indebtedness of the Company and will rank PARI PASSU in right of payment with
all existing and future Senior Indebtedness of the Company, including, without
limitation, amounts due under the New Credit Facility. The Subsidiary Guarantees
constitute senior indebtedness of the respective Subsidiary Guarantors and will
rank PARI PASSU with all existing and future senior indebtedness of the
Subsidiary Guarantors, including, without limitation, guarantees of amounts due
under the New Credit Facility. Any borrowings under the New Credit Facility, but
not the Senior Secured Notes, will be secured by the inventory and accounts
receivable of the Company and its subsidiaries. The Company conducts
substantially all of its operations through its subsidiaries. Claims of
creditors of such subsidiaries, including trade creditors and holders of
indebtedness guaranteed by such subsidiaries, will have priority with respect to
the assets and earnings of such subsidiaries over creditors of the Company,
including holders of Senior Secured Notes (except to the extent that such
creditors hold claims against such subsidiaries, such as guarantees). See "Risk
Factors -- Effective Ranking of Senior Secured Notes."
COLLATERAL AND SECURITY
Pursuant to the Indenture and the Pledge Agreement, the Company will pledge
to the Trustee all shares of Capital Stock of each of its Restricted
Subsidiaries (including, without limitation, PSNC Propane Corporation) and all
other Restricted Subsidiaries of the Company formed or acquired after the date
of the Indenture (such Capital Stock, together with any proceeds therefrom or
replacements therefor pursuant to the terms of the Indenture, being hereafter
referred to as the "Collateral"). The security interest in the Collateral will
be a first priority perfected security interest. However, absent any Default or
Event of Default, the Company will be able to receive dividends and vote, as it
sees fit in its sole discretion, the Capital Stock of the Restricted
Subsidiaries, provided that no vote may be cast, and no consent, waiver or
ratification given or action taken, which would be inconsistent with or violate
any provision of the Indenture or the Senior Secured Notes.
The Indenture will provide that the Collateral may be released from the Lien
thereon (a) upon payment in full of all obligations under the Indenture and the
termination thereof or (b) upon the sale or other disposition of such Collateral
if (i) the Company or a Subsidiary receives consideration at the time of such
sale or other disposition at least equal to the fair market value, as determined
in good faith by the Board of Directors, of the Collateral subject to the sale
or other disposition, (ii) at least 80% of the consideration thereof received by
the Company or a Subsidiary is in the form of Additional Assets or cash or cash
equivalents which cash equivalents are promptly converted into cash by the
Company, and (iii) an amount equal to 100% of the Net Available Cash is applied
by the Company as set forth in the following paragraph. The Net Available Cash
resulting from the sale or other disposition of any Collateral shall, to the
extent permitted by law, be immediately deposited in an account (the "Collateral
Account") subject to a first priority perfected Lien in favor of the Trustee,
and the Company shall cause any non-cash proceeds from such sale or other
disposition (including securities) received by the Company or a Subsidiary to
immediately become subject to a first priority perfected Lien in favor of the
Trustee.
Within 360 days after consummation of any sale or disposition of Collateral,
the Company shall apply 100% of the Net Available Cash resulting from such sale
or disposition to (i) the purchase of Additional Assets (the "Replacement
Assets"), provided, however, that, when acquired, such Replacement Assets are
subject to a first priority perfected Lien in favor of the Trustee, (ii) the
purchase of Senior Secured Notes tendered to the Company for purchase at a price
equal to at least 100% of the Accreted Value thereof, plus accrued interest, if
any, to the date of purchase (which purchase shall be made pursuant to an offer
substantially similar to an Asset Sale Offer to all of the holders of the Senior
Secured Notes), or (iii) the acquisition or formation of a Subsidiary, provided,
however, that, when acquired or formed, the Capital Stock of such Subsidiary is
subject to a first priority perfected Lien in favor of the Trustee; PROVIDED,
that if the Company does not apply such Net Available Cash in accordance with
(i), (ii) or (iii) above, such Net Available Cash shall remain in the Collateral
Account and not be released until the obligations of the Company under the
Indenture and the Senior Secured Notes have been discharged. See "-- Covenants
- -- Sale of Assets." Subject to the proviso in the preceding sentence, amounts in
the Collateral Account shall be
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released (i) upon the purchase of Additional Assets, (ii) upon the purchase of
Senior Secured Notes pursuant to an clause (ii) above, or (iii) upon the
acquisition or formation of a Subsidiary, all of whose Capital Stock has been
pledged to the Trustee. Any such actions by the Trustee to release the
Collateral must be taken in accordance with the Trust Indenture Act of 1939, as
amended, including Section 314 thereunder.
There can be no assurance that the proceeds of any sale of the Collateral
pursuant to the Indenture following an Event of Default would be sufficient to
satisfy payments due on the Senior Secured Notes. If such proceeds are not
sufficient to repay all such amounts due on the Senior Secured Notes, then
Holders of the Senior Secured Notes (to the extent not repaid from the proceeds
of the sale of the Collateral) would have only an unsecured claim against the
Company's remaining assets. In addition, the ability of the Holders of the
Senior Secured Notes to rely upon the Collateral for fulfillment of the
Company's obligations under the Indenture may be subject to certain bankruptcy
law limitations in the event of a bankruptcy.
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms used in the
Indentures.
"ACCRETED VALUE" as of any date (the "specified date") means, with respect
to each $1,000 face amount of Senior Secured Notes, the following amount:
(i) if the specified date is one of the following dates (each an
"accrual date"), the amount set forth opposite such date below:
<TABLE>
<CAPTION>
ACCRETED
ACCRUAL DATE VALUE
- ---------------------- -------------
<S> <C>
, 1994 --
, 1994 --
, 1995 --
, 1995 --
, 1996 --
, 1996 --
, 1997 --
, 1997 --
, 1998 --
, 1998 --
, 1999 1,000.00;
</TABLE>
(ii) if the specified date occurs between two accrual dates, the sum of
(A) the accreted value for the accrual date immediately preceding the
specified date and (B) an amount equal to the product of (i) the accreted
value for the immediately following accrual date less the accreted value for
the immediately preceding accrual date and (ii) a fraction, the numerator of
which is the number of days (not to exceed 180 days) from the immediately
preceding accrual date to the specified date, using a 360-day year of twelve
30-day months, and the denominator of which is 180 (or, if the immediately
following accrual date is , 1999, ); and
(iii) if the specified date occurs after , 1999, $1,000.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person existing at the time
at which such Person became a Subsidiary and not incurred in connection with, or
in contemplation of, such Person becoming a Subsidiary. Acquired Indebtedness
shall be deemed to be Incurred on the date the acquired Person becomes a
Subsidiary.
"ACQUISITION INDEBTEDNESS" means Indebtedness of a Restricted Subsidiary
incurred in connection with the acquisition of property or assets related to the
Line of Business which will be owned and used by the Company or a Restricted
Subsidiary, which Indebtedness is without recourse to the Company or any other
Restricted Subsidiary other than the Restricted Subsidiary issuing such
Acquisition Indebtedness.
"ADDITIONAL ASSETS" means (i) any property or assets related to the Line of
Business which will be owned and used by the Company or a Restricted Subsidiary;
(ii) the Capital Stock of a Person that becomes a
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Restricted Subsidiary as a result of the acquisition of such Capital Stock by
the Company or another Restricted Subsidiary or (iii) Capital Stock constituting
a minority interest in any Person that at such time is a Restricted Subsidiary.
"AFFILIATE" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under "-- Covenants -- Transactions with
Affiliates" and "-- Sales of Assets" only, "Affiliate" shall also mean any
beneficial owner of 5% or more of the total Voting Shares (on a Fully Diluted
Basis) of the Company or of rights or warrants to purchase such stock (whether
or not currently exercisable) and any Person who would be an Affiliate of any
such beneficial owner pursuant to the first sentence hereof. For purposes of the
provision described under "-- Covenants -- Limitation on Restricted Payments"
only, "Affiliate" shall also mean any Person of which the Company owns 5% or
more of any class of Capital Stock or rights to acquire 5% or more or any class
of Capital Stock and any Person who would be an Affiliate of any such Person
pursuant to the first sentence hereof.
"ASSET SALE" means any sale, transfer or other disposition (including by way
of merger, consolidation or sale leaseback transactions, but excluding (except
as provided for in the provisions described in the last paragraph under "--
Covenants -- Sales of Assets") those permitted by the provisions described under
"-- Covenants -- Merger and Consolidation") in one or a series of transactions
by the Company or any Restricted Subsidiary to any Person other than the Company
or any Wholly Owned Subsidiary, of (i) all or any of the Capital Stock of the
Company or any Restricted Subsidiary, (ii) all or substantially all of the
assets of any operating unit, division or line of business of the Company or any
Restricted Subsidiary or (iii) any other property or assets or rights to acquire
property or assets of the Company or any Restricted Subsidiary outside of the
ordinary course of business of the Company or such Restricted Subsidiary.
"ATTRIBUTABLE DEBT" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the Senior Secured Notes, compounded annually) of the total obligations
of the lessee for rental payments during the remaining term of the lease
included in such Sale/Leaseback Transaction (including any period for which such
lease has been extended).
"AVERAGE LIFE" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of (A) the numbers of years from the date of determination to
the dates of each successive scheduled principal payment of such Indebtedness or
scheduled redemption or similar payment with respect to such Indebtedness or
Preferred Stock multiplied by (B) the amount of such payment by (ii) the sum of
all such payments.
"BASIC AGREEMENTS" means (i) the Stock Redemption Agreement, dated May 7,
1994, among the Company, Energy, Mr. Lindsey, Mr. Robert Plaster, and the other
parties named therein; (ii) the Services Agreement between the Company and
Empire Service Corporation entered into pursuant to the Stock Redemption
Agreement; (iii) the Lease Agreement between the Company and Evergreen National
Corporation entered into pursuant to the Stock Redemption Agreement; (iv) and
the Non-Competition Agreement among the Company, Energy, Paul Lindsey, Robert
Plaster and Stephen Plaster entered into pursuant to the Stock Redemption
Agreement.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
authorized committee thereof.
"BUSINESS DAY" means each day which is not a Legal Holiday.
"CAPITAL STOCK" means any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation or any and
all equivalent ownership interests in a Person (other than a corporation).
"CAPITALIZED LEASE" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person; the Stated
Maturity
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thereof shall be the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which the lease may be terminated
by the lessee without payment of a penalty; and "Capitalized Lease Obligations"
means the rental obligations, as aforesaid, under such lease.
"CHANGE OF CONTROL" means the occurrence of any of the following events: (i)
at any time after the occurrence of a Public Market, any "person" (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act), other than the
Management Group or an underwriter engaged in a firm commitment underwriting on
behalf of the Company, is or becomes the beneficial owner (as such term is used
in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of
this clause (i) a person shall be deemed to have "beneficial ownership" of all
shares that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 30%, of the total Voting Shares of the Company; (ii)
during any period of two consecutive years, individuals who at the beginning of
such period constituted the Board of Directors together with any new directors
whose election by Board of Directors or whose nomination for election by the
stockholders was approved by a vote of 66 2/3% of the directors of the Company
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved cease
for any reason to constitute a majority of the Board of Directors, as the case
may be, then in office; (iii) all or substantially all of the Company's and its
Restricted Subsidiaries' assets are sold, leased, exchanged or otherwise
transferred to any Person or group of Persons acting in concert; (iv) the
Company is liquidated or dissolved or adopts a plan of liquidation; (v) prior to
the occurrence of a Public Market, the Management Group ceases in the aggregate
to beneficially own, directly or indirectly, at least 50% in the aggregate of
the total Voting Shares of the Company; or (vi) at any time prior to the
occurrence of a Change of Control pursuant to clauses (i) to (v) of this
definition as a result of which a Change of Control Offer was made, (A) the
failure of the Company for a period of greater than 90 days in any 12 month
period to continuously maintain (following the 6 month anniversary of the
Offering) on its Board of Directors at least two Outside Directors, (B) the
failure of the Company for a period of greater than 90 days in any 12 month
period to continuously maintain an audit committee of its Board of Directors
consisting solely of Outside Directors or (C) the Board of Directors consists of
greater than seven members; and the Company has agreed that upon the occurrence
of any of the events in this item (vi) the Company shall notify the Trustee of
such occurrence.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" means the party named as such in the Indenture until a successor
replaces it pursuant to the terms and conditions of the Indenture and thereafter
means the successor.
"CONSOLIDATED COVERAGE RATIO" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters to (ii) the Consolidated Interest Expense for
such four fiscal quarters; PROVIDED, HOWEVER, that if the Company or any
Restricted Subsidiary has Incurred any Indebtedness since the beginning of such
period that remains outstanding or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or
both, both EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving effect on a pro forma basis to (x) such new Indebtedness
as if such Indebtedness had been Incurred on the first day of such period and
(y) the repayment, redemption, repurchase, defeasance or discharge of any
Indebtedness repaid, redeemed, repurchased, defeased or discharged with the
proceeds of such new Indebtedness as if such repayment, redemption, repurchase,
defeasance or discharge had been made on the first day of such period; PROVIDED,
FURTHER, that if within the period during which EBITDA or Consolidated Interest
Expense is measured, the Company or any of its Restricted Subsidiaries shall
have made any Asset Sales, (x) the EBITDA for such period shall be reduced by an
amount equal to the EBITDA (if positive) directly attributable to the assets or
Capital Stock which are the subject of such Asset Sales for such period, or
increased by an amount equal to the EBITDA (if negative), directly attributable
thereto for such period and (y) the Consolidated Interest Expense for such
period shall be reduced by an amount equal to the Consolidated Interest Expense
directly attributable to any Indebtedness for which neither Company nor any
Restricted Subsidiary shall continue to be liable as a result of any such Asset
Sale or repaid, redeemed, defeased, discharged or otherwise retired in
connection with or with the proceeds of the assets or
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Capital Stock which are the subject of such Asset Sales for such period; and
PROVIDED, FURTHER, that if the Company or any Restricted Subsidiary shall have
made any acquisition of assets or Capital Stock (occurring by merger or
otherwise) since the beginning of such period (including any acquisition of
assets or Capital Stock occurring in connection with a transaction causing a
calculation to be made hereunder) the EBITDA and Consolidated Interest Expense
for such period shall be calculated, after giving pro forma effect thereto (and
without regard to clause (iv) of the definition of "Consolidated Net Income"),
as if such acquisition of assets or Capital Stock took place on the first day of
such period. For all purposes of this definition, if the date of determination
occurs prior to the completion of the first four full fiscal quarters following
the Issue Date, then "EBITDA" and "Consolidated Interest Expense" shall be
calculated after giving effect on a pro forma basis to the Offering as if the
Offering occurred on the first day of the four full fiscal quarters that were
completed preceding such date of determination.
"CONSOLIDATED CURRENT LIABILITIES," as of the date of determination, means
the aggregate amount of liabilities of the Company and its Consolidated
Restricted Subsidiaries which may properly be classified as current liabilities
(including taxes accrued as estimated), after eliminating (i) all inter-company
items between the Company and any Subsidiary and (ii) all current maturities of
long-term Indebtedness, all as determined in accordance with GAAP.
"CONSOLIDATED INCOME TAX EXPENSE" means, for any period, as applied to the
Company, the provision for local, state, federal or foreign income taxes on a
Consolidated basis for such period determined in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, as applied to the
Company, the sum of (a) the total interest expense of the Company and its
Consolidated Restricted Subsidiaries for such period as determined in accordance
with GAAP, including, without limitation, (i) amortization of original issue
discount on any Indebtedness and the interest portion of any deferred payment
obligation, calculated in accordance with the effective interest method of
accounting, and amortization of debt issuance costs (other than issuance costs
with regard to the Offering, the execution of the New Credit Facility and the
related transactions occurring simultaneously therewith), (ii) accrued interest,
(iii) noncash interest payments, (iv) commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing, (v) interest actually paid by the Company or any such Subsidiary
under any guarantee of Indebtedness or other obligation of any other Person and
(vi) net costs associated with Interest Rate Agreements (including amortization
of discounts) and Currency Agreements, plus (b) all but the principal component
of rentals in respect of Capitalized Lease Obligations paid, accrued, or
scheduled to be paid or accrued by the Company or its Consolidated Restricted
Subsidiaries, plus (c) one-third of all Operating Lease Obligations paid,
accrued and/or scheduled to be paid by the Company and its Consolidated
Restricted Subsidiaries, plus (d) amortization of capitalized interest, plus (e)
dividends paid in respect of Preferred Stock of the Company or any Restricted
Subsidiary held by Persons other than the Company or a Wholly Owned Subsidiary,
plus (f) cash contributions to any employee stock ownership plan to the extent
such contributions are used by such employee stock ownership plan to pay
interest or fees to any person (other than the Company or a Restricted
Subsidiary) in connection with loans incurred by such employee stock ownership
plan to purchase Capital Stock of the Company.
"CONSOLIDATED NET INCOME (LOSS)" means, for any period, as applied to the
Company, the Consolidated net income (loss) of the Company and its Consolidated
Restricted Subsidiaries for such period, determined in accordance with GAAP,
adjusted by excluding (without duplication), to the extent included in such net
income (loss), the following: (i) all extraordinary gains or losses; (ii) any
net income of any Person if such Person is not a Restricted Subsidiary, except
that (A) the Company's equity in the net income of any such Person for such
period shall be included in Consolidated Net Income (Loss) up to the aggregate
amount of cash actually distributed by such Person during such period to the
Company or a Restricted Subsidiary as a dividend or other distribution and (B)
the equity of the Company or a Restricted Subsidiary in a net loss of any such
Person for such period shall be included in determining Consolidated Net Income
(Loss); (iii) the net income of any Restricted Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such Restricted
Subsidiary of such income is not at the time thereof permitted, directly or
indirectly, by operation of the terms of its charter or by-laws or any
agreement, instrument, judgment,
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decree, order, statute, rule or governmental regulation applicable to such
Restricted Subsidiary or its stockholders; (iv) any net income (or loss) of any
Person combined with the Company or any of its Restricted Subsidiaries on a
"pooling of interests" basis attributable to any period prior to the date of
such combination; (v) any gain or loss realized upon the sale or other
disposition of any property, plant or equipment of the Company or its Restricted
Subsidiaries (including pursuant to any sale-and-leaseback arrangement) which is
not sold or otherwise disposed of in the ordinary course of business and any
gain (but not loss) realized upon the sale or other disposition by the Company
or any Restricted Subsidiary of any Capital Stock of any Person; and (vi) the
cumulative effect of a change in accounting principles; and further adjusted by
subtracting from such net income the tax liability of any parent of the Company
to the extent of payments made to such parent by the Company pursuant to any tax
sharing agreement or other arrangement for such period.
"CONSOLIDATED NET TANGIBLE ASSETS" means, as of any date of determination,
as applied to the Company, the total amount of assets (less accumulated
depreciation or amortization, allowances for doubtful receivables, other
applicable reserves and other properly deductible items) which would appear on a
Consolidated balance sheet of the Company and its Consolidated Restricted
Subsidiaries, determined on a Consolidated basis in accordance with GAAP, and
after giving effect to purchase accounting and after deducting therefrom, to the
extent otherwise included, the amounts of: (i) Consolidated Current Liabilities;
(ii) minority interests in Consolidated Subsidiaries held by Persons other than
the Company or a Restricted Subsidiary; (iii) excess of cost over fair value of
assets of businesses acquired, as determined in good faith by the Board of
Directors; (iv) any revaluation or other write-up in value of assets subsequent
to December 31, 1993 as a result of a change in the method of valuation in
accordance with GAAP; (v) unamortized debt discount and expenses and other
unamortized deferred charges, goodwill, patents, trademarks, service marks,
trade names, copyrights, licenses, organization or developmental expenses and
other intangible items; (vi) treasury stock; and (vii) any cash set apart and
held in a sinking or other analogous fund established for the purpose of
redemption or other retirement of Capital Stock to the extent such obligation is
not reflected in Consolidated Current Liabilities.
"CONSOLIDATED NET WORTH" means, at any date of determination, as applied to
the Company, stockholders' equity as set forth on the most recently available
Consolidated balance sheet of the Company and its Consolidated Restricted
Subsidiaries (which shall be as of a date no more than 60 days prior to the date
of such computation), less any amounts attributable to Redeemable Stock or
Exchangeable Stock, the cost of treasury stock and the principal amount of any
promissory notes receivable from the sale of Capital Stock of the Company or any
Subsidiary.
"CONSOLIDATION" means, with respect to any Person, the consolidation of
accounts of such Person and each of its subsidiaries if and to the extent the
accounts of such Person and such subsidiaries are consolidated in accordance
with GAAP. The term "Consolidated" shall have a correlative meaning.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary against fluctuations in currency values to
or under which the Company or any Restricted Subsidiary is a party or a
beneficiary on the Issue Date or becomes a party or beneficiary thereafter.
"DEFAULT" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"DOMESTIC SUBSIDIARY" means a Restricted Subsidiary that is not a Foreign
Subsidiary.
"DEFAULTED INTEREST" means any interest on any Security which is payable,
but is not punctually paid or duly provided for on any Interest Payment Date.
"EBITDA" means, for any period, as applied to the Company, the sum of
Consolidated Net Income (Loss) (but without giving effect to adjustments,
accruals, deductions or entries resulting from purchase accounting,
extraordinary losses or gains and any gains or losses from any Asset Sales),
plus the following to the extent included in calculating Consolidated Net Income
(Loss): (a) Consolidated Income Tax Expense, (b) Consolidated Interest Expense,
(c) depreciation expense, and (d) amortization expense, in each case for
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such period; PROVIDED that, if the Company has any Subsidiary that is not a
Wholly Owned Subsidiary, EBITDA shall be reduced (to the extent not otherwise
reduced by GAAP) by an amount equal to (A) the consolidated net income (loss) of
such Subsidiary (to the extent included in Consolidated Net Income (Loss)
multiplied by (B) the quotient of (1) the number of shares of outstanding common
stock of such Subsidiary not owned on the last day of such period by the Company
or any Wholly Owned Subsidiary of the Company divided by (2) the total number of
shares of outstanding common stock of such Subsidiary on the last day of such
period.
"ENERGY" means Empire Energy Corporation, a Tennessee corporation.
"EXCESS PAYMENTS" means any amounts paid in respect of salary, bonus,
insurance or annuity premiums (other than premiums for "key man" insurance the
sole beneficiary of which is the Company), or other payments or contributions to
any employee benefit, severance, retirement, stock ownership or stock purchase
plan or program or any similar plan or arrangement, to, or for the benefit of, a
Lindsey Entity in excess of the lesser of (A) the aggregate scheduled amounts of
any such payments as set forth in the Employment Agreements between each of Paul
Lindsey and Kristen Lindsey, on the one hand, and the Company on the other hand,
each dated as of , 1994, as they may be amended from time to time, and
(B) an aggregate of $1,000,000.
"EXCHANGEABLE STOCK" means any Capital Stock which by its terms is
exchangeable or convertible at the option of any Person other than the Company
into another security (other than Capital Stock of the Company which is neither
Exchangeable Stock nor Redeemable Stock).
"FOREIGN ASSET SALE" means an Asset Sale in respect of the Capital Stock or
assets of a Foreign Subsidiary or a Restricted Subsidiary of the type described
in Section 936 of the Code to the extent that the proceeds of such Asset Sale
are received by a Person subject in respect of such proceeds to the tax laws of
a jurisdiction other than the United States of America or any State thereof or
the District of Columbia.
"FOREIGN SUBSIDIARY" means a Restricted Subsidiary that is incorporated in a
jurisdiction other than the United States of America or a State thereof or the
District of Columbia.
"FULLY DILUTED BASIS" means after giving effect to the exercise of any
outstanding options, warrants or rights to purchase Voting Shares and the
conversion or exchange of any securities convertible into or exchangeable for
Voting Shares.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect and, to the extent optional, adopted by the Company on
the Issue Date, consistently applied, including, without limitation, those set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board.
"GUARANTEE" means, as applied to any obligation, contingent or otherwise, of
any Person, (i) a guarantee, direct or indirect, in any manner, of any part or
all of such obligation (other than by endorsement of negotiable instruments for
collection in the ordinary course of business) and (ii) an agreement, direct or
indirect, contingent or otherwise, the practical effect of which is to insure in
any way the payment or performance (or payment of damages in the event of
nonperformance) of any part or all of such obligation, including the payment of
amounts drawn down under letters of credit.
"HOLDER" or "SECURITYHOLDER" means the Person in whose name a Senior Secured
Note is registered on the Registrar's books.
"INCUR" means, as applied to any obligation, to create, incur, issue,
assume, guarantee or in any other manner become liable with respect to,
contingently or otherwise, such obligation, and "INCURRED," "INCURRENCE" and
"INCURRING" shall each have a correlative meaning; provided, however, that any
Indebtedness or Capital Stock of a Person existing at the time such Person
becomes (after the Issue Date) a Subsidiary (whether by merger, consolidation,
acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at
the time it becomes a Subsidiary; and PROVIDED, FURTHER, that any amendment,
modification or waiver of any provision of any document pursuant to which
Indebtedness was previously Incurred shall not
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be deemed to be an Incurrence of Indebtedness as long as (i) such amendment,
modification or waiver does not (A) increase the principal or premium thereof or
interest rate thereon, (B) change to an earlier date the Stated Maturity thereof
or the date of any scheduled or required principal payment thereon or the time
or circumstances under which such Indebtedness may or shall be redeemed, (C) if
such Indebtedness is contractually subordinated in right of payment to the
Senior Secured Notes, modify or affect, in any manner adverse to the Holders,
such subordination, (D) if the Company is the obligor thereon, provide that a
Restricted Subsidiary shall be an obligor, or (E) violate, or cause the
Indebtedness to violate, the provisions described under "-- Covenants --
Limitation on Payment Restrictions Affecting Subsidiaries" and "-- Limitation on
Liens" and (ii) such Indebtedness would, after giving effect to such amendment,
modification or waiver as if it were an Incurrence, comply with clause (i) of
the first proviso to the definition of "Refinancing Indebtedness."
"INDEBTEDNESS" of any Person means, without duplication, (i) the principal
of and premium (if any such premium is then due and owing) in respect of (A)
indebtedness of such Person for money borrowed and (B) indebtedness evidenced by
notes, debentures, bonds or other similar instruments for the payment of which
such Person is responsible or liable; (ii) all Capitalized Lease Obligations of
such Person; (iii) all obligations of such Person Incurred as the deferred
purchase price of property, all conditional sale obligations of such Person and
all obligations of such Person under any title retention agreement; (iv) all
obligations of such Person for the reimbursement of any obligor on any letter of
credit, banker's acceptance or similar credit transaction (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in (i) through (iii) above) entered into in the ordinary
course of business of such Person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no
later than the tenth Business Day following receipt by such Person of a demand
for reimbursement following payment on the letter of credit); (v) the amount of
all obligations of such Person with respect to the scheduled redemption,
repayment or other repurchase of any Redeemable Stock and, in the case of any
Subsidiary, with respect to any other Preferred Stock (but excluding in each
case any accrued dividends); (vi) all obligations of other Persons and all
dividends of other Persons for the payment of which, in either case, such Person
is responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise, including by means of any guarantee; (vii) all liabilities or other
obligations, contingent or otherwise, purchased, assumed or with respect to
which such Person shall otherwise become liable or responsible in connection
with the purchase, acquisition or assumption of property, services or business
operations to the extent reflected on the balance sheet of such Person in
accordance with GAAP; (viii) contractual obligations to repurchase goods sold or
distributed; (ix) all obligations of such Person in respect of Interest Rate
Agreements and Currency Agreements; and (x) all obligations of the type referred
to in clauses (i) through (ix) of other Persons secured by any Lien on any
property or asset of such Person (whether or not such obligation is assumed by
such Person), the amount of such obligation being deemed to be the lesser of the
value of such property or assets or the amount of the obligation so secured;
PROVIDED, HOWEVER, that Indebtedness shall not include trade accounts payable
arising in the ordinary course of business. The amount of Indebtedness of any
Person at any date shall be, with respect to unconditional obligations, the
outstanding balance at such date of all such obligations as described above and,
with respect to any contingent obligations (other than pursuant to clause (vii)
above, which shall be included to the extent reflected on the balance sheet of
such Person in accordance with GAAP) at such date, the maximum liability
determined by such Person's board of directors, in good faith, as, in light of
the facts and circumstances existing at the time, reasonably likely to be
Incurred upon the occurrence of the contingency giving rise to such obligation.
"INTERCOMPANY NOTES" means the notes issued to the Company by its
Subsidiaries pursuant to the Master Intercompany Note dated as of , 1994,
among the Company and each of the Subsidiaries pursuant to which the Company
shall make certain loans to finance the working capital needs of the
Subsidiaries incurred pursuant to the New Credit Facility, as such Intercompany
Notes may be amended or otherwise modified from time to time.
"INTEREST PAYMENT DATE" means the stated maturity of an installment of
interest on the Senior Secured Notes.
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"INTEREST RATE AGREEMENT" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement or other similar agreement or arrangement designed
to protect against fluctuations in interest rates to or under which the Company
or any of its Restricted Subsidiaries is a party or beneficiary on the Issue
Date or becomes a party or beneficiary thereunder.
"INVESTMENT" means, with respect to any Person, any direct or indirect
advance, loan (other than advances to customers who are not Affiliates in the
ordinary course of business that are recorded as accounts receivable on the
balance sheet of such Person or its Subsidiaries) or other extension of credit
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any other investment in any other Person, or any purchase or
acquisition by such Person of any Capital Stock, bonds, notes, debentures or
other securities or assets issued or owned by any other Person (whether by
merger, consolidation, amalgamation, sale of assets or otherwise). For purposes
of the definition of "Unrestricted Subsidiary" and the provisions set forth
under "-- Covenants -- Limitation on Restricted Payments", (i) "Investment"
shall include the portion (proportionate to the Company's equity interest in
such Subsidiary) of the fair market value of the net assets of any Restricted
Subsidiary at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary and shall exclude the fair market value of the net
assets of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer, in each case as determined by the
Board of Directors in good faith.
"ISSUE DATE" means the date on which the Senior Secured Notes are originally
issued under the Indenture.
"LIEN" means any mortgage, lien, pledge, charge, or other security interest
or encumbrance of any kind (including any conditional sale or other title
retention agreement and any lease in the nature thereof).
"LINDSEY ENTITY" means Paul S. Lindsey, Jr., Kristen L. Lindsey, any member
of their family and any Person of which any of the foregoing Persons are
Affiliates.
"LINE OF BUSINESS" means the sale and distribution of propane gas and
operations related thereto.
"MANAGEMENT GROUP" means, collectively, (i) those individuals who
beneficially own, directly or indirectly, Voting Shares of the Company or any
successor thereto immediately following the consummation of the Offering and the
transactions related thereto and are members of management of the Company or any
of its Subsidiaries (or the estate or any beneficiary of any such individual or
any immediate family member of any such individual or any trust established for
the benefit of any such individual or immediate family member).
"NET AVAILABLE CASH" means, with respect to any Asset Sale or Collateral
Sale, the cash or cash equivalent payments received by the Company or a
Subsidiary in connection with such Asset Sale or Collateral Sale (including any
cash received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise, but only as or when received and also
including the proceeds of other property received when converted to cash or cash
equivalents) net of the sum of, without duplication, (i) all reasonable legal,
title and recording tax expenses, reasonable commissions, and other reasonable
fees and expenses incurred directly relating to such Asset Sale or Collateral
Sale, (ii) provision for all local, state, federal and foreign taxes expected to
be paid (whether or not such taxes are actually be paid or payable) as a
consequence of such Asset Sale or Collateral Sale, without regard to the
consolidated results of the Company and its Subsidiaries, (iii) payments made to
repay Indebtedness which is secured by any assets subject to such Asset Sale or
Collateral Sale in accordance with the terms of any Lien upon or other security
agreement of any kind with respect to such assets, or which must by its terms,
or by applicable law, be repaid out of the proceeds from such Asset Sale or
Collateral Sale, and (iv) reasonable amounts reserved by the Company or any
Subsidiary of the Company receiving proceeds of such Asset Sale or Collateral
Sale against any liabilities associated with such Asset Sale or Collateral Sale,
including without limitation, indemnification obligations, PROVIDED that such
amounts shall not exceed 10% of the payments received by the Company
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or a Subsidiary in connection with such Asset Sale or Collateral Sale, and
PROVIDED FURTHER that such amounts will be applied as described under "--
Covenants -- Sales of Assets" or "Collateral and Security," as the case may be,
no later than the fifth anniversary of such Asset Sale or Collateral Sale if not
previously paid to satisfy such liabilities.
"NET CASH PROCEEDS" means, with respect to any issuance or sale of Capital
Stock by any Person, the cash proceeds to such Person of such issuance or sale
net of attorneys' fees, accountants' fees, underwriters' or placement agents'
fees, discounts or commissions and brokerage, consultancy and other fees
actually incurred by such Person in connection with such issuance or sale and
net of taxes paid or payable by such Person as a result thereof.
"NEW CREDIT FACILITY" means the credit facility provided pursuant to the
credit agreement, dated as of , 1994, between the Company and Continental
Bank, N.A.
"NON-CONVERTIBLE CAPITAL STOCK" means, with respect to any corporation, any
Capital Stock of such corporation which is not convertible into another security
other than non-convertible common stock of such corporation; PROVIDED, HOWEVER,
that Non-Convertible Capital Stock shall not include any Redeemable Stock or
Exchangeable Stock.
"OFFERING" means the public offering and sale of the Senior Secured Notes.
"OFFICER" means the Chairman, the President, any Vice President, the Chief
Operating Officer, the Chief Financial Officer, the Treasurer, the Secretary,
any Assistant Treasurer, any Assistant Secretary or the Controller of the
Company.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers, one of
whom must be the President, the Treasurer or a Vice President of the Company.
Each Officers' Certificate (other than certificates provided pursuant to TIA
Section 314(a)(4)) shall include the statements provided for in TIA Section
314(e).
"OPERATING LEASE OBLIGATIONS" means any obligation of the Company and its
Restricted Subsidiaries on a Consolidated basis incurred or assumed under or in
connection with any lease of real or personal property which, in accordance with
GAAP, is not required to be classified and accounted for as a capital lease.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel, if so acceptable, may be an employee of
or counsel to the Company or the Trustee. Each such Opinion of Counsel shall
include the statements provided for in TIA Section 314(e).
"OUTSIDE DIRECTOR" means any Person who is a member of the Board of
Directors who is not (i) an employee or Affiliate of the Company, any Subsidiary
of the Company or Energy, (ii) an employee or Affiliate of Holding Capital
Group, Inc., (iii) a Plaster Entity or a Lindsey Entity, or (iv) a Person who
has engaged in a transaction with the Company or any Subsidiary of the Company
that would be required to be disclosed under Item 13 of Form 10-K if such Person
were a director of a registrant under the Securities Exchange Act of 1934, as
amended.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"PLASTER ENTITY" means Robert W. Plaster, Stephen R. Plaster, any member of
each of such individual's family, and any Person of which any of the foregoing
Persons are Affiliates.
"PLEDGE AGREEMENT" means that certain Pledge Agreement, dated as of the date
of the Indenture, by the Company in favor of the Trustee, in the form attached
to the Indenture.
"PREFERRED STOCK", as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
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"PUBLIC EQUITY OFFERING" means an underwritten primary public offering of
equity securities of the Company pursuant to an effective registration statement
under the Securities Act.
"PUBLIC MARKET" shall be deemed to have occurred if (x) a Public Equity
Offering has been consummated and (y) at least 25% (for purposes of the
definition of "Change of Control") or 20% (for purposes of the provisions
described under "-- Optional Redemption") of the total issued and outstanding
common stock of the Company has been distributed by means of an effective
registration statement under the Securities Act or sales pursuant to Rule 144
under the Securities Act.
"REDEEMABLE STOCK" means any class or series of Capital Stock of any Person
that (a) by its terms, by the terms of any security into which it is convertible
or exchangeable or otherwise is, or upon the happening of an event or passage of
time would be, required to be redeemed (in whole or in part) on or prior to the
first anniversary of the Stated Maturity of the Senior Secured Notes, (b) is
redeemable at the option of the holder thereof at any time on or prior to the
first anniversary of the Stated Maturity of the Senior Secured Notes or (c) is
convertible into or exchangeable for Capital Stock referred to in clause (a) or
clause (b) above or debt securities at any time prior to the first anniversary
of the Stated Maturity of the Senior Secured Notes.
"REFINANCING INDEBTEDNESS" means Indebtedness that refunds, refinances,
replaces, renews, repays or extends (including pursuant to any defeasance or
discharge mechanism) (collectively, "refinances," and "refinanced" shall have a
correlative meaning) any Indebtedness of the Company or a Restricted Subsidiary
existing on the Issue Date or Incurred in compliance with the Indenture
(including Indebtedness of the Company that refinances Indebtedness of any
Restricted Subsidiary and Indebtedness of any Restricted Subsidiary that
refinances Indebtedness of another Restricted Subsidiary) including Indebtedness
that refinances Refinancing Indebtedness; PROVIDED, HOWEVER, that (i) the
Refinancing Indebtedness shall be contractually subordinated in right of payment
to the Senior Secured Notes on terms at least as favorable to the Holders of
Senior Secured Notes as the terms set forth in the form of subordination
provisions attached to the Indenture, (ii) the Refinancing Indebtedness is
scheduled to mature either (a) no earlier than the Indebtedness being refinanced
or (b) after the Stated Maturity of the Senior Secured Notes, (iii) the
Refinancing Indebtedness has an Average Life at the time such Refinancing
Indebtedness is Incurred that is equal to or greater than the Average Life of
the Indebtedness being refinanced and (iv) such Refinancing Indebtedness is in
an aggregate principal amount (or if issued with original issue discount, an
aggregate issue price) that is equal to or less than the aggregate principal
amount (or if issued with original issue discount, the aggregate accreted value)
then outstanding (plus fees and expenses, including any premium and defeasance
costs) under the Indebtedness being refinanced; and PROVIDED, FURTHER, that
Refinancing Indebtedness shall not include (x) Indebtedness of a Subsidiary of
the Company that refinances Indebtedness of the Company or (y) Indebtedness of
the Company or a Restricted Subsidiary that refinances Indebtedness of an
Unrestricted Subsidiary.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that is not
designated an Unrestricted Subsidiary by the Board of Directors.
"SALE/LEASEBACK TRANSACTION" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Subsidiary transfers such
property to a Person and leases it back from such Person, other than leases for
a term of not more than 36 months or between the Company and a Wholly Owned
Subsidiary or between Wholly Owned Subsidiaries.
"SEASONAL OVERADVANCE" has the meaning ascribed to it in that certain Credit
Agreement dated as of the date of the Indenture, between the Company and
Continental Bank, N.A., which such Seasonal Overadvance shall not exceed
$3,000,000.
"SECURITIES" means all series of the Senior Secured Notes Due 2004 that are
issued under and pursuant to the terms of the Indenture, as amended or
supplemented from time to time.
"SENIOR INDEBTEDNESS" means (i) all obligations consisting of the principal
of and premium, if any, and accrued and unpaid interest (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company whether or not post-filing interest is
allowed in such proceeding),
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whether existing on the Issue Date or thereafter Incurred, in respect of (A)
Indebtedness of the Company for money borrowed and (B) Indebtedness evidenced by
notes, debentures, bonds or other similar instruments for the payment of which
the Company is responsible or liable; (ii) all Capitalized Lease Obligations of
the Company; (iii) all obligations of the Company (A) for the reimbursement of
any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (B) under Interest Rate Agreements and Currency Agreements entered
into in respect of any obligations described in clauses (i) and (ii) or (C)
issued or assumed as the deferred purchase price of property, and all
conditional sale obligations of the Company and all obligations of the Company
under any title retention agreement; (iv) all guarantees of the Company with
respect to obligations of other persons of the type referred to in clauses (ii)
and (iii) and with respect to the payment of dividends of other Persons; and (v)
all obligations of the Company consisting of modifications, renewals,
extensions, replacements and refundings of any obligations described in clauses
(i), (ii), (iii) or (iv); unless, in the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is provided that such
obligations are subordinated in right of payment to the Senior Secured Notes, or
any other Indebtedness or obligation of the Company; PROVIDED, HOWEVER, that
Senior Indebtedness shall not be deemed to include (1) any obligation of the
Company to any Subsidiary, (2) any liability for Federal, state, local or other
taxes or (3) any accounts payable or other liability to trade creditors arising
in the ordinary course of business (including guarantees thereof or instruments
evidencing such liabilities).
"SIGNIFICANT SUBSIDIARY" means any Subsidiary (other than an Unrestricted
Subsidiary) that would be a "Significant Subsidiary" of the Company within the
meaning of Rule 1-02 under Regulations S-X promulgated by the SEC.
"STATED MATURITY" means, with respect to any security, the date specified in
such security as the fixed date on which the principal of such security is due
and payable, including pursuant to any mandatory redemption provision (but
excluding any provision providing for the repurchase of such security at the
option of the holder thereof upon the happening of any contingency).
"SUBORDINATED INDEBTEDNESS" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is contractually
subordinated or junior in right of payment to the Senior Secured Notes or any
other Indebtedness of the Company.
"SUBSIDIARY" means, as applied to any Person, (i) a corporation at least a
majority of whose Capital Stock with voting power, under ordinary circumstances,
to elect a majority of the Board of Directors of such corporation is at the
time, directly or indirectly, owned or controlled by such Person, by a
Subsidiary or Subsidiaries of such Person, or by such Person and a Subsidiary or
Subsidiaries of such Person or (ii) any other Person (other than a corporation)
in which such Person, a Subsidiary or Subsidiaries of such Person, or such
Person and a Subsidiary or Subsidiaries of such Person, directly or indirectly,
at the date of determination, has at least a majority ownership interest. As of
the date of the Indenture, the Subsidiaries of the Company will include, without
limitation, PSNC Propane Corporation.
"SUBSIDIARY GUARANTEES" means the unconditional guarantees by the respective
Subsidiary Guarantors of the due and punctual payment of principal, premium, if
any, and interest on the Senior Secured Notes when and as the same shall become
due and payable and in the coin or currency in which the same are payable,
whether at Stated Maturity, by declaration of acceleration, call for redemption,
purchase or otherwise.
"SUBSIDIARY GUARANTOR" means each of the Persons listed on Schedule I
attached to the Indenture, each Person that becomes a Restricted Subsidiary of
the Company after the Issue Date and each other Person that becomes a Subsidiary
Guarantor under the Indenture pursuant to which such Person jointly and
severally unconditionally guarantees the Securities on a senior basis.
"UNRELATED BUSINESS" means any business other than the Line of Business.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that at the time of
determination shall be designated an Unrestricted Subsidiary by the Board of
Directors in the manner provided below and (ii) any subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
(including any newly
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acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any
property of, the Company or any other Subsidiary that is not a Subsidiary of the
Subsidiary to be so designated; PROVIDED, that either (A) the Subsidiary to be
so designated has total assets of $1,000 or less or (B) if such Subsidiary has
assets greater than $1,000, that such designation would be permitted pursuant to
the provisions under "Covenants -- Limitation on Restricted Payments". The Board
of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary of the Company; PROVIDED, HOWEVER, that immediately after giving
effect to such designation (x) the Company could Incur $1.00 of additional
Indebtedness pursuant to the first paragraph of "Covenants -- Limitation on
Incurrence of Indebtedness" and (y) no Default or Event of Default shall have
occurred and be continuing. Any such designation by the Board of Directors shall
be evidenced to the respective Trustee by promptly filing with the respective
Trustee a copy of the board resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. GOVERNMENT OBLIGATIONS" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case under
clauses (i) or (ii) are not callable or redeemable before the maturity thereof.
"VOTING SHARES", with respect to any corporation, means the Capital Stock
having the general voting power under ordinary circumstances to elect at least a
majority of the board of directors of such corporation (irrespective of whether
or not at the time stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency).
"WHOLLY OWNED SUBSIDIARY" means a Subsidiary (other than an Unrestricted
Subsidiary) all the Capital Stock of which (other than directors' qualifying
shares) is owned by the Company or another Wholly Owned Subsidiary.
COVENANTS
The Indentures contains covenants including, among others, the following:
LIMITATION ON RESTRICTED PAYMENTS. Under the terms of the Indenture, so
long as any of the Senior Secured Notes are outstanding, the Company shall not,
and shall not permit any Restricted Subsidiary to, directly or indirectly, (i)
declare or pay any dividend on or make any distribution or similar payment of
any sort in respect of its Capital Stock (including any payment in connection
with any merger or consolidation involving the Company) to the direct or
indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Non-Convertible Capital Stock or rights to acquire its
Non-Convertible Capital Stock and dividends or distributions payable solely to
the Company or a Restricted Subsidiary), (ii) purchase, redeem, defease or
otherwise acquire or retire for value any Capital Stock of the Company or of any
direct or indirect parent of the Company, or, with respect to the Company,
exercise any option to exchange any Capital Stock that by its terms is
exchangeable solely at the option of the Company (other than into Capital Stock
of the Company which is neither Exchangeable Stock nor Redeemable Stock), (iii)
purchase, repurchase, redeem, defease or otherwise acquire or retire for value,
prior to scheduled maturity or scheduled repayment thereof or scheduled sinking
fund payment thereon, any Subordinated Indebtedness (other than the purchase,
repurchase, or other acquisition of Subordinated Indebtedness purchased in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of acquisition) or
(iv) make any Investment in any Unrestricted Subsidiary or any Affiliate of the
Company other than a Restricted Subsidiary or a Person which will become a
Restricted Subsidiary as a result of any such Investment (each such payment
described in clauses (i)-(iv) of this paragraph, a "Restricted Payment"), unless
at the time of and after giving effect to the proposed Restricted Payment: (1)
no Default or Event of Default shall have occurred and be continuing (or would
result therefrom); (2) the Company would be permitted to Incur an additional $1
of Indebtedness pursuant to the provisions described in the first paragraph
under "-- Limitation on Incurrence of Indebtedness", and
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(3) the aggregate amount of all such Restricted Payments subsequent to the Issue
Date shall not exceed the sum of (A) 50% of aggregate Consolidated Net Income
(or if such Consolidated Net Income is a deficit, minus 100% of such deficit),
and minus 100% of the amount of any write-downs, write-offs, other negative
reevaluations and other negative extraordinary charges not otherwise reflected
in Consolidated Net Income during such period; (B) the aggregate Net Cash
Proceeds received by the Company after the Issue Date from a sale by the Company
of Capital Stock (other than Redeemable Stock or Exchangeable Stock) of the
Company or from the issuance of any options or warrants or other rights to
acquire Capital Stock (other than Redeemable Stock or Exchangeable Stock); (C)
the amount by which the principal amount of Indebtedness of the Company or its
Restricted Subsidiaries is reduced on the Company's Consolidated balance sheet
upon the conversion or exchange (other than by a Subsidiary) subsequent to the
Issue Date of any Indebtedness of the Company or any Restricted Subsidiary
converted or exchanged for Capital Stock (other than Redeemable Stock or
Exchangeable Stock) of the Company (less the amount of any cash, or the value of
any other property, distributed by the Company or any Restricted Subsidiary upon
such conversion or exchange); (D) an amount equal to the net reduction in
Investments in Unrestricted Subsidiaries resulting from payments of interest on
Indebtedness, dividends, repayments of loans or advances, or other transfers of
assets, in each case to the Company or any Restricted Subsidiary from
Unrestricted Subsidiaries, or from redesignations of Unrestricted Subsidiaries
as Restricted Subsidiaries (valued in each case as provided in the definition of
"Investments"), not to exceed in the case of any Unrestricted Subsidiary the
amount of Investments previously made by the Company or any Restricted
Subsidiary in such Unrestricted Subsidiary; and (E) $1,000,000 million, less the
aggregate of all Excess Payments made during such period.
The failure to satisfy the conditions set forth in clauses (2) and (3) of
the first paragraph under "Covenants -- Limitation on Restricted Payments" shall
not prohibit any of the following as long as the condition set forth in clause
(1) of such paragraph is satisfied (except as set forth below): (i) dividends
paid within 60 days after the date of declaration thereof if at such date of
declaration such dividend would have complied with the provisions described in
the first paragraph under "Covenants -- Limitation on Restricted Payments"; (ii)
any purchase, redemption, defeasance, or other acquisition or retirement for
value of Capital Stock or Subordinated Indebtedness of the Company made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Capital Stock of the Company (other than Redeemable Stock or Exchangeable Stock
and other than stock issued or sold to a Subsidiary or to an employee stock
ownership plan), PROVIDED, HOWEVER, that notwithstanding clause (1) of the
immediately preceding paragraph, the occurrence or existence of a Default or
Event of Default shall not prohibit the making of such purchase, redemption,
defeasance or other acquisition or retirement, and PROVIDED, FURTHER, such
purchase, redemption, defeasance or other acquisition or retirement shall not be
included in the calculation of Restricted Payments made for purposes of clause
(3) of the immediately preceding paragraph and PROVIDED, FURTHER, that the Net
Cash Proceeds from such sale shall be excluded from sub-clause (B) of clause (3)
of the immediately preceding paragraph; (iii) any purchase, redemption,
defeasance or other acquisition or retirement for value of Subordinated
Indebtedness of the Company made by exchange for, or out of the proceeds of the
substantially concurrent Incurrence of for cash (other than to a Subsidiary),
new Indebtedness of the Company, PROVIDED, HOWEVER, that (A) such new
Indebtedness shall be contractually subordinated in right of payment to the
Senior Secured Notes on terms at least as favorable to the Holders of Senior
Secured Notes as the terms set forth in the form of subordination provisions
attached to the Indenture, (B) such new Indebtedness has a Stated Maturity
either (1) no earlier than the Stated Maturity of the Indebtedness redeemed,
repurchased, defeased, acquired or retired or (2) after the Stated Maturity of
the Senior Secured Notes and (C) such Indebtedness has an Average Life equal to
or greater than the Average Life of the Indebtedness redeemed, repurchased,
defeased, acquired or retired, and PROVIDED, FURTHER, that such purchase,
redemption, defeasance or other acquisition or retirement, shall not be included
in the calculation of Restricted Payments made for purposes of clause (3) of the
immediately preceding paragraph; (iv) any purchase, redemption, defeasance or
other acquisition or retirement for value of Subordinated Indebtedness upon a
Change of Control or an Asset Sale to the extent required by the indenture or
other agreement pursuant to which such Subordinated Indebtedness was issued, but
only if the Company (A) in the case of a Change of Control, has made an offer to
repurchase the Senior Secured Notes as described under "-- Covenants -- Change
of Control" or (B) in the case of an Asset Sale, has applied the Net Available
Cash from such Asset Sale in
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accordance with the provisions described under "-- Covenants -- Sales of Assets"
and certain provisions related to the release of collateral, if applicable; (v)
pro rata dividends paid by a Subsidiary with respect to a series or class of its
Capital Stock the majority of which is held by the Company or a Wholly Owned
Subsidiary; (vi) the payment of dividends on the Capital Stock of the Company
following an initial Public Equity Offering of such Capital Stock of up to an
amount per annum of 6% of the Net Cash Proceeds received by the Company in such
Public Equity Offering; (vii) the purchase, redemption, acquisition,
cancellation, or other retirement for value of shares of Capital Stock of the
Company, options on any such shares or related phantom stock, or stock
appreciation rights or similar securities held by officers or employees or
former officers or employees (or their estates or beneficiaries under their
estates), upon the death, disability, retirement or termination of employment of
such employee or former employee, pursuant to the terms of an employee benefit
plan or any other agreement under which such shares of stock or related rights
were issued, provided that the aggregate cash consideration paid, or
distributions made, pursuant to this clause (vii) after the date of the
Indenture does not exceed an aggregate amount of $1,000,000 plus the cash
proceeds received by or contributed to the Company from any reissuance of
Capital Stock by the Company to members of management and employees of the
Company and its Subsidiaries; and (viii) Investments in Unrestricted
Subsidiaries of up to $3,000,000 at any one time outstanding.
LIMITATION ON INCURRENCE OF INDEBTEDNESS. Under the terms of the Indenture,
the Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, Incur any Indebtedness, except that the Company may
Incur Indebtedness if, after giving effect thereto, the Consolidated Coverage
Ratio would be greater than 1.75:1, if such Incurrence takes place on or prior
to , 1998, or 2.0:1, if such Incurrence takes place thereafter.
The foregoing provision will not limit the ability of the Company or any
Restricted Subsidiary to Incur the following Indebtedness: (i) Refinancing
Indebtedness (except with respect to Indebtedness referred to in clause (ii),
(iii) or (iv) below); (ii) Acquisition Indebtedness at any one time outstanding
in an aggregate principal amount not to exceed $15,000,000, PROVIDED that not
more than an aggregate of $6,000,000 of such Acquisition Indebtedness may be
incurred in any twelve month period; (iii) Indebtedness of the Company which is
owed to and held by a Wholly Owned Subsidiary and Indebtedness of a Wholly Owned
Subsidiary which is owed to and held by the Company or a Wholly Owned
Subsidiary, including without limitation, the Indebtedness evidenced by the
Intercompany Notes; PROVIDED, HOWEVER, that any subsequent issuance or transfer
of any Capital Stock which results in any such Wholly Owned Subsidiary ceasing
to be a Wholly Owned Subsidiary or any transfer of such Indebtedness (other than
to the Company or a Wholly Owned Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Indebtedness by the Company or by a Wholly
Owned Subsidiary, as the case may be; (iv) Indebtedness (whether under the New
Credit Facility or otherwise) Incurred for the purpose of financing the working
capital needs of the Company and its Restricted Subsidiaries, PROVIDED, HOWEVER,
that after giving effect to the Incurrence of such Indebtedness and any
substantially simultaneous use of the proceeds thereof, the aggregate principal
amount of all such Indebtedness Incurred pursuant to this clause (iv) and then
outstanding immediately after such Incurrence and such use of proceeds shall not
exceed the sum of 60% of the book value of the inventory and 90% of the book
value of the receivables of the Company and the Restricted Subsidiaries on a
consolidated basis at such time plus the amount of the Seasonal Overadvance, and
PROVIDED FURTHER, that the aggregate amount of Indebtedness pursuant to this
clause (iv) shall not exceed $15,000,000 at any time prior to , 1997 and
PROVIDED FURTHER, that the Company's Subsidiaries shall be permitted to
guarantee Indebtedness incurred by the Company pursuant to the New Credit
Facility; (v) Acquired Indebtedness; PROVIDED, HOWEVER, that the Company would
have been able to Incur such Indebtedness at the time of the Incurrence thereof
pursuant to the immediately preceding paragraph; and (vi) Indebtedness of the
Company or a Restricted Subsidiary outstanding on the Issue Date (other than
Indebtedness referred to in clause (iv) above and Indebtedness being repaid or
retired with the proceeds of the Offering.
Notwithstanding the provisions of this covenant described in the first two
paragraphs above, the Indenture provides that the Company shall not Incur any
Indebtedness if the proceeds thereof are used, directly or indirectly, to repay,
prepay, redeem, defease, retire, refund or refinance any Subordinated
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Indebtedness unless such repayment, prepayment, redemption, defeasance,
retirement, refunding or refinancing is not prohibited under "-- Limitation on
Restricted Payments" or unless such Indebtedness shall be contractually
subordinated to the Senior Secured Notes at least to the same extent as such
Subordinated Indebtedness.
LIMITATION ON PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. Under the terms
of the Indenture, the Company shall not, and shall not permit any Subsidiary, to
create or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to (i)
pay dividends to or make any other distributions on its Capital Stock, or pay
any Indebtedness or other obligations owed to the Company or any other
Restricted Subsidiary, (ii) make any Investments in the Company or any other
Restricted Subsidiary or (iii) transfer any of its property or assets to the
Company or any other Restricted Subsidiary; PROVIDED, HOWEVER, that the
foregoing shall not apply to (a) any encumbrance or restriction existing
pursuant to the Indenture or any other agreement or instrument as in effect or
entered into on the Issue Date (including the New Credit Facility as in effect
on the Issue Date); (b) any encumbrance or restriction with respect to a
Subsidiary pursuant to an agreement relating to any Acquired Indebtedness of
such Subsidiary; PROVIDED, HOWEVER, that such encumbrance or restriction was not
Incurred in connection with or in contemplation of such Subsidiary becoming a
Subsidiary; (c) any encumbrance or restriction pursuant to an agreement
effecting a refinancing, renewal, extension or replacement of Indebtedness
referred to in clause (a) or (b) above or contained in any amendment or
modification with respect to such Indebtedness; PROVIDED, HOWEVER, that the
encumbrances and restrictions contained in any such agreement, amendment or
modification are no less favorable in any material respect with respect to the
matters referred to in clauses (i), (ii) and (iii) above than the encumbrances
and restrictions with respect to the Indebtedness being refinanced, renewed,
extended, replaced, amended or modified; (d) in the case of clause (iii) above,
customary non-assignment provisions of any leases governing a leasehold interest
or of any supply, license or other agreement entered into in the ordinary course
of business of the Company or any Subsidiary; (e) any restrictions with respect
to a Subsidiary imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of such
Subsidiary pending the closing of such sale or disposition or (f) any
encumbrance or restriction existing by reason of applicable law. Nothing
contained in the covenant described in this paragraph prevents the sale of
assets that secure Indebtedness of the Company or its Subsidiaries.
LIMITATION ON SALE/LEASEBACK TRANSACTIONS. Under the terms of the
Indenture, the Company shall not, and shall not permit any Restricted Subsidiary
to, enter into any Sale/Leaseback Transaction unless (i) the Company or such
Subsidiary would be entitled to create a Lien on such property securing
Indebtedness in an amount equal to the Attributable Debt with respect to such
transaction without equally and ratably securing the Securities pursuant to the
covenant entitled "Limitation on Liens" or (ii) the net proceeds of such sale
are at least equal to the fair value (as determined by the Board of Directors)
of such property and the Company or such Subsidiary shall apply or cause to be
applied an amount in cash equal to the net proceeds of such sale to the
retirement, within 30 days of the effective date of any such arrangement, of
Senior Indebtedness or Indebtedness of a Restricted Subsidiary, PROVIDED,
HOWEVER, that the Company or any Restricted Subsidiary may enter into a
Sale/Leaseback Transaction as long as the sum of (x) the Attributable Debt with
respect to such Sale/Leaseback Transaction and all other Sale/Leaseback
Transactions entered into pursuant to this proviso, plus (y) the amount of
outstanding Indebtedness secured by Liens Incurred pursuant to the proviso to
the covenant described under "-- Limitation on Liens" below, does not exceed 5%
of Consolidated Net Tangible Assets as determined based on the consolidated
balance sheet of the Company as of the end of the most recent fiscal quarter for
which financial statements are available.
LIMITATION ON LIENS. Under the terms of the Indenture, except as described
under "-- Security," the Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, incur or permit to exist any Lien of any
nature whatsoever on any of its properties (including, without limitation,
Capital Stock), whether owned at the date of such Indenture or thereafter
acquired, other than (a) pledges or deposits made by such Person under workers'
compensation, unemployment insurance laws or similar legislation, or good faith
deposits in connection with bids, tenders, contracts (other than for payment of
Indebtedness) or leases to which such Person is a party, or deposits to secure
statutory or regulatory
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obligations of such Person or deposits of cash of United States Government bonds
to secure surety, appeal or performance bonds to which such Person is a party,
or deposits as security for contested taxes or import duties or for the payment
of rent, in each case Incurred in the ordinary course of business; (b) Liens
imposed by law such as carriers', warehousemen's and mechanics' Liens, in each
case, arising in the ordinary course of business and with respect to amounts not
yet due or being contested in good faith by appropriate legal proceedings
promptly instituted and diligently conducted and for which a reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made; or other Liens arising out of judgments or awards against
such Person with respect to which such Person shall then be diligently
prosecuting appeal or other proceedings for review; (c) Liens for property taxes
not yet subject to penalties for non-payment or which are being contested in
good faith and by appropriate legal proceedings promptly instituted and
diligently conducted and for which a reserve or other appropriate provision, if
any, as shall be required in conformity with GAAP shall have been made; (d)
Liens in favor of issuers or surety bonds or letters of credit issued pursuant
to the request of and for the account of such Person in the ordinary course of
its business; PROVIDED, HOWEVER, that such letters of credit may not constitute
Indebtedness; (e) minor survey exceptions, minor encumbrances, easements or
reservations of, or rights of others for, rights of way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or other
restrictions as to the use of real properties or liens incidental to the conduct
of the business of such Person or to the ownership of its properties which were
not Incurred in connection with Indebtedness or other extensions of credit and
which do not in the aggregate materially adversely affect the value of said
properties or materially impair their use in the operation of the business of
such Person; (f) Liens securing Indebtedness Incurred to finance the
construction of, purchase of, or repairs, improvements or additions to, property
(including Acquisition Indebtedness Incurred pursuant to clause (ii) of the
penultimate paragraph under "-- Limitation on the Incurrence of Indebtedness");
PROVIDED, HOWEVER, that the Lien may not extend to any other property owned by
the Company or any Restricted Subsidiary at the time the Lien is incurred, and
the Indebtedness secured by the Lien may not be issued more than 180 days after
the later of the acquisition, completion of construction, repair, improvement,
addition or commencement of full operation of the property subject to the Lien;
(g) Liens existing on the Issue Date (other than Liens relating to Indebtedness
or other obligations being repaid or Liens that are otherwise extinguished with
the proceeds of the Offering), (h) Liens on property of a Person (excluding
Capital Stock) of such Person at the time such Person becomes a Subsidiary;
PROVIDED, HOWEVER, that any Lien may not extend to any other property owned by
the Company or any Restricted Subsidiary; (i) Liens on property at the time the
Company or a Subsidiary acquires the property, including any acquisition by
means of a merger or consolidation with or into the Company or a Subsidiary;
PROVIDED, HOWEVER, that such Liens are not incurred in connection with, or in
contemplation of, such merger or consolidation; and PROVIDED, FURTHER, that the
Lien may not extend to any other property owned by the Company or any Restricted
Subsidiary; (j) Liens securing Indebtedness or other obligations of a Subsidiary
owing to the Company or a Wholly Owned Subsidiary, including without limitation,
the Indebtedness Incurred under the Intercompany Notes, PROVIDED that any Lien
securing Indebtedness pursuant to any Intercompany Notes shall be limited to the
inventory and accounts receivable of the Subsidiary of the Company issuing such
Intercompany Note; (k) Liens incurred by a Person other than the Company or any
Subsidiary on assets that are the subject of a Capitalized Lease Obligation to
which the Company or a Subsidiary is a party; PROVIDED, HOWEVER, that any such
Lien may not secure Indebtedness of the Company or any Subsidiary (except by
virtue of clause (x) of the definition of "Indebtedness") and may not extend to
any other property owned by the Company or any Restricted Subsidiary; (l) Liens
on inventory and accounts receivable of the Company and its subsidiaries
securing Indebtedness permitted to be Incurred under the provision described in
clause (iv) of the penultimate paragraph under "-- Limitation on the Incurrence
of Indebtedness"; (m) Liens to secure any refinancing, refunding, extension,
renewal or replacement (or successive refinancings, refundings, extensions,
renewals or replacements) as a whole, or in part, of any Indebtedness secured by
any Lien referred to in the foregoing clauses (f), (g), (h), (i) and (m),
PROVIDED, HOWEVER, that (x) such new Lien shall be limited to all or part of the
same property that secured the original Lien (plus improvements on such
property) and (y) the Indebtedness secured by such Lien at such time is not
increased (other than by an amount necessary to pay fees and expenses, including
premiums, related to the refinancing, refunding, extension, renewal or
replacement of such Indebtedness); and (n) Liens by which the Senior Secured
Notes are secured equally and ratably with other Indebtedness of the Company
pursuant to
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this paragraph, without effectively providing that the Senior Secured Notes
shall be secured equally and ratably with (or prior to) the obligations so
secured for so long as such obligations are so secured; PROVIDED, HOWEVER, that
the Company may incur other Liens other than on the Collateral to secure
Indebtedness as long as the sum of (x) the amount of outstanding Indebtedness
secured by Liens incurred pursuant to this proviso plus (y) the Attributable
Debt with respect to all outstanding leases in connection with Sale/ Leaseback
Transactions entered into pursuant to the proviso under "-- Limitation on
Sale/Leaseback Transactions," does not exceed 5% of Consolidated Net Tangible
Assets as determined with respect to the Company as of the end of the most
recent fiscal quarter for which financial statements are available.
CHANGE OF CONTROL. Under the terms of the Indenture, in the event of a
Change of Control, the Company shall make an offer to purchase (the "Change of
Control Offer") the Senior Secured Notes then outstanding at the time at a
purchase price equal to 101% of the Accreted Value thereof plus accrued interest
to the Change of Control Purchase Date (as defined below) on the terms set forth
in this provision. The date on which the Company shall purchase the Securities
pursuant to this provision (the "Change of Control Purchase Date") shall be no
earlier than 30 days, nor later than 60 days, after the notice referred to below
is mailed, unless a longer period shall be required by law. The Company shall
notify the Trustee in writing promptly after the occurrence of any Change of
Control of the Company's obligation to purchase the Senior Secured Notes.
Notice of a Change of Control Offer shall be mailed by the Company to the
Holders of the Senior Secured Notes at their last registered address (with a
copy to the Trustee and the Paying Agent) within thirty (30) days after a Change
in Control has occurred. The Change of Control Offer shall remain open from the
time of mailing until five (5) Business Days before the Change of Control
Purchase Date. The notice shall contain all instructions and materials necessary
to enable such Holders to tender (in whole or in part) the Senior Secured Notes
pursuant to the Change of Control Offer. The notice, which shall govern the
terms of the Change of Control Offer, shall state: (a) that the Change of
Control Offer is being made pursuant to the Indenture; (b) the purchase price
and the Change of Control Purchase Date; (c) that any Senior Secured Note not
surrendered or accepted for payment will continue to accrue interest; (d) that
any Senior Secured Note accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest after the Change of Control Purchase Date
if payment is made; (e) that any Holder electing to have a Senior Secured Note
purchased (in whole or in part) pursuant to a Change of Control Offer will be
required to surrender the Senior Secured Note, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Senior Secured Note completed,
to the Paying Agent at the address specified in the notice (or otherwise make
effective delivery of the Senior Secured Note pursuant to book-entry procedures
and the related rules of the applicable depositories) at least five Business
Days before the Change of Control Purchase Date; and (f) that any Holder will be
entitled to withdraw his or her election if the Paying Agent receives, not later
than three Business Days prior to the Change of Control Purchase Date, a
telegram, telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Senior Secured Note the Holder delivered for
purchase and a statement that such Holder is withdrawing his or her election to
have the Senior Secured Note purchased.
On the Change of Control Purchase Date, the Company shall (i) accept for
payment the Senior Secured Notes, or portions thereof, surrendered and properly
tendered and not withdrawn, pursuant to the Change of Control Offer, (ii)
deposit with the Paying Agent money sufficient to pay the purchase price plus
accrued interest of all the Senior Secured Notes or portions thereof, so
accepted and (iii) deliver to the Trustee the Senior Secured Notes so accepted
together with an Officers' Certificate stating that such securities have been
accepted for payment by the Company. The Paying Agent shall promptly mail or
deliver to Holders of securities so accepted payment in an amount equal to the
purchase price. Holders whose Securities are purchased only in part will be
issued new Securities equal in principal amount to the unpurchased portion of
the Securities surrendered.
TRANSACTIONS WITH AFFILIATES. Under the terms of the Indenture, the Company
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, enter into, permit to exist, renew or extend any transaction or
series of transactions (including, without limitation, the sale, purchase,
exchange or lease of any assets or property or the rendering of any services)
with any Affiliate of the Company, any Plaster Entity,
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<PAGE>
any Lindsey Entity or Energy unless (i) the terms of such transaction or series
of transactions are (A) no less favorable to the Company or such Restricted
Subsidiary, as the case may be, than would be obtainable in a comparable
transaction or series of related transactions in arm's-length dealings with an
unrelated third party and, in the case of a transaction or series of
transactions involving payments or consideration in excess of $100,000, approved
by a majority of the Outside Directors, and (B) set forth in writing, if such
transaction or series of transactions involves aggregate payments or
consideration in excess of $250,000, and (ii) with respect to a transaction or
series of transactions involving aggregate payments or consideration in excess
of $1 million, such transaction or series of transactions has been determined,
in the written opinion of an independent nationally recognized investment
banking firm, to be fair, from a financial point of view, to the Company or such
Restricted Subsidiary. The foregoing provisions do not prohibit (i) the payment
of reasonable fees to directors of the Company and its subsidiaries, (ii)
scheduled payments made pursuant to the terms of any of the Basic Agreements, as
the terms of each such agreement are in effect on the Issue Date, or (iii) any
transaction between the Company and a Wholly Owned Subsidiary or between Wholly
Owned Subsidiaries otherwise permitted by the terms of the Indenture. Any
transaction which has been determined, in the written opinion of an independent
nationally recognized investment banking firm, to be fair, from a financial
point of view, to the Company or the applicable Restricted Subsidiary shall be
deemed to be in compliance with this provision.
SALES OF ASSETS. Under the terms of the Indenture, neither the Company nor
any Restricted Subsidiary shall consummate any Asset Sale unless (i) the Company
or such Restricted Subsidiary receives consideration at the time of such Asset
Sale at least equal to the fair market value, as determined in good faith by the
Board of Directors, of the shares or assets subject to such Asset Sale, (ii) at
least 80% of the consideration thereof received by the Company or such
Restricted Subsidiary is in the form of Additional Assets or cash or cash
equivalents which cash equivalents are promptly converted into cash by the
Person receiving such payment and (iii) an amount equal to 100% of the Net
Available Cash is applied by the Company (or such Subsidiary, as the case may
be) as set forth herein. Under the terms of the Indenture, the Company shall not
permit any Unrestricted Subsidiary to make any Asset Sale unless such
Unrestricted Subsidiary receives consideration at the time of such Asset Sale at
least equal to the fair market value of the shares or assets so disposed of as
determined in good faith by the Board of Directors.
Under the terms of the Indenture, within 360 days (such period being the
"Application Period") following the consummation of an Asset Sale, the Company
or such Restricted Subsidiary shall apply the Net Available Cash from such Asset
Sale as follows: (i) FIRST, to the extent the Company or such Restricted
Subsidiary elects, to reinvest in Additional Assets; (ii) SECOND, to the extent
of the balance of such Net Available Cash after application in accordance with
clause (i), and to the extent the Company or such Restricted Subsidiary elects
(or is required by the terms of any Senior Indebtedness or any Indebtedness of
such Restricted Subsidiary), to prepay, repay or purchase (A) secured Senior
Indebtedness or (B) Indebtedness (other than any Preferred Stock) of a
Restricted Subsidiary in either case other than Indebtedness owed to the Company
(except to the extent that the proceeds of any such repayment received by the
Company are used to repay secured Senior Indebtedness of the Company or an
Affiliate of the Company), (iii) THIRD, to the extent of the balance of such Net
Available Cash after application in accordance with clause (i) and (ii), to make
an offer to purchase the Senior Secured Notes at not less than 100% of their
Accreted Value, plus accrued interest (if any) pursuant to and subject to the
conditions set forth in the Indenture; PROVIDED, HOWEVER that in connection with
any prepayment, repayment or purchase of Indebtedness pursuant to clause (ii) or
(iii) above, the Company or Restricted Subsidiary shall retire such Indebtedness
and cause the related loan commitment (if any) to be permanently reduced in an
amount equal to the principal amount so prepaid, repaid or purchased. To the
extent that any Net Available Cash of Asset Sales remains after the application
of such Net Available Cash in accordance with this paragraph, the Company or
such Restricted Subsidiary may utilize such remaining Net Available Cash in any
manner set forth in clause (i) or clause (ii) above.
To the extent that any or all of the Net Available Cash of any Foreign Asset
Sale is prohibited or delayed by applicable local law from being repatriated to
the United States, the portion of such Net Available Cash so affected shall not
be required to be applied at the time provided above, but may be retained by the
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applicable Restricted Subsidiary so long, but only so long, as the applicable
local law will not permit repatriation to the United States (the Company hereby
agreeing to promptly take or cause the applicable Restricted Subsidiary to
promptly take all actions required by the applicable local law to permit such
repatriation). Once such repatriation of any of such affected Net Available Cash
is permitted under the applicable local law, such repatriation shall be
immediately effected and such repatriated Net Available Cash will be applied in
the manner set forth in this provision as if such Asset Sale had occurred on the
date of such repatriation.
To the extent that the Board of Directors determines, in good faith, that
repatriation of any or all of the Net Available Cash of any Foreign Asset Sale
would have a material adverse tax consequence to the Company, the Net Available
Cash so affected may be retained outside of the United States by the applicable
Restricted Subsidiary for so long as such material adverse tax consequence would
continue.
Under the Indenture, the Company shall not be required to make an offer to
purchase the Senior Secured Notes if the Net Available Cash available from an
Asset Sale (after application of the proceeds as provided in clauses (i) and
(ii) of the second paragraph of this covenant above) is less than $1,000,000 for
any particular Asset Sale (which lesser amounts shall not be carried forward for
purposes of determining whether an offer is required with respect to the Net
Available Cash from any subsequent Asset Sale).
Notwithstanding the foregoing, this provision shall not apply to, or prevent
any sale of assets, property, or Capital Stock of Subsidiaries to the extent
that the fair market value (as determined in good faith by the Board of
Directors) of such asset, property or Capital Stock, together with the fair
market value of all other assets, property, or Capital Stock of Subsidiaries
sold, transferred or otherwise disposed of in Asset Sales during the twelve
month period preceding the date of such sale, does not exceed 5% of Consolidated
Net Tangible Assets as determined as of the end of the most recent fiscal
quarter, and no violation of this provision shall be deemed to have occurred as
a consequence thereof.
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company as an entirety to a Person in a transaction
permitted under the covenant described under "-- Merger and Consolidation", the
Successor Corporation shall be deemed to have sold the properties and assets of
the Company not so transferred for purposes of this covenant, and shall comply
with the provisions of this covenant with respect to such deemed sale as if it
were an Asset Sale.
LIMITATION ON THE ISSUANCE OF CAPITAL STOCK AND THE INCURRENCE OF
INDEBTEDNESS OF RESTRICTED SUBSIDIARIES. Pursuant to the terms of the Indenture,
the Company shall not permit any Restricted Subsidiary, directly or indirectly,
to issue or sell, and shall not permit any Person other than the Company or a
Wholly Owned Subsidiary to own (except to the extent that any such Person may
own on the Issue Date), any shares of such Restricted Subsidiary's Capital Stock
(including options, warrants or other rights to purchase shares of Capital
Stock) except, to the extent otherwise permitted by the Indenture, (i) to the
Company or another Restricted Subsidiary that is a Wholly Owned Subsidiary of
the Company, or (ii) if, immediately after giving effect to such issuance and
sale, such Restricted Subsidiary would no longer constitute a Restricted
Subsidiary for purposes of the Indenture. The Company shall not permit any
Restricted Subsidiary, directly or indirectly, to Incur Indebtedness other than
pursuant to the second paragraph under "-- Limitation on Indebtedness."
LIMITATION ON CHANGES IN THE NATURE OF BUSINESS. The Indenture provides
that the Company and its Subsidiaries shall not engage in any line of business
other than the business of the sale and distribution of propane gas and
operations related thereto for any period of time in excess of 270 consecutive
days for any such unrelated line of business.
MERGER AND CONSOLIDATION. Under the terms of the Indenture, the Company
shall not, in a single transaction or through a series of related transactions,
consolidate with or merge with or into any other corporation or sell, assign,
convey, transfer or lease or otherwise dispose of all or substantially all of
its properties and assets to any Person or group of affiliated Persons unless:
(a) either the Company shall be the continuing Person, or the Person (if other
than the Company) formed by such consolidation or into which the Company is
merged or to which the properties and assets of the Company as an entirety are
transferred (the
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"Successor Corporation"), shall be a corporation organized and existing under
the laws of the United States or any State thereof or the District of Columbia
and shall expressly assume, by an indenture supplemental to the Indenture,
executed and delivered to the Trustee, in form and substance reasonably
satisfactory to the Trustee, all the obligations of the Company under the
Indenture and the Senior Secured Notes; (b) immediately before and immediately
after giving effect to such transaction on a pro forma basis (and treating any
Indebtedness which becomes an obligation of the Company (or the Successor
Corporation if the Company is not the continuing obligor under the Indenture) or
any Restricted Subsidiary as a result of such transaction as having been
Incurred by such Person at the time of such transaction), no Default shall have
occurred and be continuing; (c) the Company shall have delivered, or caused to
be delivered, to the respective Trustee an Officers' Certificate and, as to
legal matters, an Opinion of Counsel, each in form and substance reasonably
satisfactory to the respective Trustee, each stating that such consolidation,
merger or transfer and such supplemental indenture comply with this provision
and that all conditions precedent herein provided for relating to such
transaction have been complied with; (d) immediately after giving effect to such
transaction on a pro forma basis (and treating any Indebtedness which becomes an
obligation of the Company (or the Successor Corporation if the Company is not
the continuing obligor under the Indenture) or a Restricted Subsidiary in
connection with or as a result of such transaction as having been Incurred by
such Person at the time of such transaction, the Consolidated Coverage Ratio of
the Company (or the Successor Corporation if the Company is not the continuing
obligor under the Indenture) is at least 1:1, PROVIDED that, if the Consolidated
Coverage Ratio before giving effect to such transaction is within the range set
forth in column (A) below, then the pro forma Consolidated Coverage Ratio of the
Company or the Successor Corporation shall be at least equal to the lessor of
(1) the ratio determined by multiplying the percentage set forth in column (B)
below by the Consolidated Coverage Ratio of the Company prior to such
transaction and (2) the ratio set forth in column (C) below:
<TABLE>
<CAPTION>
(A) (B) (C)
- -------------------- ---- --------
<S> <C> <C>
1.11:1 to 1.99:1 90% 1.50:1
2.00:1 to 2.99:1 80% 2.10:1
3.00:1 to 3.99:1 70% 2.40:1
4.00:1 or more 60% 2.50:1;
</TABLE>
and (e) immediately after giving effect to such transaction on a pro forma basis
(and treating any Indebtedness which becomes an obligation of the Company (or
the Successor Corporation if the Company is not the continuing obligor under the
Indenture) or a Restricted Subsidiary in connection with or as a result of such
transaction as having been Incurred by such Person at the time of such
transaction), the Company (or the Successor Corporation if the Company is not
the continuing obligor under the Indenture) shall have Consolidated Net Worth in
an amount which is not less than the Consolidated Net Worth immediately prior to
such transaction. Notwithstanding the foregoing clauses (b), (d) and (e), any
Restricted Subsidiary may consolidate with, merge into or transfer all or part
of its properties and assets to the Company or any Wholly Owned Subsidiary or
Wholly Owned Subsidiaries and no violation of this provision will be deemed to
have occurred as a consequence thereof, as long as the requirements of clauses
(a) and (c) are satisfied in connection therewith.
Upon any such assumption by the Successor Corporation, except in the case of
a lease, the Successor Corporation shall succeed to and be substituted for the
Company under the Indenture and the Senior Secured Notes and the Company shall
thereupon be released from all obligations under the Indenture and under the
Senior Secured Notes and the Company as the predecessor corporation may
thereupon or at any time thereafter be dissolved, wound up or liquidated. The
Successor Corporation thereupon may cause to be signed, and may issue either in
its own name or in the name of the Company, all or any of the Senior Secured
Notes issuable under the Indenture which theretofore shall not have been signed
by the Company and delivered to the Trustee; and, upon the order of the
Successor Corporation instead of the Company and subject to all the terms,
conditions and limitations prescribed in the Indenture, the Trustee shall
authenticate and shall deliver any Senior Secured Notes which the Successor
Corporation thereafter shall cause to be signed and delivered to the Trustee for
that purpose. All the Senior Secured Notes so issued shall in all
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respects have the same legal rank and benefit under the Indenture as the Senior
Secured Notes theretofore or thereafter issued in accordance with the terms of
the Indenture as though all such Senior Secured Notes had been issued at the
date of the execution of the Indenture.
A Subsidiary Guarantor (other than a Subsidiary Guarantor whose Subsidiary
Guarantee is released pursuant to the Indenture in connection with the sale by
the Company of all of the Capital Stock of such Subsidiary Guarantor as
described under "-- Subsidiary Guarantee") shall not, and the Company shall not
permit a Subsidiary Guarantor to, in a single transaction or through a series of
related transactions, consolidate with or merge into any other Person (other
than a wholly owned Subsidiary of such Subsidiary Guarantor, another Subsidiary
Guarantor or the Company) or sell, assign, convey, transfer, or lease or
otherwise dispose of all or substantially all of its properties and assets to
any Person or group of affiliated persons (other than another Subsidiary
Guarantor or the Company) unless: (a) either (A) such Subsidiary Guarantor shall
be the continuing corporation or (B) the Person (if other than such Subsidiary
Guarantor) formed by such consolidation or into which such Subsidiary Guarantor
is merged or the Person which acquires by conveyance, transfer, lease or
disposition of all or substantially all of the properties and assets of such
Subsidiary Guarantor (a "Successor Subsidiary Guarantor") (1) shall be a
corporation, organized and validly existing under the laws of the United States
of America or any State thereof or the District of Columbia or Canada and (2)
shall expressly assume by an indenture supplemental to the Indenture, executed
and delivered to the Trustee, in form reasonably satisfactory to the Trustee,
all the obligations of such Subsidiary Guarantor under the Senior Secured Notes
and the Indenture; (b) immediately before and after giving effect to such
transaction on a pro forma basis (and treating any Indebtedness not previously
an obligation of such Subsidiary Guarantor or a Subsidiary of such Subsidiary
Guarantor which becomes the obligation of such Subsidiary Guarantor or any of
its Subsidiaries in connection with or as a result of such transaction as having
been Incurred at the time of such transaction), the Subsidiary Guarantor or
Successor Subsidiary Guarantor, as the case may be, shall have a consolidated
net worth equal to or greater than the consolidated net worth of such Subsidiary
Guarantor immediately prior to such transaction (in each case consolidated net
worth shall be calculated in a manner consistent with the manner in which
Consolidated Net Worth shall be calculated with respect to the Company); (c)
immediately after giving effect to such transaction on a pro forma basis (and
treating any Indebtedness not previously an obligation of such Subsidiary
Guarantor or a Subsidiary of such Subsidiary Guarantor which becomes the
obligation of such Subsidiary Guarantor or any of its Subsidiaries in connection
with or as a result of such transaction as having been Incurred at the time of
such transaction) no Default shall have occurred and be continuing; (d)
immediately after giving effect to such transaction on a pro forma basis (and
treating any Indebtedness not previously an obligation of such Subsidiary
Guarantor or a Subsidiary of such Subsidiary Guarantor which becomes the
obligation of such Subsidiary Guarantor or any of its Subsidiaries in connection
with or as a result of such transaction as having been Incurred at the time of
such transaction), the consolidated coverage ratio of the Successor Subsidiary
Guarantor is equal to the lesser of 2:1 or the consolidated coverage ratio of
the predecessor Subsidiary Guarantor immediately prior to such transaction (in
each case consolidated coverage ratio shall be calculated in a manner consistent
with the manner in which Consolidated Coverage Ratio shall be calculated with
respect to the Company); and (e) such Subsidiary Guarantor shall have delivered,
or caused to be delivered, to the Trustee an Officers' Certificate and, as to
legal matters, an Opinion of Counsel, each in form and substance reasonably
satisfactory to the Trustee, each stating that such consolidation, merger,
conveyance or transfer or lease and such supplemental indenture comply with the
Indenture, and that all conditions precedent relating to such transactions have
been complied with.
Upon any such consolidation or merger, or any conveyance, transfer, lease,
or disposition of all or substantially all of the properties or assets of any
Subsidiary Guarantor, except in the case of a lease, the Successor Subsidiary
Guarantor shall succeed to and be substituted for such Subsidiary Guarantor
under the Indenture, and such Subsidiary Guarantor shall thereupon be released
from all obligations thereunder and such Subsidiary Guarantor, as the
predecessor Subsidiary Guarantor, may thereupon or at any time thereafter be
dissolved, wound up or liquidated.
In the case of any such consolidation, merger or transfer, such changes in
form (but not in substance) may be made in the Senior Secured Notes thereafter
to be issued as may be appropriate.
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EVENTS OF DEFAULT
"EVENTS OF DEFAULT" are defined in the Indenture as (i) default for 30 days
in payment of any interest installment due and payable on the Senior Secured
Notes, (ii) default in payment of the principal when due on the Senior Secured
Notes, or failure to redeem or purchase the Senior Secured Notes when required
pursuant to the respective Indenture, (iii) default in performance of any other
covenants or agreements in the Indenture, the Senior Secured Notes or the Pledge
Agreement and the default continues for 30 days after written notice to the
Company by the Trustee or the Collateral Agent or to the Company and the Trustee
by the holders of at least 25% in principal amount of the outstanding Senior
Secured Notes; PROVIDED that the failure to commence a Change of Control Offer
following a Change of Control pursuant to clause (vi) of the definition of
"Change of Control" shall not constitute an Event of Default if, during such 30
day period, the Company takes the necessary actions with respect to the Board of
Directors to comply with the requirements of clauses (vi)(A), (vi)(B) and
(vi)(C) of the definition of "Change of Control", (iv) there shall have occurred
either (a) a default by the Company or any Subsidiary under any instrument under
which there is or may be secured or evidenced any Indebtedness of the Company or
any Subsidiary of the Company (other than the Securities) having an outstanding
principal amount of $2,000,000 (or its foreign currency equivalent) or more
individually or $5,000,000 (or its foreign currency equivalent) or more in the
aggregate that has caused the holders thereof to declare such Indebtedness to be
due and payable prior to its Stated Maturity or (b) a default by the Company or
any Subsidiary in the payment when due of any portion of the principal under any
such instrument, and such unpaid portion exceeds $2,000,000 (or its foreign
currency equivalent) individually or $5,000,000 (or its foreign currency
equivalent) in the aggregate and is not paid, or such default is not cured or
waived, within any grace period applicable thereto; (v) any final judgment or
order (not covered by insurance) for the payment of money shall be rendered
against the Company or any Subsidiary in an amount in excess of $2,000,000 (or
its foreign currency equivalent) individually or $5,000,000 (or its foreign
currency equivalent) in the aggregate for all such final judgments or orders
against all such Persons (treating any deductibles, self-insurance or retention
as not so covered) and shall not be discharged, and there shall be any period of
30 consecutive days following entry of the final judgment or order in excess of
$2,000,000 individually or that causes the aggregate amount for all such final
judgments or orders outstanding against all such Persons to exceed $5,000,000
during which a stay of enforcement of such final judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect; (vi) certain events of
bankruptcy, insolvency and reorganization of the Company; (vii) except as
permitted by the Indenture, the Trustee fails to have a first priority perfected
security interest in the Collateral; and (viii) except as permitted by the
Indenture and the Senior Secured Notes, the cessation of effectiveness of any
Subsidiary Guarantee as against any Subsidiary Guarantor, or the finding by any
judicial proceeding that any such Subsidiary Guarantee is, as to any Subsidiary
Guarantor, unenforceable or invalid, or the written denial or disaffirmation by
any Subsidiary Guarantor of its obligations under its Subsidiary Guarantee.
If any Event of Default (other than an Event of Default described in clause
(vi) with respect to the Company) has occurred and is continuing, the Indenture
provides that the Trustee may by notice to the Company, or the Holders of not
less than 25% in principal amount of the Senior Secured Notes may by notice to
the Company and the Trustee, declare the principal amount of the Senior Secured
Notes and any accrued and unpaid interest to be due and payable immediately. If
an Event of Default described in clause (vi) with respect to the Company occurs,
the principal of and interest on all the Senior Secured Notes shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holders of Senior Secured Notes. The Holders
of a majority in principal amount of the Senior Secured Notes by notice to the
Trustee may rescind any such declaration and its consequences (if the rescission
would not conflict with' any judgment or decree) if all existing Events of
Default (other than the non-payment of principal of or interest on the Senior
Secured Notes which shall have become due by such declaration) shall have been
cured or waived.
The Company must file annually with the Trustee a certificate describing any
Default by the Company in the performance of any conditions or covenants that
has occurred under the Indenture and its status. The
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Company must give the Trustee written notice within 30 days of any Default under
the Indenture that could mature into an Event of Default described in clause
(iii), (iv), (v), (vi), (vii) or (viii) of the second preceding paragraph.
The Trustee is entitled, subject to the duty of the Trustee during a Default
to act with the required standard of care, to be indemnified before proceeding
to exercise any right or power under the Indenture at the direction of the
Holders of the Senior Secured Notes or which requires the Trustee to expend or
risk its own funds or otherwise incur any financial liability. The Indenture
also provides that the Holders of a majority in principal amount of the Senior
Secured Notes issued under the Indenture may direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee; however, the Trustee may
refuse to follow any such direction that conflicts with law or the Indenture, is
unduly prejudicial to the rights of other Holders of the Senior Secured Notes,
or would involve the Trustee in personal liability.
The Indenture provides that while the Trustee generally must mail notice of
a Default or Event of Default to the holders of the Senior Secured Notes within
90 days of occurrence, the Trustee may withhold notice to the Holders of the
Senior Secured Notes of any Default or Event of Default (except in payment on
the Senior Secured Notes) if the Trustee in good faith determines that the
withholding of such notice is in the interest of the Holders of the Senior
Secured Notes.
MODIFICATION OF THE INDENTURE
Under the terms of the Indenture, the Company, the Subsidiary Guarantors and
the Trustee may, with the consent of the Holders of a majority in principal
amount of the outstanding Senior Secured Notes amend or supplement the
Indenture, the Pledge Agreement or the Senior Secured Notes except that no
amendment or supplement may, without the consent of each affected Holder, (i)
reduce the principal of or change the Stated Maturity of any Senior Secured
Note, (ii) reduce the rate of or change the time of payment of interest on any
Senior Secured Note, (iii) change the currency of payment of the Senior Secured
Notes, (iv) reduce the premium payable upon the redemption of any Senior Secured
Note, or change the time at which any such Senior Secured Note may or shall be
redeemed, (v) reduce the amount of Senior Secured Notes, the holders of which
must consent to an amendment or supplement, (vi) change the provisions of the
Indenture relating to Waiver of past defaults, rights of Holders of the Senior
Secured Notes to receive payments or the provisions relating to amendments of
the Indenture that require the consent of Holders of each affected Senior
Secured Note, (vii) directly or indirectly release the Liens on all or
substantially all of the collateral securing the Senior Secured Notes or (viii)
modify or affect in any manner adverse to the Holders the terms and conditions
of the obligation of any Subsidiary Guarantor for the due and punctual payment
of the principal of premium, if any, or interest on the Senior Secured Notes. In
addition, certain amendments or supplements may be adopted without the consent
of Holders.
ACTIONS BY NOTEHOLDERS
Under the terms of the Indenture, a Holder of Senior Secured Notes may not
pursue any remedy with respect to the Indenture or the Senior Secured Notes
(except actions for payment of overdue principal or interest), unless (i) the
Holder has given notice to the Trustee of a continuing Event of Default, (ii)
Holders of at least 25% in principal amount of the Senior Secured Notes have
made a written request to the Trustee to pursue such remedy, (iii) such Holder
or Holders have offered the Trustee security or indemnity reasonably
satisfactory to it against any loss, liability or expense, (iv) the Trustee has
not complied with such request within 60 days of such request and offer and (v)
the Holders of a majority in principal amount of the Senior Secured Notes have
not given the Trustee an inconsistent direction during such 60-day period.
DEFEASANCE, DISCHARGE AND TERMINATION
DEFEASANCE AND DISCHARGE. The Indenture provides that the Company will be
discharged from any and all obligations in respect of the Senior Secured Notes,
and the provisions of the Indenture will no longer be in effect with respect to
such Senior Secured Notes (except for, among other matters, certain obligations
to register the transfer or exchange of such Senior Secured Notes, to replace
stolen, lost or mutilated Senior Secured Notes, to maintain paying agencies and
to hold monies for payment in trust, and the rights of
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holders to receive payments of principal and interest thereon), on the 123rd day
after the date of the deposit with the appropriate Trustee, in trust, of money
or U.S. Government Obligations that, through the payment of interest and
principal in respect thereof in accordance with their terms, will provide money
in an amount sufficient to pay the principal of, premium, if any, and accrued
interest on such Senior Secured Notes, when due in accordance with the terms of
the Indenture and such Senior Secured Notes. Such a trust may only be
established if, among other things, (i) the Company has delivered to the Trustee
either (a) an Opinion of Counsel (who must not be employed by the Company) to
the effect that holders will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit, defeasance and discharge and
will be subject to federal income tax on the same amount and in the same manner
and at the same times as would have been the case if such deposit, defeasance
and discharge had not occurred, which Opinion of Counsel must refer to and be
based upon a ruling of the Internal Revenue Service or a change in applicable
federal income tax law occurring after the date of the Indentures or (b) a
ruling of the Internal Revenue Service to such effect and (ii) no Default under
the Indenture shall have occurred and be continuing on the date of such deposit
or during the period ending on the 123rd day after such date of deposit and such
deposit shall not result in or constitute a Default or result in a breach or
violation of, or constitute a default under, any other agreement or instrument
to which the Company is a party or by which the Company is bound.
DEFEASANCE OF CERTAIN COVENANTS AND CERTAIN EVENTS OF DEFAULT. The
Indenture further provides that the provisions of the Indenture will no longer
be in effect with respect to the provisions described in clauses (d) and (e) of
the first paragraph and clauses (b) and (d) of the third paragraph under "--
Merger and Consolidation," and all the covenants described herein under "--
Covenants," clause (iii) under "-- Events of Default" with respect to such
covenants and clauses (d) and (e) of the first paragraph and clauses (b) and (d)
of the third paragraph under "-- Merger and Consolidation," and clauses (v) and
(vi) under "-- Events of Default" shall be deemed not to be Events of Default
under the Indenture, and the provisions described herein under "-- Ranking"
shall not apply, upon the deposit with the Trustee, in trust, of money or U.S.
Government Obligations that through the payment of interest and principal in
respect thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of, premium, if any, and accrued interest on the
Senior Secured Notes issued thereunder when due in accordance with the terms of
the Indenture. Such a trust may only be established if, among other things, the
provisions described in clause (ii) of the immediately preceding paragraph have
been satisfied and the Company has delivered to the Trustee an Opinion of
Counsel (who must not be an employee of the Company) to the effect that the
Holders will not recognize income, gain or loss for federal income tax purposes
as a result of such deposit and defeasance of certain covenants and Events of
Default and will be subject to federal income tax on the same amount and in the
same manner and at the same times as would have been the case if such deposit
and defeasance had not occurred.
DEFEASANCE AND CERTAIN OTHER EVENTS OF DEFAULT. In the event the Company
exercises its option to omit compliance with certain covenants and provisions of
the Indenture with respect to the Senior Secured Notes, as described in the
immediately preceding paragraph and such Senior Secured Notes are declared due
and payable because of the occurrence of an Event of Default that remains
applicable, the amount of money or U.S. Government Obligations on deposit with
the relevant Trustee will be sufficient to pay principal of and interest on
Senior Secured Notes on the respective dates on which such amounts are due but
may not be sufficient to pay amounts due on such Senior Secured Notes, at the
time of the acceleration resulting from such Event of Default. However, the
Company shall remain liable for such payments.
TERMINATION OF COMPANY'S OBLIGATIONS IN CERTAIN CIRCUMSTANCES. The
Indenture further provides that the Company will be discharged from any and all
obligations in respect of the Senior Secured Notes and the provisions of such
Indenture will no longer be in effect with respect to the Senior Secured Notes
(except to the extent provided under "-- Defeasance and Discharge"), if such
Senior Secured Notes mature within one year or all of them are to be called for
redemption within one year under arrangements satisfactory to the Trustee for
giving the notice of redemption, and the Company deposits with the appropriate
Trustee, in trust, money or U.S. Government Obligations that, through the
payment of interest and principal in respect thereof in accordance with their
terms, will provide money in an amount sufficient to pay the principal of,
premium if any and accrued interest on such Senior Secured Notes when due in
accordance with the terms of
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the applicable Indenture and such Senior Secured Notes. Such a trust may only be
established if, among other things, (i) no Default under the Indenture shall
have occurred and be continuing on the date of such deposit, (ii) such deposit
will not result in or constitute a Default or result in a breach or violation
of, or constitute a Default under, any other agreement or instrument to which
the Company is a party or by which it is bound and (iii) the Company has
delivered to the Trustee an Opinion of Counsel stating that such conditions have
been complied with. Pursuant to this provision, the Company is not required to
deliver an Opinion of Counsel to the effect that Holders will not recognize
income, gain or loss for U.S. federal income tax purposes as a result of such
deposit and termination, and there is no assurance that Holders would not
recognize income, gain or loss for U.S. federal income tax purposes as a result
thereof or that Holders would be subject to U.S. federal income tax on the same
amount and in the same manner and at the same times as would have been the case
if such deposit and termination had not occurred.
UNCLAIMED MONEY
Under the terms of the Indenture, subject to any applicable abandoned
property law, the Trustee will pay to the Company upon request any money held by
it for the payment of principal or interest that remains unclaimed for two
years. After payment to the Company, Noteholders entitled to such money must
look to the Company for payment as general creditors.
CONCERNING THE TRUSTEES AND PAYING AGENTS
Shawmut Bank Connecticut, National Association will act as Trustee under the
Indenture and the Pledge Agreement and will initially be Paying Agent and
Registrar for the Senior Secured Notes. The Company has had, from time to time,
and may have in the future, other relationships with such bank. Notices to the
Trustee, Paying Agent and Registrar under the Indenture should be directed to
Shawmut Bank Connecticut, National Association, 777 Main Street -- MSN 238,
Hartford, Connecticut 06115, Attention: Corporate Trust Administration.
GOVERNING LAW
Under the terms of the Indenture the laws of the State of New York govern
the Indenture and the Senior Secured Notes.
DESCRIPTION OF THE WARRANTS
GENERAL
The Company will issue an aggregate of Warrants to the purchasers of
the Senior Secured Notes. The Warrants will be issued pursuant to a Warrant
Agreement (the "Warrant Agreement") to be entered into between the Company and
Shawmut Bank Connecticut, National Association, as the Warrant Agent. The
following summary of certain provisions of the Warrant Agreement does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Warrant Agreement, including the
definitions of certain terms therein.
Each Warrant is evidenced by a Warrant Certificate which entitles the holder
thereof, at any time, to purchase one share of Common Stock from the Company at
a price (the "Exercise Price") of $7.00 per share, subject to adjustment as
provided in the Warrant Agreement. The Warrants will be separately transferable
from the Notes and may be exercised at any time after , 1994 and
prior to , 2004. Warrants that are not exercised by such date will
expire.
The aggregate number of shares of Common Stock issuable upon exercise of the
Warrants is equal to approximately 10% of the outstanding shares of Common
Stock, on a fully diluted basis, subject to certain exceptions described in the
Warrant Agreement. The Company has authorized and reserved for issuance such
number of shares of Common Stock as shall be issuable upon the exercise of all
outstanding Warrants. Such shares of Common Stock, when issued, will be duly and
validly issued and fully paid and nonassessable. The issuance of Common Stock
upon the exercise of the Warrants has been registered with the Securities and
Exchange Commission pursuant to the Registration Statement of which this
Prospectus forms a part.
The Warrants will be issued in the form of a fully registered Global
Certificate and will be deposited with, or on behalf of, the Depositary and
registered in the name of a nominee of the Depositary. Except as set forth in
"Description of the Units -- Form, Denomination and Registration," owners of
beneficial
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interest in such Global Certificate will not be entitled to have Warrants
registered in their names, will not receive or be entitled to receive physical
delivery of Warrants in definitive form and will not be considered the owners or
holders thereof under the Warrant Agreement. No service charge will be made for
any registration of transfer or exchange of Warrants, but the Company may
require payment of a sum sufficient to cover any transfer tax or other similar
governmental charge payable in connection therewith. See "Description of the
Units."
Upon the occurrence of a merger in connection with which all of the
consideration to shareholders of the Company is not cash, the Company or its
successor by merger will be required, upon the expiration of the time periods
discussed below, to offer to repurchase the Warrants. This feature of the
Warrants may have the effect of increasing the cost of purchasing the Company to
any acquiror (including an acquiror in an unsolicited merger or similar
transaction).
CERTAIN DEFINITIONS
The Warrant Agreement contains, among others, the following definitions:
A "Repurchase Event" is defined to occur if at any time prior to
, 2004, the Company consolidates with, merges into or with (where
holders of the Common Stock receive consideration in exchange for all or part of
such shares of Common Stock), or sells all or substantially all of its assets to
another person which has a class of equity securities registered under the
Exchange Act or a wholly owned subsidiary of such person, if the consideration
for the transaction does not consist solely of cash or if such merger or
consolidation is not effected solely for the purpose of changing the Company's
state of incorporation or is effected with a Plaster Entity or a Lindsey Entity.
A "Financial Expert" is a nationally recognized investment banking firm.
An "Independent Financial Expert" is a Financial Expert which does not (or
whose directors, executive officers or 5% stockholders do not) have a direct or
indirect financial interest in the Company or any of its subsidiaries, which has
not been for at least five years, and, at the time that it is called upon to
give independent financial advice to the Company, is not (and none of its
directors, executive officers or 5% stockholders is) a promoter, director or
officer of the Company or any of its subsidiaries.
CERTAIN TERMS
REPURCHASE
Following the occurrence of a Repurchase Event, the Company must make an
offer to repurchase for cash all outstanding Warrants (a "Repurchase Offer").
The holders of the Warrants may, until 5:00 p.m. (New York City time) on the
date at least 30 but not more than 60 calendar days following the date on which
the Company gives notice of such Repurchase Offer (the "Final Surrender Date"),
surrender all or part of their Warrants for repurchase by the Company. Except as
otherwise provided in the Warrant Agreement, Warrants received by the Warrant
Agent in proper form for purchase during a Repurchase Offer prior to the Final
Surrender Date are to be repurchased by the Company at a price in cash (the
"Repurchase Price") equal to the value (the "Relevant Value"), on the date five
business days prior to notice of such Repurchase Offer (the "Valuation Date")
relating thereto, of the Common Stock issuable, and other securities of the
Company which would have been delivered, upon exercise of the Warrants had the
Warrants been exercised, less the Exercise Price therefor. The Relevant Value of
the Common Stock and other securities, assuming exercise of all Warrants, on any
Valuation Date shall be (i) if the Common Stock (or other securities) is
registered under the Exchange Act, deemed to be the average of the closing sales
prices of the Common Stock (or other securities) for the 20 consecutive trading
days immediately preceding such Valuation Date or, if the Common Stock (or other
securities) has been registered under the Exchange Act for less than 20
consecutive trading days before such date, then the average of the closing sales
prices for all of the trading days before such date for which closing sales
prices are available or (ii) if the Common Stock (or other securities) is not
registered under the Exchange Act or if the value cannot be computed under
clause (i) above, the value determined (without giving effect to any
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discount for lack of liquidity, the fact that the Company has no class of equity
securities registered under the Exchange Act, or the fact that the shares of
Common Stock and other securities issuable upon exercise of the Warrants
represent a minority interest in the Company) by an Independent Financial
Expert.
In the case of clause (ii) of the preceding paragraph, the Board of
Directors of the Company is required to select an Independent Financial Expert
not less than five business days following any Repurchase Event. Within two
calendar days after its selection of the Independent Financial Expert, the
Company must deliver to the Warrant Agent a notice setting forth the name of
such Independent Financial Expert. The Company also must cause the Independent
Financial Expert to deliver to the Company, with a copy to the Warrant Agent, a
value report (the "Value Report") which states the Relevant Value of the Common
Stock and other securities of the Company, if any, being valued as of the
Valuation Date and contains a brief statement as to the nature and scope of the
examination of investigation upon which the determination was made. The Warrant
Agent will have no duty with respect to the Value Report, except to keep it on
file available for inspection by the holders of the Warrants. The determination
of the Independent Financial Expert as to Relevant Value in accordance with the
provisions of the Warrant Agreement shall be conclusive on all persons.
EXERCISE
In order to exercise all or any of the Warrants represented by a Warrant
Certificate, the holder thereof is required to surrender to the Warrant Agent
the Warrant Certificate, a duly executed copy of the subscription form set forth
as part of the Warrant Certificate, and payment in full of the Exercise Price
for each share of Common Stock or other securities issuable upon exercise of the
Warrants as to which a Warrant Certificate is exercised, which payment may be
made in cash or by certified or official bank or bank cashier's check payable to
the order of the Company. Upon the exercise of any Warrants in accordance with
the Warrant Agreement, the Warrant Agent will cause the Company to transfer
promptly to or upon the written order of the holder of such Warrant Certificate
appropriate evidence of ownership of any shares of Common Stock or other
securities or property to which it is entitled, registered or otherwise placed
in such name or names as it may direct in writing, and will deliver such
evidence of ownership to the person or persons entitled to receive the same and
fractional shares, if any, or an amount in cash, in lieu of any fractional
shares, if any.
NO RIGHTS AS STOCKHOLDERS
The holders of unexercised Warrants are not entitled, as such, to receive
dividends or other distributions, receive notice of or vote at any meeting of
the stockholders, consent to any action of the stockholders, receive notice of
any other proceedings of the Company, or any other rights as stockholders of the
Company.
MERGERS, CONSOLIDATIONS, ETC.
Except as provided below, in the event that the Company consolidates with,
merges with or into, or sells all or substantially all of its property and
assets to another person, each Warrant thereafter shall entitle the holder
thereof to receive upon exercise thereof the number of shares of capital stock
or other securities or property which the holder of a share of Common Stock is
entitled to receive upon completion of such consolidation, merger or sale of
assets. If the Company merges or consolidates with, or sells all or
substantially all of the property and assets of the Company to, another person
(other than an Affiliate of the Company) and, in connection therewith,
consideration to the holders of Common Stock in exchange for their shares is
payable solely in cash, or in the event of the dissolution, liquidation or
winding-up of the Company, then the holders of the Warrants will be entitled to
receive distributions on an equal basis with the holders of Common Stock or
other securities issuable upon exercise of the Warrants, as if the Warrants had
been exercised immediately prior to such event, less the Exercise Price. Upon
receipt of such payment, if any, the Warrants will expire and the rights of the
holders thereof will cease. If the Company has made a Repurchase Offer that has
not expired at the time of such transaction, the holders of the Warrants will be
entitled to receive the higher of (1) the amount payable to the holders of the
Warrants described above or (2) the Repurchase Price payable to the holders of
the Warrants pursuant to such Repurchase Offer. In case of any such merger,
consolidation or sale of assets, the surviving or acquiring person and, in the
event of any dissolution, liquidation or winding-up of the Company, the Company
must deposit promptly with the Warrant Agent the funds, if any, necessary to pay
the holders of the Warrants. After such funds and the
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surrendered Warrant Certificates are received, the Warrant Agent must make
payment by delivering a check in such amount as is appropriate (or, in the case
of consideration other than cash, such other consideration as is appropriate) to
such person or persons as it may be directed in writing by the holders
surrendering such Warrants.
ADJUSTMENT
The number of shares of Common Stock issuable upon the exercise of each
Warrant and the Exercise Price are subject to adjustment in certain events,
including (a) a dividend or distribution on the Company's Common Stock in shares
of its capital stock, or a subdivision, combination, or reclassification of
Common Stock, (b) the issuance of rights, options, warrants or convertible or
exchangeable securities to all holders of Common Stock entitling them to
subscribe for or purchase Common Stock at a price which is lower than the
Current Market Value (as defined in the Warrant Agreement) per share of Common
Stock, (c) the sale and issuance of shares of Common Stock, or rights, options,
warrants or convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock at a price per share lower than
the Current Market Value per share of the Common Stock in effect immediately
prior to such sale or issuance, (taking into account the consideration received
for the issuance of such right, warrant, or option plus any consideration to be
received upon the exercise thereof) and (d) a distribution of the Common Stock
of evidence of indebtedness, assets, cash dividends or distributions (excluding
distributions in connection with the dissolution, liquidation or winding up of
the Company). Upon the expiration of any rights, options, warrants or conversion
or exchange privileges that have previously resulted in an adjustment, if any
thereof shall not have been exercised, the Exercise Price and the number of
shares of Common Stock issuable upon the exercise of each Warrant shall, upon
such expiration, be readjusted. Notwithstanding the foregoing, no adjustment in
the Exercise Price or the number of shares of Common Stock issuable upon
exercise or Warrants will be required until cumulative adjustments would result
in an adjustment of at least one percent in the number of shares of Common Stock
purchasable on exercise of the Warrant.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 20,000,000 shares of
Common Stock, par value $.001 per share. As of June 1, 1994, there were
13,832,270 shares of Common Stock outstanding; 129,250 shares of Common Stock
subject to options issued but not exercised; and 329,500 shares of Treasury
Stock. Immediately following consummation of the Transaction there will be
approximately 2,400,000 shares of Common Stock outstanding.
GENERAL
Each outstanding share of Common Stock will entitle the holder to one vote
on all matters presented to stockholders for a vote and have cumulative voting
rights. In all elections for directors, each stockholder shall have the right to
cast as many votes in the aggregate as shall equal the number of shares held by
such stockholder multiplied by the number of directors to be elected at the
election, and each shareholder may cast the whole number of votes, either in
person or by proxy, for one candidate or distribute them among two or more
candidates. Consequently, persons holding less than a majority of shares may by
themselves be able to elect one or more directors. The holders of a majority of
the Common Stock entitled to vote constitute a quorum at any meeting of
stockholders. The By-Laws provide that whenever the vote of stockholders at a
meeting thereof is required or permitted to be taken, the meeting and vote of
shareholders may be dispensed with, if all the stockholders who would have been
entitled to vote upon the action if such meeting were held shall consent in
writing to such corporate action being taken. Holders of the Common Stock will
have no preemptive rights.
MISSOURI LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
Under the General and Business Corporation Law of Missouri, stockholders are
generally not liable for the Company's debts or obligations.
Pursuant to the General and Business Corporation Law of Missouri, the
Company cannot merge with or sell all or substantially all of the assets of the
Company, except upon the affirmative vote of the holders of at least two-thirds
of the outstanding shares entitled to vote on the proposed merger or sale.
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Under the General and Business Corporation Law of Missouri, the certain
shares acquired in a control share acquisition (as defined in the statute) have
the same voting rights as were accorded the shares before the control share
acquisition only to the extent granted by resolution approved by the
shareholders of the issuing public corporation, UNLESS the corporation's
articles of incorporation or bylaws provide that this section does not apply to
control share acquisitions of the shares of the corporation. The Company's
Certificate of Incorporation provides that Missouri's control share acquisition
statute shall not apply to control share acquisitions of shares of the Company.
The Company's By-Laws provide that dividends upon the capital stock of the
Company may be declared by the Board of Directors at any regular or special
meeting. Before payment of any dividend, there may be set aside out of any funds
of the Company available for dividends such sum or sums as the Directors from
time to time, in their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Company, or for such other purpose as the
Directors shall think conducive to the interest of the Company, and the
Directors may modify or abolish any such reserve in the manner in which it was
created.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain Federal income tax consequences
associated with the acquisition, ownership, and disposition of the Senior
Secured Notes and the Warrants by holders who acquire the Units on original
issue for cash. In the opinion of Wilmer, Cutler & Pickering, tax counsel to the
Company, the discussion below fairly summarizes the principal Federal income tax
consequences of the acquisition, ownership, and disposition of the Senior
Secured Notes and the Warrants by such holders. The following summary does not
discuss all of the aspects of Federal income taxation that may be relevant to a
prospective holder of the Units in light of his or her particular circumstances
or to certain types of holders (including insurance companies, tax-exempt
entities, financial institutions or broker-dealers, foreign corporations and
persons who are not citizens or residents of the United States) which are
subject to special treatment under the Federal income tax laws. In addition,
this summary does not describe any tax consequences under state, local, or
foreign tax laws.
The discussion is based upon the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury Regulations, Internal Revenue Service ("IRS") rulings and
pronouncements and judicial decisions now in effect, all of which are subject to
change at any time by legislative, judicial or administrative action. Any such
changes may be applied retroactively in a manner that could adversely affect a
holder of the Units. The Company will treat the Senior Secured Notes as
indebtedness for federal income tax purposes, and the balance of the discussion
is based on the assumption that such treatment will be respected. The Company
has not sought and will not seek any rulings from the IRS with respect to the
matters discussed below. There can be no assurance that the IRS will not take
positions concerning the tax consequences of the purchase, ownership or
disposition of the Senior Secured Notes and the Warrants which are different
from those discussed herein.
PROSPECTIVE PURCHASERS OF UNITS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF ACQUIRING, OWNING AND
DISPOSING OF SENIOR SECURED NOTES AND THE WARRANTS, AS WELL AS THE APPLICATION
OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS
ALLOCATION OF ISSUE PRICE BETWEEN THE NOTES AND THE WARRANTS.
Each Unit is comprised of Senior Secured Notes and Warrants.
Consequently, the issue price of a Unit must be allocated between the Senior
Secured Notes and the Warrants. The "issue price" of a Senior Secured Note will
equal the first price at which a substantial amount of Units is sold for money
(excluding for such purposes sales to bond houses, brokers, or similar persons
or organizations acting in the capacity of underwriters, placement agents, or
wholesalers) less the amount allocable to the Warrants (based on the
relationship of the fair market value of each of the Senior Secured Notes and
the Warrants to the fair market value of the Senior Secured Notes and Warrants
taken together as a Unit). Based on the foregoing,
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the Company intends to treat each Senior Secured Note as having been issued with
an issue price of $ per $1,000 principal amount, and each Warrant as having
been issued with an issue price of $3.65. No assurance can be given, however,
that the IRS will not challenge the Company's allocation of the issue price.
The Company's allocation of the issue price of the Units will be binding on
a holder, unless such holder discloses the use of a different allocation on the
applicable form attached to such holder's timely filed Federal income tax return
for the year of acquisition of such Unit. Holders intending to use an issue
price allocation different from that used by the Company should consult their
tax advisors as to the consequences to them of their particular allocation of
the issue price of the Unit.
AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THE SENIOR SECURED NOTES
The Senior Secured Notes will be issued with original issue discount for
federal income tax purposes, and holders of the Senior Secured Notes will be
required to recognize such original issue discount as ordinary interest income
as it accrues on the Senior Secured Notes (regardless of whether the holder is a
cash or accrual basis taxpayer). As a result, in certain accrual periods the
holder will be required to recognize gross income in excess of the amount of
cash payments received.
The amount of original issue discount with respect to each Senior Secured
Note will be equal to the excess of the "stated redemption price at maturity" of
such Senior Secured Note over its issue price, as defined above. The "stated
redemption price at maturity" of each Senior Secured Note will include all cash
payments (other than stated interest to the extent that it is unconditionally
payable at least annually at a single fixed rate ("qualified stated interest"))
required to be made thereunder until maturity. Qualified stated interest on the
Senior Secured Notes is % per annum. To the extent that the stated interest
of % that accrues beginning , 1999 exceeds qualified stated interest,
such excess will be included in the Senior Secured Notes' stated redemption
price at maturity.
TAXATION OF ORIGINAL ISSUE DISCOUNT ON THE SENIOR SECURED NOTES
Each holder of a Senior Secured Note will be required to include in gross
income (as interest) an amount equal to the sum of the "daily portions" of the
original issue discount on the Senior Secured Notes for each day such holder
holds a Senior Secured Note. The daily portions of original issue discount
required to be included in a holder's gross income will be determined on a
constant yield basis by allocating to each day during the taxable year in which
the holder holds the Senior Secured Notes a pro rata portion of the original
issue discount thereon which is attributable to the "accrual period." The amount
of the original issue discount attributable to each accrual period will be the
product of the "adjusted issue price" of the Senior Secured Notes at the
beginning of such accrual period multiplied by the "yield to maturity" of the
Senior Secured Notes, less the amount of any qualified stated interest allocable
to the accrual period. Appropriate adjustments will be made in computing the
amount of original issue discount attributable to the initial accrual period.
The adjusted issue price of the Senior Secured Notes at the beginning of the
first accrual period is the issue price. Thereafter, the adjusted issue price of
a Senior Secured Note is the issue price of the Senior Secured Note plus the
aggregate amount of original issue discount that accrued in all prior accrual
periods, and less any payments (other than payments of qualified stated
interest) on the Senior Secured Note. The yield to maturity of a Senior Secured
Note will be the discount rate that, when used to compute the present value (on
a semi-annual compounded basis) of all principal and interest payments to be
made under a Senior Secured Note, produces a present value equal to the issue
price of the Senior Secured Note.
The "accrual periods" of a Senior Secured Note (other than the initial
accrual period) are each of the six-month periods during the term of the Senior
Secured Note that end on and of each year.
TAXATION OF QUALIFIED STATED INTEREST ON THE SENIOR SECURED NOTES
Qualified stated interest paid on a Senior Secured Note will generally be
taxable to a holder as ordinary interest income at the time it accrues or is
received, in accordance with the holder's regular method of accounting for
Federal income tax purposes.
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The Company will furnish annually to certain record holders of the Senior
Secured Notes and to the IRS information with respect to original issue discount
accruing during the calendar year (as well as qualified stated interest paid
during that year) as may be required under applicable regulations.
EFFECT OF MANDATORY REPURCHASE AND OPTIONAL REDEMPTION ON ORIGINAL ISSUE
DISCOUNT OF THE SENIOR SECURED NOTES
In the event the Company is required to make a Change of Control Offer, each
holder may require the Company to repurchase such holder's Senior Secured Notes
in accordance with such Offer. In addition, in the event of an Asset Sale the
Company may be required to make an offer (the "Asset Sale Offer") to purchase
the Senior Secured Notes. Treasury Regulations contain special rules for
calculating the yield to maturity and maturity on a note in the event the debt
instrument provides for a contingency that could result in the acceleration or
deferral of one or more payments. Further, Treasury Regulations contain special
rules for determining the yield to maturity or maturity of a debt instrument if
either the holder or the issuer has an option to defer or accelerate payments.
Because neither of these rules apply by reason of a Change of Control Offer or
an Asset Sale Offer, the Company has no present intention of treating such
repurchase provisions of the Senior Secured Notes as affecting the computation
of the yield to maturity or maturity date of any Senior Secured Notes.
The Company may redeem the Senior Secured Notes, in whole or part, at any
time on or after 1999. The Company may also redeem a limited portion of
the Senior Secured Notes (up to $ million principal amount at maturity) prior
to 1997, in connection with one or more Public Equity Offerings following
which there is a Public Market. Treasury Regulations set forth special rules,
relating to the determination of yield to maturity and maturity, for a debt
instrument that may be redeemed prior to its stated maturity date at the option
of the issuer. These rules should not apply to a debt instrument, and, hence,
should not affect the determination of the yield to maturity or the maturity
date of such debt instrument, unless the issuer's exercise of its redemption
rights would reduce the yield to maturity on such instrument. The Company's
exercise of either of these redemption rights would not reduce the yield to
maturity on the Senior Secured Notes; therefore the special option rules will
not apply to the Senior Secured Notes.
SALE OR OTHER TAXABLE DISPOSITION OF THE SENIOR SECURED NOTES
The sale or other taxable disposition of a Senior Secured Note will result
in the recognition of gain or loss to the holder in an amount equal to the
difference between (a) the amount of cash and fair market value of property
received (except to the extent attributable to the payment of accrued qualified
stated interest) in exchange therefor and (b) the holder's adjusted tax basis in
such Senior Secured Note.
A holder's initial tax basis in a Senior Secured Note purchased by such
holder will be equal to the portion of the issue price of the Units allocable to
the Senior Secured Notes, as discussed above. The holder's initial tax basis in
a Senior Secured Note will be increased by the amount of original issue discount
included in gross income with respect to such Senior Secured Note to the date of
disposition and decreased by the amount of payments (other than payments of
qualified stated interest) with respect to such Senior Secured Note.
Any gain or loss on the sale or other taxable disposition of a Senior
Secured Note will be capital gain or loss, assuming a purchaser of the Senior
Secured Note holds such security as a "capital asset" (generally property held
for investment) within the meaning of Section 1221 of the Code. Any capital gain
or loss will be long-term capital gain or loss if the Senior Secured Note had
been held for more than one year and otherwise will be short-term capital gain
or loss. Payments on such disposition for accrued qualified stated interest not
previously included in income will be treated as ordinary interest income.
SALE OR OTHER TAXABLE DISPOSITION OF WARRANTS
The sale or other taxable disposition of a Warrant (other than as a result
of a Repurchase Event, as discussed below) will result in the recognition of
gain or loss to the holder in an amount equal to the difference between (a) the
amount of cash and fair market value of property received in exchange therefor
and (b) the holder's adjusted tax basis in the Warrant, which will equal the
amount of the issue price of the
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Units that is properly allocable to the Warrants as described above. Any gain or
loss from the sale or other disposition of a Warrant will be a capital gain or
loss if the Warrant is held as a capital asset within the meaning of Section
1221 of the Code. Any such capital gain or loss will be long-term capital gain
or loss if the Warrant had been held for more than one year and otherwise will
be short-term capital gain or loss. A purchase by the Company of a Warrant
pursuant to a Repurchase Event in which the Company elects to repurchase the
Warrant may give rise to ordinary income, depending on the application of
certain rules under the Code relating to whether stock redemptions result in
dividend/ordinary income treatment.
As a general rule, no gain or loss will be recognized to a holder upon the
exercise of a Warrant. The tax basis of a share of Common Stock so acquired will
be equal to the sum of the holder's adjusted tax basis in the exercised Warrant
and the exercise price, but the holding period of such share will not include
the holding period of the Warrant exercised.
Under Section 305 of the Code, adjustments to the exercise price of the
Warrants which occur under certain circumstances, or the failure to make such
adjustments, may result in a deemed dividend to holders of Common Stock.
Upon expiration of a Warrant, a holder will recognize a loss equal to such
holder's adjusted tax basis in the Warrant. If the Common Stock issuable upon
exercise of the Warrant would have been a capital asset of the holder if
acquired by the holder, such loss will be a capital loss.
PURCHASERS OF SENIOR SECURED NOTES AT OTHER THAN ORIGINAL ISSUANCE PRICE OR DATE
The foregoing does not discuss special rules which may affect the treatment
of purchasers that acquire Senior Secured Notes either (a) other than at the
time of original issuance or (b) at the time of original issuance other than at
the issue price, including those provisions of the Code relating to the
treatment of "market discount", "acquisition premium" and "amortizable bond
premium." Such purchasers should consult their tax advisors as to the
consequences to them of the acquisition, ownership, and disposition of the
Senior Secured Notes and the Warrants.
BACKUP WITHHOLDING
The backup withholding rules require a payor to deduct and withhold a tax if
(a) the payee fails to furnish a taxpayer identification number ("TIN") to the
payor, (b) the IRS notifies the payor that the TIN furnished by the payee is
incorrect, (c) the payee has failed to report properly the receipt of
"reportable payments" and the IRS has notified the payor that withholding is
required, or (d) there has been a failure of the payee to certify under the
penalty of perjury that a payee is not subject to withholding under section 3406
of the Code. As a result, if any one of the events discussed above occurs with
respect to a holder of Senior Secured Notes, the Company, its paying agent or
other withholding agent will be required to withhold a tax equal to 31% of any
"reportable payment" made in connection with the Senior Secured Notes of such
holder. A "reportable payment" includes, among other things, amounts paid in
respect of interest or original issue discount and amounts paid through brokers
in retirement of securities. Any amounts withheld from a payment to a holder
under the backup withholding rules will be allowed as a refund or credit against
such holder's federal income tax, provided that the required information is
furnished to the IRS. Certain holders (including, among others, corporations and
certain tax-exempt organizations) are not subject to the backup withholding and,
as discussed above, information reporting requirements.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND TO CORPORATE HOLDERS
OF SENIOR SECURED NOTES
The Senior Secured Notes will constitute "applicable high yield discount
obligations" ("AHYDOs") if (i) the yield to maturity of such Senior Secured
Notes is equal to or greater than the sum of the relevant applicable federal
rate (the "AFR") plus five percentage points, and (ii) such notes have
"significant original discount." The relevant AFR for debt instruments issued in
June 1994 is 7.38%. If the Senior Secured Notes constitute AHYDOs, the Company
will not be entitled to deduct original issue discount that accrues with respect
to such Senior Secured Notes until amounts attributable to original issue
discount are paid, although the tax consequences to holders will not be
affected. In addition, if the yield to maturity of the Senior Secured Notes
exceeds the sum of the relevant AFR plus six percentage points (the "Excess
Yield"), the
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"disqualified portion" of the original issue discount accruing on the Senior
Secured Notes will be characterized as a non-deductible dividend with respect to
the Company and also may be treated as a dividend distribution solely for
purposes of the dividends received deduction of Sections 243, 246 and 246A of
the Code with respect to holders which are corporations. In general, the
"disqualified portion" of original issue discount for any accrual period will be
equal to the product of (i) a percentage determined by dividing the Excess Yield
by the yield to maturity, and (ii) the original issue discount for the accrual
period. Assuming a corporate holder satisfies the requirements of Sections 243,
246 and 246A of the Code (which include a holding period requirement and a debt
financing limitation), such a holder will be entitled to a dividends received
deduction (generally at a 70% rate) with respect to the disqualified portion of
the accrued original issue discount if the Company has sufficient current or
accumulated "earnings and profits". To the extent that the Company's earnings
and profits are insufficient, any portion of the original issue discount that
otherwise would have been recharacterized as a dividend for purposes of the
dividends received deduction will continue to be taxed as ordinary original
issue discount income in accordance with the rules described above.
DESCRIPTION OF OTHER INDEBTEDNESS
NEW CREDIT FACILITY
The Company expects to enter into a New Credit Facility contemporaneously
with the consummation of this Offering. The following is a brief description of
certain terms the Company expects the New Credit Facility will contain, based on
the commitment letter it has received from its lender. This summary is qualified
in its entirety by reference to the credit agreement governing the New Credit
Facility (the "Credit Agreement"). Capitalized terms used in this section and
not otherwise defined have the meanings ascribed thereto in the Credit
Agreement.
The New Credit Facility will be provided by Continental Bank, N.A. ("CBNA")
as agent. The Credit Agreement will provide for maximum borrowings under a
revolving credit line of $15 million, with available borrowings determined as
follows: (i) up to 85% of eligible accounts receivable with eligibility
determined by CBNA; (ii) up to 60% of eligible inventory; (iii) for the months
of August through January, an additional seasonal overadvance of $3.0 million,
but with inventory advances plus the seasonal overadvance not to exceed 80% of
eligible inventory. All current assets of the Company (i.e., inventory and
receivables) and a negative pledge on fixed assets will secure the Company's
obligations under the New Credit Facility.
INTEREST AND FEES. Amounts borrowed under the revolving credit line will
bear interest at either (i) 1.0% over CBNA's Reference Rate per annum (as
defined), or, at the Company's option, (ii) 2.5% over the LIBOR rate.
The Company will be required to pay a commitment fee of .375% per annum on
the unused portion of the New Credit Facility. The Company will be required to
pay a fee of 1% of the total New Credit Facility payable at the closing.
PRINCIPAL REPAYMENTS. The New Credit Facility will mature on or about July
1, 1997.
FINANCIAL COVENANTS. Under the Credit Agreement, the Company will be
subject to certain financial covenants, including financial covenants related to
(i) interest coverage, (ii) minimum tangible net worth, (iii) the ratio of
liabilities to net worth, and (iv) maximum capital expenditures. In addition,
the Credit Agreement will provide a number of other affirmative and negative
covenants.
EVENTS OF DEFAULT. The Credit Agreement will contain usual and customary
provisions specifying various events that shall be events of default and will
include cross default and cross acceleration provisions to all material
indebtedness of the Company, including the Senior Secured Notes.
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2007 9% SUBORDINATED DEBENTURES
The following is a brief description of certain terms contained in the
Company's indenture, as such indenture has been amended, for the 2007 9%
Subordinated Debentures and is qualified in its entirety by reference to the
indenture, as amended. Capitalized terms used in this section and not otherwise
defined have the meanings ascribed thereto in the indenture, as amended
Pursuant to an indenture dated June 7, 1983, as amended by the First
Supplemental Indenture dated December 13, 1989, the Company is indebted to the
holders of $25.9 principal amount of debentures due in 2007. The Company will
repurchase approximately $13.7 million principal amount of these debentures,
$4.7 million of which will be repurchased from Mr. Plaster, with the proceeds of
this Offering. See "Use of Proceeds" and "Certain Relationships and Related
Transactions." The 2007 9% Subordinated Debentures represent general unsecured
obligations of the Company and rank junior in right of payment to all Senior
Indebtedness (as defined) of the Company, including the Senior Secured Notes.
The 2007 9% Subordinated Debentures mature on December 31, 2007, unless
redeemed before such date. The 2007 9% Subordinated Debentures bear interest at
the rate of 9% per annum payable semi-annually on December 31 and June 30 of
each year.
The 2007 9% Subordinated Debentures are subject to redemption at any time,
in whole or in part, at the option of the Company, at a redemption price,
beginning January 1, 1993, of 100% of the principal amount thereof, plus accrued
and unpaid interest. The Company is required to redeem $1.37 million principal
amount 2007 9% Subordinated Debentures commencing December 31, 1993 and on each
December 31 thereafter, at 100% of the principal amount thereof plus accrued and
unpaid interest. The repurchase of $13.7 million principal amount of these
debentures will satisfy the Company's sinking fund obligation through 2004.
The 2007 9% Subordinated Debenture indenture contains a number of covenants,
including affirmative covenants relating to maintenances of offices or agency,
maintenance of corporate existence, and other matters.
Events of default under the indenture for the 2007 9% Subordinated
Debentures include: (i) failure to pay any interest on any debenture when due
and the continuance of such failure for a period of 30 days; (ii) failure to pay
the principal or any premium, on any debenture when due whether at maturity or
upon redemption by declaration or otherwise, including any Sinking Fund (as
defined) payment; (iii) failure to perform or breach of the covenants or
agreements on the part of the Company contained in the debenture or in the
indenture and the continuance of such failure for a period of 60 days following
written notice of such failure; or (iv) certain events of bankruptcy or
insolvency.
THE UNDERWRITER
Under the terms and subject to the conditions in an Underwriting Agreement
dated the date hereof, Morgan Stanley & Co. Incorporated (the "Underwriter") has
agreed to purchase, and the Company has agreed to sell to the Underwriter, the
Units.
The Underwriting Agreement provides that the obligation of the Underwriter
to pay for and accept delivery of the Units is subject to the approval of
certain legal matters by its counsel and to certain other conditions. The
Underwriter is obligated to take and pay for all the Units if any are taken.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The Underwriter proposes to offer part of the Units directly to the public
initially at the public offering price set forth on the cover page hereof and
part to certain dealers at a price that represents a concession not in excess of
% of the principal amount at maturity of the Units. The Underwriter may
allow, and such dealers may reallow, a concession not in excess of % of the
principal amount at maturity of the Units to certain other dealers.
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The Company does not intend to apply for listing of the Units, the Senior
Secured Notes, the Warrants or the Common Stock on a national securities
exchange, but has been advised by the Underwriter that it presently intends to
make a market in the Units, the Senior Secured Notes, and the Warrants, as
permitted by applicable laws and regulations. The Underwriter is not obligated,
however, to make a market in the Units, the Senior Secured Notes or the Warrants
and any such market making may be discontinued at any time at the sole
discretion of the Underwriter. Accordingly, no assurance can be given as to the
liquidity of, or trading markets for, the Units, the Senior Secured Notes and
the Warrants. See "Risk Factors -- Absence of Public Market."
LEGAL MATTERS
The validity of the issuance of the Units offered hereby will be passed upon
for the Company by Wilmer, Cutler & Pickering, Washington, D.C. Certain legal
matters with respect to the Offering will be passed upon for the Underwriter by
Skadden, Arps, Slate, Meagher & Flom, New York, New York.
EXPERTS
The consolidated financial statements and the related schedules of Empire
Gas included in this Prospectus and the Registration Statement have been
examined by Baird, Kurtz, & Dobson, independent public accountants, for the
periods indicated in its reports thereon which appear elsewhere herein and in
the Registration Statement. The consolidated financial statements and schedules
examined by Baird, Kurtz & Dobson have been included in reliance on its reports
given on its authority as experts in accounting and auditing.
AVAILABLE INFORMATION
Empire Gas and the Guarantors have filed with the Securities and Exchange
Commission (the "Commission") in Washington, D.C. a Registration Statement on
Form S-1 under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Units offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement as permitted by the
rules and regulations of the Commission. For further information pertaining to
the Company and the Units offered hereby, reference is made to the Registration
Statement and the exhibits and schedules filed as a part thereof. Statements
contained in this Prospectus as to the contents of any contract or any other
document referred to are not necessarily complete, and, with respect to any
contract or other document filed as an exhibit to the Registration Statement,
each such statement is qualified in all respects by reference to such exhibit.
The Company is not currently subject to the informational requirements of
the Securities Exchange Act of 1934 (the "Exchange Act"). As a result of the
Offering, the Company will become subject to such requirements, and in
accordance therewith will file periodic reports and other information with the
Commission. Empire Gas Operating Corporation (formerly Empire Gas Corporation),
a subsidiary of the Company, is currently subject to the informational
requirements of the Exchange Act, and in accordance therewith, files periodic
reports and other information with the Commission and with the Pacific Stock
Exchange. The Registration Statement and the exhibits and schedules thereto,
filed by Empire Gas Operating Corporation as well as the reports and information
filed by the Company under the Exchange Act, may be inspected and copied at the
public reference facilities of the Commission at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, or at its regional offices located at Suite 1400,
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661-2511 and Suite
1300, 7 World Trade Center, New York, New York 10048. Copies of such material
can be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Such reports and
other information concerning the Company can also be inspected at the Pacific
Stock Exchange, 301 Pine Street, San Francisco, California.
The Indenture requires the Company to file with the Commission annual
reports containing consolidated financial statements and the related report of
independent public accountants and quarterly reports containing unaudited
consolidated financial statements for the first three quarters of each fiscal
year for so long as any Senior Secured Notes are outstanding.
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<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
EMPIRE GAS CORPORATION
HISTORICAL:
Report of Independent Accountants.......................................... F-2
Consolidated Balance Sheets as of June 30, 1992 and 1993 and
as of March 31, 1994 (unaudited).......................................... F-3
Consolidated Statements of Operations for the Years Ended
June 30, 1991, 1992, and 1993 and for the Nine Months Ended
March 31, 1993 and 1994 (unaudited)....................................... F-4
Consolidated Statements of Stockholders' Equity for the Years
June 30, 1991, 1992, and 1993 and for the Nine Months
Ended March 31, 1994 (unaudited).......................................... F-5
Consolidated Statements of Cash Flows for the Years Ended
June 30, 1991, 1992, and 1993 and for the
Nine Months Ended March 31, 1993 and 1994 (unaudited)..................... F-6
Notes to Consolidated Financial Statements................................. F-7
PSNC PROPANE CORPORATION
Report of Independent Accountants.......................................... F-17
Balance Sheets as of June 30, 1993
and as of March 31, 1994 (unaudited)...................................... F-18
Statements of Income for the Year Ended June 30, 1993
and for the Nine Months Ended March 31, 1994 (unaudited).................. F-19
Statements of Stockholder's Equity for the Year Ended June 30, 1993
and for the Nine Months Ended March 31, 1994 (unaudited).................. F-20
Statements of Cash Flows for the Year Ended June 30, 1993
and for the Nine Months Ended March 31, 1994 (unaudited).................. F-21
Notes to Financial Statements.............................................. F-22
PRO FORMA:
Unaudited Pro Forma Income Statements of PSNC Propane
Corporation (PSNC) for the Year Ended June 30,
1993, Nine Months Ended March 31, 1994, and
Twelve Months Ended March 31, 1994........................................ P-1
Unaudited Pro Forma Balance Sheet of PSNC Propane
Corporation (PSNC) as of March 31, 1994................................... P-7
</TABLE>
F-1
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Stockholders
Empire Gas Corporation
Lebanon, Missouri
We have audited the accompanying consolidated balance sheets of EMPIRE GAS
CORPORATION (FORMERLY EMPIRE GAS ACQUISITION CORPORATION) as of June 30, 1993
and 1992, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended June 30,
1993. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
EMPIRE GAS CORPORATION as of June 30, 1993 and 1992, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended June 30, 1993, in conformity with generally accepted accounting
principles.
BAIRD KURTZ & DOBSON
Springfield, Missouri
July 30, 1993
F-2
<PAGE>
EMPIRE GAS CORPORATION
(FORMERLY EMPIRE GAS ACQUISITION CORPORATION)
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30,
--------------------
1992 1993
--------- ---------
MARCH 31,
-----------
1994
-----------
(UNAUDITED)
ASSETS
<S> <C> <C> <C>
CURRENT ASSETS
Cash..................................................... $ 216 $ 362 $ 183
Trade receivables, less allowance for doubtful accounts;
June 30, 1992 - $2,720, June 30, 1993 - $2,657, March
31, 1994 - $2,953 (NOTE 3).............................. 6,508 8,199 15,072
Inventories (NOTE 3)..................................... 7,913 9,691 9,313
Prepaid expenses......................................... 629 305 299
Deferred income taxes (NOTE 4)........................... -- -- 408
--------- --------- -----------
Total Current Assets................................... 15,266 18,557 25,275
--------- --------- -----------
PROPERTY AND EQUIPMENT, At Cost (NOTE 3)
Land and buildings....................................... 11,821 12,215 12,626
Storage and consumer service facilities.................. 113,450 113,821 114,973
Transportation, office and other equipment............... 24,245 25,550 27,668
--------- --------- -----------
149,516 151,586 155,267
Less accumulated depreciation............................ 34,055 41,906 47,429
--------- --------- -----------
115,461 109,680 107,838
--------- --------- -----------
OTHER ASSETS
Debt acquisition costs, net of amortization.............. -- 475 446
Excess of cost over fair value of net assets acquired, at
amortized cost.......................................... 20,212 18,834 17,870
Other.................................................... 532 474 764
--------- --------- -----------
20,744 19,783 19,080
--------- --------- -----------
$ 151,471 $ 148,020 $ 152,193
--------- --------- -----------
--------- --------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt (NOTE 3)............ $ 16,590 $ 5,181 $ 6,135
Accounts payable......................................... 5,341 4,485 3,823
Accrued salaries......................................... 1,574 1,573 2,970
Accrued expenses......................................... 2,612 2,193 3,792
Income taxes payable (NOTE 9)............................ 3,094 165 3,822
--------- --------- -----------
Total Current Liabilities............................ 29,211 13,597 20,542
--------- --------- -----------
LONG-TERM DEBT (NOTE 3).................................... 59,372 74,068 66,696
--------- --------- -----------
DUE TO RELATED PARTY (NOTES 2 AND 3)....................... 2,996 -- --
--------- --------- -----------
DEFERRED INCOME TAXES (NOTE 4)............................. 33,428 32,568 31,214
--------- --------- -----------
ACCRUED SELF INSURANCE LIABILITY (NOTE 8).................. 1,563 1,874 2,039
--------- --------- -----------
STOCKHOLDERS' EQUITY.......................................
Common; $.001 par value; authorized 20,000,000 shares;
issued and outstanding June 30, 1992 - 13,921,458
shares, June 30, 1993 and March 31, 1994 - 13,832,270
shares................................................ 14 14 14
Additional paid-in capital............................. 27,133 27,088 27,088
Retained earnings (deficit)............................ (2,118) 110 5,899
--------- --------- -----------
25,029 27,212 33,001
Treasury stock, at cost June 30, 1992 - 39,367 shares,
June 30, 1993 and March 31, 1994 - 329,500 shares..... (128) (1,299) (1,299)
--------- --------- -----------
24,901 25,913 31,702
--------- --------- -----------
$ 151,471 $ 148,020 $ 152,193
--------- --------- -----------
--------- --------- -----------
</TABLE>
See Notes to Consolidated Financial Statements
F-3
<PAGE>
EMPIRE GAS CORPORATION
(FORMERLY EMPIRE GAS ACQUISITION CORPORATION)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
---------------------------------- ----------------------
1991 1992 1993 1993 1994
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING REVENUE.................................... $ 121,758 $ 112,080 $ 128,401 $ 111,332 $ 110,108
COST OF PRODUCT SOLD................................. 59,971 50,973 60,202 52,807 50,770
---------- ---------- ---------- ---------- ----------
GROSS PROFIT......................................... 61,787 61,107 68,199 58,525 59,338
---------- ---------- ---------- ---------- ----------
OPERATING COSTS AND EXPENSES
Provision for doubtful accounts.................... 2,828 214 958 298 413
General and administrative......................... 41,594 39,463 40,437 31,351 32,359
Rent expense to related party (NOTE 2)............. 350 375 450 337 337
Depreciation and amortization...................... 9,552 10,062 10,351 7,672 7,494
---------- ---------- ---------- ---------- ----------
54,324 50,114 52,196 39,658 40,603
---------- ---------- ---------- ---------- ----------
OPERATING INCOME..................................... 7,463 10,993 16,003 18,867 18,735
---------- ---------- ---------- ---------- ----------
OTHER EXPENSE
Interest expense................................... (11,455) (10,406) (8,877) (6,873) (6,446)
Interest expense to related party
(NOTES 2 AND 3).................................. (583) (315) (949) (668) --
Amortization of debt discount and expense.......... (890) (1,006) (1,686) (1,167) (1,396)
Crested Butte litigation (NOTE 8).................. (702) -- -- -- --
Merger proposal costs (NOTE 5)..................... -- (450) -- -- --
Restructuring proposal costs (NOTE 6).............. -- -- (223) -- (674)
---------- ---------- ---------- ---------- ----------
(13,630) (12,177) (11,735) (8,708) (8,516)
---------- ---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES.................... (6,167) (1,184) 4,268 10,159 10,219
PROVISION (CREDIT) FOR INCOME TAXES (NOTE 4)......... (1,610) 290 2,040 4,230 4,430
---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS).................................... $ (4,557) $ (1,474) $ 2,228 $ 5,929 $ 5,789
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
INCOME (LOSS) PER COMMON SHARE (NOTE 1).............. $ (.33) $ (.11) $ .16 $ .41 $ .40
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
See Notes to Consolidated Financial Statements
F-4
<PAGE>
EMPIRE GAS CORPORATION
(FORMERLY EMPIRE GAS ACQUISITION CORPORATION)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL RETAINED TOTAL
PAID-IN EARNINGS TREASURY STOCKHOLDERS'
COMMON STOCK CAPITAL (DEFICIT) STOCK EQUITY
------------- ----------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1990................................. $ 14 $ 27,105 $ 3,913 $ (50) $ 30,982
STOCK OPTIONS EXERCISED................................ -- 13 -- -- 13
NET LOSS............................................... -- -- (4,557) -- (4,557)
--- ----------- ----------- --------- ------------
BALANCE, JUNE 30, 1991................................. 14 27,118 (644) (50) 26,438
STOCK OPTIONS EXERCISED................................ -- 15 -- -- 15
PURCHASE OF TREASURY STOCK............................. -- -- -- (78) (78)
NET LOSS............................................... -- -- (1,474) -- (1,474)
--- ----------- ----------- --------- ------------
BALANCE, JUNE 30, 1992................................. 14 27,133 (2,118) (128) 24,901
STOCK OPTIONS EXERCISED................................ -- 225 -- -- 225
NET INCOME............................................. -- -- 2,228 -- 2,228
SALE OF TREASURY STOCK................................. -- (270) -- 270 --
PURCHASE OF TREASURY STOCK............................. -- -- -- (1,441) (1,441)
--- ----------- ----------- --------- ------------
BALANCE, JUNE 30, 1993................................. 14 27,088 110 (1,299) 25,913
NET INCOME (UNAUDITED)................................. -- -- 5,789 -- 5,789
--- ----------- ----------- --------- ------------
BALANCE, MARCH 31, 1994 (UNAUDITED).................... $ 14 $ 27,088 $ 5,899 $ (1,299) $ 31,702
--- ----------- ----------- --------- ------------
--- ----------- ----------- --------- ------------
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE>
EMPIRE GAS CORPORATION
(FORMERLY EMPIRE GAS ACQUISITION CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
--------------------------------- --------------------
1991 1992 1993 1993 1994
--------- --------- ----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).................................... $ (4,557) $ (1,474) $ 2,228 $ 5,929 $ 5,789
Items not requiring (providing) cash:
Depreciation....................................... 8,263 8,789 9,004 6,663 6,496
Amortization....................................... 2,179 2,279 3,033 2,107 2,394
(Gain) loss on sale of assets...................... 252 (758) 155 (162) 3
Deferred income taxes.............................. (2,210) (810) (860) (571) (1,762)
Changes in:
Bank overdraft..................................... (872) -- -- -- --
Trade receivables.................................. 1,360 32 (1,691) (9,393) (6,873)
Inventories........................................ (1,074) (300) (1,886) (1,251) 378
Accounts payable................................... 1,418 246 (856) (247) (662)
Accrued expenses and self insurance................ (560) 1,772 (3,158) 1,828 6,768
Prepaid expenses and other......................... 348 224 272 (350) (218)
--------- --------- ----------- --------- ---------
Net cash provided by operating activities........ 4,547 10,000 6,241 4,553 12,313
--------- --------- ----------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets......................... 497 3,062 1,088 360 153
Purchases of property and equipment.................. (8,629) (6,601) (4,358) (3,098) (4,721)
--------- --------- ----------- --------- ---------
Net cash used in investing activities............ (8,132) (3,539) (3,270) (2,738) (4,568)
--------- --------- ----------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in working capital financing..... 3,500 3,400 (1,875) (200) (3,800)
Increase in notes payable to related party........... 1,498 554 -- 45 --
Principal payments on notes payable to related
party............................................... (1,116) (3,310) (2,996) -- --
Principal payments on acquisition credit facility.... -- (6,750) (13,250) -- --
Principal payments on other long-term debt........... (195) (191) (182) (134) (162)
Debenture sinking fund payments...................... -- -- (528) (528) (2,012)
Purchase of debentures from employee benefit plan.... -- -- (778) -- --
Proceeds from issuance of term credit facility....... -- -- 18,000 -- --
Principal payments on term credit facility........... -- -- -- -- (1,950)
Stock options exercised.............................. 13 15 173 163 --
Purchase of treasury stock........................... -- (78) (1,441) (142) --
Sale of treasury stock............................... -- -- 52 52 --
--------- --------- ----------- --------- ---------
Net cash provided by (used in) financing
activities...................................... $ 3,700 $ (6,360) $ (2,825) $ (744) $ (7,924)
--------- --------- ----------- --------- ---------
INCREASE (DECREASE) IN CASH............................ $ 115 $ 101 $ 146 $ 1,071 $ (179)
CASH, BEGINNING OF PERIOD.............................. -- 115 216 216 362
--------- --------- ----------- --------- ---------
CASH, END OF PERIOD.................................... $ 115 $ 216 $ 362 $ 1,287 $ 183
--------- --------- ----------- --------- ---------
--------- --------- ----------- --------- ---------
</TABLE>
See Notes to Consolidated Financial Statements
F-6
<PAGE>
EMPIRE GAS CORPORATION
(Formerly Empire Gas Acquisition Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three Years Ended June 30, 1991, 1992 and 1993
and for the Nine Months Ended March 31, 1993 and 1994 (Unaudited)
NOTE 1 : ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
The Company's principal operations are the sale of LP gas at retail and
wholesale. Most of the Company's customers are owners of residential single or
multi-family dwellings who make periodic purchases on credit. Such customers are
located throughout the United States with the larger number concentrated in the
central and southeastern states and along the Pacific coast. The Company was
formed in September 1988 to acquire 100% of the stock of Empire Gas Operating
Corporation (formerly Empire Gas Corporation) in a transaction which was
accounted for by the purchase method of accounting. At acquisition date, asset
and liability values were recorded at their market values with respect to the
purchase price.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Empire Gas
Corporation and its subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
UNAUDITED INTERIM FINANCIAL STATEMENTS
In the opinion of Management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly Empire
Gas Corporation's consolidated financial position as of December 31, 1993, and
the related consolidated results of its operations and cash flows for the
six-month periods ended December 31, 1992 and 1993. All such adjustments are of
a normal recurring nature.
The results of operations for the nine-month period ended March 31, 1994,
are not necessarily indicative of the results to be expected for the full year
due to the seasonal nature of the Company's business.
REVENUE RECOGNITION POLICY
Sales and related cost of product sold are recognized upon delivery of the
product or service.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined by
the first-in, first-out method for retail operations and specific identification
method for wholesale operations. At June 30 the inventories were:
<TABLE>
<CAPTION>
1992 1993
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Gas and other petroleum products................ $ 3,199 $ 4,279
Gas distribution parts, appliances and
equipment...................................... 4,714 5,412
--------- ---------
$ 7,913 $ 9,691
--------- ---------
--------- ---------
</TABLE>
PROPERTY AND EQUIPMENT
Depreciation is provided on all property and equipment on the straight-line
method over estimated useful lives of 5 to 33 years.
INCOME TAXES
Deferred tax liabilities and assets are recognized for the tax effects of
differences between the financial statement and tax bases of assets and
liabilities. A valuation allowance is established to reduce deferred tax assets
if it is more likely than not that a deferred tax asset will not be realized.
F-7
<PAGE>
EMPIRE GAS CORPORATION
(FORMERLY EMPIRE GAS ACQUISITION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED JUNE 30, 1991, 1992 AND 1993
AND FOR THE NINE MONTHS ENDED MARCH 31, 1993 AND 1994 (UNAUDITED)
NOTE 1 : ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
RECLASSIFICATION
Certain reclassifications have been made to the 1992 and 1991 financial
statements to conform to the 1993 financial statement presentation. These
reclassifications had no effect on net earnings.
AMORTIZATION
The debt acquisition costs related to the revolving credit facility and term
credit facility (originally $525,000) are being amortized over five years.
Amortization of discounts on debentures (Note 3) is on the effective
interest, bonds outstanding method.
The excess of cost over fair value of net assets acquired (originally
$25,600,000) is being amortized on the straight-line basis over 20 years.
INCOME PER COMMON SHARE
Income per common share is computed by dividing net income by the weighted
average number of common shares and, except where anti-dilutive, common share
equivalents outstanding, if any. The weighted average number of common shares
outstanding used in the computation of earnings per share was 13,881,091,
13,885,087, and 14,055,407 for each of the fiscal years ended June 30, 1991,
1992, and 1993, respectively.
NOTE 2 : RELATED PARTY TRANSACTIONS
During each of the last three years, the Company has periodically borrowed
funds from an officer of the Company who is also a principal shareholder (the
"Shareholder") of the Company and from individuals and corporations related to
the Shareholder. The Company had no outstanding borrowings from this related
party at June 30, 1993. The amounts of outstanding borrowings from this related
party at June 30, 1991 and 1992, were $5,753,000 and $2,996,000, respectively.
The maximum amounts borrowed from this related party except for the November
1992 agreement described below during the years ended June 30, 1991, 1992 and
1993, were $5,928,000, $5,753,000 and $3,000,000, respectively. The interest
rate on these borrowings was equal to or below the rates available through the
working capital facility. Interest expense incurred on these related party
borrowings was $583,000, $315,000 and $200,000, for the years ended June 30,
1991, 1992 and 1993, respectively. During November 1992 the Shareholder loaned
under a separate agreement $13.25 million to the Company to repay the
acquisition credit facility (see Note 3). Interest expense incurred on this
related party borrowing for the year ended June 30, 1993, was $749,000. In June
1993, all outstanding borrowings from the Shareholder were repaid using the
proceeds from the new term credit facility.
The Company provides data processing, office rent and other clerical
services to two corporations principally owned by certain officers and
shareholders of the Company and is currently being reimbursed $7,000 per month
for these services.
The Company leases a jet aircraft and an airport hanger from a corporation
owned by the Shareholder. The lease requires annual rent payments of $100,000
beginning April 1, 1992, for a period of eight years. In addition to direct
lease payments, the Company is also responsible for the operating costs of the
aircraft and the hanger. During the years ended June 30, 1992 and 1993, the
Company paid direct rent of $25,000 and $100,000, respectively.
F-8
<PAGE>
EMPIRE GAS CORPORATION
(FORMERLY EMPIRE GAS ACQUISITION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED JUNE 30, 1991, 1992 AND 1993
AND FOR THE NINE MONTHS ENDED MARCH 31, 1993 AND 1994 (UNAUDITED)
NOTE 2 : RELATED PARTY TRANSACTIONS (CONTINUED)
The Company paid $150,000 in each of the three years ended June 30, 1993, to
a corporation owned by the Shareholder pursuant to an agreement providing the
Company the right to use business guest facilities owned by the corporation.
The Company has entered into a lease agreement with a corporation which is
principally owned by the Shareholder for the corporate home office, land,
buildings and equipment. The lease was extended in 1991 for a term of ten years,
with two three-year renewal options. The Company paid $200,000 during each of
the three years ended June 30, 1993, related to this lease.
NOTE 3 : LONG-TERM DEBT
Long-term debt (in thousands) consisted of:
<TABLE>
<CAPTION>
JUNE 30,
-------------------- MARCH 31,
1992 1993 1994
--------- --------- ------------
<S> <C> <C> <C>
(UNAUDITED)
Acquisition credit facility (A)......................... $ 13,250 $ -- $ --
Working capital facility (B)............................ 8,700 -- --
Term credit facility (C)................................ -- 18,000 16,050
Revolving credit facility (C)........................... -- 7,300 3,500
9% Convertible Subordinated Debentures,
due 1998 (D)........................................... 17,539 17,767 17,125
9% Subordinated Debentures, due 2007 (E)................ 16,040 15,691 16,097
12% Senior Subordinated Debentures,
due 2002 (F)........................................... 19,121 19,361 18,891
Purchase contract obligations (G)....................... 1,312 1,130 1,168
--------- --------- ------------
75,962 79,249 72,831
Less current maturities................................. 16,590 5,181 6,135
--------- --------- ------------
$ 59,372 $ 74,068 $ 66,696
--------- --------- ------------
--------- --------- ------------
<FN>
- ---------
(A) The acquisition credit agreement to which substantially all the Company's
assets were pledged bore interest at 14 1/2%.
In November 1992 the principal shareholder of the Company, referred to in
Note 2 as the Shareholder, loaned $13.25 million to the Company. The
proceeds were used by the Company to repay the acquisition credit facility.
The loan was secured by substantially all of the assets of the Company on
an equal basis with the working capital facility. The loan had interest at
10% per annum. This loan was repaid in June 1993, with the proceeds from
the new term credit facility.
(B) The Company's working capital facility, under which substantially all the
Company's assets were pledged, provided for borrowings up to $20 million
and bore interest at 1% over prime. The agreement provided for a commitment
fee of 1/2% per annum of the unadvanced portion of the commitment. This
loan was repaid in June 1993 with the proceeds from the new term and
revolving credit facilities.
</TABLE>
F-9
<PAGE>
EMPIRE GAS CORPORATION
(FORMERLY EMPIRE GAS ACQUISITION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED JUNE 30, 1991, 1992 AND 1993
AND FOR THE NINE MONTHS ENDED MARCH 31, 1993 AND 1994 (UNAUDITED)
NOTE 3 : LONG-TERM DEBT (CONTINUED)
<TABLE>
<S> <C>
At June 30, 1992, the Company was in default of the working capital ratio
covenant and a covenant
requiring minimum consolidated operating cash flow. The lenders waived the
noncompliance with these covenants.
(C) The term credit facility and revolving credit facility are provided to the
Company by the same lender under one agreement. In June 1993 the proceeds
from these new loans were used to repay the $13.25 million loan from
Shareholder, working capital facility and other outstanding borrowings to
Shareholder. Substantially all of the Company's assets are pledged to the
agreement which contains working capital, debt and certain dividend
restrictions. These dividend restrictions prohibit the Company from paying
common stock cash dividends. The term credit facility bears interest at
either 1.125% over prime or 2.625% over the Eurodollar rate. The effective
interest rates at June 30, 1993 and March 31, 1994, are approximately 6.2%
and 6.1% respectively. The agreement requires quarterly principal payments
of $650,000.
The revolving credit facility provides for borrowings up to $22 million and
bears interest at either 1 % over prime or 2.5 % over the Eurodollar rate.
The effective interest rates at June 30, 1993 and March 31, 1994 are
approximately 6.2% and 7.0% respectively. The agreement provides for a
commitment fee of .5% per annum of the unadvanced portion of the
commitment. The Company's unused revolving credit line amounted to
$13,448,000 at June 30, 1993, after considering $1,252,000 of letters of
credit. At December 31, 1993, the Company was in default of the
consolidated working capital covenant. The lender waived the noncompliance
with this covenant.
(D) The convertible debentures issued in January 1981 were convertible into
common stock at a rate equal to $10.31 of principal amount for each share
of common stock through December 1989. In December 1989 the Company
executed a supplemental indenture for the convertible debentures. The
supplemental indenture provides that the holder of each convertible
debenture now has, in lieu of the right to convert each debenture into
common stock, the right to convert each debenture into the right to receive
$3.75 cash for each $10.31 face amount of debentures. The debentures mature
in 1998, and at maturity an 8% premium of the outstanding principal amount
will be paid. Such premium is being accrued over the term to maturity. The
debentures are redeemable at the Company's option, as a whole or in part,
at 100% of the principal amount plus accrued interest to the redemption
date, on any date prior to maturity. A sinking fund payment sufficient to
retire $1,250,000 of principal is required annually on each December 31.
The original principal amount of debentures outstanding ($21,854,000) was
adjusted to market value (effective interest rate of 14.5%) in October
1988, in accordance with the purchase method of accounting. The discount on
these debentures is being amortized over the remaining life of the
debentures using the effective interest, bonds outstanding method. The face
value of debentures outstanding at June 30, 1993, is $21,230,000.
(E) The debentures, issued June 1983, are redeemable at the Company's option,
as a whole or in part, at par value. Annual sinking fund payments
sufficient to retire $1,366,000 of principal outstanding are required on
each December 31.
The original principal amount of debentures issued ($27,313,000) was
adjusted to market value (effective interest rate of 16.5%) in October
1988, in accordance with the purchase method of accounting.
</TABLE>
F-10
<PAGE>
EMPIRE GAS CORPORATION
(FORMERLY EMPIRE GAS ACQUISITION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED JUNE 30, 1991, 1992 AND 1993
AND FOR THE NINE MONTHS ENDED MARCH 31, 1993 AND 1994 (UNAUDITED)
NOTE 3 : LONG-TERM DEBT (CONTINUED)
<TABLE>
<S> <C>
The discount on these debentures is being amortized over the remaining life
of the debentures using the effective interest, bonds outstanding method.
The face value of debentures outstanding at June 30, 1993, is $26,037,000.
(F) The debentures, issued April 1986, are redeemable at the Company's option,
as a whole or in part, at 100% of the principal amount plus accrued
interest to the redemption date, on any date prior to maturity. Annual
sinking fund payments sufficient to retire $690,000 of principal
outstanding, are required beginning March 31, 1994.
The original principal amount of debentures issued ($23,000,000) was
adjusted to market value (effective interest rate of 15.0%) in October
1988, in accordance with the purchase method of accounting. The discount on
the debentures is being amortized over the remaining life of the debentures
using the effective interest, bonds outstanding method. The face value of
debentures outstanding at June 30, 1993, is $22,998,000.
(G) Purchase contract obligations arise from the purchase of operating
businesses and are collateralized by the equipment and real estate acquired
in the respective acquisitions. At June 30, 1992 and 1993, these
obligations carried interest rates from 7.5% to 10% and are due
periodically through 1999.
</TABLE>
Aggregate annual maturities and sinking fund requirements (in thousands) of
the long-term debt outstanding at June 30, 1993, are:
<TABLE>
<S> <C>
1994............................................................ $ 5,181
1995............................................................ 6,027
1996............................................................ 6,025
1997............................................................ 5,973
1998............................................................ 18,469
Thereafter...................................................... 37,574
---------
$ 79,249
---------
---------
</TABLE>
F-11
<PAGE>
EMPIRE GAS CORPORATION
(FORMERLY EMPIRE GAS ACQUISITION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED JUNE 30, 1991, 1992 AND 1993
AND FOR THE NINE MONTHS ENDED MARCH 31, 1993 AND 1994 (UNAUDITED)
NOTE 4 : INCOME TAXES
Components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
CURRENT DEFERRED
----------- ---------
(IN THOUSANDS)
<S> <C> <C>
YEAR ENDED JUNE 30, 1991
Tax expense (benefit) before application of tax credits $ 241 $ (1,851)
Alternative minimum tax 359 (359)
----------- ---------
Tax expense (benefit) $ 600 $ (2,210)
----------- ---------
----------- ---------
YEAR ENDED JUNE 30, 1992
Tax expense (benefit) before application of tax credits $ 954 $ (664)
Alternative minimum tax 146 (146)
----------- ---------
Tax expense (benefit) $ 1,100 $ (810)
----------- ---------
----------- ---------
YEAR ENDED JUNE 30, 1993
Tax expense (benefit) before application of tax credits $ 3,548 $ (1,508)
Alternative minimum tax credit (648) 648
----------- ---------
Tax expense (benefit) $ 2,900 $ (860)
----------- ---------
----------- ---------
</TABLE>
Principal items making up the deferred income tax provisions are as follows:
<TABLE>
<CAPTION>
1991 1992 1993
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Depreciation and asset dispositions................................... $ (942) $ (1,332) $ (1,439)
Amortization of 1981 debenture costs.................................. (130) (190) (284)
Allowance for doubtful accounts....................................... (564) -- 23
Accrued expenses...................................................... (201) 936 147
Alternative minimum tax............................................... (359) (146) 648
Other................................................................. (14) (78) 45
--------- --------- ---------
$ (2,210) $ (810) $ (860)
--------- --------- ---------
--------- --------- ---------
</TABLE>
Reconciliation of the statutory federal income tax rate to the effective tax
rate as a percent of pretax financial income is as follows:
<TABLE>
<CAPTION>
1991 1992 1993
----------- ----------- -----------
<S> <C> <C> <C>
Statutory tax rate................................................... (34.0)% (34.0)% 34.0%
State income taxes, net of federal income tax benefits............... 2.1 13.9 4.8
Amortization of excess of cost over fair value of net assets
acquired............................................................ 6.3 32.5 9.0
Unamortized excess of cost over fair value of assets sold............ -- 5.7 .9
Other tax accruals................................................... (.5) 6.4 (.9)
----------- ----------- ---
Effective tax rate............................................. (26.1)% 24.5 % 47.8%
----------- ----------- ---
----------- ----------- ---
</TABLE>
F-12
<PAGE>
EMPIRE GAS CORPORATION
(FORMERLY EMPIRE GAS ACQUISITION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED JUNE 30, 1991, 1992 AND 1993
AND FOR THE NINE MONTHS ENDED MARCH 31, 1993 AND 1994 (UNAUDITED)
NOTE 4 : INCOME TAXES (CONTINUED)
CHANGE IN ACCOUNTING PRINCIPLE
Effective July 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). As a result of the change, there was no effect on income tax expense and
the effect on current-noncurrent classification of deferred assets and
liabilities was not material.
SFAS 109 requires recognition of deferred tax liabilities and assets for the
difference between the financial statement and tax basis of assets and
liabilities. Under this new standard, a valuation allowance is established to
reduce deferred tax assets if it is more likely than not that a deferred tax
asset will not be realized.
Prior to July 1, 1993, deferred taxes were determined using the Statement of
Financial Accounting Standards No. 96.
Deferred tax balances at July 1, 1993, consisted of:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Deferred Tax Assets
Allowance for doubtful accounts............................................................... $ 1,016
Accounts receivable advance collections....................................................... 182
Self insurance liabilities and contingencies.................................................. 1,474
1981 debenture premium........................................................................ 403
--------------
3,075
--------------
Deferred Tax Liabilities
Accumulated depreciation...................................................................... (33,975)
1981 debenture discount....................................................................... (1,668)
--------------
(35,643)
--------------
Net Deferred Tax Liability.................................................................... $ (32,568)
--------------
--------------
</TABLE>
NOTE 5 : MERGER PROPOSAL COSTS
During the year ended June 30, 1992, the Company submitted a proposal to
acquire a large competitor in the propane business after incurring due diligence
costs including professional fees and out-of-pocket expenses in connection with
the proposed acquisition. The Company abandoned the proposal and expensed the
related $450,000 of costs in 1992.
NOTE 6 : RESTRUCTURING PROPOSAL COSTS
During the year ended June 30, 1993, the Company was considering proposals
to restructure the debt and equity of the Company. The Company abandoned the
proposal and expensed the related $223,000 of costs in 1993.
NOTE 7 : EMPLOYEE BENEFIT PLANS
The Company had a qualified profit-sharing plan which covered substantially
all full-time employees under which annual Company contributions were determined
by the Board of Directors. No contributions to the plan were made in the past
six fiscal years.
F-13
<PAGE>
EMPIRE GAS CORPORATION
(FORMERLY EMPIRE GAS ACQUISITION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED JUNE 30, 1991, 1992 AND 1993
AND FOR THE NINE MONTHS ENDED MARCH 31, 1993 AND 1994 (UNAUDITED)
NOTE 7 : EMPLOYEE BENEFIT PLANS (CONTINUED)
The Company had an employee stock bonus plan which covered substantially all
full-time employees under which no contributions to the plan were made in fiscal
years ended June 30, 1992 and 1993. The annual Company contribution was $100,000
in the year ended June 30, 1991, as determined by the Board of Directors.
In April 1992 the Company's Board of Directors voted to terminate both
employee benefit plans effective June 30, 1992. Applications for a Determination
Upon Plan Termination were filed with the Internal Revenue Service (IRS) and
were approved in December 1992. The Company liquidated the plans' assets and
paid out the plans' funds to participants on March 31, 1993. The Company
purchased from the plans the Company's common stock for $1.3 million and Company
debentures for $.8 million.
NOTE 8 : SELF INSURANCE AND RELATED CONTINGENCIES
Under the Company's current insurance program, coverage for comprehensive
general liability and vehicle liability is obtained for catastrophic exposures
as well as those risks required to be insured by law or contract. The Company
retains a significant portion of certain expected losses related primarily to
comprehensive general liability and vehicle liability. Under these current
insurance programs, the Company self-insures the first $500,000 of coverage (per
incident). The Company obtains excess coverage from carriers for these programs
on claims-made basis policies. The excess coverage for comprehensive general
liability provides a loss limitation that limits the Company's aggregate of
self-insured losses to $1 million per policy period. The aggregate cost of
obtaining this excess coverage from carriers for the years ended June 30, 1991,
1992 and 1993, was $961,000, $1,222,000 and $1,441,000, respectively.
For the policy periods July 1, 1989 through December 30, 1989, and December
31, 1989 through June 30, 1991, the Company has incurred aggregate comprehensive
general liability losses in excess of the policies' $1 million loss limit.
Additional losses (except for punitive damages), if any, are insured by the
excess carrier and should not result in additional expense to the Company. As of
June 30, 1993, the Company has not exceeded the $1 million loss limit for the
comprehensive general liability policy periods July 1, 1991 through June 30,
1992, and July l, 1992 through June 30, 1993.
Provisions for self-insured losses are recorded based upon the Company's
estimates of the aggregate self-insured liability for claims incurred. A summary
of the self-insurance liability, general and vehicle liability (in thousands)
for the years ended June 30, 1991, 1992 and 1993, are:
<TABLE>
<CAPTION>
BEGINNING SELF
SELF SELF INSURED ENDING SELF
INSURANCE INSURANCE CLAIMS INSURANCE
LIABILITY EXPENSES PAID LIABILITY
----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
June 30, 1991........... $ 2,070 $ 2,701 $ 2,533 $ 2,238
June 30, 1992........... $ 2,238 $ 1,764 $ 1,336 $ 2,666
June 30, 1993........... $ 2,666 $ 1,148 $ 1,480 $ 2,334
</TABLE>
The ending accrued liability for each period includes $500,000 for incurred
but not reported claims. The current portion of the ending liability of
$350,000, $1,103,000 and $460,000 at June 30, 1991, 1992 and 1993, respectively,
is included in accrued expenses in the consolidated balance sheets. The
noncurrent portion at the end of each period is included in accrued
self-insurance liability.
In November 1991 and February 1992, jury verdicts including compensatory and
punitive damages were returned in favor of numerous plaintiffs in claims filed
against the Company resulting from an explosion in
F-14
<PAGE>
EMPIRE GAS CORPORATION
(FORMERLY EMPIRE GAS ACQUISITION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED JUNE 30, 1991, 1992 AND 1993
AND FOR THE NINE MONTHS ENDED MARCH 31, 1993 AND 1994 (UNAUDITED)
NOTE 8 : SELF INSURANCE AND RELATED CONTINGENCIES (CONTINUED)
Crested Butte, Colorado, during 1990. All of the compensatory damage awards were
settled by the Company's insurance carrier in 1992. The Company paid $300,000 in
October 1992 to settle all the remaining punitive damage awards which were
accrued at June 30, 1991.
The Company and its subsidiaries are also defendants in various other
lawsuits related to the self-insurance program which are not expected to have a
material adverse effect on the Company's financial position or results of
operations.
During the years ended June 30, 1991, 1992 and 1993, the Company had
obtained workers' compensation coverage from carriers and state insurance pools
at annual costs of $810,000, $733,000 and $1,743,000, respectively. Effective
July 1, 1993, the Company changed its policy so that it will self-insure the
first $500,000 of workers' compensation coverage (per incident). The Company
will purchase excess coverage from carriers for workers' compensation claims in
excess of the self-insured coverage. Provisions for losses expected under this
program will be recorded based upon the Company's estimates of the aggregate
liability for claims incurred. The Company will provide letters of credit
aggregating approximately $2.3 million in connection with this program of which
$582,000 was already provided at June 30, 1993.
Interim accruals for the costs of excess coverages, general liability,
vehicle liability and workers' compensation are based on an estimate of the
related annual costs compared to the estimated total gallons of propane to be
sold during the same period. Presently, the resulting accrual rate of expense
recognizing these costs is 3.5 cents per gallon sold.
The Company currently self insures health benefits provided to the employees
of the Company and its subsidiaries. Provisions for losses expected under this
program are recorded based upon the Company's estimate of the aggregate
liability for claims incurred. The aggregate cost of providing the health
benefits was $1,151,000, $1,011,000 and $873,000 for the years ended June 30,
1991, 1992 and 1993, respectively.
NOTE 9 : LITIGATION CONTINGENCIES
The Company's federal income tax returns for the fiscal years 1979 and 1980
were audited by the Internal Revenue Service (IRS). Income tax due as a result
of these audits was approximately $640,000 which was paid during the year ended
June 30, 1989.
The initial amount of interest due of approximately $2,050,000 as a result
of the audits was accrued by the Company for fiscal year 1989 and included in
income taxes payable. During settlement discussions with the IRS the Company
continued to accrue interest on the unpaid interest amount until the Company
paid $2.4 million during August, 1992 to settle all outstanding federal tax
audits.
The last federal income tax return audited by the IRS was for fiscal year
1987. The Company has no federal income tax audits in process at June 30, 1993.
The Company and its subsidiaries are also defendants in various state income
tax audits and other business-related lawsuits which are not expected to have a
material adverse effect on the Company's financial position or results of
operations.
F-15
<PAGE>
EMPIRE GAS CORPORATION
(FORMERLY EMPIRE GAS ACQUISITION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED JUNE 30, 1991, 1992 AND 1993
AND FOR THE NINE MONTHS ENDED MARCH 31, 1993 AND 1994 (UNAUDITED)
NOTE 10 : STOCK OPTIONS
The table below summarizes transactions under the Company's stock option
plan:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OPTION PRICE
----------- ----------------
<S> <C> <C>
Balance June 30, 1990.................................... 495,737 $ .377 - $1.50
Exercised.............................................. (11,858) .377 - 1.50
-----------
Balance June 30, 1991.................................... 483,879 .377 - 1.50
Exercised.............................................. (15,950) .377 - 1.50
-----------
Balance June 30, 1992.................................... 467,929 .377 - 1.50
Exercised.............................................. (338,679) .377 - 1.50
-----------
Balance June 30, 1993.................................... 129,250 1.12 - 1.50
-----------
-----------
</TABLE>
NOTE 11 : SUBSEQUENT EVENT
The Company is considering an exchange of assets and liabilities of
approximately 133 retail subsidiaries plus other non-retail assets for
12,004,430 shares of Company Common Stock, at a fair value of $84,031,000. The
proposed shares of stock being redeemed are principally held by the Shareholder
described in Note 2. In connection with this transaction, the Company will issue
approximately $122 million of new
debentures (with expected proceeds before expenses of approximately $100
million) which will be used to retire approximately $72 million of existing
debt. The remaining net proceeds will be used to finance an acquisition,
repurchase common shares for cash and for working capital.
NOTE 12 : ADDITIONAL CASH FLOW INFORMATION (IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
------------------------------- --------------------
1991 1992 1993 1993 1994
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NONCASH INVESTING AND FINANCING ACTIVITIES
Mortgage obligations incurred on property and
equipment purchases.................................. $ 184 $ 102 -- -- $ 200
Short-term note payable issued for the repurchase of
debentures from the employee benefit plan............ -- -- -- $ 778 --
Short-term note payable issued for the purchase of
Company stock from the employee benefit plan......... -- -- -- $ 1,299 --
ADDITIONAL CASH PAYMENT INFORMATION
Interest paid......................................... $ 11,880 $ 11,213 $ 12,185 $ 9,543 $ 6,043
Income taxes paid (net of refunds).................... $ 1,328 $ (441) $ 3,434 $ 2,384 $ 2,529
</TABLE>
F-16
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Stockholder
PSNC Propane Corporation
Gastonia, North Carolina
We have audited the accompanying balance sheet of PSNC PROPANE CORPORATION
(A WHOLLY-OWNED SUBSIDIARY OF PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INC.) as
of June 30, 1993, and the related statements of income, stockholder's equity and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PSNC PROPANE CORPORATION as
of June 30, 1993, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
BAIRD, KURTZ & DOBSON
Springfield, Missouri
May 27, 1994
F-17
<PAGE>
PSNC PROPANE CORPORATION
BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
JUNE 30,
1993
--------- MARCH 31,
1994
-----------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents............................................................... $ 1,466 $ 1,094
Trade receivables, less allowance for doubtful accounts; June 30, 1993 -- $160, March
31, 1994 -- $184....................................................................... 512 1,180
Inventories............................................................................. 1,322 700
Prepaid expenses........................................................................ 147 119
Refundable income taxes................................................................. 100 --
Deferred income taxes (NOTE 3).......................................................... 434 434
--------- -----------
Total Current Assets.................................................................. 3,981 3,527
--------- -----------
PROPERTY AND EQUIPMENT, At Cost
Land and buildings...................................................................... 1,123 1,109
Storage and consumer service facilities................................................. 9,292 9,255
Transportation, office and other equipment.............................................. 2,354 2,419
--------- -----------
12,769 12,783
Less accumulated depreciation........................................................... 3,443 3,904
--------- -----------
9,326 8,879
--------- -----------
OTHER ASSETS.............................................................................. 432 296
--------- -----------
$ 13,739 $ 12,702
--------- -----------
--------- -----------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable........................................................................ $ 570 $ 329
Accrued expenses........................................................................ 292 149
Income taxes payable.................................................................... -- 328
Due to related party (NOTE 2)........................................................... 375 462
Advances from related party (NOTE 2).................................................... 9,063 6,813
Cash deposit (NOTE 6)................................................................... -- 250
--------- -----------
Total Current Liabilities............................................................. 10,300 8,331
--------- -----------
DEFERRED INCOME TAXES (NOTE 3)............................................................ 2,188 2,289
--------- -----------
STOCKHOLDER'S EQUITY
Common stock; $1 par value; authorized 100,000 shares; issued and outstanding 500
shares................................................................................. 1 1
Retained earnings....................................................................... 1,250 2,081
--------- -----------
1,251 2,082
--------- -----------
$ 13,739 $ 12,702
--------- -----------
--------- -----------
</TABLE>
See Notes to Financial Statements
F-18
<PAGE>
PSNC PROPANE CORPORATION
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR
ENDED
JUNE 30,
1993
--------- NINE MONTHS
ENDED
MARCH 31,
1994
------------
(UNAUDITED)
<S> <C> <C>
OPERATING REVENUE........................................................................ $ 9,587 $ 9,526
COST OF PRODUCTS SOLD.................................................................... 4,643 4,663
--------- ------------
GROSS PROFIT............................................................................. 4,944 4,863
--------- ------------
OPERATING EXPENSES
Provision for doubtful accounts........................................................ 30 34
General and administrative............................................................. 3,770 2,752
Rent expense to related party (NOTE 2)................................................. 68 53
Depreciation and amortization.......................................................... 975 692
--------- ------------
4,843 3,531
--------- ------------
OPERATING INCOME......................................................................... 101 1,332
INTEREST INCOME.......................................................................... 61 27
--------- ------------
INCOME BEFORE INCOME TAXES............................................................... 162 1,359
PROVISION FOR INCOME TAXES............................................................... 63 528
--------- ------------
NET INCOME............................................................................... $ 99 $ 831
--------- ------------
--------- ------------
INCOME PER COMMON SHARE.................................................................. $ 198 $ 1,662
--------- ------------
--------- ------------
</TABLE>
See Notes to Financial Statements
F-19
<PAGE>
PSNC PROPANE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
RETAINED STOCKHOLDER'S
COMMON STOCK EARNINGS EQUITY
--------------- ----------------- -------------
<S> <C> <C> <C>
BALANCE,
JUNE 30, 1992................................................. $ 1 $ 1,151 $ 1,152
NET INCOME...................................................... 99 99
------ ------ ------
BALANCE,
JUNE 30, 1993................................................. 1 1,250 1,251
NET INCOME (UNAUDITED).......................................... 831 831
------ ------ ------
BALANCE,
MARCH 31, 1994 (UNAUDITED).................................... $ 1 $ 2,081 $ 2,082
------ ------ ------
------ ------ ------
</TABLE>
See Notes to Financial Statements
F-20
<PAGE>
PSNC PROPANE CORPORATION
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE
YEAR MONTHS ENDED
ENDED MARCH 31, 1994
JUNE 30, ---------------
1993
----------- (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................................................ $ 99 $ 831
Items not requiring cash:
Depreciation........................................................................ 778 568
Amortization........................................................................ 197 124
Deferred income taxes............................................................... 166 101
Loss on sale of assets.............................................................. 26 20
Changes in:
Trade receivables................................................................... (60) (668)
Inventories......................................................................... (971) 622
Accounts payable.................................................................... 455 (241)
Accrued expenses.................................................................... 174 372
Prepaid expenses and other.......................................................... (89) 290
----------- ------
Net cash provided by operating activities......................................... 775 2,019
----------- ------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets.......................................................... 384 145
Purchases of property and equipment................................................... (722) (286)
----------- ------
Net cash used in investing activities............................................. (338) (141)
----------- ------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of related party advances.................................................. (1,222) (2,250)
----------- ------
Net cash used in financing activities............................................. (1,222) (2,250)
----------- ------
DECREASE IN CASH AND CASH EQUIVALENTS................................................... (785) (372)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.......................................... 2,251 1,466
----------- ------
CASH AND CASH EQUIVALENTS, END OF PERIOD................................................ $ 1,466 $ 1,094
----------- ------
----------- ------
</TABLE>
See Notes to Financial Statements
F-21
<PAGE>
PSNC PROPANE CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1993 AND
NINE MONTHS ENDED MARCH 31, 1994 (UNAUDITED)
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
The Company's principal operations are the sale of LP gas at retail and
wholesale. Most of the Company's customers are owners of residential single or
multi-family dwellings who make periodic purchases on credit. Such customers are
located mainly in North Carolina and South Carolina with the larger number
concentrated in North Carolina. The Company is wholly-owned by Public Service
Company of North Carolina, Inc. (PSC).
UNAUDITED INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly PSNC Propane
Corporation's financial position as of March 31, 1994, and the related results
of its operations and cash flows for the nine-month period ended March 31, 1994.
All such adjustments are of a normal recurring nature.
The results of operations for the nine-month period ended March 31, 1994,
are not necessarily indicative of the results to be expected for the full year
due to the seasonal nature of the Company's business.
REVENUE RECOGNITION
Sales and related cost of products sold are recognized upon delivery of the
product or service.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined by
the first-in, first-out method. At June 30, 1993, the inventories (in thousands)
were:
<TABLE>
<S> <C>
Gas and other petroleum products............................ $ 1,074
Gas distribution parts, appliances and equipment............ 248
---------
$ 1,322
---------
---------
</TABLE>
PROPERTY AND EQUIPMENT
Depreciation is provided on all property and equipment on the straight-line
method over estimated useful lives of 4 to 30 years.
INCOME TAXES
Deferred tax liabilities and assets are recognized for the tax effects of
differences between the financial statement and tax bases of assets and
liabilities. A valuation allowance is established to reduce deferred tax assets
if it is more likely than not that deferred tax asset will not be realized.
The Company files consolidated income tax returns with its parent, PSC.
Income taxes resulting from the consolidated returns are allocated to PSNC
Propane Corporation and subsidiaries based upon the separate-return method.
EARNINGS PER COMMON SHARE
Earnings per common share are computed by dividing net income by the
weighted average number of common shares and, except where anti-dilutive, common
share equivalents outstanding, if any. The weighted average number of common
shares outstanding used in the computation of earnings per share was 500 for the
fiscal year ended June 30, 1993.
F-22
<PAGE>
PSNC PROPANE CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED JUNE 30, 1993 AND
NINE MONTHS ENDED MARCH 31, 1994 (UNAUDITED)
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
AMORTIZATION
Noncompete agreements, included in other assets, are amortized on a
straight-line basis over the life of the agreement, which is generally 60
months.
CASH EQUIVALENTS
The Company considers all liquid investments with original maturities of
three months or less to be cash equivalents. At June 30, 1993, cash equivalents
consisted primarily of a repuchase account.
NOTE 2: RELATED PARTY TRANSACTIONS
The Company rents three of its offices under operating leases with PSC. The
leases required aggregate monthly rent payments of $5,900. During the year ended
June 30, 1993, the Company paid direct rents of $67,880.
At June 30, 1993, the Company had outstanding amounts due to PSC of $375,000
for Company payroll and other expenses paid by the parent which are generally
repaid within 60 days. The Company also had at June 30, 1993, outstanding
advances of $9,063,000 which were used to finance acquisitions and working
capital needs of the Company. Payment of advances are subject to a subordination
agreement for the holders of certain PSC debentures.
PSC provides payroll processing services to the Company and is currently
being reimbursed $4 per employee per month for these services. Included in 1993
PSC payroll charges are $26,000 allocated to the Company for payroll paid to PSC
administrative staff.
NOTE 3: INCOME TAXES
The provision for income taxes includes these components:
<TABLE>
<S> <C>
Taxes currently refundable............................... $(103,000)
Deferred income taxes.................................... 166,000
---------
$ 63,000
---------
---------
</TABLE>
The tax effects of temporary differences related to deferred taxes shown on
the balance sheet were:
<TABLE>
<S> <C>
Deferred tax assets:
Allowance for doubtful accounts...................... $ 65,000
Inventory overhead costs capitalized for tax
purposes............................................ 151,000
Pension costs paid deductible in the future.......... 218,000
------------
434,000
Deferred tax liabilities:
Accumulated depreciation............................. (2,188,000)
------------
Net deferred tax liability......................... $ (1,754,000)
------------
------------
</TABLE>
The above net deferred tax liability is presented on the balance sheet as
follows:
<TABLE>
<S> <C>
Deferred tax asset -- current.......................... $ 434,000
Deferred tax liability -- long term.................... (2,188,000)
------------
Net deferred tax liability......................... $ (1,754,000)
------------
------------
</TABLE>
F-23
<PAGE>
PSNC PROPANE CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED JUNE 30, 1993 AND
NINE MONTHS ENDED MARCH 31, 1994 (UNAUDITED)
NOTE 3: INCOME TAXES (CONTINUED)
A reconciliation of income tax expense at the statutory rate to the
Company's actual income tax expense is shown below:
<TABLE>
<S> <C>
Computed at the statutory rate 34%......................... $ 55,000
Increase resulting from:
Nondeductible travel costs............................... 1,000
State income taxes -- net of federal tax benefit......... 7,000
---------
Actual tax provision....................................... $ 63,000
---------
---------
</TABLE>
NOTE 4: PENSION AND 401(K) SAVINGS PLAN
PENSION PLAN
The Company participates in the noncontributory defined benefit pension plan
provided by PSC. The plan covers all employees of the Company who meet the
eligibility requirements. To be eligible, an employee must be 21 years of age
and have completed one year of continuous service. The plan provides benefits
based upon the career earnings of each participant, subject to certain
reductions if the employee retires before reaching age 65.
401(K) SAVINGS PLAN
The Company participates in the Savings Plan provided by PSC. The Plan
covers all employees of the Company who meet certain eligibility requirements.
To be eligible, an employee must be 21 years of age and have one year of
continuous service. The Company matches a portion of employee contributions made
to the Plan, subject to certain limitations.
Net pension and 401(k) savings plan expense for the Company's employees
participating in the plans, as allocated by PSC to the Company, was $164,000 for
the year ended June 30, 1993.
NOTE 5: SELF-INSURANCE AND LITIGATION CONTINGENCIES
Under the Company's current insurance program, coverage for comprehensive
general liability, workers' compensation and vehicle liability is obtained for
catastrophic exposures as well as those risks required to be insured by law or
contract. The Company retains a significant portion of certain expected losses
related primarily to comprehensive general liability, workers' compensation and
vehicle liability. Under these current insurance programs, the Company
self-insures the first $200,000 of coverage (per incident). The Company obtains
excess coverage from carriers for these programs on claims-made basis policies.
The aggregate cost of obtaining this excess coverage as a subsidiary under PSC's
insurance policies for the year ended June 30, 1993, was approximately $51,000.
The Company is a defendant in various lawsuits related to the self-insurance
program and other business-related lawsuits which are not expected to have a
material adverse effect on the Company's financial position or results of
operations.
The last PSC consolidated federal income tax audit, which included the
Company as a subsidiary, was for 1991. There are no federal income tax audits in
process at June 30, 1993.
NOTE 6: SUBSEQUENT EVENT
SALE OF COMPANY
In January 1994 the Company entered into an agreement with Empire Gas
Corporation (EGC) to sell the Company's entire operations to EGC. The agreement
provides for the sale of all property and equipment for $12 million plus the
respective values for inventory and accounts receivable at closing. EGC paid a
F-24
<PAGE>
PSNC PROPANE CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED JUNE 30, 1993 AND
NINE MONTHS ENDED MARCH 31, 1994 (UNAUDITED)
NOTE 6: SUBSEQUENT EVENT (CONTINUED)
nonrefundable cash deposit of $250,000 in February 1994 under the agreement. In
May 1994, EGC obtained an extension of the closing date which can be no later
than June 30, 1994. For this extension, EGC paid an additional nonrefundable
cash deposit of $250,000.
NOTE 7: ADDITIONAL CASH FLOW INFORMATION
ADDITIONAL CASH PAYMENT INFORMATION
<TABLE>
<CAPTION>
MARCH 31,
1994
JUNE 30, --------------
1993
----------- (UNAUDITED)
<S> <C> <C>
Income taxes paid (net of refunds)..................... $ (222,000) $ --
</TABLE>
F-25
<PAGE>
UNAUDITED PRO FORMA INCOME STATEMENTS OF PSNC PROPANE CORPORATION (PSNC)
FOR THE YEAR ENDED JUNE 30, 1993, NINE MONTHS ENDED
MARCH 31, 1994, AND TWELVE MONTHS ENDED MARCH 31, 1994
The following unaudited income statements show the results of PSNC and the
pro forma effects of purchase accounting adjustments in connection with the
acquisition of PSNC by EGC as if the acquisition had been consummated as of July
1, 1992. The unaudited pro forma results are not necessarily indicative of the
actual results that would have occurred had the acquisition been consummated as
of July 1, 1992, or of the future operations of the Company.
The pro forma statements of operations reflect reductions in salaries and
other expenses related to the corporate headquarters of PSNC. EGC intends to
eliminate all employees of the corporate headquarters because it currently is
providing these services to its other subsidiaries through its existing home
office. In addition to eliminating salaries and other expenses related to the
corporate headquarters, EGC intends to eliminate certain guaranteed overtime
policies, courier services, answering services, dedicated computer lines,
vehicle expenses and advertising costs which will not be necessary to operate
PSNC as a subsidiary of EGC. No adjustments were made for any increases in cost
required by the addition of PSNC.
P-1
<PAGE>
PSNC PROPANE CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1993
-------------------------------------
PURCHASE
PSNC ACCOUNTING
PROPANE ADJUSTMENTS PRO FORMA
CORPORATION ------------- ---------
-----------
(UNAUDITED)
<S> <C> <C> <C>
OPERATING REVENUE.......................................................... $ 9,587 $ $ 9,587
COST OF PRODUCT SOLD....................................................... 4,643 4,643
----------- ---------
GROSS PROFIT............................................................... 4,944 4,944
----------- ---------
OPERATING COSTS AND EXPENSES
Provision for doubtful accounts.......................................... 30 30
General and administrative............................................... 3,838 (1,219)(1) 2,619
Depreciation and amortization............................................ 975 83(2) 1,058
----------- ------------- ---------
4,843 (1,136) 3,707
----------- ------------- ---------
OPERATING INCOME........................................................... 101 1,136 1,237
----------- ------------- ---------
OTHER INCOME (EXPENSE)
Interest income (expense)................................................ 61 (1,125)(3) (1,064)
Amortization of debt discount and expense................................ -- (423)(4) (423)
----------- ------------- ---------
61 (1,548) (1,487)
----------- ------------- ---------
INCOME (LOSS) BEFORE INCOME TAXES.......................................... 162 (412) (250)
PROVISION (CREDIT) FOR INCOME TAXES........................................ 63 (163)(5) (100)
----------- ------------- ---------
NET INCOME (LOSS).......................................................... $ 99 $ (249) $ (150)
----------- ------------- ---------
----------- ------------- ---------
</TABLE>
P-2
<PAGE>
PSNC PROPANE CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31, 1994
-------------------------------------
PURCHASE
PSNC ACCOUNTING
PROPANE ADJUSTMENTS PRO FORMA
CORPORATION ------------- ---------
-----------
(UNAUDITED)
<S> <C> <C> <C>
OPERATING REVENUE.......................................................... $ 9,526 $ $ 9,526
COST OF PRODUCT SOLD....................................................... 4,663 4,663
----------- ---------
GROSS PROFIT............................................................... 4,863 4,863
----------- ---------
OPERATING COSTS AND EXPENSES
Provision for doubtful accounts.......................................... 34 34
General and administrative............................................... 2,805 (911) 1,894
Depreciation and amortization............................................ 692 86 778
----------- ------------- ---------
3,531 (825) 2,706
----------- ------------- ---------
OPERATING INCOME........................................................... 1,332 825 2,157
----------- ------------- ---------
OTHER INCOME (EXPENSE)
Interest income (expense)................................................ 27 (828) (801)
Amortization of debt discount and expense................................ -- (353) (353)
----------- ------------- ---------
27 (1,181) (1,154)
----------- ------------- ---------
INCOME BEFORE INCOME TAXES................................................. 1,359 (356) 1,003
PROVISION FOR INCOME TAXES................................................. 528 (138) 390
----------- ------------- ---------
NET INCOME................................................................. $ 831 $ (218) $ 613
----------- ------------- ---------
----------- ------------- ---------
</TABLE>
P-3
<PAGE>
PSNC PROPANE CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
MARCH 31, 1994
-------------------------------------
PURCHASE
ACCOUNTING
PSNC ADJUSTMENTS PRO FORMA
PROPANE ------------- ---------
CORPORATION
-----------
(UNAUDITED)
<S> <C> <C> <C>
OPERATING REVENUE........................................................ $ 10,605 $ $ 10,605
COST OF PRODUCT SOLD..................................................... 5,164 5,164
----------- ---------
GROSS PROFIT............................................................. 5,441 5,441
----------- ---------
OPERATING COSTS AND EXPENSES
Provision for doubtful accounts........................................ 40 40
General and administrative............................................. 3,685 (1,194) 2,491
Depreciation and amortization.......................................... 933 106 1,039
----------- ------------- ---------
4,658 (1,088) 3,570
----------- ------------- ---------
OPERATING INCOME......................................................... 783 1,088 1,871
----------- ------------- ---------
OTHER INCOME (EXPENSE)
Interest income (expense).............................................. 42 (1,102) (1,060)
Amortization of debt discount and expense.............................. -- (462) (462)
----------- ------------- ---------
42 (1,564) (1,522)
----------- ------------- ---------
INCOME BEFORE INCOME TAXES............................................... 825 (476) 349
PROVISION FOR INCOME TAXES............................................... 291 (161) 130
----------- ------------- ---------
NET INCOME............................................................... $ 534 $ (315) $ 219
----------- ------------- ---------
----------- ------------- ---------
</TABLE>
P-4
<PAGE>
PSNC PROPANE CORPORATION
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1993,
THE NINE MONTHS ENDED MARCH 31, 1994 AND
THE TWELVE MONTHS ENDED MARCH 31, 1994
(1) To record the effect of (a) elimination of salaries of executive and
administrative personnel and related costs, (b) elimination of auto and
travel expenses related to executive and administrative personnel being
terminated, (c) elimination of newspaper, radio, and magazine advertising,
(d) elimination of dedicated computer telephone lines and cellular
telephones, (e) elimination of temporary service personnel and overtime
wages, (f) elimination of payroll taxes related to salaries eliminated and
(g) elimination of courier service, credit bureau fees, answering service
expense and office supplies.
<TABLE>
<CAPTION>
NINE MONTHS TWELVE MONTHS
YEAR ENDED ENDED ENDED
JUNE 30, 1993 MARCH 31, 1994 MARCH 31, 1994
------------- ----------------- -----------------
<S> <C> <C> <C>
Executive and administrative salaries............. $ 695,000 $ 521,000 $ 694,000
Auto and travel expenses.......................... 29,000 18,000 25,000
Advertising expenses.............................. 18,000 7,000 12,000
Telephone expenses................................ 56,000 39,000 52,000
Temporary personnel and overtime wages............ 241,000 213,000 254,000
Payroll taxes..................................... 67,000 51,000 67,000
Other expenses.................................... 113,000 62,000 90,000
------------- -------- -----------------
Total General and Administrative Expense
Reduction...................................... $ 1,219,000 $ 911,000 $ 1,194,000
------------- -------- -----------------
------------- -------- -----------------
</TABLE>
(2) To (a) record additional depreciation based upon the purchase price of
PSNC's property and equipment, (b) record amortization on the new
non-compete agreement being amortized over five years and (c) eliminate
amortization on pre-acquisition non-compete agreements.
<TABLE>
<CAPTION>
NINE MONTHS TWELVE MONTHS
YEAR ENDED ENDED ENDED
JUNE 30, 1993 MARCH 31, 1994 MARCH 31, 1994
------------- ----------------- -----------------
<S> <C> <C> <C>
Depreciation...................................... $ 180,000 $ 135,000 $ 180,000
New non-compete amortization...................... 100,000 75,000 100,000
Old non-compete amortization...................... (197,000) (124,000) (174,000)
------------- ----------------- -----------------
$ 83,000 $ 86,000 $ 106,000
------------- ----------------- -----------------
------------- ----------------- -----------------
</TABLE>
(3) To (a) record additional interest expense assuming interest paid at 7% on
face value $14,706,000 of new Senior Secured Note borrowings, (b) recognize
additional interest expense on the revolving credit facility to reflect the
purchase of PSNC's working capital assets and the effect of operational
changes and (c) eliminate interest income earned on excess PSNC cash.
<TABLE>
<CAPTION>
NINE MONTHS TWELVE MONTHS
YEAR ENDED ENDED ENDED
JUNE 30, 1993 MARCH 31, 1994 MARCH 31, 1994
------------- ----------------- -----------------
<S> <C> <C> <C>
Senior Notes, due 2004............................ $ 1,030,000 $ 773,000 $ 1,030,000
Revolving Credit Facility......................... 34,000 27,000 29,000
Interest Income eliminated........................ 61,000 28,000 43,000
------------- -------- -----------------
$ 1,125,000 $ 828,000 $ 1,102,000
------------- -------- -----------------
------------- -------- -----------------
</TABLE>
P-5
<PAGE>
PSNC PROPANE CORPORATION
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1993,
THE NINE MONTHS ENDED MARCH 31, 1994 AND
THE TWELVE MONTHS ENDED MARCH 31, 1994
(4) To recognize amortization of the original discount on face value $14,706,000
of new Senior Secured Notes to bring the effective rate of the new debt to
12% using the effective interest method.
<TABLE>
<S> <C>
Year Ended June 30, 1993.......................................... $ 423,000
Nine Months Ended March 31, 1994.................................. $ 353,000
Twelve Months Ended March 31, 1994................................ $ 462,000
</TABLE>
(5) To record the estimated income tax reduction, computed at an effective rate
of 39%, associated with the additional deductible expense as a result of the
acquired operations.
P-6
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET OF PSNC PROPANE CORPORATION (PSNC)
AS OF MARCH 31, 1994
The following unaudited balance sheet shows the balance sheet of PSNC and
the pro forma effects of purchase accounting adjustments in connection with the
acquisition of PSNC by EGC as if the acquisition had been completed on March 31,
1994.
PSNC PROPANE CORPORATION
UNAUDITED PRO FORMA BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1994
-----------------------------------------
EFFECTS OF
PSNC PSNC PSNC
PROPANE ADJUSTMENTS ACQUISITION
CORPORATION --------------- -----------
-----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents............................................ $ 1,094 $ (1,094)(1) $
Trade receivables.................................................... 1,180 1,180
Inventories.......................................................... 700 700
Prepaid expenses..................................................... 119 (119)(1)
Deferred Income taxes................................................ 434 (434)(5)
----------- ------- -----------
Total current assets............................................... 3,527 (1,647) 1,880
----------- ------- -----------
PROPERTY AND EQUIPMENT,
At Cost, net of accumulated depreciation............................. 8,879 3,121(2) 12,000
----------- ------- -----------
OTHER ASSETS........................................................... 296 204(3) 500
----------- ------- -----------
TOTAL ASSETS......................................................... $ 12,702 $ 1,678 $ 14,380
----------- ------- -----------
----------- ------- -----------
CURRENT LIABILITIES
Current maturities of long-term debt................................. $ $ 100(4) $ 100
Accounts payable and accrued expenses................................ 1,056 (806)(1) 250
Advances from and due to related party............................... 7,275 (7,275)(4)
----------- ------- -----------
8,331 (7,981) 350
----------- ------- -----------
LONG-TERM DEBT......................................................... 14,030(4) 14,030
------- -----------
DEFERRED INCOME TAXES.................................................. 2,289 (2,289)(5)
----------- -------
STOCKHOLDER'S EQUITY
Common stock......................................................... 1 (1)(5)
Retained earnings.................................................... 2,081 (2,081)(5)
----------- -------
2,082 (2,082)
----------- ------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......................... $ 12,702 $ 1,678 $ 14,380
----------- ------- -----------
----------- ------- -----------
<FN>
- ---------
(1) To eliminate working capital assets and liabilities not acquired under the
acquisition agreement.
(2) To adjust the property and equipment to the acquisition price which is the
fair value.
(3) To (a) eliminate pre-acquisition deferred charges, intangibles and
non-compete agreements and (b) record a $500,000 non-compete agreement
issued as part of the PSNC acquisition by EGC.
(4) To (a) eliminate advances from and amounts due to PSNC's parent of
$7,275,000 not assumed under the acquisition agreement, (b) record the
estimated net proceeds ($12,000,000) of Senior Secured Notes issued to
acquire the fixed assets, (c) record a revolver advance of $1,630,000 to
purchase the accounts receivable and inventory under the acquisition
agreement (net of the $250,000 deposit made under the agreement) and (d)
record a liability to PSNC's parent of $500,000 for the non-compete
agreement issued.
(5) To eliminate pre-acquisition equity and deferred income taxes.
</TABLE>
P-7
<PAGE>
EMPIRE GAS CORPORATION
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses expected to be incurred in
connection with the Offering described in this Registration Statement. All of
such amounts (except the Commission Registration Fee and the NASD Filing Fee)
are estimates.
<TABLE>
<S> <C>
Commission Registration Fee................................................ $ 34,483
NASD Filing Fee............................................................ 10,500
Blue Sky Fees and Expenses (excluding legal fees).......................... *
Printing and Engraving Costs............................................... *
Legal Fees and Expenses.................................................... *
Accounting Fees and Expenses............................................... *
Trustee's Fees and Expenses................................................ *
Miscellaneous.............................................................. *
---------
Total...................................................................... $ *
---------
---------
<FN>
- ---------
* To be supplied by amendment.
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Article 9 of the Company's Articles of Incorporation, included as Exhibit
3.1 to this Registration Statement to this Registration Statement, provide for
the indemnification of the directors, officers and employees of the Company. The
effect of these provisions is to indemnify the directors, officers and employees
for all expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by them in connection with any
threatened, pending or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, in which they are involved by reason
of their affiliation with the Company if they acted in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of the
Company and, with respect to any criminal action, with no reasonable cause to
believe their actions unlawful, to the full extent allowed by The General and
Business Corporation Law of Missouri; except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person's conduct
shall have been adjudged to be knowingly fraudulent or deliberately dishonest or
willful misconduct.
Article VII, Section 7, of the Company's By-Laws, included as Exhibit 3.2 to
this Registration Statement, provides that the Company may purchase liability
insurance that indemnifies directors, officers, employees and agents against any
liability and any expense asserted against or incurred by them in their capacity
as such and also may establish a separate fund alone or with other companies to
provide and maintain such insurance. At the present time, the Company has not
purchased any such insurance, or established or contributed to any such fund.
Section 351.355 of The General and Business Corporation Law of Missouri
requires a corporation to indemnify a director, officer, employee, or agent of
the corporation who has been successful on the merits or otherwise in defense of
any action for all expenses, including attorneys' fees, actually and reasonably
incurred in connection with the action. The Section also permits indemnification
for expenses (including attorneys' fees), judgments, fines, and amounts paid in
settlement actually and reasonably incurred in connection with actions, suits or
proceedings in which a corporate director, officer, employee, or agent, if he is
a party by reason of the fact that he is or was such a director, officer,
employee, or agent, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. Indemnification in connection with actions by
or in the right of the corporation is permitted only for expenses, including
attorneys' fees, and amounts paid in settlement actually and reasonably incurred
by him in connection with the defense or settlement of the action or suit and
only if the officer, director, or
II-1
<PAGE>
employee acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and is not adjudged liable
for negligence or misconduct in the performance of his duty to the corporation,
unless the court otherwise provides.
The employment agreement between the Company and Robert W. Plaster provides
that Mr. Plaster, his heirs, executors and administrators shall be indemnified
by the Company against fines, judgments, amounts paid in settlement and
reasonable expenses, including attorneys' fees, incurred by him in connection
with any pending, threatened or completed action, suit or proceeding against him
arising by reason of his being or having been a director or officer of the
Company, any parent company, or any subsidiary, except in relation to any matter
in which his conduct has been finally adjudged to have been knowingly
fraudulent, deliberately dishonest or willful misconduct. The obligation of the
Company to provide indemnification to Mr. Plaster shall continue after
termination of the employment agreement with respect to any matter against Mr.
Plaster arising by reason of his having been a director or officer of the
Company or of any parent or subsidiary of the Company prior to such termination,
or by reason of any action taken by him as such director or officer prior to the
date of such termination.
The Company has entered into agreements with directors, persons named as
becoming directors, and certain of its officers whereby the Company shall
indemnify such persons for all damages, judgments, settlements and costs, cost
of investigation, and cost of defense of legal actions (other than fines or
other obligations which it is prohibited by applicable law from paying for any
reason), because of any claim or claims made against such persons of any act or
omission or neglect or breach of duty including any actual or alleged error or
misstatement committed or suffered while acting in the capacity and solely
because of such capacity as officer and director.
Reference is made to Section 7 of the form of Underwriting Agreement filed
as Exhibit 1.1 to the Registration Statement for additional indemnification
provisions.
See Item 17 for the Registrants' undertakings with respect to
indemnification.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following information relates to securities of the Company issued or
sold within the past three years that were not registered under the Securities
Act.
The purchases described below were made upon exercise of options issued
pursuant to the Company's Incentive Stock Option Plan.
On July 16, 1991, Mr. Alan Simer, an employee of the Company, purchased
2,010 shares of the Company's common stock, $.001 par value, at $.377 per share
and 8,000 shares at $1.50 per share for an aggregate purchase price of $12,758.
On August 20, 1991, Mr. Larry Bisig, an employee of the Company, purchased
8,000 shares of the Company's common stock at $1.50 per share and 7,950 shares
at $.377 per share, for an aggregate purchase price of $14,997.
On October 29, 1992, Joseph L. Schaefer, an executive officer of the
Company, purchased 39,750 shares of the Company's common stock at $.377 per
share, 20,250 shares at $1.125 per share, and 20,000 shares at $1.50 per share,
for an aggregate purchase price of $67,767.
On October 30, 1992, Mr. Stephen R. Plaster, a director and executive
officer of the Company, purchased 13,500 shares of the Company's common stock,
$.001 par value, at $1.125 per share and 6,000 shares at $1.50 per share, for an
aggregate purchase price of $24,188.
On November 27, 1992, Mr. Dwight Gilpin, an officer of the Company,
purchased 26,500 shares of the Company's common stock at $.377 per share, 20,000
shares at $1.50 per share, and 3,500 shares at $1.125 per share, for an
aggregate purchase price of $43,929.
II-2
<PAGE>
On December 10, 1992, Ms. Gwendolyn B. VanDerhoef, an officer of the
Company, purchased 26,500 shares of the Company's common stock at $.377 per
share, 8,000 shares at $1.50 per share, and 5,500 shares at $1.125 per share,
for an aggregate purchase price of $28,178.
On December 21, 1992, Mr. Robert L. Wooldridge, an executive officer of the
Company, purchased 72,467 shares of the Company's common stock at $.377 per
share, for an aggregate purchase price of $27,320.
On December 31, 1992, Floyd Waterman, an officer of the Company, purchased
5,000 shares of the Company's common stock at $1.125 per share, for an aggregate
purchase price of $5,625, and Earl L. Noe, an executive officer of the Company,
purchased 26,500 shares of the Company's common stock at $.377 per share for an
aggregate purchase price of $9,991.
On February 17, 1993, Mr. Paul Stahlman, an officer of the Company,
purchased 18,712 shares of the Company's common stock at $.377 per share, for an
aggregate purchase price of $7,054.
On April 15, 1993, Mr. Charles Jones, an officer of the Company, purchased
13,250 shares of the Company's common stock at $.377 per share, for an aggregate
purchase price of $4,995.
On June 18, 1993, Mr. James E. Acreman, an executive officer of the Company,
purchased 13,250 shares of the Company's common stock at $.377 per share, for an
aggregate purchase price of $4,995.
These transactions were completed without registration under the Securities
Act in reliance on Section 4(2) of the Act. In relying on this exemption, the
Company relied on representations from these purchasers that each purchaser was
an accredited investor, that each was acquiring the shares for investment
purposes, and that each had received adequate opportunity to obtain information
regarding the Company. The shares issued contained a legend restricting transfer
of the shares absent registration under the Securities Act or the availability
of an exemption therefrom.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----------- -------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement
2.1 Stock Redemption Agreement, dated May 7, 1994, between the Company, EGOC,
Energy, Robert W. Plaster, Paul S. Lindsey, Jr., Stephen R. Plaster, Joseph L.
Schaefer, the Robert W. Plaster Trust dated December 13, 1988, the Stephen
Robert Plaster Trust dated October 30, 1988, the Stephen Robert Plaster Trust
dated July 30, 1984, Empire Ranch, Inc., Empire Airlines, Inc., and Evergreen
National Corporation (incorporated herein by reference to Exhibit 10.1 to the
Empire Gas Operating Corporation (Commission File No. 1-6537-3) Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 1994)
2.2+ Stock Redemption Agreement, dated May 7, 1994, between the Company, the Dolly
Francine Plaster Trust dated July 30, 1984, the Tammy Jane Plaster Trust dated
July 30, 1984, the Cheryl Jean Plaster Schaefer Trust dated October 30, 1988,
and the Cheryl Jean Plaster Schaefer Trust dated July 30, 1984
2.3+ Form of Merger Agreement by and between the Company and EGOC
3.1+ Articles of Incorporation of the Company
3.2 Certificate of Amendment of the Certificate of Incorporation of the Company,
dated April 26, 1994, relating to the change of name
3.3+ By-laws of the Company
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----------- -------------------------------------------------------------------------------
<C> <S>
4.1 Indenture between Empire Gas Corporation and J. Henry Schroder Bank & Trust
Company, Trustee, relating to the 9% Subordinated Debentures due December 31,
2007 and the form of 9% Subordinated Debentures due December 31, 2007
(incorporated herein by reference to Exhibit 4(a) to the Empire Incorporated
and Exco Acquisition Corp. (Commission File No. 2-83683) Registration
Statement on Form S-14 filed with the Commission on May 11, 1983; and First
Supplemental Indenture thereto between Empire Gas Corporation (now known as
EGOC) and IBJ Schroder Bank & Trust Co., dated as of December 13, 1989
(incorporated herein by reference to Exhibit 4(c) to Empire Gas Corporation
(now known as EGOC) Registration Statement on Form 8-B filed with the
Commission on February 1, 1990)
4.2 Form of Proposed Indenture between the Company and Shawmut Bank Connecticut,
National Association, Trustee, relating to the % Senior Secured Notes due
2004, including the form of % Senior Secured Notes due 2004, the form of the
Guarantee and the form of the Pledge Agreement
4.3 Form of Proposed Warrant Agreement
5.1* Opinion of Wilmer, Cutler & Pickering as to the validity of the issuance of the
Senior Secured Notes
8.1* Form of opinion of Wilmer, Cutler & Pickering with respect to certain tax
matters
10.1+ Shareholder Agreement, dated as of October 28, 1988, by and among Empire Gas
Acquistion Corporation and Robert W. Plaster Trust, Robert W. Plaster,
Trustee; Paul S. Lindsey, Jr.; Stephen R. Plaster Trust, Lynn C. Hoover,
Trustee; Cheryl Plaster Schaefer Trust, Lynn C. Hoover, Trustee; Robert L.
Wooldridge; Gwendolyn B. VanDerhoef; Dwight Gilpin; Luther Henry Gill; Valeria
Schall; Floyd J. Waterman; Larry W. Bisig; Larry Weis; Robert Heagerty; Murl
J. Waterman; Earl L. Noe; Thomas Flak; Michael Kent St. John; James E.
Acreman; Carolyn S. Rein; Dan Weatherly; Nina Irene Craighead; Joyce Sue
Kinnett; Edwin H. McMahon; Paul Stahlman; Ralph Wilson; Alan Simer; Ferrell
Stamper; and Empire Gas Corporation Employee Stock Ownership Plan, Robert W.
Plaster, Trustee
10.2+ 1989 Incentive Stock Option Plan
10.3* Form of Credit Agreement between the Company and Continental Bank, as agent
10.4 Lease Agreement, dated May 7, 1994, between the Company and Evergreen National
Corporation (incorporated herein by reference to Exhibit F of Exhibit 10.1 to
the Empire Gas Operating Corporation (Commission File No. 1-6537-3) Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 1994)
10.5 Form of Services Agreement, dated May 7, 1994, between the Company and Empire
Service Corporation (incorporated herein by reference to Exhibit G of Exhibit
10.1 to the Empire Gas Operating Corporation (Commission File No. 1-6537-3)
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1994)
10.6 Non-Competition Agreement, dated May 7, 1994, by and among the Company, Energy,
Robert W. Plaster, Stephen R. Plaster, Joseph L. Schaefer, Paul S. Lindsey,
Jr. (incorporated herein by reference to Exhibit E of Exhibit 10.1 to the
Empire Gas Operating Corporation (Commission File No. 1-6537-3) Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 1994)
10.7* Form of Employment Agreement between the Company and Paul S. Lindsey, Jr.
10.8* Form of Asset Purchase Agreement by and among the Company, Empiregas, Inc. of
North Carolina, PSNC Propane Corporation, and Public Service Company of North
Carolina, Incorporated
10.9 Form of Indemnification Agreement between the Company and Douglas A. Brown
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----------- -------------------------------------------------------------------------------
<C> <S>
10.10* Form of Tax Indemnification Agreement between the Company and Energy
10.11 Supply Contract No. 1, dated September 13, 1991, between EGOC and Phillips 66
Company
10.12 Supply Contract No. 2, dated September 13, 1991, between EGOC and Phillips 66
Company; and Amendment thereto between EGOC and Phillips 66 Company, dated
October 15, 1992
10.13 Supply Contract, dated as of November 4, 1991, between EGOC and Conoco, Inc.
10.14 Supply Contract, dated as of January 21, 1992, between EGOC and Conoco Inc.
10.15 Supply Contract, dated as of January 24, 1992, between EGOC and Conoco, Inc.
10.16 Supply Contract No. 1, dated November 20, 1986, between EGOC and Warren
Petroleum Company
10.17 Supply Contract No. 2, dated November 20, 1986, between EGOC and Warren
Petroleum Company
10.18 Supply Contract, dated November 22, 1986, between EGOC and Warren Petroleum
Company
10.19 Supply Contract, dated November 24, 1986, between EGOC and Warren Petroleum
Company
10.20 Supply Contract No. 1, dated June 1, 1993, between EGOC and Warren Petroleum
Company
10.21 Supply Contract No. 2, dated June 1, 1993, between EGOC and Warren Petroleum
Company
12.1+ Statement regarding computation of ratio of earnings to fixed charges
21.1 Subsidiaries of the Company
23.1+ Consent of Baird, Kurtz & Dobson, dated April 29, 1994
23.2* Consent of Wilmer, Cutler & Pickering, included in the opinion filed as Exhibit
5.1
23.3+ Consent of Douglas A. Brown to being named as a director
23.4+ Second Consent of Baird, Kurtz & Dobson, dated June 3, 1994
23.5* Consent of Valuation Research Corporation
23.6+ Consent of Bruce M. Withers, Jr. to being named as a director
23.7+ Consent of Jim J. Shoemake to being named as a director
23.8 Third Consent of Baird, Kurtz & Dobson, dated June 9, 1994
24.1+ Power of Attorney, located on signature page
25.1+ Statement of Eligibility and Qualification of Trustee on Form T-1
25.2 Report of Condition and Income of Shawmut Bank Connecticut, N.A., for the
period ending March 31, 1994
99.1* Opinion of Valuation Research Corporation re solvency
<FN>
- ---------
+ Previously filed.
* To be supplied by amendment.
</TABLE>
II-5
<PAGE>
(b) Financial Statement Schedules
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
- ---------- -----------------------------------------------------------------
<C> <S>
V. Property and Equipment
VI. Accumulated Depreciation
VIII. Valuation and Qualifying Accounts
X. Supplementary Income Statement Information
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrants hereby undertake as follows:
(1) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions described under Item 14 hereof, or otherwise,
the Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by the director, officer, or controlling person thereof in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(2) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrants pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(4) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1993;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(5) For the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(6) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Amendment No. 1 to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the District of
Columbia on the 9th day of June, 1994.
EMPIRE GAS CORPORATION
By: _______/s/_Robert W. Plaster______
CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD
THE SUBSIDIARY GUARANTORS LISTED
BELOW
By: _____/s/_Paul S. Lindsey, Jr._____
PRESIDENT OF EACH GUARANTOR
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY IN WHICH SIGNED DATE
- ------------------------------------------------------ --------------------------------------- ----------------
<C> <S> <C>
Chief Executive Officer and Chairman of
/s/Robert W. Plaster* the Board of Empire Gas Corporation June 9, 1994
Robert W. Plaster (principal executive officer)
Vice President/Controller of Empire Gas
/s/Willis D. Green* Corporation (principal financial and June 9, 1994
Willis D. Green accounting officer)
/s/Paul S. Lindsey, Jr.
Paul S. Lindsey, Jr. Director of Empire Gas Corporation June 9, 1994
/s/Stephen R. Plaster*
Stephen R. Plaster Director of Empire Gas Corporation June 9, 1994
/s/Paul S. Lindsey, Jr. Principal Executive Officer of each of
Paul S. Lindsey, Jr. the Subsidiary Guarantors June 9, 1994
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY IN WHICH SIGNED DATE
- ------------------------------------------------------ --------------------------------------- ----------------
<C> <S> <C>
/s/Valeria Schall* Director of each of the Subsidiary
Valeria Schall Guarantors June 9, 1994
/s/Earl L. Noe* Director of each of the Subsidiary
Earl L. Noe Guarantors June 9, 1994
*By: /s/Paul S. Lindsey, Jr.
Paul S. Lindsey, Jr.
ATTORNEY-IN-FACT
</TABLE>
II-8
<PAGE>
GUARANTORS
EMPIRE TANK LEASING CORPORATION
EMPIREGAS EQUIPMENT CORPORATION
EMPIRE UNDERGROUND STORAGE, INC.
EMPIRE INDUSTRIAL SALES CORPORATION
UTILITY COLLECTION CORPORATION
EMPIREGAS TRANSPORTS, INC. (MISSOURI)
EMPIRE AVIATION CORPORATION
EMPIREGAS TRANSPORTS, INC. - OR
EMPIREGAS INC. OF CLINTON (MISSOURI)
EMPIREGAS INC. OF KANSAS CITY
EMPIREGAS INC. OF ALBANY
EMPIREGAS INC. OF AIKEN
EMPIREGAS OF ARMA, INC.
EMPIREGAS INC. OF ARNAULDVILLE
EMPIREGAS INC. OF AUBURN
EMPIREGAS INC. OF BIG RAPIDS
EMPIREGAS INC. OF BOLIVAR
EMPIREGAS INC. OF BOISE
EMPIREGAS INC. OF BOULDER
EMPIREGAS INC. OF BOWLING GREEN
EMPIREGAS INC. OF BRANDON
EMPIREGAS INC. OF BREMERTON
EMPIREGAS OF BRISTOW, INC.
EMPIREGAS INC. OF BUFFALO
EMPIREGAS INC. OF ADRIAN
EMPIREGAS INC. OF CAMDENTON
EMPIREGAS INC. OF CANON CITY
EMPIREGAS INC. OF CANTON
EMPIREGAS INC. OF CARTHAGE
EMPIREGAS INC. OF CASTLE ROCK
EMPIREGAS INC. OF CENTERVILLE
EMPIREGAS INC. OF CHARLOTTE
EMPIREGAS INC. OF CHASSEL
EMPIREGAS INC. OF CHEHALIS
EMPIREGAS INC. OF CLINTON, ILLINOIS
EMPIREGAS OF COLCORD, INC.
EMPIREGAS INC. OF COLE CAMP
EMPIREGAS INC. OF COLEMAN
EMPIREGAS INC. OF COLORADO SPRINGS
EMPIREGAS INC. OF COQUILLE
EMPIREGAS INC. OF CUBA
EMPIREGAS INC. OF CHETEK
EMPIREGAS INC. OF DENVER
EMPIREGAS INC. OF DOVER
EMPIREGAS INC. OF DURAND
EMPIREGAS INC. OF EL DORADO SPRINGS
EMPIREGAS INC. OF ELSBERRY
EMPIREGAS INC. OF ELSINORE
EMPIREGAS INC. OF ESCONDIDO
EMPIREGAS INC. OF EUNICE
EMPIREGAS INC. OF EVERGREEN
SALGAS INC. OF FAIRPLAY
EMPIREGAS INC. OF EAU CLAIRE
EMPIREGAS INC. OF FORT COLLINS
EMPIREGAS INC. OF FOWLER
EMPIREGAS INC. OF MID-MISSOURI
II-9
<PAGE>
EMPIREGAS INC. OF GALVESTON
EMPIREGAS INC. OF GALVA
EMPIREGAS INC. OF GAYLORD
EMPIREGAS INC. OF GLOBE
EMPIREGAS INC. OF GOOSE CREEK
EMPIREGAS INC. OF GREELEY
EMPIREGAS INC. OF GRAND JUNCTION
EMPIREGAS OF GROVE, INC.
EMPIREGAS INC. OF HERMISTON
EMPIREGAS INC. OF HERMITAGE
EMPIREGAS INC. OF HIAWASSEE
EMPIREGAS INC. OF HIGGINSVILLE
EMPIREGAS OF HITICHITA, INC.
EMPIREGAS INC. OF HOOPESTON
EMPIREGAS INC. OF HORNICK
EMPIREGAS INC. OF HUMANSVILLE
EMPIREGAS INC. OF JACKSONVILLE
EMPIREGAS INC. OF JACKSON, MI
EMPIREGAS INC. OF KALAMAZOO
EMPIREGAS INC. OF KIRKSVILLE
EMPIREGAS INC. OF LAFAYETTE
EMPIREGAS INC. OF LAKE CHARLES
EMPIREGAS INC. OF LAKE PROVIDENCE
EMPIREGAS INC. OF LAURIE
EMPIREGAS OF LE SUEUR, INC.
EMPIREGAS INC. OF LINCOLN
EMPIREGAS INC. OF LONGMONT
EMPIREGAS INC. OF LOS ANGELES
EMPIREGAS INC. OF LOVELAND
EMPIREGAS INC. OF MARQUETTE
EMPIREGAS INC. OF MARSHALL
EMPIREGAS INC. OF MEDFORD
EMPIREGAS INC. OF MENOMONIE
EMPIREGAS INC. OF MERILLAN
EMPIREGAS INC. OF MILLER
EMPIREGAS INC. OF MODESTO
EMPIREGAS INC. OF MONTE VISTA
EMPIREGAS INC. OF MOUNT VERNON
EMPIREGAS INC. OF MUNISING
EMPIREGAS INC. OF MURPHY
THRIF-T-GAS INC. OF BLACKWATER
EMPIREGAS INC. OF NORTH BEND
EMPIREGAS INC. OF NORTH MYRTLE BEACH, INC.
EMPIREGAS INC. OF OAK GROVE
EMPIREGAS INC. OF ONAWA
EMPIREGAS INC. OF ORANGEBURG
EMPIREGAS INC. OF OWENSVILLE
EMPIREGAS INC. OF SANTA PAULA
EMPIREGAS INC. OF PADUCAH
EMPIREGAS INC. OF PALMYRA
EMPIREGAS INC. OF PLACERVILLE
EMPIREGAS INC. OF POMONA
EMPIREGAS INC. OF POTOSI
EMPIREGAS INC. OF PUEBLO
EMPIREGAS INC. OF REEDSPORT
EMPIREGAS INC. OF RICHLAND
EMPIREGAS INC. OF ROLLA
II-10
<PAGE>
EMPIREGAS INC. OF SACRAMENTO
EMPIREGAS INC. OF SANDY
EMPIREGAS INC. OF SHELL LAKE
EMPIREGAS INC. OF SILOAM SPRINGS
EMPIREGAS OF STIGLER, INC.
EMPIREGAS INC. OF SUSANVILLE
EMPIREGAS INC. OF SUNNYSIDE
EMPIREGAS INC. OF ROCKY MOUNT
EMPIREGAS INC. OF THE DALLES
EMPIREGAS INC. OF TIPTON (IOWA)
EMPIREGAS INC. OF TRAVERSE CITY
EMPIREGAS INC. OF VANDALIA
EMPIREGAS INC. OF VASSAR
EMPIREGAS INC. OF VINITA, INC.
EMPIREGAS INC. OF WARREN
EMPIREGAS INC. OF WARSAW (MISSOURI)
EMPIREGAS INC. OF WASHINGTON
EMPIREGAS INC. OF WAUKON
EMPIREGAS INC. OF WAYNESVILLE
EMPIREGAS INC. OF WAYNESVILLE, NC
EMPIREGAS INC. OF WENATCHEE
EMPIREGAS INC. OF WENTZVILLE
EMPIREGAS OF WESTVILLE, INC.
EMPIREGAS INC. OF WILLS POINT
EMPIREGAS INC. OF WILMINGTON
EMPIREGAS INC. OF WILSON
EMPIREGAS INC. OF WOODLAND PARK
EMPIREGAS INC. OF YAKIMA
EMPIREGAS INC. OF YUCCA VALLEY
EMPIREGAS INC. OF ZEBULON
EMPIREGAS INC. OF COLUMBIANA
EMPIREGAS OF ZUMBRO FALLS, INC.
GINCO GAS COMPANY, INC.
EMPIREGAS INC. OF ORANGE COUNTY
EMPIREGAS INC. OF MORGAN COUNTY
EMPIREGAS INC. OF LAKE OZARK
EMPIREGAS INC. OF WACO
EMPIREGAS INC. OF PARIS, TX
EMPIREGAS INC. OF DALLAS, TX
EMPIREGAS INC. OF KEMP
EMPIREGAS INC. OF SAN ANTONIO
THRIFT-T-GAS CO., INC.
EMPIREGAS INC. OF PARIS, MO
SALIDA GAS CO., INC.
SALGAS INC. OF GUNNISON
EMPIREGAS INC. OF TOLEDO
EMPIREGAS INC. OF WILKESBORO
EMPIREGAS INC. OF HENDERSVILLE
EMPIREGAS INC. OF NORTH CAROLINA
EMPIREGAS INC. OF CARTHAGE
EMPIREGAS INC. OF APEX
EMPIREGAS INC. OF DURHAM
EMPIREGAS INC. OF WARRENTON
II-11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
Board of Directors and Stockholders
Empire Gas Corporation
Lebanon, Missouri
In connection with our audit of the financial statements of EMPIRE GAS
CORPORATION (FORMERLY EMPIRE GAS ACQUISITION CORPORATION) for each of the three
years in the period ended June 30, 1993, we have also audited the following
financial statement schedules. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion of these financial statement schedules based on our audits of the basic
financial statements. The schedules are presented for purposes of complying with
the Securities and Exchange Commission's rules and regulations and are not a
required part of the consolidated financial statements.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
BAIRD, KURTZ & DOBSON
Springfield, Missouri
July 30, 1993
S-1
<PAGE>
EMPIRE GAS CORPORATION AND SUBSIDIARIES
SCHEDULE V -- PROPERTY AND EQUIPMENT
YEARS ENDED JUNE 30, 1993, 1992 AND 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
COL. B COL. F
---------- COL. C ----------
COL. A BALANCE AT ----------- COL. D COL. E BALANCE AT
- ------------------------------------------------------- BEGINNING ADDITIONS ----------- --------- END OF
CLASSIFICATION OF YEAR AT COST RETIREMENTS OTHER YEAR
- ------------------------------------------------------- ---------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1993:
Land and buildings................................... $ 11,821 $ 884 $ 490 $ 12,215
Storage and consumer service facilities.............. 113,450 1,520 1,149 113,821
Transportation, office and other equipment........... 24,245 1,954 649 25,550
---------- ----------- ----------- ----------
$ 149,516 $ 4,358 $ 2,288 $ 151,586
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
Year Ended June 30, 1992:
Land and buildings................................... $ 10,781 $ 1,381 $ 341 $ 11,821
Storage and consumer service facilities.............. 113,343 2,058 1,951 113,450
Transportation, office and other equipment........... 22,765 3,264 1,784 24,245
---------- ----------- ----------- ----------
$ 146,889 $ 6,703 $ 4,076 $ 149,516
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
Year Ended June 30, 1991:
Land and buildings................................... $ 9,457 $ 1,439 $ 115 $ 10,781
Storage and consumer service facilities.............. 111,646 2,651 954 113,343
Transportation, office and other equipment........... 20,150 4,723 2,108 22,765
---------- ----------- ----------- ----------
$ 141,253 $ 8,813 $ 3,177 $ 146,889
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
</TABLE>
S-2
<PAGE>
EMPIRE GAS CORPORATION AND SUBSIDIARIES
SCHEDULE VI -- ACCUMULATED DEPRECIATION
YEARS ENDED JUNE 30, 1993, 1992 AND 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
COL. C
COL. B ----------- COL. F
----------- ADDITIONS -----------
COL. A BALANCE AT CHARGED TO COL. D COL. E BALANCE AT
- ------------------------------------------------------ BEGINNING COSTS AND ----------- --------- END OF
CLASSIFICATION OF YEAR EXPENSES RETIREMENTS OTHER YEAR
- ------------------------------------------------------ ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1993:
Buildings........................................... $ 1,444 $ 332 $ 73 $ 1,703
Storage and consumer service facilities............. 19,536 5,529 631 24,434
Transportation, office and other equipment.......... 13,075 3,143 449 15,769
----------- ----------- ----------- -----------
$ 34,055 $ 9,004 $ 1,153 $ 41,906
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year Ended June 30, 1992:
Buildings........................................... $ 1,172 $ 302 $ 30 $ 1,444
Storage and consumer service facilities............. 14,751 5,473 688 19,536
Transportation, office and other equipment.......... 11,378 3,014 1,317 13,075
----------- ----------- ----------- -----------
$ 27,301 $ 8,789 $ 2,035 $ 34,055
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year Ended June 30, 1991:
Buildings........................................... $ 928 $ 260 $ 16 $ 1,172
Storage and consumer service facilities............. 9,710 5,316 275 14,751
Transportation, office and other equipment.......... 10,828 2,687 2,137 11,378
----------- ----------- ----------- -----------
$ 21,466 $ 8,263 $ 2,428 $ 27,301
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
S-3
<PAGE>
EMPIRE GAS CORPORATION AND SUBSIDIARIES
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JUNE 30, 1993, 1992 AND 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO AMOUNT BALANCE AT
BEGINNING COSTS AND WRITTEN END OF
DESCRIPTION OF YEAR EXPENSES OFF YEAR
- ------------------------------------------------------------------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Valuation accounts deducted from assets to which they apply -- for
doubtful accounts receivable:
June 30, 1993.................................................... $ 2,720 $ 958 $ 1,021 $ 2,657
June 30, 1992.................................................... 2,719 214 213 2,720
June 30, 1991.................................................... 1,648 2,828 1,757 2,719
</TABLE>
S-4
<PAGE>
EMPIRE GAS CORPORATION AND SUBSIDIARIES
SCHEDULE X -- SUPPLEMENTARY INFORMATION
YEARS ENDED JUNE 30, 1993, 1992 AND 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
COL. B
-----------
COL. A CHARGED TO
- ------------------------------------------------------------------------------------------------------ COSTS AND
ITEM EXPENSES
- ------------------------------------------------------------------------------------------------------ -----------
<S> <C>
June 30, 1993:
Maintenance and repairs............................................................................. $ 2,963
June 30, 1992:
Maintenance and repairs............................................................................. $ 3,070
June 30, 1991:
Maintenance and repairs............................................................................. $ 3,806
</TABLE>
S-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS PAGE
- ----------- ---------
<C> <S> <C>
1.1* Form of Underwriting Agreement
2.1 Stock Redemption Agreement, dated May 7, 1994, between the Company, EGOC,
Energy, Robert W. Plaster, Paul S. Lindsey, Jr., Stephen R. Plaster, Joseph
L. Schaefer, the Robert W. Plaster Trust dated December 13, 1988, the
Stephen Robert Plaster Trust dated October 30, 1988, the Stephen Robert
Plaster Trust dated July 30, 1984, Empire Ranch, Inc., Empire Airlines,
Inc., and Evergreen National Corporation (incorporated herein by reference
to Exhibit 10.1 to the Empire Gas Operating Corporation (Commission File No.
1-6537-3) Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1994)
2.2+ Stock Redemption Agreement, dated May 7, 1994, between the Company, the Dolly
Francine Plaster Trust dated July 30, 1984, the Tammy Jane Plaster Trust
dated July 30, 1984, the Cheryl Jean Plaster Schaefer Trust dated October
30, 1988, and the Cheryl Jean Plaster Schaefer Trust dated July 30, 1984
2.3+ Form of Merger Agreement by and between the Company and EGOC
3.1+ Articles of Incorporation of the Company
3.2 Certificate of Amendment of the Certificate of Incorporation of the Company,
dated April 26, 1994, relating to the change of name
3.3+ By-laws of the Company
4.1 Indenture between Empire Gas Corporation and J. Henry Schroder Bank & Trust
Company, Trustee, relating to the 9% Subordinated Debentures due December
31, 2007 and the form of 9% Subordinated Debentures due December 31, 2007
(incorporated herein by reference to Exhibit 4(a) to the Empire Incorporated
and Exco Acquisition Corp. (Commission File No. 2-83683) Registration
Statement on Form S-14 filed with the Commission on May 11, 1983; and First
Supplemental Indenture thereto between Empire Gas Corporation (now known as
EGOC) and IBJ Schroder Bank & Trust Co., dated as of December 13, 1989
(incorporated herein by reference to Exhibit 4(c) to Empire Gas Corporation
(now known as EGOC) Registration Statement on Form 8-B filed with the
Commission on February 1, 1990)
4.2 Form of Proposed Indenture between the Company and Shawmut Bank Connecticut,
National Association, Trustee, relating to the % Senior Secured Notes due
2004, including the form of % Senior Secured Notes due 2004, the form of
the Guarantee and the form of the Pledge Agreement
4.3 Form of Proposed Warrant Agreement
5.1* Opinion of Wilmer, Cutler & Pickering as to the validity of the issuance of
the Senior Secured Notes
8.1* Form of opinion of Wilmer, Cutler & Pickering with respect to certain tax
matters
10.1+ Shareholder Agreement, dated as of October 28, 1988, by and among Empire Gas
Acquistion Corporation and Robert W. Plaster Trust, Robert W. Plaster,
Trustee; Paul S. Lindsey, Jr.; Stephen R. Plaster Trust, Lynn C. Hoover,
Trustee; Cheryl Plaster Schaefer Trust, Lynn C. Hoover, Trustee; Robert L.
Wooldridge; Gwendolyn B. VanDerhoef; Dwight Gilpin; Luther Henry Gill;
Valeria Schall; Floyd J. Waterman; Larry W. Bisig; Larry Weis; Robert
Heagerty; Murl J. Waterman; Earl L. Noe; Thomas Flak; Michael Kent St. John;
James E. Acreman; Carolyn S. Rein; Dan Weatherly; Nina Irene Craighead;
Joyce Sue Kinnett; Edwin H. McMahon; Paul Stahlman; Ralph Wilson; Alan
Simer; Ferrell Stamper; and Empire Gas Corporation Employee Stock Ownership
Plan, Robert W. Plaster, Trustee
10.2+ 1989 Incentive Stock Option Plan
10.3* Form of Credit Agreement between the Company and Continental Bank, as agent
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS PAGE
- ----------- ---------
<C> <S> <C>
10.4 Lease Agreement, dated May 7, 1994, between the Company and Evergreen
National Corporation (incorporated herein by reference to Exhibit F of
Exhibit 10.1 to the Empire Gas Operating Corporation (Commission File No.
1-6537-3) Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1994)
10.5 Form of Services Agreement, dated May 7, 1994, between the Company and Empire
Service Corporation (incorporated herein by reference to Exhibit G of
Exhibit 10.1 to the Empire Gas Operating Corporation (Commission File No.
1-6537-3) Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1994)
10.6 Non-Competition Agreement, dated May 7, 1994, by and among the Company,
Energy, Robert W. Plaster, Stephen R. Plaster, Joseph L. Schaefer, Paul S.
Lindsey, Jr. (incorporated herein by reference to Exhibit E of Exhibit 10.1
to the Empire Gas Operating Corporation (Commission File No. 1-6537-3)
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1994)
10.7* Form of Employment Agreement between the Company and Paul S. Lindsey, Jr.
10.8* Form of Asset Purchase Agreement by and among the Company, Empiregas, Inc. of
North Carolina, PSNC Propane Corporation, and Public Service Company of
North Carolina, Incorporated
10.9 Form of Indemnification Agreement between the Company and Douglas A. Brown
10.10* Form of Tax Indemnification Agreement between the Company and Energy
10.11 Supply Contract No. 1, dated September 13, 1991, between EGOC and Phillips 66
Company
10.12 Supply Contract No. 2, dated September 13, 1991, between EGOC and Phillips 66
Company; and Amendment thereto between EGOC and Phillips 66 Company, dated
October 15, 1992
10.13 Supply Contract, dated as of November 4, 1991, between EGOC and Conoco Inc.
10.14 Supply Contract, dated as of January 21, 1992, between EGOC and Conoco Inc.
10.15 Supply Contract, dated as of January 24, 1992, between EGOC and Conoco, Inc.
10.16 Supply Contract No. 1, dated November 20, 1986, between EGOC and Warren
Petroleum Company
10.17 Supply Contract No. 2, dated November 20, 1986, between EGOC and Warren
Petroleum Company
10.18 Supply Contract, dated November 22, 1986, between EGOC and Warren Petroleum
Company
10.19 Supply Contract, dated November 24, 1986, between EGOC and Warren Petroleum
Company
10.20 Supply Contract No. 1, dated June 1, 1993, between EGOC and Warren Petroleum
Company
10.21 Supply Contract No. 2, dated June 1, 1993, between EGOC and Warren Petroleum
Company
12.1+ Statement regarding computation of ratio of earnings to fixed charges
21.1 Subsidiaries of the Company
23.1+ Consent of Baird, Kurtz & Dobson, dated April 29, 1994
23.2* Consent of Wilmer, Cutler & Pickering, included in the opinion filed as
Exhibit 5.1
23.3+ Consent of Douglas A. Brown to being named as a director
23.4+ Second Consent of Baird, Kurtz & Dobson, dated June 3, 1994
23.5* Consent of Valuation Research Corporation
23.6+ Consent of Bruce M. Withers, Jr. to be named as a director
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS PAGE
- ----------- ---------
<C> <S> <C>
23.7+ Consent of Jim J. Shoemake to be named as a director
23.8 Third Consent of Baird, Kurtz & Dobson, dated June 9, 1994
24.1+ Power of Attorney, located on signature page
25.1+ Statement of Eligibility and Qualification of Trustee on Form T-1
25.2 Report of Condition and Income of Shawmut Bank Connecticut, N.A., for the
period ending March 31, 1994
99.1* Opinion of Valuation Research Corporation re solvency
<FN>
- ---------
+ Previously filed.
* To be supplied by amendment.
</TABLE>
<PAGE>
DESCRIPTION OF GRAPHIC:
Inside front cover
Map of the United States showing the locations of retail service centers,
transport terminals, rail terminals, underground storage, pipeline terminals
and home office (on a pro form basis for the Transaction).
Page 39
Illustration showing movement of propane from refinery or gas processing plant
to retail distriubtion center by rail, pipeline or truck, and then on to
residential, commercial and agricultural users.
<PAGE>
Exhibit 3.2
STATE OF MISSOURI
[STATE SEAL] JUDITH K. MORIARTY, SECRETARY OF STATE
P.O. BOX 778, JEFFERSON CITY, MO. 65102
CORPORATION DIVISION
AMENDMENT OF ARTICLES OF INCORPORATION
(To be submitted in duplicate)
Pursuant to the provisions of The General and Business Corporation Law of
Missouri, the undersigned Corporation certifies the following:
1. The present name of the Corporation is Empire Gas Acquisition Corporation.
The name under which it was originally organized was Empire Gas Acquisition
Corporation.
2. An amendment to the Corporation's Articles of Incorporation was adopted by
the shareholders on April 25, 1994.
3. Article Number 1. is amended to read as follows:
The name of the corporation (hereinafter the "Corporation") is:
Empire Gas Corporation.
(IF MORE THAN ONE ARTICLE IS TO BE AMENDED OR MORE SPACE IS NEEDED
ATTACH FLY SHEET.)
<PAGE>
4. Of the 13,832,270 shares outstanding, 13,832,270 of such shares were
entitled to vote on such amendment.
The number of outstanding shares of any class ENTITLED TO VOTE THEREON AS
A CLASS were as follows:
CLASS NUMBER OF OUTSTANDING SHARES
Common Stock 13,832,270
5. The number of shares voted for and against the amendment was as follows:
CLASS NO. VOTED FOR NO. VOTED AGAINST
Common Stock 13,832,270 0
6. If the amendment changed the number or par value of authorized shares
having a par value, the amount in dollars of authorized shares having a par
value as changed is:
N/A
If the amendment changed the number of authorized shares without par value,
the authorized number of shares without par value as changed and the
consideration proposed to be received for such increased authorized shares
without par value as are to be presently issued are:
7. If the amendment provides for an exchange, reclassification, or
cancellation of issued shares, or a reduction of the number of authorized
shares of any class below the number of issued shares of that class, the
following is a statement of the manner in which such reduction shall be
effected:
N/A
<PAGE>
IN WITNESS WHEREOF, the undersigned, Stephen R. Plaster has executed this
---------------------
President
instrument and its Valeria Schall has affixed its corporate seal
--------------------------------
Secretary or Assistant Secretary
hereto and attested said seal on the 25th day of April, 1994.
PLACE
CORPORATE SEAL
HERE
(If no seal, state "None.")
NONE
Empire Gas Acquisition Corporation
--------------------------------------
Name of Corporation
ATTEST:
/s/ Valeria Schall By /s/ Stephen R. Plaster
- -------------------------------- --------------------------------------
Secretary of Assistant Secretary President or Vice President
State of Missouri )
) ss.
County of Laclede )
I, Jackie Day, a Notary Public, do hereby certify that on this 25th day of
April, 1994, personally appeared before me Stephen R. Plaster who, being by me
first duly sworn, declared that he is the President of Empire Gas Acquisition
Corporation that he signed the foregoing documents as Vice President of the
corporation, and that the statements therein contained are true.
(Notarial Seal) /s/ Jackie Day
----------------------------------------
Notary Public
My commission expires 9/30/97
<PAGE>
The Secretary of State's Office makes every effort to provide program
accessibility to all citizens without regard to disability. If you desire this
publication in alternate form because of a disability, please contact the
Director of Publications, P.O. Box 778, Jefferson City, Mo. 65102; phone (314)
751-1814. Hearing-impaired citizens may contact the Director by phone through
Missouri Relay (800-735-2966). The Corporations Division also maintains a
Telecommunications Device for the Deaf (TDD) at (314) 526-5599.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EMPIRE GAS CORPORATION
and
CERTAIN SUBSIDIARY GUARANTORS HERETO
and
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, Trustee
- --------------------------------------------------------------------------------
Indenture
Dated as of __________, 1994
- --------------------------------------------------------------------------------
$___,000,000 Principal Amount at Maturity
Senior Secured Notes Due 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Other Definitions. . . . . . . . . . . . . . . . . . . . . . 26
SECTION 1.3 Incorporation by Reference of
Trust Indenture Act . . . . . . . . . . . . . . . . . . . 27
SECTION 1.4 Rules of Construction . . . . . . . . . . . . . . . . . . . 28
ARTICLE II
THE SECURITIES
SECTION 2.1 Form and Dating . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.2 Execution and Authentication . . . . . . . . . . . . . . . . 30
SECTION 2.3 Registrar and Paying Agent . . . . . . . . . . . . . . . . . 31
SECTION 2.4 Paying Agent To Hold Money in Trust . . . . . . . . . . . . 31
SECTION 2.5 Securityholder Lists . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.6 Transfer and Exchange . . . . . . . . . . . . . . . . . . . 32
SECTION 2.7 Replacement Securities . . . . . . . . . . . . . . . . . . . 35
SECTION 2.8 Outstanding Securities . . . . . . . . . . . . . . . . . . . 35
SECTION 2.9 Determination of Holders' Action . . . . . . . . . . . . . . 36
SECTION 2.10 Temporary Securities . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.11 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.12 Defaulted Interest . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE III
COVENANTS
SECTION 3.1 Payment of Securities . . . . . . . . . . . . . . . . . . . 38
SECTION 3.2 Maintenance of Office or Agency . . . . . . . . . . . . . . 38
SECTION 3.3 Limitation on Restricted Payments. . . . . . . . . . . . . . 39
SECTION 3.4 Limitation on Incurrence of Indebtedness . . . . . . . . . . 43
SECTION 3.5 Limitation on Payment Restrictions
Affecting Subsidiaries . . . . . . . . . . . . . . . . . . 45
SECTION 3.6 Limitation on Sale/Leaseback Transactions . . . . . . . . . 46
SECTION 3.7 Limitation on Liens . . . . . . . . . . . . . . . . . . . . 47
SECTION 3.8 Change of Control . . . . . . . . . . . . . . . . . . . . . 50
SECTION 3.9 Compliance Certificate . . . . . . . . . . . . . . . . . . . 52
SECTION 3.10 SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 3.11 Transactions with Affiliates . . . . . . . . . . . . . . . . 53
SECTION 3.12 Sales of Assets . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 3.13 Corporate Existence . . . . . . . . . . . . . . . . . . . . 59
SECTION 3.14 Payment of Taxes and Other Claims . . . . . . . . . . . . . 60
SECTION 3.15 Notice of Defaults and Other Events . . . . . . . . . . . . 60
<PAGE>
SECTION 3.16 Maintenance of Properties and Insurance . . . . . . . . . . 60
SECTION 3.17 Limitation on Issuance of Capital Stock
and Incurrence of Indebtedness of
Restricted Subsidiaries . . . . . . . . . . . . . . . . . 61
SECTION 3.18 Limitation on Changes in the Nature of
the Business . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE IV
CONSOLIDATION, MERGER AND SALE
SECTION 4.1 Merger and Consolidation of Company . . . . . . . . . . . . 62
SECTION 4.2 Successor Substituted . . . . . . . . . . . . . . . . . . . 66
ARTICLE V
DEFAULTS AND REMEDIES
SECTION 5.1 Events of Default . . . . . . . . . . . . . . . . . . . . . 67
SECTION 5.2 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 5.3 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 5.4 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . 71
SECTION 5.5 Control by Majority . . . . . . . . . . . . . . . . . . . . 72
SECTION 5.6 Limitation on Suits . . . . . . . . . . . . . . . . . . . . 72
SECTION 5.7 Rights of Holders To Receive Payment . . . . . . . . . . . . 72
SECTION 5.8 Collection Suit by Trustee . . . . . . . . . . . . . . . . . 73
SECTION 5.9 Trustee May File Proofs of Claim . . . . . . . . . . . . . . 73
SECTION 5.10 Priorities . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 5.11 Undertaking for Costs . . . . . . . . . . . . . . . . . . . 74
SECTION 5.12 Waiver of Stay or Extension Laws . . . . . . . . . . . . . . 74
ARTICLE VI
TRUSTEE
SECTION 6.1 Duties of Trustee . . . . . . . . . . . . . . . . . . . . . 75
SECTION 6.2 Rights of Trustee . . . . . . . . . . . . . . . . . . . . . 76
SECTION 6.3 Individual Rights of Trustee . . . . . . . . . . . . . . . . 77
SECTION 6.4 Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . 77
SECTION 6.5 Notice of Defaults . . . . . . . . . . . . . . . . . . . . . 78
SECTION 6.6 Reports by Trustee to Holders . . . . . . . . . . . . . . . 78
SECTION 6.7 Compensation and Indemnity . . . . . . . . . . . . . . . . . 78
SECTION 6.8 Replacement of Trustee . . . . . . . . . . . . . . . . . . . 80
SECTION 6.9 Successor Trustee by Merger, etc. . . . . . . . . . . . . . 81
SECTION 6.10 Eligibility; Disqualification . . . . . . . . . . . . . . . 81
SECTION 6.11 Preferential Collection of Claims Against
Company . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 6.12 Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . 82
<PAGE>
ARTICLE VII
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 7.1 Discharge of Liability on Securities;
Defeasance . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 7.2 Termination of Company's Obligations . . . . . . . . . . . . 83
SECTION 7.3 Defeasance and Discharge of Indenture . . . . . . . . . . . 84
SECTION 7.4 Defeasance of Certain Obligations . . . . . . . . . . . . . 87
SECTION 7.5 Application of Trust Money . . . . . . . . . . . . . . . . . 90
SECTION 7.6 Repayment to Company . . . . . . . . . . . . . . . . . . . . 90
SECTION 7.7 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . 91
ARTICLE VIII
AMENDMENTS AND SUPPLEMENTS
SECTION 8.1 Without Consent of Holders . . . . . . . . . . . . . . . . . 91
SECTION 8.2 With Consent of Holders . . . . . . . . . . . . . . . . . . 92
SECTION 8.3 Compliance with Trust Indenture Act . . . . . . . . . . . . 94
SECTION 8.4 Revocation and Effect of Consents . . . . . . . . . . . . . 94
SECTION 8.5 Notation on or Exchange of Securities . . . . . . . . . . . 94
SECTION 8.6 Trustee To Sign Amendments . . . . . . . . . . . . . . . . . 94
SECTION 8.7 Fixing of Record Dates . . . . . . . . . . . . . . . . . . . 95
ARTICLE IX
REDEMPTION
SECTION 9.1 Notices to Trustee . . . . . . . . . . . . . . . . . . . . . 95
SECTION 9.2 Selection of Securities To Be Redeemed . . . . . . . . . . . 96
SECTION 9.3 Notice of Redemption . . . . . . . . . . . . . . . . . . . . 96
SECTION 9.4 Effect of Notice of Redemption . . . . . . . . . . . . . . . 97
SECTION 9.5 Deposit of Redemption Price . . . . . . . . . . . . . . . . 97
SECTION 9.6 Securities Redeemed in Part . . . . . . . . . . . . . . . . 97
ARTICLE X
SECURITY AND PLEDGE OF COLLATERAL
SECTION 10.1 Collateral Documents . . . . . . . . . . . . . . . . . . . . 98
SECTION 10.2 Recording and Opinions . . . . . . . . . . . . . . . . . . . 99
SECTION 10.3 Remedies Upon an Event of Default . . . . . . . . . . . . . 99
SECTION 10.4 Release of the Collateral . . . . . . . . . . . . . . . . . 100
SECTION 10.5 Purchase of Securities with Net
Available Cash . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 10.6 Certificates of Company . . . . . . . . . . . . . . . . . . 104
SECTION 10.7 Authorization of Actions to be Taken
by the Trustee Under the Pledge
<PAGE>
Agreement . . . . . . . . . . . . . . . . . . . . . . . . 104
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Trust Indenture Act Controls . . . . . . . . . . . . . . . . 105
SECTION 11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 105
SECTION 11.3 Communication by Holders with Other
Holders . . . . . . . . . . . . . . . . . . . . . . . . . 106
SECTION 11.4 Certificate and Opinion as to Conditions
Precedent . . . . . . . . . . . . . . . . . . . . . . . . 106
SECTION 11.5 Statements Required in Certificate or
Opinion . . . . . . . . . . . . . . . . . . . . . . . . . 107
SECTION 11.6 Rules by Trustee and Agents . . . . . . . . . . . . . . . . 108
SECTION 11.7 Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . 108
SECTION 11.8 Successors; No Recourse Against Others . . . . . . . . . . . 108
SECTION 11.9 Duplicate Originals . . . . . . . . . . . . . . . . . . . . 108
SECTION 11.10 Other Provisions . . . . . . . . . . . . . . . . . . . . . . 108
SECTION 11.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 108
ARTICLE XII
SUBSIDIARY GUARANTEES
SECTION 12.1 Subsidiary Guarantees . . . . . . . . . . . . . . . . . . . 109
SECTION 12.2 Execution and Delivery of Subsidiary
Guarantees . . . . . . . . . . . . . . . . . . . . . . . . 111
SECTION 12.3 Subsidiary Guarantors May Consolidate, Etc.
on Certain Terms . . . . . . . . . . . . . . . . . . . . . 112
SECTION 12.4 Release of Subsidiary Guarantors . . . . . . . . . . . . . . 112
SECTION 12.5 Additional Subsidiary Guarantors . . . . . . . . . . . . . . 114
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
EXHIBIT A--FORM OF SECURITY . . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B--FORM OF GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C--FORM OF SUBORDINATION PROVISIONS . . . . . . . . . . . . . . . . C-1
EXHIBIT D--PLEDGE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . D-1
<PAGE>
INDENTURE dated as of ___________, 1994, between Empire Gas
Corporation, a Missouri corporation (the "Company"), each of the Subsidiary
Guarantors (as hereinafter defined) and Shawmut Bank Connecticut, National
Association, a National Banking Association (the "Trustee").
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the holders of the Company's Senior Secured
Notes Due 2004:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 DEFINITIONS.
"ACCRETED VALUE" means as of any date (the "specified date") with
respect to each $1,000 face amount of Securities, the following amount:
(i) if the specified date is one of the following dates (each an
"accrual date"), the amount set forth opposite such date below:
<TABLE>
<CAPTION>
<S> <C>
ACCRUAL DATE ACCRETED VALUE
______, 1994 . . . . . . . . . . . . ______
______, 1994 . . . . . . . . . . . . ______
______, 1995 . . . . . . . . . . . . ______
______, 1995 . . . . . . . . . . . . ______
______, 1996 . . . . . . . . . . . . ______
______, 1996 . . . . . . . . . . . . ______
______, 1997 . . . . . . . . . . . . ______
______, 1997 . . . . . . . . . . . . ______
______, 1998 . . . . . . . . . . . . ______
______, 1998 . . . . . . . . . . . . ______
______, 1999 . . . . . . . . . . . . $1,000;
</TABLE>
(ii) if the specified date occurs between two accrual dates, the
sum of (A) the accreted value for the accrual date immediately preceding
the specified date and (B) an amount equal to the product of (i) the
accreted value for the immediately following accrual date less the accreted
value for
<PAGE>
the immediately preceding accrual date and (ii) a fraction, the numerator
of which is the number of days (not to exceed 180 days) from the
immediately preceding accrual date to the specified date, using a 360-day
year of twelve 30-day months, and the denominator of which is 180 (or, if
the immediately following accrual date is _________, 1999, ___); and
(iii) if the specified date occurs after ______, 1999, $1,000.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person existing at the
time at which such Person became a Subsidiary and not incurred in connection
with, or in contemplation of, such Person becoming a Subsidiary. Acquired
Indebtedness shall be deemed to be Incurred on the date the acquired Person
becomes a Subsidiary.
"ACQUISITION INDEBTEDNESS" means Indebtedness of a Restricted
Subsidiary incurred in connection with the acquisition of property or assets
related to the Line of Business which will be owned and used by the Company or a
Restricted Subsidiary, which Indebtedness is without recourse to the Company or
any Restricted Subsidiary other than the Restricted Subsidiary issuing such
Acquisition Indebtedness.
"ADDITIONAL ASSETS" means (i) any property or assets related to the
Line of Business which will be owned and used by the Company or a Restricted
Subsidiary, (ii) the Capital Stock of a Person that becomes a Restricted
Subsidiary as a result of the acquisition of such Capital Stock by the Company
or another Restricted Subsidiary or (iii) Capital Stock constituting a minority
interest in any Person that at such time is a Restricted Subsidiary.
"AFFILIATE" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by, or under direct or indirect common
control with, such specified Person. For the purposes of this definition,
"control," when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract
2
<PAGE>
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing. For purposes of Sections 3.11 and 3.12 only,
"Affiliate" shall also mean any beneficial owner of 5% or more of the total
Voting Shares (on a Fully Diluted Basis) of the Company or of rights or warrants
to purchase such stock (whether or not currently exercisable) and any Person who
would be an Affiliate of any such beneficial owner pursuant to the first
sentence hereof. For purposes of Section 3.3, "Affiliate" shall also mean any
Person of which the Company owns 5% or more of any class of Capital Stock or
rights to acquire 5% or more of any class of Capital Stock and any Person who
would be an Affiliate of any such Person pursuant to the first sentence hereof.
"AGENT" means any Registrar, Paying Agent or co-registrar.
"ASSET SALE" means any sale, transfer or other disposition (including
by way of merger, consolidation or sale/leaseback transactions, but excluding
(except as provided for in the last paragraph of Section 3.12(b)) those
permitted by Article IV hereof) in one or a series of transactions by the
Company or any Restricted Subsidiary to any Person other than the Company or any
Wholly Owned Subsidiary, of (i) all or any of the Capital Stock of the Company
or any Restricted Subsidiary, (ii) all or substantially all of the assets of any
operating unit, or line of business of the Company or any Restricted Subsidiary
or (iii) any other property or assets or rights to acquire property or assets of
the Company or any Restricted Subsidiary outside of the ordinary course of
business of the Company or such Restricted Subsidiary.
"ATTRIBUTABLE DEBT" in respect of a Sale/Leaseback Transaction means,
as at the time of determination, the present value (discounted at the interest
rate borne by the Securities, compounded annually) of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in such Sale/Leaseback Transaction (including any period for which such lease
has been extended).
"AVERAGE LIFE" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of (A) the numbers of years from the date of
3
<PAGE>
determination to the dates of each successive scheduled principal payment of
such Indebtedness or scheduled redemption or similar payment with respect to
such Indebtedness or Preferred Stock multiplied by (B) the amount of such
payment by (ii) the sum of all such payments.
"BASIC AGREEMENTS" means (i) the Stock Redemption Agreement, dated
May 7, 1994, among the Company, Energy, Mr. Lindsey, Mr. Robert Plaster and the
other parties named therein; (ii) the Services Agreement, between the Company
and Empire Service Corp., entered into pursuant to the Stock Redemption
Agreement; (iii) the Lease Agreement, among the Company and Evergreen National
Corporation, entered into pursuant to the Stock Redemption Agreement and (iv)
the Non-Competition Agreement, among the Company, Energy, Paul Lindsey, Robert
Plaster and Stephen Plaster, entered into pursuant to the Stock Redemption
Agreement.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or
any authorized committee thereof.
"BOARD RESOLUTION" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"BUSINESS DAY" means each day which is not a Legal Holiday.
"CAPITAL STOCK" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation or any
and all equivalent ownership interests in a Person (other than a corporation).
"CAPITALIZED LEASE" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person; the Stated
Maturity thereof shall be the date of the last payment of rent or any other
amount due under such lease prior to the first date upon which the lease may be
terminated by the lessee
4
<PAGE>
without payment of a penalty; and "Capitalized Lease Obligations" means the
rental obligations, as aforesaid, under such lease.
"CHANGE OF CONTROL" means the occurrence of any of the following
events: (i) at any time after the occurrence of a Public Market, any "person"
(as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other
than the Management Group or an underwriter engaged in a firm commitment
underwriting on behalf of the Company, is or becomes the "beneficial owner" (as
such term is used in Rules 13d-3 and 13d-5 under the Exchange Act, except that
for purposes of this clause (i) a person shall be deemed to have beneficial
ownership of all shares that such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 30% of the total Voting Shares of the Company; (ii)
during any period of two consecutive years, individuals who at the beginning of
such period constituted the Board of Directors together with any new directors
whose election by the Board of Directors or whose nomination for election by the
stockholders was approved by a vote of 66-2/3% of the directors of such person
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved cease
for any reason to constitute a majority of the Board of Directors then in
office; (iii) all or substantially all of the Company's and its Restricted
Subsidiaries' assets are sold, leased, exchanged or otherwise transferred to any
Person or group of Persons acting in concert; (iv) the Company is liquidated or
dissolved or adopts a plan of liquidation; (v) prior to the occurrence of a
Public Market, the Management Group ceases in the aggregate to beneficially own,
directly or indirectly, at least 50% in the aggregate of the total voting power
of the Voting Shares of the Company; or (vi) at any time prior to the occurrence
of a Change of Control pursuant to clauses (i) to (v) of this definition as a
result of which a Change of Control Offer was made, (A) the failure of the
Company for a period of greater than 90 days in any 12 month period to
continuously maintain (following the 6 month anniversary of the Offering) on its
Board of Directors at least two Outside Directors, (B) the failure of the
Company for a period of greater than 90 days in any 12 month period to
continuously maintain an audit committee of its Board of Direc-
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tors consisting solely of Outside Directors or (C) the Board of Directors
consists of greater than seven members; PROVIDED, HOWEVER, that upon the
occurrence of any of the events in this item (vi) the Company shall notify the
Trustee of such occurrence.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means the collateral securing the Obligations of the
Company hereunder as defined in the Pledge Agreement.
"COLLATERAL ACCOUNT" means an account subject to a first priority
perfected Lien in favor of the Trustee, the funds of which shall be invested in
Temporary Cash Investments.
"COLLATERAL AGENT" means Shawmut Bank Connecticut, National
Association, as provided for in the Pledge Agreement until a successor replaces
it and thereafter means the successor.
"COMPANY" means the party named as such in the Indenture until a
successor replaces it pursuant to the terms and conditions of the Indenture and
thereafter means the successor.
"CONSOLIDATED COVERAGE RATIO" as of any date of determination means
the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters to (ii) the Consolidated Interest
Expense for such four fiscal quarters; PROVIDED, HOWEVER, that if the Company or
any Restricted Subsidiary has Incurred any Indebtedness since the beginning of
such period that remains outstanding or if the transaction giving rise to the
need to calculate the Consolidated Coverage Ratio is an Incurrence of
Indebtedness, or both, both EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving effect on a pro forma basis to (x) such
new Indebtedness as if such Indebtedness had been Incurred on the first day of
such period and (y) the repayment, redemption, repurchase, defeasance or
discharge of any Indebtedness repaid, redeemed, repurchased, defeased or
discharged with the proceeds of such new Indebtedness as if such repayment,
redemption, repurchase, defeasance or discharge had been
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made on the first day of such period; PROVIDED, FURTHER, that if within the
period during which EBITDA or Consolidated Interest Expense is measured, the
Company or any of its Consolidated Restricted Subsidiaries shall have made any
Asset Sales, (x) the EBITDA for such period shall be reduced by an amount equal
to the EBITDA (if positive) directly attributable to the assets or Capital Stock
which are the subject of such Asset Sales for such period, or increased by an
amount equal to the EBITDA (if negative), directly attributable thereto for such
period and (y) the Consolidated Interest Expense for such period shall be
reduced by an amount equal to the Consolidated Interest Expense directly
attributable to any Indebtedness for which neither the Company nor any
Consolidated Restricted Subsidiary shall continue to be liable as a result of
any such Asset Sale or which is repaid, redeemed, defeased, discharged or
otherwise retired in connection with or with the proceeds of the assets or
Capital Stock which are the subject of such Asset Sales for such period; and
PROVIDED, FURTHER, that if the Company or any Consolidated Restricted Subsidiary
shall have made any acquisition of assets or Capital Stock (occurring by merger
or otherwise) since the beginning of such period (including any acquisition of
assets or Capital Stock occurring in connection with a transaction causing a
calculation to be made hereunder) the EBITDA and Consolidated Interest Expense
for such period shall be calculated, after giving pro forma effect thereto (and
without regard to clause (iv) of the proviso to the definition of "Consolidated
Net Income"), as if such acquisition of assets or Capital Stock took place on
the first day of such period. For all purposes of this definition, if the date
of determination occurs prior to the completion of the first four full fiscal
quarters following the Issue Date, then "EBITDA" and "Consolidated Interest
Expense" shall be calculated after giving effect on a pro forma basis to the
Offering as if the Offering occurred on the first day of the four full fiscal
quarters that were completed preceding such date of determination.
"CONSOLIDATED CURRENT LIABILITIES," as of the date of determination,
means the aggregate amount of liabilities of the Company and its Consolidated
Restricted Subsidiaries which may properly be classified as current liabilities
(including taxes accrued as estimated), after eliminating (i) all inter-company
items be-
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tween the Company and any Subsidiary and (ii) all current maturities of long-
term Indebtedness, all as determined in accordance with GAAP.
"CONSOLIDATED INCOME TAX EXPENSE" means, for any period, as applied to
the Company, the provision for local, state, federal or foreign income taxes on
a Consolidated basis for such period determined in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, as applied to
the Company, the sum of (a) the total interest expense of the Company and its
Consolidated Restricted Subsidiaries for such period as determined in accordance
with GAAP, including, without limitation, (i) amortization of original issue
discount on any Indebtedness and the interest portion of any deferred payment
obligation, calculated in accordance with the effective interest method of
accounting, and amortization of debt issuance costs (other than issuance costs
with regard to the Offering, the execution of the New Credit Facility and the
related transactions occurring simultaneously therewith), (ii) accrued interest,
(iii) noncash interest payments, (iv) commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing, (v) interest actually paid by the Company or any such Subsidiary
under any guarantee of Indebtedness or other obligation of any other Person and
(vi) net costs associated with Interest Rate Agreements (including amortization
of discounts) and Currency Agreements, plus (b) all but the principal component
of rentals in respect of Capitalized Lease Obligations paid, accrued, or
scheduled to be paid or accrued by the Company or its Consolidated Restricted
Subsidiaries, plus (c) one-third of all Operating Lease Obligations paid,
accrued and/or scheduled to be paid by the Company and its Consolidated
Restricted Subsidiaries, plus (d) amortization of capitalized interest, plus (e)
dividends paid in respect of Preferred Stock of the Company or any Consolidated
Restricted Subsidiary held by Persons other than the Company or a Wholly Owned
Subsidiary, plus (f) cash contributions to any employee stock ownership plan to
the extent such contributions are used by such employee stock ownership plan to
pay interest or fees to any person (other than the Company or a Restricted
Subsidiary) in connection with loans incurred by such employee stock ownership
plan to purchase Capital Stock
8
<PAGE>
of the Company.
"CONSOLIDATED NET INCOME (LOSS)" means, for any period, as applied to
the Company, the Consolidated net income (loss) of the Company and its
Consolidated Restricted Subsidiaries for such period, determined in accordance
with GAAP, adjusted by excluding (without duplication), to the extent included
in such net income (loss), the following: (i) all extraordinary gains or
losses; (ii) any net income of any Person if such Person is not a Restricted
Subsidiary, except that (A) the Company's equity in the net income of any such
Person for such period shall be included in Consolidated Net Income (Loss) up to
the aggregate amount of cash actually distributed by such Person during such
period to the Company or a Restricted Subsidiary as a dividend or other
distribution and (B) the equity of the Company or a Restricted Subsidiary in a
net loss of any such Person for such period shall be included in determining
Consolidated Net Income (Loss); (iii) the net income of any Restricted
Subsidiary to the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of such income is not at the time
thereof permitted, directly or indirectly, by operation of the terms of its
charter or by-laws or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to such Restricted
Subsidiary or its stockholders; (iv) any net income (or loss) of any Person
combined with the Company or any of its Restricted Subsidiaries on a "pooling of
interests" basis attributable to any period prior to the date of such
combination; (v) any gain or loss realized upon the sale or other disposition of
any property, plant or equipment of the Company or its Restricted Subsidiaries
(including pursuant to any sale/leaseback arrangement) which is not sold or
otherwise disposed of in the ordinary course of business and any gain (but not
loss) realized upon the sale or other disposition by the Company or any
Restricted Subsidiary of any Capital Stock of any Person; and (vi) the
cumulative effect of a change in accounting principles; and further adjusted by
subtracting from such net income the tax liability of any parent of the Company
to the extent of payments made to such parent by the Company pursuant to any tax
sharing agreement or other arrangement for such period.
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"CONSOLIDATED NET TANGIBLE ASSETS" means, as of any date of
determination, as applied to the Company, the total amount of assets (less
accumulated depreciation or amortization, allowances for doubtful receivables,
other applicable reserves and other properly deductible items) which would
appear on a Consolidated balance sheet of the Company and its Consolidated
Restricted Subsidiaries, determined on a Consolidated basis in accordance with
GAAP, and after giving effect to purchase accounting and after deducting
therefrom, to the extent otherwise included, the amounts of: (i) Consolidated
Current Liabilities; (ii) minority interests in Consolidated Subsidiaries held
by Persons other than the Company or a Restricted Subsidiary; (iii) excess of
cost over fair value of assets of businesses acquired, as determined in good
faith by the Board of Directors; (iv) any revaluation or other write-up in value
of assets subsequent to December 31, 1993 as a result of a change in the method
of valuation in accordance with GAAP; (v) unamortized debt discount and expenses
and other unamortized deferred charges, goodwill, patents, trademarks, service
marks, trade names, copyrights, licenses, organization or developmental expenses
and other intangible items; (vi) treasury stock; and (vii) any cash set apart
and held in a sinking or other analogous fund established for the purpose of
redemption or other retirement of Capital Stock to the extent such obligation is
not reflected in Consolidated Current Liabilities.
"CONSOLIDATED NET WORTH" means, at any date of determination, as
applied to the Company, stockholders' equity as set forth on the most recently
available Consolidated balance sheet of the Company and its Consolidated
Restricted Subsidiaries (which shall be as of a date no more than 60 days prior
to the date of such computation), less any amounts attributable to Redeemable
Stock or Exchangeable Stock, the cost of treasury stock and the principal amount
of any promissory notes receivable from the sale of Capital Stock of the Company
or any Subsidiary.
"CONSOLIDATION" means, with respect to any Person, the consolidation
of accounts of such Person and each of its subsidiaries if and to the extent the
accounts of such Person and such subsidiaries are consolidated in accordance
with GAAP. The term "Consolidated" shall have a correlative meaning.
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<PAGE>
"CURRENCY AGREEMENT" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary against fluctuations in currency values to
or under which the Company or any Restricted Subsidiary is a party or a
beneficiary on the Issue Date or becomes a party or beneficiary thereafter.
"DEFAULT" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"DEPOSITARY" means The Depositary Trust Company, its nominees, and
their respective successors until a successor Depositary shall have become such
pursuant to the applicable provisions of this Indenture and thereafter
"Depositary" shall mean or include each Person who is then a Depositary
hereunder.
"DEFAULTED INTEREST" means any interest on any Security which is
payable, but is not punctually paid or duly provided for on any Interest Payment
Date.
"EBITDA" means, for any period, as applied to the Company, the sum of
Consolidated Net Income (Loss) (but without giving effect to adjustments,
accruals, deductions or entries resulting from purchase accounting,
extraordinary losses or gains and any gains or losses from any Asset Sales),
plus the following to the extent included in calculating Consolidated Net Income
(Loss): (a) Consolidated Income Tax Expense, (b) Consolidated Interest Expense,
(c) depreciation expense and (d) amortization expense, in each case for such
period; PROVIDED that, if the Company has any Subsidiary that is not a Wholly
Owned Subsidiary, EBITDA shall be reduced (to the extent not otherwise reduced
by GAAP) by an amount equal to (A) the consolidated net income (loss) of such
Subsidiary (to the extent included in Consolidated Net Income (Loss)) multiplied
by (B) the quotient of (1) the number of shares of outstanding common stock of
such Subsidiary not owned on the last day of such period by the Company or any
Wholly Owned Subsidiary of the Company divided by (2) the total number of shares
of outstanding common stock of such Subsidiary on the last day of such period.
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<PAGE>
"ENERGY" means Empire Energy Corporation, a Missouri corporation.
"EXCESS PAYMENTS" means any amounts paid in respect of salary, bonus,
insurance or annuity premiums (other than premiums for "key man" insurance the
sole beneficiary of which is the Company), or other payments or contributions to
any employee benefit, severance, retirement, stock ownership or stock purchase
plan or program or any similar plan or arrangement, to, or for the benefit of, a
Lindsey Entity in excess of the lesser of (A) the aggregate scheduled amounts of
any such payments as set forth in the Employment Agreements between each of Paul
Lindsey and Kristen Lindsey, on the one hand, and the Company on the other hand,
each dated as of _______, 1994, as they may be amended from time to time and (B)
an aggregate of $1,000,000.
"EXCHANGEABLE STOCK" means any Capital Stock which by its terms is
exchangeable or convertible at the option of any Person other than the Company
into another security (other than Capital Stock of the Company which is neither
Exchangeable Stock nor Redeemable Stock).
"FAIR VALUE" of any property shall mean its fair value as of a date
not more than 90 days prior to the date of the certificate relating thereto,
such Fair Value to be determined in any case as if such property were free of
Liens securing Indebtedness, if any.
"FOREIGN ASSET SALE" means an Asset Sale in respect of the Capital
Stock or assets of a Foreign Subsidiary or a Restricted Subsidiary of the type
described in Section 936 of the Code to the extent that the proceeds of such
Asset Sale are received by a Person subject in respect of such proceeds to the
tax laws of a jurisdiction other than the United States of America or any State
thereof or the District of Columbia.
"FOREIGN SUBSIDIARY" means a Restricted Subsidiary that is
incorporated in a jurisdiction other than the United States of America or a
State thereof or the District of Columbia.
"FULLY DILUTED BASIS" means after giving effect to the exercise of any
outstanding options, warrants or rights to purchase Voting Shares and the
conversion or
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<PAGE>
exchange of any securities convertible into or exchangeable for Voting Shares.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect and, to the extent optional, adopted by the
Company on the Issue Date, consistently applied, including, without limitation,
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board.
"GUARANTEE" means, as applied to any obligation, contingent or
otherwise, of any Person, (i) a guarantee, direct or indirect, in any manner, of
any part or all of such obligation (other than by endorsement of negotiable
instruments for collection in the ordinary course of business) and (ii) an
agreement, direct or indirect, contingent or otherwise, the practical effect of
which is to insure in any way the payment or performance (or payment of damages
in the event of nonperformance) of any part or all of such obligation, including
the payment of amounts drawn down under letters of credit.
"HOLDER" or "SECURITYHOLDER" means the Person in whose name a Security
is registered on the Registrar's books.
"INCUR" means, as applied to any obligation, to create, incur, issue,
assume, guarantee or in any other manner become liable with respect to,
contingently or otherwise, such obligation, and "INCURRED," "INCURRENCE" and
"INCURRING" shall each have a correlative meaning; PROVIDED, HOWEVER, that any
Indebtedness or Capital Stock of a Person existing at the time such Person
becomes (after the Issue Date) a Subsidiary (whether by merger, consolidation,
acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at
the time it becomes a Subsidiary; and PROVIDED, FURTHER, that any amendment,
modification or waiver of any provision of any document pursuant to which
Indebtedness was previously Incurred shall not be deemed to be an Incurrence of
Indebtedness as long as (i) such amendment, modification or waiver does not (A)
increase the principal or premium thereof or interest rate thereon, (B) change
to an earlier date the
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<PAGE>
Stated Maturity thereof or the date of any scheduled or required principal
payment thereon or the time or circumstances under which such Indebtedness may
or shall be redeemed, (C) if such Indebtedness is contractually subordinated in
right of payment to the Securities, modify or affect, in any manner adverse to
the Holders, such subordination, (D) if the Company is the obligor thereon,
provide that a Restricted Subsidiary shall be an obligor, or (E) violate, or
cause the Indebtedness to violate, the provisions of Sections 3.5 or 3.7 and
(ii) such Indebtedness would, after giving effect to such amendment,
modification or waiver as if it were an Incurrence, comply with clause (i) of
the first proviso to the definition of "Refinancing Indebtedness."
"INDEBTEDNESS" of any Person means, without duplication, (i) the
principal of and premium (if any such premium is then due and owing) in respect
of (A) indebtedness of such Person for money borrowed and (B) indebtedness
evidenced by notes, debentures, bonds or other similar instruments for the
payment of which such Person is responsible or liable; (ii) all Capitalized
Lease Obligations of such Person; (iii) all obligations of such Person Incurred
as the deferred purchase price of property, all conditional sale obligations of
such Person and all obligations of such Person under any title retention
agreement; (iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other- than obligations with respect to letters of credit securing
obligations (other than obligations described in (i) through (iii) above)
entered into in the ordinary course of business of such Person to the extent
such letters of credit are not drawn upon or, if and to the extent drawn upon,
such drawing is reimbursed no later than the tenth Business Day following
receipt by such Person of a demand for reimbursement following payment on the
letter of credit); (v) the amount of all obligations of such Person with respect
to the scheduled redemption, repayment or other repurchase of any Redeemable
Stock and, in the case of any Subsidiary, with respect to any Preferred Stock
(but excluding in each case any accrued dividends); (vi) all obligations of
other Persons and all dividends of other Persons for the payment of which, in
either case, such Person is responsible or liable, directly or indirectly, as
obligor, guarantor or otherwise, including by means of any guarantee; (vii) all
liabilities or other
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<PAGE>
obligations, contingent or otherwise, purchased, assumed or with respect to
which such Person shall otherwise become liable or responsible in connection
with the purchase, acquisition or assumption of property, services or business
operations to the extent reflected on the balance sheet of such Person in
accordance with GAAP; (viii) contractual obligations to repurchase goods sold or
distributed; (ix) all obligations of such Person in respect of Interest Rate
Agreements and Currency Agreements; and (x) all obligations of the type referred
to in clauses (i) through (ix) of other Persons secured by any Lien on any
property or asset of such Person (whether or not such obligation is assumed by
such Person), the amount of such obligation being deemed to be the lesser of the
value of such property or assets or the amount of the obligation so secured;
PROVIDED, HOWEVER, that Indebtedness shall not include trade accounts payable
arising in the ordinary course of business. The amount of Indebtedness of any
Person at any date shall be, with respect to unconditional obligations, the
outstanding balance at such date of all such obligations as described above and,
with respect to any contingent obligations (other than pursuant to clause (vii)
above, which shall be included to the extent reflected on the balance sheet of
such Person in accordance with GAAP) at such date, the maximum liability
determined by such Person's board of directors, in good faith, as, in light of
the facts and circumstances existing at the time, reasonably likely to be
Incurred upon the occurrence of the contingency giving rise to such obligation.
"INTERCOMPANY NOTES" means the notes issued to the Company by its
Subsidiaries pursuant to the Master Intercompany Note, dated as of ___________,
1994, among the Company and each of the Subsidiaries pursuant to which the
Company shall make certain loans to finance the working capital needs of the
Subsidiaries with the proceeds of the Indebtedness incurred pursuant to the New
Credit Facility, as such Intercompany Notes may be amended or otherwise modified
from time to time.
"INTEREST PAYMENT DATE" means the stated maturity of an installment of
interest on the Securities.
"INTEREST RATE AGREEMENT" means any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap
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agreement, interest rate cap agreement, interest rate collar agreement, interest
rate hedge agreement or other similar agreement or arrangement designed to
protect against fluctuations in interest rates to or under which the Company or
any of its Restricted Subsidiaries is a party or beneficiary on the Issue Date
or becomes a party or beneficiary thereafter.
"INVESTMENT" means, with respect to any Person, any direct or indirect
advance, loan (other than advances to customers who are not Affiliates in the
ordinary course of business that are recorded as accounts receivable on the
balance sheet of such Person or its Subsidiaries) or other extension of credit
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any other investment in any other Person, or any purchase or
acquisition by such Person of any Capital Stock, bonds, notes, debentures or
other securities or assets issued or owned by any other Person (whether by
merger, consolidation, amalgamation, sale of assets or otherwise). For purposes
of the definition of "Unrestricted Subsidiary" and the provisions set forth in
Section 3.3, (i) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of any Restricted Subsidiary at the time that such Restricted
Subsidiary is designated an Unrestricted Subsidiary and shall exclude the fair
market value of the net assets of any Unrestricted Subsidiary at the time that
such Unrestricted Subsidiary is designated a Restricted Subsidiary and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer, in each case as determined
by the Board of Directors in good faith.
"ISSUE DATE" means the date on which the Securities are originally
issued under the Indenture.
"LIEN" means any mortgage, lien, pledge, charge, hypothecation,
assignment, claim, option, priority, preferential arrangement of any kind or
nature or other security interest or encumbrance of any kind or nature
(including any conditional sale or other title retention agreement and any lease
in the nature thereof).
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"LINDSEY ENTITY" means Paul S. Lindsey, Jr., Kristen L. Lindsey, any
member of their family and any Person of which any of the foregoing Persons are
Affiliates.
"LINE OF BUSINESS" means the sale and distribution of propane gas and
operations related thereto.
"MANAGEMENT GROUP" means, collectively, those individuals who
beneficially own, directly or indirectly, Voting Shares of the Company or any
successor thereto immediately following the consummation of the Offering and the
transactions related thereto and are members of management of the Company or any
Subsidiaries of the Company (or the estate or any beneficiary of any such
individual or any immediate family member of any such individual or any trust
established for the benefit of any such individual or immediate family member).
"NET AVAILABLE CASH" means, with respect to any Asset Sale or
Collateral Sale, the cash or cash equivalent payments received by the Company or
a Subsidiary in connection with such Asset Sale or Collateral Sale (including
any cash received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise, but only as or when received and also
including the proceeds of other property received when converted to cash or cash
equivalents) net of the sum of, without duplication, (i) all reasonable legal,
title and recording tax expenses, reasonable commissions, and other reasonable
fees and expenses incurred directly relating to such Asset Sale or Collateral
Sale, (ii) provision for all local, state, federal and foreign taxes expected to
be paid (whether or not such taxes are actually paid or payable) as a
consequence of such Asset Sale or Collateral Sale, without regard to the
consolidated results of the Company and its Subsidiaries, (iii) payments made to
repay Indebtedness which is secured by any assets subject to such Asset Sale or
Collateral Sale in accordance with the terms of any Lien upon or other security
agreement of any kind with respect to such assets, or which must by its terms,
or by applicable law, be repaid out of the proceeds from such Asset Sale or
Collateral Sale, and (iv) reasonable amounts reserved by the Company or any
Subsidiary of the Company receiving proceeds of such Asset Sale or Collateral
Sale against any liabilities associated with such Asset Sale or Collateral Sale,
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including without limitation, indemnification obligations PROVIDED that, such
amounts shall be applied as described in Section 3.12 or Section 10.4, as the
case may be, no later than the fifth anniversary of such Asset Sale or
Collateral Sale if not previously paid to satisfy such liabilities and PROVIDED
FURTHER that such amounts shall not exceed 10% of the payments received by the
Company or a Subsidiary in connection with such Asset Sale or Collateral Sale.
"NET CASH PROCEEDS" means, with respect to any issuance or sale of
Capital Stock by any Person, the cash proceeds to such Person of such issuance
or sale net of attorneys' fees, accountants' fees, underwriters' or placement
agents' fees, discounts or commissions and brokerage, consultancy and other fees
actually incurred by such Person in connection with such issuance or sale and
net of taxes paid or payable by such Person as a result thereof.
"NEW CREDIT FACILITY" means the credit facility provided pursuant to
the credit agreement, dated as of _________ __, 1994, as it may be amended or
otherwise modified from time to time, between the Company and Continental Bank,
N.A. and its successors and assigns.
"NON-CONVERTIBLE CAPITAL STOCK" means, with respect to any
corporation, any Capital Stock of such corporation which is not convertible into
another security other than non-convertible common stock of such corporation;
PROVIDED, HOWEVER, that Non-Convertible Capital Stock shall not include any
Redeemable Stock or Exchangeable Stock.
"OBLIGATIONS" means for any Person all principal, premium, interest,
penalties, expenses, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness of such
Person.
"OFFERING" means the public offering and sale of the Securities.
"OFFICER" means the Chairman, the President, any Vice President, the
Chief Operating Officer, the Chief Financial Officer, the Treasurer, the
Secretary,
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any Assistant Treasurer, any Assistant Secretary or the Controller of the
Company.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers,
one of whom must be the President, the Treasurer or a Vice President of the
Company. Each Officers' Certificate (other than certificates provided pursuant
to TIA Section 314(a)(4)) shall include the statements provided for in TIA
Section 314(e).
"OPERATING LEASE OBLIGATIONS" means any obligation of the Company and
its Restricted Subsidiaries on a Consolidated basis incurred or assumed under or
in connection with any lease of real or personal property which, in accordance
with GAAP, is not required to be classified and accounted for as a capital
lease.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel, if so acceptable, may be an employee of
or counsel to the Company or the Trustee. Each such Opinion of Counsel shall
include the statements provided for in TIA Section 314(e).
"OUTSIDE DIRECTOR" means any Person who is a member of the Board of
Directors who is not (i) an employee or Affiliate of the Company, any Subsidiary
of the Company or Energy, (ii) an employee or Affiliate of Holding Capital
Group, Inc. (iii) a Plaster Entity or a Lindsey Entity, or (iv) a Person who has
engaged in a transaction with the Company or any Subsidiary of the Company that
would be required to be disclosed under Item 13 of Form 10-K if such Person were
a director of a registrant under the Securities Exchange Act of 1934, as
amended.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"PLASTER ENTITY" means Robert W. Plaster, Stephen R. Plaster, any
member of each such individual's
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family, and any Person of which any of the foregoing Persons are Affiliates.
"PLEDGE AGREEMENT" means that certain Pledge Agreement, dated as of
the date hereof, by the Company in favor of the Trustee, in the form attached
hereto as EXHIBIT D, as amended, supplemented and/or restated.
"PREFERRED STOCK", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"PRINCIPAL" means, with respect to the Securities, the Accreted Value
of the Securities.
"PUBLIC EQUITY OFFERING" means an underwritten primary public offering
of equity securities of the Company pursuant to an effective registration
statement under the Securities Act.
"PUBLIC MARKET" shall be deemed to have occurred if (x) a Public
Equity Offering has been consummated and (y) at least 25% (for purposes of the
definition of "Change of Control") or 20% (for purposes of paragraph 5 of the
Securities attached hereto) of the total issued and outstanding common stock of
the Company has been distributed by means of an effective registration statement
under the Securities Act or sales pursuant to Rule 144 under the Securities Act.
"REDEEMABLE STOCK" means any class or series of Capital Stock of any
Person that (a) by its terms, by the terms of any security into which it is
convertible or exchangeable or otherwise is, or upon the happening of an event
or passage of time would be, required to be redeemed (in whole or in part) on or
prior to the first anniversary of the Stated Maturity of the Securities, (b) is
redeemable at the option of the holder thereof at any time on or prior to the
first anniversary of the Stated Maturity of the Securities or (c) is convertible
into or exchangeable for Capital Stock referred to in clause (a) or clause (b)
above or debt securities at any time prior
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to the first anniversary of the Stated Maturity of the Securities.
"REFINANCING INDEBTEDNESS" means Indebtedness that refunds,
refinances, replaces, renews, repays or extends (including pursuant to any
defeasance or discharge mechanism) (collectively, "refinances," and "refinanced"
shall have a correlative meaning) any Indebtedness of the Company or a
Restricted Subsidiary existing on the Issue Date or Incurred in compliance with
the Indenture (including Indebtedness of the Company that refinances
Indebtedness of any Restricted Subsidiary and Indebtedness of any Restricted
Subsidiary that refinances Indebtedness of another Restricted Subsidiary)
including Indebtedness that refinances Refinancing Indebtedness; PROVIDED,
HOWEVER, that (i) the Refinancing Indebtedness shall be contractually
subordinated in right of payment to the Securities on terms at least as
favorable to the Holders of the Securities as the terms set forth in the form of
subordinated provisions attached hereto as Exhibit C, (ii) the Refinancing
Indebtedness shall be scheduled to mature either (a) no earlier than the
Indebtedness being refinanced or (b) after the Stated Maturity of the
Securities, (iii) the Refinancing Indebtedness has an Average Life at the time
such Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being refinanced and (iv) such Refinancing
Indebtedness shall have an aggregate principal amount (or if issued with
original issue discount, an aggregate issue price) that is equal to or less than
the aggregate principal amount (or if issued with original issue discount, the
aggregate accreted value) then outstanding (plus fees and expenses, including
any premium and defeasance costs) under the Indebtedness being refinanced; and
PROVIDED, FURTHER, that Refinancing Indebtedness shall not include (x)
Indebtedness of a Subsidiary of the Company that refinances Indebtedness of the
Company or (y) Indebtedness of the Company or a Restricted Subsidiary that
refinances Indebtedness of an Unrestricted Subsidiary.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that is
not designated an Unrestricted Subsidiary by the Board of Directors.
"SALE/LEASEBACK TRANSACTION" means an arrangement relating to property
now owned or hereafter acquired
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whereby the Company or a Subsidiary transfers such property to a Person and
leases it back from such Person, other than leases for a term of not more than
36 months or between the Company and a Wholly Owned Subsidiary or between Wholly
Owned Subsidiaries.
"SEASONAL OVERADVANCE" has the meaning ascribed to it in that certain
Credit Agreement, dated as of the date hereof, between the Company and
Continental Bank, N.A., which such Seasonal Overadvance shall not exceed
$3,000,000.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" means all series of the Senior Secured Notes Due 2004
that are issued under and pursuant to the terms of this Indenture, as amended or
supplemented from time to time.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
"SENIOR INDEBTEDNESS" means (i) all obligations consisting of the
principal of and premium, if any, and accrued and unpaid interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company whether or not post-filing interest is
allowed in such proceeding), whether existing on the Issue Date or thereafter
Incurred, in respect of (A) Indebtedness of the Company for money borrowed and
(B) Indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which the Company is responsible or liable; (ii)
all Capitalized Lease Obligations of the Company; (iii) all obligations of the
Company (A) for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (B) under Interest Rate
Agreements and Currency Agreements entered into in respect of any obligations
described in clauses (i) and (ii) or (C) issued or assumed as the deferred
purchase price of property, and all conditional sale obligations of the Company
and all obligations of the Company under any title retention agreement; (iv) all
guarantees of the Company with respect to obligations of other persons of the
type referred to in clauses (ii) and (iii) and with respect to the payment of
dividends of
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other Persons; and (v) all obligations of the Company consisting of
modifications, renewals, extensions, replacements and refundings of any
obligations described in clauses (i), (ii), (iii) or (iv); unless, in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are subordinated in right of
payment to the Securities, or any other Indebtedness or obligation of the
Company; PROVIDED, HOWEVER, that Senior Indebtedness shall not be deemed to
include (1) any obligation of the Company to any Subsidiary, (2) any liability
for Federal, state, local or other taxes or (3) any accounts payable or other
liability to trade creditors arising in the ordinary course of business
(including guarantees thereof or instruments evidencing such liabilities).
"SIGNIFICANT SUBSIDIARY" means any Subsidiary (other than an
Unrestricted Subsidiary) that would be a "Significant Subsidiary" of the Company
within the meaning of Rule 1-02 under Regulations S-X promulgated by the SEC.
"STATED MATURITY" means, with respect to any security, the date
specified in such security as the fixed date on which the principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency).
"SUBORDINATED INDEBTEDNESS" means any Indebtedness of the Company
(whether outstanding on the Issue Date or thereafter Incurred) which is
contractually subordinated or junior in right of payment to the Securities or
any other Indebtedness of the Company.
"SUBSIDIARY" means, as applied to any Person, (i) a corporation, at
least a majority of whose Capital Stock with voting power, under ordinary
circumstances, to elect a majority of the board of directors of such corporation
is at the time, directly or indirectly, owned or controlled by such Person, by a
Subsidiary or Subsidiaries of such Person, or by such Person and a Subsidiary or
Subsidiaries of such Person or (ii) any other Person (other than a corporation)
in which such Person, a Subsidiary or Subsidiaries of such Person, or such
Person and a Subsidiary or Subsidiaries of such Person, directly
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or indirectly, at the date of determination, has at least a majority ownership
interest. As of the date of this Indenture, the Subsidiaries of the Company
include, without limitation, PSNC Propane Corporation.
"SUBSIDIARY GUARANTEES" means the unconditional guarantees by the
respective Subsidiary Guarantors of the due and punctual payment of principal,
premium, if any, and interest on the Securities when and as the same shall
become due and payable and in the coin or currency in which the same are
payable, whether at Stated Maturity, by declaration of acceleration, call for
redemption, purchase or otherwise.
"SUBSIDIARY GUARANTOR" means each of the Persons listed on Schedule I
attached hereto, each Person that becomes a Restricted Subsidiary of the Company
after the Issue Date and each other Person that becomes a Subsidiary Guarantor
under this Indenture by executing a supplement to this Indenture pursuant to
which such Person jointly and severally unconditionally guarantees the
Securities on a senior basis.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. 77aaa-
77bbbb) as in effect on the date first above written.
"TEMPORARY CASH INVESTMENTS" means any of the following: (i) any
investment in direct obligations of the United States of America or any agency
thereof or obligations Guaranteed by the United States of America or any agency
thereof, in each case, maturing within 360 days of the date of acquisition
thereof, (ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company (including the Trustee) which is
organized under the laws of the United States of America, any state thereof or
any foreign country recognized by the United States having capital, surplus and
undivided profits aggregating in excess of $250,000,000 and whose debt is rated
"A" (or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by an registered broker
dealer or mutual fund distributor,(iii) repurchase obligations with a term of
not more than 30 days for
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underlying securities of the types described in clause (i) above entered into
with a bank meeting the qualifications described in clause (ii) above, (iv)
investments in commercial paper, maturing not more than 90 days after the date
of acquisition, issued by a corporation (other than an Affiliate or Subsidiary
of the Company) organized and in existence under the laws of the United States
of America or any foreign country recognized by the United States of America
with a rating at the time as of which any investment therein is made of "P-2"
(or higher) according to Moody's Investors Service, Inc. or "A-2" (or higher)
according to Standard and Poor's Corporation, (v) securities with maturities or
six months or less from the date of acquisition backed by standby or direct pay
letters of credit issued by any bank satisfying the requirements of clause (ii)
above and (vi) securities with maturities of six months or less from the date of
acquisition issued or fully Guaranteed by any state, commonwealth or territory
of the United States of America, or by any political subdivision or taxing
authority thereof, and rated at least "A" by Standard and Poor's Corporation or
"A" by Moody's Investors Service, Inc.
"TRUSTEE" means the party named as such above until a successor
replaces it and thereafter means the successor.
"TRUST OFFICER" means any officer of the Trustee assigned by the
Trustee to administer its corporate trust matters or to whom any corporate trust
matter is referred because of that officer's knowledge of and familiarity with
the particular subject.
"UNIFORM COMMERCIAL CODE" means the New York Uniform Commercial Code
as in effect from time to time.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that at the time of
determination shall be designated an Unrestricted Subsidiary by the Board of
Directors in the manner provided below and (ii) any subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds
any Lien on any property of, the Company or any
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other Subsidiary that is not a Subsidiary of the Subsidiary to be so designated;
PROVIDED, that either (A) the Subsidiary to be so designated has total assets of
$1,000 or less or (B) if such Subsidiary has assets greater than $1,000, that
such designation would be permitted pursuant to Section 3.3. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary of the Company; PROVIDED, HOWEVER, that immediately after giving
effect to such designation (x) the Company could Incur $1.00 of additional
Indebtedness pursuant to Section 3.4(a) and (y) no Default or Event of Default
shall have occurred and be continuing. Any such designation by the Board of
Directors shall be evidenced to the respective Trustee by promptly filing with
the respective Trustee a copy of the board resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"U.S. GOVERNMENT OBLIGATIONS" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case under
clauses (i) or (ii) are not callable or redeemable before the maturity thereof.
"VOTING SHARES," with respect to any corporation, means the Capital
Stock having the general voting power under ordinary circumstances to elect at
least a majority of the board of directors of such corporation (irrespective of
whether or not at the time stock of any other class or classes shall have or
might have voting power by reason of the happening of any contingency).
"WHOLLY OWNED SUBSIDIARY" means a Subsidiary (other than an
Unrestricted Subsidiary) all the Capital Stock of which (other than directors'
qualifying shares) is owned by the Company or another Wholly Owned Subsidiary.
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SECTION 1.2 OTHER DEFINITIONS.
TERM DEFINED IN SECTION
"Application Period" . . . . . . . . . . . . . . . . . . . . . . . 3.12
"Asset Sale Offer" . . . . . . . . . . . . . . . . . . . . . . . . 3.12
"Asset Sale Offer Amount" . . . . . . . . . . . . . . . . . . . . . 3.12
"Asset Sale Purchase Date" . . . . . . . . . . . . . . . . . . . . 3.12
"Bankruptcy Law" . . . . . . . . . . . . . . . . . . . . . . . . . 5.1
"Change of Control Offer" . . . . . . . . . . . . . . . . . . . . . 3.8
"Change of Control Purchase Date" . . . . . . . . . . . . . . . . . 3.8
"Collateral Application Period" . . . . . . . . . . . . . . . . . . 10.4
"Collateral Offer Period" . . . . . . . . . . . . . . . . . . . . . 10.5
"Collateral Sale" . . . . . . . . . . . . . . . . . . . . . . . . . 10.4
"Collateral Sale Offer" . . . . . . . . . . . . . . . . . . . . . . 10.5
"Collateral Sale Offer Amount" . . . . . . . . . . . . . . . . . . 10.5
"Collateral Sale Purchase Date" . . . . . . . . . . . . . . . . . . 10.5
"Custodian" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1
"Event of Default" . . . . . . . . . . . . . . . . . . . . . . . . 5.1
"Global Securities" . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
"Legal Holiday" . . . . . . . . . . . . . . . . . . . . . . . . . . 11.7
"Offer Period" . . . . . . . . . . . . . . . . . . . . . . . . . . 3.12
"Paying Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
"Registrar" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
"Restricted Payment" . . . . . . . . . . . . . . . . . . . . . . 3.3
"Successor Corporation" . . . . . . . . . . . . . . . . . . . . . . 4.1
"Successor Subsidiary Guarantor" . . . . . . . . . . . . . . . . . . 4.1
SECTION 1.3 INCORPORATION BY REFERENCE OF
TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"COMMISSION" means the SEC;
"INDENTURE SECURITIES" means the Securities;
"INDENTURE SECURITY HOLDER" means a Holder or Securityholder;
"INDENTURE TO BE QUALIFIED" means this Indenture;
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"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; and
"OBLIGOR" on the indenture securities means the Company.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings assigned to them.
SECTION 1.4 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) "generally accepted accounting principles" means, and any
accounting term not otherwise defined has the meaning assigned to it and shall
be construed in accordance with, GAAP;
(c) "OR" is not exclusive;
(d) words in the singular include the plural, and in the plural
include the singular;
(e) provisions apply to successive events and transactions;
(f) "including" means including, without limitation;
(g) unsecured debt shall not be deemed to be subordinate or junior to
secured debt merely by virtue of its nature as unsecured debt;
(h) the principal amount of any non-interest bearing or other
discount security (other than the Securities) at any date shall be the principal
amount thereof that would be shown on a balance sheet of the issuer dated such
date prepared in accordance with generally accepted accounting principles and
accretion of principal on such security shall be deemed to be the Incurrence of
Indebtedness; and
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(i) the principal amount (if any) of any Preferred Stock shall be the
greatest of (i) the stated value, (ii) the redemption price or (iii) the
liquidation preference of such Preferred Stock.
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ARTICLE II
THE SECURITIES
SECTION 2.1 FORM AND DATING.
The Securities and the Trustee's certificate of authentication shall
be substantially in the form of Exhibit A annexed hereto, which is part of this
Indenture. The Securities may have notations, legends or endorsements required
by law, stock exchange rule or usage and shall have endorsed thereon the
Subsidiary Guarantee executed by the Subsidiary Guarantors as provided in
Article XII. Each Security shall be dated the date of its authentication.
The terms and provisions contained in the form of Security annexed
hereto as Exhibit A shall constitute, and are expressly made, a part of this
Indenture. To the extent applicable, the Company, each Subsidiary Guarantor and
the Trustee, by their execution and delivery of this Indenture, expressly agree
to such terms and provisions and to be bound thereby.
The Securities shall be issued initially in the form of one or more
permanent global Securities in registered form (the "Global Securities"),
deposited with, or on behalf of, the Depositary, duly executed by the Company
and authenticated by the Trustee as hereinafter provided. Each Global Security
shall bear such legend as may be required or reasonably requested by the
Depositary. Each Global Security shall have endorsed thereon the Subsidiary
Guarantee executed by the Subsidiary Guarantors.
The definitive Securities shall be typed, printed, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner permitted by the rules of any securities exchange on which the
Securities may be listed, all as determined by the officers executing such
Securities, as evidenced by their execution of such Securities.
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SECTION 2.2 EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Securities for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Securities
and the Subsidiary Guarantee of the Subsidiary Guarantors shall be endorsed
thereon.
If an Officer whose signature is on a Security no longer holds that
office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the manual
signature of an authorized signatory of the Trustee. The signature shall be
conclusive evidence that the Security has been authenticated under this
Indenture.
The Trustee shall authenticate Securities for original issue up to the
aggregate principal amount stated in paragraph 4 of Exhibit A upon a written
order of the Company signed by two Officers. Such order shall specify the
amount of the Securities to be authenticated and the date on which the original
issue of Securities is to be authenticated. The aggregate principal amount of
Securities outstanding at any time may not exceed that amount except as provided
in Section 2.7.
The Trustee shall initially act as authenticating agent and may
subsequently appoint another Person acceptable to the Company as authenticating
agent to authenticate Securities. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company or an Affiliate of the Company.
Provided that the authentication agent has entered into an agreement with the
Company concerning the authentication agent's duties, the Trustee shall not be
liable for any act or any failure of the authenticating agent to perform any
duty either required herein or authorized herein to be performed by such person
in accordance with this Indenture.
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The Securities shall be issued only in registered form without coupons
and only in denominations of $1,000 and integral multiples thereof.
SECTION 2.3 REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Securities may be presented for payment ("Paying Agent").
The Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may appoint one or more co-registrars and one or more
additional paying agents. The term "Paying Agent" includes any additional
paying agent.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-registrar not a party to this Indenture. The
agreement shall implement the provisions of this Indenture that relate to such
Agent. The Company shall promptly notify the Trustee of the name and address of
any such Agent and any change in the address of such agent. If the Company
fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and
shall be entitled to appropriate compensation therefor pursuant to Section 6.7.
The Company or any Subsidiary or Affiliate of the Company may act as Paying
Agent, Registrar, co-registrar or transfer agent; provided, however, that the
Company shall not act as Paying Agent during such time as an Event of Default
shall have occurred and be continuing.
The Company initially appoints the Trustee as Registrar and Paying
Agent in connection with the Securities.
SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST.
On or prior to 1:00 p.m. on each due date of the principal and
interest on any Security (including any redemption date fixed under the terms of
such Security or this Indenture) the Company shall deposit with the Paying Agent
a sum of money sufficient to pay such principal and interest in funds available
when such becomes due. The Company shall require each Paying Agent (other than
the Trustee) to agree in writing that the Paying Agent shall
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hold in trust for the benefit of Securityholders or the Trustee all money held
by the Paying Agent for the payment of principal of or interest on the
Securities (whether such money has been paid to it by the Company or any other
obligor on the Securities, including any Subsidiary Guarantor) and shall notify
the Trustee of any default by the Company (or any other obligor on the
Securities, including any Subsidiary Guarantor) in making any such payment. If
the Company or a Subsidiary or an affiliate of the Company acts as Paying Agent,
it shall segregate the money held by it as Paying Agent and hold it as a
separate trust fund for the benefit of the Securityholders. If the Company
defaults in its obligation to deposit funds for the payment of principal and
interest the Trustee may, during the continuation of such default, require a
Paying Agent to pay all money held by it to the Trustee. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee and
to account for any funds disbursed by it. Upon doing so, the Paying Agent
(other than the Company or a Subsidiary or Affiliate of the Company) shall have
no further liability for the money delivered to the Trustee.
SECTION 2.5 SECURITYHOLDER LISTS.
The Trustee shall preserve in as current a form as reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Company shall furnish
to the Trustee at least five Business Days before each interest payment date and
at such other times as the Trustee may request in writing a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of the Securityholders, and the Company shall otherwise comply with
TIA Section 312(a).
SECTION 2.6 TRANSFER AND EXCHANGE.
The Securities shall be transferable only upon the surrender of a
Security for registration of transfer. When a Security is presented to the
Registrar or a co-registrar with a request to register a transfer, the Registrar
shall register the transfer as requested if the requirements of Section 8-401(1)
of the Uniform Commercial Code are met and, if so required by the Trustee, the
Company or any Subsidiary Guarantor, if the Security presented is accompanied by
a written instrument of
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transfer in form satisfactory to the Trustee, the Company and each of the
Subsidiary Guarantors, duly executed by the registered owner or by his or her
attorney duly authorized in writing. When Securities are presented to the
Registrar or a co-registrar with a request to exchange them for an equal
principal amount of Securities of other denominations, the Registrar shall make
the exchange as requested if the same requirements are met. To permit
registration of transfers and exchanges, the Company shall execute and the
Trustee shall authenticate Securities endorsed thereon with the Subsidiary
Guarantee of the Subsidiary Guarantors at the Registrar's or co-registrar's
request. No service charge shall be made for any registration of transfer or
exchange of the Securities, but the Company may require payment of a sum
sufficient to cover any transfer tax or similar governmental charge payable in
connection therewith (other than any such transfer taxes or similar governmental
charge payable upon exchange pursuant to Section 2.10 or 8.5 of this Indenture).
The Company shall not be required to make and the Registrar need not register
transfers or exchanges of Securities selected for redemption (except, in the
case of Securities to be redeemed in part, the portion thereof not to be
redeemed) or for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.
Prior to the due presentation for registration of transfer of any
Security, the Company, each of the Subsidiary Guarantors, the Trustee, the
Paying Agent, the Registrar or any co-registrar may deem and treat the person in
whose name a Security is registered as the absolute owner of such Security for
the purpose of receiving payment of principal of and interest on such Security
and for all other purposes whatsoever, whether or not such Security is overdue,
and none of the Company, the Trustee, the Paying Agent, the Registrar or any co-
registrar shall be affected by notice to the contrary.
Notwithstanding any other provisions of this Section 2.6, unless and
until it is exchanged in whole or in part for Securities in definitive
registered form, a Global Security representing all or a portion of the
Securities may not be transferred except as a whole by the Depositary to a
nominee of such Depositary or by a nominee of such Depositary to such Depositary
or another
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nominee of such Depositary or by such Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
If the Depositary notifies the Company that it is unwilling or unable
to continue as Depositary for the Global Securities or if at any time the
Depositary shall no longer be eligible under the next sentence of this
paragraph, the Company shall appoint a successor Depositary with respect to the
Securities. Each Depositary appointed pursuant to this Section 2.6 must, at the
time of its appointment and at all times while it serves as Depositary, be a
clearing agency registered under the Exchange Act and any other applicable
statute or regulation. The Company will execute, and the Trustee will
authenticate and deliver upon a written order of the Company signed by two
Officers, Securities in definitive registered form with the Subsidiary Guarantee
of the Subsidiary Guarantors endorsed thereon in any authorized denominations
representing such Securities in exchange for such Global Security or Securities
if (i) the Depositary notifies the Company that it is unwilling or unable to
continue or unable to continue as Depositary for the Global Securities or if at
any time the Depositary shall no longer be eligible to serve as Depositary and a
successor Depositary for the Securities is not appointed by the Company within
60 days after the Company receives such notice or becomes aware of such
ineligibility or (ii) an Event of Default has occurred and is continuing.
The Company may at any time and in its sole discretion determine that
the Securities shall no longer be represented by a Global Security or
Securities. In such event the Company will execute, and the Trustee will
authenticate and deliver upon a written order of the Company signed by two
Officers, Securities with the Subsidiary Guarantee of the Subsidiary Guarantors
endorsed thereon in exchange for such Global Security or Securities.
Upon the exchange of a Global Security for Securities in definitive
registered form without coupons, in authorized denominations, such Global
Security shall be cancelled by the Trustee. Securities in definitive registered
form issued in exchange for a Global Security pursuant to this Section 2.6 shall
be registered in such names and in such authorized denominations as the Deposi-
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tary for such Global Security, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Trustee. The Trustee
shall deliver such Securities to or as directed by the Persons in whose names
such Securities are so registered.
All Securities issued upon any transfer or exchange pursuant to the
terms of this Indenture will evidence the same debt and will be entitled to the
same benefits under this Indenture as the Securities surrendered upon such
transfer or exchange.
SECTION 2.7 REPLACEMENT SECURITIES.
If a mutilated security is surrendered to the Registrar or if the
Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken and the Holder furnishes to the Company, each Subsidiary
Guarantor and the Trustee evidence to their satisfaction of such loss,
destruction or wrongful taking, the Company shall issue and the Trustee shall,
in the absence of notice to the Company or the Trustee that such Security has
been acquired by a BONA FIDE purchaser, authenticate a replacement Security with
the Subsidiary Guarantee of the Subsidiary Guarantors endorsed thereon if the
requirements of Section 8-405 of the Uniform Commercial Code are met and if
there is delivered to the Company, each Subsidiary Guarantor and the Trustee
such security or indemnity as may be required to save each of them harmless,
satisfactory to the Company or the Trustee, as the case may be. The Company,
each Subsidiary Guarantor and the Trustee may charge the Holder for their
expenses in replacing a Security.
Every replacement Security is an additional obligation of the Company
and shall be entitled to the benefits of this Indenture.
SECTION 2.8 OUTSTANDING SECURITIES.
The Securities outstanding at any time are all the Securities
authenticated by the Trustee except for those canceled by it, those delivered to
it for cancellation, and those described in this Section as not outstanding.
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If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a BONA FIDE purchaser.
If all the principal and interest on any Securities are considered
paid under Section 3.1, such Securities cease to be outstanding under this
Indenture and interest on such Securities shall cease to accrue.
If the Paying Agent (other than the Company or a Subsidiary or an
Affiliate of the Company) holds in accordance with this Indenture on a
redemption date or maturity date money sufficient to pay all principal and
interest due on that date then on and after that date such Securities cease to
be outstanding and interest on them ceases to accrue (unless there shall be a
default in such payment).
If a Security is called for redemption, the Company and the Trustee
need not treat the Security as outstanding in determining whether Holders of the
required principal amount of Securities have concurred in any direction, waiver
or consent.
Subject to Section 2.9, a Security does not cease to be outstanding
because the Company or an Affiliate thereof holds the Security.
SECTION 2.9 DETERMINATION OF HOLDERS' ACTION.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, amendment, waiver or consent,
Securities owned by or pledged to the Company, any Subsidiary Guarantor, any
other obligor upon the Securities or any Affiliate of the Company, any
Subsidiary Guarantor or such other obligor shall be disregarded and deemed not
to be outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Securities which the Trustee knows are so owned or pledged shall be so
disregarded.
SECTION 2.10 TEMPORARY SECURITIES.
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Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities having endorsed
thereon temporary Subsidiary Guarantees executed by the Subsidiary Guarantors.
Temporary Securities shall be substantially in the form of definitive Securities
but may have variations that the Company considers appropriate for temporary
Securities and having duly endorsed thereon the Subsidiary Guarantees which
shall be substantially in the form of definitive Subsidiary Guarantees but which
may have variations that the Company believes appropriate for temporary
securities. Without unreasonable delay, the Company shall prepare and the
Trustee, upon the written order of the Company signed by two Officers, shall
authenticate definitive Securities in exchange for temporary Securities. Until
such exchange, temporary Securities shall be entitled to the same rights,
benefits and privileges as definitive Securities.
SECTION 2.11 CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Securities surrendered to them for registration of transfer, exchange or
payment. The Trustee shall cancel all Securities surrendered for registration
of transfer, exchange, payment or cancellation and shall destroy the same or
otherwise dispose of canceled Securities as the Company directs by written order
signed by two Officers. The Company may not issue new Securities to replace
Securities that it has paid or delivered to the Trustee for cancellation.
SECTION 2.12 DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Securities, it
shall pay defaulted interest, plus any interest payable on the defaulted
interest to the extent permitted by law, in any lawful manner. It may pay the
defaulted interest to the Persons who are Securityholders on a subsequent
special record date which date shall be at least five Business Days prior to the
payment date. The Company shall fix the special record date and payment date.
At least 15 days before the special record date, the Company (or the Trustee, in
the name of and at the expense of the Company) shall mail to
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Securityholders a notice that states the special record date, payment date and
amount of interest to be paid.
ARTICLE III
COVENANTS
SECTION 3.1 PAYMENT OF SECURITIES.
The Company shall pay the principal of and interest on the Securities
on the dates and in the manner provided in the Securities. The Company shall
pay interest on overdue principal at the rate borne by the Securities; it shall
pay interest on overdue installments of interest at the rate borne by the
Securities to the extent lawful. Principal and interest shall be considered
paid on the date due (including a redemption date) if the Trustee or the Paying
Agent (other than the Company or a Subsidiary or an Affiliate of the Company)
has received from or on behalf of the Company on or prior to 1:00 p.m. on that
date money sufficient to pay all principal and interest then due.
SECTION 3.2 MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency where Securities may be surrendered for
registration of transfer or exchange or for presentation for payment and where
notices and demands to or upon the Company or any Subsidiary Guarantor in
respect of the Securities any Subsidiary Guarantee endorsed thereon and this
Indenture may be served. The Company and the Subsidiary Guarantors will give
prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company or any
Subsidiary Guarantor shall fail to maintain any such required office or agency
or to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 11.2 of this Indenture.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
PROVIDED, HOWEVER, that no such designation
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or rescission shall in any manner relieve the Company of its obligation to
maintain an office or agency in the Borough of Manhattan, the City of New York,
for such purposes. The Company will give prompt written notice to the Trustee
of any such designation or rescission and of any change in the location of any
such other office or agency.
The Company hereby initially designates the office of Shawmut Trust
Company in the Borough of Manhattan, the City of New York, as such office of the
Company in accordance with Section 2.3.
SECTION 3.3 LIMITATION ON RESTRICTED PAYMENTS.
(a) So long as any of the Securities are outstanding, the Company
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, (i) declare or pay any dividend on or make any distribution or
similar payment of any sort in respect of its Capital Stock (including any
payment in connection with any merger or consolidation involving the Company) to
the direct or indirect holders of its Capital Stock (other than dividends or
distributions payable solely in its Non-Convertible Capital Stock or rights to
acquire its Non-Convertible Capital Stock and dividends or distributions payable
solely to the Company or a Restricted Subsidiary), (ii) purchase, redeem,
defease or otherwise acquire or retire for value any Capital Stock of the
Company or of any direct or indirect parent of the Company or, with respect to
the Company, exercise any option to exchange any Capital Stock that by its terms
is exchangeable solely at the option of the Company (other than into Capital
Stock of the Company which is neither Exchangeable Stock nor Redeemable Stock),
(iii) purchase, repurchase, redeem, defease or otherwise acquire or retire for
value, prior to scheduled maturity or scheduled repayment thereof or scheduled
sinking fund payment thereon, any Subordinated Indebtedness (other than the
purchase, repurchase, or other acquisition of Subordinated Indebtedness
purchased in anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year of the date of
acquisition) or (iv) make any Investment in any Unrestricted Subsidiary or any
Affiliate of the Company other than a Restricted Subsidiary or a Person which
will become a Restricted Subsidiary as a result of any such
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Investment (each such payment described in clauses (i)-(iv) of this paragraph, a
"Restricted Payment"), unless at the time of and after giving effect to the
proposed Restricted Payment:
(1) no Default or Event of Default shall have occurred and be
continuing (or would result therefrom);
(2) the Company would be permitted to Incur an additional $1 of
Indebtedness pursuant to the provisions of Section 3.4(a); and
(3) the aggregate amount of all such Restricted Payments
subsequent to the Issue Date shall not exceed the sum of:
(A) 50% of aggregate Consolidated Net Income (or if such
Consolidated Net Income is a deficit, minus 100% of such deficit), and
minus 100% of the amount of any write-downs, write-offs, other
negative reevaluations and other negative extraordinary charges not
otherwise reflected in Consolidated Net Income during such period;
(B) the aggregate Net Cash Proceeds received by the Company
after the Issue Date from a sale by the Company of Capital Stock
(other than Redeemable Stock or Exchangeable Stock) of the Company or
from the issuance of any options or warrants or other rights to
acquire Capital Stock (other than Redeemable Stock or Exchangeable
Stock);
(C) the amount by which the principal amount of Indebtedness
of the Company or its Restricted Subsidiaries is reduced on the
Company's Consolidated balance sheet upon the conversion or exchange
(other than by a Subsidiary) subsequent to the Issue Date of any
Indebtedness of the Company or any Restricted Subsidiary converted or
exchanged for Capital Stock (other than Redeemable Stock or
Exchangeable Stock) of the Company (less the amount of any cash, or
the value of any other property,
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distributed by the Company or any Restricted Subsidiary upon such
conversion or exchange);
(D) an amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from payments of interest on
Indebtedness, dividends, repayments of loans or advances, or other
transfers of assets, in each case to the Company or any Restricted
Subsidiary from Unrestricted Subsidiaries, or from redesignations of
Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each
case as provided in the definition of "Investments"), not to exceed in
the case of any Unrestricted Subsidiary the amount of Investments
previously made by the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary; and
(E) $1,000,000, less the aggregate of all Excess Payments
made during such period.
(b) The failure to satisfy the conditions set forth in clauses (2) and
(3) of Section 3.3(a) shall not prohibit any of the following as long as the
condition set forth in Section 3.3(a)(1) is satisfied (except as set forth
below):
(i) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with Section 3.3(a);
(ii) any purchase, redemption, defeasance, or other acquisition
or retirement for value of Capital Stock or Subordinated Indebtedness of
the Company made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Capital Stock of the Company (other than
Redeemable Stock or Exchangeable Stock and other than stock issued or sold
to a Subsidiary or to an employee stock ownership plan), PROVIDED, HOWEVER,
that notwithstanding Section 3.3(a)(1), the occurrence or existence of a
Default or Event of Default shall not prohibit the making of such purchase,
redemption, defeasance or other acquisition or retirement, and PROVIDED,
FURTHER, such purchase, redemption, defeasance or other acquisition or
retirement shall not be included in
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the calculation of Restricted Payments made for purposes of Section
3.3(a)(3) and PROVIDED, FURTHER, that the Net Cash Proceeds from such sale
shall be excluded from Section 3.3(a)(3)(B);
(iii) any purchase, redemption, defeasance or other acquisition
or retirement for value of Subordinated Indebtedness of the Company made by
exchange for, or out of the proceeds of the substantially concurrent
Incurrence of for cash (other than to a Subsidiary), new Indebtedness of
the Company, PROVIDED, HOWEVER, that (A) such new Indebtedness shall be
contractually subordinated in right of payment to the Securities on terms
at least as favorable to the Security holders as the terms set forth in the
form of subordination provisions attached hereto as Exhibit B, (B) such new
Indebtedness has a Stated Maturity either (1) no earlier than the Stated
Maturity of the Indebtedness redeemed, repurchased, defeased, acquired or
retired or (2) after the Stated Maturity of the Securities and (C) such
Indebtedness has an Average Life equal to or greater than the Average Life
of the Indebtedness redeemed, repurchased, defeased, acquired or retired,
and PROVIDED, FURTHER, that such purchase, redemption, defeasance or other
acquisition or retirement shall not be included in the calculation of
Restricted Payments made for purposes of Section 3.3(a)(3);
(iv) any purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Indebtedness upon a Change of Control
or an Asset Sale to the extent required by the indenture or other agreement
pursuant to which such Subordinated Indebtedness was issued, but only if
the Company (A) in the case of a Change of Control, has made an offer to
repurchase the Securities as described under Section 3.8 or (B) in the case
of an Asset Sale, has applied the Net Available Cash from such Asset Sale
in accordance with Section 3.12 and Section 10.4 (if applicable);
(v) pro rata dividends paid by a Subsidiary with respect to a
series or class of its Capital Stock the majority of which is held by the
Company or a Wholly Owned Subsidiary;
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(vi) the payment of dividends on the Capital Stock of the Company
following an initial Public Equity Offering of such Capital Stock of up to
an amount per annum of 6% of the Net Cash Proceeds received by the Company
in such Public Equity Offering;
(vii) the purchase, redemption, acquisition, cancellation, or
other retirement for value of shares of Capital Stock of the Company,
options on any such shares or related phantom stock, or stock appreciation
rights or similar securities held by officers or employees or former
officers or employees (or their estates or beneficiaries under their
estates), upon the death, disability, retirement or termination of
employment of such employee or former employee, pursuant to the terms of an
employee benefit plan or any other agreement under which such shares of
stock or related rights were issued, provided that the aggregate cash
consideration paid, or distributions made, pursuant to this clause (vii)
after the date of this Indenture does not exceed an aggregate amount of
$1,000,000 plus the cash proceeds received by or contributed to the Company
from any reissuance of Capital Stock by the Company to members of
management and employees of the Company and its Subsidiaries; and
(viii) Investments in Unrestricted Subsidiaries of up to
$3,000,000 at any one time outstanding.
SECTION 3.4 LIMITATION ON INCURRENCE OF INDEBTEDNESS.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, Incur any Indebtedness, except that the
Company may Incur Indebtedness if, after giving effect thereto, the Consolidated
Coverage Ratio would be greater than 1.75:1 if such Incurrence takes place on or
prior to __________, 1998, or 2.0:1, if such Incurrence takes place thereafter.
(b) Notwithstanding the foregoing, this Section shall not limit the
ability of the Company or any Restricted Subsidiary to Incur the following
Indebtedness:
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(i) Refinancing Indebtedness (except with respect to
Indebtedness referred to in clauses (ii), (iii) or (iv) below);
(ii) Acquisition Indebtedness at any one time outstanding in an
aggregate principal amount not to exceed $15,000,000, PROVIDED that not
more than an aggregate of $6,000,000 of such Acquisition Indebtedness may
be incurred in any twelve month period;
(iii) Indebtedness of the Company which is owed to and held by a
Wholly Owned Subsidiary and Indebtedness of a Wholly Owned Subsidiary which
is owed to and held by the Company or a Wholly Owned Subsidiary, including,
without limitation, the Indebtedness evidenced by the Intercompany Notes;
PROVIDED, HOWEVER, that any subsequent issuance or transfer of any Capital
Stock which results in any such Wholly Owned Subsidiary ceasing to be a
Wholly Owned Subsidiary or any transfer of such Indebtedness (other than to
the Company or a Wholly Owned Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Indebtedness by the Company or by a
Wholly Owned Subsidiary, as the case may be;
(iv) Indebtedness of the Company (whether under the New Credit
Facility or otherwise) Incurred for the purpose of financing the working
capital needs of the Company and its Restricted Subsidiaries, PROVIDED,
HOWEVER, that after giving effect to the Incurrence of such Indebtedness
and any substantially simultaneous use of the proceeds thereof, the
aggregate principal amount of all such Indebtedness Incurred pursuant to
this clause (iv) and then outstanding immediately after such Incurrence and
such use of proceeds shall not exceed the sum of 60% of the book value of
the inventory and 90% of the book value of the receivables of the Company
and the Restricted Subsidiaries on a consolidated basis at such time plus
the amount of the Seasonal Overadvance and, PROVIDED, FURTHER, that such
aggregate principal amount outstanding shall not exceed $15,000,000 at any
time prior to __________, 1997 and PROVIDED FURTHER, that the Company's
Subsidiaries shall be permitted to guaran-
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tee Indebtedness Incurred by the Company pursuant to the New Credit
Facility;
(v) Acquired Indebtedness; PROVIDED, HOWEVER, that the Company
would have been able to Incur such Indebtedness at the time of the
Incurrence thereof pursuant to Section 3.4(a); and
(vi) Indebtedness of the Company or a Restricted Subsidiary
outstanding on the Issue Date (other than Indebtedness referred to in
clause (iv) above and Indebtedness being repaid or retired with the
proceeds of the Offering).
(c) Notwithstanding Sections 3.4(a) and (b), the Company shall not
Incur any Indebtedness if the proceeds thereof are used, directly or indirectly,
to repay, prepay, redeem, defease, retire, refund or refinance any Subordinated
Indebtedness unless such repayment, prepayment, redemption, defeasance,
retirement, refunding or refinancing is not prohibited by Section 3.3 or unless
such Indebtedness shall be contractually subordinated to the Securities at least
to the same extent as such Subordinated Indebtedness.
SECTION 3.5 LIMITATION ON PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any Subsidiary, to create
or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to (i)
pay dividends to or make any other distributions on its Capital Stock, or pay
any Indebtedness or other obligations owed to the Company or any other
Restricted Subsidiary, (ii) make any Investments in the Company or any other
Restricted Subsidiary or (iii) transfer any of its property or assets to the
Company or any other Restricted Subsidiary; PROVIDED, HOWEVER, that the
foregoing shall not apply to:
(a) any encumbrance or restriction existing pursuant to this Indenture
or any other agreement or instrument as in effect or entered into on the Issue
Date (including the New Credit Facility as in effect on the Issue Date);
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(b) any encumbrance or restriction with respect to a Subsidiary
pursuant to an agreement relating to any Acquired Indebtedness; PROVIDED,
HOWEVER, that such encumbrance or restriction was not Incurred in connection
with or in contemplation of such Subsidiary becoming a Subsidiary;
(c) any encumbrance or restriction pursuant to an agreement effecting
a refinancing, renewal, extension or replacement of Indebtedness referred to in
clause (a) or (b) above or contained in any amendment or modification with
respect to such Indebtedness; PROVIDED, HOWEVER, that the encumbrances and
restrictions contained in any such agreement, amendment or modification are no
less favorable in any material respect with respect to the matters referred to
in clauses (i), (ii) and (iii) above than the encumbrances and restrictions with
respect to the Indebtedness being refinanced, renewed, extended, replaced,
amended or modified;
(d) in the case of clause (c)(iii) above, customary non-assignment
provisions of any leases governing a leasehold interest or of any supply,
license or other agreement entered into in the ordinary course of business of
the Company or any Subsidiary;
(e) any restrictions with respect to a Subsidiary imposed pursuant to
an agreement entered into for the sale or disposition of all or substantially
all of the Capital Stock or assets of such Subsidiary pending the closing of
such sale or disposition; or
(f) any encumbrance or restriction existing by reason of applicable
law.
Nothing contained in this Section 3.5 shall prohibit the sale of
assets that secure Indebtedness of the Company or its Subsidiaries.
SECTION 3.6 LIMITATION ON SALE/LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any Restricted Subsidiary
to, enter into any Sale/Leaseback Transaction unless (i) the Company or such
Subsidiary would be entitled to create a Lien on such property securing
Indebtedness in an amount equal to the Attributable Debt with respect to such
transaction without equal-
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ly and ratably securing the Securities pursuant to Section 3.7 or (ii) the net
proceeds of such sale are at least equal to the fair value (as determined by the
Board of Directors) of such property and the Company or such Subsidiary shall
apply or cause to be applied an amount in cash equal to the net proceeds of such
sale to the retirement, within 30 days of the effective date of any such
arrangement, of Senior Indebtedness or Indebtedness of a Restricted Subsidiary,
PROVIDED, HOWEVER, that the Company or any Restricted Subsidiary may enter into
a Sale/Leaseback Transaction as long as the sum of (x) the Attributable Debt
with respect to such Sale/Leaseback Transaction and all other Sale/Leaseback
Transactions entered into pursuant to this proviso, plus (y) the amount of
outstanding Indebtedness secured by Liens Incurred pursuant to the final proviso
of Section 3.7, does not exceed 5% of Consolidated Net Tangible Assets as
determined based on the consolidated balance sheet of the Company as of the end
of the most recent fiscal quarter for which financial statements are available.
SECTION 3.7 LIMITATION ON LIENS.
Except as provided for under Article X, the Company shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly, incur or
permit to exist any Lien of any nature whatsoever on any of its properties
(including, without limitation, Capital Stock), whether owned at the date of
such Indenture or thereafter acquired, other than:
(a) pledges or deposits made by such Person under workers'
compensation, unemployment insurance laws or similar legislation, or good faith
deposits in connection with bids, tenders, contracts (other than for payment of
Indebtedness) or leases to which such Person is a party, or deposits to secure
statutory or regulatory obligations of such Person or deposits of cash of United
States Government bonds to secure surety, appeal or performance bonds to which
such Person is a party, or deposits as security for contested taxes or import
duties or for the payment of rent, in each case Incurred in the ordinary course
of business;
(b) Liens imposed by law such as carriers', warehousemen's and
mechanics' Liens, in each case, arising in the ordinary course of business and
with respect
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to amounts not yet due or being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; or other Liens arising out of judgments or awards
against such Person with respect to which such Person shall then be diligently
prosecuting appeal or other proceedings for review;
(c) Liens for property taxes not yet subject to penalties for non-
payment or which are being contested in good faith and by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made;
(d) Liens in favor of issuers or surety bonds or letters of credit
issued pursuant to the request of and for the account of such Person in the
ordinary course of its business; PROVIDED, HOWEVER, that such letters of credit
may not constitute Indebtedness;
(e) minor survey exceptions, minor encumbrances, easements or
reservations of, or rights of others for, rights of way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or other
restrictions as to the use of real properties or liens incidental to the conduct
of the business of such Person or to the ownership of its properties which were
not Incurred in connection with Indebtedness or other extensions of credit and
which do not in the aggregate materially adversely affect the value of said
properties or materially impair their use in the operation of the business of
such Person;
(f) Liens securing Indebtedness Incurred to finance the construction
of, purchase of, or repairs, improvements or additions to, property (including
Acquisition Indebtedness Incurred pursuant to Section 3.4(b)(ii)); PROVIDED,
HOWEVER, that the Lien may not extend to any other property owned by the Company
or any Restricted Subsidiary at the time the Lien is incurred, and the
Indebtedness secured by the Lien may not be issued more than 180 days after the
later of the acquisition, completion of construction, repair, improvement,
addition or commencement of full operation of the property subject to the Lien;
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(g) Liens existing on the Issue Date (other than Liens relating to
Indebtedness or other obligations being repaid or Liens that are otherwise
extinguished with the proceeds of the Offering);
(h) Liens on property (excluding Capital Stock) of a Person at the
time such Person becomes a Subsidiary; PROVIDED, HOWEVER, that any such Lien may
not extend to any other property owned by the Company or any Restricted
Subsidiary;
(i) Liens on property at the time the Company or a Subsidiary acquires
the property, including any acquisition by means of a merger or consolidation
with or into the Company or a Subsidiary; PROVIDED, HOWEVER, that such Liens are
not incurred in connection with, or in contemplation of, such merger or
consolidation; and PROVIDED, FURTHER, that the Lien may not extend to any other
property owned by the Company or any Restricted Subsidiary;
(j) Liens securing Indebtedness or other obligations of a Subsidiary
owing to the Company or a Wholly Owned Subsidiary, including, without
limitation, the Indebtedness Incurred under Intercompany Notes; PROVIDED, that
any such Lien securing Indebtedness pursuant to any Intercompany Note shall be
limited to the inventory and accounts receivable of the Subsidiary of the
Company issuing such Intercompany Note;
(k) Liens incurred by a Person other than the Company or any
Subsidiary on assets that are the subject of a Capitalized Lease Obligation to
which the Company or a Subsidiary is a party; PROVIDED, HOWEVER, that any such
Lien may not secure Indebtedness of the Company or any Subsidiary (except by
virtue of clause (x) of the definition of "Indebtedness") and may not extend to
any other property owned by the Company or any Restricted Subsidiary;
(l) Liens on inventory and accounts receivable of the Company and its
Subsidiaries securing Indebtedness permitted to be incurred pursuant to Section
3.4(b)(iv);
(m) Liens to secure any refinancing, refunding, extension, renewal or
replacement (or successive
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refinancings, refundings, extensions, renewals or replacements) as a whole, or
in part, of any Indebtedness secured by any Lien referred to in the foregoing
clauses (f), (g), (h) and (i), PROVIDED, HOWEVER, that (x) such new Lien shall
be limited to all or part of the same property that secured the original Lien
(plus improvements on such property) and (y) the Indebtedness secured by such
Lien at such time is not increased (other than by an amount necessary to pay
fees and expenses, including premiums, related to the refinancing, refunding,
extension, renewal or replacement of such Indebtedness); and
(n) Liens by which the Securities are secured equally and ratably with
other Indebtedness of the Company pursuant to this Section 3.7;
without effectively providing that the Securities shall be secured equally and
ratably with (or prior to) the obligations so secured for so long as such
obligations are so secured; PROVIDED, HOWEVER, that the Company may incur other
Liens other than on the Collateral to secure Indebtedness as long as the sum of
(x) the amount of outstanding Indebtedness secured by Liens incurred pursuant to
this proviso plus (y) the Attributable Debt with respect to all outstanding
leases in connection with Sale/Leaseback Transactions entered into pursuant to
the proviso to Section 3.6 does not exceed 5% of Consolidated Net Tangible
Assets as determined with respect to the Company as of the end of the most
recent fiscal quarter for which financial statements are available.
SECTION 3.8 CHANGE OF CONTROL.
In the event of a Change of Control, the Company shall make an offer
to purchase (the "Change of Control Offer") the Securities then outstanding at a
purchase price equal to 101 percent (101%) of the Accreted Value thereof plus
accrued interest to the Change of Control Purchase Date (as defined below) on
the terms set forth in this Section. The date on which the Company shall
purchase the Securities pursuant to this Section (the "Change of Control
Purchase Date") shall be no earlier than 30 days, nor later than 60 days, after
the notice referred to below is mailed, unless a longer period shall be required
by law. The Company shall notify the Trustee in writing promptly after the
occurrence of any Change of Control of the Company's obliga-
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tion to offer to purchase the Securities.
Notice of a Change of Control Offer shall be mailed by the Company to
the Holders of the Securities at their last registered address (with a copy to
the Trustee and the Paying Agent) within thirty (30) days after a Change in
Control has occurred. The Change of Control Offer shall remain open from the
time of mailing until five (5) Business Days before the Change of Control
Purchase Date. The notice shall contain all instructions and materials
necessary to enable such Holders to tender (in whole or in part) the Securities
pursuant to the Change of Control Offer. The notice, which shall govern the
terms of the Change of Control Offer, shall state:
(a) that the Change of Control Offer is being made pursuant to this
Section;
(b) the purchase price and the Change of Control Purchase Date;
(c) that any Security not surrendered or accepted for payment will
continue to accrue interest;
(d) that any Security accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control
Purchase Date if payment is made;
(e) that any Holder electing to have a Security purchased (in whole
or in part) pursuant to a Change of Control Offer will be required to surrender
the Security, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Security completed, to the Paying Agent at the address specified
in the notice (or otherwise make effective delivery of the Security pursuant to
book-entry procedures and the related rules of the applicable depositories) at
least five Business Days before the Change of Control Purchase Date; and
(f) that any Holder will be entitled to withdraw his or her election
if the Paying Agent receives, not later than three Business Days prior to the
Change of Control Purchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Security the Holder delivered for purchase and a statement that such Holder
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is withdrawing his or her election to have the Security purchased.
On the Change of Control Purchase Date, the Company shall (i) accept
for payment the Securities, or portions thereof, surrendered and properly
tendered and not withdrawn, pursuant to the Change of Control Offer, (ii)
deposit with the Paying Agent money sufficient to pay the purchase price plus
accrued interest of all the Securities or portions thereof, so accepted and
(iii) deliver to the Trustee the Securities so accepted together with an
Officers' Certificate stating that such Securities have been accepted for
payment by the Company. The Paying Agent shall promptly mail or deliver to
Holders of Securities so accepted payment in an amount equal to the purchase
price. Holders whose Securities are purchased only in part will be issued new
Securities equal in principal amount to the unpurchased portion of the
Securities surrendered.
The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section by virtue thereof.
SECTION 3.9 COMPLIANCE CERTIFICATE.
The Company shall, within 120 days after the close of each fiscal year
following the issuance of the Securities, file with the Trustee an Officer's
Certificate, with one of the Officers executing the same being the principal
executive officer, the principal financial officer or the principal accounting
officer of the Company, covering the period from the date of issuance of the
Securities to the end of the fiscal year in which the Securities were issued, in
the case of the first such certificate, and covering the preceding fiscal year
in the case of each subsequent certificate, and stating whether or not, to the
knowledge of each such executing Officer, the Company and each Subsidiary
Guarantor has complied with and performed and fulfilled all
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conditions and covenants on its part contained in this Indenture and is not in
default in the performance or observance of any of the terms, provisions and
conditions contained in this Indenture, and, if any such signer has obtained
knowledge of any default by the Company in the performance, observance or
fulfillment of any such condition, covenant, term or provision specifying each
such default and the nature thereof. For the purpose of this Section 3.9,
compliance shall be determined without regard to any grace period or requirement
of notice provided pursuant to the terms of this Indenture.
SECTION 3.10 SEC REPORTS.
The Company shall, to the extent required by TIA 314(a), file with
the Trustee, within 15 days after the filing with the SEC, copies of the annual
reports and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the SEC may by rules and regulations
prescribe) which the Company is required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act. In the event the Company is at any
time no longer subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act, it shall, for so long as the Securities remain outstanding,
file with the Trustee and the SEC and mail to each Securityholder at such
Securityholder's registered address, within 15 days after the Company would have
been required to file such documents with the SEC, copies of the annual reports
and of the information, documents and other reports which the Company would have
been required to file with the SEC if the Company had continued to be subject to
such Sections 13 or 15(d). The Company also shall comply with the other
provisions of TIA 314(a).
SECTION 3.11 TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, enter into, permit to exist, renew or extend any
transaction or series of transactions (including, without limitation, the sale,
purchase, exchange or lease of any assets or property or the rendering of any
services) with any Affiliate of the Company, any Plaster Entity, any Lindsey
Entity or Energy unless (i) the terms of such transaction or series of
transactions are (A) no less favorable to
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the Company or such Restricted Subsidiary, as the case may be, than would be
obtainable in a comparable transaction or series of related transactions in
arm's-length dealings with an unrelated third party and, in the case of a
transaction or series of transactions involving payments or consideration in
excess of $100,000 approved by a majority of the Outside Directors, and (B) set
forth in writing if such transaction or series of transactions involves
aggregate payments or consideration in excess of $250,000, and (ii) with respect
to a transaction or series of transactions involving aggregate payments or
consideration in excess of $1,000,000, such transaction or series of
transactions has been determined, in the written opinion of an independent
nationally recognized investment banking firm, to be fair, from a financial
point of view, to the Company or such Restricted Subsidiary. The foregoing
provisions do not prohibit (i) the payment of reasonable fees to directors of
the Company and its subsidiaries, (ii) scheduled payments made pursuant to the
terms of any of the Basic Agreements, as the terms of each such agreement are in
effect on the Issue Date, or (iii) any transaction between the Company and a
Wholly Owned Subsidiary or between Wholly Owned Subsidiaries otherwise permitted
by the terms of the Indenture. Any transaction which has been determined, in
the written opinion of an independent nationally recognized investment banking
firm, to be fair, from a financial point of view, to the Company or the
applicable Restricted Subsidiary shall be deemed to be in compliance with this
Section 3.11.
SECTION 3.12 SALES OF ASSETS.
(a) Neither the Company nor any Restricted Subsidiary shall
consummate any Asset Sale unless (i) the Company or such Restricted Subsidiary
receives consideration at the time of such Asset Sale at least equal to the fair
market value, as determined in good faith by the Board of Directors, of the
shares or assets subject to such Asset Sale, (ii) at least 80% of the
consideration thereof received by the Company or such Restricted Subsidiary is
in the form of Additional Assets or cash or cash equivalents which cash
equivalents are promptly converted into cash by the Person receiving such
payment and (iii) an amount equal to 100% of the Net Available Cash is applied
by the Company (or such Subsidiary, as the case may be) as set forth herein.
The Company shall not
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permit any Unrestricted Subsidiary to make any Asset Sale unless such
Unrestricted Subsidiary receives consideration at the time of such Asset Sale at
least equal to the fair market value of the shares or assets so disposed of as
determined in good faith by the Board of Directors.
(b) Within three hundred and sixty (360) days (such 360 days being
the "Application Period") following the consummation of an Asset Sale, the
Company or such Restricted Subsidiary shall apply the Net Available Cash from
such Asset Sale as follows: (i) FIRST, to the extent the Company or such
Restricted Subsidiary elects, to reinvest in Additional Assets; (ii) SECOND, to
the extent of the balance of such Net Available Cash after application in
accordance with clause (i), and to the extent the Company or such Restricted
Subsidiary elects (or is required by the terms of any Senior Indebtedness or any
Indebtedness of such Restricted Subsidiary), to prepay, repay or purchase (A)
secured Senior Indebtedness or (B) Indebtedness (other than any Preferred Stock)
of a Restricted Subsidiary, in either case other than Indebtedness owed to the
Company (except to the extent that the proceeds of any such repayment received
by the Company are used to repay secured Senior Indebtedness of the Company or
an Affiliate of the Company); and (iii) THIRD, to the extent of the balance of
such Net Available Cash after application in accordance with clause (i) and
(ii), to make an offer to purchase the Securities at not less than 100% of their
Accreted Value, plus accrued interest (if any) pursuant to and subject to the
conditions of Section 3.12(c); PROVIDED, HOWEVER, that in connection with any
prepayment, repayment or purchase of Indebtedness pursuant to clause (ii) or
(iii) above, the Company or such restricted Subsidiary shall retire such
Indebtedness and cause the related loan commitment (if any) to be permanently
reduced in an amount equal to the principal amount so prepaid, repaid or
purchased. To the extent that any Net Available Cash remains after the
application of such Net Available Cash in accordance with this paragraph, the
Company or such Restricted Subsidiary shall utilize such remaining Net Available
Cash in any manner set forth in clause (i) or clause (ii) above.
To the extent that any or all of the Net Available Cash of any Foreign
Asset Sale is prohibited or delayed by applicable local law from being
repatriated to the United States, the portion of such Net Available Cash
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so affected shall not be required to be applied at the time provided above, but
may be retained by the applicable Restricted Subsidiary so long, but only so
long, as the applicable local law will not permit repatriation to the United
States (the Company hereby agreeing to promptly take or cause the applicable
Restricted Subsidiary to promptly take all actions required by the applicable
local law to permit such repatriation). Once such repatriation of any of such
affected Net Available Cash is permitted under the applicable local law, such
repatriation shall be immediately effected and such repatriated Net Available
Cash will be applied in the manner set forth in this Section as if such Asset
Sale had occurred on the date of such repatriation.
To the extent that the Board of Directors determines, in good faith,
that repatriation of any or all of the Net Available Cash of any Foreign Asset
Sale would have a material adverse tax consequence to the Company, the Net
Available Cash so affected may be retained outside of the United States by the
applicable Restricted Subsidiary for so long as such material adverse tax
consequence would continue.
Notwithstanding the foregoing, this Section shall not apply to, or
prevent any sale of assets, property, or Capital Stock of Subsidiaries to the
extent that the fair market value (as determined in good faith by the Board of
Directors) of such asset, property or Capital Stock, together with the fair
market value of all other assets, property, or Capital Stock of Subsidiaries
sold, transferred or otherwise disposed of in Asset Sales during the twelve
month period preceding the date of such sale, does not exceed 5% of Consolidated
Net Tangible Assets as determined as of the end of the most recent fiscal
quarter, and no violation of this Section shall be deemed to have occurred as a
consequence thereof.
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company as an entirety to a Person in a transaction
permitted under Article IV, the Successor Corporation shall be deemed to have
sold the properties and assets of the Company not so transferred for purposes of
Section 3.12, and shall comply with the Section 3.12 with respect to such deemed
sale as if it were an Asset Sale.
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(c) Subject to the last sentence of this paragraph, in the event of
an Asset Sale that requires the purchase of Securities pursuant to clause (iii)
of the first paragraph of Section 3.12(b), the Company will be required to
purchase Securities tendered pursuant to an offer by the Company for the
Securities (the "Asset Sale Offer") at a purchase price of not less than 100% of
their Accreted Value plus accrued interest to the Asset Sale Purchase Date in
accordance with the procedures (including prorationing in the event of
oversubscription) set forth in Section 3.12(d). If the aggregate purchase price
of Securities tendered pursuant to the Asset Sale Offer is less than the Net
Available Cash allotted to the purchase of the Securities, the Company shall
apply the remaining Net Available Cash in accordance with the last sentence of
the first paragraph of Section 3.12(b). The Company shall not be required to
make an Asset Sale Offer for Securities pursuant to this Section if the Net
Available Cash available therefor (after application of the proceeds as provided
in Section 3.12(b)(i) and (ii)) is less than $1,000,000 for any particular Asset
Sale (which lesser amounts shall not be carried forward for purposes of
determining whether an Asset Sale Offer is required with respect to the Net
Available Cash from any subsequent Asset Sale).
(d) (1) Promptly, and in any event prior to the 360th day after the
later of the date of each Asset Sale as to which the Company must make an Asset
Sale Offer or the receipt of Net Available Cash therefrom, the Company shall be
obligated to deliver to the Trustee and send, by first-class mail to each
Holder, a written notice stating that the Holder may elect to have his
Securities purchased by the Company either in whole or in part (subject to
prorationing as hereinafter described in the event the Asset Sale Offer is
oversubscribed) in integral multiples of $1,000 of principal amount, at the
applicable purchase price. The notice shall specify a purchase date not less
than 30 days, nor more than 60 days, after the date of such notice (the "Asset
Sale Purchase Date") and shall contain the information required in a notice for
a Change of Control Offer, to the extent applicable.
(2) Not later than the date upon which written notice of an
Asset Sale Offer is delivered to the Trustee as provided in Section 3.12(d)(1),
the Company
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shall deliver to the Trustee an Officers' Certificate as to (i) the amount of
the Asset Sale Offer (the "Asset Sale Offer Amount"), (ii) the allocation of the
Net Available Cash from the Asset Sales pursuant to which such Asset Sale Offer
is being made and (iii) the compliance of such allocation with Section 3.12(a).
On such date, the Company shall also deposit with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust) funds in
an amount equal to the Asset Sale Offer Amount to be held for payment in
accordance with the provisions of this Section. Upon the expiration of the
period for which the Asset Sale Offer remains open (the "Offer Period"), the
Company shall deliver, or cause to be delivered, to the Trustee the Securities
or portions thereof which have been properly tendered to and are to be accepted
by the Company. The Paying Agent shall, on the Asset Sale Purchase Date, mail
or deliver payment to each tendering Holder in the amount of the purchase price.
In the event that the aggregate purchase price of the Securities delivered, or
caused to be delivered, by the Company to the Trustee is less than the Asset
Sale Offer Amount, the Paying Agent shall deliver the excess to the Company
immediately after the expiration of the Offer Period.
(3) Holders electing to have a Security purchased will be
required to surrender the Security, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Security duly completed, to the Company or
the Paying Agent, as specified in, and at the address specified in, the notice
at least ten Business Days prior to the Asset Sale Purchase Date. Holders will
be entitled to withdraw their election if the Trustee or the Paying Agent
receives, not later than three Business Days prior to the Asset Sale Purchase
Date, a telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the Security which was delivered for
purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased. If at the expiration of the Offer
Period the aggregate principal amount of Securities surrendered by Holders
exceeds the Asset Sale Offer Amount, the Company shall select the Securities to
be purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Securities in denominations of $1,000,
or integral multiples thereof, shall be purchased). Holders
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whose Securities are purchased only in part will be issued new Securities equal
in principal amount to the unpurchased portion of the Securities surrendered.
(4) At the time the Company delivers Securities to the Trustee
which are to be accepted for purchase, the Company will also deliver an
Officers' Certificate stating that such Securities are to be accepted by the
Company pursuant to and in accordance with the terms of this Section. A
Security shall be deemed to have been accepted for purchase at the time the
Paying Agent, directly or through an agent, mails or delivers payment therefor
to the surrendering Holder.
(e) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section by virtue thereof.
SECTION 3.13 CORPORATE EXISTENCE.
Except as permitted under Article IV, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect its
corporate existence and the corporate existence of each Restricted Subsidiary in
accordance with the respective organizational documents of the Company and of
each Restricted Subsidiary and the rights (charter and statutory), licenses and
franchises of the Company and the Restricted Subsidiaries necessary or
appropriate to carry out their businesses; PROVIDED, HOWEVER, that the Company
shall not be required to preserve any such right, license or franchise, or the
corporate existence of any Restricted Subsidiary if the preservation thereof is
no longer desirable in the conduct of the business of the Company and the
Restricted Subsidiaries taken as a whole; and PROVIDED, FURTHER, that any
Restricted Subsidiary may consolidate with, merge into, or sell, convey,
transfer, lease or otherwise dispose of all or part of its property and assets
to the Company or any Wholly Owned Subsidiary to the extent otherwise permitted
under this Indenture.
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SECTION 3.14 PAYMENT OF TAXES AND OTHER CLAIMS.
The Company shall pay or discharge, or cause to be paid or discharged,
before any material penalty accrues thereon all material taxes, assessments and
governmental charges levied or imposed upon the Company or any Restricted
Subsidiary or upon the income, profits or property of the Company or any
Restricted Subsidiary; PROVIDED, HOWEVER, that the Company shall not be required
to pay or discharge, or cause to be paid or discharged, any such tax,
assessment, charge or claim the amount, applicability or validity of which is
being contested in good faith by appropriate proceedings and for which adequate
reserves, if the same shall be required in accordance with generally accepted
accounting principles, have been made.
SECTION 3.15 NOTICE OF DEFAULTS AND OTHER EVENTS.
In the event that any Indebtedness of the Company or any Significant
Subsidiary having an outstanding principal amount of $1,000,000 or more
individually or $2,000,000 or more in the aggregate has been or could be
declared due and payable before its maturity because of the occurrence of any
event of default under such Indebtedness (including any Default under this
Indenture), the Company, promptly after it becomes aware thereof, will give
written notice thereof to the Trustee.
SECTION 3.16 MAINTENANCE OF PROPERTIES AND INSURANCE.
The Company shall cause all properties used or useful in the conduct
of its business or the business of each Restricted Subsidiary and material to
the Company and the Restricted Subsidiaries taken as a whole to be maintained
and kept in normal condition, repair and working order and supplied with all
necessary equipment; PROVIDED, HOWEVER, that nothing in this Section 3.16 shall
prevent the Company or any Restricted Subsidiary from discontinuing the use,
operation or maintenance of any of such properties or disposing of any of them,
if such discontinuance or disposal is, in the judgment of an Officer (or other
employee of the Company or any Restricted Subsidiary) of the Company or such
Restricted Subsidiary having managerial responsibility for any such property,
appropriate.
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The Company shall provide or cause to be provided, for itself and the
Restricted Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds customarily insured against by corporations
similarly situated and owning like properties, including, but not limited to,
product liability insurance and public liability insurance with reputable
insurers or with the government of the United States of America, or an agency or
instrumentality thereof, of such kinds, and in such amounts, with such
deductibles and by such methods as the Company in good faith shall determine to
be reasonable and appropriate in the circumstances.
SECTION 3.17 LIMITATION ON ISSUANCE OF CAPITAL STOCK AND INCURRENCE OF
INDEBTEDNESS OF RESTRICTED SUBSIDIARIES.
The Company shall not permit any Restricted Subsidiary, directly or
indirectly, to issue or sell, and shall not permit any Person other than the
Company or a Wholly Owned Subsidiary to own (except to the extent that any such
Person may own on the Issue Date), any shares of such Restricted Subsidiary's
Capital Stock (including options, warrants or other rights to purchase shares of
Capital Stock) except, to the extent otherwise permitted by this Indenture, (i)
to the Company or another Restricted Subsidiary that is a Wholly Owned
Subsidiary of the Company, or (ii) if, immediately after giving effect to such
issuance and sale, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary for purposes of this Indenture. The Company shall not
permit any Restricted Subsidiary, directly or indirectly, to Incur Indebtedness
other than pursuant to Section 3.4(b).
SECTION 3.18 LIMITATION ON CHANGES IN THE
NATURE OF THE BUSINESS.
The Company and its Subsidiaries shall not engage in any line of
business other than the business of the sale and distribution of propane gas and
operations related thereto for any period of time in excess of 270 consecutive
days for any such unrelated line of business.
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ARTICLE IV
CONSOLIDATION, MERGER AND SALE
SECTION 4.1 MERGER AND CONSOLIDATION OF COMPANY.
(a) The Company shall not, in a single transaction or through a
series of related transactions, consolidate with or merge with or into any other
corporation or sell, assign, convey, transfer or lease or otherwise dispose of
all or substantially all of its properties and assets to any Person or group of
affiliated Persons unless:
(i) either the Company shall be the continuing Person, or the
Person (if other than the Company) formed by such consolidation or into
which the Company is merged or to which the properties and assets of the
Company as an entirety are transferred (the "Successor Corporation"), shall
be a corporation organized and existing under the laws of the United States
or any State thereof or the District of Columbia and shall expressly
assume, by an indenture supplemental hereto executed and delivered to the
Trustee, in form and substance satisfactory to the Trustee, all the
obligations of the Company under this Indenture and the Securities;
(ii) immediately before and immediately after giving effect to
such transaction on a pro forma basis (and treating any Indebtedness which
becomes an obligation of the Company (or the Successor Corporation if the
Company is not the continuing obligor under the Indenture) or any
Restricted Subsidiary as a result of such transaction as having been
Incurred by such Person at the time of such transaction), no Default shall
have occurred and be continuing;
(iii) the Company shall have delivered, or caused to be
delivered, to the Trustee an Officers' Certificate and, as to legal
matters, an Opinion of Counsel, each in form and substance satisfactory to
the Trustee, each stating that such consolidation, merger or transfer and
such supplemental indenture comply with this Section and that
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all conditions precedent herein provided for relating to such transaction
have been complied with;
(iv) immediately after giving effect to such transaction on a pro
forma basis (and treating any Indebtedness which becomes an obligation of
the Company (or the Successor Corporation if the Company is not the
continuing obligor under this Indenture) or a Restricted Subsidiary in
connection with or as a result of such transaction as having been Incurred
by such Person at the time of such transaction, the Consolidated Coverage
Ratio of the Company (or the Successor Corporation if the Company is not
the continuing obligor under this Indenture) is at least 1:1, PROVIDED
that, if the Consolidated Coverage Ratio before giving effect to such
transaction is within the range set forth in column (A) below, then the pro
forma Consolidated Coverage Ratio of the Company or the Successor
Corporation shall be at least equal to the lesser of (1) the ratio
determined by multiplying the percentage set forth in column (B) below by
the Consolidated Coverage Ratio of the Company prior to such transaction
and (2) the ratio set forth in column (C) below:
(A) (B) (C)
1.11:1 to 1.99:1 90% 1.50:1
2.00:1 to 2.99:1 80% 2.10:1
3.00:1 to 3.99:1 70% 2.40:1
4.00:1 or more 60% 2.50:1;
and
(v) immediately after giving effect to such transaction on a pro
forma basis (and treating any Indebtedness which becomes an obligation of
the Company (or the Successor Corporation if the Company is not the
continuing obligor under this Indenture) or a Restricted Subsidiary in
connection with or as a result of such transaction as having been Incurred
by such Person at the time of such transaction), the Company (or the
Successor Corporation if the Company is not the continuing obligor under
this Indenture) shall have Consolidated Net Worth in an amount which is not
less than the Consolidated Net Worth immediately prior to such transaction.
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Notwithstanding the foregoing paragraphs (ii), (iv) and (v), any
Restricted Subsidiary may consolidate with, merge into or transfer all or part
of its properties and assets to the Company or any Wholly Owned Subsidiary or
Wholly Owned Subsidiaries and no violation of this Section shall be deemed to
have occurred as a consequence thereof, as long as the requirements of
paragraphs (i) and (iii) are satisfied in connection therewith.
(b) A Subsidiary Guarantor (other than a Subsidiary Guarantor whose
Subsidiary Guarantee is being released pursuant to Section 12.4 as a result of
such transaction) shall not, and the Company shall not permit a Subsidiary
Guarantor to, in a single transaction or through a series of related
transactions, consolidate with or merge into any other Person (other than a
wholly owned Subsidiary of such Subsidiary Guarantor, another Subsidiary
Guarantor or the Company) or sell, assign, convey, transfer, or lease or
otherwise dispose of all or substantially all of its properties and assets to
any Person or group of affiliated persons (other than another Subsidiary
Guarantor or the Company) unless:
(i) either (A) such Subsidiary Guarantor shall be the continuing
corporation or (B) the Person (if other than such Subsidiary Guarantor)
formed by such consolidation or into which such Guarantor is merged or the
Person which acquires by conveyance, transfer, lease or disposition of all
or substantially all of the properties and assets of such Subsidiary
Guarantor (a "Successor Subsidiary Guarantor") (1) shall be a corporation,
organized and validly existing under the laws of the United States of
America or any State thereof or the District of Columbia or Canada and (2)
shall expressly assume by an indenture supplemental hereto, executed and
delivered to the Trustee, in form reasonably satisfactory to the Trustee,
all the obligations of such Subsidiary Guarantor under the Securities and
this Indenture;
(ii) immediately before and after giving effect to such
transaction on a pro forma basis (and treating any Indebtedness not
previously an obligation of such Subsidiary Guarantor or a subsidiary of
such Subsidiary Guarantor which becomes the obligation of such Subsidiary
Guarantor or any of its
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subsidiaries in connection with or as a result of such transaction as
having been Incurred at the time of such transaction), the Subsidiary
Guarantor or Subsidiary Successor Guarantor, as the case may be, shall have
a consolidated net worth equal to or greater than the consolidated net
worth of such Subsidiary Guarantor immediately prior to such transaction
(in each case consolidated net worth shall be calculated in a manner
consistent with the manner in which Consolidated Net Worth shall be
calculated hereunder with respect to the Company);
(iii) immediately after giving effect to such transaction on a
pro forma basis (and treating any Indebtedness not previously an obligation
of such Subsidiary Guarantor or a Subsidiary of such Subsidiary Guarantor
which becomes the obligation of such Guarantor or any of its Subsidiaries
in connection with or as a result of such transaction as having been
Incurred at the time of such transaction) no Default shall have occurred
and be continuing;
(iv) immediately after giving effect to such transaction on a
pro forma basis (and treating any Indebtedness not previously an obligation
of such Subsidiary Guarantor or a Subsidiary of such Subsidiary Guarantor
which becomes the obligation of such Subsidiary Guarantor or any of its
Subsidiaries in connection with or as a result of such transaction as
having been Incurred at the time of such transaction), the consolidated
coverage ratio of the Successor Subsidiary Guarantor is equal to at least
the lesser of 2:1 or the consolidated coverage ratio of the predecessor
Subsidiary Guarantor immediately prior to such transaction (in each case
consolidated Coverage Ratio shall be calculated in a manner consistent with
the manner in which Consolidated coverage ratio shall be calculated
hereunder with respect to the Company); and
(v) such Subsidiary Guarantor shall have delivered or caused to
be delivered to the Trustee an Officers' Certificate and, as to legal
matters, an Opinion of Counsel, each in form and substance reasonably
satisfactory to the Trustee, each stating that such consolidation, merger,
conveyance or
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transfer or lease and such supplemental indenture comply with this
Indenture, and that all conditions precedent herein provided for relating
to such transactions have been complied with.
SECTION 4.2 SUCCESSOR SUBSTITUTED.
(a) Upon any such consolidation or merger, or any conveyance,
transfer, or disposition of all or substantially all of the properties or assets
of the Company in accordance with Section 4.1(a), but not in the case of a
lease, the Successor Corporation shall succeed to and be substituted for the
Company under this Indenture and the Securities, and the Company shall thereupon
be released from all obligations hereunder and under the Securities and the
Company, as the predecessor corporation, may thereupon or at any time thereafter
be dissolved, wound up or liquidated. The Successor Corporation thereupon may
cause to be signed, and may issue either in its own name or in the name of the
Company, all or any of the Securities issuable hereunder which theretofore shall
not have been signed by the Company and delivered to the Trustee; and, upon the
order of the Successor Corporation instead of the Company and subject to all the
terms, conditions and limitations prescribed in this Indenture, the Trustee
shall authenticate and shall deliver any Securities which the Successor
Corporation thereafter shall cause to be signed and delivered to the Trustee for
that purpose. All the Securities so issued shall in all respects have the same
legal rank and benefit under this Indenture as the Securities theretofore or
thereafter issued in accordance with the terms of this Indenture as though all
such Securities had been issued at the date of the execution hereof.
(b) Upon any such consolidation or merger, or any conveyance,
transfer, or disposition of all or substantially all of the properties or assets
of any Subsidiary Guarantor in accordance with Section 4.1(b), but not in the
case of a lease, the Successor Subsidiary Guarantor shall succeed to and be
substituted for such Subsidiary Guarantor under this Indenture and the
Securities, and such Subsidiary Guarantor shall thereupon be released from all
obligations hereunder and under the Securities and such guarantor, as the
predecessor guarantor, may thereupon or at any time thereafter be dissolved,
wound up or liquidated.
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(c) In the case of any consolidation, merger or transfer described in
Section 4.2(a) or 4.2(b) above, such changes in form (but not in substance) may
be made in the Securities thereafter to be issued as may be appropriate.
ARTICLE V
DEFAULTS AND REMEDIES
SECTION 5.1 EVENTS OF DEFAULT.
An "Event of Default" means any of the following events:
(a) default in the payment of interest on any Security when the same
becomes due and payable, and such default continues for a period of 30 days;
(b) default in the payment of the principal of any Security when the
same becomes due and payable at maturity or otherwise or a failure to redeem or
purchase Securities when required pursuant to this Indenture or the Securities;
(c) default in performance of any other covenants or agreements in
the Securities, this Indenture or the Pledge Agreement and the default continues
for 30 days after the date on which written notice of such default is given to
the Company by the Trustee or the Collateral Agent or to the Company and the
Trustee by Holders of at least 25% in principal amount of the Securities then
outstanding hereunder; PROVIDED that the failure to commence a Change of Control
Offer following a Change of Control pursuant to clause (vi) of the definition of
"Change of Control" shall not constitute an Event of Default if, during such 30
day period, the Company takes the necessary actions with respect to the Board of
Directors to comply with the requirements of clauses (vi)(A), (vi)(B) and
(vi)(C) of the definition of "Change of Control";
(d) there shall have occurred either (a) a default by the Company or
any Subsidiary under any instrument under which there is or may be secured or
evidenced any Indebtedness of the Company or any Subsidiary of the Company
(other than the Securities) having an
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outstanding principal amount of $2,000,000 (or its foreign currency equivalent)
or more individually or $5,000,000 (or its foreign currency equivalent) or more
in the aggregate that has caused the holders thereof to declare such
Indebtedness to be due and payable prior to its Stated Maturity or (b) a default
by the Company or any Subsidiary in the payment when due of any portion of the
principal under any such instrument, and such unpaid portion exceeds $2,000,000
(or its foreign currency equivalent) individually or $5,000,000 (or its foreign
currency equivalent) in the aggregate and is not paid, or such default is not
cured or waived, within any grace period applicable thereto;
(e) any final judgment or order (not covered by insurance) for the
payment of money shall be rendered against the Company or any Significant
Subsidiary in an amount in excess of $2,000,000 (or its foreign currency
equivalent) individually or $5,000,000 (or its foreign currency equivalent) in
the aggregate for all such final judgments or orders against all such Persons
(treating any deductibles, self-insurance or retention as not so covered) and
shall not be discharged, and there shall be any period of 30 consecutive days
following entry of the final judgment or order in excess of $2,000,000 (or its
foreign currency equivalent) individually or that causes the aggregate amount
for all such final judgments or orders outstanding against all such Persons to
exceed $5,000,000 (or its foreign currency equivalent) during which a stay of
enforcement of such final judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect;
(f) the Company or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in
an involuntary case,
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
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(v) admits in writing its inability to generally pay its debts
as such debts become due,
or takes any comparable action under any foreign laws relating to insolvency;
(g) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any Significant
Subsidiary in an involuntary case,
(ii) appoints a Custodian of the Company or any Significant
Subsidiary or for all or substantially all of its property, or
(iii) orders the winding up or liquidation of the Company or any
Significant Subsidiary,
or any similar relief is granted under any foreign laws; and the order or decree
remains unstayed and in effect for 60 days; and
(h) except as permitted by this Indenture, the Trustee fails to have
a first priority perfected security interest in the Collateral; and
(i) except as permitted by the terms hereof and the Securities, the
cessation of effectiveness of any Subsidiary Guarantee as against any Subsidiary
Guarantor, or the finding by any judicial proceeding that any such Subsidiary
Guarantee is, as to any Subsidiary Guarantor, unenforceable or invalid, or the
written denial or disaffirmation by any Subsidiary Guarantor of its obligations
under its Subsidiary Guarantee.
The term "Bankruptcy Law" means Title 11 of the U.S. Code or any
similar Federal or State law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
Any notice of Default given by the Trustee or Securityholders under
this Section must specify the Default, demand that it be remedied and state that
the notice is a "Notice of Default."
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The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice of any event which with the giving of notice
or the lapse of time or both would become an Event of Default under clause (c),
(d), (e), (g), (h) or (i) hereof.
Subject to the provisions of Section 6.1 and 6.2, the Trustee shall
not be charged with knowledge of any Event of Default unless written notice
thereof shall have been given to the Trustee as specified in Section 11.2 by the
Company, the Paying Agent, the Collateral Agent, any Holder or an agent of any
Holder.
SECTION 5.2 ACCELERATION.
If an Event of Default (other than an Event of Default specified in
clause (f) and (g) of Section 5.1 with respect to the Company) occurs and is
continuing, the Trustee by notice to the Company, or the Holders of at least 25%
in principal amount of the Securities by notice to the Company and the Trustee,
may declare the principal of and accrued interest on all the Securities to be
due and payable. Upon such declaration the principal amount at maturity and
interest shall be due and payable immediately. If an Event of Default specified
in clause (f) or (g) of Section 5.1 with respect to the Company occurs, the
principal amount at maturity of and interest on all the Securities shall IPSO
FACTO become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any Securityholders. The Holders of a
majority in principal amount of the Securities by notice to the Trustee may
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default have
been cured or waived except nonpayment of principal or interest that has become
due solely because of the acceleration. No such rescission shall affect any
subsequent or other Default or Event of Default or impair any consequent right.
SECTION 5.3 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal amount at
maturity or
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interest on the Securities or to enforce the performance of any provision of the
Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
SECTION 5.4 WAIVER OF PAST DEFAULTS.
The Holders of a majority in principal amount of the Securities by
notice to the Trustee may waive an existing Default and its consequences except
(a) a Default in the payment of the principal of or interest on any Security or
(b) a Default in respect of a provision that under Section 8.2 cannot be amended
without the consent of each Securityholder affected. When a Default is waived,
it is deemed cured, but no such waiver shall extend to any subsequent or other
Default or Event of Default or impair any consequent right.
SECTION 5.5 CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the Securities may
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on it.
However, the Trustee may refuse to follow any direction that conflicts with law
or this Indenture, or, subject to Section 6.1, that the Trustee determines is
unduly prejudicial to the rights of other Securityholders, or would involve the
Trustee in personal liability; PROVIDED, HOWEVER, that the Trustee may take any
other action deemed proper by the Trustee that is not inconsistent with such
direction. Prior to taking any action hereunder, the Trustee shall be entitled
to indemnification reasonably satisfactory to it against all risk, losses and
expenses caused by taking or not taking such action. Subject to Section 6.1,
the Trustee shall be under no obligation to exercise any of the rights or powers
vested in it by this Indenture at the request or direction of the
Securityholders pursuant to this Indenture, unless such Securityholders shall
have provided to
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the Trustee security or indemnity reasonably satisfactory to it against the
costs, expenses and liabilities which might be incurred in compliance with such
request or direction.
SECTION 5.6 LIMITATION ON SUITS.
A Securityholder may pursue a remedy with respect to this Indenture or
the Securities only if:
(a) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(b) the Holders of at least 25% in principal amount of the Securities
make a written request to the Trustee to pursue the remedy;
(c) such Holder or Holders offer to the Trustee security reasonably
satisfactory to it or indemnity against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
(e) the Holders of a majority in principal amount of the Securities
do not give the Trustee a direction inconsistent with the request during such
60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 5.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Security to receive payment of principal and interest on the
Security, on or after the respective due dates expressed in the Security, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of the Holder.
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SECTION 5.8 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 5.1(a) or (b) occurs and
is continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Company for the whole amount of principal and
interest remaining unpaid (together with interest on such unpaid interest to the
extent lawful) and the amounts provided for in Section 6.7.
SECTION 5.9 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents and take such other actions including participating as a member or
otherwise in any committees of creditors appointed in the matter as may be
necessary or advisable in order to have the claims of the Trustee (including any
claim for the amounts provided in Section 6.7) and the Securityholders allowed
in any judicial proceedings relative to the Company, its creditors or its
property and, unless prohibited by law or applicable regulations, may vote on
behalf of the Holders in any election of a trustee in bankruptcy or other Person
performing similar functions, and any Custodian in any such judicial proceeding
is hereby authorized by each Holder to make payments to the Trustee and, in the
event that the Trustee shall consent to the making of such payments directly to
the Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 6.7. To
the extent that the payment of any such amount due to the Trustee under Section
6.7 out of the estate in any such proceeding shall be denied for any reason,
payment of the same shall be secured by a Lien on, and shall be paid out of, any
and all distributions, dividends, money, securities and other properties which
the Holders of the Securities may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise.
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SECTION 5.10 PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee for amounts due under Section 6.7;
Second: to Securityholders for amounts due and unpaid on the
Securities for principal, premium, if any, and interest, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Securities for principal and interest, respectively; and
Third: to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section. At least 15 days before such record
date, the Company shall give written notice to each Securityholder and the
Trustee of the record date, the payment date and amount to be paid.
SECTION 5.11 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 5.7, or a suit by Holders of more than 10% in principal
amount of the Securities.
SECTION 5.12 WAIVER OF STAY OR EXTENSION LAWS.
The Company and each Subsidiary Guarantor (to the extent that each of
them may lawfully do so) shall not at any time insist upon, or plead, or in any
manner whatsoever, claim or take the benefit or advantage of,
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any stay or extension law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of this Indenture; and
the Company and each Subsidiary Guarantor (to the extent that each of them may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and shall not hinder, delay or impede the execution of any power herein
granted to the Trustee, but shall suffer and permit the execution of every such
power as though no such law had been enacted.
ARTICLE VI
TRUSTEE
SECTION 6.1 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and the Pledge Agreement, and use the same degree of care and skill in
their exercise, as a prudent Person would exercise or use under the
circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) The Trustee need perform only those duties that are
specifically set forth in this Indenture and no others and no implied
covenants or obligations shall be read into this Indenture or the Pledge
Agreement against the Trustee.
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture or the
Pledge Agreement. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture or the Pledge Agreement.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent
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failure to act, or its own willful misconduct, except that:
(i) This paragraph does not limit the effect of paragraph (b) of
this Section.
(ii) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts.
(iii) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 5.2, 5.4 or 5.5.
(iv) No provision of this Indenture and the Pledge Agreement
shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, unless it
receives indemnity satisfactory to it against any risk, loss, liability or
expense.
(d) Every provision of this Indenture and the Pledge Agreement that
in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of
this Section.
(e) The Trustee, in its capacity as Trustee and Registrar and Paying
Agent, shall not be liable to the Company, the Securityholders or any other
Person for interest on any money received by it, including, but not limited to,
money with respect to principal of or interest on the Securities, except as the
Trustee may agree with the Company.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
SECTION 6.2 RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document reasonably believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee
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need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on any
such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers PROVIDED, HOWEVER, that the Trustee's conduct does not constitute wilful
misconduct, negligence or bad faith.
(e) The Trustee may consult with counsel, and the advice or opinion
of such counsel as to matters of law shall be full and complete authorization
and protection from liability in respect of any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advice of such
counsel.
(f) The Trustee shall not be obligated to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture or any other paper or document.
SECTION 6.3 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or an
Affiliate with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. However, the Trustee is subject to Sections
6.10 and 6.11.
SECTION 6.4 TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture, the Pledge Agreement, the Subsidiary Guarantees or the
Securities, it
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shall not be accountable for the Company's use of the proceeds from the
Securities, it shall not be responsible for the use or application of any money
received by the Paying Agent (other than the Trustee) and it shall not be
responsible for any statement in the Securities other than its authentication.
SECTION 6.5 NOTICE OF DEFAULTS.
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to Securityholders a notice of
the Default or Event of Default within 90 days of notification of such
occurrence. Except in the case of a Default in any payment on any Security, the
Trustee may withhold the notice if and so long as the board of directors, the
executive committee or a trust committee of directors and/or a committee of its
Trust Officers in good faith determines that withholding the notice is in the
interests of Securityholders.
SECTION 6.6 REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after the reporting date stated in Section 11.10, the
Trustee shall mail to Securityholders a brief report dated as of such reporting
date that complies with TIA Section 313(a) if required by that Section. The
Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange on which the Securities are
listed. The Company shall promptly notify the Trustee when the Securities are
listed on any stock exchange and of any delisting thereof.
SECTION 6.7 COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket
disbursements, expenses and advances incurred by it. Such expenses shall
include the
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reasonable compensation and out-of-pocket disbursements and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold it harmless
against, any loss, liability and expenses including reasonable attorneys' fees,
disbursements and expenses, incurred by it in connection with the administration
of this trust and the performance of its duties hereunder and under the Pledge
Agreement including the costs and expenses of defending itself against or
investigating any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder and thereunder. The
Trustee shall notify the Company promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Company shall not relieve
the Company of its obligations hereunder. The Company shall defend the claim
and the Trustee shall cooperate in the defense. The Trustee may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its consent;
provided however, that the consent of the Company shall not be required if the
Company has instituted proceedings to be adjudicated a bankrupt or insolvent, or
is otherwise subject to proceedings under Title 11 of the United States
Bankruptcy Code, or has consented to the appointment of a receiver, liquidator,
assignee, trustee or similar official for the Company or of any substantial part
of its property, or has made an assignment for the benefit of creditors, or has
admitted in writing its inability to pay its debts generally as they become due,
or has taken corporate action in furtherance of any such action.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Securities on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 5.1(f) or (g) occurs, the expenses and the
compensation
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for the services are intended to constitute expenses of administration under any
Bankruptcy Law.
The Company's obligations under this Section 6.7 and any Lien arising
hereunder shall survive the resignation or removal of the Trustee, the
satisfaction and discharge of the Company's obligations pursuant to Article VII
of this Indenture or the termination of this Indenture or the Pledge Agreement.
SECTION 6.8 REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign at any time by so notifying the Company. The
Holders of a majority in principal amount of the Securities may, by written
notice to the Trustee, remove the Trustee by so notifying the Trustee and the
Company. The Company, by notice to the Trustee, shall remove the Trustee if:
(a) the Trustee fails to comply with Section 6.10;
(b) the Trustee is adjudged a bankrupt or an insolvent;
(c) a receiver or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the Securities may appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the Securities may
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petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 6.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture and the Pledge Agreement. The successor Trustee shall mail
a notice of its succession to Securityholders. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the successor Trustee,
subject to the Lien provided for in Section 6.7.
SECTION 6.9 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
SECTION 6.10 ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1). The Trustee shall always have a combined
capital and surplus of at least $50,000,000 as set forth in its most recent
published annual report of condition. The Trustee shall comply with TIA Section
310(b). Nothing herein shall prevent the Trustee from filing with the SEC the
application referred to in the second-to-last paragraph of TIA Section 310(b).
SECTION 6.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIA Section 311(a), except with respect
to any creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned
or been
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removed is subject to TIA Section 311(a) to the extent indicated.
SECTION 6.12 PAYING AGENTS.
The Company shall cause each Paying Agent other than the Trustee to
execute and deliver to it and the Trustee an instrument in which such agent
shall agree with the Trustee, subject to the provisions of this Section 6.12:
(a) that it will hold all sums held by it as agent for the payment of
principal of, or interest on, the Securities (whether such sums have been paid
to it by the Company or by any obligor on the Securities) in trust for the
benefit of Holders of the Securities;
(b) that it will at any time during the continuance of any Event of
Default specified in Section 5.1, upon written request from the Trustee, deliver
to the Trustee all sums so held in trust by it;
(c) that it will give the Trustee written notice within one (1)
Business Day of any failure of the Company (or by any obligor on the Securities)
in the payment of any installment of the principal of, or interest on, the
Securities when the same shall be due and payable; and
(d) that it will comply with the provisions of the TIA applicable to
it.
ARTICLE VII
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 7.1 DISCHARGE OF LIABILITY ON SECURITIES; DEFEASANCE.
If (i) the Company delivers to the Trustee all outstanding Securities
(other than Securities replaced pursuant to Section 2.7) for cancellation or
(ii) all outstanding Securities have become due and payable and the Company or a
Subsidiary Guarantor irrevocably deposits with the Trustee as trust funds
solely for the benefit of the Holders for that purpose funds sufficient to pay
at maturity the principal of and all accrued interest
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on all outstanding Securities (other than Securities replaced pursuant to
Section 2.7), and if in either case the Company or a Subsidiary Guarantor pays
all other sums payable hereunder by the Company, then, subject to Sections 7.2
and 7.7, this Indenture shall cease to be of further effect. The Trustee shall
acknowledge satisfaction and discharge of this Indenture on written demand of
the Company accompanied by an Officers' Certificate and an Opinion of Counsel
and at the cost and expense of the Company.
SECTION 7.2 TERMINATION OF COMPANY'S OBLIGATIONS.
Except as otherwise provided in this Section 7.2, the Company may
terminate its obligations under the Securities and this Indenture if:
(i) the Securities mature within one year or all of them are to be
called for redemption within one year under arrangements satisfactory to the
Trustee for giving the notice of redemption, (ii) the Company irrevocably
deposits in trust with the Trustee or Paying Agent (other than the Company or a
Subsidiary or Affiliate of the Company) during such one-year period, under the
terms of an irrevocable trust agreement in form and substance satisfactory to
the Trustee, as trust funds solely for the benefit of the Holders for that
purpose, money or U.S. Government Obligations sufficient (in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee), without consideration
of any reinvestment of such interest, to pay principal and interest on the
Securities to maturity or redemption, as the case may be, and to pay all other
sums payable by it hereunder, (iii) no Default shall have occurred and be
continuing on the date of such deposit, (iv) such deposit will not result in or
constitute a Default or result in a breach or violation of, or constitute a
default under, any other agreement or instrument to which the Company is a party
or by which it is bound and (v) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the satisfaction and
discharge of this Indenture have been complied with; PROVIDED that the Trustee
or Paying Agent shall have been irrevocably instructed to apply such money or
the proceeds of such U.S. Government Obligations
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to the payment of such principal and interest with respect to the Securities.
With respect to the foregoing, the Company's obligations in Sections
2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.12, 3.1, 3.2, 6.7, 6.8, 7.5 and 7.6 shall
survive until the Securities are no longer outstanding. Thereafter, only the
Company's obligations in Sections 6.7, 6.8 and 7.6 shall survive. After any
such irrevocable deposit, the Trustee upon request shall acknowledge in writing
the discharge of the Company's obligations under the Securities and this
Indenture except for those surviving obligations specified above.
SECTION 7.3 DEFEASANCE AND DISCHARGE OF INDENTURE.
The Company will be deemed to have paid and will be discharged from
any and all obligations in respect of the Securities on the 123rd day after the
date of the deposit referred to in clause (i) hereof, and the provisions of this
Indenture will no longer be in effect with respect to the Securities, and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same, except as to (a) rights of registration of transfer and
exchange, (b) substitution of mutilated, defaced, destroyed, lost or stolen
Securities pursuant to Section 2.7, (c) rights of Holders to receive payments of
principal thereof and interest thereon, (d) the Company's obligations under
Sections 3.2 and 6.7, (e) the rights, obligations and immunities of the Trustee
hereunder and (f) the rights of the Holders as beneficiaries of this Indenture
with respect to the property so deposited with the Trustee payable to all or any
of them; PROVIDED that the following conditions shall have been satisfied:
(i) with reference to this Section 7.3, the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirement of Section 6.10) or
Paying Agent (other than the Company or a Subsidiary or Affiliate of the
Company) and conveyed all right, title and interest for the benefit of the
Holders, under the terms of an irrevocable trust agreement in form and
substance satisfactory to the Trustee as trust funds in trust, specifically
pledged as security for, and dedicated solely to,
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the benefit of the Holders, in and to, (A) money in an amount, (B) U.S.
Government Obligations that, through the payment of interest and principal
in respect thereof in accordance with their terms, will provide, not later
than one day before the due date of any payment referred to in this clause
(i), money in an amount or (C) a combination thereof in an amount
sufficient, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered
to the Trustee, to pay and discharge, without consideration of the
reinvestment of such interest and after payment of all federal, state and
local taxes or other fees, charges and assessments in respect thereof
payable by the Trustee or Paying Agent, the principal of and interest on
the outstanding Securities when due; PROVIDED that the Trustee or Paying
Agent shall have been irrevocably instructed to apply such money or the
proceeds of such U.S. Government Obligations to the payment of such
principal and interest with respect to the Securities;
(ii) such deposit will not result in or constitute a Default or
result in a breach or violation of, or constitute a default under, any
other agreement or instrument to which the Company is a party or by which
it is bound;
(iii) no Default shall have occurred and be continuing on the
date of such deposit or during the period ending on the 123rd day after
such date of deposit;
(iv) the Company shall have delivered to the Trustee (A) either
(1) a ruling directed to the Trustee received from the Internal Revenue
Service to the effect that the Holders will not recognize income, gains or
loss for federal income tax purposes as a result of the Company's exercise
of its option under this Section 7.3 and will be subject to federal income
tax on the same amount and in the same manner and at the same times as
would have been the case if such option had not been exercised or (2) an
Opinion of Counsel (who must not be an employee of the Company) to the same
effect as the ruling described in clause (1) accompanied by a
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ruling to that effect published by the Internal Revenue Service, unless
there has been a change in the applicable federal income tax law since the
date of this Indenture such that a ruling from the Internal Revenue Service
is no longer required and (B) an Opinion of Counsel to the effect that (1)
the creation of the defeasance trust does not violate the Investment
Company Act of 1940, (2) after the passage of 123 days following the
deposit (except, with respect to any trust funds for the account of any
Holder who may be deemed to be an "insider" for purposes of Title 11 of the
United States Bankruptcy Code, after one year following the deposit), the
trust funds will not be subject to the effect of Section 547 of the United
States Bankruptcy Code or Section 15 of the New York Debtor and Creditor
Law in a case commenced by or against the Company under either such
statute, and either (x) the trust funds will no longer remain the property
of the Company (and therefore, will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally) or (y) if a court were to rule under any such
law in any case or proceeding that the trust funds remained property of the
Company, (I) assuming such trust funds remained in the possession of the
Trustee prior to such court ruling to the extent not paid to Holders, the
Trustee will hold, for the benefit of the Holders, a valid and perfected
security interest in such trust funds that is not avoidable in bankruptcy
or otherwise except for the effect of Section 552(b) of the United States
Bankruptcy Code on interest on the trust funds accruing after the
commencement of a case under such statute and (II) the Holders will be
entitled to receive adequate protection of their interests in such trust
funds if such trust funds are used in such case or proceeding; and
(v) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 7.3 have been complied with.
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Notwithstanding the foregoing, prior to the end of the 123-day period
referred to in clause (iv)(B)(2) above, none of the Company's obligations under
this Indenture shall be discharged. Subsequent to the end of such 123-day
period with respect to this Section 7.3, the Company's obligations in Sections
2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.12, 3.1, 3.2, 6.7, 6.8, 7.6 and 7.7 shall
survive until the securities are no longer outstanding. Thereafter, only the
Company's obligations in Sections 6.7, 7.6 and 7.7 shall survive. If and when a
ruling from the Internal Revenue Service or Opinion of Counsel referred to in
clause (iv)(A) above is able to be provided specifically without regard to, and
not in reliance upon, the continuance of the Company's obligations under Section
3.1, then the Company's obligations under such Section 3.1 shall cease upon
delivery to the Trustee of such ruling or Opinion of Counsel and compliance with
the other conditions precedent provided for herein relating to the defeasance
contemplated by this Section 7.3.
After any such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Securities and this Indenture except for those surviving obligations in the
immediately preceding paragraph.
SECTION 7.4 DEFEASANCE OF CERTAIN OBLIGATIONS.
The Company may omit to comply with any term, provision or condition
set forth in clauses (iv) and (v) of Section 4.1(a), clauses (ii) and (iv) of
Section 4.1(b) and Sections 3.3 through 3.18, and clause (c) of Section 5.1
with respect to clauses (iv) and (v) of Section 4.1(a), clauses (ii) and (iv)
of Section 4.1(b) and Sections 3.3 through 3.18, and clauses (d) and (e) of
Section 5.1 shall be deemed not to be Events of Default, in each case with
respect to the outstanding Securities if:
(i) with reference to this Section 7.4, the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section 6.10) or
Paying Agent (other than the Company or a Subsidiary or Affiliate of the
Company) and conveyed all right, title and interest for the benefit of the
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Holders, under the terms of an irrevocable trust agreement in form and
substance satisfactory to the Trustee as trust funds in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders, in and to, (A) money in an amount, (B) U.S. Government obligations
that, through the payment of interest and principal in respect thereof in
accordance with their terms, will provide, not later than one day before
the due date of any payment referred to in this clause (i), money in an
amount or (C) a combination thereof in an amount, sufficient, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to
pay and discharge, without consideration of the reinvestment of interest
and after payment of all federal, state and local taxes or other fees,
charges and assessments in respect thereof payable by the Trustee or Paying
Agent, the principal of and interest on the outstanding Securities when
due; PROVIDED that the Trustee or Paying Agent shall have been irrevocably
instructed to apply such money or the proceeds of such U.S. Government
Obligations to the payment of such principal and interest with respect to
the Securities;
(ii) such deposit will not result in or constitute a Default or
result in a breach or violation of, or constitute a default under, any
other agreement or instrument to which the Company is a party or by which
it is bound;
(iii) no Default shall have occurred and be continuing on the
date of such deposit;
(iv) the Company has delivered to the Trustee an Opinion of
Counsel who is not employed by the Company to the effect that (A) the
creation of the defeasance trust does not violate the Investment Company
Act of 1940, (B) the Holders have a valid first-priority security interest
in the trust funds, (C) the Holders will not recognize income, gain or loss
for federal income tax purposes as a result of such deposit and defeasance
of certain obligations and will be subject to federal income tax on the
same amount and in the same manner and at the same times as would have been
the case if such deposit
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and defeasance had not occurred and (D) after the passage of 123 days
following the deposit (except, with respect to any trust funds for the
account of any Holder who may be deemed to be an "insider" for purposes of
the United States Bankruptcy Code, after one year following the deposit),
the trust funds will not be subject to the effect of Section 547 of the
United States Bankruptcy Code or Section 15 of the New York Debtor and
Creditor Law in a case commenced by or against the Company under either
such statute, and either (1) the trust funds will no longer remain the
property of the Company (and therefore, will not be subject to the effect
of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally) or (2) if a court were to rule under
any such law in any case or proceeding that the trust funds remained
property of the Company, (x) assuming such trust funds remained in the
possession of the Trustee prior to such court ruling to the extent not paid
to Holders, the Trustee will hold, for the benefit of the Holders, a valid
and perfected first priority security interest in such trust funds that is
not avoidable in bankruptcy or otherwise except for the effect of Section
552(b) of the United States Bankruptcy Code on interest on the trust funds
accruing after the commencement of a case under such statute and (y) the
Holders will be entitled to receive adequate protection of their interests
in such trust funds if such trust funds are used in such case or
proceeding; and
(v) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 7.4 have been complied with.
SECTION 7.5 APPLICATION OF TRUST MONEY.
Subject to Section 7.7 of this Indenture, the Trustee or Paying Agent
shall hold in trust money or U.S. Government Obligations deposited with it
pursuant to Section 7.2, 7.3 or 7.4 of this Indenture, as the case may be, and
shall apply the deposited money and the money from U.S. Government Obligations
in accordance with this
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Indenture to the payment of principal of and interest on the Securities. The
Trustee shall be under no obligation to invest such money or U.S. Government
Obligations except as it may agree with the Company.
SECTION 7.6 REPAYMENT TO COMPANY.
Subject to Sections 6.7, 7.2, 7.3 and 7.4 of this Indenture, the
Trustee and the Paying Agent shall promptly pay to the Company upon written
request any excess money held by them at any time and thereupon shall be
relieved from all liability with respect to such money. The Trustee and the
Paying Agent shall pay to the Company upon written request any money held by
them for the payment of principal or interest that remains unclaimed for two
years; PROVIDED, HOWEVER, that the Company shall, if requested by the Trustee or
the Paying Agent, give the Trustee or such Paying Agent indemnification
reasonably satisfactory to it against any and all liability which may be
incurred by it by reason of such payment; and PROVIDED, FURTHER, that the
Trustee or such Paying Agent before being required to make any payment may cause
to be published at the expense of the Company once in a newspaper of general
circulation in the City of New York or mail to each Holder entitled to such
money at such Holder's address as set forth in the Security Register notice that
such money remains unclaimed and that after a date specified therein (which
shall be at least 30 days from the date of such publication or mailing) any
unclaimed balance of such money then remaining will be repaid to the Company.
After payment to the Company, Holders entitled to such money must look to the
Company for payment as general creditors unless an applicable law designates
another person, and all liability of the Trustee and such Paying Agent with
respect to such money shall cease.
SECTION 7.7 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 7.2, 7.3 or 7.4 of this
Indenture, as the case may be, by reason of any legal proceeding or by reason of
any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, the Company's obligations
under this Indenture and the Securities shall be revived
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and reinstated as though no deposit had occurred pursuant to Section 7.2, 7.3 or
7.4 of this Indenture, as the case may be, until such time as the Trustee or
Paying Agent is permitted to apply all such money or U.S. Government Obligations
in accordance with Section 7.2, 7.3 or 7.4 of this Indenture, as the case may
be; PROVIDED that, if the Company has made any payment of principal of or
interest on any Securities because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Securities to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
ARTICLE VIII
AMENDMENTS AND SUPPLEMENTS
SECTION 8.1 WITHOUT CONSENT OF HOLDERS.
The Company, the Subsidiary Guarantors and the Trustee may amend or
supplement this Indenture, the Pledge Agreement or the Securities without notice
to or the consent of any Securityholder:
(a) to cure any ambiguity, omission, defect or inconsistency;
(b) to comply with Article IV;
(c) to provide for uncertificated Securities in addition to
certificated Securities; PROVIDED, HOWEVER, that the uncertificated Securities
are issued in registered form for purposes of Section 163(f) of the Internal
Revenue Code of 1986, as amended, or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(d) to add additional guarantees with respect to the Securities or to
secure the Securities;
(e) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the Company;
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(f) to comply with the requirements of the SEC in connection with
qualification of the Indenture under the TIA;
(g) to make any change that does not adversely affect the rights of
any Securityholder;
(h) to provide for certain amendments to the Pledge Agreement
expressly called for therein and to add Collateral thereto; or
(i) to increase the aggregate principal amount at maturity of
Securities that may be issued by the Company pursuant to this Indenture;
PROVIDED, HOWEVER, that any such additional Indebtedness Incurred is otherwise
permitted to be Incurred by the Company pursuant to the terms of this Indenture.
After an amendment or supplement under this Section becomes effective,
the Company shall mail to Securityholders a notice briefly describing such
amendment or supplement. The failure to give such notice to all
Securityholders, or any defect therein, shall not impair or affect the validity
of an amendment or supplement under this Section.
SECTION 8.2 WITH CONSENT OF HOLDERS.
The Company, the Subsidiary Guarantors and the Trustee may amend or
supplement this Indenture, the Pledge Agreement or the Securities with the
written consent of the Holders of a majority in principal amount of the
Securities. However, without the consent of each Securityholder affected, an
amendment or supplement under this Section may not:
(a) reduce the amount of Securities the Holders of which must consent
to an amendment or supplement;
(b) reduce the rate of or change the time for payment of interest on
any Security;
(c) reduce the principal of or change the Stated Maturity of any
Security;
(d) reduce the premium payable upon the redemption of any Security or
change the time at which any
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Security may or shall be redeemed in accordance with Article IX;
(e) make any Security payable in currency or consideration other than
that stated in the Security;
(f) make any change in Section 5.4, 5.7 or 8.2 (second sentence);
(g) directly or indirectly release Liens on all or substantially all
of the Collateral; or
(h) modify or affect in any manner adverse to the Holders the terms
and conditions of the obligation of any Guarantor for the due and punctual
payment of the principal of, premium, if any, or interest on the Securities.
It shall not be necessary for the consent of the Holders under this
Section 8.2 to approve the particular form of any proposed amendment, supplement
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment or supplement under this Section becomes effective,
the Company shall mail to Securityholders a notice briefly describing such
amendment or supplement. The failure to give such notice to all
Securityholders, or any defect therein, shall not impair or affect the validity
of an amendment or supplement under this Section.
SECTION 8.3 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Securities
shall be set forth in a supplemental indenture that complies with the TIA as
then in effect.
SECTION 8.4 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment or supplement under this Article or a waiver under
Article V becomes effective, a consent to it by a Holder of a Security is a
continuing consent by the Holder and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the consenting Holder's
Security, even if notation of the consent is not made on any Security. Howev-
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er, any such Holder or subsequent Holder may revoke the consent as to his
Security or portion of a Security if the Trustee receives the notice of
revocation before the date the amendment, supplement or waiver becomes
effective.
After an amendment or supplement becomes effective, it shall bind
every Securityholder.
SECTION 8.5 NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment changes the terms of a Security, the Trustee may
require the Holder of the Security to deliver it to the Trustee. The Trustee
may place an appropriate notation on the Security regarding the changed terms
and return it to the Holder. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Security shall issue and the Trustee
shall authenticate a new Security that reflects the changed terms. Failure to
make the appropriate notation or to issue a new Security shall not affect the
validity of such amendment.
SECTION 8.6 TRUSTEE TO SIGN AMENDMENTS.
The Trustee shall sign any supplemental indenture which sets forth an
amendment or supplement authorized pursuant to this Article if the amendment or
supplement does not adversely affect the rights, duties, liabilities or
immunities of the Trustee. If it does, the Trustee may but need not sign it.
In signing such supplemental indenture the Trustee shall be entitled to receive,
and (subject to Section 6.1) shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel stating that such supplemental
indenture is authorized or permitted by this Indenture.
SECTION 8.7 FIXING OF RECORD DATES.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to take any action under this
Indenture by vote or consent. Except as provided herein, such record date shall
be the later of 30 days prior to the first solicitation of such consent or vote
or the date of the most recent list of Securityholders furnished to the Trustee
pursuant to Section 2.5 prior to such solicita-
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tion. If a record date is fixed, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to take such action by vote or consent or to revoke any vote or consent
previously given, whether or not such Persons continue to be Holders after such
record date; PROVIDED, HOWEVER, that unless such vote or consent is obtained
from the Holders (or their duly designated proxies) of the requisite principal
amount of outstanding Securities prior to the date which is the 120th day after
such record date, any such vote or consent previously given shall automatically
and without further action by any Holder be canceled and of no further effect.
ARTICLE IX
REDEMPTION
SECTION 9.1 NOTICES TO TRUSTEE.
If the Company elects to redeem Securities pursuant to paragraph 5 of
the Securities it shall notify the Trustee in writing of the redemption date and
the principal amount (not including any premium in respect thereof) of
Securities to be redeemed and the paragraph of the Securities pursuant to which
the redemption will occur.
The Company shall give the notices provided for in this Section at
least 40 days before the redemption date (unless a shorter period shall be
satisfactory to the Trustee). Such notice shall be accompanied by an Officers'
Certificate to the effect that such redemption will comply with the conditions
herein. If fewer than all the Securities are to be redeemed, the record date
relating to such redemption shall be selected by the Company and given to the
Trustee, which record date shall be not less than 15 days after the date of
notice to the Trustee.
SECTION 9.2 SELECTION OF SECURITIES TO BE REDEEMED.
If fewer than all the Securities are to be redeemed, the Trustee shall
select the Securities to be redeemed pro rata or by lot or by any other method
that complies with applicable legal and securities exchange
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requirements, if any, and that the Trustee considers, in its sole discretion,
fair and appropriate and in accordance with methods generally used at the time
of selection by fiduciaries in similar circumstances. The Trustee shall make
the selection not more than 75 days before the redemption date from outstanding
Securities not previously called for redemption. The Trustee may select for
redemption portions of the principal of Securities that have denominations
larger than $1,000 in original principal amount at maturity. Securities and
portions of them selected by the Trustee shall be in amounts of $1,000 or whole
multiples of $1,000. Provisions of this Indenture that apply to Securities
called for redemption also apply to portions of Securities called for
redemption.
SECTION 9.3 NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail a notice of redemption to each Holder whose Securities
are to be redeemed at the address set forth for such Holder on the register
referred to in Section 2.3.
The notice shall identify the Securities to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) the name and address of the Paying Agent;
(d) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(e) if fewer than all the outstanding Securities are to be redeemed,
the identification and principal amounts of the particular Securities to be
redeemed;
(f) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on and
after the redemption date; and
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(g) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Securities.
At the Company's written request, made at least 45 days before a
redemption date, unless a shorter period shall be satisfactory to the Trustee,
the Trustee shall give the notice of redemption provided for in this Section in
the Company's name and at its expense.
SECTION 9.4 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, Securities called for redemption
become due and payable on the redemption date at the redemption price. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued and unpaid interest to the redemption
date.
SECTION 9.5 DEPOSIT OF REDEMPTION PRICE.
Prior to the redemption date, the Company shall deposit with the
Paying Agent (or, if the Company or a Subsidiary is the Paying Agent, shall
segregate and hold in trust) money sufficient to pay the redemption price of and
accrued and unpaid interest on all Securities to be redeemed on that date other
than Securities or portions of Securities called for redemption which have been
delivered by the Company to the Trustee for cancellation.
SECTION 9.6 SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is redeemed in part, the Company
shall execute and the Trustee shall authenticate for the Holder (at the
Company's expense) a new Security equal in principal amount to the unredeemed
portion of the Security surrendered.
ARTICLE X
SECURITY AND PLEDGE OF COLLATERAL
SECTION 10.1 COLLATERAL DOCUMENTS.
The due and punctual payment of the principal of, premium, if any, and
interest on the Securities when
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and as the same shall be due and payable, whether on an interest payment date,
at maturity, by acceleration, repurchase, redemption or otherwise, and interest
on the overdue principal of, premium and interest (to the extent permitted by
law), if any, on the Securities and performance of all other Obligations of the
Company to the Holders or the Trustee under this Indenture and the Securities,
according to the terms hereunder and thereunder, shall be secured as provided in
the Pledge Agreement. Each Holder, by its acceptance of a Security, consents
and agrees to the terms of the Pledge Agreement (including, without limitation,
the provisions providing for foreclosure and release of Collateral) as the same
may be in effect or may be amended from time to time in accordance with the
terms thereof and hereof and authorizes and directs the Trustee to enter into
the Pledge Agreement and to perform its Obligations and exercise its rights
thereunder in accordance therewith. The Company will do or cause to be done all
such acts and things as may be necessary or proper, or as may be required by the
provisions of the Pledge Agreement, to assure and confirm to the Trustee the
security interest in the Collateral contemplated hereby and by the Pledge
Agreement, as from time to time constituted, so as to render the same available
for the security and benefit of this Indenture and of the Securities secured
hereby, according to the intent and purposes herein expressed. The Company
shall take, upon request of the Trustee, any and all actions required to cause
the Pledge Agreement to create and maintain, as security for the Obligations of
the Company under this Indenture and the Securities, valid and enforceable,
perfected (except as expressly provided therein), Liens in and on all the
Collateral, in favor of the Trustee, superior to and prior to the rights of all
third Persons, and subject to no other Liens, other than as provided herein and
therein.
SECTION 10.2 RECORDING AND OPINIONS.
The Company shall furnish to the Trustee within 5 days after the
execution and delivery of this Indenture an Opinion of Counsel either (i)
stating that in the opinion of such counsel all action has been taken with
respect to the recording, registering and filing of this Indenture, the Pledge
Agreement, financing statements or other instruments necessary to make effective
the Lien intended to be created by the Pledge Agreement, and
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reciting the details of such action, or (ii) stating that, in the opinion of
such counsel, no such action is necessary to make such Lien effective.
SECTION 10.3 REMEDIES UPON AN EVENT OF DEFAULT.
(a) Upon the occurrence of an Event of Default, then or at any time
during the continuance of such occurrence, the Trustee is hereby authorized and
empowered, at its election, in accordance with its rights hereunder and under
the Pledge Agreement (i) to transfer and register in its or its nominee's name
the whole or any part of the Collateral, (ii) to exercise all voting rights with
respect thereto, (iii) to demand, sue for, collect, receive and give acquittance
for any and all cash dividends or other distributions or monies due or to become
due upon or by virtue thereof, and to settle, prosecute or defend any action or
proceeding with respect thereto, (iv) to transfer to or to register in the name
of the Trustee or any of its nominees any or all of the Collateral, (v) to
exchange certificates or instruments representing or evidencing the Collateral
for certificates or instruments of different denominations, (vi) to sell in one
or more sales the whole or any part of the Collateral or otherwise to transfer
or assign the same, applying the proceeds therefrom to the payment of the
Securities in accordance with Section 5.10, and (vii) otherwise to act with
respect to the Collateral or the proceeds thereof as though the Trustee were the
outright owner thereof.
SECTION 10.4. RELEASE OF THE COLLATERAL.
(a) As long as no Event of Default shall have occurred and be
continuing, at the sole cost and expense of the Company, the Company shall be
entitled at any time and from time to time to request the Trustee to release a
portion of the Collateral and the Trustee shall release such portion of the
Collateral upon:
(i) payment in full of all obligations under this Indenture and
the termination thereof; or
(ii) the sale or other disposition of the Collateral (the
"Collateral Sale") if (A) the Company or a Subsidiary receives
consideration at the time of the Collateral Sale at least equal to the
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fair market value, as determined in good faith by the Board of Directors,
of the Collateral subject to the sale or disposition, (B) at least 80% of
the consideration thereof received by the Company or a Subsidiary is in the
form of Additional Assets or cash or cash equivalents which cash
equivalents are promptly converted into cash by the Company (or a
Subsidiary, as the case may be), (C) an amount equal to 100% of the Net
Available Cash is immediately deposited in the Collateral Account to be
used in accordance with Section 10.4(b), (D) the non-cash proceeds from
such Collateral Sale (including securities or other Additional Assets)
received by the Company or a Subsidiary immediately become subject to a
first priority perfected Lien in favor of the Trustee, and (E) the Company
(or a Subsidiary, as the case may be) complies with all the requirements of
Section 10.6,
PROVIDED, that the Trustee shall not release any Lien on any Collateral pursuant
to this Section 10.4 unless and until it shall have received from the Company an
Officers' Certificate certifying that all conditions precedent hereunder have
been met and such other documents required by Section 10.6 hereof. Upon
compliance with the above provisions, the Trustee shall execute, deliver or
acknowledge any necessary or proper instruments of termination, satisfaction or
release to evidence the release of any Collateral permitted to be released
pursuant to this Indenture.
(b) Within three hundred and sixty (360) days (such 360 days being
the "Collateral Application Period") following the sale or disposition of the
Collateral, the Company or such Subsidiary shall apply the Net Available Cash
from such Collateral Sale as follows: (i) FIRST, if the Collateral Sale results
in the Person sold no longer being a Subsidiary, then to the extent required by
the agreement governing the New Credit Facility and not otherwise satisfied in
connection with such Collateral Sale, to outstanding Indebtedness Incurred under
the New Credit Facility in an amount equal to (A) the outstanding principal
amount of Indebtedness to the Company of the Subsidiary subject to such
Collateral Sale as evidenced by the applicable Intercompany Note, plus (B) an
additional amount, if any, necessary to prevent the aggregate outstanding
Indebtedness Incurred pursuant to the New Credit Facility to exceed the amount
of Indebtedness then
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permitted to be outstanding pursuant to the borrowing formulae contained in the
agreement evidencing such Indebtedness plus the Seasonal Overadvance; (ii)
SECOND, to the extent that the balance of such Net Available Cash after
application in accordance with clause (i), and to the extent the Company or the
Subsidiary elects, to reinvest in Additional Assets, provided, however, that,
when acquired, (A) if such Additional Assets are stock of a Subsidiary, then
such Additional Assets shall be subject to a first priority perfected Lien in
favor of the Trustee, and (B) if such Additional Assets are other than stock of
a Subsidiary, accounts receivable or inventory, then such Additional Assets
shall be unencumbered by any Lien; (iii) THIRD, to the extent of the balance of
such Net Available Cash after application in accordance with clauses (i) and
(ii), and to the extent the Company or such Subsidiary elects, to make an offer
to purchase the Securities at not less than 100% of their Accreted Value, plus
accrued interest (if any) pursuant to and subject to the conditions of Section
10.5(a); and (iv) FOURTH, to the extent of the balance of such Net Available
Cash after application in accordance with clauses (i), (ii) and (iii), and to
the extent the Company or such Subsidiary elects, to acquire or form a
Subsidiary which, when acquired or formed, the Capital Stock of such Subsidiary
shall be subject to a first priority perfected Lien in favor of the Trustee. To
the extent that any Net Available Cash remains after the application of the Net
Available Cash in accordance with the previous sentence, such Net Available Cash
will remain in the Collateral Account and will not be released until the
obligations of the Company under this Indenture and the Securities have been
discharged.
SECTION 10.5. PURCHASE OF SECURITIES WITH NET AVAILABLE CASH.
(a) In the event of a purchase of Securities pursuant to clause (ii)
of Section 10.4(b), the Company will purchase Securities tendered pursuant to an
offer by the Company for the Securities (the "Collateral Sale Offer") at a
purchase price of not less than 100% of their Accreted Value plus accrued
interest to the Collateral Sale Purchase Date in accordance with the procedures
(including prorationing in the event of oversubscription) set forth below. If
the aggregate purchase price of Securities tendered pursuant to the Collateral
Sale Offer is less than the Net Available Cash allotted
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to the purchase of the Securities, the Company shall apply the remaining Net
Available Cash in accordance with Section 10.4(b).
(b) Promptly, and in any event prior to the 360th day after the later
of the date of each Collateral Sale as to which the Company makes a Collateral
Sale Offer or the receipt of Net Available Cash therefrom, the Company shall be
obligated to deliver to the Trustee and send, by first-class mail to each
Holder, a written notice stating that the Holder may elect to have his
Securities purchased by the Company either in whole or in part (subject to
prorationing as hereinafter described in the event the Collateral Sale Offer is
oversubscribed) in integral multiples of $1,000 of principal amount at maturity,
at the applicable purchase price. The notice shall specify a purchase date not
less than 30 days, nor more than 60 days, after the date of such notice (the
"Collateral Sale Purchase Date") and shall contain the information required in a
notice for a Change of Control Offer as described in Section 3.8, to the extent
applicable.
(c) Not later than the date upon which written notice of a Collateral
Sale Offer is delivered to the Trustee as provided below, the Company shall
deliver to the Trustee an Officers' Certificate as to (i) the amount of the
Collateral Sale Offer (the "Collateral Sale Offer Amount"), (ii) the allocation
of the Net Available Cash from the Collateral Sale pursuant to which such
Collateral Sale Offer is being made and (iii) the compliance of such allocation
with Section 10.4(a). On such date, the Trustee shall also deposit with a
Paying Agent other than the Company or a Subsidiary or an Affiliate of the
Company funds in an amount equal to the Collateral Sale Offer Amount to be held
for payment in accordance with the provisions of Section 10.4. Upon the
expiration of the period for which the Collateral Sale Offer remains open (the
"Collateral Offer Period"), the Company shall deliver, or cause to be delivered,
to the Trustee the Securities or portions thereof which have been properly
tendered to and are to be accepted by the Company. The Paying Agent shall, on
the Collateral Sale Purchase Date, mail or deliver payment to each tendering
Holder in the amount of the purchase price. In the event that the aggregate
purchase price of the Securities delivered, or caused to be delivered, by the
Company to the Trustee is
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less than the Collateral Sale Offer Amount, the Paying Agent shall deliver the
excess to the Trustee immediately after the expiration of the Collateral Offer
Period and the Trustee shall place such funds in the Collateral Account.
(d) Holders electing to have a Security purchased will be required to
surrender the Security, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Security duly completed, to the Company or the
Paying Agent, as specified in, and at the address specified in, the notice at
least ten Business Days prior to the Collateral Sale Purchase Date. Holders
will be entitled to withdraw their election if the Trustee or the Paying Agent
receives, not later than three Business Days prior to the Collateral Sale
Purchase Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of the Security which was delivered
for purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased. If at the expiration of the
Collateral Offer Period the aggregate principal amount of Securities surrendered
by Holders exceeds the Collateral Sale Offer Amount, the Company shall select
the Securities to be purchased on a pro rata basis (with such adjustments as may
be deemed appropriate by the Company so that only Securities in denominations of
$1,000, or integral multiples thereof, shall be purchased). Holders whose
Securities are purchased only in part will be issued new Securities equal in
principal amount to the unpurchased portion of the Securities surrendered.
(e) At the time the Company delivers Securities to the Trustee which
are to be accepted for purchase, the Company will also deliver an Officers'
Certificate stating that such Securities are to be accepted by the Company
pursuant to and in accordance with the terms of this Section. A Security shall
be deemed to have been accepted for purchase at the time the Paying Agent,
directly or through an agent, mails or delivers payment therefor to the
surrendering Holder.
(f) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant
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to clause (ii) of Section 10.4(b). To the extent that the provisions of any
securities laws or regulations conflict with provisions of this Section, the
Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under this Section by
virtue thereof.
SECTION 10.6. CERTIFICATES OF COMPANY.
(a) The Company will furnish to the Trustee prior to each proposed
release of Collateral pursuant to Section 10.4 all documents required by
Sections 314(c) and 314(d) of the TIA. The Trustee may, to the extent permitted
by Sections 6.1 and 6.2 hereof, accept as conclusive evidence of compliance with
the foregoing provisions the appropriate statements contained in such
instruments. Any certificate or opinion required by Sections 314(c) and 314(d)
of the TIA may be made by an Officer of the Company, except in cases where TIA
Sections 314(c) and 314(d) require that such certificate or opinion be made by
an independent engineer, appraiser or other expert within the meaning of
Sections 314(c) and 314(d) of the TIA.
SECTION 10.7 AUTHORIZATION OF ACTIONS TO BE TAKEN UNDER THE PLEDGE AGREEMENT.
The Trustee may, in its sole discretion and without the consent of the
Holders, on behalf of the Holders, take all actions its deems necessary or
appropriate in order to (a) enforce any of the terms of the Pledge Agreement and
(b) collect and receive any and all amounts payable in respect of the
Obligations of the Company hereunder. The Trustee shall have the power to
institute and to maintain such suits and proceedings as it may deem expedient to
prevent any impairment of the Collateral by any acts that may be unlawful or in
violation of the Pledge Agreement or this Indenture, and such suits and
proceedings as the Trustee may deem expedient to preserve or protect its
interests and interests of the Holders in the Collateral (including power to
institute and maintain suits or proceedings to restrain the enforcement of or
compliance with any legislative or other governmental enactment, rule or order
that may be unconstitutional or otherwise invalid if the enforcement of,
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or compliance with, such enactment, rule or order would impair the security
interest hereunder or be prejudicial to the interests of the Holders or of the
Trustee).
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by any of TIA Sections 310 to 317, inclusive, through
operation of TIA Section 318(c), such imposed duties shall control.
SECTION 11.2 NOTICES.
Any notice or communication shall be in writing and delivered in
person, or mailed by first-class mail (certified, return receipt requested),
addressed as follows:
if to the Company or the Subsidiary Guarantors:
Empire Gas Corporation
1700 South Jefferson Street
P.O. Box 303
Lebanon, Missouri 65536
Attention: Secretary
if to the Trustee:
Shawmut Bank Connecticut,
National Association
777 Main Street - MSN 238
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
The Company, any Subsidiary Guarantor or the Trustee by notice to the
others may designate additional or different addresses for subsequent notices or
communications.
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Any notice or communication to a Securityholder shall be mailed by
first-class mail to the Securityholder's address shown on the register kept by
the Registrar. Failure to mail a notice or communication to a Securityholder or
any defect in it shall not affect its sufficiency with respect to other
Securityholders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company or any Subsidiary Guarantor mails a notice or
communication to Securityholders, it shall mail a copy to the Trustee and each
Agent at the same time.
SECTION 11.3 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA Section 312(b) with
other Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Subsidiary Guarantors, the Trustee, the Registrar
and anyone else shall have the protection of TIA Section 312(c).
SECTION 11.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company or any Subsidiary
Guarantor to the Trustee to take any action under this Indenture, the Company
shall, if requested by the Trustee, furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers, all
conditions precedent (including any covenants compliance with which constitutes
a condition precedent), if any, provided for in this Indenture relating to the
proposed action have been complied with; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel (which
may rely upon an Officers' Certificate as to factual matters), all such
conditions precedent have been complied with.
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SECTION 11.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture other than certificates
provided pursuant to Section 3.9 shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him or her to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
SECTION 11.6 RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
SECTION 11.7 LEGAL HOLIDAYS.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York, the State of
Connecticut or the State in which the principal office of the Paying Agent is
located. If a payment date is a Legal Holiday, payment may be made at that
place on the next succeeding day that is not a Legal Holiday, and no interest
shall accrue for the intervening period. If a regular record date is a Legal
Holiday, the regular record date shall not be affected.
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SECTION 11.8 SUCCESSORS; NO RECOURSE AGAINST OTHERS.
(a) All agreements of the Company in this Indenture and the
Securities shall bind its successor. All agreements of the Trustee in this
Indenture shall bind its successor.
(b) All liability of the Company or any Subsidiary Guarantor
described in the Securities insofar as it relates to any director, officer,
employee or stockholder, as such, of the Company is waived and released by each
Securityholder.
SECTION 11.9 DUPLICATE ORIGINALS.
The parties may sign any number of copies of this Indenture. One
signed copy is enough to prove this Indenture.
SECTION 11.10 OTHER PROVISIONS.
The first certificate pursuant to Section 3.9 shall be for the fiscal
year ending on June 30, 1994. The reporting date for Section 6.6 is May 15th of
each year. The first reporting date is May 15, 1995.
SECTION 11.11 GOVERNING LAW.
The laws of the State of New York govern this Indenture and the
Securities, without regard to the conflicts of laws rules thereof.
ARTICLE XII
SUBSIDIARY GUARANTEES
SECTION 12.1 SUBSIDIARY GUARANTEES.
Each of the Subsidiary Guarantors hereby jointly and severally
unconditionally guarantees to each Holder of a Senior Secured Note authenticated
and delivered by the Trustee, and to the Trustee on behalf of such Holder, the
due and punctual payment of the principal of (and premium, if any) and interest
on such Senior Secured Note when and as the same shall become due and payable,
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whether at the Stated Maturity, by acceleration, call for redemption, purchase
or otherwise, in accordance with the terms of such Senior Secured Note and of
this Indenture. In case of the failure of the Company punctually to make any
such payment, each of the Subsidiary Guarantors hereby jointly and severally
agrees to cause such payment to be made punctually when and as the same shall
become due and payable, whether at the Stated Maturity or by acceleration, call
for redemption, purchase or otherwise, and as if such payment were made by the
Company.
Each of the Subsidiary Guarantors hereby jointly and severally agrees
that its obligations hereunder shall be unconditional, irrespective of the
validity, regularity or enforceability of such Senior Secured Note or this
Indenture, the absence of any action to enforce the same, any exchange, release
or non-perfection of any Lien on any collateral for, or any release or amendment
or waiver of any term of any other guarantee of, or any consent to departure
from any requirement of any other guarantee of all or any of the Securities, the
election by the Trustee or any of the Holders in any proceeding under Chapter 11
of the Bankruptcy Law of the application of Section 1111(b)(2) of the Bankruptcy
Law, any borrowing or grant of a security interest by the Company, as debtor-in-
possession, under Section 364 of the Bankruptcy Law, the disallowance, under
Section 502 of the Bankruptcy Law, of all or any portion of the claims of the
Trustee or any of the Holders for payment of any of the Senior Secured Note, any
waiver or consent by the Holder of such Senior Secured Note or by the Trustee
with respect to any provisions thereof or of this Indenture, the obtaining of
any judgment against the Company or any action to enforce the same or any other
circumstances which might otherwise constitute a legal or equitable discharge or
defense of a guarantor. Each of the Subsidiary Guarantors hereby waives the
benefits of diligence, presentment, demand of payment, any requirement that the
Trustee or any of the Holders protect, secure, perfect or insure any security
interest in or other Lien on any property subject thereto or exhaust any right
or take any action against the Company or any other Person or any Collateral,
filing of claims with a court in the event of insolvency or bankruptcy of the
Company, any right to require a proceeding first against the Company, protest or
notice with respect to such Security or the Indebtedness evidenced thereby and
all demands whatsoever, and covenants, that this
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Subsidiary Guarantee will not be discharged in respect of such Senior Secured
Note except by complete performance of the obligations contained in such Senior
Secured Note and in this Subsidiary Guarantee. Each of the Subsidiary
Guarantors hereby agrees that, in the event of a default in payment of principal
(or premium, if any) or interest on such Senior Secured Note, whether at their
Stated Maturity, by acceleration, call for redemption, purchase or otherwise,
legal proceedings may be instituted by the Trustee on behalf of, or by, the
Holder of such Senior Secured Note, subject to the terms and conditions set
forth in this Indenture, directly against each of the Subsidiary Guarantors to
enforce this Subsidiary Guarantee without first proceeding against the Company.
Each Subsidiary Guarantor agrees that if, after the occurrence and during the
continuance of an Event of Default, the Trustee or any of the Holders are
prevented by applicable law from exercising their respective rights to
accelerate the maturity of the Senior Secured Notes, to collect interest on the
Senior Secured Notes, or to enforce or exercise any other right or remedy with
respect to the Senior Secured Notes, or the Trustee or the Holders are prevented
from taking any action to realize on the Collateral, such Subsidiary Guarantor
agrees to pay to the Trustee for the account of the Holders, upon demand
therefor, the amount that would otherwise have been due and payable had such
rights and remedies been permitted to be exercised by the Trustee or any of the
Holders.
Each Subsidiary Guarantor shall be subrogated to all rights of the
Holders of the Senior Secured Notes upon which its guarantee is endorsed against
the Company in respect of any amounts paid by such Subsidiary Guarantor on
account of such Senior Secured Note pursuant to the provisions of its Subsidiary
Guarantee or this Indenture; PROVIDED, HOWEVER, that no Subsidiary Guarantor
shall be entitled to enforce or to receive any payments arising out of, or based
upon, such right of subrogation until the principal of (and premium, if any) and
interest on all Senior Secured Notes issued hereunder shall have been paid in
full.
Each Subsidiary Guarantee shall remain in full force and effect and
continue to be effective should any petition be filed by or against the Company
for liquidation or reorganization, should the Company become insolvent or make
an assignment for the benefit of creditors
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or should a receiver or trustee be appointed for all or any significant part of
the Company's assets, and shall, to the fullest extent permitted by law,
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of the Senior Secured Notes, is, pursuant to applicable
law, rescinded or reduced in amount, or must otherwise be restored or returned
by any obligee on the Senior Secured Notes, whether as a "voidable preference,"
"fraudulent transfer," or otherwise, all as though such payment or performance
had not been made. In the event that any payment, or any part thereof, is
rescinded, reduced, restored or returned, the Senior Secured Notes shall, to the
fullest extent permitted by law, be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.
SECTION 12.2 EXECUTION AND DELIVERY OF SUBSIDIARY
GUARANTEES.
The Subsidiary Guarantees to be endorsed on the Senior Secured Notes
shall include the terms of the Subsidiary Guarantee set forth in Section 12.1
and any other terms that may be set forth in the form established pursuant to
Exhibit B annexed hereto, which is part of this Indenture. Each of the
Subsidiary Guarantors hereby agrees to execute its Subsidiary Guarantee, in a
form established pursuant to Exhibit B, to be endorsed on each Security
authenticated and delivered by the Trustee.
The Subsidiary Guarantee shall be executed on behalf of each
respective Subsidiary Guarantor by any one of such Subsidiary Guarantor's
Chairman of the Board, Vice Chairman of the Board, President or Vice Presidents,
attested by its Secretary or Assistant Secretary. The signature of any or all
of these officers on the Subsidiary Guarantee may be manual or facsimile.
A Subsidiary Guarantee bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of a Subsidiary Guarantor
shall bind such Subsidiary Guarantor, notwithstanding that such individuals or
any of them have ceased to hold such offices prior to the authentication and
delivery of the Security on which such Subsidiary Guarantee is endorsed or did
not hold such offices at the date of such Subsidiary Guarantee.
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The delivery of any Senior Secured Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
Subsidiary Guarantee endorsed thereon on behalf of the Subsidiary Guarantors.
Each of the Subsidiary Guarantors hereby jointly and severally agrees that its
Subsidiary Guarantee set forth in Section 12.1 shall remain in full force and
effect notwithstanding any failure to endorse a Subsidiary Guarantee on any
Senior Secured Note.
SECTION 12.3 SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
Except as set forth in Section 12.4 and in Articles III and IV hereof,
nothing contained in this Indenture or in any of the Senior Secured Notes shall
prevent any consolidation or merger of a Subsidiary Guarantor with or into the
Company or a Subsidiary Guarantor or shall prevent any sale or conveyance of the
property of a Subsidiary Guarantor as an entirety of substantially as an
entirety to the Company or a Subsidiary Guarantor.
SECTION 12.4 RELEASE OF SUBSIDIARY GUARANTORS.
(a) Concurrently with any consolidation or merger of a Subsidiary
Guarantor or any sale or conveyance of the property of a Subsidiary Guarantor as
an entirety or substantially as an entirety, in each case as permitted by
Section 12.3 hereof, and upon delivery by the Company to the Trustee of an
Officers' Certificate and an Opinion of Counsel to the effect that such
consolidation, merger, sale or conveyance was made in accordance with Section
12.3 hereof, the Trustee shall execute any documents reasonably required in
order to evidence the release of such Subsidiary Guarantor from its obligations
under its Subsidiary Guarantees endorsed on the Senior Secured Notes and under
this Article XII. Any Subsidiary Guarantor not released from its obligations
under its Subsidiary Guarantees endorsed on the Senior Secured Notes and under
this Article XII shall remain liable for the full amount of principal of and
interest on the Senior Secured Notes and for the other obligations of a
Subsidiary Guarantor under its Subsidiary Guarantees endorsed on the Senior
Secured Notes and under this Article XII.
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(b) Concurrently with the defeasance of the Senior Secured Notes
under Section 7.2 hereof, the Subsidiary Guarantors shall be released from all
of their obligations under their Subsidiary Guarantees endorsed on the Senior
Secured Notes and under this Article XII subject to reinstatement if the
obligations under the Securities are reinstated pursuant to Section 7.7.
(c) Upon the sale or disposition (by merger or otherwise) of any
Subsidiary Guarantor by the Company or any Restricted Subsidiary of the Company
to any entity that is not the Company or a Subsidiary or Affiliate thereof and
which sale or disposition is otherwise in compliance with the terms of this
Indenture, such Subsidiary Guarantor shall automatically be released from all
obligations under its Subsidiary Guarantees endorsed on the Senior Secured Notes
and under this Article XII, PROVIDED THAT such Subsidiary Guarantor is sold or
disposed of for fair market value (evidenced by a Board Resolution and set forth
in an Officers' Certificate delivered to the Trustee).
(d) Upon the redesignation by the Company of a Subsidiary Guarantor
from Restricted Subsidiary to an Unrestricted Subsidiary in compliance with the
provisions of this Indenture, such Subsidiary shall cease to be a Subsidiary
Guarantor and shall be released from all of the obligations of a Subsidiary
Guarantor under its Subsidiary Guarantees endorsed on the Senior Secured Notes
and under this Article XII.
SECTION 12.5 ADDITIONAL SUBSIDIARY GUARANTORS.
(a) The Company shall cause any Person that becomes a Restricted
Subsidiary after the date of this Indenture to become a Subsidiary Guarantor
with respect to the Senior Secured Notes. Any such Person shall become a
Subsidiary Guarantor by executing and delivering to the Trustee (a) a
supplemental indenture, in form and substance satisfactory to the Trustee, which
subjects such Person to the provisions (including the representations and
warranties) of this Indenture as a Subsidiary Guarantor and (b) an Opinion of
Counsel to the effect that such supplemental indenture has been duly authorized
and executed by such Person and constitutes the legal, valid, binding and
enforceable obligation of such Person (subject to such customary exceptions
concerning credi-
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tors' rights and equitable principles as may be reasonably acceptable to the
Trustee in its discretion).
(b) The Company will cause any Subsidiary of the Company that is or
becomes a borrower under or guarantor of the Company's obligations under the New
Credit Facility to become a Subsidiary Guarantor with respect to the Senior
Secured Notes.
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SIGNATURES
Dated: , 199_
EMPIRE GAS CORPORATION
By_______________________
Name:
Title:
Attest: By_______________________
Name:
Title:
_________________________
Each of the SUBSIDIARY GUARANTORS listed on
Schedule I attached hereto
By_______________________
Name:
Title:
Attest:
_________________________
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, as
Trustee
By_______________________
Name:
Title:
[SEAL]
Attest:
_________________________
116
<PAGE>
SCHEDULE I
Empire Tank Leasing Corporation
Empiregas Equipment Corporation
Empire Underground Storage, Inc.
Empire Industrial Sales Corporation
Utility Collection Corporation
Empiregas Transports, Inc. (Missouri)
Empiregas Aviation Corporation
Empiregas Transports, Inc. - OR
Empiregas Inc. of Clinton (Missouri)
Empiregas Inc. of Kansas City
Empiregas Inc. of Albany
Empiregas Inc. of Aiken
Empiregas of Arma, Inc.
Empiregas Inc. of Arnauldville
Empiregas Inc. of Auburn
Empiregas Inc. of Big Rapids
Empiregas Inc. of Bolivar
Empiregas Inc. of Boise
Empiregas Inc. of Boulder
Empiregas Inc. of Bowling Green
Empiregas Inc. of Brandon
Empiregas Inc. of Bremerton
Empiregas of Bristow, Inc.
Empiregas Inc. of Buffalo
Empiregas Inc. of Adrian
Empiregas Inc. of Camdenton
Empiregas Inc. of Canon City
Empiregas Inc. of Canton
Empiregas Inc. of Carthage
Empiregas Inc. of Castle Rock
Empiregas Inc. of Centerville
Empiregas Inc. of Charlotte
Empiregas Inc. of Chassel
Empiregas Inc. of Chehalis
Empiregas Inc. of Clinton, Illinois
Empiregas of Colcord, Inc.
Empiregas Inc. of Cole Camp
Empiregas Inc. of Coleman
Empiregas Inc. of Colorado Springs
Empiregas Inc. of Coquille
Empiregas Inc. of Cuba
1
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Empiregas Inc. of Chetek
Empiregas Inc. of Denver
Empiregas Inc. of Dover
Empiregas Inc. of Durand
Empiregas Inc. of El Dorado Springs
Empiregas Inc. of Elsberry
Empiregas Inc. of Elsinore
Empiregas Inc. of Escondido
Empiregas Inc. of Eunice
Empiregas Inc. of Evergreen
Salgas Inc. of Fairplay
Empiregas Inc. of Eau Claire
Empiregas Inc. of Fort Collins
Empiregas Inc. of Fowler
Empiregas Inc. of Mid-Missouri
Empiregas Inc. of Galveston
Empiregas Inc. of Galva
Empiregas Inc. of Gaylord
Empiregas Inc. of Globe
Empiregas Inc. of Goose Creek
Empiregas Inc. of Greeley
Empiregas Inc. of Grand Junction
Empiregas of Grove, Inc.
Empiregas Inc. of Hermiston
Empiregas Inc. of Hermitage
Empiregas Inc. of Hiawassee
Empiregas Inc. of Higginsville
Empiregas of Hitichita, Inc.
Empiregas Inc. of Hoopeston
Empiregas Inc. of Hornick
Empiregas Inc. of Humansville
Empiregas Inc. of Jacksonville
Empiregas Inc. of Jackson, MI
Empiregas Inc. of Kalamazoo
Empiregas Inc. of Kirksville
Empiregas Inc. of Lafayette
Empiregas Inc. of Lake Charles
Empiregas Inc. of Lake Providence
Empiregas Inc. of Laurie
Empiregas of Le Sueur, Inc.
Empiregas Inc. of Lincoln
Empiregas Inc. of Longmont
Empiregas Inc. of Los Angeles
Empiregas Inc. of Loveland
Empiregas Inc. of Marquette
Empiregas Inc. of Marshall
Empiregas Inc. of Medford
2
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Empiregas Inc. of Menomonie
Empiregas Inc. of Merillan
Empiregas Inc. of Miller
Empiregas Inc. of Modesto
Empiregas Inc. of Monte Vista
Empiregas Inc. of Mount Vernon
Empiregas Inc. of Munising
Empiregas Inc. of Murphy
Thrif-T-Gas Inc. of Blackwater
Empiregas Inc. of North Bend
Empiregas Inc. of North Myrtle Beach, Inc.
Empiregas Inc. of Oak Grove
Empiregas Inc. of Onawa
Empiregas Inc. of Orangeburg
Empiregas Inc. of Owensville
Empiregas Inc. of Santa Paula
Empiregas Inc. of Paducah
Empiregas Inc. of Palmyra
Empiregas Inc. of Placerville
Empiregas Inc. of Pomona
Empiregas Inc. of Potosi
Empiregas Inc. of Pueblo
Empiregas Inc. of Reedsport
Empiregas Inc. of Richland
Empiregas Inc. of Rolla
Empiregas Inc. of Sacramento
Empiregas Inc. of Sandy
Empiregas Inc. of Shell Lake
Empiregas Inc. of Siloam Springs
Empiregas of Stigler, Inc.
Empiregas Inc. of Susanville
Empiregas Inc. of Sunnyside
Empiregas Inc. of Rocky Mount
Empiregas Inc. of the Dalles
Empiregas Inc. of Tipton (Iowa)
Empiregas Inc. of Traverse City
Empiregas Inc. of Vandalia
Empiregas Inc. of Vassar
Empiregas Inc. of Vinita, Inc.
Empiregas Inc. of Warren
Empiregas Inc. of Warsaw (Missouri)
Empiregas Inc. of Washington
Empiregas Inc. of Waukon
Empiregas Inc. of Waynesville
Empiregas Inc. of Waynesville, NC
Empiregas Inc. of Wenatchee
Empiregas Inc. of Wentzville
3
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Empiregas of Westville, Inc.
Empiregas Inc. of Wills Point
Empiregas Inc. of Wilmington
Empiregas Inc. of Wilson
Empiregas Inc. of Woodland Park
Empiregas Inc. of Yakima
Empiregas Inc. of Yucca Valley
Empiregas Inc. of Zebulon
Empiregas Inc. of Columbiana
Empiregas of Zumbro Falls, Inc.
Ginco Gas Company, Inc.
Empiregas Inc. of Orange County
Empiregas Inc. of Morgan County
Empiregas Inc. of Lake Ozark
Empiregas Inc. of Waco
Empiregas Inc. of Paris, TX
Empiregas Inc. of Dallas, TX
Empiregas Inc. of Kemp
Empiregas Inc. of San Antonio
Thrift-T-Gas Co., Inc.
Empiregas Inc. of Paris, MO
Salida Gas Co., Inc.
Salgas Inc. of Gunnison
Empiregas Inc. of Toledo
Empiregas Inc. of Wilkesboro
Empiregas Inc. of Hendersville
Empiregas Inc. of North Carolina
Empiregas Inc. of Carthage
Empiregas Inc. of Apex
Empiregas Inc. of Durham
Empiregas Inc. of Warrenton
4
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EXHIBIT A
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(Form of Face of Security)
Unless this certificate is presented by an authorized representative
of The Depositary Trust Company, a New York corporation ("DTC"), to the Company
(as defined below) or its agent for registration of transfer, exchange or
payment, and any certificate issued is registered in the name of Cede & Co., or
such other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co., or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
Unless and until it is exchanged in whole or in part for Securities in
definitive registered form, this certificate may not be transferred except as a
whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another
nominee of DTC or by DTC or any such nominee to a successor Depositary or a
nominee of such successor Depositary.
EMPIRE GAS CORPORATION
% SENIOR SECURED NOTE DUE 2004
No. $
Empire Gas Corporation, a Missouri corporation, promises to pay to
, or registered assigns, the principal sum of Dollars on ,
2004.
Interest Payment Dates:
Record Dates:
Additional provisions of this Security are set forth on the reverse
hereof.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
Date:
EMPIRE GAS CORPORATION
By_______________________
Name:
Title:
By_______________________
Name:
Title:
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION:
, as Trustee,
certifies that this is one
of the Securities referred
to in the Indenture. (SEAL)
By: _________________________
Authorized Signature
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(Form of Back of Security)
EMPIRE GAS CORPORATION
% SENIOR SECURED NOTE DUE 2004
(1) INTEREST. Empire Gas Corporation, a Missouri corporation (such
corporation, and its successors and assigns under the Indenture referred to
below, being herein called the "Company"), promises to pay interest on the
principal amount at maturity of this Security at the rate of [____]% per annum
until [______], 1999 and at the rate of [__]% per annum from and including
[________], 1999 until maturity.
Interest will be payable semiannually (to the holders of record of the
Securities at the close of business on the [_____] or [_____] immediately
preceding the Interest Payment Date) on each Interest Payment Date, commencing
[___________], 1994.
Interest on the Securities will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from [_____],
1994; PROVIDED that, if there is no existing default in the payment of interest
and if this Security is authenticated between a Regular Record Date referred to
on the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such Interest Payment Date. Interest will be computed on the basis
of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and premium, if
any, and interest on overdue installments of interest, to the extent lawful, at
a rate per annum that is 2% in excess of the rate otherwise payable.
(2) METHOD OF PAYMENT. The Company will pay interest on the
Securities (except defaulted interest) to the persons who are registered Holders
of Securities at the close of business on the record date next preceding the
interest payment date even though Securities are canceled after the record date
and on or before the interest payment date. Holders must surrender Securities
to a Paying Agent to collect principal payments. The Company will pay principal
and interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. However, the Company may pay
principal and
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interest by check payable in such money. It may mail an interest check to a
Holder's registered address.
(3) PAYING AGENT, REGISTRAR. Initially, Shawmut Bank Connecticut,
National Association, a National Banking Association (the "Trustee"), will act
as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-registrar without notice. The Company may act as Paying Agent,
Registrar or co-registrar.
(4) INDENTURE. The Company issued the Securities under an Indenture
dated as of , 1994 (the "Indenture") between the Company, the
Subsidiary Guarantors (as defined therein) and the Trustee. The Securities are
general obligations of the Company limited to $ aggregate principal
amount at maturity, subject to increase pursuant to the terms of the Indenture.
The terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.
Code Sections 77aaa-77bbbb) (the "TIA"). Capitalized terms used herein but not
defined herein are used as defined in the Indenture, and references to the
principal amount of any Security refer to the Accreted Value of such Security as
determined pursuant to the Indenture. The Securities are subject to all such
terms, and Securityholders are referred to the Indenture and the TIA for a
statement of such terms.
(5) OPTIONAL REDEMPTION. Except as set forth in the following
paragraph, the Company may not redeem the Securities prior to _____, 1999. On
and after such date, the Company may redeem the Securities at any time as a
whole, or from time to time in part, at the following redemption prices
(expressed in percentages of Accreted Value), plus accrued interest to the
redemption date, if redeemed during the 12-month period beginning _____,
YEAR %
1999 . . . . . . . . . .
2000 . . . . . . . . . .
2001, and thereafter . .
The Company may redeem up to $ principal amount at maturity
of Securities with the proceeds of one or more Public Equity Offerings following
which there is a Public Market, at any time in whole or from time to time in
part, at a price (expressed as a percentage of Accreted
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Value), plus accrued interest to the redemption date, of % if redeemed at
any time prior to , 1997.
(6) NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed at the address set forth for such Holder on
the register referred to in Section 2.3 of the Indenture. Unless the Company
shall default in payment of the redemption price plus accrued interest, on and
after the redemption date interest ceases to accrue on such Securities or
portions of them called for redemption. Securities in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000.
(7) "ACCRETED VALUE" means as of any date (the "specified date") with
respect to each $1,000 face amount of Securities, the following amount:
(i) if the specified date is one of the following dates (each an
"accrual date"), the amount set forth opposite such date below:
ACCRUAL DATE ACCRETED VALUE
______, 1994 . . . . . . . . . . . . ______
______, 1994 . . . . . . . . . . . . ______
______, 1995 . . . . . . . . . . . . ______
______, 1995 . . . . . . . . . . . . ______
______, 1996 . . . . . . . . . . . . ______
______, 1996 . . . . . . . . . . . . ______
______, 1997 . . . . . . . . . . . . ______
______, 1997 . . . . . . . . . . . . ______
______, 1998 . . . . . . . . . . . . ______
______, 1998 . . . . . . . . . . . . ______
______, 1999 . . . . . . . . . . . . $1,000;
(ii) if the specified date occurs between two accrual dates, the
sum of (A) the accreted value for the accrual date immediately preceding
the specified date and (B) an amount equal to the product of (i) the
accreted value for the immediately following accrual date less the accreted
value for the immediately preceding accrual date and (ii) a fraction, the
numerator of which is the number of days (not to exceed 180 days) from the
immediately preceding accrual date to the specified date, using a 360-day
year of twelve 30-
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day months, and the denominator of which is 180 (or, if the immediately
following accrual date is _________, 1999, ___); and
(iii) if the specified date occurs after _____ __, 1999, $1,000.
(8) DENOMINATIONS; TRANSFER; EXCHANGE. The Securities are in
registered form without coupons in denominations of $1,000 in face amount and
whole multiples of $1,000. The transfer of Securities may be registered and
Securities may be exchanged as provided in the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not exchange or register the transfer of any
Security or portion of a Security selected for redemption (except, in the case
of a Security to be redeemed in part, the portion thereof not to be redeemed) or
any Securities for a period of 15 days before a selection of Securities to be
redeemed, or 15 days before an interest payment date.
(9) PUT PROVISIONS. Upon a Change of Control, any Holder of
Securities will have the right to cause the Company to repurchase all or any
part of the Securities of such Holder at a repurchase price equal to 10 % of the
principal amount of the Securities to be repurchased plus accrued interest to
the date of repurchase as provided in, and subject to the terms of, the
Indenture.
(10) DEFEASANCE. Subject to certain conditions, the Company at any
time may terminate some or all of its obligations under the Securities and the
Indenture if the Company deposits with the Trustee money or U.S. Government
Obligations for the payment of principal and interest on the Securities to
redemption or maturity, as the case may be.
(11) SECURITY. As provided in the Indenture and the Pledge
Agreement, and subject to certain limitations set forth therein, the Obligations
of the Company under the Indenture and the Pledge Agreement are secured by the
Collateral as provided in the Indenture and the Pledge Agreement. Each Holder,
by accepting a Security, agrees to be bound by all terms and provisions of the
Pledge Agreement, as the same may be amended form time to time. The Liens
created under the Indenture and the Pledge Agreement shall
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<PAGE>
be released upon the terms and subject to the conditions set forth in the
Indenture and Pledge Agreement.
(12) PERSONS DEEMED OWNERS. The registered Holder of a Security may
be treated as its owner for all purposes, except that interest (other than
defaulted interest) will be paid to the person that was the registered Holder on
the relevant record date for such payment of interest.
(13) AMENDMENTS AND WAIVERS. Subject to certain exceptions, (i) the
Indenture or the Securities may be amended or supplemented with the consent of
the Holders of a majority in principal amount of the Securities; and (ii) any
existing default may be waived with the consent of the Holders of a majority in
principal amount of the Securities. Without the consent of any Securityholder,
the Indenture or the Securities may be amended or supplemented to cure any
ambiguity, omission, defect or inconsistency, to provide for assumption of
Company obligations to Securityholders or to provide for uncertificated
Securities in addition to or in place of certificated Securities, to provide for
guarantees with respect to, or security for, the Securities, or to comply with
the TIA or to add additional covenants or surrender Company rights, to make
certain amendments to the Pledge Agreement called for therein to add Collateral
or to make any change that does not adversely affect the Rights of any
Securityholder.
(14) REMEDIES. If an Event of Default occurs and is continuing, the
Trustee or Holders of at least 25% in principal amount of the Securities may
declare all the Securities to be due and payable immediately. Securityholders
may not enforce the Indenture or the Securities except as provided in the
Indenture. The Trustee may require an indemnity before it enforces the
Indenture or the Securities. Subject to certain limitations, Holders of a
majority in principal amount of the Securities may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Securityholders
notice of any continuing default (except a Default in payment of principal or
interest) if it determines that withholding notice is in their interests. The
Company must furnish an annual compliance certificate to the Trustee.
(15) TRUSTEE DEALINGS WITH COMPANY. Subject to the provisions of the
TIA, the Trustee under the Indenture,
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in its individual or any other capacity, may make loans to, accept deposits
from, and perform services for the Company or its Affiliates, and may otherwise
deal with the Company or its Affiliates, as if it were not Trustee. The Trustee
will initially be Shawmut Bank Connecticut, National Association.
(16) NO RECOURSE AGAINST OTHERS. A director, officer, employee or
stockholder, as such, of the Company or a Subsidiary Guarantor shall not have
any liability for any obligations of the Company under the Securities or the
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Securityholder by accepting a Security
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
(17) AUTHENTICATION. This Security shall not be valid until
authenticated by the manual signature of an authorized signatory of the Trustee
or an authenticating agent.
(18) ABBREVIATIONS. Customary abbreviations may be used in the name
of a Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
(19) SUBSIDIARY GUARANTEE. The payment of principal of, premium, if
any and interest on the Securities is guaranteed on a senior basis by the
Guarantors pursuant to Article XII of the Indenture.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST
AND WITHOUT CHARGE A COPY OF THE INDENTURE AND THE PLEDGE AGREEMENT, WHICH
INDENTURE HAS IN IT THE
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TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO: SECRETARY,
EMPIRE GAS CORPORATION, 1700 SOUTH JEFFERSON STREET, P.O. BOX 303, LEBANON,
MISSOURI, 65536 ATTENTION: SECRETARY.
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ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Insert assignee's soc. sec or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint agent to transfer this Security on
the books of the Company. The agent may substitute another to act for him.
____________________________________________________________
Dated: ________________ Signed: ____________________
____________________
(Sign exactly as your name appears on the
other side of this Security)
Signature Guarantee: _______________________________________
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OPTION OF HOLDER TO ELECT PURCHASE FORM
If you wish to elect to have this Security purchased by the Company
pursuant to Section 3.8, 3.12 or 10.5 of the Indenture, check this box:
/ /
If you wish to elect to have only part of this Security purchased by the
Company pursuant to Section 3.8, 3.12 or 10.5 of the Indenture, state the
amount: $
*As set forth in the Indenture, any purchase pursuant to Section 3.12 is
subject to proration in the event the offer is oversubscribed.
Dated: ________________ Signed: ____________________
____________________
(Sign exactly as your name appears on the
other side of this Security)
Signature Guarantee: _______________________________________
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<PAGE>
EXHIBIT B
FORM OF GUARANTEE
GUARANTEE
For value received, each of the Subsidiary Guarantors listed below
hereby jointly and severally unconditionally guarantees to the Holder of the
Senior Secured Note on which this guarantee is endorsed, and to the Trustee on
behalf of such Holder, the due and punctual payment of the principal of (and
premium, if any) and interest on such Senior Secured Note when and as the same
shall become due and payable, whether at the Stated Maturity, by acceleration,
call for redemption, purchase or otherwise, according to the terms thereof and
of the Indenture referred to therein. In case of the failure of the Company
punctually to make any such payment, each of the Subsidiary Guarantors hereby
jointly and severally agrees to cause such payment to be made punctually when
and as the same shall become due and payable, whether at the Stated Maturity or
by acceleration, call for redemption, purchase or otherwise, and as if such
payment were made by the Company.
Each of the Subsidiary Guarantors hereby jointly and severally agrees
that its obligations hereunder shall be unconditional, irrespective of the
validity, regularity or enforceability of such Senior Secured Note or the
Indenture, the absence of any action to enforce the same, or any release or
amendment or waiver of any term of any other guarantee of, or any consent to
departure from any requirement of any other guarantee of all or of any of the
Securities, the election by the Trustee or any of the Holders in any proceeding
under Chapter 11 of the Bankruptcy Code, 11 U.S.C. Sections 101-13330, as
amended (the "Bankruptcy Law") of the application of Section 1111(b)(2) of the
Bankruptcy Law, any borrowing or grant of a security interest by the Company, as
debtor-in-possession, under Section 364 of the Bankruptcy Law, the disallowance,
under Section 502 of the Bankruptcy Law, of all or any portion of the claims of
the Trustee or any of the Holders for payment of any of the Securities, any
waiver or consent by the Holder of such Security or by the Trustee or either of
them with respect to any provisions thereof or of the Indenture, the obtaining
of any judgment against the Company or any action to enforce
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the same or any other circumstances which might otherwise constitute a legal or
equitable discharge or defense of a guarantor. Each of the Subsidiary
Guarantors hereby waives the benefits of diligence, presentment, demand of
payment, any requirement that the Trustee or any of the Holders protect, secure,
perfect or insure any security interest in or other Lien on any property subject
thereto or exhaust any right or take any action against the Company or any other
Person, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest or notice with respect to such Security or the Debt evidenced thereby
and all demands whatsoever, and covenants that this Subsidiary Guarantee will
not be discharged except by complete performance of the obligations contained in
such Senior Secured Note and in this Subsidiary Guarantee. Each of the
Subsidiary Guarantors hereby agrees that, in the event of a default in payment
of principal (or premium, if any) or interest on such Senior Secured Note,
whether at its Stated Maturity, by acceleration, call for redemption purchase or
otherwise, legal proceedings may be instituted by the Trustee on behalf of, or
by, the Holder of such Senior Secured Note, subject to the terms and conditions
set forth in the Indenture, directly against each of the Subsidiary Guarantors
to enforce this Subsidiary Guarantee without first proceeding against the
Company. Each Subsidiary Guarantor agrees that if, after the occurrence and
during the continuance of an Event of Default, the Trustee or any of the Holders
are prevented by applicable law from exercising their respective rights to
accelerate the maturity of the Senior Secured Notes, to collect interest on the
[BSenior Secured Notes, or to enforce or exercise any other right or remedy with
respect to the Senior Secured Notes, such Subsidiary Guarantor agrees to pay to
the Trustee for the account of the Holders, upon demand therefor, the amount
that would otherwise have been due and payable had such rights and remedies been
permitted to be exercised by the Trustee or any of the Holders.
No reference herein to the Indenture and no provision of this
Subsidiary Guarantee or of the Indenture shall alter or impair the Subsidiary
Guarantee of any Subsidiary Guarantor, which is absolute and unconditional, of
the due and punctual payment of the principal (and premium, if any) and interest
on the Security upon which this Subsidiary Guarantee is endorsed.
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Each Subsidiary Guarantor shall be subrogated to all rights of the
Holder of this Senior Secured Note against the Company in respect of any amounts
paid by such Subsidiary Guarantor on account of this Security pursuant to the
provisions of this Subsidiary Guarantee or the Indenture; PROVIDED, HOWEVER,
that such Subsidiary Guarantor shall not be entitled to enforce or to receive
any payments arising out of, or based upon, such right of subrogation until the
principal of (and premium, if any) and interest on this Security and all other
Securities issued under the Indenture shall have been paid in full.
This Subsidiary Guarantee shall remain in full force and effect and
continue to be effective should any petition be filed by or against the Company
for liquidation or reorganization, should the Company become insolvent or make
an assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of the Company's assets, and shall, to
the fullest extent permitted by law, continue to be effective or be reinstated,
as the case may be, if at any time payment and performance of the Senior Secured
Notes, is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee on the Senior Secured Notes
whether as a "voidable preference," "fraudulent transfer," or otherwise, all as
though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Senior Secured Notes shall, to the fullest extent permitted by law, be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.
The Subsidiary Guarantors shall have the right to seek contribution
from any non-paying Subsidiary Guarantor so long as the exercise of such right
does not impair the rights of the Holders under this Subsidiary Guarantee.
The Subsidiary Guarantors or any particular Subsidiary Guarantor shall
be released from this Subsidiary Guarantee upon the terms and subject to certain
conditions provided in the Indenture.
By delivery of a Supplemental Indenture to the Trustee in accordance
with the terms of the Indenture, each Person that become a Subsidiary Guarantor
after the date of the Indenture will be deemed to have executed and delivered
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this Subsidiary Guarantee for the benefit of the Holder of this Senior Secured
Note with the same effect as if such Subsidiary Guarantor was named below.
All terms used in this Subsidiary Guarantee which are defined in the
Indenture referred to in the Security upon which this Subsidiary Guarantee is
endorsed shall have the meanings assigned to them in such Indenture.
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Senior Secured Note upon
which this Subsidiary Guarantee is endorsed shall have been executed by the
Trustee under the Indenture by manual signature.
Reference is made to Article Twelve of the Indenture for further
provisions with respect to this Subsidiary Guarantee.
THIS SUBSIDIARY GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, each of the Subsidiary Guarantors has caused this
Subsidiary Guarantee to be duly executed.
Each of the SUBSIDIARY GUARANTORS listed on Schedule I
attached hereto
Each as Subsidiary Guarantor
By
Title:
Attest:
___________________________
Title:
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EXHIBIT C
FORM OF SUBORDINATION PROVISIONS
[THE TERM "SECURITIES" IN THIS FORM
REFERS TO THE SUBORDINATED SECURITIES
REFERRED TO IN THE DEFINITION OF
"REFINANCING INDEBTEDNESS" AND SECTION 3.4(B)
TO WHICH THESE PROVISIONS WOULD APPLY.]
ARTICLE __
SUBORDINATION
SECTION ____ AGREEMENT TO SUBORDINATE.
The Company agrees, and each Securityholder by accepting a Security agrees,
that the indebtedness evidenced by the Securities is subordinated in right of
payment, to the extent and in the matter provided herein, to the prior payment
in full of all Senior Debt, and that the subordination is for the benefit of the
holders of Senior Debt.
SECTION ____ CERTAIN DEFINITIONS.
"REPRESENTATIVE" means the indenture trustee or other trustee, agent or
representative for an issue of Senior Debt.
"SENIOR DEBT" means (a) the principal of and accrued and unpaid interest
(including interest accruing on or after filing of any petition in bankruptcy or
for reorganization relating to the Company whether or not a claim for post-
filing interest is allowed in such proceeding) in respect of (1) indebtedness
(other than the Securities) of the Company for money borrowed, including,
without limitation, the Senior Secured Notes Due 2004 of the Company, and for
the reimbursement of amounts paid under letters of credit, (2) express written
guarantees by the Company of indebtedness for money borrowed by any other
Person, (3) indebtedness evidenced by notes, debentures, bonds or other
instruments of indebtedness for the payment of which the Company is responsible
or liable, by guarantees or otherwise, (4) obligations of the Company under any
agreement in respect of any interest rate or currency swap, interest rate cap,
floor or collar, interest rate future, currency exchange or for-
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ward currency transaction, or any similar interest rate or currency hedging
transaction, but only to the extent such obligations relate to other Senior Debt
(exclusive of Senior Debt consisting of obligations referred to in this clause
(4)) and (5) obligations of the Company under any agreement to lease, or any
lease of, any real or personal property which, in accordance with generally
accepted accounting principles, is classified upon the Company's balance sheet
as a liability, irrespective of whether in any case referred to in the foregoing
(1) through (5) such indebtedness, guarantee or obligation is outstanding on the
date of execution of this Indenture or thereafter created, incurred or assumed,
and (b) modifications, renewals, extensions and refundings of any such
indebtedness, guarantee or obligation; unless, in any case referred to in the
foregoing clauses (a) and (b), in the instrument creating or evidencing the
indebtedness, guarantee or obligation or pursuant to which the same is
outstanding, it is provide that such indebtedness, guarantee or obligation, or
such modification, renewal, extension or refunding thereof, is not superior in
right of payment to the Securities; PROVIDED, HOWEVER, that Senior Debt shall
not be deemed to include (i) any obligation of the Company to any Subsidiary and
(ii) any other indebtedness, guarantee or obligation of the Company of the type
set forth in clauses (a) or (b) above which is subordinate or junior in ranking
in any respect to any other indebtedness, guarantee or obligation of the
Company.
SECTION ____ LIQUIDATION, DISSOLUTION, BANKRUPTCY.
Upon any payment or distribution of assets of the Company to creditors upon
a liquidation or total or partial dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or its property:
(1) holders of Senior Debt shall be entitled to receive payment in
full of the Senior Debt before Securityholders shall be entitled to
received any payment of principal of, or interest on, the Securities; and
(2) until Senior Debt shall received payment in full, any
distribution to which Securityholders would be entitled but for this
Article shall be made to holders of Senior Debt as their interests may
appear, except that Securityholders may receive securities that
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are subordinated to Senior Debt to at least the same extent as the
Securities.
For purposes of this Section "payment in full", as used with respect to Senior
Debt, means the receipt of cash or securities (taken at their fair value at the
time of receipt, determined as hereinafter provided) equal to the principal of
and interest on the Senior Debt to the date of payment. "Fair value" means (i)
if the securities are quoted on a nationally recognized securities exchange, the
closing price on the day such securities are received or, if there are no sales
reported on that day, the reported closing bid price on that day, and (ii) if
the securities are not so quoted, a price determined by a nationally recognized
investment banking house selected by the Trustee or the Holders of a majority in
principal amount of the Securities and the Representative or the holders of
Senior Debt receiving such securities, such price to be determined as of the
date of receipt of such securities by the holders of Senior Debt.
SECTION ____ DEFAULT ON SENIOR DEBT.
(a) The Company may not pay principal of or interest on the Securities and
may not (and may not permit any Subsidiary to) acquire any Securities for cash
or property, other than capital stock of the Company, if:
(i) a default in the payment of any principal of or interest on any
Senior Debt occurs and is continuing, whether at maturity or at a date
fixed for redemption or by declaration or otherwise; or
(ii) a default on Senior Debt (other than as described in clause
(a)(i) of this Section) occurs and is continuing that permits holders of
such Senior Debt to accelerate its maturity, and the default is the subject
of judicial proceedings or the Company receives a notice of the default
from a Person who may give it pursuant to Section .12 (if the Company
receives any such notice, a similar notice received within nine months
thereafter relating to the same default on the same issue of Senior Debt
shall not be effective for purposes of this Section).
(b) The Company may resume payment on the Securities and the Company or a
Subsidiary may acquire them when:
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(i) the default is cured or waived, or
(ii) in the case of clause (a)(ii) of this Section, 180 days pass
after the notice is given if the default is not the subject of judicial
proceedings,
if this Article otherwise permits the payment or acquisition at that time.
SECTION ____ ACCELERATION OF SECURITIES.
If payment of the Securities is accelerated because of an Event of Default,
the Company or the Trustee shall promptly notify holders of Senior Debt and
their Representative of the acceleration. The Company may not pay principal of
or interest on the Securities until after 180 days following the acceleration
and only if this Article permits the payment at that time.
SECTION ____ WHEN PAYMENT OR DISTRIBUTION MUST BE PAID OVER.
If a payment or distribution is made to Securityholders that because of
this Article should not have been made to them, the Securityholders who receive
the payment or distribution shall hold it in trust for holders of Senior Debt
and pay it over to them or their Representative, if any, as their interests may
appear promptly after receipt thereof.
SECTION ____ NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent of any
facts known to the Company that would cause a payment of principal of or
interest on the Securities to violate this Article.
SECTION ____ SUBROGATION.
After all Senior Debt is paid in full and until the Securities are paid in
full, Securityholders shall be subrogated to the rights of holders of Senior
Debt to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Securityholders have been applied to the
payment of Senior Debt. A distribution made under this Article to holders of
Senior Debt which otherwise would have been made to Securityholders is not, as
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<PAGE>
between the Company and Securityholders, a payment by the Company on Senior
Debt.
SECTION ____ RELATIVE RIGHTS.
This Article defines the relative rights of Securityholders and holders of
Senior Debt. Nothing in this Indenture shall:
(a) impair, as between the Company and Securityholders, the obligation of
the Company, which is absolute and unconditional, to pay principal of and
interest on the Securities in accordance with their terms;
(b) affect the relative rights of Securityholders and creditors of the
Company other than holders of Senior Debt; or
(c) prevent the Trustee or any Securityholder from exercising its
available remedies upon a Default, subject to the rights of holders of Senior
Debt to receive distribution otherwise payable to Securityholders.
SECTION ____ SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Debt to enforce the subordination of the
indebtedness evidenced by the Securities shall be impaired by any act or failure
to act by the Company or by its failure to comply with this Indenture.
SECTION ____ DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
SECTION ____ RIGHTS OF TRUSTEE AND PAYING AGENT.
The Trustee or Paying Agent may continue to make payments on the Securities
until it receives notice of facts that would cause a payment of principal of or
interest on the Securities to violate this Article. The Company, the Registrar,
the Paying Agent, a Representative or a holder of an issue of Senior Debt that
has no Representative may give the notice.
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The Trustee in its individual or any other capacity may hold Senior Debt
with the same rights it would have if it were not Trustee. Any Agent may do the
same with the like rights.
SECTION ____ TRUSTEE AND SECURITYHOLDERS ENTITLED TO RELY.
In connection with any payment or distribution pursuant to this Article,
the Trustee and the Securityholders shall be entitled to rely (i) upon any order
or decree of a court of competent jurisdiction in which any proceedings of the
nature referred to in Section .03 are pending, (ii) upon a certificate of the
liquidating trustee or agent or other Person making such payment or distribution
to the Securityholders or (iii) upon the Representative, if any, of the holders
of Senior Debt for the purpose of ascertaining the persons entitled to
participate in such payment or distribution, the holders of the Senior Debt and
other indebtedness of the Company, the amount thereof or payment thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article. In the event that the Trustee determines, in good
faith, that evidence is required with respect to the right of any Person as a
holder of Senior Debt to participate in any payment or distribution pursuant to
this Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and other facts pertinent to the rights of such Person
under this Article, and, if such evidence is not furnished, the Trustee may
defer any payment to such Person pending judicial determination as to the right
of such Person to receive such payment.
SECTION ____ ARTICLE [ ] NOT TO PREVENT EVENTS OF DEFAULT OR LIMIT RIGHT TO
ACCELERATE.
The failure to make a payment pursuant to the Securities by reason of any
provision in this Article shall not be construed as preventing the occurrence of
a Default or an Event of Default. Nothing in this Article shall have any effect
on the right of the Securityholders to accelerate the maturity of the
Securities.
C-6
<PAGE>
SECTION ____ TRUSTEE TO EFFECTUATE SUBORDINATION.
Each Securityholder by accepting a Security authorizes and directs the
Trustee on his behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination between the Securityholders and the
holders of Senior Debt as provided in this Article and appoints the Trustee as
attorney-in-fact for any and all such purposes.
SECTION ____ TRUSTEE NOT CHARGED WITH KNOWLEDGE OF PROHIBITION.
Notwithstanding the provisions of this Article or any other provision of
this Indenture, but subject to the provisions under "Duties of Trustee" and
"Rights of Trustee", the Trustee and any Paying Agent shall not be charged with
knowledge of the existence of any Senior Debt, or of any default in the payment
of the principal of, or interest on, any Senior Debt, or of any facts which
would prohibit the making of any payment of money to or by the Trustee or any
such Paying Agent, unless and until the Trustee or such Paying Agent shall have
received at least three business days prior to the date set for payment under
the terms of this Indenture written notice thereof from the Company or a holder
of any kind or category of any Senior Debt or the Representative or such holder;
nor shall the Trustee or any such Paying Agent be charged with knowledge of the
curing of any such default or of the elimination of the fact or condition
preventing any such payment, unless and until the Trustee or such Paying Agent
shall have received an Officers' Certificate to such effect. Nothing contained
in this Section shall limit the rights of holders of Senior Debt to recover
payments pursuant to Section .06.
SECTION ____ TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR DEBT.
The Trustee shall not be deemed to owe any fiduciary duty to the holders of
Senior Debt and shall not be liable to any such holders if it shall mistakenly
pay over or distribute to Securityholders or the Company or any other Person,
money or assets to which any holders of Senior Debt shall be entitled by virtue
of this Article or otherwise.
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<PAGE>
SECTION ____ ARTICLE APPLYING TO PAYING AGENTS.
In case at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term "Trustee" as
used in this Article shall in such case (unless the context shall otherwise
require) be construed as extending to and including such Paying Agent within its
meaning as fully for all intents and purposes as if such Paying Agent were named
in this Article in addition to or in place of the Trustee.
SECTION ____ RELIANCE BY HOLDERS OF SENIOR DEBT ON SUBORDINATION PROVISIONS.
Each Securityholder by accepting a Security acknowledges and agrees that
the foregoing subordination provisions are, and are intended to be, an
inducement and a consideration to each holder of any Senior Debt, whether such
Senior Debt was created or acquired before or after the issuance of the
Securities, to acquire and continue to hold, or to continue to hold, such Senior
Debt and such holder of Senior Debt shall be deemed conclusively to have relied
on such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Debt.
SECTION ____ ENFORCEMENT BY HOLDERS OF SENIOR DEBT.
Each Securityholder by accepting a Security appoints each holder of Senior
Debt and each such holder's Representative as such Securityholder's agent and
attorney-in-fact to make and enforce any matured claim of such Securityholder
against the Company for payment on the Securities in the event that the Trustee
or such Securityholder does not make and enforce such a claim within 60 days
after receipt by the Trustee of a written demand for such enforcement made by a
holder of Senior Debt or such holder's Representative. Each Securityholder
authorizes such holder or Representative to take all action and to execute all
documents on behalf of such Securityholder or the Trustee to make and enforce
such a claim in such event.
C-8
<PAGE>
EXHIBIT D
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (as amended, amended and restated, supplemented
or otherwise modified from time to time in accordance with the terms hereof,
this "PLEDGE AGREEMENT") is made and entered into as of _________, 1994 by
EMPIRE GAS CORPORATION, a Missouri corporation, (the "PLEDGOR"), in favor of
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking association,
not individually but in its capacity as trustee (the "TRUSTEE") for the holders
(the "HOLDERS") of the Senior Secured Notes (as defined herein).
WITNESSETH:
WHEREAS, the Pledgor and the Trustee have entered into an indenture,
dated as of _________, 1994 (as amended, amended and restated, supplemented or
otherwise modified from time to time, the "SENIOR SECURED NOTE INDENTURE"),
pursuant to which the Pledgor is issuing on the date hereof $___________ in
aggregate principal amount ($100,000,000 initial accreted value) of its __%
Senior Secured Notes due 2004 (the "SENIOR SECURED NOTES");
WHEREAS, the Pledgor is the legal and beneficial owner of the out-
standing shares of common stock set forth on SCHEDULE I hereto (the "PLEDGED
SHARES") of the subsidiaries listed on SCHEDULE I hereto (the "Restricted
Subsidiaries" and, together with any future Restricted Subsidiaries of the
Pledgor, the "ISSUERS"); and
WHEREAS, to secure its payment and performance obligations under the
Senior Secured Note Indenture and the Senior Secured Notes (the "OBLIGATIONS"),
the Pledgor has agreed to (i) pledge to the Trustee, for the Trustee's benefit
and the equal and ratable benefit of the Holders, and grant to the Trustee for
the Trustee's benefit and the equal and ratable benefit of the Holders, a
security interest in the Collateral (as defined herein) and (ii) execute and
deliver this Pledge Agreement in order to secure the payment and performance
when due by the Pledgor of all such Obligations.
<PAGE>
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and in order to
induce the Holders to purchase the Senior Secured Notes, the Pledgor hereby
agrees with the Trustee, for the Trustee's benefit and the equal and ratable
benefit of the Holders, as follows:
SECTION 1. DEFINITIONS.
(a) Capitalized terms used and not otherwise defined herein, includ-
ing, without limitation, the term "Event of Default," shall have the meanings
given to such terms in the Senior Secured Note Indenture, and terms defined in
the Uniform Commercial Code as in effect from time to time in the State of New
York (the "UCC") and not otherwise defined herein shall have the meanings
ascribed thereto in the UCC.
(b) The following terms shall have the following meanings:
"COLLATERAL" means, collectively.
(i) the Pledged Shares and the certificates representing
the Pledged Shares, the Relevant Records and all Proceeds, wherever located,
whether now owned or existing or hereafter acquired or arising; and
(ii) all additional shares of, all securities convertible
into, and all warrants, options or other rights to purchase, stock of or other
equity interests in, any of the Issuers from time to time acquired by the
Pledgor in any manner, and the certificates representing any such additional
shares (any such additional shares shall constitute part of the Pledged Shares
under and as defined in this Pledge Agreement), and all Proceeds of the forego-
ing.
"LIEN NOTICE" means any financing statement, notice of lien, assign-
ment or collateral assignment, security agreement, equipment mortgage, mortgage,
deed of trust or similar notice or instrument filed or recorded in the public
records which covers the Collateral or any portion thereof.
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"PLEDGE DOCUMENTS" means, collectively, this Pledge Agreement and each
of the stock powers and other instruments and documents pertaining to the
Collateral required to be delivered by the Pledgor pursuant to the terms hereof,
as the same may be amended, restated or otherwise modified from time to time in
accordance with the terms hereof and of the Senior Secured Note Indenture.
"PROCEEDS" shall have the meaning ascribed thereto in the UCC and
shall include, without limitation, the following: (a) whatever is now or
hereafter received by the Pledgor upon the sale, exchange, collection or other
disposition of any Pledged Shares or any Relevant Records or any proceeds
thereof, including, without limitation, (i) all dividends, cash, options,
warrants, rights, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
Pledged Shares and (ii) all funds deposited in the Collateral Account pursuant
to the terms of the Senior Secured Note Indenture; (b) any property now or
hereafter acquired by the Pledgor with any Proceeds; and (c) any payments under
insurance or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing.
"RELEVANT RECORDS" means, collectively, all certificates, instruments,
account statements, books and other records of the Pledgor relating to the
Pledged Shares or any Proceeds thereof.
"UCC COLLATERAL" means all Collateral in which a security interest or
Lien can be perfected under the UCC.
SECTION 2. PLEDGE. To secure the full and prompt payment and perfor-
mance when due of the Obligations, the Pledgor hereby pledges to the Trustee for
the Trustee's benefit and for the equal and ratable benefit of the Holders, and
grants to the Trustee for the Trustee's benefit and the equal and ratable
benefit of the Holders, a continuing first priority security interest in and
Lien upon all of the Pledgor's right, title and interest in the Collateral.
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SECTION 3. DELIVERY OF COLLATERAL. All certificates or instruments
representing or evidencing any of the Collateral shall be delivered to and held
by or on behalf of the Trustee pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed, undated stock
powers or other instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Trustee.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Pledgor hereby repre-
sents and warrants that:
(a) DUE AUTHORIZATION. The execution, delivery and performance by
the Pledgor of the Pledge Documents have been duly authorized by all
necessary corporate action of the Pledgor, and each of the Pledge Documents
has been duly executed and delivered by the Pledgor.
(b) ENFORCEABILITY. Each of the Pledge Documents constitutes a
legal, valid and binding obligation of the Pledgor, enforceable against the
Pledgor in accordance with its terms, except as enforceability may be
limited by the effect of applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally.
(c) NO VIOLATION; NO CONSENTS. The execution, delivery and perfor-
mance of the Pledge Documents by the Pledgor will not violate, conflict
with or constitute a breach of any of the terms or provisions of, or a
default under (or an event that, with notice or the lapse of time, or both,
would constitute a default), or require consent under, or result in the
imposition of a Lien on any properties of the Pledgor or any of its
subsidiaries (except for the security interest created by this Pledge
Agreement) or an acceleration of indebtedness pursuant to: (i) the
Pledgor's or any of its subsidiaries' charter or by-laws, (ii) any bond,
debenture, note, indenture, mortgage, deed of trust or other agreement or
instrument to which the Pledgor or any of its subsidiaries is party or by
which any of them or their property is or may be bound, (iii) any statute,
rule or regulation applicable to the Pledgor, any of its subsidiaries or
any of their assets or properties, or (iv) any judgment, order or decree of
any court or governmental
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agency or authority having jurisdiction over the Pledgor, any of its
subsidiaries, or any of its or their respective assets or properties,
which, in the case of clauses (ii) and (iii) only, could not reasonably be
expected to have a material adverse effect on the business, condition
(financial or other), results of operations or properties of the Pledgor
and its subsidiaries, taken as a whole. No consent, approval, authoriza-
tion or other action by, or order of, or filing, registration, qualifica-
tion, license or permit of or with, any court or governmental agency, body
or administrative agency is required either (i) for the pledge by the
Pledgor of the Collateral pursuant to this Pledge Agreement or for the
execution, delivery and performance of the Pledge Documents by the Pledgor
or (ii) for the exercise by the Trustee of the voting and other rights
provided for in this Pledge Agreement or the remedies in respect of the
Collateral pursuant to this Pledge Agreement (except as may be required in
connection with such disposition by laws affecting the offering and sale of
securities). No consents or waivers from any other person or entity are
required for the execution, delivery and performance by the Pledgor of the
Pledge Documents other than such consents and waivers as have been ob-
tained.
(d) PLEDGED SHARES. The Pledged Shares have been (or to the extent
that Pledged Shares are acquired after the date hereof, shall be), duly
authorized, validly issued, fully paid and non assessable.
(e) SECURITY INTEREST. The Pledgor is (or, to the extent Collateral
is acquired after the date hereof, will be) the sole legal, record and
beneficial owner of the Collateral. Upon delivery to the Trustee of the
Collateral and (as to certain of the Relevant Records and Proceeds that are
UCC Collateral) the filing of UCC financing statements, the pledge of the
Collateral pursuant to this Pledge Agreement creates a valid and perfected
first priority security interest in the Collateral, securing the payment of
the Obligations for the benefit of the Trustee and the Holders, and
enforceable as such against all creditors of the Pledgor and any persons or
entities purporting to purchase any of the Collateral from the Pledgor
other than as permitted by the Senior Secured Note
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Indenture. As of the date hereof, the Trustee's security interest in the
Collateral is free and clear of any Lien or claims of any person or entity
except for Liens permitted in the Senior Secured Note Indenture.
(f) LITIGATION. No litigation, investigation or proceeding of or
before any arbitrator or governmental authority is pending or, to the
knowledge of the Pledgor, threatened by or against the Pledgor or against
any of its properties or revenues with respect to any of the Pledge
Documents or any of the transactions contemplated thereby.
(g) CAPITAL STOCK. Pledged Shares constitute all of the authorized,
issued and outstanding capital stock of the respective Issuer and Schedule
I reflects all of the subsidiaries of Pledgor as of the date hereof.
(h) NO PROHIBITION. The pledge of the Collateral pursuant to the
Pledge Documents is not prohibited by any applicable law or governmental
regulation, release, interpretation or opinion of the Board of Governors of
the Federal Reserve System or other regulatory agency (including, without
limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System).
(i) ACCURACY OF INFORMATION. All information set forth herein
relating to the Collateral is accurate and complete in all respects.
SECTION 5. VOTING RIGHTS; DIVIDENDS; ETC.
(a) So long as no Event of Default shall have occurred and be
continuing, the Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Shares or any part thereof for
any purpose not inconsistent with the terms of this Pledge Agreement or the
Senior Secured Note Indenture; PROVIDED, HOWEVER, that the Pledgor shall not
exercise or shall refrain from exercising any such right if such action would be
inconsistent with or violate any provisions of any of the Pledge Documents or
the Senior Secured Note Indenture.
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(b) So long as no Event of Default shall have occurred and be
continuing, and subject to the other terms and conditions hereof, the Pledgor
shall be entitled to receive, and to utilize free and clear of the Lien of this
Pledge Agreement, all dividends and distributions paid from time to time in
respect of the Pledged Shares as permitted by the Senior Secured Note Indenture
other than dividends and distributions in the form of additional shares of
capital stock of the respective Issuers which shall be Collateral pursuant to
Section 6(h) hereof.
(c) The Trustee shall execute and deliver (or cause to be executed
and delivered) to the Pledgor all such proxies and other instruments as the
Pledgor may reasonably request for the purpose of enabling the Pledgor to
exercise the voting and other rights that it is entitled to exercise pursuant to
Sections 5(a) and (b) above.
(d) Upon the occurrence and during the continuance of an Event of
Default, all rights of the Pledgor to exercise the voting and other consensual
rights that it would otherwise be entitled to exercise pursuant to Section 5(a)
shall cease, and all such rights shall thereupon become vested in the Trustee,
which shall thereupon have the sole right to exercise such voting and other
consensual rights.
(e) Upon the occurrence and during the continuance of an Event of
Default, the Pledgor shall execute and deliver (or cause to be executed and
delivered) to the Trustee all such proxies and other instruments as the Trustee
may request for the purposes of enabling the Trustee to exercise the voting and
other rights that it is entitled to exercise pursuant to Section 5(d) above.
(f) All dividends or other distributions that are received by the
Pledgor contrary to the provisions of this Section 5 shall be received in trust
for the benefit of the Trustee and the Holders, be segregated from the other
property or funds of the Pledgor and be forthwith delivered to the Trustee as
Collateral in the same form as so received (with any necessary endorsements).
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SECTION 6. COVENANTS. The Pledgor covenants and agrees with the
Trustee and the Holders from and after the date of this Pledge Agreement until
the Obligations have been paid in full:
(a) LIEN NOTICES. The Pledgor will defend the Collateral against all
Liens, claims and demands of all persons and entities at any time claiming any
interest therein, and the Pledgor will not permit any Lien Notices with respect
to the Collateral or any portion thereof to exist or be on file in any public
office, except with respect to Permitted Liens and the Lien created hereby.
(b) FURTHER ASSURANCES. Promptly upon request by the Trustee, the
Pledgor will execute and deliver or cause to be executed and delivered, or use
its best efforts to procure, all stock powers, proxies, assignments, instruments
and other documents, all in form and substance satisfactory to the Trustee,
deliver any instruments to the Trustee and take any other actions (including
filing any Lien Notice covering Collateral or any portion thereof) that are
necessary or, in the opinion of the Trustee, desirable to perfect, continue the
perfection and priority of the Trustee's security interest in the Collateral, to
protect the Collateral against the rights, claims, or interests of their persons
or entities (other than holders of Permitted Liens) or to effect the purposes of
the Pledge Documents. The Pledgor also hereby authorizes the Trustee to file
any financing or continuation statements with respect to the Collateral without
the signature of the Pledgor to the extent permitted by applicable law. The
Pledgor will pay all costs incurred in connection with any of the foregoing.
(c) NO LIENS. Without the prior written consent of the Trustee, the
Pledgor will not in any way hypothecate, create or permit to exist any Lien upon
or with respect to any of the Collateral or any portion thereof.
(d) DISPOSITION OF COLLATERAL. The Pledgor will not sell, transfer,
assign, pledge, collaterally assign, exchange or otherwise dispose of, or grant
any option or warrant with respect to, any of the Collat-
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eral, except as permitted by the Senior Secured Note Indenture. If the
Collateral, or any part thereof, is sold, transferred, assigned, exchanged,
or otherwise disposed of in violation of these provisions, the security
interest of the Trustee shall continue in such Collateral or part thereof
notwithstanding such sale, transfer, assignment, exchange or other disposi-
tion. In addition to its rights under Section 6(i) below, following such a
sale, transfer, assignment, exchange or other disposition, the Trustee may
elect to have the Pledgor transfer such proceeds to the Trustee in kind.
(e) NO RESTRICTION ON SALES. Except as permitted by the Senior
Secured Note Indenture, the Pledgor will not enter into any agreement or
understanding that purports to or may restrict or inhibit the Trustee's rights
or remedies hereunder, including, without limitation, the Trustee's right or
ability to sell or otherwise dispose of the Collateral or any part thereof after
the occurrence of an Event of Default.
(f) RIGHTS OF TRUSTEE. Upon the occurrence and during the continu-
ance of an Event of Default, the Trustee shall have the right at any time to
make any payments and do any other acts the Trustee may deem necessary to
protect its security interests in the Collateral, including, without limitation,
the rights to pay, purchase, contest or compromise any Lien which, in the
judgment of the Trustee, appears to be prior to or superior to the security
interests granted hereunder, and challenge any action or proceeding purporting
to affect its security interests in, and/or the value of, the Collateral. The
Pledgor hereby agrees to reimburse the Trustee for all payments made and
expenses incurred under the Pledge Documents including fees, expenses and
disbursements of attorneys and paralegals (including, the allocated costs of
inside counsel) acting for the Trustee, including any of the foregoing payments
under or acts taken to perfect or protect its security interest in the Collater-
al, which amount shall be secured under the Pledge Documents, and agrees that it
shall be bound by any payment made or act taken by the Trustee hereunder. The
Trustee shall have no obligation to make any
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of the foregoing payments or perform any of the foregoing acts.
(g) NO MERGER. Except as permitted by the Senior Secured Note
Indenture, the Pledgor agrees that it will not permit any Issuer to merge or
consolidate, unless all outstanding capital stock of the surviving corporation
is, upon such merger or consolidation, pledged hereunder to the Trustee.
(h) ADDITIONAL SHARES. The Pledgor agrees that immediately upon
becoming the beneficial owner of any additional shares of capital stock of any
of the Issuers, it will pledge and deliver to the Trustee for its benefit and
the ratable benefit of the Holders and grant to the Trustee for its benefit and
the ratable benefit of the Holders, a continuing first priority security
interest in such shares (as well as duly executed stock powers or other instru-
ments of transfer or assignment in blank, all form and substance satisfactory to
the Trustee). The Pledgor further agrees that it will promptly (and in any
event within five Business Days after such acquisition) deliver to the Trustee a
pledge amendment, duly executed by the Pledgor, in substantially the form of
EXHIBIT A hereto (a "PLEDGE AMENDMENT"), with respect to the additional Collat-
eral that is to be pledged pursuant to this Pledge Agreement. The Pledgor
hereby authorizes the Trustee to attach each Pledge Amendment to this Pledge
Agreement and agrees that any stock listed on any Pledge Amendment delivered to
the Trustee shall for all purposes hereunder be considered Collateral.
(i) TURNOVER OF CERTAIN PROCEEDS. In the event any letters of
credit, chattel paper or negotiable documents, instruments or securities
included in the Collateral come into the Pledgor's possession, whether upon
consummation of an Asset Sale or otherwise, the Pledgor shall segregate such
items from its other cash and assets, hold such items in trust for the Trustee,
and shall promptly deliver the same to the Trustee with any necessary endorse-
ments in favor of the Trustee. No sale of Collateral may be made in contraven-
tion of the terms of the Senior Secured Note Indenture and the cash proceeds of
the sale of any Collateral shall be immediately remitted to the Trustee for
deposit in the Collateral Account.
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(j) RECORDS. The Pledgor will keep and maintain at its own cost and
expense complete Relevant Records in such form as is satisfactory to the
Trustee.
(k) ACCESS. The Trustee shall at all times have full and free access
during normal business hours to all the books, correspondence and records of the
Pledgor relating to the Collateral, and the Trustee and its representatives may
examine the same, take extracts therefrom and make photocopies thereof, and the
Pledgor agrees to render to the Trustee, at the Pledgor's cost and expense, such
clerical and other assistance, at all times and in such manner as may be
requested with regard thereto. The Trustee and its representatives shall at all
times also have the right to enter, during normal business hours, into and upon
any premises where any of the Collateral is located for the purpose of inspect-
ing the same, observing its use or otherwise protecting its interests therein.
(l) NOTICES OF LIENS. The Pledgor will advise the Trustee promptly,
in reasonable detail, at the address set forth in SECTION 11.02 of the Senior
Secured Note Indenture, of any Lien (other than Liens permitted in the Senior
Secured Note Indenture) on, or claim asserted against, any of the Collateral.
(m) TAXES. The Pledgor shall pay all taxes, assessments and levies
as and to the extent required by SECTION 3.14 of the Senior Secured Note
Indenture; PROVIDED that the Pledgor shall in any event pay such taxes, assess-
ments or levies not later than five days prior to the date of any proposed sale
under any judgment, writ or warrant of attachment with regard to any Collateral
entered or filed against the Pledgor as a result of the failure to make such
payment.
SECTION 7. SUBSEQUENT CHANGES AFFECTING COLLATERAL. The Pledgor
represents to the Trustee and the Holders that the Pledgor has made its own
arrangements for keeping informed of changes or potential changes affecting the
Collateral (including, but not limited to, rights to convert, rights to sub-
scribe, payment of dividends, payments of interest and/or principal, reorganiza-
tion or other exchanges, tender offers and voting rights), and the
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Pledgor agrees that the Trustee and the Holders shall have no responsibility or
liability for informing the Pledgor of any such changes or potential changes or
for taking any action or omitting to take any action with respect thereto.
Except as permitted by the Senior Secured Note Indenture, the Pledgor covenants
that it will not, without the prior written consent of the Trustee, vote to
enable, or take any other action to permit, any Issuer to issue any capital
stock or other securities or to sell or otherwise dispose of, or grant any
option with respect to, any of the Collateral or create or permit to exist any
Lien upon or with respect to any of the Collateral, except for the security
interests granted under the Pledge Documents.
SECTION 8. REMEDIES UPON DEFAULT.
(a) If any Event of Default shall have occurred and be continuing,
the Trustee and the Holders shall have, in addition to all other rights given by
law or by the Pledge Documents or the Senior Secured Note Indenture, all of the
rights and remedies with respect to the Collateral of a secured party under the
applicable UCC in effect at that time. The Trustee may, without notice and at
its option, transfer or register, and the Pledgor shall register or cause to be
registered upon request therefor by the Trustee, the Collateral or any part
thereof on the books of the Issuers or Obligors thereof into the name of the
Trustee or the Trustee's nominee(s). In addition, with respect to any Collater-
al that shall then be in or shall thereafter come into the possession or custody
of the Trustee, the Trustee may sell or cause the same to be sold at any
broker's board or at public or private sale, in one or more sales or lots, at
such price or prices as the Trustee may deem best, for cash or on credit or for
future delivery, without assumption of any credit risk. The purchaser of any or
all Collateral so sold shall thereafter hold the same absolutely, free from any
claim, encumbrance or right of any kind whatsoever. Unless any of the Collater-
al threatens to decline speedily in value or is or becomes of a type sold on a
recognized market, the Trustee will give the Pledgor reasonable notice of the
time and place of any public sale thereof, or of the time after which any
private sale or other intended disposition is to be made. Any sale of the
Collateral conducted in conformity with reasonable commercial
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practices of banks, insurance companies, commercial finance companies, or other
financial institutions disposing of property similar to the Collateral shall be
deemed to be commercially reasonable. Any requirements of reasonable notice
shall be met if such notice is mailed to the Pledgor as provided in Section
10(a) herein, at least ten (10) days before the time of the sale or disposition.
The Trustee or any Holder may, in its own name or in the name of a designee or
nominee, buy any of the Collateral at any public sale and, if permitted by
applicable law, at any private sale. All expenses (including court costs and
reasonable attorneys' fees, expenses and disbursements) of, or incident to, the
enforcement of any of the provisions hereof shall be recoverable from the
proceeds of the sale or other disposition of the Collateral.
(b) If the Trustee shall determine to exercise its right to sell any
or all of the Pledged Shares pursuant to Section 8(a) above, and if in the
opinion of counsel for the Trustee it is necessary, or if in the opinion of the
Trustee it is advisable, to have the Pledged Shares or that portion thereof to
be sold, registered under the provisions of the Securities Act of 1933, as
amended (the "SECURITIES ACT"), the Pledgor will cause the Issuer to (i) execute
and deliver, and cause its directors and officers to execute and deliver, all at
the Pledgor's own expense, all such instruments and documents, and to do or
cause to be done all such other acts and things, as may be necessary or, in the
opinion of the Trustee, advisable to register such Pledged Shares under the
provisions of the Securities Act, (ii) use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for period of 180 days from the date of the first public offering of
such Pledged Shares or that portion thereof to be sold and (iii) make all
amendments thereto and/or to the related prospectus that, in the opinion of the
Trustee, are necessary or advisable, all in conformity with the requirements of
the Securities Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto. The Pledgor agrees to use its best efforts to
cause the applicable Issuer to comply with the provisions of the securities or
"Blue Sky" laws of any jurisdiction that the Trustee shall
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designate for the sale of the Pledged Shares and to make available to the
Issuer's security holders, as soon as practicable, an earnings statement (which
need not be audited) that will satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder. The Pledgor will cause the Issuer to
furnish to the Trustee such number of copies as the Trustee may reasonably
request of each preliminary prospectus and prospectus, to notify promptly the
Trustee of the happening of any event as a result of which any prospectus
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances when such prospectus is delivered to any
purchaser, misleading, and cause the Trustee to be furnished with such number of
copies as the Trustee may request of such supplement to or amendment of such
prospectus as is necessary to eliminate such untrue statement or supply such
omission. The Pledgor will use its best efforts to cause each Issuer, to the
extent permitted by law, to indemnify, defend and hold harmless the Trustee and
the Holders from and against all losses, liabilities, expenses or claims
(including reasonable legal expenses and the reasonable costs of investigation)
that the Trustee or the Holders may incur under the Securities Act or otherwise,
insofar as such losses, liabilities, expenses or claims arise out of or are
based upon any alleged untrue statement of a material fact contained in such
registration statement (or any amendment thereto) or in any preliminary prospec-
tus or prospectus (or any amendment or supplement thereto), or arise out of or
are based upon any alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading. The
Pledgor will cause the Issuer to bear all costs and expenses of carrying out is
obligation hereunder.
(c) In view of the fact that federal and state securities laws may
impose certain restrictions on the method by which a sale of certain of the
Collateral may be effected after an Event of Default, the Pledgor agrees that
upon the occurrence and during the continuance of an Event of Default, the
Trustee may, from time to time, attempt to sell all or any part of the Collater-
al by means of a private place-
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ment, restricting the prospective purchasers to those who will represent and
agree that they are purchasing for investment only and not for distribution. In
so doing, the Trustee may solicit offers to buy the Collateral, or any part of
it, for cash, from a limited number of investors who might be interested in
purchasing the Collateral. The Pledgor acknowledges and agrees that any such
private sale may result in prices and terms less favorable than if such sale
were a public sale and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner. The Trustee shall be under no obligation to delay a sale of any of the
Collateral for the period of time necessary to permit the Pledgor to cause the
Issuer to register such securities for public sale under the Securities Act, or
under applicable state securities laws, even if the Pledgor could cause the
Issuer to do so.
(d) The Pledgor further agrees to use its best efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Collateral pursuant to this Section 8 valid and
binding and in compliance with any and all other applicable requirements of law.
The Pledgor further agrees that a breach of any of the covenants contained in
this Section 8 will cause irreparable injury to the Trustee and the Holders,
that the Trustee and the Holders have no adequate remedy at law in respect of
such breach and, as a consequence, that each and every covenant contained in
this Section 8 shall be specifically enforceable against the Pledgor, and the
Pledgor hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants except for a defense that no Event of
Default has occurred.
SECTION 9. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO THE ISSUER. The
Pledgor hereby authorizes and instructs each Issuer to comply with any instruc-
tion received by such Issuer from the Trustee that (i) states that an Event of
Default has occurred and (ii) is otherwise in accordance with the terms of this
Pledge Agreement, without any other or further instructions from the Pledgor,
and the Pledgor agrees that each Issuer shall be fully protected in so comply-
ing.
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SECTION 10. MISCELLANEOUS PROVISIONS.
(a) NOTICES. All notices, approvals, consents or other communica-
tions required or desired to be given hereunder shall be in the form and manner,
and delivered to each of the parties hereto at their respective addresses, as
set forth in Section 11.2 of the Senior Secured Note Indenture.
(b) NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Pledge
Agreement may not be used to interpret another pledge, security or debt agree-
ment of the Pledgor, any Issuer or obligor or any subsidiary thereof. No such
pledge, security or debt agreement may be used to interpret any Pledge Document.
(c) SEVERABILITY. The provisions of the Pledge Documents are
severable, and, if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or provi-
sion, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of any
Pledge document in any jurisdiction.
(d) HEADINGS. The headings in this Pledge Agreement have been
inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
(e) COUNTERPART ORIGINALS. This Pledge Agreement may be signed in
two or more counterparts, each of which shall be deemed an original, but all of
which shall together constitute one and the same agreement.
(f) BENEFITS OF PLEDGE AGREEMENT. Nothing in this Pledge Agreement,
express or implied, shall give to any person or entity, other than the parties
hereto, the Holders and their respective successors and permitted assigns, any
benefit or any legal or equitable right, remedy or claim under the Pledge
Documents.
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(g) AMENDMENTS, WAIVERS AND CONSENTS. Any amendment or waiver of any
provision of this Pledge Agreement and any consent to any departure by the
Pledgor from any provision of any Pledge Document shall be effective only if
made or given in compliance with all of the terms and provisions of the Senior
Secured Note Indenture, and neither the Trustee nor any Holder shall be deemed,
by any act, delay, indulgence, omission or otherwise, to have waived any right
or remedy hereunder or to have acquiesced in any Default or Event of Default or
in any breach of any of the terms and conditions hereof. Failure of the Trustee
or any Holder to exercise, or delay in exercising, any right, power or privilege
hereunder shall not operate as a waiver thereof. No single or partial exercise
of any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by the Trustee or any Holder of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy that the Trustee
or such Holder would otherwise have on any future occasion. The rights and
remedies herein provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any rights or remedies provided by law.
(h) INTERPRETATION OF PLEDGE DOCUMENTS. Time is of the essence in
each provision of the Pledge Documents of which time is an element. All terms
not defined therein or in the Senior Secured Note Indenture shall have the
respective meanings set forth in the applicable UCC, except where the context
otherwise requires. To the extent a term or provision of this Pledge Agreement
conflicts with the Senior Secured Note Indenture and is not dealt with herein
with more specificity, the Senior Secured Note Indenture shall control with
respect to the subject matter of such term or provision. Acceptance of or
acquiescence in a course of performance rendered under the Pledge Document shall
not be relevant to determine the meaning of any Pledge Document even though the
accepting or acquiescing party had knowledge of the nature of the performance
and opportunity for objection.
(i) CONTINUING SECURITY INTEREST; TRANSFER OF SECURITIES. The Pledge
Documents shall create a
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continuing security interest in the Collateral and shall (i) unless otherwise
provided in the Senior Secured Note Indenture or in the Pledge Documents, remain
in full force and effect until the payment in full and performance of all
Obligations and payment in full of all fees and expenses owing to the Trustee,
(ii) be binding upon the Pledgor, its successors and assigns, and (iii) inure,
together with the rights and remedies of the Trustee hereunder, to the benefit
of the Trustee, the Holders and their respective successors and permitted
transferees and assigns.
(j) SECURITY INTEREST ABSOLUTE. All rights of the Trustee and the
Holders and security interests hereunder, and all obligations of the Pledgor
hereunder, shall be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of the Senior
Secured Note Indenture or any other agreement or instrument relating
thereto;
(ii) any change in the time, manner or place of payment of,
or in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from the Senior
Secured Note Indenture;
(iii) any exchange, surrender, release or non-perfection of
any Liens on any other collateral, or any release or amendment or waiver of
or consent to departure from any guarantee, for all or any of the Obliga-
tions; or
(iv) any other circumstances which might otherwise consti-
tute a defense available to, or a discharge of, the Pledgor in respect of
the Obligations or of the Pledge Documents.
(k) REINSTATEMENT. The Pledge documents shall continue to be
effective or be reinstated, as the case may be, if at any time any amount
received by the Trustee or any Holder in respect of the Obligations is rescinded
or must otherwise be restored or returned by the Trustee or any Holder upon the
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insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Pledgor or upon the appointment of any receiver, intervenor, conservator,
trustee or similar official for the Pledgor or any substantial part of its
assets, or otherwise, all as though such had not been made.
(l) SURVIVAL OF PROVISIONS. All representations, warranties and
covenants of the Pledgor contained herein shall survive the execution and
delivery of the Pledge Documents, and shall terminate only upon the full and
final payment and performance by the Pledgor of the Obligations.
(m) POWER OF ATTORNEY. In addition to all of the powers granted to
the Trustee pursuant to Article VI of the Senior Secured Note Indenture, the
Pledgor hereby appoints and constitutes the Trustee as the Pledgor's attorney-
in-fact to exercise all of the following powers upon and at any time after the
occurrence and during the continuance of an Event of Default: (i) collection of
Proceeds; (ii) conveyance of any item of Collateral to any purchaser thereof;
(iii) giving of any notice or recording of any Liens under Section 6(b) hereof;
(iv) making of any payments or taking any acts under Section 6(f) hereof and (v)
paying or discharging taxes or Liens levied or placed upon or threatened against
the Collateral, the legality or validity thereof and the amounts necessary to
discharge the same to be determined by the Trustee in its sole discretion, and
such payments made by the Trustee to become the Obligations of the Pledgor to
the Trustee, due and payable immediately without demand. The Trustee's authori-
ty hereunder shall include, without limitation, the authority to endorse and
negotiate any checks or instruments in the name of the Pledgor, execute and give
receipt for any certificate of ownership or any document, transfer title to any
item of Collateral, prepare, file and sign the Pledgor's name on all financing
statements or any other documents deemed necessary or appropriate by the Trustee
to preserve, protect or perfect the security interest in the Collateral and to
file the same, and prepare, file and sign the Pledgor's name on a proof of claim
in bankruptcy or similar document against any customer of the Pledgor, and to
take any other actions arising from or incident to the powers granted to the
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Trustee in this Pledge Agreement. This power of attorney is coupled with an
interest and is irrevocable by the Pledgor.
(n) WAIVERS. The Pledgors waives presentment and demand for payment
of any of the Obligations, protest and notice of dishonor or default with
respect to any of the Obligations, and all other notices to which the Pledgor
might otherwise be entitled, except as otherwise expressly provided herein or in
the Senior Secured Not Indenture.
(o) AUTHORITY OF THE TRUSTEE.
(i) The Trustee shall have and be entitled to exercise all
powers hereunder that are specifically granted to the Trustee by the terms
hereof, together with such powers as are reasonably incident thereto. The
Trustee may perform any of its duties hereunder or in connection with the
Collateral by or through agents or employees and shall be entitled to
retain counsel and to act in reliance upon the advice of counsel concerning
all such matters. Neither the Trustee, any director, officer, employee,
attorney or agent of the Trustee nor the Holders shall be liable to the
Pledgor for any action taken or omitted to be taken by it or them hereun-
der, except for its or their own negligence or bad faith, nor shall the
Trustee be responsible for the validity, effectiveness or sufficiency
hereof or of any document or security furnished pursuant hereto. The
Trustee and its directors, officers, employees, attorneys and agents shall
be entitled to rely on any communication, instrument or document believed
by it or then to be genuine and correct and to have been signed or sent by
the proper person or persons.
(ii) The Pledgor acknowledges that the rights and responsi-
bilities of the Trustee under this Pledge Agreement with respect to any
action taken by the Trustee or the exercise or non-exercise by the Trustee
of any option, right, request, judgment or other right or remedy provided
for herein or resulting or
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arising out of this Pledge Agreement shall, as between the Trustee and the
Holders, be governed by the Senior Secured Note Indenture and by such other
agreements with respect thereto as may exist from time to time among them,
but, as between the Trustee and the Pledgor, the Trustee shall be conclu-
sively presumed to be acting as agent for the Holder with full and valid
authority so to act or refrain from acting, and the Pledgor shall not be
obliged or entitled to make any inquiry respecting such authority.
(p) RELEASE; TERMINATION OF PLEDGE AGREEMENT.
(i) Subject to the provisions of Section 10(k) hereof, this
Pledge Agreement shall terminate upon (A) full and final payment and
performance of all Obligations, (B) receipt by the Trustee of an Officers'
Certificate to the effect that all such Obligations have been satisfied,
and (C) payment in full of all fees and expenses owing by the Pledgor to
the Trustee.
(ii) The Pledgor agrees that it will not, except as permit-
ted by the Senior Secured Note Indenture, sell, transfer or otherwise
dispose of any of the Collateral, PROVIDED, HOWEVER, that if the Pledgor
shall sell any of the Collateral in accordance with the terms of the Senior
Secured Note Indenture, the Trustee shall, at the request of the Pledgor,
release the Collateral subject to such sale free and clear of the Lien and
security interest under the Pledge Documents in the manner specified in the
Senior Secured Note Indenture.
(iii) Upon any termination of the Pledge Documents or release
of Collateral as permitted by the Senior Secured Note Indenture, the
Trustee will, at the expense of the Pledgor, execute and deliver to the
Pledgor such documents and take such other actions as the Pledgor shall
reasonably request to evidence the termination of the Pledge Documents or
the release of such Collateral, as the case may be. Any such
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action taken by the Trustee shall be without warranty by or recourse to the
Trustee, except as to the absence of any prior assignments by the Trustee
of its interests in the Collateral, and shall be at the expense of the
Pledgor. The Trustee may conclusively rely on any certificate delivered to
it by the Pledgor stating that the execution of such documents and release
of the Collateral is in accordance with and permitted by the terms of the
Pledge Documents and the Senior Secured Note Indenture.
(q) NO DUTY. The powers conferred on the Trustee hereunder are
solely to protect the interest of the Trustee and the Holders in the Collateral
and shall not impose any duties on the Trustee or any Holder to exercise such
powers. Except for the exercise of reasonable care in the custody of any
Collateral in its possession and the accounting for any monies actually received
by it hereunder or under the Senior Secured Note Indenture, the Trustee shall
have no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to the
Collateral. The Trustee shall be deemed to exercise reasonable care in the
custody and preservation of the Collateral if the Collateral is accorded
treatment substantially equal to that which the Trustee accords its own proper-
ty, it being understood that the Trustee shall have no responsibility for (i)
ascertaining or taking action with respect to calls, conversations, exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
the Trustee has or is deemed to have knowledge of such matters, or (ii) collec-
tion of any proceeds of any Collateral or by reason of any invalidity, lack of
value or uncollectibility of any of the payments received by it from obligors or
otherwise.
(r) PAYMENT OF FEES AND EXPENSES. The Pledgor will upon demand pay
to the Trustee, without duplication, the amount of all expenses, including
without limitation, the reasonable fees, expenses and disbursements of its
counsel, of any investment banking firm, business broker or other selling agent
and of any other experts and agents retained by the Trustee that the Trustee may
incur in connection with
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(i) administration of the Pledge Documents, (ii) the custody, preservation,
use or operation of, or the sale of, collection from, or other realization
upon, any of the Collateral, (iii) the exercise or enforcement of any of
the rights of the Trustee and the Holders hereunder or (iv) the failure by
the Pledgor to perform to observe any of the provisions hereof.
(s) FINAL EXPRESSION. The Pledge Documents are intended by the
parties as a final expression of the Pledge Documents and are intended as a
complete and exclusive statement of the terms and conditions thereof.
(t) PLEDGOR TO REMAIN LIABLE. Anything herein to the contrary
notwithstanding: (i) the Pledgor shall remain liable under any contracts and
agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Pledge Agreement had not been executed, (ii) the exercise by the Trustee of
any of the rights hereunder shall not release the Pledgor from any of its duties
or obligations under the contracts and agreements included in the Collateral,
and (iii) the Trustee shall not have any obligation or liability under any
contracts and agreements included in the Collateral by reason of this Pledge
Agreement, nor shall the Trustee be obligated to perform any of the obligations
or duties of the Pledgor thereunder or to take any action to collect or enforce
any claim for payment assigned hereunder.
(u) LIMITATION BY LAW. All rights, remedies and powers provided
herein may be exercised only to the extent that the exercise thereof does not
violate any applicable provision of law, and all the provisions hereof are
intended to be subject to all applicable mandatory provisions of law which may
be controlling and to be limited by the extent necessary so that they will not
render any of the Pledge documents invalid, unenforceable in whole or in part or
not entitled to be recorded, registered or filed under provisions of any
applicable law.
(v) INCORPORATION BY REFERENCE. THE PROVISIONS OF ARTICLE X OF THE
SENIOR SECURED NOTE INDEN-
23
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TURE ARE INCORPORATED BY REFERENCE HEREIN WITH THE SAME FORCE AND EFFECT AS IF
FULLY SET FORTH HEREIN.
[SIGNATURE PAGE FOLLOWS]
24
<PAGE>
IN WITNESS WHEREOF, the Pledgor and the Trustee have each caused this
Pledge Agreement to be duly executed and delivered as of the date first above
written.
PLEDGOR:
EMPIRE GAS CORPORATION
By:
--------------------------------
Name:
Title:
TRUSTEE:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, as Trustee
By:
--------------------------------
Name:
Title:
25
<PAGE>
SCHEDULE I
Number of Pledged Share Certificate Percentage of
Issuer Shares Number Outstanding Shares
- ------ ----------------- ------------------ ------------------
100%
26
<PAGE>
EXHIBIT A
Pledge Amendment
This Pledge Amendment, dated __________, 19__, is delivered pursuant
to Section 6(h) of the Pledge Agreement referred to below. The undersigned
hereby pledges to the Trustee for its benefit and the ratable benefit of the
Holders, and grants to the Trustee for its benefit and the ratable benefit of
the Holders, a continuing first priority security interest in all of its right,
title and interest in the shares of stock listed below:
Number of Pledged Share Certificate Percentage of
Issuer Shares Number Outstanding Shares
- ------ ----------------- ----------------- ------------------
The undersigned hereby agrees that this Pledge Agreement may be
attached to the Pledge Agreement, dated __________, 1993, between the under-
signed and Shawmut Bank Connecticut, National Association as Trustee (the
"PLEDGE AGREEMENT"); capitalized terms used herein and not otherwise defined
herein shall have the meanings given to such terms in the Pledge Agreement; and
the Collateral listed on this Pledge Amendment shall be deemed to be part of the
Collateral, and shall become part of the Collateral and shall secure all
Obligations.
EMPIRE GAS CORPORATION
By:
---------------------------------
Name:
Title:
27
<PAGE>
WARRANT AGREEMENT
between
EMPIRE GAS CORPORATION
and
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
Warrant Agent
_________________________
Dated as of June __, 1994
<PAGE>
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of June ___, 1994 (this "AGREEMENT")
between Empire Gas Corporation, a Missouri corporation (the "Company"), and
Shawmut Bank Connecticut, National Association, a National Banking Association,
as warrant agent (the "WARRANT AGENT").
Pursuant to the terms of an Underwriting Agreement dated as of June
___, 1994 between the Company and Morgan Stanley & Co. Incorporated, as
Purchaser (the "UNDERWRITING AGREEMENT"), the Company has agreed to issue and
sell ______ units (the "UNITS"). Each Unit will consist of (i) __ Senior
Secured Notes, each Senior Secured Note having a principal amount at maturity of
$1,000 (the "SENIOR SECURED NOTES"), to be issued pursuant to the provisions of
an Indenture dated as of June ___, 1994 between the Company, each of the
Subsidiary Guarantors (as defined therein) and Shawmut Bank Connecticut,
National Association, as trustee, and (ii) _____ warrants (each, a "WARRANT") of
the Company, each Warrant entitling the registered owner thereof, subject to
the terms and conditions set forth herein, to purchase one share of Common
Stock, $.001 par value per share, of the Company (the "COMMON STOCK") at an
initial purchase price of $7.00 per share. The Senior Secured Note and the
Warrants included in each Unit will become separately transferable at the close
of business on December __, 1994.
In consideration of the foregoing and of the agreements contained in
the Underwriting Agreement and for the purpose of defining the terms and
provisions of the Warrants and the respective rights and obligations thereunder
of the Company and the record holders thereof (the "HOLDERS"), the Company and
the Warrant Agent hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
"Affiliate" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by, or under direct or indirect common
control with such specified Person. For purposes of this defini-
<PAGE>
tion, "control," when used with respect to any Person means the power to direct
the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Agent Members" has the meaning specified in Section 8.2.
"Business Day" means any day which is not a Saturday, a Sunday, or a
day on which banking institutions are not required to be open in the State of
New York or the State in which the principal corporate trust office of the
Warrant Agent is located.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Common Stock of the Company and any other
capital stock of the Company into which such common stock may be converted or
reclassified or that may be issued in respect of, in exchange for, or in
substitution of, such common stock by reason of any stock splits, stock
dividends, distributions, mergers, consolidations or other like events.
"Company" has the meaning specified in the preamble to this Agreement.
"Depositary" means The Depository Trust Company, its nominees and
their respective successors.
"Default" has the meaning specified in Article X.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exercise Price" has the meaning specified in Section 3.1.
"Expiration Date" means June __, 2004.
"Final Surrender Date" has the meaning specified in Section 3.4(b).
2
<PAGE>
"Financial Expert" means a nationally recognized investment banking
firm.
"Global Warrant" has the meaning specified in Section 2.1.
"Holders" has the meaning specified in the recitals to this Agreement.
"Independent Financial Expert" means a Financial Expert which does not
(or whose directors, executive officers or 5% stockholders do not) have a direct
or indirect financial interest in the Company or any of its subsidiaries, which
has not been for at least five years, and, at the time it is called upon to give
independent financial advice to the Company, is not (and none of its directors,
executive officers or 5% stockholders is) a promoter, director, or officer of
the Company or any of its subsidiaries. The Independent Financial Expert may be
compensated and indemnified by the Company for opinions or services it provides
as an Independent Financial Expert.
"Lindsey Entity" means Paul S. Lindsey, Jr., Kristen L. Lindsey, any
member of their family and any Person or which any or the foregoing Persons are
Affiliates.
"Notice Date" has the meaning specified in Section 3.4(b).
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof or any other entity.
"Physical Security" has the meaning specified in Section 2.1.
"Plaster Entity" means Robert W. Plaster, Stephen R. Plaster, any
member of such individual's family, and any Person of which any of the foregoing
Persons are Affiliates.
"Relevant Value" means the value of the Warrants as set forth in the
Value Report in accordance with Section 3.4(d).
3
<PAGE>
"Repurchase Event" means, and shall be deemed to occur if at any time
prior to June __, 2004 the Company consolidates with, merges into or with (where
holders of the Common Stock receive consideration in exchange for all or part of
such shares of Common Stock), or sells all or substantially all of its assets
to, another Person which has a class of equity securities registered under the
Exchange Act, or a wholly owned subsidiary of such Person, if (i) the
consideration for such transaction does not consist solely of cash, (ii) such
merger or consolidation is not effected solely for the purpose of changing the
Company's state of incorporation or (iii) such transaction is effected with a
Plaster Entity or a Lindsey Entity.
"Repurchase Obligation" has the meaning specified in Section 10.2.
"Repurchase Offer" means the Company's offer to repurchase Warrants in
accordance with Section 3.4.
"Repurchase Price" means the amount of cash payable in respect of
Warrants surrendered pursuant to a Repurchase Offer determined in accordance
with Section 3.4(d).
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Secured Notes" has the meaning specified in the recitals to
this Agreement.
"Separation Date" means the close of business on December __, 1994.
"Underwriter" has the meaning specified in the recitals to this
Agreement.
"Units" has the meaning specified in the recitals to this Agreement.
"Valuation Date" means the date five Business Days prior to the Notice
Date.
"Value Report" means the value report prepared by an Independent
Financial Expert in accordance with Section 3.4(d).
4
<PAGE>
"Warrant" has the meaning specified in the recitals to this Agreement.
"Warrant Agent" has the meaning specified in the preamble to this
Agreement.
"Warrant Certificate" has the meaning specified in Section 2.1.
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
SECTION 2.1 FORM OF WARRANT CERTIFICATES. Certificates representing
the Warrants (the "WARRANT CERTIFICATES") shall be substantially in the form
attached hereto as Exhibit A, shall be dated the date on which countersigned by
the Warrant Agent and shall have such insertions as are appropriate or required
or permitted by this Agreement and may have such letters, numbers or other marks
of identification and such legends and endorsements stamped, printed,
lithographed or engraved thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may be required
to comply with any law or with any rule or regulation pursuant thereto or with
any rule or regulation of any securities exchange on which the Warrants may be
listed, or to conform to usage.
The Warrants shall be issued initially in the form of a single
permanent global Warrant in registered form, substantially in the form set forth
in Exhibit A (the "GLOBAL WARRANT"), deposited with the Warrant Agent, as
custodian for the Depositary, duly executed by the Company and countersigned by
the Warrant Agent as hereinafter provided. The aggregate number of Warrants
represented by the Global Warrant may from time to time be increased or
decreased by adjustments made on the records of the Warrant Agent, as custodian
for the Depositary or its nominee, as hereinafter provided.
Warrants issued pursuant to Section 8.2 in exchange for an interest in
the Global Warrant shall be issued in the form of permanent Warrant Certificates
in registered form in substantially the form set forth in Exhibit A (the
"PHYSICAL SECURITY").
5
<PAGE>
The definitive Warrant Certificates shall be typed, printed,
lithographed or engraved or produced by any combination of these methods or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Warrants may be listed, all as determined by the officers
executing such Warrant Certificates, as evidenced by their execution of such
Warrant Certificates.
SECTION 2.2 RESTRICTIVE LEGENDS. (A) Each Global Warrant shall
bear the following legend on the face thereof:
UNLESS THIS WARRANT CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, TO THE COMPANY OR THE
WARRANT AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR REPURCHASE,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TRUST COMPANY (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHER-
WISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL WARRANT SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL WARRANT SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN ARTICLE VIII OF THE WARRANT AGREEMENT.
(b) Prior to the Separation Date, each Warrant Certificate shall
bear the following legend on the face thereof:
6
<PAGE>
THE WARRANTS ARE INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS,
EACH OF WHICH CONSISTS OF(I) [ ] ___% SENIOR SECURED NOTES DUE 2004
OF EMPIRE GAS CORPORATION AND (II) _____ WARRANTS. PRIOR TO THE CLOSE
OF BUSINESS ON DECEMBER __, 1994, THE WARRANTS EVIDENCED BY THIS
CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT
MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE SENIOR SECURED
NOTES ISSUED BY EMPIRE GAS CORPORATION IN CONNECTION HEREWITH.
SECTION 2.3 EXECUTION AND DELIVERY OF WARRANT CERTIFICATES. Warrant
Certificates evidencing Warrants to purchase initially an aggregate of up to
_______ shares of Common Stock may be executed, on or after the date of this
Agreement, by the Company and delivered to the Warrant Agent for
countersignature, and the Warrant Agent shall thereupon countersign and deliver
such Warrant Certificates upon the order and at the direction of the Company to
the purchasers thereof on the date of issuance. The Warrant Agent is hereby
authorized to countersign and deliver Warrant Certificates as required by this
Section 2.3 or by Section 3.3, Section 3.4, Article VI or Article VIII hereof.
The Warrant Certificates shall be executed on behalf of the Company by
its Chairman of the Board, Chief Executive Officer, President or a Vice
President, either manually or by facsimile signature printed thereon. The
Warrant Certificates shall be manually countersigned by the Warrant Agent and
shall not be valid for any purpose unless so countersigned. In case any officer
of the Company whose signature shall have been placed upon any of the Warrant
Certificates shall cease to be such officer of the Company before
countersignature by the Warrant Agent and issue and delivery thereof, such
Warrant Certificates may, nevertheless, be countersigned by the Warrant Agent
and issued and delivered with the same force and effect as though such person
had not ceased to be such officer of the Company.
7
<PAGE>
ARTICLE III
EXERCISE PRICE; EXERCISE AND REPURCHASE OF WARRANTS
SECTION 3.1 EXERCISE PRICE. Each Warrant Certificate shall, when
countersigned by the Warrant Agent, entitle the Holder thereof, subject to the
provisions of this Agreement, to purchase one share of Common Stock for each
Warrant represented thereby at a purchase price (the "EXERCISE PRICE") of $7.00
per share, subject to adjustment as provided in Section 4.1 and Article V.
SECTION 3.2 EXERCISE; RESTRICTIONS ON EXERCISE. At any time after
the Separation Date and on or before the Expiration Date, all outstanding
Warrants may be exercised on any Business Day. Any Warrants not exercised by
5:00 pm., New York City time, on the Expiration Date shall expire and all rights
of the Holders of such Warrants shall terminate; PROVIDED, HOWEVER, that the
Warrants may expire and all rights of the Holders of such Warrants may terminate
pursuant to Section 4.1(i)(ii) in the event the Company merges or consolidates
with or sells all or substantially all of its property and assets to a Person
(other than an Affiliate of the Company) if the consideration payable to holders
of Common Stock in exchange for their Common Stock in connection with such
merger, consolidation or sale consists solely of cash or in the event of the
dissolution, liquidation or winding up of the Company.
SECTION 3.3 METHOD OF EXERCISE; PAYMENT OF EXERCISE PRICE. In order
to exercise all or any of the Warrants represented by a Warrant Certificate, the
Holder thereof must surrender for exercise the Warrant Certificate to the
Warrant Agent at its corporate trust office set forth in Section 12.5 herein,
with the Subscription Form set forth in the Warrant Certificate duly executed,
together with payment in full of the Exercise Price then in effect for each
share of Common Stock or other securities or property issuable upon exercise of
the Warrants as to which a Warrant is exercised; such payment may be made in
cash or by certified or official bank or bank cashier's check payable to the
order of the Company. All payments received upon exercise of Warrants shall be
delivered to the Company by the Warrant Agent as instructed in writing by the
Company. If less than all the Warrants represented by a Warrant Certificate are
exer-
8
<PAGE>
cised, such Warrant Certificate shall be surrendered and a new Warrant Certifi-
cate of the same tenor and for the number of Warrants which were not exercised
shall be executed by the Company and delivered to the Warrant Agent and the
Warrant Agent shall countersign the new Warrant Certificate, registered in such
name or names as may be directed in writing by the Holder, and shall deliver the
new Warrant Certificate to the Person or Persons entitled to receive the same.
Upon exercise of any Warrants following surrender of a Warrant Certificate in
conformity with the foregoing provisions, the Warrant Agent shall cause the
Company to transfer promptly to or upon the written order of the Holder of such
Warrant Certificate appropriate evidence of ownership of any shares of Common
Stock or other securities or property (including money) to which it is entitled,
registered or otherwise placed in such name or names as may be directed in
writing by the Holder, and to deliver such evidence of ownership and any other
securities or property (including money) to the Person or Persons entitled to
receive the same, together with an amount in cash in lieu of any fraction of a
share as provided in Section 4.5; PROVIDED that the Holder of such Warrant shall
be responsible for the payment of any transfer taxes required as the result of
any change in ownership of such Warrants. Upon exercise of a Warrant or
Warrants the Warrant Agent is hereby authorized and directed to requisition from
any transfer agent of the Common Stock (and all such transfer agents are hereby
irrevocably authorized to comply with all such requests) certificates for the
necessary number of shares to which the Holder of the Warrant or Warrants may be
entitled. A Warrant shall be deemed to have been exercised immediately prior to
the close of business on the date of the surrender for exercise, as provided
above, of the Warrant Certificate representing such Warrant and, for all
purposes of this Agreement, the Person entitled to receive any shares of Common
Stock or other securities or property deliverable upon such exercise shall, as
between such Person and the Company, be deemed to be the Holder of such shares
of Common Stock or other securities or property of record as of the close of
business on such date and shall be entitled to receive, and the Warrant Agent
shall deliver to such Person, any money, shares of Common Stock or other
securities or property to which he would have been entitled had he been the
record holder on such date. Without limiting the foregoing, if, at the date
referred to above, the transfer books for the shares
9
<PAGE>
of Common Stock or other securities purchasable upon the exercise of the
Warrants shall be closed, the certificates for the shares of Common Stock or
securities in respect of which such Warrants are then exercised shall be
issuable as of the date on which such books shall next be opened, and until such
date the Company shall be under no duty to deliver any certificate for such
shares of Common Stock or other securities; PROVIDED FURTHER that the transfer
books or records, unless required by law, shall not be closed at any one time
for a period longer than 20 days.
SECTION 3.4 REPURCHASE OFFERS. (a) NOTICE OF REPURCHASE EVENT.
Within five Business Days following the occurrence of a Repurchase Event, the
Company shall give notice to the Holders of the Warrants that such event has
occurred and will result in the Company making a Repurchase Offer.
(b) REPURCHASE OFFERS GENERALLY. Following the occurrence of a
Repurchase Event, the Company shall offer to purchase for cash all outstanding
Warrants pursuant to the provisions of this Section 3.4 (each a "REPURCHASE
OFFER"). The Company shall give notice of a Repurchase Offer in accordance with
Section 3.4(f). The date on which the Company gives any such notice is referred
to as a "NOTICE DATE". Each Repurchase Offer shall commence on the Notice Date
for such offer and shall expire at 5:00 p.m., New York City time on a date (the
"FINAL SURRENDER DATE") as specified in the notice provided for in Section
3.4(f) which date shall be at least 30 but not more than 60 calendar days after
such Notice Date. Once a Repurchase Event has occurred, there is no limit on
the number of Repurchase Offers the Company may make.
(c) REPURCHASE OFFERS. (i) In any Repurchase Offer, the Company
shall offer to purchase for cash at the Repurchase Price for such Repurchase
Offer all Warrants outstanding on the Notice Date for such offer that are
properly tendered to the Warrant Agent on or prior to the Final Surrender Date
for such Repurchase Offer.
(ii) Each Holder may, but shall not be obligated to, accept such
Repurchase Offer, by tendering to the Warrant Agent, on or prior to the
10
<PAGE>
Final Surrender Date for such Repurchase Offer, the Warrant Certificates
evidencing the Warrants such Holder desires to have repurchased in such offer,
together with a completed Certificate for Surrender for Repurchase Offer
referred to in Section 3.4(f). A Holder may withdraw all or a portion of the
Warrants tendered to the Warrant Agent at any time prior to the Final Surrender
Date for such Repurchase Offer. If less than all the Warrants represented by a
Warrant Certificate shall be tendered, such Warrant Certificate shall be
surrendered and a new Warrant Certificate of the same tenor and for the number
of Warrants which were not tendered shall be executed by the Company and
delivered to the Warrant Agent and the Warrant Agent shall countersign the new
Warrant Certificate, registered in such name or names as may be directed in
writing by the Holder, and shall deliver the new Warrant Certificate to the
Person or Persons entitled to receive the same; PROVIDED that the Holder of such
Warrants shall be responsible for the payment of any transfer taxes required as
the result of any change in ownership of such Warrants.
(d) REPURCHASE PRICE. (i) The purchase price (the "REPURCHASE
PRICE") for each Warrant properly tendered to the Warrant Agent pursuant to a
Repurchase Offer shall be equal to the value (the "RELEVANT VALUE") on the
Valuation Date of the Common Stock and other securities or property of the
Company which would have been delivered upon exercise of Warrants had the
Warrants been exercised, less the Exercise Price then in effect.
(ii) The Relevant Value of the Common Stock and other securities or
property issuable upon exercise of all the Warrants, will be:
(I) If the Common Stock (or other securities) is registered
under the Exchange Act, deemed to be the average of the closing sales
prices of the Common Stock (or other securities) for the 20 consecu-
tive trading days immediately preceding such Valuation Date or, if the
Common Stock (or other securities) has been registered under the
Exchange Act for less than 20 consecutive trading days before such
11
<PAGE>
date, then the average of the closing sales prices for all of the
trading days before such date for which closing sales prices are
available.
(II) If the Common Stock (or other securities) is not regis-
tered under the Exchange Act or if the value cannot be computed under
clause (I) above, equal to the value set forth in the Value Report (as
defined below) as determined by an Independent Financial Expert, which
shall be selected by the Board of Directors in accordance with Section
3.4(e), and retained on customary terms and conditions, using one or
more valuation methods that the Independent Financial expert, in its
best professional judgment, determines to be most appropriate but
without giving effect to any discount for lack of liquidity, the fact
that the Company has no class of equity registered under the Exchange
Act, or the fact that the shares of Common Stock and other securities
or property issuable upon exercise of the Warrants represent a minori-
ty interest in the Company. The Company shall cause the Independent
Financial Expert to deliver to the Company, with a copy to the Warrant
Agent, within 45 days of the appointment of the Independent Financial
Expert in accordance with Section 3.4(e), a value report (the "VALUE
REPORT") stating the Relevant Value of the Common Stock and other
securities or property of the Company, if any, being valued as of the
Valuation Date and containing a brief statement as to the nature and
scope of the examination or investigation upon which the determination
of Relevant Value was made. The Warrant Agent shall have no duty with
respect to the Value Report of any Independent Financial Expert,
except to keep it on file and available for inspection by the Holders.
The determination as to Relevant Value in accordance with the provi-
sions of this Section 3.4(d) shall be conclusive on all Persons. The
Independent Financial Expert shall consult with management of the
Company in order to allow management to comment on the proposed
Relevant Value prior to delivery to the Company of any
12
<PAGE>
Value Report of the Independent Financial Expert.
(e) SELECTION OF INDEPENDENT FINANCIAL EXPERT. If a Value Report is
required pursuant to Section 3.4(d)(ii)(II), the Board of Directors of the
Company shall select an Independent Financial Expert not more than five Business
Days following a Repurchase Event. Within two days after such selection of the
Independent Financial Expert, the Company shall deliver to the Warrant Agent a
notice setting forth the name of such Independent Financial Expert.
(f) NOTICE OF REPURCHASE OFFER. Each notice of a Repurchase Offer
given by the Company pursuant to Section 3.4(b) shall be given (i) if the
Relevant Value is determined pursuant to Section 3.4(d)(ii)(I), within ten
Business Days following the occurrence of the Repurchase Event or (ii) if the
Relevant Value is determined pursuant to Section 3.4(d)(ii)(II) within five
Business Days after the Company receives the Value Report with respect to such
offer. Such notice shall specify (i) the Final Surrender Date for such Repur-
chase Offer, (ii) the manner in which Warrants may be surrendered to the Warrant
Agent for repurchase by the Company, (iii) the Repurchase Price at which the
Warrants will be repurchased by the Company, (iv) if applicable, the name of the
Independent Financial Expert whose valuation of the Common Stock and other
securities or property was utilized in connection with determining such Repur-
chase Price and (v) that payment of the Repurchase Price will be made by the
Warrant Agent. Each such notice shall be accompanied by a Certificate for
Surrender for Repurchase Offer in substantially the form attached to the Warrant
Certificate and a copy of the Valuation Report.
(g) PAYMENT FOR WARRANTS. Upon surrender for repurchase of any
Warrants in conformity with the provisions of this Section 3.4, the Warrant
Agent shall thereupon promptly notify the Company of such surrender. On or
before the Final Surrender Date for any Repurchase Offer, the Company shall
deposit with the Warrant Agent funds sufficient to make payment for the Warrants
tendered to the Warrant Agent and not withdrawn. After receipt of such deposit
from the Company, the Warrant Agent shall make payment, by delivering a check in
such amount as is appropriate, to such Person or Persons as it
13
<PAGE>
may be directed in writing by the Holder surrendering such Warrants, net of any
transfer taxes required to be paid in the event that the check is to be deliv-
ered to a Person other than the Holder.
(h) COMPLIANCE WITH LAWS. Notwithstanding anything contained in this
Section 3.4, if the Company is required to comply with laws or regulations in
connection with making any Repurchase Offer, such laws or regulations shall also
govern the making of such Repurchase Offer.
ARTICLE IV
ADJUSTMENTS
SECTION 4.1 ADJUSTMENTS. The Exercise Price and the number of shares
of Common Stock issuable upon exercise of each Warrant shall be subject to
adjustment from time to time as follows:
(a) STOCK DIVIDENDS; STOCK SPLITS; REVERSE STOCK SPLITS;
RECLASSIFICATIONS. In case the Company shall (i) pay a dividend or make any
other distribution with respect to its Common Stock in shares of any class or
series of its capital stock, (ii) subdivide its outstanding shares of Common
Stock, (iii) combine its outstanding Common Stock into a smaller number of
shares or (iv) issue any shares of its capital stock in a reclassification of
the Common Stock (other than a reclassification in connection with a merger,
consolidation or other business combination which will be governed by Section
4.1(i)), the number of shares of Common Stock purchasable upon exercise of each
Warrant immediately prior to the record date for such dividend or distribution
or the effective date of such subdivision, or combination or reclassification
shall be adjusted so that the Holder of each Warrant shall thereafter be
entitled to receive the kind and number of shares of Common Stock or other secu-
rities of the Company which such Holder would have been entitled to receive
after the happening of any of the events described above had such Warrant been
exercised immediately prior to the happening of such event or any record date
with respect thereto. An adjustment made pursuant to this Section 4.1(a) shall
become effective immediately after the effective date of
14
<PAGE>
such event retroactive to the record date, if any, for such event.
(b) RIGHTS; OPTIONS; WARRANTS. In case the Company shall issue
rights, options, warrants or convertible or exchangeable securities (other than
a convertible or exchangeable security subject to Section 4.1(a)) to all holders
of its Common Stock, entitling them to subscribe for or purchase Common Stock at
a price per share which is lower (at the record date for such issuance) than the
greater of (i) the then Current Market Value per share of Common Stock and (ii)
the Exercise Price, the number of shares of Common Stock thereafter purchasable
upon the exercise of each Warrant shall be determined by multiplying the number
of shares of Common Stock theretofore purchasable upon exercise of each Warrant
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to the issuance of such rights, options,
warrants or convertible or exchangeable securities plus the number of additional
shares of Common Stock offered for subscription or purchase, and the denominator
of which shall be the number of shares of Common Stock outstanding immediately
prior to the issuance of such rights, options, warrants or convertible or
exchangeable securities plus the number of shares which the aggregate offering
price of the total number of shares of Common Stock so offered would purchase at
the greater of (i) the then Current Market Value per share of Common Stock and
(ii) the Exercise Price. Such adjustment shall be made whenever such rights,
options, warrants or convertible or exchangeable securities are issued, and
shall become effective retroactively immediately after the record date for the
determination of shareholders entitled to receive such rights, options, warrants
or convertible or exchangeable securities.
(c) ISSUANCE OF COMMON STOCK AT LOWER VALUES. In case the Company
shall sell and issue shares of Common Stock, or rights, options, warrants or
convertible or exchangeable securities containing the right to subscribe for or
purchase shares of Common Stock (excluding shares, rights, options, warrants or
convertible or exchangeable securities issued in any of the transactions
described in Section 4.1(a) or (b)) at a price per share of Common Stock
(determined in the case of such rights, options, warrants or convertible or
exchangeable securi-
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ties, by dividing (x) the total amount receivable by the Company in consid-
eration of the sale and issuance of such rights, options, warrants or convert-
ible or exchangeable securities, plus the total consideration payable to the
Company upon exercise, conversion or exchange thereof, by (y) the total number
of shares of Common Stock covered by such rights, options, warrants or convert-
ible or exchangeable securities) that is lower than the greater of (i) the Cur-
rent Market Value per share of the Common Stock in effect immediately prior to
such sale or issuance and (ii) the Exercise Price, then the number of shares of
Common Stock thereafter purchasable upon the exercise of each Warrant shall be
determined by multiplying the number of shares of Common Stock theretofore
purchasable upon exercise of each Warrant by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding on the date of such
sale or issuance and the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to such sale or issuance plus the
number of shares of Common Stock which the aggregate consideration received
(determined as provided below) for such sale or issuance would purchase at the
greater of (i) such Current Market Value per share of Common Stock and (ii) the
Exercise Price. For purposes of this Section 4.1(c), the shares of Common Stock
which the holder of any such rights, options, warrants or convertible or ex-
changeable securities shall be entitled to subscribe for or purchase shall be
deemed to be issued and outstanding as of the date of such sale and issuance and
the consideration received by the Company therefor shall be deemed to be the
consideration received by the Company for such rights, options, warrants or
convertible or exchangeable securities, plus the consideration or premiums
stated in such rights, options, warrants or convertible or exchangeable securi-
ties to be paid for the shares of Common Stock covered thereby. In case the
Company shall sell and issue shares of Common Stock or rights, options, warrants
or convertible or exchangeable securities containing the right to subscribe for
or purchase shares of Common Stock, for a consideration consisting, in whole or
in part, of property other than cash or its equivalent, then in determining the
"price per share of Common Stock" and the "consideration received by the
Company" for purposes of the first sentence of this Section 4.1(c), the Board of
Directors of the Company shall determine, in good faith, the fair value of said
property, which determination shall be evi-
16
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denced by a resolution of the Board of Directors of the Company. In case the
Company shall sell and issue rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase shares
of Common Stock together with one or more other securities as part of a unit at
a price per unit, then in determining the "price per share of Common Stock" and
the "consideration received by the Company" for purposes of the first sentence
of this Section 4.1(c), the Board of Directors of the Company shall determine,
in good faith, the fair value of the rights, options, warrants or convertible or
exchangeable securities then being sold as part of such unit.
(d) DISTRIBUTIONS OF DEBT, ASSETS, SUBSCRIPTION RIGHTS OR CONVERTIBLE
SECURITIES. In case the Company shall fix a record date for the making of a
distribution to all holders of shares of its Common Stock of evidences of its
indebtedness, assets, cash dividends or distributions (excluding dividends or
distributions referred to in Section 4.1(a) above and excluding distributions in
connection with the dissolution, liquidation or winding up of the Company which
will be governed by Section 4.1(i)(ii) below) or securities (excluding those
referred to in Section 4.1(a), Section 4.1(b) or Section 4.1(c) above), then in
each case the number of shares of Common Stock purchasable after such record
date upon the exercise of each Warrant shall be determined by multiplying the
number of shares of Common Stock purchasable upon the exercise of such Warrant
immediately prior to such record date by a fraction, the numerator of which
shall be the Current Market Value per share of Common Stock immediately prior to
the record date for such distribution and the denominator of which shall be the
Current Market Value per share of Common Stock immediately prior to the record
date for such distribution less the then fair value (as determined in good faith
by the Board of Directors of the Company) of the portion of the assets, evidence
of indebtedness, cash dividends or distributions or securities so distributed
applicable to one share of Common Stock. Such adjustment shall be made whenever
any such distribution is made, and shall become effective on the date of
distribution retroactive to the record date for the determination of share-
holders entitled to receive such distribution.
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(e) EXPIRATION OF RIGHTS, OPTIONS AND CONVERSION PRIVILEGES. Upon
the expiration of any rights, options, warrants or conversion or exchange
privileges that have previously resulted in an adjustment hereunder, if any
thereof shall not have been exercised, the Exercise Price and the number of
shares of Common Stock issuable upon the exercise of each Warrant shall, upon
such expiration, be readjusted and shall thereafter, upon any future exercise,
be such as they would have been had they been originally adjusted (or had the
original adjustment not been required, as the case may be) as if (i) the only
shares of Common Stock so issued were the shares of Common Stock, if any,
actually issued or sold upon the exercise of such rights, options, warrants or
conversion or exchange rights and (ii) such shares of Common Stock, if any, were
issued or sold for the consideration actually received by the Company upon such
exercise plus the consideration, if any, actually received by the Company for
issuance, sale or grant of all such rights, options, warrants or conversion or
exchange rights whether or not exercised; PROVIDED FURTHER that no such read-
justment shall have the effect of increasing the Exercise Price by an amount, or
decreasing the number of shares issuable upon exercise of each Warrant by a num-
ber, in excess of the amount or number of the adjustment initially made in
respect to the issuance, sale or grant of such rights, options, warrants or
conversion or exchange rights.
(f) CURRENT MARKET VALUE. For the purposes of any computation under
this Article IV, the Current Market Value per share of Common Stock or of any
other security (herein collectively referred to as a "security") at any date
herein specified shall be:
(i) if the security is not registered under the Exchange Act,
the value of the security (1) most recently determined as of a date within
the six months preceding such date by an Independent Financial Expert
selected by the Company in accordance with the criteria for such valuation
set out in Section 3.4(d)(ii)(II), or (2) if no such determination shall
have been made within such six-month period or if the Company so chooses,
determined as of such date by an Independent Financial Expert selected by
the Company in accordance with the criteria for such valuation set out in
Section
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3.4(d)(ii)(II); PROVIDED, HOWEVER, that in determining the value of the
Common Stock under Section 4.5, if the foregoing clause (1) shall not be
applicable, the Current Market Value per share of Common Stock shall be
determined in good faith by the Board of Directors of the Company, or
(ii) if the security is registered under the Exchange Act, deemed to
be the average of the daily market prices of the security for the 20 consecutive
trading days immediately preceding such date or, if the security has been
registered under the Exchange Act for less than 20 consecutive trading days
before such date, then the average of the daily market prices for all of the
trading days before such date for which daily market prices are available. The
market price for each such trading day shall be: (A) in the case of a security
listed or admitted to trading on any national securities exchange, the closing
sales price, regular way, on such day, or if no sale takes place on such day,
the average of the closing bid and asked prices on such day, (B) in the case of
a security not then listed or admitted to trading on any national securities
exchange, the last reported sale price on such day, or if no sale takes place on
such day, the average of the closing bid and asked prices on such day, as
reported by a reputable quotation source designated by the Company, (C) in the
case of a security not then listed or admitted to trading on any national
securities exchange and as to which no such reported sale price or bid and asked
prices are available, the average of the reported high bid and low asked prices
on such day, as reported by a reputable quotation service, or a newspaper of
general circulation in the Borough of Manhattan, City and State of New York
customarily published on each Business Day, designated by the Company, or, if
there shall be no bid and asked prices on such day, the average of the high bid
and low asked prices, as so reported, on the most recent day (not more than 30
days prior to the date in question) for which prices have been so reported and
(D) if there are no bid and asked prices reported during the 30 days prior to
the date in question, the Current Market Value of the security shall be deter-
mined as if the security were not registered under the Exchange Act.
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(g) DE MINIMIS ADJUSTMENTS. No adjustment in the number of shares of
Common Stock purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one percent (1%) in the number
of shares of Common Stock purchasable upon the exercise of each Warrant;
PROVIDED, HOWEVER, that any adjustments which by reason of this Section 4.1(g)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations shall be made to the nearest one-
thousandth of a share.
(h) ADJUSTMENT OF EXERCISE PRICE. Whenever the number of shares
of Common Stock purchasable upon the exercise of each Warrant is adjusted, as
herein provided, the Exercise Price per share of Common Stock payable upon
exercise of such Warrant shall be adjusted (calculated to the nearest $.0001) so
that it shall equal the price determined by multiplying such Exercise Price
immediately prior to such adjustment by a fraction the numerator of which shall
be the number of shares purchasable upon the exercise of each Warrant immediate-
ly prior to such adjustment and the denominator of which shall be the number of
shares so purchasable immediately thereafter.
(i) CONSOLIDATION, MERGER, ETC. Subject to the provisions of
Subsection (ii) below of this Section 4.1(i), in case of the consolidation of
the Company with, or merger of the Company with or into, or of the sale of all
or substantially all of the properties and assets of the Company to, any Person,
and in connection therewith consideration is payable to holders of Common Stock
(or other securities or property purchasable upon exercise of Warrants) in
exchange therefor, the Warrants shall remain subject to the terms and conditions
set forth in this Agreement and each Warrant shall, after such consolidation,
merger or sale, entitle the Holder to receive upon exercise the number of shares
of capital stock or other securities or property (including cash) of the
Company, or of such Person resulting from such consolidation or surviving such
merger or to which such sale shall be made or of the parent of such Person, as
the case may be, that would have been distributable or payable on account of the
Common Stock (or other securities or property pur-
20
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chasable upon exercise of Warrants) if such Holder's Warrants had been exercised
immediately prior to such merger, consolidation or sale (or, if applicable, the
record date therefor); and in any such case the provisions of this Agreement
with respect to the rights and interests thereafter of the Holders of Warrants
shall be appropriately adjusted by the Board of Directors in good faith so as to
be applicable, as nearly as may reasonably be, to any shares of stock or other
securities or any property thereafter deliverable on the exercise of the
Warrants.
(ii) Notwithstanding the foregoing, (x) if the Company merges or
consolidates with, or sells all or substantially all of its property and assets
to, another Person (other than an Affiliate of the Company) and, in connection
therewith, consideration is payable to holders of Common Stock in exchange for
their Common Stock in connection with such merger, consolidation or sale which
consists solely of cash, or (y) in the event of the dissolution, liquidation or
winding up of the Company, then the Holders of Warrants shall be entitled to
receive distributions on the date of such event on an equal basis with holders
of Common Stock (or other securities issuable upon exercise of the Warrants) as
if the Warrants had been exercised immediately Prior to such event, less the
Exercise Price. Upon receipt of such payment, if any, the rights of a Holder
shall terminate and cease and his or her Warrants shall expire. Notwithstanding
the foregoing, if the Company has made a Repurchase Offer, which has not expired
at the time of such transaction, the Holders of the Warrants shall be entitled
to receive on the date of such transaction the higher of (1) the amount payable
to Holders of Warrants pursuant to this paragraph and (2) the Repurchase Price
payable to Holders of Warrants pursuant to such Repurchase Offer. In case of
any such merger, consolidation or sale of assets, the surviving or acquiring
Person and, in the event of any dissolution, liquidation or winding up of the
Company, the Company shall deposit promptly with the Warrant Agent the funds, if
any, necessary to pay the Holders of the Warrants. After receipt of such
deposit from such Person or the Company and after receipt of surrendered Warrant
Certificates, the Warrant Agent shall make payment
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by delivering a check in such amount as is appropriate (or, in the case of
consideration other than cash, such other consideration as is appropriate) to
such Person or Persons as it may be directed in writing by the Holder surrender-
ing such Warrants.
SECTION 4.2 NOTICE OF ADJUSTMENT. Whenever the number of shares of
Common Stock or other stock or property purchasable upon the exercise of each
Warrant or the Exercise Price is adjusted, as herein provided, the Company shall
cause the Warrant Agent promptly to mail, at the expense of the Company, to each
Holder notice of such adjustment or adjustments and shall deliver to the Warrant
Agent a certificate of a firm of independent public accountants selected by the
Board of Directors of the Company (who may be the regular accountants employed
by the Company) setting forth the number of shares of Common Stock or other
stock or property purchasable upon the exercise of each Warrant and the Exercise
Price after such adjustment, setting forth a brief statement of the facts
requiring such adjustment and setting forth the computation by which such
adjustment was made. Such certificate shall be conclusive evidence of the
correctness of such adjustment. The Warrant Agent shall be entitled to rely on
such certificate and shall be under no duty or responsibility with respect to
any such certificate, except to exhibit the same, from time to time, to any
Holder desiring an inspection thereof during reasonable business hours. The
Warrant Agent shall not at any time be under any duty or responsibility to any
Holders to determine whether any facts exist which may require any adjustment of
the Exercise Price or the number of shares of Common Stock or other stock or
property purchasable on exercise of the Warrants, or with respect to the nature
or extent of any such adjustment when made, or with respect to the method
employed in making such adjustment, or the validity or value (or the kind or
amount) of any shares of Common Stock or other stock or property which may be
purchasable on exercise of the Warrants. The Warrant Agent shall not be
responsible for any failure of the Company to make any cash payment or to issue,
transfer or deliver any shares of Common Stock or stock certificates or other
common stock or properties upon the exercise of any Warrant.
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SECTION 4.2 STATEMENT ON WARRANTS. Irrespective of any adjustment in
the Exercise Price or the number or kind of shares purchasable upon the exercise
of the Warrants, Warrants theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated in the
Warrants initially issuable pursuant to this Agreement.
SECTION 4.4 NOTICE OF CONSOLIDATION, MERGER, ETC. In case at any
time after the date hereof and prior to 5:00 p.m., New York City time, on the
Expiration Date, there shall be any (i) consolidation or merger involving the
Company or sale, transfer or other disposition of all or substantially all of
the Company's property, assets or business (except a merger or other reorgani-
zation in which the Company shall be the surviving corporation and holders of
Common Stock (or other securities or property purchasable upon exercise of the
Warrants) receive no consideration in respect of their shares) or (ii) any other
transaction contemplated by Section 4.1(i)(ii) above; then in any one or more of
said cases, the Company shall cause to be mailed to the Warrant Agent and each
Holder of a Warrant, at the earliest practicable time (and, in any event, not
less than 20 calendar days before any date set for definitive action), notice of
the date on which such reorganization, sale, consolidation, merger, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also set forth such facts as shall indicate the effect of such action (to
the extent such effect may be known at the date of such notice) on the Exercise
Price and the kind and amount of the shares of Common Stock and other securi-
ties, money and other property deliverable upon exercise of the Warrants. Such
notice shall also specify the date as of which the holders of record of the
shares of Common Stock or other securities or property issuable upon exercise of
the Warrants shall be entitled to exchange their shares for securities, money or
other property deliverable upon such reorganization, sale, consolidation,
merger, dissolution, liquidation or winding up, as the case may be.
SECTION 4.5 FRACTIONAL INTERESTS. The Company may but shall not be
required to issue fractional shares of Common Stock on the exercise of Warrants.
If more than one Warrant shall be presented for exercise in full at the same
time by the same Holder, the number of full
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shares of Common Stock which shall be issuable upon such exercise
thereof shall be computed on the basis of the aggregate number of
shares of Common Stock purchasable on exercise of the Warrants so
presented. If any fraction of a share of Common Stock would, except
for the provisions of this Section 4.5, be issuable on the exercise of
any Warrant (or specified portion thereof), the Company shall pay an
amount in cash calculated by it to be equal to the then Current Market
Value per share of Common Stock multiplied by such fraction computed
to the nearest whole cent.
ARTICLE V
DECREASE IN EXERCISE PRICE
The Board of Directors of the Company, in its sole discretion, shall
have the right at any time, or from time to time, to decrease the Exercise Price
of the Warrants, such reduction of the Exercise Price to be effective for a
period or periods to be determined by it, but in no event for a period of less
than 30 calendar days. Any exercise by the Board of Directors of any rights
granted in this Article V must be preceded by a written notice from the Company
to each Holder of the Warrants setting forth the reduction in the Exercise Price
and to the Warrant Agent, which notice shall be mailed at least 30 calendar days
prior to the effective date of such decrease in the Exercise Price of the War-
rants. Any reduction of the Exercise Price pursuant to provisions of this
Article V shall not alter or adjust the number of shares of Common Stock or
other securities issuable upon the exercise of the Warrants.
ARTICLE VI
LOSS OR MUTILATION
Upon receipt by the Company and the Warrant Agent of evidence satis-
factory to them of the ownership and the loss, theft, destruction or mutilation
of any Warrant Certificate and of indemnity satisfactory to them and (in the
case of mutilation) upon surrender and cancellation thereof, then, in the
absence of notice to the Company or the Warrant Agent that the Warrants repre-
sent-
24
<PAGE>
ed thereby have been acquired by a bona fide purchaser, the Company shall
execute and the Warrant Agent shall countersign and deliver to the registered
Holder of the lost, stolen, destroyed or mutilated Warrant Certificate, in
exchange for or in lieu thereof, a new Warrant Certificate of the same tenor and
for a like aggregate number of Warrants. Upon the issuance of any new Warrant
Certificate under this Article VI, the Company may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and other expenses (including the fees and expenses of the
Warrant Agent) in connection therewith. Every new Warrant Certificate executed
and delivered pursuant to this Article VI in lieu of any lost, stolen or
destroyed Warrant Certificate shall constitute a contractual obligation of the
Company, whether or not the allegedly lost, stolen or destroyed Warrant Certifi-
cates shall be at any time enforceable by anyone, and shall be entitled to the
benefits of this Agreement equally and proportionately with any and all other
Warrant Certificates duly executed and delivered hereunder. The provisions of
this Article VI are exclusive and shall preclude (to the extent lawful) all
other rights or remedies with respect to the replacement of mutilated, lost,
stolen, or destroyed Warrant Certificates.
ARTICLE VII
RESERVATION, AUTHORIZATION AND
REGISTRATION OF COMMON STOCK
SECTION 7.1 RESERVATION AND AUTHORIZATION. The Company shall at all
times reserve and keep available for issue upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock or other securities
of the Company deliverable upon exercise of Warrants as will be sufficient to
permit the exercise in full of all outstanding Warrants and will cause appro-
priate evidence of ownership of such Common Stock or other securities of the
Company to be delivered to the Warrant Agent upon its request for delivery upon
the exercise of Warrants, and all such shares of Common Stock will, at all
times, be duly approved for listing subject to official notice of issuance on
each securities exchange, if any, on which such Common Stock is then listed.
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SECTION 7.2 REGISTRATION. Subject to Section 3.2, if the issuance
or sale of any shares of Common Stock or other securities issuable upon the
exercise of the Warrants require registration or approval of any governmental
authority, or the taking of any other action under the laws of the United States
of America or any political subdivision thereof, before such securities may be
validly offered or sold in compliance with such laws, then the Company covenants
that it will, in good faith and as expeditiously as reasonably practicable,
endeavor to secure and maintain such registration or approval or to take such
other action, as the case may be, and the Company will furnish the Warrant Agent
with current Prospectuses meeting the requirements of the Securities Act and the
rules and regulations of the Commission thereunder in sufficient quantity to
permit the Warrant Agent to deliver a Prospectus to each Holder of a Warrant
upon the exercise thereof. In connection with the foregoing, the Company agrees
to maintain the effectiveness of the Registration Statement (Registration No.
33-53343) pursuant to which the Units were originally issued, or a successor
thereto, until the earlier of the Expiration Date or the exercise of all of the
Warrants. The Company further agrees to pay all fees, costs and expenses in
connection with the preparation and delivery to the Warrant Agent of the
Prospectuses and the delivery thereof by the Warrant Agent to the Holders of the
Warrants. The Company shall also advise the Warrant Agent of the political
subdivisions of the United States and the persons in such subdivision in and to
whom such shares may be issued.
ARTICLE VII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
SECTION 8.1 TRANSFER AND EXCHANGE. The Warrant Certificates shall be
issued in registered form only. The Company shall cause to be kept at the
office of the Warrant Agent a register in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Warrant Certificates and transfers or exchanges of Warrant Certificates as
herein provided. All Warrant Certificates issued upon any registration of
transfer or exchange of Warrant Certificates shall be the valid obligations of
the Compa-
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ny, evidencing the same obligations, and entitled to the same benefit under this
Agreement, as the Warrant Certificate surrendered for such registration of
transfer or exchange.
The Warrants shall initially be issued as part of an issuance of
Units, each of which consists of ___ Senior Secured Notes and __ Warrants.
Prior to the Separation Date, the Warrants may not be transferred or exchanged
separately from, but may be transferred or exchanged only together with, the
Senior Secured Notes issued in connection with such Warrants.
A Holder may transfer its Warrants only by written application to the
Warrant Agent stating the name of the proposed transferee and otherwise comply-
ing with the terms of this Agreement. No such transfer shall be effected until,
and such transferee shall succeed to the rights of a Holder only upon, final
acceptance and registration of the transfer by the Warrant Agent in the regis-
ter. Prior to the registration of any transfer of Warrants by a Holder as
provided herein, the Company, the Warrant Agent, and any agent of the Company
may treat the person in whose name the Warrants are registered as the owner
thereof for all purposes and as the person entitled to exercise the rights
represented thereby, any notice to the contrary notwithstanding. Furthermore,
any Holder of a Global Warrant shall, by acceptance of such Global Warrant,
agree that transfers of beneficial interests in such Global Warrant may be
effected only through a book entry system maintained by the Holder of such
Global Warrant (or its agent), and that ownership of a beneficial interest in
the Warrants represented thereby shall be required to be reflected in a book
entry. When Warrant Certificates are presented to the Warrant Agent with a
request to register the transfer or to exchange them for an equal amount of War-
rants of other authorized denominations, the Warrant Agent shall register the
transfer or make the exchange as requested if its requirements for such trans-
actions are met. To permit registrations of transfers and exchanges, the
Company shall execute Warrant Certificates at the Warrant Agent's request. No
service charge shall be made for any registration of transfer or exchange of
Warrants, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed
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in connection with any registration of transfer of Warrants.
SECTION 8.2 BOOK-ENTRY PROVISIONS FOR GLOBAL WARRANT. (a) The Global
Warrant initially shall (i) be registered in the name of the Depositary for such
Global Warrant or the nominee of such Depositary, (ii) be delivered to the
Warrant Agent as custodian for such Depositary and (iii) bear legends as set
forth in Section 2.2.
Members of, or participants in, the Depositary ("AGENT MEMBERS") shall
have no rights under this Agreement with respect to the Global Warrant held on
their behalf by the Depositary, or the Warrant Agent as its custodian, or under
the Global Warrant, and the Depositary may be treated by the Company, the
Warrant Agent and any agent of the Company or the Warrant Agent as the absolute
owner of such Global Warrant for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Warrant Agent or any
agent of the Company or the Warrant Agent, from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or im-
pair, as between the Depositary and its Agent Members, the operation of cus-
tomary practices governing the exercise of the rights of a holder of any
Warrants.
(b) Transfers of the Global Warrant shall be limited to trans-
fers of such Global Warrant in whole, but not in part, to the Depositary, its
successors or their respective nominees. Interests of beneficial owners in the
Global Warrant may be transferred in accordance with the rules and procedures of
the Depositary. Beneficial owners may obtain Physical Securities in exchange
for their beneficial interests in the Global Warrant upon request in accordance
with the Depositary's and the Warrant Agent's procedures. In addition, Physical
Securities shall be transferred to all beneficial owners in exchange for their
beneficial interests in the Global Warrant if the Depositary notifies the
Company that it is unwilling or unable to continue as Depositary for the Global
Warrant, and a successor depositary is not appointed by the Company within 90
days of such notice.
(c) In connection with any transfer of a portion of the benefi-
cial interests in the Global Warrant to beneficial owners pursuant to paragraph
(b) of this Section, the Warrant Agent shall reflect on its books and
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records the date and a decrease in the amount of Warrants represented by the
Global Warrant in an amount equal to the amount of the beneficial interest in
the Global Warrant to be transferred, and the Company shall execute, and the
Warrant Agent shall countersign and deliver, one or more Physical Securities of
like tenor and amount.
(d) In connection with the transfer of the entire Global Warrant
to beneficial owners pursuant to paragraph (b) of this Section, the Global
Warrant shall be deemed to be surrendered to the Warrant Agent for cancellation,
and the Company shall execute, and the Warrant Agent shall countersign and
deliver, to each beneficial owner identified by the Depositary in exchange for
its beneficial interest in the Global Warrant an equal aggregate principal
amount of Physical Securities of authorized denominations.
(e) Any Physical Security delivered in exchange for an interest
in the Global Warrant pursuant to paragraphs (b) or (d) of this Section shall
bear the legend regarding transfer restrictions applicable to the Physical
Security set forth in Section 2.2.
(f) The registered holder of the Global Warrant may grant
proxies and otherwise authorize any person, including Agent Members and persons
that may hold interests through Agent Members, to take any action which a Holder
is entitled to take under this Agreement or the Warrants.
The Warrant Agent shall retain copies of all letters, notices and
other written communications received pursuant to this Section 8.2. The Company
shall have the right to inspect and make copies of all such letters, notices or
other written communications at any reasonable time upon the giving of reason-
able written notice to the Warrant Agent.
SECTION 8.3 SURRENDER OF WARRANT CERTIFICATES. Any Warrant Certifi-
cate surrendered for registration of transfer, exchange, exercise or repurchase
of the Warrants represented thereby shall, if surrendered to the Company, be
delivered to the Warrant Agent, and all Warrant Certificates surrendered or so
delivered to the Warrant Agent shall be promptly cancelled by the Warrant Agent
and shall not be reissued by the Company and,
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except as provided in this Article VIII in case of an exchange, Article III in
case of the exercise or repurchase of less than all the Warrants represented
thereby or Article VI in case of a mutilated Warrant Certificate, no Warrant
Certificate shall be issued hereunder in lieu thereof. The Warrant Agent shall
deliver to the Company from time to time or otherwise dispose of such cancelled
Warrant Certificates as the company may direct.
ARTICLE IX
WARRANT HOLDERS
SECTION 9.1 WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Prior to the
exercise of the Warrants, no Holder of a Warrant Certificate, as such, shall be
entitled to any rights of a stockholder of the Company, including, without
limitation, the right to vote or to consent to any action of the stockholders,
to receive dividends or other distributions, to exercise any preemptive right or
to receive any notice of meetings of stockholders and, except as otherwise
provided in this Agreement, shall not be entitled to receive any notice of any
proceedings of the Company.
SECTION 9.2 RIGHT OF ACTION. All rights of action with respect to
this Agreement are vested in the Holders of the Warrants, and any Holder of any
Warrant, without the consent of the Warrant Agent or the Holders of any other
Warrant, may, in his own behalf and for his own benefit, enforce, and may insti-
tute and maintain any suit, action or proceeding against the Company suitable to
enforce, or otherwise in respect of, his right to exercise his Warrants in the
manner provided in the Warrant Certificate representing his Warrants and in this
Agreement.
ARTICLE X
REMEDIES
SECTION 10.1 DEFAULTS. It shall be deemed to be a Default with
respect to the Company's (or its successor's) obligations under this Agreement
if: (i) the Company (or its successor) shall fail to make a
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Repurchase Offer pursuant to Section 3.4 hereof or (ii) the Company (or its
successor) shall fail to purchase the Warrants pursuant to any Repurchase
Offer in accordance with the provisions of Section 3.4.
SECTION 10.2 PAYMENT OBLIGATIONS. Upon the happening of a Default
under this Agreement the Company shall be obligated to increase the amount
otherwise payable pursuant to Section 3.4(d) in respect of the Repurchase Offer
to which such Default relates by an amount equal to interest thereon at a rate
per annum equal to ___% from the date of the Default to the date of payment,
which interest shall compound quarterly (all such payment obligations in respect
of any such Repurchase Offer, together with all such increased amounts, being
the "REPURCHASE OBLIGATION").
SECTION 10.3 REMEDIES; NO WAIVER. Notwithstanding any other provi-
sion of this Warrant Agreement, if a Default occurs and is continuing, the
Holders of the Warrants may pursue any available remedy to collect the Repur-
chase Obligation or to enforce the performance of any provision of this Warrant
Agreement. A delay or omission by any Holder of a Warrant in exercising, or a
failure to exercise, any right or remedy arising out of a Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Default. All remedies are cumulative to the extent permitted by law.
ARTICLE XI
THE WARRANT AGENT
SECTION 11.1 DUTIES AND LIABILITIES. The Warrant Agent hereby
accepts the agency established by this Agreement and agrees to perform the same
upon the terms and conditions herein set forth, by all of which the Company and
the Holders of Warrants, by their acceptance thereof, shall be bound. The
Warrant Agent shall not, by countersigning Warrant Certificates or by any other
act hereunder, be deemed to make any representations as to the validity or
authorization of the Warrants or the Warrant Certificates (except as to its
countersignature thereon) or of any securities or other property delivered upon
exercise or repurchase of any Warrant, or as to the accuracy of the computation
of the Exercise Price or the
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number or kind or amount of stock or other securities or other property deliver-
able upon exercise or repurchase of any Warrant, or as to the independence of
any Independent Financial Expert or the correctness of the representations of
the Company made in the certificates that the Warrant Agent receives. The
Warrant Agent shall not be accountable for the use or application by the Company
of the proceeds of the exercise of any Warrant. The Warrant Agent shall not
have any duty to calculate or determine any adjustments with respect to either
the Exercise Price or the kind and amount of shares or other securities or any
property receivable by Holders upon the exercise or repurchase of Warrants
required from time to time and the Warrant Agent shall have no duty or responsi-
bility in determining the accuracy or correctness of such calculation. The
Warrant Agent shall not be (a) liable for any recital or statement of fact
contained herein or in the Warrant Certificates or for any action taken,
suffered or omitted by it in good faith in the belief that any Warrant Cer-
tificate or any other documents or any signatures are genuine or properly autho-
rized, (b) responsible for any failure on the part of the Company to comply with
any of its covenants and obligations contained in this Agreement or in the
Warrant Certificates or (c) liable for any act or omission in connection with
this Agreement except for its own gross negligence or willful misconduct. The
Warrant Agent is hereby authorized to accept instructions with respect to the
performance of its duties hereunder from the President, any Vice President or
the Secretary of the Company and to apply to any such officer for instructions
(which instructions will be promptly given in writing when requested) and the
Warrant Agent shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with the instructions of any such officer;
however, in its discretion the Warrant Agent may in lieu thereof accept other
evidence of such or may require such further or additional evidence as it may
deem reasonable. The Warrant Agent shall not be liable for any action taken in
the event it requests instructions from the Company and does not receive such
instructions within a reasonable period of time after the request therefor.
The Warrant Agent may execute and exercise any of the rights and
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys, agents or employees, and the Warrant Agent
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shall not be answerable or accountable for any act, default, neglect or miscon-
duct of any such attorneys, agents or employees, provided reasonable care has
been exercised in the selection and in the continued employment of any such
attorney, agent or employee. The Warrant Agent shall not be under any obliga-
tion or duty to institute, appear in or defend any action, suit or legal
proceeding in respect hereof, unless first indemnified to its satisfaction, but
this provision shall not affect the power of the Warrant Agent to take such
action as the Warrant Agent may consider proper, whether with or without such
indemnity. The Warrant Agent shall promptly notify the company in writing of
any claim made or action, suit or proceeding instituted against it arising out
of or in connection with this Agreement.
The Company will perform, execute, acknowledge and deliver or cause to
be delivered all such further acts, instruments and assurances as may reasonably
be required by the Warrant Agent in order to enable it to carry out or perform
its duties under this Agreement.
The Warrant Agent shall act solely as agent of the Company hereunder.
The Warrant Agent shall not be liable except for the failure to perform such
duties as are specifically set forth herein, and no implied covenants or
obligations shall be read into this Agreement against the Warrant Agent, whose
duties and obligations shall be determined solely by the express provisions
hereof.
SECTION 11.2 RIGHT TO CONSULT COUNSEL. The Warrant Agent may at any
time consult with legal counsel (who may be legal counsel for the Company), and
the opinion or advice of such counsel shall be full and complete authorization
and protection to the Warrant Agent and the Warrant Agent shall incur no
liability or responsibility to the Company or to any Holder for any action
taken, suffered or omitted by it in good faith in accordance with the opinion or
advice of such counsel.
SECTION 11.3 COMPENSATION; INDEMNIFICATION. The Company agrees
promptly to pay the Warrant Agent from time to time, on demand of the Warrant
Agent, compensation for its services hereunder as the Company and the Warrant
Agent may agree from time to time, and to reimburse it for reasonable expenses
and counsel fees in-
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curred in connection with the execution and administration of this Agreement,
and further agrees to indemnify the Warrant Agent and save it harmless against
any losses, liabilities or expenses arising out of or in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of investigating or defending any claim of such liability, except that
the Company shall have no liability hereunder to the extent that any such loss,
liability or expense results from the Warrant Agent's own gross negligence or
willful misconduct. The obligations of the Company under this Section shall
survive the exercise and the expiration of the Warrants and the resignation or
removal of the Warrant Agent.
SECTION 11.4 NO RESTRICTIONS ON ACTIONS. The Warrant Agent and any
stockholder, director, officer or employee of the Warrant Agent may buy, sell or
deal in any of the Warrants or other securities of the Company or become
pecuniarily interested in transactions in which the Company may be interested,
or contract with or lend money to the Company or otherwise act as fully and
freely as though it were not the Warrant Agent under this Agreement. Nothing
herein shall preclude the Warrant Agent from acting in any other capacity for
the Company or for any other legal entity.
SECTION 11.5 DISCHARGE OR REMOVAL; REPLACEMENT WARRANT AGENT. The
Warrant Agent may resign from its position as such and be discharged from all
further duties and liabilities hereunder (except liability arising as a result
of the Warrant Agent's own gross negligence or willful misconduct), after giving
one month's prior written notice to the Company. The Company may remove the
Warrant Agent upon one month's written notice specifying the date when such
discharge shall take effect, and the Warrant Agent shall thereupon in like
manner be discharged from all further duties and liabilities hereunder, except
as aforesaid. The Warrant Agent or the Company shall cause to be mailed to each
Holder of a Warrant a copy of said notice of resignation or notice of removal,
as the case may be. Upon such resignation or removal the Company shall appoint
in writing a new warrant agent. If the Company shall fail to make such appoint-
ment within a period of 30 calendar days after it has been notified in writing
of such resignation by the resigning Warrant Agent or after such removal, then
the
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resigning Warrant Agent or the Holder of any Warrant may apply to any court of
competent jurisdiction for the appointment of a new warrant agent. Any new
warrant agent, whether appointed by the Company or by such a court, shall be a
bank or trust company doing business under the laws of the United States or any
state thereof, in good standing and having a combined capital and surplus of not
less than $25,000,000. The combined capital and surplus of any such new warrant
agent shall be deemed to be the combined capital and surplus as set forth in the
most recent annual report of its condition published by such warrant agent prior
to its appointment, provided that such reports are published at least annually
pursuant to law or to the requirements of a federal or state supervising or
examining authority. After acceptance in writing of such appointment by the new
warrant agent, it shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the Warrant Agent,
without any further assurance, conveyance, act or deed; however, if for any
reason it shall be necessary or expedient to execute and deliver any further
assurance, conveyance, act or deed, the same shall be done at the expense of the
Company and shall be legally and validly executed and delivered by the resigning
or removed Warrant Agent. Not later than the effective date of any such
appointment the Company shall file notice thereof with the resigning or removed
Warrant Agent and shall forthwith cause a copy of such notice to be mailed to
each Holder of a Warrant. Failure to give any notice provided for in this
Section 11.5, however, or any defect therein, shall not affect the legality or
validity of the resignation of the Warrant Agent or the appointment of a new
warrant agent, as the case may be.
SECTION 11.6 SUCCESSOR WARRANT AGENT. Any corporation into which the
Warrant Agent or any new warrant agent may be merged, or any corporation
resulting from any consolidation to which the Warrant Agent or any new warrant
agent shall be a party, shall be a successor Warrant Agent under this Agreement
without any further act, provided that such corporation would be eligible for
appointment as successor to the Warrant Agent under the provisions of Section
11.5. Any such successor Warrant Agent shall promptly cause notice of its
succession as Warrant Agent to be mailed to each Holder of a Warrant.
35
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ARTICLE XII
MISCELLANEOUS
SECTION 12.1 MONEY DEPOSITED WITH THE WARRANT AGENT. The Warrant
Agent shall not be required to pay interest on any moneys deposited pursuant to
the provisions of this Agreement except such as it shall agree in writing with
the Company to pay thereon. Any moneys, securities or other property which at
any time shall be deposited by the Company or on its behalf with the Warrant
Agent pursuant to this Agreement shall be and are hereby assigned, transferred
and set over to the Warrant Agent in trust for the purpose for which such
moneys, securities or other property shall have been deposited; but such moneys,
securities or other property need not be segregated from other funds, securities
or other property except to the extent required by law. Any money, securities
or other property deposited with the Warrant Agent for payment or distribution
to the Holders that remains unclaimed for two years after the date the money,
securities or other property was deposited with the Warrant Agent shall be
delivered to the Company upon its request therefor.
SECTION 12.2 PAYMENT OF TAXES. All shares of Common Stock or other
securities issuable upon the exercise of Warrants shall be validly issued, fully
paid and nonassessable, and the Company shall pay any taxes and other governmen-
tal charges that may be imposed under the laws of the United States of America
or any political subdivision or taxing authority thereof or therein in respect
of the issue or delivery thereof or of other securities deliverable upon
exercise of Warrants or in respect of any Repurchase Offer (other than income
taxes imposed on the Holders). The Company shall not be required, however, to
pay any tax or other charge imposed in connection with any transfer involved in
the issue of any certificate for shares of Common Stock or other securities or
property issuable upon the exercise of the Warrants or in respect of any
Repurchase Offer or payment of cash to any Person other than the Holder of a
Warrant Certificate surrendered upon the exercise or repurchase of a Warrant and
in case of such transfer or payment, the Warrant Agent and the Company shall not
be required to issue any stock certificate or pay any cash until such tax or
charge has been paid or it has been established to
36
<PAGE>
the Warrant Agent's and the Company's satisfaction that no such tax or charge is
due.
SECTION 12.3 NO MERGER, CONSOLIDATION OR SALE OF ASSETS OF THE
COMPANY. Except as otherwise provided herein, the Company will not merge into
or consolidate with any other Person, or sell or otherwise transfer its proper-
ty, assets and business substantially as an entirety to a successor of the
Company, unless the Person resulting from such merger or consolidation, or such
successor of the Company, shall expressly assume, by supplemental agreement
satisfactory in form to the Warrant Agent and executed and delivered to the
Warrant Agent, the due and punctual performance and observance of each and every
covenant and condition of this Agreement to be performed and observed by the
Company.
SECTION 12.4 REPORTS TO HOLDERS. Until the Company has a class of
equity securities registered under the Exchange Act, the Company will prepare,
for the first three quarters of each fiscal year, full quarterly financial
reports (including combined or consolidated quarterly financial statements and a
management discussion and analysis of financial condition and results of opera-
tions). The Company will also prepare, on an annual basis, complete audited
combined or consolidated financial statements including, but not limited to, a
balance sheet, a statement of income and stockholders' equity, a statement of
changes in financial position and all appropriate notes. Such annual report
will also include a management discussion and analysis of financial condition
and results of operations. All financial statements will be prepared in
accordance with generally accepted accounting principles consistently applied,
except for changes with which the Company's independent public accountants
concur and except that quarterly statements may be subject to year-end adjust-
ments. The Company will cause a copy of the respective reports to be mailed to
the Warrant Agent and to each of the Holders of the Warrants within 60 calendar
days after the close of each of the first three quarters of each fiscal year and
within 120 calendar days after the close of each fiscal year, at such Holder's
address appearing on the register of the Company maintained by the Warrant
Agent.
If the Company shall have a class of equity securities registered
under the Exchange Act, the Company
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will cause a copy of the annual reports and of the information, documents and
other reports which the Company shall be required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act to be mailed to the Warrant
Agent and to each Holder of the Warrants within 15 days after such information,
documents and other reports have been so filed, at such Holder's address
appearing on the register of the Company maintained by the Warrant Agent.
SECTION 12.5 NOTICES. Except as otherwise provided in Section
12.5(b), any notice, demand or delivery authorized by this Agreement shall be
sufficiently given or made when mailed, if sent by first class mail, postage
prepaid, addressed to any Holder of a Warrant at such Holder's last known
address appearing on the register of the Company maintained by the Warrant Agent
and to the Company or the Warrant Agent as follows:
To the Company: Empire Gas Corporation
1700 South Jefferson Street
P.O. Box 303
Lebanon, Missouri 66536
Attention: Secretary
To the Warrant Agent: Shawmut Bank Connecticut
National Association
777 Main Street MSN 238
Hartford, Connecticut 06115
Attention: Corporate Trust
Administration
or such other address as shall have been furnished to the party giving or making
such notice, demand or delivery. Any notice that is mailed in the manner herein
provided shall be conclusively presumed to have been duly given when mailed,
whether or not the Holder receives the notice.
(b) Any notice required to be given by the Company to the Holders
pursuant to Section 3.4(b), shall be made by mailing by registered mail, return
receipt requested, to the Holders at their last known addresses appearing on the
register of the Company maintained by the Warrant Agent. The Company hereby
irrevocably authorizes the Warrant Agent, in the name and at the expense of the
Company, to mail any such notice upon
38
<PAGE>
receipt thereof from the Company. Any notice that is mailed in the manner
herein provided shall be conclusively presumed to have been duly given when
mailed, whether or not the Holder receives the notice.
SECTION 12.6 APPLICABLE LAW. This Agreement, each Warrant Certifi-
cate issued hereunder and all rights arising hereunder shall be construed and
determined in accordance with the laws of the State of New York, and the
performance thereof shall be governed and enforced in accordance with such laws.
SECTION 12.7 BINDING EFFECT. This Agreement shall be binding upon
and inure to the benefit of the Company and the Warrant Agent and their respec-
tive successors and assigns, and the Holders from time to time of the Warrants.
Nothing in this Agreement is intended or shall be construed to confer upon any
Person, other than the Company, the Warrant Agent and the Holders of the
Warrants, any right, remedy or claim under or by reason of this Agreement or any
part hereof.
SECTION 12.8 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together constitute one and the same instrument.
SECTION 12.9 AMENDMENTS. The Warrant Agent may, without the consent
or concurrence of the Holders of the Warrants, by supplemental agreement or
otherwise, join with the Company in making any changes or corrections in this
Agreement that they shall have been advised by counsel (a) are required to cure
any ambiguity or to correct any defective or inconsistent provision or clerical
omission or mistake or manifest error herein contained or (b) add to the
covenants and agreements of the Company in this Agreement further covenants and
agreements of the Company thereafter to be observed, or surrender any rights or
power reserved to or conferred upon the Company in this Agreement; PROVIDED that
in either case such changes or corrections do not and will not adversely affect,
alter or change the rights, privileges or immunities of the Holders of Warrants.
SECTION 12.10 HEADINGS. The descriptive headings of the several Sections
of this Agreement are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, as of the day and year first above written.
EMPIRE GAS CORPORATION
By_____________________________________
Name:
Title:
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
as Warrant Agent
By_____________________________________
Name:
Title:
40
<PAGE>
EXHIBIT A
FORM OF WARRANT CERTIFICATE
[UNLESS THIS WARRANT CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTA-
TIVE OF THE DEPOSITORY TRUST COMPANY, TO THE COMPANY OR THE WARRANT AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR REPURCHASE, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY OR SUCH OTHER REPRESENTATIVE OF THE DEPOSITARY TRUST COMPANY OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR
TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL WARRANT SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL WARRANT
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN ARTICLE VIII OF THE WARRANT AGREEMENT. ]1
THE WARRANTS ARE INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS. EACH
UNIT CONSISTS OF (i) ___ SENIOR SECURED NOTES AND (ii) ___ WARRANTS OF THE
COMPANY. PRIOR TO THE CLOSE OF BUSINESS DECEMBER __, 1994, THE WARRANTS
EVIDENCED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPA-
RATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE
SENIOR SECURED NOTES ISSUED BY EMPIRE GAS CORPORATION, IN CONNECTION HERE-
WITH.
[CUSIP] [SINS] No. ________
- -----------------------------
1. Include only for Global Warrant
A-1
<PAGE>
No. _____ Certificate for _______ Warrants
WARRANTS TO PURCHASE COMMON STOCK
This certifies that _____________, or its registered assigns, is the
owner of the number of Warrants set forth above, each of which represents the
right to purchase, after the Separation Date (as defined below), from EMPIRE GAS
CORPORATION, a Missouri corporation (the "Company"), one share of Common Stock,
par value $.001 per share, of the Company ("Common Stock") at the purchase price
(the "Exercise Price") of $7.00 per share (subject to adjustment as provided in
the Warrant Agreement hereinafter referred to), upon surrender hereof at the
office of Shawmut Bank Connecticut, National Association or to its successor as
the warrant agent under the Warrant Agreement hereinafter referred to (any such
warrant agent being herein called the "Warrant Agent"), with the Subscription
Form on the reverse hereof duly executed, with signature guaranteed as therein
specified and simultaneous payment in full (in cash or by certified or official
bank or bank cashier's check payable to the order of the Company) of the pur-
chase price for the share(s) as to which the Warrant(s) represented by this
Warrant Certificate are exercised, all subject to the terms and conditions
hereof and of the Warrant Agreement. "Separation Date" means the close of
business upon December __, 1994.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of June __, 1994 (the "Warrant Agreement"), between
the Company and Shawmut Bank Connecticut, National Association, as Warrant
Agent, and is subject to the terms and provisions contained therein; to all of
which terms and provisions the Holder of this Warrant Certificate consents by
acceptance hereof. The Warrant Agreement is hereby incorporated herein by
reference and made a part hereof. Reference is hereby made to the Warrant
Agreement for a full description of the rights, limitations of rights, obliga-
tions, duties and immunities thereunder of the Company and the Holders of the
Warrants. The summary of the terms of the Warrant Agreement contained in this
Warrant Certificate is qualified in its entirety by express reference to the
Warrant Agreement. All terms used in this Warrant Certificate that are defined
in the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
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<PAGE>
Copies of the Warrant Agreement are on file at the office of the
Warrant Agent and may be obtained by writing to the Warrant Agent at the
following address:
Shawmut Bank Connecticut, National
Association
777 Main Street MSN 238
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
A "Repurchase Event", as defined in the Warrant Agreement, shall be
deemed to occur if at any time prior to June __, 2004 the Company consolidates
with, merges into or with (where holders of the Common Stock receive consid-
eration in exchange for all or part of such shares of Common Stock), or sells
all or substantially all of its assets to, another Person which has a class of
equity Securities registered under the Exchange Act, or a wholly owned subsid-
iary of such Person, if the consideration for such transaction does not consist
solely of cash or such merger or consolidation is not effected solely for the
purpose of changing the Company's state of incorporation or is effected with a
Plaster Entity or a Lindsey Entity.
Following a Repurchase Event, the Company must make an offer to
repurchase all Warrants surrendered for repurchase (a "Repurchase Offer"). If
the Company makes a Repurchase Offer, Holders may, until the Final Surrender
Date of such offer, surrender all or part of their Warrants for repurchase by
the Company.
Warrants received by the Warrant Agent in proper form during a
Repurchase Offer will, except as otherwise provided in the Warrant Agreement, be
repurchased by the Company at a price (the "Repurchase Price") equal to the
value on the Valuation Date relating thereto of the Common Stock and other
securities or property of the Company which would have been delivered upon
exercise of the Warrants, less the Exercise Price. The value of such Common
Stock and other securities will be (i) if the Common Stock (or other securities)
is registered under the Exchange Act, determined based upon the closing sales
prices of the Common Stock (or other securities) for the 20 trading days
immediately preceding such Valuation Date or (ii) if the Common Stock (or other
securities) is not registered under the Exchange Act or if the value cannot be
computed under clause (i) above, determined by the Independent Financial Expert
(as defined in
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<PAGE>
the Warrant Agreement), in each case as set forth in the Warrant Agreement.
The "Valuation Date" as defined in the Warrant Agreement shall be
deemed to occur on the date five business days prior to the date notice of the
Repurchase Offer is first given.
If the Company fails to make or complete any Repurchase Offer (a
"Default") as required by the Warrant Agreement, it shall be obligated to
increase the amount otherwise payable pursuant to the Warrant Agreement in
respect of the Repurchase Offer to which such Default relates by an amount equal
to interest thereon at a rate of ___% per annum from the date of the Default to
the date of payment, which interest shall compound quarterly.
If the Company merges or consolidates with, or sells all or substan-
tially all of its property and assets to, another Person (other than an Affili-
ate of the Company) solely for cash, the Holders of Warrants shall be entitled
to receive upon exercise cash on an equal basis with holders of Common Stock, as
if the Warrants had been exercised immediately prior to such transaction or the
amount payable pursuant to an outstanding Repurchase Offer, if higher.
The number of shares of Common Stock purchasable upon the exercise of
each Warrant and the price per share are subject to adjustment as provided in
the Warrant Agreement. Except as stated in the immediately preceding paragraph,
in the event the Company merges or consolidates with, or sells all or substan-
tially all of its assets to, another Person, each Warrant will, upon exercise,
entitle the Holder thereof to receive the number of shares of stock or other
securities or the amount of money and other property which the holder of a share
of Common Stock (or other securities or property issuable upon exercise of a
Warrant) is entitled to receive upon completion of such merger, consolidation or
sale.
As to any final fraction of a share which the same Holder of one or
more Warrant Certificates would otherwise be entitled to purchase upon exercise
thereof in the same transaction, the Company may pay the cash value thereof
determined as provided in the Warrant Agreement.
All shares of Common Stock or other securities issuable by the Company
upon the exercise of Warrants shall be validly issued, fully paid and nonassess-
able, and the Company
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shall pay all taxes and other governmental charges that may be imposed under the
laws of the United States of America or any political subdivision or taxing
authority thereof or therein in respect of the issue or delivery of such shares
or of other securities deliverable upon exercise of Warrants. The Company shall
not be required, however, to pay any tax or other charge imposed in connection
with any transfer involved in the issue of any certificate for shares of Common
Stock, and in such case the Company shall not be required to issue or deliver
any stock certificate until such tax or other charge has been paid or it has
been established to the Warrant Agent's and the Company's satisfaction that no
tax or other charge is due.
Subject to the restrictions on transfer set forth in Article VIII of
the Warrant Agreement, this Warrant Certificate and all rights hereunder are
transferable by the registered Holder hereof, in whole or in part, on the
register of the Company maintained by the Warrant Agent for such purpose at its
office in Hartford, Connecticut, upon surrender of this Warrant Certificate duly
endorsed, or accompanied by a written instrument of transfer in form satisfacto-
ry to the Company and the Warrant Agent duly executed, with signatures guaran-
teed as specified in the attached Form of Assignment, by the registered Holder
hereof or his attorney duly authorized in writing and upon payment of any
necessary transfer tax or other governmental charge imposed upon such transfer.
Upon any partial transfer the Company will issue and deliver to such Holder a
new Warrant Certificate or Certificates with respect to any portion not so
transferred. Each taker and Holder of this Warrant Certificate, by taking and
holding the same, consents and agrees that prior to the registration of transfer
as provided in the Warrant Agreement, the Company and the Warrant Agent may
treat the person in whose name the Warrants are registered as the absolute owner
hereof for any purpose and as the Person entitled to exercise the rights repre-
sented hereby, any notice to the contrary notwithstanding.
This Warrant Certificate may be exchanged at the office of the Warrant
Agent maintained for such purpose in Hartford, Connecticut for Warrant Certifi-
cates representing the same aggregate number of Warrants, each new Warrant
Certificate to represent such number of Warrants as the Holder hereof shall
designate at the time of such exchange.
Prior to the exercise of the Warrants represented hereby, the Holder
of this Warrant Certificate, as such, shall not be entitled to any right of a
stockholder of the Company,
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<PAGE>
including, without limitation, the right to vote or to consent to any action of
the stockholders, to receive dividends or other distributions, to exercise any
preemptive right or to receive any notice of meetings of stockholders, and shall
not be entitled to receive any notice of any proceedings of the Company except
as provided in the Warrant Agreement.
This Warrant Certificate shall be void and all rights evidenced hereby
shall cease on June __, 2004 unless sooner terminated by the liquidation, disso-
lution or winding-up of the Company or as otherwise provided in the Warrant
Agreement upon the consolidation or merger of the Company with or sale of the
Company to, another Person (other than an Affiliate of the Company), or unless
such date is extended as provided in the Warrant Agreement.
A-6
<PAGE>
This Warrant Certificate shall not be valid for any purpose until it
shall have been countersigned by the Warrant Agent.
Dated: June __, 1994
EMPIRE GAS CORPORATION
By:____________________________________
Name:
Title:
Countersigned:
Shawmut Bank Connecticut,
National Association,
as Warrant Agent
By:______________________
A-7
<PAGE>
FORM OF REVERSE OF WARRANT CERTIFICATE
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
To:
The undersigned irrevocably exercises _________ of the Warrants for
the purchase of one share (subject to adjustment) of Common Stock, par value
$.001 per share, of EMPIRE GAS CORPORATION for each Warrant represented by the
Warrant Certificate and herewith makes payment of $__________ (such payment
being in cash or by certified or official bank or bank cashier's check payable
to the order of ____________________________________), all at the exercise price
and on the terms and conditions specified in the within Warrant Certificate and
the Warrant Agreement therein referred to, surrenders this Warrant Certificate
and all right, title and interest therein to __________________________________-
_______ and directs that the shares of Common Stock deliverable upon the
exercise of said Warrants be registered or placed in the name and at the address
specified below and delivered thereto.
Dated:
(1)
------------------------------------------------
(Signature of Owner)
------------------------------------------------
(Street Address)
------------------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
- ---------------------------
(1) The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by a national
bank or trust company or by a member firm of any national securities
exchange.
<PAGE>
FORM OF CERTIFICATE FOR SURRENDER FOR REPURCHASE OFFER
(To be executed only upon repurchase
of Warrant by the Company)
To:
The undersigned, having received prior notice of the consideration for
which EMPIRE GAS CORPORATION will repurchase the Warrants represented by the
within Warrant Certificate, hereby surrenders this Warrant Certificate for
repurchase by EMPIRE GAS CORPORATION for the consideration set forth in said
notice.
Dated:
(1)
------------------------------------------------
(Signature of Owner)
------------------------------------------------
(Street Address)
------------------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
Check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
- -----------------------------------------------
(l) The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by a national
bank or trust company or by a member firm of any national securities
exchange.
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered holder of the within
Warrant Certificate hereby sells, assigns, and transfers unto the Assignee(s)
named below (including the undersigned with respect to any Warrants constituting
a part of the Warrants evidenced by the within Warrant Certificate not being as-
signed hereby) all of the right of the undersigned under the within Warrant
Certificate, with respect to the number of Warrants set forth below:
Name(s) of
ASSIGNEE(S) ADDRESS NO. OF WARRANTS
- ----------- ------- ---------------
Please insert social security or other identifying number of assignee(s).
and does hereby irrevocably constitute and appoint _____________
__________ the undersigned's attorney to make such transfer on the books of
_____________________ maintained for the purposes, with full power of substitu-
tion in the premises.
Dated:
(1)
--------------------------------------------------
(Signature of Owner)
--------------------------------------------------
(Street Address)
--------------------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
- ----------------------------------------------
(1) The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by a national
bank or trust company or by a member firm of
<PAGE>
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (the "Agreement") is entered into this
__ day of _____, 1994, between Douglas A. Brown ("Brown") and Empire Gas
Corporation, formerly Empire Gas Acquisition Corporation (the "Company").
RECITALS
WHEREAS, as part of a series of transactions that will effect a change
in its ownership and management, the Company filed on April 29, 1994 a
registration statement on Form S-1 (the "Registration Statement") relating to
the registration of Senior Secured Notes due 2004 in an aggregate principal
amount expected to result in gross proceeds of $100,000,000 in a public offering
(the "Offering"); and
WHEREAS, Brown will become a director of the Company upon the
consummation of the Offering; and
WHEREAS, included as an exhibit to the Registration Statement is a
written consent by Brown to be named in the Registration Statement as a
prospective director of the Company; and
WHEREAS, Article 9 of the Company's Articles of Incorporation provides
for the indemnification of all directors, officers, employees and agents of the
Company; and
WHEREAS, the Company agrees to indemnify Brown with respect to
liability incurred by him as a result of his being named as a director and
consenting thereto, as an inducement to become a director;
In consideration of the foregoing and the respective covenants and
agreements set forth in this Agreement, Brown and the Company agree as follows:
Section 1 INDEMNIFICATION.
Notwithstanding the fact that Brown was not a director of the Company
at the time the Registration Statement was filed, the Company agrees to
indemnify Brown, to the full extent provided for indemnification of directors
set forth in Article 9 of the Company's Articles of Incorporation as in effect
on the date of this Agreement, against any and all loss, liability, claim,
damage and expense whatsoever (a "Loss"), as incurred, arising out of or
resulting from his being named as a director in
<PAGE>
the Registration Statement and consenting thereto, including without limitation
any Loss arising out of any untrue statement or alleged untrue statement of
material fact contained in the Registration Statement (or any amendment
thereto), including the information deemed to be part of the Registration
Statement pursuant to Rule 430A(b) of the regulations pursuant to the Securities
Act of 1933, as amended, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any preliminary or
final prospectus (or any amendment or supplement thereto) or the omission or
alleged omission therefrom of a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Section 2 PROCEDURE.
(a) Indemnification under this Agreement shall be provided in
accordance with the procedures set forth in Article 9 of the Articles of
Incorporation of the Company and as set forth in this Section 3.
(b) Brown shall give notice as promptly as reasonably practicable to
the Company of any action commenced against him in respect of which an indemnity
may be sought hereunder, but failure to do so notify the Company shall not
relieve the Company from any liability which it may have otherwise than on
account of this Agreement. The Company may participate at its own expense in
the defense of such action. If it so elects within a reasonable time after
receipt of such notice, the Company may assume the defense of such action with
counsel chosen by it and approved by Brown, unless Brown reasonably objects to
such assumption on the ground that the named parties to any such action
(including any impleaded parties) include both Brown and the Company, and Brown
reasonably believes that there may be legal defenses available to him which are
different from or in addition to those available to the Company. If the Company
assumes the defense of such action, the Company shall not be liable for any fees
and expenses of counsel for Brown incurred thereafter in connection with such
action. In no event shall the Company be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from its own
counsel for Brown in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances.
Section 3 NOTICES.
All notices called for under this Agreement must be in writing and
will be deemed given for all purposes (i) upon
-2-
<PAGE>
personal delivery, (ii) two days after being sent, when sent by professional
overnight courier service, (iii) five days after posting when sent by registered
or certified mail, or (iv) on the date of transmission when sent by telegram,
telegraph, telex, or facsimile transmission, addressed to Brown and the Company
at the following addresses (or at such other address for a party as is specified
by like notice; provided that notices of a change of address will be effective
only upon receipt of the notice):
To Douglas A. Brown:
Holding Capital Group
685 Fifth Avenue
New York, New York 10022
Attention: Douglas A. Brown
To Empire Gas Corporation:
Empire Gas Corporation
1700 South Jefferson Street
Lebanon, Missouri 65536
Attention: Paul S. Lindsey, Jr.
Section 4 SEVERABILITY.
If any provision of this Agreement is held invalid, such invalidity
will not affect any other provision of the Agreement that can be given effect
without the invalid provision, and to this end, the provisions of this Agreement
are separable.
Section 5 ASSIGNMENT.
This Agreement will bind and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests and obligations hereunder, may be
assigned by any party without the written consent of the other party.
Section 6 AMENDMENT.
This Agreement may be modified only by a written instrument duly
executed by the Company and Brown and compliance with any provision or condition
contained in this Agreement, or the obtaining of any consent provided for in
this Agreement, may be waived only by written instrument duly executed by the
party to be bound by such waiver.
-3-
<PAGE>
Section 7 GOVERNING LAW.
The rights of the parties arising under this Agreement shall be
construed and enforced under the laws of the State of Missouri without giving
effect to any choice of law or conflict of law rules.
Section 8 ENTIRE AGREEMENT.
This Agreement contains the entire understanding of the parties to
this Agreement respecting the subject matter hereof and supersedes all prior
agreements, discussions, and understandings.
Section 9 CAPTIONS.
The captions in this Agreement are for convenience only, do not
form a part of it, and do not in any way modify, interpret or construe the
intentions of the parties to it.
Section 10 COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which will be deemed an original but all of which will constitute one and the
same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the date set forth in the first paragraph of this Agreement.
Empire Gas Corporation
By: __________________________
__________________________
Douglas A. Brown
-4-
<PAGE>
EXHIBIT 10.11
PHILLIPS 66 COMPANY
NGL DIVISION
SALES CONFIRMATION
764 ADAMS BUILDING
BARTLESVILLE, OK 74004
________________________________________________________________________________
EMPIRE GAS CORP. DATE AUGUST 29, 1991
P.O. BOX 303 PHILLIPS' SALES CONFIRMATION NO. _______________
LEBANON, MO 65536 CUSTOMER'S PURCHASE CONFIRMATION NO. _______________
ATTENTION MR. EARL NOE
THIS CONSTITUTES A CONTRACT BETWEEN OUR RESPECTIVE COMPANIES WHEREBY BOTH
PARTIES HAVE AGREED TO THE FOLLOWING TERMS AND CONDITIONS OF THIS SALE.
________________________________________________________________________________
1. PERIOD: July 1, 1991 - June 30, 1992, subject to 30 day written notice of
cancellation during any summer month (April-September)
2. PRODUCTS: HD-5 Propane
3. QUANTITY: Phillips National Accounts posting on date of lifting at Paola,
KS; Jeff City, MO; St. Louis, MO; E. St. Louis, IL; Decatur &
Kankakee, IL
4. PRICE: Per Attachment A
5. F.O.B.: Wire transfer, .5% (one-half percent) 5 days
6. TERMS: Net 10 days
7. SHIPPING INSTRUCTIONS: / / TANK CAR /X/ TANK TRUCK / / OTHER:
8. MATERIAL: /X/ STENCHED / / UNSTENCHED
9. SPECIAL INSTRUCTIONS: During periods of terminal allocation at Phillips
Pipe Line Co. terminals, allocation earnings shall
be the lesser of: (a) monthly contract volume, (b)
total summer deliveries multiplied by three (3)
and divided by six (6), (c) a proportionate share
of the terminal capacity calculated as a percent
(%) of your forecast volume to the total forecast
volume for all customers at the terminal.
PHILLIPS INVOICES SHOULD
BE MAILED TO THE FOLLOWING CUSTOMER INVOICES SHOULD PLEASE FORWARD
ADDRESS: BE MAILED TO: BILLS OF LADING TO:
- -------------------------- ------------------------ -------------------
- -------------------------- ------------------------ -------------------
- -------------------------- ------------------------ -------------------
________________________________________________________________________________
THE GENERAL PROVISIONS AND WARNINGS APPEARING ON THE REVERSE SIDE HEREOF
ARE A PART OF THIS CONTRACT. PLEASE INDICATE YOUR ACCEPTANCE OF THIS
AGREEMENT IN THE SPACE PROVIDED BELOW AND RETURN ONE COPY FOR OUR FILES.
ACCEPTED AND AGREED TO THIS 13TH PHILLIPS 66 COMPANY
-----------
DAY OF Sept, 1991
--------------------------------
BY /s/ Earl Noe BY /s/ J.R. Fouts
------------------------------------ --------------------------------
TITLE Sr. V.P. J.R. Fouts
--------------------------------
TITLE Director, National Accounts
-----------------------------
<PAGE>
EMPIRE GAS CORP.
PPCo. Pipe Line East Leg 1991 - 1992
ATTACHMENT A
(Thousands of Gallon)
Forecast: OCT NOV DEC JAN FEB MAR
Paola L 388 100 190 240 260 180 100
---- ---- ---- ---- ---- ---- ----
Jeff City L 350 1000 1200 1900 1950 1500 1000
---- ---- ---- ---- ---- ---- ----
St. Louis L 325 310 310 490 490 440 340
---- ---- ---- ---- ---- ---- ----
E. St. Louis L 330 40 90 110 120 90 30
---- ---- ---- ---- ---- ---- ----
Decatur L 240 250 250 320 340 300 250
---- ---- ---- ---- ---- ---- ----
Kankakee L 354 230 190 180 190 200 140
---- ---- ---- ---- ---- ---- ----
Forecast: APR MAY JUN JUL AUG SEP
Paola L 388 60 40 40 30 60 120
---- ---- ---- ---- ---- ---- ----
Jeff City L 350 560 370 340 240 540 800
---- ---- ---- ---- ---- ---- ----
St. Louis L 325 110 100 110 110 230 330
---- ---- ---- ---- ---- ---- ----
E. St. Louis L 330 20 20 20 20 20 60
---- ---- ---- ---- ---- ---- ----
Decatur L 240 90 80 60 60 80 200
---- ---- ---- ---- ---- ---- ----
Kankakee L 354 80 80 80 40 60 140
---- ---- ---- ---- ---- ---- ----
12 Month Total: 20,720
--------
<PAGE>
PAGE 2
10. TITLE AND RISK OF LOSS
Title to and risk of loss for propane purchased by BUYER at a Phillips Pipe
Line Company terminal shall pass from SELLER to BUYER when such propane
passes through the flange connection between such PPLC terminals' delivery
hose and a transport truck or tank car furnished or arranged for by BUYER.
11. RECORDS AND AUDIT
Each party shall maintain a true and correct set of records pertaining to
its performance of this Contract and all transactions related hereto. Each
party further agrees to retain all such records for a period of time not
less than two (2) years after completion of this Contract. Any
representative or representatives authorized by either party may audit any
and all such records of the other party at any time or times during such
performance of this Contract and during the two (2) year period after
completion of performance.
12. SEVERABILITY
If any provision hereof is found by any court of competent jurisdiction to
be illegal, invalid or unenforceable, for any reason whatsoever, such
finding shall not affect the other provisions hereof, which shall remain in
full force and effect.
13. NONWAIVER
No waiver of any breach by either party of the terms, conditions or
obligations in this Contract shall be deemed a waiver of the same or
similar terms in the future nor a waiver of subsequent breaches of the same
or similar nature.
14. ENTIRE AGREEMENT
This Contract contains the entire and only agreement between SELLER and
BUYER respecting the sale/purchase of propane, and there are no promises,
terms, conditions or obligations except those which are expressly
incorporated herein. In order to be binding upon SELLER or BUYER, any
modification or amendment of this Contract, or of any of the provisions
hereof, must be in writing and signed by both parties.
15. TERMINATION OF PRIOR CONTRACT
The Contract, as of its effective date, terminates and supersedes all prior
sales contracts by and between SELLER and BUYER covering propane, subject,
however, to all rights accruing under said prior sales contract before the
said date of termination thereof.
16. ASSIGNMENT
The terms, conditions and provisions of this Contract shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that neither party shall assign this Contract, or any
interest therein, without the other party's prior written consent.
<PAGE>
PAGE 3
17. APPLICABLE LAW
REGARDLESS OF THE PLACE OF CONTRACTING, PLACE(S) OF PERFORMANCE, OR
OTHERWISE, THIS CONTRACT, AND ALL AMENDMENTS, MODIFICATIONS, ALTERNATIONS
OR SUPPLEMENTS THERETO, IF ANY, SHALL BE GOVERNED EXCLUSIVELY BY THE LAWS
OF THE STATE OF OKLAHOMA, AS TO THE NATURE, VALIDITY AND INTERPRETATION
THEREOF.
18. WARRANTY: TAXES
SELLER hereby warrants that it has good and marketable title, free of
liens, taxes and encumbrances, to the propane delivered to BUYER hereunder.
Any tax (other than an income or franchise tax based on or measured by net
income, or a franchise tax or fee based on capital employed), license fee,
inspection fee, or other charge imposed by any governmental authority or
other agency or measured by gross receipts from propane herein sold, or on
the production, transportation, sale, use, delivery or other handling of
propane, or on any other feature of this Contract, existing at the time of
delivery hereunder, shall be added to the price then in effect hereunder
and shall be paid by BUYER to SELLER, if such tax, fee or charge is
required to be or is paid by SELLER. The failure of SELLER to add any such
tax, fee or charge to an invoice hereunder shall not relieve BUYER of
future liability therefor. BUYER shall reimburse SELLER for any interest
and/or penalty assessed by any governmental authority or other agency when
such penalty and/or interest is accrued as the result of false, incorrect
or delinquent certification made to SELLER by BUYER.
<PAGE>
[LOGO] PHILLIPS 66 COMPANY
BARTLESVILLE, OKLAHOMA 74004 918 661-6600
NGL DIVISION August 29, 1991
Empire Gas Co.
P.O. Box 303
Lebanon, Missouri 65536
Gentlemen:
Your attention is directed to that certain "NGL Division Sales Confirmation"
dated August 29, 1991, by and between yourself as Buyer and Phillips 66 Company
as Seller.
1) Paragraph 1 shall be amended by adding the following sentence at the end
thereof, to wit:
"The indemnity provision in paragraph 2 shall not apply to any damage
or injury caused by a failure of Seller to deliver propane that meets
the aforesaid specifications except as to a failure to odorize as is
more fully set forth in paragraph 2."
2) Paragraph 2 shall be amended by inserting the word "reasonable" before the
word "attorney's" in the second line of the text.
3) Paragraph 3 hereof shall be amended by adding the following language at the
end thereof, to wit:
"Anything herein to the contrary notwithstanding, it is agreed that
deliveries hereunder shall be made only at pipeline terminals into
trucks designated by Buyer. The risk of loss passes to Buyer upon
actual delivery into such trucks."
In every other respect, the terms and conditions of the aforementioned NGL
Division Sales Confirmation dated August 29, 1991, by and between yourself and
Phillips is hereby ratified and confirmed.
Please signify your agreement by signing the enclosed copy and returning it to
the undersigned.
Yours truly,
/s/ J.R. Fouts
J.R. Fouts
Director, National Accounts
ACCEPTED AND AGREED TO THIS
13th DAY OF Sept , 1991
- ---- ----------
EMPIRE GAS CORP.
BY /s/ Earl Noe
--------------------------------
<PAGE>
EXHIBIT 10.12
[logo] PHILLIPS 66 COMPANY
NGL DIVISION
SALES CONFIRMATION
764 Adams Building
-----------------------
Bartlesville, OK 74004
-----------------------
- --------------------------------------------------------------------------------
Empire Gas Corp. Date August 29, 1991
- ------------------------- ---------------
P.O. Box 303 PHILLIPS' SALES CONFIRMATION NO.
- ------------------------- ---------------
Lebanan, MO 65536 CUSTOMER'S PURCHASE CONFIRMATION NO.
- ------------------------- ---------------
ATTENTION Mr. Earl Noe
----------------
THIS CONSTITUTES A CONTRACT BETWEEN OUR RESPECTIVE COMPANIES WHEREBY BOTH
PARTIES HAVE AGREED TO THE FOLLOWING TERMS AND CONDITIONS OF THIS SALE.
- --------------------------------------------------------------------------------
1. PERIOD: July 1, 1991 - June 30, 1992, subject to 30 day written notice
of cancellation during any summer month (April-September)
2. PRODUCTS: HD-5 Propane
3. QUANTITY: Per Attachment A
4. PRICE: Phillips posted price on date of lifting
5. F.O.B.: Memphis, TN; W. Memphis, AR; Denver, CO; LaJunta, CO; Sweeny,
TX
6. TERMS: 1% 10 Days
7. SHIPPING INSTRUCTIONS: / / TANK CAR / / TANK TRUCK / / OTHER
8. MATERIAL: / / STENCHED / / UNSTENCHED
Customer #'s: Memphis, TN 223541 Denver, CO 223826
W.Memphis, AR 223687 LaJunta, CO 223827
9. SPECIAL INSTRUCTIONS: Sweeny, TX 223775
Subject to Phillips allocation procedure as
applicable to all other customers at locations
specified above.
PHILLIPS INVOICES SHOULD
BE MAILED TO THE CUSTOMER INVOICES PLEASE FORWARD BILLS
FOLLOWING ADDRESS: SHOULD BE MAILED TO: OF LADING TO:
__________________________ __________________________ __________________________
__________________________ __________________________ __________________________
__________________________ __________________________ __________________________
________________________________________________________________________________
THE GENERAL PROVISIONS AND WARNINGS APPEARING ON THE REVERSE SIDE HEREOF ARE A
PART OF THIS CONTRACT. PLEASE INDICATE YOUR ACCEPTANCE OF THIS AGREEMENT IN THE
SPACE PROVIDED BELOW AND RETURN ONE COPY FOR OUR FILES.
ACCEPTED AND AGREED TO THIS 13th PHILLIPS 66 COMPANY
---------------
DAY OF Sept. , 1991
------------------------------------
BY /s/ Earl Noe BY /s/ J.R. Fouts
---------------------------------------- -------------------------------
J. R. Fouts
TITLE Sr. V.P. TITLE Director, National Accounts
------------------------------------- ----------------------------
<PAGE>
PAGE 2
10. TITLE AND RISK OF LOSS
Title to and risk of loss for propane purchased by BUYER at a Phillips Pipe
Line Company terminal shall pass from SELLER to BUYER when such propane
passes through the flange connection between such PPLC terminals' delivery
hose and a transport truck or tank car furnished or arranged for by BUYER.
11. RECORDS AND AUDIT
Each party shall maintain a true and correct set of records pertaining to
its performance of this Contract and all transactions related hereto. Each
party further agrees to retain all such records for a period of time not
less than two (2) years after completion of this Contract. Any
representative or representatives authorized by either party may audit any
and all such records of the other party at any time or times during such
performance of this Contract and during the two (2) year period after
completion of performance.
12. SEVERABILITY
If any provision hereof is found by any court of competent jurisdiction to
be illegal, invalid or unenforceable, for any reason whatsoever, such
finding shall not affect the other provisions hereof, which shall remain in
full force and effect.
13. NONWAIVER
No waiver of any breach by either party of the terms, conditions or
obligations in this Contract shall be deemed a waiver of the same or
similar terms in the future nor a waiver of subsequent breaches of the same
or similar nature.
14. ENTIRE AGREEMENT
This Contract contains the entire and only agreement between SELLER and
BUYER respecting the sale/purchase of propane, and there are no promises,
terms, conditions or obligations except those which are expressly
incorporated herein. In order to be binding upon SELLER or BUYER, any
modification or amendment of this Contract, or of any of the provisions
hereof, must be in writing signed by both parties.
15. TERMINATION OF PRIOR CONTRACT
The Contract, as of its effective date, terminates and supersedes all prior
sales contracts by and between SELLER and BUYER covering propane, subject,
however, to all rights accruing under said prior sales contract before the
said date of termination thereof.
16. ASSIGNMENT
The terms, conditions and provisions of this Contract shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that neither party shall assign this Contract, or any
interest therein, without the other party's prior written consent.
<PAGE>
PAGE 3
17. APPLICABLE LAW
REGARDLESS OF THE PLACE OF CONTRACTING, PLACE(S) OF PERFORMANCE, OR
OTHERWISE, THIS CONTRACT, AND ALL AMENDMENTS, MODIFICATIONS, ALTERNATIONS
OR SUPPLEMENTS THERETO, IF ANY, SHALL BE GOVERNED EXCLUSIVELY BY THE LAWS
OF THE STATE OF OKLAHOMA, AS TO THE NATURE, VALIDITY AND INTERPRETATION
THEREOF.
18. WARRANTY: TAXES
SELLER hereby warrants that it has good and marketable title, free of
liens, taxes and encumbrances, to the propane delivered to BUYER hereunder.
Any tax (other than an income or franchise tax based on or measured by net
income, or a franchise tax or fee based on capital employed), license fee,
inspection fee, or other charge imposed by any governmental authority or
other agency or measured by gross receipts from propane herein sold, or on
the production, transportation, sale, use, delivery or other handling of
propane, or on any other feature of this Contract, existing at the time of
delivery hereunder, shall be added to the price then in effect hereunder
and shall be paid by BUYER to SELLER, if such tax, fee or charge is
required to be or is paid by SELLER. The failure of SELLER to add any such
tax, fee or charge to an invoice hereunder shall not relieve BUYER of
future liability therefor. BUYER shall reimburse SELLER for any interest
and/or penalty assessed by any governmental authority or other agency when
such penalty and/or interest is accrued as the result of false, incorrect
or delinquent certification made to SELLER by BUYER.
<PAGE>
ATTACHMENT A
(Thousands of Gallon)
<TABLE>
<CAPTION>
Forecast: OCT NOV DEC JAN FEB MAR
<S> <C> <C> <C> <C> <C> <C> <C>
LaJunta L 362 200 260 400 400 300 30
--- --- --- --- --- --- ---
Denver L 322 180 260 620 620 450 220
--- --- --- --- --- --- ---
Memphis L 813 170 190 260 260 270 200
--- --- --- --- --- --- ---
<CAPTION>
Forecast:
APR MAY JUN JUL AUG SEPT
<S> <C> <C> <C> <C> <C> <C> <C>
LaJunta L 362 50 50 50 50 90 240
--- --- --- --- --- --- ---
Denver L 322 100 120 120 100 150 200
--- --- --- --- --- --- ---
Memphis L 813 90 90 40 40 80 130
--- --- --- --- --- --- ---
12 Month Total: 7,080
-----
</TABLE>
<PAGE>
[logo] PHILLIPS 66 COMPANY
BARTLESVILLE, OKLAHOMA 74004 918 661-6600
NGL DIVISION August 29, 1991
Empire Gas Co.
P. O. Box 303
Lebanon, Missouri 65536
Gentlemen:
Your attention is directed to that certain "NGL Division Sales Confirmation"
dated August 29, 1991, by and between yourself as Buyer and Phillips 66 Company
as Seller.
1) Paragraph 1 shall be amended by adding the following sentence at the end
thereof, to wit:
"The indemnity provision in paragraph 2 shall not apply to any damage
or injury caused by a failure of Seller to deliver propane that meets
the aforesaid specifications except as to a failure to odorize as is
more fully set forth in paragraph 2."
2) Paragraph 2 shall be amended by inserting the word "reasonable" before the
word "attorney's" in the second line of the text.
3) Paragraph 3 hereof shall be amended by adding the following language at the
end thereof, to wit:
"Anything herein to the contrary notwithstanding, it is agreed that
deliveries hereunder shall be made only at pipeline terminals into
trucks designated by Buyer. The risk of loss passes to Buyer upon
actual delivery into such trucks."
In every other respect, the terms and conditions of the aforementioned NGL
Division Sales Confirmation dated August 29, 1991, by and between yourself and
Phillips is hereby ratified and confirmed.
Please signify your agreement by signing the enclosed copy and returning it to
the undersigned.
Yours truly,
/s/ J. R. Fouts
J. R. Fouts
Director, National Accounts
ACCEPTED AND AGREED TO THIS
13TH day of Sept, 1991
EMPIRE GAS CORP.
BY /s/ Earl Noe
--------------------------
<PAGE>
[logo] PHILLIPS 66 COMPANY
A DIVISION OF PHILLIPS PETROLEUM COMPANY
BARTLESVILLE, OKLAHOMA 74004 918 661-6600
NATURAL GAS LIQUIDS October 13, 1992
Earl Noe
Empire Gas Corp.
P.O. Box 303
Lebanon, MO 65536
Dear Earl:
This letter shall serve to amend our letter agreement dated July 2, 1992, and
include Borger and Sweeny as sales locations with all of the terms and
conditions applicable to the letter agreement dated July 2, 1992.
Please indicate your acceptance of this amendment and return one copy for our
files.
Accepted and agreed to
This 15th day of October 1992
By /s/ Earl Noe By /s/ J. R. Fouts
--------------------------------- --------------------------------
Title Sr. V.P. Title Wholesale Sales Director
------------------------------ -------------------------------
JRF:sks
<PAGE>
ATTACHMENT A
1992 - 1993
EMPIRE GAS CORP.
<TABLE>
<CAPTION>
Sales Forecast: OCT NOV DEC JAN FEB MAR
<S> <C> <C> <C> <C> <C> <C> <C>
Borger L 310 18 27 45 54 36 18
--- --- --- --- --- --- ---
Sweeny L 234 27 18 45 60 36 27
--- --- --- --- --- --- ---
L____ ____ ____ ____ ____ ____ ____
L____ ____ ____ ____ ____ ____ ____
L____ ____ ____ ____ ____ ____ ____
L____ ____ ____ ____ ____ ____ ____
Subtotal: ____ ____ ____ ____ ____ ____
<CAPTION>
Sales Forecast: APR MAY JUN JUL AUG SEP
<S> <C> <C> <C> <C> <C> <C> <C>
Borger L 310 18 9 9 9 9 9
--- --- --- --- --- --- ---
Sweeny L 234 18 9 9 18 18 27
--- --- --- --- --- --- ---
L____ ____ ____ ____ ____ ____ ____
L____ ____ ____ ____ ____ ____ ____
L____ ____ ____ ____ ____ ____ ____
L____ ____ ____ ____ ____ ____ ____
Subtotal: ____ ____ ____ ____ ____ ____
12 Month Total: _______
</TABLE>
<PAGE>
EXHIBIT 10.13
CONOCO
DEALER SALE CONTRACT Conoco Inc.
Gas Products Division
Humber Building - 1021
P.O. Box 2197
Houston, TX 77252 LP-GAS
(713) 293-3815
We hereby confirm SALE
to:
Empire Gas Corporation DATE: November 4, 1991
P.O. Box 303 CONOCO No.: 30-9028517-0000
Lebanon, MO 65536 SYSTEM CODE: 50
Attention: Earl Noe ACCOUNT CODE: 509
Per conversations between Earl Noe and our Richard Fitzgerald
PRODUCT: Propane (Stenched) meeting GPA specifications
PRICE: Conoco Established Price On Date Of Delivery
TERMS OF PAYMENT: 1% 10 Days/Net 11 Days From Date of Invoice
F.O.B. ORIGIN POINT DESTINATION
- ----------------------------------------- -----------------------------------
Conoco/Denver Refinery - Commerce City, c 30-9028517-0000 Various, Denver
FREIGHT: Origin Collect
METHOD OF TRANSPORTATION: Customer Truck and/or Common Carrier
TERM OF AGREEMENT: The primary term of this agreement shall be for a period of
one year commencing November 4, 1991, and shall be automatically renewed from
year to year thereafter unless either buyer or seller otherwise notifies the
other party in writing not less than 90 days before the expiration of the
primary term or the anniversary date of any renewal.
REMARKS: QUANTITY: Product will be sold on an as-available basis.
Conoco Inc. invoices should be Customer invoices, contracts, and
mailed to the following address: correspondence to be mailed to:
Conoco Inc.
Empire Gas Corporation Gas Products Division
P.O. Box 303 Humber Building - 1021
Lebanon, MO 65536 P.O. Box 2197
Houston, TX 77252
("Buyer") ("Seller")
Subject to terms and conditions on
reverse side
Accepted June 9 , 1992 By /s/ J. H. Thomas
- ------------------------------------ -------------------------------------
Empire Gas Corporation Ben Boldt
- ------------------------------------ Manager - Marketing
By /s/ Earl Noe
- ------------------------------------
Please sign and return one copy and
retain one copy for your files.
<PAGE>
EXHIBIT 10.14
DEALER SALE CONTRACT Conoco Inc. CONOCO
Gas Products Division
Humber Building - 1021
P.O. Box 2197 LP-gas
Houston, TX 77252
(713) 293-3815
We hereby confirm SALE
to:
Empire Gas Corporation DATE: January 21, 1992
P.O. Box 303 CONOCO NO.: 30-9026859-0000-A01
Lebanon, MO 65536 SYSTEM CODE: 35
Attention: Earl Noe ACCOUNT CODE: 586
Per conversations between Earl Noe and our Lewis Bradshaw
PRODUCT: Propane (Stenched) meeting GPA specifications
PRICE: Conoco Established Price On Date Of Delivery
TERMS OF PAYMENT: 1% 10 Days/Net 11 Days From Date of Invoice
F.O.B. ORIGIN POINT DESTINATION
- --------------------------------------- --------------------------------------
Texas Eastern Pipeline - Coshocton, OH 30-9013694-0000 Various, Illinois
Texas Eastern Pipeline - Greensburg, PA 30-9026840-0000 Various, Indiana
Texas Eastern Pipeline - Todhunter, OH 30-9026859-0000 Various, Ohio
Texas Eastern Pipeline - Princeton, IN 30-9027260-0000 Various, Pennsylvania
FREIGHT: Origin Collect
METHOD OF TRANSPORTATION: Common Carrier and/or Customer Truck
TERM OF AGREEMENT: January 21, 1992 through June 30, 1993 and year to year
thereafter.
QUANTITY: Subject to the terms and conditions on the reverse hereof, seller
agrees to sell and deliver, and buyer agrees to purchase and receive the
following volumes of product: (000) Gallons
MIN MAX MIN MAX MIN MAX MIN MAX
---- ---- ---- ---- ---- ---- ---- ----
JAN 1016 1524 APR 248 372 JUL 112 168 OCT 856 1284
FEB 776 1164 MAY 192 288 AUG 240 360 NOV 832 1248
MAR 512 768 JUN 152 228 SEP 504 756 DEC 960 1440
---- ---- ---- ---- ---- ---- ---- ----
Q1 2304 3456 Q2 592 888 Q3 856 1284 Q4 2648 3972
Year Total 6400 9600
REMARKS: CONVERSION OPTION: Empire Gas reserves the right to convert up to 5
million gallons of the above stated volumes to "5 cents down - forward
contract volumes". No more than 25,000 barrels per day will be
converted without Conoco's prior approval. Upon an Empire conversion
request, Conoco will
(Continued on attached page)
Conoco Inc. invoices should be Customer invoices, contracts, and
mailed to the following address: correspondence to be mailed to:
Conoco Inc.
Empire Gas Corporation Gas Products Division
P.O. Box 303 Humber Building - 1021
Lebanon, MO 65536 P.O. Box 2197
Houston, TX 77252
("Buyer") ("Seller")
Subject to terms and conditions on reverse side
Accepted June 9, 1992 By /s/ Ben Boldt
----------------------------- ------------------------------------
Empire Gas Corporation Ben Boldt
- --------------------------------------
Manager - Marketing
By /s/ Earl Noe
------------------------------------
Please sign and return one copy and retain one copy for your files.
<PAGE>
TERMS AND CONDITIONS DEALER SALE CONTRACT
1. SPECIFICATIONS. All Products delivered hereunder will conform to applicable
NGPA and individual pipeline specifications in effect at time of delivery
unless mutually agreed otherwise and specified elsewhere in this Agreement.
Seller guarantees specifications at delivery point.
2. MEASUREMENT. Quantities of Products delivered will be determined in tank
cars or trucks at delivery point by means of slip tube, rotary gauge, or
other mutually acceptable gauging method or device. Volumes of LP-gas
Products will be corrected for temperature to 80DEG.F using "Standard
Factors for Volume Correction and Specific Gravity Conversion of Liquified
Petroleum Gases and Volatile Gasolines," NGPA Publication No. 2142-57 or
latest revision thereof. Volumes of Natural Gasoline will be corrected for
temperatures to 60DEG.F, using ASTM-IP Petroleum Measurement Tables,
American Addition, ASTM designation D 1250, abridged Table No. 7. A barrel
will consist of 42 U.S. gallons, and a gallon will contain 231 cubic
inches.
3. DELIVERIES. Seller's tank cars must be unloaded and returned to railroad
within the 48-hour period beginning at 7 a.m. on the day following notice
of arrival at destination. Demurrage charges at destination will be borne
by Buyer. Seller's tank cars and transport trucks will not be diverted
except with written consent from Seller. If delivery is made by Seller, in
Seller-owned equipment, there will be added to the invoice a separate
freight charge equal to the lowest published applicable transportation
charge, as determined by Seller, from Supplier's terminal to Buyer's
destination(s).
4. TITLE. Seller represents that it has title to the Products delivered and
has the right to deliver same. Title to Products delivered will pass to
Buyer upon completion of loading the same into tank trucks and/or tank cars
furnished by Buyer, upon delivery of Products in a tank car to carrier,
upon delivery thereof in a tank truck or tank car furnished by Seller
alongside Buyer's storage facilities at destination, or as stipulated on
the face hereof, as the case may be. Thereafter, Buyer will bear all risk
of and be solely liable for any loss or damage caused by or attributable to
said Products, or to their transportation, care, handling, resale, or use.
Title to Products delivered via pipeline will pass to Buyer at the FOB
point.
5. TAXES. In addition to the delivered price, Buyer will pay all applicable
federal, state, and local sales or other excise taxes required to be paid
or collected by Seller by reason of the manufacture, sale, or delivery of
Products. Buyer agrees to furnish Seller with satisfactory tax exemption
certificate where exemption from applicable taxes is claimed.
6. PAYMENT REQUIREMENTS. Payment for all Product delivered under this
Agreement will be paid to Seller at the place of payment designated on the
invoice. Invoices not paid pursuant to the "Terms of Payment section on the
face of this Agreement will be considered delinquent. Seller may charge
interest at the lesser of the maximum legal interest or 18 percent per
annum on all unpaid amounts on any delinquent accounts. Cash discounts, if
any, will not apply to freight charges prepaid by Seller.
7. CREDIT. If Buyer's credit becomes impaired or unsatisfactory to Seller or
if Buyer fails to make any payment due to Seller or if Buyer defaults in
performance of any of Buyer's obligations hereunder, Seller may, at its
discretion and without prejudice to its other legal remedies, suspend
deliveries to Buyer, or cancel this Agreement or ship hereunder only on a
COD or other basis satisfactory to Seller. In event of suspension of
deliveries, Seller reserves the right to adjust scheduled volumes.
8. MALODORANT. Unless otherwise expressly directed in writing or on the face
hereof, LPG Products delivered will contain malodorant at the rate of 1 1/2
pounds of ethyl mercaptan, or its equivalent, per 10,000 gallons; the kind
and quantity of malodorant added will be indicated on the bill of lading or
the invoice relating to each delivery.
9. CLAIMS. Seller will have no liability to Buyer for any defect in quality or
shortage in quantity of Products sold and delivered hereunder, unless Buyer
gives Seller notice of Buyer's claim by telegraph and Seller is given an
opportunity to inspect the Products in question prior to unloading or, in
case of any latent defect in quality, Buyer gives Seller notice thereof
within 48 hours after Buyer's discovery of such defect. Seller will have no
liability for any defect in any Product which has been commingled in any
way with a similar Product obtained elsewhere or with a different Product,
regardless of where obtained. Every notice of claim will set forth fully
the facts upon which the claim is based. It is agreed that any claim of any
kind by Buyer based upon or arising out of this Agreement or otherwise will
be barred unless asserted by Buyer by the commencement of an action within
12 months after the delivery of the Product or other event, action, or
inaction to which such claim relates, provided, however, Seller will not be
liable for prospective profits or special, indirect, or consequential
damages. This provision will survive any termination of this Agreement,
however arising.
10. PURCHASE REQUIREMENT. If maximum, minimum volumes are specified on the face
of this Agreement, then Buyer will use its best effort to purchase and
accept delivery of the scheduled volumes indicated on the face of the
Agreement each month as scheduled. Buyer will not exceed the specified
maximum volumes during any month without prior consent of Seller. Buyer may
order and take delivery of volumes less than the scheduled minimum volumes
during any month, provided, however, that Buyer must purchase and accept
delivery of the minimum cumulative volumes for each calendar quarter.
Should Buyer fail to purchase and accept delivery of the minimum cumulative
volumes for any calendar quarter, Seller may at its option cancel this
Agreement, except as provided for in paragraph 13.
11. TRADEMARK AND TRADE NAME. If Conoco is the Seller hereunder, Conoco hereby
grants Buyer, during the term of this Agreement, the right and license to
use and display, in a manner specified by Conoco, and at Buyer's expense,
Conoco's trademarks, trade name, advertising, and other indicia of Conoco
in the advertisement, sale, or distribution of the Product, provided,
however, that the right and license hereby granted will terminate when this
Agreement ceases to be in force and effect or may be cancelled at any time
upon 30 days' prior written notice from Conoco to Buyer. Upon the effective
date of such notice or upon the termination of such right and license,
Buyer will forthwith remove such trademark, trade name, advertising, and
the indicia from Buyer's Delivery Points, other places of business, and
equipment. At no time will Buyer apply Conoco's trademark, trade name,
advertising, or other indicia to any Product other than Products sold and
purchased under this Agreement.
12. SET-OFF. In the event Buyer fails to make timely payment of any monies due
and owing to Seller, Seller may offset any deliveries or payments due under
this or any other agreement between the parties.
13. FORCE MAJEURE. Neither party will be liable to the other for any delay or
failure in performance under this Agreement other than the obligation to
make payments in the event and to the extent that such delay or failure in
performance is caused or prevent by any cause reasonably beyond its
control, including, but not limited to, acts of God, perils of navigation,
public enemies, war, riots, insurrection, acts or orders of governmental
authorities, fire, flood, explosion, accident, strike, or other difference
with workmen, embargo, inability to obtain fuel, power, labor,
transportation facilities, or raw materials upon which their performance of
this Agreement is dependent, accident, breakage of machinery or apparatus,
or national defense requirements, provided; however, that performance will
be resumed with a reasonable time after such cause has been removed and
provided, further, that neither party will be required to settle any labor
dispute against its will. Any deliveries suspended as a result of this
paragraph 13 will be cancelled without prejudice or penalty, but this
Agreement will otherwise remain unaffected. If, because of any of the
foregoing circumstances, Seller is unable to supply its requirements for
and its contractual obligations for one or more of the Products, then
Seller will allocate the available supply of such Product among its
contract customers and itself on an equitable pro rata basis. In the event
Seller, during a period of allocation pursuant to the provisions of this
paragraph 13, delivers to Buyer a quantity of product less than the minimum
quantity Buyer is required to purchase during such period as provided on
the face of this Agreement, then neither Seller nor Buyer will have any
obligation to sell or purchase the difference between the amount so
delivered and such minimum quantity during such period.
14. MISCELLANEOUS. (a) Except as provided for in paragraph 13, should either
party fail to comply with any of the terms and conditions of this
Agreement, the other party, by notice in writing, may request the
noncomplying party to correct such noncompliance within 10 days from the
date of such notice. If such noncompliance is not corrected before the
expiration of said 10-day period, the other party, at its option, may
terminate this Agreement forthwith, but failure of either party to notify
the other party of such noncompliance will not be regarded, in the event of
any future similar noncompliance, as a waiver of the right to terminate
this Agreement in accordance with the foregoing provision.
(b) This Agreement sets forth the entire agreement between parties
respecting the sale and purchase of the Products, but neither it nor any
amendment will be binding upon either party until it is executed by both
parties.
(c) This Agreement will inure to the benefit of and be binding upon the
parties, their heirs, personal representatives, successors, and assigns,
but no assignment of all or any portion of this Agreement by Buyer will be
valid without the written consent of Seller.
(d) This Agreement is subject to and may be overridden by all applicable
federal, state, and local laws, rules, regulations, and orders. Invoices
must bear a certification that these Products were produced and handled in
compliance with applicable requirements of the Fair Labor Standards Act, as
amended, and the regulations and orders of the U.S. Labor Department issued
pursuant thereto.
(e) Unless otherwise provided for herein, all notices will be in writing
and considered given when deposited in the United States mail, postage
prepaid, addressed to the appropriate party at the address shown above.
(f) Seller will indemnify, defend, and hold Buyer harmless from the acts or
omissions of Seller, and Buyer will indemnify, defend, and hold Seller
harmless from the acts or omissions of Buyer.
15. AUDIT. No commissions or fees will be paid nor any payments or rebates be
made to any employee or officer of Conoco, nor will anyone favor any
employee or officer of Conoco with gifts or entertainment of significant
cost or value, or enter into any business arrangements with any employees
or officers of Conoco other than as representatives of Conoco.
The parties hereto will maintain a true and correct set of records
pertaining to this Agreement and all transactions related thereto and will
retain such records for a period of 2 years after termination of this
Agreement. Prior to the expiration of such 2-year period, either party will
have access to all of such records and information, including all books,
papers, documents, agreements, and any other information that may have any
bearing on or pertain to this Agreement or any business conducted between
the parties, and either party will have the right to audit all such records
and information at reasonable times and places during normal working hours.
The parties hereto will also have the right to obtain statements from any
personnel of the other party in order to conduct or complete such audit.
The other party will cooperate fully in any such audit. All audits will be
conducted in accordance with generally accepted auditing standards.
16. WARNING. The Material Safety Data Sheets and labels for Products delivered
hereunder contain formation regarding health risks and recommendations for
the safe use and handling of such Products. Buyer acknowledges and
represents that it has read and understands the Material Safety Data
Sheets, the labels, or warnings regarding such Products. Buyer will
exercise the degree of care necessary to protect all persons and property
from all hazards disclosed in such Material Safety Data Sheets, labels, or
warnings. Buyers obligations in this regard will include but not be limited
to (1) warning the employees of Buyer and its affiliates who may become
exposed to such Products or their hazards; (2) taking measures to assure
that such employees have appropriate safety equipment which is adequately
maintained and properly used and that all precautions contained in Material
Safety Data Sheets, labels, and other warnings are followed; and (3)
warning third parties, including but not limited to Buyer's customers, who
may use or be exposed to such Products of their hazards, and requiring that
the precautions contained in such Material Safety Data Sheets, labels, and
other warnings are followed. If Buyer does not so protect all persons and
property from all hazards disclosed in such Material Safety Data Sheets,
labels, or warnings, Buyer will indemnify and hold Seller harmless from any
claims, causes of action, liabilities, losses, or expenses on account of
injury or death of persons and/or damage to property arising directly or
indirectly out of Buyer's failure to fulfill its obligations under this
paragraph 16.
<PAGE>
CONTRACT ATTACHMENT 30-9026859-0000-A01 Page 2
January 21, 1992
offer a quote based on current market conditions and the following
formulae:
Conversion Dates Mt. Belvieu Current spot plus
Princeton's Winter T&T plus 1.85
CPG plus
January 21 - April 30, 1992 1.25 CPG
May 1 - July 31, 1992 1.00 CPG
August 1 - October 31, 1992 0.75 CPG
Additionally, deliveries to Todhunter, Coshocton and Greensburg will also
be billed the incremental winter tariff for delivery beyond Princeton.
Empire reserves the right to determine which terminals the converted
volumes will be pulled.
No vintaging of conversion volumes will occur. Instead, a new weighted
average conversion price will be calculated as additional volumes are
converted.
The down payment of 5.00 CPG will be due within ten days from date of
invoice. The balance will be invoiced in accordance with the above
schedule as the product is delivered to Empire, but in no event later than
March 31, 1993. Balances will be due net, upon receipt of invoice.
This section shall be updated in 1993, prior to converting volumes for the
1993/1994 heating season.
<PAGE>
EXHIBIT 10.15
Dealer Sale Contract Conoco Inc. CONOCO
Gas Products Division
Humber Building - 1021
P.O. Box 2197 LP-gas
Houston, TX 77252
(713) 293-3815
We hereby confirm SALE
to:
Empire Gas Corporation DATE: January 24, 1992
P.O. Box 303 CONOCO NO.: 30-9009636-0000-A09
Lebanon, MO 65536 SYSTEM CODE: 15
Attention: Earl Noe ACCOUNT CODE: 407
Per conversations between Earl Noe and our Lewis Bradshaw
PRODUCT: Propane (Stenched) meeting GPA specifications
PRICE: See Remarks
TERMS OF PAYMENT: 1% 10 Days/Net 11 Days From Date of Invoice
F.O.B. ORIGIN POINT DESTINATION
- ---------------------------------------- ----------------------------------
Cherokee Pipeline - Wood River, IL 30-9009636-0000 Missouri, Various
Cherokee Pipeline - Belle, MO 30-9013694-0000 Illinois, Various
Cherokee Pipeline - Mt. Vernon, MO
Conoco/Medford Plant - Medford, OK
Conoco/Ponca City Refinery - Ponca City,
FREIGHT: Origin Collect
METHOD OF TRANSPORTATION: Common Carrier and/or Customer Truck
TERM OF AGREEMENT: January 21, 1992 through June 30, 1993 and year to year
thereafter.
QUANTITY: Subject to the terms and conditions on the reverse hereof, seller
agrees to sell and deliver, and buyer agrees to purchase and receive the
following volumes of product: (000) Gallons
MIN MAX MIN MAX MIN MAX MIN MAX
---- ---- ---- ---- ---- ---- ---- ----
JAN 2800 4200 APR 576 864 JUL 280 420 OCT 1480 2220
FEB 2224 3336 MAY 456 684 AUG 872 1308 NOV 1960 2940
MAR 1720 2580 JUN 352 528 SEP 1440 2160 DEC 2640 3960
---- ---- ---- ---- ---- ---- ---- ----
Q1 6744 10116 Q2 1384 2076 Q3 2592 3888 Q4 6080 9120
Year Total 16800 25200
REMARKS: CONVERSION OPTION: Empire Gas reserves the right to convert up to 50%
of the above stated volumes to "5 cents down - forward contract
volumes". No more than 25,000 barrels per day will be converted
without Conoco's prior
(Continued on attached page)
Conoco Inc. invoices should be Customer invoices, contracts, and
mailed to the following address: correspondence to be mailed to:
Conoco Inc.
Empire Gas Corporation Gas Products Division
P.O. Box 303 Humber Building - 1021
Lebanon, MO 65536 P.O. Box 2197
Houston, TX 77252
("Buyer") ("Seller")
Subject to terms and conditions on reverse side
Accepted June 9, 1992 By /s/ Ben Bolt
------------------------ --------------------------------
Empire Gas Corporation Ben Boldt
- --------------------------------- Manager - Marketing
By /s/ Earl Noe
------------------------------
Please sign and return one copy and retain one copy for your files.
<PAGE>
CONTRACT ATTACHMENT 30-9009636-0000-A09 Page 2
January 24, 1992
approval. Upon an Empire conversion request, Conoco will offer a
quote based on current market conditions and the following formulae:
Mt. Vernon
Conversion Dates Conway current spot plus
January 21 - April 30, 1992 6.00 CPG
May 1 - July 31, 1992 5.75 CPG
August 1 - October 31, 1992 5.50 CPG
Belle and Wood River will be billed on the above schedule plus 0.50
CPG.
Empire reserves the right to pull up to 45% of the converted volumes
at the Belle terminal. Empire may pull greater than 45% of the
converted volumes at the Belle terminal upon written authorization
from Conoco Propane Marketing. No limitations apply to the proportion
of converted volumes which Empire may pull at Mt. Vernon and Wood
River.
No vintaging of conversion volumes will occur. Instead, a new
weighted average conversion price will be calculated as additional
volumes are converted.
The down payment of 5.00 CPG will be due net within ten days from date
of invoice. The balance will be invoiced in accordance with the above
schedule as the product is delivered to Empire, but in no event later
than March 31, 1993. The balance due invoices will be subject to
1.00% 10 days/Net 11 days from date of invoice.
This section shall be updated in 1993, prior to converting volumes for
the 1993/1994 heating season.
PRICE: Contract amended effective 4/1/91 until the end of the
contract term -- price shall be Conoco's established price on the
date of delivery less 0.700 cents per gallon. This reduction shall
only apply to purchases on Conoco's established posting.
<PAGE>
EXHIBIT 10.16
[LOGO] WARREN PETROLEUM COMPANY PRODUCT SALES AGREEMENT
A Division of Chevron U.S.A. Inc.
PREPARE IN ORIGINAL AND FOUR COPIES
- --------------------------------------------------------------------------------
Purchaser | Confirming Arrangements Made With
EMPIRE GAS CORPORATION | JOYCE KINNET/EARL NOE
- --------------------------------------------------------------------------------
Address | Arrangements Made By | Date
P. O. BOX 303 | D. W. CAMPION | Nov. 20, 1986
- --------------------------------------------------------------------------------
Lebanon, MO 65536 | Warren No. | Purchaser No.
| No. S40844 |
- --------------------------------------------------------------------------------
1. Warren will sell the following during period of: DECEMBER 1, 1986 AND
THEREAFTER (SEE
ATTACHMENT NO. 1)
- --------------------------------------------------------------------------------
Product | Quantity | Delivery Point | Product Sale
| | | Price
- --------------------------------------------------------------------------------
Description | Approx. Bbls.|Measrmnt.| Location | Methods | Cents/Gallon
|(net at 60 |(see 2) | | (see 3) |
| degree F) | | | |
- --------------------------------------------------------------------------------
HD-5 PROPANE| (SEE AT- | A | Origin | A |(SEE ATTACH-
| TACHMENT | | MT. VERNON, IN | | MENT NO. 1)
| NO. 1 | | | |
- -----------------------------------------------------------------|
| | | Destination | |
| | | | |
- --------------------------------------------------------------------------------
2. Measurement (See General Provisions, Item 2) Basis: V - Volumetric per API
/X/ A. Trucks Tables 23 and 24 or
/ / B. Tank Cars 23A or 24A or 5A
/ / C. Pipeline and 6A
/ / D. Ship or Barge M - Mass per GPA 8182
/ / E. Other 1 - Origin
----------------------------------------- 2 - Destination
-----------------------------------------
- --------------------------------------------------------------------------------
3. Methods
/X/ A. To Truck
/ / B. To Pipeline
/ / C. To Tank Car
/ / D. To Barge
/ / E. To Ship
/ / F. Other
-----------------------------------------
-----------------------------------------
- --------------------------------------------------------------------------------
4. Specifications
HD-5 PROPANE
- --------------------------------------------------------------------------------
5. Product: /X/ Stenched / / Unstenched
- --------------------------------------------------------------------------------
6. Terms (SEE ATTACHMENT NO. 1)
/ / Expires on __________________________ /s/
- --------------------------------------------------------------------------------
7. Warren sends statements, invoices and shipping documentation to
(SAME AS ABOVE)
- --------------------------------------------------------------------------------
8. Terms of Payment
NET 10 DAYS FROM DATE OF INVOICE.
- --------------------------------------------------------------------------------
9. Special Provisions
THE TERMS AND CONDITIONS SET FORTH IN ATTACHMENT A AND ATTACHMENT
NO. 1 ARE INCORPORATED HEREIN AND MADE A PART OF THIS AGREEMENT.
- --------------------------------------------------------------------------------
10. In addition to the above terms and conditions, the General Provisions of
this Product Sales Agreement as set forth on the reverse side hereof are
incorporated herein by reference and made a part of this Agreement.
- --------------------------------------------------------------------------------
If you are in agreement with the foregoing terms and conditions, please so
indicate by signing below and returning one copy of the Agreement to Warren.
- --------------------------------------------------------------------------------
Accepted and Agreed to | Warren Petroleum Company
EMPIRE GAS CORPORATION | A Division of Chevron U.S.A. Inc.
- -----------------------------------|--------------------------------------------
By /s/ Earl Noe | By /s/
- -----------------------------------|--------------------------------------------
| Mgr., Domestic & Industrial Sales
- --------------------------------------------------------------------------------
Distribution: Original - Buyer for file WP 82021 (CD 9 85)
Pink - Buyer for acceptance and Printed in U.S.A.
return to Warren's Tulsa Office
Yellow - Distribution Section, Tulsa
Green - Marketing Department, Tulsa
White - Retained by Originator
<PAGE>
PRODUCT SALES AGREEMENT
GENERAL PROVISIONS
1. DELIVERIES
A. When delivery is point of origin, delivery shall be deemed to have
been completed:
1. To ships or barges when the product has passed the vessel's
loading flange;
2. To tank trucks when the product has actually been delivered into
the truck;
3. To tank cars when the carrier accepts the same for shipment;
4. To pipelines upon metering of the product.
B. When delivery is point of destination, delivery shall be deemed to
have been completed:
1. From ships or barges when the product has passed the vessel's
discharge flange;
2. From tank trucks when truck has been placed at buyer's facilities
for unloading;
3. From tank cars when carrier delivers same at the destination;
4. From pipeline upon metering of the product.
C. When by an in-line product transfer, delivery shall be deemed to have
been completed upon execution of the order by the pipeline carrier.
D. If any common or contract carrier trucks are used, Warren shall not be
liable to Buyer for quantity or quality of product. After completion
of loading at the point of origin, Buyer agrees that the handling,
care or use of product delivered as herein provided shall thereafter
be at Buyer's sole risk and expense.
2. MEASUREMENT--Measurement shall be done in the manner customarily utilized
at the point of delivery so long as it is in accordance with one of the
following alternatives:
A. On all deliveries into/out of tank cars, the quantity shall be
determined by official tank car capacity tables, meters with no vapor
return, or by weighing, in accordance with GPA Publication 8162 and
all revisions thereof.
B. On all deliveries into/out of transport and tank truck equipment,
quantities shall be determined by meter with no vapor return, slip
tube, rotary gauging device or weighing, in accordance with GPA
Publication 8162 and all revisions thereof.
C. On all deliveries into/out of pipeline, quantity shall be determined
by turbine or positive displacement pipeline meter in accordance with
API Manual of Petroleum Measurement Standards and all revisions
thereof.
D. On all deliveries to/from ships or barges, shore tank or turbine or
positive displacement meter measurements shall determine quantity,
unless otherwise agreed upon. Use of meters shall not allow vapor
return.
E. All quantities shall be corrected to 60 degrees Fahrenheit and
equilibrium vapor pressure at 60 degrees Fahrenheit.
F. Volume and compressibility correction factors shall be determined from
referenced API tables or computer programs used to generate these
tables.
3. PASSAGE OF TITLE AND WARRANTY OF TITLE--Title to the product and risk of
loss shall pass to Buyer upon delivery. Warren warrants to Buyer that it
has title to the product(s) delivered by it hereunder and the right to
deliver same, and agrees to indemnify, defend and hold the Buyer harmless
from and against any loss, claim or demand by reason of any failure of such
title or breach of this warranty. Except as set forth in this paragraph 3
and elsewhere herein, WARREN MAKES NO OTHER WARRANTY WITH RESPECT TO THE
PRODUCT OR OTHERWISE, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE.
4. TAXES--Any tax, duty, toll, fee, impost, charge or other exaction, or the
amount equivalent thereto, now or hereafter imposed, levied or assessed by
any governmental authority upon, measured by, incident to or as a result of
the transaction herein provided for, or the transportation, importation,
production, manufacture, use or ownership of the goods or source materials
thereof which are the subject matter of this Agreement, shall, if
collectible or payable by Warren, be paid by Buyer on demand by Warren.
Notwithstanding the foregoing, it is understood and agreed that any
personal property taxes levied or assessed by any governmental authority
upon the value of the products covered by this Agreement shall be paid by
the party having title thereto at the time of such assessment. Buyer shall
furnish Warren proper exemption certificate where tax exemption is claimed
on any or all product(s) delivered hereunder, or shall pay such taxes.
5. FUTURE OBLIGATIONS--SUPPLIER/PURCHASER RELATIONSHIP--This Agreement is
freely entered into between the parties hereto. It does not reflect or
grow out of any previously existing legal obligation which either party may
have to the other to supply any petroleum product. Part of the
consideration for this Agreement is each party's express agreement that
neither party expects or desires that this Agreement form the basis of any
additional future obligation of either party to supply any petroleum
product to the other. To the extent that under present or future laws or
regulations this Agreement may give rise to such obligations, each party
hereby waives in advance its right to enforce any such obligation and upon
submittal of written notice of termination by one party to the other under
this Agreement, it is agreed that both parties intend to terminate any such
additional future supplier/buyer relationship which may be created by this
Agreement under such laws or regulations. Additionally, at any time
hereafter, the parties agree to submit and/or execute documentation in
compliance with the then applicable laws and regulations as may be
necessary to evidence such termination insofar as the parties are
concerned. The parties further agree to obtain any other consents or
authorization required under the then applicable laws and regulations
insofar as reasonably possible to give effect to the intent hereof.
6. GOVERNMENT REGULATIONS & LAW--Warren warrants that the product it delivers
hereunder will be produced and delivered in full compliance with all
applicable federal and state laws and regulations and all Presidential
Proclamations which may be applicable. This agreement shall be construed
in accordance with the laws of the State of Oklahoma including the Uniform
Commercial Code. Buyer agrees to comply with the provisions contained in
Exhibit "B" attached hereto, to the extent that such provisions are legally
applicable to Buyer.
7. FORCE MAJEURE--If either party is rendered unable, wholly or in part, to
perform its obligations under this Agreement (other than to make payments
due hereunder) due to force majeure, defined herein as acts of God, flood,
fire, explosion or storm; transportation difficulty; strike, lockout or
other industrial disturbance; war or any law, rule, order or action of any
court or instrumentality of the federal or any state government;
exhaustion, reduction or unavailability of products from one or more of the
sources of supply from which deliveries are normally made hereunder, or
exhaustion or unavailability or delay in delivery of any material or
product necessary in the manufacture of the product(s) deliverable
hereunder; or any other cause or causes beyond its control whether similar
or dissimilar to those stated above, then in any such event, it is agreed
that the affected party shall give promptly after the occurrence of force
majeure notice and full particulars of such force majeure to the other
party, the obligations of the affected party shall be suspended for the
duration of such inability to perform but for no longer period, and such
cause shall, so far as possible, be remedied with all reasonable dispatch.
Force majeure shall also include the failure of any third party pipeline,
through no fault of the parties hereto, to accept the referenced products
for transportation to or from Warren's facilities.
8. ASSIGNMENT--This Agreement shall extend to and be binding upon the parties
hereto, their heirs, executors, administrators, successors and assigns; but
it is expressly agreed that neither party shall voluntarily assign this
Agreement without the prior written consent of the other.
9. NOTICE--Any notice hereunder shall be in writing and shall be delivered
personally, by mail, by telex, or by telegram to the address first
hereinabove set forth, unless changed by notice. Such notice shall be
deemed to have been given on the date of the delivery thereof.
10. WAIVER--The waiver by either party of the breach of any provision hereof by
the other party shall not be deemed to be a waiver of the breach of any
other provision or provisions hereof or of any subsequent or continuing
breach of such provision or provisions.
11. ALTERATIONS--No oral promises, agreements or warranties shall be deemed a
part hereof, nor shall any alteration or amendment of this Agreement, or
waiver of any of its provisions, be binding upon either party hereto unless
the same be in writing, signed by the party charged.
12. INSPECTION--Unless otherwise specified, Buyer will provide gauging,
sampling, and testing at no charge to Warren. Either party may secure
outside inspectors to perform this work and if this is done, the payments
for these services will be shared equally among the parties unless some
other arrangement for payment is mutually agreed upon.
13. MARINE PROVISIONS--If delivery of any products hereunder is to be
accomplished by waterborne transportation, the provisions set out in the
"Marine Provisions" attached hereto and made a part hereof shall apply to
such deliveries.
14. INVOICES AND TERMS OF PAYMENT--Invoices will be prepared by Warren and
transmitted to the Buyer from time to time during the month. Unless
otherwise specified, payment is due within ten (10) days after receipt of
invoice.
15. FINANCIAL RESPONSIBILITY--If in the judgment of Warren the financial
responsibility of Buyer becomes impaired or unsatisfactory, advance cash
payments or acceptable security including, but not limited to a letter of
credit from a financial institution acceptable to Warren shall be given by
Buyer upon demand of Warren, and Buyer's failure to abide by the provisions
of this Paragraph shall be considered a breach hereof and in such event
payment for all products delivered hereunder shall be due and owing and
shall be paid immediately, and Warren may without waiving any rights or
remedies it may have, withhold further deliveries until such payment or
security is received. Buyer's duty to provide the hereinabove credit
assurance shall be a condition precedent to Warren's obligation to perform
under this agreement.
16. CONFLICTS OF INTEREST--No director, employee or agent of either party shall
give or receive any commission, fee, rebate, gift or entertainment of
significant cost or value in connection with this Agreement. Any
representative(s) authorized by either party may audit the applicable
records of the other party solely for the purpose of determining whether
there has been compliance with this paragraph.
17. AUDIT--Each party and its duly authorized representatives shall have access
to the accounting records and other documents maintained by the other party
which relate to the product being delivered to the other party under this
Agreement and shall have the right to audit such records once a year at any
reasonable time or times during the terms of this Agreement and for two
years after the year in which this Agreement terminates. Neither party
shall make claim on the other for any adjustment after said two-year
period.
18. QUALITY--Any requirements of customer pertaining to potential contaminants
and/or specific hydrocarbon composition not listed in Warren's product
specification must be identified by customer and allowable concentrations
agreed to in writing by both parties prior to delivery of product to be
effective under this Agreement.
19. WARREN'S TANK CARS--Unless Warren's tank cars are unloaded and returned to
railroad, Buyer shall be liable to Warren for rental at the rate of
________________ for each day or fraction thereof in excess of
________________ days (LPG cars). Tank cars shall not be diverted without
Warren's written consent.
20. PRICES--Prices at destination include allowance for transportation charges
at lowest applicable common carrier rate between shipping point and actual
destination. Warren reserves the right to add other shipping points and to
change the shipping points on which destination prices are based. Notice
of any such additions or changes in shipping points shall be given to Buyer
in writing and unless objected to within ten days after receipt, said
shipping points shall be deemed accepted by Buyer. Deletions of shipping
points shall be made in like manner with like effect. Destination prices
are subject to adjustment with changes in common carrier freight rates and
any changes in applicable freight rates shall be for Buyer's account.
Unless otherwise provided, if common carrier is employed, transportation
charges shall be paid by consignee directly to carrier.
If prices are based on quotations in industry publications, quotations
published on dates of shipment shall apply. If no quotations for date of
shipment are published in designated industry publication, the last
previous quotations in such publication shall govern.
<PAGE>
PRODUCT SALES AGREEMENT
ATTACHMENT A
(PSA #S-40844)
1. SHORTAGE OF PRODUCTS. Due to uncertainties in the supply/demand situation,
Warren may not have sufficient supplies of said product to be delivered
hereunder from its then contemplated sources of supply to meet the full
requirements of all of its customers, contract or otherwise. Whenever that
situation exists and regardless of whether Warren's performance hereunder
is otherwise excused, Warren shall have, in addition to any other rights
Warren may have under this Agreement, the right to reduce deliveries of
such product on any basis which in Warren's opinion is equitable, allowing
for such priorities to such classes of customers as Warren deems
appropriate. No such priorities to such classes of customers as Warren
deems appropriate. No such reduction need be made up. If any such
reduction occurs, Buyer shall have the option to accept such reduction
occurs, Buyer shall have the option to accept such reduction or to
terminate this Agreement as to any or all products by fifteen (15) day's
notice to Warren given at any time within thirty (30) days after the notice
of reduction.
2. BRAND NAMES. Buyer agrees not represent, or authorize or permit any other
person to represent, that the product delivered hereunder is the product of
Warren. All products delivered to Buyer hereunder shall be used for sold
under Buyer's own brand names or under brand names approved by Warren, and
Buyer shall not authorize or permit said product to be used or sold under
any other brand names.
3. CONDUCT OF BUYER'S BUSINESS. Buyer agrees to conduct all operations in
strict compliance with all applicable law, ordinances, and regulations of
governmental authorities. Buyer in the performance of this Agreement is
engaged in an independent business and nothing therein contained shall be
construed as giving to Warren any right to control Buyer in any way in its
performance of this Agreement. Warren has no right to exercise control
over any of the Buyer's employees. All employees of Buyer shall be
entirely under the control and direction of Buyer who shall be responsible
for their actions and omissions.
ATTACHMENT ACCEPTED AND AGREED TO:
EMPIRE GAS CORPORATION Warren Petroleum Company
- --------------------------------- A Division of CHEVRON U.S.A. Inc.
By: /s/ Earl Noe By: /s/
------------------------------ ------------------------------------
Mgr., Domestic & Industrial Sales
<PAGE>
WARREN PETROLEUM COMPANY
A Division of Chevron U.S.A. Inc.
P. O. Box 1589
Tulsa, Oklahoma 74102
ATTACHMENT NO. 1
(LP-GAS SALES)
Product Sales Agreement No. S-40844
1. TERM: This agreement shall remain in effect for a primary term of one (1)
year beginning December 1, 1986, and shall continue thereafter from year-to-year
unless terminated at the end of the primary term or on any subsequent
anniversary thereof by either party giving the other the not less than sixty
(60) days' prior written notice of termination.
2. QUANTITY: During the term hereof, Buyer agrees to buy the product herein
specified in monthly quantities of not less than the minimum nor more than the
maximum set forth below and Warren agrees to sell said quantities to Buyer.
Buyer agrees to purchase such quantities from Warren as evenly as possible over
each month. Unless otherwise provided, the monthly quantities set forth below
shall be the quantities applicable for the entire term of this agreement.
Notwithstanding the foregoing, if during any period of this agreement the
quantity of product Warren is obligated to deliver to Buyer is prescribed by
government rules, regulations or orders, then the quantity of product covered by
this agreement shall be the quantity so prescribed for such period and Buyer
agrees to buy and Warren agrees to sell such quantity.
Volume (In Thousands of Gallons)
Minimum Maximum Minimum Maximum
April 100 200 October 100 200
-------- -------- --------- --------
May 100 200 November 100 200
-------- -------- --------- --------
June 100 200 December 100 200
-------- -------- --------- --------
July 100 200 January 100 200
-------- -------- --------- --------
August 100 200 February 100 200
-------- -------- --------- --------
September 100 200 March 100 200
-------- -------- --------- --------
For the purposes of determining compliance with the above quantity
schedule, purchase of product shall be allocated to the month in which shipment
is made. Should either party fail to comply in any amount with the above
schedule, the other party may elect to terminate this agreement by mailing
notice of such termination on or before the 20th day of the succeeding month.
If the Buyer fails to purchase 100% of the above specified minimum monthly
quantities during any month or months of the period beginning April 1 and ending
September 30 and Warren does not elect to terminate this agreement, Warren shall
not be obligated hereunder to sell to Buyer in any of the succeeding six months
(October through March) more than one and one half times the average monthly
quantity which Buyer actually purchased during the preceding six-month period
(April through September), but in no event more than the maximum monthly
quantities shown for each of the months October through March.
When delivery is into tank trucks furnished by Buyer, the delivery ticket
showing the quantity delivered and measured in tank trucks shall be signed by
the loader at the point of origin as the agent of Warren and by the truck driver
as the agent of the Buyer; thereafter, such quantities shall be conclusively
presumed to have been delivered to Buyer.
Buyer agrees that on or before the 1st day of each month Warren will be
furnished with requisitions showing quantities required during such month,
delivery dates, and, when applicable, destinations of each shipment to be made
by Warren. Warren shall not be obligated to ship less than a tank car load or
less than a tank truck load.
Page 1 of 2
<PAGE>
3. METHOD OF DELIVERY: __X__ By tank trucks furnished by Buyer.
_____ By tank trucks owned or controlled by Buyer.
_____ By tank cars furnished by ____________ with a
capacity of ________ gallons each.
4. PRICES: Subject to General Provision No. 20 (Prices) of this agreement,
Buyer shall pay the applicable prices per gallon listed under "Price
Information" set forth hereinbelow for the product specified, unless and until
such prices are changed by written notice given in accordance with the
provisions hereof.
Said prices may be changed at any time and from time to time by Warren upon
written notice effective when deposited in the United States Mail, postage
prepaid and addressed to Buyer. However, if any such notice shall increase
Warren's price per gallon for the designated product to Buyer at any shipping
point or destination listed herein above Warren's highest price for such product
in effect thereat during the elapsed portion of the calendar year in which
Warren's notice is effective, Buyer may by written notice to Warren given and
effective within 15 days from the date of Warren's said notice, terminate this
contract with respect to such shipping point or destination.
If the sale is on the basis of a destination price and if delivery is into
tank trucks furnished by Buyer, the Buyer shall receive an allowance calculated
at the lowest applicable common carrier truck rate between shipping point and
actual destination.
PRICE INFORMATION
(Prices in effect as of November 20, 1986)
(Check if sale on /X/ shipping point basis or / / destination price basis)
Price in
Shipping Points Destinations Product cents/gallons
MT. VERNON, INDIANA VARIOUS HD-5 PROPANE 25.50
5. ODORIZATION: All product sold and delivered hereunder shall be odorized
unless delivery of unodorized product is permitted by law and there is in
effect a separate written agreement between Warren and Buyer providing for
the delivery of unodorized product.
6. SALE OF BUSINESS: The Buyer agrees that in the event of a sale of its LP-
gas business or substantially all of its assets used in its LP-gas
business, Buyer will require the purchaser of such business or such assets
as a condition of the sale to assume the obligation of Buyer under this
agreement.
7. TRADEMARKS: Buyer acknowledges that the CHEVRON and WARRENGAS trademarks
are valuable property rights belonging to Chevron Corporation and its
subsidiaries, including Chevron U.S.A. Inc., and that any use thereof by
Buyer in connection with this agreement is solely for the purposes of
advertising products obtained from such subsidiaries. Upon termination of
this agreement, Buyer agrees that it will make no further use of such
trademarks or any other mark, name or designs confusingly similar
therewith.
8. APPORTIONMENT: Notwithstanding the obligations of this agreement, Warren
may apportion its available supply at a given location or in a stated area
among its customers in such manner as it may determine.
Page 2 of 2
<PAGE>
EXHIBIT 10.17
WARREN PETROLEUM COMPANY PRODUCT SALES AGREEMENT
A Division of Chevron U.S.A. Inc.
<TABLE>
PREPARE IN ORIGINAL AND FOUR COPIES.
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Purchaser Confirming Arrangements Made With
EMPIRE GAS CORPORATION JOYCE KINNET/EARL NOE
- --------------------------------------------------------------------------------------------------------------------------------
Address Arrangements Made by Date
P. O. BOX 303 D. W. CAMPION NOV. 20, 1986
- --------------------------------------------------------------------------------------------------------------------------------
Warren No. Purchaser No.
LEBANON, MO 65536 No. S 4 0 8 4 5
- --------------------------------------------------------------------------------------------------------------------------------
1. Warren will sell the following during period of: DECEMBER 1, 1986 AND THEREAFTER (SEE ATTACHMENT NO. 1)
- --------------------------------------------------------------------------------------------------------------------------------
Product Quantity Delivery Point Product Sale Price
- --------------------------------------------------------------------------------------------------------------------------------
Approx. Bbls. Measrmnt. Methods
Description (net @ 60 DEG. F) (see 2) Location (see 3) Cents/Gallon
- --------------------------------------------------------------------------------------------------------------------------------
HD-5 PROPANE (SEE AT- A LEBANON, IN A (SEE ATTACH-
- ------------------------------------------------ ----------------------------------------------------------------------
TACHMENT Origin MENT NO. 1)
- ------------------------------------------------ ----------------------------------------------------------------------
NO. 1)
- --------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------ ----------------------------------------------------------------------
Destination
- ------------------------------------------------ ----------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
2. Measurement (See General Provisions, Item 2) Basis: V -- Volumetric per API Tables 23 and 24
or 23A and 24A or 5A and 6A
M -- Mass per GPA 8182
/x/ A. Trucks / / D. Ship or Barge 1 -- Origin 2 -- Destination
/ / B. Tank Cars / / E. Other
----------------------------------------
/ / C. Pipeline
----------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
3. Methods
/x/ A. To Truck / / E. To Ship
/ / B. To Pipeline / / F. Other
-------------------------------------------------
/ / C. To Tank Car
-------------------------------------------------
/ / D. To Barge
- ---------------------------------------------------------------------------------------------------------------------------------
4. Specifications
HD-5 PROPANE
- ---------------------------------------------------------------------------------------------------------------------------------
5. Product: /x/ Stenched / / Unstenched
- ---------------------------------------------------------------------------------------------------------------------------------
6. Terms (SEE ATTACHMENT NO. 1)
/x/ Expires on
------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
7. Warren sends statements, invoices and shipping documentation to
(SAME AS ABOVE)
- ---------------------------------------------------------------------------------------------------------------------------------
8. Terms of Payment
NET 10 DAYS FROM DATE OF INVOICE.
- ---------------------------------------------------------------------------------------------------------------------------------
9. Special Provisions
THE TERMS AND CONDITIONS SET FORTH IN ATTACHMENT A AND ATTACHMENT NO. 1 ARE INCORPORATED HEREIN AND MADE A PART OF THIS
AGREEMENT.
10. In addition to the above terms and conditions, the General Provisions of this Product Sales Agreement as set forth on the
reverse side hereof are incorporated herein by reference and made a part of this Agreement.
- ---------------------------------------------------------------------------------------------------------------------------------
If you are in agreement with the foregoing terms and conditions, please so indicate by signing below and returning one copy of the
Agreement to Warren.
- ---------------------------------------------------------------------------------------------------------------------------------
Accepted and Agreed to EMPIRE GAS CORPORATION Warren Petroleum Company
A Division of Chevron U.S.A. Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
By By
/s/ Earl Noe /s/
- ---------------------------------------------------------------------------------------------------------------------------------
MGR., DOMESTIC & INDUSTRIAL SALES
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution: Original -- Buyer for file Yellow -- Distribution Section, Tulsa WP 82021 (CD 9 85)
Pink -- Buyer for acceptance and Green -- Marketing Department, Tulsa Printed in U.S.A.
return to Warren's Tulsa Office White -- Retained by Originator
</TABLE>
<PAGE>
PRODUCT SALES AGREEMENT
GENERAL PROVISIONS
1. DELIVERIES
A. When delivery is point of origin, delivery shall be deemed to have been
completed:
1. To ships or barges when the product has passed the vessel's loading
flange;
2. To tank trucks when the product has actually been delivered into the
truck;
3. To tank cars when the carrier accepts the same for shipment;
4. To pipelines upon metering of the product.
B. When delivery is point of destination, delivery shall be deemed to have
been completed:
1. From ships or barges when the product has passed the vessel's
discharge flange;
2. From tank trucks when truck has been placed at buyer's facilities for
unloading;
3. From tank cars when carrier delivers same at the destination;
4. From pipeline upon metering of the product.
C. When by an in-line product transfer, delivery shall be deemed to have
been completed upon execution of the order by the pipeline carrier.
D. If any common or contract carrier trucks are used, Warren shall not be
liable to Buyer for quantity or quality of product. After completion of
loading at the point of origin, Buyer agrees that the handling, care or
use of product delivered as herein provided shall thereafter be at
Buyer's sole risk and expense.
2. MEASUREMENT -- Measurement shall be done in the manner customarily utilized
at the point of delivery so long as it is in accordance with one of the
following alternatives:
A. On all deliveries into/out of tank cars, the quantity shall be
determined by official tank car capacity tables, meters with no vapor
return, or by weighing, in accordance with GPA Publication 8162 and all
revisions thereof.
B. On all deliveries into/out of transport and tank truck equipment,
quantities shall be determined by meter with no vapor return, slip tube,
rotary gauging device or weighing, in accordance with GPA Publication
8162 and all revisions thereof.
C. On all deliveries into/out of pipeline, quantity shall be determined by
turbine or positive displacement pipeline meter in accordance with API
Manual of Petroleum Measurement Standards and all revisions thereof.
D. On all deliveries to/from ships or barges, shore tank or turbine or
positive displacement meter measurements shall determine quantity,
unless otherwise agreed upon. Use of meters shall not allow vapor
return.
E. All quantities shall be corrected to 60 degrees Fahrenheit and
equilibrium vapor pressure at 60 degrees Fahrenheit.
F. Volume and compressibility correction factors shall be determined from
referenced API tables or computer programs used to generate these
tables.
3. PASSAGE OF TITLE AND WARRANTY OF TITLE -- Title to the product and risk of
loss shall pass to Buyer upon delivery. Warren warrants to Buyer that it
has title to the product(s) delivered by it hereunder and the right to
deliver same, and agrees to indemnify, defend and hold the Buyer harmless
from and against any loss, claim or demand by reason of any failure of such
title or breach of this warranty. Except as set forth in this paragraph 3
and elsewhere herein, WARREN MAKES NO OTHER WARRANTY WITH RESPECT TO THE
PRODUCT OR OTHERWISE, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE.
4. TAXES -- Any tax, duty, toll, fee, impost, charge or other exaction, or the
amount equivalent thereto, now or hereafter imposed, levied or assessed by
any governmental authority upon, measured by, incident to or as a result of
the transaction herein provided for, or the transportation, importation,
production, manufacture, use or ownership of the goods or source materials
thereof which are the subject matter of this Agreement, shall, if
collectible or payable by Warren, be paid by Buyer on demand by Warren.
Notwithstanding the foregoing, it is understood and agreed that any
personal property taxes levied or assessed by any governmental authority
upon the value of the products covered by this Agreement shall be paid by
the party having title thereto at the time of such assessment. Buyer shall
furnish Warren proper exemption certificate where tax exemption is claimed
on any or all product(s) delivered hereunder, or shall pay such taxes.
5. FUTURE OBLIGATIONS -- SUPPLIER/PURCHASER RELATIONSHIP -- This Agreement is
freely entered into between the parties hereto. It does not reflect or
grow out of any previously existing legal obligation which either party may
have to the other to supply any petroleum product. Part of the
consideration for this Agreement is each party's express agreement that
neither party expects or desires that this Agreement form the basis of any
additional future obligation of either party to supply any petroleum
product to the other. To the extent that under present or future laws or
regulations this Agreement may give rise to such obligations, each party
hereby waives in advance its right to enforce any such obligation and upon
submittal of written notice of termination by one party to the other under
this Agreement, it is agreed that both parties intend to terminate any such
additional future supplier/buyer relationship which may be created by this
Agreement under such laws or regulations. Additionally, at any time
hereafter, the parties agree to submit and/or execute documentation in
compliance with the then applicable laws and regulations as may be
necessary to evidence such termination insofar as the parties are
concerned. The parties further agree to obtain any other consents or
authorization required under the then applicable laws and regulations
insofar as reasonably possible to give effect to the intent hereof.
6. GOVERNMENT REGULATIONS & LAW -- Warren warrants that the product it delivers
hereunder will be produced and delivered in full compliance with all
applicable federal and state laws and regulations and all Presidential
Proclamations which may be applicable. This agreement shall be construed
in accordance with the laws of the State of Oklahoma including the Uniform
Commercial Code. Buyer agrees to comply with the provisions contained in
Exhibit "B" attached hereto, to the extent that such provisions are legally
applicable to Buyer.
7. FORCE MAJEURE -- If either party is rendered unable, wholly or in part, to
perform its obligations under this Agreement (other than to make payments
due hereunder) due to force majeure, defined herein as acts of God, flood,
fire, explosion or storm; transportation difficulty; strike, lockout or
other industrial disturbance; war or any law, rule, order or action of any
court or instrumentality of the federal or any state government;
exhaustion, reduction or unavailability of products from one or more of the
sources of supply from which deliveries are normally made hereunder, or
exhaustion or unavailability or delay in delivery of any material or
product necessary in the manufacture of the product(s) deliverable
hereunder, or any other cause or causes beyond its control whether similar
or dissimilar to those stated above, then in any such event, it is agreed
that the affected party shall give promptly after the occurrence of force
majeure notice and full particulars of such force majeure to the other
party, the obligations of the affected party shall be suspended for the
duration of such inability to perform but for no longer period, and such
cause shall, so far as possible, be remedied with all reasonable dispatch.
Force majeure shall also include the failure of any third party pipeline,
through no fault of the parties hereto, to accept the referenced products
for transportation to or from Warren's facilities.
8. ASSIGNMENT -- This Agreement shall extend to and be binding upon the parties
hereto, their heirs, executors, administrators, successors and assigns; but
it is expressly agreed that neither party shall voluntarily assign this
Agreement without the prior written consent of the other.
9. NOTICE -- Any notice hereunder shall be in writing and shall be delivered
personally, by mail, by telex, or by telegram to the address first
hereinabove set forth, unless changed by notice. Such notice shall be
deemed to have been given on the date of the delivery thereof.
10. WAIVER -- The waiver by either party of the breach of any provision hereof
by the other party shall not be deemed to be a waiver of the breach of any
other provision or provisions hereof or of any subsequent or continuing
breach of such provision or provisions.
11. ALTERATIONS -- No oral promises, agreements or warranties shall be deemed a
part hereof, nor shall any alteration or amendment of this Agreement, or
waiver of any of its provisions, be binding upon either party hereto unless
the same be in writing, signed by the party charged.
12. INSPECTION -- Unless otherwise specified, Buyer will provide gauging,
sampling, and testing at no charge to Warren. Either party may secure
outside inspectors to perform this work and if this is done, the payments
for these services will be shared equally among the parties unless some
other arrangement for payment is mutually agreed upon.
13. MARINE PROVISIONS -- If delivery of any products hereunder is to be
accomplished by waterborne transportation, the provisions set out in the
"Marine Provisions" attached hereto and made a part hereof shall apply to
such deliveries.
14. INVOICES AND TERMS OF PAYMENT -- Invoices will be prepared by Warren and
transmitted to the Buyer from time to time during the month. Unless
otherwise specified, payment is due within ten (10) days after receipt of
invoice.
15. FINANCIAL RESPONSIBILITY -- If in the judgment of Warren the financial
responsibility of Buyer becomes impaired or unsatisfactory, advance cash
payments or acceptable security including, but not limited to a letter of
credit from a financial institution acceptable to Warren shall be given by
Buyer upon demand of Warren, and Buyer's failure to abide by the provisions
of this Paragraph shall be considered a breach hereof and in such event
payment for all products delivered hereunder shall be due and owing and
shall be paid immediately, and Warren may without waiving any rights or
remedies it may have, withhold further deliveries until such payment or
security is received. Buyer's duty to provide the hereinabove credit
assurance shall be a condition precedent to Warren's obligation to perform
under this agreement.
16. CONFLICTS OF INTEREST -- No director, employee or agent of either party
shall give or receive any commission, fee, rebate, gift or entertainment of
significant cost or value in connection with this Agreement. Any
representative(s) authorized by either party may audit the applicable
records of the other party solely for the purpose of determining whether
there has been compliance with this paragraph.
17. AUDIT -- Each party and its duly authorized representatives shall have
access to the accounting records and other documents maintained by the other
party which relate to product being delivered to the other party under this
Agreement and shall have the right to audit such records once a year at any
reasonable time or times during the terms of this Agreement and for two
years after the year in which this Agreement terminates. Neither party
shall make claim on the other for any adjustment after said two year
period.
18. QUALITY -- Any requirements of customer pertaining to potential contaminants
and/or specific hydrocarbon composition not listed in Warren's product
specification must be identified by customer and allowable concentrations
agreed to in writing by both parties prior to delivery of product to be
effective under this Agreement.
19. WARREN'S TANK CARS -- Unless Warren's tank cars are unloaded and returned to
railroad, Buyer shall be liable to Warren for rental at the rate of
________________ for each day or fraction thereof in excess of
________________ days (LPG cars). Tank cars shall not be diverted without
Warren's written consent.
20. PRICES -- Prices at destination include allowance for transportation charges
at lowest applicable common carrier rate between shipping point and actual
destination. Warren reserves the right to add other shipping points and to
change the shipping points on which destination prices are based. Notice
of any such additions or changes in shipping points shall be given to Buyer
in writing and unless objected to within ten days after receipt, said
shipping points shall be deemed accepted by Buyer. Deletions of shipping
points shall be made in like manner with like effect. Destination prices
are subject to adjustment with changes in common carrier freight rates and
any changes in applicable freight rates shall be for Buyer's account.
Unless otherwise provided, if common carrier is employed, transportation
charges shall be paid by consignee directly to carrier.
If prices are based on quotations in industry publications, quotations
published on dates of shipment shall apply. If no quotations for date of
shipment are published in designated industry publication, the last
previous quotations in such publication shall govern.
<PAGE>
PRODUCT SALES AGREEMENT
ATTACHMENT A
(PSA #s-40845)
1. SHORTAGE OF PRODUCTS. Due to uncertainties in the supply/demand situation,
Warren may not have sufficient supplies of said product to be delivered
hereunder from its then contemplated sources of supply to meet the full
requirements of all of its customers, contract or otherwise. Whenever that
situation exists and regardless of whether Warren's performance hereunder
is otherwise excused, Warren shall have, in addition to any other rights
Warren may have under this Agreement, the right to reduce deliveries of
such product on any basis which in Warren's opinion is equitable, allowing
for such priorities to such classes of customers as Warren deems
appropriate. No such priorities to such classes of customers as Warren
deems appropriate. No such reduction need be made up. If any such
reduction occurs, Buyer shall have the option to accept such reduction
occurs, Buyer shall have the option to accept such reduction or to
terminate this Agreement as to any or all products by fifteen (15) day's
notice to Warren given at any time within thirty (30) days after the notice
of reduction.
2. BRAND NAMES. Buyer agrees not represent, or authorize or permit any other
person to represent, that the product delivered hereunder is the product of
Warren. All products delivered to Buyer hereunder shall be used for sold
under Buyer's own brand names or under brand names approved by Warren, and
Buyer shall not authorize or permit said product to be used or sold under
any other brand names.
3. CONDUCT OF BUYER'S BUSINESS. Buyer agrees to conduct all operations in
strict compliance with all applicable law, ordinances, and regulations of
governmental authorities. Buyer in the performance of this Agreement is
engaged in an independent business and nothing therein contained shall be
construed as giving to Warren any right to control Buyer in any way in its
performance of this Agreement. Warren has no right to exercise control
over any of the Buyer's employees. All employees of Buyer shall be
entirely under the control and direction of Buyer who shall be responsible
for their actions and omissions.
ATTACHMENT ACCEPTED AND AGREED TO:
Warren Petroleum Company
EMPIRE GAS CORPORATION A Division of CHEVRON U.S.A. Inc.
- ----------------------------------------
By: /s/ Earl Noe By: /s/
- ---------------------------------------- ------------------------------
MGR., DOMESTIC & INDUSTRIAL
SALES
<PAGE>
WARREN PETROLEUM COMPANY
A Division of Chevron U.S.A. Inc.
P. O. Box 1589
Tulsa, Oklahoma 74102
ATTACHMENT NO. 1
(LP-GAS SALES)
Product Sales Agreement No. S-40845
1. TERM: This agreement shall remain in effect for a primary term of one (1)
year beginning December 1, 1986, and shall continue thereafter from year-to-year
unless terminated at the end of the primary term or on any subsequent
anniversary thereof by either party giving the other the not less than sixty
(60) days' prior written notice of termination.
2. QUANTITY: During the term hereof, Buyer agrees to buy the product herein
specified in monthly quantities of not less than the minimum not more than the
maximum set forth below and Warren agrees to sell said quantities to Buyer.
Buyer agrees to purchase such quantities from Warren as evenly as possible over
each month. Unless otherwise provided, the monthly quantities set forth below
shall be the quantities applicable for the entire term of this agreement.
Notwithstanding the foregoing, if during any period of this agreement the
quantity of product Warren is obligated to deliver to Buyer is prescribed by
government rules, regulations or orders, then the quantity of product covered by
this agreement shall be the quantity so prescribed for such period and Buyer
agrees to buy and Warren agrees to sell such quantity.
<TABLE>
<CAPTION>
Volume (In Thousands of Gallons)
Minimum Maximum Minimum Maximum
<S> <C> <C> <C> <C> <C>
April 250 650 October 250 650
------- ------- ------- -------
May 250 650 November 250 650
------- ------- ------- -------
June 250 650 December 250 650
------- ------- ------- -------
July 250 650 January 250 650
------- ------- ------- -------
August 250 650 February 250 650
------- ------- ------- -------
September 250 650 March 250 650
------- ------- ------- -------
</TABLE>
For the purposes of determining compliance with the above quantity
schedule, purchase of product shall be allocated to the month in which shipment
is made. Should either party fail to comply in any amount with the above
schedule, the other party may elect to terminate this agreement by mailing
notice of such termination on or before the 20th of the succeeding month. If
the Buyer fails to purchase 100% of the above specified minimum monthly
quantities during any month or months of the period beginning April 1 and ending
September 30 and Warren does not elect to terminate this agreement, Warren shall
not be obligated hereunder to sell to Buyer in any of the succeeding six months
(October through March) more than one and one half times the average monthly
quantity which Buyer actually purchased during the preceding six-month period
(April through September), but in no event more than the maximum monthly
quantities shown for each of the months October through March.
When delivery is into tank trucks furnished by Buyer, the delivery ticket
showing the quantity delivered and measures in tank trucks shall be signed by
the loader at the point of origin as the agent of Warren and by the truck driver
as the agent of the Buyer; thereafter, such quantities shall be conclusively
presumed to have been delivered to Buyer.
Buyer agrees that on or before the 1st day of each month Warren will be
furnished with requisitions showing quantities required during such month,
delivery dates, and, when applicable, destinations of each shipment to be made
by Warren. Warren shall not be obligated to ship less than a tank car load or
less than a tank truck load.
Page 1 of 2
<PAGE>
3. METHOD OF DELIVERY: __x__ By tank trucks furnished by Buyer.
_____ By tank trucks owned or controlled by Buyer.
_____ By tank cars furnished by ____________ with a
capacity of ________ gallons each.
4. PRICES: Subject to General Provision No. 20 (Prices) of this agreement,
Buyer shall pay the applicable prices per gallon listed under "Price
Information" set forth hereinbelow for the product specified, unless and until
such prices are changed by written notice given in accordance with the
provisions hereof.
Said prices may be changed at any time and from time to time by Warren
upon written notice effective when deposited in the United States Mail, postage
prepaid and addressed to Buyer. However, if any such notice shall increase
Warren's price per gallon for the designated product to Buyer at any shipping
point or destination listed herein above Warren's highest price for such product
in effect thereat during the elapsed portion of the calendar year in which
Warren's notice is effective, Buyer may by written notice to Warren given and
effective within 15 days from the date of Warren's said notice, terminate this
contract with respect to such shipping point or destination.
If the sale is on the basis of a destination price and if delivery is into
tank trucks furnished by Buyer, the Buyer shall receive an allowance calculated
at the lowest applicable common carrier truck rate between shipping point and
actual destination.
PRICE INFORMATION
(Prices in effect as of November 20, 1986)
(Check if sale on /x/ shipping point basis or / / destination price basis)
Price in
Shipping Points Destinations Product cents/gallons
LEBANON, INDIANA Various HD-5 Propane 26.00
5. ODORIZATION: All product sold and delivered hereunder shall be ordorized
unless delivery of unordorized product is permitted by law and there is in
effect a separate written agreement between Warren and Buyer providing for
the delivery of unodorized product.
6. SALE OF BUSINESS: The Buyer agrees that in the event of a sale of its LP-
gas business or substantially all of its assets used in its assets used in
its LP-gas business, Buyer will require the purchaser of such business or
such assets as a condition of the ale to assume the obligation of Buyer
under this agreement.
7. TRADEMARKS: Buyer acknowledges that the CHEVRON and WARRENGAS trademarks
are valuable rights belonging to Chevron Corporation and its subsidiaries,
including Chevron U.S.A. Inc., and that any use thereof by Buyer in
connection with this agreement is solely for the purposes of advertising
products obtained from such subsidiaries. Upon termination of this
agreement, Buyer agrees that it will make no further use of such trademarks
or any other mark, name or designs confusingly similar therewith.
8. APPORTIONMENT: Notwithstanding the obligations of this agreement, Warren
may apportion its available supply at a given location or in a stated area
among its customers in such manner as it may determine.
Page 2 of 2
<PAGE>
EXHIBIT 10.18
[LOGO] WARREN PETROLEUM COMPANY PRODUCT SALES AGREEMENT
A Division of Chevron U.S.A. Inc.
PREPARE IN ORIGINAL AND FOUR COPIES
- --------------------------------------------------------------------------------
Purchaser | Confirming Arrangements Made With
EMPIRE GAS CORPORATION | JOYCE KINNET/EARL NOE
- --------------------------------------------------------------------------------
Address | Arrangements Made By | Date
P. O. BOX 303 | D. W. CAMPION | Nov. 22, 1986
- --------------------------------------------------------------------------------
Lebanon, MO 65536 | Warren No. | Purchaser No.
| No. S40849 |
- --------------------------------------------------------------------------------
1. Warren will sell the following during period of: DECEMBER 1, 1986 AND
THEREAFTER (SEE
ATTACHMENT A)
- --------------------------------------------------------------------------------
Product | Quantity | Delivery Point | Product Sale
| | | Price
- --------------------------------------------------------------------------------
Description | Approx. |Measrmnt.| Location | Methods | Cents/Gallon*
|(net at 60 |(see 2) | | (see 3) |
| degree F) | | | |
- --------------------------------------------------------------------------------
COMMERCIAL |200,000 | A | Origin | A | 35.50
PROPANE |GALLONS PER | | F.O.B. RICHMOND,| |*PRICE SUBJECT
|MONTH | | CA | |TO CHANGE--
- -----------------------------------------------------------------|SEE ATTACH-
| | | Destination | |MENT A)
| | | | |
- --------------------------------------------------------------------------------
2. Measurement (See General Provisions, Item 2) Basis: V - Volumetric per API
/X/ A. Trucks Tables 23 and 24 or
/ / B. Tank Cars 23A and 24A or 5A
/ / C. Pipeline and 6A
/ / D. Ship or Barge M - Mass per GPA 8182
/ / E. Other____________________________________ 1 - Origin
_________________________________________ 2 - Destination
- --------------------------------------------------------------------------------
3. Methods
/X/ A. To Truck
/ / B. To Pipeline
/ / C. To Tank Car
/ / D. To Barge
/ / E. To Ship
/ / F. Other___________________________________
________________________________________
- --------------------------------------------------------------------------------
4. Specifications
COMMERCIAL PROPANE - GPA SPECIFICATIONS.
- --------------------------------------------------------------------------------
5. Product: /X/ Stenched / / Unstenched
- --------------------------------------------------------------------------------
6. Terms (SEE ATTACHMENT A)
/ / Expires on __________________________
/ / Until _____________ and continuing thereafter unless terminated by
either party's giving at least ___________ days prior written notice
- --------------------------------------------------------------------------------
7. Warren sends statements, invoices and shipping documentation to
(SAME AS ABOVE)
- --------------------------------------------------------------------------------
8. Terms of Payment
NET 10 DAYS FROM DATE OF INVOICE.
- --------------------------------------------------------------------------------
9. Special Provisions
THE TERMS AND CONDITIONS SET FORTH IN ATTACHMENT A ARE INCORPORATED
HEREIN AND MADE A PART OF THIS AGREEMENT.
- --------------------------------------------------------------------------------
10. In addition to the above terms and conditions, the General Provisions of
this Product Sales Agreement as set forth on the reverse side hereof are
incorporated herein by reference and made a part of this Agreement.
- --------------------------------------------------------------------------------
If you are in agreement with the foregoing terms and conditions, please so
indicate by signing below and returning one copy of the Agreement to Warren.
- --------------------------------------------------------------------------------
Accepted and Agreed to | Warren Petroleum Company
EMPIRE GAS CORPORATION | A Division of Chevron U.S.A. Inc.
- -----------------------------------|--------------------------------------------
By /s/ Earl Noe | By /s/
- -----------------------------------|--------------------------------------------
| MGR., DOMESTIC & INDUSTRIAL SALES
- --------------------------------------------------------------------------------
Distribution: Original - Buyer for file WP 82021 (CD 9 85)
Pink - Buyer for acceptance and Printed in U.S.A.
return to Warren's Tulsa Office
Yellow - Distribution Section, Tulsa
Green - Marketing Department, Tulsa
White - Retained by Originator
<PAGE>
PRODUCT SALES AGREEMENT
GENERAL PROVISIONS
1. DELIVERIES
A. When delivery is point of origin, delivery shall be deemed to have
been completed:
1. To ships or barges when the product has passed the vessel's
loading flange;
2. To tank trucks when the product has actually been delivered into
the truck;
3. To tank cars when the carrier accepts the same for shipment;
4. To pipelines upon metering of the product.
B. When delivery is point of destination, delivery shall be deemed to
have been completed:
1. From ships or barges when the product has passed the vessel's
discharge flange;
2. From tank trucks when truck has been placed at buyer's facilities
for unloading;
3. From tank cars when carrier delivers same at the destination;
4. From pipeline upon metering of the product.
C. When by an in-line product transfer, delivery shall be deemed to have
been completed upon execution of the order by the pipeline carrier.
D. If any common or contract carrier trucks are used, Warren shall not be
liable to Buyer for quantity or quality of product. After completion
of loading at the point of origin, Buyer agrees that the handling,
care or use of product delivered as herein provided shall thereafter
be at Buyer's sole risk and expense.
2. MEASUREMENT--Measurement shall be done in the manner customarily utilized
at the point of delivery so long as it is in accordance with one of the
following alternatives:
A. On all deliveries into/out of tank cars, the quantity shall be
determined by official tank car capacity tables, meters with no vapor
return, or by weighing, in accordance with GPA Publication 8162 and
all revisions thereof.
B. On all deliveries into/out of transport and tank truck equipment,
quantities shall be determined by meter with no vapor return, slip
tube, rotary gauging device or weighing, in accordance with GPA
Publication 8162 and all revisions thereof.
C. On all deliveries into/out of pipeline, quantity shall be determined
by turbine or positive displacement pipeline meter in accordance with
API Manual of Petroleum Measurement Standards and all revisions
thereof.
D. On all deliveries to/from ships or barges, shore tank or turbine or
positive displacement meter measurements shall determine quantity,
unless otherwise agreed upon. Use of meters shall not allow vapor
return.
E. All quantities shall be corrected to 60 degrees Fahrenheit and
equilibrium vapor pressure at 60 degrees Fahrenheit.
F. Volume and compressibility correction factors shall be determined from
referenced API tables or computer programs used to generate these
tables.
3. PASSAGE OF TITLE AND WARRANTY OF TITLE--Title to the product and risk of
loss shall pass to Buyer upon delivery. Warren warrants to Buyer that it
has title to the product(s) delivered by it hereunder and the right to
deliver same, and agrees to indemnify, defend and hold the Buyer harmless
from and against any loss, claim or demand by reason of any failure of such
title or breach of this warranty. Except as set forth in this paragraph 3
and elsewhere herein, WARREN MAKES NO OTHER WARRANTY WITH RESPECT TO THE
PRODUCT OR OTHERWISE, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE.
4. TAXES--Any tax, duty, toll, fee, impost, charge or other exaction, or the
amount equivalent thereto, now or hereafter imposed, levied or assessed by
any governmental authority upon, measured by, incident to or as a result of
the transaction herein provided for, or the transportation, importation,
production, manufacture, use or ownership of the goods or source materials
thereof which are the subject matter of this Agreement, shall, if
collectible or payable by Warren, be paid by Buyer on demand by Warren.
Notwithstanding the foregoing, it is understood and agreed that any
personal property taxes levied or assessed by any governmental authority
upon the value of the products covered by this Agreement shall be paid by
the party having title thereto at the time of such assessment. Buyer shall
furnish Warren proper exemption certificate where tax exemption is claimed
on any or all product(s) delivered hereunder, or shall pay such taxes.
5. FUTURE OBLIGATIONS--SUPPLIER/PURCHASER RELATIONSHIP--This Agreement is
freely entered into between the parties hereto. It does not reflect or
grow out of any previously existing legal obligation which either party may
have to the other to supply any petroleum product. Part of the
consideration for this Agreement is each party's express agreement that
neither party expects or desires that this Agreement form the basis of any
additional future obligation of either party to supply any petroleum
product to the other. To the extent that under present or future laws or
regulations this Agreement may give rise to such obligations, each party
hereby waives in advance its right to enforce any such obligation and upon
submittal of written notice of termination by one party to the other under
this Agreement, it is agreed that both parties intend to terminate any such
additional future supplier/buyer relationship which may be created by this
Agreement under such laws or regulations. Additionally, at any time
hereafter, the parties agree to submit and/or execute documentation in
compliance with the then applicable laws and regulations as may be
necessary to evidence such termination insofar as the parties are
concerned. The parties further agree to obtain any other consents or
authorization required under the then applicable laws and regulations
insofar as reasonably possible to give effect to the intent hereof.
6. GOVERNMENT REGULATIONS & LAW--Warren warrants that the product it delivers
hereunder will be produced and delivered in full compliance with all
applicable federal and state laws and regulations and all Presidential
Proclamations which may be applicable. This agreement shall be construed
in accordance with the laws of the State of Oklahoma including the Uniform
Commercial Code. Buyer agrees to comply with the provisions contained in
Exhibit "B" attached hereto, to the extent that such provisions are legally
applicable to Buyer.
7. FORCE MAJEURE--If either party is rendered unable, wholly or in part, to
perform its obligations under this Agreement (other than to make payments
due hereunder) due to force majeure, defined herein as acts of God, flood,
fire, explosion or storm; transportation difficulty; strike, lockout or
other industrial disturbance; war or any law, rule, order or action of any
court or instrumentality of the federal or any state government;
exhaustion, reduction or unavailability of products from one or more of the
sources of supply from which deliveries are normally made hereunder, or
exhaustion or unavailability or delay in delivery of any material or
product necessary in the manufacture of the product(s) deliverable
hereunder, or any other cause or causes beyond its control whether similar
or dissimilar to those stated above, then in any such event, it is agreed
that the affected party shall give promptly after the occurrence of force
majeure notice and full particulars of such force majeure to the other
party, the obligations of the affected party shall be suspended for the
duration of such inability to perform but for no longer period, and such
cause shall, so far as possible, be remedied with all reasonable dispatch.
Force majeure shall also include the failure of any third party pipeline,
through no fault of the parties hereto, to accept the referenced products
for transportation to or from Warren's facilities.
8. ASSIGNMENT--This Agreement shall extend to and be binding upon the parties
hereto, their heirs, executors, administrators, successors and assigns; but
it is expressly agreed that neither party shall voluntarily assign this
Agreement without the prior written consent of the other.
9. NOTICE--Any notice hereunder shall be in writing and shall be delivered
personally, by mail, by telex, or by telegram to the address first
hereinabove set forth, unless changed by notice. Such notice shall be
deemed to have been given on the date of the delivery thereof.
10. WAIVER--The waiver by either party of the breach of any provision hereof by
the other party shall not be deemed to be a waiver of the breach of any
other provision or provisions hereof or of any subsequent or continuing
breach of such provision or provisions.
11. ALTERATIONS--No oral promises, agreements or warranties shall be deemed a
part hereof, nor shall any alteration or amendment of this Agreement, or
waiver of any of its provisions, be binding upon either party hereto unless
the same be in writing, signed by the party charged.
12. INSPECTION--Unless otherwise specified, Buyer will provide gauging,
sampling, and testing at no charge to Warren. Either party may secure
outside inspectors to perform this work and if this is done, the payments
for these services will be shared equally among the parties unless some
other arrangement for payment is mutually agreed upon.
13. MARINE PROVISIONS--If delivery of any products hereunder is to be
accomplished by waterborne transportation, the provisions set out in the
"Marine Provisions" attached hereto and made a part hereof shall apply to
such deliveries.
14. INVOICES AND TERMS OF PAYMENT--Invoices will be prepared by Warren and
transmitted to the Buyer from time to time during the month. Unless
otherwise specified, payment is due within ten (10) days after receipt of
invoice.
15. FINANCIAL RESPONSIBILITY--If in the judgment of Warren the financial
responsibility of Buyer becomes impaired or unsatisfactory, advance cash
payments or acceptable security including, but not limited to a letter of
credit from a financial institution acceptable to Warren shall be given by
Buyer upon demand of Warren, and Buyer's failure to abide by the provisions
of this Paragraph shall be considered a breach hereof and in such event
payment for all products delivered hereunder shall be due and owing and
shall be paid immediately, and Warren may without waiving any rights or
remedies it may have, withhold further deliveries until such payment or
security is received. Buyer's duty to provide the hereinabove credit
assurance shall be a condition precedent to Warren's obligation to perform
under this agreement.
16. CONFLICTS OF INTEREST--No director, employee or agent of either party shall
give or receive any commission, fee, rebate, gift or entertainment of
significant cost or value in connection with this Agreement. Any
representative(s) authorized by either party may audit the applicable
records of the other party solely for the purpose of determining whether
there has been compliance with this paragraph.
17. AUDIT--Each party and its duly authorized representatives shall have access
to the accounting records and other documents maintained by the other party
which relate to product being delivered to the other party under this
Agreement and shall have the right to audit such records once a year at any
reasonable time or times during the terms of this Agreement and for two
years after the year in which this Agreement terminates. Neither party
shall make claim on the other for any adjustment after said two year
period.
18. QUALITY--Any requirements of customer pertaining to potential contaminants
and/or specific hydrocarbon composition not listed in Warren's product
specification must be identified by customer and allowable concentrations
agreed to in writing by both parties prior to delivery of product to be
effective under this Agreement.
19. WARREN'S TANK CARS--Unless Warren's tank cars are unloaded and returned to
railroad, Buyer shall be liable to Warren for rental at the rate of
________________ for each day or fraction thereof in excess of
________________ days (LPG cars). Tank cars shall not be diverted without
Warren's written consent.
20. PRICES--Prices at destination include allowance for transportation charges
at lowest applicable common carrier rate between shipping point and actual
destination. Warren reserves the right to add other shipping points and to
change the shipping points on which destination prices are based. Notice
of any such additions or changes in shipping points shall be given to Buyer
in writing and unless objected to within ten days after receipt, said
shipping points shall be deemed accepted by Buyer. Deletions of shipping
points shall be made in like manner with like effect. Destination prices
are subject to adjustment with changes in common carrier freight rates and
any changes in applicable freight rates shall be for Buyer's account.
Unless otherwise provided, if common carrier is employed, transportation
charges shall be paid by consignee directly to carrier.
If prices are based on quotations in industry publications, quotations
published on dates of shipment shall apply. If no quotations for date of
shipment are published in designated industry publication, the last
previous quotations in such publication shall govern.
<PAGE>
PRODUCT SALES AGREEMENT
ATTACHMENT A
(Product Sales Agreement
No. S-40849)
1. SHORTAGE OF PRODUCTS. Due to uncertainties in the supply/demand situation,
Warren may not have sufficient supplies of said product to be delivered
hereunder from its then contemplated sources of supply to meet the full
requirements of all of its customers, contract or otherwise. Whenever that
situation exists and regardless of whether Warren's performance hereunder
is otherwise excused, Warren shall have, in addition to any other rights
Warren may have under this Agreement, the right to reduce deliveries of
such product on any basis which in Warren's opinion is equitable, allowing
for such priorities to such classes of customers as Warren deems
appropriate. No such reduction need be made up. If any such reduction
occurs, Buyer shall have the option to accept such reduction occurs,
Buyer shall have the option to accept such reduction or to terminate this
Agreement as to any or all products by fifteen (15) day's notice to Warren
given at any time within thirty (30) days after the notice of reduction.
2. BRAND NAMES. Buyer agrees not represent, or authorize or permit any other
person to represent, that the product delivered hereunder is the product of
Warren. All products delivered to Buyer hereunder shall be used or sold
under Buyer's own brand names or under brand names approved by Warren, and
Buyer shall not authorize or permit said product to be used or sold under
any other brand names.
3. CONDUCT OF BUYER'S BUSINESS. Buyer agrees to conduct all operations in
strict compliance with all applicable law, ordinances, and regulations of
governmental authorities. Buyer in the performance of this Agreement is
engaged in an independent business and nothing therein contained shall be
construed as giving to Warren any right to control Buyer in any way in its
performance of this Agreement. Warren has no right to exercise control
over any of the Buyer's employees. All employees of Buyer shall be
entirely under the control and direction of Buyer who shall be responsible
for their actions and omissions.
4. TERM. This agreement shall remain in effect for a primary term of one (1)
year beginning Dec. 1, 1986 and shall continue thereafter from year-to-year
unless terminated at the end of the primary term or any subsequent
anniversary thereof by either party giving the other not less than sixty
(60) days' prior written notice of termination.
5. QUANTITY. Buyer agrees to purchase such quantities from Warren as evenly
as possible over each month. Unless otherwise excused, should either party
fail to comply with the stated quantity, the other party may elect to
terminate this agreement by written notice of such termination on or before
the 20th day of the succeeding month.
6. PRICE. Said prices may be changed at any time and from time-to-time by
Warren upon written notice to Buyer. Notwithstanding other notice
provisions contained herein, such written price change notifications shall
be effective on the date such notice is deposited in the United States mail
posted prepaid, transmitted by telex, or transmitted by telegram. However,
if any such notice shall increase Warren's price per gallon for the
designated product to Buyer at any shipping point or destination listed
herein above Warren's highest price for such product in effect therat during
the elapsed portion of the calendar year in which Warren's notice is
effective, Buyer may by written notice to Warren given and effective within
15 days from the date of Warren's said notice, terminate this contract with
respect to such shipping point or destination.
7. DUTY DRAWBACK ALLOWANCE. Warren reserves the right to claim and receive
any duty drawback allowance in connection with product that is purchased
by Buyer and exported from the United States. The Buyer shall notify and
assist Warren in securing any duty drawback allowance that may be
available, including providing all necessary certificates and
documentation.
8. TERMINATION OF PRIOR AGREEMENTS. This agreement shall, as of the
commencement date hereof, terminate and supersede all prior agreements for
the purchase and sale of the products(s) named, provided that any accrued
obligations of either party under any such prior agreement shall be
performed by such party.
<PAGE>
EXHIBIT 10.19
[LOGO] WARREN PETROLEUM COMPANY PRODUCT SALES AGREEMENT
A Division of Chevron U.S.A. Inc.
PREPARE IN ORIGINAL AND FOUR COPIES
- --------------------------------------------------------------------------------
Purchaser | Confirming Arrangements Made With
EMPIRE GAS CORPORATION | JOYCE KINNET/EARL NOE
- --------------------------------------------------------------------------------
Address | Arrangements Made By | Date
P. O. BOX 303 | D. W. CAMPION | Nov. 24, 1986
- --------------------------------------------------------------------------------
Lebanon, MO 65536 | Warren No. | Purchaser No.
| No. S 4 0 8 4 7 |
- --------------------------------------------------------------------------------
1. Warren will sell the following during period of: DECEMBER 1, 1986 AND
THEREAFTER (SEE
ATTACHMENT NO. 1)
- --------------------------------------------------------------------------------
Product | Quantity | Delivery Point | | Product Sale
| | | | Price
- --------------------------------------------------------------------------------
Description | Approx. Bbls.|Measrmnt.| Location | Methods | Cents/Gallon
|(net at |(see 2) | | (see 3) |
| 60DEG. F) | | | |
- --------------------------------------------------------------------------------
HD-5 PROPANE| (SEE AT- | A | Origin | A | 20.00
| TACHMENT | | MT. BELVIEU, TX | |
| NO. 1 | | | |(PRICE SUBJECT
- -----------------------------------------------------------------|TO CHANGE --
| | | Destination | |SEE ATTACHMENT
| | | | |NO. 1)
- --------------------------------------------------------------------------------
2. Measurement (See General Provisions, Item 2) Basis: V - Volumetric per API
/X/ A. Trucks Tables 23 and 24 or
/ / B. Tank Cars 23A or 24A or 5A
/ / C. Pipeline and 6A
/ / D. Ship or Barge M - Mass per GPA 8182
/ / E. Other 1 - Origin
----------------------------------------- 2 - Destination
-----------------------------------------
- --------------------------------------------------------------------------------
3. Methods
/X/ A. To Truck
/ / B. To Pipeline
/ / C. To Tank Car
/ / D. To Barge
/ / E. To Ship
/ / F. Other
-----------------------------------------
-----------------------------------------
- --------------------------------------------------------------------------------
4. Specifications
HD-5 PROPANE
- --------------------------------------------------------------------------------
5. Product: /X/ Stenched / / Unstenched
- --------------------------------------------------------------------------------
6. Terms (SEE ATTACHMENT NO. 1)
/ / Expires on __________________________
- --------------------------------------------------------------------------------
7. Warren sends statements, invoices and shipping documentation to
(SAME AS ABOVE)
- --------------------------------------------------------------------------------
8. Terms of Payment
NET 10 DAYS FROM DATE OF INVOICE.
- --------------------------------------------------------------------------------
9. Special Provisions
THE TERMS AND CONDITIONS SET FORTH IN ATTACHMENT A AND ATTACHMENT NO.
1 ARE INCORPORATED HEREIN AND MADE A PART OF THIS AGREEMENT.
- --------------------------------------------------------------------------------
10. In addition to the above terms and conditions, the General Provisions of
this Product Sales Agreement as set forth on the reverse side hereof are
incorporated herein by reference and made a part of this Agreement.
- --------------------------------------------------------------------------------
If you are in agreement with the foregoing terms and conditions, please so
indicate by signing below and returning one copy of the Agreement to Warren.
- --------------------------------------------------------------------------------
Accepted and Agreed to EMPIRE GAS CORPORATION | Warren Petroleum Company
| A Division of Chevron U.S.A.
| Inc.
- --------------------------------------------------------------------------------
By /s/ Earl Noe | By /s/
- --------------------------------------------------------------------------------
| Mgr., Domestic & Industrial
| Sales
- --------------------------------------------------------------------------------
Distribution: Original - Buyer for file WP 82021 (CD 9 85)
Pink - Buyer for acceptance and Printed in U.S.A.
return to Warren's Tulsa Office
Yellow - Distribution Section, Tulsa
Green - Marketing Department, Tulsa
White - Retained by Originator
<PAGE>
PRODUCT SALES AGREEMENT
GENERAL PROVISIONS
1. DELIVERIES
A. When delivery is point of origin, delivery shall be deemed to have
been completed:
1. To ships or barges when the product has passed the vessel's
loading flange;
2. To tank trucks when the product has actually been delivered into
the truck;
3. To tank cars when the carrier accepts the same for shipment;
4. To pipelines upon metering of the product.
B. When delivery is point of destination, delivery shall be deemed to
have been completed:
1. From ships or barges when the product has passed the vessel's
discharge flange;
2. From tank trucks when truck has been placed at buyer's facilities
for unloading;
3. From tank cars when carrier delivers same at the destination;
4. From pipeline upon metering of the product.
C. When by an in-line product transfer, delivery shall be deemed to have
been completed upon execution of the order by the pipeline carrier.
D. If any common or contract carrier trucks are used, Warren shall not be
liable to Buyer for quantity or quality of product. After completion
of loading at the point of origin, Buyer agrees that the handling,
care or use of product delivered as herein provided shall thereafter
be at Buyer's sole risk and expense.
2. MEASUREMENT--Measurement shall be done in the manner customarily utilized
at the point of delivery so long as it is in accordance with one of the
following alternatives:
A. On all deliveries into/out of tank cars, the quantity shall be
determined by official tank car capacity tables, meters with no vapor
return, or by weighing, in accordance with GPA Publication 8162 and
all revisions thereof.
B. On all deliveries into/out of transport and tank truck equipment,
quantities shall be determined by meter with no vapor return, slip
tube, rotary gauging device or weighing, in accordance with GPA
Publication 8162 and all revisions thereof.
C. On all deliveries into/out of pipeline, quantity shall be determined
by turbine or positive displacement pipeline meter in accordance with
API Manual of Petroleum Measurement Standards and all revisions
thereof.
D. On all deliveries to/from ships or barges, shore tank or turbine or
positive displacement meter measurements shall determine quantity,
unless otherwise agreed upon. Use of meters shall not allow vapor
return.
E. All quantities shall be corrected to 60 degrees Fahrenheit and
equilibrium vapor pressure at 60 degrees Fahrenheit.
F. Volume and compressibility correction factors shall be determined from
referenced API tables or computer programs used to generate these
tables.
3. PASSAGE OF TITLE AND WARRANTY OF TITLE--Title to the product and risk of
loss shall pass to Buyer upon delivery. Warren warrants to Buyer that it
has title to the product(s) delivered by it hereunder and the right to
deliver same, and agrees to indemnify, defend and hold the Buyer harmless
from and against any loss, claim or demand by reason of any failure of such
title or breach of this warranty. Except as set forth in this paragraph 3
and elsewhere herein, WARREN MAKES NO OTHER WARRANTY WITH RESPECT TO THE
PRODUCT OR OTHERWISE, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE.
4. TAXES--Any tax, duty, toll, fee, impost, charge or other exaction, or the
amount equivalent thereto, now or hereafter imposed, levied or assessed by
any governmental authority upon, measured by, incident to or as a result of
the transaction herein provided for, or the transportation, importation,
production, manufacture, use or ownership of the goods or source materials
thereof which are the subject matter of this Agreement, shall, if
collectible or payable by Warren, be paid by Buyer on demand by Warren.
Notwithstanding the foregoing, it is understood and agreed that any
personal property taxes levied or assessed by any governmental authority
upon the value of the products covered by this Agreement shall be paid by
the party having title thereto at the time of such assessment. Buyer shall
furnish Warren proper exemption certificate where tax exemption is claimed
on any or all product(s) delivered hereunder, or shall pay such taxes.
5. FUTURE OBLIGATIONS--SUPPLIER/PURCHASER RELATIONSHIP--This Agreement is
freely entered into between the parties hereto. It does not reflect or
grow out of any previously existing legal obligation which either party may
have to the other to supply any petroleum product. Part of the
consideration for this Agreement is each party's express agreement that
neither party expects or desires that this Agreement form the basis of any
additional future obligation of either party to supply any petroleum
product to the other. To the extent that under present or future laws or
regulations this Agreement may give rise to such obligations, each party
hereby waives in advance its right to enforce any such obligation and upon
submittal of written notice of termination by one party to the other under
this Agreement, it is agreed that both parties intend to terminate any such
additional future supplier/buyer relationship which may be created by this
Agreement under such laws or regulations. Additionally, at any time
hereafter, the parties agree to submit and/or execute documentation in
compliance with the then applicable laws and regulations as may be
necessary to evidence such termination insofar as the parties are
concerned. The parties further agree to obtain any other consents or
authorization required under the then applicable laws and regulations
insofar as reasonably possible to give effect to the intent hereof.
6. GOVERNMENT REGULATIONS & LAW--Warren warrants that the product it delivers
hereunder will be produced and delivered in full compliance with all
applicable federal and state laws and regulations and all Presidential
Proclamations which may be applicable. This agreement shall be construed
in accordance with the laws of the State of Oklahoma including the Uniform
Commercial Code. Buyer agrees to comply with the provisions contained in
Exhibit "B" attached hereto, to the extent that such provisions are legally
applicable to Buyer.
7. FORCE MAJEURE--If either party is rendered unable, wholly or in part, to
perform its obligations under this Agreement (other than to make payments
due hereunder) due to force majeure, defined herein as acts of God, flood,
fire, explosion or storm; transportation difficulty; strike, lockout or
other industrial disturbance; war or any law, rule, order or action of any
court or instrumentality of the federal or any state government;
exhaustion, reduction or unavailability of products from one or more of the
sources of supply from which deliveries are normally made hereunder, or
exhaustion or unavailability or delay in delivery of any material or
product necessary in the manufacture of the product(s) deliverable
hereunder, or any other cause or causes beyond its control whether similar
or dissimilar to those stated above, then in any such event, it is agreed
that the affected party shall give promptly after the occurrence of force
majeure notice and full particulars of such force majeure to the other
party, the obligations of the affected party shall be suspended for the
duration of such inability to perform but for no longer period, and such
cause shall, so far as possible, be remedied with all reasonable dispatch.
Force majeure shall also include the failure of any third party pipeline,
through no fault of the parties hereto, to accept the referenced products
for transportation to or from Warren's facilities.
8. ASSIGNMENT--This Agreement shall extend to and be binding upon the parties
hereto, their heirs, executors, administrators, successors and assigns; but
it is expressly agreed that neither party shall voluntarily assign this
Agreement without the prior written consent of the other.
9. NOTICE--Any notice hereunder shall be in writing and shall be delivered
personally, by mail, by telex, or by telegram to the address first
hereinabove set forth, unless changed by notice. Such notice shall be
deemed to have been given on the date of the delivery thereof.
10. WAIVER--The waiver by either party of the breach of any provision hereof by
the other party shall not be deemed to be a waiver of the breach of any
other provision or provisions hereof or of any subsequent or continuing
breach of such provision or provisions.
11. ALTERATIONS--No oral promises, agreements or warranties shall be deemed a
part hereof, nor shall any alteration or amendment of this Agreement, or
waiver of any of its provisions, be binding upon either party hereto unless
the same be in writing, signed by the party charged.
12. INSPECTION--Unless otherwise specified, Buyer will provide gauging,
sampling, and testing at no charge to Warren. Either party may secure
outside inspectors to perform this work and if this is done, the payments
for these services will be shared equally among the parties unless some
other arrangement for payment is mutually agreed upon.
13. MARINE PROVISIONS--If delivery of any products hereunder is to be
accomplished by waterborne transportation, the provisions set out in the
"Marine Provisions" attached hereto and made a part hereof shall apply to
such deliveries.
14. INVOICES AND TERMS OF PAYMENT--Invoices will be prepared by Warren and
transmitted to the Buyer from time to time during the month. Unless
otherwise specified, payment is due within ten (10) days after receipt of
invoice.
15. FINANCIAL RESPONSIBILITY--If in the judgment of Warren the financial
responsibility of Buyer becomes impaired or unsatisfactory, advance cash
payments or acceptable security including, but not limited to a letter of
credit from a financial institution acceptable to Warren shall be given by
Buyer upon demand of Warren, and Buyer's failure to abide by the provisions
of this Paragraph shall be considered a breach hereof and in such event
payment for all products delivered hereunder shall be due and owing and
shall be paid immediately, and Warren may without waiving any rights or
remedies it may have, withhold further deliveries until such payment or
security is received. Buyer's duty to provide the hereinabove credit
assurance shall be a condition precedent to Warren's obligation to perform
under this agreement.
16. CONFLICTS OF INTEREST--No director, employee or agent of either party shall
give or receive any commission, fee, rebate, gift or entertainment of
significant cost or value in connection with this Agreement. Any
representative(s) authorized by either party may audit the applicable
records of the other party solely for the purpose of determining whether
there has been compliance with this paragraph.
17. AUDIT--Each party and its duly authorized representatives shall have access
to the accounting records and other documents maintained by the other party
which relate to product being delivered to the other party under this
Agreement and shall have the right to audit such records once a year at any
reasonable time or times during the terms of this Agreement and for two
years after the year in which this Agreement terminates. Neither party
shall make claim on the other for any adjustment after said two year
period.
18. QUALITY--Any requirements of customer pertaining to potential contaminants
and/or specific hydrocarbon composition not listed in Warren's product
specification must be identified by customer and allowable concentrations
agreed to in writing by both parties prior to delivery of product to be
effective under this Agreement.
19. WARREN'S TANK CARS--Unless Warren's tank cars are unloaded and returned to
railroad, Buyer shall be liable to Warren for rental at the rate of
________________ for each day or fraction thereof in excess of
________________ days (LPG cars). Tank cars shall not be diverted without
Warren's written consent.
20. PRICES--Prices at destination include allowance for transportation charges
at lowest applicable common carrier rate between shipping point and actual
destination. Warren reserves the right to add other shipping points and to
change the shipping points on which destination prices are based. Notice
of any such additions or changes in shipping points shall be given to Buyer
in writing and unless objected to within ten days after receipt, said
shipping points shall be deemed accepted by Buyer. Deletions of shipping
points shall be made in like manner with like effect. Destination prices
are subject to adjustment with changes in common carrier freight rates and
any changes in applicable freight rates shall be for Buyer's account.
Unless otherwise provided, if common carrier is employed, transportation
charges shall be paid by consignee directly to carrier.
If prices are based on quotations in industry publications, quotations
published on dates of shipment shall apply. If no quotations for date of
shipment are published in designated industry publication, the last
previous quotations in such publication shall govern.
<PAGE>
PRODUCT SALES AGREEMENT
ATTACHMENT A
(PSA #S-40847)
1. SHORTAGE OF PRODUCTS. Due to uncertainties in the supply/demand situation,
Warren may not have sufficient supplies of said product to be delivered
hereunder from its then contemplated sources of supply to meet the full
requirements of all of its customers, contract or otherwise. Whenever that
situation exists and regardless of whether Warren's performance hereunder
is otherwise excused, Warren shall have, in addition to any other rights
Warren may have under this Agreement, the right to reduce deliveries of
such product on any basis which in Warren's opinion is equitable, allowing
for such priorities to such classes of customers as Warren deems
appropriate. No such priorities to such classes of customers as Warren
deems appropriate. No such reduction need be made up. If any such
reduction occurs, Buyer shall have the option to accept such reduction
occurs, Buyer shall have the option to accept such reduction or to
terminate this Agreement as to any or all products by fifteen (15) day's
notice to Warren given at any time within thirty (30) days after the notice
of reduction.
2. BRAND NAMES. Buyer agrees not represent, or authorize or permit any other
person to represent, that the product delivered hereunder is the product of
Warren. All products delivered to Buyer hereunder shall be used for sold
under Buyer's own brand names or under brand names approved by Warren, and
Buyer shall not authorize or permit said product to be used or sold under
any other brand names.
3. CONDUCT OF BUYER'S BUSINESS. Buyer agrees to conduct all operations in
strict compliance with all applicable law, ordinances, and regulations of
governmental authorities. Buyer in the performance of this Agreement is
engaged in an independent business and nothing therein contained shall be
construed as giving to Warren any right to control Buyer in any way in its
performance of this Agreement. Warren has no right to exercise control
over any of the Buyer's employees. All employees of Buyer shall be
entirely under the control and direction of Buyer who shall be responsible
for their actions and omissions.
ATTACHMENT ACCEPTED AND AGREED TO:
EMPIRE GAS CORPORATION Warren Petroleum Company
- --------------------------------- A Division of CHEVRON U.S.A. Inc.
By: /s/ Earl Noe By /s/
------------------------------ ------------------------------------
Mgr., Domestic & Industrial Sales
<PAGE>
WARREN PETROLEUM COMPANY
A Division of Chevron U.S.A. Inc.
P. O. Box 1589
Tulsa, Oklahoma 74102
ATTACHMENT NO. 1
(LP-GAS SALES)
Product Sales Agreement No. S-40847
1. TERM: This agreement shall remain in effect for a primary term of one (1)
year beginning December 1, 1986, and shall continue thereafter from year-to-year
unless terminated at the end of the primary term or on any subsequent
anniversary thereof by either party giving the other the not less than sixty
(60) days' prior written notice of termination.
2. QUANTITY: During the term hereof, Buyer agrees to buy the product herein
specified in monthly quantities of not less than the minimum not more than the
maximum set forth below and Warren agrees to sell said quantities to Buyer.
Buyer agrees to purchase such quantities from Warren as evenly as possible over
each month. Unless otherwise provided, the monthly quantities set forth below
shall be the quantities applicable for the entire term of this agreement.
Notwithstanding the foregoing, if during any period of this agreement the
quantity of product Warren is obligated to deliver to Buyer is prescribed by
government rules, regulations or orders, then the quantity of product covered by
this agreement shall be the quantity so prescribed for such period and Buyer
agrees to buy and Warren agrees to sell such quantity.
Volume (In Thousands of Gallons)
Minimum Maximum Minimum Maximum
April 50 100 October 50 100
-------- -------- --------- --------
May 50 100 November 50 100
-------- -------- --------- --------
June 50 100 December 50 100
-------- -------- --------- --------
July 50 100 January 50 100
-------- -------- --------- --------
August 50 100 February 50 100
-------- -------- --------- --------
September 50 100 March 50 100
-------- -------- --------- --------
For the purposes of determining compliance with the above quantity
schedule, purchase of product shall be allocated to the month in which shipment
is made. Should either party fail to comply in any amount with the above
schedule, the other party may elect to terminate this agreement by mailing
notice of such termination on or before the 20th of the succeeding month. If
the Buyer fails to purchase 100% of the above specified minimum monthly
quantities during any month or months of the period beginning April 1 and ending
September 30 and Warren does not elect to terminate this agreement, Warren shall
not be obligated hereunder to sell to Buyer in any of the succeeding six months
(October through March) more than one and one half times the average monthly
quantity which Buyer actually purchased during the preceding six-month period
(April through September), but in no event more than the maximum monthly
quantities shown for each of the months October through March.
When delivery is into tank trucks furnished by Buyer, the delivery ticket
showing the quantity delivered and measures in tank trucks shall be signed by
the loader at the point of origin as the agent of Warren and by the truck driver
as the agent of the Buyer; thereafter, such quantities shall be conclusively
presumed to have been delivered to Buyer.
Buyer agrees that on or before the 1st day of each month Warren will be
furnished with requisitions showing quantities required during such month,
delivery dates, and, when applicable, destinations of each shipment to be made
by Warren. Warren shall not be obligated to ship less than a tank car load or
less than a tank truck load.
Page 1 of 2
<PAGE>
3. METHOD OF DELIVERY: __X__ By tank trucks furnished by Buyer.
_____ By tank trucks owned or controlled by Buyer.
_____ By tank cars furnished by ____________ with a
capacity of ________ gallons each.
4. PRICES: Subject to General Provision No. 20 (Prices) of this agreement,
Buyer shall pay the applicable prices per gallon listed under "Price
Information" set forth hereinbelow for the product specified, unless and until
such prices are changed by written notice given in accordance with the
provisions hereof.
Said prices may be changed at any time and from time to time by Warren upon
written notice effective when deposited in the United States Mail, postage
prepaid and addressed to Buyer. However, if any such notice shall increase
Warren's price per gallon for the designated product to Buyer at any shipping
point or destination listed herein above Warren's highest price for such product
in effect thereat during the elapsed portion of the calendar year in which
Warren's notice is effective, Buyer may by written notice to Warren given and
effective within 15 days from the date of Warren's said notice, terminate this
contract with respect to such shipping point or destination.
If the sale is on the basis of a destination price and if delivery is into
tank trucks furnished by Buyer, the Buyer shall receive an allowance calculated
at the lowest applicable common carrier truck rate between shipping point and
actual destination.
PRICE INFORMATION
(Prices in effect as of November 24, 1986)
(Check if sale on /X/ shipping point basis or / / destination price basis)
Price in
Shipping Points Destinations Product cents/gallons
MT. BELVIEU, TX VARIOUS HD-5 PROPANE 21.00
5. ODORIZATION: All product sold and delivered hereunder shall be ordorized
unless delivery of unordorized product is permitted by law and there is in
effect a separate written agreement between Warren and Buyer providing for
the delivery of unodorized product.
6. SALE OF BUSINESS: The Buyer agrees that in the event of a sale of its LP-
gas business or substantially all of its assets used in its assets used in
its LP-gas business, Buyer will require the purchaser of such business or
such assets as a condition of the ale to assume the obligation of Buyer
under this agreement.
7. TRADEMARKS: Buyer acknowledges that the CHEVRON and WARRENGAS trademarks
are valuable rights belonging to Chevron Corporation and its subsidiaries,
including Chevron U.S.A. Inc., and that any use thereof by Buyer in
connection with this agreement is solely for the purposes of advertising
products obtained from such subsidiaries. Upon termination of this
agreement, Buyer agrees that it will make no further use of such trademarks
or any other mark, name or designs confusingly similar therewith.
8. APPORTIONMENT: Notwithstanding the obligations of this agreement, Warren
may apportion its available supply at a given location or in a stated area
among its customers in such manner as it may determine.
Page 2 of 2
<PAGE>
<TABLE>
Chevron Exhibit 10.20
WARREN PETROLEUM COMPANY PRODUCT SALES AGREEMENT
A Division of Chevron U.S.A. Inc.
Prepare in original and four copies.
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchaser Confirming Arrangements Made With
Empire Gas Corporation Paul Lindsay
- -------------------------------------------------------------------------------------------------------------------
Address Arrangements Made by Date
P.O. Box 303 L.C. Shull 6/1/93
- -------------------------------------------------------------------------------------------------------------------
Lebanon, MO 65536 Warren No. Purchaser No.
No. S 58558
- -------------------------------------------------------------------------------------------------------------------
1. Warren will sell the following during period of: 6/1/93 and thereafter (See Item No. 6 below)
- -------------------------------------------------------------------------------------------------------------------
Product Quantity Delivery Point Product Sale Price
- -------------------------------------------------------------------------------------------------------------------
Description Approx. Bbls. Measurement. Location Methods Cents/Gallon
(net @ 60 Degrees F) (see 2) (see 3)
- -------------------------------------------------------------------------------------------------------------------
Commercial Propane See AV1 Millis, WY
- -------------------------------------------------------------- ----------------------------------------
Attachment Origin
- -------------------------------------------------------------- ----------------------------------------
A
- -------------------------------------------------------------------------------------------------------------------
Nampa, ID AV1 See
- -------------------------------------------------------------------------------------------------------------------
Destination Attachment
- -------------------------------------------------------------- ----------------------------------------
A
- -------------------------------------------------------------------------------------------------------------------
2. Measurement (See General Provisions, Item 2) Basis: V -- Volumetric per API Tables 23 and 24 or 23A and
A. Trucks D. Ship or Barge 24A or 5A and 6A
--------- E. Inventory Transfer M -- Mass per GPA 8182
B. Tank Cars F. Other _________________ 1 -- Origin 2 - Destination
C. Pipeline
- -------------------------------------------------------------------------------------------------------------------
3. Methods
A. Trucks D. To Ship or Barge F. Other ___________________
--------- E. Inventory Transfer
B. To Tank Car
C. To Pipeline
- -------------------------------------------------------------------------------------------------------------------
4. Specifications
Commercial Propane, as per GPA specifications
- -------------------------------------------------------------------------------------------------------------------
5. Product: /X/ Stenched / / Unstenched
- -------------------------------------------------------------------------------------------------------------------
6. Terms
/ / Expires on ________________ /X/ Until 5/31/94 and continuing year to year thereafter unless and until
cancelled at the end of any year by either party giving the other at
least 60 days written notice prior to the proposed termination date.
- -------------------------------------------------------------------------------------------------------------------
7. Warren sends statements, invoices and shipping documentation to
Same as above
- -------------------------------------------------------------------------------------------------------------------
8. Terms of Payment
Net 10 days from date of invoice.
- -------------------------------------------------------------------------------------------------------------------
9. Special Provisions
The terms and conditions set forth in Attachment A to this Agreement are incorporated herein by reference and
made a part of this Agreement.
- -------------------------------------------------------------------------------------------------------------------
10. In addition to the above terms and conditions, the General Provisions of this Product Sales Agreement as set
forth on the reverse side hereof are incorporated herein by reference and made a part of this Agreement.
- -------------------------------------------------------------------------------------------------------------------
If you are in agreement with the foregoing terms and conditions, please so indicate by signing below and returning
one copy of the Agreement to Warren.
- -------------------------------------------------------------------------------------------------------------------
Accepted and Agreed to Warren Petroleum Company
A Division of Chevron U.S.A. Inc.
- -------------------------------------------------------------------------------------------------------------------
By /s/ Earl Noe By /s/ J.L. Gawronski
- -------------------------------------------------------------------------------------------------------------------
Title Date Title
J.L. Gawronski, Manager, Western District
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PRODUCT SALES AGREEMENT
GENERAL PROVISIONS
1. DELIVERIES
A. When delivery is point of origin, delivery shall be deemed to have
been completed:
1. To ships or barges when the product has passed the vessel's
loading flange;
2. To tank trucks when the product has actually been delivered into
the truck;
3. To tank cars when the carrier accepts the same for shipment;
4. To pipelines upon metering of the product.
B. When delivery is point of destination, delivery shall be deemed to
have been completed;
1. From ships or barges when the product has passed the vessel's
discharge flange;
2. From tank trucks when truck has been placed at buyer's facilities
for unloading;
3. From tank cars when carrier delivers same at the destination;
4. From pipeline upon metering of the product.
C. When by an in-line product transfer, delivery shall be deemed to have
been completed upon execution of the order by the pipeline carrier.
D. If any common or contract carrier trucks are used, Warren shall not be
liable to Buyer for quantity or quality of product. After completion
of loading at the point of origin, Buyer agrees that the handling,
care or use of product delivered as herein provided shall thereafter
be at Buyer's sole risk and expense.
2. MEASUREMENT -- Measurement shall be done in the manner customarily utilized
at the point of delivery so long as it is in accordance with one of the
following alternatives.
A. On all deliveries into/out of tank cars, the quantity shall be
determined by official tank car capacity tables, meters with no vapor
return, or by weighing, in accordance with GPA Publication 8162 and
all revisions thereof.
B. On all deliveries into/out of transport and tank truck equipment,
quantities shall be determined by meter with no vapor return, slip
tube, rotary gauging device or weighing, in accordance with GPA
Publication 8162 and all revisions thereof.
C. On all deliveries into/out of pipeline, quantity shall be determined
by turbine or positive displacement pipeline meter in accordance with
API Manual of Petroleum Measurement Standards and all revisions
thereof.
D. On all deliveries to/from ships or barges, shore tank or turbine or
positive displacement meter measurements shall determine quantity,
unless otherwise agreed upon. Use of meters shall not allow vapor
return.
E. All quantities shall be corrected to 60 degrees Fahrenheit and
equilibrium vapor pressure at 60 degrees Fahrenheit.
F. Volume and compressibility correction factors shall be determined from
referenced API tables or computer programs used to generate these
tables.
3. PASSAGE OF TITLE AND WARRANTY OF TITLE -- Title to the product and risk of
loss shall pass to Buyer upon delivery. Warren warrants to Buyer that it
has title to the product(s) delivered by it hereunder and the right to
deliver same, and agrees to indemnify, defend and hold the Buyer harmless
from and against any loss, claim or demand by reason of any failure of such
title or breach of this warranty. Except as set forth in this paragraph 3
and elsewhere herein, WARREN MAKES NO OTHER WARRANTY WITH RESPECT TO THE
PRODUCT OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE.
4. TAXES -- Any tax, duty, toll, fee, impost, charge or other exaction, or the
amount equivalent thereto, nor or hereafter imposed, levied or assessed by
any governmental authority upon, measured by, incident to or as a result of
the transaction herein provided for, or the transportation, importation,
production, manufacture, use or ownership of the goods or source materials
thereof which are the subject matter of this Agreement, shall, if
collectible or payable by Warren, be paid by Buyer on demand by Warren.
Notwithstanding the foregoing, it is understood and agreed that any
personal property taxes levied or assessed by any governmental authority
upon the value of the products covered by this Agreement shall be paid by
the party having title thereto at the time of such assessment. Buyer shall
furnish Warren proper exemption certificate where tax exemption is claimed
on any or all product(s) delivered hereunder, or shall pay such taxes.
5. FUTURE OBLIGATIONS -- Supplier/Purchaser Relationship -- This Agreement is
freely entered into between the parties hereto. It does not reflect or grow
out of any previously existing legal obligation which either party may have
to the other to supply any petroleum product. Part of the consideration for
this Agreement is each party's express agreement that neither party expects
or desires that this Agreement form the basis of any additional future
obligation of either party to supply any petroleum product to the other. To
the extent that under present or future laws or regulations this Agreement
may give rise to such obligations, each party hereby waives in advance its
right to enforce any such obligation and upon submittal of written notice
of termination by one party to the other under this Agreement, it is agreed
that both parties intend to terminate any such additional future
supplier/buyer relationship which may be created by this Agreement under
such laws or regulations. Additionally, at any time hereafter, the parties
agree to submit and/or execute documentation in compliance with the then
applicable laws and regulations as may be necessary to evidence said
termination insofar as the parties are concerned. The parties further agree
to obtain any other consents or authorization required under the then
applicable laws and regulations insofar as reasonably possible to give
effect to the intent hereof.
6. GOVERNMENT REGULATIONS & LAW -- Warren warrants that the product it
delivers hereunder will be produced and delivered in full compliance with
all applicable federal and state laws and regulations and all Presidential
Proclamations which may be applicable. This agreement shall be construed in
accordance with the laws of the State of Oklahoma including the Uniform
Commercial Code. Buyer agrees to comply with the provisions contained in
Exhibit "A" attached hereto, to the extent that such provisions are legally
applicable to Buyer.
7. FORCE MAJEURE -- If either party is rendered unable, wholly or in part, to
perform its obligations under this Agreement (other than to make payments
due hereunder) due to force majeure, defined herein as acts of God, flood,
fire, explosion or storm; transportation difficulty, strike, lockout or
other industrial disturbance; war or any law, rule, order or action of any
court or instrumentality of the federal or any state government;
exhaustion, reduction or unavailability of products from one or more of the
sources of supply from which deliveries are normally made hereunder, or
exhaustion or unavailability or delay in delivery of any material or
product necessary in the manufacture of the product(s) deliverable
hereunder; or any other cause or causes beyond its control whether similar
or dissimilar to those stated above, then in any such event, it is agreed
that the affected party shall give promptly after the occurrence of force
majeure notice and full particulars of such force majeure to the other
party, the obligations of the affected party shall be suspended for the
duration of such inability to perform but for no longer period, and such
cause shall, so far as possible, be remedied with all reasonable dispatch.
Force majeure shall also include the failure of any third party pipeline,
through no fault of the parties hereto, to accept the referenced products
for transportation to or from Warren's facilities.
8. ASSIGNMENT -- This Agreement shall extend to and be binding upon the
parties hereto, their heirs, executors, administrators, successors and
assigns; but it is expressly agreed that neither party shall voluntarily
assign this Agreement without the prior written consent of the other.
9. NOTICE -- Any notice hereunder shall be in writing and shall be delivered
personally, by mail, by telex, or by telegram to the address first
hereinabove set forth, unless changed by notice. Such notice shall be
deemed to have been given on the date of the delivery thereof.
10. WAIVER -- The waiver by either party of the breach of any provisions hereof
by the other party shall not be deemed to be a waiver of the breach of any
other provision or provisions hereof or of any subsequent or continuing
breach of such provisions or provisions.
11. ALTERATIONS -- No oral promises, agreements or warranties shall be deemed a
part hereof, nor shall any alteration or amendment of this Agreement, or
waiver of any of its provisions, be binding upon either party hereto unless
the same be in writing, signed by the party charged.
12. INSPECTION -- Unless otherwise specified, Buyer will provide gauging,
sampling, and testing at no charge to Warren. Either party may secure
outside inspectors to perform this work and if this is done, the payments
for these services will be shared equally among the parties unless some
other arrangement for payment is mutually agreed upon.
13. MARINE PROVISIONS -- If delivery of any products hereunder is to be
accomplished by waterborne transportation, the provisions set out in the
"Marine Provisions" attached hereto and made a part hereof shall apply to
such deliveries.
14. INVOICES AND TERMS OF PAYMENT -- Invoices will be prepared by Warren and
transmitted to the Buyer from time to time during the month. Unless
otherwise specified, payment is due within ten (10) days after receipt of
invoice.
15. FINANCIAL RESPONSIBILITY -- If in the judgment of Warren the financial
responsibility of Buyer becomes impaired or unsatisfactory, advance cash
payments or acceptable security (including, but not limited to a letter of
credit from a financial institution acceptable to Warren) shall be given by
Buyer upon demand of Warren, and Buyer's failure to abide by the provisions
of this Paragraph shall be considered a breach hereof and in such event
payment for all products delivered hereunder shall be due and owing and
shall be paid immediately, and Warren may without waiving any rights or
remedies it may have, without further deliveries until such payment or
security is received. Buyer's duty to provide the hereinabove credit
assurance shall be a condition precedent to Warren's obligation to perform
under this agreement.
16. CONFLICTS OF INTEREST -- No director, employee or agent of either party
shall give or receive any commission, fee, rebate, gift or entertainment of
significant cost or value in connection with this Agreement. Any
representative(s) authorized by either party may audit the applicable
records of the other party solely for the purpose of determining whether
there has been compliance with this paragraph.
17. AUDIT -- Each party and its duly authorized representatives shall have
access to the accounting records and other documents maintained by the
other party which related to the product being delivered to the other party
under this Agreement and shall have the right to audit such records once a
year at any reasonable time or times during the term of this Agreement and
for two years after the year in which this Agreement terminates. Neither
party shall make claim on the other for any adjustment after said two-year
period.
18. QUALITY -- Any requirements of customer pertaining to potential
contaminants and/or specific hydrocarbon composition not listed in Warren's
product specification must be identified by customer and allowable
concentrations agreed to in writing by both parties prior to delivery of
product to be effective under this Agreement.
19. WARREN'S TANK CARS -- Unless Warren's tank care are unloaded and returned
to railroad, Buyer shall be liable to Warren for rental at the rate of
_______________ for each day or fraction thereof in excess of _________
days (LPG cars). Tank cars shall not be diverted without Warren's written
consent.
20. PRICES -- Prices at destination include allowance for transportation
charges at lowest applicable common carrier rate between shipping point and
actual destination. Warren reserves the right to add other shipping points
and to change the shipping points on which destination prices are based.
Notice of any such additions or changes in shipping points shall be given
to Buyer in writing and unless objected to within ten days after receipt,
said shipping points shall be deemed accepted by Buyer. Deletions of
shipping points shall be made in like manner with like effect. Destination
prices are subject to adjustment with changes in common carrier freight
rates and any changes in applicable freight rates shall be for Buyer's
account. Unless otherwise provided, if common carrier is employed,
transportation charges shall be paid by consignee directly to carrier.
If prices are based on quotations in industry publications, quotations
published on dates of shipment shall apply. If no quotations of shipment
are published in designated industry publication, the last previous
quotations in such publication shall govern.
<PAGE>
ATTACHMENT A TO
PRODUCT SALES AGREEMENT No. 58558
1. SHORTAGE OF PRODUCTS. Due to uncertainties in the supply/demand situation,
Warren may not have sufficient supplies of product to be delivered hereunder to
meet the full requirements of all of its customers, contract or otherwise.
Whenever that situation exists, Warren shall have, in addition to any other
rights Warren may have under this Agreement, the right to reduce deliveries of
such product on any basis which in Warren's opinion is equitable, allowing for
such priorities to such classes of customers as Warren deems appropriate. If any
such reduction occurs, Buyer shall have the option to terminate this Agreement
as to any or all products by fifteen (15) day's notice, given within thirty (30)
days of the notice of reduction.
2. PRODUCT HAZARDS. Buyer acknowledges receipt of Warren's Safety Bulletin
for odorized propane and is knowledgeable of the hazards or risks in handling or
using the product. Buyer warrants that Buyer shall inform its employees,
contractors and customers of any hazards or risks associated with the product.
3. CONDUCT OF BUYER'S BUSINESS. Buyer in the performance of this Agreement is
engaged in an independent business and nothing herein contained shall be
construed as giving Warren any right to control Buyer in any way in its
performance of its business. Warren has no right to exercise control over any of
Buyer's employees. All employees of Buyer shall be entirely under the control
and direction of Buyer who shall be responsible for their actions and omissions.
4. PAYMENT. If payment is not made within the time allowed under this
Agreement, then Warren may charge interest on the unpaid balance at the lesser
of 1 1/2% per month or the highest rate permitted by Oklahoma law and Warren
shall be entitled to recover in any court in Oklahoma its reasonable costs of
collection, including attorney's fees.
5. U.S. GOVERNMENT SUBCONTRACT REQUIREMENTS. If this contract is a
subcontract under contract(s) with the United States Government, it incorporated
by this reference, and each party shall always comply with, all provisions
required by United States laws, regulations, and orders applicable to a covered
subcontract, including (without limitation) those relating to equal employment
opportunity, utilization of minority business enterprises, listing of employment
openings, employment of the handicapped and maintenance of nonsegregated
facilities.
6. PRICES. Product and freight prices hereunder may be changed at any time by
Warren upon written notice effective when deposited in the United States mail,
faxed or otherwise transmitted to customer. If any such notice shall increase
Warren's price to Buyer at any shipping point or destination above Warren's
highest price for such product or freight in effect during the elapsed portion
of the calendar year in which Warren's notice is effective, Buyer may be written
notice to Warren given and effective within fifteen (15) days from the date of
Warren's notice, terminate this contract with respect to such shipping point or
destination.
7. ODORIZATION. Unless otherwise specifically agreed in writing, Buyer hereby
requests that the propane sold hereunder be odorized with 1.5lbs. of ethyl
mercaptan per 10,000 gallons. Buyer warrants that compliance with its request
will satisfy all applicable legal requirements, and agrees to monitor and
maintain the stench at or above the legally required levels.
8. SALE OF BUSINESS. The Buyer agrees that in the event of a sale of its LP-
gas business or substantially all of the assets used in its LP-business, Buyer
will require the purchaser of such assets as a condition of the sale to assume
the obligation of Buyer under this agreement.
9. TRADEMARK. Buyer acknowledges that the CHEVRON and WARRENGAS Trademarks
are valuable property rights belonging to Chevron Corporation and its
subsidiaries, including Chevron U.S.A. Inc. and that any use thereof by Buyer in
connection with this agreement is solely for the purposes of advertising
products obtained from such subsidiaries. Upon termination of this agreement,
Buyer agrees that it will make no further use of such trademarks or any other
mark name or designs confusingly similar herewith.
<PAGE>
10. QUANTITY. During the term hereof, Buyer agrees to buy the product herein
specified in monthly quantities of not less than the minimum set forth below and
Warren agrees to sell said quantities to Buyer. Buyer shall purchase such
quantities as evenly as possible during each month. If during any period of this
agreement the quantity of product Warren is obligated to deliver to Buyer is
prescribed by government rules, regulations or orders, then the quantity of
product covered by this agreement shall be the quantity so prescribed for such
period and Buyer agrees to buy and Warren agrees to sell such quantity.
Volume (In Thousands of Gallons)
Minimum Maximum Minimum Maximum
April 20 30 October 20 30
------- ------- ------- -------
May 20 30 November 20 30
------- ------- ------- -------
June 20 30 December 20 30
------- ------- ------- -------
July 20 30 January 20 30
------- ------- ------- -------
August 20 30 February 20 30
------- ------- ------- -------
September 20 30 March 20 30
------- ------- ------- -------
For the purpose of determining compliance with the above quantity schedule,
purchase of product shall be allocated to the month in which shipment is made.
Should either party fail to comply in any amount with the above schedule, the
other party may elect to terminate this agreement by mailing notice of such
termination on or before the 20th day of the succeeding month. If the Buyer
fails to purchase 100% of the above specified minimum monthly quantities during
any month or months and Warren does not elect to terminate this agreement,
Warren shall not be obligated hereunder to sell to Buyer in any of the
succeeding six months more than one and one half times the average monthly
quantity which Buyer actually purchased during the preceding six-month period.
When delivery is into tank trucks furnished by Buyer, the delivery ticket
showing the quantity delivered shall be signed by the loader as the agent of
Warren and by the truck driver as the agent of the Buyer; such quantities shall
be conclusively presumed to have been delivered to Buyer.
On or before the 1st day of each month Buyer shall inform Warren of
quantities required during such month, delivery dates, and when applicable,
destinations of each shipment, Warren shall not be obligated to ship less than a
tank car or tank truck load.
11. METHOD OF DELIVERY: By tank trucks furnished by Buyer.
-----------
X By tank trucks furnished by Warren.
-----------
By tank trucks furnished by _________
----------- with a capacity of ____ gallons each.
PRICE INFORMATION
Prices in effect as of 6/1 , 1993
-------
Sale based on / / shipping point price or X destination price
<TABLE>
<CAPTION>
Shipping or Price in
Pricing Points Destinations Product cents/ gallons Freight Charges
<S> <C> <C> <C> <C>
Millis, Wy Nampa, ID Comm. Propane *31.00 CENTS *10.65 CENTS
<FN>
*Price subject to change
</TABLE>
<PAGE>
Chevron Warren Petroleum Company
112 J. Street, Suite 300
Sacramento, CA 95814
916-557-1088
FAX 916-557-1093
Marketing Department
July 22, 1993
Mr. Paul Lindsay
Empire Gas Corporation
P.O. Box 303
Lebanon, MO 65536
Dear Paul:
Enclosed please find four (4) copies of an Indemnity Agreement which should be
attached to our Product Sales Agreements 58558 and 58559. After executing the
agreements, please return the pink copies to our office.
Thank you for your prompt attention to this matter.
Sincerely,
/s/ Leslie C. Shull
L.C. Shull
Sales Representative
Western District D&I Sales
LCS:ec
Enclosures
<PAGE>
INDEMNITY AGREEMENT
Warren Petroleum Company and Empire Gas Corporation shall each indemnify, and
hold harmless the other, its agents and employees, from and against each and
every claim, demand, or cause of action and any and all liability, costs,
expense (including, but not limited to, reasonable attorney's fees), damage, or
loss in connection therewith which may be made or asserted by that party or any
third parties on account of personal injury, death, or property damage caused
by, arising out of, or in any way incidental to or in connection with that
party's performance under the Contract (whether such performance was complete,
partial, or nonexistent), but only if such injury, death or property damage is
the result of that party's fault or negligence.
Any party hereto having a claim for indemnification against the other party
shall give written notice specifying the nature and amount of such claim as soon
as possible after the claim is asserted, and no such claim shall be waived or
forfeited by either party's failure to give such notice within a certain period
of time unless notice is not given prior to trial or settlement of the claim or
as required by law.
7-15-93
Sales Agreement 58558
/s/ J.L. Gawronski /s/ Earl Noe
- ------------------ -------------
Warren Empire Gas
Petroleum
Company
<PAGE>
<TABLE>
Chevron Exhibit 10.21
WARREN PETROLEUM COMPANY PRODUCT SALES AGREEMENT
A Division of Chevron U.S.A. Inc.
Prepare in original and four copies.
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchaser Confirming Arrangements Made With
Empire Gas Corporation Paul Lindsay
- -------------------------------------------------------------------------------------------------------------------
Address Arrangements Made by Date
P.O. Box 303 L.C. Shull 6/1/93
- -------------------------------------------------------------------------------------------------------------------
Lebanon, MO 65536 Warren No. Purchaser No.
No. S 58559
- -------------------------------------------------------------------------------------------------------------------
1. Warren will sell the following during period of: 6/1/93 and thereafter (See Item No. 6 below)
- -------------------------------------------------------------------------------------------------------------------
Product Quantity Delivery Point Product Sale Price
- -------------------------------------------------------------------------------------------------------------------
Description Approx. Bbls. Measurement. Location Methods Cents/Gallon
(net @ 60 Degrees F) (see 2) (see 3)
- -------------------------------------------------------------------------------------------------------------------
Commercial Propane See AV1 Wingate, AZ
- -------------------------------------------------------------- ----------------------------------------
Attachment Origin
- -------------------------------------------------------------- ----------------------------------------
A
- -------------------------------------------------------------------------------------------------------------------
Globe, AZ AV1 See
- -------------------------------------------------------------------------------------------------------------------
Destination Attachment
- -------------------------------------------------------------- ----------------------------------------
A
- -------------------------------------------------------------------------------------------------------------------
2. Measurement (See General Provisions, Item 2) Basis: V -- Volumetric per API Tables 23 and 24 or 23A and
A. Trucks D. Ship or Barge 24A or 5A and 6A
--------- E. Inventory Transfer M -- Mass per GPA 8182
B. Tank Cars F. Other _________________ 1 -- Origin 2 - Destination
C. Pipeline
- -------------------------------------------------------------------------------------------------------------------
3. Methods
A. Trucks D. To Ship or Barge F. Other ___________________
--------- E. Inventory Transfer
B. To Tank Car
C. To Pipeline
- -------------------------------------------------------------------------------------------------------------------
4. Specifications
Commercial Propane, as per GPA specifications
- -------------------------------------------------------------------------------------------------------------------
5. Product: /X/ Stenched / / Unstenched
- -------------------------------------------------------------------------------------------------------------------
6. Terms
/ / Expires on ________________ /X/ Until 5/31/94 and continuing year to year thereafter unless and until
cancelled at the end of any year by either party giving the other at
least 60 days written notice prior to the proposed termination date.
- -------------------------------------------------------------------------------------------------------------------
7. Warren sends statements, invoices and shipping documentation to
Same as above
- -------------------------------------------------------------------------------------------------------------------
8. Terms of Payment
Net 10 days from date of invoice.
- -------------------------------------------------------------------------------------------------------------------
9. Special Provisions
The terms and conditions set forth in Attachment A to this Agreement are incorporated herein by reference and
made a part of this Agreement.
- -------------------------------------------------------------------------------------------------------------------
10. In addition to the above terms and conditions, the General Provisions of this Product Sales Agreement as set
forth on the reverse side hereof are incorporated herein by reference and made a part of this Agreement.
- -------------------------------------------------------------------------------------------------------------------
If you are in agreement with the foregoing terms and conditions, please so indicate by signing below and returning
one copy of the Agreement to Warren.
- -------------------------------------------------------------------------------------------------------------------
Accepted and Agreed to Warren Petroleum Company
A Division of Chevron U.S.A. Inc.
- -------------------------------------------------------------------------------------------------------------------
By /s/ Earl Noe By /s/ J.L. Gawronski
- -------------------------------------------------------------------------------------------------------------------
Title Date Title
J.L. Gawronski, Manager, Western District
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PRODUCT SALES AGREEMENT
GENERAL PROVISIONS
1. DELIVERIES
A. When delivery is point of origin, delivery shall be deemed to have
been completed:
1. To ships or barges when the product has passed the vessel's
loading flange;
2. To tank trucks when the product has actually been delivered into
the truck;
3. To tank cars when the carrier accepts the same for shipment;
4. To pipelines upon metering of the product.
B. When delivery is point of destination, delivery shall be deemed to
have been completed;
1. From ships or barges when the product has passed the vessel's
discharge flange;
2. From tank trucks when truck has been placed at buyer's facilities
for unloading;
3. From tank cars when carrier delivers same at the destination;
4. From pipeline upon metering of the product.
C. When by an in-line product transfer, delivery shall be deemed to have
been completed upon execution of the order by the pipeline carrier.
D. If any common or contract carrier trucks are used, Warren shall not be
liable to Buyer for quantity or quality of product. After completion
of loading at the point of origin, Buyer agrees that the handling,
care or use of product delivered as herein provided shall thereafter
be at Buyer's sole risk and expense.
2. MEASUREMENT -- Measurement shall be done in the manner customarily utilized
at the point of delivery so long as it is in accordance with one of the
following alternatives.
A. On all deliveries into/out of tank cars, the quantity shall be
determined by official tank car capacity tables, meters with no vapor
return, or by weighing, in accordance with GPA Publication 8162 and
all revisions thereof.
B. On all deliveries into/out of transport and tank truck equipment,
quantities shall be determined by meter with no vapor return, slip
tube, rotary gauging device or weighing, in accordance with GPA
Publication 8162 and all revisions thereof.
C. On all deliveries into/out of pipeline, quantity shall be determined
by turbine or positive displacement pipeline meter in accordance with
API Manual of Petroleum Measurement Standards and all revisions
thereof.
D. On all deliveries to/from ships or barges, shore tank or turbine or
positive displacement meter measurements shall determine quantity,
unless otherwise agreed upon. Use of meters shall not allow vapor
return.
E. All quantities shall be corrected to 60 degrees Fahrenheit and
equilibrium vapor pressure at 60 degrees Fahrenheit.
F. Volume and compressibility correction factors shall be determined from
referenced API tables or computer programs used to generate these
tables.
3. PASSAGE OF TITLE AND WARRANTY OF TITLE -- Title to the product and risk of
loss shall pass to Buyer upon delivery. Warren warrants to Buyer that it
has title to the product(s) delivered by it hereunder and the right to
deliver same, and agrees to indemnify, defend and hold the Buyer harmless
from and against any loss, claim or demand by reason of any failure of such
title or breach of this warranty. Except as set forth in this paragraph 3
and elsewhere herein, WARREN MAKES NO OTHER WARRANTY WITH RESPECT TO THE
PRODUCT OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE.
4. TAXES -- Any tax, duty, toll, fee, impost, charge or other exaction, or the
amount equivalent thereto, nor or hereafter imposed, levied or assessed by
any governmental authority upon, measured by, incident to or as a result of
the transaction herein provided for, or the transportation, importation,
production, manufacture, use or ownership of the goods or source materials
thereof which are the subject matter of this Agreement, shall, if
collectible or payable by Warren, be paid by Buyer on demand by Warren.
Notwithstanding the foregoing, it is understood and agreed that any
personal property taxes levied or assessed by any governmental authority
upon the value of the products covered by this Agreement shall be paid by
the party having title thereto at the time of such assessment. Buyer shall
furnish Warren proper exemption certificate where tax exemption is claimed
on any or all product(s) delivered hereunder, or shall pay such taxes.
5. FUTURE OBLIGATIONS -- Supplier/Purchaser Relationship -- This Agreement is
freely entered into between the parties hereto. It does not reflect or grow
out of any previously existing legal obligation which either party may have
to the other to supply any petroleum product. Part of the consideration for
this Agreement is each party's express agreement that neither party expects
or desires that this Agreement form the basis of any additional future
obligation of either party to supply any petroleum product to the other. To
the extent that under present or future laws or regulations this Agreement
may give rise to such obligations, each party hereby waives in advance its
right to enforce any such obligation and upon submittal of written notice
of termination by one party to the other under this Agreement, it is agreed
that both parties intend to terminate any such additional future
supplier/buyer relationship which may be created by this Agreement under
such laws or regulations. Additionally, at any time hereafter, the parties
agree to submit and/or execute documentation in compliance with the then
applicable laws and regulations as may be necessary to evidence said
termination insofar as the parties are concerned. The parties further agree
to obtain any other consents or authorization required under the then
applicable laws and regulations insofar as reasonably possible to give
effect to the intent hereof.
6. GOVERNMENT REGULATIONS & LAW -- Warren warrants that the product it
delivers hereunder will be produced and delivered in full compliance with
all applicable federal and state laws and regulations and all Presidential
Proclamations which may be applicable. This agreement shall be construed in
accordance with the laws of the State of Oklahoma including the Uniform
Commercial Code. Buyer agrees to comply with the provisions contained in
Exhibit "A" attached hereto, to the extent that such provisions are legally
applicable to Buyer.
7. FORCE MAJEURE -- If either party is rendered unable, wholly or in part, to
perform its obligations under this Agreement (other than to make payments
due hereunder) due to force majeure, defined herein as acts of God, flood,
fire, explosion or storm; transportation difficulty, strike, lockout or
other industrial disturbance; war or any law, rule, order or action of any
court or instrumentality of the federal or any state government;
exhaustion, reduction or unavailability of products from one or more of the
sources of supply from which deliveries are normally made hereunder, or
exhaustion or unavailability or delay in delivery of any material or
product necessary in the manufacture of the product(s) deliverable
hereunder; or any other cause or causes beyond its control whether similar
or dissimilar to those stated above, then in any such event, it is agreed
that the affected party shall give promptly after the occurrence of force
majeure notice and full particulars of such force majeure to the other
party, the obligations of the affected party shall be suspended for the
duration of such inability to perform but for no longer period, and such
cause shall, so far as possible, be remedied with all reasonable dispatch.
Force majeure shall also include the failure of any third party pipeline,
through no fault of the parties hereto, to accept the referenced products
for transportation to or from Warren's facilities.
8. ASSIGNMENT -- This Agreement shall extend to and be binding upon the
parties hereto, their heirs, executors, administrators, successors and
assigns; but it is expressly agreed that neither party shall voluntarily
assign this Agreement without the prior written consent of the other.
9. NOTICE -- Any notice hereunder shall be in writing and shall be delivered
personally, by mail, by telex, or by telegram to the address first
hereinabove set forth, unless changed by notice. Such notice shall be
deemed to have been given on the date of the delivery thereof.
10. WAIVER -- The waiver by either party of the breach of any provisions hereof
by the other party shall not be deemed to be a waiver of the breach of any
other provision or provisions hereof or of any subsequent or continuing
breach of such provisions or provisions.
11. ALTERATIONS -- No oral promises, agreements or warranties shall be deemed a
part hereof, nor shall any alteration or amendment of this Agreement, or
waiver of any of its provisions, be binding upon either party hereto unless
the same be in writing, signed by the party charged.
12. INSPECTION -- Unless otherwise specified, Buyer will provide gauging,
sampling, and testing at no charge to Warren. Either party may secure
outside inspectors to perform this work and if this is done, the payments
for these services will be shared equally among the parties unless some
other arrangement for payment is mutually agreed upon.
13. MARINE PROVISIONS -- If delivery of any products hereunder is to be
accomplished by waterborne transportation, the provisions set out in the
"Marine Provisions" attached hereto and made a part hereof shall apply to
such deliveries.
14. INVOICES AND TERMS OF PAYMENT -- Invoices will be prepared by Warren and
transmitted to the Buyer from time to time during the month. Unless
otherwise specified, payment is due within ten (10) days after receipt of
invoice.
15. FINANCIAL RESPONSIBILITY -- If in the judgment of Warren the financial
responsibility of Buyer becomes impaired or unsatisfactory, advance cash
payments or acceptable security (including, but not limited to a letter of
credit from a financial institution acceptable to Warren) shall be given by
Buyer upon demand of Warren, and Buyer's failure to abide by the provisions
of this Paragraph shall be considered a breach hereof and in such event
payment for all products delivered hereunder shall be due and owing and
shall be paid immediately, and Warren may without waiving any rights or
remedies it may have, without further deliveries until such payment or
security is received. Buyer's duty to provide the hereinabove credit
assurance shall be a condition precedent to Warren's obligation to perform
under this agreement.
16. CONFLICTS OF INTEREST -- No director, employee or agent of either party
shall give or receive any commission, fee, rebate, gift or entertainment of
significant cost or value in connection with this Agreement. Any
representative(s) authorized by either party may audit the applicable
records of the other party solely for the purpose of determining whether
there has been compliance with this paragraph.
17. AUDIT -- Each party and its duly authorized representatives shall have
access to the accounting records and other documents maintained by the
other party which related to the product being delivered to the other party
under this Agreement and shall have the right to audit such records once a
year at any reasonable time or times during the term of this Agreement and
for two years after the year in which this Agreement terminates. Neither
party shall make claim on the other for any adjustment after said two-year
period.
18. QUALITY -- Any requirements of customer pertaining to potential
contaminants and/or specific hydrocarbon composition not listed in Warren's
product specification must be identified by customer and allowable
concentrations agreed to in writing by both parties prior to delivery of
product to be effective under this Agreement.
19. WARREN'S TANK CARS -- Unless Warren's tank care are unloaded and returned
to railroad, Buyer shall be liable to Warren for rental at the rate of
_______________ for each day or fraction thereof in excess of ________ days
(LPG cars). Tank cars shall not be diverted without Warren's written
consent.
20. PRICES -- Prices at destination include allowance for transportation
charges at lowest applicable common carrier rate between shipping point and
actual destination. Warren reserves the right to add other shipping points
and to change the shipping points on which destination prices are based.
Notice of any such additions or changes in shipping points shall be given
to Buyer in writing and unless objected to within ten days after receipt,
said shipping points shall be deemed accepted by Buyer. Deletions of
shipping points shall be made in like manner with like effect. Destination
prices are subject to adjustment with changes in common carrier freight
rates and any changes in applicable freight rates shall be for Buyer's
account. Unless otherwise provided, if common carrier is employed,
transportation charges shall be paid by consignee directly to carrier.
If prices are based on quotations in industry publications, quotations
published on dates of shipment shall apply. If no quotations of shipment
are published in designated industry publication, the last previous
quotations in such publication shall govern.
<PAGE>
ATTACHMENT A TO
PRODUCT SALES AGREEMENT No. 58559
1. SHORTAGE OF PRODUCTS. Due to uncertainties in the supply/demand situation,
Warren may not have sufficient supplies of product to be delivered hereunder to
meet the full requirements of all of its customers, contract or otherwise.
Whenever that situation exists, Warren shall have, in addition to any other
rights Warren may have under this Agreement, the right to reduce deliveries of
such product on any basis which in Warren's opinion is equitable, allowing for
such priorities to such classes of customers as Warren deems appropriate. If any
such reduction occurs, Buyer shall have the option to terminate this Agreement
as to any or all products by fifteen (15) day's notice, given within thirty (30)
days of the notice of reduction.
2. PRODUCT HAZARDS. Buyer acknowledges receipt of Warren's Safety Bulletin
for odorized propane and is knowledgeable of the hazards or risks in handling or
using the product. Buyer warrants that Buyer shall inform its employees,
contractors and customers of any hazards or risks associated with the product.
3. CONDUCT OF BUYER'S BUSINESS. Buyer in the performance of this Agreement is
engaged in an independent business and nothing herein contained shall be
construed as giving Warren any right to control Buyer in any way in its
performance of its business. Warren has no right to exercise control over any of
Buyer's employees. All employees of Buyer shall be entirely under the control
and direction of Buyer who shall be responsible for their actions and omissions.
4. PAYMENT. If payment is not made within the time allowed under this
Agreement, then Warren may charge interest on the unpaid balance at the lesser
of 1 1/2% per month or the highest rate permitted by Oklahoma law and Warren
shall be entitled to recover in any court in Oklahoma its reasonable costs of
collection, including attorney's fees.
5. U.S. GOVERNMENT SUBCONTRACT REQUIREMENTS. If this contract is a
subcontract under contract(s) with the United States Government, it incorporated
by this reference, and each party shall always comply with, all provisions
required by United States laws, regulations, and orders applicable to a covered
subcontract, including (without limitation) those relating to equal employment
opportunity, utilization of minority business enterprises, listing of employment
openings, employment of the handicapped and maintenance of nonsegregated
facilities.
6. PRICES. Product and freight prices hereunder may be changed at any time by
Warren upon written notice effective when deposited in the United States mail,
faxed or otherwise transmitted to customer. If any such notice shall increase
Warren's price to Buyer at any shipping point or destination above Warren's
highest price for such product or freight in effect during the elapsed portion
of the calendar year in which Warren's notice is effective, Buyer may be written
notice to Warren given and effective within fifteen (15) days from the date of
Warren's notice, terminate this contract with respect to such shipping point or
destination.
7. ODORIZATION. Unless otherwise specifically agreed in writing, Buyer hereby
requests that the propane sold hereunder be odorized with 1.5lbs. of ethyl
mercaptan per 10,000 gallons. Buyer warrants that compliance with its request
will satisfy all applicable legal requirements, and agrees to monitor and
maintain the stench at or above the legally required levels.
8. SALE OF BUSINESS. The Buyer agrees that in the event of a sale of its LP-
gas business or substantially all of the assets used in its LP-business, Buyer
will require the purchaser of such assets as a condition of the sale to assume
the obligation of Buyer under this agreement.
9. TRADEMARK. Buyer acknowledges that the CHEVRON and WARRENGAS Trademarks
are valuable property rights belonging to Chevron Corporation and its
subsidiaries, including Chevron U.S.A. Inc. and that any use thereof by Buyer in
connection with this agreement is solely for the purposes of advertising
products obtained from such subsidiaries. Upon termination of this agreement,
Buyer agrees that it will make no further use of such trademarks or any other
mark name or designs confusingly similar herewith.
<PAGE>
10. QUANTITY. During the term hereof, Buyer agrees to buy the product herein
specified in monthly quantities of not less than the minimum set forth below and
Warren agrees to sell said quantities to Buyer. Buyer shall purchase such
quantities as evenly as possible during each month. If during any period of this
agreement the quantity of product Warren is obligated to deliver to Buyer is
prescribed by government rules, regulations or orders, then the quantity of
product covered by this agreement shall be the quantity so prescribed for such
period and Buyer agrees to buy and Warren agrees to sell such quantity.
Volume (In Thousands of Gallons)
Minimum Maximum Minimum Maximum
April 20 40 October 20 40
------- ------- ------- -------
May 20 40 November 20 40
------- ------- ------- -------
June 20 40 December 20 40
------- ------- ------- -------
July 20 40 January 20 40
------- ------- ------- -------
August 20 40 February 20 40
------- ------- ------- -------
September 20 40 March 20 40
------- ------- ------- -------
For the purpose of determining compliance with the above quantity schedule,
purchase of product shall be allocated to the month in which shipment is made.
Should either party fail to comply in any amount with the above schedule, the
other party may elect to terminate this agreement by mailing notice of such
termination on or before the 20th day of the succeeding month. If the Buyer
fails to purchase 100% of the above specified minimum monthly quantities during
any month or months and Warren does not elect to terminate this agreement,
Warren shall not be obligated hereunder to sell to Buyer in any of the
succeeding six months more than one and one half times the average monthly
quantity which Buyer actually purchased during the preceding six-month period.
When delivery is into tank trucks furnished by Buyer, the delivery ticket
showing the quantity delivered shall be signed by the loader as the agent of
Warren and by the truck driver as the agent of the Buyer; such quantities shall
be conclusively presumed to have been delivered to Buyer.
On or before the 1st day of each month Buyer shall inform Warren of
quantities required during such month, delivery dates, and when applicable,
destinations of each shipment, Warren shall not be obligated to ship less than a
tank car or tank truck load.
11. METHOD OF DELIVERY: By tank trucks furnished by Buyer.
-----------
X By tank trucks furnished by Warren.
-----------
By tank trucks furnished by _________
----------- with a capacity of ____ gallons each.
PRICE INFORMATION
Prices in effect as of 6/1 , 1993
Sale based on / / shipping point price or X destination price
<TABLE>
<CAPTION>
Shipping or Price in
Pricing Points Destinations Product cents/ gallons Freight Charges
<S> <C> <C> <C> <C>
Wingate, Az Globe, AZ Comm. Propane *35.00 CENTS *7.44 CENTS
<FN>
*Price subject to change
</TABLE>
<PAGE>
Chevron Warren Petroleum Company
112 J. Street, Suite 300
Sacramento, CA 95814
916-557-1088
FAX 916-557-1093
Marketing Department
July 22, 1993
Mr. Paul Lindsay
Empire Gas Corporation
P.O. Box 303
Lebanon, MO 65536
Dear Paul:
Enclosed please find four (4) copies of an Indemnity Agreement which should be
attached to our Product Sales Agreements 58558 and 58559. After executing the
agreements, please return the pink copies to our office.
Thank you for your prompt attention to this matter.
Sincerely,
/s/ Leslie C. Shull
L.C. Shull
Sales Representative
Western District D&I Sales
LCS:ec
Enclosures
<PAGE>
INDEMNITY AGREEMENT
Warren Petroleum Company and Empire Gas Corporation shall each indemnify, and
hold harmless the other, its agents and employees, from and against each and
every claim, demand, or cause of action and any and all liability, costs,
expense (including, but not limited to, reasonable attorney's fees), damage, or
loss in connection therewith which may be made or asserted by that party or any
third parties on account of personal injury, death, or property damage caused
by, arising out of, or in any way incidental to or in connection with that
party's performance under the Contract (whether such performance was complete,
partial, or nonexistent), but only if such injury, death or property damage is
the result of that party's fault or negligence.
Any party hereto having a claim for indemnification against the other party
shall give written notice specifying the nature and amount of such claim as soon
as possible after the claim is asserted, and no such claim shall be waived or
forfeited by either party's failure to give such notice within a certain period
of time unless notice is not given prior to trial or settlement of the claim or
as required by law.
7-15-93
Sales Agreement 58559
/s/ J.L. Gawronski /s/ Earl Noe
- ------------------ -------------
Warren Empire Gas
Petroleum
Company
<PAGE>
SUBSIDIARIES OF THE COMPANY
EMPIRE GAS CORPORATION MO
EMPIRE GAS OPERATING CORPORATION# MO
EMPIREGAS INC. OF LINCOLN AR
EMPIREGAS INC. OF SILOAM SPRINGS AR
EMPIREGAS INC. OF WARREN AR
EMPIREGAS INC. OF GLOBE AZ
EMPIREGAS INC. OF ELSINORE CA
EMPIREGAS INC. OF ESCONDIDO CA
EMPIREGAS INC. OF LOS ANGELES CA
EMPIREGAS INC. OF MODESTO CA
EMPIREGAS INC. OF SANTA PAULA CA
EMPIREGAS INC. OF PLACERVILLE CA
EMPIREGAS INC. OF POMONA CA
EMPIREGAS INC. OF SACRAMENTO CA
EMPIREGAS INC. OF SUSANVILLE CA
EMPIREGAS INC. OF YUCCA VALLEY CA
EMPIREGAS INC. OF BOULDER CO
EMPIREGAS INC. OF CANON CITY CO
EMPIREGAS INC. OF CASTLE ROCK CO
EMPIREGAS INC. OF COLORADO SPRINGS CO
EMPIREGAS INC. OF DENVER CO
EMPIREGAS INC. OF EVERGREEN CO
SALGAS INC. OF FAIRPLAY CO
EMPIREGAS INC. OF FORT COLLINS CO
EMPIREGAS INC. OF FOWLER CO
EMPIREGAS INC. OF GREELEY CO
EMPIREGAS INC. OF GRAND JUNCTION CO
EMPIREGAS INC. OF LONGMONT CO
EMPIREGAS INC. OF LOVELAND CO
EMPIREGAS INC. OF MONTE VISTA CO
EMPIREGAS INC. OF PUEBLO CO
EMPIREGAS INC. OF WOODLAND PARK CO
SALGAS INC. OF GUNNISON CO
SALIDA GAS CO., INC. DE
GINCO GAS COMPANY INC. CO
EMPIREGAS INC. OF BOISE ID
EMPIREGAS INC. OF BREMERTON WA
EMPIREGAS INC. OF CLINTON, ILL DE
EMPIREGAS INC. OF GALVA DE
EMPIREGAS INC. OF HOOPESTON DE
EMPIREGAS INC. OF JACKSONVILLE DE
EMPIREGAS INC. OF VANDALIA DE
EMPIREGAS INC. OF BRANDON IA
EMPIREGAS INC. OF CENTERVILLE IA
1
<PAGE>
EMPIREGAS INC. OF HORNICK IA
EMPIREGAS INC. OF ONAWA IA
EMPIREGAS INC. OF TIPTON IA
EMPIREGAS INC. OF WAUKON IA
EMPIREGAS INC. OF ARMA KS
EMPIREGAS INC. OF ARNAUDVILLE LA
EMPIREGAS INC. OF EUNICE DE
EMPIREGAS INC. OF LAFAYETTE LA
EMPIREGAS INC. OF LAKE CHARLES LA
EMPIREGAS INC. OF LAKE PROVIDENCE LA
EMPIREGAS INC. OF OAK GROVE LA
EMPIREGAS INC. OF BIG RAPIDS MI
EMPIREGAS INC. OF CHARLOTTE MI
EMPIREGAS INC. OF CHASSEL MI
EMPIREGAS INC. OF COLEMAN MI
EMPIREGAS INC. OF DURAND MI
EMPIREGAS INC. OF GAYLORD MI
EMPIREGAS INC. OF JACKSON MI
EMPIREGAS INC. OF KALAMAZOO MI
EMPIREGAS INC. OF MARQUETTE MI
EMPIREGAS INC. OF MUNISING MI
EMPIREGAS INC. OF TRAVERSE CITY MI
EMPIREGAS INC. OF VASSAR MI
EMPIREGAS OF LE SUER INC. MN
EMPIREGAS OF ZUMBRO FALLS, INC. MN
EMPIRE TANK LEASING CORPORATION DE
EMPIREGAS EQUIPMENT CORPORATION CA
EMPIRE UNDERGROUND STORAGE, INC. KS
EMPIRE INDUSTRIAL SALES CORPORATION OK
UTILITY COLLECTION CORPORATION DE
EMPIREGAS TRANSPORTS, INC. (MO) DE
EMPIRE AVIATION CORPORATION DE
EMPIREGAS TRANSPORTS, INC.-OREGON OR
EMPIREGAS INC. OF CLINTON, MO DE
EMPIREGAS INC. OF KANSAS CITY DE
EMPIREGAS INC. OF BOLIVAR DE
EMPIREGAS INC. OF BOWLING GREEN DE
EMPIREGAS INC. OF BUFFALO DE
EMPIREGAS INC. OF ADRIAN DE
EMPIREGAS INC. OF CAMDENTON DE
EMPIREGAS INC. OF CARTHAGE DE
EMPIREGAS INC. OF COLE CAMP DE
2
<PAGE>
EMPIREGAS INC. OF CUBA DE
EMPIREGAS OF EL DORADO SPRINGS, INC. DE
EMPIREGAS INC. OF ELSBERRY DE
EMPIREGAS INC. OF MID-MISSOURI DE
EMPIREGAS INC. OF HERMITAGE DE
EMPIREGAS INC. OF HIGGINSVILLE MO
EMPIREGAS INC. OF HUMANSVILLE DE
EMPIREGAS INC. OF KIRKSVILLE DE
EMPIREGAS INC. OF LAURIE DE
EMPIREGAS INC. OF MARSHALL MO
EMPIREGAS INC. OF MILLER DE
THRIF-T-GAS INC. OF BLACKWATER DE
EMPIREGAS INC. OF OWENSVILLE DE
EMPIREGAS INC. OF PALMYRA DE
EMPIREGAS INC. OF POTOSI DE
EMPIREGAS INC. OF RICHLAND DE
EMPIREGAS INC. OF ROLLA DE
EMPIREGAS INC. OF WARSAW, MO DE
EMPIREGAS INC. OF WAYNESVILLE, MO DE
EMPIREGAS INC. OF WENTZVILLE DE
EMPIREGAS INC. OF MORGAN COUNTY DE
EMPIREGAS INC. OF LAKE OZARK DE
THRIFT-T-GAS CO., INC. DE
EMPIREGAS INC. OF PARIS, MO DE
EMPIREGAS INC. OF HIAWASSEE DE
EMPIREGAS INC. OF MURPHY NC
EMPIREGAS INC. OF NORTH CAROLINA NC
EMPIREGAS INC. OF ROCKY MOUNT NC
EMPIREGAS INC. OF WASHINGTON NC
EMPIREGAS INC. OF WAYNESVILLE, NC NC
EMPIREGAS INC. OF WILMINGTON NC
EMPIREGAS INC. OF WILSON NC
EMPIREGAS INC. OF ZEBULON NC
EMPIREGAS INC. OF DOVER DE
EMPIREGAS INC. OF MOUNT VERNON OH
EMPIREGAS INC. OF COLUMBIANA OH
EMPIREGAS INC. OF TOLEDO OH
EMPIREGAS INC. OF BRISTOW, INC. OK
EMPIREGAS INC. OF COLCORD, INC. OK
EMPIREGAS INC. OF GROVE, INC. OK
EMPIREGAS INC. OF HITICHITA, INC. OK
EMPIREGAS INC. OF STIGLER, INC. OK
3
<PAGE>
EMPIREGAS INC. OF VINITA, INC. OK
EMPIREGAS INC. OF WESTVILLE, INC. OK
EMPIREGAS INC. OF ALBANY OR
EMPIREGAS INC. OF COQUILLE OR
EMPIREGAS INC. OF HERMISTON OR
EMPIREGAS INC. OF MEDFORD OR
EMPIREGAS INC. OF NORTH BEND OR
EMPIREGAS INC. OF REEDSPORT OR
EMPIREGAS INC. OF SANDY DE
EMPIREGAS INC. OF THE DALLES OR
EMPIREGAS INC. OF AIKEN SC
EMPIREGAS INC. OF GOOSE CREEK SC
EMPIREGAS OF NORTH MYRTLE BEACH, INC. OK
EMPIREGAS INC. OF ORANGEBURG SC
EMPIREGAS INC. OF CANTON TX
EMPIREGAS INC. OF GALVESTON TX
EMPIREGAS INC. OF PADUCAH TX
EMPIREGAS INC. OF WILLS POINT TX
EMPIREGAS INC. OF ORANGE COUNTY TX
EMPIREGAS INC. OF WACO TX
EMPIREGAS INC. OF PARIS, TX TX
EMPIREGAS INC. OF DALLAS, TX TX
EMPIREGAS INC. OF KEMP TX
EMPIREGAS INC. OF SAN ANTONIO TX
EMPIREGAS INC. OF AUBURN WA
EMPIREGAS INC. OF CHEHALIS WA
EMPIREGAS INC. OF SUNNYSIDE WA
EMPIREGAS INC. OF WENATCHEE WA
EMPIREGAS INC. OF YAKIMA WA
EMPIREGAS INC. OF CHETEK WI
EMPIREGAS INC. OF EAU CLAIRE WI
EMPIREGAS INC. OF MENOMONIE WI
EMPIREGAS INC. OF MERILLAN WI
EMPIREGAS INC. OF SHELL LAKE WI
EMPIREGAS INC. OF WILKESBORO NC
EMPIREGAS INC. OF HENDERSVILLE NC
EMPIREGAS INC. OF CARTHAGE NC
EMPIREGAS INC. OF APEX NC
EMPIREGAS INC. OF DURHAM NC
EMPIREGAS INC. OF WARRENTON NC
EMPIRE ENERGY CORPORATION* TN
EMPIREGAS INC. OF ARAB* DE
EMPIREGAS INC. OF ATHENS, AL* DE
EMPIREGAS INC. OF BELLE MINA* DE
EMPIREGAS INC. OF CULLMAN* DE
EMPIREGAS INC. OF DALEVILLE* DE
4
<PAGE>
EMPIREGAS INC. OF DOTHAN* DE
EMPIREGAS INC. OF DOUBLE SPRINGS* DE
EMPIREGAS INC. OF FAYETTE* DE
EMPIREGAS INC. OF FORT PAYNE* DE
JEFFERSON COUNTY GAS CO.* DE
EMPIREGAS INC. OF GERALDINE* DE
EMPIREGAS INC. OF HENAGAR* DE
EMPIREGAS INC. OF HUNTSVILLE* DE
EMPIREGAS INC. OF ONEONTA* DE
EMPIREGAS INC. OF SKYLINE* DE
EMPIREGAS INC. OF ALBERTVILLE* DE
EMPIREGAS INC. OF NEW HOPE* DE
EMPIREGAS INC. OF BATESVILLE* AR
EMPIREGAS INC. OF BELLA VISTA* AR
EMPIREGAS INC. OF BLYTHEVILLE* AR
EMPIREGAS INC. OF HARDY* AR
EMPIREGAS INC. OF HARRISON* AR
EMPIREGAS INC. OF HORSESHOE BEND* AR
EMPIREGAS INC. OF MELBOURNE* AR
EMPIREGAS INC. OF MOUNTAIN HOME* AR
EMPIREGAS INC. OF ROGERS* AR
EMPIRE BUILDING CORPORATION* DE
EMPIRE EQUIPMENT CORPORATION* DE
EMPIREGAS TRUCKING CORPORATION (JASPER)* DE
EMPIREGAS INC. OF CROSS CITY* DE
EMPIREGAS INC. OF CRYSTAL RIVER* DE
EMPIREGAS INC. OF DADE CITY* FL
EMPIREGAS INC. OF GROVELAND* FL
EMPIREGAS INC. OF LEESBURG* FL
EMPIREGAS INC. OF PANAMA CITY* FL
EMPIREGAS INC. OF PENSACOLA* FL
EMPIREGAS INC. OF PORT RICHEY* FL
EMPIREGAS INC. OF RIVERVIEW* FL
EMPIREGAS INC. OF BAINBRIDGE* DE
EMPIREGAS INC. OF BLAIRSVILLE* DE
EMPIREGAS INC. OF BLAKELY* DE
EMPIREGAS INC. OF BLUE RIDGE* DE
EMPIREGAS INC. OF CARTERSVILLE* DE
EMPIREGAS INC. OF CLERMONT* DE
EMPIREGAS INC. OF DALTON* DE
EMPIREGAS INC. OF DAWSON* DE
EMPIREGAS INC. OF DONALSONVILLE* DE
5
<PAGE>
EMPIREGAS INC. OF JASPER* DE
EMPIREGAS INC. OF MOULTRIE* DE
EMPIREGAS INC. OF ROME* DE
EMPIREGAS INC. OF TRENTON* DE
EMPIREGAS INC. OF WARNER ROBINS* DE
NAILS CREEK GAS CO.* DE
EMPIREGAS INC. OF SANDERSVILLE* DE
EMPIREGAS INC. OF MOUND CITY* DE
EMPIREGAS INC. OF BRYANT* IN
EMPIREGAS INC. OF COLUMBUS* IN
EMPIREGAS INC. OF EVANSVILLE* IN
EMPIREGAS INC. OF GREENSBURG* IN
EMPIREGAS INC. OF HARTFORD CITY* IN
EMPIREGAS INC. OF MARION* IN
EMPIREGAS INC. OF INDIANAPOLIS* IN
EMPIREGAS INC. OF OSGOOD* IN
EMPIREGAS INC. OF PENDLETON* IN
EMPIREGAS INC. OF ROCHESTER* IN
EMPIREGAS INC. OF SCOTTSBURG* IN
EMPIREGAS INC. OF VINCENNES* IN
EMPIREGAS INC. OF WARSAW* IN
EMPIREGAS INC. OF BARDSTOWN* KY
EMPIREGAS INC. OF CORBIN* KY
EMPIREGAS INC. OF CORINTH* KY
EMPIREGAS INC. OF CROFTON* KY
EMPIREGAS INC. OF FALMOUTH* KY
EMPIREGAS INC. OF HAZARD* KY
EMPIREGAS INC. OF WALTON* KY
EMPIREGAS INC. OF HODGENVILLE* KY
EMPIREGAS INC. OF JACKSON* KY
EMPIREGAS INC. OF LA GRANGE* KY
EMPIREGAS INC. OF LEBANON JUNCTION* KY
EMPIREGAS INC. OF LOUISVILLE* KY
EMPIREGAS INC. OF MOREHEAD* KY
EMPIREGAS INC. OF NICHOLASVILLE* KY
EMPIREGAS INC. OF OWENSBORO* KY
EMPIREGAS INC. OF AMORY* MS
EMPIREGAS INC. OF BAY SPRINGS* MS
EMPIREGAS INC. OF BLUE MOUNTAIN* MS
EMPIREGAS INC. OF BRUCE* MS
EMPIREGAS INC. OF COLUMBUS, MS* MS
EMPIREGAS INC. OF JACKSON, MS* MS
6
<PAGE>
EMPIREGAS INC. OF KOSCIUSKO* MS
EMPIREGAS INC. OF PONTOTOC* MS
EMPIREGAS INC. OF WAYNESBORO* MS
EMPIREGAS INC. OF ALTON* DE
EMPIREGAS INC. OF AVA* DE
EMPIREGAS INC. OF BIRCH TREE* DE
EMPIREGAS INC. OF BLUE EYE* DE
EMPIREGAS INC. OF BRANSON* DE
EMPIREGAS INC. OF CAPE GIRARDEAU* DE
EMPIREGAS INC. OF CASSVILLE* DE
EMPIREGAS INC. OF ELLINGTON* DE
EMPIREGAS INC. OF FAIR GROVE* DE
EMPIREGAS INC. OF GALENA* DE
EMPIREGAS INC. OF HOUSTON, MO* DE
EMPIREGAS INC. OF KIMBERLING CITY* DE
EMPIREGAS INC. OF MALDEN* DE
EMPIREGAS INC. OF MONETT* DE
EMPIREGAS INC. OF MOUNTAIN GROVE* DE
EMPIREGAS INC. OF NEOSHO* DE
EMPIREGAS INC. OF NOEL* DE
EMPIREGAS INC. OF PERRYVILLE* DE
EMPIREGAS INC. OF PIEDMONT* DE
EMPIREGAS INC. OF POPLAR BLUFF* DE
EMPIREGAS INC. OF SPRINGFIELD* DE
EMPIREGAS INC. OF SALEM* DE
EMPIREGAS INC. OF SELIGMAN* DE
EMPIREGAS INC. OF SIKESTON* DE
EMPIREGAS INC. OF WEST PLAINS* DE
EMPIREGAS INC. OF WHEATON* DE
GENERAL GAS CO., INC.* DE
S. P. GAS CO. OF LEBANON* DE
EMPIREGAS INC. OF MARSHFIELD* DE
EMPIREGAS INC. OF GREENE COUNTY* DE
TRI LAKES GAS CO. INC.* DE
TRI LAKES GAS, INC. OF HIGHLANDVILLE* DE
EMPIREGAS INC. OF ARDMORE* TN
EMPIREGAS INC. OF ATHENS, TN* TN
EMPIREGAS INC. OF CHATTANOOGA* TN
EMPIREGAS INC. OF CLEVELAND* TN
EMPIREGAS INC. OF CLINTON, TN* TN
EMPIREGAS INC. OF COOKEVILLE* TN
EMPIREGAS INC. OF DUNLAP* TN
7
<PAGE>
EMPIREGAS INC. OF FAYETTEVILLE* TN
EMPIREGAS INC. OF KINGSTON* TN
EMPIREGAS INC. OF LEBANON* TN
EMPIREGAS INC. OF LEWISBURG* TN
EMPIREGAS INC. OF LORETTO* TN
EMPIREGAS INC. OF MARYVILLE* TN
EMPIREGAS INC. OF MURFREESBORO* TN
EMPIREGAS INC. OF NEW TAZEWELL* TN
EMPIREGAS INC. OF SEVIERVILLE* TN
EMPIREGAS INC. OF SHELBYVILLE* TN
EMPIREGAS INC. OF SNEEDVILLE* TN
EMPIREGAS INC. OF TULLAHOMA* TN
* Pursuant to the Stock Redemption Agreement, dated May 7, 1994, the Company
will transfer 100% of the common stock of Empire Energy Corporation to Mr.
Robert W. Plaster and certain departing directors, officers, and employees in
exchange for 12,004,430 of their shares of the Company's common stock.
# Immediately prior to the consummation of the Offering, Empire Gas
Operating Corporation, the Company's subsidiary, will merge into the Company.
8
<PAGE>
EXHIBIT 23.8
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Registration Statement on Form S-1 of
our reports dated July 30, 1993, relating to the financial statements and
financial statement schedules of EMPIRE GAS CORPORATION (FORMERLY EMPIRE GAS
ACQUISITION CORPORATION) and our report dated May 27, 1994, relating to the
financial statements of PSNC PROPANE CORPORATION, all of which appear in such
Registration Statement. We also consent to the reference to us under the heading
"Experts" in such Registration Statement.
BAIRD, KURTZ & DOBSON
Springfield, Missouri
June 9, 1994
<PAGE>
EXHIBIT 6
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Expires February 28, 1995
Federal Financial Institutions Examination Council
- --------------------------------------------------------------------------------
/ 1 /
Please refer to page i,
Table of Contents, for
the required disclosure
of estimated burden.
- --------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES--FFIEC 031
REPORT AT THE CLOSE OF BUSINESS MARCH 31, 1994 (940331)
--------
This report is required by law: 12 U.S.C. Section 324 (State member banks); 12
U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161 (National
banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
- --------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.
I, Romolo C. Santarosa, SVP and Controller of the named bank do hereby declare
---------------------------------------
Name and Title of Officer Authorized to Sign Report
that these Reports of Condition and Income (including the supporting schedules)
have been prepared in conformance with the instructions issued by the
appropriate Federal regulatory authority and are true to the best of my
knowledge and belief.
/s/ Romolo C. Santarosa
- -------------------------------------------------
Signature of Officer Authorized to Sign Report
April 29, 1994
- -------------------------------------------------
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in some
cases differ from generally accepted accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it has
been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
/s/
- -------------------------------------------------
Director (Trustee)
/s/
- -------------------------------------------------
Director (Trustee)
/s/
- -------------------------------------------------
Director (Trustee)
- --------------------------------------------------------------------------------
For Banks Submitting Hard Copy Report Forms:
State Member Banks: Return the original and one copy to the appropriate Federal
Reserve District Bank.
State Nonmember Banks: Return the original only in the SPECIAL RETURN ADDRESS
ENVELOPE PROVIDED. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2139
Espey Court, Crofton, MD 21114.
National Banks: Return the original only in the SPECIAL RETURN ADDRESS ENVELOPE
PROVIDED. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2139
Espey Court, Crofton, MD 21114.
- --------------------------------------------------------------------------------
FDIC Certificate Number Call No. 187 31 03-31-94
---------------
CERT: 02499 10582 STBK 09-0590
SHAWMUT BANK CONNECTICUT, NATIONAL A
777 MAIN STREET
HARTFORD, CT 06115
<PAGE>
/2/
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Signature Page Cover
Report of Income
Schedule RI--Income Statement. . . . . . . . . . . . . . . . . . . . RI-1, 2, 3
Schedule RI-A--Changes in Equity Capital . . . . . . . . . . . . . . . . . RI-3
Schedule RI-B--Charge-offs and Recoveries and
Changes in Allowance for Loan and Lease
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .RI-4, 5
Schedule RI-C--Applicable Income Taxes by
Taxing Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . RI-5
Schedule RI-D--Income from
International Operations . . . . . . . . . . . . . . . . . . . . . . . . RI-6
Schedule RI-E--Explanations. . . . . . . . . . . . . . . . . . . . . . .RI-7, 8
REPORT OF CONDITION
Schedule RC--Balance Sheet . . . . . . . . . . . . . . . . . . . . . . .RC-1, 2
Schedule RC-A--Cash and Balances Due
From Depository Institutions . . . . . . . . . . . . . . . . . . . . . . RC-3
Schedule RC-B--Securities. . . . . . . . . . . . . . . . . . . . . . . .RC-4, 5
Schedule RC-C--Loans and Lease Financing
Receivables:
Part I. Loans and Leases . . . . . . . . . . . . . . . . . . . . . .RC-6, 7
Part II. Loans to Small Businesses and
Small Farms (included in the forms for
June 30 only). . . . . . . . . . . . . . . . . . . . . . . . . .RC-7a, 7b
Schedule RC-D--Assets Held in Trading Accounts
in Domestic Offices Only (to be completed only
by banks with $1 billion or more in total assets). . . . . . . . . . . . RC-8
Schedule RC-E--Deposit Liabilities . . . . . . . . . . . . . . . . . . RC-9, 10
Schedule RC-F--Other Assets. . . . . . . . . . . . . . . . . . . . . . . .RC-11
Schedule RC-G--Other Liabilities . . . . . . . . . . . . . . . . . . . . .RC-11
Schedule RC-H--Selected Balance Sheet Items for
Domestic Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . .RC-12
Schedule RC-I--Selected Assets and Liabilities
of IBFs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .RC-13
Schedule RC-K--Quarterly Averages. . . . . . . . . . . . . . . . . . . . .RC-13
Schedule RC-L--Off-Balance Sheet Items . . . . . . . . . . . . . . . .RC-14, 15
Schedule RC-M--Memoranda . . . . . . . . . . . . . . . . . . . . . . .RC-16, 17
Schedule RC-N--Past Due and Nonaccrual Loans,
Leases, and Other Assets . . . . . . . . . . . . . . . . . . . . . .RC-18, 19
Schedule RC-O--Other Data for Deposit
Insurance Assessments. . . . . . . . . . . . . . . . . . . . . . . .RC-20, 21
Schedule RC-R--Risk-Based Capital. . . . . . . . . . . . . . . . . . .RC-22, 23
Optional Narrative Statement Concerning the
Amounts Reported in the Reports of
Condition and Income . . . . . . . . . . . . . . . . . . . . . . . . . .RC-24
Special Report (to be completed by all banks)
Schedule RC-J--Repricing Opportunities (sent only to
and to be completed only by savings banks)
Disclosure of Estimated Burden
The estimated average burden associated with this information collection is 30.7
hours per respondent and is estimated to vary from 15 to 200 hours per response,
depending on individual circumstances. Burden estimates include the time for
reviewing instructions, gathering and maintaining data in the required form, and
completing the information collection, but exclude the time for compiling and
maintaining business records in the normal course of a respondent's activities.
Comments concerning the accuracy of this burden estimate and suggestions for
reducing this burden should be directed to the Office of Information and
Regulatory Affairs, Office of Management and Budget, Washington D.C. 20503, and
to one of the following:
Secretary
Board of Governors of the Federal Reserve System
Washington, D.C. 20551
Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219
Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429
For information or assistance, national and state nonmember banks should contact
the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington, D.C.
20429, toll free on (800) 688-FDIC (3342), Monday through Friday between
8:00 a.m. and 5:00 p.m., Eastern time. State member banks should contact their
Federal Reserve District Bank.
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RI-1
Consolidated Report of Income
For the period January 1, 1994-March 31, 1994
Report of income schedules are to be reported on a calendar year-to-date basis
in thousands of dollars.
Schedule RI--Income Statement
<TABLE>
<CAPTION>
-------
| 1480 |
--------------------|
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- -----------------------------------------------------------------------------------------------|-------------------|
<S> <C> <C> <C>
Interest income: | ///////////////// |
a. Interest and fee income on Loans: | ///////////////// |
(1) In domestic offices: | ///////////////// |
(a) Loans secured by real estate. . . . . . . . . . . . . . . . . . . . . . . . . . | 4011 82,308 | 1.a.(1)(a)
(b) Loans to depository institutions. . . . . . . . . . . . . . . . . . . . . . . . | 4019 75 | 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers . . . . . . | 4024 23 | 1.a.(1)(c)
(d) Commercial and industrial loans . . . . . . . . . . . . . . . . . . . . . . . . | 4012 36,347 | 1.a.(1)(d)
(e) Acceptances of other banks. . . . . . . . . . . . . . . . . . . . . . . . . . . | 4026 2 | 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expenditures: | ///////////////// |
(1) Credit cards and related plans . . . . . . . . . . . . . . . . . . . . . . | 4054 859 | 1.a.(1)(f)(1)
(2) Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4055 7,181 | 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions. . . . . . . . . . . . . | 4056 0 | 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political | ///////////////// |
subdivisions in the U.S.: | ///////////////// |
(1) Taxable obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4503 8 | 1.a.(1)(h)(1)
(2) Tax-exempt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . | 4504 670 | 1.a.(1)(h)(2)
(i) All other loans in domestic offices . . . . . . . . . . . . . . . . . . . . . . | 4058 8,572 | 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs. . . . . . . . . . . . | 4059 0 | 1.a.(2)
b. Income from lease financing receivables: | ///////////////// |
(1) Taxable leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4505 41 | 1.b.(1)
(2) Tax-exempt leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4307 0 | 1.b.(2)
c. Interest income on balances due from depository institutions:(1) | ///////////////// |
(1) In domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4105 0 | 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs. . . . . . . . . . . . | 4106 793 | 1.c.(2)
d. Interest and dividend income on securities: | ///////////////// |
(1) U.S. Treasury securities and U.S. Government agency and corporation obligations. . . | 4027 51,410 | 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.: | ///////////////// |
(a) Taxable securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4506 0 | 1.d.(2)(a)
(b) Tax-exempt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4507 0 | 1.d.(2)(b)
(3) Other domestic debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3657 13,170 | 1.d.(3)
(4) Foreign debt securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3658 46 | 1.d.(4)
(5) Equity securities (including investments in mutual funds). . . . . . . . . . . . . . | 3659 373 | 1.d.(5)
e. Interest income from assets held in trading accounts. . . . . . . . . . . . . . . . . . . | 4069 0 | 1.e.
---------------------
<FN>
- ------------------------
(1) Includes interest income on time certificates of deposit not held in trading
accounts.
</TABLE>
3
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RI-2
Schedule RI--Continued
<TABLE>
<CAPTION>
--------------------|
Dollar Amounts in Thousands | Year-to-date |
- ------------------------------------------------------------------------------------|-------------------|
| RIAD Bil Mil Thou |
<S> <C> <C> <C> <C> <C>
1. Interest income (continued)
f. Interest income on federal funds sold and securities purchased | ///////////////// |
under agreements to resell in domestic offices of the bank and of | ///////////////// |
its Edge and Agreement subsidiaries, and in IBFs . . . . . . . . . . . . | 4020 145 | 1.f.
g. Total interest income (sum of items 1.a through 1.f) . . . . . . . . . . | 4107 202,023 | 1.g.
2. Interest expense: | ///////////////// |
a. Interest on deposits: | ///////////////// |
(1) Interest on deposits in domestic offices: | ///////////////// |
(a) Transaction accounts (NOW accounts, ATS accounts, and | ///////////////// |
telephone and preauthorized transfer accounts) . . . . . . . . | 4508 2,508 | 2.a.(1)(a)
(b) Nontransaction accounts: | ///////////////// |
(1) Money market deposit accounts (MMDAs) . . . . . . . . . . | 4509 2,449 | 2.a.(1)(b)(1)
(2) Other savings deposits. . . . . . . . . . . . . . . . . . | 4511 8,765 | 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more. . . . . | 4174 4,234 | 2.a.(1)(b)(3)
(4) All other time deposits . . . . . . . . . . . . . . . . . | 4512 13,673 | 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement | ///////////////// |
subsidiaries, and IBFs. . . . . . . . . . . . . . . . . . . . . . . | 4172 1,199 | 2.a.(2)
b. Expense of federal funds purchased and securities sold under | ///////////////// |
agreements to repurchase in domestic offices of the bank and of | ///////////////// |
its Edge and Agreement subsidiaries, and in IBFs . . . . . . . . . . . . | 4180 36,607 | 2.b.
c. Interest on demand notes issued to the U.S. Treasury and on | ///////////////// |
other borrowed money . . . . . . . . . . . . . . . . . . . . . . . . . . | 4185 2,565 | 2.c.
d. Interest on mortgage indebtedness and obligations under | ///////////////// |
capitalized leases . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4072 220 | 2.d.
e. Interest on subordinated notes and debentures. . . . . . . . . . . . . . | 4200 0 | 2.e.
f. Total interest expense (sum of items 2.a through 2.e). . . . . . . . . . | 4073 72,220 | 2.f.
| |---------------------
3. Net interest income (items 1.g minus 2.f) . . . . . . . . . . . . . . . . . . | ///////////////// | RIAD 4074 | 129,803 | 3.
4. Provisions: | ///////////////// |---------------------
a. Provision for loan and lease losses. . . . . . . . . . . . . . . . . . . | ///////////////// | RIAD 4230 | (1,258)| 4.a.
b. Provision for allocated transfer risk. . . . . . . . . . . . . . . . . . | ///////////////// | RIAD 4243 | 0 | 4.b.
5. Noninterest income: | ///////////////// |---------------------|
a. Income from fiduciary activities . . . . . . . . . . . . . . . . . . . . | 4070 17,690 | 5.a.
b. Service charges on deposit accounts in domestic offices. . . . . . . . . | 4080 16,395 | 5.b.
c. Trading gains (losses) and fees from foreign exchange transactions . . . | 4075 (186)| 5.c.
d. Other foreign transaction gains (losses) . . . . . . . . . . . . . . . . | 4076 0 | 5.d.
e. Gains (losses) and fees from assets held in trading accounts . . . . . . | 4077 498 | 5.e.
f. Other noninterest income: | ///////////////// |
(1) Other fee income. . . . . . . . . . . . . . . . . . . . . . . . . . | 5407 11,415 | 5.f.(1)
(2) All other noninterest income* . . . . . . . . . . . . . . . . . . . | 5408 14,673 | 5.f.(2)
| |---------------------
g. Total noninterest income (sum of items 5.a through 5.f). . . . . . . . . | ///////////////// | RIAD 4079 | 60,485 | 5.g.
6. a. Realized gains (losses) on held-to-maturity securities . . . . . . . . . | ///////////////// | RIAD 3521 | 290 | 6.a.
b. Realized gains (losses) on available-for-sale securities . . . . . . . . | ///////////////// | RIAD 3196 | (1,010)| 6.b.
7. Noninterest expense: | ///////////////// |---------------------
a. Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . | 4135 67,849 | 7.a.
b. Expenses of premises and fixed assets (net of rental income) | ///////////////// |
(excluding salaries and employee benefits and mortgage interest) . . . . | 4217 20,811 | 7.b.
c. Other noninterest expense* . . . . . . . . . . . . . . . . . . . . . . . | 4092 40,091 | 7.c.
d. Total noninterest expense (sum of items 7.a through 7.c) . . . . . . . . | ///////////////// |---------------------
8. Income (loss) before income taxes and extraordinary items and other | ///////////////// | RIAD 4093 | 128,751 | 7.d.
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d) . . | ///////////////// |---------------------
| | RIAD 4301 | 62,075 | 8.
9. Applicable income taxes (on item 8) . . . . . . . . . . . . . . . . . . . . . | ///////////////// | RIAD 4302 | 21,131 | 9.
| |---------------------
10. Income (loss) before extraordinary items and other adjustments | ///////////////// |---------------------
(item 8 minus 9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | ///////////////// | RIAD 4300 | 40,944 | 10.
------------------------------------------
<FN>
- -------------------------
*Describe on Schedule RI-E--Explanations.
</TABLE>
4
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RI 3
Schedule RI--Continued
<TABLE>
<CAPTION>
--------------
| Year-to-date |
--------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- ------------------------------------------------------------------------------------------------ |
<C> <S> <C> <C> <C> <C> <C> <C>
11. Extraordinary items and other adjustments: ///////////////// |
a. Extraordinary items and other adjustments, gross of income taxes* . | 4310 0 | 11.a.
b. Applicable income taxes (on item 11.a)* . . . . . . . . . . . . . . | 4515 0 | 11.b.
c. Extraordinary items and other adjustments, net of income taxes | ///////////////// |___________________________
(item 11.a minus 11.b). . . . . . . . . . . . . . . . . . . . . . . | ///////////////// | RIAD 4320 | 0 | 11.c.
12. Net income (loss) (sum of items 10 and 11.c) . . . . . . . . . . . . . | ///////////////// | RIAD 4340 | 40,944 | 12.
------------------------------------------------
</TABLE>
<TABLE>
<CAPTION> -----------------
| Year-to-date |
-----------------------
Memoranda Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- ------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after | ////////////////// |
August 7, 1986, that is not deductible for federal income tax purposes . . . . . . . . . . . . . | 4513 2 |M.1.
2. Fee income from the sale and servicing of mutual funds and annuities in domestic offices | ////////////////// |
(included in Schedule RI, item 5.g). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 8431 388 |M.2.
3. Estimated foreign tax credit included in applicable income taxes, items 9 and 11.b above . . . . | 4309 0 |M.3.
4. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Taxable equivalent adjustment to "income (loss) before income taxes and extraordinary | ////////////////// |
items and other adjustments" (item 8 above). . . . . . . . . . . . . . . . . . . . . . . . . . . | 1244 466 |M.4.
5. Number of full-time equivalent employees on payroll at end of current period (round to | //// Number |
nearest whole number). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4150 5,705 |M.5.
-----------------------
</TABLE>
Schedule RI-A-- Changes in Equity Capital
Indicate decreases and losses in parentheses.
<TABLE>
<CAPTION>
--------
| 1483 |
-----------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- ------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
1. Total equity capital originally reported in the December 31, 1993, Reports of Condition | /////////////////// |
and Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3215 1,131,626 | 1.
2. Equity capital adjustments from amended Reports of Income, net*. . . . . . . . . . . . . . . . . | 3216 0 | 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2) . . . . . . . . . . . . . . | 3217 1,131.626 | 3.
4. Net income (loss) (must equal Schedule R1, item 12). . . . . . . . . . . . . . . . . . . . . . . | 4340 40,944 | 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net . . . . . . . . . . . . . . . | 4346 0 | 5.
6. Changes incident to business combinations, net . . . . . . . . . . . . . . . . . . . . . . . . . | 4356 0 | 6.
7. LESS: Cash dividends declared on preferred stock . . . . . . . . . . . . . . . . . . . . . . . . | 4470 0 | 7.
8. LESS: Cash dividends declared on common stock. . . . . . . . . . . . . . . . . . . . . . . . . . | 4460 21,500 | 8.
9. Cumulative effect of changes in accounting principles from prior years* (see instructions | /////////////////// |
for this schedule) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4411 0 | 9.
10. Corrections of material accounting errors from prior years* (see instructions for this schedule) | 4412 0 | 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities . . . . . . . . | 8433 (14,105)| 11.
12. Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4414 0 | 12.
13. Other transactions with parent holding company* (not included in items 5, 7, or 8 above) . . . . | 4415 0 | 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal Schedule RC, | /////////////////// |
item 28) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3210 1,136,965 | 14.
|---------------------|
<FN>
- ------------------------
* Describe on Schedule RI-E-Explanations
</TABLE>
5
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RI 4
Schedule RI-B--Charge-offs and Recoveries and Changes
in Allowance for Loan and Lease Losses
Part I. Charge-offs and Recoveries on Loans and Leases
Part I excludes charge-offs and recoveries through
the allocated transfer risk reserve.
<TABLE>
<CAPTION>
--------------
| 1486 |
-----------------------------------------------
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
|---------------------------------------------|
| calendar year-to-date |
|---------------------------------------------|
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
- --------------------------------------------------------------------------------|---------------------------------------------|
<C> <S> <C> <C> <C> <C> <C>
1. Loans secured by real estate: | /////////////////////////////////////////// |
a. To U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . . . | 4651 13,681 | 4661 1,899 | 1.a.
b. To non-U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . | 4652 0 | 4662 0 | 1.b.
2. Loans to depository institutions and acceptances of other banks: . . . . . | /////////////////////////////////////////// |
a. To U.S. Banks and other U.S. depository institutions. . . . . . . . . . | 4653 0 | 4663 0 | 2.a.
b. To foreign Banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4654 0 | 4664 0 | 2.b.
3. Loans to finance agricultural production and other loans to farmers. . . . | 4655 0 | 4665 1 | 3.
4. Commercial and industrial loans: | /////////////////////////////////////////// |
a. To U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . . . | 4645 4,567 | 4617 1,539 | 4.a.
b. To non-U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . | 4646 0 | 4618 0 | 4.b.
5. Loans to individuals for household, family, and other personal | /////////////////////////////////////////// |
expenditures: | /////////////////////////////////////////// |
a. Credit cards and related plans. . . . . . . . . . . . . . . . . . . . . | 4656 354 | 4666 86 | 5.a.
b. Other (includes single payment, installment, and all student loans) . . | 4657 600 | 4667 1,225 | 5.b.
6. Loans to foreign governments and official institutions . . . . . . . . . . | 4643 0 | 4627 0 | 6.
7. All other loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4644 852 | 4628 45 | 7.
8. Lease financing receivables: | /////////////////////////////////////////// |
a. Of U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . . . | 4658 0 | 4668 0 | 8.a.
b. Of non-U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . | 4659 0 | 4669 0 | 8.b.
9. Total (sum of items 1 through 8) . . . . . . . . . . . . . . . . . . . . . | 4635 20,054 | 4605 4,795 | 9.
-----------------------------------------------
<CAPTION>
-------------------------------------------
| Cumulative | Cumulative |
| Charge-offs | Recoveries |
| Jan. 1, 1986 | Jan. 1, 1986 |
| through | through |
Memoranda Dollar Amounts in Thousands | Dec. 31, 1989 | Report Date |
- --------------------------------------------------------------------------------|-----------------------------------------|
To be completed by national banks only. | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
-------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
1. Charge-offs and recoveries of Special-Category Loans, as defined for this | ///////////////// | /////////////////// |
Call Report by the Comptroller of the Currency . . . . . . . . . . . . . . | ///////////////// | 4784 644 | M.1.
|-----------------------------------------|
| (Column A) | (Column B) |
Memorandum items 2 and 3 are to be completed by all banks | Charge-offs | Recoveries |
|-------------------|---------------------|
| calendar year-to-date |
|-----------------------------------------|
2. Loans to finance commercial real estate, construction, and land | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
development activities (not secured by real estate) included in |-----------------------------------------|
Schedule RI-8, part I, items 4 and 7, above. . . . . . . . . . . . . . . . | 5409 515 | 5410 138 |M.2.
3. Loans secured by real estate in domestic offices (included in | ///////////////// | /////////////////// |
Schedule RI-8, part I, item 1, above). . . . . . . . . . . . . . . . . . . | ///////////////// | /////////////////// |
a. Construction and land development . . . . . . . . . . . . . . . . . . . | 3582 570 | 3583 23 |M.3.a.
b. Secured by farmland . . . . . . . . . . . . . . . . . . . . . . . . . . | 3584 0 | 3585 13 |M.3.b.
c. Secured by 1-4 family residential properties: | ///////////////// | /////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ///////////////// | /////////////////// |
properties and extended under lines of credit . . . . . . . . . . . | 5411 319 | 5412 11 |M.3.c.(1)
(2) All other loans secured by 1-4 family residential properties. . . . | 5413 4,638 | 5414 534 |M.3.c.(2)
d. Secured by multifamily (5 or more) residential properties . . . . . . . | 3588 2,252 | 3589 6 |M.3.d.
3. Secured by nonfarm nonresidential properties. . . . . . . . . . . . . . | 3590 5,902 | 3591 1,311 |M.3.e.
-------------------------------------------
</TABLE>
6
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 Main Street
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RI-5
Schedule RI-B--Continued
Part II. Changes in Allowance for Loan and
Lease Losses and in Allocated
Transfer Risk Reserve
<TABLE>
<CAPTION>
-------------------------------------------
| (Column A) | (Column B) |
| Allowance for | Allocated |
| Loan and Lease | Transfer Risk |
| Losses | Reserve |
|--------------------|--------------------|
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
- ---------------------------------------------------------------------------|--------------------|--------------------|
<C><S> <C> <C> <C> <C> <C>
1. Balance originally reported in the December 31, 1993, Reports of | ////////////////// | ////////////////// |
Condition and Income. . . . . . . . . . . . . . . . . . . . . . . . . . | 3124 350,900 | 3131 0 | 1.
2. Recoveries (column A must equal part I, item 9, column B above) . . . . | 4605 4,795 | 3132 0 | 2.
3. LESS: Charge-offs (column A must equal part I, item 9, column A above). | 4635 20,054 | 3133 0 | 3.
4. Provision (column A must equal Schedule RI, item 4.a; column B must | ////////////////// | ///////////////////|
equal Schedule RI, item 4.b). . . . . . . . . . . . . . . . . . . . . . | 4230 (1,258)| 4243 0 | 4.
5. Adjustments* (see instructions for this schedule) . . . . . . . . . . . | 4815 0 | 3134 0 | 5.
6. Balance end of current period (sum of items 1 through 5) (column A must | ////////////////// | ////////////////// |
equal Schedule RC, item 4.b; column B must equal Schedule RC, | ////////////////// | ////////////////// |
item 4.c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3123 334,383 | 3128 0 | 6.
-------------------------------------------
- ------------
<FN>
*Describe on Schedule RI-E--Explanations.
</TABLE>
Schedule RI-C--Applicable Income Taxes by Taxing Authority
Schedule RI-C is to be reported with the December Report of Income.
<TABLE>
<CAPTION>
--------
| 1489 | (-
----------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------
<C><S> <C> <C> <C>
1. Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4780 N/A | 1.
2. State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4790 N/A | 2.
3. Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4795 N/A | 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and 11.b). . . . . . | 4770 N/A | 4.
------------------------------| |
5. Deferred portion of item 4 . . . . . . . . . . . . . . . . . . | RIAD 4772 | N/A | ////////////////// | 5.
----------------------------------------------------
</TABLE>
7
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-GK: 09-0590 FFIEC 031
Page RI-6
Schedule RI-D--Income from International Operations
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs
where international operations account for more than 10 percent of total
revenues, total assets, or net income.
Part I. Estimated Income from International Operations
<TABLE>
<CAPTION>
-----------
| 1492 | (-
----------------
| Year-to-date |
----------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------
<C><S> <C> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, | ////////////////// |
and IBFs: | ////////////////// |
a. Interest income booked . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4837 N/A | 1.a.
b. Interest expense booked. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4838 N/A | 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and IBFs | ////////////////// |
(item 1.a minus 1.b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4839 N/A | 1.c.
2. Adjustments for booking location of international operations: | ////////////////// |
a. Net interest income attributable to international operations booked at domestic offices. . | 4840 N/A | 2.a.
b. Net interest income attributable to domestic business booked at foreign offices. . . . . . | 4841 N/A | 2.b.
c. Net booking location adjustment (item 2.a minus 2.b) . . . . . . . . . . . . . . . . . . . | 4842 N/A | 2.c.
3. Noninterest income and expense attributable to international operations: | ////////////////// |
a. Noninterest income attributable to international operations. . . . . . . . . . . . . . . . | 4097 N/A | 3.a.
b. Provision for loan and lease losses attributable to international operations . . . . . . . | 4235 N/A | 3.b.
c. Other noninterest expense attributable to international operations . . . . . . . . . . . . | 4239 N/A | 3.c.
d. Net noninterest income (expense) attributable to international operations (item 3.a | ////////////////// |
minus 3.b and 3.c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4843 N/A | 3.d.
4. Estimated pretax income attributable to international operations before capital allocation | ////////////////// |
adjustment (sum of items 1.c, 2.c, and 3.d) . . . . . . . . . . . . . . . . . . . . . . . . . | 4844 N/A | 4.
5. Adjustment to pretax income for internal allocations to international operations to reflect | ////////////////// |
the effects of equity capital on overall bank funding costs . . . . . . . . . . . . . . . . . | 4845 N/A | 5.
6. Estimated pretax income attributable to international operations after capital allocation | ////////////////// |
adjustment (sum of items 4 and 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4846 N/A | 6.
7. Income taxes attributable to income from international operations as estimated in item 6. . . | 4797 N/A | 7.
8. Estimated net income attributable to international operations (item 6 minus 7). . . . . . . . | 4341 N/A | 8.
----------------------
<CAPTION>
Memoranda
----------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------
<C><S> <C> <C> <C>
1. Intracompany interest income included in item 1.a above . . . . . . . . . . . . . . . . . . . | 4847 N/A | M.1.
2. Intracompany interest income included in item 1.b above . . . . . . . . . . . . . . . . . . . | 4848 N/A | M.2.
----------------------
</TABLE>
Part II. Supplementary Details on Income from International Operations Required
by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts
<TABLE>
<CAPTION>
----------------
| Year-to-date |
----------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------
<C><S> <C> <C> <C>
1. Interest income booked at IBFs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4849 N/A | 1.
2. Interest expense booked at IBFs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4850 N/A | 2.
3. Noninterest income attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs): | ////////////////// |
a. Gains (losses) and extraordinary items . . . . . . . . . . . . . . . . . . . . . . . . . . | 5491 N/A | 3.a.
b. Fees and other noninterest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5492 N/A | 3.b.
4. Provision for loan and lease losses attributable to international operations booked at | ////////////////// |
domestic offices (excluding IBFs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4852 N/A | 4.
5. Other noninterest expense attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4853 N/A | 5.
----------------------
</TABLE>
8
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 03:
Page RI-7
SCHEDULE RI-E--EXPLANATIONS
Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.
Detail all adjustments in Schedules RI-A and RI-B, all extraordinary items and
other adjustments in Schedule RI, and all significant items of other noninterest
income and other noninterest expense in Schedule RI. (See instructions for
details.)
<TABLE>
<CAPTION>
----------
| I495 | (-
----------------
| Year-to-date |
----------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------------|
<S> <C> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2)) | ////////////////// |
Report amounts that exceed 10% of Schedule RI, item 5.f.(2): | ////////////////// |
a. Net gains on other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5415 0 | 1.a.
b. Net gains on sales of loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5416 0 | 1.b.
c. Net gains on sales of premises and fixed assets. . . . . . . . . . . . . . . . . . . . . . . | 5417 0 | 1.c.
Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// |
Schedule RI, item 5.f.(2): | ////////////////// |
------------- | |
d. | TEXT 4461 | Chargeback to affiliates | 4461 8,494 | 1.d.
-----------------------------------------------------------------------------------------------| |
e. | TEXT 4462 | | 4462 | 1.e.
-----------------------------------------------------------------------------------------------| |
f. | TEXT 4463 | | 4463 | 1.f.
-----------------------------------------------------------------------------------------------| |
2. Other noninterest expense (from Schedule RI, item 7.c): | ////////////////// |
a. Amortization expense of intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . | 4531 2,450 | 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c: | ////////////////// |
b. Net losses on other real estate owned. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5418 0 | 2.b.
c. Net losses on sales of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5419 0 | 2.c.
d. Net losses on sales of premises and fixed assets . . . . . . . . . . . . . . . . . . . . . . | 5420 0 | 2.d.
Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// |
Schedule RI, item 7.c: | ////////////////// |
------------- | |
e. | TEXT 4464 | | 4464 | 2.e.
-----------------------------------------------------------------------------------------------| |
f. | TEXT 4467 | | 4467 | 2.f.
-----------------------------------------------------------------------------------------------| |
g. | TEXT 4468 | | 4468 | 2.g.
-----------------------------------------------------------------------------------------------| |
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and | ////////////////// |
applicable income tax effect (from Schedule RI, item 11.b) (itemize and describe | ////////////////// |
all extraordinary items and other adjustments): | ////////////////// |
------------- | |
a. (1) | TEXT 4469 | | 4469 | 3.a.(1)
-------------------------------------------------------------------------------------------| |
(2) Applicable income tax effect | RIAD 4486 | | ////////////////// | 3.a.(2)
------------- ------------------------------------| |
b. (1) | TEXT 4487 | | 4487 | 3.b.(1)
-------------------------------------------------------------------------------------------| |
(2) Applicable income tax effect | RIAD 4488 | | ////////////////// | 3.b.(2)
------------- ------------------------------------| |
c. (1) | TEXT 4489 | | 4489 | 3.c.(1)
-------------------------------------------------------------------------------------------| |
(2) Applicable income tax effect | RIAD 4491 | | ////////////////// | 3.c.(2)
------------------------------------| |
4. Equity capital adjustments from amended Reports of Income (from Schedule RI+A, | ////////////////// |
item 2) (itemize and describe all adjustments): | ////////////////// |
------------- | |
a. | TEXT 4492 | | 4492 | 4.a.
-----------------------------------------------------------------------------------------------| |
b. | TEXT 4493 | | 4493 | 4.b.
-----------------------------------------------------------------------------------------------| |
5. Cumulative effect of changes in accounting principles from prior years (from | ////////////////// |
Schedule RI-A, item 9) (itemize and describe all changes in accounting principles): | ////////////////// |
------------- | |
a. | TEXT 4494 | | 4494 | 5.a.
-----------------------------------------------------------------------------------------------| |
b. | TEXT 4495 | | 4495 | 5.b.
-----------------------------------------------------------------------------------------------| |
6. Corrections of material accounting errors from prior years (from Schedule RI-A, | ////////////////// |
item 10) (itemize and describe all corrections): | ////////////////// |
------------- | |
a. | TEXT 4496 | | 4496 | 6.a.
b. | TEXT 4497 | | 4497 | 6.b.
---------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RI-8
SCHEDULE RI-E--Continued
<TABLE>
<CAPTION>
----------------
| Year-to-date |
---------------------
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------|--------------------|
<S> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A, item 13) | ////////////////// |
(itemize and describe all such transactions): | ////////////////// |
------------ | |
a. | TEXT 4498 | | 4498 | 7.a.
-----------------------------------------------------------------------------------------------| |
b. | TEXT 4499 | | 4499 | 7.b
-----------------------------------------------------------------------------------------------| |
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, | ////////////////// |
item 5) (itemize and describe all adjustments): | ////////////////// |
------------
a. | TEXT 4521 | | 4521 | 8.a.
-----------------------------------------------------------------------------------------------| |
b. | TEXT 4522 | | 4522 | 8.b.
-----------------------------------------------------------------------------------------------|--------------------|
9. Other explanations (the space below is provided for the bank to briefly describe, | I498 | I499 | (-
at its option, any other significant items affecting the Report of Income):
---
No comment | | (RIAD 4769)
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>
10
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RC-1
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for March 31, 1994
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
<TABLE>
<CAPTION>
-------
| C400 |
--------------------|
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- -----------------------------------------------------------------------------------------------|-------------------|
<S> <C> <C> <C>
ASSETS | ///////////////// |
1. Cash and balances due from depository institutions (from Schedule RC-A): | ///////////////// |
(a) Noninterest-bearing balances and currency and coin(1). . . . . . . . . . . . . . . . | 0081 904,815 | 1.a.
(b) Interest-bearing balances(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 0071 200,000 | 1.b.
2. Securities: | ///////////////// |
(a) Held-to maturity securities (from Schedule RC-B, column A) . . . . . . . . . . . . . | 1754 3,503,554 | 2.a.
(b) Available-for-sale securities (from Schedule RC-B, column D) . . . . . . . . . . . . | 1773 1,011,545 | 2.b.
3. Federal funds sold and securities purchased under agreements to resell in domestic offices| ///////////////// |
of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | ///////////////// |
(a) Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 0276 0 | 3.a.
(b) Securities purchased under agreements to resell. . . . . . . . . . . . . . . . . . . | 0277 0 | 3.b.
4. Loans and Lease financing receivables: ------------------------| ///////////////// |
(a) Loans and Leases, net of unearned income (from Schedule RC-C)| RCFD 2122 | 8,266,522 | ///////////////// | 4.a.
(b) LESS: Allowance for Loan and Lease Losses . . . . . . . . . | RCFD 3123 | 334,383 | ///////////////// | 4.b.
(c) LESS: Allocated transfer risk reserve . . . . . . . . . . . | RCFD 3128 | 0 | ///////////////// | 4.c.
(d) Loans and leases, net of unearned income, ------------------------| ///////////////// |
allowance, and reserve (item 4.a minus 4.b and 4.c) . . . . . . . . . . . . . . . | 2125 7,932,139 | 4.d.
5. Assets held in trading accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3545 0 | 5.
6. Premises and fixed assets (including capitalized Leases). . . . . . . . . . . . . . . . . | 2145 168,167 | 6.
7. Other real estate owned (rom Schedule RC-H) . . . . . . . . . . . . . . . . . . . . . . . | 2150 20,657 | 7.
8. Investment in unconsolidated subsidiaries and associated companies (from Schedule RC-H) . | 2130 0 | 8.
9. Customers' liability to this bank on acceptances outstanding. . . . . . . . . . . . . . . | 2155 31,157 | 9.
10. Intangible assets (from Schedule RC-H). . . . . . . . . . . . . . . . . . . . . . . . . . | 2143 72,849 |10.
11. Other assets (from Schedule RC-F) . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2160 648,388 |11.
12. Total assets (sum of items 1 through 11). . . . . . . . . . . . . . . . . . . . . . . . . | 2170 14,493,271 |12.
--------------------
- ------------------------
<FN>
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.
</TABLE>
11
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RC-2
Schedule RC--Continued
<TABLE>
<CAPTION>
---------------------------
Dollar Amounts in Thousands | //////// Bil Mil Thou |
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LIABILITIES | /////////////////////// |
13. Deposits: | /////////////////////// |
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E part 1) . . | RCON 2200 7,548,857 | 13.a.
------------------------
(1) Noninterest-bearing (1) . . . . . . . . . . . . . . . . | RCON 6631 2,344,664 | /////////////////////// | 13.a.(1)
(2) Interest-bearing . . . . . . . . . . . . . . . . . . . | RCON 6636 5,204,193 | /////////////////////// | 13.a.(2)
------------------------
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, | /////////////////////// |
part 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFN 2200 243,933 | 13.b.
------------------------
(1) Noninterest-bearing . . . . . . . . . . . . . . . . . . | RCFN 6631 0 | /////////////////////// | 13.b.(1)
(2) Interest-bearing . . . . . . . . . . . . . . . . . . . | RCFN 6636 243,933 | /////////////////////// | 13.b.(2)
------------------------
14. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | /////////////////////// |
a. Federal funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 0278 1,824,426 | 14.a.
b. Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . | RCFD 0279 3,162,509 | 14.b.
15. a. Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . . . . . . | RCON 2840 168,554 | 15.a.
b. Trading liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 3548 7,085 | 15.b.
16. Other borrowed money: | /////////////////////// |
a. With original maturity of one year or less . . . . . . . . . . . . . . . . . . . . | RCFD 2332 279,380 | 16.a.
b. With original maturity of more than one year . . . . . . . . . . . . . . . . . . . | RCFD 2333 0 | 16.b.
17. Mortgage indebtedness and obligations under capitalized Leases . . . . . . . . . . . . | RCFD 2910 9,880 | 17.
18. Bank's Liability on acceptances executed and outstanding . . . . . . . . . . . . . . . | RCFD 2920 31,157 | 18.
19. Subordinated notes and debentures . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 3200 0 | 19.
20. Other Liabilities (from Schedule RC-G) . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 2930 80,525 | 20.
21. Total Liabilities (sum of items 13 through 20) . . . . . . . . . . . . . . . . . . . . | RCFD 2948 13,356,306 | 21.
| /////////////////////// |
22. Limited-Life preferred stock and related surplus . . . . . . . . . . . . . . . . . . . | RCFD 3282 0 | 22.
EQUITY CAPITAL | /////////////////////// |
23. Perpetual preferred stock and related surplus . . . . . . . . . . . . . . . . . . . . | RCFD 3838 0 | 23.
24. Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 3230 19,489 | 24.
25. Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . . . . . | RCFD 3839 849,190 | 25.
26. a. Undivided profits and capital reserves . . . . . . . . . . . . . . . . . . . . . . | RCFD 3632 281,158 | 26.a.
b. Net unrealized holdings gains (Losses) on available-for-sale securities . . . . . . | RCFD 8438 (12,872)| 26.b.
27. Cumulative foreign currency translation adjustments . . . . . . . . . . . . . . . . . | RCFD 3284 0 | 27.
28. Total equity capital (sum of items 23 through 27) . . . . . . . . . . . . . . . . . . | RCFD 3210 1,136,965 | 28.
29. Total liabilities, Limited-Life preferred stock, and equity capital(sum of items 21, 22,| /////////////////////// |
and 28). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 3300 14,493,271 | 29.
---------------------------
</TABLE>
MEMORANDUM
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best
describes the most comprehensive level of auditing work performed for the
bank by independent external auditors as of any date during 1993. . . . . .
Number
--------------------
| RCFD 6724 2 | M.1.
---------------------
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors (may
be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- ------------------------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
12
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RC-3
Schedule RC-A--Cash and Balances Due From Depository Institutions
Exclude assets held in trading accounts.
<TABLE>
<CAPTION>
----------
| C4DS |
-------------------------------------------
| (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
|--------------------|--------------------|
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
- ---------------------------------------------------------------------------|--------------------|--------------------|
<S> <C> <C> <C> <C> <C>
1. Cash items in process of collection, unposted debits, and currency and | ////////////////// | ////////////////// |
coin ................................................................. | 0022 596,851 | ////////////////// | 1.
a. Cash items in process of collection and unposted debits............. | ////////////////// | 0020 483,959 | 1.a.
b. Currency and coin................................................... | ////////////////// | 0080 112,892 | 1.b.
2. Balances due from depository institutions in the U.S. ................. | ////////////////// | 0082 86,207 | 2.
a. U.S. branches and agencies of foreign banks (including their 18Fs).. | 0083 0 | ////////////////// | 2.a.
b. Other commercial banks in the U.S. and other depository institutions | ////////////////// | ////////////////// |
in the U.S. (including their 18Fs).................................. | 0085 86,207 | ////////////////// | 2.b.
3. Balances due from banks in foreign countries and foreign central banks. | ////////////////// | 0070 204,415 | 3.
a. Foreign branches of other U.S. banks................................ | 0073 0 | ////////////////// | 3.a.
b. Other banks in foreign countries and foreign central banks.......... | 0074 204,415 | ////////////////// | 3.b.
4. Balances due from Federal Reserve Banks................................ | 0090 217,342 | 0090 217,342 | 4.
5. Total (sum of items 1 through 4) (total of column A must equal | ////////////////// | ////////////////// |
Schedule RC, sum of items 1.a and 1.b)................................. | 0010 1,104,815 | 0010 1,104,815 | 5.
-------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------
Memorandum Dollar Amounts in Thousands | RCON Bil Mil Thou |
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2, | ////////////////// |
column 8 above)................................................................................ | 0050 86,207 |
---------------------- M.1.
</TABLE>
13
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RC-4
Schedule RC-B--Securities
Exclude assets held in trading accounts.
<TABLE>
<CAPTION>
--------
| C410 |
-------------------------------------------------------------------------------------
| Held-to-maturity | Available-for-sale |
-------------------------------------------------------------------------------------
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
------------------------------------------------------------------------------------|
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- ----------------------------------------------------------------------------------------------------------------------|
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. U.S. Treasury securities...... | 0211 1,048,235 | 0213 1,011,643 | 1286 758,370 | 1287 741,321 | 1.
2. U.S. Government agency | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and corporation obligations | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(exclude mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities): | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Issued by U.S. Govern- | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
ment agencies(2)........... | 1289 0 | 1290 0 | 1291 0 | 1293 0 | 2.a.
b. Issued by U.S. | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
Government-sponsored | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
agencies(3)................ | 1294 0 | 1295 0 | 1297 0 | 1298 0 | 2.b.
3. Securities issued by states | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and political subdivisions | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
in the U.S.: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. General obligations........ | 1676 0 | 1677 0 | 1678 138 | 1679 142 | 3.a.
b. Revenue obligations........ | 1681 0 | 1686 0 | 1690 0 | 1691 0 | 3.b.
c. Industrial development | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and similar obligations.... | 1694 0 | 1695 0 | 1696 0 | 1697 0 | 3.c.
4. Mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities (MBS): | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Pass-through securities | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Guaranteed by | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
GNMA................... | 1698 0 | 1699 0 | 1701 91,023 | 1702 94,713 | 4.a.(1)
(2) Issued by FNMA | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and FHLMC.............. | 1703 1,669,092 | 1705 1,656,370 | 1706 0 | 1707 0 | 4.a.(2)
(3) Privately-issued....... | 1709 20,194 | 1710 19,468 | 1711 0 | 1713 0 | 4.a.(3)
b. CMOs and REMICs: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Issued by FNMA | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and FHLMC.............. | 1714 0 | 1715 0 | 1716 0 | 1717 0 | 4.b.(1)
(2) Privately-issued | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and collateralized | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
by MBS issued or | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
guaranteed by | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
FNMA, FHLMC, or | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
GNMA................... | 1718 0 | 1719 0 | 1731 0 | 1732 0 | 4.b.(2)
(3) All other privately- | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
issued................. | 1733 37,690 | 1734 37,382 | 1735 155,019 | 1736 148,784 | 4.b.(3)
5. Other debt securities: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Other domestic debt | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities................. | 1737 725,093 | 1738 726,925 | 1739 0 | 1741 0 | 5.a
b. Foreign debt | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities................. | 1742 3,250 | 1743 3,264 | 1744 0 | 1746 0 | 5.b
|-----------------------------------------------------------------------------------|
<FN>
- -----------------
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates,"
U.S. Maritime Administration obligations, and Export-Import Bank participation
certificates.
(3) Includes obligations (other than pass-through securities, CMOs, and REMICs)
issued by the Farm Credit System, the Federal Home Loan Bank System, the
Federal Home Loan Mortgage Corporation, the Federal National Mortgage
Association, the Financing Corporation, Resolution Funding Corporation, the
Student Loan Marketing Association, and the Tennessee Valley Authority.
</TABLE>
14
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RC-5
Schedule RC-B--Continued
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
| Held-to-maturity | Available-for-sale |
-------------------------------------------------------------------------------------
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
-------------------------------------------------------------------------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6. Equity securities: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Investments in mutual | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
funds............................ | ////////////////// | ////////////////// | 1747 0 | 1748 0 | 6.a.
b. Other equity securities | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
with readily determin- | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
able fair values................. | ////////////////// | ////////////////// | 1749 0 | 1751 0 | 6.b.
c. All other equity | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities(1).................... | ////////////////// | ////////////////// | 1752 26,585 | 1753 26,585 | 6.c.
7. Total (sum of items 1 | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
through 6) (total of | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
column A must equal | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
Schedule RC, item 2.a) | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(total of column D must | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
equal Schedule RC, | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
item 2.b)........................... | 1754 3,503,554 | 1771 3,455,052 | 1772 1,031,135 | 1773 1,011,545 | 7.
-------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------
| C412 | (-
MEMORANDA ----------------------
Dollar Amounts in Thousands| RCFD Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Pledged securities(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | D416 3,719,885 | M.1.
2. Maturity and repricing data for debt securities(2)(3)(4) (excluding those in nonaccrual status):| ////////////////// |
a. Fixed rate debt securities with a remaining maturity of: | ////////////////// |
(1) Three months or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 0343 16,585 | M.2.a.(1)
(2) Over three months through 12 months . . . . . . . . . . . . . . . . . . . . . . . . . . | 0344 0 | M.2.a.(2)
(3) Over one year through five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 0345 2,062,474 | M.2.a.(3)
(4) Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 0346 2,236,321 | M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through 2.a.(4)) . . . | 0347 4,315,380 | M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4544 20,194 | M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly . . . . . . . . . . . . | 4545 152,940 | M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually . . . . . . . . . | 4551 0 | M.2.b.(3)
(4) Less frequently than every five years . . . . . . . . . . . . . . . . . . . . . . . . . | 4552 0 | M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1) through 2.b.(4)). . | 4553 173,134 | M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal total debt | ////////////////// |
securities from Schedule RC-B, sum of items 1 through 5, columns A and D, minus nonaccrual | ////////////////// |
debt securities included in Schedule RC-B, item 9, column C) . . . . . . . . . . . . . . . . | 0393 4,488,514 | M.2.c.
3. Not applicable | ////////////////// |
4. Held-to-maturity debt securities restructured and in compliance with modified terms (included | ////////////////// |
in Schedule RC-B, items 3 through 5, column A, above). . . . . . . . . . . . . . . . . . . . . | 5365 0 | M.4.
5. Not applicable | ////////////////// |
6. Floating rate debt securities with a remaining maturity of one year or less(2) (included in | ////////////////// |
Memorandum item 2.b.(5) above) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5519 2,000 | M.6.
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or | ////////////////// |
trading securities during the calendar year-to-date . . . . . . . . . . . . . . . . . . . . . | 1778 0 | M.7.
----------------------
<FN>
- -------------------------
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c. column D.
(2) Includes held-to-maturity securities at amortized cost and available-for-
sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(4) Memorandum item 2 is not applicable to savings banks that must complete
supplemental Schedule RC-J.
</TABLE>
15
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RC-6
SCHEDULE RC-C--LOANS AND LEASE FINANCING RECEIVABLES
Part I. Loans and Leases
<TABLE>
<CAPTION>
Do not deduct the allowance for Loan and Lease Losses from amounts --------
reported in this schedule. Report total Loans and Leases, net of unearned | C415 | (-
income. Exclude assets held in trading accounts. -------------------------------------------
| (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
-------------------------------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Loans secured by real estate . . . . . . . . . . . . . . . . . . . . . . .| 1410 4,370,884 | ////////////////// | 1.
a. Construction and land development . . . . . . . . . . . . . . . . . . .| ////////////////// | 1415 89,497 | 1.a.
b. Secured by farmland (including farm residential and other | ////////////////// | ////////////////// |
improvements) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .| ////////////////// | 1420 1,482 | 1.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit . . . . . . . . . . .| ////////////////// | 1797 394,116 | 1.c.(1)
(2) All other loans secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(a) Secured by first liens. . . . . . . . . . . . . . . . . . . . .| ////////////////// | 5367 2,536,461 | 1.c.(2)(a)
(b) Secured by junior liens . . . . . . . . . . . . . . . . . . . .| ////////////////// | 5368 179,781 | 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties . . . . . . .| ////////////////// | 1460 84,769 | 1.d.
e. Secured by nonfarm nonresidential properties. . . . . . . . . . . . . .| ////////////////// | 1480 1,084,778 | 1.e.
2. Loans to depository institutions: | ////////////////// | ////////////////// |
a. To commercial banks in the U.S. . . . . . . . . . . . . . . . . . . . .| ////////////////// | 1505 6,581 | 2.a.
(1) To U.S. branches and agencies of foreign banks. . . . . . . . . . .| 1506 0 | ////////////////// | 2.a.(1)
(2) To other commercial banks in the U.S. . . . . . . . . . . . . . . .| 1507 6,581 | ////////////////// | 2.a.(2)
b. To other depository institutions in the U.S.. . . . . . . . . . . . . .| 1517 0 | 1517 0 | 2.b.
c. To banks in foreign countries . . . . . . . . . . . . . . . . . . . . .| ////////////////// | 1510 0 | 2.c.
(1) To foreign branches of other U.S. banks . . . . . . . . . . . . . .| 1513 0 | ////////////////// | 2.c.(1)
(2) To other banks in foreign countries . . . . . . . . . . . . . . . .| 1516 0 | ////////////////// | 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers. . . .| 1590 1,259 | 1590 1,259 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . . .| 1763 2,625,120 | 1763 2,625,120 | 4.a.
b. To non-U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . .| 1764 0 | 1764 0 | 4.b.
5. Acceptances of other banks: | ////////////////// | ////////////////// |
a. Of U.S. banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . .| 1756 154 | 1756 154 | 5.a.
b. Of foreign banks. . . . . . . . . . . . . . . . . . . . . . . . . . . .| 1757 0 | 1757 0 | 5.b.
6. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures (i.e., consumer loans) (includes purchased paper) . . . . . .| ////////////////// | 1975 389,666 | 6.
a. Credit cards and related plans (includes check credit and other | ////////////////// | ////////////////// |
revolving credit plans) . . . . . . . . . . . . . . . . . . . . . . . .| 2008 27,099 | ////////////////// | 6.a.
b. Other (includes single payment, installment, and all student loans) . .| 2011 362,567 | ////////////////// | 6.b.
7. Loans to foreign governments and official institutions (including | ////////////////// | ////////////////// |
foreign central banks) . . . . . . . . . . . . . . . . . . . . . . . . . .| 2081 0 | 2081 0 | 7.
8. Obligations (other than securities and leases) of states and political | ////////////////// | ////////////////// |
subdivisions in the U.S. (includes nonrated industrial development | ////////////////// | ////////////////// |
obligations) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .| 2107 53,771 | 2107 53,771 | 8.
9. Other loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .| 1563 820,827 | ////////////////// | 9.
a. Loans for purchasing or carrying securities (secured and unsecured) . .| ////////////////// | 1545 268,502 | 9.a.
b. All other loans (exclude consumer loans). . . . . . . . . . . . . . . .| ////////////////// | 1564 552,325 | 9.b.
10. Lease financing receivables (net of unearned income) . . . . . . . . . . .| ////////////////// | 2165 2,653 |10.
a. Of U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . . .| 2182 2,653 | ////////////////// |10.a.
b. Of non-U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . .| 2183 0 | ////////////////// |10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above. . . . . .| 2123 4,393 | 2123 4,393 |11.
12. Total Loans and Leases, net of unearned income (sum of items 1 through | ////////////////// | ////////////////// |
10 minus item 11) (total of column A must equal Schedule RC, item 4.a) . .| 2122 8,266,522 | 2122 8,266,522 |12.
-------------------------------------------
</TABLE>
16
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RI-7
Schedule RC-C--Continued
Part I. Continued
<TABLE>
<CAPTION>
------------------------------------------------
| (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
Memoranda ------------------------------------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Commercial paper included in Schedule RC-C, part I, above . . . . . . . . . | 1496 0 | 1496 0 | M.1.
2. Loans and leases restructured and in compliance with modified terms | ////////////////// | /////////////////////// |
(included in Schedule RC-C, part I, above): | ////////////////// | /////////////////////// |
a. Loans secured by real estate: | ////////////////// | /////////////////////// |
---------------------------
(1) To U.S. addressees (domicile). . . . . . . . . . . . . . . . . . . . | 1687 29,848 | M.2.a(1)
(2) To non-U.S. addresses (domicile) . . . . . . . . . . . . . . . . . . | 1689 0 | M.2.a(2)
b. Loans to finance agricultural production and other loans to farmers . . | 1613 0 | M.2.b.
c. Commericial and industrial loans: | ////////////////// |
(1) To U.S. addressees (domicile). . . . . . . . . . . . . . . . . . . . | 1758 1,579 | M.2.c.(1)
(2) To non-U.S. addresses (domicile) . . . . . . . . . . . . . . . . . . | 1759 0 | M.2.c.(2)
d. All other loans (exclude loans to individuals for household, | ////////////////// |
family, and other personal expenditures) . . . . . . . . . . . . . . . . | 1615 0 | M.2.d.
e. Lease financing receivables: | ////////////////// |
(1) Of U.S. addressees (domicile). . . . . . . . . . . . . . . . . . . . | 1789 0 | M.2.e.(1)
(2) Of non-U.S. addresses (domicile) . . . . . . . . . . . . . . . . . . | 1790 0 | M.2.e.(2)
f. Total (sum of Memorandum items 2.a through 2.e). . . . . . . . . . . . . | 1616 31,427 | M.2.f.
3. Maturity and repricing data for loans and leases (1) (excluding those | ////////////////// |
in nonaccrual status): | ////////////////// |
a. Fixed rate loans and leases with a remaining maturity of: | ////////////////// |
(1) Three months or less . . . . . . . . . . . . . . . . . . . . . . . . | 0348 411,426 | M.3.a.(1)
(2) Over three months through 12 months. . . . . . . . . . . . . . . . . | 0349 57,005 | M.3.a.(2)
(3) Over one year through five years . . . . . . . . . . . . . . . . . . | 0356 721,559 | M.3.a.(3)
(4) Over five years. . . . . . . . . . . . . . . . . . . . . . . . . . . | 0357 1,994,884 | M.3.a.(4)
(5) Total fixed rate loans and leases (sum of | ////////////////// |
Memorandum items 3.a.(1) through 3.a.(4)). . . . . . . . . . . . . . | 0358 3,184,874 | M.3.a.(5)
b. Floating rate loans with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently . . . . . . . . . . . . . . . . . . . . | 4554 4,434,366 | M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly. . . | 4555 310,256 | M.3.b.(2)
(3) Every five years or more frequently, but less frequently than | ////////////////// |
annually . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4561 182,904 | M.3.b.(3)
(4) Less frequently than every five years. . . . . . . . . . . . . . . . | 4564 0 | M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1) | ////////////////// |
through 3.b.(4). . . . . . . . . . . . . . . . . . . . . . . . . . . | 4567 4,927,526 | M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5) and 3.b.(5)) | ////////////////// |
(must equal the sum of total loans and leases, net, from | ////////////////// |
Schedule RC-C, part I, item 12, plus unearned income from | ////////////////// |
Schedule RC-C, part I, item 11, minus total nonaccrual loans and | ////////////////// |
leases from Schedule RC-W, sum of items 1 through 8, column C) . . . . . | 1479 8,112,400 | M.3.c.
4. Loans to finance commercial real estate, construction, and land | ////////////////// |
development activities (not secured by real estate) included in | ////////////////// |
Schedule RC-C, part I, items 4 and 9, column A, page RC-6(2) . . . . . . . | 2746 40,590 | M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, above) . | 5369 233,342 | M.5.
6. Adjustable rate closed-end loans secured by first liens on 1-4 family | ////////////////// ---------------------------
residential properties (included in Schedule RC-C, part I, item | ////////////////// | RCON Bil Mil Thou |
---------------------------
1.c.(2)(a), column B, page RC-6). . . . . . . . . . . . . . . . . . . . . . | ////////////////// | 5370 981,320 | M.6.
------------------------------------------------
<FN>
- ------------------------
(1) Memorandum item 3 is not applicable to savings banks that must complete
supplemental Schedule RC-J.
(2) Exclude loans secured by real estate that are included in Schedule RC-C,
part I, item 1, column A.
</TABLE>
17
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RC-8
Schedule RC-D--Trading Assets and Liabilities
Schedule RC-D is to be completed only by banks with $1 billion or more in total
assets or with $2 billion or more in par/notional amount of interest rate,
foreign exchange rate, and other commodity and equity contracts (as reported in
Schedule RC-L, items 11, 12, and 13).
<TABLE>
<CAPTION>
-----------------
| C420 |
------------------------------
Dollar Amounts in Thousands | /////////// Bil Mil Thou |
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS | ////////////////////////// |
1. U.S. Treasury securities in domestic offices . . . . . . . . . . . . . . . . . . . | RCON 3531 0 | 1.
2. U.S. Government agency and corporation obligations in domestic offices | ////////////////////////// |
(exclude mortgage-backed securites) . . . . . . . . . . . . . . . . . . . . . . . . | RCON 3532 0 | 2.
3. Securities issued by states and political subdivisions in the U.S. in | ////////////////////////// |
domestic offices: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCON 3533 0 | 3.
4. Mortgage-backed securities in domestic offices: | ////////////////////////// |
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA. . . . . . | RCON 3534 0 | 4.a.
b. CMOs and REMICs issued by FNMA or FHLMC . . . . . . . . . . . . . . . . . . . . | RCON 3535 0 | 4.b.
c. All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCON 3536 0 | 4.c.
5. Other debt securities in domestic offices. . . . . . . . . . . . . . . . . . . . . | RCON 3537 0 | 5.
6. Certificates of deposit in domestic offices. . . . . . . . . . . . . . . . . . . . | RCON 3538 0 | 6.
7. Commercial paper in domestic offices . . . . . . . . . . . . . . . . . . . . . . . | RCON 3539 0 | 7.
8. Bankers acceptances in domestic offices. . . . . . . . . . . . . . . . . . . . . . | RCON 3540 0 | 8.
9. Other trading assets in domestic offices . . . . . . . . . . . . . . . . . . . . . | RCON 3541 0 | 9.
10. Trading assets in foreign offices. . . . . . . . . . . . . . . . . . . . . . . . . | RCON 3542 0 | 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity | ////////////////////////// |
and equity contracts: | ////////////////////////// |
a. In domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCON 3543 0 | 11.a.
b. In foreign offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFN 3544 0 | 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5). | RCFD 3545 0 | 12.
------------------------------
------------------------------
| /////////// Bil Mil Thou |
LIABILITIES ------------------------------
13. Liability for short positions. . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 3546 0 | 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity | ////////////////////////// |
and equity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 3547 7,085 | 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, | ////////////////////////// |
item 15.b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 3548 7,085 | 15.
------------------------------
</TABLE>
18
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RC-9
Schedule RC-E--Deposit Liabilities
Part I. Deposits in Domestic Offices
<TABLE>
<CAPTION>
--------
| C425 |
--------------------------------------------------------------|
| | Nontransaction |
| Transaction Accounts | Accounts |
--------------------------------------------------------------|
| (Column A) | (Column B) | (Column C) |
| Total transaction | Memo: Total | Total |
| accounts (including| demand deposits | nontransaction |
| total demand | (included in | accounts |
| deposits) | column A) | (including MMDAs)|
--------------------------------------------------------------|
Dollar Amounts in Thousands | RCON Bil Mil Thou | RCON Bil Mil Thou | RCON Bil Mil Thou |
- ------------------------------------------------------------------------------------------------------------------------
Deposits of: | ////////////////// | ////////////////// | ///////////////// |
<C><S> <C> <C> <C> <C> <C> <C> <C>
1. Individuals, partnerships, and corporations ......... | 2201 2,834,904 | 2240 1,894,010 | 2346 4,012,928 | 1.
2. U.S. Government ..................................... | 2202 6,768 | 2280 6,768 | 2520 0 | 2.
3. States and political subdivisions in the U.S. ....... | 2203 175,226 | 2290 150,389 | 2530 224,034 | 3.
4. Commercial banks in the U.S. ........................ | 2206 144,590 | 2310 144,590 | ///////////////// | 4.
a. U.S. branches and agencies of foreign banks ...... | ////////////////// | ////////////////// | 2347 0 | 4.a.
b. Other commercial banks in the U.S. ............... | ////////////////// | ////////////////// | 2348 1,500 | 4.b.
5. Other depository institutions in the U.S. ........... | 2207 102,800 | 2312 102,800 | 2349 0 | 5.
6. Banks in foreign countries .......................... | 2213 1,633 | 2320 1,633 | ///////////////// | 6.
a. Foreign branches of other U.S. banks ............. | ////////////////// | ////////////////// | 2367 0 | 6.a.
b. Other banks in foreign countries ................. | ////////////////// | ////////////////// | 2373 0 | 6.b.
7. Foreign governments and official institutions | ////////////////// | ////////////////// | ///////////////// |
(including foreign central banks) ................... | 2216 298 | 2300 298 | 2377 0 | 7.
8. Certified and official checks ....................... | 2330 44,176 | 2330 44,176 | ///////////////// | 8.
9. Total (sum of items 1 through 8) (sum of | ////////////////// | ////////////////// | ///////////////// |
columns A and C must equal Schedule RC, | ////////////////// | ////////////////// | ///////////////// |
item 13.a) .......................................... | 2215 3,310,395 | 2210 2,344,664 | 2385 4,238,462 | 9.
---------------------------------------------------------------
---------------------
Memoranda Dollar Amounts in Thousands | RCON Bil Mil Thou |
- ------------------------------------------------------------------------------------------------------------------------
1. Selected components of total deposits (i.e. sum of item 9, columns A and C): | ///////////////// |
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts ........................ | 6835 785,416 | M.1.a.
b. Total brokered deposits .................................................................... | 2365 19,857 | M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above): | ///////////////// |
(1) issued in denominations of less than $100,000 .......................................... | 2343 48 | M.1.c.(1)
(2) issued either in denominations of $100,000 or in denominations greater than $100,000 | ///////////////// |
and participated out by the broker in shares of $100,000 or less ....................... | 2344 13,357 | M.1.c.(2)
d. Total deposits denominated in foreign currencies ........................................... | 3776 0 | M.1.d.
e. Preferred deposits (uninsured deposits or states and political subdivisions in the U.S. | ///////////////// |
reported in item 3 above which are secured or collateralized as required under state law)... | 5590 399,259 | M.1.e.
2. Components of total nontransaction accounts (sum of Memoranda items 2.a through 2.d must | ///////////////// |
equal item 9, column C above): | ///////////////// |
a. Savings deposits: | ///////////////// |
(1) Money market deposit accounts (NHDAs) ................................................... | 6810 533,488 | M.2.a.(1)
(2) Other savings deposits (excludes NHDAs) ................................................. | 0352 2,040,291 | M.2.a.(2)
b. Total time deposits of less than $100,000 .................................................. | 6648 1,332,962 | M.2.b.
c. Time certificates of deposit of $100,000 or more ........................................... | 6645 331,721 | M.2.c.
d. Open-account time deposits of $100,000 or more ............................................. | 6646 0 | M.2.d.
3. All NOW accounts (included in column A above) ................................................. | 2398 965,731 | M.3.
---------------------
</TABLE>
19
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RC-10
Schedule RC-E--Continued
Part I. Continued
Memoranda (continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
| Deposit Totals of FDIC Insurance Assessments(1) |
| --------------------- |
| Dollar Amounts in Thousands | RCON Bil Mil Thou | |
|----------------------------------------------------------------------------------------------------------------------- |
<C><S> <C> <C>
| 4. Total deposits in domestic offices (sum of item 9, column A and item 9, column C) | ///////////////// | |
| (must equal Schedule RC, item 13.a) ......................................................... | 2200 7,548,857 | M.4. |
| | ///////////////// | |
| a. Total demand deposits (must equal item 9, column 8) ...................................... | 2210 2,344,664 | M.4.a.|
| b. Total time and savings deposits(2) (must equal item 9, column A plus item 9, column C | ///////////////// | |
| minus item 9, column B) .................................................................. | 2350 5,204,193 | M.4.b.|
| --------------------- |
| ------------- |
<FN>
| (1) An amended Certified Statement should be submitted to the FDIC if the deposit totals reported in this item are amended |
| after the semiannual Certified Statement originally covering this report date has been filed with the FDIC. |
| (2) For FDIC insurance assessment purposes, "total time and savings deposits" consists of nontransaction accounts and all |
| transaction accounts other than demand deposits. |
| |
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- ------------------------------------------------------------------------------------------------------------------------
<C><S> <C> <C>
5. Time deposits of less than $100,000 and open-account time deposits of $100,000 or more | ///////////////// |
(included in Memorandum items 2.b and 2.d above) with a remaining maturity or repricing | ///////////////// |
frequency of:(1) | ///////////////// |
a. Three months or less ....................................................................... | 0359 565,968 | M.5.a.
b. Over three months through 12 months (but not over 12 months) ............................... | 3644 322,670 | M.5.b.
6. Maturity and repricing data for time certificates of deposit of $100,000 or more:(1) | ///////////////// |
a. Fixed rate time certificates of deposit of $100,000 or more with a remaining maturity of: | ///////////////// |
(1) Three months or less ................................................................... | 2761 226,799 | M.6.a.(1)
(2) Over three months through 12 months .................................................... | 2762 52,027 | M.6.a.(2)
(3) Over one year through five years ....................................................... | 2763 48,528 | M.6.a.(3)
(4) Over five years ........................................................................ | 2765 4,367 | M.6.a.(4)
(5) Total fixed rate time certificates of deposit of $100,000 or more (sum of | ///////////////// |
Memorandum items 6.a.(1) through 6.a.(4)) .............................................. | 2767 331,721 | M.6.a.(5)
b. Floating rate time certificates of deposit of $100,000 or more with a repricing frequency of:| ///////////////// |
(1) Quarterly or more frequently ........................................................... | 4568 0 | M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ | 4569 0 | M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. | 4571 0 | M.6.b.(3)
(4) Less frequently than every five years .................................................. | 4572 0 | M.6.b.(4)
(5) Total floating rate time certificates of deposit of $100,000 or more (sum of | ///////////////// |
Memorandum items 6.b.(1) through 6.b.(4)) .............................................. | 4573 0 | M.6.b.(5)
c. Total time certificates of deposit of $100,000 or more (sum of Memorandum items 6.a.(5) | ///////////////// |
and 6.b.(5)) (must equal Memorandum item 2.c. above) ....................................... | 6645 331,721 | M.6.c.
--------------------
- --------------
<FN>
(1) Memorandum items 5 and 6 are not applicable to savings banks that must complete supplemental Schedule RC-J.
</TABLE>
20
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RC-11
Schedule RC - E -- Continued
Part II. Deposits in Foreign Offices (including Edge and Agreement subsidiaries
and IBFs)
<TABLE>
<CAPTION>
----------------------
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
- ---------------------------------------------------------------------------------------------|---------------------
<S> <C> <C> <C>
Deposits of: | ////////////////// |
1. Individuals, partnerships, and corporations . . . . . . . . . . . . . . . . . . . . . . | 2621 243,933 | 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks). . . . . . . . . . . . . | 2623 0 | 2.
3. Foreign banks (including U.S. branches and . . . . . . . . . . . . . . . . . . . . . . | ///////////////// |
agencies of foreign banks, including their IBFs). . . . . . . . . . . . . . . . . . . . | 2625 0 | 3.
4. Foreign government and official institutions (including foreign central banks). . . . . | 2650 0 | 4.
5. Certified and official checks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2330 0 | 5.
6. All other deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2668 0 | 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b). . . . . . . . . . | 2200 243,933 | 7.
----------------------
</TABLE>
Schedule RC - F -- Other Assets
<TABLE>
<CAPTION>
---------
| C430 |
-----------------------------
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Income earned, not collected on loans . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 2164 37,243 | 1.
2. Net deferred tax assets(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 2148 120,018 | 2.
3. Excess residential mortgage servicing fees receivable . . . . . . . . . . . . . . . . . | RCFD 5371 39,725 | 3.
4. Other (itemize amounts that exceed 25% of this item). . . . . . . . . . . . . . . . . . | RCFD 2168 451,402 | 4.
------------ -----------------------------------
a. | TEXT 3549 |---------------------------------------| RCFD 3549 | | /////////////////////// | 4.a.
b. | TEXT 3550 |---------------------------------------| RCFD 3550 | | /////////////////////// | 4.b.
c. | TEXT 3551 |---------------------------------------| RCFD 3551 | | /////////////////////// | 4.c.
---------------------------------------------------------------------------------------
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11). . . . . . . . . . . | RCFD 2160 648,388 | 5.
-----------------------------
<CAPTION>
Memorandum
-----------------------------
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------------
1. Deferred tax assets disallowed for regulatory capital purposes. . . . . . . . . . . . . | RCFD 5610 8,491 | M.1.
-----------------------------
</TABLE>
Schedule RC - G -- Other Liabilities
<TABLE>
<CAPTION>
---------
| C435 |
-----------------------------
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. a. Interest accrued and unpaid on deposits in domestic offices(2) . . . . . . . . . . . | RCDN 3645 6,556 | 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable). . . . . . | RCFD 3646 58,026 | 1.b.
2. Net deferred tax liabilities(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 3049 0 | 2.
3. Minority interest in consolidated subsidiaries. . . . . . . . . . . . . . . . . . . . . | RCFD 3000 0 | 3.
4. Other (itemize amounts that exceed 25% of this item). . . . . . . . . . . . . . . . . . | RCFD 2938 15,943 | 4.
------------- -----------------------------------| |
a. | TEXT 3552 |---------------------------------------| RCFD 3552 | | /////////////////////// | 4.a.
b. | TEXT 3553 |---------------------------------------| RCFD 3553 | | /////////////////////// | 4.b.
c. | TEXT 3554 |---------------------------------------| RCFD 3554 | | /////////////////////// | 4.c.
---------------------------------------------------------------------------------------| |
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20). . . . . . . . . . . | RCFD 2930 80,525 | 5.
-----------------------------
<FN>
- ------------------------
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) For savings banks, include "dividends" accrued and unpaid on deposits.
</TABLE>
21
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RC-12
Schedule RC-H--Selected Balance Sheet Items for Domestic Offices
<TABLE>
<CAPTION>
---------
| C440 | (-
------------------------
| Domestic Offices |
------------------------
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Customers' liability to this bank on acceptances outstanding. . . . . . . . . . . . . . | 2155 31,157 | 1.
2. Rank's liability on acceptances executed and outstanding. . . . . . . . . . . . . . . . | 2920 31,157 | 2.
3. Federal funds sold and securities purchased under agreements to resell. . . . . . . . . | 1350 0 | 3.
4. Federal funds purchased and securities sold under agreements to repurchase. . . . . . . | 2800 4,986,935 | 4.
5. Other borrowed money. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2850 279,380 | 5.
EITHER | ////////////////// |
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs . . . . . . | 2163 N/A | 6.
OR | ////////////////// |
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs . . . . . . . | 2941 43,933 | 7.
8. Total assets (excludes net due from foreign offices, Edge and Agreement | |
subsidiaries, and IBFs).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2192 14,293,271 | 8.
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement | |
subsidiaries, and IBFs) | 3129 13,112,371 | 9.
-------------------------
Items 10-17 include held-to-maturity and available-for-sale securities in domestic offices.
-------------------------
RCON Bil Mil Thou |
-------------------------
10. U.S. Treasury securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1779 1,789,556 | 10.
11. U.S. Government agency and corporation obligations (exclude mortgage-backed | ////////////////// |
securities). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1785 0 | 11.
12. Securities issued by states and political subdivisions in the U.S. . . . . . . . . . . | 1786 142 | 12.
13. Mortgage-backed securities: | ////////////////// |
a. Pass-through securities: | ///////////////// |
(1) Issued or guaranteed by FHMA, FHLMC , or GNMA . . . . . . . . . . . . . . . . . | 1787 1,763,805 | 13.a.(1)
(2) Privately-issued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1869 20,194 | 13.a.(2)
b. CMOs and REMICs: | ////////////////// |
(1) Issued by FHMA and FHLMC. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1877 0 | 13.b.(1)
(2) Privately-issued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2253 186,474 | 13.b.(2)
14. Other domestic debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3159 725,093 | 14.
15. Foreign debt securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3160 3,250 | 15.
16. Equity securities: | ////////////////// |
a. Investments in mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3161 0 | 16.a.
b. Other equity securities with readily determinable fair values . . . . . . . . . . . | 3162 0 | 16.b.
c. All other equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3169 26,585 | 16.c.
17. Total held-to maturity and available-for-sale securities (sum of items 10 through 16). | 3170 4,515,099 | 17.
-------------------------
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)
-------------------------
Dollar Amounds in Thousands | RCON Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
EITHER | ////////////////// |
1. Net due from the IBF of the domestic offices of the reporting bank. . . . . . . . . . . | 3051 N/A | N.1.
OR | //////////////////
2. Net due to the IBF of the domestic offices of the reporting bank. . . . . . . . . . . . | 3059 N/A | N.2.
-------------------------
</TABLE>
22
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RC-13
Schedule RC-I--Selected Assets and Liabilities of IBFs
To be completed only by banks with IBFs and other "foreign" offices.
<TABLE>
<CAPTION>
--------
| C445 | (-
---------------------
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12) ................ | 2133 N/A | 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, item 12, | ////////////////// |
column A) .................................................................................... | 2076 N/A | 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4, column A) ... | 2077 N/A | 3.
4. Total IBF liabilities (component of Schedule RC, item 21) .................................... | 2898 N/A | 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E, | ////////////////// |
part II, items 2 and 3) ...................................................................... | 2379 N/A | 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5, and 6) .... | 2381 N/A | 6.
----------------------
Schedule RC-K--Quarterly Averages (1)
--------
| C455 | (-
---------------------------
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------
ASSETS | /////////////////////// |
1. Interest-bearing balances due from depository institutions .............................. | RCFD 3381 88,889 | 1.
2. U.S. Treasury securities and U.S. Government agency and corporation obligations(2) ...... | RCFD 3382 3,684,324 | 2.
3. Securities issued by states and political subdivisions in the U.S.(2) ................... | RCFD 3383 145 | 3.
4. a. Other debt securities(2) ............................................................. | RCFD 3647 897,639 | 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal Reserve stock). | RCFD 3648 25,573 | 4.b.
5. Federal funds sold and securities purchased under agreements to resell in domestic offices| /////////////////////// |
of the bank and of its Edge and Agreement subsidiaries, and in IBFs ..................... | RCFD 3365 18,750 | 5.
6. Loans: | /////////////////////// |
a. Loans in domestic offices: | /////////////////////// |
(1) Total loans ...................................................................... | RCON 3360 8,044,221 | 6.a.(1)
(2) Loans secured by real estate ..................................................... | RCON 3385 4,291,796 | 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers .............. | RCON 3386 1,446 | 6.a.(3)
(4) Commercial and industrial loans .................................................. | RCON 3387 2,468,743 | 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures ...... | RCON 3388 377,364 | 6.a.(5)
(6) Obligations (other than securities and leases) of states and political | /////////////////////// |
subdivisions in the U.S. ......................................................... | RCON 3389 54,847 | 6.a.(b)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs ............ | RCFN 3360 0 | 6.b.
7. Assets held in trading accounts ......................................................... | RCFD 3401 0 | 7.
8. Lease financing receivables (net of unearned income) .................................... | RCFD 3484 2,425 | 8.
9. Total assets ............................................................................ | RCFD 3368 14,016,825 | 9.
LIABILITIES | /////////////////////// |
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts, | /////////////////////// |
and telephone and preauthorized transfer accounts) (exclude demand deposits) ............ | RCON 3485 950,655 | 10.
11. Nontransaction accounts in domestic offices: | /////////////////////// |
a. Money market deposit accounts (MMDAs) ................................................ | RCON 3486 525,558 | 11.a.
b. Other savings deposits ............................................................... | RCON 3487 2,008,424 | 11.b.
c. Time certificates of deposit of $100,000 or more ..................................... | RCON 3345 431,476 | 11.c.
d. All other time deposits .............................................................. | RCON 3469 1,354,641 | 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs . | RCFN 3404 152,789 | 12.
13. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs ............. | RCFD 3353 4,537,597 | 13.
14. Other borrowed money .................................................................... | RCFD 3355 124,995 | 14.
--------------------------
<FN>
- --------------------------
(1) For all items, banks have the option of reporting either (1) an average of daily figures for the quarter, or
(2) an average of weekly figures (i.e., the Wednesday of each week of the quarter).
(2) Quarterly averages for all debt securities should be based on amortized cost.
(3) Quarterly averages for all equity securities should be based on historical cost.
</TABLE>
23
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RC-14
Schedule RC-L--Off-Balance Sheet Items
<TABLE>
<CAPTION>
Please read carefully the instructions for the preparation of Schedule RC-L. Some of the amounts
reported in Schedule RC-L are regarded as volume indicators and not necessarily as measures of risk.
--------
| C460 | (-
---------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
1. Unused commitments: | ////////////////// |
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home | ////////////////// |
equity lines .............................................................................. | 3814 402,918 | 1.a.
b. Credit card lines ......................................................................... | 3815 0 | 1.b.
c. Commercial real estate, construction, and land development: | ////////////////// |
(1) Commitments to fund loans secured by real estate ...................................... | 3816 51,143 | 1.c.(1)
(2) Commitments to fund loans not secured by real estate .................................. | 6550 24,282 | 1.c.(2)
d. Securities underwriting ................................................................... | 3817 0 | 1.d.
e. Other unused commitments .................................................................. | 3818 4,258,577 | 1.e.
2. Financial standby letters of credit and foreign office guarantees ......-----------------------| 3819 663,706 | 2.
a. Amount of financial standby letters of credit conveyed to others | RCFD 3820 | 1,877 | ////////////////// | 2.a.
3. Performance standby letters of credit and foreign office guarantees ....-----------------------| 3821 43,317 | 3.
a. Amount of performance standby letters of credit conveyed to -----------------------| ////////////////// |
others ..............................................................| RCFD 3822 | 0 | ////////////////// | 3.a.
4. Commercial and similar letters of credit ...............................-----------------------| 3411 7,243 | 4.
5. Participations in acceptances (as described in the instructions) conveyed to others by | ////////////////// |
the reportings bank ...........................................................................| 3428 0 | 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting | ////////////////// |
(nonaccepting) bank .......................................................................... | 3429 0 | 6.
7. Securities borrowed .......................................................................... | 3432 0 | 7.
8. Securities lent (including customers' securities lent where the customer is indemnified | ////////////////// |
against loss by the reporting bank) .......................................................... | 3433 0 | 8.
9. Mortgages transferred (i.e., sold or swapped) with recourse that have been treated as sold | ////////////////// |
for Call Report purposes: | ////////////////// |
a. FNMA and FHLMC residential mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date .......... | 3650 146,238 | 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date .................. | 3651 146,238 | 9.a.(2)
b. Private (nongovernment-issued or -guaranteed) residential mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date .......... | 3652 0 | 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date .................. | 3653 0 | 9.b.(2)
c. Farmer Mac agricultural mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date .......... | 3654 0 | 9.c.(1)
(2) Amount of recourse exposure on these mortgages as of the report date .................. | 3655 0 | 9.c.(2)
10. When-issued securities: | ////////////////// |
a. Gross commitments to purchase ............................................................. | 3434 0 | 10.a.
b. Gross commitments to sell ................................................................. | 3435 0 | 10.b.
11. Interest rate contracts (exclude when-issued securities): | ////////////////// |
a. Notional value of interest rate swaps ..................................................... | 3450 2,206,000 | 11.a.
b. Futures and forward contracts ............................................................. | 3823 4,144,000 | 11.b.
c. Option contracts (e.g., options on Treasuries): | ////////////////// |
(1) Written option contracts .............................................................. | 3824 1,293,000 | 11.c.(1)
(2) Purchased option contracts ............................................................ | 3825 2,108,000 | 11.c.(2)
12. Foreign exchange rate contracts: | ////////////////// |
a. Notional value of exchange swaps (e.g., cross-currency swaps) ............................. | 3826 0 | 12.a.
b. Commitments to purchase foreign currencies and U.S. dollar exchange (spot, forward, | ////////////////// |
and futures) .............................................................................. | 3415 6,711,984 | 12.b.
c. Option contracts (e.g., options on foreign currency): | ////////////////// |
(1) Written option contracts .............................................................. | 3827 0 | 12.c.(1)
(2) Purchased option contracts ............................................................ | 3828 0 | 12.c.(2)
----------------------
</TABLE>
24
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RC-15
<TABLE>
<CAPTION>
Schedule RC-L--Continued
--------------
| C461 |
----------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
13. Contracts on other commodities and equities: | ////////////////// |
a. Notional value of other swaps (e.g., oil swaps) . . . . . . . . . . . . . . . . . . . . | 3829 0 | 13.a.
b. Futures and forward contracts (e.g., stock index and commodity--precious metals, | ////////////////// |
wheat, cotton, livestock--contracts) | 3830 0 | 13.b.
c. Option contracts (e.g., options on commodities, individual stocks and stock indexes): | ////////////////// |
(1) Written option contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3831 0 | 13.c.(1)
(2) Purchased option contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3832 0 | 13.c.(2)
14. All other off-balance sheet liabilities (itemize and describe each component of this item | ////////////////// |
over 25% of Schedule RC, item 28, "Total equity capital"). . . . . . . . . . . . . . . . . | 3430 0 | 14.
------------- ------------- | ////////////////// |
a. | TEXT 3555 | | RCFD 3555 | | ////////////////// | 14.a.
|-----------|---------------------------------------------------| | | |
b. | TEXT 3556 | | RCFD 3556 | | ////////////////// | 14.b.
|-----------|---------------------------------------------------| | | |
c. | TEXT 3557 | | RCFD 3557 | | ////////////////// | 14.c.
|-----------|---------------------------------------------------| | | |
d. | TEXT 3558 | | RCFD 3558 | | ////////////////// | 14.d.
|-----------|-----------------------------------------------------------------------------| |
15. All other off-balance sheet assets (itemize and describe each component of this item | ////////////////// |
over 25% of Schedule RC, item 28, "Total equity capital"). . . . . . . . . . . . . . . . . | 5591 0 | 15.
------------- ------------- | ////////////////// |
a. | TEXT 5592 | | RCFD 5592 | | ////////////////// | 15.a.
|-----------|---------------------------------------------------| | | |
b. | TEXT 5593 | | RCFD 5593 | | ////////////////// | 15.b.
|-----------|---------------------------------------------------| | | |
c. | TEXT 5594 | | RCFD 5594 | | ////////////////// | 15.c.
|-----------|---------------------------------------------------| | | |
d. | TEXT 5595 | | RCFD 5595 | | ////////////////// | 15.d.
|-----------|---------------------------------------------------------------------------------------------------
Memoranda
--------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------
1. Not applicable | ////////////////// |
2. Not applicable | ////////////////// |
3. Unused commitments with an original maturity exceeding one year that are reported in | ////////////////// |
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of | ////////////////// |
commitments that are fee paid or otherwise legally binding). . . . . . . . . . . . . . . . | 3833 2,544,660 | M.3.
a. Participations in commitments with an original maturity ----------------------| ////////////////// |
exceeding one year conveyed to others . . . . . . . . . . . . . . . | RCFD 3834 | 20,453 | ////////////////// | M.3.a.
4. To be completed only by banks with $1 billion or more in total assets: ----------------------| ////////////////// |
Standby letters of credit and foreign office guarantees (both financial and performance) | ////////////////// |
issued to non-U.S. addressees (domicile) included in Schedule RC-L, items 2 and 3, above . | 3377 213,815 | M.4.
5. To be completed for the September report only: | ////////////////// |
Installment Loans to individuals for household, family, and other personal expenditures | ////////////////// |
that have been securitized and sold without recourse (with servicing retained), amounts | ////////////////// |
outstanding by type of loan: | ////////////////// |
a. Loans to purchase private passenger automobiles . . . . . . . . . . . . . . . . . . . . | 2741 N/A | M.5.a.
b. Credit cards and related plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2742 N/A | M.5.b.
c. All other consumer installment credit (including mobile home loans) . . . . . . . . . . | 2743 N/A | M.5.c.
---------------------
</TABLE>
25
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RC-16
<TABLE>
<CAPTION>
Schedule RC-M--Memoranda
|---------|
| C465 |
|----------|---------|
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers, directors, principal | ////////////////// |
shareholders, and their related interests as of the report date: | ////////////////// |
a. Aggregate amount of all extensions of credit to all executive officers, directors, principal | ////////////////// |
shareholders, and their related interests ................................................... | 6164 2,987 | 1.a
b. Number of executive officers, directors, and principal shareholders to whom the amount of all | ////////////////// |
extensions of credit by the reporting bank (including extensions of credit to | ////////////////// |
related interests) equals or exceeds the lesser of $500,000 or 5 percent Number | ////////////////// |
of total capital as defined for this purpose in agency regulations. |-------------------------| |
| RCFD 6165 | 7 | ////////////////// | 1.b.
|-------------------------| |
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches | ////////////////// |
and agencies of foreign banks(1) (included in Schedule RC, items 3.a. and 3.b) .................| 3405 0 | 2.
3. Not applicable. | ////////////////// |
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others | ////////////////// |
(include both retained servicing and purchased servicing): | ////////////////// |
a. Mortgages serviced under a GNMA contract . . . . . . . . . . . . . . . . . . . . . . . . . . | 5500 28,003 | 4.a.
b. Mortgages serviced under a FHLMC contract: | ////////////////// |
(1) Serviced with recourse to servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5501 87,828 | 4.b.(1)
(2) Serviced without recourse to servicer. . . . . . . . . . . . . . . . . . . . . . . . . . | 5502 730,620 | 4.b.(2)
c. Mortgages serviced under a FNMA contract: | ////////////////// |
(1) Serviced under a regular option contract . . . . . . . . . . . . . . . . . . . . . . . . | 5503 61,256 | 4.c.(1)
(2) Serviced under a special option contract . . . . . . . . . . . . . . . . . . . . . . . . | 5504 2,231,506 | 4.c.(2)
d. Mortgages serviced under other servicing contracts . . . . . . . . . . . . . . . . . . . . . | 5505 4,324,582 | 4.d.
5. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must | ////////////////// |
equal Schedule RC, item 9): | ////////////////// |
a. U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2103 31,157 | 5.a.
b. Non-U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2104 0 | 5.b.
6. Intangible assets: | ////////////////// |
a. Mortgage servicing rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3164 18,622 | 6.a.
b. Other identifiable intangible assets: | ////////////////// |
(1) Purchased credit card relationships. . . . . . . . . . . . . . . . . . . . . . . . . . . | 5506 0 | 6.b.(1)
(2) All other identifiable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . | 5507 0 | 6.b.(2)
c. Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3163 54,227 | 6.c.
d. Total (sum of items 6.a through 6.e) (must equal Schedule RC, item 10) . . . . . . . . . . . | 2143 72,849 | 6.d
e. Intangible assets that have been grandfathered for regulatory capital purposes . . . . . . . | 6442 0 | 6.e
|--------------------|
YES NO
|--------------------|
7. Does your bank have any mandatory convertible debt that is part of your Tier 2 capital? . . . . | 6167 |///| X | 7.
|--------------------|
If yes, complete items 7.a through 7.e: | RCFD Bil Mil Thou |
|--------------------|
a. Total equity contract notes, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3290 N/A | 7.a.
b. Common or perpetual preferred stock dedicated to redeem the above notes. . . . . . . . . . . | 3291 N/A | 7.b.
c. Total equity commitment notes, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3293 N/A | 7.c.
d. Common or perpetual preferred stock dedicated to redeem the above notes. . . . . . . . . . . | 3294 N/A | 7.d.
e. Total (item 7.a minus 7.b plus 7.c minus 7.d). . . . . . . . . . . . . . . . . . . . . . . . | 3295 N/A | 7.e.
|--------------------|
- ----------------------
<FN>
(1) Do NOT report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.
</TABLE>
26
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RC-17
Schedule RC - M -- Continued
<TABLE>
<CAPTION>
------------------------------
Dollar Amounts in thousands | ///////// Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
8. a. Other real estate owned: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures . . . . . . . . . . | RCFD 5372 0 | 8.a.(1)
(2) All other real estate owned: | /////////////////////// |
(a) Construction and land development in domestic offices . . . . . . . . . | RCON 5508 6,855 | 8.a.(2)(a)
(b) Farmland in domestic offices. . . . . . . . . . . . . . . . . . . . . . | RCON 5509 0 | 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices . . . . . . . . . | RCON 5510 4,044 | 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices. . . | RCON 5511 83 | 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices . . . . . . . . . | RCON 5512 9,675 | 8.a.(2)(e)
(f) In foreign offices. . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFN 5513 0 | 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) . | RCFD 2150 20,657 | 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures . . . . . . . . . . | RCFD 5374 0 | 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and | /////////////////////// |
associated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 5375 0 | 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2) (must equal Schedule RC, item 8). . | RCFD 2130 0 | 8.b.(3)
c. Total assets of unconsolidated subsidiaries and associated companies. . . . . . | RCFD 5376 0 | 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in | /////////////////////// |
Schedule RC, item 23, "Perpetual preferred stock and related surplus". . . . . . . | RCFD 3778 0 | 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include | /////////////////////// |
proprietary, private label, and third party mutual funds): | /////////////////////// |
a. Money market funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCON 6441 41,284 | 10.a.
b. Equity securities funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCON 8427 8,380 | 10.b.
c. Debt securities funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCON 8428 3,841 | 10.c.
d. Other mutual funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCON 8429 0 | 10.d.
e. Annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCON 8430 0 | 10.e.
------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
| ------------------------------ |
| Memorandum Dollar Amounts in Thousands | RCFD Bil Mil Thou | |
- -----------------------------------------------------------------------------------------------------------------------------------
|1. Interbank holdings of capital instruments (to be completed for the December | /////////////////////// |
| report only): | /////////////////////// | |
| a. Reciprocal holdings of banking organizations' capital instruments . . . . . . . | 3836 N/A | M.1.a. |
| b. Nonreciprocal holdings of banking organizations' capital instruments. . . . . . | 3837 N/A | M.1.b. |
| ------------------------------- |
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RC-18
Schedule RC - N -- Past Due and Nonaccrual Loans, Leases and Other Assets
The FFIEC regards the information reported in
all of Memorandum item 1, in items 1 through 10,
Column A, and in Memorandum items 2 through 4,
Column A, as confidential.
<TABLE>
<CAPTION>
----------
| C470 |
-------------------------------------------------------------------
| (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
| accruing | accruing | |
-------------------------------------------------------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1. Loans secured by real estate: | /////////////////// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile). . . . . . . . . | | 1246 12,517 | 1247 127,407 | 1.a.
b. To non-U.S. addressees (domicile). . . . . . . | C | 1249 0 | 1250 0 | 1.b.
2. Loans to depository institutions and | O | ////////////////// | ////////////////// |
acceptances of other banks: | N | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository | F | ////////////////// | ////////////////// |
institutions . . . . . . . . . . . . . . . . . | I | 5378 0 | 5379 0 | 2.a.
b. To foreign banks . . . . . . . . . . . . . . . | D | 5381 0 | 5382 0 | 2.b.
3. Loans to finance agricultural production and | E | ////////////////// | ////////////////// |
other loans to farmers. . . . . . . . . . . . . . | N | 1597 0 | 1583 114 | 3.
4. Commercial and industrial loans: | T | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile). . . . . . . . . | I | 1252 2,064 | 1253 26,122 | 4.a.
b. To non-U.S. addressees (domicile). . . . . . . | A | 1255 0 | 1256 0 | 4.b.
5. Loans to individuals for household, family and | L | ////////////////// | ////////////////// |
other personal expenditures: | | ////////////////// | ////////////////// |
a. Credit cards and related plans . . . . . . . . | | 5384 97 | 5385 588 | 5.a.
b. Other (includes single payment, installment, | | ////////////////// | ////////////////// |
and all student loans) . . . . . . . . . . . . | | 5387 303 | 5388 2,546 | 5.b.
6. Loans to foreign governments and official | | ////////////////// | ////////////////// |
institutions. . . . . . . . . . . . . . . . . . . | | 5390 0 | 5391 0 | 6.
7. All other loans . . . . . . . . . . . . . . . . . | | 5460 1,252 | 5461 1,738 | 7.
8. Lease financing receivables: | | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile). . . . . . . . . | | 1258 0 | 1259 0 | 8.a.
b. Of non-U.S. addressees (domicile). . . . . . . | | 1272 0 | 1791 0 | 8.b.
9. Debt securities and other assets (exclude other | | ////////////////// | ////////////////// |
real estate owned and other repossessed assets) . | | 3506 0 | 3507 0 | 9.
-------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed portions of past due and nonaccrual loans and
leases. Report in item 10 below certain guaranteed loans and leases that have already been included in the amounts reported in items
1 through 8.
<CAPTION>
-------------------------------------------------------------------
| RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
10. Loans and leases reported in items 1 -------------------------------------------------------------------
through 8 above which are wholly or partially | ////////////////// | ////////////////// | ////////////////// |
guaranteed by the U.S. Government. . . . . . . . | CONFIDENTIAL | 5613 85 | 5614 268 | 10.
a. Guaranteed portion of loans and leases | ////////////////// | ////////////////// | ////////////////// |
included in item 10 above . . . . . . . . . . | | 5616 69 | 5617 253 | 10.a.
-------------------------------------------------------------------
</TABLE>
28
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RC-19
Schedule RC - N -- Continued
<TABLE>
<CAPTION>
----------
| C473 | (-
-------------------------------------------------------------------
| (Column A) | (Column B) | (Column C) |
| past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
| accruing | accruing | |
-------------------------------------------------------------------
Memoranda Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1. Restructured loans and leases included in | ////////////////// | ////////////////// | ////////////////// |
Schedule RC-N, items 1 through 8, above . . . . . | | | M.1.
2. Loans to finance commercial real estate, | | CONFIDENTIAL |
construction, and land development activities | C | |
(not secured by real estate) included in | O | | |
Schedule RC-N, items 4 and 7, above . . . . . . . | N |---------------------| ------------------- | M.2.
3. Loans secured by real estate in domestic offices | F | RCON Bil Mil Thou | RCON Bil Mil Thou |
(included in Schedule RC-N, item 1, above): | I |---------------------| ---------------------
a. Construction and land development. . . . . . . | D | 2769 200 | 3492 21,589 | M.3.a.
b. Secured by farmland. . . . . . . . . . . . . . | E | 3494 0 | 3495 391 | M.3.b.
c. Secured by 1-4 family residential properties: | N | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by | T | ////////////////// | ////////////////// |
1-4 family residential properties and | I | ////////////////// | ////////////////// |
extended under lines of credit . . . . . . | A | 5399 91 | 5400 1,102 |M.3.c.(1)
(2) All other loans secured by 1-4 family | L | ////////////////// | ////////////////// |
residential properties and extended under | | ////////////////// | ////////////////// |
lines of credit. . . . . . . . . . . . . . | | 5402 4,550 | 5403 23,130 |M.3.c.(2)
d. Secured by multifamily (5 or more) | | ////////////////// | ////////////////// |
residential properties | | 3500 715 | 3501 8,630 | M.3.d.
e. Secured by nonfarm nonresidential properties . | | 3503 6,961 | 3504 72,565 | M.3.e.
-------------------------------------------------------------------
---------------------------------------------
| (Column A) | (Column B) |
| past due 30 | Past due 90 |
| through 89 days | days or more |
---------------------------------------------
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
---------------------------------------------
4. Interest rate, foreign exchange rate, and other | ////////////////// | ////////////////// |
commodity and equity contracts: | ////////////////// | ////////////////// |
a. Book value of amounts carried as assets. . . . | 3522 0 | 3528 0 | M.4.a.
b. Replacement cost of contracts with a | ////////////////// | ////////////////// |
positive replacement cost. . . . . . . . . . . | 3529 0 | 3530 0 | M.4.b.
---------------------------------------------
</TABLE>
29
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RC-20
Schedule RC - O -- Other Data for Deposit Insurance Assessments
An amended Certified Statement should be submitted to the FDIC if the amounts
reported in items 1 through 10 of this schedule are amended after the
semiannual Certified Statement originally covering this report date has been
filed with the FDIC.
<TABLE>
<CAPTION>
--------
| C475 | (-
-----------------------
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Unposted debits (see instructions): | ////////////////// |
a. Actual amount of all unposted debits. . . . . . . . . . . . . . . . . . . . . . . . . . | 0030 N/A | 1.a.
OR | ////////////////// |
b. Separate amount of unposted debits: | ////////////////// |
(1) Actual amount of unposted debits to demand deposits . . . . . . . . . . . . . . . . | 0031 0 | 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1). . . . . . . . . . | 0032 0 | 1.b.(2)
2. Unposted credits (see instructions): | ////////////////// |
a. Actual amount of all unposted credits . . . . . . . . . . . . . . . . . . . . . . . . . | 3510 N/A | 2.a.
OR | ////////////////// |
b. Separate amount of unposted credits: | ////////////////// |
(1) Actual amount of unposted credits to demand deposits. . . . . . . . . . . . . . . . | 3512 160,725 | 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1) . . . . . . . . . | 3514 0 | 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total | ////////////////// |
deposits in domestic offices). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3520 0 | 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in | ////////////////// |
Puerto Rico and U.S. territories and possessions (not included in total deposits): | ////////////////// |
a. Demand deposits of consolidated subsidiaries. . . . . . . . . . . . . . . . . . . . . . | 2211 7,943 | 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries . . . . . . . . . . . . . . . | 2351 0 | 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries. . . . . . . . . . | 5514 0 | 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions: | ////////////////// |
a. Demand deposits in insured branches (included in Schedule RC-E, Part II). . . . . . . . | 2229 0 | 5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, Part II) . | 2383 0 | 5.b.
c. Interest accrued and unpaid on deposits in insured branches | ////////////////// |
(included in Schedule RC-G, item 1.b) . . . . . . . . . . . . . . . . . . . . . . . . . | 5515 0 | 5.c.
-----------------------
-----------------------
Item 6 is not applicable to state nonmember banks that have not been authorized by the | ////////////////// |
Federal Reserve to act as pass-through correspondents. | ////////////////// |
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on | ////////////////// |
behalf of its respondent depository institutions that are also reflected as deposit | ////////////////// |
liabilities of the reporting bank: | ////////////////// |
a. Amount reflected in demand deposits (included in Schedule RC-E, Part I, | ////////////////// |
Memorandum item 4.a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2314 0 | 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I, | ////////////////// |
Memorandum item 4.b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2315 0 | 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1) | ////////////////// |
a. Unamortized premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5516 0 | 7.a.
b. Unamortized discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5517 0 | 7.b.
-----------------------
- -----------------------------------------------------------------------------------------------------------------------------------
|8. To be completed by banks with "Oakar deposits." ----------------------- |
| Total "Adjusted Attributable Deposits" of all institutions acquired under Section 5(d)(3) of | ////////////////// | |
| the Federal Deposit Insurance Act (from most recent FDIC Oaker Transaction Worksheet(s)) . | 5518 N/A | 8. |
| ----------------------- |
- ------------------------------------------------------------------------------------------------------------------------------------
-----------------------
9. Deposits in lifeline accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5596 ///////////// | 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in total | ////////////////// |
deposits in domestic offices). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 8432 0 | 10.
-----------------------
<FN>
- -------------
(1) For FDIC insurance assessment purposes, "time and savings deposits" consists of
nontransaction and all transaction accounts other than demand deposits.
</TABLE>
30
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RC-21
Schedule RC - O -- Continued
<TABLE>
<CAPTION>
Memoranda (to be completed each quarter except as noted) |----------------------|
Dollar Amounts in Thousands | RCON Bil Mil Thou |
- -------------------------------------------------------------------------------------------------|----------------------|
<S> <C> <C> | <C>
1. Total deposits in domestic offices of the bank (sum of Memorandum items 1.a.(1) and 1.b.(1) | //////////////////// |
must equal Schedule RC, item 13.a): | //////////////////// |
a. Deposit accounts of $100,000 or less: | //////////////////// | M.1.a.(1)
(1) Amount of deposit accounts of $100,000 or less . . . . . . . . . . . . . . . . . . . . | 2702 4,413,942 |
Number | |
(2) Number of deposit accounts of $100,000 or less (to be --------------------------------| //////////////////// | M.1.a.(2)
completed for the June report only). . . . . . . . . . | RCON 3779 | N/A | //////////////////// |
b. Deposit accounts of more than $100,000: --------------------------------| |
(1) Amount of deposit accounts of more than $100,000 Number | 2710 3,134,915 | M.1.b.(1)
--------------------------------| |
(2) Number of deposit accounts of more than $100,000 . . . | RCON 2722 | 7,096 | //////////////////// | M.1.b.(2)
--------------------------------|----------------------|
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by multiplying the number of
deposit accounts of more than $100,000 reported in Memorandum item 1.b (2) above by
$100,000 and subtracting the result from the amount of deposit accounts of more than
$100,000 reported in Memorandum item 1.b. (1) above.
YES NO
Indicate in the appropriate box at the right whether your bank has a method or procedure |---------------------|
for determining a better estimate of uninsured deposits than the estimate described above. .| 6861 | | /// | X | M.2.a.
|---------------------|
| RCON Bil Mil Thou |
b. If the box marked YES has been checked, report the estimate of uninsured deposits |---------------------|
determined by using your bank's method or procedure. . . . . . . . . . . . . . . . . . . . .| 5597 N/A | M.2.b.
---------------------
- --------------------------------------------------------------------------------------------------------------------------
Person to whom questions about the Reports of Condition and Income should be directed: | C477 | (-
|-------|
<FN>
ROBERT DUFF, ASSISTANT VICE PRESIDENT (203) 986-2474
- ------------------------------------------------------------------------------------ ----------------------------------
Name and Title (TEXT 8901) Area code and phone number (TEXT 8902)
</TABLE>
31
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RC-22
SCHEDULE RC - R -- RISK BASED CAPITAL
<TABLE>
<CAPTION>
This schedule must be completed by all banks as follows: Banks that reported total assets of $1 billion or more in Schedule RC,
item 12, for June 30, 1993, must complete items 2 through 9 and Memorandum item 1. Banks with assets of less than
$1 billion must complete items 1 through 3 below or Schedule RC-R in its entirety, depending on their response to item 1 below.
<S> <C> <C> <C>
|-------------------|
| C480 | (-
1. Test for determining the extent to which Schedule RC-R must be completed. To be completed |-------------------|
only by banks with total assets of less than $1 billion. Indicate in the appropriate | YES NO |
box at the right whether the bank has total capital greater than or equal to eight |-----------|-----|-------------|
percent of adjusted total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 6056 | | //// | | 1.
|-------------------------------|
</TABLE>
For purposes of this test, adjusted total assets equals total assets less
cash, U.S. Treasuries, U.S. Government agency obligations, and 80 percent of
U.S. Government-sponsored agency obligations plus the allowance for loan and
lease losses and selected off-balance sheet items as reported on Schedule RC-L
(see instructions).
If the box marked YES has been checked, then the bank only has to complete
items 2 and 3 below. If the box marked NO has been checked, the bank must
complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual
risk-based capital ratio is less than eight percent or that the bank is not in
compliance with the risk-based capital guidelines.
<TABLE>
<CAPTION>
------------------------------------------
| (Column A) | (Column B) |
|Subordinated Debt(1)| Other |
| and Intermediate | Limited- |
| Term Preferred | Life Capital |
Items 2 and 3 are to be completed by all banks. | Stock | Instruments |
|--------------------|-------------------|
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- --------------------------------------------------------------------------------|------------------- |-------------------|
<S> <C> | <C> <C>
2. Subordinated debt(1) and other limited-life capital instruments (original | ////////////////// | ///////////////// |
weighted average maturity of at least five years) with a remaining | ////////////////// | ///////////////// |
maturity of: | ////////////////// | ///////////////// |
a. One year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3780 0 | 3786 0 | 2.a.
b. Over one year through two years. . . . . . . . . . . . . . . . . . . . . | 3781 0 | 3787 0 | 2.b.
c. Over two years through three years . . . . . . . . . . . . . . . . . . . | 3782 0 | 3788 0 | 2.c.
d. Over three years through four years. . . . . . . . . . . . . . . . . . . | 3783 0 | 3789 0 | 2.d.
e. Over four years through five years . . . . . . . . . . . . . . . . . . . | 3784 0 | 3790 0 | 2.e.
f. Over five years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3785 0 | 3791 0 | 2.f.
-------------------- -------------------
|-------------------|
| RCFD Bil Mil Thou |
3. Total qualifying capital (i.e., Tier 1 and Tier 2 capital) allowable under the risk-based |-------------------|
capital guidelines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3792 1,235,505 | 3.
|-------------------|
------------------------------------------
| (Column A) | (Column B) |
| Assets | Credit Equiv- |
Items 4-9 and Memorandum item 1 are to be completed | Recorded | alent Amount |
by banks that answered NO to item 1 above and | on the | of Off-Balance |
by banks with total assets of $1 billion or more. | Balance Sheet | Sheet Items(2) |
|--------------------|-------------------|
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
4. Assets and credit equivalent amounts of off-balance sheet items assigned |--------------------|-------------------|
to the Zero percent risk category: | ////////////////// | ///////////////// |
a. Assets recorded on the balance sheet: | ////////////////// | ///////////////// |
(1) Securities issued by, other claims on, and claims unconditionally | ////////////////// | ///////////////// |
guaranteed by, the U.S. Government and its agencies and other | ////////////////// | ///////////////// |
OECD central governments. . . . . . . . . . . . . . . . . . . . . . | 3794 1,997,407 | ///////////////// | 4.a.(1)
(2) All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3795 356,343 | ///////////////// | 4.a.(2)
b. Credit equivalent amount of off-balance sheet items . . . . . . . . . . | ////////////////// | 3796 0 | 4.b.
|--------------------|-------------------|
- ------------------
<FN>
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.e,
"Total."
(2) Do not report in column B the risk-weighted amount of assets reported in
column A.
</TABLE>
32
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-8K: 09-0590 FFIEC 031
Page RC-23
Schedule RC-R--Continued
<TABLE>
<CAPTION>
-------------------------------------------
| (Column A) | (Column B) |
| Assets | Credit Equiv- |
| Recorded | alent Amount |
| on the | of Off-Balance |
| Balance Sheet | Sheet Items(1) |
-------------------------------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 20 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet: | ////////////////// | ////////////////// |
(1) Claims conditionally guaranteed by the U.S. Government and its | ////////////////// | ////////////////// |
agencies and other OECD central governments ....................... | 3798 19,894 | ////////////////// | 5.a.(1)
(2) Claims collateralized by the U.S. Government | ////////////////// | ////////////////// |
and its agencies and other OECD central governments; by | ////////////////// | ////////////////// |
securities issued by U.S. Government-sponsored agencies; and | ////////////////// | ////////////////// |
by cash on deposit ................................................ | 3799 0 | ////////////////// | 5.a.(2)
(3) All other ......................................................... | 3800 2,450,545 | ////////////////// | 5.a.(3)
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3801 124,572 | 5.b.
6. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 50 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................. | 3802 2,701,931 | ////////////////// | 6.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3803 215,248 | 6.b.
7. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 100 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................. | 3804 7,321,123 | ////////////////// | 7.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3805 1,947,040 | 7.b.
8. On-balance sheet asset values excluded from the calculation of the | ////////////////// | ////////////////// |
risk-based capital ratio(2) .............................................. | 3806 (19,589)| ////////////////// | 8.
9. Total assets recorded on the balance sheet (sum of | ////////////////// | ////////////////// |
items 4.a, 5.a, 6.a, 7.a, and 8, column A)(must equal Schedule RC, | ////////////////// | ////////////////// |
item 12 plus items 4.b and 4.c) .......................................... | 3807 14,827,654 | ////////////////// | 9.
-------------------------------------------
-------------------------------------------
| (Column A) | (Column B) |
| Notional | Replacement |
| Principal | Cost |
| Value | (Market Value) |
Memorandum -------------------------------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
- -------------------------------------------------------------------------------------------------------------------------
1. Notional principal value and replacement cost of interest rate and | ////////////////// | ////////////////// |
foreign exchange rate contracts (in column B, report only those | ////////////////// | ////////////////// |
contracts with a positive replacement cost): | ////////////////// | ////////////////// |
a. Interest rate contracts (exclude futures contracts) ................... | ////////////////// | 3808 20,463 | M.1.a.
(1) With a remaining maturity of one year or less ..................... | 3809 1,903,000 | ////////////////// | M.1.a.(1)
(2) With a remaining maturity of over one year ........................ | 3810 2,396,000 | ////////////////// | M.1.a.(2)
b. Foreign exchange rate contracts (exclude contracts with an original | ////////////////// | ////////////////// |
maturity of 14 days or less and futures contracts) .................... | ////////////////// | 3811 87,721 | M.1.b.
(1) With a remaining maturity of one year or less ..................... | 3812 6,131,499 | ////////////////// | M.1.b.(1)
(2) With a remaining maturity of over one year ........................ | 3813 0 | ////////////////// | M.1.b.(2)
-------------------------------------------
<FN>
- --------------
(1) Do not report in column B the risk-weighted amount of assets reported in column A.
(2) Until a final rule on the regulatory capital treatment of net unrealized holding gains (losses) an available-for-sale
securities that is applicable to the reporting bank has taken effect, a bank that has adopted FASB Statement No. 115 should
include the difference between the fair value and the amortized cost of its available-for-sale securities in item 8 and report
the amortized cost of these securities in items 4 through 7 above. Item 8 also includes on-balance sheet asset values (or
portions thereof) of off-balance sheet interest rate, foreign exchange rate, and commodity contracts and those contracts (e.g.,
futures contracts) not subject to risk-based capital. Exclude from item 8 margin accounts and accrued receivables as well as
any portion of the allowance for loan and lease losses in excess of the amount that may be included in Tier 2 capital.
</TABLE>
33
<PAGE>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031
Page RC-24
OPTIONAL NARRATIVE STATEMENT CONCERNING THE AMOUNTS
REPORTED IN THE REPORTS OF CONDITION AND INCOME
at close of business on March 31, 1994
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION HARTFORD , CONNECTICUT
- ------------------------------------------------- -------------- -----------
Legal Title of Bank City State
The management of the reporting bank may, if it wishes, submit a brief
narrative statement on the amounts reported in the Reports of Condition and
Income. This optional statement will be made available to the public, along
with the publicly available data in the Reports of Condition and Income, in
response to any request for individual bank report data. However, the
information reported in column A and in all of Memorandum item 1 of Schedule
RC-N is regarded as confidential and will not be released to the public.
BANKS CHOOSING TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE
STATEMENT DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL
BANK CUSTOMERS, REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS
IN SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE NOT WILLING TO HAVE
MADE PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks
choosing not to make a statement may check the "No comment" box below and
should make no entries of any kind in the space provided for the narrative
statement; i.e., DO NOT enter in this space such phrases as "No statement,"
"Not applicable," "N/A," "No comment," and "None."
The optional statement must be entered on this sheet. The statement should
not exceed 100 words. Further, regardless of the number of words, the
statement must not exceed 750 characters, including punctuation, indentation,
and standard spacing between words and sentences. If any submission should
exceed 750 characters, as defined, it will be truncated at 750 characters
with no notice to the submitting bank and the truncated statement will appear
as the bank's statement both on agency computerized records and in computer-
file releases to the public.
All information furnished by the bank in the narrative statement must be
accurate and not misleading. Appropriate efforts shall be taken by the
submitting bank to ensure the statement's accuracy. The statement must be
signed, in the space provided below, by a senior officer of the bank who
thereby attests to its accuracy.
If, subsequent to the original submission, material changes are submitted for
the data reported in the Reports of Condition and Income, the existing
narrative statement will be deleted from the files, and from disclosure; the
bank, at its option, may replace it with a statement, under signature,
appropriate to the amended data.
The optional narrative statement will appear in agency records and in release
to the public exactly as submitted (or amended as described in the preceding
paragraph) by the management of the bank (except for the truncation of
statements exceeding the 750-character limit described above). THE STATEMENT
WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR
ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY
FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE
INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY
PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE
REPORTING BANK.
- -----------------------------------------------------------------------------
No comment |X| (RCON 6979) | C471 | C472| (-
--- --------------
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
-------------------------------------- ---------------------
Signature of Executive Officer of Bank Date of Signature
34