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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended June 30, 1994
Commission file Number 1-6537
EMPIRE GAS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
MISSOURI 43-1494323
(State or other jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
P.O. Box 303
1700 SOUTH JEFFERSON STREET, LEBANON, MISSOURI 65536
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (417) 532-3101
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
9% Subordinated Debentures due 2007 PACIFIC STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part II of this Form 10-K or any
amendment to this Form 10-K. (X)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of close of business on September 15, 1994 is: $116,480
Shares of Common Stock, $0.001 par value, outstanding as of close of business on
September 15, 1994: 1,579,225.
Upon request, Empire Gas Corporation will furnish a copy of any exhibit listed
but not contained herein. A fee of $.05 per page, to cover the Company's costs
in furnishing exhibits requested will be charged. Please direct all requests
to: Corporate Secretary, 1700 South Jefferson, Lebanon, Missouri 65536;
Telephone (417)532-3101.
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PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES.
Prior to June 29, 1994, Empire Gas Corporation ("Empire Gas" or the
"Company") was the owner of 100% of the outstanding common stock of Empire Gas
Operating Corporation ("EGOC") and had no other assets or operations. Prior to
a name change on April 26, 1994, EGOC had been known as Empire Gas Corporation,
and filed reports under the Securities Exchange Act of 1934 under that name. On
June 29, 1994, EGOC merged with and into the Company, with the Company as the
surviving corporation. All references to the Company in this report refer to
Empire Gas Corporation and its consolidated subsidiaries, which prior to June
29, 1994 included EGOC.
On June 30, 1994, the Company engaged in a series of transactions
(the "Transaction") including the transfer of all of the shares of common stock
of Empire Energy Corporation ("Energy") to the Company's former chairman, Robert
W. Plaster, and certain departing directors, officers and employees. See "The
Transaction," below. Energy held the common stock of 136 subsidiaries of the
Company that carried on the business of the Company in ten states, primarily in
the Southeast. As part of the Transaction, the Company also acquired the assets
of PSNC Propane Corporation ("PSNC"). Except where noted otherwise, all
financial information in this report and the financial statements included with
this report include the results of operations of Energy through June 30, 1994
and exclude the results of operations of PSNC, but balance sheet data exclude
the assets of Energy and include the assets of PSNC. Other than financial
information, except where noted otherwise, the information presented in this
report excludes the operations and assets of Energy, includes the operations and
assets of PSNC, and otherwise reflects the effect of the Transaction.
PROPANE OPERATIONS
The Company is engaged in the business of the retail distribution of
propane and has been in operation since 1963. In addition, the Company sells
related gas-burning appliances and equipment and rents customer storage tanks.
The Company's operations consist of 162 retail service centers with 18
additional bulk storage facilities. During the fiscal year ended June 30, 1994,
the Company, after giving effect to the Transaction, sold approximately 82.8
million gallons of propane 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 Company's operations are
geographically diversified with retail service centers located in the west, the
southwest, Colorado, the upper midwest, the Mississippi Valley and the
southeast. This diversification reduces the potential impact of fluctuations of
weather in a particular region.
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
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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. 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. 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.
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, giving effect to the Transaction, accounted for approximately 69.5%
of the Company's aggregate propane sales revenue and 32.4% of its aggregate
gross margin from propane sales in fiscal year 1994. Historically, this market
has provided higher margins than other retail propane sales. Based on fiscal
year 1994 propane sales revenue after giving effect to the Transaction, the
customer base consisted of 16.7% commercial and 13.8% 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 2.5% of sales.
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 1994, contract suppliers sold nearly 76% of the propane purchased
by the Company (including the centers that were transferred in the Transaction),
and the two largest suppliers sold 23% and 16%, 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. The Company has retail service centers
with an aggregate storage capacity of approximately 8.7 million gallons
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of propane, and each service center has equipment for transferring the gas into
and from the bulk storage tanks. The Company operates 15 over-the-road tractors
and 18 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 1
million barrels. 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 making the necessary
modifications to provide storage that it may use for its own purposes or lease
to third parties. The Company is exploring the possibility of making
modifications to its underground storage facility, and management believes that
required modifications can be made for a cost of approximately $2.0 million.
The Company is currently exploring options for financing these modifications,
and there is no assurance that such financing will be available.
Deliveries to customers are made by means of 370 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.
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 nine regions: West Coast
(North); West Coast (South); Colorado; Midwest (North); Midwest (South); Midwest
(Central); North and South Carolina; Mideast; and New York. 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. Empire Service Corporation
("Service Corp."), a wholly owned
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subsidiary of Energy, provides data processing and management information
services to the Company pursuant to a services agreement. See "Item 13 --
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 to plan accordingly to improve the
operations of the Company as a whole.
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 two-thirds of the Company's retail
propane sales 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.
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,
including suppliers of electricity for sales to residential and commercial
customers. Empire Gas believes growth can be achieved by the conversion to
propane of homes that currently use either electricity or fuel oil products.
Propane has advantages over electricity and fuel oil. 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's 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.
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 can predict neither the impact of future conservation
measures nor the effect that any technological advances might have on the
Company's operations.
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
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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.
The Company believes the highly fragmented retail propane market
presents substantial opportunities for growth through acquisitions. The
Company's ability to compete through acquisitions will be limited in certain
geographic areas as a result of a non-competition agreement signed in connection
with 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 and Tennessee) and
certain territories in three other states (southeastern Missouri, northern
Arkansas and an area within a 50-mile radius of an existing Energy operation in
Illinois) until June 30, 1997. The agreement also restricts the Company from
starting service centers (other than through acquisitions) in western Virginia
and western West Virginia. The same restrictions apply to Energy under the
agreement. See "The Transaction," below and "Item 13 -- 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. Prior to July 1994, workers compensation
coverage had a $500,000 deductible per incident. The deductibles mean that the
Company is effectively self-insured for liability up to these deductibles.
THE TRANSACTION
On June 30, 1994, the Company effected a change in ownership and
management by repurchasing shares of its common stock from its controlling
shareholder, Mr. Robert W. Plaster, and certain other officers in exchange for
all of the shares of common stock of Energy, a subsidiary of the Company, and
cash consideration aggregating approximately $2.5 million. Energy owns the
stock of 136 subsidiaries, 133 of which are retail service centers located
primarily in the southeast. Upon the consummation of this stock purchase, Mr.
Robert Plaster and the other officers from whom stock was repurchased terminated
their employment with the Company, and Mr. Paul S. Lindsey, Jr., an employee of
the Company for 26 years who, prior to the Transaction, served as the Company's
Chief Operating Officer and Vice Chairman of the Board, became the Company's
controlling
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shareholder, Chief Executive Officer, and President. Also upon consummation of
the Transaction, certain lease and use agreements between the Company and Mr.
Plaster or entities controlled by Mr. Plaster were terminated and a new lease, a
non-competition agreement (the "Non-Competition Agreement"), and a support
services agreement (the "Service Agreement") were entered into. See "Item 13 --
Certain Relations and Related Transactions."
Contemporaneously with the repurchase of shares, the Company
acquired the assets of PSNC, 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 aggregate purchase price was
approximately $13.6 million (which includes payment for inventory and accounts
receivable), consisting of $12.0 million for certain assets, primarily customer
and storage tanks, approximately $1.1 million for accounts receivable and
inventory, and $500,000 for a non-compete agreement with the seller. Based on
the gallons sold by the acquired operations in 1994, the Company believes the
acquisition of PSNC will increase its annual propane sales by approximately 9.5
million gallons, approximately 64% of which will be for sales to residential
customers, which generally have higher margins than sales to industrial and
agricultural customers.
Contemporaneously with the repurchase of shares and the acquisition
Name of Each Exchange of PSNC, the Company issued $127,200,000 principal amount
Notes due 2004 and warrants to purchase 175,536 shares of Common Stock at $.01
per share. The Company received proceeds from the issuance of the notes and
warrants (net of underwriting discounts and commissions) of $96,573,216. At the
same time, the Company retired its existing credit facility and replaced it with
a revolving credit line of up to $15 million from Continental Bank, N.A. See
"Item 7 -- Management's Discussion and Analysis of Financial Condition and
Results of Operations (Liquidity and Capital Resources)."
The following table sets forth, for the five years ending June 30,
1994, selected aggregate operating data for the retail service centers of the
Company that were retained after the Transaction and for the retail service
centers the Company acquired from PSNC.
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------------
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
(in thousands except percentages, degree days
and per gallon data)
<S> <C> <C> <C> <C> <C>
Operating revenue.............. $75,342 $75,250 $69,216 $76,931 $74,837
Gross profit (1)............... $39,455 $37,799 $38,031 $41,243 $39,731
Retail gallons sold............ 82,180 74,278 76,167 84,840 82,754
Average gross profit per gallon $.418 $.441 $.426 $.429 $.430
__________
<FN>
(1) Represents operating revenue less the cost of product sold.
</TABLE>
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The operations of the Company after the Transaction differ from the
operations prior to the Transaction in terms of the size, geographical scope,
management and leverage of the Company. Accordingly, operations of the Company
prior to the Transaction are not indicative of expected operations of the
Company after the Transaction.
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 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 hazardous materials
training. The Company has established ongoing training programs in all phases
of product knowledge and safety including participation in the National Propane
Gas Association's ("NPGA") Certified Employee Training Program.
EMPLOYEES
As of September 15, 1994, the Company had approximately 635
employees, none of whom was represented by unions. The Company has never
experienced any significant work stoppage or other significant labor problems
and believes it has good relations with its employees.
ITEM 3. 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.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On April 22, 1994, the Company, as the sole shareholder of EGOC and
acting by unanimous consent in lieu of a meeting, approved an amendment to the
Articles of Incorporation of the subsidiary changing its name from Empire Gas
Corporation to Empire Gas Operating Corporation.
On April 22, 1994, the shareholders of the Company, acting by
unanimous consent in lieu of a meeting, approved an amendment to the Articles of
Incorporation of the Company changing its name from Empire Gas Acquisition
Corporation to Empire Gas Corporation.
On June 20, 1994, the Company, as the sole shareholder of EGOC and
acting by unanimous consent in lieu of a meeting, approved the Transaction,
pursuant to which the shares of certain shareholders of the Company were
redeemed in exchange for cash and the shares of Energy. See "Item 1 -- Business
(The Transaction)" and "Item 13 -- Certain Relationships and Related
Transactions (The Transaction)."
On June 20, 1994, the shareholders of the Company, acting by
unanimous consent in lieu of a meeting, approved the Transaction, pursuant to
which the shares of certain shareholders of the Company were redeemed in
exchange for cash and the shares of Energy. See "Item 1 -- Business (The
Transaction)" and "Item 13 -- Certain Relationships and Related Transactions
(The Transaction)."
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
As of September 15, 1994, the Company's Common Stock was held of
record by 8 shareholders. There is currently no active trading market in the
Company's Common Stock.
As of September 15, 1994, there are outstanding Warrants to purchase
175,536 shares of the Company's Common Stock.
No dividends on the Common Stock of the Company were paid during the
Company's 1993 or 1994 fiscal years. The indenture relating to the 12 7/8 %
Senior Secured Notes due 2004 and the terms of the Company's revolving credit
facility each contain dividend restrictions that prohibit the Company from
paying common stock cash dividends. As a result, the Company has no current
intention of paying cash dividends on the Common Stock.
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ITEM 6. SELECTED FINANCIAL DATA.
The following table presents selected consolidated operating and
balance sheet data of Empire Gas as of and for each of the years in the
five-year period ended June 30, 1994. The financial data of the Company as of
and for each of the years in the five-year period ended June 30, 1994 were
derived from the Company's audited consolidated financial statements. 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 with this report. Because the operating data do not take into account
the effects of the Transaction on the Company, management does not believe they
are indicative of the results of the Company that can be expected after the
Transaction.
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<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
(in thousands except ratios and per share amounts)
<S> <C> <C> <C> <C> <C>
Operating data:
Operating revenue............... $123,153 $121,758 $112,080 $128,401 $124,522
Gross profit (1)................ 64,962 61,787 61,107 68,199 66,632
Operating expenses.............. 39,062 44,772 40,052 41,845 44,966
Depreciation and amortization... 9,334 9,552 10,062 10,351 10,150
Operating income................ 16,566 7,463 10,993 16,003 11,516
Interest expense:
Cash interest.............. 11,437 12,038 10,721 9,826 8,542
Amortization of debt discount
and expenses 1,147 890 1,006 1,686 2,016
Total interest expense. 12,584 12,928 11,727 11,512 10,558
Net income (loss) before
extraordinary items (2) 1,216 (4,557) (1,474) 2,228 (1,190)
Other operating data:
Capital expenditures............ 6,240 8,813 6,703 4,358 20,015
Cash from sale of retail service
centers and other assets...... 430 497 3,062 1,088 366
EBITDA (3)...................... 25,900 17,015 21,055 26,354 21,666
Income (loss) per share before
extraordinary items $.04 $(.33) $(.11) $.16 $(0.08)
<CAPTION>
AS OF JUNE 30,
------------------------------------------------
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance sheet data:
Total assets.................... $158,383 $158,383 $151,471 $148,020 $104,644
Long-term debt (including
current maturities)............ 79,666 84,289 78,958 79,249 105,612
Stockholders' equity (deficit).. 30,982 26,438 24,901 25,913 (28,220)
___________
<FN>
(1) Represents operating revenue less the cost of products sold.
(2) Empire Gas did not declare or pay dividends on its common stock
during the five-year period ending June 30, 1994.
(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>
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ITEM 7. 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 and the historical consolidated financial statements of Empire Gas and the
notes thereto included in this Report.
RESULTS OF OPERATIONS
GENERAL
Empire Gas' primary source of revenue is retail propane sales, which
accounted for approximately 91% of its revenue (without taking account of the
Transaction) in fiscal year 1994. 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.
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. 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% Convertible Subordinated Debentures, and 2007
9% Subordinated Debentures. The Company retired the 12% Senior Subordinated
Debentures and the 1998 9% Convertible Subordinated Debentures in connection
with the Transaction, but the Company's interest expense will increase
substantially as a result of the issuance of the 12 7/8% Senior Secured Notes
due 2004. Through 1999 a significant portion of the increase will be non-cash
interest expense.
The following discussion does not reflect either the transfer of
Energy or the acquisition of the assets of PSNC in the Transaction and therefore
is not indicative of results
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that can be expected in the future. In general, these transactions will result
in a net reduction in the number of gallons sold, and thus in results (including
operating revenue, cost of products sold, gross profit, and provisions for
doubtful accounts) that are related to the number of gallons sold. General and
administrative expenses are also expected to decline as a result of the
elimination of salaries and related expenses of 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 are no longer part of the Company.
FISCAL YEARS ENDED JUNE 30, 1994 AND JUNE 30, 1993
OPERATING REVENUE. Operating revenue decreased $3.8 million or
3.0%, from $128.4 million in fiscal year 1993 to $124.6 million in fiscal year
1994. This decrease was the result of a $4.0 million decrease in propane sales
and a $300,000 decrease in other revenue, offset by a $500,000 increase in sales
of parts and gas appliances. The decrease in propane sales was caused by a 1.9%
decrease in gallons sold and a 1.1% decrease in the average gross sales price
per gallon. The decreased volume reflects the results of slightly warmer winter
weather.
COST OF PRODUCTS SOLD. Cost of products sold decreased $2.3
million, or 3.8%, from $60.2 million in fiscal year 1993 to $57.9 million in
fiscal year 1994. The decrease resulted from the 1.9% decrease in gallons sold,
which reflects the slightly warmer winter weather, and a 3.7% decrease in the
wholesale cost of propane.
GROSS PROFIT. The Company's gross profit for the year decreased
$1.6 million, or 2.3%. The decrease was caused by the 3.0% decrease in
operating revenue partially offset by the 3.8% decrease in cost of products
sold. The Company's gross profit per gallon was relatively constant at $.430 in
fiscal year 1994 and $.429 in fiscal year 1993.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative
expenses increased $3.0 million, or 7.5% from $40.4 million in fiscal year 1993
to $43.5 million in fiscal year 1994. The increase was due primarily to
increases of $1.0 million in insurance and liability claims, $800,000 in
salaries and commissions, and $400,000 in professional fees. The increase in
insurance and liability claims was due primarily to increased claims. The
increase in salaries and commissions was due to annual pay increases combined
with a slight decrease in the total number of employees. The increase in
professional fees was due to increased litigation fees relating to liability
claims and increased accounting and other fees related to the Transaction that
were not capitalized. Other smaller increases were incurred in transportation,
office expenses, taxes and licenses, rent and maintenance, payroll taxes and
employee benefits, travel and entertainment, and advertising.
PROVISION FOR DOUBTFUL ACCOUNTS. The provision for doubtful
accounts increased $100,000 from $960,000 in fiscal year 1993 to $1.1 million in
fiscal year 1994. This
-13-
<PAGE>
increase was the result of a slightly older aging of accounts receivable at June
30, 1994, compared to June 30, 1993.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization
remained relatively constant, decreasing by $200,000, or 1.9%, from $10.4
million in fiscal year 1993 to $10.2 million in fiscal year 1994.
INTEREST EXPENSE. Cash interest expense decreased by
approximately $1.3 million, or 13.1%, from $9.8 million in fiscal year 1993 to
$8.5 million in fiscal year 1994. This decrease was the result of lower
interest rates and reduced borrowing levels as compared to the prior year.
Amortization of debt discount and expense increased $300,000, or 19.6%, from
$1.7 million in 1993 to $2.0 million in 1994. 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 credit
facility.
RECAPITALIZATION COSTS. During fiscal years 1994 and 1993, the
Company incurred $398,000 and $223,000, respectively, in expenses relating to
proposed recapitalizations that the Company later decided not to pursue.
INCOME TAXES. The effective tax rate for the fiscal year ended
June 30, 1994, was approximately 41.7% compared to 47.8% for the fiscal year
ended June 30, 1993. The Company had a positive effective tax rate in 1994
despite its reported loss primarily because of the amortization of the excess of
cost over fair value of assets sold and state income taxes imposed on operations
that were profitable in individual states.
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. 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.
-14-
<PAGE>
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.
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 Convertible Debentures, 2007 9% Subordinated
Debentures, and 12% Senior Subordinated Debentures, as well as amortization of
expenses related to the Company's 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.
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<PAGE>
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.
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.
Cash flow provided from operating activities was $12.9 million in
fiscal year 1994 as compared to $6.2 million in fiscal year 1993. Working
capital provided from operating activities was $9.1 million in fiscal year 1994
as compared to $13.6 million in fiscal year 1993. This reduction in working
capital resulted from the $4.5 million decrease in operating income in fiscal
1994 compared to 1993. This reduction in net income and working capital did not
reduce cash flow provided by operations due to the following factors: (i)
checks in the process of collection increased $3.3 million in 1994 and (ii)
inventories and accounts receivable decreased $1.0 million and accounts payable
and accrued expenses related to self insurance claims increased by $1.1 million
offset by an increase in prepaid expenses principally related to refundable
income taxes of $1.6 million. The working capital items noted above that
increased cash flow by $3.8 million in 1994 contributed a decrease in cash flow
of $7.4 million in 1993.
The Company will be required to use a significant portion of its
cash flow from operations to meet its debt service obligations. In addition to
normal operating cash needs, the Company anticipates debenture interest payments
of approximately $9.8 million in fiscal 1995. The Company's high degree of
leverage makes 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 Company's credit facility bears interest at a floating rate.
The Company believes that, based on current levels of operations and assuming
winter weather that is not substantially warmer in the various regions in which
it operates than the historical average of winter temperatures for those
regions, it will be able to fund its debt service obligations from funds
generated from operations, proceeds of potential sales of service centers
and funds available under its credit facility.
The seasonal nature of the Company's business will require it to
rely on borrowings under its $15.0 million credit facility as well as cash from
operations,
-16-
<PAGE>
particularly during the summer and fall months when the Company is building its
inventory in preparation for the winter heating season. While approximately
two-thirds of the Company's operating revenue is earned in the second and third
quarters of its fiscal year, 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.
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's capital expenditures in fiscal year 1994 were $20.0
million which increased approximately $15.6 million from the preceding year.
The increase was due primarily to the acquisition of PSNC Propane Corporation,
an acquisition of a service center in Colorado (requiring a cash payment of
$273,000 and the issuance of two five-year notes) and increased purchases of new
transportation equipment. The Company's proceeds from sales of fixed assets
decreased approximately $700,000 which was due to the lack of any sales of
existing companies and the reduction of other sales of property compared to the
previous year.
The Company intends to fund its routine capital expenditures and the
purchase of assets for new retail service centers with cash from operations,
borrowings under its credit facility, or other bank financing. The Company
intends to fund acquisitions with seller financing, to the extent feasible, and
with cash from operations or bank financing. The Company is exploring the
possibility of making modifications to its underground storage facility, and
management believes that the required modifications can be made for a cost of
approximately $2.0 million. The Company is currently exploring options for
financing these modifications, and there is no assurance that such financing
will be available.
The Company's credit facility and the indenture for the Senior
Secured Notes impose restrictions on the Company's ability to incur additional
indebtedness. Such restrictions, together with the highly leveraged position of
the Company, could restrict the ability of the Company to acquire financing for
capital expenditures and other corporate activities. These restrictions permit
additional indebtedness of $6 million for the current fiscal year for the
purpose of financing acquisitions, but allow additional indebtness to be
incurred by subsidiaries formed for the purpose of making acquisitions as long
as the Company does not transfer over $3,000,000 (in the aggregate) of assets
to such subsidiaries.
The Company's $15.0 million 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 credit facility, or the
-17-
<PAGE>
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 12 7/8%.
The Company believes cash from operations will be sufficient to meet the
increased interest payments.
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 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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See the Consolidated Financial Statements included elsewhere herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The directors and executive officers of the Company are as follows:
NAME
AGE POSITION HELD WITH THE COMPANY
AND PRINCIPAL OCCUPATION
Paul S. Lindsey, Jr. 49 Chairman of the Board, Chief Executive Officer,
and President since June 1994; previously Vice
Chairman of the Board (since February 1987) and
Chief Operating Officer (since March 1988);
term as director expires 1997
Douglas A. Brown 34 Director since July 1994; member Holding
Capital Group, Inc. (since 1989); term as
director expires 1997
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<PAGE>
Kristin L. Lindsey 46 Director/Vice President since June 1994;
previously pursued charitable and other
personal interests; term as director expires
1996
Bruce M. Withers, Jr.67 Director since July 1994; Chairman and Chief
Executive Officer of Trident NGL Holding, Inc.
(since August 1991) and President of the
Transmission and Processing Division of
Mitchell Energy Corporation (1979 to 1991);
term as director expires 1996
Jim J. Shoemake 56 Director since July 1994; partner of Guilfoil,
Petzall & Shoemake (since 1970); term as
director expires 1995
Mark W. Buettner 52 Divisional Vice President since mid-1993; and
Regional Vice President and Regional Manager
from 1989 to 1993
Kenneth J. DePrinzio 47 Divisional Vice President since mid-1993;
previously Regional Manager of the Company
(1992 to 1993), restaurant owner 1991 to 1992,
Vice President of Star Gas Corporation (1990 to
1991) and Area Vice President at Petrolane,
Inc. (from prior to 1989 through 1990)
Robert C. Heagerty 47 Divisional Vice President since mid-1993;
previously Regional Manager and Regional Vice
President since 1987
James E. Acreman 57 Vice President/Treasurer since June 1994;
previously Senior Vice President since 1989
Valeria Schall 40 Vice President since 1992; Corporate Secretary
since 1985 and Assistant to the Chairman
(Assistant to the Vice Chairman prior to June
1994) since 1987
Willis D. Green 57 Controller since 1989
After expiration of the initial terms of directors as set forth above,
each director will serve for a term of three years. Officers of the Company are
elected by the Board of Directors of the Company and will serve at the
discretion of the Board, except for Mr. Lindsey who is employed pursuant to an
employment agreement that expires June 24, 1999 (subject to extension).
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<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
EXECUTIVE COMPENSATION
The following table provides compensation information for each of the
years ended June 30, 1994, 1993, and 1992 for (i) the Chief Executive Officer of
the Company, (ii) the four other executive officers of the Company who are most
highly compensated and whose total compensation exceeded $100,000 for the most
recent fiscal year and (iii) those persons who are no longer executive officers
of the Company but were among the four most highly compensated and whose total
compensation exceeded $100,000 for the most recent year.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
All
Name and Principal Position Other Other
Fiscal Annual Compensation
At End of Fiscal Year 1994 Year Salary Bonus Compensation(1) (1) (2)
- - --------------------------- ------- ------ ----- --------------- -------------
<S> <C> <C> <C> <C> <C>
Paul S. Lindsey, Jr. 1994 $300,000 $5,000 - -
Chief Executive Officer, 1993 230,000 5,000 - $1,648
Chairman of the Board, 1992 230,000 - - -
and President
1994 1,000,000 - $100,000(6) -
1993 1,000,000 - 100,000(6) 1,648
Robert W. Plaster 1992 1,000,000 -
None(3)
1994 100,000 50,000 - -
1993 100,000 50,000 - 927
Stephen R. Plaster 1992 75,000 50,000 - -
None(4)
Robert L. Wooldridge 1994 100,000 57,308 - -
None(5) 1993 90,000 69,222 - 970
1992 85,000 45,663 - -
_________
<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 fiscal year 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
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<PAGE>
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) Prior to the consummation of the Transaction on June 30, 1994, Mr.
Plaster served as Chief Executive Officer and Chairman of the Board
of the Company.
(4) Prior to the consummation of the Transaction on June 30, 1994, Mr.
S. Plaster served as the President and a Director of the Company.
(5) Prior to the Transaction on June 30, 1994, Mr. Wooldridge was
Executive Vice President - Marketing of the Company.
(6) 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 with the terms of his
employment agreement with the Company. 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 "Item 13 -- Certain Relationships and
Related Transactions (Past Transactions and Relationships)."
</TABLE>
EMPLOYMENT AGREEMENTS
On June 24, 1994, the Company entered into an employment agreement
with Mr. Lindsey. The agreement has a five-year term and provides for the
payment of an annual salary of $350,000 and reimbursement for reasonable travel
and business expenses. The agreement requires Mr. Lindsey to devote
substantially all of his time to the Company's business. The agreement is for a
term of five years, but is automatically renewed for one year unless either
party elects to terminate the agreement at least four months prior to the end of
the term or any extension. The agreement may be terminated by Mr. Lindsey or
the Company, but if the agreement is terminated by the Company and without
cause, the Company must pay one year's salary as severance pay.
INCENTIVE STOCK OPTION PLAN
The following table sets forth certain information concerning
options exercised during fiscal year 1994. There were no unexercised options
held as of the end of the 1994 fiscal year.
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<PAGE>
AGGREGATED OPTION EXERCISES IN THE FISCAL YEAR ENDED JUNE 30, 1994
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SHARES
ACQUIRED ON VALUE
NAME EXERCISE REALIZED (1)
---- ----------- ------------
<S> <C> <C>
Paul S. Lindsey Jr.
James E. Acreman 8,000 $ 44,000
Robert W. Plaster
Stephen R. Plaster
Robert L. Wooldridge 40,000 220,000
___________
<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 received by certain officers,
directors, and employees in connection with the Transaction.
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not during its last completed fiscal year have a
compensation committee. A compensation committee was formed in July 1994,
consisting of Messrs. Withers, Shoemake and Brown. An entity affiliated with
Mr. Brown received $500,000 in the year ended June 30, 1994 with respect to
certain financial and advisory services. See "Item 13 - Certain Relationships
and Related Transactions (Other Transactions and Relationships)." Mr. Lindsey
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 compensation committee. The
compensation committee will determine the compensation of Mr. Lindsey and his
wife.
DIRECTOR COMPENSATION
During the last completed fiscal year, the directors of Empire Gas
did not receive any compensation for their services. Directors of a subsidiary
of Empire Gas, other than Mr. Lindsey and Mr. Stephen Plaster, received an
annual fee of $25,000, payable quarterly, for their services. Beginning with
the 1995 fiscal year, all directors of Empire Gas will receive an annual fee of
$25,000, payable quarterly.
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<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The table below sets forth information with respect to the
beneficial ownership of shares of Common Stock of the Company as of September
15, 1994, 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 owning shares, and by all directors and executive officers of the Company
as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED PERCENT
- - --------------------------- ------------------ -------
<S> <C> <C>
Paul S. Lindsey, Jr.(2) 1,507,610 95.5%
Kristin L. Lindsey(2) 753,805 47.7
James E. Acreman(3) 16,675 1.1
Douglas A. Brown --- --
Bruce M. Withers, Jr. --- --
Jim J. Shoemake --- --
All directors and executive officers
as a group (8 persons)(3) 1,554,417 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) 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 ownership of the shares held by her husband in the Paul S.
Lindsey, Jr. Trust.
(3) The amounts shown include the shares beneficially owned by Messrs.
Lindsey and Acreman, and Mrs. Lindsey as set forth above, and 30,132
shares owned by other executive officers.
</TABLE>
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<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
THE TRANSACTION
The following occurred in connection with the Transaction:
Pursuant to the terms of a stock redemption agreement entered into
between the Company, Robert W. Plaster and certain other shareholders (the
"Stock Redemption Agreement"), the Company repurchased the shares of Common
Stock held by Mr. Robert W. Plaster, and trusts for the benefit of Mr. Plaster,
Mr. Stephen R. Plaster, and certain of their relatives by exchanging one share
of common stock ("Energy Common Stock") of Energy for each share of Common Stock
of the Company held by such shareholders. The Stock Redemption Agreement also
obligated 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 received $7.00 per share for a portion of their shares of Common Stock
and one share of Energy Common Stock for each of their remaining shares of
Common Stock of the Company. The aggregate amount of shares of Common Stock
held by these individuals and the consideration received for the shares are as
set forth below:
<TABLE>
<CAPTION>
Number of Shares of Number of Shares of
Name Common Stock Energy Common Stock Cash
---- ------------------- -------------------- ---------
<S> <C> <C> <C>
Mr. Robert W. Plaster......... 10,974,103(1) 10,974,103(4) -
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 were held in two trusts for Mr. S. Plaster.
(3) Includes 40,000 options Mr. Wooldridge was required to exercise
prior to the date of the Transaction.
(4) Upon the consummation of the Transaction, Mr. Plaster became the
controlling shareholder of Energy, which owns approximately 133
retail services centers located in ten states.
</TABLE>
Upon consummation of the Transaction, Mr. Plaster resigned 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 also resigned from their positions with the
Company and its subsidiaries. Energy and Messrs. Plaster and S. Plaster have
entered into a non-competition agreement which restricts them and their
respective affiliates from competing with the Company, Mr. Lindsey and their
respective affiliates in the territories in which the Company is doing business
immediately
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<PAGE>
following the Stock Purchase. Similarly, Empire Gas, Mr. Lindsey, and their
respective affiliates are restricted from competing with Energy, Messrs. Plaster
and S. Plaster and their respective affiliates in seven states and certain areas
within five states. The non-competition agreement is for a term of three years
from the date on which the Transaction is consummated. Certain relatives of Mr.
Plaster and Mr. Lindsey, and the officers of Energy and the Company entered into
a substantially similar non-competition agreement.
Pursuant to the Stock Redemption Agreement: (i) Empire Gas made a
payment of $1,497,031 to Energy based on the balance of certain liabilities net
of certain assets as of the date on which the Transaction is consummated; (ii)
the Company paid Energy approximately $4.1 million; (iii) the Company and Energy
entered into an agreement regarding use of the Empire Gas name and logo; and
(iv) the responsibility for litigation relating to matters or events occurring
prior to the Transaction (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 were allocated 52.3% to the Company and
47.7% to Energy. The Company and Energy also entered into a tax indemnity
agreement allocating liability for taxes incurred prior to the Transaction.
Pursuant to the terms of the Stock Redemption Agreement, the Company
repurchased, at face value, $4.7 million principal amount of the Company's 2007
9% Subordinated Debentures from Robert W. Plaster and purchased, at face value,
$285,000 principal amount of the Company's 2007 9% Subordinated Debentures from
certain departing officers and employees of the Company.
OTHER TRANSACTIONS AND RELATIONSHIPS
The Company and Service Corp., a wholly owned subsidiary of Energy
controlled by Mr. Robert W. Plaster as a result of the Transaction, entered into
an agreement (the "Service Agreement") pursuant to which Service Corp. provides
to the Company certain data processing and management information services. The
Company pays 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 that the
Company terminates the Service Agreement 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.
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<PAGE>
Prior to the Transaction, the Company leased 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 year 1994.
The Company also paid the utilities, taxes and maintenance costs during that
year. That lease was terminated and a new lease became 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 pays monthly rent of $6,250 and is 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 an agreement ("the Aircraft Facility Agreement"), the
Company leased a jet aircraft and an airport hangar from a corporation owned by
Mr. Robert W. Plaster during fiscal year 1994. 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 $75,000 in fiscal year 1994. In connection with the Transaction,
the Aircraft Facility Agreement was 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 47.7%
of the Company's outstanding Common Stock and became 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 $210,400 in fiscal year 1994.
During fiscal year 1994, the Company received certain financial
advisory services in connection with the negotiation of the Company's revolving
credit facility and with the structuring and execution of the offering of the
Senior Secured Notes from Mr. Douglas A. Brown and Holding Capital Group, Inc.
("HCGI"). HCGI received $500,000 in aggregate with respect to those services.
The Company has entered into an agreement with each person who was a
shareholder prior to the Transaction (all of whom were directors or employees of
the Company) providing the Company with 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
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<PAGE>
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.
During fiscal year 1994, pursuant to an agreement (the "Ranch
Agreement"), the Company paid $150,000 and provided services at a cost of
approximately $25,000 to a wildlife preserve owned by Empire Ranch, Inc., a
corporation wholly owned by Mr. Robert W. Plaster and members of his family.
The Company used the facilities at the preserve for meetings with Company
employees and business guests. The Ranch Agreement was terminated in connection
with the Transaction.
Prior to the Transaction, the Company provided bookkeeping, data
processing, and accounting services to two corporations controlled by Mr. Robert
W. Plaster. The Company received an annual fee of $84,000 in fiscal year 1994
for providing these services. Since the Transaction, the Company no longer
provides these services to the two corporations.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Exhibits
EXHIBIT
NO. DESCRIPTION
- - -- -----------
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 (incorporated herein by reference to
Exhibit 2.2 to the Company's Registration Statement on Form S-1 (No.
33-53343))
-27-
<PAGE>
2.3 Merger Agreement by and between the Company and EGOC
3.1 Articles of Incorporation of the Company (incorporated herein by
reference to Exhibit 3.1 to the Company's Registration Statement on
Form S-1 (No. 33-53343))
3.2 Certificate of Amendment of the Certificate of Incorporation of the
Company, dated April 26, 1994, relating to the change of name
(incorporated herein by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (No. 33-53343))
3.3 By-laws of the Company (incorporated herein by reference to Exhibit
3.3 to the Company's Registration Statement on Form S-1 (No.
33-53343))
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 Indenture between the Company and Shawmut Bank Connecticut, National
Association, Trustee, relating to the 12 7/8% Senior Secured Notes
due 2004, including the 12 7/8% Senior Secured Notes due 2004, the
Guarantee and the Pledge Agreement
4.3 Warrant Agreement
10.1 Shareholder Agreement, dated as of October 28, 1988, by and among
Empire Gas Acquisition 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 (incorporated herein by
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<PAGE>
reference to Exhibit 10.1 to the Company's Registration Statement on
Form S-1 (No. 33-53343))
10.2 1989 Incentive Stock Option Plan (incorporated herein by reference
to Exhibit 10.2 to the Company's Registration Statement on Form S-1
(No. 33-53343))
10.3 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 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 Employment Agreement between the Company and Paul S. Lindsey, Jr.
(incorporated herein by reference to Exhibit 10.7 to the Company's
Registration Statement on Form S-1 (No. 33-53343))
10.8 Asset Purchase Agreement by and among the Company, Empire Gas, Inc.
of North Carolina, PSNC Propane Corporation, and Public Service
Company of North Carolina, Incorporated (incorporated herein by
reference to Exhibit 10.8 to the Company's Registration Statement on
Form S-1 (No. 33-53343))
10.9 Indemnification Agreement between the Company and Douglas A. Brown
(incorporated herein by reference to Exhibit 10.9 to the Company's
Registration Statement on Form S-1 (No. 33-53343))
10.10 Tax Indemnification Agreement between the Company and Energy
(incorporated herein by reference to Exhibit 10.10 to the Company's
Registration Statement on Form S-1 (No. 33-53343))
-29-
<PAGE>
10.11 Supply Contract No. 1, dated September 13, 1991, between EGOC and
Phillips 66 Company (incorporated herein by reference to Exhibit
10.11 to the Company's Registration Statement on Form S-1 (No.
33-53343))
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 (incorporated herein by reference
to Exhibit 10.12 to the Company's Registration Statement on Form S-1
(No. 33-53343))
10.13 Supply Contract, dated as of November 4, 1991, between EGOC and
Conoco, Inc. (incorporated herein by reference to Exhibit 10.13 to
the Company's Registration Statement on Form S-1 (No. 33-53343))
10.14 Supply Contract, dated as of January 21, 1992, between EGOC and
Conoco Inc. (incorporated herein by reference to Exhibit 10.14 to
the Company's Registration Statement on Form S-1 (No. 33-53343))
10.15 Supply Contract, dated as of January 24, 1992, between EGOC and
Conoco, Inc. (incorporated herein by reference to Exhibit 10.15 to
the Company's Registration Statement on Form S-1 (No. 33-53343))
10.16 Supply Contract No. 1, dated November 20, 1986, between EGOC and
Warren Petroleum Company (incorporated herein by reference to
Exhibit 10.16 to the Company's Registration Statement on Form S-1
(No. 33-53343))
10.17 Supply Contract No. 2, dated November 20, 1986, between EGOC and
Warren Petroleum Company (incorporated herein by reference to
Exhibit 10.17 to the Company's Registration Statement on Form S-1
(No. 33-53343))
10.18 Supply Contract, dated November 22, 1986, between EGOC and Warren
Petroleum Company (incorporated herein by reference to Exhibit 10.18
to the Company's Registration Statement on Form S-1 (No. 33-53343))
10.19 Supply Contract, dated November 24, 1986, between EGOC and Warren
Petroleum Company (incorporated herein by reference to Exhibit 10.19
to the Company's Registration Statement on Form S-1 (No. 33-53343))
10.20 Supply Contract No. 1, dated June 1, 1993, between EGOC and Warren
Petroleum Company (incorporated herein by reference to Exhibit 10.20
to the Company's Registration Statement on Form S-1 (No. 33-53343))
10.21 Supply Contract No. 2, dated June 1, 1993, between EGOC and Warren
Petroleum Company (incorporated herein by reference to Exhibit 10.21
to the Company's Registration Statement on Form S-1 (No. 33-53343))
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<PAGE>
21.1 Subsidiaries of the Company (incorporated herein by reference to
Exhibit 21.1 to the Company's Registration Statement on Form S-1
(No. 33-53343))
27.1 Financial Data Schedules
(b) Financial Statement Schedules
SCHEDULE DESCRIPTION
V. Property and Equipment
VI. Accumulated Depreciation
VIII. Valuation and Qualifying Accounts
X. Supplementary Income Statement Information
(c) Reports on Form 8-K
The predecessor of the Company filed a report on Form 8-K on April
29, 1994 reporting under Item 5 of Form 8-K the agreement to enter into the
Transaction and the filing of the registration statement with respect to the
Senior Secured Notes.
-31-
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Empire Gas Corporation
By: /S/ PAUL S. LINDSEY, JR.
-------------------------
Paul S. Lindsey, Jr.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE CAPACITY IN WHICH SIGNED DATE
/s/ Paul S. Lindsey, Jr. Chief Executive Officer and September 27, 1994
- - ------------------------ Chairman of the Board of
Paul S. Lindsey, Jr. Empire Gas Corporation
(principal financial and
executive officer)
/s/ Willis D. Green Vice President/Controller September 27, 1994
- - ------------------- of Empire Gas Corporation
Willis D. Green (principal accounting
officer)
/s/ Douglas A. Brown Director of Empire Gas September 27, 1994
- - -------------------- Corporation
Douglas A. Brown
/s/ Kristin L. Lindsey Director of Empire Gas September 27, 1994
- - ---------------------- Corporation
Kristin L. Lindsey
/s/ Bruce M. Withers, Jr. Director of Empire Gas September 27, 1994
- - ------------------------- Corporation
Bruce M. Withers, Jr.
/s/ Jim J. Shoemake Director of Empire Gas September 27, 1994
- - ------------------- Corporation
Jim J. Shoemake
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<PAGE>
FINANCIAL STATEMENT INDEX
Empire Gas Corporation - Consolidated Financial Statements for June 30, 1994
Independent Accountants' Report........................................... 34
Consolidated Balance Sheets as of June 30, 1994 and 1993.................. 35
Consolidated Statements of Operations - Years Ended June 30, 1994,
1993, and 1992............................................................ 37
Consolidated Statements of Stockholder's Equity - Years Ended
June 20, 1994, 1993, and 1992............................................. 39
Consolidated Statements of Cash Flows - Years Ended June 30,
1994, 1993, and 1992...................................................... 40
FINANCIAL STATEMENT SCHEDULE INDEX
Empire Gas Corporation - Consolidated Financial Statements for June 30, 1994
Independent Accountants' Report.................................61
Schedule V - Property and Equipment.............................62
Schedule VI - Accumulated Depreciation and Depletion............63
Schedule VIII - Valuation and Qualifying Accounts...............64
Schedule X - Supplementary Information..........................65
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<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, 1994
and 1993, and the related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for each of the three years in the period ended
June 30, 1994. 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 financial position of EMPIRE GAS
CORPORATION as of June 30, 1994 and 1993, and the results of its operations and
its cash flows for each of the three years in the period ended June 30, 1994, in
conformity with generally accepted accounting principles.
As discussed in Note 4, the Company changed its method of accounting for
income taxes in 1994.
Springfield, Missouri
August 26, 1994
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<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1994 AND 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS
1994 1993
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash $ 2,927 $ 362
Trade receivables, less allowance
for doubtful accounts; 1994 - $1,620,
1993 - $2,657 (NOTE 4) 5,454 8,199
Inventories (NOTE 4) 5,179 9,691
Prepaid expenses 619 305
Refundable income taxes 2,254 --
Deferred income taxes (NOTE 5) 631 --
------ ------
Total Current Assets 17,064 18,557
------ ------
PROPERTY AND EQUIPMENT, AT COST (NOTES 4 AND 13)
Land and buildings 8,732 12,215
Storage and consumer service facilities 68,223 113,821
Transportation, office and other equipment 16,165 25,550
------ -------
93,120 151,586
Less accumulated depreciation 25,847 41,906
------ -------
67,273 109,680
------ -------
OTHER ASSETS
Debt acquisition costs, net of amortization 5,406 475
Excess of cost over fair value of net assets
acquired, at amortized cost 14,027 18,834
Other 874 474
------ ------
20,307 19,783
------ ------
$ 104,644 $148,020
------- -------
------- -------
See Notes to Consolidated Financial Statements
</TABLE>
-35-
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
1994 1993
---- ----
<S> <C> <C>
CURRENT LIABILITIES
Checks in process of collection $ 3,262 $ --
Current maturities of long-term debt (NOTE 4) 292 5,181
Accounts payable 4,039 4,485
Accrued salaries 1,249 1,573
Accrued expenses 1,412 2,193
Due to Empire Energy Corporation (NOTE 2) 497 --
Income taxes payable -- 165
------- -------
Total Current Liabilities 10,751 13,597
------- -------
LONG-TERM DEBT (NOTE 4) 105,320 74,068
------- -------
DEFERRED INCOME TAXES (NOTE 5) 15,421 32,568
------ ------
ACCRUED SELF-INSURANCE LIABILITY (NOTE 9) 1,372 1,874
----- -----
STOCKHOLDERS' EQUITY (DEFICIT) (NOTE 2)
Common; $.001 par value; authorized 20,000,000
shares; issued June 30, 1994 - 14,291,020
shares, June 30, 1993 - 14,161,770 shares 14 14
Common stock purchase warrants (NOTE 11) 1,227 --
Additional paid-in capital 27,279 27,088
Retained earnings 31,235 110
------ ------
60,655 27,212
Treasury stock, at cost
June 30, 1994 - 12,711,795 shares,
June 30, 1993 - 329,500 shares (87,975) (1,299)
-------- -------
(28,220) 25,913
-------- -------
$ 104,644 $148,020
-------- -------
-------- -------
</TABLE>
See Notes to Consolidated Financial Statements
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<PAGE>
EMPIRE GAS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
OPERATING REVENUE $ 124,552 $ 128,401 $ 112,080
COST OF PRODUCT SOLD 57,920 60,202 50,973
------ ------ ------
GROSS PROFIT 66,632 68,199 61,107
------ ------ ------
OPERATING COSTS AND EXPENSES
Provision for doubtful accounts 1,056 958 214
General and administrative 43,485 40,437 39,463
Rent expense to related party (NOTE 3) 425 450 375
Depreciation and amortization 10,150 10,351 10,062
------ ------ ------
55,116 52,196 50,114
------ ------ ------
OPERATING INCOME 11,516 16,003 10,993
------ ------ ------
OTHER EXPENSE
Interest expense (8,542) (8,877) (10,406)
Interest expense to related party
(NOTES 3 AND 4) -- (949) (315)
Amortization of debt discount and expense (2,016) (1,686) (1,006)
Merger proposal costs (NOTE 6) -- -- (450)
Restructuring proposal costs (NOTE 7) (398) (223) --
Reduction in carrying value of Underground
Storage facility (NOTE 13) (1,400) -- --
------- ------- -------
(12,356) (11,735) (12,177)
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES (840) 4,268 (1,184)
PROVISION FOR INCOME TAXES (NOTE 5) 350 2,040 290
--- ----- ---
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS (1,190) 2,228 (1,474)
EXTRAORDINARY ITEMS (NOTE 2)
Loss on extinguishment
of debt, net of income taxes (5,555) -- --
Excess of fair value over book
value of Energy net assets,
net of income taxes 37,870 -- --
------ -- --
NET INCOME (LOSS) $ 31,125 $ 2,228 $ (1,474)
------ ----- -------
------ ----- -------
</TABLE>
See Notes to Consolidated Financial Statements
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<PAGE>
EMPIRE GAS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS PER
COMMON SHARE $ (.08) $ .16 $ (.11)
EXTRAORDINARY ITEMS PER
COMMON SHARE
Loss on extinguishment
of debt, net of income taxes (.40) -- --
Excess of fair value over book
value of Energy net assets,
net of income taxes 2.71 -- --
----------- ----------- ---------
NET INCOME (LOSS) PER COMMON
SHARE (NOTE 1) $ 2.23 $ .16 $ (.11)
----------- ----------- ---------
----------- ----------- ---------
</TABLE>
See Notes to Consolidated Financial Statements
-38-
<PAGE>
EMPIRE GAS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
Common Total
Stock Additional Stockholders'
Common Purchase Paid-in Retained Treasury Equity
Stock Warrants Stock Earnings Stock (Deficit)
------ -------- ----------- ---------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
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
STOCK OPTIONS EXERCISED -- -- 191 -- -- 191
COMMON STOCK
PURCHASE WARRANTS -- 1,227 -- -- -- 1,227
PURCHASE OF
TREASURY STOCK -- -- -- -- (2,645) (2,645)
EXCHANGE OF SUBSIDIARY
STOCK FOR COMPANY
COMMON STOCK -- -- -- -- (84,031) (84,031)
NET INCOME -- -- -- 31,125 -- 31,125
------ ------- -------- --------- --------- ---------
BALANCE, JUNE 30, 1994 $ 14 $ 1,227 $27,279 $ 31,235 $ (87,975) $ (28,220)
------ ------- -------- --------- --------- ---------
------ ------- -------- --------- --------- ---------
</TABLE>
See Notes to Consolidated Financial Statements
-39-
<PAGE>
EMPIRE GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
CASH FLOWS FROM OPERATING
ACTIVITIES
<S> <C> <C> <C>
Net income (loss) $ 31,125 $ 2,228 $ (1,474)
Items not requiring (providing) cash:
Depreciation 8,973 9,004 8,789
Amortization 3,193 3,033 2,279
(Gain) loss on sale of assets 1,300 155 (758)
Extraordinary loss 5,555 -- --
Extraordinary gain (37,870) -- --
Deferred income taxes (3,166) (860) (810)
Changes in:
Checks in process of collection 3,262 -- --
Trade receivables (130) (1,691) 32
Inventories 1,170 (1,886) (300)
Accounts payable (254) (856) 246
Accrued expenses and self insurance 1,377 (3,158) 1,772
Prepaid expenses and other (1,617) 272 224
Net cash provided by operating ---------- ---------- --------
activities 12,918 6,241 10,000
---------- ---------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of assets 366 1,088 3,062
Acquisition of retail service centers (12,923) -- --
Purchases of property and equipment (7,665) (4,358) (6,601)
---------- ---------- --------
Net cash used in investing activities (20,222) (3,270) (3,539)
---------- ---------- --------
</TABLE>
See Notes to Consolidated Financial Statements
-40-
<PAGE>
EMPIRE GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES
Increase (decrease) in working capital
financing $ (3,200) $ (1,875) $ 3,400
Increase in notes payable to related
party -- -- 554
Principal payments on notes payable
to related party -- (2,996) (3,310)
Principal payments on acquisition
credit facility -- (13,250) (6,750)
Principal payments on other long-term debt (203) (182) (191)
Debenture sinking fund payments (2,023) (528) --
Purchase of debentures from employee
benefit plan -- (778) --
Proceeds from issuance of term credit
facility -- 18,000 --
Stock options exercised -- 173 15
Purchase of treasury stock (2,274) (1,441) (78)
Sale of treasury stock -- 52 --
Proceeds from new debt offering 96,573 -- --
Retirement of debt with proceeds of
new debt offering (77,897) -- --
Cash distributed with Empire Energy
Corporation (1,107) -- --
------------ ------------ ------------
Net cash provided by (used in)
financing activities 9,869 (2,825) (6,360)
------------ ------------ ------------
INCREASE IN CASH 2,565 146 101
CASH, BEGINNING OF PERIOD 362 216 115
------------ ------------ ------------
CASH, END OF PERIOD $ 2,927 $ 362 $ 216
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See Notes to Consolidated Financial Statements
-41-
<PAGE>
EMPIRE GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1994
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 western 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. At June 30, 1994, the Company's ownership and management was
changed. See Note 2 for a description of this restructuring transaction.
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.
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>
1994 1993
---- ----
(In Thousands)
<S> <C> <C>
Gas and other petroleum products $ 2,385 $4,279
Gas distribution parts, appliances and equipment 2,792 5,412
------- ------
$5,177 $9,691
------- ------
------- ------
</TABLE>
-42-
<PAGE>
NOTE 1:ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
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.
AMORTIZATION
Debt acquisition costs are being amortized on a straight-line basis over the
terms of the debt to which the costs are related as follows: the revolving
credit facility and term credit facility costs (originally $525,000) were
amortized over an original five-year period ending in fiscal 1994; the 1994
senior secured note costs (originally $5,105,000) are amortized over ten years;
and the new revolving credit facility costs (originally $301,000) are amortized
over three years.
Amortization of discounts on debentures and notes (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 in 1993, $20,750,000 in 1994 after giving effect to the
restructuring transaction) 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 13,961,520,
14,055,407 and 13,885,087 for each of the fiscal years ended June 30, 1994, 1993
and 1992, respectively.
-43-
<PAGE>
NOTE 2: RESTRUCTURING TRANSACTION
On June 30, 1994, the Company implemented a change in ownership and management
by repurchasing 12,004,430 shares of Company common stock from its former
principal shareholder (Former Shareholder) and certain other departing officers
in exchange for all of the shares of a subsidiary Empire Energy Corporation
(Energy) that owns 133 retail service centers located principally in the
Southeast plus certain home office assets and liabilities. Certain departing
officers and employees received $7.00 per share net of the stock option exercise
price for the remaining 377,865 shares of common stock that they held. The
Company will retain ownership of 158 retail service centers located in 20 states
plus certain home office assets and liabilities.
In connection with the stock purchase, the Former Shareholder terminated his
employment with the Company as well as terminated certain lease and use
agreements with the Company (see Note 3). Following the stock repurchase, the
Company's previous chief operating officer became the Company's president,
chairman of the board and principal shareholder (Principal Shareholder).
The Company has received a private letter ruling from the Internal Revenue
Service which provides that, based on certain representations contained in the
ruling, neither income nor gain for federal income tax purposes will be
recognized by the Company as a result of the stock purchase.
In connection with the stock purchase, the Company issued $127.2 million of
new debentures (with proceeds of $100.1 million before expenses of $3.5 million)
which was used to retire $77.9 million of existing debt. The remaining net
proceeds were used to finance a $12.9 million acquisition of six retail service
centers in North Carolina, $2.5 million to repurchase treasury stock and $3.3
million for working capital.
The following table sets forth selected aggregate operating data for the
retail service centers of the Company that will be retained after the
restructuring transaction and for the six retail service centers the Company
acquired in North Carolina. This acquisition was consummated June 30, 1994, and
was accounted for as a purchase of assets; accordingly, no revenues or expenses
related to the acquisition are included in the statement of operations.
-44-
<PAGE>
NOTE 2: RESTRUCTURING TRANSACTION (CONTINUED)
<TABLE>
<CAPTION>
Empire Gas
Corporation
(after giving effect North
to the Restructuring Carolina
Transaction) Acquisition Pro Forma
------------ ----------- ---------
(Unaudited)
(In thousands)
<S> <C> <C> <C>
June 30, 1994
Operating revenue $ 64,336 $ 10,501 $ 74,837
Cost of product sold 29,891 5,215 35,106
--------- --------- ---------
Gross profit $34,445 $ 5,286 $ 39,731
--------- --------- ---------
--------- --------- ---------
June 30, 1993
Operating revenue $67,344 $ 9,587 $ 76,931
Cost of product sold 31,045 4,643 35,688
--------- --------- ---------
Gross profit $36,299 $ 4,944 $ 41,243
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company and Energy have agreed to share certain liabilities at June 30,
1994, based on an agreed-upon percentage which is intended to estimate the
relative historical revenue of the retail subsidiaries of the Company (52.3%)
and Energy (47.7%). In addition, certain home office assets and liabilities
have been retained by the Company and a payable to Energy of $497,031 has been
recorded at June 30, 1994, reflecting the settlement of these assets and
liabilities in accordance with the stock redemption agreement.
The retirement of existing debt (described in Note 4) resulted in an
extraordinary loss of $8,655,000, including net unamortized debt acquisition
costs of $420,000 related to the debt retired. These amounts were expensed in
June 1994 net of $3,100,000 of tax benefit.
The excess of fair value of net assets of Energy ($84,031,000) over book value
($46,111,000) was an extraordinary credit to income ($37,870,000) in June 1994,
net of $50,000 of income tax expense.
-45-
<PAGE>
NOTE 3: RELATED-PARTY TRANSACTIONS
The Company has periodically borrowed funds from its Former Shareholder and
from individuals and corporations related to the Former Shareholder. The
Company had no outstanding borrowings from this related party at June 30, 1994
and 1993. The amount of outstanding borrowings from this Former Shareholder at
June 30, 1992, was $2,996,000. The maximum amounts borrowed from this Former
Shareholder during the years ended June 30, 1994, 1993 and 1992, were $-0-,
$3,000,000 and $5,753,000, 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 $200,000 and
$315,000 for the years ended June 30, 1993 and 1992, respectively. During
November 1992 the Former Shareholder loaned under a separate agreement $13.25
million to the Company to repay the acquisition credit facility (see Note 4).
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
Former Shareholder were repaid using the proceeds from the term credit facility.
In connection with the stock purchase, the Company repurchased, at face value,
$4.7 million principal amount of the Company's 2007 9% Subordinated Debentures
from the Former Shareholder and purchased, at face value, $285,000 principal
amount of the Company's 2007 9% Subordinated Debentures from certain departing
officers and employees of the Company.
The Company provided data processing, office rent and other clerical services
to two corporations owned principally by the Former Shareholder and was being
reimbursed $7,000 per month for these services. The Company has discontinued
providing these services as of June 30, 1994.
The Company leased a jet aircraft and an airport hanger from a corporation
owned by the Former Shareholder. The lease required annual rent payments of
$100,000 beginning April 1, 1992. In addition to direct lease payments, the
Company was also responsible for the operating costs of the aircraft and the
hanger. During the years ended June 30, 1994, 1993 and 1992, the Company paid
direct rent of $75,000, $100,000 and $25,000, respectively. This lease was
terminated effective June 30, 1994, at no additional expense to the Company.
The Company paid $150,000 in each of the three years ended June 30, 1994, to a
corporation owned by the Former Shareholder pursuant to an agreement providing
the
-46-
<PAGE>
Company the right to use business guest facilities owned by the corporation.
This agreement was terminated effective June 30, 1994, at no additional expense
to the Company.
The Company leased the corporate home office, land, buildings and equipment
from a corporation principally owned by the Former Shareholder. The Company
paid $200,000 during each of the three years ended June 30, 1994, related to
this lease. This lease was terminated effective June 30, 1994, at no additional
expense to the Company. The Company has entered into a new lease agreement with
a corporation owned principally by the Former Shareholder principally to lease
its corporate office space. The new lease requires annual rent payments of
$75,000 beginning July 1, 1994, for a period of seven years, with two three-year
renewal options.
The Company has entered into a seven-year services agreement with a subsidiary
of Energy to provide data processing and management information services
beginning July 1, 1994. The services agreement provides for payments by the
Company to be based on an allocation of the subsidiary's actual costs based on
the gallons of LP gas sold by the Company as a percentage of the gallons of LP
gas sold by the Company and Energy.
During 1994, 1993 and 1992, the Company has purchased $210,400, $68,900 and
$116,300, respectively, of paint from a corporation owned by the spouse of the
Principal Shareholder of the Company.
During fiscal year 1994, the Company paid an investment banking firm
affiliated with a director of the Company $500,000 in return for services
rendered in connection with the negotiation of the Company's revolving credit
facility and with the Restructuring Transaction.
NOTE 4: LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt at June 30 consisted of: 1994 1993
---- ----
(In Thousands)
<S> <C> <C>
Acquisition credit facility (A) $ -- $ --
Working capital facility (B) -- --
Term credit facility (C) -- 18,000
Revolving credit facility (C) -- 7,300
12 7/8% Senior Secured Notes, due 2004 (D) 99,220 --
New revolving credit facility (E) -- --
9% Convertible Subordinated Debentures, due 1998 (F) -- 17,767
9% Subordinated Debentures, due 2007 (G) 5,003 15,691
</TABLE>
-47-
<PAGE>
NOTE 4: LONG-TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C>
12% Senior Subordinated Debentures, due 2002 (H) -- 19,361
Purchase contract obligations (I) 1,389 1,130
---------- ---------
105,612 79,249
Less current maturities 292 5,181
---------- ---------
$ 105,320 $ 74,068
---------- ---------
---------- ---------
<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 Former 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 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 .5% per annum of the unadvanced portion of the commitment. This loan was
repaid in June 1993 with the proceeds from the term and revolving credit
facilities.
(C) The term and revolving credit facilities were provided to the Company by the
same lender under one agreement. In June 1993 the proceeds from these loans
were used to repay the acquisition credit facility, working capital facility
and notes payable to Former Shareholder. Substantially all of the Company's
assets were pledged to the agreement which contained working capital, debt
and certain dividend restrictions. These dividend restrictions prohibited
the Company from paying common stock cash dividends.
The term credit facility bore interest at either 1.125% over prime or 2.625%
over the Eurodollar rate. The agreement required quarterly principal
payments of $650,000. This loan was repaid in June 1994 with the proceeds
from the issuance of the 12 7/8% Senior Secured Notes, due 2004.
The revolving credit facility provided for borrowings up to $22 million and
bore interest at either 1% over prime or 2.5% over the Eurodollar rate. The
agreement provided for a commitment fee of .5% per annum of the unadvanced
portion of the commitment. This loan was repaid in June 1994 with the
proceeds from the issuance of the 12 7/8% Senior Secured Notes, due 2004.
</TABLE>
-48-
<PAGE>
NOTE 4: LONG-TERM DEBT (CONTINUED)
(D) The notes, issued June 1994, were issued at a discount and bear interest at
7% through July 15, 1999, and at 12 7/8 % thereafter. The notes are
redeemable at the Company's option. Prior to July 15, 1999, only 35% of
the original principal issued may be redeemed, as a whole or in part, at
110% of the principal amount through July 15, 1997, and at declining
percentages thereafter. The notes are guaranteed by the subsidiaries of
the Company and secured by the common stock of the subsidiaries of the
Company.
The original principal amount of the notes issued ($127,200,000) was
adjusted ($27,980,000) to give effect for the original issue discount and
the common stock purchase warrants (effective interest rate of 13.0%). The
discount on these notes is being amortized over the remaining life of the
notes using the effective interest, bonds outstanding method. The face
value of notes outstanding at June 30, 1994, is $127,200,000.
The proceeds from this new offering were used to repay the term credit
facility, revolving credit facility, 9% Convertible Subordinated
Debentures, due 1998; 12% Senior Subordinated Debentures, due 2007;
repurchase a portion of the 9% Subordinated Debentures, due 2007; fund an
acquisition; repurchase Company stock; and for working capital (Note 2).
Separate financial statements of the guarantor subsidiaries are not
included because such subsidiaries have jointly and severally guaranteed
the notes on a full and unconditional basis, the aggregate assets and
liabilities of the guarantor subsidiaries are substantially equivalent to
the assets and liabilities of the parent on a consolidated basis and the
separate financial statements and other disclosures concerning the
subsidiary guarantors are not deemed to be material.
The guarantor subsidiaries are restricted from paying dividends to the
Company during any periods of default under the respective debt agreements
or in periods where the Company has borrowed under the overadvance option
described below.
(E) The new revolving credit facility was provided to the Company in June 1994
in conjunction with the offering of the 12 7/8% Senior Secured Notes, due
2004. All of the Company's receivables and inventories are pledged to the
agreement which contains working capital, capital expenditure, debt and
certain dividend restrictions. These dividend restrictions prohibit the
Company from paying common stock cash dividends.
-49-
<PAGE>
NOTE 4: LONG-TERM DEBT (CONTINUED)
The facility provides for borrowings up to $15 million, subject to a
sufficient borrowing base. The borrowing base generally limits the
Company's total borrowings to 85% of eligible accounts receivable and 60%
of eligible inventory. In addition, the Company can borrow an additional
$3 million during the period August 1, 1994, to January 31, 1995, and $1.5
million during the period August 1, 1995, to January 31, 1996 (overadvance
option). The facility bears interest at either 1% over prime or 2.5% over
the LIBOR rate. The agreement provides for a commitment fee of .375% per
annum of the unadvanced portion of the commitment. The Company's available
revolving credit line amounted to $3,441,000 at June 30, 1994, after
considering $1,858,000 of outstanding letters of credit.
(F) 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 provided that the holder of each convertible
debenture had, 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 were to
mature in 1998; and at maturity, an 8% premium of the outstanding principal
amount would have been paid. Such premium was being accrued over the term
to maturity. The debentures were 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 was required annually on each
December 31. In June 1994, the Company used proceeds from the Issuance of
the 12 7/8% Senior Secured Notes, due 2004, to repurchase $19,980,000 face
value of these debentures which resulted in an extraordinary charge
(Note 2).
The original principal amount of debentures outstanding ($21,854,000) was
adjusted to market value (effective interest rate of 14.5%) at June 9,
1983, in accordance with the purchase method of accounting. The discount
on these debentures was being amortized over the remaining life of the
debentures using the effective interest, bonds outstanding method. There
are no debentures outstanding at June 30, 1994.
(G) The debentures, issued June 1983, are redeemable at the Company's option,
as a whole or in part, at par value. A sinking fund payment sufficient to
retire $191,000 of principal outstanding is required on December 31, 2005.
Notes, due 2004. In June 1994, the Company used proceeds from the issuance
of the 12 7/8% Senior Secured Notes, due 2004, to
-50-
<PAGE>
NOTE 4: LONG-TERM DEBT (CONTINUED)
repurchase $16,201,200 face value of these debentures at a discount which
resulted in an extraordinary charge (Note 2).
The original principal amount of debentures issued ($27,313,000) was
adjusted to market at issuance (effective interest rate of 16.5%). The
remaining 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,
1994, is $9,745,800.
(H) The debentures, issued April 1986, were 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 was required each March 31. In June 1994, the Company used
proceeds from the issuance of the 12 7/8% Senior Secured Notes, due 2004,
to repurchase $22,308,000 face value of these debentures which resulted in
an extraordinary charge (Note 2).
The original principal amount of debentures issued ($23,000,000) was
adjusted to market at issuance (effective interest rate of 15.0%). The
discount on the debentures was being amortized over the remaining life of
the debentures using the effective interest, bonds outstanding method.
There are no debentures outstanding at June 30, 1994.
(I) 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, 1994 and 1993, these
obligations carried interest rates from 7% to 10% and are due periodically
through 1999.
Aggregate annual maturities and sinking fund requirements (in thousands) of
the long-term debt outstanding at June 30, 1994, are:
<TABLE>
<CAPTION>
<S> <C>
1995 $ 292
1996 232
1997 228
1998 444
1999 193
Thereafter 104,223
--------
$105,612
--------
--------
</TABLE>
-51-
<PAGE>
NOTE 5: INCOME TAXES
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.
The provision for income taxes includes these components:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Taxes currently payable $ 2,887 $ 2,900 $ 1,100
Deferred income taxes (2,537) (860) (810)
--------- ---------- ---------
$ 350 $ 2,040 $ 290
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
The tax effects of temporary differences related to deferred taxes were:
<TABLE>
<CAPTION>
June 30, July 1,
1994 1993
-------- -------
Deferred Tax Assets
<S> <C> <C>
Allowance for doubtful accounts $ 566 $ 1,016
Accounts receivable advance collections 201 182
Self-insurance liabilities and contingencies 638 1,474
Alternative minimum tax credit 100
1981 debenture premium 403
--------- ---------
1,505 3,075
--------- ---------
</TABLE>
-52-
<PAGE>
NOTE 5: INCOME TAXES (CONTINUED)
CHANGE IN ACCOUNTING PRINCIPLE (Continued)
<TABLE>
June 30, July 1,
1994 1993
-------- -------
<S> <C> <C>
Deferred Tax Liability
Accumulated depreciation $ (16,295) $ (33,975)
1981 debenture discount (1,668)
---------- ---------
(16,295) (35,643)
---------- ---------
Net deferred tax liability $ (14,790) $(32,568)
---------- ---------
---------- ---------
</TABLE>
The above net deferred tax asset (liability) is presented on the June 30,
1994, balance sheet as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Deferred tax asset - current $ 631
Deferred tax liability - long-term (15,421)
----------
Net deferred tax liability $ (14,790)
----------
----------
</TABLE>
A reconciliation of income tax expense at the statutory rate to the Company's
actual income tax expense is shown below:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Computed at the statutory rate (34%) $ (285) $ 1,451 $ (403)
Increase (decrease) resulting from:
Amortization of excess of cost over
fair value of assets acquired 393 422 452
State income taxes - net of federal tax benefit 150 158 230
Nondeductible travel costs and other expenses 56 11 24
Other 36 (2) (13)
------ ------- ------
Actual tax provision $ 350 $ 2,040 $ 290
------ ------- ------
------ ------- ------
</TABLE>
-53-
<PAGE>
NOTE 6: 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 7: RESTRUCTURING PROPOSAL COSTS
During the years ended June 30, 1994 and 1993, the Company was considering
proposals to restructure the debt and equity of the Company. The Company
abandoned the proposals and expensed the related costs of $398,000 and $223,000
in 1994 and 1993, respectively.
NOTE 8: 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
three fiscal years.
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
year ended June 30, 1992.
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.
-54-
<PAGE>
NOTE 9: 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 and vehicle liability. Under these current insurance
programs, the Company self-insures the first $500,000 of coverage (per
incident). Effective July 1994, the Company reduced its self insured retention
for vehicle liability to $250,000 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, 1994, 1993 and 1992, was $1,634,000,
$1,441,000 and $1,222,000, respectively.
For the policy periods July 1, 1989, through December 30, 1989, December
31, 1989, through June 30, 1991, and July 1, 1993, through June 30, 1994, the
Company has provided for aggregate comprehensive general liability losses
through 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, 1994, the Company
has not provided for losses which exceed 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.
During the years ended June 30, 1993 and 1992, the Company had obtained
workers' compensation coverage from carriers and state insurance pools at annual
costs of $1,743,000 and $733,000, respectively. Effective July 1, 1993, the
Company changed its policy to self-insure the first $500,000 of workers'
compensation coverage (per incident). The Company purchased excess coverage from
carriers for workers' compensation claims in excess of the self-insured
coverage. Provisions for losses expected under this program were recorded based
upon the Company's estimates of the aggregate liability for claims incurred. The
Company provided letters of credit aggregating approximately $2.3 million in
connection with this program of which $1,218,000 is outstanding at June 30,
1994. Effective July 1994, the Company changed its policy so that it will obtain
workers' compensation coverage from carriers and state insurance pools.
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, vehicle and workers' compensation
liabilities (in thousands) for the years ended June 30, 1994, 1993 and 1992,
are:
-55-
<PAGE>
NOTE 9: SELF INSURANCE AND RELATED CONTINGENCIES (CONTINUED)
<TABLE>
<CAPTION>
Beginning Self Ending
Self Self Insured Restructuring Self
Insurance Insurance Claims Transaction Insurance
Liability Expenses Paid (Note 2) Liability
--------- --------- ------- ------------- ---------
<S> <C> <C> <C> <C> <C>
June 30, 1992 $2,238 $1,764 $1,336 $2,666
June 30, 1993 $2,666 $1,148 $1,480 $2,334
June 30, 1994 $2,334 $3,709 $2,464 $1,707 $1,872
</TABLE>
The ending accrued liability includes $125,000 for incurred but not reported
claims at June 30, 1994, and $500,000 at both June 30, 1993 and 1992. The
current portion of the ending liability of $500,000, $460,000 and $1,103,000 at
June 30, 1994, 1993 and 1992, 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.
The Company and its subsidiaries are also defendants in various 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.
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 $979,000, $873,000 and $1,011,000 for the years ended June 30,
1994, 1993 and 1992, respectively.
In conjunction with the restructuring transaction (Note 2) the Company and
Energy have agreed to share on a percentage basis the self-insured liabilities
incurred prior to June 30, 1994, including both reported and unreported claims.
The self-insured liabilities included under this agreement include general,
vehicle, workers' compensation and health insurance liabilities. Under the
agreement, the Company will assume 52.3% of the liability with Energy assuming
the remaining 47.7%. The self-insured liability included in the Company's
financial statements at June 30, 1994, represents its 52.3% portion of the total
liability as of that date.
-56-
<PAGE>
NOTE 10: LITIGATION CONTINGENCIES
The Company's federal income tax returns for the fiscal years 1979 and 1980
were audited by the IRS. During August 1992, the Company paid $2.4 million
which represented interest on previously paid income taxes. This payment
settled all outstanding federal tax audits. The Company has no federal income
tax audits in process at June 30, 1994.
The Company and its subsidiaries are presently involved in two state income
tax audits and are also defendants in other business-related lawsuits which are
not expected to have a material adverse effect on the Company's financial
position or results of operations.
In conjunction with the restructuring transaction (Note 2) the Company and
Energy have agreed to share on a percentage basis amounts incurred related to
federal and state audits and other business related lawsuits incurred prior to
June 30, 1994. The liability recorded at June 30, 1994, in the Company's
financial statements related to these contingencies represents its 52.3% portion
of the total liability as of that date.
NOTE 11: STOCK OPTIONS AND WARRANTS
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, 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
Exercised (129,250) 1.12 - 1.50
--------
Balance June 30, 1994 -0-
--------
</TABLE>
All outstanding stock options were exercised on June 30, 1994, in connection
with the restructuring transaction (see Note 2).
-57-
<PAGE>
NOTE 11: STOCK OPTIONS AND WARRANTS (CONTINUED)
COMMON STOCK PURCHASE WARRANTS
In connection with the Company's restructuring, the Company attached warrants
to purchase common stock to the new issuance of 12 7/8% Senior Secured Notes,
due 2004. Each warrant represents the right to purchase one share of the
Company's common stock for $.01 per warrant. The warrants are exercisable after
January 15, 1995, and will expire on July 15, 2004.
The table below summarizes warrant activity of the Company:
<TABLE>
<CAPTION>
Number
Of Shares Exercise Price
--------- --------------
<S> <C> <C>
Issued 175,536 $.01
-------
Balance at June 30, 1994 175,536 $.01
-------
-------
</TABLE>
NOTE 12: ADDITIONAL CASH FLOW INFORMATION (IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
NONCASH INVESTING AND FINANCING ACTIVITIES
<S> <C> <C> <C>
Mortgage obligations incurred on the
acquisition of retail service centers $1,015 -- $102
Debt acquisition costs in accounts payable $746 -- --
Purchase of treasury stock, net of option
exercise price, in accounts payable $180 -- --
</TABLE>
-58-
<PAGE>
NOTE 12: ADDITIONAL CASH FLOW INFORMATION (IN THOUSANDS) (CONTINUED)
Distribution of operating assets other than cash with Empire Energy
Corporation:
<TABLE>
<S> <C>
Current assets $ 8,185
Fixed assets, net 51,620
Other assets 3,822
Current liabilities (2,697)
Long-term liabilities (15,926)
-------
$45,004
-------
-------
</TABLE>
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
ADDITIONAL CASH PAYMENT INFORMATION
<S> <C> <C> <C>
Interest paid $9,191 $12,185 $11,213
Income taxes paid (net of refunds) $2,620 $3,434 $(441)
</TABLE>
NOTE 13: UNDERGROUND STORAGE FACILITY
The Company owns salt cavern LPG underground storage facilities which are not
in use and are subject to a consent agreement with the State of Kansas. Under
the agreement, the Company was to submit a plan to the state for resuming use of
the facilities or permanently closing them. The due date of the plan was
initially January 1, 1994. The state has verbally extended the due date until
October 1, 1994.
The Company has obtained from an engineering and construction company a study
of the costs of rehabilitating and opening the facilities. The Company has
received various reports which estimate the cost of rehabilitating and opening
the facility to be from $500,000 to $3.0 million. Management believes that the
needed work can be accomplished for $2.0 million. Based on the approximately
one million barrel capacity of the facilities, management believes the fair
value of the facilities after rehabilitation would be approximately
$4.0 million. Accordingly, the Company has reduced the current carrying value of
the facilities to $1.0 million by charging $1.4 million against 1994 earnings.
Management is presently evaluating several options after rehabilitation of the
facility, including use as expanded storage for company inventories, use as
leased storage to customers and other distributors, and sale. If the
rehabilitation work is not performed and the facilities cannot be sold, then
-59-
<PAGE>
EMPIRE GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1994
NOTE 13: UNDERGROUND STORAGE FACILITY (CONTINUED)
the Company would be required to close the facilities at a cost not yet
estimated and write off any remaining book value.
-60-
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT 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 for each of the three years in the period ended June 30, 1994, 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 on 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.
Springfield, Missouri
August 26, 1994
-61-
<PAGE>
SCHEDULE V - PROPERTY AND EQUIPMENT
YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
------ ---------- ---------- -------- ------ ----------
Balance at Balance at
Beginning Additions Retire- End of
Classification of Year At Cost ments Other Year
- - -------------- ---------- ---------- ------- ----- ---------
(A)
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1994
Land and buildings $ 12,215 $ 2,165 $ 128 $ 5,520 $ 8,732
Storage and consumer
service facilities 113,821 10,817 1,973 54,442 68,223
Transportation, office and
other equipment 25,550 7,033 1,912 14,506 16,165
---------- --------- -------- --------- ---------
$ 151,586 $ 20,015 $ 4,013 $ 74,468 $ 93,120
---------- --------- -------- --------- ---------
---------- --------- -------- --------- ---------
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
---------- --------- -------- ---------
---------- --------- -------- ---------
<FN>
(A) These assets were distributed in the Restructuring Transaction described in
Note 2 of the consolidated financial statements.
</TABLE>
-62-
<PAGE>
SCHEDULE VI - ACCUMULATED DEPRECIATION
YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
Balance at Balance at
Beginning Additions Retire- End of
Classification of Year At Cost ments Other Year
- - -------------- --------- --------- -------- -------- ----------
(A)
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1994:
Buildings $ 1,703 $ 350 $ 24 $ 858 $ 1,171
Storage and consumer service
facilities 24,434 5,519 596 13,602 15,755
Transportation, office and
other equipment 15,769 3,104 1,564 8,388 8,921
--------- -------- -------- -------- ---------
$ 41,906 $ 8,973 $ 2,184 $ 22,848 $ 25,847
--------- -------- -------- -------- ---------
--------- -------- -------- -------- ---------
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
--------- -------- -------- ---------
--------- -------- -------- ---------
<FN>
(A) These assets were distributed in the Restructuring Transaction described in
Note 2 of the consolidated financial statements.
</TABLE>
-63-
<PAGE>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
Balance at Charged to Amount Balance at
Beginning Costs and Written End of
Description of Year Expenses Off Other Year
----------- ---------- --------- -------- ----- ----------
Valuation accounts deducted
from assets to which
they apply - for doubtful
accounts receivable:
<S> <C> <C> <C> <C> <C>
June 30, 1994 $2,657 $1,056 $520 $(1,684)(A) $1,620
$111(B)
June 30, 1993 $2,720 $958 $1,021 $2,657
June 30, 1992 $2,719 $214 $213 $2,720
<FN>
(A) Related to assets which were distributed in the Restructuring Transaction
described in Note 2 of the consolidated financial statements.
(B) Allowance for doubtful accounts receivable established with respect to the
acquisition described in Note 2 of the consolidated financial statements.
</TABLE>
-64-
<PAGE>
SCHEDULE X - SUPPLEMENTARY INFORMATION
YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
Col. A Col. B
------ ------
Charged to
Costs and
Item Expenses
---- ----------
<S> <C>
June 30, 1994:
Maintenance and repairs............................................... $3,223
June 30, 1993:
Maintenance and repairs............................................... $2,963
June 30, 1992:
Maintenance and repairs............................................... $3,070
</TABLE>
- 65 -
<PAGE>
ARTICLES OF MERGER OF
EMPIRE GAS OPERATING CORPORATION
WITH AND INTO
EMPIRE GAS CORPORATION
______________________
Pursuant to the provisions of Section 351.447 of the General
and Business Corporation Law of Missouri, Empire Gas Corporation, a Missouri
corporation ("Parent") hereby certifies that:
1. Parent is the owner of all of the 10,448,162 issued
and outstanding shares of common stock, par value $.001 per share ("Empire
Common Stock") of Empire Gas Operating Corporation, a Missouri corporation
(the "Subsidiary"), and Parent is the owner of all of the 100,000 shares of
the Class A Preferred Stock, without par value, of Subsidiary and all of the
100,000 shares of the Class B Preferred Stock, without par value, of
Subsidiary. Parent is therefore in compliance with the 90 percent ownership
requirement of Section 351.447 of the General and Business Corporation Law
of Missouri and it will maintain at least 90 percent ownership of all
classes of stock of the Subsidiary until the issuance by the Secretary of
State of a certificate of merger with respect to the merger of Subsidiary
with and into Parent.
2. Parent, by the following resolutions of its Board
of Directors, duly adopted by the unanimous written consent of the members
thereof dated June 20, 1994 and acting pursuant to Section 351.447 of the
General and Business Corporation Law of the State of Missouri, approved a
plan of merger of Subsidiary with and into Parent:
WHEREAS, Empire Gas Corporation (the "Parent") is a
corporation duly organized and validly existing under the laws of the State
of Missouri having authorized capital stock consisting of 20,000,000 shares
of common stock, $.001 par value per share ("Parent Common Stock"), of which
13,832,270 shares are outstanding; and
WHEREAS, Empire Gas Operating Corporation (the "Subsidiary")
is a corporation duly organized and validly existing under the laws of the
State of Missouri having authorized capital stock consisting of 25,000,000
shares of common stock, $.001 par value per share ("Subsidiary Common
Stock"), of which 10,448,162 shares are outstanding, 100,000 shares of
Class A Preferred Stock, without par value, all of which are outstanding,
and 100,000 shares of Class B Preferred Stock, without par value, all of
which are outstanding; and
WHEREAS, Parent owns 10,448,162 shares of the Subsidiary
Common Stock and all shares of the Class A and Class B Preferred Stock,
which is in excess of 90% of the issued and outstanding shares of such
stock; and
WHEREAS, the Board of Directors of Parent deems it advisable
that the Subsidiary merge with and into Parent, upon the terms and subject
to the conditions set forth herein and in accordance with the laws of the
State of Missouri (such merger hereinafter referred to as the "Merger"), and
that the shares of Subsidiary Common Stock, be cancelled upon consummation
of the Merger as set forth herein; and
<PAGE> 2 of 7
WHEREAS, Parent intends that the Merger qualify as a tax-
free transaction under Section 332 of the Internal Revenue Code of 1986 for
federal income tax purposes;
NOW, THEREFORE, IT IS RESOLVED, that the Subsidiary be
merged into Parent pursuant to Section 351.447 of the General and Business
Corporation Law of the State of Missouri on the following terms and
conditions:
SECTION l
Effect of the Merger; Manner and
Basis of Converting and Cancelling Shares
1.1 At the Effective Time (as hereinafter defined),
Subsidiary shall be merged with and into Parent, the separate corporate
existence of Subsidiary (except as may be continued by operation of law)
shall cease, and Parent shall continue as the surviving corporation, all
with the effects provided by applicable law. Parent, in its capacity as the
surviving corporation of the Merger, is hereinafter sometimes referred to as
the "Surviving Corporation."
1.2 At the Effective Time, each share of common stock,
$.01 par value per share of Subsidiary ("Subsidiary Common Stock") issued
and outstanding immediately prior to the Effective Time (all of which are
owned by Parent and which consist of 10,448,162 shares of common stock)
shall by virtue of the Merger and without any action by Subsidiary, Parent,
the stockholders of Subsidiary or Parent or any other person, be cancelled.
1.3 At the Effective Time, each share of the Class A
Preferred Stock, without par value, of Subsidiary ("Subsidiary Class A
Preferred Stock") and each share of the Class B Preferred Stock, without par
value, of Subsidiary ("Subsidiary Class B Preferred Stock") issued and
outstanding immediately prior to the Effective Time (all of which are owned
by Parent and which consist of 100,000 shares of Subsidiary Class A
Preferred Stock and 100,000 shares of Subsidiary Class B Preferred Stock)
shall by virtue of the Merger and without any action by Subsidiary, Parent,
the stockholders of Subsidiary or Parent or any other person, be cancelled.
1.4 Shares of stock of Parent issued and outstanding
immediately prior to the Effective Time shall not be affected at all by
virtue of the Merger and shall continue to be outstanding immediately after
the Effective Time.
1.5 At and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises,
of both a public and private nature, and be subject to all the restrictions,
disabilities and duties of Subsidiary, and all rights, privileges, powers
and franchises of Subsidiary, and all property, real, personal and mixed,
and all debts due on whatever account, including subscriptions for shares
and including the obligations under the Credit Agreement dated as of May 20,
1993 between Subsidiary and First National Bank of Boston, as agent (the
"Credit Agreement"), the obligations under an Indenture dated as of January
15, 1981 between Subsidiary and Continental Illinois National Bank and Trust
Company of Chicago with respect to 9% Convertible Subordinated Debentures
<PAGE> 3 of 7
due December 31, 1998, as amended by the Supplemental Indenture No. 1
thereto dated as of December 3, 1985 and the Second Supplement to the
Indenture dated December 13, 1989 (the "9% Convertible Subordinated
Debenture Indenture"), the obligations under an Indenture dated as of June
7, 1983 between Subsidiary and J. Henry Schroder Bank and Trust Company with
respect to 9% Subordinated Debentures due December 31, 2007 and the First
Supplement thereto dated December 13, 1989 (the "9% Subordinated Debenture
Indenture"), the obligations under an Indenture dated as of March 31, 1986
between Subsidiary and First Trust Company, Inc. with respect to 12% Senior
Secured Debentures due 2002, as amended by the First Supplement to the
Indenture dated as of December 13, 1989 (the "12% Senior Secured Debenture
Indenture"), and all other choses in action, and all and every other
interest, of or belonging to Subsidiary, shall be taken and deemed to be
transferred to and vested in the Surviving Corporation without further act
or deed; and title to any real estate, or any interest therein, vested in
Subsidiary shall not revert or be in any way impaired by reason of the
Merger; and the Surviving Corporation shall thenceforth be responsible and
liable for all liabilities and obligations of Subsidiary; and any claim
existing or action or proceeding pending by or against Subsidiary may be
prosecuted to judgment as if the Merger had not taken place and the
Surviving Corporation may be substituted in its place; all with the effect
set forth in Section 351.450 of the General and Business Law of Missouri
(the "Missouri Law").
1.6 At the Effective Time, the Surviving Corporation
shall execute supplemental indentures assuming the obligations of Subsidiary
under the 9% Convertible Subordinated Debenture Indenture, the 9%
Subordinated Debenture Indenture, and the 12% Senior Secured Debenture
Indenture, pursuant to Sections 13.01, 12.01, and 13.01 thereof,
respectively, and shall execute or provide such additional documents as are
required pursuant to those provisions.
1.7 At the Effective Time, the Surviving Corporation
shall execute assumption agreements assuming the obligations of Subsidiary
under the Credit Agreement and shall execute or provide such additional
documents as are required pursuant to those agreements.
SECTION 2
Effective Time
2.1 Upon satisfaction of the conditions set forth in
Section 4 of this Merger Agreement, Parent shall cause Articles of Merger to
be executed, verified, attested to, and filed with the Secretary of State of
the State of Missouri as provided in Section 351.430 and 351.435 of the
Missouri Law.
2.2 The Merger shall become effective (the "Effective
Time") upon the issuance of a certificate of merger by the Secretary of
State of the State of Missouri.
SECTION 3
Articles of Incorporation and
By-Laws; Board of Directors
<PAGE> 4 of 7
3.1 The Articles of Incorporation of Parent as in
effect at the Effective Time shall govern the Surviving Corporation, until
they shall be amended as provided by law.
3.2 The By-Laws of Parent as in effect at the Effective
Time, subject to alteration, amendment or repeal from time to time by the
Board of Directors or the stockholders of the Surviving Corporation, shall
govern the Surviving Corporation.
3.3 The members of the Board of Directors of Subsidiary
holding office immediately prior to the Effective Time shall be the members
of the Board of Directors of the Surviving Corporation and the officers of
Subsidiary holding office immediately prior to the Effective Time shall be
the officers (holding the same positions as they held with Subsidiary
immediately prior to the Effective Time) of the Surviving Corporation and
shall hold such offices until the expiration of their current terms, or
their prior resignation, removal or death. Exhibit A.
SECTION 4
Conditions
4.1 Consummation of the Merger shall be conditioned
upon (i) the receipt by Subsidiary of a waiver of Sections 8.12, 10.1.2
(solely with respect to violations of Section 8.12), and 10.1.6(c) of the
Credit Agreement, and (ii) the effectiveness of the registration statement
on Form S-1 filed by the Parent with respect to the offering of senior
secured notes by the Parent in aggregate principal amount expected to result
in aggregate offering proceeds of $100,000,000.
<PAGE> 5 of 7
IT IS FURTHER RESOLVED, that the President or any Vice
President of the Parent is hereby authorized to execute and verify, and the
Secretary of the Parent is authorized to attest Articles of Merger effecting
the Merger and to file such Articles with the Secretary of State of the
State of Missouri, and to take such further action as is deemed necessary
and advisable by such officers to effect the Merger.
IN WITNESS WHEREOF, Empire Gas Corporation has caused these
Articles to be executed in duplicate and verified by Stephen R. Plaster, its
President, and attested by Valeria Schall, its Secretary, this 27th day of
June, 1994.
Empire Gas Corporation
By: /s/ Stephen R. Plaster
______________________
Stephen R. Plaster
President
Attest
By: /s/ Valeria Schall
____________________
Valeria Schall
Secretary
STATE OF MISSOURI )
COUNTY OF LACLEDE ) ss
I, Valeria Schall, a notary public, do hereby certify
that on the 27th day of June, 1994, personally appeared before me, Stephen
R. Plaster, who, being by me first duly sworn, declared that he is the
person who signed the foregoing document as President of Empire Gas
Corporation and that the statements therein contained are true.
/s/ Valeria Schall
__________________
Notary Public
<PAGE> 6 of 7
IN WITNESS WHEREOF, Empire Gas Operating Corporation has
caused these Articles to be executed in duplicate and verified by Larry
Weis, its Vice President, and attested by Earl L. Noe, its Secretary, this
27th day of June, 1994.
Empire Gas Operating Corporation
By: /s/ Larry Weis
_______________
Larry Weis
Vice President
Attest
By: /s/ Earl L. Noe
_______________
Earl L. Noe
Secretary
STATE OF MISSOURI )
COUNTY OF LACLEDE ) ss
I, Jackie Day, a notary public, do hereby certify that
on the 27th day of June, 1994, personally appeared before me, Earl L. Noe,
who, being by me first duly sworn, declared that he is the person who signed
the foregoing document as Vice President of Empire Gas Operating Corporation
and that the statements therein contained are true.
/s/ Jackie Day
_______________
Notary Public
My commission expires 11-30-97
<PAGE> 7 of 7
Exhibit A
OFFICERS AND DIRECTORS - EMPIRE GAS OPERATING CORPORATION 4/1/94
Officers
Robert W. Plaster Chairman of the Board of Chief
Executive Office
Paul S. Lindsey Vice Chairman of the Board &
Chief Operating Officer
Stephen R. Plaster President
Robert L. Wooldrigde Chief Operating Officer -
Eastern
James E. Acreman Senior Vice President -
Operations
Earl L. Noe Senior Vice President -
Administration
Larry A. Weis Vice President - Treasurer
Dwight R. Gilpin Vice President
Floyd J. Waterman Vice President
Gwen R. VanDerhoef Vice President
Thomas Flak Vice President - Data Processing
Willis D. Green Vice President - Controller
Kevin B. Moran Vice President - Property and
Tax
Valeria Schall Vice President
Mark Buettner Divisional Vice President
Robert C. Heagerty Divisional Vice President
Kenneth DePrinzio Divisional Vice President
Luther Gill Divisional Vice President
Paul Stahlman Divisional Vice President
Charles Jones Regional Vice President
Business address of all of the above is:
1700 S. Jefferson
Lebanon, Missouri 65536
Directors
Robert W. Plaster Stephen R. Plaster
1700 S. Jefferson 1700 S. Jefferson
Lebanon, Missouri 65536 Lebanon, Missouri 65536
Paul S. Lindsey S.A. Spencer
1700 S. Jefferson 685 Fifth Avenue, 14th Floor
Lebanon, Missouri 65536 New York, NY 10022
<PAGE>
____________________________________________________________________________
EMPIRE GAS CORPORATION
and
CERTAIN SUBSIDIARY GUARANTORS HERETO
and
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, Trustee
____________________________________________________________________________
Indenture
Dated as of June 29, 1994
____________________________________________________________________________
$127,200,000 Principal Amount at Maturity
Senior Secured Notes Due 2004
____________________________________________________________________________
<PAGE> 2 of 81 CROSS-REFERENCE TABLE
Indenture
TIA Section Section
___________ _________
310 (a)(1) 6.10
(a)(2) 6.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 6.10
(b) 6.8;
6.10;
11.2
(c) N.A.
311 (a) 6.11
(b) 6.11
(c) N.A.
312 (a) 2.5
(b) 11.3
(c) 11.3
313 (a) 6.6
(b)(1) N.A.
(b)(2) 6.6
(c) 6.6
(d) 6.6
314 (a)(1) 3.10;
11.2
(a)(2) 3.10;
11.2
(a)(3) 3.10;
11.2
(a)(4) 3.9
(b) 10.2
(c)(1) 10.6;
11.4
(c)(2) 10.6;
11.4
(c)(3) N.A.
(d) 10.6
(e) 11.5
(f) N.A.
315 (a) 6.1(b)
(b) 6.5;
11.2
(c) 6.1(a)
(d) 6.1(c)
(e) 5.11
316 (a) (last sentence) 2.9
(a)(1)(A) 5.5
(a)(1)(B) 5.4
(a)(2) N.A.
(b) 5.7
(c) 8.7
317 (a)(1) 5.8
(a)(2) 5.9
(b) 2.4
318 (a) 11.1
________________
N.A. means not applicable.
<PAGE> 3 of 81
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 1.2 Other Definitions . . . . . . . . . . . . . . . . . . . . 23
SECTION 1.3 Incorporation by Reference of
Trust Indenture Act. . . . . . . . . . 24
SECTION 1.4 Rules of Construction . . . . . . . . . . . . . . . . . . 24
ARTICLE II
THE SECURITIES
SECTION 2.1 Form and Dating . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.2 Execution and Authentication. . . . . . . . . . . . . . . 25
SECTION 2.3 Registrar and Paying Agent. . . . . . . . . . . . . . . . 26
SECTION 2.4 Paying Agent To Hold Money in Trust . . . . . . . . . . . 27
SECTION 2.5 Securityholder Lists. . . . . . . . . . . . . . . . . . . 27
SECTION 2.6 Transfer and Exchange . . . . . . . . . . . . . . . . . . 27
SECTION 2.7 Replacement Securities. . . . . . . . . . . . . . . . . . 29
SECTION 2.8 Outstanding Securities. . . . . . . . . . . . . . . . . . 29
SECTION 2.9 Determination of Holders' Action. . . . . . . . . . . . . 30
SECTION 2.10 Temporary Securities. . . . . . . . . . . . . . . . . . . 30
SECTION 2.11 Cancellation. . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.12 Defaulted Interest. . . . . . . . . . . . . . . . . . . . 30
ARTICLE III
COVENANTS
SECTION 3.1 Payment of Securities . . . . . . . . . . . . . . . . . . 31
SECTION 3.2 Maintenance of Office or Agency . . . . . . . . . . . . . 31
SECTION 3.3 Limitation on Restricted Payments.. . . . . . . . . . . . 31
SECTION 3.4 Limitation on Incurrence of Indebtedness. . . . . . . . . 34
SECTION 3.5 Limitation on Payment Restrictions
Affecting Subsidiaries . . . . . . . . 35
SECTION 3.6 Limitation on Sale/Leaseback Transactions . . . . . . . . 36
SECTION 3.7 Limitation on Liens . . . . . . . . . . . . . . . . . . . 37
SECTION 3.8 Change of Control . . . . . . . . . . . . . . . . . . . . 39
SECTION 3.9 Compliance Certificate. . . . . . . . . . . . . . . . . . 40
SECTION 3.10 SEC Reports . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 3.11 Transactions with Affiliates. . . . . . . . . . . . . . . 41
SECTION 3.12 Sales of Assets . . . . . . . . . . . . . . . . . . . . . 42
SECTION 3.13 Corporate Existence . . . . . . . . . . . . . . . . . . . 45
SECTION 3.14 Payment of Taxes and Other Claims . . . . . . . . . . . . 45
SECTION 3.15 Notice of Defaults and Other Events . . . . . . . . . . . 45
SECTION 3.16 Maintenance of Properties and Insurance . . . . . . . . . 45
SECTION 3.17 Limitation on Issuance of Capital Stock
and Incurrence of Indebtedness of
Restricted Subsidiaries. . . . . . . . 46
SECTION 3.18 Limitation on Changes in the Nature of
the Business . . . . . . . . . . . . . 46
ARTICLE IV
CONSOLIDATION, MERGER AND SALE
SECTION 4.1 Merger and Consolidation of Company . . . . . . . . . . . 46
<PAGE> 4 of 81
SECTION 4.2 Successor Substituted . . . . . . . . . . . . . . . . . . 48
ARTICLE V
DEFAULTS AND REMEDIES
SECTION 5.1 Events of Default . . . . . . . . . . . . . . . . . . . . 48
SECTION 5.2 Acceleration. . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.3 Other Remedies. . . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.4 Waiver of Past Defaults . . . . . . . . . . . . . . . . . 51
SECTION 5.5 Control by Majority . . . . . . . . . . . . . . . . . . . 51
SECTION 5.6 Limitation on Suits . . . . . . . . . . . . . . . . . . . 51
SECTION 5.7 Rights of Holders To Receive Payment. . . . . . . . . . . 52
SECTION 5.8 Collection Suit by Trustee. . . . . . . . . . . . . . . . 52
SECTION 5.9 Trustee May File Proofs of Claim. . . . . . . . . . . . . 52
SECTION 5.10 Priorities. . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 5.11 Undertaking for Costs . . . . . . . . . . . . . . . . . . 53
SECTION 5.12 Waiver of Stay or Extension Laws. . . . . . . . . . . . . 53
ARTICLE VI
TRUSTEE
SECTION 6.1 Duties of Trustee . . . . . . . . . . . . . . . . . . . . 54
SECTION 6.2 Rights of Trustee . . . . . . . . . . . . . . . . . . . . 55
SECTION 6.3 Individual Rights of Trustee. . . . . . . . . . . . . . . 55
SECTION 6.4 Trustee's Disclaimer. . . . . . . . . . . . . . . . . . . 55
SECTION 6.5 Notice of Defaults. . . . . . . . . . . . . . . . . . . . 56
SECTION 6.6 Reports by Trustee to Holders . . . . . . . . . . . . . . 56
SECTION 6.7 Compensation and Indemnity. . . . . . . . . . . . . . . . 56
SECTION 6.8 Replacement of Trustee. . . . . . . . . . . . . . . . . . 57
SECTION 6.9 Successor Trustee by Merger, etc. . . . . . . . . . . . . 58
SECTION 6.10 Eligibility; Disqualification . . . . . . . . . . . . . . 58
SECTION 6.11 Preferential Collection of Claims Against
Company. . . . . . . . . . . . . . . . 58
SECTION 6.12 Paying Agent. . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE VII
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 7.1 Discharge of Liability on Securities;
Defeasance . . . . . . . . . . . . . . 59
SECTION 7.2 Termination of Company's Obligations. . . . . . . . . . . 59
SECTION 7.3 Defeasance and Discharge of Indenture . . . . . . . . . . 60
SECTION 7.4 Defeasance of Certain Obligations . . . . . . . . . . . . 62
SECTION 7.5 Application of Trust Money. . . . . . . . . . . . . . . . 63
SECTION 7.6 Repayment to Company. . . . . . . . . . . . . . . . . . . 63
SECTION 7.7 Reinstatement . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE VIII
AMENDMENTS AND SUPPLEMENTS
SECTION 8.1 Without Consent of Holders. . . . . . . . . . . . . . . . 64
SECTION 8.2 With Consent of Holders . . . . . . . . . . . . . . . . . 65
<PAGE> 5 of 81
SECTION 8.3 Compliance with Trust Indenture Act . . . . . . . . . . . 66
SECTION 8.4 Revocation and Effect of Consents . . . . . . . . . . . . 66
SECTION 8.5 Notation on or Exchange of Securities . . . . . . . . . . 66
SECTION 8.6 Trustee To Sign Amendments. . . . . . . . . . . . . . . . 66
SECTION 8.7 Fixing of Record Dates. . . . . . . . . . . . . . . . . . 67
ARTICLE IX
REDEMPTION
SECTION 9.1 Notices to Trustee. . . . . . . . . . . . . . . . . . . . 67
SECTION 9.2 Selection of Securities To Be Redeemed. . . . . . . . . . 67
SECTION 9.3 Notice of Redemption. . . . . . . . . . . . . . . . . . . 68
SECTION 9.4 Effect of Notice of Redemption. . . . . . . . . . . . . . 68
SECTION 9.5 Deposit of Redemption Price . . . . . . . . . . . . . . . 68
SECTION 9.6 Securities Redeemed in Part . . . . . . . . . . . . . . . 69
ARTICLE X
SECURITY AND PLEDGE OF COLLATERAL
SECTION 10.1 Collateral Documents. . . . . . . . . . . . . . . . . . . 69
SECTION 10.2 Recording and Opinions. . . . . . . . . . . . . . . . . . 69
SECTION 10.3 Remedies Upon an Event of Default . . . . . . . . . . . . 70
SECTION 10.4 Release of the Collateral . . . . . . . . . . . . . . . . 70
SECTION 10.5 Purchase of Securities with Net
Available Cash . . . . . . . . . . . . 71
SECTION 10.6 Certificates of Company . . . . . . . . . . . . . . . . . 73
SECTION 10.7 Authorization of Actions to be Taken
by the Trustee Under the Pledge
Agreement. . . . . . . . . . . . . . . 73
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Trust Indenture Act Controls. . . . . . . . . . . . . . . 74
SECTION 11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 11.3 Communication by Holders with Other
Holders. . . . . . . . . . . . . . . . 74
SECTION 11.4 Certificate and Opinion as to Conditions
Precedent. . . . . . . . . . . . . . . 75
SECTION 11.5 Statements Required in Certificate or
Opinion. . . . . . . . . . . . . . . . 75
SECTION 11.6 Rules by Trustee and Agents . . . . . . . . . . . . . . . 75
SECTION 11.7 Legal Holidays. . . . . . . . . . . . . . . . . . . . . . 75
SECTION 11.8 Successors; No Recourse Against Others. . . . . . . . . . 76
SECTION 11.9 Duplicate Originals . . . . . . . . . . . . . . . . . . . 76
SECTION 11.10 Other Provisions. . . . . . . . . . . . . . . . . . . . . 76
SECTION 11.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE XII
SUBSIDIARY GUARANTEES
SECTION 12.1 Subsidiary Guarantees . . . . . . . . . . . . . . . . . . 76
<PAGE> 6 of 81
SECTION 12.2 Execution and Delivery of Subsidiary
Guarantees . . . . . . . . . . . . . . 78
SECTION 12.3 Subsidiary Guarantors May Consolidate, Etc.
on Certain Terms . . . . . . . . . . . 78
SECTION 12.4 Release of Subsidiary Guarantors. . . . . . . . . . . . . 79
SECTION 12.5 Additional Subsidiary Guarantors. . . . . . . . . . . . . 79
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SCHEDULE I--LIST OF SUBSIDIARY GUARANTORS . . . . . . . . . . . . . . . . I1
EXHIBIT A--FORM OF SECURITY . . . . . . . . . . . . . . . . . . . . . . . A1
EXHIBIT B--FORM OF GUARANTEE. . . . . . . . . . . . . . . . . . . . . . . B1
EXHIBIT C--FORM OF SUBORDINATION PROVISIONS . . . . . . . . . . . . . . . C1
EXHIBIT D--PLEDGE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . D1
<PAGE>
<PAGE> 7 of 81
INDENTURE dated as of June 29, 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 "speci-
fied date") with respect to each $1,000 face amount of Securities, the
following amount:
(i) if the specified date is one of the following
dates (each an "accrual date"), the amount set forth
opposite such date below:
Accrual Date Accreted Value
_____________ ______________
July 15, 1994 . . . . . . . . . . . . . .$ 788.20
January 15, 1995. . . . . . . . . . . . . . . . 803.95
July 15, 1995 . . . . . . . . . . . . . . . 820.70
January 15, 1996. . . . . . . . . . . . . . . . 838.53
July 15, 1996 . . . . . . . . . . . . . . . 857.51
January 15, 1997. . . . . . . . . . . . . . . . 877.72
July 15, 1997 . . . . . . . . . . . . . . . 899.22
January 15, 1998. . . . . . . . . . . . . . . . 922.11
July 15, 1998 . . . . . . . . . . . . . . . 946.47
January 15, 1999. . . . . . . . . . . . . . . . 972.40
July 15, 1999 . . . . . . . . . . . . . . . .$1,000.00;
(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; and
(iii) if the specified date occurs after July 15, 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.
<PAGE> 8 of 81
"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 Re-
stricted 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 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 trans-
actions 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 annu
ally) of the total obligations of the lessee for rental payments during the
remaining term of the lease included in such Sale/Leaseback Transaction (in-
cluding 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
<PAGE> 9 of 81
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 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 Redemp-
tion 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 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 consecu-
tive 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
<PAGE> 10 of 81
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) a majority 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 Directors
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 determi-
nation 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 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
<PAGE> 11 of 81
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 elimi-
nating (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
<PAGE> 12 of 81
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 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 extraor-
dinary 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 attribut-
able 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 Sub-
sidiary 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 receiv-
ables, 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 Re-
stricted 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
<PAGE> 13 of 81
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 determina-
tion, 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 consoli-
dated 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.
"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
<PAGE> 14 of 81
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 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 pay-
ments or contributions to any employee benefit, severance, retirement, stock
ownership or stock purchase plan or program or any similar plan or arrange-
ment, 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 June 29,
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 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
<PAGE> 15 of 81
(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 princi-
pal 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 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 obligations,
contingent or otherwise, purchased, assumed or with respect to which such
<PAGE> 16 of 81
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 Revolving Credit Note, dated as
of June 29, 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, or any substantially similar master
intercompany note pursuant to any credit facility Incurred pursuant to
Section 3.4(b)(iv) refinancing 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 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
<PAGE> 17 of 81
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 and evidenced by a Board Resolution, provided that
if such fair market value, as determined by the Board of Directors, exceeds
$2,500,000 then the Company shall also receive the written opinion of an
independent nationally recognized investment banking firm that such
valuation of the Board of Directors is fair from a financial point of view.
"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).
"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 indi-
vidual 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
<PAGE> 18 of 81
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 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 June 29, 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 corpo-
ration; 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, 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
<PAGE> 19 of 81
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 Sub-
sidiary 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 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 out-
standing 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 Matu-
rity 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 to the first anniversary of the Stated Maturity
of the Securities.
<PAGE> 20 of 81
"Refinancing Indebtedness" means Indebtedness that refunds,
refinances, replaces, renews, repays or extends (including pursuant to any
defeasance or discharge mechanism) (collectively, "refinances," and "refi-
nanced" 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 Refi-
nancing 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 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 Subsid-
iaries.
"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 bank-
ruptcy or for reorganization relating to the Company whether or not post-
filing interest is allowed in such proceeding), whether existing on the
<PAGE> 21 of 81
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 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 Securi-
ties 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 con-
trolled 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 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
<PAGE> 22 of 81
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.
Sections 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 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.
<PAGE> 23 of 81
"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 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 designa-
tion by the Board of Directors shall be evidenced to the respective Trustee
by promptly filing with the respective Trustee a copy of the board resolu-
tion 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 con-
trolled 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.
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
<PAGE> 24 of 81
"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
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 Security-
holder;
"indenture to be qualified" means this Indenture;
"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;
<PAGE> 25 of 81
(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
(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.
ARTICLE II
THE SECURITIES
SECTION 2.1 Form and Dating.
The Securities and the Trustee's certificate of authenti-
cation 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 Inden-
ture, 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.
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.
<PAGE> 26 of 81
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.
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.
<PAGE> 27 of 81
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 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 con-
tinuation 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 rea-
sonably 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 transfer in form satis-
factory to the Trustee, the Company and each of the Subsidiary Guarantors,
duly executed by the registered owner or by his or her attorney duly autho-
rized 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
<PAGE> 28 of 81
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 Trust-
ee, 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 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.
<PAGE> 29 of 81
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 Depositary 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 surren-
dered 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 re-
placement Security with the Subsidiary Guarantee of the Subsidiary
Guarantors endorsed thereon if the requirements of Section 8-405 of the Uni-
form 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 Secu-
rities 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.
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).
<PAGE> 30 of 81
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 Guar-
antor, 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 deter-
mining whether the Trustee shall be protected in relying on any such direc-
tion, waiver or consent, only Securities which the Trustee knows are so
owned or pledged shall be so disregarded.
SECTION 2.10 Temporary Securities.
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 Sub-
sidiary 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 Securi-
ties 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
<PAGE> 31 of 81
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 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 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
<PAGE> 32 of 81
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 Re-
stricted 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 oc-
curred 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 re-
ceived 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 Sub-
sidiaries 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 ex-
changed 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
<PAGE> 33 of 81
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 pay-
ments 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 Unre-
stricted Subsidiaries, or from redesignations of Unre-
stricted 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 notwith-
standing 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 pro-
vided, further, 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) 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 Indebted-
ness 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, repur-
chased, defeased, acquired or retired, and provided, further, that
such purchase, redemption, defeasance or other acquisition or
<PAGE> 34 of 81
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 accor-
dance 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;
(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 contrib-
uted 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 July 15, 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:
(i) Refinancing Indebtedness (except with respect
to Indebtedness referred to in clauses (ii), (iii) or (iv) below);
<PAGE> 35 of 81
(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 July 15, 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 or pursuant to a credit facility Incurred pursuant
to this Section 3.4(b)(iv) refinancing 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 refi-
nance any Subordinated Indebtedness unless such repayment, prepayment,
redemption, defeasance, retirement, refunding or refinancing is not pro-
hibited by Section 3.3 or unless such Indebtedness shall be contractually
subordinated to the Securities at least to the same extent as such Subor-
dinated Indebtedness.
SECTION WP\ Limitation on Payment Restrictions
Affecting Subsidiaries.
<PAGE> 36 of 81
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 Sub-
sidiary 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; pro-
vided, 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);
(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 Subsid-
iary;
(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 equally 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
<PAGE> 37 of 81
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 indi-
rectly, 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 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
<PAGE> 38 of 81
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;
(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 Sub-
sidiary 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 contem-
plation of, such merger or consolidation; and provided, further, that the
Lien may not extend to any other property owned by the Company or any Re-
stricted 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; pro-
vided, 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 and Liens on Intercompany Notes, in any case
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 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
<PAGE> 39 of 81
expenses, including premiums, related to the refinancing, refunding, exten-
sion, 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 Trans-
actions 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 one hundred-one 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 obligation 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;
DAT 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
<PAGE> 40 of 81
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 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 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 condi-
tion, 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.
<PAGE> 41 of 81
SECTION 3.10 SEC Reports.
The Company shall, to the extent required by TIA Section
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 Section 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 limi-
tation, the sale, purchase, exchange or lease of any assets or property or
the rendering of any services) with any Affiliate of the Company, any Plas-
ter Entity, 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 re-
spect 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 transac-
tion 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
<PAGE> 42 of 81
Directors, of the shares or assets subject to such Asset Sale, (ii) at least
85% 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 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 Avail-
able 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) Indebt-
edness (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 clauses (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; provided further that in the case of any
prepayment or repayment of Indebtedness under the New Credit Facility or
Indebtedness Incurred pursuant to Section 3.4(b)(iv) refinancing the New
Credit Facility, such related loan commitment shall not be required to be
permanently reduced. 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 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 repa-
triation 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
<PAGE> 43 of 81
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.
(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
<PAGE> 44 of 81
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 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 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 ac-
cepted 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
<PAGE> 45 of 81
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 Re-
stricted Subsidiary in accordance with the respective organizational docu-
ments 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.
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, appli-
cability 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 occur-
rence 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
<PAGE> 46 of 81
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.
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.
ARTICLE IV
CONSOLIDATION, MERGER AND SALE
SECTION 4.1 Merger and Consolidation of Company.
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 a majority 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
<PAGE> 47 of 81
(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;
(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 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 all conditions precedent herein provided for relat-
ing 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 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
(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 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
<PAGE> 48 of 81
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 paragraphs (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 Sub-
sidiary or Wholly Owned Subsidiaries and no violation of this Section shall
be deemed to have occurred as a consequence thereof, as long as the require-
ments of paragraphs (a) and (c) are satisfied in connection therewith.
SECTION 4.2 Successor Substituted.
Upon any such consolidation or merger, or any conveyance,
transfer, or disposition of a majority of the properties or assets of the
Company in accordance with Section 4.1, 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. In the case of any
consolidation, merger or transfer described 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 agree-
ments 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
<PAGE> 49 of 81
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 neces-
sary 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 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 de-
fault by the Company or any Subsidiary in the payment when due of any por-
tion 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 appli-
cable 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 out-
standing against all such Persons to exceed $5,000,000 (or its foreign cur-
rency 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
(v) admits in writing its inability to generally
pay its debts as such debts become due,
<PAGE> 50 of 81
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 Sig-
nificant 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 Collat-
eral; 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 Security-
holders under this Section must specify the Default, demand that it be
remedied and state that the notice is a "Notice of Default."
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 De-
fault 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
<PAGE> 51 of 81
the principal amount at maturity and interest shall be due and payable imme-
diately. 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 immedi-
ately 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 accel-
eration 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 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 indemnifica-
tion 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 the Trustee security or indemnity reasonably
<PAGE> 52 of 81
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 Security-holder.
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.
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
<PAGE> 53 of 81
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.
SECTION \A\7 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, any stay or extension law wherever enacted, now or at any time hereafter
<PAGE> 54 of 81
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 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.
<PAGE> 55 of 81
(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 segre-
gated 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 be-
lieved by it to be genuine and to have been signed or presented by the
proper Person. The Trustee need not investigate any fact or matter stated
in the document.
(b) Before the Trustee acts or refrains from acting, it may
require 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 investi-
gation 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 shall not be accountable for the Company's use of the
<PAGE> 56 of 81
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 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 con-
nection 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
<PAGE> 57 of 81
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 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 petition any court of competent jurisdiction for the appointment of a
successor Trustee.
<PAGE> 58 of 81
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 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 inter-
est on, the Securities when the same shall be due and payable; and
<PAGE> 59 of 81
(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 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, sub-
ject 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 to the payment of
such principal and interest with respect to the Securities.
<PAGE> 60 of 81
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, 7.6
and 7.7 shall survive until the Securities are no longer outstanding.
Thereafter, only the Company's obligations in Sections 6.7, 6.8, 7.6 and 7.7
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 obli-
gations 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 Compa-
ny 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 Subsid-
iary 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 secu-
rity 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 con-
sideration 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;
<PAGE> 61 of 81
(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 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 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 (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
DAT 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.
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 out-
standing. 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
<PAGE> 62 of 81
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 (d) and (e) of Section 4.1 and Sections 3.3
through 3.18, and clause (c) of Section 5.1 with respect to clauses (d) and
(e) of Section 4.1 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 Compa-
ny 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 Subsid-
iary 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 secu-
rity 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;
<PAGE> 63 of 81
(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 and defeasance had not occurred and (D) after the pas-
sage 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 bank-
ruptcy 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 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
<PAGE> 64 of 81
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 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
<PAGE> 65 of 81
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;
(f) to comply with the requirements of the SEC in con-
nection 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 other-
wise 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 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);
<PAGE> 66 of 81
DAT 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. However, 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
<PAGE> 67 of 81
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 solicitation.
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 Secu-
rities 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
requirements, if any, and that the Trustee considers, in its sole discre-
tion, 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
<PAGE> 68 of 81
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 por-
tions 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 surren-
dered 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 redemp-
tion payment, interest on Securities called for redemption ceases to accrue
on and after the redemption date; and
DAT 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
<PAGE> 69 of 81
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 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 limita-
tion, 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 first priority Lien intended to be created by the Pledge
Agreement, and 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. To the extent required by the TIA, the Company shall also fur-
<PAGE> 70 of 81
nish to the Trustee at least annually an Opinion of Counsel either (i) stat-
ing that in the opinion of such counsel such action has been taken with
respect to the recording, filing, re-recording and refiling 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 reciting the details of such action or (ii) stating that, in
the opinion of such counsel, no such action is necessary to maintain such
Lien.
SECTION 10.3 Remedies Upon an Event of Default.
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
name or in the names of any of its nominees 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 proceed-
ing with respect thereto, (iv) to exchange certificates or instruments
representing or evidencing the Collateral for certificates or instruments of
different denominations, (v) 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 (vi) 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 Collater-
al (the "Collateral Sale") if (A) the Company or a Subsidiary
receives consideration at the time of the Collateral Sale at least
equal to the fair market value, as determined in good faith by the
Board of Directors and by an independent engineer, appraiser or
other expert, to the extent required by the TIA, of the Collateral
subject to the sale or disposition, (B) at least 80% of the consid-
eration 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,
<PAGE> 71 of 81
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 and an Opinion of Counsel certifying
that all conditions precedent hereunder have been met, to the extent
required by the TIA, an Opinion of Counsel that the release of such Lien
complies with the TIA and such other documents required by Section 10.6
hereof. Upon compliance with the above provisions, the Trustee shall exe-
cute, deliver or acknowledge any necessary or proper instruments of termina-
tion, 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 (or the agreement governing Indebtedness Incurred pursuant to
Section 3.4(b)(iv) refinancing the New Credit Facility) and not otherwise
satisfied in connection with such Collateral Sale, to outstanding Indebted-
edness Incurred under the New Credit Facility in an amount equal to (A) the
outstanding principal amount of Indebtedness to the Company of the Sub-
sidiary 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 permitted to be
outstanding pursuant to the borrowing formulae contained in the agreement
evidencing such Indebtedness plus the Seasonal Overadvance to the extent
applicable; (ii) second, to the extent that the balance of such Net Avail-
able Cash after application in accordance with clause (i), and to the extent
the Company or the Subsidiary elects, to reinvest in Additional Assets, pro-
vided, 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 Secu-
rities 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 Subsid-
iary 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 ten-
dered pursuant to an offer by the Company for the Securities (the "Col-
<PAGE> 72 of 81
lateral 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 over-
subscription) set forth below. If the aggregate purchase price of Securi-
ties tendered pursuant to the Collateral 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 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.
\DA 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 Securi-
ties 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 less than the Collateral Sale Offer Amount, the Paying
Agent shall deliver the excess to the Trustee immediately after the expira-
tion 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 aggre-
gate principal amount of Securities surrendered by Holders exceeds the
<PAGE> 73 of 81
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 appro-
priate 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 Securi-
ties pursuant 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 evi-
dence 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, 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).
<PAGE> 74 of 81
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.
Any notice or communication to a Securityholder shall be
mailed by first-class mail to the Security-holder'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.
<PAGE> 75 of 81
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 reason-
ably 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.
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
<PAGE> 76 of 81
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.
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 re-
leased 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 Security
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 Security when and as the same shall become due
and payable, whether at the Stated Maturity, by acceleration, call for
redemption, purchase or otherwise, in accordance with the terms of such
Security and of this Indenture; provided, however, that the liability of a
Subsidiary Guarantor hereunder shall not exceed at any time the maximum
amount of Indebtedness permitted at the time of the grant of such Subsidiary
Guarantee or, if greater, at the time payment is required under such
Subsidiary Guarantee, to be incurred in compliance with any applicable
fraudulent conveyance or similar law. 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 punctu-
ally when and as the same shall become due and payable, whether at the
Stated Maturity or by acceleration, call for redemption, purchase or other-
wise, and as if such payment were made by the Company.
<PAGE> 77 of 81
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 Security
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 Securities, any waiver or consent by the
Holder of such Security 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 Subsidiary Guarantee will not be discharged in respect of such
Security except by complete performance of the obligations contained in such
Security and in this Subsidiary Guarantee. Each of the Subsidiary Guar-
antors hereby agrees that, in the event of a default in payment of principal
(or premium, if any) or interest on such Security, 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 Security, 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 Securities, to collect interest on the
Securities, or to enforce or exercise any other right or remedy with respect
to the Securities, 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 Securities upon which its guarantee is endorsed
against the Company in respect of any amounts paid by such Subsidiary
Guarantor on account of such Securities 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 Securities issued hereunder
shall have been paid in full.
<PAGE> 78 of 81
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 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 Securities, is, pursuant to applicable
law, rescinded or reduced in amount, or must otherwise be restored or
returned by any obligee on the Securities, whether as a "voidable pref-
erence," "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 Securities 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 Securities
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.
The delivery of any Security 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 Security.
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 Securities
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
<PAGE> 79 of 81
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 Securities and under this Article XII. Any Subsidiary Guarantor not
released from its obligations under its Subsidiary Guarantees endorsed on
the Securities and under this Article XII shall remain liable for the full
amount of principal of and interest on the Securities and for the other
obligations of a Subsidiary Guarantor under its Subsidiary Guarantees en-
dorsed on the Securities and under this Article XII.
(b) Concurrently with the defeasance of the Securities
under Section 7.2 hereof, the Subsidiary Guarantors shall be released from
all of their obligations under their Subsidiary Guarantees endorsed on the
Securities 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 and by an independent engineer,
appraiser or other expert, to the extent required by the TIA).
(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 Securities 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 Securities. 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
<PAGE> 80 of 81
customary exceptions concerning creditors' 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 Securities.<PAGE>
<PAGE> 81 of 81
SIGNATURES
Dated: June 29, 1994
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:
_________________________
<PAGE>
<PAGE> I1 of 3
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
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
<PAGE> I2 of 3
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
Empiregas Inc. of Sacramento
<PAGE> I3 of 3
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 Hendersonville
Empiregas Inc. of North Carolina
Empiregas Inc. of Creedmoor
Empiregas Inc. of Apex
Empiregas Inc. of Durham
Empiregas Inc. of Warrenton
<PAGE>
<PAGE> A1 of 8
EXHIBIT A
____________________________________________________________________________
(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
12 7/8% Senior Secured Note Due 2004
No. 1 $127,200,000
Empire Gas Corporation, a Missouri corporation, promises to
pay to Cede & Co., or registered assigns, the principal sum of $127,200,000
Dollars on July 15, 2004.
Interest Payment Dates: January 15 and July 15
Record Dates: January 1 and July 1
Additional provisions of this Security are set forth on the
reverse hereof.
<PAGE>
<PAGE> A2 of 8
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:
Shawmut Bank Connecticut,
National Association, as
Trustee,
certifies that this is one
of the Securities referred
to in the Indenture. (SEAL)
By: _________________________
Authorized Signature
____________________________________________________________________________
<PAGE> A3 of 8
(Form of Back of Security)
Empire Gas Corporation
12 7/8% Senior Secured Note Due 2004
(1) Interest. Empire Gas Corporation, a Missouri corpora-
tion (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
7% per annum until July 15, 1999 and at the rate of 12 7/8% per annum from
and including July 15, 1999 until maturity.
Interest will be payable semiannually (to the holders of
record of the Securities at the close of business on the January 1 or July 1
immediately preceding the Interest Payment Date) on each Interest Payment
Date, commencing January 15, 1995.
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
June 29, 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 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 June 29, 1994 (the "Indenture") between the Company,
the Subsidiary Guarantors (as defined therein) and the Trustee. The Secu-
rities are general obligations of the Company limited to $127,200,000 aggre-
gate 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
<PAGE> A4 of 8
the Indenture, and references to the principal amount of any Security refer
to the Accreted Value of such Security as determined pursuant to the Inden-
ture. 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 fol-
lowing paragraph, the Company may not redeem the Securities prior to July
15, 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 re-
demption prices (expressed in percentages of Accreted Value), plus accrued
interest to the redemption date, if redeemed during the 12-month period
beginning July 15,
Year %
____ _______
1999 . . . . . . . . . . 106.438
2000 . . . . . . . . . . 103.219
2001, and thereafter . . 100.000
The Company may redeem up to $44.52 million 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
Value), plus accrued interest to the redemption date, of 110% if redeemed at
any time prior to July 15, 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 "speci-
fied 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
____________ ______________
July 15, 1994 $ 788.20
January 15, 1995 803.95
July 15, 1995 820.70
January 15, 1996 838.53
July 15, 1996 857.51
January 15, 1997 877.72
July 15, 1997 899.22
January 15, 1998 922.11
July 15, 1998 946.47
January 15, 1999 972.40
July 15, 1999 $1,000.00;
<PAGE> A5 of 8
(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; and
(iii) if the specified date occurs after July 15,
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 endorse-
ments 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
101% of the principal amount of the Securities to be repurchased plus ac-
crued interest to the date of repurchase as provided in, and subject to the
terms of, the Indenture.
(10) Defeasance. Subject to certain conditions, the Compa-
ny 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 Agree-
ment. 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 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 excep-
tions, (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
<PAGE> A6 of 8
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 incon-
sistency, 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 con-
tinuing, 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 provi-
sions of the TIA, the Trustee under the Indenture, 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
<PAGE> A7 of 8
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 text of this Security in larger type. Re-
quests may be made to: Secretary, Empire Gas Corporation, 1700 South
Jefferson Street, P.O. Box 303, Lebanon, Missouri, 65536 Attention:
Secretary.<PAGE>
<PAGE> A8 of 8
____________________________________________________________________________
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: ______________________________________________________
___________________________________________________________________________
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: _____________________________________________________
<PAGE>
<PAGE> B1 of 3
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 Security 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 Security 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; provided, however, that the
liability of a Subsidiary Guarantor hereunder shall not exceed at any time
the maximum amount of Indebtedness permitted at the time of the grant of
each Subsidiary Guarantee or, if greater, at the time payment is required
under such Subsidiary Guarantee, to be incurred in compliance with any
applicable fraudulent conveyance or similar law. 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 Security
or the Indenture, the absence of any action to enforce the same, or any re-
lease 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 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 Security 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
<PAGE> B2 of 3
on such Security, 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 Security, 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 exercis-
ing their respective rights to accelerate the maturity of the Securities, to
collect interest on the Securities, or to enforce or exercise any other
right or remedy with respect to the Securities, 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.
Each Subsidiary Guarantor shall be subrogated to all rights
of the Holder of this Security 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 Securities, is, pursuant to applicable
law, rescinded or reduced in amount, or must otherwise be restored or
returned by any obligee on the Securities 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 Securities
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.
<PAGE> B3 of 3
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 this Subsidiary Guarantee for the benefit of the
Holder of this Security 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 Security 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________________________________________
Name: Paul S. Lindsey, Jr.
Title: President of each of the
SUBSIDIARY GUARANTORS
Attest:
___________________________
Name:
Title:<PAGE>
<PAGE> C1 of 5
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 forward 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 execu-
tion 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
<PAGE> C2 of 5
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
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
<PAGE> C3 of 5
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:
(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 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
<PAGE> C4 of 5
(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.
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 rea-
sonable 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
<PAGE> C5 of 5
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.
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.
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 Repre-
sentative. 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.
<PAGE>
WARRANT AGREEMENT
between
EMPIRE GAS CORPORATION
and
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
Warrant Agent
_________________________
Dated as of June 29, 1994
<PAGE> 2 of 29
WARRANT AGREEMENT
AGREEMENT dated as of June 29, 1994 (this "Agreement") be-
tween Empire Gas Corporation, a Missouri corporation (the "Company"), and
Shawmut Bank Connecticut, National Association, a National Banking Associa-
tion, as warrant agent (the "Warrant Agent").
Pursuant to the terms of an Underwriting Agreement dated as
of June 23, 1994 between the Company and Morgan Stanley & Co. Incorporated,
as Underwriter (the "Underwriting Agreement"), the Company has agreed to
issue and sell 12,720 units (the "Units"). Each Unit will consist of (i)
ten 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 29, 1994 between the Compa-
ny, each of the Subsidiary Guarantors (as defined therein) and Shawmut Bank
Connecticut, National Association, as trustee, and (ii) 13.8 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 $.01 per share. The Senior
Secured Notes and the Warrants included in each Unit will become separately
transferable on January 15, 1995.
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 1.
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
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.
"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
<PAGE> 3 of 29
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.
"Current Market Value" has the meaning specified in Section
4.1(f).
"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 July 15, 2004.
"Final Surrender Date" has the meaning specified in Section
3.4(b).
"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.
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"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).
"Repurchase Event" means, and shall be deemed to occur if at
any time prior to July 15, 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 substan-
tially 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 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.
"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 January 15, 1995.
"Underwriter" has the meaning specified in the recitals to
this Agreement.
"Underwriting Agreement" 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).
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"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 2.
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 War-
rant 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
interests 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").
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. 1. 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
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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 REPRESEN-
TATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRE-
SENTATIVE 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 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.
2. Prior to the Separation Date, each Warrant
Certificate shall bear the following legend on the face thereof:
THE WARRANTS ARE INITIALLY ISSUED AS PART OF AN
ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF(I) TEN
12 7/8% SENIOR SECURED NOTES DUE 2004 OF EMPIRE GAS
CORPORATION AND (II) 13.8 WARRANTS. PRIOR TO
JANUARY 15, 1995, THE WARRANTS EVIDENCED BY THIS
CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED
SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EX-
CHANGED ONLY TOGETHER WITH, THE SENIOR SECURED
NOTES ISSUED BY EMPIRE GAS CORPORATION IN CON-
NECTION HEREWITH.
Section 2.3 Execution and Delivery of Warrant Certificates.
Warrant Certificates evidencing Warrants to purchase initially an aggregate
of up to 175,536 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
<PAGE> 7 of 29
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.
ARTICLE 3.
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 $.01 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 4:00 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 shall be exercised, such
Warrant Certificate shall be surrendered and a new Warrant Certificate 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
<PAGE> 8 of 29
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 of Common Stock or other securities
purchasable upon the exercise of the Warrants shall be closed, the certifi-
cates 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 re-
quired by law, shall not be closed at any one time for a period longer than
20 days.
Section 3.4 Repurchase Offers. 1. 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.
2. 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
4:00 p.m., New York City time on the date (the "Final Surrender Date") 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.
3. Repurchase Offers. a. In any Repurchase
Offer, the Company shall offer to purchase for cash at the Repurchase Price
<PAGE> 9 of 29
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.
b. Each Holder may, but shall not be obligated to,
accept such Repurchase Offer, by tendering to the Warrant
Agent, on or prior to the 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 re-
sponsible for the payment of any transfer taxes required as
the result of any change in ownership of such Warrants.
4. Repurchase Price. a. 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.
b. The Relevant Value of the Common Stock and
other securities or property issuable upon exercise of all
the Warrants, will be:
(1) If the Common Stock (or other securi-
ties) 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 avail-
able.
(2) If the Common Stock (or other securi-
ties) is not registered under the Exchange Act or
if the value cannot be computed under clause (I)
<PAGE> 10 of 29
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 minority
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 con-
taining 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 provisions 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 Value Report of the Independent Financial Ex-
pert.
5. Selection of Independent Financial Expert. 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.
6. 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 Repurchase Offer, (ii) the manner in which
Warrants may be surrendered to the Warrant Agent for repurchase by the
<PAGE> 11 of 29
Company, (iii) the Repurchase Price at which the Warrants will be repur-
chased 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 Repurchase 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.
7. 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 the Final surrender Date and 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 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 delivered to a
Person other than the Holder.
8. 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 4.
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:
1. 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 securities 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
<PAGE> 12 of 29
become effective immediately after the effective date of such event retro-
active to the record date, if any, for such event.
2. 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 sub-
scribe for or purchase Common Stock at a price per share which is lower (at
the record date for such issuance) than the then Current Market Value per
share of Common Stock, 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 then
Current Market Value per share of Common Stock. 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.
3. 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 securities, by dividing (x) the
total amount receivable by the Company in consideration of the sale and
issuance of such rights, options, warrants or convertible 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 convertible or
exchangeable securities) that is lower than the Current Market Value per
share of the Common Stock in effect immediately prior to such sale or issu-
ance, 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 (deter-
mined as provided below) for such sale or issuance would purchase at such
Current Market Value per share of Common Stock. 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 exchangeable securities shall be
<PAGE> 13 of 29
entitled to subscribe for or purchase shall be deemed to be issued and out-
standing 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 securities 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-
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.
4. 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 shareholders entitled to receive
such distribution.
5. 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
<PAGE> 14 of 29
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
readjustment 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 number, 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.
6. 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:
a. if the security is not registered under the
Exchange Act, the value of the security (l) 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 deter-
mination 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 3.4(d)(ii)(II); provided, however, that in determin-
ing the value of the Common Stock under Section 4.5, if the
foregoing clause (l) 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
b. if the security is registered under the Ex-
change Act, 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
<PAGE> 15 of 29
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 determined as if the security were not
registered under the Exchange Act.
7. 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.
8. 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 immediately prior to
such adjustment and the denominator of which shall be the number of shares
so purchasable immediately thereafter.
9. Consolidation, Merger, Etc. a. 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 Agree-
ment 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 purchasable upon exercise of
<PAGE> 16 of 29
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.
b. 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 con-
nection therewith, consideration is payable to holders of
Common Stock in exchange for their Common Stock in connec-
tion 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 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 surrendering
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
<PAGE> 17 of 29
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.
Section 4.3 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 4:00 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 reorganization 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 securities, 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
<PAGE> 18 of 29
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
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 5.
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 Warrants. 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 6.
LOSS OR MUTILATION
Upon receipt by the Company and the Warrant Agent of
evidence satisfactory 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 can-
cellation thereof, then, in the absence of notice to the Company or the
Warrant Agent that the Warrants represented 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 Cer-
tificate 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 Certificates shall be at any time enforceable by anyone,
<PAGE> 19 of 29
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 7.
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 appropriate 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.
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.
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 8.
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
<PAGE> 20 of 29
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 Company, 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 10 Senior Secured Notes and
13.8 Warrants. Prior to the Separation Date, the Warrants may not be trans-
ferred 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 complying 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 register. 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 Security, 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 Certifi-
cates are presented to the Warrant Agent with a request to register the
transfer or to exchange them for an equal amount of Warrants of other
authorized denominations, the Warrant Agent shall register the transfer or
make the exchange as requested if its requirements for such transactions 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 in connection with
any registration of transfer of Warrants.
Section 8.2 Book-Entry Provisions for Global Warrant. 1.
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 Mem-
bers") 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 whatso-
ever. Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Warrant Agent or any agent of the Company or the Warrant Agent,
<PAGE> 21 of 29
from giving effect to any written certification, proxy or other authoriza-
tion furnished by the Depositary or impair, as between the Depositary and
its Agent Members, the operation of customary practices governing the exer-
cise of the rights of a holder of any Warrants.
2. Transfers of the Global Warrant shall be
limited to transfers 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 and the provisions of Sec-
tion 8.3. 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 ap-
pointed by the Company within 90 days of such notice.
3. In connection with any transfer of a portion of
the beneficial interests in the Global Warrant to beneficial owners pursuant
to paragraph (b) of this Section, the Warrant Agent shall reflect on its
books and 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.
4. 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.
5. Any Physical Security delivered in exchange for
an interest in the Global Warrant pursuant to paragraphs (b) or (d) of this
Section shall, except as otherwise provided by paragraph (f) of Section 8.3,
bear the legend regarding transfer restrictions applicable to the Physical
Security set forth in Section 2.2.
6. 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 reasonable written notice to the Warrant Agent.
<PAGE> 22 of 29
Section 8.3 Surrender of Warrant Certificates. Any Warrant
Certificate 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, 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 9.
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 stock-
holders 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 institute 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 10.
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
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 12 7/8% from the date of the
Default to the date of payment, which interest shall compound quarterly (all
<PAGE> 23 of 29
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 provision of this Warrant Agreement, if a Default occurs and is
continuing, the Holders of the Warrants may pursue any available remedy to
collect the Repurchase 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 11.
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 represen-
tations 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 number or kind or amount of stock or other securities or other property
deliverable 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 responsibility 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 Certificate or any other documents
or any signatures are genuine or properly authorized, (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 re-
quested) 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
<PAGE> 24 of 29
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
shall not be answerable or accountable for any act, default, neglect or
misconduct 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 obligation 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 incurred 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
<PAGE> 25 of 29
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 war-
rant agent. If the Company shall fail to make such appointment 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
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
<PAGE> 26 of 29
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.
ARTICLE 12.
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 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 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 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 property, 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
<PAGE> 27 of 29
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 operations). 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 adjustments. 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 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. 1. 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
<PAGE> 28 of 29
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.
2. 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 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
Certificate 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 respective 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.
<PAGE>
<PAGE> 29 of 29
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:
<PAGE>
<PAGE> 1 of 9
EXHIBIT A
FORM OF WARRANT CERTIFICATE
[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 REPUR-
CHASE, 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 (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.]
THE WARRANTS ARE INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS.
EACH UNIT CONSISTS OF (i) 10 SENIOR SECURED NOTES AND (ii) 13.8 WAR-
RANTS OF THE COMPANY. PRIOR TO JANUARY 15, 1995, THE WARRANTS EVI-
DENCED 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 CON-
NECTION HEREWITH.
CUSIP No. 291714129
No. Certificate for Warrants
_____ _______
_______________________
[FN]
<F1> Include only for Global Security.
<PAGE> 2 of 9
WARRANTS TO PURCHASE COMMON STOCK
This certifies that _____________, or its registered as-
signs, 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 be-
low), 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 $.01 per
share (subject to adjustment as provided in the Warrant Agreement hereinaf-
ter 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 purchase
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 January 15,
1995.
This Warrant Certificate is issued under and in accordance
with a Warrant Agreement dated as of June 29, 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, obligations, 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.
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 July 15, 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 such
<PAGE> 3 of 9
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 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 12 7/8% 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
substantially all of its property and assets to, another Person (other than
an Affiliate 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 substantially 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.
<PAGE> 4 of 9
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 shall 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 nonassessable, and the Company 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 satisfactory to the Company and the Warrant Agent duly
executed, with signatures guaranteed 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
represented 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 Certificates 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, 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 enti-
tled to receive any notice of any proceedings of the Company except as pro-
vided in the Warrant Agreement.
<PAGE> 5 of 9
This Warrant Certificate shall be void and all rights evi-
denced hereby shall cease on July 15, 2004 unless sooner terminated by the
liquidation, dissolution 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.
<PAGE>
<PAGE> 6 of 9
This Warrant Certificate shall not be valid for any purpose
until it shall have been countersigned by the Warrant Agent.
Dated:
EMPIRE GAS CORPORATION
By:
______________________
Name:
Title:
Countersigned:
Shawmut Bank Connecticut,
National Association,
as Warrant Agent
By:
_________________________
Authorized Signature<PAGE>
<PAGE> 7 of 9
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 ___ share[s] (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:
_____________________________<F1>
(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:
________________________________
[FN]
<F1> 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>
<PAGE> 8 of 9
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 War-
rant Certificate for repurchase by EMPIRE GAS CORPORATION for the consider-
ation set forth in said notice.
Dated:
_____________________________<F1>
(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:
_________________________________
[FN]
<F1> 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>
<PAGE> 9 of 9
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 assigned 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
substitution in the premises.
Dated:
_____________________________<F1>
(Signature of Owner)
_____________________________
(Street Address)
_____________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
___________________________________
[FN]
<F1> 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>
____________________________________________________________________________
____________________________________________________________________________
LOAN AND SECURITY AGREEMENT
DATED AS OF JUNE 29, 1994
AMONG
EMPIRE GAS CORPORATION, AS BORROWER,
CONTINENTAL BANK N.A., AS AGENT AND A LENDER,
AND
THE OTHER LENDERS PARTY HERETO
____________________________________________________________________________
____________________________________________________________________________
<PAGE> 2 of 78
TABLE OF CONTENTS
Page
1. DEFINITIONS AND OTHER TERMS. . . . . . . . . . . . . . . . . . . . . . 5
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . 5
1.2 Other Definitional Provisions . . . . . . . . . . . . 20
1.3 Interpretation of Agreement . . . . . . . . . . . . . 20
1.4 Compliance with Financial Restrictions. . . . . . . . 20
2. LOANS; LETTERS OF CREDIT; OTHER MATTERS. . . . . . . . . . . . . . . . 20
2.1 Loans . . . . . . . . . . . . . . . . . . . . . . . . 20
2.2 Letters of Credit . . . . . . . . . . . . . . . . . . 22
2.3 Loan Account; Demand Deposit Account. . . . . . . . . 24
2.4 Interest and Fees . . . . . . . . . . . . . . . . . . 25
2.5 Requests for Loans; Borrowing Base Certificates;
Other Information . . . . . . . . . . . . . . . . . . 25
2.6 Statements. . . . . . . . . . . . . . . . . . . . . . 26
2.7 Overdraft Loans . . . . . . . . . . . . . . . . . . . 26
2.8 Over Advances . . . . . . . . . . . . . . . . . . . . 27
2.9 All Loans One Obligation. . . . . . . . . . . . . . . 27
2.10 Making of Payments; Application of Collections;
Charging of Accounts. . . . . . . . . . . . . . . . . 27
2.11 Agent's Election Not to Enforce . . . . . . . . . . . 29
2.12 Reaffirmation . . . . . . . . . . . . . . . . . . . . 29
2.13 Setoff. . . . . . . . . . . . . . . . . . . . . . . . 29
2.14 Closing Fee . . . . . . . . . . . . . . . . . . . . . 29
2.15 Settlements, Distributions and Apportionment of
Payments. . . . . . . . . . . . . . . . . . . . . . . 29
3. COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.1 Grant of Security Interest. . . . . . . . . . . . . . 30
3.2 Accounts Receivable . . . . . . . . . . . . . . . . . 31
3.3 Inventory . . . . . . . . . . . . . . . . . . . . . . 34
3.4 Supplemental Documentation. . . . . . . . . . . . . . 35
3.5 Collateral for the Benefit of Agent and Lenders . . . 35
4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 36
4.1 Organization. . . . . . . . . . . . . . . . . . . . . 36
4.2 Authorization . . . . . . . . . . . . . . . . . . . . 36
4.3 No Conflicts. . . . . . . . . . . . . . . . . . . . . 36
4.4 Validity and Binding Effect . . . . . . . . . . . . . 37
4.5 No Default. . . . . . . . . . . . . . . . . . . . . . 37
4.6 Financial Statements. . . . . . . . . . . . . . . . . 37
4.7 Insurance . . . . . . . . . . . . . . . . . . . . . . 37
4.8 Litigation; Contingent Liabilities. . . . . . . . . . 37
4.9 Liens . . . . . . . . . . . . . . . . . . . . . . . . 38
4.10 Subsidiaries. . . . . . . . . . . . . . . . . . . . . 38
4.11 Partnerships; Joint Ventures. . . . . . . . . . . . . 38
4.12 Business and Collateral Locations . . . . . . . . . . 38
4.13 Senior Notes. . . . . . . . . . . . . . . . . . . . . 39
4.14 Eligibility of Collateral . . . . . . . . . . . . . . 39
4.15 Intentionally Omitted . . . . . . . . . . . . . . . . 39
<PAGE> 3 of 78
4.16 Patents, Trademarks, etc. . . . . . . . . . . . . . . 39
4.17 Solvency. . . . . . . . . . . . . . . . . . . . . . . 39
4.18 Contracts; Labor Matters. . . . . . . . . . . . . . . 39
4.19 Pension and Welfare Plans . . . . . . . . . . . . . . 40
4.20 Regulations G and U . . . . . . . . . . . . . . . . . 40
4.21 Compliance. . . . . . . . . . . . . . . . . . . . . . 40
4.22 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 40
4.23 Investment Company Act Representation . . . . . . . . 41
4.24 Public Utility Holding Company Act Representation . . 41
4.25 Environmental and Safety and Health Matters . . . . . 41
4.26 Related Agreements. . . . . . . . . . . . . . . . . . 42
4.27 Capitalized Lease Obligations . . . . . . . . . . . . 42
5. BORROWER COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.1 Financial Statements and Other Reports. . . . . . . . 42
5.2 Notices . . . . . . . . . . . . . . . . . . . . . . . 44
5.3 Existence . . . . . . . . . . . . . . . . . . . . . . 47
5.4 Nature of Business. . . . . . . . . . . . . . . . . . 47
5.5 Books, Records and Access . . . . . . . . . . . . . . 47
5.6 Insurance . . . . . . . . . . . . . . . . . . . . . . 48
5.7 Intentionally Omitted . . . . . . . . . . . . . . . . 48
5.8 Repair. . . . . . . . . . . . . . . . . . . . . . . . 48
5.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 48
5.10 Compliance. . . . . . . . . . . . . . . . . . . . . . 49
5.11 Pension Plans . . . . . . . . . . . . . . . . . . . . 49
5.12 Merger, Purchase and Sale . . . . . . . . . . . . . . 49
5.13 Restricted Payments . . . . . . . . . . . . . . . . . 49
5.14 Borrower's and Subsidiaries' Stock. . . . . . . . . . 50
5.15 Indebtedness. . . . . . . . . . . . . . . . . . . . . 50
5.16 Liens . . . . . . . . . . . . . . . . . . . . . . . . 50
5.17 Guaranties. . . . . . . . . . . . . . . . . . . . . . 51
5.18 Investments . . . . . . . . . . . . . . . . . . . . . 51
5.19 Subsidiaries. . . . . . . . . . . . . . . . . . . . . 51
5.20 Intentionally Omitted . . . . . . . . . . . . . . . . 52
5.21 Change in Accounts Receivable . . . . . . . . . . . . 52
5.22 Environmental Issues. . . . . . . . . . . . . . . . . 52
5.23 Related Agreements. . . . . . . . . . . . . . . . . . 52
5.24 Unconditional Purchase Options. . . . . . . . . . . . 52
5.25 Use of Proceeds . . . . . . . . . . . . . . . . . . . 53
5.26 Transactions with Related Parties . . . . . . . . . . 53
5.27 Amendment of Documents. . . . . . . . . . . . . . . . 53
6. DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.1 Event of Default. . . . . . . . . . . . . . . . . . . 53
6.2 Effect of Event of Default; Remedies. . . . . . . . . 56
7. ADDITIONAL PROVISIONS REGARDING COLLATERAL AND AGENT'S RIGHTS. . . . . 57
7.1 Notice of Disposition of Collateral . . . . . . . . . 57
7.2 Application of Proceeds of Collateral . . . . . . . . 57
7.3 Care of Collateral. . . . . . . . . . . . . . . . . . 57
7.4 Performance of Borrower's Obligations . . . . . . . . 57
7.5 Agent's Rights. . . . . . . . . . . . . . . . . . . . 57
8. CONDITIONS PRECEDENT; DELIVERY OF DOCUMENTS AND OTHER MATTERS. . . . . 58
8.1 Conditions Precedent to Initial Loans . . . . . . . . 58
8.2 Continuing Conditions Precedent to all Loans;
Certification . . . . . . . . . . . . . . . . . . . . 62
<PAGE> 4 of 78
9. INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.1 Environmental and Safety and Health Indemnity . . . . 63
9.2 General Indemnity . . . . . . . . . . . . . . . . . . 63
9.3 Capital Adequacy. . . . . . . . . . . . . . . . . . . 64
10. AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.1 Appointment of Agent. . . . . . . . . . . . . . . . . 64
10.2 Nature of Duties of Agent . . . . . . . . . . . . . . 64
10.3 Agent in its Capacity as Lender . . . . . . . . . . . 65
10.4 Independent Credit Analysis . . . . . . . . . . . . . 65
10.5 General Immunity. . . . . . . . . . . . . . . . . . . 65
10.6 Action by Agent.. . . . . . . . . . . . . . . . . . . 66
10.7 Right to Indemnity. . . . . . . . . . . . . . . . . . 67
10.8 Rights and Remedies to be Exercised by Agent Only.. . 67
10.9 Agent's Resignation.. . . . . . . . . . . . . . . . . 67
10.10 Disbursement of Proceeds of Loans and Other Advances. 68
10.11 Release of Collateral.. . . . . . . . . . . . . . . . 68
10.12 Agreement to Cooperate. . . . . . . . . . . . . . . . 68
10.13 Sharing of Collateral.. . . . . . . . . . . . . . . . 68
10.14 Lenders to Act as Agents. . . . . . . . . . . . . . . 69
11. ADDITIONAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . 69
12. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
12.1 Borrower Waiver . . . . . . . . . . . . . . . . . . . 69
12.2 Power of Attorney . . . . . . . . . . . . . . . . . . 69
12.3 Expenses; Attorneys' Fees . . . . . . . . . . . . . . 70
12.4 Continental's Fees and Charges. . . . . . . . . . . . 71
12.5 Lawful Interest . . . . . . . . . . . . . . . . . . . 71
12.6 No Waiver by Agent or any Lender; Amendments. . . . . 71
12.7 Termination of Revolving Credit . . . . . . . . . . . 72
12.8 Notices . . . . . . . . . . . . . . . . . . . . . . . 72
12.9 Assignments and Participations; Information . . . . . 73
12.10 Severability. . . . . . . . . . . . . . . . . . . . . 75
12.11 Successors. . . . . . . . . . . . . . . . . . . . . . 75
12.12 Construction. . . . . . . . . . . . . . . . . . . . . 75
12.13 Consent to Jurisdiction . . . . . . . . . . . . . . . 75
12.14 Subsidiary Reference. . . . . . . . . . . . . . . . . 75
12.15 Waiver of Jury Trial. . . . . . . . . . . . . . . . . 75
<PAGE> 5 of 78
LOAN AND SECURITY AGREEMENT
THIS AGREEMENT ("Agreement") is made as of this 29th day of June,
1994 by and among CONTINENTAL BANK N.A. (in its individual capacity,
"Continental"), a national banking association having its principal office
at 231 South LaSalle Street, Chicago, Illinois 60697, as Agent and a Lender
hereunder, the other Lenders from time to time party hereto, and EMPIRE GAS
CORPORATION ("Borrower"), a Missouri corporation having its principal office
at 1700 South Jefferson Street, Lebanon, Missouri 65536.
W I T N E S S E T H:
_ _ _ _ _ _ _ _ _ _
WHEREAS, Borrower may, from time to time, request loans or other
financial accommodations from Lenders, and the parties wish to provide for
the terms and conditions upon which such loans or other financial
accommodations shall be made;
NOW, THEREFORE, in consideration of any loan or advance or grant
of credit (including any loan or advance or grant of credit by renewal or
extension) hereafter made to Borrower by, or on behalf of, Lenders, and for
other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties agree as follows:
1. DEFINITIONS AND OTHER TERMS.
1.1 Definitions. In addition to terms defined elsewhere in
this Agreement or any Supplement, Schedule or Exhibit hereto, when used
herein, the following terms shall have the following meanings (such meanings
shall be equally applicable to the singular and plural forms of the terms
used, as the context requires):
"Account Debtor" means any Person who is or who may become
obligated to Borrower or any Subsidiary under, with respect to, or on
account of an Account Receivable, Contract Right or other Collateral.
"Account Receivable" means any account of Borrower or any
Subsidiary and any other right of Borrower or any Subsidiary to payment for
goods sold or leased or for services rendered, whether or not evidenced by
an instrument or chattel paper and whether or not yet earned by performance.
"Acquisitions" means, collectively, the acquisitions from time to
time by Borrower of other businesses engaged in businesses comparable to
those conducted by Borrower and the Subsidiaries, including without
limitation the acquisition of PSNC Propane Corporation consummated on the
date hereof.
"Adjusted Reference Rate" has the meaning ascribed to such term
in Supplement A.
"Agent" means Continental in its capacity as agent for Lenders
hereunder and under the Related Agreements, or any successor agent pursuant
to Section 10.
"Agreement" means this Loan and Security Agreement, as the same
may be amended, modified or supplemented from time to time.
<PAGE> 6 of 78
"Application" means an application by Borrower, in a form and
containing terms and provisions acceptable to Agent and Issuing Bank, for
the issuance by Issuing Bank of a Letter of Credit.
"Assignee Deposit Account" has the meaning ascribed to such term
in Section 3.2(d).
"Assignment and Acceptance Agreement" means an agreement in the
form of Exhibit D pursuant to which a Lender assigns all or a portion of its
rights, and delegates all or such portion of its obligations, under this
Agreement and the Related Agreements, to another Person.
"Attorneys' Fees" has the meaning ascribed to such term in
Section 12.3.
"Banking Day" means any day other than a Saturday, Sunday or
legal holiday on which banks are authorized or required to be closed for the
conduct of commercial banking business in Chicago, Illinois; provided, with
respect to LIBOR Rate Loans, Banking Days shall not include a day on which
dealings in U.S. Dollars may not be carried on by Continental in the London
interbank LIBOR market.
"Borrower" has the meaning ascribed to such term in the Preamble.
"Borrower Collateral" has the meaning ascribed to such term in
Section 3.1.
"Borrowing Base" has the meaning ascribed to such term in
Supplement A.
"Borrowing Base Certificate" means a certificate in the form of
Exhibit A attached hereto, executed and certified as accurate by an officer
of Borrower designated in writing by Borrower to Lender pursuant to
resolutions of the Board of Directors of Borrower.
"Borrowing Subsidiary" means any Subsidiary identified in writing
to Agent by Borrower from time to time as a Borrowing Subsidiary and that
has satisfied, in form and substance satisfactory to Agent in its sole
discretion, each of the following requirements: (i) such Subsidiary has
executed a guaranty in favor of Agent, for the benefit of itself and
Lenders, pursuant to which such Subsidiary has unconditionally guarantied
the Liabilities; (ii) such Subsidiary has entered into a security agreement
with Agent, for the benefit of itself and Lenders, pursuant to which such
Subsidiary has granted a security interest in its accounts receivable,
inventory, and certain related assets to Agent, for the benefit of itself
and Lenders, as collateral for the guaranty described in clause (i) above,
and Agent, for the benefit of itself and Lenders has a validly perfected
first priority security interest in such assets; (iii) such Subsidiary has
entered into a security agreement with Borrower pursuant to which such
Subsidiary has granted a security interest in its accounts receivable,
inventory, and certain related assets to Borrower as security
for the Intercompany Loans, and Borrower has a validly perfected second
priority security interest in such assets; (iv) such Subsidiary has executed
the Intercompany Agreement and such other agreements, instruments and
documents as Agent shall require in order to evidence such Subsidiary's
Intercompany Loans and (v) Borrower has assigned the proceeds of such
Subsidiary's Intercompany Loan, all of the agreements, instruments and
documents described in clause (iv), and the second priority security
<PAGE> 7 of 78
interest related thereto, to Agent, for the benefit of itself and Lenders.
The Borrowing Subsidiaries as of the date hereof are designated as such on
Schedule 4.10 hereto. Any Subsidiary which is a Restricted Subsidiary shall
be required to be a Borrowing Subsidiary.
"Capitalized Lease" means any lease which is or should be
capitalized on the balance sheet of the lessee in accordance with GAAP.
"Closing Date" means the first date on which Loans are made, or
Letters of Credit are issued, under this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, and
any successor statute of similar import, together with the regulations
thereunder, in each case as in effect from time to time. References to
sections of the Code shall be construed to also refer to any successor
sections.
"Collateral" means, collectively, (a) Borrower Collateral and (b)
the Obligor Collateral.
"Continental" has the meaning ascribed to such term in the
Preamble.
"Contract Right" means any right of Borrower or any Subsidiary to
payment under a contract for the sale or lease of goods or the rendering of
services, which right is not yet earned by performance.
"Credit" means the facility established under this Agreement
pursuant to which Lenders will make Revolving Loans (the "Revolving Credit")
to Borrower, and/or cause Issuing Bank to issue Letters of Credit for the
account of Borrower.
"Default Rate" means, with respect to a Loan, the rate of
interest which is applicable to such Loan after the occurrence of an Event
of Default, as determined pursuant to Supplement A.
"Demand Deposit Account" has the meaning ascribed to such term in
Section 2.3.
"Depository Accounts" has the meaning ascribed to such term in
Section 3.2(d).
"Disproportionate Advance" has the meaning ascribed to such term
in Section 2.1.1(a).
"Eligible Account Receivable" means an Account Receivable owing
to a Borrowing Subsidiary which meets the following requirements:
(a) it is genuine and in all respects what it purports to
be;
(b) it arises from either (i) the performance of services by
such Borrowing Subsidiary, which services have been fully performed and, if
applicable, acknowledged and/or accepted by the Account Debtor with respect
thereto or (ii) the sale or lease of goods by such Borrowing Subsidiary; and
if it arises from the sale or lease of goods, (A) such goods comply with
such Account Debtor's specifications (if any) and have been shipped to, or
Page> 8 of 78
delivered to and accepted by, such Account Debtor and neither Borrower nor
such Borrowing Subsidiary has knowledge that the Account Debtor has failed
to accept delivery of all or a portion of such goods, and (B) such Borrowing
Subsidiary has possession of shipping and delivery receipts evidencing such
shipment, delivery and acceptance;
(c) it (i) is evidenced by an invoice rendered to the
Account Debtor with respect thereto which (A) is dated not earlier than the
date of shipment or performance and (B) has payment terms not unacceptable
to Agent in its reasonable judgment and (ii) meets the additional Eligible
Account Receivable requirements set forth in Supplement A;
(d) it is not subject to any assignment, claim or Lien,
other than (i) a Lien in favor of Agent, for the benefit of itself and
Lenders, (ii) a Lien in favor of Borrower to secure the Intercompany Loans,
so long as Borrower has assigned such Lien to Agent, for the benefit of
itself and Lenders, (iii) a Lien for current Taxes not delinquent, (iv) a
carrier's, warehouseman's, materialman's or other like statutory Lien
arising in the ordinary course of business and securing obligations which
are not overdue, or (v) a Lien consented to by Agent in writing;
(e) to Borrower's knowledge, it is a valid, legally
enforceable and unconditional obligation of the Account Debtor with respect
thereto, and is not subject to setoff, counterclaim, credit or allowance
(except any credit or allowance which has been deducted in computing the net
amount of the applicable invoice as shown in the original schedule or
Borrowing Base Certificate furnished to Agent identifying or including such
Account Receivable) or adjustment by the Account Debtor with respect
thereto, or to any claim by such Account Debtor denying liability thereunder
in whole or in part, and such Account Debtor has not refused to accept any
of the goods or services which are the subject of such Account Receivable or
offered or attempted to return any of such goods;
(f) to Borrower's knowledge, there are no proceedings or
actions which are then threatened or pending against the Account Debtor with
respect thereto or to which such Account Debtor is a party which might
result in any material adverse change in such Account Debtor's financial
condition or in its ability to pay any Account Receivable in full when due;
(g) it does not arise out of a contract which, by its terms,
forbids, restricts or makes void or unenforceable the assignment by such
Borrowing Subsidiary to Agent, for the benefit of itself and Lenders, of the
Account Receivable arising with respect thereto;
(h) the Account Debtor with respect thereto is not a
Subsidiary, Related Party or Obligor, or a director, officer, employee or
agent of Borrower, a Subsidiary, Related Party or Obligor;
(i) the Account Debtor with respect thereto is a resident or
citizen of, and is located within, the United States of America;
(j) it is not an Account Receivable arising from a "sale on
approval," "sale or return" or "consignment," or subject to any other
repurchase or return agreement;
(k) it is not an Account Receivable with respect to which
possession and/or control of the goods sold giving rise thereto is held,
<PAGE> 9 of 78
maintained or retained by such Borrowing Subsidiary or any Subsidiary,
Related Party or other Obligor (or by any agent or custodian of such
Borrowing Subsidiary, any Subsidiary, Related Party or Obligor) for the
account of or subject to further and/or future direction from the Account
Debtor thereof;
(l) it is not an Account Receivable which in any way fails
to meet or violates any warranty, representation or covenant contained in
this Agreement or any Related Agreement relating directly or indirectly to
Accounts Receivable;
(m) the Account Debtor thereunder is not located in the
States of Indiana, New Jersey or Minnesota; provided, however, that such
restriction shall not apply to an Account Receivable if at the time the
Account Receivable was created and at all times thereafter (i) such Borrow-
ing Subsidiary has filed and has maintained effective a current Notice of
Business Activities Report with the appropriate office or agency of the
State of Indiana, New Jersey or Minnesota, as applicable or (ii) such
Borrowing Subsidiary was and has continued to be exempt from the filing of
such Report and has provided Agent with satisfactory evidence thereof;
(n) it arises in the ordinary course of such Borrowing
Subsidiary's business;
(o) if the Account Debtor is the United States of America or
any department, agency or instrumentality thereof, and the face amount of
such Account Receivable is in excess of $10,000, such Borrowing Subsidiary
has assigned its rights to payment of such Account Receivable to Agent, for
the benefit of itself and Lenders, pursuant to the Assignment of Claims Act
of 1940, as amended;
(p) if Agent in its reasonable business judgment has
established a credit limit for an Account Debtor, the aggregate dollar
amount of Accounts Receivable due from such Account Debtor, including such
Account Receivable, does not exceed such credit limit;
(q) if the Account Receivable is evidenced by chattel paper
or an instrument, (i) Agent shall have specifically agreed in writing to
include such Account Receivable as an Eligible Account Receivable, (ii) only
payments then due and payable under such chattel paper or instrument shall
be included as an Eligible Account Receivable and (iii) the originals of
such chattel paper or instruments have been endorsed and/or assigned and
delivered to Agent, for the benefit of itself and Lenders, in a manner
satisfactory to Agent; and
(r) it is an Account Receivable with respect to which Agent,
for itself and Lenders, has a valid, first priority and fully perfected
Lien.
Agent further reserves the right, from time to time hereafter, to designate
as ineligible specific Accounts Receivable that meet the aforementioned
criteria for Eligible Accounts Receivable if either (i) such Accounts
Receivable are deemed by Agent, in its reasonable business judgment, to be
unacceptable or (ii) Agent determines, in its reasonable business judgment,
that the prospect of payment or performance by the Account Debtor with
respect thereto is or will be impaired for any reason whatsoever. An
Account Receivable which is at any time an Eligible Account Receivable, but
<PAGE> 10 of 78
which subsequently fails to meet any of the foregoing requirements, shall
forthwith cease to be an Eligible Account Receivable.
"Eligible Inventory" means Inventory of propane gas and other
hard good inventory (exclusive of propane gas tanks held for sale, other
than twenty pound propane gas grill tanks held for resale) of Borrower or
any Borrowing Subsidiary, which meets the following requirements:
(a) it is owned by Borrower or a Borrowing Subsidiary and is
not subject to any prior assignment, claim or Lien, other than (i) a Lien in
favor of Agent, for the benefit of itself and Lenders, (ii) a Lien in favor
of Borrower to secure the Intercompany Loans, so long as Borrower has
assigned such Lien to Agent, for the benefit of itself and Lenders, and
(iii) Liens consented to by Agent in writing;
(b) if it is a hard good held for sale or lease or
furnishing under contracts of service, it is (except as Agent may otherwise
consent in writing) new and unused;
(c) except as Agent may otherwise consent, it is in the
possession and control of Borrower, a Borrowing Subsidiary or their
respective agents;
(d) if it is in the possession or control of a bailee,
warehouseman, processor or other Person other than Borrower or a Borrowing
Subsidiary, Agent is in possession of such agreements, instruments and
documents as Agent may require (each in form and content acceptable to Agent
and duly executed, as appropriate, by the bailee, warehouseman, processor or
other Person in possession or control of such Inventory, as applicable),
including but not limited to warehouse receipts in Agent's name, for the
benefit of itself and Lenders, covering such Inventory;
(e) it is not Inventory which is dedicated to, identifiable
with, or is otherwise specifically to be used in the manufacture of, goods
which are to be sold or leased to the United States of America or any
department, agency or instrumentality thereof and in respect of which
Inventory Borrower or a Borrowing Subsidiary shall have received any
progress or other advance payment which is or may be against any Account
Receivable generated upon the sale or lease of any such goods;
(f) it is not Inventory produced in violation of the Fair
Labor Standards Act and subject to the "hot goods" provisions contained in
Title 29 U.S.C. Section 215 or any successor statute or section;
(g) it is not (i) packaging or shipping materials, (ii)
goods used in connection with maintenance or repair of Borrower's or a
Borrowing Subsidiary's business, properties or assets, (iii) work-in-process
or (iv) general supplies;
(h) it is not Inventory which in any way fails to meet or
violates any warranty, representation or covenant contained in this
Agreement or any Related Agreement relating directly or indirectly to
Inventory;
(i) Agent has not determined in its reasonable business
judgment that it is unacceptable due to age, type, category, quality and/or
quantity;
<PAGE> 11 of 78
(j) it is Inventory with respect to which (i) Agent, for
itself and Lenders, has a valid, first priority and fully perfected Lien and
(ii) if it is Inventory of a Borrowing Subsidiary, Borrower has a valid,
second priority and fully perfected Lien, and such Lien has been assigned to
Agent, for itself and Lenders; and
(k) it is not Inventory the use of which by Borrower or a
Borrowing Subsidiary or the manufacture or sale thereof by Borrower or a
Borrowing Subsidiary, is subject to any licensing, patent, royalty,
trademark, tradename or copyright agreement of any other Person.
Inventory which is at any time Eligible Inventory but which subsequently
fails to meet any of the foregoing requirements shall forthwith cease to be
Eligible Inventory.
"Environmental Laws" means the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response, Compensation and Liability
Act, any so-called "Superfund" or "Superlien" law, the Toxic Substances
Control Act, and any other federal, state or local statute, law, ordinance,
code, rule, regulation, order or decree or other requirement regulating,
relating to, or imposing liability or standards of conduct (including but
not limited to permit requirements, and emission or effluent restrictions)
concerning any Hazardous Materials or any hazardous, toxic or dangerous
waste, substance or constituent, or any pollutant or contaminant or other
substance, whether solid, liquid or gas, as now or at any time hereafter in
effect.
"Environmental Lien" means a Lien in favor of any governmental
entity for (a) any liability under any Environmental Law or (b) damages
arising from or costs incurred by such governmental entity in response to a
Release of any Hazardous Material or the spillage, disposal or release into
the environment of any other hazardous, toxic or dangerous waste, substance
or constituent, or other substance.
"Equipment" means all equipment of Borrower or any Subsidiary of
every description, including without limitation fixtures, furniture,
vehicles and trade fixtures, together with any and all accessions, parts and
equipment attached thereto or used in connection therewith, and any
substitutions therefor and replacements thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, together with
the regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA shall be construed to also refer to any
successor sections.
"ERISA Affiliate" means any corporation, partnership, or other
trade or business (whether or not incorporated) that is, along with
Borrower, a member of a controlled group of corporations or a controlled
group of trades or businesses, as described in Sections 414(b) and 414(c),
respectively, of the Code or Section 4001 of ERISA, or a member of the same
affiliated service group within the meaning of Section 414(m) of the Code.
"Eurocurrency Reserve Requirement" means, with respect to any
LIBOR Rate Loan for any Interest Rate Period, a percentage equal to the
daily average during such Interest Rate Period of the percentages in effect
on each day of such Interest Rate Period, as prescribed by the Federal
<PAGE> 12 of 78
Reserve Board, for determining the aggregate maximum reserve requirements
(including all basic, supplemental, marginal and other reserves) applicable
to "Eurocurrency liabilities" pursuant to Regulation D or any other then
applicable regulation of the Federal Reserve Board which prescribes reserve
requirements applicable to "Eurocurrency liabilities," as presently defined
in Regulation D. Without limiting the effect of the foregoing, the
Eurocurrency Reserve Requirement shall reflect any other reserves required
to be maintained by Continental against (i) any category of liabilities that
includes deposits by reference to which the LIBOR Rate is to be determined,
or (ii) any category of extensions of credit or other assets that includes
LIBOR Rate Loans. For purposes of this Agreement, any LIBOR Rate Loan
hereunder shall be deemed to be "Eurocurrency liabilities," as defined in
Regulation D, and, as such, shall be deemed to be subject to such reserve
requirements without the benefit of, or credit for, proration, exceptions or
offsets which may be available to Continental from time to time under
Regulation D.
"Event of Default" has the meaning ascribed to such term in
Section 6.1.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal, for each day during such period, to the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Banking Day, for the next
preceding Banking Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Banking Day, the average of
the quotations for such day on such transactions received by Agent from
three federal funds brokers of recognized standing selected by it.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System or any successor thereto.
"Fiscal Year" means any period of twelve (12) consecutive
calendar months ending on the thirtieth (30th) day of June. References to a
Fiscal Year with a number corresponding to any calendar year (e.g. "Fiscal
Year 1994") refer to the Fiscal Year ending on the thirtieth (30th) day of
June occurring during such calendar year.
"GAAP" means generally accepted accounting principles as in
effect from time to time (except as otherwise provided in Section 1.4), as
applied in the preparation of the audited financial statement of Borrower
referred to in Section 4.6.
"Hazardous Materials" means any toxic substance, hazardous
substance, hazardous material, hazardous chemical or hazardous waste defined
or qualifying as such in (or for the purposes of) any Environmental Law, or
any pollutant or contaminant, and shall include, but not be limited to,
petroleum, including crude oil, any radioactive material, including but not
limited to any source, special nuclear or by-product material as defined at
42 U.S.C. Section 2011 et seq., as amended or hereafter amended,
polychlorinated biphenyls and asbestos in any form or condition.
"Indebtedness" of any Person means, without duplication, (a) the
principal portion of any obligation of such Person for borrowed money,
including without limitation (i) any obligation of such Person evidenced by
bonds, debentures, notes or other similar debt instruments and (ii) any
<PAGE> 13 of 78
obligation for borrowed money which is non-recourse to the credit of such
Person but which is secured by a Lien on any asset of such Person, (b) any
obligation of such Person on account of deposits or advances, (c) any
obligation of such Person for the deferred purchase price of any property or
services, except Trade Accounts Payable, (d) any obligation of such Person
as lessee under a Capitalized Lease, (e) any obligation of such Person with
respect to interest rate swaps, interest rate caps, interest rate collars or
other interest hedging agreements, (f) any obligation of such Person in
respect of foreign exchange contracts, (g) any obligation of such Person
with respect to Letters of Credit, acceptances, guarantees or similar
obligations of another Person issued for the account of such Person and (h)
any Indebtedness of another Person secured by a Lien on any asset of such
first Person, whether or not such Indebtedness is assumed by such first
Person. For all purposes of this Agreement, the Indebtedness of any Person
shall include the Indebtedness of any partnership or joint venture in which
such Person is a general partner or joint venturer.
"Intercompany Agreement" means that certain Intercompany
Agreement of even date herewith among Borrower and each of the Borrowing
Subsidiaries.
"Intercompany Loans" means revolving loans made by Borrower to
the Borrowing Subsidiaries with the proceeds of the Loans pursuant to the
terms of this Agreement and the Intercompany Agreement. All funds
downstreamed by Borrower to the Borrowing Subsidiaries with the proceeds of
the Loans will be deemed to be Intercompany Loans.
"Interest Rate Period" means with respect to any portion of the
Revolving Loans, the period commencing on the date on which the LIBOR Rate
is deemed applicable to such portion of the Revolving Loans, and ending on
the numerically corresponding day one (1), two (2) or three (3) months
thereafter, as selected by Borrower pursuant to Section 3.1.1(c) of
Supplement A; provided, however, that:
(a) any Interest Rate Period which would otherwise
end on a day which is not a Banking Day shall end on the next
succeeding Banking Day unless such next succeeding Banking Day
falls in another calendar month, in which case such Interest Rate
Period shall end on the next preceding Banking Day;
(b) any Interest Rate Period which begins on the
last Banking Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the
end of such Interest Rate Period) shall end on the last Banking
Day of the calendar month at the end of such Interest Rate
Period; and
(c) no Interest Rate Period shall extend beyond the
Termination Date.
"Inventory" means any and all of Borrower's and each Subsidiary's
goods (including without limitation goods in transit) which are held for
sale, furnished under any contract of service, or held as raw materials,
work in process, or supplies or materials used or consumed in Borrower's or
such Subsidiary's business, or which are held for use in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such
goods, and any and all goods the sale or other disposition of which has
<PAGE> 14 of 78
given rise to an Account Receivable, Contract Right or any other property
described in Section 3.1(a), which are returned to and/or repossessed and/or
stopped in transit by, or at any time hereafter are in the possession or
under the control of, Borrower, any Subsidiary, Agent or any Lender or any
agent or bailee of any of them, and all documents of title or other
documents representing the same; provided, that the foregoing does not
include tanks leased to, or held for lease to, customers, storage tanks and
other Equipment.
"Investment" of any Person means any investment, made in cash or
by delivery of any kind of property or asset, in any other Person, whether
by acquisition of shares of stock or similar interest, Indebtedness or other
obligation or security, or by loan, advance or capital contribution, or
otherwise.
"Issuing Bank" means Continental or any other Lender selected by
Agent with Borrower's consent (which will not be unreasonably withheld) to
issue Letters of Credit under this Agreement.
"L/C Draft" means a draft drawn on Issuing Bank pursuant to a
Letter of Credit.
"Lenders" means, collectively, Continental and any other Person
that becomes a Lender under this Agreement and each of their respective
successors and assigns as provided in this Agreement; and "Lender" means any
one of Lenders.
"Letter of Credit" means a standby or documentary letter of
credit issued by the Issuing Bank on the Application of Borrower.
"Letter of Credit Obligations" means at any time an amount equal
to the sum of (a) the aggregate outstanding face amount of all Letters of
Credit plus (b) the aggregate outstanding face amount of all accepted but
unpaid L/C Drafts.
"Liabilities" means all of the liabilities, obligations
(including obligations of performance) and indebtedness of Borrower to Agent
or any Lender of any kind or nature, however created, arising or evidenced,
whether direct or indirect, absolute or contingent, now or hereafter
existing or due or to become due, and arising under, or in connection with,
this Agreement, any Note, any Related Agreement, any Letter of Credit or any
Application therefor, including without limitation all interest, charges,
expenses, Attorneys' Fees and other sums chargeable to Borrower by Agent or
any Lender hereunder or thereunder. "Liabilities" shall also include any
and all amendments, extensions, renewals, refundings or refinancings of any
of the foregoing.
"LIBOR Base Rate" means, with respect to each Interest Rate
Period for a LIBOR Rate Loan, the sum of two and one-half percent (2.50%)
plus the rate per annum at which U.S. Dollar deposits in immediately
available funds are offered to Continental two (2) Banking Days prior to the
beginning of such Interest Rate Period by major banks in the London inter-
bank eurodollar market at or about 11:00 a.m., London time, for delivery on
the first day of such Interest Rate Period, for the number of days comprised
therein and in an amount equal to the amount of the LIBOR Rate Loan to be
outstanding during such Interest Rate Period.
<PAGE> 15 of 78
"LIBOR Rate" means, with respect to each Interest Rate Period for
a LIBOR Rate Loan, a rate per annum (rounded upward, if necessary, to the
nearest one hundredth of one percent (1/100th of 1%)) determined pursuant to
the following formula:
LIBOR Rate = LIBOR Base Rate
__________________________________
1-Eurocurrency Reserve Requirement
"LIBOR Rate Loan" means any portion of the Revolving Loan which
bears interest at a rate determined with reference to the LIBOR Rate.
"Lien" means any security interest, mortgage, pledge,
hypothecation, judgment lien or similar legal process, title retention lien,
or other lien or encumbrance, including without limitation the interest of a
vendor under any conditional sale or other title retention agreement and the
interest of a lessor under any Capitalized Lease.
"Loan" means (a) any Revolving Loan made pursuant to Section
2.1.1 and (b) any other loan or advance made to Borrower by Agent or any
Lender under or pursuant to this Agreement.
"Loan Account" has the meaning ascribed to such term in Section
2.3.
"Margin Stock" has the meaning ascribed to such term in
Regulation U of the Federal Reserve Board or any regulation substituted
therefor, as in effect from time to time.
"Master Revolving Credit Note" means the Master Revolving Credit
Note dated on or about June 30, 1994 (as it may be amended from time to
time) executed by each Borrowing Subsidiary in favor of Borrower and
evidencing the Intercompany Loans made to each Borrowing Subsidiary under
the Intercompany Agreement.
"Material Adverse Change" means (a) a material adverse change in
the condition (financial or otherwise), operations, performance, prospects,
properties or affairs, taken as a whole, of Borrower or in the ability of
Borrower to perform its obligations under any material agreement to which
Borrower is a party, (b) a material adverse change in the condition
(financial or otherwise), operations, performance, prospects, properties or
affairs of Borrower and the Subsidiaries taken as a whole or in the ability
of Borrower and the Subsidiaries taken as a whole to perform their
obligations under any material agreements to which they are parties or (c)
an impairment of Agent's interest, for the benefit of itself and Lenders, in
any material portion of the Collateral or the material diminution in value
of the Collateral.
"Material Adverse Effect" means (a) a material adverse effect
upon the condition (financial or otherwise), operations, performance,
prospects, properties or affairs, taken as a whole, of Borrower or upon the
ability of Borrower to perform its obligations under any material agreement
to which Borrower is a party, (b) a material adverse effect upon the
condition (financial or otherwise), operations, performance, prospects,
properties or affairs of Borrower and the Subsidiaries taken as a whole or
upon the ability of Borrower and the Subsidiaries taken as a whole to
perform their obligations under any material agreements to which they are
<PAGE> 16 of 78
parties or (c) an impairment of Agent's interest, for the benefit of itself
and Lenders, in any material portion of the Collateral or the material
diminution in value of the Collateral.
"Maximum Facility" means $15,000,000.
"Maximum Loan Amount" means, with respect to any Lender, the
maximum amount of Loans which such Lender has agreed, pursuant to the terms
and conditions of this Agreement, to make available to Borrower, as set
forth on the signature page hereto or in an Assignment and Acceptance
Agreement executed by such Lender.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA that is maintained for employees of Borrower or
any ERISA Affiliate.
"Note" means any promissory note of Borrower evidencing any loan
or advance made by any Lender to Borrower pursuant to this Agreement, as the
same may be amended, modified or supplemented from time to time.
"Obligor" means Borrower and each other Person who is or shall
become primarily or secondarily liable on any of the Liabilities, or who
grants to Agent, for the benefit of itself and Lenders, a Lien on any
property of such Person as security for any of the Liabilities.
"Obligor Collateral" means any real or personal property of any
Obligor on which a Lien has been granted to Agent, for the benefit of itself
and Lenders, in order to secure the Liabilities and/or such Obligor's
guaranty of the Liabilities.
"Occupational Safety and Health Law" means the Occupational
Safety and Health Act of 1970 and any other federal, state or local statute,
law, ordinance, code, rule, regulation, order or decree regulating, relating
to or imposing liability or standards of conduct concerning employee health
and/or safety.
"Over Advance" has the meaning ascribed to such term in Section
2.8.
"Overdraft Loan" has the meaning ascribed to such term in Section
2.7.
"Participant" means any Person, now or at any time or times
hereafter, participating with any Lender, pursuant to the provisions of
Section 12.9, in the Loans made or Letters of Credit issued, pursuant to
this Agreement or any Related Agreement.
"Payment Liabilities" means all Liabilities other than contingent
obligations of Borrower with respect to which neither Agent nor any Lender
has asserted a claim against Borrower or against which Borrower has provided
reserves or Collateral satisfactory to Agent or such Lender; provided, that
Payment Liabilities shall include the Letter of Credit Obligations.
"PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
<PAGE> 17 of 78
"Pension Plan" means a "pension plan," as such term is defined in
Section 3(2) of ERISA, that is subject to the provisions of Title IV of
ERISA (other than a Multiemployer Plan) and to which Borrower or any ERISA
Affiliate may have any liability, including any liability by reason of being
deemed to be a contributing sponsor under Section 4069 of ERISA.
"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
institution, entity, or government (whether national, federal, state,
county, city, municipal or otherwise, including without limitation any
instrumentality, division, agency, body or department thereof).
"Pre-Settlement Determination Date" has the meaning ascribed to
such term in Section 2.15.
"Pro Rata Share" means, with respect to any Lender, a fraction
(expressed as a percentage in nine (9) decimal places), the numerator of
which shall be the Maximum Loan Amount of such Lender and the denominator of
which shall be the aggregate amount of the Maximum Loan Amounts of all
Lenders.
"Real Property" means, collectively, all real property presently
owned or hereafter acquired, or presently or hereafter leased, by Borrower
or any Subsidiary.
"Reference Rate" means, at any time, the rate of interest then
most recently announced by Continental at Chicago, Illinois as its reference
rate. Each change in the interest rate on any Loan shall take effect on the
effective date of the change in the Reference Rate.
"Register" has the meaning ascribed to such term in Section
12.9(d).
"Related Agreement" means any agreement, instrument or document
(including without limitation notes, guarantees, chattel mortgages, pledges,
powers of attorney, consents, assignments, contracts, notices, security
agreements, leases, financing statements, subordination agreements,
intercreditor agreements, trust account agreements and all other written
matter) heretofore, now, or hereafter delivered to Agent or any Lender with
respect to or in connection with or pursuant to this Agreement or any of the
Liabilities, and executed by or on behalf of Borrower, any Subsidiary or
any other Obligor, as each of the same may be amended, modified or
supplemented from time to time and shall specifically include any Notes.
"Related Party" means, with respect to any Person, any other
Person (a) that directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such first
Person or a subsidiary of such first Person, (b) that beneficially owns or
holds ten percent (10%) or more of the equity interest of such first Person
or a subsidiary of such first Person or (c) ten percent (10%) or more of the
equity interest of which is beneficially owned or held by such first Person
or a subsidiary of such first Person. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
<PAGE> 18 of 78
"Release" means any actual or threatened spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing of Hazardous Materials into the environment.
"Reportable Event" has the meaning given to such term in ERISA.
"Requisite Lenders" means Lenders having, in the aggregate, Pro
Rata Shares of (a) one hundred percent (100%) at such times as there are one
or two Lenders, or (b) at least fifty-one percent (51%) at such times as
there are three or more Lenders.
"Restricted Subsidiaries" has the meaning given to such term in
the Senior Loan Documents.
"Revolving Credit" has the meaning ascribed to such term in the
definition of "Credit."
"Revolving Credit Amount" has the meaning ascribed to such term
in Supplement A.
"Revolving Loan" has the meaning ascribed to such term in Section
2.1.1.
"Revolving Loan Availability" means the lesser of (a) the
Revolving Credit Amount minus the Letter of Credit Obligations and (b) the
Borrowing Base minus the Letter of Credit Obligations.
"Seasonal Overadvance" means the advances to Borrower under
Sections 2.2(iii) and (iv) of Supplement A.
"Senior Loan Documents" means, collectively, the agreements,
instruments and documents evidencing, governing and securing the Senior
Notes, including the Senior Note Indenture as each of the same may be
amended, modified or supplemented from time to time pursuant to Section 5.27
hereof.
"Senior Loans" means, collectively, all indebtedness of Borrower
represented by the Senior Notes.
"Senior Note Indenture" means the Indenture dated June 29, 1994
between Borrower, certain Subsidiaries and Shawmut Bank Connecticut,
National Association, Trustee.
"Senior Notes" means, collectively, Borrower's 12 7/8% Senior
Secured Notes due 2004 in the aggregate principal amount due upon maturity
of not more than $127,200,000, issued pursuant to the Senior Loan Documents.
"Settlement Date" has the meaning ascribed to such term in
Section 2.15.
"Stock Repurchase" means the repurchase by Borrower of all shares
of its common stock held by Mr. Robert W. Plaster and certain other
departing officers of Borrower, which is being consummated on the date
hereof.
"Subordinated Debt" means, collectively, (a) Indebtedness of
Borrower under the certain Indenture dated June 7, 1983 relating to
Borrower's 9% Subordinated Debentures due December 31, 2007, as supplemented
<PAGE> 19 of 78
by a certain First Supplemental Indenture dated December 13, 1989
(collectively, the "2007 Indenture"), in the current aggregate approximate
principal amount of $9,500,000, and (b) that portion of any other
liabilities, obligations or Indebtedness of Borrower which contains terms
satisfactory to Agent and is subordinated, in a manner satisfactory to Agent
(as evidenced by Agent's written agreement of satisfaction), as to right and
time of payment of principal and interest thereon, to all of the
Liabilities.
"Subordinated Debt Documents" means, collectively, the
agreements, instruments and documents evidencing or otherwise pertaining to
any Subordinated Debt, including without limitation the 2007 Indenture, as
each of the same may be amended, modified or supplemented from time to time
pursuant to Section 5.27.
"Subsidiary" means any Person of which or in which Borrower and
its other Subsidiaries own directly or indirectly more than fifty percent
(50%) of (a) the combined voting power of all classes of stock having
general voting power under ordinary circumstances to elect a majority of the
board of directors of such Person, if it is a corporation, (b) the capital
interest or profits interest of such Person, if it is a partnership, joint
venture or similar entity or (c) the beneficial interest of such Person, if
it is a trust, association or other unincorporated organization.
"Supplemental Documentation" has the meaning ascribed to such
term in Section 3.4.
"Tangible Net Worth" means at any time, the total of
shareholders' equity (including capital stock, additional paid-in capital
and retained earnings and after deducting treasury stock), less the sum of
the total amount of all intangible assets, in each case determined on a
consolidated basis for Borrower and the Subsidiaries and in accordance with
GAAP. Intangible assets shall include, without limitation, unamortized debt
discount and expense, unamortized deferred charges and goodwill.
"Taxes" with respect to any Person means taxes, assessments or
other governmental charges or levies imposed upon such Person, its income or
any of its properties, franchises or assets.
"Termination Date" means June 29, 1997 or such later date to
which it may be extended pursuant to Section 12.7.
"Trade Accounts Payable" of any Person means trade accounts
payable of such Person with a maturity of not greater than ninety (90) days
incurred in the ordinary course of such Person's business.
"Transactions" has the meaning ascribed to such term in Section
8.1.3.
"UCC" means the Uniform Commercial Code as in effect in the State
of Illinois, and any successor statute, together with any regulations
thereunder, in each case as in effect from time to time. References to
sections of the UCC shall be construed to also refer to any successor
sections.
"Units" means the investment unit consisting of ten Senior Notes
and 13.8 Warrants.
<PAGE> 20 of 78
"Unmatured Event of Default" means any event or condition which,
with the lapse of time or giving of notice to Borrower or both, would
constitute an Event of Default.
"Warrant Agreement" means the Warrant Agreement dated on or about
June 29, 1994 executed by Empire and Shawmut Bank Connecticut, National
Association, as Warrant Agent.
"Warrants" means warrants issued to holders of the Senior Notes
entitling such holders to purchase up to 175,536 shares of the common stock,
$.001 par value per share, of Borrower, in accordance with the Warrant
Agreement.
1.2 Other Definitional Provisions. Unless otherwise defined
or the context otherwise requires, all financial and accounting terms used
herein or in any certificate or other document made or delivered pursuant
hereto shall be defined in accordance with GAAP. Unless otherwise defined
therein, all terms defined in this Agreement shall have the defined meanings
when used in any Related Agreement or Supplemental Documentation. Terms
used in this Agreement which are defined in any Supplement or Exhibit hereto
shall, unless the context otherwise indicates, have the meanings given them
in such Supplement or Exhibit. Other terms used in this Agreement shall,
unless the context indicates otherwise, have the meanings provided for by
the UCC to the extent the same are used or defined therein.
1.3 Interpretation of Agreement. A Section, an Exhibit or a
Schedule is, unless otherwise stated, a reference to a section hereof, an
exhibit hereto or a schedule hereto, as the case may be. Section captions
used in this Agreement are for convenience only and shall not affect the
construction of this Agreement. The words "hereof," "herein," "hereto" and
"hereunder" and words of similar import when used in this Agreement refer to
this Agreement as a whole and not to any particular provision of this
Agreement. Reference to "this Agreement" shall include the provisions of
Supplement A.
1.4 Compliance with Financial Restrictions. Compliance with
each of the financial ratios and restrictions contained in Section 5 or
Supplement A shall, except as otherwise provided herein, be determined in
accordance with GAAP consistently followed.
2. LOANS; LETTERS OF CREDIT; OTHER MATTERS.
2.1 Loans.
2.1.1 Revolving Loans.
(a) Subject to the terms and conditions of this Agreement
and the Related Agreements, and in reliance upon the warranties and
representations of Borrower set forth herein and the warranties and
representations of Borrower and each other Obligor set forth in the Related
Agreements, each Lender, severally and not jointly, agrees to make its Pro
Rata Share of such loans or advances (individually each a "Revolving Loan"
and collectively the "Revolving Loans") from time to time before the
Termination Date to Borrower as Borrower may from time to time request;
provided, that Agent may, but shall not be obligated to, make such Revolving
Loans to Borrower on behalf of Lenders as a "Disproportionate Advance" (as
defined below); provided further, that, except as provided in Section 2.8,
<PAGE> 21 of 78
the aggregate outstanding principal amount of the Revolving Loans made by or
on behalf of Lenders shall not at any time exceed the Revolving Loan
Availability. Revolving Loans made by or on behalf of Lenders may be repaid
and, subject to the terms and conditions hereof, reborrowed to but not
including the Termination Date unless the Credit extended under this
Agreement is otherwise terminated as provided in this Agreement. No Lender
shall be obligated at any time to make available to Borrower its Pro Rata
Share of any requested Revolving Loan if such amount, plus its Pro Rata
Share of all Revolving Loans then outstanding, would exceed such Lender's
Maximum Loan Amount at such time. No Lender shall be obligated to make
available its Pro Rata Share of any Revolving Loans during the occurrence of
any Event of Default or Unmatured Event of Default; provided that
notwithstanding the foregoing or anything contained herein to the contrary,
regardless of whether an Event of Default or an Unmatured Event of Default
exists, each Lender shall, at the request of Agent, continue to be obligated
to make its Pro Rata Share of the Revolving Loans available to Borrower for
a period of up to five (5) Banking Days, but in any event, no Lender shall
be obligated at any time to make available to Borrower its Pro Rata Share of
any such requested Revolving Loan if such amount, plus its Pro Rata Share of
all Revolving Loans then outstanding, would exceed such Lender's Maximum
Loan Amount at such time. Neither Agent nor any Lender shall be responsible
for any failure by any other Lender to perform its obligations to make
advances hereunder, and the failure of any Lender to make its Pro Rata Share
of any advance hereunder shall not relieve any other Lender of its
obligation, if any, to make its Pro Rata Share of Loans hereunder, nor
require such other Lender to make more than its Pro Rata Share of any Loans
hereunder. If Borrower makes a request for a Revolving Loan as provided
herein, or if Agent desires to make a Revolving Loan pursuant to Sections
2.2(b), 2.2(c), 2.2(d), 2.4.4, 2.10(c), 3.2(c), 5.5, 5.6, 5.22, 7.4, 12.3,
12.4 or any other provision of this Agreement or any Related Agreement that
permits Agent to advance Revolving Loans to Borrower, Agent, at its option
and in its sole and absolute discretion, shall do either of the following:
(i) Advance the amount of the proposed Revolving
Loan to Borrower disproportionately (a "Disproportionate
Advance") out of Agent's own funds on behalf of Lenders, and
request settlement in accordance with Section 2.15, such that
upon such settlement, each Lender's share of the outstanding
Revolving Loans (including, without limitation, the amount of any
Disproportionate Advance) equals its Pro Rata Share and such
Disproportionate Advance shall be deemed to be repaid; or
(ii) Notify each Lender and Borrower by telecopy or
other similar form of teletransmission of the proposed advance on
the same day Agent is notified by Borrower of Borrower's request
for an advance hereunder or the same day Agent desires to make a
Revolving Loan for the benefit of Borrower (to the extent
permitted hereunder or under any Related Agreement). Each Lender
shall remit, to the Demand Deposit Account, on or prior to twelve
o'clock noon, Chicago time, on the business day immediately
succeeding the date of such notification, immediately available
funds in an amount equal to such Lender's Pro Rata Share of such
proposed advance.
If and to the extent that a Lender does not settle with Agent as required
under clause (i), Borrower agrees to repay to Agent forthwith on demand such
amount required to be paid by such Lender to Agent, together with interest
<PAGE> 22 of 78
thereon, for each day from the date such amount is made available to
Borrower until the date such amount is repaid to Agent, at the interest rate
applicable at such time for such Revolving Loans; provided, that Borrower's
obligation to repay such advance to Agent shall not relieve each Lender of
its liability to Agent or Borrower for failure to settle as provided in
clause (i).
(b) In the event the aggregate outstanding principal balance
of the Revolving Loans exceeds the Revolving Loan Availability, Borrower
shall, unless Agent permits such Over Advance as provided in Section 2.8 or
Requisite Lenders shall otherwise consent, without notice or demand of any
kind, immediately make such repayments of the Revolving Loans or take such
other actions as shall be necessary to eliminate such excess.
(c) All Revolving Loans hereunder shall be paid by Borrower
on the Termination Date, unless payable sooner pursuant to the provisions of
this Agreement, but may, at Borrower's election, be repaid in whole or in
part at any time prior to such date without premium or penalty (other than
as expressly provided in Section 3.4 of Supplement A with respect to LIBOR
Rate Loans repaid prior to the end of the applicable Interest Rate Period).
2.1.2 Prepayment of all Liabilities; Reduction of Revolving
Credit Amount. Borrower may prepay all of the Liabilities in full at any
time, without premium or penalty (other than as expressly provided in
Section 3.4 of Supplement A with respect to LIBOR Rate Loans repaid prior to
the end of the applicable Interest Rate Period), by prepaying the
outstanding principal balance of the Revolving Loans, together with (a) all
accrued and unpaid interest on the Liabilities, (b) all other outstanding
Liabilities and (c) cash in the amount of, or adequate (in Agent's
determination) cash collateral for, the Letter of Credit Obligations.
Borrower may not permanently reduce the Revolving Credit Amount except in
connection with the prepayment in full of all of the Liabilities.
2.1.3 Maximum Outstanding Liabilities. Notwithstanding any
other provision of this Agreement, the aggregate outstanding principal
balance of the Loans plus Letter of Credit Obligations shall not exceed the
Maximum Facility; provided, however, that the foregoing shall not limit the
right of Agent to advance Revolving Loans to Borrower pursuant to the
provisions of Section 2.2(b), 2.2(c), 2.2(d), 2.4.4, 2.10(c), 3.2(c), 5.5,
5.6, 5.22, 7.4, 12.3 or 12.4 or any other provision of this Agreement or any
Related Agreement that permits Agent to advance Revolving Loans to Borrower.
Any Revolving Loan advanced by Agent to Borrower under any of the foregoing
provisions shall be deemed to be a Revolving Loan made by Agent on behalf of
Lenders.
2.2 Letters of Credit.
(a) In addition to Loans made pursuant to Section 2.1, Agent
will, upon receipt of duly executed Applications and such other documents,
instruments and/or agreements as Agent may require, request, on Borrower's
behalf, that Issuing Bank issue Letters of Credit on such terms as are
satisfactory to Agent and Issuing Bank, provided, however that no Letter of
Credit will be issued if, before or after taking such Letter of Credit into
account, (i) the Letter of Credit Obligations exceed $4,000,000 or (ii) the
Letter of Credit Obligations exceeds the lesser of (A) the Revolving Credit
Amount minus the outstanding principal balance of the Revolving Loans and
<PAGE> 23 of 78
(B) the Borrowing Base minus the outstanding principal balance of the
Revolving Loans. If such excess shall at any time exist, Borrower shall,
unless Requisite Lenders shall otherwise consent, promptly make such
payments as are necessary to eliminate such excess or shall promptly post
cash collateral in the amount of such excess. No Letter of Credit shall
have an expiry date after the date that is thirty (30) days prior to the
initial Termination Date or, if the Termination Date is extended pursuant to
Section 12.7, the applicable extended Termination Date.
(b) Borrower agrees to pay to Issuing Bank, on demand,
Issuing Bank's standard issuance, negotiation and administrative operating
fees and charges in effect from time to time for issuing and administering
any Letters of Credit and if not so paid, each Lender shall, without regard
to any other provision of this Agreement or any other Related Agreement, any
defense that Borrower may have to its obligation to pay Issuing Bank in
connection with such fees and charges or any defense that any Lender may
have in connection with the participation described in Section 2.2(e) in
connection with any Letter of Credit or L/C Draft, pay Issuing Bank for such
Lender's Pro Rata Share of such fees and charges, and any payments so made
by Lenders to Issuing Bank shall be deemed to be Revolving Loans. Each
Lender (other than a Lender that is Issuing Bank) acknowledges and agrees
that it shall not be entitled to any of the fees and charges of Issuing
Bank. Borrower further agrees to pay Agent, for the benefit of itself and
Lenders, a commission equal to one percent (1%) per annum (calculated on the
basis of a year consisting of three hundred sixty (360) days and paid for
actual days elapsed) of the daily average of the undrawn amount of each
Letter of Credit and on each L/C Draft accepted in connection therewith.
Such Letter of Credit commissions shall be paid in arrears on the last day
of each month thereafter. Agent may provide for the payment of any fees,
charges or commissions due hereunder by advancing the amount thereof to
Borrower as a Revolving Loan. At all times that any
Default Rate is being charged under this Agreement, the Letter of Credit
commission shall be equal to the otherwise applicable commission plus two
percent (2%) per annum.
(c) Subject to the remaining sentences of this clause (c),
Borrower agrees to reimburse Issuing Bank, on demand, for each payment made
by Issuing Bank under or pursuant to any Letter of Credit or L/C Draft and
if not so reimbursed, each Lender shall, without regard to any other
provision of this Agreement or any other Related Agreement, any defense that
Borrower may have to its obligation to reimburse Issuing Bank in connection
with such payment or any defense that any Lender may have in connection with
the participation described in Section 2.2(e) in connection with any Letter
of Credit or L/C Draft, reimburse Issuing Bank for such Lender's Pro Rata
Share of such payment, and any payments so made by Lenders to Issuing Bank
shall be deemed to be Revolving Loans. Agent and Lenders agree that so long
as there is sufficient Revolving Loan Availability and provided that no
Event of Default is then in existence or would be caused thereby, Agent will
provide for the payment of any reimbursement obligations and any interest
accrued thereon by advancing the amount thereof to Borrower as a Revolving
Loan as soon as reasonably practicable. Prior to such advance, the amount
of such reimbursement obligations shall bear interest at the then applicable
Adjusted Reference Rate. Agent shall have the option, pursuant to Section
2.8, to so provide for such payments even if there is not sufficient
Revolving Loan Availability or if an Event of Default is then in existence
or would be caused thereby and such amounts will bear interest at the rate
set forth in Section 2.8. In the event a Letter of Credit or
<PAGE> 24 of 78
L/C Draft is not reimbursed from a Revolving Loan as provided herein,
Borrower agrees to pay Agent, for the benefit of itself and Lenders, on
demand, interest at the Default Rate on any amounts paid by Issuing Bank in
respect of a Letter of Credit or an L/C Draft until the reimbursement of
Issuing Bank by Borrower of such payment.
(d) Notwithstanding anything to the contrary herein or in
any Application, upon the occurrence of an Event of Default, an amount equal
to the aggregate amount of the outstanding Letter of Credit Obligations
shall, at Agent's option and without demand upon or further notice to
Borrower, be deemed (as between Lenders and Borrower) to have been paid or
disbursed by Agent under the Letters of Credit and accepted L/C Drafts
(notwithstanding that such amounts may not in fact have been so paid or
disbursed), and a Revolving Loan to Borrower in the amount of such Letter of
Credit Obligations to have been made and accepted, which Loan shall be
immediately due and payable. In lieu of the foregoing, at the election of
Agent at any time after an Event of Default, Borrower shall, upon Agent's
demand, deliver to Agent cash collateral equal to the aggregate Letter of
Credit Obligations. Any such cash collateral and/or any amounts received by
Agent in payment of the Loan made pursuant to this paragraph (d) shall be
held by Agent, for the benefit of itself and Lenders, in the Assignee
Deposit Account or a separate account appropriately designated as a cash
collateral account in relation to this Agreement and the Letters of Credit
and shall be retained by Agent, for the benefit of itself and Lenders, as
collateral security in respect of, first, the Liabilities under or in
connection with the Letters of Credit and L/C Drafts and then, all other
Liabilities. Such amounts shall not be used by Agent to pay any amounts
drawn or paid under or pursuant to any Letter of Credit or L/C Draft, but
may be applied to reimburse Issuing Bank for drawings or payments under or
pursuant to Letters of Credit or L/C Drafts which Issuing Bank has paid, or
if no such reimbursement is required, to payment of such other Liabilities
as Agent shall determine. Any amounts remaining in any cash collateral
account established pursuant to this paragraph (d) following payment in full
of all Liabilities shall be returned to Borrower.
(e) Immediately upon the issuance of a Letter of Credit in
accordance with this Agreement, each Lender shall be deemed to have
irrevocably and unconditionally purchased and received from Issuing Bank,
without recourse or warranty, an undivided interest and participation
therein to the extent of such Lender's Pro Rata Share (including without
limitation, all obligations of Borrower with respect thereto). Borrower
hereby indemnifies each of Agent and each Lender against any and all
liability and expense it may incur in connection with any Letter of Credit
or L/C Draft and agrees to reimburse each of Agent and each Lender for any
payment made by Agent or any Lender to Issuing Bank, except for any
liability incurred or payment made as a result of Agent's or such Lender's
gross negligence or willful misconduct.
2.3 Loan Account; Demand Deposit Account. Agent shall
establish or cause to be established on its books in Borrower's name one or
more accounts (each a "Loan Account") to evidence Loans made to Borrower.
Agent or Lenders, as appropriate, will credit or cause to be credited to a
commercial account ("Demand Deposit Account") maintained by Borrower at
Continental's 231 South LaSalle Street, Chicago, Illinois office the amount
of any sums advanced as Loans hereunder, which shall be disbursed at
Borrower's direction. Any amounts advanced as Loans hereunder which are
credited to Borrower's Demand Deposit Account, together with any other
<PAGE> 25 of 78
amounts advanced to Borrower as a Loan pursuant to this Agreement, will be
debited to the applicable Loan Account and result in an increase in the
principal balance outstanding in such Loan Account in the amount thereof.
2.4 Interest and Fees.
2.4.1 Interest. The unpaid principal amount of each Revolving
Loan hereunder shall bear interest until maturity at the rate or rates
applicable to Revolving Loans indicated in Supplement A hereto. If any
Revolving Loan or portion thereof is not paid when due, whether by
acceleration or otherwise, the entire unpaid principal amount of the
Revolving Loans shall bear interest thereafter until such amount is paid in
full at the Default Rate applicable to Revolving Loans indicated in
Supplement A hereto. Until maturity, interest on the Revolving Loans shall
be paid by Borrower on the date(s) indicated in Supplement A, and at such
maturity. After maturity, whether by acceleration or otherwise, accrued
interest shall be payable on demand.
2.4.2 Nonuse Fee. Borrower agrees to pay to Agent, for the
benefit of itself and Lenders, a fee equal to three-eighths of one percent
(0.375%) per annum on the daily average amount by which the Revolving Credit
Amount exceeds the outstanding principal balance of the Revolving Loans plus
the Letter of Credit Obligations. The fee provided for in this Section
2.4.2 shall be payable monthly in arrears on the twenty-eighth day of each
month commencing July 28, 1994, and on the date the Revolving Credit
terminates for the period then ended.
2.4.3 Method of Calculating Interest and Fees. Interest on
the unpaid principal amount of each Loan shall accrue from and including the
date such Loan is made to, but not including, the date such Loan is paid.
Interest and any fees shall be calculated on the basis of a year consisting
of three hundred sixty (360) days and paid for actual days elapsed.
2.4.4 Payment of Interest and Fees. Agent may provide for the
payment of any unpaid accrued interest and any fees by charging the Demand
Deposit Account or any bank account maintained by Borrower with Agent or by
advancing the amount thereof to Borrower as a Revolving Loan.
2.5 Requests for Loans; Borrowing Base Certificates; Other
Information.
(a) Loans shall be requested in writing or by telephone,
except for Overdraft Loans and Revolving Loans made pursuant to the
provisions of Section 2.2(b), 2.2(c), 2.2(d), 2.4.4, 2.10(c), 3.2(c), 5.5,
5.6, 5.22, 7.4, 12.3, or 12.4 or any other provision of this Agreement or
any Related Agreement that permits Agent to advance Revolving Loans to
Borrower.
(b) In the event that Borrower shall at any time, or from
time to time, (i) make a request for a Loan hereunder or (ii) be deemed to
have requested an Overdraft Loan, Borrower agrees to forthwith provide Agent
and Lenders with such information, at such frequency and in such format, as
is reasonably required by Agent, such information to be current as of the
time of such request. As of the date hereof, it is not Agent's intent to
require that Borrower provide information to Agent and Lenders in excess of,
or at times other than, that specifically required to be provided by the
terms of this Agreement or the Related Agreements; however, Agent reserves
the right, from time to time, in its reasonable judgment, to require
<PAGE> 26 of 78
Borrower to provide information at different times than currently required
and/or to provide additional types of information.
(c) Borrower further agrees to provide to Agent and Lenders
a current Borrowing Base Certificate on the first Banking Day of each month
for the preceding month and, after the occurrence of an Event of Default or
an Unmatured Event of Default, at such other times as Agent may request.
Such Borrowing Base Certificate shall be in substantially the same form as
that attached hereto as Exhibit A, executed and certified as accurate by
such officers or employees of Borrower as Borrower designates in writing to
Agent pursuant to duly adopted resolutions of Borrower's Board of Directors
authorizing such action.
(d) Borrower may request, telephonically or by written
authorization, the disbursement of Revolving Loans by Agent or Lenders, as
appropriate. Borrower shall provide Agent with documentation satisfactory
to Agent indicating the names of those employees of Borrower authorized by
Borrower to sign Borrowing Base Certificates and/or to make telephonic
requests for Loans and Letters of Credit, and/or to authorize disbursement
of the proceeds of Loans by wire transfer or otherwise, and Agent and
Lenders shall be entitled to rely upon such documentation until notified in
writing by Borrower of any change(s) in the names of the employees so
authorized. Agent and Lenders shall be entitled to act on the instructions
of anyone identifying himself as one of the persons authorized to request
Loans and Letters of Credit, or disbursements of Loan proceeds by telephone
and Borrower shall be bound thereby in the same manner as if the person were
actually so authorized. Borrower agrees to indemnify and hold each of Agent
and each Lender harmless from any and all claims, damages, liabilities,
losses, costs and expenses (including Attorneys' Fees) which may arise or be
created by the acceptance of instructions for making or paying Loans in
writing or by telephone. Each such request must be received by Agent no
later than 11:00 a.m. (Chicago time) on the date on which such Revolving
Loan is requested to be made.
2.6 Statements. All Loans and payments hereunder shall be
recorded on Agent's books, which shall be rebuttably presumptive evidence of
the amount of such Loans outstanding at any time hereunder. Agent will
account monthly as to all Loans and payments hereunder and, absent
demonstrable error, each monthly accounting will be fully binding on
Borrower unless, within fifteen (15) days of Borrower's receipt thereof,
Borrower shall provide Agent with a specific listing of exceptions.
Notwithstanding any term or condition of this Agreement to the contrary,
however, the failure of Agent to record the date and amount of any Loan
hereunder shall not limit or otherwise affect the obligation of Borrower to
repay any such Loan.
2.7 Overdraft Loans. Agent, in its sole and absolute
discretion, and subject to the terms hereof, may make a Revolving Loan to
Borrower in an amount equal to the amount of any overdraft which may from
time to time exist with respect to the Demand Deposit Account or any bank
account which Borrower may now or hereafter have with Agent. The existence
of any such overdraft shall be deemed to be a request by Borrower for such
Loan. Borrower acknowledges that Agent is under no duty or obligation to
make any Loan to Borrower to cover any overdraft. Borrower further agrees
that if the making of a Loan to cover any Overdraft would result in an Over
Advance, such overdraft shall constitute a separate Loan under this
Agreement (an "Overdraft Loan"), which shall bear, from the date on which
<PAGE> 27 of 78
the overdraft occurred until paid, interest in an amount equal to the
greater of one hundred thirty percent (130%) of the highest rate of interest
then actually being charged for Revolving Loans (other than Overdraft Loans)
made hereunder, and $50 per day. If Agent, in its sole and absolute
discretion, decides not to make a Loan to cover part or all of any
overdraft, Agent may return any check(s) which created such overdraft.
2.8 Over Advances. If the aggregate outstanding Revolving
Loans and Letter of Credit Obligations exceed the lesser of (i) the
Borrowing Base and (ii) the Revolving Credit Amount (such excess Liabilities
are herein referred to as "Over Advances"), Agent, in its sole and absolute
discretion, may, for a period of five (5) Banking Days, to the extent such
Over Advance arises as a result of a reduction in the Borrowing Base, permit
such Over Advance to exist without the consent of any Lender (but subject to
Section 2.1.1(a)) and continue to make Revolving Loans on behalf of Lenders,
and after the expiration of such five (5) Banking Day period, no such event
or occurrence shall cause or constitute a waiver by any Lender of its right
to refuse to make any further Revolving Loans at any time that an Over
Advance exists or would result therefrom; provided, that Agent may not (i)
make Revolving Loans on behalf of Lenders under this Section 2.8 to the
extent such Revolving Loans would cause a Lender's Pro Rata Share of the
Revolving Loans to exceed such Lender's Maximum Loan Amount or (ii) make
Revolving Loans on behalf of Lenders under this Section 2.8 to the extent
such Revolving Loans would cause the then outstanding Revolving Loans and
Letter of Credit Obligations to exceed the sum of $1,000,000 and the amount
of the outstanding Revolving Loans and Letter of Credit Obligations as of
the date Agent became aware of the Over Advance. During any period in which
an Over Advance exists, the amount of Over Advances shall bear interest at a
rate equal to one hundred thirty percent (130%) of the highest rate of
interest then actually being charged for Revolving Loans made hereunder.
2.9 All Loans One Obligation. The Revolving Loans and all
other Loans under this Agreement shall constitute one Loan, and all
Indebtedness and other Liabilities of Borrower under this Agreement and any
of the Related Agreements shall constitute one general obligation secured by
Agent's Lien, for the benefit of itself and Lenders, on all of the
Collateral and by all other Liens heretofore, now, or at any time or times
hereafter granted by Borrower or any other Obligor to Agent, for the benefit
of itself and Lenders. Borrower agrees that all of the rights of Agent and
Lenders set forth in this Agreement shall apply to any modification of or
supplement to this Agreement, any Supplements or Exhibits hereto, and the
Related Agreements, unless otherwise agreed in writing.
2.10 Making of Payments; Application of Collections; Charging
of Accounts.
(a) All payments hereunder (including payment of Letter of
Credit Obligations and payments with respect to any Notes) shall be made
without set-off or counterclaim and shall be made to Agent in immediately
available funds (except for payments to be made to Issuing Bank as provided
in Section 2.2 and except as Agent may otherwise consent) prior to 12:30
p.m., Chicago time, on the date due at Continental's office at 231 South
LaSalle Street, Chicago, Illinois 60697, or at such other place as may be
designated by Agent to Borrower in writing. Any payments received after
such time shall be deemed received on the next Banking Day. Whenever any
payment to be made hereunder or under any Note shall be stated to be due on
a date other than a Banking Day, such payment may be made on the next
<PAGE> 28 of 78
succeeding Banking Day, and such extension of time shall be included in the
calculation of interest and any fees.
(b) (i) Borrower authorizes Agent, and Agent will, subject
to the provisions of this paragraph (b), apply the whole or any part of any
amounts received by Agent (whether deposited in the Assignee Deposit Account
or otherwise received by Agent) from the collection of items of payment and
proceeds of any Collateral (including without limitation proceeds of
insurance), against the principal and/or interest of any Loans made
hereunder and/or any other Liabilities, whether or not then due, in such
order of application as Agent may determine; provided, however, that prior
to the occurrence of an Event of Default, any such amounts received by Agent
shall be applied in the manner, if any, specifically set forth in this
Agreement with respect to such payment and if no such manner is specifically
set out, then as follows: first, to payment of amounts then due with respect
to fees (including Attorneys' Fees), charges and expenses for which
Borrower is liable pursuant to this Agreement and the Related Agreements;
second, to payment of amounts then due with respect to interest on the
Loans; third, to payment of the principal of the Loans.
(ii) Notwithstanding subparagraph (i) above, if prior to an
Event of Default, at any time (x) the funds received by Agent in the
Assignee Deposit Account, or otherwise, exceed (A) the sum of the
outstanding principal balance of the Loans bearing interest at the Adjusted
Reference Rate, and the amounts described in clauses first and second of the
proviso set forth above in subparagraph (i) or (B) the sum of the amounts
described in clauses first, second and third of the proviso set forth above
in subparagraph (i), or (y) there are no Payment Liabilities, then in any
such case, Borrower may direct that such excess proceeds be held in a cash
collateral account maintained by Agent. The funds held in any cash
collateral account referred to in the preceding sentence may be disbursed,
at Borrower's direction, so long as after giving effect to such
disbursements, the Payment Liabilities do not exceed Revolving Loan
Availability.
(iii) Notwithstanding anything to the contrary herein, (i) all
cash, checks, instruments and other items of payment, solely for purposes of
determining the occurrence of an Event of Default, shall be deemed received
upon actual receipt by Agent, unless the same is subsequently dishonored for
any reason whatsoever, (ii) for purposes of determining whether, under
Sections 2.1 and 2.2, there is availability for Loans or Letters of Credit,
all cash, checks, instruments and other items of payment shall be applied
against the Liabilities on the first Banking Day after receipt thereof by
Agent and (iii) solely for purposes of interest calculation hereunder, all
cash, checks, instruments and other items of payment shall be deemed to have
been applied against the Liabilities on the first Banking Day after receipt
by Agent of collected funds with respect thereto; further provided, that any
amounts earned on such funds during the period after receipt thereof by
Agent and prior to application thereof against the Liabilities as provided
herein, shall be retained by Agent for Agent's own account. Notwithstanding
the foregoing, no checks, drafts or other instruments received by Agent
shall constitute final payment with respect to any Liabilities unless and
until such item of payment has actually been collected.
(c) Borrower hereby authorizes Agent, and Agent may, in its
sole and absolute discretion, charge to Borrower at any time when due all or
any portion of any of the Liabilities including but not limited to any
<PAGE> 29 of 78
Attorneys' Fees and other costs and expenses of Agent and Lenders for which
Borrower is liable pursuant to the terms of this Agreement or any Related
Agreement, or for which any other Obligor is liable pursuant to the terms of
any Related Agreement, by charging Borrower's Demand Deposit Account or any
bank account of Borrower with Agent or by advancing the amount thereof to
Borrower as a Revolving Loan; provided, however that the provisions of this
Section 2.10(c) shall not affect Borrower's obligation to pay when due all
amounts payable by Borrower under this Agreement, any Note or any Related
Agreement, whether or not there are sufficient funds therefor in the Demand
Deposit Account or any such other bank account of Borrower.
2.11 Agent's Election Not to Enforce. Notwithstanding any
term or condition of this Agreement to the contrary, Agent, in the sole and
absolute discretion of Requisite Lenders, at any time and from time to time,
may suspend or refrain from enforcing any or all of the restrictions imposed
in this Section 2, but no such suspension or failure to enforce shall impair
any right or power of Agent or any Lender under this Agreement, including
without limitation any right of each Lender to refrain from making a Loan or
Issuing Bank to refrain from issuing a Letter of Credit if all conditions
precedent to such Lender's obligation to make such Loan or Issuing Bank's
obligation to issue such Letter of Credit have not been satisfied.
2.12 Reaffirmation. Each Loan or Letter of Credit, or
designation or continuation of a LIBOR Rate Loan, in each case requested by
Borrower pursuant to this Agreement, shall constitute an automatic
certification by Borrower to Agent and Lenders that (a) all of the
representations and warranties of Borrower in this Agreement and each of the
Related Agreements are true and correct on the date of such request to the
same extent as if made on such date, except for such changes as are
specifically permitted hereunder (or under such Related Agreement) and
except for those representations and warranties made solely as of the date
hereof or the Closing Date and (b) immediately before and after making the
requested Loan or issuing the requested Letter of Credit, no Event of
Default, or Unmatured Event of Default, then exists or would result
therefrom.
2.13 Setoff. In addition to and not in limitation of all
other rights and remedies (including other rights of offset or banker's
lien) that Agent and Lenders may have under applicable law, each of Agent
and each Lender shall, upon the occurrence of any Event of Default described
in Section 6.1, or any Unmatured Event of Default described in Section
6.1(e), have the right to appropriate and apply to the payment of the
Liabilities (whether or not then due), in such order of application as Agent
may elect, any and all balances, credits, deposits (general or special, time
or demand, provisional or final), accounts or moneys of Borrower then or
thereafter with Agent or any Lender. Agent and each Lender shall promptly
advise Borrower of any such setoff and application but failure to do so
shall not affect the validity of such setoff and application.
2.14 Closing Fee. Borrower agrees to pay to Continental, for
its own account, in connection with the closing of this Agreement, a closing
fee of $150,000, which amount shall be deemed fully earned and shall be
payable in full on the Closing Date. With Agent's consent, the amount of
the closing fee may be advanced to Borrower as a Revolving Loan.
2.15 Settlements, Distributions and Apportionment of
Payments. On a weekly basis (or more frequently if required by Agent) (a
<PAGE> 30 of 78
"Settlement Date"), Agent shall provide each Lender with a statement of the
outstanding balance of the Liabilities as of the end of the Banking Day
preceding the Settlement Date (the "Pre-Settlement Determination Date") and
the current balance of the Revolving Loans funded by each Lender (whether
made directly by such Lender to Borrower or constituting a settlement by
such Lender of a previous Disproportionate Advance made by Agent on behalf
of such Lender to Borrower). If such statement discloses that such Lender's
current balance of the Revolving Loans as of the Pre-Settlement
Determination Date exceeds such Lender's Pro Rata Share of the Revolving
Loans outstanding as of the Pre-Settlement Determination Date, then Agent
shall, one (1) Banking Day after the Settlement Date, transfer to such
Lender, by wire transfer, the net amount due to such Lender in accordance
with such Lender's instructions, and if such statement discloses that such
Lender's current balance of the Revolving Loans as of the Pre-Settlement
Determination Date is less than such Lender's Pro Rata Share of the
Revolving Loans outstanding as of the Pre-Settlement Determination Date,
then such Lender shall, one (1) Banking Day after the Settlement Date,
transfer to Agent, by wire transfer the net amount due to Agent in
accordance with Agent's instructions. In addition, payments actually
received by Agent with respect to the following items shall be distributed
by Agent to Lenders as follows:
(a) Within one (1) Banking Day of receipt thereof by
Agent, payments to be applied to interest on the Loans shall be
paid to each Lender in proportion to its Pro Rata Share, subject
to any adjustments for any Disproportionate Advances so that
Agent shall receive interest on the Disproportionate Advances and
each Lender shall only receive interest on the amount of funds
actually advanced by such Lender; and
(b) Within one (1) Banking Day of receipt thereof by
Agent, payments to be applied to the unused line fee set forth in
Section 2.4.2 and the Letter of Credit commission set forth in
Section 2.2(b), shall each be paid to each Lender in proportion
to its Pro Rata Share. Notwithstanding the foregoing, if a
Lender has failed to remit its Pro Rata Share of any Loans
required to be made pursuant to Section 2.1.1 or has failed to
make a settlement payment to Agent pursuant to this Section 2.15,
no payment shall be made to such Lender by Agent at any time such
Lender's share of the outstanding Loans is less than such
Lender's Pro Rata Share. If Agent or any Lender fails to pay the
other any payment due under this Agreement on its due date, the
party to whom such payment is due shall be entitled to recover
interest from the party obligated to make such payment at a rate
per annum equal to the overnight Federal Funds Rate.
3. COLLATERAL.
3.1 Grant of Security Interest. As security for the
payment of all Loans now or hereafter made by, or on behalf of, Lenders to
Borrower hereunder or under any Note, and as security for the payment or
other satisfaction of all other Liabilities (including without limitation
all reimbursement obligations under any Letters of Credit), Borrower hereby
grants to Agent, for the benefit of itself and Lenders, a security interest
in and to the following property of Borrower, whether now owned or existing,
or hereafter acquired or coming into existence, wherever now or hereafter
located (all such property is hereinafter referred to collectively as the
<PAGE> 31 of 78
"Borrower Collateral"):
(a) Accounts Receivable; Contract Rights; any and
all security deposits and other security held by or granted to
Borrower to secure payments from any and all persons who are or
may become obligated to Borrower under, with respect to, or on
account of any Account Receivable or Contract Right; and all
chattel paper and instruments evidencing, arising out of or
relating to any obligations to Borrower for goods sold or leased
or services rendered, or otherwise arising out of or relating to
any property described in this Section 3.1;
(b) any and all amounts from time to time owing by
Subsidiaries to Borrower pursuant to the Master Revolving Credit
Note; all agreements, instruments and documents evidencing or
otherwise pertaining to the loans made pursuant to such Master
Revolving Credit Note; and any or all security held by or granted
to Borrower by any or all Subsidiaries to secure amounts owing by
any or all Subsidiaries to Borrower pursuant to such Master Re-
volving Credit Note;
(c) Inventory (whether or not Eligible Inventory);
(d) Any and all balances, credits, deposits (general
or special, time or demand, provisional or final), accounts or
monies of or in the name of Borrower now or hereafter with Agent
and any and all property of every kind or description of or in
the name of Borrower now or hereafter, for any reason or purpose
whatsoever, in the possession or control of, or in transit to, or
standing to Borrower's credit on the books of, Agent, any agent
or bailee for Agent, or any Participant;
(e) To the extent related to the property described
in clauses (a) through (d) above, all books, correspondence,
credit files, records, invoices and other papers and documents,
including without limitation, to the extent so related, all
tapes, cards, computer runs, computer programs and other papers
and documents in the possession or control of Borrower or any
computer bureau from time to time acting for Borrower, and, to
the extent so related, all rights in, to and under all policies
of insurance, including claims of rights to payments thereunder
and proceeds therefrom, including any credit insurance; and
(f) All products and proceeds (including but not
limited to any Accounts Receivable or other proceeds arising from
the sale or other disposition of any property described above,
any returns of Inventory sold by Borrower, and the proceeds of
any insurance covering any of the property described above) of
any of the foregoing.
3.2 Accounts Receivable.
(a) If requested by Agent, Borrower shall notify Agent
immediately of each dispute or claim by any Account Debtor of an amount in
excess of $30,000 and settle or adjust them, or cause them to be settled or
adjusted, at no expense to Agent or Lenders. If Agent directs after the
occurrence of an Event of Default, no discount or credit allowance shall be
<PAGE> 32 of 78
granted thereafter by Borrower or any Subsidiary to any Account Debtor,
other than discounts and trade allowances offered in the ordinary course of
Borrower's or a Subsidiary's business, on terms no more advantageous to
customers than those being granted by Borrower or such Subsidiary to
customers on the Closing Date. If requested by Agent, Borrower will, and
will cause each Subsidiary to, make proper entries in its books and records,
disclosing the assignment of Accounts Receivable to Agent, for the benefit
of itself and Lenders.
(b) Borrower warrants and covenants that: (i) all of the
Accounts Receivable are and will continue to be bona fide existing
obligations created by the sale of goods, the rendering of services, or the
furnishing of other good and sufficient consideration to Account Debtors in
the regular course of business; (ii) all shipping or delivery receipts and
other documents furnished or to be furnished to Agent upon Agent's request
in connection therewith are and will be genuine; and (iii) none of the
Accounts Receivable identified or included on any schedule, Borrowing Base
Certificate or report as Eligible Accounts Receivable fail at the time so
identified or included to satisfy any of the requirements for eligibility
set forth in the definition of Eligible Accounts Receivable.
(c) Agent is authorized and empowered (which authorization
and power, being coupled with an interest, is irrevocable until the last to
occur of termination of this Agreement and payment and performance in full
of all of the Payment Liabilities under this Agreement) at any time in its
sole and absolute discretion:
(i) After the occurrence of an Event of Default, to
request, in the name of Agent, in Borrower's or a Subsidiary's
name or the name of a third party, confirmation from any Account
Debtor or party obligated under or with respect to any Collateral
of the amount shown by the Accounts Receivable or other
Collateral to be payable, or any other matter stated therein;
(ii) To endorse in Borrower's or a Subsidiary's name
and to collect any chattel paper, checks, notes, drafts,
instruments or other items of payment tendered to or received by
Agent in payment of any Account Receivable or other obligation
owing to Borrower or such Subsidiary;
(iii) After the occurrence of an Event of Default, to
notify, either in Agent's name or Borrower's or a Subsidiary's
name, and/or to require Borrower or such Subsidiary to notify,
any Account Debtor or other Person obligated under or in respect
of any Collateral, of the fact of Agent's Lien thereon, for the
benefit of itself and Lenders, and of the collateral assignment
thereof to Agent, for the benefit of itself and Lenders;
(iv) After the occurrence of an Event of Default, to
direct, either in Borrower's or a Subsidiary's name or Agent's
name, and/or to require Borrower or such Subsidiary to direct,any
Account Debtor or other Person obligated under or in respect of
any Collateral to make payment directly to Agent of any amounts
due or to become due thereunder or with respect thereto; and
(v) After the occurrence of an Event of Default, to
demand, collect, surrender, release or exchange all or any part
<PAGE> 33 of 78
of any Collateral or any amounts due thereunder or with respect thereto, or
compromise or extend or renew for any period (whether or not longer than the
initial period) any and all sums which are now or may hereafter become due
or owing upon or with respect to any of the Collateral, or enforce, by suit
or otherwise, payment or performance of any of the Collateral either in
Agent's own name or in the name of Borrower or a Subsidiary.
Under no circumstances shall Agent be under any duty to act in regard to any
of the foregoing matters. The costs relating to any of the foregoing
matters, including Attorneys' Fees and out-of-pocket expenses, and the cost
of any Depository Account, Assignee Deposit Account, or other bank account
or accounts which may be required hereunder, shall be borne solely by
Borrower whether the same are incurred by Agent or Borrower, and Agent may
advance same to Borrower as a Revolving Loan.
(d) Unless otherwise consented to by Agent, Borrower will,
forthwith upon receipt by Borrower of all checks, drafts, cash and other
remittances in payment or as proceeds of, or on account of, any of the
Accounts Receivable or other Collateral, deposit the same in special bank
accounts (the "Depository Accounts") at such banks or financial institutions
as Agent shall consent. Said proceeds shall be deposited in precisely the
form received except for Borrower's endorsement where necessary to permit
collection of items, which endorsement Borrower agrees to make. Pending
such deposit, Borrower agrees not to commingle any such checks, drafts, cash
and other remittances with any of its funds or property, but will hold them
separate and apart therefrom and upon an express trust for Agent, for the
benefit of itself and Lenders, until deposit thereof is made in the
Depository Accounts. All funds in the Depository Accounts at the end of
each Banking Day will be wire transferred or transferred by other means
acceptable to Agent to a special bank account (the "Assignee Deposit
Account") at Continental, over which Agent alone has power of withdrawal.
Borrower acknowledges that the maintenance of the Assignee Deposit Account
is solely for the convenience of Agent in facilitating its own operations,
and Borrower does not and shall not have any right, title or interest in the
Assignee Deposit Account or in the amounts at any time appearing to the
credit thereof, except to the extent that such amounts are transferred to a
cash collateral account in accordance with Section 2.10(b)(ii). Borrower
agrees not to maintain any depository accounts other than Depository
Accounts and the Assignee Deposit Account established pursuant to this
Section 3.2(d) and other than depository accounts established solely for the
proceeds of property of Borrower and the Subsidiaries other than the
Collateral, pursuant to the terms of the Senior Loan Documents. The
foregoing shall not limit Borrower's ability to maintain such separate
disbursement accounts as Borrower determines to be appropriate from time to
time. Upon Agent's request after the occurrence of an Event of Default,
Borrower agrees to notify its Account Debtors to make all payments in
respect of Borrower's Accounts Receivable directly to one or more lockbox
accounts under the control of Agent and evidenced by agreements in form and
substance satisfactory to Agent. Upon the liquidation of all Payment
Liabilities, Agent will pay over to Borrower any excess amounts received by
Agent as payment or proceeds of Collateral, whether received by Agent as a
deposit in the Assignee Deposit Account, contained in a lockbox account or
any Depository Account or received by Agent as a direct payment on any of
the sums due hereunder. Borrower will cause each of its Subsidiaries to
establish accounts comparable to those set forth above for the collection of
the proceeds of their Accounts Receivable, and Borrower shall cause each
<PAGE> 34 of 78
Subsidiary to take all other actions to implement the collection mechanism
set forth in this Section 3.2(d).
(e) Borrower appoints Agent, or any Person whom Agent may
from time to time designate, as Borrower's attorney and agent-in-fact with
power: (i) after the occurrence of an Event of Default, to notify the post
office authorities to change the address for delivery of Borrower's mail to
an address designated by Agent; (ii) to receive, open and dispose of all
mail addressed to Borrower, but received by Agent; (iii) after the
occurrence of an Event of Default, to send requests for verification of
Accounts Receivable or other Collateral to Account Debtors; (iv) to open
under Agent's sole control (subject, where applicable, to the provisions of
Section 2.10(b)), an Assignee Deposit Account, Depository Accounts, lockbox
accounts or other accounts required under this Agreement for the collection
of Accounts Receivable or other Collateral, if not required contem-
poraneously with the execution hereof and if not previously opened by
Borrower; and (v) to do all other things which Agent is permitted to do
under this Agreement or any Related Agreement or which are necessary to
carry out this Agreement and the Related Agreements. Neither Agent nor any
of its directors, officers, employees or agents will be liable for any acts
of commission or omission nor for any error in judgment or mistake of fact
or law, unless the same shall have resulted from gross negligence or willful
misconduct. The foregoing appointment and power, being coupled with an
interest, is irrevocable until all Payment Liabilities under this Agreement
are paid and performed in full and this Agreement is terminated. Borrower
expressly waives presentment, demand, notice of dishonor and protest of all
instruments and any other notice to which it might otherwise be entitled.
(f) If any Account Receivable or Contract Right in an amount
in excess of $10,000 arises out of a contract with the United States or any
department, agency, or instrumentality thereof, Borrower will, upon Agent's
request, immediately notify Agent in writing and execute any instruments and
take any steps required by Agent in order that all monies due and to become
due under such contract shall be assigned to Agent, for the benefit of
itself and Lenders, and notice thereof given to the government under the
Federal Assignment of Claims Act of 1940, as amended, or other applicable
laws or regulations.
(g) If any Account Receivable or Contract Right is evidenced
by chattel paper or promissory notes, trade acceptances, or other
instruments for the payment of money, Borrower will, unless Agent shall
otherwise agree, deliver the originals of same to Agent, appropriately
endorsed to Agent's order and, regardless of the form of such endorsement,
Borrower hereby expressly waives presentment, demand, notice of dishonor,
protest and notice of protest and all other notices with respect thereto.
3.3 Inventory.
(a) Borrower warrants and covenants that: (i) all of the
Inventory is, and at all times shall be, owned by Borrower or a Subsidiary
free of all claims and Liens (except as set forth in Section 5.16); and (ii)
neither Borrower nor any Subsidiary will make any further assignment of any
thereof or create or permit to exist any further Lien thereon, unless
approved in writing by Requisite Lenders, nor permit any of Agent's rights
therein to be affected by any attachment, levy, garnishment or other
judicial process.
<PAGE> 35 of 78
(b) Neither Agent nor any Lender shall be liable or
responsible in any way for the safekeeping of any Inventory delivered to it,
to any bailee appointed by or for it, to any warehouseman, or under any
other circumstances. Neither Agent nor any Lender shall be responsible for
collection of any proceeds or for losses in collected proceeds held by
Borrower or any Subsidiary in trust for Agent. Any and all risk of loss for
any or all of the foregoing shall be upon Borrower and the Subsidiaries,
except for such loss as shall result from Agent's or any Lenders' gross
negligence or willful misconduct.
(c) Any material change in the value (other than changes
resulting from market price changes), or condition of any Inventory, and any
errors discovered in any monthly inventory certificate under Section 5.1.3
or any other inventory schedule delivered to Agent and Lenders, shall be
reported to Agent promptly. Borrower represents and warrants that, as to
each schedule of Inventory delivered to Agent or any Lender:
(i) The descriptions, origins, sizes, qualities, quantities,
weights, and markings of all goods stated thereon, or on any
attachment thereto, are true and correct in all material
respects;
(ii) None of the goods are defective, of second quality,
used, or goods returned after shipment, except where described as
such; and
(iii) All Inventory not included on such schedule has been
previously scheduled.
3.4 Supplemental Documentation. At Agent's request,
Borrower shall execute and deliver, or cause to be executed and delivered,
to Agent, at any time or times hereafter, such agreements, documents,
financing statements, warehouse receipts, bills of lading, notices of
assignment of Accounts Receivable, schedules of Accounts Receivable
assigned, and other written matter necessary or reasonably requested by
Agent to perfect and maintain perfected Agent's security interest in the
Collateral, for the benefit of itself and Lenders (all the above hereinafter
referred to as "Supplemental Documentation"), in form and substance
acceptable to Agent, and pay all taxes, fees and other costs and expenses
associated with any recording or filing of the Supplemental Documentation.
Borrower hereby irrevocably makes, constitutes and appoints Agent (and all
Persons designated by Agent for that purpose) as Borrower's true and lawful
attorney (and agent-in-fact) (which appointment and power, being coupled
with an interest, is irrevocable until the last to occur of termination of
this Agreement and payment and performance in full of all of the Payment
Liabilities under this Agreement) to sign the name of Borrower on any of the
Supplemental Documentation and to deliver any of the Supplemental
Documentation to such Persons as Agent in its sole and absolute discretion,
may elect. Borrower agrees that a carbon, photographic, photostatic, or
other reproduction of this Agreement or of a financing statement is
sufficient as a financing statement.
3.5 Collateral for the Benefit of Agent and Lenders. All
Liens granted to Agent hereunder and under the Related Agreements and all
Collateral delivered to Agent hereunder and under the Related Agreements
shall be deemed to have been granted and delivered to Agent, for the benefit
of itself and Lenders, to secure the Liabilities.
<PAGE> 36 of 78
4. REPRESENTATIONS AND WARRANTIES.
To induce Agent and Lenders to make Loans to, and issue Letters
of Credit for the account of, Borrower under this Agreement, Borrower makes
the following representations and warranties to Agent and Lenders, all of
which shall be true and correct as of the date the initial Loan is made or
the initial Letter of Credit is issued and shall survive the execution of
this Agreement and the making of the initial Loan and the issuance of the
initial Letter of Credit:
4.1 Organization. Borrower and all of its corporate
Borrowing Subsidiaries are corporations duly organized, validly existing and
in good standing under the laws of the jurisdictions of their respective
incorporation. All of Borrower's other Borrowing Subsidiaries, if any, are
entities duly organized, validly existing and in good standing under the
laws of the jurisdictions of their respective organization. Borrower and
all of the Borrowing Subsidiaries are in good standing and are duly
qualified to do business in each jurisdiction where, because of the nature
of their respective activities or properties, such qualification is
required, except for those states in which its failure to qualify to do
business would not be likely to have a Material Adverse Effect. Except as
set forth on Schedule 4.1, on the date hereof, Borrower and each Borrowing
Subsidiary conducts business in its own name exclusively. Schedule 4.1 sets
forth a complete and accurate list, as of the date of this Agreement, of (a)
the state of formation of Borrower, (b) each state in which Borrower is
qualified to do business and (c) all of Borrower's tradenames, trade styles
or doing business forms.
4.2 Authorization. Borrower is duly authorized to execute
and deliver this Agreement, any Notes, and any Related Agreements or
Supplemental Documentation contemplated by this Agreement, and is and will
continue to be duly authorized to borrow monies hereunder and to perform its
obligations under this Agreement, any Notes and any such Related Agreements
and Supplemental Documentation. Each Borrowing Subsidiary is duly
authorized to execute and deliver any Related Agreements or Supplemental
Documentation contemplated to be delivered by such Borrowing Subsidiary, and
is and will continue to be duly authorized to perform its obligations
thereunder. The execution, delivery and performance by (a) Borrower of this
Agreement, any Notes, and any Related Agreements or Supplemental
Documentation contemplated by this Agreement, and the borrowings hereunder
and (b) each Borrowing Subsidiary of any Related Agreements or Supplemental
Documentation to which it is a party, do not and will not require any
consent or approval of any governmental agency or authority.
4.3 No Conflicts. The execution, delivery and performance
by (a) Borrower of this Agreement, any Notes, and any Related Agreements or
Supplemental Documentation contemplated by this Agreement and (b) each
Borrowing Subsidiary of any Related Agreements or Supplemental Documentation
to which it is a party, do not and will not conflict with (i) any provision
of law, (ii) the Certificate or Articles of Incorporation, as applicable, or
by-laws, of Borrower or such Borrowing Subsidiary, (iii) any agreement
binding upon Borrower or such Borrowing Subsidiary or (iv) any court or
administrative order or decree applicable to Borrower or such Borrowing
Subsidiary, and do not and will not require, or result in, the creation or
imposition of any Lien on any asset of Borrower or any Borrowing Subsidiary,
except as provided herein.
<PAGE> 37 of 78
4.4 Validity and Binding Effect. This Agreement, any Notes,
and any Related Agreements or Supplemental Documentation contemplated by
this Agreement, when duly executed and delivered will be legal, valid and
binding obligations of Borrower and each Subsidiary party thereto, as
applicable, enforceable against Borrower and each such Subsidiary in
accordance with their respective terms.
4.5 No Default. Neither Borrower nor any Subsidiary is in
default under any agreement or instrument to which Borrower or any
Subsidiary is a party or by which any of their respective properties or
assets is bound or affected, which default is reasonably likely to have a
Material Adverse Effect. No Event of Default or Unmatured Event of Default
has occurred and is continuing.
4.6 Financial Statements. Borrower's consolidated audited
financial statements as at June 30, 1993 and Borrower's consolidated
unaudited financial statements as at March 31, 1994, copies of which have
been furnished to Agent, have been prepared in conformity with GAAP applied
on a basis consistent with that of the preceding Fiscal Year and period and
present fairly the financial condition of Borrower and the Subsidiaries as
at such dates and the results of their operations for the periods then
ended, subject (in the case of the interim financial statement) to year-end
audit adjustments. Since March 31, 1994, there has been no Material Adverse
Change. Borrower's consolidated unaudited pro forma balance sheets as of
the Closing Date reflect pro forma changes in Borrower's financial condition
since March 31, 1994, including the pro forma effects of the Transactions
and the application of proceeds in respect thereof, and have been prepared
in conformity with GAAP and, to the best knowledge of Borrower, present
fairly the expected financial condition of Borrower and the Subsidiaries as
of such date.
4.7 Insurance. Schedule 4.7 hereto is a complete and
accurate summary, as of the date hereof, of the property and casualty
insurance program carried by Borrower and the Subsidiaries on the date
hereof. Schedule 4.7 includes the insurer's(s') name(s), policy number(s),
expiration date(s), amount(s) of coverage, type(s) of coverage, the annual
premium(s), deductibles and self-insured retention and describes any retro-
spective rating plan, fronting arrangement or any other self-insurance or
risk assumption agreed to by Borrower or any Subsidiary or imposed upon
Borrower or any Subsidiary by any such insurer. This summary also includes
any self-insurance program that is in effect.
4.8 Litigation; Contingent Liabilities.
(a) As of the date hereof, except for those referred to in
Schedule 4.8, there are no claims, litigation, arbitration proceedings or
governmental proceedings pending or threatened against or affecting Borrower
or any Subsidiary which involve an amount in controversy in excess of
$100,000 or which request injunctive or other equitable relief. Neither
Borrower nor any Subsidiary is subject to any claims, litigation,
arbitration proceeding or governmental proceeding, either pending or threat-
ened, the result of which is reasonably likely to have a Material Adverse
Effect.
(b) Other than any liability incident to the claims,
litigation or proceedings disclosed in Schedule 4.8 or Schedule 4.19, or
provided for or disclosed in the financial statements referred to in Section
4.6, as of the date hereof, neither Borrower nor any of the Subsidiaries has
<PAGE> 38 of 78
any contingent liabilities which are reasonably likely to have a Material
Adverse Effect.
4.9 Liens. None of the Collateral or other property,
revenues or assets of Borrower or any Subsidiary is subject to any Lien
(including but not limited to Liens pursuant to Capitalized Leases under
which Borrower or any Subsidiary is a lessee) except: (a) Liens in favor of
Agent, for the benefit of itself and Lenders; (b) Liens for current Taxes
not delinquent or Taxes being contested in good faith and by appropriate
proceedings and as to which such reserves or other appropriate provisions as
may be required by GAAP are being maintained; (c) carriers', warehousemen's,
mechanics', materialmen's and other like statutory Liens arising in the
ordinary course of business securing obligations which are not overdue or
which are being contested in good faith and by appropriate proceedings and
as to which such reserves or other appropriate provisions as may be required
by GAAP are being maintained; (d) Liens listed on Schedule 4.9 and Liens
permitted by Section 5.16; (e) Liens granted to the holders of the Senior
Notes or their representatives pursuant to the Senior Loan Documents; (f)
Liens on Obligor Collateral of the Borrowing Subsidiaries in favor of
Borrower, securing the Intercompany Loans and assigned to Agent, for the
benefit of itself and Lenders; (g) other Liens securing Indebtedness not in
excess of $100,000 in the aggregate; and (h) Liens consented to in writing
by Requisite Lenders.
4.10 Subsidiaries. As of the date hereof, all of Borrower's
Subsidiaries are listed on Schedule 4.10. Schedule 4.10 sets forth, for
each such Subsidiary, a complete and accurate statement of (a) Borrower's
and each Subsidiary's percentage ownership of each of their respective
Subsidiaries, (b) the state or other jurisdiction of formation or
incorporation of each Subsidiary, (c) each state in which each Subsidiary is
qualified to do business and (d) all of each Subsidiary's trade names, trade
styles or doing business forms. Except as otherwise noted on Schedule 4.10,
all of the Subsidiaries listed on Schedule 4.10 are Restricted Subsidiaries.
4.11 Partnerships; Joint Ventures. As of the date hereof,
neither Borrower nor any of the Subsidiaries is a partner or joint venturer
in any partnership or joint venture other than the partnerships and joint
ventures listed on Schedule 4.11. Schedule 4.11 sets forth, for each such
partnership or joint venture, a complete and accurate statement of (a)
Borrower's and each Subsidiary's percentage ownership of each such
partnership or joint venture, (b) the state or other jurisdiction of
formation or incorporation, as appropriate, of each such partnership or
joint venture, (c) each state in which each such partnership or joint
venture is qualified to do business and (d) all of each such partnership's
or joint venture's trade names, trade styles or doing business forms on the
date of this Agreement.
4.12 Business and Collateral Locations.
(a) On the date hereof, the office where Borrower and each
Borrowing Subsidiary keeps its books and records concerning its Accounts
Receivable and other Collateral, and Borrower's chief place of business and
chief executive office, is located at the address of Borrower set forth on
the signature pages of this Agreement. Schedule 4.12 contains a complete
and accurate list, as of the date of this Agreement, of all of Borrower's
and each Subsidiary's places of business other than that referred to in the
first sentence of this paragraph (a).
<PAGE> 39 of 78
(b) Schedule 4.12 contains a complete and accurate list, as
of the date of this Agreement, of the locations of all Inventory and other
tangible Collateral and if any Inventory or other Collateral is not in the
possession or control of Borrower or the owner of such Collateral, the name
and mailing address of each bailee, processor, warehouseman or other Person
in possession or control thereof.
4.13 Senior Notes. The Units have been issued in accordance
with and pursuant to the terms of the Prospectus dated as of June 23, 1994
and in compliance with all applicable federal and state securities laws.
The issuance of the Units has been duly authorized by all necessary
corporate action on the part of Borrower and will not require any consent or
approval of any governmental agency or authority that has not been obtained
prior to the date hereof. The issuance of the Units and the execution of
the Senior Loan Documents does not conflict with (i) any provision of law,
(ii) the Certificate of Incorporation or by-laws of Borrower, (iii) any
agreement binding upon Borrower or (iv) any court or administrative order or
decree applicable to Borrower, and do not and will not require, or result
in, the creation or imposition of any Lien on any asset of Borrower or any
Subsidiary, except as expressly provided therein.
4.14 Eligibility of Collateral. Each Account Receivable or
item of Inventory which Borrower shall, expressly or by implication (by
inclusion on a Borrowing Base Certificate or otherwise), request Agent to
classify as an Eligible Account Receivable or as Eligible Inventory,
respectively, will, as of the time when such request is made, conform in all
respects to the requirements of such classification set forth in the
respective definitions of "Eligible Account Receivable" and "Eligible
Inventory" set forth herein.
4.15 Intentionally Omitted.
4.16 Patents, Trademarks, etc. Borrower and each of the
Borrowing Subsidiaries possesses adequate licenses, patents, patent
applications, copyrights, trademarks, trademark applications, trade styles,
and tradenames to continue to conduct its respective business as heretofore
conducted by it, and all such licenses, patents, patent applications,
copyrights, trademarks, trademark applications, trade styles, and tradenames
existing on the date hereof and that are material to the business of
Borrower or any Borrowing Subsidiary, and, in the case of patents,
trademarks and copyrights, the date of issuance thereof, are listed on
Schedule 4.16.
4.17 Solvency. Borrower and its Subsidiaries, taken as a
whole, now have capital sufficient to carry on their businesses and
transactions and all businesses and transactions in which any of them is
about to engage, and they are able to pay their debts as they mature.
Borrower and its Subsidiaries, taken as a whole, are now solvent and now own
property having a value, both at fair valuation and at present fair salable
value, greater than the amount required to pay the debts of Borrower and its
Subsidiaries.
4.18 Contracts; Labor Matters. Except as disclosed on
Schedule 4.18: (a) neither Borrower nor any Borrowing Subsidiary is a party
to any contract or agreement, or is subject to any charge, corporate
restriction, judgment, decree or order, which is reasonably likely to have a
Material Adverse Effect; (b) as of the date hereof, no labor contract to
<PAGE> 40 of 78
which Borrower or any Borrowing Subsidiary is a party or is otherwise
subject is scheduled to expire prior to the initial Termination Date; (c)
neither Borrower nor any Borrowing Subsidiary has, within the two (2)-year
period preceding the date of this Agreement, taken any action which would
have constituted or resulted in a "plant closing" or "mass layoff" within
the meaning of the Federal Worker Adjustment and Retraining Notification Act
of 1988 or any similar applicable federal, state or local law, and Borrower
has no reasonable expectation that any such action is or will be required at
any time prior to the initial Termination Date and (d) on the date of this
Agreement (i) neither Borrower nor any Borrowing Subsidiary is a party to
any labor dispute and (ii) there are no strikes or walkouts relating to any
labor contracts to which Borrower or any Borrowing Subsidiary is a party or
is otherwise subject.
4.19 Pension and Welfare Plans. Each Pension Plan complies,
and has been administered in compliance, in all material respects, with all
applicable statutes and governmental rules and regulations; no Reportable
Event has occurred and is continuing with respect to any Pension Plan;
neither Borrower nor any ERISA Affiliate has withdrawn from any
Multiemployer Plan in a "complete withdrawal" or a "partial withdrawal" as
defined in Section 4203 or 4205 of ERISA, respectively; no steps have been
instituted to terminate any Pension Plan; no contribution failure has
occurred with respect to any Pension Plan sufficient to give rise to a Lien
under Section 302(f) of ERISA; no condition exists or event or transaction
has occurred in connection with any Pension Plan or Multiemployer Plan that
is reasonably likely to have a Material Adverse Effect; and neither Borrower
nor any ERISA Affiliate is a "contributing sponsor" as defined in Section
4001(a)(13) of ERISA of a "single-employer plan" as defined in Section
4001(a)(15) of ERISA that has two or more contributing sponsors at least two
of whom are not under common control. Except as listed in Schedule 4.19,
neither Borrower nor any ERISA Affiliate, to the extent there is joint and
several liability with Borrower to pay such benefits, has any liability to
pay any welfare benefits under any employee welfare benefit plan within the
meaning of Section 3(l) of ERISA to former employees thereof or to current
employees with respect to claims incurred after the termination of their
employment other than as required by Section 4980B of the Code or Part 6 of
Subtitle B of Title 1 of ERISA.
4.20 Regulations G and U. Borrower is not engaged in the
business of purchasing or selling Margin Stock or extending credit to others
for the purpose of purchasing or carrying Margin Stock, and no part of the
proceeds of any borrowing hereunder will be used to purchase or carry any
Margin Stock or for any other purpose which would violate any of the margin
regulations of the Federal Reserve Board.
4.21 Compliance. Except as described on Schedule 4.21 or
Schedule 4.25, Borrower and the Subsidiaries are in compliance with all
statutes and governmental rules and regulations applicable to them, the
noncompliance with which is reasonably likely to have a Material Adverse
Effect.
4.22 Taxes. Each of Borrower and the Subsidiaries has filed
all tax returns which are required to have been filed and has paid, or made
adequate provisions for the payment of, all of its Taxes which are due and
payable, except such Taxes, if any, as are being contested in good faith and
by appropriate proceedings and as to which such reserves or other
appropriate provisions as may be required by GAAP have been maintained. The
<PAGE> 41 of 78
federal income tax liability of Borrower and the Subsidiaries has been
audited by the Internal Revenue Service and has been finally determined and
satisfied (or the time for audit has expired) for all tax years up to and
including the tax year ended June 30, 1990. Except as described on Schedule
4.22, Borrower is not aware of any proposed assessment against Borrower or
any of the Subsidiaries for additional Taxes (or any basis for any such
assessment) which is reasonably likely to have a Material Adverse Effect.
4.23 Investment Company Act Representation. Borrower is not
an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
4.24 Public Utility Holding Company Act Representation.
Borrower is not a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
4.25 Environmental and Safety and Health Matters. Except as
disclosed on Schedule 4.25, Borrower and each of the Subsidiaries and/or
each property, operations and facility that Borrower or any Subsidiary may
own, operate or control (a) complies in all respects with (i) all applicable
Environmental Laws the failure with which to comply would be reasonably
likely to have a Material Adverse Effect and (ii) all applicable
Occupational Safety and Health Laws the failure with which to comply would
be reasonably likely to have a Material Adverse Effect; (b) is not subject
to any judicial or administrative proceeding alleging the violation of any
Environmental Law or Occupational Safety and Health Law which violation, if
proven, would be reasonably likely to have a Material Adverse Effect; (c)
has not received any notice (i) that it may be in violation of any
Environmental Law or Occupational Safety and Health Law which violation, if
proven, would be reasonably likely to have a Material Adverse Effect, (ii)
threatening the commencement of any proceeding relating to allegedly
unlawful, unsafe or unhealthy conditions, which, if adversely determined,
would be reasonably likely to have a Material Adverse Effect, or (iii)
alleging that it is or may be responsible for any response, cleanup, or
corrective action, including but not limited to any remedial
investigation/feasibility studies, under any Environmental Law or
Occupational Safety and Health Law, which, if adversely determined, would be
reasonably likely to have a Material Adverse Effect; (d) to Borrower's
knowledge, is not the subject of federal or state investigation evaluating
whether any investigation, remedial action or other response is needed to
respond to (i) a Release or threatened Release into the environment of any
Hazardous Material or the spillage, disposal or release or threatened
release into the environment of any other hazardous, toxic or dangerous
waste, substance or constituent, or other substance which, if adversely
determined, would be reasonably likely to have a Material Adverse Effect or
(ii) any allegedly unsafe or unhealthful condition, which, if adversely
determined, would be reasonably likely to have a Material Adverse Effect;
(e) has not filed any notice under or relating to any Environmental Law or
Occupational Safety and Health Law indicating or reporting (i) any past or
present Release into the environment of, or treatment, storage or disposal
of, any Hazardous Material or spillage, disposal or release into the
environment of any other hazardous, toxic or dangerous waste, substance or
constituent, or other substance or (ii) any potentially unsafe or
unhealthful condition, in either case, which, if adversely determined, would
be reasonably likely to have a Material Adverse Effect, and to Borrower's
knowledge, there exists no basis for such notice irrespective of whether
<PAGE> 42 of 78
such notice was actually filed; and (f) has no contingent liability in
connection with (i) any actual or potential Release into the environment of,
or otherwise with respect to, any Hazardous Material or spillage, disposal
or release into the environment of any other hazardous, toxic or dangerous
waste, substance or constituent, or other substance, whether on any premises
owned or occupied by Borrower or any Subsidiary or on any other premises,
which would be reasonably likely to have a Material Adverse Effect or (ii)
any unsafe or unhealthful condition, which would be reasonably likely to
have a Material Adverse Effect. Except as disclosed on Schedule 4.25, there
are no Hazardous Materials on, in or under any property or facilities owned,
operated or controlled by Borrower or any Subsidiary the presence of which
would be reasonably likely to have a Material Adverse Effect, including but
not limited to such Hazardous Materials that may be contained in underground
storage tanks, but excepting such Hazardous Materials used in accordance
with all applicable laws and in the same manner as an ordinary consumer
(e.g., gasoline in tanks of motor vehicles, small amounts of cosmetic
cleaners, etc.).
4.26 Related Agreements. As of the date hereof, all
representations and warranties of Borrower and each Subsidiary contained in
any Related Agreements and any agreement evidencing any of the other Trans-
actions (whether such representations and warranties were made to Agent or
any Lender or to another Person), other than the Senior Loan Documents, are
true and correct as if made on the date hereof (except for those
representations and warranties which are expressly made as of another
specified date) and Borrower hereby adopts and affirms all such
representations and warranties which Borrower agrees shall be incorporated
by reference herein and made a part hereof.
4.27 Capitalized Lease Obligations. As of the date hereof,
the Indebtedness of Borrower and its Subsidiaries under Capitalized Leases
is as set forth on Schedule 4.27.
5. BORROWER COVENANTS.
From the date of this Agreement and thereafter until the Credit
is terminated and all Payment Liabilities of Borrower hereunder are paid in
full, Borrower agrees that unless Agent, at the written direction of
Requisite Lenders, shall otherwise consent in writing, it will:
5.1 Financial Statements and Other Reports. Furnish to
Agent and each Lender, in form satisfactory to Agent:
5.1.1 Financial Reports:
(a) Annual Audited Financial Statements. Within ninety (90)
days after each Fiscal Year, a copy of the annual audited financial
statements of Borrower and the Subsidiaries prepared on a consolidated basis
and in conformity with GAAP and certified by an independent certified public
accountant who shall be satisfactory to Agent, together with (i) a
certificate from such accountant, (x) in the form attached hereto as Exhibit
B, acknowledging to Agent and Lenders such accountant's understanding that
Agent, Lenders and any Participant are relying on such annual audit report,
(y) containing a computation of, and showing compliance with, each of the
financial ratios and restrictions contained in this Section 5 or in
Supplement A, and (z) to the effect that, in making the examination
necessary for the signing of such annual audit report, such accountant has
<PAGE> 43 of 78
not become aware of any Event of Default or Unmatured Event of Default that
has occurred and is continuing and that relates to financial or other
accounting matters or the financial ratios and restrictions contained in
this Section 5 or in Supplement A, or, if such accountant has become aware
of any such event, describing it and the steps, if any, being taken to cure
it and (ii) the annual operating statements of Borrower and the Subsidiaries
prepared on a consolidating basis and in conformity with GAAP applied in a
manner consistent with the audit report referred to in preceding clauses
(a)(i), signed by Borrower's chief financial officer.
(b) Monthly Financial Statement. Within thirty (30) days
after the end of each month of each Fiscal Year of Borrower, a copy of the
unaudited financial statement of Borrower and the Subsidiaries prepared on a
consolidated basis and in conformity with GAAP applied in a manner
consistent with the audit report referred to in preceding clause (a)(i),
signed by Borrower's chief financial officer and consisting of at least a
balance sheet as at the close of such month and an income statement and cash
flow statement for such month and for the period from the beginning of such
Fiscal Year to the close of such month, compared, in each case, to the
actual results for the same period during the prior Fiscal Year and to
Borrower's budget (delivered pursuant to Section 5.1.1(c), for the current
Fiscal Year.
(c) Annual Budgets. Within thirty (30) days after the end
of each Fiscal Year of Borrower, a copy of an annual budget for the current
Fiscal Year, prepared on a consolidated basis and in conformity with GAAP
applied in a manner consistent with the prior Fiscal Year's budget, signed
by Borrower's chief financial officer and consisting of at least a balance
sheet, an income statement and a cash flow statement, each calculated on a
quarter by quarter basis.
(d) Officer's Certificate. Together with the financial
statements furnished by Borrower under the preceding clauses (a), and (b),
a certificate of Borrower's chief financial officer in the form of Exhibit
C, dated the date of such annual audit report or such monthly financial
statement, as the case may be, containing a statement that no Event of
Default or Unmatured Event of Default has occurred and is continuing, or, if
there is any such event, describing it and the steps, if any, being taken to
cure it, and containing a computation of, and showing compliance with, each
of the financial ratios and restrictions contained in this Section 5 or in
Supplement A.
5.1.2 Agings. Within fifteen (15) days after the end of each
month, an aging of all Accounts Receivable and an aging of all accounts
payable of Borrower and the Borrowing Subsidiaries as of the end of such
month, in each case in form and content acceptable to Agent.
5.1.3 Inventory Certification. Within fifteen (15) days after
the end of each month, an Inventory certification report as of the end of
the month for all Inventory locations of Borrower and the Borrowing
Subsidiaries as of the end of such month, in form and content acceptable to
Agent.
5.1.4 Other Reports and Information:
(a) SEC and Other Reports. Copies of each filing and report
made by Borrower or any Subsidiary with or to any securities exchange or the
<PAGE> 44 of 78
Securities and Exchange Commission promptly upon the filing or making
thereof;
(b) Report of Change Relating to Borrower or Subsidiaries.
Promptly from time to time, a written report of any change in the
information set forth in Schedule 4.10 concerning Borrower or any
Subsidiary;
(c) Intercompany Loans. Within fifteen (15) days after the
end of each month, a list of all outstanding balances of each Borrowing
Subsidiary's Intercompany Loan as of the end of such month, together with a
list of all debits and credits with respect thereto, in form and content
acceptable to Agent; and
(d) Other Reports. Any information required to be provided
pursuant to other provisions of this Agreement, and such other reports or
information from time to time reasonably requested by Agent on behalf of
itself or any Lender. As of the date hereof, it is not Agent's intent to
require that Borrower provide information to Agent and Lenders in excess of,
or at times other than, that specifically required to be provided by the
terms of this Agreement; however, Agent reserves the right, from time to
time, in its reasonable judgment, to require Borrower to provide information
at different times than currently required and/or to provide additional
types of information.
5.2 Notices. Notify Agent in writing of any of the
following, within the periods indicated, describing the same and, if applic-
able, the steps being taken by the Person(s) affected with respect thereto:
(a) Concurrent Reporting. Concurrently with the occurrence
thereof:
(i) the consummation of any Acquisition; and
(ii) any change in the location of Borrower's or any
Subsidiary's chief executive office or chief place of business.
(b) Prompt Reporting. Within ten (10) Banking Days after
Borrower learns of the occurrence thereof (or, in the case of clause (viii),
after the delivery or receipt thereof):
(i) Default. The occurrence of (i) an Event of
Default or Unmatured Event of Default and (ii) the default by
Borrower, any other Obligor or any Subsidiary under any note,
indenture, loan agreement, mortgage, lease, deed or other similar
agreement to which Borrower, any other Obligor or any Subsidiary,
as appropriate, is a party or by which it is bound (including
without limitation any Senior Loan Document or Subordinated Debt
Document) that evidences or secures Indebtedness in a principal
amount in excess of $500,000, or where such default would be
reasonably likely to have a Material Adverse Effect;
(ii) Litigation. The institution of any litigation,
arbitration proceeding or governmental proceeding affecting
Borrower, any other Obligor, any Subsidiary or any Collateral,
involving an amount in controversy in excess of $2,000,000,
<PAGE> 45 of 78
whether or not considered to be covered by insurance, or request-
ing injunctive relief;
(iii) Judgment. The entry of any uninsured judgment
or decree against Borrower, any other Obligor or any Subsidiary,
if the amount of such judgment exceeds $500,000;
(iv) Material Adverse Change or Effect. The
occurrence of a Material Adverse Change or the occurrence of any
event that would be reasonably likely to have a Material Adverse
Effect;
(v) Change in Chief Executive Officer or Lines of
Business. If any change occurs in the Person holding the
position of chief executive officer of Borrower, or any change
occurs in Borrower's or any Subsidiary's line(s) of business;
(vi) Insurance Cancellation. Any cancellation of any
insurance by Borrower or any Subsidiary or any receipt by
Borrower or any Subsidiary of any notice of any cancellation by
any of its insurers;
(vii) Other Indebtedness Notices. Copies of any
amendments, waivers or consents, notices of breach or default,
notices relating to the exercise or nonexercise of any remedy
available to any Person, notices of indemnity or other claims,
written materials relating to any dispute, written materials
relating to the exercise of any rights derived from or arising in
connection with any Indebtedness and other written communications
of a material nature, including any communications by Borrower in
connection with the Senior Loans or the Subordinated Debt other
than any such notice or other written materials already sent to
Agent pursuant to any other Section of this Agreement; and
(viii) Stock Purchase/Acquisitions. Copies of any
agreements, instruments and documents and any amendments, waivers
or consents, notices of breach or default, notices relating to
the exercise or nonexercise of any remedy available to any
Person, notices of indemnity or other claims, written materials
relating to any dispute, written materials relating to the
exercise of any rights derived from or arising in connection with
the Stock Repurchase or any Acquisition and other written
communications of a material nature, pertaining thereto.
(c) Monthly Reporting - Name Changes. Within ten (10)
Banking Days after the end of the month during which such a change occurs,
any change in the name of Borrower, any Subsidiary or any other Obligor.
(d) Quarterly Reporting. Within ten (10) Banking Days after
the end of the fiscal quarter during which Borrower learns of the occurrence
thereof:
(i) Pension Plans and Welfare Plans. The occurrence
of a Reportable Event with respect to any Pension Plan; the
filing of a notice of intent to terminate a Pension Plan by
Borrower or any ERISA Affiliate; the institution of proceedings
to terminate a Pension Plan by the PBGC or any other Person; the
withdrawal in a "complete withdrawal" or a "partial withdrawal"
<PAGE> 46 of 78
as defined in Sections 4203 and 4205, respectively, of ERISA by
Borrower or any ERISA Affiliate from any Multiemployer Plan; the
failure of Borrower or any ERISA Affiliate to make a required
contribution to any Pension Plan, including but not limited to
any failure to pay an amount sufficient to give rise to a Lien
under Section 302(f) of ERISA; the taking of any action with
respect to a Pension Plan that could result in the requirement
that Borrower or any ERISA Affiliate furnish a bond or other
security to the PBGC or such Pension Plan; the occurrence of any
other event with respect to any Pension Plan that is reasonably
likely to have a Material Adverse Effect; or, with respect to any
"employee welfare benefit plan" as defined in Section 3(l) of
ERISA which covers former employees thereof or current employees
and their beneficiaries with respect to claims incurred after the
termination of their employment, the establishment of a new plan
subject to ERISA or an amendment to any existing plan which will
result in a material increase in contributions or benefits under
such plan or the incurrence of any material increase in the
liability of Borrower or an ERISA Affiliate to the extent there
is joint and several liability with Borrower or any other Obligor
or any Subsidiary;
(ii) Business and Collateral Information. Any change
or proposed change in any of the information set forth on
Schedule 4.10 or Schedule 4.12, including but not limited to (i)
the formation of any new Subsidiary, (ii) any change in the
location of any Inventory or any Collateral to a location not
included on such Schedule, (iii) the identity of any new bailee,
processor, warehouseman or other Person in possession or control
of any Inventory or other Collateral, (iv) any opening, closing
or other change in the list of offices and other places of
business of Borrower and each Subsidiary and (v) any opening,
closing or other change in the offices and other places of
business of each other Obligor;
(iii) Insurance Information. Any material change in
the information set forth in Schedule 4.7;
(iv) Environmental and Safety and Health Matters.
The occurrence of any event, or the acquisition of any
information which, if it had occurred or was true on or before
the Closing Date, would have been required to have been disclosed
and included on Schedule 4.25, including but not limited to
existence of any Environmental Lien and receipt of any notice
from any federal, state or local government or agency with
respect to any actual or alleged violation of any Environmental
Law or any Occupational Safety and Health Law;
(v) Change in Other Operating Management. If any
change occurs in any of the Persons holding the positions of
chief financial officer or divisional vice president of Borrower;
or any change occurs in Borrower's or any Subsidiary's line(s) of
business;
(vi) Patents, Etc. Any change to the list of
patents, trademarks, copyrights and other information set forth
in Schedule 4.16;
<PAGE> 47 of 78
(vii) Litigation. An update of any changes to
Schedule 4.8 since the last quarterly update, disclosing all
newly instituted claims, litigation, arbitration proceedings or
governmental proceedings against or affecting Borrower or any
Subsidiary which involves an amount in controversy in excess of
$100,000 or which requests injunctive or other equitable relief,
and which discloses any significant events or occurrences in any
of the matters set forth on Schedule 4.8 or any updates
previously provided thereto;
(viii) Certain Changes. Any change in the information
set forth in Schedule 4.1 or Schedule 4.11 concerning Borrower,
any Subsidiary or any partnership or joint venture; and
(ix) Other Notices. Notice of the occurrence of such
other event as Agent may reasonably from time to time specify.
(e) Other Notices. On a timely basis, any notices required
to be provided pursuant to any Related Agreement or the other provisions of
this Agreement.
5.3 Existence. Maintain and preserve, and cause each
Subsidiary to maintain and preserve, its respective existence as a
corporation or other form of business organization, as the case may be, and
all rights, privileges, licenses, patents, patent rights, copyrights,
trademarks, trade names, trade styles, franchises and other authority to the
extent material and necessary for the conduct of its respective business in
the ordinary course as conducted from time to time.
5.4 Nature of Business. Engage in, and cause each
Subsidiary to engage in, substantially the same fields of business as it is
engaged in on the date hereof.
5.5 Books, Records and Access. Maintain, and cause each
Subsidiary to maintain, complete and accurate books and records (including
but not limited to records relating to Accounts Receivable, Inventory, and
other Collateral and property), in which full and correct entries in
conformity with GAAP shall be made of all dealings and transactions in
relation to its respective business and activities, including without
limitation complete and accurate records of all debits and credits in
respect of all Intercompany Loans. Cause its books and records as at the
end of any calendar month to be posted and closed not more than thirty (30)
days after the last business day of such month. Permit, and cause each
Subsidiary to permit, access by Agent and its agents and employees to the
books and records of Borrower and such Subsidiary at Borrower's or such
Subsidiary's place or places of business at intervals to be determined by
Agent (but in the absence of an Event of Default no more than four (4) times
each in any twelve (12) month period) upon reasonable prior notice and
during normal business hours and without hindrance or delay, and permit and
cause each Subsidiary to permit Agent and its agents and employees to
inspect the books and records and location of such Subsidiary and to
inspect, audit, check and make copies and/or extracts from the books,
records, computer data and records, computer programs, journals, orders,
receipts, correspondence and other data relating to Inventory, Accounts
Receivable, and, any other Collateral and property, or relating to any other
transactions between the parties hereto; provided, that Borrower shall
permit each Lender and its respective agents and employees to accompany
<PAGE> 48 of 78
Agent on each such visit; and provided further, that after the occurrence of
an Event of Default, Agent and Lenders may have access to such premises at
such times as they desire, without having given prior notice. Any and all
such inspections, appraisals and/or audits by Agent and its agents and
employees relating to Borrower's books and records and location shall be at
Borrower's expense, no matter when the same shall occur; and any and all
such inspections, appraisals and/or audits by Agent and its agents and
employees relating to a Subsidiary's books and records and location shall be
at Borrower's expense only after the occurrence of an Event of Default.
Agent may advance such costs for which Borrower is responsible to Borrower
as a Revolving Loan.
5.6 Insurance. Maintain, and cause each Subsidiary to
maintain, insurance to such extent and against such hazards and liabilities
as is commonly maintained by companies similarly situated. Keep the
Collateral properly housed and insured for its full insurable value (subject
to customary deductibles) against loss or damage by fire, theft, explosion,
sprinklers and such other risks as are customarily insured against by
persons engaged in business similar to that of Borrower or such Subsidiary,
as applicable, with such companies, in such amounts and under policies in
such form as shall be satisfactory to Agent. Certificates of such policies
of insurance (other than workman's compensation insurance) have been
delivered to Agent prior to the date hereof together with evidence of
payment of all premiums therefor then due; certificates with respect to
worker's compensation insurance and evidence of premium payment shall be
delivered to Agent within thirty (30) days after the Closing Date. Borrower
shall cause each issuer of an insurance policy for Borrower or any
Subsidiary to provide Agent within thirty (30) days after the Closing Date,
with an endorsement or an independent instrument naming Agent as an
additional insured, for the benefit of itself and Lenders. In the event
Borrower at any time or times hereafter shall fail to obtain or maintain any
of the policies of insurance required herein or to pay any premium in whole
or in part relating thereto when due, then Agent, without waiving or
releasing any obligation of or default by Borrower hereunder, may at any
time or times thereafter (but shall be under no obligation to do so) obtain
and maintain such policies of insurance and pay such premiums and take any
other action with respect thereto which Agent deems advisable. All sums so
disbursed by Agent, including reasonable Attorneys' Fees, court costs,
expenses and other charges relating thereto, shall be payable on demand by
Borrower to Agent, and Agent may, in its sole and absolute discretion,
advance such sums to Borrower as a Revolving Loan. Borrower shall cause
each Subsidiary to grant to Agent rights identical to those granted by
Borrower to Agent in respect of its insurance.
5.7 Intentionally Omitted.
5.8 Repair. Maintain, preserve and keep, and cause each
Subsidiary to maintain, preserve and keep, its Equipment and other
properties in good operating condition and repair, ordinary wear and tear
excepted, and from time to time make, and cause each Subsidiary to make, all
necessary and proper repairs, renewals, replacements, additions, betterments
and improvements thereto so that at all times the efficiency thereof shall
be fully preserved and maintained.
5.9 Taxes. Pay, and cause each Subsidiary to pay, when due,
all of its Taxes, unless and only to the extent that Borrower or such
Subsidiary is contesting such Taxes in good faith and by appropriate
<PAGE> 49 of 78
proceedings and Borrower or such Subsidiary has set aside on its books such
reserves or other appropriate provisions therefor as may be required by
GAAP; not file a consolidated tax return together with any other Person,
unless consented to in writing by Agent, except that Borrower and the
Subsidiaries may file consolidated returns; and not change its Fiscal Year
or tax year without Agent's prior written consent.
5.10 Compliance. Comply, and cause each Subsidiary to
comply, with all statutes and governmental rules and regulations applicable
to it, except where the failure to so comply would not be reasonably likely
to have a Material Adverse Effect.
5.11 Pension Plans. Not permit, and not permit any
Subsidiary to permit, any condition to exist in connection with any Pension
Plan that might constitute grounds for the PBGC to institute proceedings to
have such Pension Plan terminated or a trustee appointed to administer such
Pension Plan; not fail, and not permit any Subsidiary to fail, to make a
required contribution to any Pension Plan if such failure is sufficient to
give rise to a Lien under Section 302(f) of ERISA; and not engage in, or
permit to exist or occur, or permit any of the Subsidiaries to engage in, or
permit to exist or occur, any other condition, event or transaction with
respect to any Pension Plan that is reasonably likely to result in a
Material Adverse Effect.
5.12 Merger, Purchase and Sale. Not, and not permit any
Subsidiary to: (a) be a party to any merger, liquidation or consolidation,
including without limitation a merger constituting a "Repurchase Event"
under the terms of the Warrant Agreement; (b) except for sales of Inventory
and Equipment in the normal course of its business, sell, transfer, convey,
lease or otherwise dispose of its assets; or (c) sell or assign, with or
without recourse, any Accounts Receivable, Contract Rights, notes receivable
or chattel paper, except as provided in this Agreement; provided, that
nothing herein shall prohibit the (i) merger of any Borrowing Subsidiary
with another Borrowing Subsidiary, and (ii) sale, transfer, conveyance,
lease or other disposition of all of the capital stock of any Subsidiary or
all or substantially all of the assets of any Subsidiary if: (A) no Event
of Default or Unmatured Event of Default then exists or would exist after
giving effect to such transaction and the application of proceeds thereof,
and (B) Borrower delivers to Agent from the proceeds thereof for application
to the Loans in accordance with Section 2.10 an amount not less than the
outstanding principal amount of the Intercompany Loan of such Subsidiary,
along with all accrued interest thereon, as of the date of such transaction,
plus the amount, if any, of any Over Advance that would result from such
transaction after giving effect to the repayment of such Intercompany Loan
but before any other application of proceeds thereof. Nothing in this
Agreement shall be deemed to in any way limit the right of the holders of
the Senior Notes or their representative to exercise any rights under the
Senior Loan Documents, although such exercise may constitute a breach of
this Section 5.12 or other Sections of this Agreement.
5.13 Restricted Payments. Not, and not permit any Subsidiary
to, (a) purchase or redeem any shares of its stock or any options or
warrants therefor, other than a repurchase of the Warrants upon the
occurrence of a merger constituting a Repurchase Event to which Agent has
consented; (b) declare or pay any dividends on any of its stock (other than
dividends payable in non-redeemable capital stock) or make any distribution
to stockholders as such or set aside any funds for any such purpose; (c)
<PAGE> 50 of 78
make any voluntary prepayment, purchase or redemption of any Senior Loans
other than as expressly required by the terms of the Senior Loan Documents;
(d) except as permitted in any applicable subordination or intercreditor
agreements, or any subordination terms contained within the applicable
Subordinated Debt Documents, pay, prepay, purchase or redeem any
Subordinated Debt; or (e) repay any amounts owing from time to time by any
Subsidiary to Borrower, exclusive of the Intercompany Loans; provided, that
if no Event of Default or Unmatured Event of Default then exists and if the
outstanding amount of the Revolving Loans does not exceed the sum of the
amounts described in Sections 2.2(i) and (ii) of Supplement A, or if there
are then no Payment Liabilities, (i) any Subsidiary may pay dividends to
Borrower from time to time, and (ii) any Borrowing Subsidiary may repay any
amounts owing from time to time by such Borrowing Subsidiary to Borrower.
5.14 Borrower's and Subsidiaries' Stock. Not permit any
Subsidiary to purchase or otherwise acquire any shares of the stock of
Borrower, and not take any action, or permit any Subsidiary to take any
action, which will result in a decrease in Borrower's or any Subsidiary's
ownership interest in any Subsidiary.
5.15 Indebtedness. Not, and not permit any Subsidiary to,
incur or permit to exist any Indebtedness (including but not limited to
Indebtedness as lessee under Capitalized Leases), except: (a) Indebtedness
under the terms of this Agreement; (b) Subordinated Debt; (c) other
Indebtedness outstanding on the date hereof and listed on Schedule 5.15; (d)
Indebtedness hereafter incurred in connection with Liens permitted under
Section 5.16(d); (e) Indebtedness in respect of the Senior Loans, with an
aggregate principal amount due upon maturity of not more than $127,200,000;
(f) Indebtedness in respect of loans from Borrower to a Borrowing
Subsidiary, including without limitation any Intercompany Loans the right to
receive payment of which has been assigned by Borrower to Agent, for the
benefit of itself and Lenders; (g) other Indebtedness not in excess of
$100,000 for Borrower and the Subsidiaries at any time outstanding; (h)
"Acquisition Indebtedness" as that term is defined in the Senior Loan
Documents in an aggregate principal amount at any one time outstanding not
to exceed $15,000,000 and no more than $6,000,000 of which may be incurred
in any twelve month period, (i) other Indebtedness, if after giving effect
thereto, the "Consolidated Coverage Ratio" (as defined in the Senior Note
Indenture) would be greater than 1.75:1.00; and (j) other Indebtedness
approved in writing by Requisite Lenders.
5.16 Liens. Not, and not permit any Subsidiary to, create or
permit to exist any Lien with respect to any property, revenue or assets now
owned or hereafter acquired, except: (a) Liens for current Taxes not
delinquent or Taxes being contested in good faith and by appropriate
proceedings and as to which such reserves or other appropriate provisions as
may be required by GAAP are being maintained; (b) carriers', warehousemen's,
mechanics', materialmen's, repairmen's, and other like statutory Liens
arising in the ordinary course of business securing obligations which are
not overdue or which are being contested in good faith and by appropriate
proceedings and as to which such reserves or other appropriate provisions as
may be required by GAAP are being maintained; (c) pledges or deposits in
connection with workers' compensation, unemployment insurance and other
social security legislation; (d) Liens in connection with the acquisition of
Equipment after the date hereof, by way of purchase money mortgage,
conditional sale or other title retention agreement, Capitalized Lease or
other deferred payment contract, and attaching only to the property being
<PAGE> 51 of 78
acquired, if (i) the Indebtedness secured thereby does not exceed eighty
percent (80%) of the fair market value of such property at the time of the
acquisition thereof, (ii) the Indebtedness secured by any single piece of
property does not exceed $100,000 and (iii) the aggregate outstanding amount
of such Indebtedness of Borrower and the Subsidiaries does not exceed
$3,000,000; (e) Liens in favor of Agent, for the benefit of itself and
Lenders; (f) Liens on property of Borrowing Subsidiaries in favor of
Borrower securing the Intercompany Loans and assigned to Agent, for the
benefit of itself and Lenders; (g) Liens granted to the holders of Senior
Notes or their representative pursuant to the Senior Loan Documents;
(h)Liens referred to in Section 4.9; (i) Liens granted to the holders of
Indebtedness incurred pursuant to clause (h) of Section 5.15 to the extent
such Liens do not encumber any property other than the property acquired
with such Indebtedness and to the extent such Liens do not encumber any
assets described in Section 3.1 and (j) Liens consented to in writing by
Requisite Lenders.
5.17 Guaranties. Not, and not permit any Subsidiary to,
become or be a guarantor or surety of, or otherwise become or be responsible
in any manner (whether by agreement to purchase any obligations, stock,
assets, goods or services, or to supply or advance any funds, assets, goods
or services, or otherwise) with respect to, any undertaking of any other
Person, except for the endorsement, in the ordinary course of collection, of
instruments payable to it or its order, except any guaranty in favor of
Agent, for the benefit of itself and Lenders, except for any guaranty of the
Senior Notes (in the form attached to the Senior Loan Documents) executed by
any Restricted Subsidiary and except for guaranties by Borrower or any
Subsidiary of utility bills and charges of newly organized Subsidiaries in
an aggregate amount not in excess of $50,000.
5.18 Investments. Not, and not permit any Subsidiary to,
make or permit to exist any Investment in any Person, except for: (a)
advances to employees of Borrower or any of the Subsidiaries for travel or
other ordinary business expenses provided that the aggregate amount
outstanding at any one time shall not exceed $25,000 for any single employee
and $75,000 in the aggregate for all employees; (b) extensions of credit in
the nature of Accounts Receivable or notes receivable arising from the sale
of goods and services in the ordinary course of business; (c) shares of
stock, obligations or other securities received in settlement of claims
arising in the ordinary course of business; (d) other Investments
outstanding on the date hereof and listed on Schedule 5.18; (e) other
Investments not in excess of $50,000 in the aggregate for Borrower and the
Subsidiaries; (f) Investments made in the form of loans by Borrower to the
Borrowing Subsidiary, including without limitation the Intercompany Loans;
(g) Investments in the form of capital contributions by Borrower in new and
existing Subsidiaries with funds not constituting proceeds of the Revolving
Loans or the Collateral (other than proceeds of the Collateral located in a
cash collateral account and available to Borrower under the terms of Section
2.10(b)(ii); (h) Investments resulting from Acquisitions complying with the
provisions of clause (d) of Section 5.12; (i) Investments in Unrestricted
Subsidiaries to the extent permitted in the Senior Note Indenture; (j)
Investments consisting of bank accounts permitted under this Agreement; and
(k) other Investments consented to by Requisite Lenders in writing.
5.19 Subsidiaries. Except as provided in Section 5.12, not,
and not permit any Subsidiary to, acquire any stock or similar interest in
any Person, and not create, establish or acquire any Subsidiaries; not
<PAGE> 52 of 78
designate any Restricted Subsidiary to be an "Unrestricted Subsidiary" (as
defined in the Senior Loan Documents) or designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; and not designate any new
Subsidiary as an Unrestricted Subsidiary unless such designation complies
with the applicable terms of the Senior Note Indenture and unless Agent
receives concurrent notice of such designation.
5.20 Intentionally Omitted.
5.21 Change in Accounts Receivable. After the occurrence of
an Event of Default, not permit or agree to, or permit any Subsidiary to
permit or agree to, any extension, compromise or settlement or make any
change or modification of any kind or nature with respect to any Account
Receivable, including any of the terms relating thereto.
5.22 Environmental Issues. Provide such information and
certifications which Agent may reasonably request from time to time
pertaining to the environmental aspects of Borrower and the Subsidiaries and
any property owned, operated or controlled by Borrower or any Subsidiary.
In order to investigate environmental aspects of Borrower and the
Subsidiaries and their properties, facilities and operations, Agent and its
agents shall have the right at any time that Agent shall have determined
that an environmental condition affecting any Real Property would be
reasonably likely to have a monetary impact of $2,000,000 or more upon
Borrower or a Subsidiary, upon reasonable notice to enter upon the property
of Borrower or any Subsidiary, take samples, review the books, records or
other documents of Borrower and the Subsidiaries, interview officers and
employees of Borrower or the Subsidiaries, and conduct such other activities
as Agent, in its sole discretion, deems appropriate. Borrower shall, and
shall cause the Subsidiaries to, cooperate fully in the conduct of any such
audit. Borrower shall pay upon demand all costs and expenses (including
Attorney's Fees) connected with such audit. Agent, may, in its discretion,
provide for the payment of any amount due from Borrower under this Section
5.22 by making Borrower a Revolving Loan. Nothing in this Section 5.22, and
no actions taken by Agent or any Lender pursuant thereto, shall give, or be
construed as controlling, or giving to Agent or any Lender the right or
obligation to direct or control, the conduct or action or inaction of
Borrower or any Subsidiary with respect to any environmental matters,
including but not limited to those pertaining to compliance with any
Environmental Laws. Agent agrees to share with Borrower the results of any
such audit conducted by a third party.
5.23 Related Agreements. Not enter into, or permit any
Subsidiary to enter into, any agreement containing any provision which would
be violated or breached by the performance by Borrower or such Subsidiary of
its obligations hereunder or under any Related Agreement or any instrument
or document delivered or to be delivered by Borrower or such Subsidiary in
connection herewith.
5.24 Unconditional Purchase Options. Not enter into or be a
party to, or permit any Subsidiary to enter into or be a party to any
contract for the purchase of materials, supplies or other property or
services, if such contract requires that payment be made by it regardless of
whether or not delivery is ever made of such materials, supplies or other
property or services.
<PAGE> 53 of 78
5.25 Use of Proceeds. Not use or permit any proceeds of the
Loans or Letters of Credit to be used, either directly or indirectly, for
the purpose, whether immediate, incidental or ultimate, of "purchasing or
carrying" any Margin Stock, and furnish to Agent upon request, a statement
in conformity with the requirements of Federal Reserve Form U-l referred to
in Regulation U of the Board of Governors of the Federal Reserve System.
5.26 Transactions with Related Parties. Not, and not permit
any Subsidiary to, (a) pay any management, consulting or similar fees to any
Related Party, whether for services rendered to Borrower or any Subsidiary,
or otherwise or (b) enter into or be a party to any other transaction or
arrangement, including without limitation the purchase, sale, lease or
exchange of property or the rendering of any service, with any Related
Party, except in the ordinary course of and pursuant to the reasonable
requirements of Borrower's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to Borrower or such Subsidiary than would
obtain in a comparable arm's-length transaction with a Person not a Related
Party.
5.27 Amendment of Documents. Not amend, modify or alter, or
permit to be amended, modified or altered, (a) any Senior Loan Document
(other than an amendment permitted by section 8.1(a), (b), (c) or (f) of the
Senior Note Indenture), or (b) any Subordinated Debt Document (other than an
amendment permitted by section 11.01(a) or (d) of the 2007 Indenture or that
has the purpose of curing any ambiguity or correcting or supplementing any
provision contained in the 2007 Indenture which may be defective or
inconsistent with any other provision contained in the 2007 Indenture), or
(c) any agreement, instrument or document evidencing any of the Indebtedness
listed on Schedule 5.15.
6. DEFAULT.
6.1 Event of Default. Each of the following shall
constitute an Event of Default under this Agreement:
(a) Non-Payment. Default in the payment, when due or
declared due, of any of the Liabilities.
(b) Non-Payment of Other Indebtedness. Default in the
payment when due, whether by acceleration or otherwise (subject to any
applicable grace period), of any Indebtedness of, or guaranteed by,
Borrower, any other Obligor or any Subsidiary with a principal balance in
excess of $1,000,000 (other than (i) any Indebtedness under this Agreement
and any Notes or (ii) any Indebtedness of any Subsidiary to Borrower or to
any other Subsidiary), including without limitation the Senior Loans and the
Subordinated Debt.
(c) Acceleration of Other Indebtedness. Any event or
condition shall occur which results in the acceleration of the maturity of
any Indebtedness of, or guaranteed by, Borrower, any other Obligor or any
Subsidiary with a principal balance in excess of $1,000,000 (other than (i)
any Indebtedness of any Subsidiary to Borrower or to any other Subsidiary
and (ii) the Indebtedness under this Agreement and any Notes), including
without limitation the Senior Loans and the Subordinated Debt, or enables
the holder or holders of such other Indebtedness or any trustee or agent for
such holders to accelerate the maturity of such other Indebtedness.
<PAGE> 54 of 78
(d) Other Obligations. Default in the performance or
observance (subject to any applicable grace period or waiver of such
default) of (i) any obligation or agreement of Borrower, any other Obligor
or any Subsidiary to or with Agent or any Lender (other than any obligation
or agreement of Borrower hereunder and under any Notes) or (ii) any
obligation or agreement of Borrower, any other Obligor or any Subsidiary to
or with any other Person (other than (x) any such obligation or agreement
constituting or related to Indebtedness, (y) Trade Accounts Payable or (z)
any obligation or agreement of any Subsidiary to Borrower or to any other
Subsidiary), in any case, if such default would be reasonably likely to have
a Material Adverse Effect, except only to the extent that the existence of
any such default is being contested by Borrower, such other Obligor or such
Subsidiary, as the case may be, in good faith and by appropriate proceedings
and Borrower, such other Obligor or such Subsidiary, as applicable, shall
have set aside on its books such reserves or other appropriate provisions
therefor as may be required by GAAP.
(e) Bankruptcy. Borrower, any other Obligor or any
Subsidiary applies for, consents to, or acquiesces in the appointment of a
trustee, receiver or other custodian for Borrower, such other Obligor or
such Subsidiary, or for a substantial part of the property of Borrower, such
other Obligor or such Subsidiary, or makes a general assignment for the
benefit of creditors; or, in the absence of such application, consent or
acquiescence, a trustee, receiver or other custodian is appointed for
Borrower, any other Obligor or any Subsidiary, or for a substantial part of
the property of Borrower, any other Obligor or any Subsidiary and is not
discharged or dismissed within sixty (60) days; or any bankruptcy,
reorganization, debt arrangement or other proceeding under any bankruptcy or
insolvency law, or any dissolution or liquidation proceeding, is instituted
by or against Borrower, any other Obligor or any Subsidiary; or any warrant
of attachment or similar legal process is issued against any substantial
part of the property of Borrower, any other Obligor or any Subsidiary.
Notwithstanding the foregoing, none of the foregoing events that occurs with
respect to a Subsidiary shall constitute an Event of Default, unless such
event would be reasonably likely to have a Material Adverse Effect.
(f) Insolvency. Borrower, any other Obligor or any
Subsidiary becomes insolvent, or generally fails to pay, or admits in
writing its inability to pay, its debts as they mature. Notwithstanding the
foregoing, none of the foregoing events that occurs with respect to a
Subsidiary shall constitute an Event of Default, unless such event would be
reasonably likely to have a Material Adverse Effect.
(g) ERISA Liabilities. Any of the following events shall
have occurred, if such event is reasonably likely to have a Material Adverse
Effect: (i) the existence of a Reportable Event, (ii) the withdrawal of
Borrower or any ERISA Affiliate from a Pension Plan during a plan year in
which it was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA, (iii) the occurrence of an obligation to provide affected parties
with a written notice of intent to terminate a Pension Plan in a distress
termination under Section 4041 of ERISA, (iv) the institution by PBGC of
proceedings to terminate any Pension Plan, (v) any event or condition that
would require the appointment of a trustee to administer a Pension Plan,
(vi) the withdrawal of Borrower or any ERISA Affiliate from a Multiemployer
Plan, and (vii) any event that would give rise to a Lien under Section
302(f) of ERISA.
<PAGE> 55 of 78
(h) Non-Compliance With This Agreement. Default in the
performance of any of Borrower's agreements set forth in Section 3.2, 3.3,
5.5, 5.6, 5.12 through 5.19, 5.22 through 5.27 or in Section 6 of Supplement
A hereto (and not constituting an Event of Default under any of the other
subsections of this Section 6.1) and continuance of such default for ten
(10) days after the occurrence thereof; or default in the performance of any
of Borrower's agreements set forth in Section 5.1.1, 5.1.2, 5.1.3, 5.1.4 or
5.2 (and not constituting an Event of Default under any of the other
subsections of this Section 6.1), and continuance of such default for five
(5) days after the occurrence thereof; or default in the performance of any
of Borrower's other agreements herein set forth (and not constituting an
Event of Default under any of the other subsections of this Section 6.1),
and continuance of such default for thirty (30) days after notice thereof to
Borrower by Agent.
(i) Non-Compliance With Related Agreements. Default in the
performance by Borrower, any other Obligor or any Subsidiary of any of its
agreements set forth in any Related Agreement (and not constituting an Event
of Default under any of the other subsections of this Section 6.1), and
continuance of such default after notice from Agent and the expiration of
the grace or cure period (if any) set forth therein.
(j) Representations and Warranties. Any representation or
warranty made by Borrower or any other Obligor herein (including without
limitation any representation or warranty contained in Section 3.2 or 3.3)
or in any Related Agreement is untrue or misleading in any material respect
when made or deemed made; or any schedule, statement, report, notice,
certificate or other writing furnished by Borrower or any other Obligor to
Agent or any Lender is untrue or misleading in any material respect on the
date as of which the facts set forth therein are stated or certified; or any
certification made or deemed made by Borrower or any other Obligor to Agent
or any Lender is untrue or misleading in any material respect on or as of
the date made or deemed made.
(k) Litigation. There shall be entered against any one of
Borrower, any other Obligor or any Subsidiary one or more judgments or
decrees in excess of $2,000,000 in the aggregate at any one time
outstanding, excluding those judgments or decrees (i) that shall have been
outstanding less than thirty (30) calendar days from the entry thereof, (ii)
for and to the extent which Borrower, such Obligor or such Subsidiary, as
applicable, is insured and with respect to which the insurer has assumed
responsibility in writing or for and to the extent which Borrower, such
Obligor or such Subsidiary, as applicable, is otherwise indemnified if the
terms of such indemnification are satisfactory to Agent or (iii) which have
been stayed pending appeal and with respect to which Borrower, such Obligor
or such Subsidiary has posted any required bond or letter of credit.
(l) Termination of Obligations. If any Obligor shall
terminate any of its obligations to Agent or any Lender in respect of the
Liabilities.
(m) Validity. If the validity or enforceability of this
Agreement or any Related Agreement shall be challenged by Borrower or any
other Obligor, or if this Agreement or any Related Agreement shall fail to
remain in full force and effect.
(n) Conduct of Business. If Borrower, any other Obligor or
any Subsidiary is enjoined, restrained or in any way prevented by court
<PAGE> 56 of 78
order, which has not been dissolved or stayed within five (5) Banking Days,
from conducting all or any material part of its business affairs and such
event might have a Material Adverse Effect.
(o) Change of Control. If Paul S. Lindsey, Jr., members of
his immediate family, and the other Persons who are officers of Borrower on
the Closing Date, cease to retain among them record and beneficial ownership
of not less than a majority of the outstanding voting stock of Borrower on a
fully diluted basis; or if any "Change of Control" (as defined in the Senior
Loan Documents) occurs which results in an obligation of Borrower to
commence a "Change of Control Offer" pursuant to the terms of the Senior
Loan Documents.
(p) Material Adverse Change. Agent shall have determined in
good faith that a Material Adverse Change has occurred.
6.2 Effect of Event of Default; Remedies.
(a) In the event that one or more Events of Default
described in Section 6.1(e) shall occur, then each Lender's commitment and
the Credit extended under this Agreement shall terminate and all Liabilities
hereunder and under any Notes shall be immediately due and payable without
demand, notice or declaration of any kind whatsoever.
(b) In the event an Event of Default other than one
described in Section 6.1(e) shall occur, at the option of Agent or Requisite
Lenders, each Lender's commitment shall terminate and all Liabilities
hereunder and under any Notes shall immediately be due and payable without
demand or notice of any kind whatsoever, whereupon the Credit extended under
this Agreement shall terminate. Agent shall promptly advise Borrower of any
such declaration.
(c) In the event of the occurrence of any Event of Default,
Agent may exercise any one or more or all of the following remedies, all of
which are cumulative and non-exclusive:
(i) Any remedy contained in this Agreement or in any of the
Related Agreements or any Supplemental Documentation;
(ii) Any rights and remedies available to Agent or any Lender
under the UCC, and any other applicable law;
(iii) To the extent permitted by applicable law, Agent may,
without notice, demand or legal process of any kind, take
possession of any or all of the Collateral (in addition to
Collateral which it may already have in its possession), wherever
it may be found, and for that purpose may pursue the same
wherever it may be found, and may enter into any premises where
any of the Collateral may be or is supposed to be, and search
for, take possession of, remove, keep and store any of the Colla-
teral until the same shall be sold or otherwise disposed of, and
Agent shall have the right to store the same in any of Borrower's
premises without cost to Agent;
(iv) At Agent's request, Borrower will, at Borrower's
expense, assemble the Collateral and make it available to Agent
<PAGE> 57 of 78
at a place or places to be designated by Agent which is
reasonably convenient to Agent and Borrower; and
(v) Agent at its option, and pursuant to notification given
to Borrower as provided for below, may sell any Collateral
actually or constructively in its possession at public or private
sale and apply the proceeds thereof as provided below.
7. ADDITIONAL PROVISIONS REGARDING COLLATERAL AND AGENT'S RIGHTS.
7.1 Notice of Disposition of Collateral. Any notification
of intended disposition of any of the Collateral required by law shall be
deemed reasonably and properly given if given at least five (5) calendar
days before such disposition.
7.2 Application of Proceeds of Collateral. Any proceeds of
any disposition by Agent of any of the Collateral may be applied by Agent to
the payment of expenses in connection with the taking possession of,
storing, preparing for sale, and disposition of Collateral, including
Attorneys' Fees and legal expenses, and any balance of such proceeds may be
applied by Agent toward the payment of such of the Liabilities, and in such
order of application, as Agent may from time to time elect.
7.3 Care of Collateral. Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any Collateral
in its possession if it takes such action for that purpose as Borrower
requests in writing, but failure of Agent to comply with such request shall
not, of itself, be deemed a failure to exercise reasonable care, and no
failure of Agent to preserve or protect any rights with respect to such
Collateral against prior parties, or to do any act with respect to the
preservation of such Collateral not so requested by Borrower, shall be
deemed a failure to exercise reasonable care in the custody or preservation
of such Collateral.
7.4 Performance of Borrower's Obligations. Agent shall have
the right, but shall not be obligated, to discharge any claims or Liens
against, and any Taxes at any time levied or placed upon any or all
Collateral, including without limitation those arising under statute or in
favor of landlords, taxing authorities, government, public and/or private
warehousemen, common and/or private carriers, processors, finishers,
draymen, coopers, dryers, mechanics, artisans, laborers, attorneys, courts,
or others. Agent may also pay for maintenance and preservation of
Collateral. Agent may, but is not obligated to, perform or fulfill any of
Borrower's responsibilities under this Agreement which Borrower has failed
to perform or fulfill. Agent may advance to Borrower as a Revolving Loan
any payment made or expense incurred under this Section 7.4.
7.5 Agent's Rights. None of the following shall affect the
obligations of Borrower or any Subsidiary to Agent or any Lender under this
Agreement or Agent's right with respect to the remaining Collateral (any or
all of which actions may be taken by Agent at any time, whether before or
after an Event of Default, at its sole and absolute discretion and without
notice to Borrower):
(a) acceptance or retention by Agent or any Lender of other
property or interests in property as security for the
Liabilities, or acceptance or retention of any Obligor(s), in
addition to Borrower, with respect to any of the Liabilities;
<PAGE> 58 of 78
(b) release of its Lien on, or surrender or release of, or
the substitution or exchange of or for, all or any part of the
Collateral or any other property securing any of the Liabilities
(including but not limited to any property of any Obligor other
than Borrower), or any extension or renewal for one or more
periods (whether or not longer than the original period), or
release, compromise, alteration or exchange, of any obligations
of any guarantor or other Obligor with respect to any Collateral
or any such property;
(c) extension or renewal for one or more periods (whether or
not longer than the original period), or release, compromise,
alteration or exchange of any of the Liabilities, or release or
compromise of any obligation of any Obligor with respect to any
of the liabilities; or
(d) failure by Agent or any Lender to resort to other
security or pursue any Person liable for any of the Liabilities
before resorting to the Collateral.
8. CONDITIONS PRECEDENT; DELIVERY OF DOCUMENTS AND OTHER MATTERS.
8.1 Conditions Precedent to Initial Loans and Letters of
Credit. The obligation of each Lender that is a party to this Agreement on
the date hereof to make the initial Loans and for Issuing Bank to issue the
initial Letters of Credit is subject to satisfaction of the following
conditions precedent (in addition to those provided in Section 8.2):
8.1.1 Legal Audit. Each Lender's counsel shall have completed
its legal due diligence relating to Borrower, each Subsidiary, and each
other Obligor, the results of which shall provide such Lender with results
and information which, in such Lender's sole determination, are satisfactory
to permit such Lender to enter into the secured financing transaction
described in this Agreement and the Related Agreements. Such due diligence
examination may include but need not be limited to an analysis of all of
Borrower's, each Subsidiary's, and each other Obligor's business operations,
affairs, conditions, assets, liabilities and commitments (including without
limitation analysis of contingent liabilities, environmental and health and
safety matters, material contracts, labor matters, union contracts, employee
benefit plans, pending or threatened litigation and tax matters).
8.1.2 Liens. The Liens on the Collateral granted under this
Agreement and the Related Agreements and all other Liens granted to Agent,
for the benefit of itself and Lenders, to secure the Liabilities, shall be
senior, perfected Liens, except for the Liens disclosed on Schedule 4.9
which are designated as senior to the Liens of Agent, and except as
otherwise agreed by Agent and Lenders, and all financing statements and
other documents relating to Collateral shall have been filed or recorded, as
appropriate.
8.1.3 Transactions. (i) Borrower shall have issued the Units,
such Units and the Senior Loan Documents shall in all respects be
satisfactory to each Lender, the net proceeds of such Units, in an amount
not less than $95,000,000, shall have been received by Borrower and the
proceeds thereof shall have been used by Borrower in substantially the
manner described in the "Use of Proceeds" section of the effective
Registration Statement for the Units (the "Prospectus"), (ii) the Stock
<PAGE> of 59 of 78
Repurchase shall have been consummated in accordance with the terms of the
applicable agreements and all applicable laws, (iii) Borrower shall have
acquired the assets of PSNC Propane Corporation, and (iv) the merger of
Empire Gas Operating Corporation and Borrower shall have been consummated,
all as described in the Prospectus and all pursuant to agreements,
instruments and documents in form and substance satisfactory to each Lender
(the transactions referred to in clauses (i), (ii), (iii) and (iv) are
hereinafter referred to as the "Transactions").
8.1.4 Solvency. Each Lender shall be satisfied that, after
giving effect to the Transactions, and the initial Loans and Letters of
Credit, Borrower, each Borrowing Subsidiary and each other Obligor shall
have assets (excluding goodwill and other intangible assets not capable of
valuation) having a value, both at present fair salable value and at fair
valuation, greater than the amount of such Person's liabilities (including
trade debt and Indebtedness to Agent and Lenders). Each Lender shall be
satisfied that all of the assets supporting the Loans and Letters of Credit
under this Agreement shall be sufficient in value to provide Borrower and
each Subsidiary with sufficient cash flow and working capital to enable it
to thereafter profitably operate its business and to meet its obligations as
they become due. Each Lender shall be satisfied that Borrower and each
Borrowing Subsidiary has adequate capital for the business in which it is
about to engage. Notwithstanding the foregoing, the failure of any
individual Borrowing Subsidiaries to meet the foregoing requirements shall
not constitute a failure to satisfy this Section 8.1.4 unless such failure
would be reasonably likely to have Material Adverse Effect. In connection
with the foregoing, each Lender shall have received such written appraisals,
balance sheets, solvency certificates or other materials as Agent shall
reasonably request.
8.1.5 Maximum Initial Loans. There shall be no Loans made on
the Closing Date in excess of $2,000,000.
8.1.6 Organization. Each Lender shall be satisfied with the
corporate, capital and legal structures of Borrower and the Subsidiaries,
and the terms of any agreements, documents or instruments relating thereto.
8.1.7 Effect of Law. No law or regulation affecting Agent's
or any Lender's entering into the secured financing transaction contemplated
by this Agreement shall impose upon Agent or such Lender any material
obligation, fee, liability, loss, penalty, cost, expense or damage.
8.1.8 Exhibits; Schedules. All Exhibits and Schedules to this
Agreement shall have been completed and submitted to each Lender, shall be
in form and substance satisfactory to such Lender and shall contain no facts
or information which such Lender, in its sole judgment, determines to be
unacceptable.
8.1.9 Licenses, Permits and Consents. All licenses, permits,
consents, judicial and regulatory approvals and corporate action necessary
to consummate the Transactions and the making of the initial Loans and the
issuance of the initial Letters of Credit shall have been obtained on terms
acceptable to each Lender.
8.1.10 Fees. If not funded with the proceeds of the initial
Loans, Agent shall have received the closing fee referred to in Section 2.14
and any other fees due and payable by Borrower or any other Person on the
<PAGE> 60 of 78
funding of the initial Loans and the issuance of the initial Letters of
Credit.
8.1.11 Title to Assets. Borrower and its Subsidiaries shall
have good, indefeasible and merchantable title to the Collateral, free and
clear of all Liens, except as otherwise permitted in Section 5.16 hereof.
8.1.12 Material Adverse Change; Litigation. No Material
Adverse Change, as reasonably determined by each Lender, shall have occurred
from March 31, 1994 through the Closing Date and the issuance of the initial
Letters of Credit and no Material Adverse Change, as reasonably determined
by such Lender, shall have occurred in the facts and information disclosed
to such Lender or otherwise relied upon by such Lender in making its
decision to enter into this Agreement. In addition, there shall not have
been instituted or threatened any litigation or proceedings in any court or
administrative forum affecting or threatening to affect the consummation of
the Transactions or which would have a Material Adverse Effect, in each case
as reasonably determined by each Lender.
8.1.13 Documents. In addition to this Agreement, each Lender
shall have received all of the following, each duly executed where
appropriate and dated as of the Closing Date (or such other date as shall be
satisfactory to Agent), in form, and containing terms and provisions,
acceptable to such Lender:
(a) Resolutions. A copy, duly certified by the secretary or
an assistant secretary of Borrower of (i) resolutions of the
Board of Directors of Borrower authorizing (A) the borrowings by
Borrower hereunder, (B) the execution, delivery and performance
by Borrower of this Agreement and each Related Agreement to which
Borrower is a party or by which it is bound, and (C) certain
officers or employees of Borrower to request borrowings by
telephone and to execute Borrowing Base Certificates, and the
consent of the shareholders of Borrower thereto, (ii) all
documents evidencing any other necessary corporate action with
respect to this Agreement and the Related Agreements, (iii) all
approvals or consents, if any, with respect to this Agreement and
the Related Agreements, (iv) a list of the names of all officers
and directors of Borrower, together with the true signatures of
such officers, and specifying those authorized to sign this
Agreement and the Related Agreements, (v) the by-laws of
Borrower, (vi) the Certificate of Incorporation of Borrower and
(vii) a list of all shareholders of Borrower and the number of
shares of Borrower's stock owned by each; and similar certifi-
cates executed by the secretary or assistant secretary of each
Borrowing Subsidiary or other Obligor;
(b) Borrower's Closing Certificate. The certificate of the
President or Chairman of the Board of Borrower certifying to the
fulfillment of all conditions precedent to closing and funding
the secured financing transaction contemplated by this Agreement
(other than those conditions solely under the control of Agent
and Lenders), to the truth and accuracy, as of such date, of the
representations and warranties of Borrower contained in this
Agreement and each Related Agreement to which Borrower is a party
or by which it is bound and to the absence of any defaults under
any such agreements;
<PAGE> 61 of 78
(c) Certificates and Articles of Incorporation. A copy,
duly certified by the Secretary of State of Missouri, of
Borrower's Certificate of Incorporation; and a copy, duly
certified by the Secretary of State of the applicable state, of
each Borrowing Subsidiary's and other Obligor's Articles or
Certificates of Incorporation, as applicable;
(d) Good Standing. A copy, duly certified by the applicable
Secretary of State of (i) a certificate of good standing issued
by the Secretary of the State of each state where Borrower, any
Borrowing Subsidiary or any other Obligor is incorporated or
organized and (ii) in any state in which Borrower, any Borrowing
Subsidiary or any other Obligor is doing business under an
assumed name, a certificate or other document issued by the
Secretary of State of each such state evidencing Borrower's, any
Borrowing Subsidiary's or any other Obligor's authority to use
such name;
(e) Legal Opinion. Legal opinion from Wilmer, Cutler &
Pickering, counsel for Borrower and the Subsidiaries;
(f) Insurance. Evidence satisfactory to Agent of the
existence of insurance on the Collateral and business of Borrower
and each Subsidiary, in amounts and with insurers acceptable to
Agent, together with evidence establishing that Agent, for the
benefit of itself and Lenders, is named as the sole loss payee
with respect to property and casualty insurance covering the
Collateral, and additional insured with respect to liability
insurance;
(g) Authorization to Pay Proceeds. Written authorization
and instructions from Borrower, in form satisfactory to Agent,
for disbursement of the proceeds of the initial Loans and
issuance and delivery of the initial Letters of Credit;
(h) Intercompany Loans. The agreements, instruments and
documents governing the Intercompany Loans shall have been
executed and delivered by Borrower and the Subsidiaries, such
agreements, instruments and documents shall be in form and
substance satisfactory to each Lender, and the liens and security
interests granted to secure such indebtedness shall have been
properly perfected;
(i) Other Related Agreements. Notes in the aggregate amount
of $15,000,000 with respect to the Revolving Loans executed by
Borrower; and a Solvency Certificate executed by Borrower;
(j) Borrowing Subsidiary Guaranty. Each Borrowing
Subsidiary shall have entered into a guaranty in favor of Agent,
for the benefit of itself and Lenders, pursuant to which such
Borrowing Subsidiary shall have unconditionally guaranteed the
Liabilities;
(k) Borrowing Subsidiary Security Agreement. Each Borrowing
Subsidiary shall have entered into a security agreement with
Agent, for the benefit of itself and Lenders, pursuant to which
such Borrowing Subsidiary shall have granted to Agent, for the
<PAGE> 62 of 78
benefit of itself and Lenders, a security interest in the
accounts receivable, inventory, and certain other assets of such
Borrowing Subsidiary as collateral for the guaranty described in
clause (j) above; and
(l) Other Documents. Such other documents as Lenders shall
determine, in their sole discretion, to be necessary or
desirable.
8.1.14 Default. No Event of Default or Unmatured Event of
Default shall have occurred and be continuing or would be caused thereby.
8.2 Continuing Conditions Precedent to all Loans;
Certification. The obligation of each Lender to make the initial Loans and
each subsequent Loan and to establish any LIBOR Rate Loans, and for Issuing
Bank to issue the initial Letters of Credit and each subsequent Letter of
Credit, is subject to satisfaction of the following conditions precedent in
addition to those provided in Section 8.1:
(a) No Change in Condition. No change in the condition or
operations, financial or otherwise, of Borrower, any Subsidiary
or any other Obligor, shall have occurred which change, in the
reasonable credit judgment of Requisite Lenders, is reasonably
likely to have a Material Adverse Effect;
(b) Default. Before and after giving effect to such Loan
and/or Letter of Credit, no Event of Default or Unmatured Event
of Default shall have occurred and be continuing;
(c) Insurance. There shall have been no material change, or
notice of prospective material change (whether such notice is
formal or informal), in the nature, extent, scope or cost of the
insurance policies of Borrower or any Subsidiary listed on
Schedule 4.7 which change would have a Material Adverse Effect,
or would significantly adversely affect Borrower's or any
Subsidiary's ability to perform its obligations under this
Agreement, any Note(s), or any Related Agreement to which it is a
party or by which it is bound;
(d) Representations and Warranties. Before and after giving
effect to such Loan and/or Letter of Credit, the representations
and warranties in Section 4 shall be true and correct as though
made on the date of such Loan and/or Letter of Credit, except for
those representations and warranties which are expressly made as
of the date hereof, except for such changes as are specifically
permitted hereunder, and except for the representation and
warranty contained in Section 4.26 with regard to the
truthfulness and correctness of all representations and
warranties contained in any agreement evidencing any of the
Transactions (which representations and warranties are only being
made as of the date specified in the relevant agreement) other
than those, if any, contained in the Senior Loan Documents; and
(e) Accounting Methods. Borrower shall not have made any
material (as determined by Agent) change in its accounting
methods or principles except as required by GAAP.
<PAGE> 63 of 78
Each request for a Loan or a Letter of Credit hereunder made or deemed to
have been made by Borrower shall be deemed to be a certificate of Borrower
as to the matters set out in the foregoing provisions of this Section 8.2.
9. INDEMNITY.
9.1 Environmental and Safety and Health Indemnity. Borrower
hereby indemnifies Agent and each Lender and agrees to hold Agent and each
Lender harmless from and against any and all losses, liabilities, damages,
injuries, costs, expenses and claims of any and every kind whatsoever
(including without limitation court costs and Attorneys' Fees) which at any
time or from time to time may be paid, incurred or suffered by, or asserted
against, Agent or any Lender for, with respect to, or as a direct or
indirect result of the violation by Borrower or any of the Subsidiaries of
any Environmental Law or Occupational Safety and Health Law, or with respect
to, or as a direct or indirect result of (a) the presence on or under, or
the Release from, properties utilized by Borrower and/or any Subsidiary in
the conduct of its business into or upon any land, the atmosphere, or any
watercourse, body of water or wetland, of any Hazardous Material or the
escape, seepage, leakage, spillage, disposal, discharge, emission or release
of any other hazardous or toxic waste, substance or constituent, or other
substance (including without limitation any losses, liabilities, damages,
injuries, costs, expenses or claims asserted or arising under any Environ-
mental Law) or (b) the existence of any unsafe or unhealthful condition on
or at any premises utilized by Borrower and/or any Subsidiary in the conduct
of its business, in either case, except for any such amounts owing as a
direct result of the gross negligence or willful misconduct of Agent or any
Lender. The provisions of and undertakings and indemnification set out in
this Section 9.1 shall survive satisfaction and payment of the Liabilities
and termination of this Agreement.
9.2 General Indemnity. In addition to the payment of
expenses pursuant to Section 12.3, whether or not the transactions
contemplated hereby shall be consummated, Borrower agrees to indemnify, pay
and hold Agent and each Lender, and the officers, directors, employees,
agents, and affiliates of each of Agent and each Lender (collectively, the
"Indemnitees") harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever
(including without limitation the reasonable fees and disbursements of
counsel for any of such Indemnitees in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or
not any of such Indemnitees shall be designated a party thereto) that may be
imposed on, incurred by, or asserted against any Indemnitee, in any manner
relating to or arising out of this Agreement or any Related Agreement, the
statements contained in any commitment letter delivered by Agent or any
Lender, Agent's or any Lender's agreement to make the Loans or to issue
Letters of Credit hereunder, the use or intended use of any Letters of
Credit, or the use or intended use of the proceeds of any of the Loans
hereunder (the "indemnified liabilities"); provided that Borrower shall have
no obligation to an Indemnitee hereunder with respect to indemnified
liabilities arising from the gross negligence or willful misconduct of such
Indemnitee. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in the preceding sentence may be unenforceable because it
violates any law or public policy, Borrower shall contribute the maximum
portion that it is permitted to pay under applicable law to the payment and
satisfaction of all indemnified liabilities incurred by the Indemnitees or
any of them. The provisions of the undertakings and indemnification set out
<PAGE> 64 of 78
in this Section 9.2 shall survive satisfaction and payment of the
Liabilities and termination of this Agreement.
9.3 Capital Adequacy. If Agent or any Lender shall
reasonably determine that the application or adoption of any law, rule,
regulation, directive, interpretation, treaty or guideline regarding capital
adequacy, or any change therein or in the interpretation or administration
thereof, whether or not having the force or law (including without
limitation application of changes to Regulation H and Regulation Y of the
Federal Reserve Board issued by the Federal Reserve Board on January 19,
1989 and regulations of the Comptroller of the Currency, Department of the
Treasury, 12 CFR Part 3, Appendix A, issued by the Comptroller of the
Currency on January 27, 1989) increases the amount of capital required or
expected to be maintained by Agent or such Lender or any Person controlling
Agent or such Lender in excess of any such increases affecting Agent or such
Lender as of the date hereof, and such increase is based upon the existence
of Agent's or such Lender's obligations hereunder and other commitments of
this type, then from time to time, within ten (10) days after demand from
Agent or such Lender, Borrower shall pay to Agent or such Lender, as
applicable, such amount or amounts as will compensate Agent or such Lender
or such controlling Person, as the case may be, for such increased capital
requirement. The determination of any amount to be paid by Borrower under
this Section 9.3 shall take into consideration the policies of Agent or such
Lender or any Person controlling Agent or such Lender with respect to
capital adequacy and shall be based upon any reasonable averaging,
attribution and allocation methods. A certificate of Agent or such Lender,
as applicable, setting forth the amount or amounts as shall be necessary to
compensate Agent or such Lender as specified in this Section 9.3 shall be
delivered to Borrower and shall be conclusive in the absence of manifest
error.
10. AGENT.
10.1 Appointment of Agent. Each Lender hereby irrevocably
appoints and authorizes Continental to act as its Agent under this Agreement
and the Related Agreements. Each Lender hereby irrevocably appoints and
authorizes Agent to take such action on such Lender's behalf under the
provisions of this Agreement and the Related Agreements and to exercise such
powers and perform such duties under this Agreement and the Related
Agreements as are specifically delegated to Agent by the terms hereof and
thereof, together with such other powers as are reasonably incidental hereto
and thereto. Agent may perform any of its duties hereunder or under the
Related Agreements by or through its agents or employees. The provisions of
this Section 10 are solely for the benefit of Agent and Lenders, and neither
Borrower nor any Obligor shall have any rights as a third party beneficiary
of any of the provisions hereof. In performing its functions and duties
under this Agreement and the Related Agreements, Agent shall act solely as
agent of Lenders and does not assume and shall not be deemed to have assumed
any obligation toward or relationship of agency or trust with or for
Borrower or any Obligor.
10.2 Nature of Duties of Agent. Agent shall have no duties,
obligations or responsibilities except those expressly set forth in this
Agreement and the Related Agreements. Neither Agent nor any of its
officers, directors, employees or agents shall be liable for any action
taken or omitted by it as such hereunder or under the Related Agreements or
in connection herewith or therewith, unless caused by its or their gross
<PAGE> 65 of 78
negligence or willful misconduct. The duties of Agent shall be mechanical
and administrative in nature; Agent shall not have by reason of this
Agreement or the Related Agreements a fiduciary relationship in respect of
any Lender; and nothing in this Agreement or the Related Agreements,
expressed or implied, is intended to or shall be so construed as to impose
upon Agent any obligations in respect of this Agreement or the Related
Agreements except as expressly set forth herein or therein. No duty to act,
or refrain from acting, and no other obligation whatsoever, shall be implied
on the basis of or imputed in respect of any right, power or authority
granted to Agent or shall become effective in the event of any temporary or
partial exercise of such rights, power or authority.
10.3 Agent in its Capacity as Lender. With respect to its
obligation to lend under this Agreement and the Related Agreements, the
Loans made by it and its participation in Letters of Credit, Agent shall
have the same rights and powers under this Agreement and the Related
Agreements as any Lender and may exercise the same as though it were not
Agent, and the terms "Lender" or "Lenders" shall, unless the context
otherwise indicates, include Agent in its capacity as a Lender hereunder.
Agent, any Lender and their respective affiliates may accept deposits from,
lend money to, and generally engage in any kind of banking or trust business
with Borrower, or Related Parties of Borrower, as if it were not Agent or as
if it or they were not a Lender hereunder and without any duty to account
therefor to the other parties to this Agreement; provided, that the
obligations of Borrower under such transactions shall not be deemed to be
Liabilities or secured by any Collateral without the prior written agreement
of the Requisite Lenders; provided, further that Lenders acknowledge and
agree that the obligations of Borrower to Continental or any other Lender as
Issuing Bank and with respect to any lockbox or bank account maintained by
or for the benefit of Borrower, including the Demand Deposit Account, the
Depository Accounts, and the Assignee Deposit Account, shall be deemed to be
Liabilities secured by the Collateral.
10.4 Independent Credit Analysis. Each Lender agrees that it
has, independently and without reliance upon Agent, any other Lender, or the
directors, officers, agents, attorneys or employees of Agent or of any other
Lender, and instead in reliance upon information supplied to it by or on
behalf of Borrower, made its own independent credit analysis and decision to
enter into this Agreement and the Related Agreements to which it is a party,
and that it shall independently and without reliance upon Agent, any other
Lender, or the directors, officers, agents, attorneys or employees of Agent
or of any other Lender, continue to make its own independent credit analysis
and decisions in acting or not acting under this Agreement and the Related
Agreements. Except as otherwise expressly provided herein, Agent shall not
have any duty or responsibility, either initially or on a continuing basis,
to provide any Lender with any credit or other information concerning the
affairs, financial condition, litigation, liabilities, or business of
Borrower or any other Obligor which may at any time come into the possession
of Agent (or any of its affiliates). In the event such information is
furnished to any Lender by Agent, Agent shall have no duty to confirm or
verify its accuracy or completeness and shall have no liability whatsoever
with respect thereto.
10.5 General Immunity. Neither Agent nor any of its
directors, officers, agents, attorneys or employees shall be liable to any
Lender for any action taken or omitted to be taken by it or them under this
Agreement or the Related Agreements or in connection herewith or therewith
<PAGE> 66 of 78
except for its or their own willful misconduct or gross negligence. Without
limiting the generality of the foregoing, Agent: (i) shall not be
responsible to Lenders for any recitals, statements, warranties or
representations under this Agreement or the Related Agreements or any
agreement or document relative hereto or thereto or for the financial or
other condition of any Obligor, (ii) shall not be responsible for the
authenticity, accuracy, completeness, value, validity, effectiveness, due
execution, legality, genuineness, enforceability, collectibility or
sufficiency of this Agreement or the Related Agreements or any other
agreements or any assignments, certificates, requests, financial statements,
projections, notices, schedules or opinions of counsel executed and
delivered pursuant hereto or thereto, (iii) shall not be bound to ascertain
or inquire as to the performance or observance of any of the terms,
covenants or conditions of this Agreement or the Related Agreements on the
part of Obligors or of any of the terms of any such agreement by any party
hereto or thereto and shall have no duty to inspect the property (including
the books and records) of any Obligor, (iv) shall have no obligation
whatsoever to Lenders or to any other Person to assure that the Collateral
exists or is owned by Borrower or another Obligor or is cared for, protected
or insured or that the Liens granted to Agent herein or in Related
Agreements or pursuant hereto or thereto have been properly or sufficiently
or lawfully created, perfected, protected, enforced, realized upon or are
entitled to any particular priority, and (v) shall incur no liability under
or in respect of this Agreement or the Related Agreements or any other
document by acting upon any notice, consent, certificate or other instrument
or writing (which may be by telegram, cable, telex, telecopier or similar
form of facsimile transmission) believed by Agent to be genuine and signed
or sent by the proper party. Agent may consult with legal counsel
(including counsel for Borrower), independent public accountants and other
experts selected by Agent and shall not be liable for any action taken or
omitted to be taken in good faith in accordance with the advice of such
counsel, accountants or experts.
10.6 Action by Agent.
(a) Actual Knowledge. Agent may assume that no Event of
Default has occurred and is continuing, unless Agent has actual knowledge of
the Event of Default, has received notice from Borrower or Borrower's
independent certified public accountants stating the nature of the Event of
Default, or has received notice from a Lender stating the nature of the
Event of Default and that such Lender considers the Event of Default to have
occurred and to be continuing.
(b) Discretion to Act. Agent shall have the right to
request instructions from Requisite Lenders by notice to each Lender. If
Agent shall request instructions from Requisite Lenders with respect to any
act or action (including the failure to act) in connection with this
Agreement or any Related Agreement, Agent shall be entitled to refrain from
such act or taking such action unless and until Agent shall have received
instructions from Requisite Lenders, and Agent shall not incur liability to
any Person by reason of so refraining. Without limiting the foregoing, no
Lender shall have any right of action whatsoever against Agent as a result
of Agent acting or refraining from acting hereunder or under any Related
Agreement in accordance with the instructions of Requisite Lenders. Agent
may give any notice required under Section 6 hereof without the consent of
any of Lenders unless otherwise directed by Requisite Lenders in writing and
will, at the direction of Requisite Lenders, give any such notice required
<PAGE> 67 of 78
under Section 6. Except for any obligation expressly set forth in this
Agreement or the Related Agreements, Agent may, but shall not be required
to, exercise its discretion to act or not act, except that Agent shall be
required to act or not act upon the instructions of Requisite Lenders
(unless all of Lenders are required to provide such instructions as provided
in Section 12.6) and those instructions shall be binding upon Agent and all
Lenders; provided that Agent shall not be required to act or not act if to
do so would expose Agent to liability or would be contrary to this Agreement
or any Related Agreements or to applicable law.
10.7 Right to Indemnity. Agent shall be fully justified in
failing or refusing to take any action under this Agreement or the Related
Agreements or in relation hereto or thereto unless it shall first be
indemnified (upon requesting such indemnification) to its satisfaction by
Lenders against any and all liability and expense which it may incur by
reason of taking or continuing to take any such action. Lenders further
agree to indemnify Agent ratably in accordance with their Pro Rata Shares
for any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind and
nature whatsoever which may be imposed on, incurred by or asserted against
Agent in any way relating to or arising out of this Agreement or the other
Related Agreements or the transactions contemplated hereby or thereby, or
the enforcement of any of the terms hereof or thereof or of any other
documents; provided no such liability, obligation, loss, damage, penalty,
action, judgment, suit, cost, expense or disbursement results from Agent's
gross negligence or willful misconduct. Each Lender agrees to reimburse
Agent in the amount of its Pro Rata Share of any out-of-pocket expenses for
which Agent is entitled to receive, but has not received, reimbursement
pursuant to this Agreement. The agreements in this Section 10.7 shall
survive the payment and fulfillment of the Liabilities and termination of
this Agreement.
10.8 Rights and Remedies to be Exercised by Agent Only. In
the event any remedy may be exercised with respect to this Agreement or the
Related Agreements or the Collateral, Agent shall pursue remedies designated
by Requisite Lenders subject to the proviso set forth in Section 10.6(b).
Each Lender agrees that no Lender shall have any right individually (a) to
realize upon the security created by this Agreement or the Related
Agreements, (b) enforce any provision of this Agreement or the Related
Agreements, or (c) make demand under this Agreement or the Related
Agreements; provided, that any Lender that is an Issuing Bank may make
demand upon Borrower as the Issuing Bank pursuant to Sections 2.2(b) and
2.2(c) and Continental may make demand upon Borrower pursuant to Section
12.4. Without limiting the foregoing, no Lender shall have any right
individually to take any action or provide any notice in connection with any
Subordinated Debt.
10.9 Agent's Resignation. Agent may resign at any time after
giving at least thirty (30) days' prior written notice of its intention to
do so to each Lender and to Borrower. Upon satisfaction of the foregoing
condition, Requisite Lenders shall have the right to appoint a successor
Agent (such appointment to be subject to the consent of Borrower (which
consent of Borrower shall not be unreasonably withheld or delayed);
provided, that Borrower's consent shall not be required if a Lender is
appointed Agent). If no successor Agent shall have been so appointed and
shall have accepted such appointment within twenty (20) days after Agent's
giving of such notice of resignation, then the resigning Agent may appoint a
<PAGE> 68 of 78
successor Agent. After any resigning Agent's resignation hereunder as
Agent, it shall be discharged from its duties and obligations under this
Agreement but the provisions of this Section 10 shall continue to bind Agent
and inure to Agent's benefit as to any actions taken or omitted to be taken
by it while it was Agent hereunder. Upon appointment of a successor Agent,
the term "Agent" shall for all purposes of this Agreement thereafter mean
such successor.
10.10 Disbursement of Proceeds of Loans and Other Advances.
Agent may (and is hereby irrevocably authorized by Lenders), but shall have
no duty to make such other disbursements and advances as Revolving Loans on
behalf of Lenders, including without limitation the making of advances for
the expenditures described in Section 7.4 of this Agreement, which Agent, in
its sole discretion, deems necessary or desirable to preserve or protect the
Collateral, or any portion thereof. Agent's use of its own checks upon its
funds or Agent's transfer of its own funds, by wire or otherwise, to an
account of Borrower or any other Obligor shall be deemed to be disbursements
made by each Lender under this Agreement and pursuant to the Related
Agreements.
10.11 Release of Collateral. Each Lender hereby irrevocably
authorizes Agent, at its option and in its discretion, to release any and
all guaranties of the Liabilities and any Lien granted to or held by Agent
upon any Collateral (i) upon termination of Lenders' obligations to make
Loans and payment and satisfaction of all Loans, Letter of Credit
reimbursement obligations and all other Payment Liabilities and which Agent
has been notified in writing are then due and payable; (ii)constituting
Collateral being sold or disposed of if Borrower certifies to Agent that the
sale or disposition is made in compliance with the terms of this Agreement
(and, absent any actual knowledge of Agent to the contrary, Agent may rely
conclusively on any such certificate, without further inquiry); (iii)
constituting property in which Borrower or any other Obligor owned no
interest at the time the Lien was granted and at all times thereafter; or
(iv) if approved, authorized or ratified in writing by Agent at the
direction of all Lenders. Upon request by Agent at any time, each Lender
will confirm in writing Agent's authority to release particular types or
items of Collateral pursuant to this Section 10.11.
10.12 Agreement to Cooperate. Each Lender agrees to cooperate
to the end that the terms and provisions of this Agreement may be promptly
and fully carried out. Lenders also agree, from time to time, at the
request of Agent, to execute and deliver any and all other agreements,
documents or instruments and to take such other actions, all as may be
reasonably necessary or desirable to effectuate the terms, provisions and
intent of this Agreement and the Related Agreements.
10.13 Sharing of Collateral. If any Lender shall obtain any
payment (whether voluntary, involuntary, through exercise of any right of
set off, or otherwise) on account of the Liabilities in excess of the amount
to which it is entitled pursuant to this Agreement, such Lender shall
forthwith purchase from the other Lenders such participations in such other
Lenders' claims against Borrower as shall be necessary to cause such
purchasing Lender to share the excess payment with the other Lenders in
accordance with the provisions of this Agreement; provided, that if all or
any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase from such other Lender shall be rescinded
and such other Lenders shall repay to the purchasing Lender the purchase
<PAGE> 69 of 78
price to the extent of their portion of such recovery together with an
amount equal to the share (according to the proportion of (i) the amount of
such other Lenders' required repayment, to (ii) the total amount so
recovered from the purchasing Lender) of any interest or other amount paid
or payable by purchasing Lender in respect of the total amount recovered.
10.14 Lenders to Act as Agents. If any Collateral or proceeds
thereof at any time comes into the possession or under the control of any
Lender, such Lender shall hold such Collateral or proceeds thereof as agent
for the joint benefit of Lenders, and will, upon receipt therefor, deliver
such Collateral or proceeds thereof to Agent.
11. ADDITIONAL PROVISIONS.
Additional provisions are set forth in Supplement A.
12. GENERAL.
12.1 Borrower Waiver. Except as otherwise provided for in
this Agreement, Borrower waives (a) presentment, demand and protest and
notice of presentment, protest, default, non-payment, maturity, release,
compromise, settlement, one or more extensions or renewals of any or all
commercial paper, accounts, contract rights, documents, instruments, chattel
paper and guaranties at any time held by Agent or any Lender on which
Borrower may in any way be liable and hereby ratifies and confirms whatever
Agent or any Lender may do in this regard; (b) all rights to notice and a
hearing prior to Agent's or any Lender's taking possession or control of, or
Agent's or any Lender's replevy, attachment or levy on or of, the Collateral
or any bond or security which might be required by any court prior to
allowing Agent or any Lender to exercise any of Agent's or any Lender's
remedies; and (c) the benefit of all valuation, appraisement and exemption
laws. Borrower acknowledges that it has been advised by counsel of its
choice with respect to this Agreement and the transactions evidenced by this
Agreement.
12.2 Power of Attorney. Borrower appoints Agent, or any
Person whom Agent may from time to time designate, as Borrower's attorney
and agent-in-fact with power (which appointment and power, being coupled
with an interest, is irrevocable until all Payment Liabilities under this
Agreement are paid and performed in full and this Agreement is terminated),
without notice to Borrower, to:
(a) At such time or times hereafter as Agent or said agent,
in its sole and absolute discretion, may determine in Borrower's
or Agent's name (i) endorse Borrower's name on any checks, notes,
drafts or any other items of payment relating to and/or proceeds
of the Collateral which come into the possession of Agent or
under Agent's control and apply such payment or proceeds to the
Liabilities; (ii) endorse Borrower's name on any chattel paper,
document, instrument, invoice, freight bill, bill of lading or
similar document or agreement in Agent's possession relating to
Accounts Receivable, Inventory or any other Collateral; (iii)
after the occurrence of an Event of Default, use the information
recorded on or contained in any data processing equipment and
computer hardware and software to which Borrower has access
relating to Accounts Receivable, Inventory and/or other
Collateral; (iv) after the occurrence of an Event of Default, use
<PAGE> 70 of 78
Borrower's stationery and sign the name of Borrower to
verification of Accounts Receivable and notices thereof to
Account Debtors; and (v) if not done by Borrower, do all acts and
things determined by Agent to be necessary, to fulfill Borrower's
obligations under this Agreement; and
(b) At such time or times after the occurrence of an Event
of Default, as Agent or said agent, in its sole and absolute
discretion, may determine, in Borrower's or Agent's name: (i)
demand payment of the Accounts Receivable; (ii) enforce payment
of the Accounts Receivable, by legal proceedings or otherwise;
(iii) exercise all of Borrower's rights and remedies with respect
to the collection of the Accounts Receivable and other Colla-
teral; (iv) settle, adjust, compromise, extend or renew the
Accounts Receivable; (v) settle, adjust or compromise any legal
proceedings brought to collect the Accounts Receivable; (vi) if
permitted by applicable law, sell or assign the Accounts
Receivable and/or other Collateral upon such terms for such
amounts and at such time or times as Agent may deem advisable;
(vii) discharge and release the Accounts Receivable and/or other
Collateral; (viii) prepare, file and sign Borrower's name on any
proof of claim in bankruptcy or similar document against any
Account Debtor; (ix) prepare, file and sign Borrower's name on
any notice of lien, assignment or satisfaction of lien or similar
document in connection with the Accounts Receivable and/or other
Collateral; and (x) do all acts and things necessary, in Agent's
sole and absolute discretion, to obtain repayment of the Liabili-
ties and to fulfill Borrower's other obligations under this
Agreement.
12.3 Expenses; Attorneys' Fees. Borrower agrees, whether or
not any Loan is made or Letter of Credit is issued hereunder, to pay upon
demand all Attorneys' Fees and all other reasonable expenses incurred by
Agent at any time, including fees, costs and expenses incurred in connection
with Collateral field audits or other due diligence investigations by Agent
and all Attorneys' Fees and other reasonable expenses incurred by any Lender
after the occurrence of an Event of Default. For purposes of this
Agreement, "Attorneys' Fees" means the reasonable value of the services (and
costs, charges and expenses related thereto) of the attorneys (and all
paralegals and any outside consultants employed by such attorneys) employed
by Agent or any Lender (including but not limited to attorneys and
paralegals who are employees of Agent or any Lender) from time to time (a)
in connection with the negotiation, preparation, execution, delivery,
administration and enforcement of this Agreement, any Related Agreement, any
Supplemental Documentation and all other documents or instruments provided
for herein or in any thereof or delivered or to be delivered hereunder or
under any thereof or in connection herewith or with any thereof, (b) to
prepare documentation related to the Loans made and other Liabilities
incurred hereunder, (c) to prepare any amendment to or waiver under this
Agreement or any Related Agreement and any documents or instruments related
thereto, (d) to represent Agent or any Lender in any litigation, contest,
dispute, suit or proceeding or to commence, defend or intervene in any
litigation, contest, dispute, suit or proceeding or to file a petition,
complaint, answer, motion or other pleading, or to take any other action in
or with respect to, any litigation, contest, dispute, suit or proceeding
(whether instituted by Agent or any Lender, Borrower or any other Person and
whether in bankruptcy or otherwise) in any way or respect relating to the
<PAGE> 71 of 78
Collateral, this Agreement or any Related Agreement (other than any
litigation, contest, dispute, suit or proceedings involving a dispute
between Agent and any Lender or between any Lender and any other Lender), or
Borrower's or any other Obligor's or any Subsidiary's affairs, (e) to
protect, collect, lease, sell, take possession of, or liquidate any of the
Collateral, (f) to perfect or attempt to enforce any security interest in
any of the Collateral or to give any advice with respect to such enforcement
and (g) to enforce any of Agent's or any Lender's rights to collect any of
the Liabilities. Agent may advance all such amounts to Borrower as a
Revolving Loan. Borrower also agrees (y) to indemnify and hold Agent and
each Lender harmless from any loss or expense which may arise or be created
by the acceptance of telephonic or other instructions for making Loans or
issuing Letters of Credit and (z) to pay, and save Agent and each Lender
harmless from all liability for, any stamp or other taxes which may be
payable with respect to the execution or delivery of this Agreement, or any
Related Agreement or Supplemental Documentation, or the issuance of any Note
or of any other instruments or documents provided for herein or to be
delivered hereunder or in connection herewith. In addition to the
foregoing, "Attorneys' Fees" shall include Agent's fees and expenses of the
types described in the preceding sentence incurred in connection with the
syndication, participation and assignment of this Agreement, any Related
Agreement and any Supplemental Documentation. Borrower's foregoing
obligations shall survive any termination of this Agreement.
12.4 Continental's Fees and Charges. To the extent not
already covered by Section 12.3, Borrower agrees to pay Continental on
demand by Continental the customary fees and charges of Continental for
maintenance of accounts with Continental or for providing other services to
Borrower (including fees, costs, and expenses incurred in connection with
Collateral field audits or other due diligence investigations) and if not so
paid, each Lender shall, without regard to any other provision of this
Agreement or any other Related Agreement or any defense that Borrower may
have to its obligation to pay Continental in connection with such fees and
charges, pay Continental for such Lender's Pro Rata Share of such fees and
charges, and any payments so made by Lenders to Continental shall be deemed
to be Revolving Loans. Each Lender (other than Continental) acknowledges
and agrees that it shall not be entitled to any of the fees and charges of
Continental as provided in the immediately preceding sentence. Agent may,
in its sole and absolute discretion, provide for such payment by advancing
the amount thereof to Borrower as a Revolving Loan.
12.5 Lawful Interest. In no contingency or event whatsoever
shall the interest rate charged pursuant to the terms of this Agreement
exceed the highest rate permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. In
the event that such a court determines that any Lender has received interest
hereunder in excess of the highest applicable rate, such Lender shall
promptly refund its Pro Rata Share of such excess interest to Borrower.
12.6 No Waiver by Agent or any Lender; Amendments. No
failure or delay on the part of Agent or any Lender in the exercise of any
power or right, and no course of dealing between Borrower and Agent or any
Lender shall operate as a waiver of such power or right, nor shall any
single or partial exercise of any power or right preclude other or further
exercise thereof or the exercise of any other power or right. The remedies
provided for herein are cumulative and not exclusive of any remedies which
may be available to Agent or any Lender at law or in equity. No notice to
<PAGE> 72 of 78
or demand on Borrower not required hereunder shall in any event entitle
Borrower to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the right of Agent or any Lender to
any other or further action in any circumstances without notice or demand.
No amendment, modification or waiver of, or consent with respect to, any
provision of this Agreement or any Related Agreement shall in any event be
effective unless the same shall be in writing and signed and delivered by
Requisite Lenders. Notwithstanding the foregoing, any amendment, modifica-
tion, termination, waiver or consent with respect to any of the following
provisions of this Agreement shall be effective only by a written agreement,
signed by each Lender affected thereby: (a) increase in the amount of the
Maximum Loan Amount of such Lender, (b) reduction of the principal of, rate
or amount of interest on the Revolving Loans or any fees or charges
(including, without limitation, any Letter of Credit fees or charges)
payable to such Lender (other than by the payment or prepayment thereof),
(c) postponement of the date fixed for any payment of principal of, or
interest on, the Loans or any fees or charges) (including, without
limitation, any Letter of Credit fees or charges) or other amounts payable
to such Lender, (d) change in the aggregate Pro Rata Share of Lenders which
shall be required for Lenders or any of them to take action hereunder or
amend the definition of "Requisite Lenders," or (e) amendment of this
Section 12.6. Agent may, but shall have no obligation to, with the written
concurrence of any Lender, execute amendments, modifications, waivers or
consents on behalf of that Lender. Any waiver of any provision of this
Agreement, and any consent to any departure by Borrower from the terms of
any provision of this Agreement, shall be effective only in the specific
instance and for the specific purpose for which given.
12.7 Termination of Revolving Credit. The Termination Date
and each Lender's commitment to make Loans hereunder may be extended for
successive one (1)-year periods by written agreement among Borrower and each
Lender executed at least ninety (90) days prior to a scheduled Termination
Date. Borrower may terminate the Revolving Credit at any time upon notice
to Agent and payment in full of the outstanding principal balance of the
Loans and all other Payment Liabilities under this Agreement and the Related
Agreements, as provided in Section 2.1.2. All of Agent's and each Lender's
rights and remedies, the Liens of Agent on the Collateral, for the benefit
of itself and Lenders, and all of Borrower's duties and obligations under
this Agreement shall survive termination of the Credit extended to Borrower
hereunder until all of the Payment Liabilities hereunder have been finally
paid and performed in full. The termination or cancellation of the Credit
shall not affect or impair the liabilities and obligations of Borrower or
any one or more of the Obligors to Agent and Lenders or Agent's and each
Lender's rights with respect to any Loans and advances made and other
Liabilities incurred prior to such termination or with respect to the
Collateral. Upon termination of the Revolving Credit and repayment of the
Payment Liabilities, Agent will promptly release all of its Liens on the
Collateral and all guaranties of the Liabilities.
12.8 Notices. Except as otherwise expressly provided herein,
any notice hereunder to Borrower, Agent or any Lender shall be in writing
(including facsimile communication) and shall be given to Borrower, Agent or
such Lender at its address or facsimile number set forth on the signature
pages hereof or at such other address or facsimile number as Borrower, Agent
or such Lender may, by written notice, designate as its address or facsimile
number for purposes of notices hereunder. All such notices shall be deemed
to be given when transmitted by facsimile, delivered by courier, personally
<PAGE> 73 of 78
delivered or, in the case of notice by mail, three (3) Banking Days
following deposit in the United States mails, properly addressed as herein
provided, with proper postage prepaid; provided, however, that notice to
Agent of Borrower's intent to terminate the Credit shall not be effective
until actually received by Agent.
12.9 Assignments and Participations; Information.
(a) This Agreement may not be assigned by Borrower without
the prior written consent of Agent and Lenders. Whenever in this Agreement
reference is made to any of the parties hereto, such reference shall be
deemed to include, wherever applicable, a reference to the successors and
permitted assigns of Borrower and the successors and assigns of Agent and
each Lender.
(b) Borrower and each Lender hereby agree that on or after
the date hereof, Continental may, in its discretion, without Borrower's or
any other Lender's consent, sell one or more assignments of portions of its
interest in the Credit. Each sale described in the preceding sentence shall
be to a Person or Persons satisfactory to Continental, in its discretion,
and on such terms and conditions as Continental may determine. No other
Lender may sell any portion of its interest in the Credit without the
consent of Borrower and Agent, which consent will not be unreasonably
withheld.
(c) Each assignment of an interest hereunder shall be
subject to the following conditions: (i) each assignment shall be of a
constant, and not a varying, ratable percentage of all of the assigning
Lender's rights and obligations under this Agreement, and the Maximum Loan
Amount assigned shall be in a minimum amount of $5,000,000 and after giving
effect to such assignment no Lender's Maximum Loan Amount shall be less than
$5,000,000 (unless such Lender sells all of its interest in the Credit), and
(ii) the parties to each such assignment shall execute and deliver to Agent,
for its acceptance and recording in the Register, an Assignment and
Acceptance Agreement, with a copy to Borrower. Upon such execution,
delivery, acceptance and recording in the Register, from and after the
effective date specified in each Assignment and Acceptance Agreement and
agreed to by Agent, (x) the assignee thereunder shall, in addition to any
rights and obligations hereunder held by it immediately prior to such
effective date, if any, have the rights and obligations hereunder that have
been assigned to it pursuant to such Assignment and Acceptance Agreement and
shall, to the fullest extent permitted by law, have the same rights and
benefits hereunder as if it were an original Lender hereunder and (y) the
assigning Lender shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance
Agreement, relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an Assignment and Acceptance Agreement
covering all or the remaining portion of such assigning Lender's rights and
obligations under this Agreement, the assigning Lender shall cease to be a
party hereto).
(d) Agent shall maintain a copy of each Assignment and
Acceptance Agreement delivered to and accepted by it and a register (the
"Register") for the recordation of the names and addresses of Lenders and
the Maximum Loan Amount and principal amount of the Loans owing to each
Lender from time to time. The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and Borrower, Agent and
<PAGE> 74 of 78
Lenders may treat each Person whose name is recorded in the Register as a
Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance
Agreement executed by the assigning Lender and the assignee and a processing
and recordation fee of $2,500 (payable by the assigning Lender or the
assignee, as shall be agreed between them), Agent shall, if such Assignment
and Acceptance Agreement has been completed and is in compliance with this
Agreement and in substantially the form of Exhibit D and Agent has consented
to the assignment evidenced thereby, (i) accept such Assignment and
Acceptance Agreement, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to Borrower.
(f) Each Lender may sell participations to one or more other
financial institutions in or to all or a portion of its rights and
obligations under and in respect of any and all facilities under this
Agreement; provided, however, that (i) such Lender's obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (iii) Borrower, Agent and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and (iv) such participant's
rights to agree or to restrict such Lender's ability to agree to the
modification, waiver or release of any of the terms of this Agreement or the
Related Agreements or to the release of any Collateral covered by this
Agreement or the Related Agreements, to consent to any action or failure to
act by any party to this Agreement or any of the Related Agreements, or to
exercise or refrain from exercising any powers or rights which any Lender
may have under or in respect of this Agreement or the Related Agreements or
any Collateral, shall be limited to the right to consent to (A) an increase
in the Maximum Loan Amount of Lender from whom such participant purchased a
participation, (B) reduction of the principal of, or rate or amount of
interest on the Loans subject to such participation (other than by the
payment or prepayment thereof) or (C) postponement of any date fixed for any
payment of principal of, or interest on, the Loans subject to such partici-
pation.
(g) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section 12.9, disclose to the assignee or participant or proposed assignee
or participant, any information relating to Borrower or its Subsidiaries
furnished to such Lender by or on behalf of Borrower; provided that, prior
to any such disclosure, such assignee or participant, or proposed assignee
or participant, shall agree to preserve the confidentiality of any
confidential information described therein and such Lender shall notify
Borrower of the assignee or participant, or proposed assignee or partici-
pant.
(h) Anything in this Agreement to the contrary notwith-
standing, in the case of any participation, all amounts payable by Borrower
under this Agreement or the Related Agreements shall be calculated and made
in the manner and to the parties required hereby as if no such participation
had been sold.
<PAGE> 75 of 78
(i) Agent agrees to promptly notify Borrower of each sale of
a participation or permitted assignment hereunder. Borrower agrees to use
its best efforts to assist Lenders in their efforts to sell assignments and
participations hereunder. In addition, Borrower agrees to execute new Notes
in favor of each of the selling and purchasing Lender, upon each sale of an
assignment hereunder, provided that the existing Notes in favor of the
selling Lender are simultaneously therewith returned to Borrower.
12.10 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
12.11 Successors. This Agreement shall be binding upon each
of Borrower, Agent and each Lender and their respective successors and
permitted assigns, and shall inure to the benefit of each of Borrower, Agent
and each Lender and their respective successors and permitted assigns.
12.12 Construction. Borrower acknowledges that this Agreement
shall not be binding upon Agent or any Lender or become effective until and
unless accepted by Agent or such Lender, as applicable, in writing. If so
accepted by Agent or any Lender, this Agreement and the Related Agreements
and Supplemental Documents shall, unless otherwise expressly provided
therein, be deemed to have been negotiated and entered into in, and shall be
governed and controlled by the laws of, the State of Illinois as to
interpretation, enforcement, validity, construction, effect, choice of law,
and in all other respects, including but not limited to the legality of the
interest rate and other charges, but excluding perfection of security
interests and liens which shall be governed and controlled by the laws of
the relevant jurisdiction.
12.13 Consent to Jurisdiction. To induce Agent and each
Lender to accept this Agreement, Borrower irrevocably agrees that, subject
to Agent's sole and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY
WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT,
THE RELATED AGREEMENTS, OR THE SUPPLEMENTAL DOCUMENTATION OR THE COLLATERAL
SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE
OF ILLINOIS. BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF
ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE AND
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON BORROWER, AND AGREES
THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL DIRECTED TO
BORROWER AT THE ADDRESS STATED ON THE SIGNATURE PAGE HEREOF AND SERVICE SO
MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF.
12.14 Subsidiary Reference. Any reference herein to a
Subsidiary or Subsidiaries of Borrower, and any financial definition, ratio,
restriction or other provision of this Agreement which is stated to be
applicable to "Borrower and the Subsidiaries" or which is to be determined
on a "consolidated" or "consolidating" basis, shall apply only to the extent
Borrower has any Subsidiaries and, where applicable, to the extent any such
Subsidiaries are consolidated with Borrower for financial reporting
purposes.
12.15 Waiver of Jury Trial. BORROWER, AGENT AND EACH LENDER
EACH WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS (a) UNDER THIS AGREEMENT OR ANY RELATED
<PAGE> 76 of 78
AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
(b) ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
<PAGE>
<PAGE> 77 of 78
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of
the date first written above.
EMPIRE GAS CORPORATION
By: _______________________________
Title:____________________________
Address: 1700 South Jefferson Street
Lebanon, Missouri 65536
Telecopier Number: (417) 532-3101
Attention: Chief Executive Officer
CONTINENTAL BANK N.A.
By: ________________________________
Title: ___________________________
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Telecopier Number: (312) 828-6647
Attention: Business Credit Group
Maximum Loan Amount: $15,000,000
<PAGE>
<PAGE> 78 of 78
LIST OF EXHIBITS AND SCHEDULES
______________________________
Exhibits:
________
Exhibit A Form of Borrowing Base Certificate
Exhibit B Form of Accountant's Letter
Exhibit C Form of Compliance Certificate
Exhibit D Form of Assignment and Acceptance Agreement
Schedules:
Schedule 4.1 Schedule of Tradenames, State of Incorporation &
Qualification
Schedule 4.7 Insurance Summary
Schedule 4.8 Schedule of Litigation and Contingent Liabilities
Schedule 4.9 Schedule of Liens
Schedule 4.10 Schedule of Subsidiaries
Schedule 4.11 Schedule of Partnerships and Joint Ventures
Schedule 4.12 Schedule of Business and Collateral Locations
Schedule 4.16 Schedule of Patents, Trademarks and Copyrights
Schedule 4.18 Schedule of Labor Matters
Schedule 4.19 Schedule of Contingent Employee Benefit Plan Liabilities
Schedule 4.21 Schedule of Noncompliance
Schedule 4.22 Schedule of Proposed Tax Assessments
Schedule 4.25 Schedule of Environmental Matters
Schedule 4.27 Schedule of Capitalized Lease Obligations
Schedule 5.15 Schedule of Indebtedness
Schedule 5.18 Schedule of Investments
<PAGE>
SUPPLEMENT A
to
LOAN AND SECURITY AGREEMENT
Dated as of June 29, 1994 among
Empire Gas Corporation,
Continental Bank N.A., as Agent and a Lender,
and the other Lenders Party Thereto
1. Loan Agreement Reference. This Supplement A, as it may be
amended or modified from time to time, is a part of the Loan and Security
Agreement dated as of June 29, 1994 among Borrower, Agent and Lenders
(together with all amendments, modifications and supplements thereto, the
"Loan Agreement"). Terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Loan Agreement.
2. Revolving Credit Amount; Borrowing Base.
2.1 Revolving Credit Amount. The maximum amount of
Revolving Loans which Lenders will make available to Borrower (such amount
is herein called the "Revolving Credit Amount") is $15,000,000.
2.2 Borrowing Base. The term "Borrowing Base," as used
herein, shall mean:
(i) an amount equal to up to 85% of the
net amount (after deduction of such reserves and
allowances as Agent deems proper and necessary in
its reasonable judgment) of Eligible Accounts
Receivable ("Accounts Receivable Availability");
plus
(ii) an amount equal to the least of (a)
$8,000,000, (b) 150% of Accounts Receivable
Availability and (c) up to 60% (after deduction of
such reserves and allowances as Agent deems proper
and necessary in its reasonable judgment) of
Eligible Inventory; plus
(iii) during the period commencing on
August 1, 1994 and ending on January 31, 1995,
$3,000,000; plus
(iv) during the period commencing on
August 1, 1995 and ending on January 31, 1996,
$1,500,000.
2.3 Agent's and Lenders' Rights. Borrower agrees that
nothing contained in Supplement A (i) shall be construed as Agent's or any
Lender's agreement to resort or look to a particular type or item of
Collateral as security for any specific Loan or portion of the Liabilities
or advance or in any way limit Agent's or any Lender's right to resort to
any or all of the Collateral as security for any of the Liabilities, (ii)
shall be deemed to limit or reduce any Lien upon any portion of the
Collateral or other security for the Liabilities or (iii) shall supersede
Section 2.9 of the Loan Agreement.
3. Interest.
3.1 Loans.
<PAGE> 2 of 5
3.1.1 Revolving Loans.
(a) Interest to Maturity. The unpaid principal balance
of the Revolving Loans (other than Overdraft Loans and Over Advances) shall
bear interest to maturity at a per annum rate equal to the Reference Rate in
effect from time to time plus 1.00% (the "Adjusted Reference Rate");
provided, that pursuant to the provisions of Section 3.1.1(c), below, from
time to time Borrower may elect to have all or any portion of the Revolving
Loans bear interest at the LIBOR Base Rate.
(b) Default Rate. After the occurrence of any Event of
Default, at the option of Requisite Lenders, the entire unpaid principal
balance of the Revolving Loans shall bear interest until paid at a rate per
annum equal to the greater of (i) the applicable interest rate from time to
time in effect plus 2.00% and (ii) 2.00% above the applicable interest rate
in effect at the time of such Event of Default.
(c) LIBOR Rate Option. Borrower shall have the right,
from time to time, to designate all or any portion of the Revolving Loans as
bearing interest at the then applicable LIBOR Base Rate, by means of a
written notice to Agent specifying (i) the amount of such Revolving Loans
that will bear interest at a LIBOR Base Rate (provided, that such LIBOR Rate
Loans shall be in a minimum amount of Five Hundred Thousand Dollars
($500,000)); (ii) the date on which the applicable Interest Rate Period
shall begin; and (iii) the Interest Rate Period applicable thereto. All
designations of Revolving Loans as LIBOR Rate Loans must be received by
Agent not later than 10:00 a.m., Chicago time, three (3) Banking Days prior
to the date the applicable Interest Rate Period is to begin (or is to be
continued). Notwithstanding the foregoing, (x) all undesignated portions of
the Revolving Loans shall bear interest at the Adjusted Reference Rate, (y)
no Interest Rate Period may commence or be continued at any time that an
Event of Default or an Unmatured Event of Default is in existence, notwith-
standing a contrary designation by Borrower, and (z) in no event may more
than four (4) LIBOR Rate Loans having different Interest Rate Periods be
outstanding at any one time. Each designation by Borrower of a LIBOR Rate
Loan shall be irrevocable.
3.1.2 Overdraft Loans; Over Advances. Overdraft Loans
and Over Advances shall bear interest at the rate(s) determined pursuant to
Section 2.7 or Section 2.8 of the Loan Agreement, as applicable.
3.2 Computation. Interest shall be calculated on the
basis of a year consisting of 360 days and paid for actual days elapsed;
provided, that the computation of interest on LIBOR Rate Loans shall include
the date on which the applicable Interest Rate Period began, but shall
exclude the last day of the applicable Interest Rate Period. LIBOR Rate
Loans not repaid on the last day of the Interest Rate Period applicable
thereto shall be continued or converted into Revolving Loans bearing
interest at the Adjusted Reference Rate, as applicable, and bear interest as
provided herein, from and including the last day of such Interest Rate
Period. Changes in any interest rate provided for herein which are due to
changes in the Reference Rate shall take effect on the date of the change in
the Reference Rate.
3.3 Payment. Until maturity, interest on the Loans
shall be payable on the 28th day of each month, commencing on July 28, 1994,
and at maturity; provided, that interest on LIBOR Rate Loans shall be
payable in arrears on the last day of the Interest Rate Period applicable
<PAGE> 3 of 5
thereto and at maturity. After maturity, whether by acceleration or
otherwise, accrued interest shall be payable on demand.
3.4 Funding Indemnification. If any payment of a LIBOR
Rate Loan occurs on a date which is not the last day of the applicable
Interest Rate Period, whether because of acceleration, prepayment or
otherwise, Borrower will indemnify each Lender and Agent for any loss or
cost incurred by it resulting therefrom, including without limitation any
loss or cost in liquidating or employing deposits acquired to fund or
maintain such Loan. Agent shall deliver a written statement as to the
amount due, if any, under this Section, after consultation with each Lender
so affected. Such written statement shall set forth in reasonable detail
the calculations upon which Agent and each Lender determined such amount and
shall be final, conclusive and binding on Borrower in the absence of
manifest error. Determination of amounts payable under this Section shall
be calculated as though each Lender funded its LIBOR Rate Loans through the
purchase of a deposit of the type and maturity corresponding to the LIBOR
Rate Loan and applicable Interest Rate Period bearing interest at the LIBOR
Base Rate less two and fifty hundredths percent (2.50%), as applicable,
whether or not the Lender actually funded the Loan in that manner. The
amount specified in the written statement shall be payable on demand after
receipt by Borrower of the written statement.
3.5 Availability of Interest Rate Options. If any
Lender determines that maintenance of any of its LIBOR Rate Loans would
violate any applicable law, rule, regulation or directive, whether or not
having the force of law, the Lender shall immediately notify Agent thereof
and Agent shall suspend the availability of such LIBOR Rate Loans and
require any LIBOR Rate Loans outstanding and so affected to be repaid; or if
any Lender determines that (i) deposits of a type or maturity appropriate to
match fund LIBOR Rate Loans are not available, (ii) the LIBOR Rate does not
accurately reflect the cost of making such Loans, or (iii) the Lender's
ability to make or maintain LIBOR Rate Loans has been materially adversely
affected by the occurrence of any event after the date hereof, then Lender
shall immediately notify Agent thereof and Agent shall suspend the
availability of the LIBOR Rate Loans, as applicable, after the date of any
such determination.
3.6 Lenders' Obligation to Mitigate. Agent and each
Lender agrees that if it becomes aware of either (i) the occurrence of an
event or the existence of a condition described in Section 9.3 of the Loan
Agreement or Section 3.5 hereof that would cause Agent or such Lender to
make a determination of the nature described therein, or (ii) the
imposition, assessment or collection of any taxes on or in respect of any
Loan or Letter of Credit, Agent or such Lender will, to the extent
consistent with its internal policies, use reasonable efforts to issue,
make, fund or maintain the affected Letters of Credit or Loans through
another lending office of such Agent or Lender, if any, if, as a result
thereof, the additional amounts that would otherwise be required to be paid
to Agent or such Lender in respect thereof, would be reduced, or LIBOR Rate
Loans could be maintained, as the case may be, and if, as determined by
Agent or such Lender in its reasonable discretion, the issuing, making,
funding or maintaining of such Letters of Credit or Loans through such other
lending office would not adversely affect Agent or such Lender or such
Letters of Credit or Loans. Borrower hereby agrees to pay all reasonable
expenses incurred by Agent or any Lender in using another lending office
pursuant to this Section 3.6.
<PAGE> 4 of 5
4. Additional Eligible Account Receivable Requirements. Each
Account Receivable identified by Borrower as an Eligible Account Receivable
must not be unpaid on the date that is 120 days after the applicable invoice
dates. If invoices representing 25% or more of the unpaid net amount of all
Accounts Receivable from any one Account Debtor are unpaid more than 120
days after the applicable invoice dates, then all Accounts Receivable
relating to such Account Debtor shall cease to be Eligible Accounts
Receivable.
5. Intentionally Omitted.
6. Additional Covenants. From the Closing Date and thereafter
until all of Borrower's Liabilities under the Loan Agreement are paid in
full, Borrower agrees that, unless Requisite Lenders otherwise consent in
writing:
6.1 Tangible Net Worth. Borrower will not permit
Tangible Net Worth to be less than the following amounts on any date set
forth below:
Date Tangible Net Worth
____ __________________
Closing Date $(53,000,000)
June 30, 1995 (57,000,000)
June 30, 1996 (61,000,000)
6.2 Capital Expenditures. Borrower will not purchase
or otherwise acquire (including, without limitation, acquisition by way of
Capitalized Lease), or commit to purchase or otherwise acquire, or permit
its Subsidiaries to purchase or otherwise acquire or commit to purchase or
otherwise acquire, any fixed asset if, after giving effect to such purchase
or other acquisition, the aggregate cost of all fixed assets purchased or
otherwise acquired by Borrower or its Subsidiaries in any Fiscal Year period
set forth below, other than in connection with an Acquisition or startup,
would exceed the following amounts during the corresponding periods:
Period Capital Expenditures
______ ____________________
1995 Fiscal Year $3,750,000
1996 Fiscal Year 3,000,000
1997 Fiscal Year 3,000,000
6.3 Interest Coverage Ratio. Borrower will not permit
the ratio ("Interest Coverage Ratio") of (a) net earnings before interest
expense, income tax expense, depreciation and amortization for any period
set forth below, to (b) cash interest expense in respect of Indebtedness
under the Agreement, in respect of the Senior Notes, in respect of
Subordinated Debt and in respect of Acquisition Indebtedness, in each case
for such period, each determined for Borrower and its Subsidiaries on a
<PAGE> 5 of 5
consolidated basis, and in accordance with GAAP, to be less than 1.2:1.0 for
any fiscal quarter.
For purposes of Section 6.3, (i) net earnings shall not
include any gains or losses on the sale or other disposition of Investments
or fixed assets or any other extraordinary items of income, and (ii)
interest expense shall include, without limitation, implicit interest
expense on Capitalized Leases.
Borrower's Initials_______
Agent's Initials_________
Date: June 29, 1994
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<PAGE>
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<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> JUL-01-1993
<PERIOD-END> JUN-30-1994
<CASH> 2,927
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<RECEIVABLES> 5,454
<ALLOWANCES> 1,620
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<CURRENT-ASSETS> 17,064
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