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, 1995
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 Incorporation (IRS Employer
or Organization) Identification No.)
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) 532-3103
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, 1995 is: $116,480
Shares of Common Stock, $0.001 par value, outstanding as of close of
business on September 15, 1995: 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) 532-3103.
<PAGE> 2 of 55
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES.
Introduction
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. 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 for June 30, 1994 and all financial information from
periods beginning thereafter exclude the assets of Energy and include the
assets of PSNC.
On August 15, 1995, the Company entered into a joint venture
with Northwestern Growth Corporation, a subsidiary of Northwestern Public
Service Corporation, to acquire the assets of Synergy Group Incorporated,
the nation's fifth largest LP gas distributor. The Company has acquired for
$10,000 10% of the common stock of SYN, Inc., the acquisition entity, and
has an option to acquire an additional 20% of the common stock of SYN, Inc.
for $20,000. The Company has entered into a Management Agreement pursuant
to which the Company manages the joint entity. Under the terms of the
Management Agreement, the Company provides all management of the retail
facilities and accounting services at the central office. In exchange for
those services, the Company receives a $500,000 annual management fee and
$3.25 million annual overhead cost reimbursement, both paid on a monthly
basis. Unless specifically referenced, all information contained herein
excludes information pertaining to the Synergy operations.
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 156 retail
service centers with 18 additional bulk storage facilities. Since August
15, 1995 the Company has operated an additional 107 service centers pursuant
to the Management Agreement relating to SYN, Inc. During the fiscal year
ended June 30, 1995, the Company sold approximately 86.7 million gallons of
propane to approximately 112,000 customers in 21 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<PAGE>
<PAGE> 3 of 55
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 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.
Sales of propane to residential and commercial customers,
which account for the vast majority of the Company's revenue, have provided
a relatively stable source of revenue for the Company. Sales to residential
customers accounted for approximately 66.0% of the Company's aggregate
propane sales revenue and 70.7% of its aggregate gross margin from propane
sales in fiscal year 1995. Historically, this market has provided higher
margins than other retail propane sales. Based on fiscal year 1995 propane
sales revenue, the customer base consisted of 23.9% commercial and 10.1%
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 1.1% of
revenue from 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 1995, contract
suppliers sold nearly 73% of the propane purchased by the Company, and the
two largest suppliers sold 17.6% and 12%, 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 9.0
million gallons of propane, and each service center has equipment for
transferring the gas into and from the bulk storage tanks. The Company
<PAGE> 4 of 55
operates 13 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 owns an
underground storage facility with a 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 or sell to third parties. The Company is exploring the possibility of
making modifications to its underground storage facility, and has obtained
from an engineering and construction company a study of the costs of
rehabilitating and opening the facilities, which range from $500,000 to
$3,000,000. If the rehabilitation work is not performed and the facilities
cannot be sold, then the Company would be required to close the facilities
at a cost which the Company believes will not exceed $500,000.
Deliveries to customers are made by means of 400 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. Most 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 eighteen regions,
which include 107 service centers managed since August 1995 pursuant to the
Management Agreement relating to SYN, Inc. Each region is supervised by a
regional manager. The regions are grouped into four divisions, and the
regional managers report to their respective divisional vice president or
manager. 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 subsidiary of Energy,
provides data processing and management information services to the Company
pursuant to a services agreement. See "Introduction," above. 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
<PAGE> 5 of 55
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 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, and amended in April 1995. Subject to
<PAGE> 6 of 55
an exception for multi-state acquisitions, the non-competition agreement as
amended restricts the Company from making acquisitions in certain
territories in two states (southeastern Missouri and northern Arkansas) and
an area within a 50-mile radius of an Energy operation in any state east of
the Mississippi River until June 30, 1997. Reciprocal restrictions apply to
Energy under the agreement.
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 comprehensive general and automobile liability policy
provides coverage for losses of up to $101.0 million with a $500,000
deductible per occurrence. 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. During the year ended
July 1994, workers compensation coverage had a $500,000 deductible per
incident. Since July 1994 (and prior to July 1993) the Company has obtained
workers' compensation coverage from carriers and state insurance pools. The
deductibles on comprehensive general and automobile liability and for
workers' compensation for the year ended July 1994 mean that the Company is
effectively self-insured for liability up to these deductibles.
Regulation
The Company's operations are subject to various federal,
state, and local laws governing the transportation, storage and distribution
of propane, occupational health and safety, and other matters. All states
in which the Company operates have adopted fire safety codes that regulate
the storage and distribution of 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, 1995, the Company had approximately 600
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.
<PAGE> 7 of 55
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its annual shareholder meeting on June 26,
1995. The only matter presented for a vote was the re-election of Jim J.
Shoemake as a director. Mr. Shoemake was re-elected with 1,579,225 votes
cast in favor and no votes cast against, withheld or abstaining. The term
of office of the following directors continued after the meeting: Paul S.
Lindsey, Jr., Douglas A. Brown, Kristin L. Lindsey, and Bruce M. Withers,
Jr.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
As of September 15, 1995, the Company's Common Stock was
held of record by 9 shareholders. There is currently no active trading
market in the Company's Common Stock.
As of September 15, 1995, 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 1994 or 1995 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.
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, 1995. The financial data of the Company as
of and for each of the years in the five-year period ended June 30, 1995
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 for the
period ending June 30, 1994 do not take into account the effects of the
Transaction on the Company, the data for that period are not comparable to
the data for the year ended June 30, 1995.
<PAGE>
<PAGE> 8 of 55
<TABLE>
<CAPTION>
Year Ended June 30,
___________________________________________________________________________
1991 1992 1993 1994 1995
____ ____ ____ ____ ____
(in thousands except ratios and per share amounts)
<S> <C> <C> <C> <C> <C>
Operating data:
Operating revenue $121,758 $112,080 $128,401 $124,522 $74,640
Gross profit <F1> 61,787 61,107 68,199 66,632 39,028
Operating expenses 44,772 40,052 41,845 44,966 29,694
Depreciation and amortization 9,552 10,062 10,351 10,150 6,166
Operating income 7,463 10,993 16,003 11,516 3,168
Interest expense:
Cash interest 12,038 10,721 9,826 8,542 10,681
Amortization of debt discount
and expenses 890 1,006 1,686 2,016 4,889
Total interest expense 12,928 11,727 11,512 10,558 15,570
Net income (loss) before extraordinary
items <F2> (4,557) (1,474) 2,228 (1,190) (8,726)
Other operating data:
Capital expenditures 8,813 6,703 4,358 20,015 11,874
Cash from sale of retail service
centers and other assets 497 3,062 1,088 366 2,956
EBITDA <F3> 17,015 21,055 26,354 21,666 9,334
Income (loss) per share before
extraordinary items $(.33) $(.11) $.16 $(0.08) $(5.53)
/TABLE
<PAGE>
<PAGE> 9 of 55
<TABLE>
<CAPTION>
As of June 30,
____________________________________________________________________________
1991 1992 1993 1994 1995
____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C>
Balance sheet data:
Total assets $158,383 $151,471 $148,020 $104,644 $105,128
Long-term debt (including current
maturities) 84,289 78,958 79,249 105,612 115,647
Stockholders' equity (deficit) 26,438 24,901 25,913 (28,220) (36,946)
___________
<FN>
<F1> Represents operating revenue less the cost of products sold.
<F2> Empire Gas did not declare or pay dividends on its common stock during the five-year period ending June 30, 1995.
<F3> 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).
</FN>
</TABLE>
<PAGE>
<PAGE> 10 of 55
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 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 89% of its revenue in fiscal year
1995. 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 consists primarily of interest on its existing credit
facility and the 12 7/8% Senior Secured Notes due 2004 (the "Senior Secured
Notes"). Interest expense increased significantly between 1994 and 1995 as
a result of issuance of the Senior Secured Notes at the end of June, 1994.
Through 1999 a significant portion of the increase will be non-cash interest
expense.
Historical financial data for years ended prior to June 30,
1994 do not reflect either the transfer of Energy or the acquisition of the
assets of PSNC in the Transaction and therefore historical data for those
periods are not comparable to results for the periods subsequent to June 30,
1994. In general, these transactions have resulted 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 have also declined as a result of the elimination of
salaries and related expenses of departing officers, the termination of
certain agreements between the Company and its former principal shareholder
or entities controlled by him, and the elimination of costs related to
service centers that are no longer part of the Company.
<PAGE> 11 of 55
Fiscal Years Ended June 30, 1995 and June 30, 1994
Operating revenue. Operating revenue decreased $49.9
million to $74.6 million in fiscal year 1995 as compared to $124.5 million
in fiscal year 1994. The decrease was primarily due to the disposition of
service centers in the Transaction, offset by increases due to the
acquisition of service centers from PSNC in the Transaction. Operating
revenue from service centers retained in the Transaction and acquired from
PSNC was $74.8 million in fiscal year 1994. The decrease of $200,000, or
.3%, in fiscal year 1995 was due to a $1.9 million decrease in gas sales
offset by increases of $1.0 million in gas systems and appliances, $400,000
in miscellaneous income, and $300,000 in service labor. The decrease in gas
sales was due to an approximately $.06 per gallon decrease in the average
net sales price of propane created by competitive pressures resulting from
decreased demand due to warm weather. The decrease was partially offset by
a 3.9 million gallons volume increase due to the addition of retail service
centers through five acquisitions and ten new startups during fiscal year
1995. The increase in miscellaneous income was due primarily to the gain on
assets sold including six retail service centers. The increase in service
labor is due to the increased installations from greater appliance sales and
the increased service market created by the acquisitions discussed above.
Cost of products sold. Cost of products sold decreased
$22.3 million to $35.6 million in fiscal year 1995 as compared to $57.9
million in fiscal year 1994, primarily as a result of the Transaction. Cost
of product sold from service centers retained in the Transaction and
acquired from PSNC was $35.1 million in fiscal year 1994. The increase of
$500,000, or 1.4%, is the result of the 3.9 million gallon volume increase,
partially offset by a $.01 reduction in the cost of propane and an increase
in gas systems and appliances cost due to the volume of sales.
Gross profit. The Company's gross profit for the year
decreased $27.6 million to $39.0 million in fiscal year 1995 as compared to
$66.6 million in fiscal year 1994, primarily as a result of the Transaction.
Gross profit from service centers retained in the Transaction and acquired
from PSNC was $39.7 million in fiscal year 1994. The decrease of $700,000,
or 1.8%, was caused by the .3% decrease in operating revenue and the 1.4%
increase in cost of products sold. The Company's gross profit per gallon
decreased from $.43 in 1994 for service centers retained in the Transaction
and acquired from PSNC to $.38 in fiscal year 1995, as a result of the
decrease in sales price of $.06 per gallon offset by the $.01 reduction in
the cost of propane.
General and administrative expense. General and
administrative expenses decreased $15.4 million to $28.6 million in fiscal
year 1995 from $43.9 million in fiscal year 1994, primarily as a result of
savings resulting from the reduction of personnel in connection with the
Transaction. As a percentage of total revenues, general and administrative
expenses increased to 38.3% in fiscal year 1995 from 35.3% in fiscal year
1994. The increase is due primarily to increases as a percent of total
revenues of 2.2% in salaries and commissions, .6% in professional fees, .3%
in both rent and maintenance and taxes and licenses, and .4% in office
expenses. These increases were partially offset by a decrease of .5% in
vehicle fuel and maintenance and .4% in insurance and liability claims.
Other smaller increases were incurred in miscellaneous expenses and travel
and entertainment and advertising.
<PAGE> 12 of 55
The increase in salaries and commissions was due to several
factors including 1) increased retail salary expense due primarily to
additional employees as a result of acquisitions and startups and increased
commissions as a result of increased emphasis on new customers and tank sets
and 2) increased home office salary expense as a result primarily of
additional operational employees due to acquisitions and additional
marketing employees as a result of the Company's emphasis on enhanced sales
efforts. The increase in professional fees is due to fees related to the
formation of a 401k plan, fees resulting from a state income tax audit, and
fees for a supply purchase consulting agreement. The increase in rent and
maintenance of buildings is primarily due to increased tank painting,
building and maintenance in converting certain rental facilities to a new
identity in connection with the restructuring and an increase in the rental
of facilities primarily related to the six retail service centers acquired
in June 1994. The increase in taxes and licenses relates primarily to
property taxes paid for six retail service centers acquired in June 1994.
The increase in office expenses is primarily due to additional spending
required for the change of identity for several retail sites and additional
mailings to customers. The decrease in insurance and liability claims is
due to a reduction in liability claims expense as a result of reduced
claims. The decrease in vehicle fuel and maintenance is due to the
replacement of older vehicles occurring at the end of fiscal year 1994 and
in early fiscal year 1995 resulting in lower maintenance expenses.
Provision for doubtful accounts. The provision for doubtful
accounts increased approximately $80,000 to a little over $1.1 million in
fiscal year 1995 from a little under $1.1 million in 1994. The increase is
due to the final determination of management regarding the aged balances of
accounts after substantial collection efforts during fiscal year 1995 offset
in part by a reduction in the level of accounts receivable as a result of
the transfer of Energy.
Depreciation and amortization. Depreciation and
amortization costs decreased by $4.0 million to $6.2 million from $10.2
million primarily as a result of the reduction in assets as a result of the
Transaction. Depreciation and amortization on assets retained in the
Transaction or acquired from PSNC increased by $700,000, or 12.7%, from $5.5
million for the year ended June 30, 1994 due to amortization of noncompete
agreements acquired with new service centers and depreciation of the related
assets purchased in June 1994 and fiscal 1995.
Interest expense. Interest expense increased by
approximately $2.4 million, or 25.9%, to $10.7 million in fiscal year 1995
as compared to $8.5 million in 1994, due to the approximately $45 million
face value of additional long-term debt outstanding as compared to the same
period of the prior year, partially offset by an overall lower rate of
interest, principally on the new senior secured notes issued in June 1994,
as compared to the higher rates on debt repaid with the June 1994 offering.
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
<PAGE> 13 of 55
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 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
<PAGE> 14 of 55
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.
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 flows generated by operations and from borrowings under its
working capital facility.
Cash flow provided from operating activities was $1.4
million in fiscal year 1995 as compared to $12.9 million in fiscal year
1994. This reduction in cash flow resulted from the $8.3 million decrease
in operating income which was caused by the Transaction occurring at June
30, 1994 and the negative sales impact of warmer winter weather in fiscal
1995. In addition to the reduction in operating income, cash flow provided
by operations was affected by the following factors: (i) inventories and
accounts receivable decreased $700,000 in 1995 and (ii) accounts payable and
accrued expenses increased by $5.0 million, primarily due to accrued
interest on the senior secured notes, offset by (iii) a decrease in checks
in process of collection of $1.7 million and (iv) an increase in refundable
income taxes and prepaid expenses of $2.3 million. The working capital
items noted above that increased cash flow by $1.7 million in 1995
contributed to an increase in cash flow of $3.8 million in 1994.
Pursuant to the indenture for the 12 7/8% Senior Secured
Notes, the Company was required to make a $4.5 million, semi-annual interest
payment on July 15, 1995. (The July 15 payment was not required in 1994
because the Senior Secured Notes were not issued until shortly before that
date.) The Company met this interest payment requirement and funding for
its acquisition program through operating cash flows, the proceeds of
previously planned sales of marginally profitable retail service centers and
properties pursuant to its long-range business plan, expanding its customer
advance purchase program for future retail propane deliveries and scheduling
its payments for equipment purchases in the fall of 1995. After the
interest payment was made the Company continued its long-range plan by
divesting an additional five marginally profitable retail service centers
for approximately $1.6 million.
In August 1995, the Company acquired a minority interest in
another propane retailer, SYN, Inc. As part of this acquisition, the
Company contracted to provide administrative and related services to the
retail operations of SYN, Inc. in exchange for an annual management fee
payment of $500,000 and overhead cost reimbursement of $3.25 million.
The Company's high degree of leverage makes it vulnerable to
adverse changes in the weather and could 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 working
capital 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<PAGE>
<PAGE> 15 of 55
the historical average of winter temperatures for those regions, it will be
able to fund its debt service obligations from funds generated from
operations including the additional funds from the SYN, Inc. Management
Agreement discussed above, proceeds of potential sales of service centers
and funds available under its working capital 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, 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 1995, were
$11.9 million which decreased approximately $8.1 million from the preceding
year. The decrease was due primarily to a decrease of $4.6 million, from
$12.3 million in fiscal year 1994 to $7.7 million in fiscal year 1995, in
acquisitions of retail service centers resulting from the 1994 purchases of
PSNC Propane Corporation and an additional service center in Colorado
compared to the 1995 purchases of four service centers and the addition of
several new start-ups. The remaining decrease of $3.5 million is due
primarily to the reduced size of the Company as a result of the Transaction
and the large amount of new transportation equipment purchased in 1994.
During fiscal year 1995, the Company raised $3.0 million from the planned
sale of marginally profitable service centers, and raised an additional $4.5
million since June 30, 1995.
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 has obtained from an engineering and
construction company a study of the costs of rehabilitating and opening the
facilities, which range from $500,000 to $3,000,000. The Company is
currently exploring options for financing these modifications, and there is
no assurance that such financing will be available. If the rehabilitation
work is not performed and the facilities cannot be sold, then the Company
would be required to close the facilities at a cost which the Company
believes will not exceed $500,000.
<PAGE>
<PAGE> 16 of 55
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 indebtedness 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 credit
facility also contains tangible net worth, capital expenditures, interest
coverage and debt restrictions. At June 30, 1995, the Company was not in
compliance with the original capital expenditures and interest coverage
ratio covenants. The bank has amended the covenants, and the company is now
in compliance with the amended covenants.
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 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.
<PAGE>
<PAGE> 17 of 55
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. 50 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 35 Director since July 1994; member Holding
Capital Group, Inc. (since 1989); term as
director expires 1997
Kristin L. Lindsey 47 Director/Vice President since June 1994;
previously pursued charitable and other
personal interests; term as director
expires 1996
Bruce M. Withers, Jr. 68 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 57 Director since July 1994; partner of
Guilfoil, Petzall & Shoemake (since
1970); term as director expires 1998
Valeria Schall 41 Vice President since 1992; Corporate
Secretary since 1985 and Assistant to the
Chairman (Assistant to the Vice Chairman
prior to June 1994) since 1987
Mark Castaneda 31 Vice President Finance and Administration
since August 1995; previously Controller
of Skelgas Propane since 1991 and an
accountant at Deloitte & Touche since
1986.
Willis D. Green 58 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<PAGE>
<PAGE> 18 of 55
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).
ITEM 11. EXECUTIVE COMPENSATION.
Executive Compensation
The following table provides compensation information for
each of the years ended June 30, 1995, 1994, and 1993 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 (of which there were none)
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 (of which there were none).
<TABLE>
Summary Compensation Table
Annual Compensation
______________________________________________________
All
<CAPTION> Other Other
Name and Principal Position Fiscal Annual Compensation
At End of Fiscal Year 1995 Year Salary Bonus Compensation <F1>
___________________________ ______ ______ _____ ____________ ____
<S> <C> <C> <C> <C> <C>
Paul S. Lindsey, Jr. 1995 $350,000 - - -
Chief Executive Officer, 1994 300,000 $5,000 - -
Chairman of the Board, 1993 230,000 5,000 - $1,648
and President
___________
<FN>
<F1> This amount includes the allocation of a portion of the forfeitures under the Company's profit sharing plan (the
"Profit Sharing Plan") to the named officer in the amount of $1,296. This amount also includes the allocation of
a portion of the forfeitures under the Company's stock bonus plan (the "Stock Bonus Plan") to the named officer
in the amount of $352. The Company made no contributions to either plan in fiscal year 1993. In September 1992,
the Company terminated both plans and filed with the Internal Revenue Service ("IRS") for determination that the
plans were qualified at termination. The IRS issued favorable determination letters for both plans in December
1992. The Company liquidated the assets of both plans and paid out the plan accounts to participants on March
31, 1993.
</FN>
</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 <PAGE>
<PAGE> 19 of 55
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
There were no options granted to the named officer nor
exercised by him during fiscal year 1995 and no unexercised options held by
him as of the end of the 1995 fiscal year.
Compensation Committee Interlocks and Insider Participation
A compensation committee was formed in July 1994, consisting
of Messrs. Withers, Shoemake and Brown. Mr. Lindsey makes the initial
recommendation concerning executive compensation for the executive officers
of the Company, other than recommendations concerning his own and his wife's
compensation, which are then approved by the compensation committee. The
compensation committee determines the compensation of Mr. Lindsey's wife
and, subject to the employment agreement described above, Mr. Lindsey.
Director Compensation
During the last completed fiscal year, the directors of
Empire Gas received an annual fee of $25,000, payable quarterly, for their
services. In addition, directors other than Mr. Lindsey and Kristin L.
Lindsey received options pursuant to the Company's stock option plan, with
Mr. Brown receiving options for 122,830 shares and Messrs. Shoemake and
Withers each receiving options for 17,548 shares. Each of the options is
exercisable at a price of $7.00 per share, and the options are exercisable
until January 23, 2005.
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, 1995, 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.
Number of Shares
Name of Beneficial Owner<F1> Beneficially Owned Percent
____________________________ __________________ _______
Paul S. Lindsey, Jr.<F2> 1,507,610 95.5%
Kristin L. Lindsey<F2> 753,805 47.7
Douglas A. Brown 122,830 7.2
Bruce M. Withers, Jr. 17,548 1.1
Jim J. Shoemake 17,548 1.1
All directors and executive officers as a
group (8 persons)<F3> 1,689,939 97.3
<PAGE>
<PAGE> 20 of 55
_________________
[FN]
<F1> 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.
<F2> 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.
<F3> The amounts shown include the shares beneficially owned by Mr.
Lindsey and Acreman, and Mrs. Lindsey as set forth above, and 30,132
shares owned by other executive officers.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
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 $157,842 in Fiscal year 1995 and $210,400
in fiscal year 1994.
The Company has entered into an agreement with each
shareholder (all of whom are 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 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.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(i) Financial Statements
Report of Independent Accountants
Consolidated Balance Sheets as of June 30, 1995 and 1994
Consolidated Statement of Operations for the Years Ended
June 30, 1995, 1994 and 1993
Consolidated Statements of Stockholders' Equity (Deficit)
for the Years Ended June 30, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the Years Ended
June 30, 1995, 1994 and 1993
<PAGE> 21 of 55
(a)(2) Financial Statement Schedules
Schedule II Valuation and qualifying accounts
(a)(3) Exhibits
Exhibit
No. Description
___ ___________
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 (incorporated herein by reference to Exhibit 4.2
to the Registrant's Annual Report on Form 10-K for the year
ended June 30, 1994)
4.3 Warrant Agreement (incorporated herein by reference to
Exhibit 4.3 to the Registrant's Annual Report on Form 10-K
for the year ended June 30, 1994)
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;<PAGE>
<PAGE> 22 of 55
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 reference to
Exhibit 10.1 to the Company's Registration Statement on Form
S-1 (No. 33-53343))
10.2 1995 Stock Option Plan of Empire Gas Company
10.3 Credit Agreement between the Company and Continental Bank,
as agent (incorporated herein by reference to Exhibit 10.3
to the Registrant's Annual Report on Form 10-K for the year
ended June 30, 1994)
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))
<PAGE> 23 of 55
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))
10.11 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))
10.12 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))
10.13 Management Agreement between Empire Gas Company,
Northwestern Growth Corporation and SYN, Inc. dated May 17,
1995
10.14 Agreement Among Initial Stockholders and SYN, Inc. dated May
17, 1995
10.15 Waiver Agreement dated April 29, 1995 by and among Empire
Gas Corporation, SYN, Inc., Paul S. Lindsey, Jr.,
Northwestern Growth Corporation, Empire Energy Corporation,
Robert W. Plaster and Stephen R. Plaster
10.16+ Propane Sales Agreement dated August 24, 1995 between Empire
Gas Corporation and Warren Petroleum Company
10.17+ Supply Contract dated April 27, 1995 between Empire Gas
Corporation and Phillips 66 Company
10.18+ Dealer Sale Contract dated January 20, 1995 between Empire
Gas Corporation and Conoco Inc.
10.19+ Supply Contract dated April 24, 1995 between Empire Gas
Corporation and Enron Gas Liquids, Inc.
10.20 Amendment No. 1 to Supplement A to Loan and Securities
Agreement dated June 29, 1995 between Empire Gas Corporation
and Bank of America Illinois
21.1 Subsidiaries of the Company
27.1 Financial Data Schedules
(b) Reports on Form 8-K
None
(c) Exhibits
See (a)(2) above.
<PAGE> 24 of 55
(d) Financial Statements
See (a)(2) above.
+ Confidential treatment has been requested. The copy filed as an
exhibit omits the information subject to the confidentially request.
<PAGE>
<PAGE> 25 of 55
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.
<TABLE>
<CAPTION>
Signature Capacity in which Signed Date
_________ ________________________ ____
<S> <C> <C>
/s/ Paul S. Lindsey, Jr. Chief Executive Officer and September 27, 1995
_____________________________ Chairman of the Board of
Paul S. Lindsey, Jr. Empire Gas Corporation
(principal executive officer)
/s/ Mark Castaneda Vice President Finance and September 27, 1995
_____________________________ Administration
Mark Castaneda (principal financial officer)
/s/ Willis D. Green Vice President/Controller of September 27, 1995
_____________________________ Empire Gas Corporation
Willis D. Green (principal accounting officer)
/s/ Douglas A. Brown Director of Empire Gas September 27, 1995
_____________________________ Corporation
Douglas A. Brown
/s/ Kristin L. Lindsey Director of Empire Gas September 27, 1995
_____________________________ Corporation
Kristin L. Lindsey
/s/ Bruce M. Withers, Jr. Director of Empire Gas September 27, 1995
_____________________________ Corporation
Bruce M. Withers, Jr.
/s/ Jim J. Shoemake Director of Empire Gas September 27, 1995
_____________________________ Corporation
Jim J. Shoemake
</TABLE>
<PAGE> 26 of 55
FINANCIAL STATEMENT INDEX
_________________________
Empire Gas Corporation - Consolidated Financial Statements for
June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Independent Accountants' Report . . . . . . . . . . . . . . . . . . . . . 27
Consolidated Balance Sheets as of June 30, 1995 and 1994. . . . . . . . . 28
Consolidated Statements of Operations - Years Ended June 30, 1995,
1994, and 1993. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Consolidated Statements of Stockholder's Equity - Years Ended
June 30, 1995, 1994, and 1993 . . . . . . . . . . . . . . . . . . . . . 33
Consolidated Statements of Cash Flows - Years Ended June 30, 1995,
1994, and 1993. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . 36
FINANCIAL STATEMENT SCHEDULE INDEX
__________________________________
Independent Accountants' Report . . . . . . . . . . . . . . . . . . . . . 54
Schedule II - Valuation and Qualifying Accounts . . . . . . . . . . . . . 55
<PAGE>
<PAGE> 27 of 55
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 as of June 30, 1995 and 1994, 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, 1995. 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, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years in the period
ended June 30, 1995, in conformity with generally accepted accounting
principles.
As discussed in Note 5, the Company changed its method of accounting for
income taxes in 1994.
Baird, Kurtz & Dobson
Springfield, Missouri
August 25, 1995<PAGE>
<PAGE> 28 of 55
<TABLE>
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND 1994
(Dollars In Thousands, Except Per Share Amounts)
ASSETS
______
<CAPTION>
1995 1994
____ ____
CURRENT ASSETS
<S> <C> <C>
Cash $ 821 $ 2,927
Trade receivables, less allowance
for doubtful accounts; 1995 - $800,
1994 - $1,620 (Note 4) 4,571 5,454
Inventories (Note 4) 5,686 5,179
Prepaid expenses 521 619
Refundable income taxes 1,567 2,254
Deferred income taxes (Note 5) 1,350 631
______ ______
Total Current Assets 14,516 17,064
PROPERTY AND EQUIPMENT, At Cost (Notes 4 and 12)
Land and buildings 9,496 8,732
Storage and consumer service facilities 68,706 68,223
Transportation, office and other equipment 20,015 16,165
______ ______
98,217 93,120
Less accumulated depreciation 27,111 25,847
______ ______
71,106 67,273
______ ______
OTHER ASSETS
Debt acquisition costs, net of amortization 4,856 5,406
Excess of cost over fair value of net assets
acquired, at amortized cost 12,992 14,027
Other 1,658 874
______ ______
19,506 20,307
______ ______
$ 105,128 $ 104,644
_______ _______
_______ _______
See Notes to Consolidated Financial Statements
/TABLE
<PAGE>
<PAGE> 29 of 55
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
______________________________________________
<CAPTION>
1995 1994
____ ____
CURRENT LIABILITIES
<S> <C> <C>
Checks in process of collection $ 1,585 $ 3,262
Current maturities of long-term debt (Note 4) 504 292
Accounts payable 4,252 4,039
Accrued salaries 1,233 1,249
Accrued interest 4,100 500
Accrued expenses 1,206 912
Due to Empire Energy Corporation (Note 2) 497
_____ ___
Total Current Liabilities 12,880 10,751
______ ______
LONG-TERM DEBT (Note 4) 115,143 105,320
_______ _______
DEFERRED INCOME TAXES (Note 5) 13,140 15,421
ACCRUED SELF-INSURANCE LIABILITY (Note 6) 911 1,372
___ _____
STOCKHOLDERS' EQUITY (DEFICIT)
Common; $.001 par value; authorized 20,000,000
shares; issued June 30, 1995 and 1994
- 14,291,020 shares 14 14
Common stock purchase warrants (Note 8) 1,227 1,227
Additional paid-in capital 27,279 27,279
Retained earnings 22,509 31,235
______ ______
51,029 59,755
Treasury stock, at cost
June 30, 1995 and 1994
- 12,711,795 shares (87,975) (87,975)
________ ________
(36,946) (28,220)
$ 105,128 $ 104,644
_______ _______
_______ _______
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 30 of 55
<TABLE>
EMPIRE GAS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
(In Thousands, Except Per Share Amounts)
<CAPTION>
1995 1994 1993
____ ____ ____
<S> <C> <C> <C>
OPERATING REVENUE $ 74,640 $ 124,552 $ 128,401
COST OF PRODUCT SOLD 35,612 57,920 60,202
______ ______ ______
GROSS PROFIT 39,028 66,632 68,199
______ ______ ______
OPERATING COSTS AND EXPENSES
Provision for doubtful accounts 1,136 1,056 958
General and administrative 28,558 43,910 40,887
Depreciation and amortization 6,166 10,150 10,351
______ ______ ______
35,860 55,116 52,196
______ ______ ______
OPERATING INCOME 3,168 11,516 16,003
_____ ______ ______
OTHER EXPENSE
Interest expense (10,681) (8,542) (8,877)
Interest expense to related party (Note 3) -- -- (949)
Amortization of debt discount and expense (4,889) (2,016) (1,686)
Restructuring proposal costs (Note 11) -- (398) (223)
Reduction in carrying value of underground
storage facility (Note 12) (924) (1,400) --
_____ _______ ___________
(16,494) (12,356) (11,735)
INCOME (LOSS) BEFORE INCOME TAXES (13,326) (840) 4,268
PROVISION (CREDIT) FOR INCOME TAXES (4,600) 350 2,040
_______ ___ _____
(Note 5)
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS (8,726) (1,190) 2,228
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) $ (8,726) $ 31,125 $ 2,228
_______ ______ _____
_______ ______ _____
<PAGE> 31 of 55
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<PAGE> 32 of 55
<TABLE>
EMPIRE GAS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
(In Thousands, Except Per Share Amounts)
<CAPTION>
1995 1994 1993
____ ____ ____
<S> <C> <C> <C>
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS PER
COMMON SHARE $ (5.53) $ (.08) $ .16
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) $ (5.53) $ 2.23 $ .16
______ ____ ___
______ ____ ___
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<PAGE> 33 of 55
<TABLE>
EMPIRE GAS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
(In Thousands)
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, 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)
_____ ______ _______ _______ ________ ________
NET LOSS _____ ______ ______ (8,726) _______ (8,726)
BALANCE, JUNE 30, 1995 $ 14 $ 1,227 $ 27,279 $ 22,509 $(87,975) $ (36,946)
_____ ______ _______ _______ ________ ________
_____ ______ _______ _______ ________ ________
See Notes to Consolidated Financial Statements
/TABLE
<PAGE>
<PAGE> 34 of 55
<TABLE>
EMPIRE GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
(In Thousands)
<CAPTION>
1995 1994 1993
____ ____ ____
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $ (8,726) $ 31,125 $ 2,228
Items not requiring (providing) cash:
Depreciation 4,971 8,973 9,004
Amortization 6,084 3,193 3,033
(Gain) loss on sale of assets (550) (100) 155
Loss on underground
storage facility 924 1,400 --
Extraordinary loss -- 5,555 --
Extraordinary gain -- (37,870) --
Deferred income taxes (3,000) (3,166) (860)
Changes in:
Checks in process of collection (1,677) 3,262 --
Trade receivables 1,075 (130) (1,691)
Inventories (383) 1,170 (1,886)
Accounts payable 213 (254) (856)
Accrued expenses and self insurance 4,758 1,377 (3,158)
Prepaid expenses and other (2,262) (1,617) 272
_______ _______ ___
Net cash provided by operating activities 1,427 12,918 6,241
_____ ______ _____
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of assets 2,956 366 1,088
Acquisition of retail service centers (7,047) (12,923) --
Purchases of property and equipment (4,154) (7,665) (4,358)
_______ _______ _______
Net cash used in investing activities (8,245) (20,222) (3,270)
_______ ________ _______
See Notes to Consolidated Financial Statements
/TABLE
<PAGE>
<PAGE> 35 of 55
<TABLE>
EMPIRE GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
(In Thousands)
<CAPTION>
1995 1994 1993
____ ____ ____
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES
Increase (decrease) in working capital
facility $ 5,058 $ (3,200) $ (1,875)
Principal payments on notes payable
to related party -- -- (2,996)
Principal payments on acquisition
credit facility -- -- (13,250)
Principal payments on purchase obligation (346) (203) (182)
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
Purchase of treasury stock -- (2,274) (1,441)
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 4,712 9,869 (2,825)
_____ _______
INCREASE (DECREASE) IN CASH (2,106) 2,565 146
CASH, BEGINNING OF PERIOD 2,927 362 216
_________ _________ ________
CASH, END OF PERIOD $ 821 $ 2,927 $ 362
_________ __________ _________
_________ __________ _________
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> of 55
EMPIRE GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
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. 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>
1995 1994
____ ____
(In Thousands)
<S> <C> <C>
Gas and other petroleum products $ 2,116 $ 2,385
Gas distribution parts, appliances and equipment 3,570 2,794
_____ _____
$ 5,686 $ 5,179
_____ _____
_____ _____
/TABLE
<PAGE>
<PAGE> 37 of 55
EMPIRE GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
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 $5,143,000) are
amortized over ten years; and the new revolving credit facility costs
(originally $341,000) are amortized over three years.
Amortization of discounts on debentures and notes (Note 4) is
on the effective interest, bonds outstanding method.
The excess of cost over fair value of net assets acquired
($20,750,000) is being amortized on the straight-line basis over 20 years.
Income (Loss) Per Common Share
______________________________
Income (loss) per common share is computed by dividing net
income (loss) 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 1,579,225, 13,961,520 and 14,055,407 for each of
the fiscal years ended June 30, 1995, 1994 and 1993, respectively.
<PAGE>
<PAGE> 38 of 55
EMPIRE GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Reclassification
________________
Certain reclassifications have been made to the 1994 and 1993
financial statements to conform to the 1995 financial statement
presentation. These reclassifications had no effect on net earnings.
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 retained ownership of
158 retail service centers located in 20 states plus certain home office
assets and liabilities. A payable to Energy of $497,031 was recorded at
June 30, 1994, to reflect the settlement of this transaction.
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 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.
<PAGE> 39 of 55
EMPIRE GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 2: RESTRUCTURING TRANSACTION (Continued)
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.
The following table sets forth selected aggregate operating
data for the retail service centers of the Company which were 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 this acquisition have been included in the
statement of operations for the year ended June 30, 1994.
<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>
<PAGE>
<PAGE> 40 of 55
EMPIRE GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 3: RELATED-PARTY TRANSACTIONS
During 1995, 1994 and 1993, the Company has purchased
$157,842, $210,400, and $68,900, 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 $400,000 in return
for services rendered in connection with the negotiation of the Company's
revolving credit facility and with the Restructuring Transaction.
Beginning July 1, 1994, the Company entered into a seven-year
services agreement with a subsidiary of Energy to provide data processing
and management information services. 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. For the
year ended June 30, 1995, total expenses related to this services agreement
were $1.1 million.
Beginning July 1, 1994, the Company entered into a new lease
agreement with a corporation owned principally by the Former Shareholder to
lease its corporate office space. The new lease requires annual rent
payments of $75,000 for a period of seven years, with two three-year renewal
options.
Prior to the Restructuring described in Note 2, the Company
had various related party transactions with its Former Shareholder as
described below.
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 years ended June
30, 1994 and 1993, related to this lease. This lease was terminated
effective June 30, 1994, at no additional expense to the Company.
In connection with the stock purchase described in Note 2, 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.
During 1994 and 1993, 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.
In 1994 and 1993, the Company leased a jet aircraft and an
airport hanger from a corporation owned by the Former Shareholder. The<PAGE>
<PAGE> 41 of 55
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
EMPIRE GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
NOTE 3: RELATED-PARTY TRANSACTIONS (Continued)
operating costs of the aircraft and the hanger. During the years ended June
30, 1994 and 1993, the Company paid direct rent of $75,000 and $100,000,
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 years ended June 30,
1994 and 1993, to a corporation owned by the Former Shareholder pursuant to
an agreement providing the 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 borrowed funds from its Former Shareholder and
from individuals and corporations related to the Former Shareholder during
the year ended June 30, 1994. The maximum amounts borrowed during this
period was $3,000,000. The interest rate on this borrowing was equal to or
below the rates available through the working capital facility. Interest
expense incurred on this related-party borrowing was $200,000. During
November 1992 the Former Shareholder loaned under a separate agreement
$13.25 million to the Company to repay the acquisition credit facility.
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.
NOTE 4: LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt at June 30 consisted of (In Thousands): 1995 1994
____ ____
<S> <C> <C>
Working capital facility (A) $ 5,058 $ --
12 7/8% Senior Secured Notes, due 2004 (B) 103,019 99,220
9% Subordinated Debentures, due 2007 (C) 5,094 5,003
Purchase contract obligations (D) 2,476 1,389
_____ _____
115,647 105,612
Less current maturities 504 292
___ ___
___ ___
$ 115,143 $ 105,320
_______ _______
</TABLE>
<PAGE> 42 of 55
EMPIRE GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 4: LONG-TERM DEBT (Continued)
(A) The working capital 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 tangible net worth, capital
expenditures, interest coverage ratio, debt and certain
dividend restrictions. These dividend restrictions prohibit
the Company from paying common stock cash dividends. At June
30, 1995, the Company was not in compliance with the original
capital expenditures and interest coverage ratio covenants.
The bank has amended the covenants, and the Company is in
compliance with the amended covenants.
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 55% of eligible inventory.
In addition, the Company can borrow an additional $1.5
million during the period July 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 $334,000 at June
30, 1995, after considering $1,501,000 of outstanding letters
of credit. The letters of credit are principally related to
the Company's self-insurance program (Note 6).
(B) The notes were issued June 1994 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, 1995 and
1994, is $127,200,000.
<PAGE>
<PAGE> 43 of 55
The proceeds from this new offering were used to repay
existing debt; 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
EMPIRE GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 4: LONG-TERM DEBT (Continued)
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
above.
(C) 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. In
June 1994, the Company used proceeds from the issuance of the
12 7/8% Senior Secured Notes, due 2004, to 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,
1995 and 1994, is $9,745,800.
(D) 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, 1995 and 1994, these obligations carried interest
rates from 7% to 10% and are due periodically through 1999.
<PAGE>
<PAGE> 44 of 55
EMPIRE GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 4: LONG-TERM DEBT (Continued)
Aggregate annual maturities and sinking fund requirements (in
thousands) of the long-term debt outstanding at June 30, 1995, are:
1996 $ 504
1997 5,568
1998 658
1999 357
2000 83
Thereafter 108,477
________
$115,647
________
________
NOTE 5: INCOME TAXES
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
tax 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.
<PAGE>
<PAGE> 45 of 55
<TABLE>
EMPIRE GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 5: INCOME TAXES (Continued)
The provision for income taxes includes these components:
<CAPTION>
1995 1994 1993
____ ____ ____
(In Thousands)
<S> <C> <C> <C>
Taxes currently payable (refundable) $ (1,600) $ 2,887 $ 2,900
Deferred income taxes (3,000) (2,537) (860)
_______ _______ _____
$ (4,600) $ 350 $ 2,040
_______ ___ _____
_______ ___ _____
The tax effects of temporary differences related to deferred taxes were:
June 30, June 30,
1995 1994
________ ________
(In Thousands)
Deferred Tax Assets
___________________
Allowance for doubtful accounts $ 300 $ 566
Accounts receivable advance collections 347 201
Self-insurance liabilities and contingencies 2,168 638
Alternative minimum tax credit 1,300 100
_____ ___
4,115 1,505
_____ _____
Deferred Tax Liability
______________________
Accumulated depreciation $ (15,905) $ (16,295)
________ ________
and tax cost differences
Net deferred tax liability $ (11,790) $ (14,790)
________ ________
________ ________
</TABLE>
<PAGE>
<PAGE> 46 of 55
EMPIRE GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 5: INCOME TAXES (Continued)
The above net deferred tax asset (liability) is presented on the June 30
balance sheet as follows:
1995 1994
____ ____
(In Thousands)
Deferred Tax Assets
___________________
Deferred tax asset - current $ 1,350 $ 631
Deferred tax liability - long-term (13,140) (15,421)
________ ________
Net deferred tax liability $ (11,790) $ (14,790)
________ ________
A reconciliation of income tax expense at the statutory rate to the
Company's actual income tax expense is shown below:
<TABLE>
<CAPTION>
1995 1994 1993
____ ____ ____
(In Thousands)
<S> <C> <C> <C>
Computed at the statutory rate (34%) $ (4,531) $ (285) $ 1,451
Increase (decrease) resulting from:
Amortization of excess of cost over
fair value of assets acquired 303 393 422
State income taxes - net of federal tax benefit (411) 150 158
Nondeductible travel costs and other expenses 39 56 11
Other -- 36 (2)
_______ _____ _____
Actual tax provision $ (4,600) $ 350 $ 2,040
_______ _____ _____
_______ _____ _____
</TABLE>
NOTE 6: 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<PAGE>
<PAGE> 47 of 55
current insurance programs, the Company self-insures the first $500,000 of
coverage (per incident). Effective July 1994, the Company reduced its
EMPIRE GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 6: SELF INSURANCE AND RELATED CONTINGENCIES (Continued)
self-insured retention for vehicle liability to $250,000 per incident.
Effective July 1995, the Company returned its self-insured retention for
vehicle liability to $500,000 per incident. The Company obtains excess
coverage from carriers for these programs on occurrence and 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,
1995, 1994 and 1993, was $1,237,000, $1,634,000 and $1,441,000,
respectively.
For the policy periods prior to July 1, 1991, July 1, 1992, through June
30, 1993, 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, if any, are insured by the excess
carrier and should not result in additional expense to the Company. As of
June 30, 1995, the Company estimates losses for the comprehensive general
liability policy periods July 1, 1991, through June 30, 1992, and July 1,
1994, through June 30, 1995, will not reach the $1 million loss limits and
has provided accordingly.
During the year ended June 30, 1993, the Company had obtained workers'
compensation coverage from carriers and state insurance pools at an annual
cost of $1,743,000. 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 $1,141,400 is outstanding at June 30,
1995. Effective July 16, 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, 1995,
1994 and 1993, are:
<PAGE>
<PAGE> 48 of 55
<TABLE>
EMPIRE GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 6: SELF INSURANCE AND RELATED CONTINGENCIES (Continued)
<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, 1993 $2,666 $1,148 $1,480 $2,334
June 30, 1994 $2,334 $3,709 $2,464 $1,707 $1,872
June 30, 1995 $1,872 $ 668 $1,129 $1,411
</TABLE>
The ending accrued liability includes $400,000 for incurred but not
reported claims at June 30, 1995, $125,000 at June 30, 1994, and $500,000 at
June 30, 1993. The current portion of the ending liability of $500,000,
$500,000, and $460,000 at June 30, 1995, 1994 and 1993, respectively, is
included in accrued expenses in the consolidated balance sheets. The
noncurrent portion at the end of each period is included in accrued self-
insurance liability.
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 $240,000, $979,000 and $873,000 for the
years ended June 30, 1995, 1994 and 1993, 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 assumed 52.3% of
the liability with Energy assuming the remaining 47.7%.
<PAGE>
<PAGE> 49 of 55
EMPIRE GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 7: LITIGATION CONTINGENCIES
The Company's federal income tax returns have been settled through June
30, 1991. The Company has no federal income tax audits in process at June
30, 1995.
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, 1995
and 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 8: STOCK OPTIONS AND WARRANTS
Stock Options
_____________
The table below summarizes transactions under the Company's stock option
plan:
Number
of Shares Option Price
_________ _____________
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-
Issued 377,926 $ 7.00
_______
Balance June 30, 1995 377,926
_______
_______
<PAGE>
<PAGE> 50 of 55
EMPIRE GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 8: STOCK OPTIONS AND WARRANTS (Continued)
At June 30, 1994, all outstanding stock options were exercised in
connection with the restructuring transaction (see Note 2). During the year
ended June 30, 1995, a new stock option plan was approved resulting in the
issuance of additional options. These options consist of 220,000 shares
issued to employees, of which one-fifth become exercisable in January 1996
and each year thereafter. The remaining 157,926 shares were issued to
directors of the Company and are exercisable at June 30, 1995.
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:
Number
of Shares Exercise Price
_________ ______________
Issued 175,536 $.01
_______
Balance at June 30, 1995 175,536 $.01
_______
_______
NOTE 9: ADDITIONAL CASH FLOW INFORMATION (In Thousands)
1995 1994
____ ____
Noncash Investing and Financing Activities
__________________________________________
Purchase contract obligations incurred $ 1,433 $ 1,015
Debt acquisition costs in accounts payable -- $ 746
Purchase of treasury stock, net of option
exercise price, in accounts payable -- $ 180
<PAGE>
<PAGE> 51 of 55
EMPIRE GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 9: ADDITIONAL CASH FLOW INFORMATION (In Thousands) (Continued)
Distribution of operating assets other than cash with Empire Energy
Corporation:
1994
____
Current assets 8,185
Fixed assets, net 51,620
Other assets 3,822
Current liabilities (2,697)
Long-term liabilities (15,926)
________
$ 45,004
________
________
1995 1994 1993
____ ____ ____
Additional Cash Payment Information
___________________________________
Interest paid $ 7,196 $ 9,191 $ 12,185
Income taxes paid (net of refunds) $ -- $ 2,620 $ 3,434
NOTE 10: EMPLOYEE BENEFIT PLAN
The Company formed in fiscal year 1995 a defined contribution retirement
plan eligible to substantially all employees. Employees who elect to
participate may contribute a percentage of their salaries to the plan. The
Company may make contributions to the plan at the discretion of its Board of
Directors. No contributions to the plan were made by the Company during the
year ended June 30, 1995.
NOTE 11: 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.
<PAGE>
<PAGE> 52 of 55
EMPIRE GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 12: 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 granted a final
extension to December 1, 1995.
The Company has obtained from an engineering and construction company a
study of the costs of rehabilitating and opening the facilities, which range
from $500,000 to $3.0 million.
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 the sale of
the facility. If the rehabilitation work is not performed and the
facilities cannot be sold, then the Company would be required to close the
facilities at a cost which the Company believes will not exceed $500,000.
Due to the uncertainties outlined above, the Company has taken a charge
of $924,000 and $1.4 million against 1995 and 1994 earnings, respectively,
thereby eliminating the carrying value of the facilities.
NOTE 13: SUBSEQUENT SALES OF SUBSIDIARIES
Subsequent to year end, the Company sold eleven retail service centers
for sales prices totaling approximately $4.5 million. Fiscal year 1995
summary data of the facilities sold were as follows:
<PAGE>
<PAGE> 53 of 55
EMPIRE GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 13: SUBSEQUENT SALES OF SUBSIDIARIES (Continued)
In Thousands
____________
Operating revenue $ 3,268
Cost of sales 1,811
Gross profit $ 1,457
_____
Working capital $ 391
___
Net property, plant and equipment $ 2,494
_____
_____
NOTE 14: SUBSEQUENT EVENT
On August 15, 1995, the Company entered into a joint venture with
Northwestern Growth Corporation, a subsidiary of Northwestern Public Service
Corporation, to acquire the assets of Synergy Group Incorporated, the
nation's fifth largest LP gas distributor. The Company has acquired for
$10,000 10% of the common stock of SYN, Inc., the acquisition entity, and
has an option to acquire an additional 20% of the common stock of SYN, Inc.
for $20,000. The Company has entered into a Management Agreement pursuant
to which the Company manages the joint entity. Under the terms of the
Management Agreement, the Company provides all management of the retail
facilities and accounting services at the central office. In exchange for
those services, the Company receives a $500,000 annual management fee and
$3.25 million annual overhead cost reimbursement, both paid on a monthly
basis.
<PAGE>
<PAGE> 54 of 55
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, 1995,
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.
Baird, Kurtz & Dobson
Springfield, Missouri
August 25, 1995
<PAGE>
<PAGE> 55 of 55
<TABLE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JUNE 30, 1995, 1994, AND 1993
(In Thousands)
<CAPTION>
Balance at Charges to Amount Balance at
Beginning Costs and Written End of
Description of Year Expenses Off Other Year
___________ __________ ___________ _______ _____ __________
<S> <C> <C> <C> <C> <C>
Valuation accounts
deducted from
assets to which
they apply - for
doubtful accounts
receivable:
June 30, 1995 $1,620 $1,136 $1,973 $17(C) $800
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
(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.
(C) Allowance for doubtful accounts receivable established with respect to the acquisition
of retail service centers.
</TABLE>
1994 Stock Option Plan of Empire Gas Corporation<PAGE>
<PAGE> 2 of 15
1994 Stock Option Plan of Empire Gas Corporation
I. General Provisions
1.1 Purposes of the Plan
Under this 1994 Stock Option Plan of Empire Gas Corporation
(the "Plan"), Empire Gas Corporation (the "Corporation") will grant options
to eligible employees, consultants, and outside directors to purchase shares
of the capital stock of the Corporation. The Plan is designed to enable the
Corporation and certain related companies to attract, retain, and motivate
their employees and other service providers by providing for or increasing
their proprietary interests in the Corporation. The options issued pursuant
to the Plan are intended to be either Incentive Stock Options or
Nonqualified Stock Options as determined by the Administrator and specified
in the recipient's option agreement.
1.2 Definitions
(a) "Administrator" means the Board, or, if the Board
delegates responsibility for any matter to the Committee, the Committee.
(b) "Board" means the Board of Directors of Empire Gas
Corporation.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) "Committee" means the Compensation Committee of the
Board, or such other committee as the Board may appoint to administer all or
a part of this Plan.
(e) "Common Stock" means the common stock, one-tenth of a
cent per share par value, of Empire Gas Corporation
(f) "Corporation" means Empire Gas Corporation, a Missouri
corporation (or any successor corporation).
(g) "Date of Exercise" means the date the Optionee delivers
to the Secretary of the Corporation or his office the notice specified in
Section 2.7(a)(i).
(h) "Date of Grant" means the date as of which the
Administrator awards an Option to an Optionee, as specified in the minutes
of the Administrator.
<PAGE> 3 of 15
(i) "Employee" means any regular full-time common law
employee, including any who are also officers or directors, of the Group or
any successor thereto. Solely for purposes of determining eligibility of
persons to be recipients of Nonqualified Stock Option grants, the term
"Employee" shall also include independent contractors and outside directors
of and consultants to the Group.
(j) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(k) "Exercise Price" means the value of the consideration
required under an Option Agreement to be provided in exchange for one share
of Common Stock.
(l) "Fair Market Value" of a share of Common Stock as of a
given date means (1) the closing price of a share of Common Stock on the
principal exchange on which Common Stock is then trading, if any, on the
trading day before such date, or, if no shares were traded on the trading
day before such date, then on the next preceding trading day during which a
sale occurred; or (2) if such stock is not traded on an exchange but is
quoted on NASDAQ or a successor quotation system, (A) the last sales price
(if the stock is then listed as a National Market Issue under the NASD
National Market System) or (B) the mean between the closing representative
bid and asked prices (in all other cases) for the stock on the trading day
before such date as reported by NASDAQ or such successor quotation system;
or (3) if such stock is not publicly traded on an exchange and not quoted on
NASDAQ or a successor quotation system, the mean between the closing bid and
asked prices for the stock on the trading day before such date, as
determined in good faith by the Administrator; or (4) if Common Stock is not
publicly traded, the fair market value established by the Administrator
acting in good faith.
(m) "Group" means the Corporation and its Subsidiaries.
(n) "Incentive Stock Option" means an Option that is an
"incentive stock option" within the meaning of Section 422 of the Code. Only
officers and other employees of the Group may be granted Incentive Stock
Options under this plan.
(o) "Nonqualified Stock Option" means an Option that does
not quality as an incentive stock option under Section 422 of the Code.
(p) "Option" means a right to purchase Common Stock granted
under the Plan.
(q) "Option Agreement" means a written agreement executed by
the Optionee and the Corporation that contains the terms and conditions
provided in Article II and such additional terms and conditions, consistent
with the Plan, as the Administrator may decide.
<PAGE> 4 of 15
(r) "Optionee" means any Employee selected to receive
Options pursuant to Section 2.1 or, where the context requires, a person
described in Section 2.5.
(s) "Plan" means the Corporation's 1994 Stock Option Plan as
set forth herein, as amended from time to time.
(t) "Rule 16b-3" means Rule 16b-3 promulgated under Section
16 of the Exchange Act.
(u) "Subsidiary" means a subsidiary corporation of the
Corporation within the meaning of Section 424(f) of the Code.
(v) "Termination of Employment" shall mean the time when the
employer-employee or other service-providing relationship between the
Employee and the Corporation ends for any reason, including death,
disability, or retirement. Notwithstanding the foregoing and unless
otherwise provided in the Option Agreement, "Termination of Employment" for
purposes of Nonqualified Stock Options shall not include instances in which
the Corporation immediately rehires a common law employee as an independent
contractor or an independent contractor as an employee. The Administrator,
in its sole discretion, shall determine all questions of whether particular
terminations or leaves of absence are Terminations of Employment.
1.3 Shares of Common Stock Subject to the Plan
(a) Subject to the provisions of Sections 1.3(c) and 3.1
(concerning corporate changes), the aggregate number of shares of Common
Stock that may be issued pursuant to Options may not exceed 500,000 shares.
The number of shares of Common Stock subject to any particular exercise of
an Option shall be subtracted from that total, with no adjustment for the
number of shares, if any, an Optionee delivers or relinquishes in
satisfaction of tax withholding obligations or delivers in payment for
exercise of an Option.
(b) At the discretion of the Board or the Committee, the
Common Stock to be issued pursuant to Options under the Plan will be made
available either from authorized but unissued shares of Common Stock or from
previously issued shares of Common Stock reacquired by the Corporation,
including shares purchased on the open market.
(c) If any Option expires, is canceled, or terminates for
any reason, the shares of Common Stock available under such Option shall
again be available for the granting of Options to the extent consistent with
Rule 16b-3 if then applicable.
1.4 Administration of the Plan
<PAGE> 5 of 15
(a) The Board shall administer the Plan unless and to the
extent that it provides for administration by the Committee. If the
Committee administers the Plan, the Committee will consist of two or more
members of the Board who are appointed by the Board. With respect to grants
made after the Common Stock is registered under Section 12 of the Exchange
Act, the members of the Committee shall be "disinterested persons" within
the meaning of Rule 16b-3 and "outside directors" for purposes of Section
162(m) of the Code. No members of the Committee shall be eligible to receive
Options under Section 2.1 while serving on the Committee.
(b) Subject to the express provisions of the Plan, the
Committee has and may exercise such powers and authority of the Board as may
be necessary or appropriate for the Committee to carry out its functions as
described in the Plan.
(c) The Administrator has the authority to interpret the
Plan, to make all other determinations necessary or advisable for the
administration of the Plan, and to prescribe, amend, and rescind reasonable
rules and regulations relating to the Plan. All Administrator
interpretations, determinations, and actions will be final, conclusive, and
binding upon all parties. The Administrator shall take all actions in
connection with the administration of the Plan pursuant to a majority vote
or by the unanimous written consent of its members.
(d) No member of the Board, the Committee, or the
agents thereof shall be liable for any action, inaction, or determination
made in good faith with respect to the Plan or any transaction arising under
the Plan.
II. Option Terms and Conditions
2.1 Authority to Grant Options
(a) The Administrator shall, in its sole discretion,
select the Employees who receive Options and determine the terms of such
Options, including the number of shares of Common Stock subject to an
Option, the schedule for exercisability (including any requirements for
satisfying performance criteria with respect to the Group and/or the
Optionee), the time and conditions for expiration of the Option, and the
form of payment due upon exercise. (In determining the type of payment that
may be used, the Administrator shall consider whether the acceptance of that
form of payment will likely benefit the Corporation.) The Administrator's
determinations under the Plan need not be uniform and may be made by it
selectively among persons who receive or are eligible to receive grants
under the Plan, whether or not such persons are similarly situated. The
Administrator may grant more than one Option to an Employee, provided the
Employee is eligible under the terms of the Plan at the time of each
succeeding grant. In its discretion, the Administrator may condition the
granting of Options upon the Employee's cancellation of all or part of a
previously granted Option. The Administrator may set the Exercise Price of
the Options without regard to any existing Options.
<PAGE> 6 of 15
(b) No more than 120,000 shares of Common Stock may be
subject to Options granted to a single Employee under this Plan within a one
calendar year period. If a portion of an Option is repriced, the number of
shares subject to that portion shall be counted against the foregoing
individual limit. Canceled options shall be counted against the limit for
the period during which they were granted.
(c) No Options shall be granted more than ten (10)
years after the date on which the Board adopts this Plan.
2.2 Conditions of Grant
The Administrator, in its sole discretion, may, as a
condition to the grant of an Option, require an Employee who is the
recipient of such Option to enter into one or more of the following
agreements with the Corporation and/or the Group on or before the Date of
Grant of such Option:
(a) A covenant not to compete with the
Corporation and the Group, which shall become effective on Termination of
Employment and which shall contain such terms and conditions as the
Administrator shall specify; or
(b) An agreement to cancel any employment
agreement, fringe benefit, or compensation arrangement in effect between the
Employee and the Corporation or the Group.
2.3 Option Agreement
The terms of each Option shall be contained in an Option
Agreement, signed by the Optionee, that includes such terms and conditions
consistent with the Plan and Rule 16b-3 as the Administrator may in its
discretion determine necessary or advisable.
2.4 Exercise Price
The Administrator shall determine the Exercise Price under
each Option, but the Exercise Price may not be less than one hundred percent
(100%) of the Fair Market Value on the Date of Grant for a Nonqualified
Stock Option nor less than 100 percent (100%) of the Fair Market Value on
the Date of Grant for an Incentive Stock Option. If an Option intended to be
an Incentive Stock Option is granted to any Employee who, at the Date of
Grant, owns Common Stock possessing more than 10 percent (10%) of the total
combined voting power of all classes of the Corporation's stock (or the
stock of any "subsidiary" or "parent" of the Corporation as those terms are
defined in Section 424 of the Code), the Exercise Price shall be no less
than 110 percent (110%) of the Fair Market Value on the Date of Grant.
<PAGE> 7 of 15
2.5 Person who may Exercise Options
During the lifetime of the Optionee and except as provided
in Section 3.5, only the Optionee or his duly appointed guardian or personal
representative may exercise the Options. After his death, any exercisable
portion of an Option may, before such portion becomes unexercisable under
the Plan or the applicable Option Agreement, be exercised by the personal
representative of the Optionee or by any person empowered to do so under the
deceased Optionee's will or under the then applicable laws of descent and
distribution.
2.6 Exercisability
(a) Options granted pursuant to this Plan shall be
exercisable at such times and under such conditions as the Administrator
shall determine; provided, however, that no portion of an Option shall be
exercisable after the expiration of ten (10) years from its Date of Grant
and that no portion of an Incentive Stock Option granted to any Employee
who, at the Date of Grant, owns stock possessing more than 10 percent (10%)
of the total combined voting power for all classes of the Corporation's
stock (or the stock of any "subsidiary" or "parent" of the Corporation as
those terms are defined in Section 424 of the Code) shall be exercisable
after the expiration of five (5) years from the Date of Grant.
(b) Subject to the provision of Section 3.7 (relating
to shareholder approval), Options shall become exercisable at such times and
in such manner as the Option Agreement may provide; provided, however, that
by a resolution adopted after an Option Agreement is entered into, the
Administrator may, on such terms and conditions as it determines
appropriate, and subject to Section 3.7, accelerate the time at which the
Optionee may exercise any portion of an Option.
(c) No portion of an Option that is unexercisable by
reason of Termination of Employment shall thereafter become exercisable,
unless the Option Agreement provides otherwise, either initially or by
amendment thereto.
(d) The Corporation will not issue fractional shares
pursuant to the exercise of an Option, but the Administrator may, in its
discretion, direct the Corporation to make a cash payment instead of issuing
fractional shares.
(e) Notwithstanding any other provision of this Plan or
of an Option Agreement, if an Employee's Termination of Employment is for
"cause" or if the Board makes a determination that the Employee (i) has
engaged in any type of disloyalty to the Group, including without
limitation, fraud, embezzlement, theft, or dishonesty in the course of his
employment or his provision of service to the Group, (ii) has been convicted
of a felony, (iii) has disclosed trade secrets or confidential information
of the Group, or (iv) has breached any agreement with any member of the
Group in respect of confidentiality, non-disclosure, or non-competition, all
<PAGE> 8 of 15
of the Employee's unexercised Options shall terminate upon the earlier of
the date of Termination of Employment for "cause" or the date of such a
finding. In the event of such a finding, in addition to immediate
termination of all of the Employee's unexercised Options, the Optionee shall
forfeit all Shares for which the Corporation has not yet delivered share
certificates to the Optionee and the Corporation shall refund to the
Optionee the Exercise Price paid to it. Moreover, the Corporation may
withhold delivery of share certificates pending the resolution of any
inquiry that could lead to a finding resulting in forfeiture.
2.7 Exercise of Options
(a) An Optionee shall exercise any portion of an Option
by delivering the notice described in Paragraph (1) below to the Secretary
of the Corporation or his office on or before the date such portion of the
Option becomes unexercisable under the applicable Option Agreement or the
Plan and making payment as provided in Paragraph (2) within three (3)
business days after such delivery:
(1) A written notice of exercise, in a form
complying with any rules the Administrator may issue, signed by the
Optionee, and specifying the number of shares of Common Stock underlying the
portion of the Option being exercised; and
(2) Full payment by cashier's or certified
check of the Exercise Price for the shares of Common Stock with respect to
which the Option is being exercised. To the extent provided in the
applicable Option Agreement, payment may also be made in one of the
following alternative forms:
(A) Full payment in shares of Common
Stock having a Fair Market Value on the Date of Exercise equal to the
Exercise Price;
(B) A combination of shares of Common
Stock valued at Fair Market Value on the Date of Exercise and cash or cash
equivalents, equal in the aggregate to the Exercise Price; or
(C) By delivering a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Corporation the sale or loan proceeds to pay the
Exercise Price.
The Optionee may deliver shares of Common Stock in
payment only if he has previously held those shares for at least six months,
unless the Administrator waives that holding requirement after due
consideration of the effect on the Corporation's financial statements.
Moreover, unless the applicable Option Agreement provides otherwise, the
alternative methods of payment are available only if and when the Common
Stock is publicly traded.
<PAGE> 9 of 15
(b) The Optionee shall also deliver to the
Administrator such representations and documents as the Administrator, in
its sole discretion, may consider necessary or advisable to comply with
applicable provisions of the Securities Act of 1933 and any other Federal or
state securities or other laws or regulations. The Administrator may, in its
sole discretion, take whatever additional actions it deems appropriate to so
comply including, without limitation, placing legends on certificates and
issuing stop-transfer orders to transfer agents and registrars.
(c) If someone other than the Employee exercises any
portion of an Option pursuant to Section 2.5, the Administrator may request
such proof as it may consider necessary or appropriate of the person's right
to exercise the Option.
(d) No adjustment will be made for a dividend or other
right for which the record date precedes the Date of Exercise, except as
provided in Section 3.1(a).
2.8 Tax Withholding
The Corporation's obligation to deliver stock certificates
upon the exercise of any Option shall be subject to the Optionee's
satisfaction of all applicable Federal, State, and local income and
employment tax withholding requirements. If such certificates have been
delivered before the time a withholding obligation arises, the Corporation
shall have the right to require the Employee to remit to the Corporation an
amount sufficient to satisfy all Federal, state, or local withholding tax
requirements at the time such obligation arises and to withhold from other
amounts payable to the Optionee, as compensation or otherwise, as necessary.
The Administrator may, in its discretion, and subject to such rules as it
may prescribe in its discretion, permit an Optionee to satisfy applicable
tax withholding obligations by any of the following means or by a
combination of such means: (a) tendering a cash payment; (b) authorizing the
Corporation to withhold from the Common Stock otherwise issuable to the
Optionee as the result of the exercise of an Option, a number of shares
having a Fair Market Value, as of the date the withholding tax obligation
arises, less than or equal to the amount of the withholding tax obligation;
or (c) delivering to the Corporation already owned and unencumbered shares
of Common Stock having a Fair Market Value, as of the date the withholding
tax obligation arises, less than or equal to the amount of the withholding
tax obligation. An Optionee may use shares of the Corporation's Common Stock
issuable to the Optionee upon exercise of the Option to satisfy the tax
withholding consequences of such exercise only after the Common Stock is
publicly-traded and then only (a) during the period beginning on the third
business day following the date of release of the quarterly or annual
summary statement of sales and earnings of the Corporation and ending on the
twelfth business day following such date or (b) pursuant to the Optionee's
irrevocable written election to use such shares of the Corporation's Common
Stock to pay all or part of the withholding taxes made at least six months
before the payment of such withholding taxes. In the absence of one of the
foregoing methods, the Optionee must deliver to the Corporation the payment
by cashier's or certified check to the Corporation of all amounts that the
<PAGE> 10 of 15
Corporation must withhold under Federal, state, or local law in connection
with the exercise of the Option if the Corporation cannot, or decides not
to, satisfy withholding obligations through additional withholding on salary
or wages. Payment of withholding obligations is due for Nonqualified Stock
Options at the same time as is payment of the Exercise Price and is due for
Incentive Stock Options as of the date, if any, at which a withholding
obligation relating thereto arises.
2.9 Expiration of Options
(a) No one may exercise an Option after the expiration
of ten (10) years from the Date of Grant or, if earlier for an Incentive
Stock Option, the first to occur of the following events:
(1) Except in the case of any Optionee who is
disabled (within the meaning of Section 22(e)(3) of the Code) or dies, the
Optionee's Termination of Employment;
(2) In the case of an Optionee who is disabled
(within the meaning of Section 22(e)(3) of the Code), the earlier of the
expiration of six months from the date of the Optionee' s Termination of
Employment for any reason other than such Optionee's death or 30 days after
the Administrator determines that the Optionee is disabled, unless the
Optionee dies before the earlier of those dates; or
(3) The expiration of 90 days from the date of
the Optionee's death.
The Administrator may, but need not, use the foregoing
standards for early expiration of a Nonqualified Stock Option.
(b) Subject to the provisions of Section 2.8(a), the
Administrator may provide in the terms of an Option Agreement that any
portion of the Option, whether then exercisable or not, expires immediately
upon a Termination of Employment or that any portion of the Option shall
become exercisable in the event of a Termination of Employment because of
the Optionee's retirement, death, or disability. In the event that exercise
is permitted after Termination of Employment, the Option shall nevertheless
expire as of the date that such former Employee violates (as determined by
the Board) any covenant not to compete in effect between any member of the
Group and the former Employee.
2.10 $100,000 Limit for Incentive Stock Options
No portion of an Option granted to an Optionee shall be
treated as an Incentive Stock Option to the extent such portion of an Option
would cause the aggregate Fair Market Value of all shares with respect to
which Incentive Stock Options are exercisable by such Optionee for the first
<PAGE> 11 of 15
time during any calendar year to exceed $100,000. That portion of the Option
shall instead be treated as a Nonqualified Stock Option. For purposes of
determining whether an Incentive Stock Option would cause such aggregate
Fair Market Value to exceed the $100,000 limitation, all such Incentive
Stock Options shall be taken into account in the order granted and the Fair
Market Value for each share under an option shall be determined as of that
option's date of grant. For purposes of this section, Incentive Stock
Options include all incentive stock options under all plans of the
Corporation that are "incentive stock option plans" within the meaning of
Section 422 of the Code.
2.11 No Exercise of Out-of-the-Money Options
If Rule 16b-3 is then applicable to the Option, an Optionee
may not exercise any portion of an Option while that portion of the Option
is out-of-the-money, i.e., while the Exercise Price for a share of Common
Stock underlying that portion of the Option exceeds the Fair Market Value of
a share of Common Stock.
III. Other Provisions
3.1 Adjustment Provisions
(a) Subject to any required action by the Corporation
(which it shall promptly take) or its shareholders, and subject to the
provisions of the General and Business Corporation Law of Missouri, if,
after the Date of Grant of an Option, the outstanding shares of Common Stock
are increased or decreased or changed into or exchanged for a different
number or kind of security by reason of any recapitalization,
reclassification, stock split, reverse stock split, combination of shares,
exchange of shares, stock dividend, or other distribution payable in capital
stock, or other increase or decrease in such Common Stock is effected
without the Corporation's receiving consideration, a proportionate and
appropriate adjustment shall be made in the number of shares of Common Stock
underlying the Option, so that the proportionate interest of the Optionee
immediately following such event shall, to the extent practicable, be the
same as immediately before such event. A commensurate change will be made in
the maximum number and kind of shares provided in Section 1.3(a) and 2.1(b).
Any such adjustment in an Option shall not change the total price with
respect to shares of Common Stock underlying the unexercised portion of the
Option but shall include a corresponding proportionate adjustment in the
Option's Exercise Price.
(b) In addition to the adjustments covered under
Section 3.1(a) above, any Option grant may contain provisions to the effect
that upon the occurrence of certain events, including a change in control of
the Corporation (as defined by the Administrator in the Optionee's Option
Agreement), any outstanding Options not theretofore exercisable or free from
restrictions, as the case may be, shall either immediately, or upon a
further determination made by the Administrator at the time of the event,
become fully exercisable or free from restrictions.
<PAGE> 12 of 15
(c) The Administrator will make adjustments and
determinations under Sections 3.1(a) and 3.1(b), and its determination will
be final, binding, and conclusive.
(d) Upon the dissolution or liquidation of the
Corporation, or upon a reorganization, merger, or consolidation of the
Corporation as a result of which the outstanding securities of the class of
securities then subject to the Options are changed into or exchanged for
cash or property or securities not of the Corporation's issue, or any
combination thereof, or upon a sale of substantially all the property of the
Corporation to, or the acquisition of shares of Common Stock representing
more than eighty percent (80%) of the voting power of the shares of Common
Stock then outstanding by, another corporation or person, the Options shall
terminate, unless provision be made in writing in connection with such
transaction for the assumption of Options theretofore granted under the
Plan, or the substitution for such options of any options covering the stock
or securities of a successor employer corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kind of shares of
stock and prices, in which event the Options shall continue in the manner
and under the terms so provided. If an Option would otherwise terminate
pursuant to the preceding sentence, the Optionee shall have the right, at
such time before the consummation of the transaction causing such
termination as the Corporation shall reasonably designate, to exercise the
unexercised portions of the Option, including the portions thereof that
would, but for this subsection, not yet be exercisable.
3.2 Continuation of Employment or Service
Nothing in the Plan or in any instrument executed pursuant
to the Plan will confer upon any Optionee any right to continue in the
employ or service of the Corporation or affect the right of the Corporation
to terminate the employment or service of any Optionee at any time with or
without cause, subject to any contrary terms in a written employment
agreement or contract for services with the Optionee.
3.3 Compliance with Government Regulations
No shares of Common Stock will be issued pursuant to an
Option until all applicable requirements imposed by Federal and state
securities and other laws, rules, and regulations, and by any regulatory
agencies having jurisdiction, and by any stock exchanges upon which the
Common Stock may be listed have been fully met. As a condition precedent to
the issuance of shares of Common Stock pursuant to an Option, the
Corporation may require the Optionee to take any reasonable action to comply
with such requirements. No provision in the Plan or action taken pursuant
thereto shall authorize any action that is otherwise prohibited by Federal
or State laws.
<PAGE>
<PAGE> 13 of 15
3.4 Privileges of Stock Ownership
No Optionee and no beneficiary or other person claiming
under or through such Optionee will have any right, title, or interest in or
to any shares of Common Stock allocated or reserved under the Plan or
subject to any Option except as to such shares of Common Stock, if any, that
have been issued to such Optionee.
3.5 Restrictions on Transferability of Options and Common Stock
Unless the Administrator otherwise approves in writing, an
Option may not be assigned, transferred, pledged, hypothecated, or disposed
of in any way, whether by operation of law or otherwise or through any legal
or equitable proceedings (including bankruptcy), to any person by the
Optionee, except by will or by operation of applicable laws of descent and
distribution. Unless the Administrator otherwise approves in advance in
writing, the Optionee may not sell, assign, pledge, encumber, or otherwise
transfer shares of Common Stock acquired upon exercise of an Option until at
least six (6) months have elapsed from (but excluding) the Grant Date, where
the Grant Date occurs upon the later of the Date of Grant as defined in
Section 1.2(h) or the date on which the shareholders approve the Plan as
provided in Section 3.7 hereof. The Administrator, in its sole discretion,
may impose such other restrictions on the transferability of Options or
shares purchasable upon the exercise of an Option, as it deems appropriate.
The Option Agreement shall set forth any such other restrictions, and the
certificates evidencing such shares of Common Stock may refer to such
restrictions.
Notwithstanding the preceding paragraph, an Optionee may, at
any time before his death, assign all or any portion of his Nonqualified
Stock Option to the trustee of a trust for the primary benefit of himself,
his spouse, or his lineal descendant. In such event, the trustee will be
entitled to all of the rights of the Optionee with respect to the assigned
portion of such Option, and such portion of the Option will continue to be
subject to all of the terms, conditions, and restrictions applicable to the
Option, as set forth herein and in the related Option Agreement, immediately
before the date of the assignment. Any such assignment will be permitted
only if (i) the Optionee does not receive any consideration therefore, and
(ii) the assignment is expressly permitted by the Option Agreement, as
approved by the Administrator. Any such assignment shall be evidenced by an
appropriate written document executed by the Optionee, and a copy thereof
shall be delivered to the Secretary of the Corporation or his office on or
before the effective date of the assignment.
3.6 Amendment and Termination of Plan; Amendment of Option
(a) The Board will have the power, in its sole
discretion, to amend, suspend, or terminate the Plan at any time; provided,
however, that the Board may not amend the Plan without approval of the
shareholders of the Corporation if Rule 16b-3 requires such approval. The
Board is specifically authorized to adopt any amendment to this Plan the
Board deems necessary or advisable to ensure that the Incentive Stock
<PAGE> 14 of 15
Options or Nonqualified Stock Options available under the Plan continue to
be treated as such, respectively, under all applicable laws.
(b) Except as otherwise provided by the applicable
Option Agreement or by Section 1.4, 3.1, or 3.8, the Administrator may not,
without the Optionee's consent, make modifications in the terms and
conditions of an Option that adversely affect the Optionee. No Incentive
Stock Option may be modified, extended, or renewed, without the Optionee's
consent, if such action would cause it to cease to be an incentive stock
option within the meaning of Section 422 of the Code.
(c) No amendment, suspension, or termination of the
Plan will, without the consent of the Optionee, alter, terminate, impair, or
adversely affect any right or obligations under any Option previously
granted under the Plan.
3.7 Approval of Plan by Stockholders
The Corporation will submit this Plan for the approval of
the Corporation's shareholders. The Administrator may grant Options before
such shareholder approval, but the Optionee cannot exercise Options before
the shareholders approve the Plan. Moreover, if the shareholders do not
approve the Plan within 12 months after the Board's initial adoption of the
Plan, all Options previously granted under the Plan shall thereupon be
canceled and become void. The Corporation shall take such actions regarding
the Plan as may be necessary to satisfy the requirements of Rule 16b-3(b),
when and if it becomes applicable.
3.8 Conformity to Securities Law
The Plan is intended to conform to the extent necessary with
all provisions of the Securities Act of 1933 and the Exchange Act and all
regulations and rules promulgated by the Securities and Exchange Commission
thereunder, including without limitation Rule 16b-3 to the extent
applicable. Notwithstanding anything herein to the contrary, the
Administrator shall administer the Plan, and Options shall be granted and
may be exercised, only in a way that conforms to such laws, rules, and
regulations. To the extent permitted by applicable law, the Plan and Options
granted hereunder shall be deemed amended to the extent necessary to conform
to such laws, rules, and regulations. To the extent any provision of the
Plan or action by the Administrator fails to comply with Rule 16b-3 (as in
effect with respect to the Plan on the date such action is taken), the
provision or action shall be deemed null and void, to the extent permitted
by law and deemed advisable by the Administrator.
3.9 Purchase for Investment and Other Restrictions
The issuance of Shares on the exercise of an Option shall be
conditioned on obtaining such appropriate representations, warranties,
restrictions, and agreements of the Optionee as set forth in the applicable
Option Agreement and any Stock Purchase Agreement. Among other
<PAGE> 15 of 15
representations, warranties, restrictions, and agreements, the Optionee
shall represent and agree that the purchase of Shares under the applicable
Option Agreement shall be for investment, and not with a view to the public
resale or distribution thereof, unless the Shares subject to the Option are
registered under the Securities Act and the transfer or sale of such Shares
complies with all other laws, rules, and regulations applicable thereto.
Unless the Shares are registered under the Securities Act, the Optionee
shall acknowledge that the Shares purchased on exercise of the Option are
not registered under the Securities Act and may not be sold or otherwise
transferred unless the Shares have been registered under the Securities Act
in connection with the sale or transfer thereof, or that counsel
satisfactory to the Corporation has issued an opinion satisfactory to the
Corporation that the sale or other transfer of such Shares is exempt from
registration under the Securities Act, and unless said sale or transfer
complies with all other applicable laws, rules, and regulations, including
all applicable Federal and state securities laws, rules, and regulations.
Additionally, the Shares, when issued upon the exercise of an Option, shall
be subject to other transfer restrictions, rights of first refusal, and
rights of repurchase as set forth in or incorporated by reference into the
applicable Stock Purchase Agreement. The certificates representing the
Shares shall contain a legend substantially similar to the following:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
UNDER ANY APPLICABLE STATE SECURITIES LAWS. THESE SHARES
HAVE NOT BEEN ACQUIRED WITH A VIEW TO DISTRIBUTION OR RESALE
AND MAY NOT BE SOLD, ASSIGNED, EXCHANGED, MORTGAGED,
PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED OR DISPOSED
OF, BY GIFT OR OTHERWISE (EXCEPT AS PROVIDED IN SECTION 3.5
OF THE PLAN), OR IN ANY WAY ENCUMBERED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES
LAWS, OR A SATISFACTORY OPINION OF COUNSEL SATISFACTORY TO
EMPIRE GAS CORPORATION THAT REGISTRATION IS NOT REQUIRED
UNDER SUCH ACT AND UNDER APPLICABLE STATE SECURITIES LAWS.
MOREOVER, THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO AND RESTRICTED BY THE PROVISIONS OF A CERTAIN
STOCK PURCHASE AGREEMENT BETWEEN EMPIRE GAS CORPORATION AND
THE STOCKHOLDER, A COPY OF WHICH AGREEMENT WILL BE FURNISHED
BY EMPIRE GAS CORPORATION UPON WRITTEN REQUEST AND WITHOUT
CHARGE, AND ALL OF THE PROVISIONS OF SUCH AGREEMENT ARE
INCORPORATED BY REFERENCE IN THIS CERTIFICATE.
3.10 Applicable Law
This Plan shall be governed by and construed in accordance
with the laws of the State of Missouri.
IV. Duration of Plan
Unless sooner terminated by the Board, the Plan will
terminate on October 24, 2004.
MANAGEMENT AGREEMENT
THIS AGREEMENT, dated May 17, 1995, is made and entered into
among Empire Gas Corporation, a Missouri corporation ("Empire"),
Northwestern Growth Corporation, a South Dakota corporation ("NGC"), and SYN
Inc., a Delaware corporation ("SYN"), with respect to the following facts:
A. Empire, NGC and SYN have entered into that certain
Agreement Among Initial Stockholders and SYN Inc., dated May 17, 1995 (the
"Stock Agreement"), which, among other things, requires this Agreement to be
made for the reasons recited in the Stock Agreement (such recitals being
incorporated herein by this reference).
B. SYN and NGC, immediately following the execution of
this Agreement, will be entering into that certain Purchase and Sale
Agreement, dated as of May 17, 1995, with Sherman C. Vogel, Stephen A.
Vogel, Jeffrey K. Vogel, John M. Vogel, Jeanette Vogel, Synergy Group
Incorporated (with its subsidiaries, "Synergy"), and S&J Investments (the
"Synergy Acquisition Agreement"), providing for the acquisition by SYN of
Synergy (the "Synergy Acquisition").
C. This Agreement is essential to the ability of SYN
to finance and consummate the Synergy Acquisition, and to manage the assets
and business to be acquired by the Synergy Acquisition.
NOW, THEREFORE, in consideration of the premises and the
agreements exchanged herein, the parties hereto agree as follows:
ARTICLE 1: ENGAGEMENT TO PLAN AND MANAGE
SYN, on behalf of itself and its subsidiaries, and for the
benefit of its stockholders (of which NGC is a principal one), hereby
engages Empire to perform the planning and management of the assets and
business operations of SYN and its subsidiaries (the "Management Services"),
and Empire hereby accepts such engagement and agrees to perform the
Management Services, subject to the direction of the Board of Directors of
SYN (the "Board") and in accordance with the terms of this Agreement.
ARTICLE 2: BUSINESS PLAN; BUDGET
Section 2.01 Initial Business Plan. The parties hereto
have developed a business plan, a copy of which is attached as Exhibit A to
this Agreement ("Initial Plan"), for the conduct of business operations of
SYN and its subsidiaries after the completion of the Synergy Acquisition
(the "SYN Operations"), showing:
(a) The general longer-term objectives (to be
accomplished in a three to five year period of time);
(b) The preliminary detailed plans for conducting the
SYN Operations through the end of SYN's fiscal year ending June 30, 1996
("fiscal 1996"), including the plant, facilities and equipment (at various
locations), and the personnel staffing at the locations, needed to carry on
the SYN Operations for the balance of fiscal 1996 following the Synergy
Acquisition and during the longer term of the plan; and
<PAGE> 2 of 14
(c) Capitalized reserves for (i) transition costs
including such items as costs of meetings with personnel at the outlets and
branches acquired in the Synergy Acquisition, retail mailings and other
items, not to exceed $500,000 in the aggregate, and (ii) costs of shutting
down Synergy's facility at Farmingdale, New York, offering severance to
Synergy employees and incorporating Synergy's operations into Empire's
facilities in Lebanon, Missouri.
Section 2.02 Initial Budget. The parties hereto have
developed a budget ("Initial Budget") for the conduct of the SYN Operations
for the balance of fiscal 1996 following the Synergy Acquisition in
accordance with the Initial Plan. A copy of the Initial Budget is attached
as Exhibit B to this Agreement.
Section 2.03 Updated and Amended Business Plans and
Budgets. At least 30 days prior to June 30, 1996 and at least 30 days prior
to each June 30 thereafter until the term of this Agreement expires or is
terminated (hereinafter sometimes referred to as the "end of the term of
this Agreement"), Empire will develop, in consultation with NGC, and obtain
the approval of the Board of:
(a) An updated version of the Initial Plan (or of the
most recent previously updated version thereof) to provide a
detailed business plan for the SYN Operations for the 18
months following such June 30 and a longer-term business
plan for the three- to five-year period following such June
30 (the Initial Plan or updated version thereof in effect at
a given time, including all amendments thereto up to such
time, is hereinafter referred to as the "Applicable Plan");
and
(b) An updated version of the Initial Budget (or of the
most recent previously updated version thereof) to provide a
budget for the conduct of the SYN Operations for the 18
months following such June 30, (the Initial Budget or
updated version thereof in effect at a given time for a
particular period, including all amendments thereto up to
such time, is hereafter referred to as the "Applicable
Budget").
Empire may amend an Applicable Plan or an Applicable Budget, or both, at any
time and from time to time by preparing such amendment, submitting the same
to the Board with such supporting information as the Board may require, and
obtaining the Board's approval thereof, but no such amendment shall be
effective unless and until approved by the Board.
Section 2.04 Acting within Applicable Plan and Budget.
Empire shall manage the SYN Operations, commencing with the Synergy
Acquisition and continuing thereafter until the end of the term of this
Agreement, in accordance with the Applicable Plan and within the Applicable
Budget, without obtaining approval of the Board of the details of such
management, but subject to approvals by the Board required by law and to the
requirements for approval by the Board specified in Article 9 herein.
Notwithstanding the foregoing:
(a) Empire may take such management action with respect
to the SYN Operations as it may deem advisable to respond
to, and attempt to curtail or avoid material adverse
<PAGE> 3 of 14
consequences resulting from material unplanned adverse
developments when (reasonably) there is adequate time in
which to secure advance approval of such action by the
Board, but in such event the situation and action taken
shall be submitted with reasonable promptness to the Board
for such further action as the Board may then deem
advisable;
(b) In addition to action taken pursuant to preceding
paragraph (a), Empire may cause SYN to make maintenance
capital expenditures which individually exceed the
Applicable Budget for such expenditures or category of
expenditures by not more than $10,000, but only if the Board
is notified prior to, or at, the time of such expenditures,
while such expenditures in excess of such $10,000 limit may
not be made or committed to unless authorized in advance by
the Board; and
(c) If Empire becomes aware that aggregate operating or
administrative expenses likely will be 1% or more in excess
of what is provided for in the then Applicable Budget,
Empire shall promptly notify the Board of such expected
excess.
Section 2.05 Other Action. Any action that needs to be
taken in the performance of the Management Services that is not provided for
in an Applicable Plan or Applicable Budget or otherwise provided for in this
Agreement shall be taken in accordance with Empire's good faith judgment as
to what is in the best interests of SYN and its subsidiaries.
ARTICLE 3: EMPIRE'S SERVICES; KEY MAN INSURANCE
Section 3.01 Effort Required. Empire, under the management
of Paul S. Lindsey, Jr. ("Lindsey") as the chief executive officer of
Empire, shall devote sufficient time and resources to reasonably assure
successful performance by Empire for SYN of the Management Services in
accordance with this Agreement.
Section 3.02 Key Man Insurance. To compensate SYN for the
loss of services that would occur in the event of Lindsey's death, at all
times while this Agreement is in effect SYN may maintain in effect (at SYN's
expense) insurance on the life of Lindsey in an amount not less than
$10,000,000, payable to SYN, and Lindsey will cooperate by providing
personal information and taking physical examinations as required by the
insurance carrier for issuing and maintaining such insurance coverage. The
cost of such insurance shall not be charged, directly or indirectly, in any
way to Empire or to any of the compensation due Empire under this Agreement.
At the end of the term of this Agreement, or at such earlier time as the
Board determines that SYN no longer needs the insurance coverage provided
for in this Section, Lindsey will have the option to purchase ownership of
such insurance policies from SYN for a price equal to any cash surrender
value of the insurance.
<PAGE>
<PAGE> 4 of 14
ARTICLE 4: COMPENSATION OF EMPIRE
Section 4.01 Compensation Entitlement. As compensation in
full for Empire's services under this Agreement, SYN shall pay Empire a
Fixed Fee (as defined in Section 4.02 hereof) per annum and a Management Fee
(as defined in Section 4.03 hereof).
Section 4.02 Fixed Fee. The Fixed Fee (the amount of which
for each fiscal year of SYN, or part thereof, will be included in the
Applicable Budget for such period), is intended to cover Empire's operating
overhead in performing its services under this Agreement. The Fixed Fee
shall be paid by SYN to Empire in equal monthly installments in advance,
upon commencement of Empire's services and thereafter on the first day of
each month, and shall be at the initial annual rate of $3,250,000 for the
period commencing with the commencement of Empire's services under this
Agreement and ending June 30, 1996, and for each 12-month period or portion
thereof thereafter until the end of the term of this Agreement the annual
rate of the Fixed Fee shall increase by the percentage increase in the
Consumer Price Index. All Items For All Urban Consumers, U.S. City Average
(1982-84 = 100), as of the start of such period as determined by the index
number for the month most recently published by the U.S. Department of Labor
or any successor governmental agency handling such publication, as of the
start of the period, compared to 151.4 (which is such index figure for the
month of March, 1995), but no reduction in the annual rates of the Fixed Fee
shall be made if a decrease in such Consumer Price Index figure shall occur.
In addition to the foregoing adjustments in the Fixed Fee related to changes
in such Consumer Price Index, the Fixed Fee shall be adjusted in an amount
approved by the Board to reflect Empire's increased fixed operating overhead
reasonably attributable to increases in SYN's business resulting from
acquisitions and start-ups of business locations after the Synergy
Acquisition is completed. In the event of changes in the basis for such
Consumer Price Index, or such index is discontinued, the parties shall amend
this Section 4.02 to provide as closely as possible for the same adjustment
mechanism, using the changed basis or a different published index, as
appropriate.
Section 403. Management Fee. The Management Fee, an
estimate of which for each fiscal year shall be included n the Applicable
Budget for such period, shall be at the annual rate of $500,000 per annum
payable by SYN to Empire in equal monthly installments in advance upon
commencement of Empire's services and thereafter on the first day of each
month, plus a sum (the "Additional Amount") equal to 10% of the amount by
which the EBITDA for SYN and its subsidiaries, on a consolidated basis,
exceeds the amount shown below for each period indicated, with the
Additional Amount for each such period to be paid by SYN to Empire within 90
days after the end of such period or at such earlier time as the final
calculation of the Additional Amount for such period is completed:
$17,500,000 for the period ending June 30, 1996;
$18,000,000 for the 12 months ending June 30, 1997;
$18,300,000 for the 12 months ending June 30, 1998;
$18,600,000 for the 12 months ending June 30, 1999; and
$18,900,000 for the 12 months ending June 30, 2000;
<PAGE>
<PAGE> 5 of 14
For purposes of this Agreement, "EBITDA" means earnings before interest,
taxes, depreciation and amortization for a specified period for the
specified corporation, or the specified group of corporations on a
consolidated basis, or the specified business locations, determined from
financial statements for such corporation or corporations or business
locations prepared on the basis of generally accepted accounting principles,
consistently applied.
ARTICLE 5: COMPETITION BETWEEN EMPIRE AND SYN
Section 5.01 Overlapping Market Areas. As promptly as is
reasonably possible, Empire and SYN shall use their best efforts to exchange
those outlets of Empire and SYN that are designated in Exhibit C attached to
this Agreement as having overlapping, competing market areas, by having some
of the SYN outlets listed on such Exhibit C transferred to Empire and some
of the Empire outlets listed on such Exhibit C transferred to SYN, such that
upon completion of these transfers, the SYN outlets transferred to Empire
will have EBITDA (as defined in Section 4.03 herein) and assets equivalent
(with immaterial exceptions) in value to the Empire outlets transferred to
SYN, and the overlapping, competing nature of the market areas shown on
Exhibit C will be eliminated by such transfers. Any shortfall of EBITDA or
asset value to either party from such transfers shall be compensated by
either a transfer of assets or a cash payment, the amount of which is to be
negotiated between NGC and SYN, as one party, and Empire, as the other
party.
Section 5.02 Non-Competition; Acquisitions.
(a) While this Agreement is in effect and for a period
one year thereafter, Empire and SYN will not solicit
customers and employees from each other.
(b) Until the end of the term of this Agreement and for
a period of two years thereafter, Empire and SYN shall not
compete in each others area of interest for new customers
within such area. Regarding individual acquisitions of
retail propane businesses greater than $7,500,000 which any
party hereto desires to make before the end of the term of
this Agreement, such acquisitions shall e owned jointly by
Empire and SYN in relation to the capital provided for such
acquisition or such other arrangements as can be negotiated
by such parties on a case by case basis, but acquisitions
less than $7,500,000 shall be pursued first by the
individual entity with operations closest to the acquired
property, or if not successfully pursued by such party, then
jointly by Empire and SYN together, based on capital
provided, and if not successfully pursued by those two
parties, then by whichever (Empire or SYN) was not such
first party.
<PAGE>
<PAGE> 6 of 14
ARTICLE 6: ACCOUNTING SYSTEM; ACCOUNTANTS
Section 6.01 Accounting System. At all times until the end
of term of this Agreement, Empire will:
(a) Cause SYN and its subsidiaries to implement and
maintain a system of accounting for the assets, liabilities,
operations and cash flows of SYN and its subsidiaries, and
internal controls over accounting and financial matters for
SYN and its subsidiaries, similar to the system and controls
maintained by Empire for itself, or, if requested by the
Board, as the Board shall reasonably require; and in
connection with the foregoing, Empire shall cause SYN to
provide NGC with such financial statements and reports with
respect to assets, liabilities, operations and developments
affecting the business or assets of SYN and its
subsidiaries, as NGC may require (taking into account the
accounting and reporting requirements of NGC's parent
corporation, Northwestern Public Service Company); and
(b) Cause SYN to engage a so-called "Big Six" firm of
independent public accountants (or whatever, at the time, is
the equivalent of the present Big Six) approved by the Board
to make quarterly reviews and annual audits of SYN and its
subsidiaries; but to the most efficient extent possible,
Empire shall cause SYN to engage Baird, Kurtz & Dobson
("BK&D") to perform detailed compliance work to assist the
designated firm of independent accountants in completing the
quarterly reviews and annual audits.
Section 6.02 Audit or Review. At all times until the end
of the term of this Agreement, Empire will allow the Board and its
authorized representatives, upon at least seven-days' prior notice to, and
in coordination with, the President and Chief Executive Officer of SYN, to
audit or review the books of account and records of all kinds kept for SYN,
inspect SYN's properties, consult with SYN's personnel and with Empire's
personnel involved in Empire's performance of services under this Agreement,
and generally to observe and monitor the operation, management and
accounting for SYN's business and assets; provided, however, that such
review and/or audit shall not last longer than five business days unless
Empire is in default under this Agreement. Such reviews shall be restricted
to no more than once a month at the home office of SYN, as maintained by
Empire, through June 30, 1996 and quarterly thereafter, and unrestricted at
all of SYN's retail locations. All reports resulting from these audits or
reviews shall be promptly furnished to the Board.
ARTICLE 7: INSURANCE FOR SYN
In addition to the key man insurance which SYN may maintain
pursuant to Section 3.02 herein, at all times while this Agreement is in
effect insurance covering liability exposures of SYN and its Board, with
types and amounts of coverages as shall be approved by the Board, shall be
obtained and maintained for SYN and its subsidiaries (at SYN's expense, and
at no cost to Empire) by Empire as part of the Management Services. Empire
shall be named as a co-insured under such coverages. The cost of such
insurance shall be included in each Applicable Budget.
<PAGE> 7 of 14
ARTICLE 8: ATTENDANCE OF EMPIRE'S BOARD MEETINGS
At all times while this Agreement is in effect, NGC will
designate a representative who may, as invited, be allowed to attend
quarterly meetings of Empire's Board of Directors and to receive copies of
all information supplied by Empire to the members of its Board of Directors
for such meetings.
ARTICLE 9: SYN BOARD APPROVAL REQUIRED
The assets and business of SYN and its subsidiaries shall be
managed as provided herein by Empire while this Agreement remains in effect,
subject to the overall direction and supervision by the Board. However,
Empire shall not take for SYN (such term at all times in this Article 9
includes SYN's subsidiaries), or cause SYN to take, any of the following
actions without having obtained the prior approval of the Board:
(a) Sell, lease, transfer or otherwise dispose of, or
enter into any agreement or arrangement for any sale, lease,
transfer or other disposition of assets of SYN, except for
(i) a sale, lease, transfer or other disposition
specifically provided for in the Applicable Budget, or (ii)
the sale of services to customers and the sale or lease of
products in the ordinary course of business of SYN;
(b) Purchase any goods or services from, or sell any
goods or services to, or enter into or amend any agreement
or other transaction with, Empire or any affiliate of Empire
that is not on an arm's-length basis;
(c) Cause SYN to incur any indebtedness for borrowed
money (including, without limitation, any capitalized lease
obligations) or to enter into an agreement for such
borrowing (or leasing) with the exception of seller
financing of the purchase of particular assets;
(d) Mortgage or otherwise grant a lien upon or security
interest in any assets of SYN except liens upon acquired
assets to secure seller financing for the acquisition of
such assets;
(e) Cause SYN to become a surety or guarantor of, or an
accommodation party to, or otherwise become or be
contingently liable for any indebtedness or obligations of
any other party, other than as a result of endorsing to
negotiate payment of instruments received from customers in
payment for goods and services in the ordinary course of
business in amounts less than $50,000;
(f) Cause SYN to enter into any joint venture or
similar relationship or acquire any stock, debt obligations
or other securities of, or loan to or make any investment in
or capital contribution to any other party which is not a
wholly-owned subsidiary of SYN;
<PAGE> 8 of 14
(g) Institute, defend, or settle any legal proceeding
on behalf of SYN, except legal proceedings against SYN shall
be defended and if the matter is partially or wholly covered
by insurance, it may be settled if the settlement payment to
be made by SYN is an amount not exceeding the deductible
under such insurance coverage for such matter and all other
matters not partially or wholly covered by insurance may be
settled if the settlement payment to be made by SYN is an
amount not exceeding $50,000 per matter;
(h) Enter into any new contract for the leasing, as
lessee, of any real or personal property, other than
operating leases entered into in the ordinary course of
business involving a term of not more than one year total or
rental of not more than $50,000, and other than retail
location operating leases;
(i) File or consent to any petition in bankruptcy,
reorganization, liquidation or similar proceeding with
respect to SYN, or seek, consent to or acquiesce in the
appointment of a trustee, receiver or liquidator of SYN, or
of all or any part of the assets of SYN, or make an
assignment for the benefit of SYN's creditors;
(j) Confess a judgment against SYN greater than
$50,000;
(k) Amend, modify, supplement or waive any provision of
any contract, the making of which was approved or required
to be approved by the Board;
(l) Make any employment, severance, consulting or
similar agreement, including any agreement with a labor
union, or amend the same, for SYN with any other party
involving payments by SYN greater than $50,000, or adopt any
employee benefit plan for employees of SYN;
(m) Open or close a primary office, plant or other
business location for SYN, or make an agreement or
commitment of any kind to do so unless it results from the
merger or consolidation with another SYN plant, office or
other business location; or
(n) Take any action in contravention of this Agreement.
ARTICLE 10: DIRECTORS AND OFFICERS
Section 10.01 Directors and Officers of SYN. During the
term of this Agreement, the provisions of Section 5.02 of the Stock
Agreement (which are hereby incorporated herein by this reference) shall be
carried out by Empire and NGC even if the Stock Agreement ceases to be in
effect for any reason.
Section 10.02 Directors and Officers of Subsidiaries. The
directors and officers of subsidiaries of SYN shall be designated by Empire
to enable Empire to achieve an efficient management and administration of
the business and affairs of the subsidiaries.
<PAGE> 9 of 14
ARTICLE 11: TERM; TERMINATION
Section 11.01 Term of This Agreement; Termination. The
term of this Agreement shall be in effect until it expires on June 30, 2000,
or at the end of any fiscal year thereafter if preceded by at least six-
months' written notice by SYN or one-year's written notice by Empire of its
desire to terminate as of such date, unless sooner terminated at the
election of the Board, and upon giving notice to Empire of such election, on
any earlier date in the event of any of the following:
(a) Upon default by Empire under this Agreement which
remains uncured after 30 days written notice of such default
has been given to Empire by SYN or NGC;
(b) Upon any change in ownership of Empire which
results in Lindsey having less than voting control (as a
stockholder) of Empire;
(c) Upon the filing or consent to any petition in
bankruptcy, reorganization, liquidation or similar
proceeding with respect to Empire, or the appointment of a
trustee, receiver or liquidator for Empire for all or a
substantial part of its assets, or the making of an
assignment by Empire for the benefit of its creditors;
(d) Upon the failure of SYN and its subsidiaries to
achieve the following cumulative (consolidated) EBITDA
results for the periods beginning with the Synergy
Acquisition and ending on the dates indicated below, as
follows:
(i) for the period ended June 30, 1996,
cumulative EBITDA of at least $14 million;
(ii) for the period ended June 30, 1997,
cumulative EBITDA of at least $29 million;
(iii) for the period ended June 30, 1998,
cumulative EBITDA of at least $45 million;
(iv) for the period ended June 30, 1999,
cumulative EBITDA of at least $62 million;
(v) for the period ended June 30, 2000,
cumulative EBITDA of at least $80 million; and
(vi) for periods (if any) subsequent to June 30,
2000, cumulative EBITDA at the end of each fiscal
year of SYN shall be at least $20,000,000 higher
than at the end of the pervious fiscal year;
(e) If SYN at any time is in default with respect to
more than $1,000,000 of its borrowings;
(f) If Empire at any time is in default with respect to
its outstanding publicly-held bonds;
(g) By mutual agreement of the parties or when required
<PAGE> 10 of 14
by final court order or final award of arbitrators; or
(h) If the stock of SYN, or stock entitling the holder
or holders thereof to cast a majority of the votes in the
general election of directors of SYN, or substantially all
of the assets of SYN, is sold, directly or by merger or
consolidation.
The term of this Agreement also may be terminated at the election of Empire
and upon giving notice to NGC and SYN of such election in the event of any
of the following:
(i) Upon default by SYN resulting from non-payment of
the Fixed Fee or the Management Fee to Empire which remains
uncured after 30 days written notice of such default has
been given by Empire to SYN or NGC; or
(ii) If the stock of SYN, or stock entitling the holder
or holders thereof to cast a majority of the votes in the
general election of directors of SYN, or substantially all
of the assets of SYN is sold, directly or by merger or
consolidation; or
(iii) If any of the terms of this Agreement are changed
without the consent of Empire.
Section 11.02 Transition Upon Termination.
(a) Upon expiration or earlier termination of this
Agreement, the parties hereto will cooperate to the fullest
extent possible to facilitate the creation of a staff of
management personnel, and the establishment of facilities
owned or leased by SYN or otherwise available for use by SYN
on terms acceptable to SYN, to enable SYN to plan and manage
its business operations and assets without the services that
would have been provided by Empire under this Agreement had
this Agreement remained in effect; and until that is
accomplished (and the parties hereto shall make a good faith
effort to accomplish it promptly), SYN shall have the use of
the personnel and facilities of Empire that had been devoted
in whole or in part to such planning and management at a
cost not to exceed the amount most recently budgeted
therefor in the last Applicable Budget, or at Empire's cost
in the absence of such budgeted amount.
(b) Notwithstanding the foregoing, in the event this
Agreement is terminated by Empire, SYN shall have up to 18
months (including the 12-months' notice period) to plan and
execute an operational and transition plan for achieving
what is provided for in preceding subsection (a).
<PAGE>
<PAGE> 11 of 14
Section 11.03 Puts and Calls
(a) In the event this Agreement is terminated by
Empire, SYN shall have a call right to purchase Empire's
shares of common stock of SYN at a price equal to 100% of
fair market value, determined by appraisal, and Empire shall
have a put right to sell to SYN Empire's shares of common
stock of SYN at a price equal to 90% of fair market value,
determined by appraisal, provided that, in case of a put by
Empire, SYN has adequate liquidity, as reasonably determined
by its Board, to make such purchase.
(b) In the event this Agreement is terminated by SYN,
SYN shall have a call right to purchase Empire's shares of
common stock of SYN at a price equal to 110% of fair market
value, determined by appraisal, and Empire shall have a put
right to sell to SYN Empire's shares of common stock of SYN
at a price equal to 100% of fair market value, determined by
appraisal, provided that in the case of a put by Empire, SYN
has adequate liquidity, as reasonably determined by its
Board, to make such purchase.
(c) For these purposes, fair market value of the shares
of common stock of SYN to be sold and purchased shall be
determined by an appraiser or investment banker selected as
provided in Section 1.04(a)(ii) of the Stock Agreement, with
the appraisal made in accordance with such Section.
ARTICLE 12: RIGHT OF FIRST REFUSAL
So long as this Agreement is in effect, Empire will require
Lindsey not to sell or otherwise dispose of the shares of stock of Empire
which he owns (other than to an affiliated entity or related party or to
Empire management personnel, provided that Lindsey retains voting control of
Empire), and Empire will not sell or otherwise dispose of all or
substantially all of its business and assets, whether such transactions are
to be done directly or indirectly by means of a merger or consolidation of
Empire with the acquiring entity, without first offering the same for sale
to NGC, on the same terms as are offered by the other party (with full
disclosure of such terms to NGC), and allowing not less than 30 days after
its receipt of the offer for NGC to accept the offer, and if such offer is
accepted by NGC, NGC shall have 90 days in which to complete the purchase on
such terms.
ARTICLE 13: MISCELLANEOUS
Section 13.01 Notices. All notices and other
communications hereunder shall be in writing and shall be deemed to have
been given (a) when delivered in person, (b) one business day after deposit
with a nationally recognized overnight courier service, (c) two business
days after being deposited in the United States mail, postage prepaid, first
class, registered or certified mail, or (d) the business day on which it is
sent and received by facsimile, as follows:
<PAGE>
<PAGE> 12 of 14
If to SYN, to: SYN Inc.
c/o Northwestern Growth Corporation
33 Third Street, S.E.
Huron SD 57350
Fax No. (605) 353-8286
Attn: Richard R. Hylland,
President and Chief Operating Officer
and to SYN Inc.
c/o Empire Gas Corporation
1700 South Jefferson Street
Lebanon, MO 65536
Fax No. (417) 532-8529
Attn: Paul S. Lindsey, Jr.,
Chief Executive Officer
If to NGC: Northwestern Growth Corporation
33 Third Street, S.E.
Huron SD 57350
Fax No. (605) 353-8286
Attn: Richard R. Hylland, President
If to Empire: Empire Gas Corporation
PO Box 303
1700 South Jefferson
Lebanon MO 65536
Fax No. (417) 532-8529
Attn: Paul S. Lindsey, Jr., President
or to such other person or address as any party hereto shall specify in
notice in writing given to the other parties hereto.
Section 13.02 Assignment Restricted; Successors and
Assigns. No party hereto may assign its interest in this Agreement without
first obtaining the written consent of the other parties hereto, except that
this Agreement may be assigned by SYN, without obtaining such consents, to
(and in connection with the closing of the acquisition by) an acquirer of
substantially all of the business and assets of SYN and its subsidiaries,
provided that written notice of such assignment is given to the other
parties hereto, and except further that this Agreement may be assigned by
NGC (in connection with the assignment of NGC's shares of common stock of
SYN) to NWPS, or any wholly-owned subsidiary of NWPS, without obtaining such
consents, provided written notice of such assignment is given to the other
parties hereto.
Section 13.03 Severability. Should any provision of this
Agreement for any reason be declared invalid or unenforceable, such decision
shall not affect the validity or enforceability of any of the other
provisions of this Agreement, which remaining provisions shall remain in
full force and effect and the application of such invalid or unenforceable
provision to persons or circumstances other than those as to which it is
held invalid or unenforceable shall be valid and be enforced to the fullest
extent permitted by law.
<PAGE> 13 of 14
Section 13.04 Interpretation. The article and section
headings contained in this Agreement are solely for the purpose of
reference, are not part of the agreement of the parties and shall not in any
way affect the meaning or interpretation of this Agreement.
Section 13.05 Arbitration. Any dispute arising under this
Agreement shall be resolved by arbitration. Each of the parties hereto
agrees (a) that each such arbitration shall be initiated and conducted in
accordance with the rules and procedures of the American Arbitration
Association ("AAA"), (b) to submit all such disputes to the office of the
AAA in charge of arbitrations conducted in the metropolitan area of the City
of Minneapolis, Minnesota, and (c) to have each such arbitration proceeding
conducted in the metropolitan area of the City of Minneapolis, Minnesota,
and (d) to be subject to the jurisdiction of the arbitrators in the City of
Minneapolis, Minnesota upon notice given in accordance with the provisions
of this Agreement that a dispute has been submitted to such office of the
AAA.
Section 13.06 Governing Law. This Agreement shall be
governed by the laws of the State of Delaware (regardless of the laws that
might otherwise govern under applicable principles of conflicts of law) as
to all matters, including but not limited to matters of validity,
construction, effect, performance and remedies.
Section 13.07 Counterparts. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but all of which
collectively shall constitute one and the same agreement.
IN WITNESS HEREOF, the parties hereto have executed this
Agreement as of the date first above written.
Empire Gas Corporation SYN Inc.
By: /s/ Paul S. Lindsey, Jr. By: /s/ Paul S. Lindsey, Jr.
________________________ ____________________________
Its President Title: _________________
Northwestern Growth Corporation
By: /s/ Richard R. Hylland
______________________
Its President
<PAGE>
<PAGE> 14 of 14
Exhibits to Management Agreement
Exhibit A Initial Business Plan (Sec. 2.01)
Exhibit B Initial Budget (Sec. 2.02)
Exhibit C Listing of overlapping market areas of
SYN (Synergy) and Empire
AGREEMENT AMONG INITIAL STOCKHOLDERS AND SYN INC.
THIS AGREEMENT, dated May 17, 1995, is made and entered into
among Empire Gas Corporation, a Missouri corporation ("Empire"),
Northwestern Growth Corporation, a South Dakota corporation ("NGC"), and SYN
Inc., a Delaware corporation ("SYN~), with respect to the following facts:
A. Empire currently is engaged in the business of
distributing and selling at retail liquified petroleum ("LP") gas and
appliances, and has a management experienced in the operation of such
business.
B. NGC is a wholly-owned subsidiary of Northwestern
Public Service Company ("NWPS") and has as one of its objectives the making
of investments that could benefit NWPS and its stockholders.
C. Empire and NGC, acting together, have made a
successful bid to acquire the LP gas distribution and appliance business of
Synergy Group Incorporated ("Synergy"; such acquisition being hereinafter
called the "Synergy Acquisition"), in what is planned to be the first Step
in the proposed development by Empire and NGC, on a team basis, of a
significant position in the LP gas distribution industry. Empire and NGC
have contemplated, in their bidding for the Synergy Acquisition, that they
will rely principally on Empire for management expertise and on NGC to
provide or arrange the financing for the Synergy Acquisition, and that the
success of the Synergy Acquisition will depend in large measure upon the
cost savings and operating improvements expected to be achieved by having
Empire do the planning and management of the business of Synergy and its
subsidiaries, under the direction of the Board of Director of SYN.
D. Empire and NGC have caused SYN to be incorporated
to serve as the vehicle (directly or through subsidiaries to be created) for
making the Synergy Acquisition.
E. Empire and NGC, on behalf of SYN, are concluding
the negotiation of the definitive agreement (the "Synergy Acquisition
Agreement") for the Synergy Acquisition, and need to provide for (i) the
initial capitalization of SYN, (ii) certain loan financing for SYN, (iii)
the management of SYN and (iv) for certain matters pertaining to the
ownership of shares of stock of SYN.
NOW THEREFORE, in consideration of the premises and the
agreements, exchanged herein, the parties hereto agree as follows:
ARTICLE 1: INITIAL CAPITALIZATION OF SYN;
STOCK SUBSCRIPTIONS AND RESERVATIONS OF STOCK
Section 1.01 Initial Authorized Stock of SYN. SYN has been
incorporated by Empire and NGC with an initial authorized capitalization (as
set forth in Article FOURTH of SYN's Certificate of Incorporation, a true
and complete copy of which is attached hereto as Exhibit A), consisting of
100,000 shares of common stock, par value 1 cents per share (the "Common Stock";
and the 100,000 shares of Common Stock referred to herein shall only be
increased with the prior written agreement of Empire and NGC unless such
increased number of shares is to be issued in an arm's length transaction to
a party who is not affiliated with any of the parties to this Agreement),
<PAGE> 2 of 12
and 100,000 shares of preferred stock, par value 1 cent per share, issuable in
one or more series (the "Preferred Stock"). Prior to the consummation of
the Synergy Acquisition, SYN shall, and Empire and NGC shall cause SYN to,
take all action necessary to create and authorize the issuance of a series
of the Preferred Stock, namely, the Series A Cumulative Preferred Stock,
consisting of 70,500 shares, the terms of which shall be as set forth in
Exhibit B attached hereto, with such changes therein as the parties hereto
may approve before such series is created (the "Series A Preferred Stock").
Section 1.02 Subscriptions and Option for Stock. NGC has
previously purchased, and hereby subscribes for, stock of SYN, and NGC has
granted Empire an option to purchase certain shares of stock from NGC, as
follows:
(a) SYN and NGC acknowledge that NGC has
purchased from SYN, and SYN has sold and issued to NGC,
1,000 shares of Common Stock for a cash purchase price of
$1,000.00 which has been paid by NGC to SYN, and that these
shares are the only shares of stock of SYN that are
currently outstanding.
(b) NGC hereby subscribes for, and agrees to
purchase from SYN, and SYN hereby agrees to sell and issue
to NGC, an additional 71,500 shares of Common Stock for a
cash purchase price of $71,500.00 to be paid at the time of
such issuance, with this transaction to be consummated (the
"Subscription Closing") at the First Closing, as defined in
the Synergy Acquisition Agreement, unless an earlier time
for the Subscription Closing is agreed to by the parties
hereto. The obligation of NGC under its subscription in
this paragraph (b) is subject to the condition (unless
waived by NGC) that NGC shall have been able to obtain the
funds from the Permanent Financing or the Temporary
Financing, as those terms are defined in the Synergy
Acquisition Agreement, at or prior to the time of the
Subscription Closing.
(c) NGC hereby subscribes for, and agrees to
purchase from SYN, and SYN hereby agrees to sell and issue
to NGC, 68,000 shares of Series A Preferred Stock for a cash
purchase price of $1,000 per share ($68,000,000.00 total),
with this transaction to be consummated at the Subscription
Closing. The obligation of NGC under its subscription in
this paragraph (c) is subject to the condition (unless
waived by NGC) that NGC shall have been able to obtain the
funds from the Permanent Financing or the Temporary
Financing, as those terms are defined in the Synergy
Acquisition Agreement, at or prior to the time of the
Subscription Closing and that, at the time of the
Subscription Closing, the First Closing (as defined in the
Synergy Acquisition Agreement) is concurrently occurring or
is reasonably assured of being consummated immediately
thereafter.
(d) Empire hereby subscribes for, and agrees to
purchase from SYN, and SYN hereby agrees to issue and sell
to Empire, 10,000 shares of Common Stock (which shall
<PAGE> 3 of 12
represent 10% of the issued and outstanding Common Stock)
for a cash purchase price of $10,000 to be paid at the time
of such issuance, with this transaction to be consummated at
the Subscription Closing. The obligation of Empire under
its subscription in this paragraph (d) is subject to the
condition (unless waived by Empire) that NGC consummates its
purchase of shares of Common Stock under paragraph (b) above
in this Section 1.02 at the Subscription Closing.
(e) NGC hereby grants to Empire an option to
purchase from NGC, at a price of $1.00 per share, up to
20,000 of the shares of Common Stock which shall represent
20% of the issued and outstanding Common Stock, subject to
NGC acquiring such shares pursuant to paragraph (b) above in
this Section 1.02. Such option may be exercised at any time
after September 30, 1995 and prior to September 30, 1997, or
the Determination Date (as defined in Section 1.04 herein),
whichever is earlier, by Empire's giving written notice of
such exercise to NGC. After the giving of such notice, NGC
shall assign and deliver to Empire the shares of Common
Stock for which the stock option was exercised, as promptly
as possible, but in any event within seven days, in exchange
for Empire's payment to NGC of the purchase price for such
shares; and the shares so assigned and delivered shall then
be shares owned by Empire and shall be held by Empire
subject to the terms of this Agreement.
Section 1.03 Reservations of Stock for Issuance. SYN
shall, and Empire and NGC shall cause SYN to, take all action necessary to
reserve for initial issuance, 17,500 shares of Common Stock and 2,500 shares
of Series A Preferred Stock to be issued to the Stockholders (as defined in
the Synergy Acquisition Agreement) at the Second Closing (also as defined in
the Synergy Acquisition Agreement), pursuant to the Synergy Acquisition
Agreement.
Section 1.04 Common Stock Returns. The following
provisions of this Section 1.04 apply in the event Empire exercises the
stock option granted to it in Section 1.02(d) herein:
(a) The "Common Stock Return," as that term is
used herein, shall be the number of shares of Common Stock
of SYN which Empire hereby agrees to assign and deliver to
NGC, without cost to NGC, in the event that the common
equity value at a Determination Date (as defined below) is
below levels specified for such date in subparagraph (iii)
in this paragraph (a). The Common Stock Return shall be set
in accordance with the following formula:
(i) The Determination Date shall be the
date on which SYN is sold (meaning a sale of
substantially all of the assets of SYN and its
subsidiaries, the acquisition of SYN by another,
non-affiliated entity by merger or consolidation,
or the sale of partnership units or shares of stock
of SYN which entitle the holder thereof to cast at
least a majority of the votes entitled to be cast
<PAGE> 4 of 12
in the general election of directors of SYN or the
date on which the sale of partnership units or
shares of SYN's Common Stock is closed in an
underwritten public offering, for which the
partnership units or shares are registered under
the Securities Act of 1933, or the date on which
this Agreement expires or is terminated in
accordance with Section 7.02 herein, whichever of
the foregoing first occurs).
(ii) The value of the total outstanding
Common Stock of SYN on the Determination Date (the
"Value"), shall be determined by the parties hereto
on the basis of the sale price for SYN if the sale
of SYN is involved, or based upon the price to SYN
(or the selling stockholders if SYN is not the
seller) in the event an underwritten public
offering of partnership units or Common Stock of
SYN is involved, or on the basis of the fair market
value of the outstanding Common Stock of SYN in
every other event, as determined by an appraisal
firm or an investment banking firm selected by the
parties hereto, with such fair market value to be
determined on the basis of the value of SYN and its
subsidiaries as a whole, if sold as a going
concern. In the event there is a combination of
one or more entities with SYN, the value of SYN
will be determined by either (x) a fair market
value appraisal or (y) in the event there is a
public offering within nine months after such
combination, the value shall be the initial price
to the public of the SYN shares of Common Stock or
partnership units in such public offering.
(iii) For these purposes, "deemed
outstanding shares of Common Stock" shall be the
total of the number of shares of Common Stock
issued and outstanding, plus the number that would
be issued and outstanding if all outstanding stock
options, warrants, conversion rights and other
rights to acquire shares of Common Stock were
exercised, whether or not exercisable at the time.
The number of shares of Common Stock of SYN
constituting the Common Stock Return shall be the
percentage of the deemed outstanding shares of
Common Stock of SYN as of the Determination Date,
determined on the basis of the following table and
paragraph (b) below, if applicable:
<PAGE>
<PAGE> 5 of 12
Column A Column B Column C
Percentage of deemed Percentage of deemed
outstanding shares of outstanding shares of
Common Stock of SYN Common Stock of SYN
shall be 0% if the shall be 7.5% if the
Fiscal Year of Value as of the Value as of the
SYN in which Determination Date is Determination Date is
Determination at least the following less than the following
Date occurs: amount: amount:
______________ ______________________ _______________________
1996 $24,500,000 $22,250,000
1997 $30,000,000 $24,750,000
1998 $36,750,000 $27,500,000
1999 $45,000,000 $30,600,000
2000 $55,200,000 $34,000,000
After 2000 1.225 times the 1.1125 times the
previous year's previous year's
amount amount
(b) If the Value as of the Determination Date is more
than the amount in Column C in Section 1.04(a)(iii) above, but less than the
amount in Column B therein, the percentage used to determine the Common
Stock Return shall be a figure between 7.5% and 0% which is in proportion to
what the Value is to the amounts in the two columns for the particular
Determination Date.
Section 1.05 Acquisition for Investment. Empire and NGC
each represent and warrant to the other, and to SYN, as follows: It has
(through its management personnel) such knowledge and experience in
financial and business matters that it is capable of evaluating the merits
and risks of its purchase of securities of SYN as provided for in this
Agreement; it is acquiring such securities, and will acquire them, for
investment and not with a view toward, or with any intention of,
distributing or selling any of the securities and it will not sell or offer
to sell or otherwise transfer any of the securities in violation of the
Securities Act of 1933, as amended.
ARTICLE 2: LOAN FINANCING FOR SYN
NGC shall make a commercially reasonable effort to arrange
for SYN, or provide SYN with, loan financing for SYN, on a fully secured
basis, of up to $70,000,000 principal amount needed by SYN for the Synergy
Acquisition.
ARTICLE 3: LIMIT TO FINANCING OBLIGATIONS
Neither Empire nor NGC, nor any of their affiliates, shall
have any obligation to provide, or arrange, financing for SYN other than as
expressly provided for in Articles 1 and 2 herein.
<PAGE>
<PAGE> 6 of 12
ARTICLE 4: SYNERGY ACQUISITION
Each of the parties hereto will make a commercially
reasonable effort in cooperation with the other parties hereto, to do those
things within its control to consummate the Synergy Acquisition in
accordance with the terms of, and subject to the conditions in, the Synergy
Acquisition Agreement. Nothing in this Agreement or otherwise shall be
construed to give anyone who is not a party to this Agreement, whether under
a third party beneficiary legal doctrine or otherwise, a right to enforce
the provisions of this Article or to obtain relief for any failure to
perform in accordance with the requirements of this Article.
ARTICLE 5: MANAGEMENT OF SYN
Section 5.01 At or before the First Closing (as defined in
the Synergy Acquisition Agreement), the parties hereto will enter into a
management agreement in substantially the form attached hereto as Exhibit C,
or with such changes therein as the parties hereto hereafter agree upon (the
"Management Agreement"), pursuant to which the planning and management of
the business of SYN subsequent to the Second Closing (as defined in the
Synergy Acquisition Agreement) will be conducted by Empire under the
direction of the Board of Directors of SYN, as provided therein.
Section 5.02 Directors and Officers of SYN.
(a) For purposes of this Agreement, "Control
Period" means the period of time commencing on the date of
this Agreement and continuing either (i) until this
Agreement is terminated pursuant to Section 7.02 herein
because of the termination of the Synergy Acquisition
Agreement without the Synergy Acquisition having been
completed or (ii) until a time after the First Closing, as
defined in the Synergy Acquisition Agreement, when (A) the
Control Period is terminated by agreement of the parties
hereto, (B) NGC no longer owns a majority of the shares of
Common Stock of SYN deemed to be outstanding (determined as
provided in Section 1.04 herein), (C) Empire no longer owns
at least 20% of the shares of Common Stock of SYN deemed to
be outstanding or has an option to acquire at least that
amount of shares, or (D) when SYN consummates an
underwritten public offering of partnership units or shares
of its Common Stock, registered under the Securities Act of
1933, whichever of (A), (B), (C) or (D) first occurs.
(b) Throughout the Control Period, NGC and
Empire shall vote their voting shares of stock of SYN that
are capable of being voted, and will otherwise use their
respective commercially reasonable efforts, to carry out the
following:
(i) the Board of Directors of SYN shall
consist of five members, three of whom shall be nominees of
NGC (the "NGC Positions") and two of whom shall be nominees
of Empire (the "Empire Positions"); and any vacancies
occurring in the NGC Positions will be promptly filled with
nominees of NGC and any vacancies occurring in the Empire
Positions will be promptly filled with nominees of Empire.
<PAGE> 7 of 12
(ii) The officers of SYN shall include
at all times a Chairman of the Board and a Vice Chairman of
the Board, who will be persons nominated by NGC, and a
President and Chief Executive Officer, who will be Paul S.
Lindsey, Jr., and a Secretary, who will be a person
nominated by Empire. The authority and duties of such
officers shall be as set forth in the by-laws of SYN, a true
and complete copy of which as in effect on the date hereof
is attached hereto as Exhibit D.
(c) To initiate compliance with preceding
paragraph (b), Empire and NGC have caused the following
persons to be elected to the positions with SYN indicated by
their names, to serve for the period provided in the by-laws
of SYN:
Chairman of the Board and director - Merle
D. Lewis (an NGC nominee for such
positions);
Vice Chairman of the Board and director
Richard R. Hylland (an NGC nominee for such
positions);
President and Chief Executive Officer and
director - Paul S. Lindsey, Jr. (an Empire
nominee as to the position of director);
Secretary and director - Douglas A. Brown
(an Empire nominee for such positions);
with the fifth member of the Board of Directors of SYN (one
of the NGC Positions) to be nominated by NGC, and elected,
at a future time when NGC has selected the nominee for such
position.
ARTICLE 6: DISPOSITION OF SYN STOCK BY EMPIRE OR NGC
Section 6.01 Permitted Dispositions.
(a) NGC may at any time or from time to time
transfer any of the securities issued by SYN which NGC may
own at any time to NWPS or any wholly-owned subsidiary of
NWPS, provided that notice of such transfer is given to the
other parties to this Agreement and that the transferee
becomes a party to this Agreement with respect to the
securities so transferred, but all of such transferees and
NGC shall collectively act, and be treated, as a single
entity with NGC acting as their representative for purposes
of this Agreement.
(b) Empire may at any time and from time to
time transfer any of the securities issued by SYN which
<PAGE> 8 of 12
Empire may own at any time to any affiliated party, provided
that notice of such transfer is given to the other parties
to this Agreement and the transferee becomes a party to this
Agreement with respect to the securities so transferred, but
all such transferees and Empire shall collectively act, and
be treated, as a single entity with Empire acting as their
representative for purposes of this Agreement.
Section 6.02 Rights of First Refusal
(a) Except as permitted by Section 1.04 and
Section 6.01(b) herein, so long as the Management Agreement
is in effect, Empire will not sell or otherwise dispose of
any shares of Common Stock of SYN, or any other securities
convertible into such shares, to any party without first
offering the same for sale to NGC in writing on the same
terms as are offered to or by the other party (with full
disclosure of such terms to NGC) and allowing not less than
30 days after its receipt of the offer for NGC to accept the
offer; and if such offer is accepted by NGC, NGC shall have
90 days in which to complete the purchase on such terms.
(b) Except as permitted by Section 1.02(e) and
Section 6.01(a) herein, so long as the Management Agreement
is in effect, NGC will not sell or otherwise dispose of any
shares of Common Stock of SYN, or any other securities
convertible into such shares, to any party without first
offering the same for sale to Empire in writing on the same
terms as are offered to or by the other party (with full
disclosure of such terms to Empire) and allowing Empire not
less than 30 days after its receipt of the offer for Empire
to accept the offer, and if such offer is accepted by
Empire, Empire shall have 90 days in which to complete the
purchase on such terms, but if Empire declines such offer,
then Empire shall have the right to participate on a pro
rata basis in the sale of such shares by NGC.
ARTICLE 7: MISCELLANEOUS
Section 7.01 Restrictive Legend. Each certificate issued
by SYN to evidence shares of Common Stock, or securities convertible into
such shares, owned by either Empire or NGC shall be endorsed with the
following legend:
"The shares represented by this certificate are
subject to the Agreement among the Corporation and
its Initial Stockholders, dated as of May 17, 1995,
as the same may be amended, on file with the
issuing Corporation at its principal business
office and may be transferred or otherwise disposed
of only in accordance therewith."
Section 7.02 Term of this Agreement. This Agreement, if
not sooner terminated by agreement of the parties hereto or pursuant to the
next sentence, shall terminate when the Control Period terminates. In the
event the Synergy Acquisition Agreement is terminated without the Synergy
<PAGE> 9 of 12
Action having been completed, the parties hereto will
liquidate and dissolve SYN as promptly as possible when all obligations of
SYN under, or with respect to, the Synergy Acquisition Agreement have been
discharged or provided for; and this Agreement shall then automatically
terminate.
Section 7.03 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been given (a)
when delivered in person (b) one business day after deposit with a
nationally recognized overnight courier service (c) two business days after
being deposited in the United States mail, postage prepaid, first class,
registered or certified mail, or (d) the business day on which it is sent
and received by facsimile as follows:
(i) If to SYN, to:
SYN Inc.
c/o Northwestern Growth Corporation
33 Third Street, S.E.
Huron, South Dakota 57350
Fax No. (605) 353-8286
Attention: Richard R. Hylland, President
with a copy to Empire, addressed and sent to it at
the place required under this Agreement for giving
notice to Empire
(ii) If to Empire, to:
Empire Gas Corporation
P.O. Box 303
1700 South Jefferson
Lebanon, Missouri 65536
Fax No. (417) 532-8529
Attention: Paul S Lindsey, Jr., President
(iii) If to NGC, to:
Northwestern Growth Corporation
33 Third Street, S.E.
Huron, South Dakota 57350
Fax No. (605) 353-8286
Attention: Richard R. Hylland, President
Section 7.04 Section 351 of the Code. Each of the parties
hereto agrees to comply with the requirements of Section 6.28 of the Synergy
Acquisition Agreement, both with respect to the transaction referred to
therein and with respect to any transaction under this Agreement to the
extent necessary to assure the result under Section 351 of the Internal
Revenue Code of 1986, as amended, for the transaction referred to in such
Section 6.28.
Section 7.05 Captions. The captions in this Agreement are
included for convenience of reference only and shall be ignored in the
construction and interpretation of this Agreement.
<PAGE> 10 of 12
Section 7.06 Governing Law. This Agreement shall be
construed in accordance with and governed by the internal laws of the State
of Delaware without regard to the choice of law principles thereof.
Section 7.07 Counterparts. Execution of separate copies of
this Agreement by each or some of the several parties hereto shall have the
same force and effect as though all such parties had executed the original
of this Agreement. Further, the parties hereto may execute several
counterparts of this Agreement, all of which shall constitute but one and
the same agreement.<PAGE>
<PAGE> 11 of 12
IN WITNESS WHEREOF, each of the parties hereto have caused
this Agreement to be executed in its name as of the date first above
written.
EMPIRE GAS CORPORATION
By /s/ Paul S. Lindsey, Jr.
________________________
President
NORTHWESTERN GROWTH CORPORATION
By /s/ Richard R. Hylland
______________________
President
SYN INC.
By /s/ Paul S. Lindsey, Jr.
________________________
Title: _____________________
<PAGE>
<PAGE> 12 of 12
Exhibit Document
_______ ________
A Syn Inc. Certificate of Incorporation
B Series A Preferred Stock
C Management Agreement
D Syn Inc. By-laws
WAIVER AGREEMENT
THIS AGREEMENT made this 29th day of April, 1995, by and
among EMPIRE GAS CORPORATION, a Missouri corporation ("Empire"), SYN, INC.,
a corporation to be formed under the laws of Delaware (such corporation and
its subsidiaries are referred to collectively as "SYN") and PAUL S. LINDSEY,
JR. ("Lindsey") (Empire, Lindsey, the affiliates of either of them, and SYN
are collectively referred to herein as the "Empire Group"); NORTHWESTERN
GROWTH CORPORATION, a South Dakota corporation ("NGC"); and EMPIRE ENERGY
CORPORATION, a Tennessee corporation ("Energy"), ROBERT W. PLASTER
("Plaster") and STEPHEN R. PLASTER ("S. Plaster") (Energy, Plaster and S.
Plaster are collectively referred to herein as the "Plaster Group").
WHEREAS, the Plaster Group and certain members of the Empire
Group are parties to a Non-Competition Agreement dated May 7, 1994 and
effective as of June 30, 1994 ("NCA") wherein the parties agreed, inter
alia, that for the period of three years from the effective date of the NCA,
such members of the Empire Group would not compete with the business of
Energy in the marketing territory of Energy as set forth in the NCA.
WHEREAS, Empire and NGC are contemplating entering into a
transaction whereby, through SYN, (i) they will acquire an interest in the
stock and/or assets of Synergy Group, Incorporated, a Delaware corporation,
and certain of its affiliates and subsidiaries (collectively, "Synergy"),
which is in the same business as Energy and which has certain of its
operations located in the marketing territory of Energy as set forth in the
NCA; and (ii) after such acquisition Empire will manage the business and
assets so acquired by SYN for the benefit of SYN and its investors, of which
NGC will be the major investor. Such transaction is hereafter referred to
as the "Synergy Transaction."
WHEREAS, the Empire Group and NGC desire to obtain a waiver
of certain provisions of the NCA in order to consummate the proposed Synergy
Transaction, and in consideration of such waiver are willing to cause SYN to
grant Energy an option to purchase certain of the retail propane locations
to be acquired as part of the Synergy Transaction.
NOW THEREFORE, in consideration of the premises and of the
mutual covenants and undertakings contained herein, the parties agree as
follows:
1. In connection with and conditioned upon the closing
of the Synergy Transaction, the Plaster Group hereby waives Sections 2(b)(2)
and 2(b)(3) of the NCA (as amended pursuant to paragraph 9 of this
Agreement) as they might apply to the Empire Group's acquisition and
subsequent operation of the retail propane outlets located in Energy's
marketing territory that are listed on Schedules A and B hereto (the retail
propane outlets listed on Schedule A are referred to as the "Optioned
Outlets," those listed on Schedule B are referred to as the "Retained
Outlets," and the Optioned Outlets and the Retained Outlets are referred to
jointly as the "Outlets"); and the Exchanged Outlets, as defined in Schedule
C hereto.
2. In connection with and conditioned upon the closing
of the Synergy Transaction, the Plaster Group agrees and covenants that no
member of the Plaster Group shall file any action or lawsuit seeking to
enforce or to obtain damages with respect to (i) Sections 2(b)(2) and
2(b)(3) of the NCA (as amended pursuant to Paragraph 9 of this Agreement)
<PAGE> 2 of 5
against the Empire Group or any member thereof based upon the Empire Group's
acquisition or subsequent operation of any of the Outlets or the Exchanged
Outlets; (ii) Section 2(a) of the NCA (as amended pursuant to Paragraph 9
of this Agreement) against SYN for any alleged breach thereof by any member
of the Empire Group; or (iii) Section 2(d) of the NCA (as amended pursuant
to Paragraph 9 of this Agreement) against SYN for any alleged breach thereof
by any member of the Empire Group that does not arise from the solicitation
or other inducement of Employees (as defined in the NCA) of the Plaster
Group to become Employees of SYN or any of its affiliates; provided, however
that, if SYN becomes the successor in interest to Empire, the agreements and
covenants set forth in subsections (ii) and (iii) of this paragraph 2 shall
become null and void.
3. Except as provided in paragraphs 1 and 2 above and
as amended pursuant to Paragraph 9 below, the terms of the NCA shall remain
in full force and effect. Specifically, nothing in this Agreement is
intended or shall be construed to waive or prevent any member of the Plaster
Group from seeking to enforce or obtain damages (i) with respect to Sections
2(b)(2) and 2(b)(3) of the NCA (as amended pursuant to Paragraph 9 of this
Agreement) other than in connection with the Empire Group's acquisition and
subsequent operation of the Outlets and the Exchanged Outlets; (ii) with
respect to Section 2(a) or 2(d) of the NCA (as amended pursuant to Paragraph
9 of this Agreement) against any member of the Empire Group other than SYN;
or (iii) with respect to any other provision of the NCA (as amended pursuant
to Paragraph 9 of this Agreement) against any member of the Empire Group;
provided, however, that no member of the Empire Group shall be deemed to be
in violation of Section 2(a) of the NCA (as amended pursuant to Paragraph 9
of this Agreement) as a result of having provided information about the
Exchanged Outlets to SYN.
4. In consideration of the Plaster Group's waiver of
the provisions of the NCA with respect to the Synergy Transaction as
specified in Paragraphs 1 and 2 of this Agreement (the "Waiver"), the Empire
Group and NGC shall cause Energy to be granted, at the time the purchase
agreement providing for the Synergy Transaction (the "Synergy Purchase
Agreement") is executed and delivered, an exclusive option (the "Option") to
purchase the assets associated with the Optioned Outlets on substantially
the terms and conditions described in the Purchase Agreement attached hereto
as Schedule D (the "Definitive Agreement"). The Option shall be assignable
by Energy to any of its affiliates. The holder of the Option is hereinafter
referred to as the "Optionee."
5. The parties acknowledge that (i) the Definitive
Agreement has been negotiated in light of the information about the Outlets
and the Synergy Transaction that has been provided to the Plaster Group as
of the date of this Agreement; (ii) neither the Plaster Group nor the Empire
Group nor NGC has had an opportunity to complete its due diligence with
respect to the Outlets as of the date of this Agreement; (iii) the form of
the Definitive Agreement is based upon the current form of the Synergy
Purchase Agreement; (iv) the Synergy Purchase Agreement will not be executed
until after the Empire Group and NGC have completed their due diligence; and
(v) the form of the Synergy Purchase Agreement and the terms of the Synergy
Transaction may change as a result of due diligence conducted by the Empire
Group and NGC and other events occurring after the date of this Agreement.
Accordingly, (x) the Empire Group and NGC agree to conduct such reasonable
due diligence with respect to the Optioned Outlets as the Plaster Group may
reasonably request and is permissible under the terms of the Synergy
Transaction, and promptly to make available to the Plaster Group all
<PAGE> 3 of 5
material information obtained as a result of such due diligence; and (y) if
the Option is exercised, the parties agree to negotiate in good faith to
make such modifications to the Definitive Agreement as may be necessary to
take account of changes in the terms of the Synergy Transaction and the
Synergy Purchase Agreement that occur after the date of this Agreement.
6. The Option may be exercised by delivering written
notice to Empire and SYN no later than 5:00 p.m. Central Time on the later
of the fifteenth day before the scheduled second closing of the Synergy
Transaction or the fifth (5th) business day after Optionee has received
written notice of the date of the scheduled second closing of the Synergy
Transaction. If the Option is exercised, the Empire Group and NGC shall
cause SYN to sell the Optioned Outlets to Optionee on the terms and
conditions set forth in the Definitive Agreement (with such modifications as
may be required pursuant to Paragraph 5 of this Agreement). Closing of the
Optionee's purchase of the Optioned Outlets shall take place in escrow,
which will be established on the same day as, and immediately following, the
first closing of the Synergy Transaction. The escrowed purchase price and
closing documents pertaining to the Optionee's purchase of the Optioned
Outlets shall be released from escrow on the same day as, and immediately
following, the second closing of the Synergy Transaction. If the second
closing of the Synergy Transaction fails to occur, the escrowed purchase
price and closing documents shall be returned to the parties that deposited
them in escrow and the Empire Group and NGC shall pay or reimburse the
Plaster Group for all fees, charges and expenses incurred by the Plaster
Group in connection with placing the above-referenced funds and closing
documents in escrow.
7. The Waiver shall remain in full effect
notwithstanding the failure or inability of the Optionee to exercise and
close on the Option; provided, however, that nothing in this paragraph is
intended or shall be construed to relieve any member of the Empire Group or
NGC of liability for breach of this Agreement, the Option, or the Definitive
Agreement.
8. The parties hereto each acknowledge and agree that,
in the event of any breach of this Agreement or the Definitive Agreement to
be entered into if the Optionee exercises the Option, the non-breaching
party would be irreparably harmed and could not be made whole by monetary
damages alone. Accordingly, the parties hereby agree that such non-
breaching party shall be entitled to compel specific performance of this
Agreement and the Definitive Agreement to be entered into if the Optionee
exercises the Option.
9. Subject to Paragraphs 4, 5 and 6 of this Agreement,
upon the second closing of the Synergy Transaction, the parties to the NCA
shall execute and deliver an amendment to the NCA to provide as follows:
(i) From and after the effective date of such
amendment, any member of the Energy Group (as defined in the
NCA) or any member of the Empire Group (as defined in the
NCA) may, directly or indirectly, own, manage, operate,
control, or participate in the ownership, management,
operation or control of, or be connected as a partner,
representative, shareholder, consultant, agent, broker,
dealer with, or have any direct or indirect financial
<PAGE> 4 of 5
interest in, or directly or indirectly finance, aid or
assist in any way in any LP gas or appliance business
located east of the Mississippi River provided that the
operating area of such business (which shall be deemed to
include all areas within a 50-mile radius of the location of
such business) does not overlap with the operating area
(which shall be deemed to include all areas within a 50-mile
radius) of any LP gas or appliance business in which any
member of the other Group then has a direct or indirect
interest.
(ii) From and after the effective date of such
amendment, the Energy Group shall have a non-exclusive
perpetual royalty-free license to use the trademarks,
service marks and logos of the Empire Group listed on
Schedule E hereto in connection with the Energy Group's
retail operations in areas east of the Mississippi River.
The remaining provisions of the NCA, including provisions relating to LP gas
or appliance businesses located west of the Mississippi River, shall not be
affected by such amendment unless the parties otherwise agree.
10. Subject to Paragraphs 4, 5 and 6 of this Agreement,
if the Optionee exercises the Option and purchases the Optioned Outlets from
SYN, and if a member of the Empire Group subsequently purchases all of the
stock and/or assets of Energy and such subsequent purchase transaction
closes within 180 days after the date of this Agreement, the portion of the
purchase price to be paid in such subsequent purchase transaction that is
attributable to the Optioned Outlets shall be equal to the sum of (a) the
total purchase price paid to SYN by the Optionee for such Optioned Outlets,
including both the Optioned Outlets Cash Price and the value of the
Exchanged Outlets (as defined in Schedule D) plus (b) the aggregate amount
of all capital expenditures made by the Optionee with respect to the
Optioned Outlets after closing of the Optionee's purchase of the Optioned
Outlets. Nothing in this Agreement shall be construed to give any member of
the Empire Group an option, right of first refusal or other right to
purchase any stock and/or assets of Energy; to require any member of the
Plaster Group to negotiate with any member of the Empire Group with respect
to the purchase and sale of any stock or assets of Energy; or to prevent any
member of the Plaster Group from negotiating with and consummating any
transaction with any third party with respect to the purchase and sale of
any stock or assets of Energy.
11. The Empire Group and NGC shall cause SYN to execute
and deliver this Agreement to all other parties promptly after SYN is
incorporated, thereby making SYN a party to this Agreement, and prior to
that happening this Agreement shall be the binding agreement of all of the
other parties hereto.
12. This Agreement shall be governed by the laws of the
State of Missouri without regard to the choice of law provisions thereof.
13. This Agreement will not become effective until it
has been executed by all parties other than SYN. This Agreement will
terminate and be null and void in the event that the second closing of the
Synergy Transaction has not occurred by September 30, 1995.
<PAGE>
<PAGE> 5 of 5
IN WITNESS WHEREOF, the parties have entered into this
Agreement as of this ____ day of April 1995, except that SYN has entered
into this Agreement as of the date set forth opposite its name below.
WITNESS:
_____________________________ By: /s/ Robert W. Plaster
_____________________
Robert W. Plaster
WITNESS:
_____________________________ By: /s/ Stephen R. Plaster
______________________
Stephen R. Plaster
EMPIRE ENERGY CORPORATION
WITNESS:
_____________________________ By: /s/ Stephen R. Plaster
______________________
Stephen R. Plaster
President
WITNESS:
_____________________________ By: /s/ Paul S. Lindsey, Jr.
________________________
Paul S. Lindsey, Jr.
EMPIRE GAS CORPORATION
WITNESS:
_____________________________ By: /s/ Paul S. Lindsey, Jr.
________________________
Paul S. Lindsey, Jr.
President
Dated: ___________________, 1995 SYN, INC.
WITNESS:
_____________________________ By: _______________________
Name: _______________________
Title: _______________________
NORTHWESTERN GROWTH CORPORATION
WITNESS:
_____________________________ By: _______________________
Name: _______________________
Title: _______________________
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS ARE MARKED BY AN ASTERISK (*).
CHEVRON Warren Petroleum Company PROPANE SALES AGREEMENT
A Division of Chevron U.S.A. Inc.
P.O. Box 1589, Tulsa, OK 74102 * Phone (918) 560-4000
Prepare in original and five copies.
Purchaser Confirming Arrangements Made With
Empire Gas Corporation Marty Lerum
Address Arrangements Made By Date
P.O. Box 303 R.E. Siedell August 24, 1995
City, State, Zip Warren No. Purchaser No.
Lebanon, MO 65536 25077
1. Term: Warren will sell the following during period from
September 01, 1995
__ Expires on __________
_X_ Until April 30, 1996 and continuing year to year thereafter unless
and until canceled at the end of any contract year by either party
giving the other not less than 60 days written notice prior to the
proposed termination date.
<TABLE>
<CAPTION>
Approx. Vol. Unit of Meas. Basis Del. Method Product Price
(net at 60F) Measure (see 2) Location (see 2) Cents/Gallon
<S> <C> <C> <C> <C> <C> <C>
Propane GPA Specifications See Attch. Gallons Other Hattiesburg, MS 0 See Item 6.2
A
</TABLE>
2. Measurement/Delivery Method (see above)
V - Volumetric per API Tables 23 and 24 or 23A and 24A or 5A and 6A
T. Trucks Other Inventory Transfer M - Mass per GPA 8182
C. Tank Cars ________________________ O - Origin D - Destination
3. Product: Stenched _X_ Unstenched into storage
WARNING
It is important that you periodically remind your customers and employees
that even though ethyl mercaptan has been recognized as the best available
odorant for propane, no odorant is effective 100% of the time. The odor of
the gas may, under some circumstances, be reduced or lost if put into a tank
that is new or that has been exposed to the air for extended periods.
Electronic gas detectors (that emit a shrill sound in the presence of gas)
<PAGE> 2 of 8
should be recommended to your customers as an additional safety measure for
detecting leaks. Your customers should be familiar with the smell of the
odorant and their ability to smell it. Inform them that colds, allergies,
smoking, alcohol, age, competing odors and simply "getting used to" the odor
can cause them not to detect escaping gas. Familiarize yourself, your
employees and your customers with the potential limitations of the odorant
and the alleged phenomenon of "odor fade". Warren's Odorization Bulletins,
Safety Guide and other safety materials are available to help with this
familiarization. If you need additional information or materials to
properly educate your employees and customers, please contact the NPGA, your
state organization, or Warren Petroleum Company.
4. Seller send statements, invoices and shipping documentation to:
Ms. Gwen Hogan
Empire Gas Corporation
P.O. Box 303
Lebanon, MO 65536
5. Terms of Payment:
EFT 14 days.
6. Special Provisions:
1. This contract replaces Synergy PSA-49952 dated October 07, 1993.
2. Price will be the Mont Belvieu OPIS non-TET average * per gallon on
the 1st and 15th of each month or the next working day if no price
is quoted. 50% Of each month's volume will be priced on the 1st
and 50% on the 15th.
3. Product to be delivered into Storage Agreement 7184 for further
handling.
7. In addition to the above terms and conditions, the General Provisions
of this Product Sales Agreement and all Attachments are incorporated
herein by reference and made a part of this Agreement. If you are in
agreement with the foregoing terms and conditions including the
indemnity provision, please so indicate by signing below and returning
one copy of the Agreement to Warren.
Accepted and Agreed to: Warren Petroleum Company
Empire Gas Corporation A Division of Chevron U.S.A. Inc.
By /s/ Kris Lindsey By /s/ R.E. Siedell
___________________ ___________________
Kris Lindsey R.E. Siedell
Title V.P. Date 09/05/95 Title
District Manager
* Confidential material deleted.
______________________________
<PAGE>
<PAGE> 3 of 8
GENERAL PROVISIONS PROPANE SALES
1. DELIVERIES
A. When delivery is point of origin, delivery shall be deemed to have
been completed:
1. To tank trucks when the product has actually been delivered
into the truck;
2. To tank cars when the carrier accepts the same for shipment;
3. To pipelines upon metering of the product:
B. When delivery is point of destination, delivery shall be deemed to
have been completed:
1. From tank trucks when truck has been placed at buyer's
facilities for unloading;
2. From tank cars when carrier delivers same at the destination;
C. Seller shall not be liable to Buyer for quantity or quality of
product, after completion of delivery. Buyer agrees that the
handling, care or use of product shall thereafter be at Buyer's
sole risk and expense.
2. MEASUREMENT - Measurement shall be done in the manner customarily
utilized at the point of delivery in accordance with one of the
following alternatives.
A. On all deliveries into/out of tank cars, the quantity shall be
determined by official tank car capacity tables, meters with no
vapor return, or by weighing, in accordance with GPA Publication
8162, 8173 and all revisions thereof.
B. On all deliveries into/out of transport and tank trunk equipment,
quantities shall be determined by meter with no vapor return, slip
tube, rotary gauging device or weighing, in accordance with GPA
Publication 8162, all appropriate GPA and API standards and all
revisions thereof.
C. On all deliveries into/out of pipelines, quantity shall be
determined by turbine or positive displacement pipeline meter in
accordance with API Manual of Petroleum Measurement Standards.
D. All quantities shall be corrected to 60 degrees Fahrenheit and
equilibrium vapor pressure at 60 degrees Fahrenheit.
E. Volume and compressibility correction factors shall be determined
from referenced API tables or computer programs used to generate
these tables.
3. PASSAGES OF TITLE AND WARRANTY OF TITLE - Title to the product and risk
of loss shall pass to Buyer upon delivery. Seller warrants to Buyer
that it has title to the product(s) delivered by it hereunder and the
right to deliver same, and agrees to indemnify, defend and hold the
Buyer harmless from and against any loss, claim or demand by reason of
any failure of such title or breach of this warranty. SELLER MAKES NO
OTHER WARRANTY WITH RESPECT TO THE PRODUCT OR OTHERWISE, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A
PARTICULAR PURPOSE.
4. TAXES - Any tax, fee, or other exaction, now or hereafter, levied or
assessed by any governmental authority upon, or as a result of the
transaction herein provided for, or the goods or source materials
thereof which are the subject matter of this Agreement, shall, if
payable by Seller, be paid by Buyer or demand by Seller. Any personal
property taxes levied or assessed by any governmental authority upon
the products covered by this Agreement shall be paid by the party
having title thereto at the time of such assessment. Buyer shall
<PAGE> 4 of 8
furnish Seller proper exemption certificate where tax exemption is
claimed on any product(s) delivered hereunder.
5. GOVERNMENT REGULATIONS & LAW - Seller warrants that the product it
delivers hereunder will be produced and delivered in full compliance
will all applicable federal and state laws and regulations and all
Presidential proclamations which may be applicable. This agreement
shall be subject to jurisdiction of, governed by and construed in
accordance with the laws of the State of Oklahoma including the Uniform
Commercial Code. Seller agrees to comply with the provisions contained
in Exhibit "A" if attached hereto, to the extent that such provisions
are legally applicable to Seller.
6. FORCE MAJEURE - If either party is rendered unable, wholly or in part,
to perform its obligations under this Agreement (other than to make
payments due hereunder) due to force majeure, defined herein as any
cause or causes beyond its control, then in any such event, it is
agreed that the affected party shall give prompt notice and full
particulars of such force majeure to the other party. The
obligations of the affected party shall be suspended for the duration
of such inability to perform but for no longer period and such cause
shall, so far as possible, be remedied with all reasonable dispatch.
7. ASSIGNMENT - This Agreement shall extend to and be binding upon the
parties hereto, their heirs, successors and assigns; but it is
expressly agreed that neither party shall voluntarily assign this
Agreement without the prior written consent of the other.
8. NOTICE - Any notice hereunder shall be in writing and shall be
delivered personally, by mail, by fax, by telex, or by telegram to the
address set forth on the attached agreement, unless changed by notice.
Such notice shall be deemed to have been given on the date of the
delivery thereof.
9. WAIVER - The waiver by either party of the breach of any provision
hereof by the other party shall not be deemed to be a waiver of the
breach of any other provision or provisions hereof or of any subsequent
or continuing breach of such provision or provisions.
10. ALTERATIONS - No oral promises, agreements or warranties shall be
deemed a part hereof, nor shall any alteration or amendment of this
Agreement, or waiver of any of its provisions, be binding upon either
party hereto unless the same be in writing, signed by the party
charged.
11. INVOICES AND TERMS OF PAYMENT - Invoices will be prepared by Seller and
transmitted to the Buyer from time to time during the month. Unless
otherwise specified, payment is due within ten (10) days after receipt
of invoice. If payment is not made within the time allowed under this
Agreement, then Seller may charge interest on the unpaid balance at the
lesser of 1 1/2% per month or the highest rate permitted by Oklahoma
law and Seller shall be entitled to recover its reasonable costs of
collection, including attorney's fee.
<PAGE>
<PAGE> 5 OF 8
12. FINANCIAL RESPONSIBILITY - If in the judgment of Seller the financial
responsibility of Buyer becomes impaired or unsatisfactory, advance
cash payments or acceptable security (including, but not limited to a
letter of credit from a financial institution acceptable to Seller) may
be required by Seller, and if Buyer fails to provide such, Seller may
without waiving any rights or remedies, withhold further deliveries
until such payment or security is received. Buyer's duty to provide
the hereinabove credit assurance shall be a condition precedent to
Seller's obligation to perform under this agreement.
13. CONFLICTS OF INTEREST - No director, employee or agent of either party
shall give or receive any commission, fee, rebate, gift or
entertainment of significant cost or value in connection with this
Agreement. Any representative(s) authorized by either party may audit
the applicable records of the other party solely for the purpose of
determining whether there has been compliance with this paragraph.
14. AUDIT - Each party and its authorized representatives shall have access
to the accounting records and other documents maintained by the other
party which relate to the product being sold to the other party under
this Agreement and shall have the right to audit such records once a
year at any reasonable time or times during the term of this Agreement
and for two years after the year in which this Agreement terminates.
Neither party shall make claim on the other for any adjustment after
said two-year period.
15. TANK CARS - If Seller's tank cars are used and they are not unloaded
and returned to railroad, Buyer shall be liable to Seller for rental at
the rate of $50.00 for each day or fraction thereof in excess of 7
days. Tank cars shall not be diverted without Seller's written
consent.
16. QUALITY - All products delivered under this Agreement shall meet the
latest GPA specifications for that product and contain no deleterious
substances. Product delivered under this agreement shall not contain
concentrations of any contaminants that may make it or its components
commercially unacceptable in general industry application. Any
requirements of buyer pertaining to potential contaminants and/or
specific hydrocarbon composition not listed in the product
specification must be identified by buyer and allowable concentrations
agreed to in writing by both parties prior to delivery.
17. SHORTAGE OF PRODUCTS - Due to uncertainties in the supply/demand
situation, Warren may not have sufficient supplies of product to be
delivered hereunder to meet the full requirements of all of its
customers, contract or otherwise. Whenever that situation exists,
Warren shall have, in addition to any other rights Warren may have
under this Agreement, the right to reduce deliveries of such product on
any basis which in Warren's opinion is equitable, allowing for such
priorities to such classes of customers as Warren deems appropriate.
If any such reduction occurs, Buyer shall have the option to terminate
this Agreement as to any or all products by fifteen (15) day's notice,
given within thirty (30) days of the notice of reduction.
<PAGE>
<PAGE> 6 OF 8
18. BRAND NAMES - Unless otherwise specifically agreed, Buyer shall not
represent or permit any other person to represent, that the product
delivered hereunder is the product of Warren. All products delivered
to Buyer hereunder shall be used or sold under Buyer's own brand names
or under brand names approved by Warren, and Buyer shall not authorize
or permit said product to be used or sold under any other brand names.
19. CONDUCT OF BUYER'S BUSINESS - Buyer in the performance of this
Agreement is engaged in an independent business and nothing herein
contained shall be construed as giving Warren any right to control
Buyer in any way in its performance of its business. Warren has no
right to exercise control over any of Buyer's employees. All employees
of Buyer shall be entirely under the control and direction of Buyer who
shall be responsible for their actions and omissions.
20. INDEMNITY - If Warren provides adequate documentation of the
odorization required by this contract, buyer agrees to defend and hold
Warren harmless from all expenses (including attorney's fees) or
liability arising from any claims of whatever kind due to injuries or
damages which occur after delivery to Buyer in connection with the
transportation, use or handling of product covered hereunder. BUYER'S
INDEMNITY OBLIGATION SHALL BE APPLICABLE EVEN IF SUCH DAMAGES ARE
DETERMINED TO HAVE BEEN PARTLY CAUSED BY THE FAULT OF SELLER OR IF
LIABILITY WITHOUT FAULT IS IMPOSED ON SELLER, THE ONLY EXCEPTION TO
SUCH OBLIGATION BEING WHERE THE FAULT OF SELLER IS DETERMINED TO BE THE
SOLE CAUSE OF SUCH DAMAGES.
21. PRICES - Prices hereunder may be changed at any time by Warren upon
notice given either electronically (i.e. fax, DTN or phone) or by U.S.
Mail, effective when sent. If any such notice shall increase Warren's
price to Buyer at any shipping point or destination above Warren's
highest price for such product or freight in effect during the elapsed
portion of the calendar year in which Warren's notice is effective,
Buyer may by written notice to Warren given and effective within
fifteen (15) days from the date of Warren's notice, terminate this
contract with respect to such shipping point or destination.
22. ODORIZATION - Unless otherwise specifically agreed in writing, Buyer
hereby requests that the propane sold hereunder be odorized with not
less than 1.0 lb. of ethyl mercaptan per 10,000 gallons. Buyer
warrants that compliance with its request will satisfy all applicable
legal requirements.
23. PRODUCT HAZARDS - Buyer acknowledges receipt of Warren's Safety
Bulletin for odorized propane and is knowledgeable of the hazards or
risks in handling or using the product. Buyer agrees that Buyer shall
inform its employees, contractors and customers of any hazards or
risks associated with the product. Warren will make available to Buyer
Warning Decals that are intended to be placed on consumers tanks or
equipment and copies of its Safety Guide. Buyer agrees to supply its
customers with these materials or other reasonably equivalent safety
material to warn them of the potential hazards or risks in using
odorized propane.
<PAGE>
<PAGE> 7 OF 8
24. INCIDENT - Buyer shall notify Warren as soon as possible after it
becomes aware of any fires or explosions occurring at locations propane
purchased hereunder is used. Buyer will inform Warren if said product
is involved and will fully cooperate with Warren in obtaining a propane
sample and any other investigation Warren deems necessary.
ATTACHMENT A TO
PROPANE SALES AGREEMENT NO. 25077
1. Trademark. Buyer acknowledges that the CHEVRON and WARRENGAS
Trademarks are valuable property rights belonging to Chevron
Corporation and its subsidiaries, including Chevron U.S.A. Inc. and
that any use thereof by Buyer in connection with this agreement is
solely for the purposes of advertising products obtained from such
subsidiaries. Upon termination of this agreement, Buyer agrees that it
will make no further use of such trademarks or any other mark, name or
designs confusingly similar therewith.
2. Quantity. During the term hereof, Buyer agrees to buy the product
herein specified in monthly quantities of not less than the minimum set
forth below and Warren agrees to sell said quantities to Buyer. Buyer
shall purchase such quantities as evenly as possibly during each month.
If during any period of this agreement the quantity of product Warren
is obligated to deliver to Buyer is prescribed by government rules,
regulations or orders, then the quantity of product covered by this
agreement shall be the quantity so prescribed for such period and Buyer
agrees to buy and Warren agrees to sell such quantity.
<TABLE>
Volume (in Thousands of Gallons)
<CAPTION>
Volume Volume
<S> <S> <C> <C> <C>
April 1300 ________ October -0- ________
May -0- ________ November -0- ________
June -0- ________ December -0- ________
July -0- ________ January -0- ________
August -0- ________ February -0- ________
September -0- ________ March -1- ________
</TABLE>
See Attachment A of Storage Agreement 7184 for estimated tank car volumes.
For the purpose of determining compliance with the above quantity schedule,
purchase or product shall be allocated to the month in which shipment is
made. Should either party fail to comply in any amount with the above
schedule, the other party may elect to terminate this agreement by mailing
notice of such termination on or before the 20th day of the succeeding
month. If the Buyer fails to purchase 100% of the above specified minimum
monthly quantities during any month or months and Warren does not elect to
terminate this agreement, Warren shall not be obligated hereunder to sell to
<PAGE> 8 OF 8
Buyer in any of the succeeding six months more than one and one half times
the average monthly quantity which Buyer actually purchased during the
preceding six-month period.
When delivery is into tank trucks furnished by Buyer, the delivery ticket
showing the quantity delivered shall be signed by the loader as the agent of
Warren and by the truck driver as the agent of the Buyer; such quantities
shall be conclusively presumed to have been delivered to Buyer.
On or before the 1st day of each month Buyer shall inform Warren of
quantities required during such month, delivery dates, and when applicable,
destinations of each shipment. Warren shall not be obligated to ship less
than a tank car or tank truck load.
3. Method of Delivery: ________ By tank trucks furnished by Buyer.
See Storage Agreement 7184 ________ By tank trucks furnished by Warren.
________ By tank cars furnished by _______
with a capacity of _______ gallons
each.
PRICE INFORMATION
_________________
Prices in effect as of , 19 ____
Sales based on _X_ Shipping point price or Destination price
Shipping or Price in Freight
Pricing Points Destinations Product Cents/Gallons Charges
______________ ____________ _______ _____________ ________
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS ARE MARKED BY AN ASTERISK (*).
MAY 01, 1995
PHILLIPS 66 COMPANY
A Division of Phillips Petroleum Company
Bartlesville, Oklahoma 74004 918-661-6600
Marketing Division April 27, 1995
Kris Lindsey
Empire Gas Corp.
P. O. Box 303
Lebanon, MO 65536
Dear Kris:
Volumes for the 1995-1996 contract year as agreed to are attached for your
review. In addition, the pricing at Denver and LaJunta shall be as follows:
April 1995 through September 1995 - *.
October 1995 - Conway O.P.I.S. average *,
15 day pricing and invoicing.
November 1995, December 1995, January 1996, February
1996 - Conway O.P.I.S. average *, 15 day pricing and
invoicing.
March 1996 - Conway O.P.I.S. average *, 15 day pricing and
invoicing.
With the exception of the pricing for Denver and LaJunta detailed above, all
terms and conditions of the sales contracts B-94-0045, dated August 15,
1994, and B-94-0044, dated August 15, 1994, remain in effect.
Please indicate your acceptance of this agreement in the space provided
below and return one copy for our files.
Sincerely,
/s/ J.R. FOUTS
______________
J. R. FOUTS
Accepted and agreed to this 24th
day of May, 1995,
by /s/ Kris Lindsey
________________
Title Vice President
______________
JRF:sks
Attachments
* Confidential material deleted.<PAGE>
<PAGE> 2 of 4
MAY 17, 1995
PHILLIPS 66 COMPANY
A Division of Phillips Petroleum Company
Bartlesville, Oklahoma 74004 918 661-6600
Marketing Division May 9, 1995
Kris Lindsey
Empire Gas Corp.
P. O. Box 303
Lebanon, MO 65536
Dear Kris:
Corrected volumes at Denver and LaJunta for the 1995-1996 season are
attached. In addition, the volume for the month of March 1996 has been
corrected at Paola to 170,000 gallons.
We sincerely appreciate your business and look forward to supplying your
propane requirements wherever possible.
Sincerely,
/s/ J.R. FOUTS
______________
J.R. Fouts
Director, Wholesale Sales
JRF:sks
Attachment<PAGE>
<PAGE> 3 of 4
EMPIRE GAS CORP.
1995-1996
ATTACHMENT A
(Thousands of Gallons)
Forecast: APR MAY JUN JUL AUG SEP
Paola L388 96 52 52 33 90 154
___
Jeff City L350 381 263 184 156 341 613
___
E St. Ls L330 45 22 18 18 51 67
___
Decatur L240 9 6 9 9 12 20
___
Forecast: OCT NOV DEC JAN FEB MAR TOTAL
Paola L388 149 203 276 322 239 170 1,836
___
Jeff City L350 675 855 1220 1385 993 669 7,735
___
E St. Ls L330 77 75 110 130 112 90 815
___
Decatur L240 32 34 35 44 32 19 261
___
<PAGE>
<PAGE> 4 of 4
EMPIRE GAS CORP.
ATTACHMENT B
1995 - 1996
(Thousands of Gallons)
Sales Forecast: APR MAY JUN JUL AUG SEP
Denver L 322 220 178 86 99 173 226
___ ___ ___ __ __ ___ ___
LaJunta L 362 116 97 87 85 110 137
___ ___ __ __ __ ___ ___
Sales Forecast: OCT NOV DEC JAN FEB MAR TOTAL
Denver L 322 347 445 610 560 512 466 3,922
___ ___ ___ ___ ___ ___ ___ _____
LaJunta L 362 205 294 351 343 315 234 2,374
___ ___ ___ ___ ___ ___ ___ _____
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS ARE MARKED BY AN ASTERISK (*).
Dealer Sale Contract CONOCO FEB. 06, 1995
_______
We hereby confirm SALE PROPANE
to:
Empire Gas Corporation DATE: January 20, 1995
P.O. Box 303 CONOCO NO.: 30-9013694-0000-A10
Lebanon, MO 65536 SYSTEM CODE: 15
Attention: Kris Lindsey ACCOUNT CODE: 407
Per conversations between Kris Lindsey and our Lewis Bradshaw
PRODUCT: Propane (Stenched) meeting GPA specifications
PRICE: See Remarks
TERMS of PAYMENT: 1% 10 Days/Net 11 Days From Date of Invoice
<TABLE>
F.O.B. ORIGIN POINT DESTINATION
- - ------------------------------------ ----------------------------------
<S> <C>
Cherokee Pipeline - Wood River, IL 30-9009636-0000 Missouri, Various
Cherokee Pipeline - Belle, MO 30-9013694-0000 Illinois, Various
Cherokee Pipeline - Mt. Vernon, MO
Conoco/Medford Plant - Medford, OK
Conoco/Ponca City Refinery - Ponca City,
</TABLE>
FREIGHT: Origin Collect
METHOD OF TRANSPORTATION: Common Carrier and/or Customer Truck
TERM OF AGREEMENT: January 21, 1992 through June 30, 1993 and year to
year thereafter.
QUANTITY: Subject to the terms and conditions on the reverse hereof, seller
agrees to sell and deliver, and buyer agrees to purchase and receive the
following volumes of product: (000) Gallons
MIN MAX MIN MAX MIN MAX MIN MAX
---- ---- ---- ---- ---- ---- ---- ----
JAN 1363 2045 APR 474 712 JUL 242 364 OCT 634 952
FEB 1119 1679 MAY 274 410 AUG 540 810 NOV 831 1247
MAR 903 1355 JUN 225 337 SEP 674 1010 DEC 1240 1860
---- ---- ---- ---- ---- ---- ---- ----
Q1 3385 5079 Q2 973 1459 Q3 1456 2184 Q4 2705 4059
Year Total 8519 12781
REMARKS: CONVERSION OPTION: Shall be negotiated on an annual basis prior
to converting volumes for the subsequent heating season.
(Continued on attached page)
<PAGE> 2 of 7
Conoco Inc. invoices should be mailed to the following address:
Empire Gas Corporation
P. O. Box 303
Lebanon, MO 65536
("Buyer")
Subject to terms and conditions on reverse side
Accepted February 7, 1995
_______________________________
/S/ KRIS LINDSEY,
_______________________________
By KRIS LINDSEY, VICE PRESIDENT
_______________________________
Please sign and return one copy and retain one copy for your files.
Mail customer invoices to:
Conoco Inc.
Gas Products Accounting
3rd Floor North Tower
P. O. Box 1267
Ponca City, OK 74602-1267
("Seller")
Mail contracts and correspondence to:
Conoco Inc.
Gas Products Division
Humber Building - 1021
P.O. Box 2197
Houston, TX 77252
1-800-423-4636
By /S/ DAVID L. LUGAR
__________________________
David L. Lugar
Manager, Propane Marketing
<PAGE>
<PAGE> 3 of 7
Terms and Conditions Dealer Sale Contract
1. Specifications. All Products delivered hereunder will conform to
applicable NGPA and individual pipeline specifications in effect at time of
delivery unless mutually agreed otherwise and specified elsewhere in this
Agreement. Seller guarantees specifications at delivery point.
2. Measurement. Quantities of Products delivered will be determined in
tank cars or trucks at delivery point by means of slip tube, rotary gauge,
or other mutually acceptable gauging method or device. Volumes of LP-gas
Products will be corrected for temperature to 60 degrees F using "Standard
Factors for Volume Correction and Specific Gravity Conversion of Liquified
Petroleum Gases and Volatile Gasolines," NGPA Publication No. 2142-57 or
latest revision thereof. Volumes of Natural Gasoline will be corrected for
temperatures to 60 degrees F, using ASTM-IP Petroleum Measurement Tables,
American Addition, ASTM designation D 1250, abridged Table No. 7. A barrel
will consist of 42 U.S. gallons, and a gallon will contain 231 cubic inches.
3. Deliveries. Seller's tank cars must be unloaded and returned to
railroad within the 48-hour period beginning at 7 a.m. on the day following
notice of arrival at destination. Demurrage charges at destination will be
borne by Buyer. Seller's tank cars and transport trucks will not be
diverted except with written consent from Seller. If delivery is made by
Seller, in Seller-owned equipment, there will be added to the invoice a
separate freight charge equal to the lowest published applicable
transportation charge, as determined by Seller, from Supplier's terminal to
Buyer's destination(s). Seller will furnish, or cause to be furnished,
Buyer with copies of bills of lading and other shipping papers.
4. Title. Seller represents that it has title to the Products delivered
and has the right to deliver same. Title to Products delivered will pass to
Buyer upon completion of loading the same into tank trucks and/or tank cars
furnished by Buyer, upon delivery of Products in a tank car to carrier, upon
delivery thereof in a tank truck or tank car furnished by Seller alongside
Buyer's storage facilities at destination, or as stipulated on the face
hereof, as the case may be. Thereafter, Buyer will bear all risk of and be
solely liable for any loss or damage caused by or attributable to said
Products, or to their transportation, care, handling, resale, or use. Title
to Products delivered via pipeline will pass to Buyer at the FOB point.
5. Taxes. In addition to the delivered price, Buyer will pay all
applicable federal, state, and local sales or other excise taxes required to
be paid or collected by Seller by reason of the manufacture, sale, or
delivery of Products. Buyer agrees to furnish Seller with satisfactory tax
exemption certificate where exemption from applicable taxes is claimed.
6. Dispute. In the event the Buyer disputes an item billed, the Buyer
shall, within 10 days date of invoice, notify Seller of the item in dispute,
specifying Buyer's complaint, and payment of that item shall be withheld by
Buyer without interest until resolution of the dispute. The undisputed
amount, however, shall be paid without delay.
7. Payment Requirements. Payment for all Product delivered under this
Agreement will be paid to Seller at the place of payment designated on the
invoice. Invoices not paid pursuant to the "Terms of Payment" section on
the face of this Agreement will be considered delinquent. Seller may charge
interest at the lesser of the maximum legal interest or 18 percent per annum
<PAGE> 4 of 7
on all unpaid amounts on any delinquent accounts. Cash discounts, if any,
will not apply to freight charges prepaid by Seller.
8. Credit. If Buyer's credit becomes impaired or unsatisfactory to Seller
or if Buyer fails to make any payment due to Seller or if Buyer defaults in
performance of any of Buyer's obligations hereunder, Seller may, at its
discretion and without prejudice to its other legal remedies, suspend
deliveries to Buyer, or cancel this Agreement or ship hereunder only on a
COD or other basis satisfactory to Seller. In event of suspension of
deliveries, Seller reserves the right to adjust scheduled volumes.
9. Malodorant. Unless otherwise expressly directed in writing or on the
face hereof, LPG Products delivered will contain malodorant at the rate of 1
1/2 pounds of ethyl mercaptan, or its equivalent, per 10,000 gallons; the
kind and quantity of malodorant added will be indicated on the bill of
lading or the invoice relating to each delivery.
10. Claims. Seller will have no liability to Buyer for any defect in
quality or shortage in quantity of Products sold and delivered hereunder,
unless Buyer gives Seller notice of Buyer's claim by telegraph and Seller is
given an opportunity to inspect the Products in question prior to unloading
or, in case of any latent defect in quality, Buyer gives Seller notice
thereof within 48 hours after Buyer's discovery of such defect. Seller will
have no liability for any defect in any Product which has been commingled in
any way with a similar Product obtained elsewhere or with a different
Product, regardless of where obtained. Every notice of claim will set forth
fully the facts upon which the claim is based. It is agreed that any claim
of any kind by Buyer based upon or arising out of this Agreement or
otherwise will be barred unless asserted by Buyer by the commencement of an
action within 12 months after the delivery of the Product or other event,
action, or inaction to which such claim relates, provided, however, Seller
will not be liable for prospective profits or special, indirect, or
consequential damages. This provision will survive any termination of this
Agreement, however arising.
11. Purchase Requirement. If maximum, minimum volumes are specified on the
face of this Agreement, then Buyer will use its best effort to purchase and
accept delivery of the scheduled volumes indicated on the face of the
Agreement each month as scheduled. Buyer will not exceed the specified
maximum volumes during any month without prior consent of Seller. Buyer may
order and take delivery of volumes less than the scheduled minimum volumes
during any month, provided, however, that Buyer must purchase and accept
delivery of the minimum cumulative volumes for each calendar quarter.
Should Buyer fail to purchase and accept delivery of the minimum cumulative
volumes for any calendar quarter, Seller may at its option cancel this
Agreement, except as provided for in paragraph 14.
12. Trademark and Trade Name. If Conoco is the Seller hereunder, Conoco
hereby grants Buyer, during the term of this Agreement, the right and
license to use and display, in a manner specified by Conoco, and at Buyer's
expense, Conoco's trademarks, trade name, advertising, and other indicia of
Conoco in the advertisement, sale, or distribution of the Product, provided,
however, that the right and license hereby granted will terminate when this
Agreement ceases to be in force and effect or may be cancelled at any time
upon 30 days' prior written notice from Conoco to Buyer. Upon the effective
date of such notice or upon the termination of such right and license, Buyer
<PAGE> 5 of 7
will forthwith remove such trademark, trade name, advertising, and the
indicia from Buyer's Delivery Points, other places of business, and
quipment. At no time will Buyer apply Conoco's trademark, trade name,
advertising, or other indicia to any Product other than Products sold and
purchased under this Agreement.
13. Set-Off. In the event Buyer fails to make timely payment of any monies
due and owing to Seller, Seller may offset any deliveries or payments due
under this or any other agreement between the parties.
14. Force Majeure. Neither party will be liable to the other for any delay
or failure in performance under this Agreement other than the obligation to
make payments in the event and to the extent that such delay or failure in
performance is caused or prevented by any cause reasonably beyond its
control, including, but not limited to, acts of God, perils of navigation,
public enemies, war, riots, insurrection, acts or orders of governmental
authorities, fire, flood, explosion, accident, strike, or other difference
with workmen, embargo, inability to obtain fuel, power, labor,
transportation facilities, or raw materials upon which their performance of
this Agreement is dependent, accident, breakage of machinery or apparatus,
or national defense requirements, provided; however, that performance will
be resumed within a reasonable time after such cause has been removed and
provided, further, that neither party will be required to settle any labor
dispute against its will. Any deliveries suspended as a result of this
paragraph 14 will be cancelled without prejudice or penalty, but this
Agreement will otherwise remain unaffected. If, because of any of the
foregoing circumstances, Seller is unable to supply its requirements for and
its contractual obligations for one or more of the Products, then Seller
will allocate the available supply of such Product among its contract
customers and itself on an equitable pro rata basis. In the event Seller,
during a period of allocation pursuant to the provisions of this paragraph
14, delivers to Buyer a quantity of Product less than the minimum quantity
Buyer is required to purchase during such period as provided on the face of
this Agreement, then neither Seller nor Buyer will have any obligation to
sell or purchase the difference between the amount so delivered and such
minimum quantity during such period.
15. Miscellaneous. (a) Except as provided for in paragraph 14, should
either party fail to comply with any of the terms and conditions of this
Agreement, the other party, by notice in writing, may request the
noncomplying party to correct such noncompliance within 10 days from the
date of such notice. If such noncompliance is not corrected before the
expiration of said 10-day period, the other party, at its option, may
terminate this Agreement forthwith, but failure of either party to notify
the other party of such noncompliance will not be regarded, in the event of
any future similar noncompliance, as a waiver of the right to terminate this
Agreement in accordance with the foregoing provision.
(b) This Agreement sets forth the entire agreement between parties
respecting the sale and purchase of the Products, but neither it nor any
amendment will be binding upon either party until it is executed by both
parties.
(c) This Agreement will insure to the benefit of and be binding upon the
parties, their heirs, personal representatives, successors, and assigns, but
no assignment of all or any portion of this Agreement by Buyer will be valid
without the written consent of Seller.
<PAGE> 6 of 7
(d) This Agreement is subject to and may be overridden by all applicable
federal, state, and local laws, rules, regulations, and orders. Invoices
must bear a certification that these Products were produced and handled in
compliance with applicable requirements of the Fair Labor Standards Act, as
amended, and the regulations and orders of the U.S. Labor Department issued
pursuant thereto.
(e) Unless otherwise provided for herein, all notices will be in writing
and considered given when deposited in the United States mail, postage
prepaid, addressed to the appropriate party at the address shown above.
(f) Seller will indemnify, defend, and hold Buyer harmless from the acts or
omissions of Seller, and Buyer will indemnify, defend, and hold Seller
harmless from the acts or omissions of Buyer.
16. Audit. No commissions or fees will be paid nor any payments or rebates
be made to any employee or officer of Conoco, nor will anyone favor any
employee or officer of Conoco with gifts or entertainment of significant
cost or value, or enter into any business arrangements with any employees or
officers of Conoco other than as representatives of Conoco.
The parties hereto will maintain a true and correct set of records
pertaining to this Agreement and all transactions related thereto and will
retain such records for a period of 2 years after termination of this
Agreement. Prior to the expiration of such 2-year period, either party will
have access to all of such records and information, including all books,
papers, documents, agreements, and any other information that may have any
bearing on or pertain to this Agreement or any business conducted between
the parties, and either party will have the right to audit all such records
and information at reasonable times and places during normal working hours.
The parties hereto will also have the right to obtain statements from any
personnel of the other party in order to conduct or complete such audit.
The other party will cooperate fully in any such audit. All audits will be
conducted in accordance with generally accepted auditing standards.
17. Warning. The Material Safety Data Sheets and labels for Products,
delivered hereunder contain information regarding health risks and
recommendations for the safe use and handling of such Products. Buyer
acknowledges and represents that it has read and understands the Material
Safety Data Sheets, the labels, or warnings regarding such Products. Buyer
will exercise the degree of care necessary to protect all persons and
property from all hazards disclosed in such Material Safety Data Sheets,
labels, or warnings. Buyers obligations in this regard will include but not
be limited to (1) warning the employees of Buyer and of its affiliates who
may become exposed to such Products or their hazards; (2) taking measures to
assure that such employees have appropriate safety equipment which is
adequately maintained and properly used and that all precautions contained
in Material Safety Data Sheets, labels, and other warnings are followed; and
(3) warning third parties, including but not limited to Buyer's customers,
who may use or be exposed to such Products of their hazards, and requiring
that the precautions contained in such Material Safety Data Sheets, labels,
and other warnings are followed. If Buyer does not so protect all persons
and property from all hazards disclosed in such Material Safety Data Sheets,
labels, or warnings, Buyer will indemnify and hold Seller harmless from any
claims, causes of action, liabilities, losses, or expenses on account of
injury or death of persons and/or damage to property arising directly or
indirectly out of Buyer's failure to fulfill its obligations under this
paragraph 17.
<PAGE> 7 of 7
CONTRACT ATTACHMENT
January 20, 1995 30-9013694-0000-A10 Page 2
PRICE: Contract amended effective 4/1/91 until the end of the contract term
- - -- price shall be Conoco's established price on the date of delivery * per
gallon. This * shall only apply to purchases on Conoco's established
posting.
Contract amended on 1/20/95 to revise contract volumes and to establish Kris
Lindsey as Empire Gas contact.
* Confidential material deleted.
______________________________
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS ARE MARKED BY AN ASTERISK (*).
CONTRACT AMENDMENT
ENRON GAS LIQUIDS, INC.
PO Box 1188 Part I
Houston TX 77251-1188
Contract Amendment with
Attn: Kris Lindsey Amendment Date: July 21, 1995
Empire Gas Corporation EGL Contract No.: SM 091395-S
PO Box 303 Contract Date: 04/24/95
Lebanon, MO 65536 Counterparty's Contract No.:
Confirms conversation between: Marty Lerum and Kris Lindsey of Empire
Gas Corporation and Bard Black
The Subject Contract will be amended as follows, effective: April 24, 1995
PRODUCT:
Propane
*QUANTITY:
The Contract Quantity is 126,000 barrels. Monthly Quantities are as
follows:
June 95 7,000 barrels December 95 14,000 barrels
July 95 7,000 barrels January 96 14,000 barrels
August 95 7,000 barrels February 96 14,000 barrels
September 95 7,000 barrels March 96 14,000 barrels
October 95 14,000 barrels April 96 7,000 barrels
November 95 14,000 barrels May 96 7,000 barrels
*CONTRACT PRICE:
The price per gallon shall be calculated monthly based upon the average
of the weekly high and low Hattiesburg, Mississippi spot prices for
propane as reported by Oil Price Information Service's Petroscan (OPIS)
for the calendar month of delivery, and using such average prices to
calculate an arithmetic average price for the relevant month. A fee of
* per gallon shall be * from this figure. The result of this
calculation shall be rounded to three (3) decimal places, using cents
per gallon.
Buyer shall take or pay for a minimum of 100% of the quantity of
Product as stated above under "Quantity." All Product not lifted by
the end of each calendar month will be billed based on the above
calculation on the day immediately following the last day of the
relevant calendar month. Seller shall have no obligation to deliver
product to Buyer after May 31, 1996. For purposes of this Contract
Price paragraph only, the delivery date shall be defined as the Meter
ticket date.
(see Special Provisions)
In the event that the monthly calculated Hattiesburg, Mississippi OPIS
price * the calculated monthly Mont Belvieu TET OPIS average spot price
by * per gallon, the Buyer's Contract Price shall be the monthly Mont
<PAGE> 2 of 2
Belvieu TET OPIS spot price * per gallon for Quantities of Product that
are delivered FOB Egan, Louisiana only.
FOB
Egan, Louisiana
(or such other point(s) as the parties may agree to)
Remarks: "*" Denotes Change in Quantity to delete the language referencing
the 80% minimum.
Please insert your company's contract number in the space provided in the
upper right hand section of this Amendment.
All other terms and conditions of the subject contract, including prior
Amendments, shall remain the same and the parties hereby ratify said
Agreement as amended herein.
Accepted and agreed to this second day of August, 1995.
EMPIRE GAS CORPORATION ENRON GAS LIQUIDS, INC.
/s/ Kris Lindsey /s/ Keith Hillegonds
_________________________ ______________________________
BY Kris Lindsey BY KEITH HILLEGONDS
_________________
TITLE: Vice President TITLE: DIRECTOR, MKTG. CENTRAL REGION
_________________
* Confidential material deleted.
______________________________
AMENDMENT NO. 1 TO
SUPPLEMENT A TO
LOAN AND SECURITY AGREEMENT
June 29, 1995
Empire Gas Corporation
1700 South Jefferson Street
Lebannon, Missouri 65536
Attn: Valeria Schall
Ladies and Gentlemen:
Reference is made to the Loan and Security Agreement (the
"Loan Agreement"), dated as of June 29, 1994 among Empire Gas Corporation
("Borrower"), the Lenders party thereto (the "Lenders") and Bank of America
Illinois, f/k/a Continental Bank, f/k/a Continental Bank N.A., as a Lender
and as Agent for the Lenders ("BAI"). Unless otherwise defined herein,
capitalized terms used herein shall have the meanings ascribed to such terms
in the Loan Agreement.
Borrower has requested that Lenders agree to amend
Supplement A to the Loan Agreement ("Supplement A") in order to amend the
Interest Coverage Ratio contained therein. Lenders have agreed to do so, on
the terms and pursuant to the conditions provided herein.
Therefore, the parties hereto agree as follows:
1. Amendment. The first paragraph of Section 6.3 of
Supplement A to the Loan and Security Agreement is hereby amended and
restated in its entirety, as follows:
"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
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 on the last day of any calendar month in any period set
forth below, calculated for the 12 months ending on such date, and
determined for Borrower and its Subsidiaries on a consolidated
basis, and in accordance with GAAP, to be less than the ratio set
forth below opposite such period:
<PAGE>
<PAGE> 2 of 2
Interest Coverage
Period Ratio
______ _____
June 1, 1995 through and including 1.0:1.0
October 31, 1995
November 1, 1995 through and including 1.1:1.0
December 31, 1995
January 1, 1996 and thereafter 1.2:1.0
2. Scope. This Amendment No. 1 to Supplement A to
Loan and Security Agreement shall have the effect of amending the Loan
Agreement and the Related Agreements as appropriate to express the
agreements contained herein. In all other respects, the Loan Agreement and
the Related Agreements shall remain in full force and effect in accordance
with their respective terms.
3. Condition to Effectiveness. This Amendment No. 1
to Supplement A to Loan and Security Agreement shall be effective
immediately upon the execution of this Amendment No. 1 to Supplement A to
Loan and Security Agreement by BAI, on behalf of the Lenders, and acceptance
hereof by Borrower and each other Obligor, and delivery hereof to BAI at 231
South LaSalle Street, Chicago, Illinois 60690, Attention: Mark Cordes, on
or prior to July 5, 1995:
Very truly yours,
BANK OF AMERICA ILLINOIS,
f/k/a CONTINENTAL BANK
f/k/a CONTINENTAL BANK, N.A.,
ON BEHALF OF THE LENDERS
By /s/ John P. Kessel
____________________
Its _____________________
Acknowledged and agreed to this
29th day of June, 1995.
EMPIRE GAS CORPORATION
By Paul S. Lindsey, Jr.
_________________________
Its _____________________
State in Which
Subsidiary is
Organized
______________
EMPIRE GAS CORPORATION
EMPIREGAS FIELD SERVICE CORPORATION
EMPIREGAS EQUIPMENT CORPORATION DE
EMPIRE UNDERGROUND STORAGE, INC. DE
EMPIRE MARKETING CORPORATION DE
UTILITY COLLECTION CORPORATION DE
EMPIREGAS TRANSPORTS, INC. (MO) DE
EMPIRE AVIATION CORPORATION DE
EMPIREGAS TRANSPORTS, INC.-OREGON DE
EMPIREGAS INC. OF GLOBE AZ
EMPIREGAS INC. OF ELSINORE CA
EMPIREGAS INC. OF ESCONDIDO CA
EMPIREGAS INC. OF LOS ANGELES CA
EMPIREGAS INC. OF MODESTO CA
EMPIREGAS INC. OF PLACERVILLE CA
EMPIREGAS INC. OF POMONA CA
EMPIREGAS INC. OF SACRAMENTO CA
EMPIREGAS INC. OF SUSANVILLE CA
EMPIREGAS INC. OF YUCCA VALLEY CA
EMPIREGAS INC. OF BOISE ID
EMPIREGAS INC. OF ALBANY OR
EMPIREGAS INC. OF HERMISTON OR
EMPIREGAS INC. OF MEDFORD OR
EMPIREGAS INC. OF NORTH BEND OR
EMPIREGAS INC. OF SANDY OR
EMPIREGAS INC. OF THE DALLES OR
EMPIREGAS INC. OF AUBURN WA
EMPIREGAS INC. OF CHEHALIS WA
EMPIREGAS INC. OF SUNNYSIDE WA
EMPIREGAS INC. OF WENATCHEE WA
EMPIREGAS INC. OF YAKIMA WA
EMPIREGAS INC. OF BREMERTON ID
ALL STAR GAS INC. OF COEUR D'ALENE CO
EMPIREGAS INC. OF COLORADO CO
GINCO GAS COMPANY INC. CO
ALL STAR GAS INC. OF GREELEY CO
ALL STAR GAS INC. OF SALIDA CO
RON'S L.P. GAS, INC. WY
ALL STAR GAS INC. OF GUNNISON CO
EMPIREGAS INC. OF CANTON TX
EMPIREGAS INC. OF PADUCAH TX
EMPIREGAS INC. OF WILLS POINT TX
EMPIREGAS INC. OF WACO TX
EMPIREGAS INC. OF PARIS, TX TX
EMPIREGAS INC. OF DALLAS, TX TX
EMPIREGAS INC. OF KEMP TX
EMPIREGAS INC. OF SAN ANTONIO TX
EMPIREGAS INC. OF BRISTOW, INC. OK
<PAGE>
<PAGE> 2 of 3
EMPIREGAS INC. OF GROVE, INC. OK
EMPIREGAS INC. OF HITICHITA, INC. OK
EMPIREGAS INC. OF STIGLER, INC. OK
EMPIREGAS INC. OF VINITA, INC. OK
EMPIREGAS INC. OF ARNAUDVILLE LA
EMPIREGAS INC. OF EUNICE LA
EMPIREGAS INC. OF LAFAYETTE LA
EMPIREGAS INC. OF LAKE CHARLES LA
EMPIREGAS INC. OF GALVESTON TX
EMPIREGAS INC. OF ORANGE COUNTY TX
EMPIREGAS INC. OF OAK GROVE LA
EMPIREGAS INC. OF WARREN AR
ALL STAR GAS INC. OF LINCOLN AR
ALL STAR GAS INC. OF SILOAM SPRINGS AR
ALL STAR GAS INC. OF GREENWOOD DE
EMPIREGAS INC. OF MISSOURI DE
EMPIREGAS INC. OF ARMA, INC. KS
ALL STAR GAS INC. OF CARTHAGE DE
ALL STAR GAS INC. OF MT. VERNON DE
ALL STAR GAS INC. OF CLINTON IL
ALL STAR GAS INC. OF BUFFALO DE
ALL STAR GAS OF EL DORADO SPRINGS, INC. DE
ALL STAR GAS INC. OF HERMITAGE DE
ALL STAR GAS INC. OF HUMANSVILLE DE
ALL STAR GAS INC. OF BOLIVAR DE
ALL STAR GAS INC. OF CAMDENTON DE
ALL STAR GAS INC. OF LAURIE DE
ALL STAR GAS INC. OF BLACKWATER DE
ALL STAR GAS INC. OF PALMYRA DE
ALL STAR GAS INC. OF RICHLAND DE
ALL STAR GAS INC. OF WENTZVILLE DE
ALL STAR GAS INC. OF MORGAN COUNTY DE
ALL STAR GAS INC. OF LAKE OZARK DE
ALL STAR GAS INC. OF CARROLLTON DE
ALL STAR GAS INC. OF PARIS, MO DE
ALL STAR GAS INC. OF MID-MISSOURI DE
ALL STAR GAS INC. OF HIGGENSVILLE DE
ALL STAR GAS INC. OF MARSHALL DE
EMPIREGAS INC. OF MISSOURI DE
ALL STAR GAS INC. OF BOWLING GREEN DE
ALL STAR GAS INC. OF ELSBERRY DE
ALL STAR GAS INC. OF WAYNESVILLE, MO DE
ALL STAR GAS INC. OF CUBA DE
ALL STAR GAS INC. OF ROLLA DE
EMPIREGAS INC. OF JACKSONVILLE IL
ALL STAR GAS INC. ZUMBRO FALLS, INC. MN
ALL STAR GAS INC. OF TOLEDO OH
EMPIREGAS INC. OF DOVER OH
EMPIREGAS INC. OF MOUNT VERNON OH
EMPIREGAS INC. OF COLUMBIANA OH
ALL STAR GAS INC. OF DURAND MI
ALL STAR GAS INC. OF GAYLORD MI
EMPIREGAS INC. OF CHASSEL MI
EMPIREGAS INC. OF MARQUETTE MI
EMPIREGAS INC. OF MUNISING MI
ALL STAR GAS INC. OF BIG RAPIDS MI
EMPIREGAS INC. OF CHARLOTTE MI
EMPIREGAS INC. OF COLEMAN MI
<PAGE> 3 of 3
EMPIREGAS INC. OF JACKSON MI
EMPIREGAS INC. OF KALAMAZOO MI
EMPIREGAS INC. OF TRAVERSE CITY MI
EMPIREGAS INC. OF VASSAR MI
ALL STAR GAS INC. OF GREENVILLE MI
EMPIRE GAS INC. OF NEW YORK NY
ALL STAR GAS INC. OF NORTH CAROLINA NC
ALL STAR GAS INC. OF ROCKY MOUNT NC
ALL STAR GAS INC. OF WASHINGTON NC
ALL STAR GAS INC. OF WILMINGTON NC
ALL STAR GAS INC. OF WILSON NC
ALL STAR GAS INC. OF ZEBULON NC
ALL STAR GAS INC. OF SOUTH CAROLINA SC
ALL STAR GAS INC. OF WAYNESVILLE, NC NC
ALL STAR GAS INC. OF WILKESBORO NC
ALL STAR GAS INC. OF NORTH CAROLINA NC
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000922404
<NAME> EMPIRE GAS CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 821
<SECURITIES> 0
<RECEIVABLES> 5,371
<ALLOWANCES> 800
<INVENTORY> 5,686
<CURRENT-ASSETS> 14,516
<PP&E> 98,217
<DEPRECIATION> 27,111
<TOTAL-ASSETS> 105,128
<CURRENT-LIABILITIES> 12,880
<BONDS> 115,143
<COMMON> 14
0
0
<OTHER-SE> (36,960)
<TOTAL-LIABILITY-AND-EQUITY> 105,128
<SALES> 70,292
<TOTAL-REVENUES> 74,640
<CGS> 35,612
<TOTAL-COSTS> 35,612
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,136
<INTEREST-EXPENSE> 15,570
<INCOME-PRETAX> (13,326)
<INCOME-TAX> (4,600)
<INCOME-CONTINUING> (8,726)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,726)
<EPS-PRIMARY> (5.53)
<EPS-DILUTED> (5.53)
</TABLE>
