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, 1998
COMMISSION FILE NUMBER 1-6537
ALL STAR GAS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
MISSOURI 43-1494323
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(State or other jurisdiction of (IRS Employer
Incorporation or Organization Identification No.)
P.O. BOX 303, 119 WEST COMMERCIAL STREET, LEBANON, MISSOURI, 65536
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(Address of Principal Executive Offices and Zip Code)
(417) 532-3103
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(Registrant's Telephone Number, Including Area Code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS
-------------------------------------
12-7/8% Senior Secured Notes Due 2004
9% Subordinated Debentures Due 2007
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 24, 1998 is: $116,480.
Shares of Common Stock, $0.001 par value, outstanding as of close of
business on September 24, 1998: 1,564,050.
Upon request, All Star Gas Corporation will furnish a copy of an 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, 119 W. Commercial Street,
Lebanon, Missouri 65536; Telephone (417) 532-3103.
PART 1
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
INTRODUCTION
All Star Gas Corporation ("All Star Gas" or the "Company") was
founded in 1963 and through its subsidiaries has been in operation for over
35 years. The Company is engaged primarily in (a) the retail marketing of
propane to residential, agricultural, and commercial customers, (b) the
retail marketing of propane-related appliances, supplies, and equipment,
and (c) the renting of consumer propane storage tanks to residential and
commercial customers under various brand names, including All Star,
Empiregas, and the names of numerous predecessors. During the fiscal year
which ended June 30, 1998, All Star Gas supplied propane to approximately
112,000 customers in 19 states from 127 retail service centers and sold
approximately 94 million gallons.
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 recognized for its
transportability and ease of use relative to other forms of stand alone
energy. 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, such as
over-the-road vehicles, forklifts, and stationary engines. Agricultural
uses include brooder heating, stock tank heating, crop drying, tobacco
curing, and weed control, as well as use as a motor fuel for farm equipment
and vehicles.
Propane is recognized as a clean alternative transportation fuel
"ATF" by the Federal and state governments and is the most widely used ATF
in the United States. The Federal government has enacted certain mandates
for use of ATF's by government and private fleets under the Clean Air Act
of 1990 and Energy Policy Act of 1992. Federal and state governments have
also provided various economic incentives for use of ATF's which will
positively impact propane demand.
The retail propane business is a "margin-based" business in which
gross profits depend on the excess of sales price over propane supply
costs. 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 65.6% of the Company's aggregate
propane sales revenue and 74.7% of its aggregate gross margin from propane
sales in fiscal year 1998. Historically, this market has provided higher
margins than other retail propane sales. Based on fiscal year 1998 propane
sales revenue, the customer base consisted of 24.5% commercial and 9.9%
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.
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 acquired, for
$30,000, 30% of the common stock of SYN, Inc. ("Synergy"), the acquisition
entity. The Company entered into a Management Agreement pursuant to which
the Company provided all management of the retail facilities and accounting
services at the central office. In exchange for those services, the Company
received a $500,000 annual base management fee, an incentive management
fee, and $3.25 million annual overhead reimbursement (adjusted annually for
inflation). Unless specifically referenced, all information contained
herein excludes information pertaining to the Synergy operations.
On December 7, 1995, the Company entered into a joint venture with
Northwestern Growth Corporation, a subsidiary of Northwestern Public
Service Company to acquire the stock of Myers Propane Gas Company, a large
Ohio LP gas distributor. The Company acquired 49% of the common stock of
Myers Acquisition Company (Myers), the acquisition entity. The Company
entered into a Management Agreement pursuant to which the Company provided
all management and administrative services. In exchange for those services,
the Company was entitled to a management fee upon the attainment of certain
performance goals.
In December, 1996, the Company and Northwestern Growth Corporation
(NGC), completed an agreement for the sale of various interests of the
Company in Synergy and Myers and the modification and termination of
certain agreements between NGC, Synergy and Myers on the one hand and the
Company on the other hand. The agreement terminated the management
agreements pursuant to which the Company provided management activities for
Synergy and Myers effective December, 1996. The agreement resulted in a
payment of $18 million to the Company resulting in a gain reflected on the
Statement of Operations of $16.9 million which is net of transaction and
other costs and fees. The Company may be entitled to an additional amount
based on a third party's indemnification obligations to Synergy.
Sources of Supply. During 1998, approximately 90% of the Company's
propane purchases of its propane supply were on a contractual basis
(generally, one year agreements subject to annual renewal). The Company's
two largest suppliers provide 15.4% and 14.1% of the total supply purchased
by the Company. Supply contracts do not, generally, lock in prices, but
rather provide for pricing in accordance with posted prices at the time of
delivery or established by current major storage points, such as Mont
Belvieu, TX, and Conway, KS. The Company has established relationships with
a number of suppliers 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 from its two major 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 is a shipper
on all major interstate LPG pipeline systems. The retail service centers
have an aggregate storage capacity of approximately 8.24 million gallons of
propane, and each service center has equipment for transferring the gas
into and from the bulk storage tanks. The Company operates 9 over-the-road
tractors and 11 transport trailers to deliver propane and consumer tanks to
its retail service centers and also relies on common carriers to deliver
propane to its retail service centers.
Deliveries to customers are made by means of 303 propane delivery
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 excellent service to its
customers and to achieve maximum operating efficiencies. 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
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 connected to the central management information
system in the Company's corporate headquarters. This computer network
system provides retail company personnel with accurate and timely
information on pricing, inventory, and customer accounts. In addition, this
system enables management to monitor pricing, sales, delivery, and the
general operations of its numerous retail service centers and to plan
accordingly to improve the operations of the Company. 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.
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. Propane competes primarily with natural gas, electricity and
fuel oil principally on the basis of price, availability and portability.
The Company also competes with suppliers of electricity. Generally
speaking, the cost of propane compares favorably to electricity allowing
the Company to enjoy a competitive advantage due to the higher costs of
electricity. Fuel oil does not present a significant competitive threat in
the Company'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.
Although propane is generally more expensive than natural gas on an
equivalent BTU basis comparison, propane serves as an alternative to
natural gas in rural areas where natural gas is not available. Propane is
also utilized by natural gas customers on a stand-by basis during peak
demand periods. The costs involved in building or connecting to a natural
gas distribution system have tempered natural gas growth in most of the
Company's trade territory.
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.
Effective July 1, 1998, the Company's comprehensive general, auto and
excess liability policy provides for losses of up to $101.0 million with a
$200,000 self-insured retention for general and excess liability losses.
The Company's combined auto and workers' compensation coverage has a
$250,000 deductible per occurrence.
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.
All Star 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, 1998 the Company had approximately 625 employees,
none of whom was represented by unions. The Company has never experienced
any significant work stoppage or other significant labor problems and
believes it has good relations with its employees.
ITEM 3. LEGAL PROCEEDINGS.
The Company and its subsidiaries are defendants in various routine
litigation incident to its business, none of which is expected to have a
material adverse effect on the Company's
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its annual shareholder meeting on July 17, 1998. The
only matter presented for a vote was the re-election of Jim J. Shoemake as
director. Mr. Shoemake was re- elected with 1,547,410 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, Jim J. Shoemake, and Bruce M.
Withers, Jr.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
As of September 24, 1998, 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 24, 1998, there are outstanding warrants to purchase
175,536 shares of the Company's Common Stock. Each warrant represents the
right to purchase one share of the Company's Common Stock for $.01 per
warrant. The warrants are exercisable currently and will expire July 15,
2004.
No dividends on the Common Stock of the Company were paid during the
Company's 1997 or 1998 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 All Star Gas as of and for each of the years in the
five-year period ended June 30, 1998. The financial data of the Company as
of and for each of the years in the five-year period ended June 30, 1998
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 does not take into account the effects of the
Transaction on the Company, the data for that period is not comparable to
the data for the years ended June 30, 1995 - 1998.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
(In thousands except ratios and per share amounts)
<S> <C> <C> <C> <C> <C>
Operating data:
Operating revenue $124,452 $74,090 $82,702 $94,543 $86,510
Gross profit (1) 66,532 38,478 39,384 41,468 44,094
Operating expenses 44,866 29,144 27,987 28,853 29,747
Depreciation & amortization 10,150 6,166 6,770 6,867 9,334
Operating income 11,516 3,168 4,627 5,748 5,013
Interest expense:
Cash interest 8,542 10,681 10,657 10,605 11,391
Amortization of debt discount
& expenses 2,016 4,889 5,476 6,140 6,796
Total interest expense 10,558 15,570 16,133 16,745 18,187
Net income (loss) before
extraordinary items(2) (1,190) (8,726) (7,897) 2,222 (9,954)
Other operating data:
Capital expenditures 19,979 11,874 8,838 13,340 17,384
Cash from sale of retail service
centers and other assets 366 2,956 6,177 5,478 2,821
EBITDA (3) 21,566 8,784 11,002 13,347 14,007
Basic & diluted income (loss)
before extraordinary items $ (0.08) $ (5.53) $ (5.00) $ 1.41 $ (6.36)
YEAR ENDED JUNE 30,
------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Balance sheet data:
Total assets $104,644 $105,128 $102,002 $107,832 $113,788
Long-term debt (including
current maturities) 105,612 115,647 122,858 126,632 142,350
Stockholders' equity (deficit) (28,220) (36,946) (44,843) (42,720) (52,674)
</TABLE>
(1) Represents operating revenue less the cost of products sold.
(2) All Star Gas did not declare or pay dividends on its common stock
during the five-year period ending June 30, 1998.
(3) EBITDA consists of earnings before depreciation, amortization,
interest, income taxes, and other non-recurring expenses excluding
gains/losses on sales of assets. 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).
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 All Star Gas and
the notes thereto included in this Report.
RESULTS OF OPERATIONS
Fiscal Years Ended June 30, 1998 and June 30, 1997
Operating Revenue. Operating revenue decreased $8.0 million, or 8.5%
to $86.5 million in fiscal year 1998 as compared to $94.5 million in fiscal
year 1997. The decrease was primarily due to an $8.2 million decrease in
propane sales which was the result of 15.3% lower propane sales prices
offset by a 10.4% increase in gallons sold. Propane sales prices decreased
an average of 14.8(cent) per gallon over fiscal 1997 which was the result
of lower wholesale prices which are discussed in the cost of products sold
section.
Cost of products sold. Cost of products sold decreased $10.7 million,
or 20.1%, to $42.4 million in fiscal year 1998 as compared to $53.1 million
in fiscal year 1997. This was due to lower average wholesale propane costs
of 13.7(cent) per gallon. In fiscal year 1998, the propane industry has
experienced higher than historical supply levels in both the domestic and
Canadian markets. Combined with warmer winter weather, which has depressed
demand, these large supplies have resulted in significantly lower product
costs. Lower costs were partially offset by increased volumes from net
acquisitions and dispositions of retail service centers. The decrease in
cost of propane products sold was partially offset by an increase in cost
of gas systems and appliances of $130,000.
Gross profit. The Company's gross profit for the year increased $2.6
million to $44.1 million in fiscal year 1998 as compared to $41.5 million
in fiscal year 1997. This increase is primarily due to a $2.6 million
improvement in propane sales gross profit. Propane sales gross profits
increased as margins per gallon remained relatively stable while volumes
increased 10.4% in fiscal 1998 as compared to fiscal 1997. Other
improvements to gross profit are the result of increased income from rental
and leasing activities of $222,000 and increased emphasis of selling value
added services through a service labor increase of $123,000. These
improvements were partially offset by a decrease in margins on gas systems
and appliances of $195,000.
General and administrative expense. General and administrative
expenses increased $2.1 million to $29.7 million in fiscal 1998 compared to
$27.6 million in fiscal 1997. The majority of the increase is due to the
elimination of the overhead reimbursement associated with the management of
SYN Inc. that was terminated in December 1996. This reimbursement was $1.4
million for the year ending June 30, 1997. Other notable changes include an
increase in salaries and employee benefits of $765,000 in fiscal 1998
mainly due to increased personnel associated with the acquisition of retail
service centers. Transportation expenses increased $402,000 due to the
increased maintenance costs of the Company's aircraft and the improvement
and maintenance of its trucks and equipment. Professional expenses
decreased $295,000 over fiscal 1997 due to the additional costs in 1997
associated with a proposed restructuring of the company's debt and equity
which was abandoned.
Provision for doubtful accounts. The provision for doubtful accounts
decreased $140,000, or 29.2%, from $483,000 in fiscal 1997 to $342,000 in
fiscal 1998. The decrease is a result of the enhanced credit and collection
efforts begun in fiscal 1995 as well as a reflection of the upgrade in
customers during the same time frame. The Company also tied certain
employees' incentive compensation to credit and collection results.
Depreciation and amortization. Depreciation and amortization expense
increased $2.4 million to $9.3 million in fiscal 1998 from $6.9 million in
fiscal 1997. This increase is due primarily to the addition of fixed assets
through the acquisition of retail service centers occurring in the 1997
fiscal year and the current period. Depreciation expense on modernization
expenditures and other asset purchases also contributed to the increase in
fiscal 1998.
Interest expense. Interest expense increased approximately $800,000
to $11.4 million in fiscal 1998 from $10.6 million in fiscal 1997 primarily
due to the increased mortgage obligation debt service resulting from recent
acquisitions.
Fiscal Years Ended June 30, 1997 and June 30, 1996
Operating Revenue. Operating revenue increased $11.8 million, or
14.3%, to $94.5 million in fiscal year 1997 as compared to $82.7 million in
fiscal year 1996. The increase was primarily due to an $11.8 million
increase in propane sales which was the result of 21% higher propane sales
prices and a 4.4% reduction in gallons sold. Propane prices increased an
average of 18(cent) per gallon over fiscal 1996 which was the result of
higher wholesale prices which are discussed in the cost of products sold
section.
Cost of products sold. Cost of products sold increased $9.8 million,
or 22.5%, to $53.1 million in fiscal year 1997 as compared to $43.3 million
in fiscal year 1996. This increase was due to the cost of propane increase
of $10.2 million due to higher wholesale propane costs of 14(cent) per
gallon. The increase in wholesale propane costs were due to low propane
inventories, as reported by the major supply points for the United States,
compared to the five year historical average. The increase of cost of
products was offset by a reduction in refined fuel costs of $200,000 due to
the disposal of the locations selling refined fuels and reduction in cost
of gas systems and appliances of $200,000.
Gross profit. The Company's gross profit for the year increased $2.1
million to $41.5 million in fiscal year 1997 as compared to $39.4 million
in fiscal year 1996. This increase is primarily due to a $1.6 million
improvement in propane sales gross profit to .427(cent) per gallon in
fiscal 1997 as compared to .390(cent) per gallon in fiscal 1996. This
increase represents an improvement of .037(cent) per gallon or 9.3% over
fiscal 1996, which is primarily due to the company's purchasing, hedging
and consumer pricing strategy of improved margins as a result of the
changes in geographic mix to higher margin areas and improvement of
customer base through the marketing focus of value added products and
services. Other improvements to gross profit are the result of increased
margins on gas system and appliance sales of $300,000 and increased
emphasis of selling value added services through a service labor increase
of $200,000.
General and administrative expense. General and administrative
expenses increased slightly by $100,000 to $27.6 million in fiscal 1997
compared to $27.5 million in fiscal 1996. Although general and
administrative expenses were flat from 1996 to 1997, there were reductions
in many categories due tro the elimination of activities required for the
management of the Synergy properties in December, 1996. The various
reductions in the expense categories were offset by the elimination of the
reimbursement of overhead expenses from Synergy of $2.4 million.
Insurance and related liability claims expense decreased
substantially by $900,000 or 36% to $1.7 million in fiscal 1997 as compared
to $2.6 million in fiscal 1996. The decrease is due primarily to an
improved claims record and the pooling of coverage with Synergy resulting
in reduced premiums.
Most other categories of general and administrative expenses were
reduced in fiscal 1997 from fiscal 1996 as a result of the elimination of
Synergy management, as previously discussed, except for salaries which
remained fairly stable, decreasing only $200,000, or .9% from $15.8 million
in fiscal 1996 to $15.6 million in fiscal 1997, which was offset by certain
other staffing related to the elimination of Synergy management. The
Company strategically expanded its executive staff and middle management in
order to allow for improved succession planning which was offset by the
reduction in certain other staffing related to the elimination of Synergy
management.
Provision for doubtful accounts. The provision for doubtful accounts
decreased approximately $400,000, or 46%, from $900,000 in fiscal 1996 to
$500,000 in fiscal 1997. The decrease is a result of the enhanced credit
and collection efforts established in fiscal 1995 as well as a reflection
of the upgrade in customers during the same time frame. The Company has
also tied employees' incentive compensation to credit and collection
results.
Depreciation and Amortization. Depreciation and amortization
increased slightly by $100,000 to $6.9 million in fiscal 1997 from $6.8
million in fiscal 1996. The increase is primarily due to fixed assets
purchases through acquisitions and capital expenditures during fiscal 1997.
Interest Expense. Interest expense was relatively unchanged from
fiscal 1996 to 1997.
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 by operating activities was $5.6 million in fiscal
year 1998 as compared to the cash flow used in fiscal year 1997, of $1.7
million. This change is due to the Company's increasing certain liabilities
and accrued expenses while carrying lower levels of inventory and accounts
receivable.
Cash flow used in investing activities was $8.4 million as compared
to the cash flow provided in fiscal year 1997, of $10.5 million. This
change is due primarily to the $18.0 million provided by the Synergy/Myers
transaction in fiscal 1997.
Cash flow provided by financing activities was $2.7 million as
compared to the cash flow used in fiscal year 1997, of $8.7 million. This
change is due primarily to a $4.5 million net increase in borrowings in
fiscal 1998 compared to a $5.8 net reduction in fiscal 1997 on the
Company's working capital facility.
Pursuant to the indenture for the 12-7/8% Senior Secured Notes, the
Company is required to make a $4.5 million, semi-annual interest payment on
each July 15 and January 15. Beginning in fiscal year 2000, the semi-annual
cash interest payment on the Notes will increase to $8.2 million. The
Company decided to utilize its 30 day grace period for the January 1998 and
July 1998 interest payments. The Company experienced a temporary shortage
in cash flow due to the unusually warm weather, lower petroleum prices
which have caused a decrease in customer demand for pre-paid gas contracts
and delays in several asset sale transactions. The Company met the
scheduled interest payments through the use of operating cash flows,
available borrowings on its working capital facility and loans from a
related party.
The Company has net working capital and stockholders' equity
deficiencies and its working capital borrowing facility is due in full in
December 1998. The Company is considering several alternatives for
mitigating these conditions during the year which include seeking a long
term extension of the existing credit facility and exploring other
financing and recapitalization alternatives. In addition, management has
undertaken significant reductions in general and administrative expenses
during the latter portion of fiscal 1998 which are expected to positively
impact fiscal 1999 results. Capital expenditures have been high over the
past three fiscal years as the Company has upgraded and improved its trucks
and equipment. During the past fiscal year, the Company has also incurred
costs related to the change of the Company name on its retail facilities
and the renovation of an existing building which was converted into the
corporate facilities for the Company allowing the Company to exit an
expensive lease agreement. While the Company believes that it will be able
to obtain the necessary financing and/or capital to mitigate these
conditions, no commitments have been obtained and no assurances can be made
that such financing and/or capital will be available to the Company. An
inability to obtain financing and/or capital could have a material adverse
effect on the Company and its ability to conduct business.
The Company's financial statements have been prepared assuming the
Company will continue as a going concern, realizing assets and liquidating
liabilities in the ordinary course of business. The Company's independent
accountants, Baird, Kurtz & Dobson, have stated in their independent
accountant's report filed as part of this Annual Report, that the net
working capital and stockholders' equity deficiencies as well as the fact
that the Company's working capital borrowing facility is due in full in
December, 1998, raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements set forth in this
Annual Report do not include any adjustments that might result from the
outcome of this uncertainty. Although not currently planned, realization of
assets in other than the ordinary course of business to meet liquidity
needs could result in losses not reflected in the financial statements set
forth in this Annual Report and could have a material adverse effect on the
Company and its ability to conduct business.
YEAR 2000
The Year 2000 problem concerns the inability of information systems
to recognize and process date-sensitive information properly from and after
January 1, 2000.
To minimize or eliminate the effect of the year 2000 problem on the
Company's information systems and applications, the Company is continually
identifying, evaluating, implementing and testing changes to its computer
systems, applications and software necessary to achieve Year 2000
compliance. The Company has given an executive officer of the Company
responsibility to identify, evaluate and implement a plan to bring all of
the Company's critical business systems and applications into Year 2000
compliance prior to December 31, 1999. The year 2000 initiative consists of
four phases: (i) identification of all critical business systems subject to
Year 2000 risk (the "Identification Phase"); (ii) assessment of such
business systems and applications to determine the method of correcting any
Year 2000 problems (the "Assessment Phase"); (iii) implementing the
corrective measures (the "Implementation Phase"); and (iv) testing and
maintaining system compliance (the "Testing Phase"). The Company has
substantially completed the Identification, Assessment and Implementation
Phases and has identified and assessed four areas of risk: (i) third party
vendor software, such as business applications and operating systems; (ii)
computer hardware components; (iii) electronic data transfer systems
between the Company and its suppliers and customers; and (iv) embedded
systems, such as phone switches. Although no assurances can be made, the
Company believes that it has identified substantially all of its systems,
applications and related software that are subject to Year 2000 compliance
risk and has either implemented or initiated the implementation of a plan
to correct such systems that are not Year 2000 compliant. The Company does
not anticipate completion of the Testing Phase until sometime prior to
December 1999.
The Company relies on third party service providers for services such
as telecommunications, internet service, utilities and other key services
as well as other third parties such as customers and suppliers.
Interruption of those services and business due to Year 2000 issues could
affect the Company's operations. The Company has developed a course of
action to determine the status of such third party service providers,
customers and suppliers to determine alternative and contingency
requirements. While approaches to reducing risks of interruption of
business operations vary, options include identification of alternative
service providers, customers and suppliers available to provide such
service and business if such third party fails to become Year 2000
compliant within an acceptable time frame prior to December 31, 1999.
Since the Company has recently updated its information systems (which
have been certified to be Year 2000 compliant) in the ordinary course of
business, there has not been any additional cost incurred by the Company in
connection with its Year 2000 compliance plan other than as would have been
incurred in the ordinary course. The Company has been expensing and
capitalizing the costs of updating its information systems and therefore
its Year 2000 compliance plan in accordance with appropriate accounting
policies. The Company does not believe that it will incur significant
future costs for remediation in connection with Year 2000 compliance. In
the event the Year 2000 modifications and conversions are not adequate, the
Year 2000 problem could have a material impact on the operations and
financial condition of the Company.
THE ESTIMATES AND CONCLUSIONS HEREIN ARE FORWARD-LOOKING STATEMENTS
AND ARE BASED ON MANAGEMENT'S BEST ESTIMATES OF FUTURE EVENTS. RISKS OF
COMPLETING THE PLAN INCLUDE THE AVAILABILITY OF RESOURCES, THE ABILITY TO
DISCOVER AND CORRECT THE POTENTIAL YEAR 2000 SENSITIVE PROBLEMS WHICH COULD
HAVE A SERIOUS IMPACT ON CERTAIN OPERATIONS AND THE ABILITY OF THE
COMPANY'S SERVICE PROVIDERS, CUSTOMERS AND SUPPLIERS TO BRING THEIR SYSTEMS
INTO YEAR 2000 COMPLIANCE.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See the Consolidated Financial Statements included elsewhere herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The directors and executive officers of the Company are as follows:
POSITION HELD WITH THE COMPANY
NAME AGE AND PRINCIPAL OCCUPATION
---- --- ------------------------------
Paul S. Lindsey, Jr. 53 Chairman of the Board, Chief Executive
Officer, and President since June 1994;
previously Vice Chairman of the Board (1982
to 1994) and Chief Operating Officer (1988
to 1994); term as director expires 2000
Douglas A. Brown 38 Director since June 1994; Partner ZS Fund
since 4/97; previously member Holding
Capital Group, Inc. (since 1989); term as
director expires 2000
Kristin L. Lindsey 50 Director/Executive Vice President since Oct.
1996; previously Director/Vice President to
June 1994; previously pursued charitable and
other personal interest; term as director
expires 1999
Bruce M. Withers, Jr. 71 Director since June 1994; previously
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 1999
Jim J. Shoemake 60 Director since June 1994; partner of
Guilfoil, Petzall & Shoemake (since 1970);
term as director expires 2001
Valeria Schall 44 Executive Vice President since October,
1996, previously Vice President since 1992;
Corporate Secretary since 1985 and Assistant
to the Chairman since 1987
James M. Trickett 48 Chief Operating Officer since 1997, Sr. Vice
President since September 1997; previously
Divisional Manager since June 1996, and
Regional Manager since August 1995.
Divisional Manager with Synergy Gas
Corporation since 1990.
Robert C. Heagerty 51 Sr. Vice President since September 1997,
previously Divisional Vice President since
June 1993; previously Regional Manager since
December 1986.
J. Greg House, Sr. 41 Vice President - Management Information
Systems since June, 1996; previously
Director-MIS since September 1994 and
Manager-MIS Paul Mueller Co. since 1987.
Each director will serve for a term of three years. Officers of the
Company are elected by the Board of Directors of the Company and will serve
at the discretion of the Board, except for Mr. Lindsey who is employed
pursuant to an employment agreement that expires June 24, 1999 (subject to
extension).
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table provides compensation information for each of the
years ended June 30, 1998, 1997, and 1996 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 was only
two) 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)
SUMMARY COMPENSATION TABLE
Annual Compensation
<TABLE>
<CAPTION>
Name and Principal
Position at End of Fiscal Other Annual All Other
Fiscal Year 1998 Year Salary Bonus Compensation Compensation
- ------------------ ---- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Paul S. Lindsey, Jr. 1998 $400,000 ----- ----- -----
Chief Executive Officer, 1997 $350,000 $750,000 ----- -----
Chairman of the Board 1996 $350,000 ----- ----- -----
and President
Valeria Schall 1998 $100,000 $35,000 ----- -----
Executive Vice 1997 $73,500 $32,500 ----- -----
President 1996 $64,000 $27,500 ----- -----
Kristin L. Lindsey 1998 $100,000 $35,000 ----- -----
Executive Vice 1997 $73,500 $32,500 ----- -----
President and Director 1996 $64,000 ----- ----- -----
</TABLE>
EMPLOYMENT AGREEMENT
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 $400,000 and reimbursement for reasonable
travel and business expenses. The agreement requires Mr. Lindsey to devote
substantially all of his time to the Company's business. The agreement is
for a term of five years, but is automatically renewed for one year unless
either party elects to terminate the agreement at least four months prior
to the end of the term or any extension. The agreement may be terminated by
Mr. Lindsey or the Company, but if the agreement is terminated by the
Company and without cause, the Company must pay one year's salary as
severance pay.
INCENTIVE STOCK OPTION PLAN
There were no options granted to the named officer nor exercised by
him during fiscal year 1998 and no unexercised options held by him as of
the end of the 1998 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 All Star Gas
received an annual fee of $25,000, payable quarterly, for their services.
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 24,
1998, 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(1) Beneficially Owned Percent
- ---------------------------- ------------------ -------
Paul S. Lindsey, Jr.(2) 1,507,610 67.02
Kristin L. Lindsey(2) 753,805 33.51
Douglas A. Brown 144,530 6.4
Valeria Schall 79,603 3.5
Bruce M. Withers, Jr. 39,248 1.74
Jim J. Shoemake 39,248 1.74
All directors and executive 1,947,559 86.58
officers as a group
(9 persons)(3)
- -----------------
(1) The address of each of the beneficial owners is c/o All Star Gas
Corporation, P.O. Box 303, 119 W. Commercial Street, Lebanon, Missouri
65536.
(2) Mr. Lindsey's shares consist of 753,805 shares owned by the Paul S.
Lindsey, Jr. Trust established January 24, 1992 and 753,805 shares
owned by the Kristin L. Lindsey Trust established January 24, 1992.
Mr. Lindsey has the power to vote and to dispose of the shares held in
the Kristin L. Lindsey Trust. Mrs. Lindsey's shares consist of the
shares owned by the Kristin L. Lindsey Trust. Mrs. Lindsey disclaims
ownership of the shares held by her husband in the Paul S. Lindsey,
Jr. Trust.
(3) The amounts shown include the shares beneficially owned by Mr. Lindsey
and Mrs. Lindsey as set forth above, and 216,932 shares owned by other
executive officers.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Mrs. Kristin L. Lindsey, who beneficially owns approximately 33.51%
of the Company's outstanding Common Stock and is a Director of the Company,
is the majority stockholder in a company that supplies paint and labels to
the Company. The Company's purchases of paint and labels from this company
totaled $188,804 in fiscal year 1998 and $285,637 in fiscal year 1997.
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.
The Company entered into an operating lease with its Chief Executive
Officer to lease a turbo prop aircraft for use in Company travel. The lease
requires $94,800 in annual payments for a term of 3 years beginning in
January, 1998, and had a requirement for a $87,500 deposit.
Over the past fiscal year the Company received advances bearing
interest at a rate of 12% from its Chief Executive Officer in an amount of
$1.8 million which has a remaining balance at September 24, 1998 of
$326,000.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
Report of Independent Accountants
Consolidated Balance Sheets as of June 30, 1998 and
1997
Consolidated Statement of Operations for the Years
Ended June 30, 1998, 1997, and 1996
Consolidated Statements of the Stockholders' Equity
(Deficit) for the Years Ended June 30, 1998, 1997,
and 1996
Consolidated Statements of Cash Flows for the Years
Ended June 30, 1998, 1997, and 1996
(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 All Star 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 All Star
Incorporated and Exco Acquisition Corp. (Commission File No.
2-83683) Registration Statement on Form S-14 with the
Commission on May 11, 1983); and First Supplemental Indenture
thereto between All Star 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 All
Star 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 All Star Gas wAcquisition Corporation and Robert W.
Plaster Trust, Robert W. Plaster, Trustee; Paul S. Lindsey,
Jr.; Stephen R. Plaster Trust, Lynn C. Hoover, Trustee; Cheryl
Plaster Schaefer Trust, Lynn C. Hoover, Trustee; Robert L.
Wooldridge; Gwendolyn B. VanDerhoef; Dwight Gilpin; Luther
Henry Gill; Valeria Schall; Floyd J. Waterman; Larry W. Bisig;
Larry Weis; Robert Heagerty; Murl J. Waterman; Earl L. Noe;
Thomas Flak; Michael Kent St. John; James E. Acreman; Carolyn
Rein; Dan Weatherly; Nina Irene Craighead; Joyce Sue Kinnett;
Edwin H. McMahon; Paul Stahlman; Ralph Wilson; Alan Simer;
Ferrell Stamper; and All Star 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 All Star Gas Company (incorporated
herein by reference to Exhibit 10.2 to the Registrant's Annual
Report on Form 10-K for the year ended June 30, 1995)
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 All Star 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
All Star Service Corporation (incorporated herein by reference
to Exhibit G of Exhibit 10.1 to the All Star 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 All Star 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, All Star
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. 33-533343)
10.9 Indemnification Agreement between the Company and Douglas A.
Brown (incorporated herein by reference to Exhibit 10.9 to the
Company's Registration Statement on Form S-1 (No. 33-53343)
10.10 Tax Indemnification Agreement between the Company and Energy
(incorporated herein by reference to Exhibit 10.10 to the
Company's Registration Statement on Form S-1 (No. 33-53343)
10.11 Supply Contract No. 1, dated June 1, 1993, between EGOC and
Warren Petroleum Company (incorporated herein by reference to
Exhibit 10.11 to the Company's Registration Statement on Form
S-1 (No. 33-53343)
10.12 Supply Contract No. 2, dated June 1, 1993, between EGOC and
Warren Petroleum Company (incorporated herein by reference to
Exhibit 10.12 to the Company's Registration Statement on Form
S-1 (No. 33-53343)
10.13 Management Agreement between All Star Gas Company, Northwestern
Growth Corporation and SYN, Inc. dated May 17, 1995
(incorporated by reference to Exhibit 10.13 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996)
10.14 Agreement Among Initial Stockholders and SYN, Inc. dated May
17, 1995 (incorporated by reference to Exhibit 10.14 to the
Company's Annual Report on Form 10-K for the year ended June
30, 1996)
10.15 Waiver Agreement dated April 29, 1995 by and among All Star Gas
Corporation, SYN, Inc., Paul S. Lindsey, Jr. Northwestern
Growth Corporation, All Star Energy Corporation, Robert W.
Plaster, and Stephen R. Plaster (incorporated herein by
reference to Exhibit 10.15 to the Registrant's Annual Report on
Form 10-K for the year ended June 30, 1995)
10.16+ Propane Sales Agreement dated August 24, 1995, between All Star
Gas Corporation and Warren Petroleum Company (incorporated by
reference to Exhibit 10.16 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1995)
10.17+ Supply Contract dated April 27, 1995, between All Star Gas
Corporation and Phillips 66 Company (incorporated by reference
to Exhibit 10.17 to the Company's Annual Report on Form 10-K
for the year ended June 30, 1995)
10.18+ Dealer Sale Contract dated January 20, 1995, between All Star
Gas Corporation and Conoco Inc. (incorporated by reference to
Exhibit 10.18 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1995)
10.19+ Supply Contract dated April 24, 1995 between All Star Gas
Corporation and Enron Gas Liquids, Inc. (incorporated by
reference to Exhibit 10.19 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1995)
10.20+ Amendment No. 1 to Supplement A to Loan and Securities
Agreement dated June 29, 1995 between All Star Gas Corporation
and Bank of America Illinois (incorporated by reference to
Exhibit 10.20 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1995)
10.21 9/9/96 Waiver, Amendment No. 2 to Loan and Security Agreement
and Amendment No. 4 to Supplement A to Loan and Security
Agreement with Bank of America Illinois (incorporated by
reference to Exhibit 10.21 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1996)
10.22 7/1/96 Agreement Amending Amended and Restated Agreement Among
Initial Stockholders and Syn Inc. (incorporated by reference to
Exhibit 10.22 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1996)
10.23 5/15/96 Waiver between Bank of America Illinois and All Star
Gas Corporation (incorporated by reference to Exhibit 10.23 to
the Company's Annual Report on Form 10-K for the year ended
June 30, 1996)
10.24 2/13/96 Amendment No. 3 to Supplement A to Loan and Security
Agreement with Bank of America Illinois (incorporated by
reference to Exhibit 10.24 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1996)
10.25 11/3/95 Agreement Among Initial Stockholders and Mac
Inc.(incorporated by reference to Exhibit 10.25 to the
Company's Annual Report on Form 10-K for the year ended June
30, 1996)
10.26 11/3/95 Management Agreement between NWPS, Myers Acquisition
Company and Empire (incorporated by reference to Exhibit 10.26
to the Company's Annual Report on Form 10-K for the year ended
June 30, 1996)
10.27 9/28/95 Amendment No. 1 to Loan and Security Agreement and
Amendment No. 2 to Supplement A to Loan and Security Agreement
with Bank of America Illinois (incorporated by reference to
Exhibit 10.27 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1996)
10.28 7/31/95 Agreement Amending Management Agreement (incorporated
by reference to Exhibit 10.28 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1996)
10.29 7/31/95 Agreement Amending and Reinstating Agreement Among
Initial Stockholders and Syn Inc. (incorporated by reference to
Exhibit 10.29 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1996)
10.30+ Propane Sales Agreement dated April 9, 1996, between All Star
Gas Corporation and Warren Petroleum Company (incorporated by
reference to Exhibit 10.30 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1996)
10.31+ Amendment to Supply Contract dated August 15, 1994, between All
Star Gas Corporation and Phillips 66 Company (incorporated by
reference to Exhibit 10.31 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1996)
10.32+ Supply Contract dated April 1, 1996, between All Star Gas
Corporation and Conoco, Inc.(incorporated by reference to
Exhibit 10.32 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1996)
10.33 June 1, 1996, Lease of Aircraft between Paul S. Lindsey,
Limited Liability Company and All Star Gas Corporation
(incorporated by reference to Exhibit 10.33 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996)
10.34+ Liquified Petroleum Gas Contract dated July 1, 1996 between All
Star Gas Corporation and Shell Anacortes Refining Company
(incorporated by reference to Exhibit 10.34 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1997)
10.35+ Liquified Petroleum Gas Contract dated July 1, 1996 between All
Star Gas Corporation and Shell Oil Company (incorporated by
reference to Exhibit 10.35 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1997)
10.36+ Propane Sales Agreements between All Star Gas Corporation and
Warren Petroleum Company (incorporated by reference to Exhibit
10.36 to the Company's Annual Report on Form 10-K for the year
ended June 30, 1997)
10.37+ Liquified Petroleum Gas Contract dated June 1, 1996 between All
Star Gas Corporation and Shell Oil Company (incorporated by
reference to Exhibit 10.37 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1997)
10.38 Amendment #3 dated 10/29/96 to Loan and Security Agreement and
Amendment #6 to Supplement A to Loan and Security Agreement
(incorporated by reference to Exhibit 10.38 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1997)
10.39 Amendment #4 to Loan and Security Agreement (incorporated by
reference to Exhibit 10.39 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1997)
10.40 Amendment No. 5 to Loan and Security Agreement and Amendment
No. 7 to Supplement A to Loan and Security Agreement dated
February 20, 1997
10.41 Amendment No. 6 to Loan and Security Agreement and Amendment
No. 8 to Supplement A to Loan and Security Agreement dated June
29, 1998
10.42 Waiver dated February 12, 1998
10.43 December 31, 1997, Lease of Aircraft Agreement between Paul S.
Lindsey, LLC, and All Star Gas Corporation
21.1 Subsidiaries of the Company
27.1 Financial Data Schedules
+ Confidential treatment has been requested. The copy filed as an exhibit
omits the information subject to the confidentiality request.
(b) Reports on Form 8-K
July 15, 1998
(c) Exhibits
See (a)(3) above.
(d) Financial Statements
See (a)(1) above.
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.
All Star Gas Corporation
By: /s/ Paul S. Lindsey, Jr.
---------------------------
Paul S. Lindsey, Jr.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE CAPACITY IN WHICH SIGNED DATE
--------- ------------------------ ----
/s/ Paul S. Lindsey, Jr. Chief Executive Officer September 24, 1998
- -------------------------- and Chairman of the
Paul S. Lindsey, Jr. Board of All Star Gas
Corporation (principal
executive officer)
/s/ Willis D. Green Controller September 24, 1998
- -------------------------- (principal financial/
Willis D. Green accounting officer)
/s/ Douglas A. Brown Director of All Star September 24, 1998
- -------------------------- Gas Corporation
Douglas A. Brown
/s/ Kristin L. Lindsey Director of All Star September 24, 1998
- -------------------------- Gas Corporation
Kristin L. Lindsey
/s/ Bruce M. Withers, Jr. Director of All Star September 24, 1998
- -------------------------- Gas Corporation
Bruce M. Withers, Jr.
/s/ Jim J. Shoemake Director of All Star September 24, 1998
- ------------------------- Gas Corporation
Jim J. Shoemake
Independent Accountants' Report
Board of Directors and Stockholders
All Star Gas Corporation
Lebanon, Missouri
We have audited the accompanying consolidated balance sheets of ALL
STAR GAS CORPORATION as of June 30, 1998 and 1997, 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, 1998.
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
ALL STAR GAS CORPORATION as of June 30, 1998 and 1997, and the results of
its operations and its cash flows for each of the three years in the period
ended June 30, 1998, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 2, the
Company has net working capital and stockholders' equity deficiencies at
June 30, 1998, and its working capital borrowing facility is due in full in
December 1998. These matters raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
/s/ Baird, Kurtz & Dobson
Springfield, Missouri
August 28, 1998, except for Note 4 as
to which the date is September 23, 1998
ALL STAR GAS CORPORATION
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND 1997
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
1998 1997
CURRENT ASSETS ---- ----
Cash $ 897 $ 965
Trade receivables, less allowance
for doubtful accounts; 1998 - $844,
1997 - $899 4,526 5,101
Inventories 6,985 6,924
Prepaid expenses 615 401
Due from related parties -- 98
Refundable income taxes 1,135 630
Deferred income taxes 312 --
--------- ---------
Total Current Assets 14,470 14,119
--------- ---------
PROPERTY AND EQUIPMENT, AT COST
Land and buildings 11,233 9,887
Storage and consumer service
facilities 77,732 70,984
Transportation, office and other
equipment 29,348 24,473
--------- ---------
118,313 105,344
Less accumulated depreciation 37,323 32,118
--------- ---------
80,990 73,226
--------- ---------
OTHER ASSETS
Debt acquisition costs, net of
amortization 3,086 3,605
Excess of cost over fair value of net
assets acquired, at amortized cost 13,202 14,101
Notes receivable - related parties 676 1,022
Other 1,364 1,759
--------- ---------
18,328 20,487
--------- ---------
$ 113,788 $ 107,832
========= =========
See Notes to Consolidated Financial Statements
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
1998 1997
---- ----
CURRENT LIABILITIES
Checks in process of collection $ 1,682 $ 1,366
Current maturities of long-term debt 7,824 2,385
Accounts payable 2,141 2,477
Accrued salaries 1,403 1,517
Accrued interest 4,174 4,081
Accrued expenses 854 841
Due to related parties 280
Customer prepayments 8,343 6,050
--------- ---------
Total Current Liabilities 26,701 18,717
--------- ---------
LONG-TERM DEBT 134,526 124,247
--------- ---------
DEFERRED INCOME TAXES 4,905 7,190
--------- ---------
ACCRUED SELF-INSURANCE LIABILITY 330 398
--------- ---------
STOCKHOLDERS' EQUITY (DEFICIT)
Common; $.001 par value; authorized
20,000,000 shares; issued June 30, 1998
and 1997, 14,291,020 shares 14 14
Common stock purchase warrants 1,227 1,227
Additional paid-in capital 27,279 27,279
Retained earnings 6,880 16,834
--------- ---------
35,400 45,354
Treasury stock, at cost; 12,726,970 shares (88,074) (88,074)
--------- ---------
(52,674) (42,720)
--------- ---------
$ 113,788 $ 107,832
========= =========
ALL STAR GAS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1998, 1997 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1998 1997 1996
---- ---- ----
OPERATING REVENUE $ 86,510 $ 94,543 $ 82,702
COST OF PRODUCT SOLD 42,416 53,075 43,318
-------- -------- ---------
GROSS PROFIT 44,094 41,468 39,384
-------- -------- ---------
OPERATING COSTS AND EXPENSES
Provision for doubtful accounts 342 483 889
General and administrative 29,745 27,638 27,493
Depreciation and amortization 9,334 6,867 6,770
(Gain) loss on sale of assets (340) 732 (395)
-------- -------- ---------
39,081 35,720 34,757
-------- -------- ---------
OPERATING INCOME 5,013 5,748 4,627
-------- -------- ---------
OTHER INCOME (EXPENSE)
Interest expense (11,391) (10,605) (10,657)
Amortization of debt discount
and expense (6,796) (6,140) (5,476)
Gain on SYN/Myers Transaction -- 16,922 --
Restructuring proposal costs (910) (1,903) --
Write off of carrying value of
underground storage facility
and closing costs -- -- (200)
-------- -------- ---------
(19,097) (1,726) (16,333)
-------- -------- ---------
INCOME (LOSS) BEFORE EQUITY IN NET
INCOME OF AFFILIATES (14,084) 4,022 (11,706)
EQUITY IN NET INCOME OF AFFILIATES -- -- 59
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES (14,084) 4,022 (11,647)
PROVISION (CREDIT) FOR INCOME TAXES (4,130) 1,800 (3,750)
-------- -------- ---------
NET INCOME (LOSS) $ (9,954) $ 2,222 $ (7,897)
======== ======== =========
BASIC AND DILUTED INCOME (LOSS)
PER COMMON SHARE $ (6.36) $ 1.41 $ (5.00)
======== ======== =========
See Notes to Consolidated Financial Statements
ALL STAR GAS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED JUNE 30, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
Common Total
Stock Additional Stockholders'
Common Purchase Paid-In Retained Treasury Equity
Stock Warrants Capital Earnings Stock (Deficit)
-------- -------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1995 $ 14 $ 1,227 $ 27,279 $ 22,509 $(87,975) $(36,946)
NET LOSS -- -- -- (7,897) -- (7,897)
-------- -------- -------- -------- -------- --------
BALANCE, JUNE 30, 1996 14 1,227 27,279 14,612 (87,975) (44,843)
TREASURY STOCK PURCHASE -- -- -- -- (99) (99)
NET INCOME -- -- -- 2,222 -- 2,222
-------- -------- -------- -------- -------- --------
BALANCE, JUNE 30, 1997 14 1,227 27,279 16,834 (88,074) (42,720)
NET LOSS -- -- -- (9,954) -- (9,954)
-------- -------- -------- -------- -------- --------
BALANCE, JUNE 30, 1998 $ 14 $ 1,227 $ 27,279 $ 6,880 $(88,074) $(52,674)
======== ======== ======== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
ALL STAR GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $ (9,954) $ 2,222 $ (7,897)
Items not requiring (providing) cash:
Depreciation 7,384 5,467 5,427
Amortization 8,746 7,540 6,819
Gain on sale of assets and
SYN/Myers transaction (340) (16,190) (395)
Loss on underground storage facility -- -- 200
Undistributed earnings of affiliate -- -- (59)
Deferred income taxes (2,597) (750) (3,850)
Changes in:
Trade receivables 91 (982) 191
Inventories 372 (905) (896)
Prepaid expenses and other 937 (644) (375)
Due from related parties -- 1,163 (599)
Accounts payable and customer
prepayments 1,584 2,392 508
Accrued expenses and self-insurance (581) (1,015) 1,243
-------- -------- --------
Net cash provided by (used in)
operating activities 5,642 (1,702) 317
-------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sales of retail service
centers and other assets 2,821 2,476 6,177
Receipts on sales of retail outlets
previously accrued -- 3,002 --
Proceeds from SYN/Myers transaction -- 18,000 --
Acquisition of retail service centers (4,435) (5,248) (1,087)
Purchases of property and equipment (7,187) (7,733) (7,033)
Advances from related parties 378 -- --
-------- -------- --------
Net cash provided by (used in)
investing activities (8,423) 10,497 (1,943)
-------- -------- --------
</TABLE>
See Notes to Consolidated Financial Statements
ALL STAR GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 t 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES
Increase (decrease) in working capital facility $ 4,500 $ (5,839) $ 1,331
Principal payments on purchase obligations (2,355) (1,362) (837)
Proceeds on long-term debt obligations 252
Increase (decrease) in checks in process of
collection 316 (1,428) 1,209
Purchase of treasury stock -- (99) --
-------- -------- --------
Net cash provided by (used in) financing
activities 2,713 (8,728) 1,703
-------- -------- --------
INCREASE (DECREASE) IN CASH (68) 67 77
CASH, BEGINNING OF YEAR 965 898 821
-------- -------- --------
CASH, END OF YEAR $ 897 $ 965 $ 898
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
ALL STAR GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
NATURE OF OPERATIONS
The Company's principal operation is the sale of wholesale and retail
liquified propane (LP) gas. Most of the Company's customers are owners of
residential single or multi-family dwellings who make periodic purchases on
unsecured 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.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of All
Star Gas Corporation and its wholly-owned 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:
1998 1997
---- ----
(In Thousands)
Gas and other petroleum products $ 3,495 $ 3,551
Gas distribution parts, appliances and equipment $ 3,490 $ 3,373
------- -------
$ 6,985 $ 6,924
======= =======
PROPERTY AND EQUIPMENT
Depreciation is provided on all property and equipment on the
straight-line method over estimated useful lives of 3 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
1994 senior secured note costs (originally $5,143,000) are amortized over
ten years; and the 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 majority of the excess of cost over fair value of net assets
acquired relates to a transaction originating prior to July 1, 1994 and is
being amortized on the straight-line basis over 25 years. Excess of cost
over fair value of net assets on subsequent acquisitions is amortized on
the straight-line basis over 5 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 1,564,050, 1,572,902 and 1,579,225 for each of the
periods ended June 30, 1998, 1997 and 1996, respectively.
FUTURES CONTRACTS AND PURCHASE COMMITMENTS
The Company uses commodity futures contracts to reduce the risk of
future price fluctuations for LP gas inventories and contracts. Gains and
losses on futures contracts purchased as hedges are deferred and recognized
in cost of sales as a component of the product cost for the related hedged
transaction. In the statement of cash flows, cash flows from qualifying
hedges are classified in the same category as the cash flows from the items
being hedged. The Company also routinely makes purchase commitments for the
delivery of LP gas inventories, particularly during its peak winter selling
season. At June 30, 1998, the Company had approximately $9.0 million in
outstanding commitments to purchase LP gas for inventory. As of June 30,
1998 and 1997, the Company's open positions on futures contracts are
immaterial.
RECLASSIFICATION
Certain reclassifications have been made to the 1997 and 1996
financial statements to conform to the 1998 financial statement
presentation. These reclassifications had no effect on net earnings.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) recently adopted
Statement of Financial Accounting Standards (SFAS) 130, Reporting
Comprehensive Income. This Statement establishes standards for reporting
and display of comprehensive income and its components in a full set of
financial statements. It does not address issues of recognition or
measurement. SFAS 130 is effective for fiscal years beginning after
December 15, 1997. The adoption of SFAS 130 is not expected to have a
material impact on the Company's financial statements.
The FASB recently adopted SFAS 131, Disclosures about Segments of an
Enterprise and Related Information. This Statement establishes standards
for the way that public business enterprises report information about
operating segments. The Statement also establishes standards for related
disclosures about products and services, geographic areas and major
customers. SFAS 131 is effective for years beginning after December 15,
1997. SFAS 131, which the Company will initially adopt for fiscal year
1999, is not expected to have a material impact on the Company's financial
statements.
The FASB recently adopted SFAS 133, Accounting for Derivative
Financial Instruments and Hedging Activities. This Statement establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities. SFAS 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999, may be adopted early for periods beginning
after issuance of the Statement and may not be applied retroactively. The
effects of adoption of SFAS 133 on the Company's financial statements are
not determinable currently. The Company expects to initially adopt SFAS 133
for fiscal year 2000.
NOTE 2: MANAGEMENT'S CONSIDERATION OF GOING CONCERN MATTERS
The Company has net working capital and stockholders' equity
deficiencies and its working capital borrowing facility (Note 4) is due in
full in December 1998. The financial statements have been prepared assuming
the Company will continue as a going concern, realizing assets and
liquidating liabilities in the ordinary course of business. Management is
considering several alternatives for mitigating these conditions during the
next year. These include seeking a long-term extension of the existing
credit facility and exploring other financing and recapitalization
alternatives. Management is also seeking operational improvements and
economies, such as those the Company expects to realize from reductions in
general and administrative expenses undertaken in the latter part of fiscal
1998. While management believes the Company will be able to obtain the
necessary financing and/or capital, no commitments have been obtained.
Although not currently planned, realization of assets in other than the
ordinary course of business to meet liquidity needs could incur losses not
reflected in these financial statements.
NOTE 3: RELATED-PARTY TRANSACTIONS
During 1998, 1997 and 1996, the Company has purchased $189,000,
$286,000 and $203,000, respectively, of paint from a corporation owned by
the spouse of the principal shareholder of the Company.
Beginning July 1, 1994, the Company entered into a seven-year
services agreement with a subsidiary of a related party to provide data
processing and management information services to the Company. The services
agreement, prior to cancellation in fiscal year 1997, provided 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 Empire Energy Corporation.
For the years ended June 30, 1997 and 1996, total expenses related to this
services agreement were $500,000 and $600,000, respectively.
On August 15, 1995, the Company entered into a joint venture with
Northwestern Growth Corporation (NGC), a subsidiary of Northwestern Public
Service Corporation, to acquire the assets of Synergy Group, Incorporated
("Synergy"), the nation's fifth largest LP gas distributor at that time.
The Company acquired 30% of the common stock of SYN Inc., the acquisition
entity, and entered into a Management Agreement pursuant to which the
Company provided management services for SYN Inc.
During 1996, the Company acquired 49% of the common stock of Myers
Acquisition Company (Myers) through another joint venture with NGC. Myers
acquired the stock of a retail LP
distributor in Ohio.
In December 1996, the Company and NGC completed an agreement for the
sale of the Company's interest in SYN Inc. and Myers and the modification
and termination of certain agreements between NGC, SYN Inc. and Myers on
the one hand and the Company on the other hand. The agreement resulted in
the termination of the Management Agreement and a payment of $18 million to
the Company resulting in a gain reflected in the statement of operations of
$16.9 million, which is net of transaction and other costs and fees.
The Company received payments of $1.7 million related to management
fees and overhead reimbursement from SYN Inc. for the year ended June 30,
1997.
During the year ended June 30, 1997, the Company purchased $20.8
million of LP gas on behalf of SYN Inc. and Myers that was transferred at
cost.
In December 1996, the Company acquired a 10% ownership interest in
Propane Resources Transportation, Inc. (PRT). In December 1996, the Company
issued a long-term mortgage obligation of $1.1 million for the purchase of
certain transport equipment from SYN Inc. This equipment was then sold to
PRT for a $1.1 million long-term note receivable. The balance of this note
receivable was $676,000 and $1.0 million at June 30, 1998 and 1997,
respectively. PRT provided transport services for a portion of the
Company's propane delivery needs resulting in freight charges paid to PRT
during 1998 and 1997 of $768,000 and $1.4 million, respectively.
During the year ended June 30, 1997, the Company acquired a 39%
interest in Propane Resources Supply and Marketing, LLC (PRSM) for
$263,000. The Company's investment is stated at amortized cost plus equity
in the affiliate's undistributed net income since acquisition. The Company
sells LP gas to PRSM on a regular basis. The Company paid consulting fees
of $200,000 and $117,000 to PRSM during 1998 and 1997, respectively.
In October 1997, the Company acquired Red Top Gas, a retail LP
distributor owned by a party related to the principal shareholder, for
$6,333,000. Prior to the acquisition, the Company sold LP gas to this
party. At June 30, 1997, the amount due from this related party was
$113,000.
At June 30, 1998, the Company has invested $134,000 along with
certain key employees in real estate partnerships as special limited
partners for tax credit allocation purposes.
In 1998, the Company entered into an operating lease with the
principal shareholder for an aircraft. The lease requires $95,000 in annual
payments for a term of three years beginning in January 1998.
In 1996, the Company entered into an operating lease with the
principal shareholder for a jet aircraft. The lease required
$283,000 in annual payments for a term of three years beginning in June
1996. The lease also required a $200,000 deposit which was paid in June
1996. The Company also leased from the principal shareholder certain real
estate property at an annual cost of $18,000. Both of these leases were
cancelled during 1998 at no further obligation to the Company.
In 1998, the principal shareholder loaned the Company amounts
totalling $1.8 million with terms ranging from 7 days to 6 months. At June
30, 1998, the balances of these obligations were $280,000.
NOTE 4: LONG-TERM DEBT
Long-term debt at June 30 consisted of (In Thousands):
1998 1997
---- ----
Working capital facility (A) $ 5,050 $ 550
127/8% Senior Secured Notes, due 2004 (B) 127,200 127,200
9% Subordinated Debentures, due 2007 (C) 9,746 9,746
Purchase contract obligations and capital
leases (D) 12,552 7,609
--------- ---------
154,548 145,105
Less unamortized discounts 12,198 18,473
--------- ---------
142,350 126,632
Less current maturities 7,824 2,385
--------- ---------
$ 134,526 $ 124,247
========= =========
(A) The working capital facility was provided to the Company in June 1994
in conjunction with the offering of the 127/8% 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, 1998, the Company was
not in compliance with the facility's acquisition availability
covenant. The Company has received a waiver of this covenant.
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
52% of eligible inventory. The facility bears interest at either 1.5%
over prime or 3.0% 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
$771,000 at June 30, 1998, after considering $981,000 of outstanding
letters of credit. The letters of credit are principally related to
the Company's self-insurance program (Note 6). The working capital
facility was due on September 29, 1998, and has been extended to
December 29, 1998, bearing interest at 1.5% over prime with the
previous LIBOR rate option eliminated. The extension provides for a
commitment fee of .50% per annum of the unadvanced portion of the
commitment.
(B) The notes were issued June 1994 at a discount and require interest
payments at 7% through July 15, 1999, and at 127/8% 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 restricted 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.
Separate financial statements of the guarantor subsidiaries are not
included because such subsidiaries have jointly and severally
guaranteed the notes on a full and unconditional basis; the aggregate
assets and liabilities of the guarantor subsidiaries are
substantially equivalent to the assets and liabilities of the parent
on a consolidated basis; and the separate financial statements and
other disclosures concerning the subsidiary guarantors are not deemed
to be material.
The guarantor subsidiaries are restricted from paying dividends to
the Company during any periods of default under the respective debt
agreements.
(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 127/8% Senior Secured Notes, due 2004, to repurchase
$16,201,000 face value of these debentures at a discount which
resulted in an extraordinary charge.
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, 1998, is $20,483,000 of which $10,737,000 are registered in
the name of the Company.
(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. Capital leases include
leases covering data processing equipment expiring in 1998. At June
30, 1998 and 1997, these obligations carried interest rates from 7%
to 11% and are due periodically through 2006.
Aggregate annual debt service requirements (in thousands) of the
long-term debt outstanding at June 30, 1998, are:
Total
Principal Interest Debt Service
1999 $ 7,824 $ 10,684 $ 18,508
2000 2,381 17,954 20,335
2001 2,312 17,764 20,076
2002 1,434 17,625 19,059
2003 1,232 17,519 18,751
Thereafter 139,365 20,079 159,444
--------- ---------- ---------
$ 154,548 $ 101,625 $ 256,173
========= ========== =========
NOTE 5: INCOME TAXES
The provision for income taxes includes these components.
1998 1997 1996
---- ---- ----
(In Thousands)
Taxes currently payable (refundable) $ (1,533) $ 2,550 $ 100
Deferred income taxes (2,597) (750) (3,850)
-------- ------- --------
$ (4,130) $ 1,800 $ (3,750)
======== ======= ========
The tax effects of temporary differences at June 30, 1998 and 1997,
related to deferred taxes were:
1998 1997
---- ----
(In Thousands)
Deferred Tax Assets
Allowance for doubtful accounts $ 274 $ 330
Accounts receivable advance collections 11 29
Self-insurance liabilities and contingencies 930 601
Original issue discount 7,497 5,252
Net operating loss carryforwards 381 --
Alternative minimum tax credit carryforwards 3,000 1,803
-------- --------
12,093 8,015
Deferred Tax Liability
Accumulated depreciation and tax cost
differences (16,686) (15,205)
-------- --------
Net deferred tax liability $ (4,593) $ (7,190)
======== ========
The above net deferred tax liability is presented on the June 30
balance sheets as follows:
1998 1997
---- ----
(In Thousands)
Deferred Tax Assets (Liabilities)
Deferred tax asset - current $ 312 $ --
Deferred tax liability - long-term (4,905) (7,190)
--------- --------
Net deferred tax liability $ (4,593) $ (7,190)
======== ========
A reconciliation of income tax expense at the statutory rate to the
Company's actual income tax expense is shown below:
<TABLE>
<CAPTION>
1998 1997 1996
(In Thousands)
<S> <C> <C> <C>
Computed at the statutory rate (34%) $ (4,789) $ 1,367 $ (3,960)
Increase (decrease) resulting from:
Amortization of excess of cost over
fair value of net assets acquired 386 268 279
State income taxes - net of federal
tax benefit (96) 90 (347)
Nondeductible travel costs and other
expenses 28 87 112
Other 31 (12) (84)
Additional accruals 310 -- 250
-------- ---------- --------
Actual tax provision $ (4,130) $ 1,800.00 $ (3,750)
======== ========== ========
</TABLE>
At June 30, 1998, the Company had approximately $3.0 million of
alternative minimum tax credits available to offset future federal income
taxes. The credits have no expiration date. The Company also has unused
operating loss carryforwards of $1.1 million, which expire in the year
2018.
NOTE 6: SELF-INSURANCE AND RELATED CONTINGENCIES
Under the Company's current insurance program, coverage for
comprehensive general liability, workers' compensation and vehicle
liability is obtained for catastrophic exposures as well as those risks
required to be insured by law or contract. The Company retains a portion of
certain expected losses related primarily to comprehensive general and
vehicle liability. The Company self insures the first $200,000 for each and
every general liability incident, which is reduced from $250,000 per
incident in the prior year. Above this retention is a corridor deductible
of $750,000 per occurrence, $1.25 million in aggregate compared to $1
million for the Company in the prior year. For the vehicle and workers'
compensation programs, the Company has a $250,000 deductible per occurrence
with a $1 million aggregate stop loss. The Company obtains excess coverage
on occurrence basis policies. Provisions for self-insured losses are
recorded based upon the Company's estimates of the aggregate self-insured
liability for claims incurred, resulting in a retention for a portion of
these expected losses.
The ending accrued liability includes $150,000 for incurred but not
reported claims at June 30, 1998 and 1997. The current portion of the
ending liability of $500,000 at June 30, 1998 and 1997, 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 and other business related
lawsuits which are not expected to have a material adverse effect on the
Company's financial position or results of operations.
The Company currently self-insures health benefits provided to the
employees of the Company and its subsidiaries subject to a $75,000 cap per
claim. 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 $700,000, $492,000
and $547,000 for the years ended June 30, 1998, 1997 and 1996,
respectively.
In conjunction with a restructuring transaction involving the Company
and Empire Energy Corporation, the parties agreed to share on a percentage
basis the self-insured liabilities and other business related lawsuits
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 Empire
Energy Corporation assuming the remaining 47.7%.
NOTE 7: CONTINGENCIES
The state of Missouri has assessed the Company approximately
$1,400,000 for additional state income tax for the years ended June 30,
1992 and 1993. An amount approximating one-half of the above assessment
could be at issue for the year ended June 30, 1994. The Company has
protested these assessments and is currently waiting for a response from
the Missouri Department of Revenue. It is likely that this matter will have
to be settled in litigation. The Company believes that it has a strong
position on this matter and intends to vigorously contest the assessment.
In conjunction with the restructuring transaction, the Company and
Energy agreed to share on a percentage basis amounts incurred related to
federal and state tax audits for fiscal years June 30, 1994, and prior.
The Company and its subsidiaries are presently involved in other
various state tax audits which are not expected to have a material adverse
effect on the Company's financial position or results of operations.
NOTE 8: STOCK OPTIONS AND WARRANTS
STOCK OPTIONS
The Company has established a Stock Option Plan for the benefit of
its employees, consultants and directors. Stock options may be either
incentive stock options or nonqualified stock options, with an option price
no less than the fair value of the Company's common stock on the date of
the grant. Options are granted for no more than a ten-year term and are
exercisable based on a written agreement between the administrator and
optionee.
The table below summarizes transactions under the Company's stock
option plan:
Number of Shares
----------------
Balance, June 30, 1995 and 1996 416,926
Granted ($7.00 per share) 276,200
Forfeited (21,000)
----------
Balance, June 30, 1997 672,126
Granted ($7.00 per share) 104,000
Forfeited (192,100)
----------
Balance, June 30, 1998 584,026
==========
Options outstanding at June 30, 1998, have a weighted-average
remaining contractual life of approximately 7 years with 212,336 options
currently exercisable at a price of $7.00 per share.
In 1996, the FASB adopted SFAS 123, Accounting for Stock-Based
Compensation. This Statement establishes an alternative fair value-based
method of accounting for stock-based compensation plans. The Company
applies Accounting Principles Board Opinion 25 and related Interpretations
in accounting for the plan, and no compensation cost has been recognized.
No fair value disclosures with respect to stock options are presented
because, in the opinion of management, such values do not have a material
effect.
COMMON STOCK PURCHASE WARRANTS
In connection with the Company's restructuring, the Company attached
warrants to purchase common stock to the new issuance of 127/8% 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 currently and will expire on July 15, 2004.
The table below summarizes warrant activity of the Company:
Number Exercise
of Shares Price
--------- --------
Issued 175,536 $.01
---------
Balance at June 30, 1998 and 1997 175,536 $.01
=========
NOTE 9: ADDITIONAL CASH FLOW INFORMATION (IN THOUSANDS)
1998 1997 1996
NONCASH INVESTING AND FINANCING
ACTIVITIES
Related party receivable from sale
of retail service center -- -- $ 662
Note receivable from sale of retail
service center -- -- $148
Receivable from sale of retail
service centers -- -- 2,390
Purchase contract obligations
incurred for business acquisitions $(7,115) $(5,463) $(1,111)
Capital lease obligations incurred
for property and equipment $ (328) -- $ (757)
ADDITIONAL CASH PAYMENT INFORMATION
Interest paid $11,406 $11,156 $10,216
Income taxes paid (refunded), net $ (842) $ 3,361 $(1,647)
NOTE 10: EMPLOYEE BENEFIT PLAN
The Company has a defined contribution retirement plan covering
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 years ended
June 30, 1998, 1997 or 1996.
NOTE 11: OPERATING LEASES
Noncancellable operating leases, which cover office space and various
equipment, expire in various years through 2004. These leases generally
contain renewal options for periods ranging from 1 to 5 years and require
the Company to pay all executory costs (property taxes, maintenance and
insurance).
Future minimum lease payments (in thousands) at June 30, 1998, were:
1999 $ 721
2000 428
2001 307
2002 152
2003 106
Thereafter 62
--------
Future minimum lease payments $ 1,776
========
NOTE 12: RESTRUCTURING PROPOSAL COSTS
During the year ended June 30, 1997, the Company was considering a
proposal to restructure its debt and equity. The Company abandoned the
proposal and has expensed the related costs of $910,000 and $1.9 million
during the years ended June 30, 1998 and 1997, respectively.
NOTE 13: SIGNIFICANT ESTIMATES AND CONCENTRATIONS
Generally accepted accounting principles require disclosure of
certain significant estimates and current vulnerabilities due to certain
concentrations. Those matters include the following:
ESTIMATES
Significant estimates related to self-insurance, goodwill
amortization, litigation, collectibility of receivables and income tax
assessments are discussed in Notes 1, 6 and 7. Actual losses related to
these items could vary materially in the near-term from amounts reflected
in the financial statements.
NOTE 14: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
At June 30, 1998 and 1997, the Company's financial instruments
consist of cash, trade receivables and payables, receivables from related
parties and long-term debt. The following methods were used to estimate the
fair value of financial instruments:
RECEIVABLES FROM RELATED PARTIES
It was not practicable to estimate the fair value of receivables from
related parties. The amounts reflected in the balance sheet at June 30,
1998 and 1997, are short-term receivables generated from transactions
between the Company and various related parties.
LONG-TERM DEBT
Fair value of long-term debt is estimated based on the trading prices
of the Company's primary debt issuance. The fair value of the other debt
approximates carrying value as other debt consists of multiple mortgage
obligations and debentures with interest rates approximating rates
currently available to the Company.
LONG-TERM DEBT (CONTINUED)
The carrying amounts and fair values of these financial instruments
at June 30 are as follows (in thousands):
1998 1997
------------------- -------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- -------- -----
Financial Assets:
Cash $ 897 $ 897 $ 965 $ 965
Financial Liabilities:
Senior Secured
Notes due 2004 $119,248 $109,392 $113,139 $121,476
Other long-term debt $ 22,573 $ 22,573 $ 12,835 $ 12,835
NOTE 15: BUSINESS ACQUISITIONS
During the year ended June 30, 1998, the Company acquired four LP gas
operations through two asset purchase and two stock purchase transactions
for a total of $12.1 million, of which $5.1 million was paid in cash with
the remainder in mortgage obligations and the assumption of certain
liabilities. During the year ended June 30, 1997, the Company acquired six
LP gas operations through five asset purchase transactions and one stock
purchase transaction for a total of $9.5 million, of which $5.1 million was
paid in cash with the remainder in mortgage obligations and the assumption
of certain liabilities. Each of these acquisitions has been accounted for
as a purchase by recording the assets acquired and the liabilities assumed
at their estimated fair values at the acquisition date. Amounts paid above
these fair values are recorded as excess of cost over fair value of net
assets acquired. The consolidated operations of the Company include the
operations of the acquirees from the acquisition dates. Unaudited pro forma
consolidated operations assuming the purchases were made at the beginning
of the previous and current years are shown below:
1998 1997
(In Millions)
Net sales $ 87.2 $ 108.7
Net income (loss) $ (9.9) $ 2.7
The pro forma results are not necessarily indicative of what would
have occurred had the acquisitions been on those dates, nor are they
necessarily indicative of future operations.
Independent Accountants' Report on Financial Statement Schedules
Board of Directors and Stockholders
All Star Gas Corporation
Lebanon, Missouri
In connection with our audit of the consolidated financial statements of
ALL STAR GAS CORPORATION for each of the three years in the period ended
June 30, 1998, 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 consolidated financial statements taken
as a whole, present fairly, in all material respects, the information
required to be included therein.
/s/ BAIRD, KURTZ & DOBSON
Springfield, Missouri
August 28, 1998
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JUNE 30, 1998, 1997 AND 1996
(IN THOUSANDS)
Balance at Charges to Amount Balance
Beginning Costs and Written at End
Description of Year Expenses Off Other of Year
- ----------- ---------- ---------- ------- ----- -------
Valuation accounts
deducted from
assets to which
they apply - for
doubtful accounts
receivable:
June 30, 1998 $899 $342 $475 $96(A) $844
$(18)(B)
June 30, 1997 $722 $483 $369 $83(A) $899
$(20)(B)
June 30, 1996 $800 $889 $820 $(147)(B) $722
(A) Allowance for doubtful accounts receivable established with respect
to the acquisition of retail service centers.
(B) Related to accounts receivable which were sold in conjunction with
the disposition of retail service centers.
Exhibit 10.40
AMENDMENT NO. 5 TO
LOAN AND SECURITY AGREEMENT
AND AMENDMENT NO. 7 TO SUPPLEMENT A
TO LOAN AND SECURITY AGREEMENT
February 20, 1997
All Star Gas Corporation, f/k/a
Empire Gas Corporation
1700 South Jefferson Street
Lebanon, Missouri 65536
Attention: Ms. Valeria Schall
Ladies and Gentlemen:
Reference is made to the Loan and Security Agreement dated as
of June 29, 1994 among All Star Gas Corporation, f/k/a Empire Gas
Corporation ("Borrower"), the Lenders party thereto ("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"), as amended through the date
hereof (the "Loan Agreement"). Unless otherwise defined herein, capitalized
terms used herein shall have the meanings ascribed to such terms in the
Loan Agreement.
Borrower has requested that Requisite Lenders agree to amend
the Loan Agreement in order (i) to increase the maximum amount of aggregate
cash consideration that may be paid in any twelve month period in
connection with Permitted Acquisitions, (ii) permit certain stock
repurchase transactions, (iii) lower the applicable interest rates and
Letter of Credit fees and (iv) delete the capital expenditure limitation.
Requisite Lenders have agreed to do so, on the terms and conditions
contained herein.
Therefore, the parties hereto agree as follows:
1. Amendments to Loan Agreement. The Loan Agreement is hereby
amended as follows:
(a) Section 1.1
(i) The formula contained in the term "LIBOR Rate"
contained in Section 1.1 of the Loan Agreement is hereby
amended and restated in its entirety, as follows:
LIBOR Base Rate
"LIBOR Rate=2.50% plus ---------------------------
1-Eurocurrency Requirement"
(ii) The definitions of the terms "Applicable LIBOR
Margin" and "Applicable Reference Margin" are hereby deleted in
their entirety.
(iii) Clause (b) of the definition of the term "Permitted
Acquisition" contained in Section 1.1 of the Loan Agreement is
hereby amended and restated in its entirety, as follows:
"(b) total cash consideration paid for such Acquisition,
together with the cash consideration paid for all other
Permitted Acquisitions consummated in the immediately preceding
twelve month period, does not exceed $15,000,000 in the
aggregate, minus the aggregate amount of Investments made by
Borrower in its Subsidiaries during the period commencing on
the Closing Date and ending on the date of such Acquisition;"
(b) Section 2.2. The third sentence of subsection (b) of
Section 2.2 of the Loan Agreement is hereby amended by deleting
therefrom the words "one and one-half percent (1.5%)" contained
herein and inserting in their place the words "one percent (1.0%)".
(c) Section 5.13. Clause (a) of Section 5.13 of the Loan
Agreement is hereby amended and restated in its entirety, as follows:
"(a) purchase or redeem any shares of its stock or any
options or warrants therefor, other than (i) a repurchase of
the Warrants upon the occurrence of a merger constituting a
Repurchase Event to which Agent has consented and (ii)
repurchases of stock of Borrower so long as no Event of Default
or Unmatured Event of Default is then in existence or would be
caused thereby; provided, that the consideration paid by
Borrower in such stock repurchases shall not exceed $250,000
for any single transaction or $1,000,000 in the aggregate for
all such stockrepurchases during the period commencing on
February 15, 1997 and ending on the Termination Date;"
2. Amendments to Supplement A. Supplement A is hereby amended
as follows:
(a) Section 3.1.1. Subsection (a) of Section 3.1.1 of
Supplement A is hereby amended by deleting the phrase "Applicable
Reference Margin" contained therein and inserting in its place the
percentage "1.00%".
(b) Section 6.2. Section 6.2 of Supplement A is hereby deleted
in its entirety.
3. Scope. This Amendment No. 5 to Loan and Security Agreement
and Amendment No. 7 to Supplement A to Loan and Security Agreement (the
"Amendment") shall have the effect of amending the Loan Agreement,
Supplement A and the Related Agreements as appropriate to express the
agreements contained herein. In all other respects, the Loan Agreement,
Supplement A and the Restated Agreements shall remain in full force and
effect in accordance with their respective terms.
4. Conditions to Effectiveness. This Amendment shall be
effective on February 28, 1997, upon the execution of this Amendment BAI,
on behalf of the Requisite Lenders, acceptance hereby by Borrower and each
other Obligor, and delivery hereof to BAI at 231 South LaSalle Street,
Chicago, Illinois 60697, Attention: Mr. Mark Cordes, on or prior to
February 28, 1997.
Very truly yours,
BANK OF AMERICA ILLINOIS,
f/k/a CONTINENTAL BANK,
f/k/a CONTINENTAL BANK N.A., AS
AGENT ON BEHALF OF REQUISITE
LENDERS
By ___________________________________
Its Senior Vice President
Acknowledged and agreed to
24th day of February, 1997.
ALL STAR GAS CORPORATION, f/k/a
EMPIRE GAS CORPORATION
By /s/ Mark Castaneda
_____________________________
Its V.P. Finance
Acknowledgment and Acceptance of Guarantors
Each of the undersigned is a party to the Master Corporate
Guaranty dated June 29, 1994 in favor of BAI, as Agent for itself and
Lenders (the "Guaranty"), pursuant to which each of the undersigned has
guaranteed the Obligations of Borrower under the Loan Agreement. Each of
the undersigned hereby acknowledges receipt of the foregoing Amendment,
accepts and agrees to be bound by the terms thereof, ratifies and confirms
all of its obligations under the Guaranty, and agrees that the Guaranty
shall continue in full force and effect as to it, notwithstanding such
Amendment.
Acknowledged and Agreed to this 24th
day of February, 1997.
EACH OF THE SUBSIDIARIES OF ALL
STAR GAS CORPORATION, f/k/a
EMPIRE GAS CORPORATION, LISTED
ON EXHIBIT A ATTACHED HERETO
By Valeria Schall
----------------------------------
Vice President of each Subsidiary
EXHIBIT A
List of Subsidiaries
Exhibit 10.41
AMENDMENT NO. 6 TO
LOAN AND SECURITY AGREEMENT
AND AMENDMENT NO. 8 TO SUPPLEMENT A
TO LOAN AND SECURITY AGREEMENT
June 29, 1998
All Star Gas Corporation, f/k/a
Empire Gas Corporation
1700 South Jefferson Street
Lebanon, Missouri 65536
Attention: Ms. Valeria Schall
Ladies and Gentlemen:
Reference is made to the Loan and Security Agreement dated as
of June 29, 1994 among All Star Gas Corporation, f/k/a Empire Gas
Corporation ("Borrower"), the Lenders party thereto ("Lenders") and Bank of
America National Trust and Savings Bank, successor by merger to 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 ("BOA"), as amended through the date
hereof (the "Loan Agreement"). Unless otherwise defined herein, capitalized
terms used herein shall have the meanings ascribed to such terms in the
Loan Agreement.
Borrower has requested that the Requisite Lenders agree to
amend the Loan Agreement and Supplement A thereto (a) to extend the
maturity date thereof through September 29, 1998 and (b) in various other
respects. The Requisite Lenders have agreed to the foregoing, on the terms
and conditions contained herein.
Therefore, the parties hereto agree as follows:
1. Amendments to Loan Agreement. The Loan Agreement
is hereby amended as follows:
(a) Section 1.1. Section 1.1 of the Loan Agreement is
hereby amended as follows:
(i) The definition of the term "LIBOR Rate" is hereby
amended by deleting the percentage "2.50%" contained therein
and inserting in its place the percentage "3.00%".
(ii) The definition of the term "Permitted Acquisition"
is amended and restated in its entirety as follows:
"'Permitted Acquisition' means any Acquisition
that is expressly consented to in writing by Requisite
Lenders."
(iii) The definition of the term "Termination Date" is
hereby amended by deleting the date "June 29, 1998" contained
therein and inserting in its place the date "September
29, 1998."
(b) Section 2.5(c). Section 2.5(c) of the Loan Agreement is
hereby amended by deleting the phrase "first Banking Day of each
month for the preceding month" and replacing it with the phrase
"first Banking Day on or after the first and fifteenth calendar days
of each month for the preceding period".
(c) Section 5.28. A new Section 5.28 is hereby added to the
Loan Agreement as follows:
"Banking Relationships. Maintain, and cause each
of its Subsidiaries to maintain, its principal business,
cash management, operating, and administrative deposit
accounts at Bank of America National Trust and Savings
Association."
(d) Section 3.2(d) of the Loan Agreement is hereby amended by
inserting the following at the end thereof:
"On or before July 15, 1998, Borrower shall establish at
Bank of America National Trust and Savings Association a
blocked account for receipt of the proceeds of Accounts
Receivable and other Collateral of Borrower and its
Subsidiaries, on terms and pursuant to documents in form
and substance acceptable to Agent."
2. Amendments to Supplement A. Supplement A is hereby amended
as follows:
(a) Section 2.2. Section 2.2 of Supplement A is hereby amended
as follows:
(i) Subsection (ii) thereof is hereby amended and
restated in its entirety as follows:
"(ii) an amount equal to the least of (a) $8,000,000, (b)
150% of Account Receivable Availability and (c) up to 52%
(after deduction of such reserves and allowances as Agent
deems proper and necessary in its reasonable judgment) of
Eligible Inventory."
(ii) Subsection (iii) is hereby deleted in its entirety.
(b) Section 3.1.1(a). Section 3.1.1(a) of Supplement A is
hereby amended by deleting the percentage "1.00%" contained therein
and inserting in its place the percentage "1.50%".
3. Representations and Warranties. The Borrower confirms that
all of the representations and warranties set forth in the Loan Agreement
are true and correct in all material respects as of the date of execution
hereof. In particular, the list of Borrower's Subsidiaries and their
business locations attached hereto as Annex 1 is true and correct in all
respects.
4. Scope. This Amendment No. 6 to Loan and Security Agreement
and Amendment No. 8 to Supplement A to Loan and Security Agreement (the
"Amendment") shall have the effect of amending the Loan Agreement,
Supplement A and the Related Agreements as appropriate to express the
agreements contained herein. In all other respects, the Loan Agreement,
Supplement A and the Related Agreements shall remain in full force and
effect in accordance with their respective terms.
5. Conditions to Effectiveness. This Amendment shall be
effective upon:
(a) the execution of this Amendment by BOA, on behalf of the
Requisite Lenders, acceptance hereof by Borrower and each other
Obligor, and delivery hereof to BOA at 231 South LaSalle Street,
Chicago, Illinois 60697, Attention: Mr. Steven Standbridge, on or
prior to June 29, 1998; and
(b) the payment to BOA of a renewal fee of $15,000 in
consideration of this Amendment, which fee may be charged by BOA to
the Loan Account and shall be fully earned upon the execution of this
Amendment.
Very truly yours,
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION, SUCCESSOR BY
MERGER TO BANK OF AMERICA ILLINOIS,
f/k/a CONTINENTAL BANK,
f/k/a CONTINENTAL BANK N.A.,
AS AGENT ON BEHALF OF REQUISITE LENDERS
By:_____________________________
Its:_____________________________
Acknowledged and agreed to
29th day of June, 1998.
ALL STAR GAS CORPORATION, f/k/a
EMPIRE GAS CORPORATION
By: /s/ Valeria Schall
Its: Executive Vice President
Acknowledgment and Acceptance of Guarantors
Each of the undersigned is either (a) a party to the Master
Corporate Guaranty dated June 29, 1994 in favor of BOA, as Agent for itself
and Lenders (the "Guaranty"), pursuant to which each of the undersigned has
guaranteed the Obligations of Borrower under the Loan Agreement, (b) has
previously acquired to become a party to the Guaranty or (c) is agreeing by
its signature below to become a party to the Guaranty. Each of the
undersigned hereby acknowledges receipt of the foregoing Amendment, accepts
and agrees to be bound by the terms thereof, ratifies and confirms all of
its obligations under the Guaranty, and agrees that the Guaranty shall
continue in full force and effect as to it, notwithstanding such Amendment.
Acknowledged and Agreed to this
29th day of June, 1998.
EACH OF THE SUBSIDIARIES OF ALL STAR GAS
CORPORATION, f/k/a EMPIRE GAS CORPORATION,
LISTED ON EXHIBIT A ATTACHED HERETO
By: /s/ Valeria Schall
---------------------------------------
Vice President of each Subsidiary
EXHIBIT A
List of Subsidiaries
<TABLE>
<CAPTION>
CORPORATE REPORT
JUNE 18, 1998
AUTHORIZED TO
CORPORATION INCORPORATED DO BUSINESS OFFICERS DIRECTORS
<S> <C> <C> <C> <C> <C>
All Star Gas Corporation Missouri None President Paul S. Lindsey Paul S. Lindsey
Exec. VP Kristin L. Lindsey Kristin L. Lindsey
Exec. VP Valeria Schall Douglas A. Brown
COO Marty Trickett Jim Shoemake
Sr. VP Robert C. Heagerty Bruce L. Withers
Sr. VP Dan Binning
VP/MIS J. Greg House
All Star Gas Inc. of Arizona None President Dan Binning Valeria Schall
Arizona Vice President Jon Brotz Robert L. Mathews
All Star - Globe VP/Corp. Sec. Valeria Schall Robby E. Roberts
All Star - Camp Verde VP/Asst. Corp. Robert L. Mathews
All Star - Flagstaff Sec. Robby E. Roberts
VP/Treasurer
All Star Gas Inc. of Arkansas Oklahoma President Robert Heagerty Valeria Schall
Arkansas Vice President Steve Swillum Robert L. Mathews
All Star - Greenwood VP/Corp. Sec. Valeria Schall Robby E. Roberts
All Star - Lincoln VP/Asst. Corp. Robert L. Mathews
All Star - Siloam Sec. Robby E. Roberts
Springs VP/Treasurer
Summer's Butane
All Star Gas Inc. of California None President Dan Binning Valeria Schall
California Vice President Jon Brotz Robert L. Mathews
All Star - Needles Vice President Steve Mackinder Robby E. Roberts
VP/Corp. Sec. Valeria Schall
O.C. Propane VP/Asst. Corp. Robert L. Mathews
Sec. Robby E. Roberts
VP/Treasurer
All Star Gas Inc. of California None President Dan Binning Valeria Schall
Elsinore Vice President Jon Brotz Robert L. Mathews
VP/Corp. Sec. Valeria Schall Robby E. Roberts
VP/Asst. Corp. Robert L. Mathews
Sec. Robby E. Roberts
VP/Treasurer
All Star Gas Inc. of California None President Dan Binning Valeria Schall
Sacramento Vice President Steve Mackinder Robert L. Mathews
VP/Corp. Sec. Valeria Schall Robby E. Roberts
VP/Asst. Corp. Robert L. Mathews
Sec. Robby E. Roberts
VP/Treasurer
All Star Gas Inc. of California None President Dan Binning Valeria Schall
Susanville Vice President Steve Mackinder Robert L. Mathews
VP/Corp. Sec. Valeria Schall Robby E. Roberts
VP/Asst. Corp. Robert L. Mathews
Sec. Robby E. Roberts
VP/Treasurer
All Star Gas Inc. of Yucca California None President Dan Binning Valeria Schall
Valley Vice President Jon Brotz Robert L. Mathews
VP/Corp. Sec. Valeria Schall Robby E. Roberts
VP/Asst. Corp. Robert L. Mathews
Sec. Robby E. Roberts
VP/Treasurer
All Star Gas Inc. of Colorado Colorado President Dan Binning Valeria Schall
Colorado Vice President Gregg Marken Robert L. Mathews
All Star - Gunnison VP/Corp. Sec. Valeria Schall Robby E. Roberts
All Star - Boulder VP/Asst. Corp. Robert L. Mathews
All Star - Canon City Sec. Robby E. Roberts
All Star - Castle VP/Treasurer
Rock
All Star - Colorado
Springs
All Star - Denver
All Star - Evergreen
All Star - Fairplay
All Star - Fort
Collins
All Star - Delta
All Star - Grand
Junction
All Star - Loveland
All Star - Monte
Vista
All Star - Pueblo
All Star - Woodland
Park
All Star Gas Inc. of Michigan None President Marty Trickett Valeria Schall
Michigan Vice President Tim Miller Robert L. Mathews
All Star - Big Rapids VP/Corp. Sec. Valeria Schall Robby E. Roberts
All Star - Newaygo VP/Asst. Corp. Robert L. Mathews
All Star - Charlotte Sec. Robby E. Roberts
All Star - Coleman VP/Treasurer
All Star - Chassell
All Star - Jackson
All Star - Kalamazoo
All Star - Marquette
All Star - Munising
All Star - Vassar
All Star - Oakley
All Star Gas Inc. of Delaware Missouri President Robert Heagerty Valeria Schall
Missouri Vice President Jerry Mulligan Robert L. Mathews
All Star - Bolivar Steve Swillum Robby E. Roberts
All Star - Buffalo VP/Corp. Sec. Valeria Schall
All Star - Carrolton VP/Asst. Corp. Robert L. Mathews
All Star - Clinton Sec. Robby E. Roberts
All Star - Cole Camp VP/Treasurer
All Star - Humansville
All Star - Kansas City
All Star - Lebanon
All Star - Marshall
All Star - Mt. Vernon
All Star - Warsaw
All Star - Camdenton
All Star - Cuba
All Star - Elsberry
All Star - Lake Ozark
All Star - Laurie
All Star - Mid-Mo
All Star - Morgan County
All Star Gas Inc. of No. No. Carolina None President Marty Trickett Valeria Schall
Carolina Vice President J.D. Deitz Robert L. Mathews
All Star - Denver VP/Corp. Sec. Valeria Schall Robby E. Roberts
All Star - Gastonia VP/Asst. Corp. Robert L. Mathews
All Star - Sec. Robby E. Roberts
Hendersonville VP/Treasurer
All Star -
Waynesville
All Star - Wilmington
All Star - Apex
All Star - Ayden
All Star - Carthage
All Star - Creedmoor
All Star - Durham
All Star - Warrenton
All Star - Washington
All Star - Wilson
All Star - Zebulon
All Star Gas Inc. of Ohio Ohio None President Marty Trickett Valeria Schall
All Star - Columbiana Vice President Tim Miller Robert L. Mathews
All Star - Dover VP/Corp. Sec. Valeria Schall Robby E. Roberts
All Star - Mt. Vernon VP/Asst. Corp. Robert L. Mathews
All Star - Toledo Sec. Robby E. Roberts
All Star - Johnstown VP/Treasurer
All Star Gas of Oklahoma, Oklahoma None President Valeria Schall Valeria Schall
Inc. Vice President Vacant Robert L. Mathews
VP/Corp. Sec. Valeria Schall Robby E. Roberts
VP/Asst. Corp. Robert L. Mathews
Sec. Robby E. Roberts
VP/Treasurer
All Star Marketing Oklahoma Iowa President Valeria Schall Valeria Schall
Corporation Missouri Vice President Vacant Robert L. Mathews
Florida VP/Corp. Sec. Valeria Schall Robby E. Roberts
Kentucky VP/Asst. Corp. Robert L. Mathews
Sec. Robby E. Roberts
VP/Treasurer
All Star Gas Inc. of Wyoming None President Dan Binning Valeria Schall
Wyoming Vice President Gregg Marken Robert L. Mathews
Big Horn VP/Corp. Sec. Valeria Schall Robby E. Roberts
Ron's LP Gas VP/Asst. Corp. Robert L. Mathews
Sec. Robby E. Roberts
VP/Treasurer
Empire Gas Corp. formerly California None President Valeria Schall Valeria Schall
Empiregas Equip. Vice President Vacant Robert L. Mathews
Corp. VP/Corp. Sec. Valeria Schall Robby E. Roberts
VP/Asst. Corp. Robert L. Mathews
Sec. Robby E. Roberts
VP/Treasurer
All Star Gas Inc. of Indiana None President Marty Trickett Valeria Schall
Indiana Vice President Tim Miller Robert L. Mathews
Orland LP Gas VP/Corp. Sec. Valeria Schall Robby E. Roberts
VP/Asst. Corp. Robert L. Mathews
Sec. Robby E. Roberts
VP/Treasurer
All Star Gas Inc. of Nevada Nevada None President Dan Binning Valeria Schall
All Star - Sparks Vice President Steve Mackinder Robert L. Mathews
Tippin - Winnemucca VP/Corp. Sec. Valeria Schall Robby E. Roberts
Tippin - Fallon VP/Asst. Corp. Robert L. Mathews
Tippin - Hawthorne Sec. Robby E. Roberts
VP/Treasurer
</TABLE>
ANNEX I
List of Subsidiaries and Locations
Exhibit 10.42
February 12, 1998
VIA FACSIMILE AND FEDERAL EXPRESS
All Star Gas Corporation, f/k/a
Empire Gas Corporation
1700 South Jefferson Street
Lebanon, Missouri 65536
RE: LOANS BY BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, F/K/A BANK OF AMERICA ILLINOIS, TO ALL STAR
GAS CORPORATION, F/K/A EMPIRE GAS CORPORATION
Ladies and Gentlemen:
Reference is made to the Loan and Security Agreement dated as
of June 29, 1994 among All Star Gas Corporation, f/k/a Empire Gas
Corporation ("Borrower"), the Lenders party thereto ("Lenders") and Bank of
America National Trust and Savings Association, f/k/a 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 ("Agent"), as amended through the date hereof
(the "Loan Agreement"). Unless otherwise defined herein, capitalized terms
used herein shall have the meanings ascribed to such terms in the Loan
Agreement.
Borrower has informed Agent that Borrower has breached Section
6.4 of Supplement A to the Loan Agreement by permitting Acquisition
Availability on December 31, 1997 to be less than the minimum required
amount for the 12 month period ended on such date. The occurrence of such
breach and the continuance thereof for a period exceeding 10 days after the
occurrence thereof constitutes an Event of Default under Section 6.1(h) of
the Loan Agreement (the "Existing Default"). Borrower has informed Agent
that the Existing Default remains in existence as of the date hereof.
Consequently, Borrower has requested that Requisite Lenders agree to waive
the Existing Default. Requisite Lenders have agreed to do so, on the
condition set forth herein.
Subject to the last paragraph hereof, Requisite Lenders hereby
waive the Existing Default and any and all rights and remedies that Agent
and Lenders may have under the Loan Agreement, the Related Agreements and
applicable law in respect thereof. Other than as expressly set forth
herein, the foregoing waiver shall not constitute a waiver of any Events of
Default or Unmatured Events of Default that are now in existence or that
may hereafter occur or any rights or remedies that Agent or any Lender may
have under the Loan Agreement, the Related Agreements or applicable law
with respect thereto, all of which rights and remedies Agent and Lenders
hereby specifically reserve.
The effectiveness of the foregoing waiver is conditioned upon
Borrower's agreement, as evidenced by its signed acknowledgment of this
letter below, that notwithstanding anything contained in Section 5.12(d) of
the Loan Agreement to the contrary, no Permitted Acquisition may be
consummated by Borrower without the prior written consent of Requisite
Lenders in their sole discretion.
Very truly yours,
BANK OF AMERICA NATIONAL TRUST
AND
SAVINGS ASSOCIATION, f/k/a Bank of
America Illinois, as Agent for the Lenders
By____________________________________
Its__________________________________
Acknowledged and agreed to this
12th day of February, 1998.
ALL STAR GAS CORPORATION,
f/k/a Empire Gas Corporation
By /s/ Paul S. Lindsey
_________________________
Its President
_____________________
Exhibit 10.43
LEASE OF AIRCRAFT
Paul S. Lindsey Limited Liability Company, a Delaware limited
liability company (hereinafter called "Lessor") enters into the following
lease with All Star Gas Corporation, a Missouri corporation (hereinafter
called "Lessee").
6. Lease of Airplane, Term, Rental. Lessor leases to Lessee,
subject to the terms and conditions, and for the consideration herein set
out, the following described airplane, 1978 Piper Model PA31T S/N
31T-7820061 (Serial No.), complete with the manufacturer's specified
equipment and the following optional equipment: (see attached) for a term
of 120 months, commencing on the date of the delivery of the airplane to
Lessee. In consideration for the lease of said airplane, Lessee shall pay
to Lessor in 36 monthly installments of $7,900.00 per month, with a final
monthly installment of remaining principal rental balance plus interest.
The parties shall have the option to renew the lease for an additional 36
month period. All payments shall be due and payable at the office of the
Lessor on the 1st day of the month, beginning January 1, 1998, a payment
default shall occur if any monthly payment is not received by lessor on the
first day of each month.
7. Security Deposit. Lessee has this day delivered to Lessor
the sum of $20,000.00 as an initial security deposit to be held by the
Lessor as security for the faithful performance of all terms, conditions
and agreements of this lease. Lessee acknowledges that Lessor may require
an additional security deposit to Lessor upon requests. Said sum, if not
applied toward payment of back rent or toward payment of damages suffered
by Lessor by reason of any breach hereunder by Lessee, may at Lessor's
option, be applied to the final payment due under this lease, or will be
returned to Lessee upon the Lessee's full and complete compliance with all
terms, conditions and agreements of this lease. In the event of any
retaking or repossession of said airplane by Lessor due to Lessee's default
hereunder. Lessor may apply the said security upon all damages suffered as
a result of said default, and may retain said security to apply on such
damages as may be suffered or which accrue thereafter by reason of said
default and breach.
8. Location of Airplane. The Lessee and Lessor agree that the
said airplane shall be permanently based at Floyd Jones Airport, in
Lebanon, MO 65536. The Lessee shall not make any change in such permanent
base without first notifying the Lessor in writing of said change and
receiving the Lessor's approval.
9. Default. In the event that Lessee defaults in any of the
provisions or in any of the terms, conditions and covenants to be performed
hereunder upon the part of the Lessee, or in the event that Lessee should
be the subject of any bankruptcy proceeding or become insolvent, or make an
assignment for the benefit of creditors, or consent to the appointment of a
receiver or trustee, or if a trustee or receiver is appointed for the
Lessee without his consent, or if bankruptcy, reorganization, arrangement,
insolvency, or liquidation proceedings are instituted by or against the
Lessee, then in such event, Lessor, at its option, may declare this lease
as terminated and take immediate possession of the airplane or declare that
Lessee has exercised its option to purchase the airplane. Lessee hereby
waives all rights under all exemption laws.
10. Right of Repossession. In the event Lessee defaults under
this lease, Lessor may take immediate possession of the airplane without
the necessity of legal action to recover possession of same, and Lessor is
hereby authorized to enter upon the premises where said aircraft may be
found without liability for trespassing for so entering, and Lessee shall
be liable to Lessor for the payment due upon termination as herein set out
as liquidated damages and not as a penalty.
11. Condition of Airplane, Title, Control. Lessee acknowledges
receipt of the said airplane in good, safe and serviceable condition, and
that it is fit for use. It is understood and agreed between the parties
that title to the airplane remains with the Lessor, but that the Lessor
shall have no control over the operation of the airplane; however, nothing
stated herein shall authorize the Lessee or any other person to operate the
airplane or to incur any liability or obligation on behalf of the Lessor.
Lessor warrants that it is the absolute owner of the said airplane and that
it has the full right to lease the airplane to the Lessee.
12. Return of Airplane. Lessee agrees that upon the termination
of this lease, Lessee will return said airplane to Lessor in the same and
as good a condition as when received by Lessee, normal wear and tear
excepted. In the event the Lessee does not return the airplane in such
condition, the Lessor may make any repairs necessary to restore the
airplane to such condition, and the Lessee agrees to reimburse the Lessor
for any expense involved for said restoration.
13. License Fees, Taxes. Lessee agrees to pay when due, all
license fees and other fees and assessments necessary for the securing of
licenses, certificates of title and other similar permits for the operation
of said airplane, such certificates showing title in the Lessor, and
further agrees to pay when due, all taxes now or hereafter imposed by any
state, federal or local government upon said airplane, or upon the leasing,
use or operation thereof whether assessed to Lessor or Lessee. Upon the
payment of fees, assessments and taxes, Lessee will immediately deliver the
receipt for such payment to Lessor.
14. Insurance. Lessee assigns and shall secure and maintain in
effect throughout the lease term such insurance policies covering said
airplane as follows:
Full Hull Coverage, including all risk, both in flight
and not in flight in an amount not less than $1,950,000.
In the event that repairs are made for damage, Lessee
agrees to pay the deductible amount as provided in the
policy.
Liability Insurance will be obtained by the Lessee and
written in the name of the Lessee, the Lessor and the
Members of the Lessor. Copies of all insurance policies
or certificates are attached to each copy of the lease or
will be provided upon request.
15. Loss of or Damage to Airplane. In the event of any loss or
damage to the airplane, the Lessee shall immediately report said loss or
damage to the Lessor, the insurance company and to any and all applicable
governmental agencies, both federal and state, and shall furnish such
information and execute such documents as may be required and necessary to
collect the proceeds from any insurance policies. In this event, the
rights, liabilities and obligations of the parties hereto shall be as
follows:
(a) In the event that the airplane is lost or is damaged beyond
repair, the proceeds of said insurance policy or policies shall be
payable to Lessor. If the proceeds of insurance are not sufficient to
cover the loss or damage to the airplane, except by reason of the
Lessee's failure to procure the amount of insurance specified above,
any difference between the proceeds of insurance and the sum
remaining to be paid under this lease, shall be the responsibility of
the Lessee, and Lessee shall pay said difference to the Lessor. Then
and in that event this lease shall terminate.
(b) In the event that the airplane is partially damaged, then
this lease shall remain in full force and effect. The Lessee shall,
at its cost and expense, fully repair the airplane in order that the
airplane shall be placed in as good as the same condition as it was
in prior to the damage. Upon the damage being repaired and the
airplane being in the same condition as prior to the damage, the
Lessor shall reimburse Lessee out of any proceeds of insurance
covering such damage received Lessor, this payment to be contingent
upon the Lessee furnishing to Lessor the necessary information and
documents required for the recovery of said insurance proceeds. The
payment of this amount is further contingent upon the approval by the
Lessor of the repairs made by the Lessee, including the cost thereof,
and the airplane placed as nearly as possible in the same condition
as before said damage occurred. Any and all risk of loss or damage
shall be borne by the Lessee.
16. Restrictions on Use. During the term of this lease, the
Lessee shall have complete use of the airplane; however, such use shall be
restricted to the ordinary purposes of Lessee's business and pleasure.
Lessee will not use, operate, maintain or store the airplane improperly,
carelessly or in violation of this lease, or of any applicable law or
regulation, federal or state, or any instructions furnished therefor by the
Lessor. Lessee shall not operate said airplane for hire. Lessee shall not
operate said airplane beyond the geographical limits as defined in the
attached insurance policies; nor use the airplane for any purpose other
than that stipulated in the insurance policies, unless it first notifies
the Lessor in time for the Lessor to approve of said operation and obtain
proper insurance coverage for the intended trip. The cost of any additional
insurance shall be borne by Lessee.
17. Maintenance, Repairs, Inspection. Lessee agrees at all
times to keep the airplane in a fully operative condition and completely
airworthy; and further to keep said airplane in mechanical condition
adequate to comply with regulations as set forth by the Department of
Transportation and the Federal Aviation Administration and any other
regulations as set forth by any federal, state or local governing body,
domestic or foreign, having power to regulate or supervise the airplane or
the Lessee's maintenance, use or operation of said airplane. Lessee agrees
that it will make no structural modifications on said airplane without
first having been granted written permission to do so by the Lessor. The
Lessor or its agent shall have the right at any reasonable times to fully
inspect the said airplane and any parts thereof to determine their
condition and to further determine whether or not the Lessee is performing
according to the covenants and conditions herein contained relative to the
proper care and maintenance of said airplane.
18. Operation of Airplane. The Lessee agrees that the subject
airplane will at all times during the term of this lease be operated by
safe, careful and duly qualified pilots employed and paid or contracted for
by the Lessee. The Lessee further agrees that the Lessor may demand the
removal of any pilot operating the said airplane provided said demand is
based upon sufficient cause. Lessee warrants that each of the pilots who
will pilot said airplane shall be a duly qualified pilot whose license is
in good standing and who meets the requirements established and specified
by the insurance policies attached to and made a part of this lease. Lessee
further agrees that the pilots operating said airplane must meet the
minimum requirements established by the insurance carrier chosen by Lessee
and approved by Lessor.
19. Indemnity of Lessor. The Lessee agrees, as part
consideration of this lease, to forever unconditionally indemnify and save
harmless the Lessor and its members, agents, representatives, managers,
employees, successors and assigns, from and against any and all loss,
damage, injury or death claims, demands and liability of every nature at
any time and from time to time (including, without limitation, claims
involving strict or absolute liability in tort), including all costs and
reasonable attorneys' fees, arising directly or indirectly from or in
connection with the possession, maintenance, use or operation of the
subject airplane. The Lessee further unconditionally agrees to hold Lessor
and its successors and assigns harmless from any and all liability arising
at any time and from time to time from Lessee's loss of use of said
airplane.
20. Indemnity of Members of Lessor. The Lessee agrees, as part
consideration of this lease, to forever unconditionally indemnify and save
harmless the Members of Lessor and their agents, representatives,
employees, successors and assigns, from and against any and all loss,
damage, injury or death claims, demands and liability of every nature at
any time and from time to time (including, without limitation, claims
involving strict or absolute liability in tort), including all costs and
reasonable attorney's fees, arising directly or indirectly from or in
connection with the possession, maintenance, use or operation of the
subject airplane. The Lessee further unconditionally agrees to hold the
Members of Lessor and their agents, representatives, employees, successors
and assigns harmless from any liability arising from Lessee's loss of use
of said airplane.
21. Assignment of Lessee. Lessee agrees not to assign this
lease or any interest therein without the prior written consent of Lessor,
or to sublet said airplane or to part with the possession of same, either
by voluntary act, operation of law or otherwise. In the event that the
Lessee sublets or attempts to sublet same, or voluntarily or involuntarily
parts with possession of same, or attempts to move said airplane from the
airport where it is required to be kept, except while being in the ordinary
business of Lessee or for its pleasure, or in any manner violates any of
the terms hereof, then in either or any of these events this lease shall be
the option of the Lessor immediately terminate and Lessor shall be entitled
to immediate possession of said airplane. Lessee agrees to pay all
attorney's fees, collection charges or other expenses, occasioned by
Lessee's failure to abide by any of the provisions hereof.
22. Assignment of Lessor. It is understood by the parties
hereto that the Lessor may assign this lease and said airplane, and that
such assignee may also assign the same. All rights of Lessor hereunder
shall be succeeded to by the assignee under any such assignment, and said
assignee's title to this lease, to the rental herein provided for and to
the said airplane shall be free from all defenses, setoffs or counterclaims
which Lessee may be entitled to assess against Lessor; it being understood
and agreed that any such assignee does not assume any obligations of the
Lessor herein named, and that Lessee may separately claim against Lessor as
to any matters which Lessee may be entitled to assert against the Lessor.
23. Entire Agreement, Severability, Successors. Lessee and
Lessor hereby agree that no representation, statement or agreement other
than those set forth herein shall be binding upon either of the parties
hereto unless specified in writing, signed by each and purporting to be an
express modification of this lease. Should any provisions of this lease be
held invalid, such provisions shall be deemed to be eliminated insofar as
it is declared invalid and the balance of the lease shall in no wise be
affected thereby. Subject to the terms hereof, the covenants and conditions
of this lease shall inure to the benefits of and be binding upon the heirs,
executors, administrators, personal representatives, trustees, successors
or assigns of the parties hereto.
24. Controlling Law and Jurisdiction. The validity,
interpretation and performance of this lease shall be subject to and
construed under the laws of Missouri, without regard to principles of
conflicts of law.
25. Waiver of Conflict of Interest. Paul S. Lindsey, Limited
Company and All Star Gas Corporation have both been represented in the
drafting of this lease by the law firm of Watson & Marshall L.C. Paul S.
Lindsey, Limited Company and All Star Gas Corporation each hereby agree to
the dual representation of them by Watson & Marshall L.C. and each of them
waives any present or future claim of conflict of interest.
IN WITNESS WHEREOF, the parties hereto have placed their hands
and seals on this 31st day of December, 1998.
All Star Gas Corporation, a Missouri corporation
By: /s/ Paul S. Lindsey
___________________________________________
Paul S. Lindsey, President
ATTEST:
/s/ Valeria Schall
________________________
Secretary
Paul S. Lindsey, Limited Liability Company
A Delaware Limited Liability Company
/s/ Valeria Schall
_______________________________________________
Valeria Schall, Manager
- ---------------------------------------------------------------------------
YEAR MFG. MANUFACTURER OF AIRCRAFT MODEL NO. SERIAL NO.
- ---------------------------------------------------------------------------
1978 Piper PA31T 31T-7820061
- ---------------------------------------------------------------------------
MFG. OF ENGINE MODEL ENGINE SERIAL FAA NO. HOME AIRPORT
ENGINE(S) NO.(S) NO(S)
- ---------------------------------------------------------------------------
Pratt & Whitney P&W PT6A-28 N303KL Floyd W. Jones
P&W PT6A-28
- ---------------------------------------------------------------------------
DESCRIBE EXTRA EQUIPMENT: Bendix radar, 11 Morrow Fly Buddy GPS
w/datacard, King Gold Crown - standard package.
- ---------------------------------------------------------------------------
Exhibit 21.1
ALL STAR GAS CORPORATION
LISTING OF SUBSIDIARIES
September 15, 1998
All Star Gas Inc. of Arizona
All Star Gas Inc. of Arkansas
All Star Gas Inc. of California
All Star Gas Inc. of Colorado
All Star Gas Inc. of Idaho
All Star Gas Inc. of Jacksonville
All Star Gas Inc. of Arma
Empire Underground Storage, Inc.
All Star Gas Inc. of Louisiana
All Star Gas Inc. of Michigan
All Star Gas Inc. of Missouri
Utility Collection Corporation
All Star Gas Field Services Corp
All Star Airlines, Inc.
All Star Gas Inc. of North Carolina
All Star Gas Inc. of Ohio
All Star Gas Inc. of Oklahoma
All Star Gas Inc. of Oregon
All Star Gas Inc. of South Carolina
All Star Gas Inc. of Texas
All Star Gas Inc. of Washington
All Star Gas Inc. of Wyoming
Empire Gas Corporation
All Star Gas Inc. of Indiana
All Star Gas Inc. of Nevada
All Star Acquisition Co.
Red Top Gas Inc.
All Star Development Corporation
All Star Transports, Inc. - Oregon
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Jun-30-1998
<PERIOD-END> Jun-30-1998
<CASH> 897
<SECURITIES> 0
<RECEIVABLES> 5,370
<ALLOWANCES> 844
<INVENTORY> 6,985
<CURRENT-ASSETS> 14,470
<PP&E> 118,313
<DEPRECIATION> 37,323
<TOTAL-ASSETS> 113,788
<CURRENT-LIABILITIES> 26,701
<BONDS> 134,526
<COMMON> 14
0
0
<OTHER-SE> (52,688)
<TOTAL-LIABILITY-AND-EQUITY> 113,788
<SALES> 82,277
<TOTAL-REVENUES> 86,510
<CGS> 42,416
<TOTAL-COSTS> 42,416
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 342
<INTEREST-EXPENSE> 18,187
<INCOME-PRETAX> (14,084)
<INCOME-TAX> (4,130)
<INCOME-CONTINUING> (9,954)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,954)
<EPS-PRIMARY> (6.36)
<EPS-DILUTED> (6.36)
</TABLE>
