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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 27, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 16 OF THE
SECURITIES EXCHANGE ACT OF 1934
for the transition period from ______ to ______
Commission File Number: 1-14222
SUBURBAN PROPANE PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 22-3410353
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
240 ROUTE 10 WEST, WHIPPANY, NJ 07981
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(Address of principal executive office) (Zip Code)
(973)887-5300
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Units New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for each shorter period that the Registrant
was required to file such reports), and (2) had been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
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 Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K [X ].
The aggregate market value as of December 16, 1997 of the Registrant's Common
Units held by non-affiliates of the Registrant, based on the reported closing
price of such units on the New York Stock Exchange on such date, was
approximately $365,214,800. At December 16, 1997 there were outstanding
21,562,500 Common Units and 7,163,750 Subordinated Units.
Documents Incorporated by Reference: None
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
INDEX TO ANNUAL REPORT
ON FORM 10-K
PART I
Page
ITEM 1. BUSINESS ............................................... 1
ITEM 2. PROPERTIES ............................................. 6
ITEM 3. LEGAL PROCEEDINGS ...................................... 6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .... 6
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS AND
RELATED UNITHOLDER MATTERS ............................. 7
ITEM 6. SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA ....... 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS .......... 10
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ............ 14
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE .................... 14
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ..... 15
ITEM 11. EXECUTIVE COMPENSATION ................................. 17
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT ......................................... 21
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ......... 23
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K .................................... 24
Signatures ....................................................... 25
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
- -----------------------------------------------
STATEMENTS MADE IN THIS FORM 10-K WHICH RELATE TO THE PARTNERSHIP'S EXPECTATIONS
OR PREDICTIONS ARE OR MAY BE DEEMED TO BE FORWARD LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND 21E OF THE SECURITIES
EXCHANGE ACT OF 1934. THE PARTNERSHIP'S ACTUAL RESULTS MAY DIFFER MATERIALLY
FROM THOSE CONTAINED IN ANY SUCH FORWARD LOOKING STATEMENTS DEPENDING ON A
NUMBER OF FACTORS, RISKS AND UNCERTAINTIES, SOME OF WHICH ARE OUTSIDE THE
PARTNERSHIP'S CONTROL, INCLUDING THE UNIT COST OF PROPANE, WEATHER, CONTINUED
CONTROL OF EXPENSES, CUSTOMER RETENTION AND REGULATORY DEVELOPMENTS (SUCH AS THE
RSPA FINAL RULE DISCUSSED IN THE GOVERNMENT REGULATION SECTION OF "ITEM 1 -
BUSINESS").
PART I
ITEM 1. BUSINESS.
GENERAL
Suburban Propane Partners, L.P. (the "Partnership"), a publicly traded
Delaware limited partnership is engaged, through subsidiaries, in the retail and
wholesale marketing of propane and related appliances and services. The
Partnership believes it is the third largest retail marketer of propane in the
United States, serving more than 700,000 active residential, commercial,
industrial and agricultural customers from more than 350 customer service
centers in over 40 states. The Partnership's operations are concentrated in the
east and west coast regions of the United States. The retail propane sales
volume of the Partnership was approximately 541 million gallons during the
fiscal year ended September 27, 1997. Based on industry statistics, the
Partnership believes that its retail propane sales volume constitutes
approximately 6% of the domestic retail market for propane.
The Partnership conducts its business principally through its subsidiary,
Suburban Propane, L.P. (the "Operating Partnership"), a Delaware limited
partnership. The Partnership and the Operating Partnership were formed in 1995
to acquire and operate the propane business and assets of the Suburban Propane
Division of Quantum Chemical Corporation (the "Predecessor Company"), then owned
by Hanson PLC ("Hanson"). In addition, Suburban Sales and Service, Inc. (the
"Service Company"), a subsidiary of the Operating Partnership, was formed to
acquire and operate the service work and appliance and propane equipment parts
businesses of the Predecessor Company. The Partnership, the Operating
Partnership and the Service Company are collectively referred to hereinafter as
the "Partnership Entities." The Partnership Entities commenced operations on
March 5, 1996 upon consummation of an initial public offering of Common Units
representing limited partner interests in the Partnership, the private placement
of $425 million aggregate principal amount of Senior Notes and the transfer of
all the propane assets (excluding the net accounts receivable balance) of the
Predecessor Company to the Operating Partnership and Service Company.
Suburban Propane GP, Inc. (the "General Partner") is a wholly-owned
subsidiary of Millennium Petrochemicals Inc., ("Millennium Petrochemicals") and
serves as the general partner of the Partnership and the Operating Partnership.
Both the General Partner and Millennium Petrochemicals are indirect wholly-owned
subsidiaries of Millennium Chemicals Inc. ("Millennium") which was formed as a
result of Hanson's demerger in October 1996. Millennium Petrochemicals was
formerly named Quantum Chemical Corporation ("Quantum"). The General Partner
holds a 1% general partner interest in the Partnership and a 1.0101% general
partner interest in the Operating Partnership. In addition, the General Partner
owns a 24.4% limited partner interest and a special limited partner interest in
the Partnership. The limited partner interest is evidenced by 7,163,750
Subordinated Units and the special limited partner interest is evidenced by
Additional Partnership Units ("APUs"). The General Partner has delegated to the
Partnership's Board of Supervisors all management powers over the business and
affairs of the Partnership Entities that the General Partner possesses under
applicable law.
HISTORY OF THE PARTNERSHIP'S OPERATIONS
The Predecessor Company had been continuously engaged in the retail propane
business since 1928 and had been owned by Quantum since 1983. During the 1980s,
the Predecessor Company grew rapidly through acquisitions and strengthened its
position as a leader in the industry. In September 1993, Quantum was acquired by
a wholly-owned subsidiary of Hanson. On March 5, 1996, the Partnership acquired
the business and assets of the Predecessor Company and commenced operating as a
public entity.
BUSINESS STRATEGY
The Partnership's strategy is to expand its operations and increase its
retail market share in selected markets both through the acquisition of other
propane distributors and through internal growth. Although acquisitions continue
to be an important element of growth, the Partnership believes that the current
market values being paid for propane distributors are greater than the cost to
grow internally through improved customer retention and marketing. As a result,
the Partnership has focused on internal growth but will continue to pursue
selective acquisitions including non- propane related companies. Acquisitions
during fiscal 1997 totaled 5 propane distributors for total consideration of
$1.7 million compared to 17 propane distributors acquired during fiscal 1996 for
total consideration of $31.7 million.
In order to facilitate the Partnership's acquisition strategy, the
Operating Partnership's Bank Credit Facilities include a $25 million Acquisition
Facility. (See Item 7.)
The Partnership plans to pursue internal growth by acquiring new customers,
retaining existing customers and by selling additional products and services to
its customers. The Partnership employs a nationwide sales organization and has a
comprehensive customer retention program. By retaining more of its existing
customers and continuing to seek new customers, the Partnership believes it can
increase its customer base and improve its profitability.
INDUSTRY BACKGROUND AND COMPETITION
Propane, a by-product of natural gas processing and petroleum refining, is
a clean-burning energy source recognized for its transportability and ease of
use relative to alternative forms of stand-alone energy sources. Retail propane
use falls into three broad categories: (i) residential and commercial
applications, (ii) industrial applications and (iii) agricultural uses. In the
residential and commercial markets, propane is used primarily for space heating,
water heating, clothes drying and cooking. Industrial customers primarily use
propane as a motor fuel burned in internal combustion engines that power
over-the-road vehicles, forklifts and stationary engines, to fire furnaces, as a
cutting gas and in other process applications. In the agricultural market,
propane is primarily used for tobacco curing, crop drying, poultry brooding and
weed control. In its wholesale operations, the Partnership sells propane
principally to large industrial end-users and other propane distributors.
Propane is extracted from natural gas or oil wellhead gas at processing
plants or separated from crude oil during the refining process. Propane is
normally transported and stored in a liquid state under moderate pressure or
refrigeration for ease of handling in shipping and distribution. When the
pressure is released or the temperature is increased, it is usable as a
flammable gas. Propane is colorless and odorless; an odorant is added to allow
its detection. Propane is clean burning, producing negligible amounts of
pollutants when consumed.
Based upon information provided by the Energy Information Agency, propane
accounts for approximately three to four percent of household energy consumption
in the United States. Propane competes primarily with electricity and fuel oil
as an energy source, principally on the basis of price, availability and
portability. In addition to competing with alternative energy sources, the
Partnership competes with other companies engaged in the retail propane
distribution business. Competition in the propane industry is highly fragmented
and generally occurs on a local basis with other large full-service multi-state
propane marketers, thousands of smaller local independent marketers and farm
cooperatives. Based on industry publications, the Partnership believes that the
10 largest retailers, including the Partnership, account for approximately 33%
of the total retail sales of propane in the United States, and that no single
marketer has a greater than 10% share of the total retail market in the United
States. Based on industry statistics, the Partnership believes that its retail
sales volume constitutes approximately 6% of the domestic retail market for
propane. Most of the Partnership's retail distribution branches compete with
five or more marketers or distributors. Each retail distribution outlet operates
in its own competitive environment because retail marketers tend to locate in
close proximity to customers in order to lower the cost of providing service.
The typical retail distribution outlet generally has an effective marketing
radius of approximately 50 miles although in certain rural areas the marketing
radius may be extended by a satellite office.
PRODUCTS, SERVICES AND MARKETING
The Partnership distributes propane through a nationwide retail
distribution network consisting of more than 350 customer service centers in
over 40 states. The Partnership's operations are concentrated in the east and
west coast regions of the United States. In fiscal 1997, the Partnership served
more than 700,000 active customers. Approximately two-thirds of the
Partnership's retail propane volume is sold during the six-month peak heating
season from October through March, as many customers use propane for heating
purposes. Typically, customer service centers are found in suburban and rural
areas where natural gas is not readily available. Generally, such locations
consist of an office, appliance showroom, warehouse and service facilities, with
one or more 18,000 to 30,000 gallon storage tanks on the premises. Most of the
Partnership's residential customers receive their propane supply pursuant to an
automatic delivery system which eliminates the customer's need to make an
affirmative purchase decision. From its customer service centers, the
Partnership also sells, installs and services equipment related to its propane
distribution business, including heating and cooking appliances and, at some
locations, propane fuel systems for motor vehicles.
The Partnership sells propane primarily to six markets: residential,
commercial, industrial (including engine fuel), agricultural, other retail users
and wholesale. Approximately 75.0% of the gallons sold by the Partnership in
fiscal 1997 were to retail customers (27.9% to residential customers, 25.6% to
commercial customers, 11.0% to industrial customers (including 8.5% to engine
fuel customers), 4.8% to agricultural customers and 5.2% to other retail users)
and approximately 25.0% were to wholesale customers. Sales to residential
customers in fiscal 1997 accounted for approximately 55% of the Partnership's
gross profit on propane sales, reflecting the higher-margin nature of this
segment of the market. No single customer accounted for 10% or more of the
Partnership's revenues during fiscal year 1997.
Retail deliveries of propane are usually made to customers by means of
bobtail and rack trucks. Propane is pumped from the bobtail truck, which
generally holds 2,200 gallons of propane, into a stationary storage tank on the
customer's premises. The capacity of these tanks ranges from approximately 100
gallons to approximately 1,200 gallons, with a typical tank having a capacity of
300 to 400 gallons. The Partnership also delivers propane to retail customers in
portable cylinders, which typically have a capacity of 5 to 35 gallons. When
these cylinders are delivered to customers, empty cylinders are picked up for
replenishment at the Partnership's distribution locations or are refilled in
place. The Partnership also delivers propane to certain other bulk end users of
propane in larger trucks known as transports (which have an average capacity of
approximately 9,000 gallons). End users receiving transport deliveries include
industrial customers, large-scale heating accounts, such as local gas utilities
which use propane as a supplemental fuel to meet peak load deliverability
requirements, and large agricultural accounts which use propane for crop drying.
Propane is generally transported from refineries, pipeline terminals, storage
facilities (including the Partnership's storage facilities in Hattiesburg,
Mississippi and Elk Grove, California), and coastal terminals to the
Partnership's customer service centers by a combination of common carriers,
owner-operators, the Partnership's own highway transport fleet, and railroad
tank cars. (See Item 2.)
In its wholesale operations, the Partnership principally sells propane to
large industrial end-users and other propane distributors. This market segment
includes customers who use propane to fire furnaces, as a cutting gas and in
other process applications. Other wholesale customers may include local gas
utility customers who use propane as a supplemental fuel to meet peak load
deliverability requirements.
PROPANE SUPPLY
The Partnership's propane supply is purchased from over 90 oil companies
and natural gas processors at more than 190 supply points located in the United
States and Canada. The Partnership also makes purchases on the spot market. The
Partnership purchased over 94% of its propane supplies from domestic suppliers
during fiscal 1997. Most of the propane purchased by the Partnership in fiscal
1997 was purchased pursuant to one year agreements subject to annual renewal,
but the percentage of contract purchases may vary from year to year as
determined by the Partnership. Supply contracts generally provide for pricing in
accordance with posted prices at the time of delivery or the current prices
established at major storage points, and some contracts include a pricing
formula that typically is based on such market prices. Some of these agreements
provide maximum and minimum seasonal purchase guidelines. The Partnership uses a
number of interstate pipelines, as well as railroad tank cars and delivery
trucks to transport propane from suppliers to storage and distribution
facilities.
Supplies of propane from the Partnership's sources historically have been
readily available. In the fiscal year ended September 27, 1997, Shell Oil
Company ("Shell") and Exxon Corporation ("Exxon") provided approximately 16% and
14%, respectively, of the Partnership's total domestic propane supply. The
Partnership believes that, if supplies from either Shell or Exxon were
interrupted, it would be able to secure adequate propane supplies from other
sources without a material disruption of its operations. Aside from Shell or
Exxon, no single supplier provided more than 10% of the Partnership's total
domestic propane supply in the fiscal year ended September 27, 1997.
The Partnership has expanded its product procurement and price risk
management activities to reduce the effect of price volatility on its product
costs and to help insure the availability of propane during periods of short
supply. The Partnership is currently a party to propane futures transactions on
the New York Mercantile Exchange and to a limited extent has entered into
contracts to purchase and sell product at fixed prices in the future.
The Partnership operates large storage facilities in Mississippi and
California and smaller storage facilities in other locations and has rights to
use storage facilities in additional locations. The Partnership's storage
facilities allow the Partnership to buy and store large quantities of propane
during periods of low demand, which generally occur during the summer months.
The Partnership believes its storage facilities help ensure a more secure supply
of propane during periods of intense demand or price instability.
TRADEMARKS AND TRADENAMES
The Partnership utilizes a variety of trademarks and tradenames which it
owns, including "Suburban Propane(R)". The Partnership regards its trademarks,
tradenames and other proprietary rights as valuable assets and believes that
they have significant value in the marketing of its products.
GOVERNMENT REGULATION
The Partnership is subject to various federal, state and local
environmental, health and safety laws and regulations. Generally, these laws
impose limitations on the discharge of pollutants and establish standards for
the handling of solid and hazardous wastes. These laws include the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), the Clean Air Act, the Occupational
Safety and Health Act, the Emergency Planning and Community Right to Know Act,
the Clean Water Act and comparable state statutes. CERCLA, also known as the
"Superfund" law, imposes joint and several liability without regard to fault or
the legality of the original conduct on certain classes of persons that are
considered to have contributed to the release or threatened release of a
"hazardous substance" into the environment. Propane is not a hazardous substance
within the meaning of CERCLA, however, the Partnership owns real property where
such hazardous substances may exist.
The Partnership has been named as a de minimis potentially responsible
party in connection with a predecessor's arranging for the shipment of waste oil
to the Purity Oil Superfund Site in Malaga, California. The Partnership, as part
of the de minimis group, entered into a negotiated Administrative Consent Order
in January 1994 regarding soil remediation at the site pursuant to which the
Partnership paid approximately $192,000. Negotiations are continuing with
respect to groundwater contamination at the site, although the Partnership
believes it has adequately reserved for the likely settlement amount of such
negotiation and that such amount will not be material. The Partnership believes
it has adequately reserved for other environmental remediation projects and,
based on information currently available to the Partnership, such projects are
not expected to have a material adverse effect on the Partnership's financial
condition or results of operation.
National Fire Protection Association Pamphlets No. 54 and No. 58, which
establish rules and procedures governing the safe handling of propane, or
comparable regulations, have been adopted as the industry standard in all of the
states in which the Partnership operates. In some states these laws are
administered by state agencies, and in others they are administered on a
municipal level. With respect to the transportation of propane by truck, the
Partnership is subject to regulations promulgated under the Federal Motor
Carrier Safety Act. These regulations cover the transportation of hazardous
materials and are administered by the United States Department of
Transportation. The Partnership conducts ongoing training programs to help
ensure that its operations are in compliance with applicable safety regulations.
The Partnership maintains various permits that are necessary to operate some of
its facilities, some of which may be material to its operations. The Partnership
believes that the procedures currently in effect at all of its facilities for
the handling, storage and distribution of propane are consistent with industry
standards and are in compliance in all material respects with applicable laws
and regulations.
The Research and Special Programs Administration (RSPA) of the U.S.
Department of Transportation has recently promulgated Final Rule HM-225 (49 CFR
171.5) which adopts temporary operating requirements for cargo tank motor
vehicles used to transport propane. The Final Rule, which became effective on
August 16, 1997 but is currently not being generally enforced, effectively
requires that such vehicles be equipped with remote control equipment capable of
shutting off the flow of propane in the event of a break in the vehicle's
delivery hose or piping. The Final Rule also contains a statement that a
pre-existing RSPA regulation (Hazardous Materials Regulation 177.834(i))
requires operators of cargo tank vehicles to maintain an "unobstructed view" of
the vehicle itself when making deliveries to customer tanks. This new
interpretation espoused by RSPA regarding the unobstructed view requirement
would require either two operators being in attendance during most customer
deliveries, which would significantly increase operating costs, or one attendant
remaining at a mid-point between bobtails and the customer tanks, a practice
that the Partnership and the propane industry consider to be unsafe. The
Partnership and four other major propane marketers have filed suit in the
U.S. District Court for the Western District of Missouri challenging the RSPA
Final Rule on the basis that it was promulgated in an arbitrary and capricious
manner and in violation of the Administrative Procedure Act. The plaintiffs seek
a preliminary injunction and other relief in this suit. The National Propane Gas
Association, the industry's trade association, has also filed a suit challenging
the Final Rule in the U.S. District Court for the Northern District of Texas.
Since these pending suits are in their early stages, the Partnership cannot yet
predict the outcome thereof or what modifications may be made to RSPA Final Rule
HM-225.
Future developments, such as stricter environmental, health or safety laws
and regulations thereunder, could affect Partnership operations. It is not
anticipated that the Partnership's compliance with or liabilities under
environmental, health and safety laws and regulations, including CERCLA, will
have a material adverse effect on the Partnership. To the extent that there are
any environmental liabilities unknown to the Partnership or environmental,
health or safety laws or regulations are made more stringent, there can be no
assurance that the Partnership's results of operations will not be materially
and adversely affected.
EMPLOYEES
As of September 27, 1997 the Partnership had 3,376 full time employees, of
whom 369 were general and administrative (including fleet maintenance
personnel), 127 were sales, 120 were transportation and product supply and 2,760
were customer service center employees. Approximately 297 of such employees are
represented by 12 different local chapters of labor unions. The Partnership
believes that its relations with both its union and non-union employees are
satisfactory. From time to time, the Partnership hires temporary workers to meet
peak seasonal demands.
ITEM 2. PROPERTIES.
The Partnership currently owns approximately 70% of the 352 customer
service centers that it operates and leases the balance of its retail locations
from third parties. In addition, the Partnership owns and operates a 187 million
gallon underground storage facility in Hattiesburg, Mississippi, and a 22
million gallon refrigerated, above-ground storage facility in Elk Grove,
California.
As of September 27, 1997 the Partnership also owned 3,610 shares or
approximately 8.6% of the common stock of the Dixie Pipeline Company ("Dixie
Pipeline"), which owns and operates a propane gas pipeline that runs from Mont
Belvieu, Texas, to Apex, North Carolina. On December 22, 1997, the Partnership
sold its ownership interest in the Dixie Pipeline to Shell Western E&P, Inc.
and Conoco Pipe Line Company for net cash proceeds approximately $13 million and
realized a gain of approximately $5 million.
The transportation of propane requires specialized equipment. The trucks
and railroad tank cars utilized for this purpose carry specialized steel tanks
that maintain the propane in a liquefied state. As of September 27, 1997, the
Partnership had a fleet of approximately 76 transport truck tractors, of which
approximately 22% are owned by the Partnership, and 638 railroad tank cars, of
which approximately 2% are owned by the Partnership. In addition, the
Partnership utilizes approximately 1,700 bobtail and rack trucks, of which
approximately 85% are owned by the Partnership and approximately 1,800 other
delivery and service vehicles, of which approximately 69% are owned by the
Partnership. The balance of such vehicles that are not owned by the Partnership
are leased. As of September 27, 1997, the Partnership owned approximately
981,000 customer storage tanks with typical capacities of 300 to 400 gallons and
approximately 86,000 portable cylinders with typical capacities of 5 to 10
gallons.
The Partnership believes that it has satisfactory title to or valid rights
to use all of its material properties and, although some of such properties are
subject to liabilities and leases and, in certain cases, liens for taxes not yet
due and payable and immaterial encumbrances, easements and restrictions, the
Partnership does not believe that any such burdens will materially interfere
with the continued use of such properties by the Partnership in its business,
taken as a whole.
ITEM 3. LEGAL PROCEEDINGS.
LITIGATION
A number of personal injury, property damage and product liability suits
are pending or threatened against the Partnership. In general, these lawsuits
have arisen in the ordinary course of the Partnership's business and involve
claims for actual damages, and in some cases, punitive damages. The Partnership
is self-insured for general and product, workers' compensation and automobile
liabilities up to predetermined amounts above which third party insurance
applies. These self-insurance reserves include provisions for losses related to
pending or threatened litigation. Although any litigation is inherently
uncertain, based on past experience, the information currently available to it,
the availability of insurance coverage and the amount of its self-insurance
reserves for known and unasserted self-insurance claims (which was approximately
$23.7 million at September 27, 1997), the Partnership does not believe that
these pending or threatened litigation matters will have a material adverse
effect on its results of operations or its financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders of the
Partnership, through the solicitation of proxies or otherwise, during the fourth
fiscal quarter of the year ended September 27, 1997.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS AND RELATED UNITHOLDER
MATTERS.
The Common Units, representing limited partner interests in the
Partnership, are listed and traded on the New York Stock Exchange under the
symbol SPH. The Common Units began trading on February 29, 1996, at an initial
public offering price of $20.50 per Common Unit. As of December 5, 1997 there
were 895 registered Common Unitholders of record. The following table sets
forth, for the periods indicated, the high and low sale prices per Common Unit,
as reported on the New York Stock Exchange, and the amount of cash distributions
paid per Common Unit.
Common Unit Price Range
CASH DISTRIBUTION
HIGH LOW PAID
---- --- ----
1996 FISCAL YEAR
Second Quarter (beginning March 5, 1996) $20.88 $20.50 $0.16*
Third Quarter 20.75 19.75 0.50
Fourth Quarter 21.75 19.63 0.50
*Prorated distribution.
1997 FISCAL YEAR
First Quarter $21.88 $18.75 $0.50
Second Quarter 20.63 17.75 0.50
Third Quarter 18.75 17.00 0.50
Fourth Quarter 20.19 18.06 0.50
There is no established public trading market for the Partnership's
Subordinated Units, representing limited partner interests, all of which are
held by the General Partner.
The Partnership makes quarterly distributions to its partners in an
aggregate amount equal to its Available Cash (as defined) for such quarter.
Available Cash generally means all cash on hand at the end of the fiscal quarter
plus all additional cash on hand as a result of borrowings and purchases of
additional limited partner units APUs subsequent to the end of such quarter less
cash reserves established by the Board of Supervisors in its reasonable
discretion for future cash requirements.
The Partnership is a publicly traded limited partnership that is not
subject to federal income tax. Instead, Unitholders are required to report their
allocable share of the Partnership's earnings or loss, regardless of whether the
Partnership makes distributions.
ITEM 6. SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA.
The following table presents selected condensed consolidated historical
and pro forma financial data (which are unaudited) of the Partnership and the
Predecessor Company. The selected condensed consolidated historical data is
derived from the audited financial statements of the Partnership and Predecessor
Company, except for the twelve months ended September 30, 1993 - See Note (c) to
the selected historical and pro forma financial data. The dollar amounts in the
table below, except per Unit data, are in thousands.
PARTNERSHIP (A) PREDECESSOR COMPANY (B) (C)
--------------------------------------------------------------------------------------
PRO FORMA
YEAR MARCH 5, OCTOBER 1,
YEAR ENDED ENDED (D) 1996 1995 YEAR ENDED TWELVE MONTHS
------------------------ THROUGH THROUGH --------------------- ENDED
SEPT 27, SEPT 28, SEPT 28, MARCH 4, SEPT 30, OCTOBER 1, SEPTEMBER 30,
1997 1996 1996 1996 1995 1994 1993
----------- ---------- --------- ---------- ---------- ---------- --------------
STATEMENT OF
OPERATIONS DATA
Revenues .............. $ 771,131 $ 707,946 $ 323,947 $ 383,999 $ 633,620 $ 677,767 $ 678,992
Gross Profit .......... 334,336 330,254 150,746 179,508 314,724 347,227 332,016
Depreciation and
Amortization .......... 37,307 35,862 21,046 14,816 34,055 34,300 37,706
Restructuring Charge... 6,911 2,340 2,340 -- -- -- --
Operating Income
(Loss) ................ 47,763 58,332 (3,464) 61,796 55,544 75,490 58,149
Interest Expense,
Net ................... 33,979 31,197 17,171 -- -- -- --
Provision for
Income Taxes .......... 190 250 147 28,147 25,299 33,644 26,733
Net Income (Loss) ..... 13,594 26,885 (20,782) 33,649 30,245 41,846 31,523
Net Income (Loss)
per Unit (e) .......... $ 0.46 $ 0.92 $ (0.71)
BALANCE SHEET DATA
(END OF PERIOD)
Current Assets ........ $ 104,361 $ 120,692 $ 120,692 $ 78,846 $ 88,566 $ 124,033
Total Assets .......... 776,407 807,424 807,424 736,459 755,053 599,939
Current Liabilities ... 96,701 101,826 101,826 69,872 74,555 70,772
Long-term Debt ........ 427,970 428,229 428,229 -- -- --
Other Long-term
Liabilities ........... 110,497 112,690 112,690 108,352 120,946 107,824
Predecessor equity ...... 558,235 559,552 421,344
Partners' Capital -
General Partner ....... 12,830 3,567 3,286
Partners' Capital -
Limited Partners ...... 128,409 174,790 161,393
STATEMENT OF
CASH FLOWS DATA
Cash Provided by
(Used in)
Operating Activities $ 58,848 $ 59,196 $ 62,961 $ (3,765) $ 53,717 $ 77,067 $ 58,312
Investing Activities $ (20,709) $ (52,414) $ (30,449) $ (21,965) $ (22,317) $ (16,126) $ (23,005)
Financing Activities $ (37,734) $ 12,013 $ (13,786) $ 25,799 $ (31,562) $ (68,093) $ (33,681)
OTHER DATA
EBITDA (f) ............ $ 85,070 $ 94,194 $ 17,582 $ 76,612 $ 89,599 $ 109,790 $ 95,855
Capital Expenditures (g)
Maintenance ........... $ 24,888 $ 25,885 $ 16,089 $ 9,796 $ 21,359 $ 17,839 $ 31,679
Acquisition ........... $ 1,880 $ 28,529 $ 15,357 $ 13,172 $ 5,817 $ 1,448 $ --
Retail Propane
Gallons Sold .......... 540,799 566,900 257,029 309,871 527,269 568,809 563,291
(a) The Partnership acquired the propane business and assets of the Predecessor
Company on March 5, 1996 (the Closing Date). There are no material
differences in the basis of assets and liabilities between the Partnership
and the Predecessor Company.
(b) The Predecessor Company's financial data for the fiscal 1995 and 1994
periods may not be comparable to the twelve months ended September 30, 1993
due to the application of purchase accounting adjustments in connection
with Hanson's acquisition of Quantum on September 30, 1993.
(c) In connection with Hanson's acquisition of Quantum on September 30, 1993,
the Predecessor Company changed its fiscal year ending December 31 to a
52-53 week fiscal year ending on the Saturday nearest to September 30. The
new fiscal year includes the full October through March heating season.
Prior to the change in fiscal year, the heating season was split between
two fiscal years. Solely for purposes of comparing the Predecessor Company
operating results to fiscal 1994 and 1995, the statement of operations data
of the Predecessor Company has been combined for the following periods:
January 1 to September 30, 1993 with the corresponding data for the period
from October 1, 1992 to December 31, 1992 (the "twelve months ended
September 30, 1993").
(d) The pro forma financial and operating information for the year ended
September 28, 1996 was derived from the historical statement of operations
of the Predecessor Company for the period October 1, 1995 through March 4,
1996 and the consolidated statement of operations of the Partnership from
March 5, 1996 to September 28, 1996. The pro forma financial and operating
information was prepared to reflect the effects of the Partnership
formation as if it had been completed in its entirety as of the beginning
of the periods presented.
Significant pro forma adjustments reflected in the financial and operating
information include the following:
1. For the year ended September 28, 1996, an adjustment to interest expense
to reflect the interest expense associated with the Senior Notes and Bank
Credit Facilities.
2. For the year ended September 28, 1996, the elimination of the provision
for income taxes, as income taxes will be borne by the partners and not
the Partnership, except for corporate income taxes related to the Service
Company.
3. The Partnership's management estimates that the incremental costs of
operating as a stand-alone entity during the year ended September 28,
1996 would have approximated the management fee paid to an affiliate of
Hanson. These incremental costs are estimated to be $1,290 for the year
ended September 28, 1996.
(e) Net income (loss) per Unit is computed by dividing the limited partners'
interest in net income (loss) by the number of Units outstanding.
(f) Defined as operating income plus depreciation and amortization. EBITDA
should not be considered as an alternative to net income (as an indicator
of operating performance) or as an alternative to cash flow (as a measure
of liquidity or ability to service debt obligations) and is not in
accordance with nor superior to generally accepted accounting principles
but provides additional information for evaluating the Partnership's
ability to pay the Minimum Quarterly Distribution.
(g) The Partnership's capital expenditures fall generally into two categories:
(i) maintenance capital expenditures, which include expenditures for repair
and replacement of property, plant and equipment, and (ii) acquisition
capital expenditures, which include expenditures related to the acquisition
of retail propane operations and a portion of the purchase price allocated
to intangibles associated with such acquired businesses.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following is a discussion of the historical and pro forma financial
condition and results of operations of the Predecessor Company and the
Partnership. The discussion should be read in conjunction with the historical
and pro forma consolidated financial statements and notes thereto included
elsewhere in this Form 10-K. Since the Operating Partnership and Service Company
account for substantially all of the assets, revenues and earnings of the
Partnership, a separate discussion of the Partnership's results of operations
from other sources is not presented.
GENERAL
The Partnership is engaged in the retail and wholesale marketing of propane
and related appliances and services. The Partnership believes it is the third
largest retail marketer of propane in the United States, serving more than
700,000 active residential, commercial, industrial and agricultural customers
from more than 350 customer service centers in over 40 states. The Partnership's
annual retail propane sales volume were approximately 541 million, 567 million
and 527 million gallons during the fiscal years ended September 27, 1997,
September 28, 1996 and September 30, 1995, respectively.
The retail propane business of the Partnership consists principally of
transporting propane purchased on the contract and spot markets, primarily from
major oil companies, to its retail distribution outlets and then to storage
tanks located on the customers' premises. In the residential and commercial
markets, propane is primarily used for space heating, water heating, clothes
drying and cooking purposes. Industrial customers primarily use propane as a
motor fuel burned in internal combustion engines that power over-the-road
vehicles, forklifts and stationary engines, to fire furnaces, as a cutting gas
and in other process applications. In the agricultural market, propane is
primarily used for tobacco curing, crop drying, poultry brooding and weed
control. In its wholesale operations, the Partnership sells propane principally
to large industrial end-users and other propane distributors.
The retail propane distribution business is seasonal because of propane's
primary use for heating in residential and commercial buildings. Historically,
approximately two-thirds of the Partnership's retail propane volume is sold
during the six-month peak heating season of October through March. Consequently,
sales and operating profits are concentrated in the Partnership's first and
second fiscal quarters. Cash flows from operations, therefore, are greatest
during the second and third fiscal quarters when customers pay for propane
purchased during the winter heating season. To the extent necessary, the
Partnership will reserve cash from the second and third quarters for
distribution to Unitholders in the first and fourth fiscal quarters.
The retail propane business is a "margin-based" business where the level of
profitability is largely dependent on the difference between retail sales prices
and product cost. The unit cost of propane is subject to volatile changes as a
result of product supply or other market conditions. Propane unit cost changes
can occur rapidly over a short period of time and can impact retail margins.
There is no assurance that the Partnership will be able to pass on product cost
increases fully, particularly when product costs increase rapidly.
SELECTED QUARTERLY HISTORICAL AND PRO FORMA FINANCIAL DATA
(in thousands)
The following historical pro forma quarterly financial data for periods
prior to the Partnership formation were derived from the historical statements
of operations of the Predecessor Company for the period October 1, 1995 through
March 4, 1996 and reflect the effects of the Partnership formation as if the
formation had been completed in its entirety as of the beginning of the periods
presented.
The pro forma quarterly financial data do not purport to present the results of
operations of the Partnership had the Partnership formation actually been
completed as of the beginning of the periods presented. In addition, the pro
forma quarterly financial data are not necessarily indicative of the results of
future operations of the Partnership and should be read in conjunction with the
consolidated financial statements and notes thereto, appearing elsewhere in this
Form 10-K.
Fiscal year ended September 27, 1997 (unaudited)
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
------------- -------------- ------------- --------------
Revenues $246,028 $277,631 $132,363 $115,109
Gross Profit 97,934 114,487 64,885 57,030
Operating Income (Loss) 25,900 39,459 (10,953) (6,643)
Net Income (Loss) 17,338 30,281 (19,181) (14,844)
EBITDA 35,181 48,647 (1,611) 2,853
Retail Gallons Sold 158,996 183,307 102,899 95,597
Fiscal year ended September 28, 1996 (unaudited)
Pro Forma Pro Forma
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
------------- -------------- ------------- --------------
Revenues $190,679 $259,992 $130,590 $126,685
Gross Profit 93,384 116,654 62,578 57,638
Operating Income (Loss) 26,396 44,337 (3,262) (9,139)
Net Income (Loss) 18,103 36,493 (10,576) (17,135)
EBITDA 35,113 53,280 5,721 80
Retail Gallons Sold 157,592 204,991 102,896 101,421
ANALYSIS OF HISTORICAL RESULTS OF OPERATIONS
The Partnership acquired the propane business and assets of the Predecessor
Company on March 5, 1996. Solely for purposes of comparing the results of
operations of the Partnership for the year ended September 27, 1997 with those
of the Partnership and the Predecessor Company in the prior year period, the
statement of operations data for the year ended September 28, 1996 is comprised
of the combined statements of operations of the Predecessor Company for the
period October 1, 1995 to March 4, 1996 and the Partnership for the period March
5, 1996 to September 28, 1996.
FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996
REVENUES. Revenues increased $63.2 million or 8.9% to $771.1 million in
fiscal 1997 as compared to $707.9 million in fiscal 1996. The overall increase
is primarily attributable to higher average retail and wholesale selling prices
resulting from higher propane product costs. Retail gallons sold decreased 4.6%
or 26.1 million gallons to 540.8 million gallons in fiscal 1997 as compared to
566.9 million gallons in the prior year, while wholesale gallons sold decreased
2.4% or 4.5 million gallons to 184.5 million gallons compared to 189.0 million
in the prior year. The decrease in gallons sold is primarily due to warmer
temperatures during the winter heating season in all areas of the Partnership's
operations.
GROSS PROFIT. Gross profit increased $4.1 million or 1.2% to $334.3 million
for fiscal 1997 compared to $330.3 million in the prior year. The increase in
gross profit principally resulted from higher average retail propane unit
margins partially offset by reduced volumes of propane sold.
OPERATING EXPENSES. Operating expenses increased $6.4 million or 3.1% to
$209.8 million for fiscal year 1997 as compared to $203.4 million in the prior
year. Operating expenses increased due to higher payroll, bad debt and equipment
and vehicle leasing costs.
RESTRUCTURING CHARGE. Fiscal 1997 results reflect a restructuring charge of
$6.9 million compared to a $2.3 million restructuring charge incurred in fiscal
1996. In fiscal 1997, after evaluating certain long-term cost reduction
strategies and organizational changes, the Partnership reorganized its product
procurement and logistics group, redesigned its fleet and maintenance, field and
corporate office organizations, and identified facilities to be closed and
impaired assets whose carrying amounts would not be recovered. In connection
with this effort, the Partnership recorded a $6.9 million restructuring charge,
comprised of severance, employee benefit and facility closure costs of $5.1
million and an impaired asset charge of $1.8 million.
In fiscal 1996, the Partnership reorganized its corporate office and
terminated certain employees. As a result of this action, the Partnership
recorded a $2.3 million restructuring charge, comprised of severance and
employee benefit costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses, including the management fee charged to the Predecessor
Company and excluding restructuring charges, increased $2.3 million or 7.5% to
$32.6 million for fiscal 1997 compared to $30.3 million in the prior year.
Expenses increased principally due to higher expenditures for professional
consulting services (primarily information systems) and expansion of customer
satisfaction programs.
OPERATING INCOME AND EBITDA. Operating income, excluding the restructuring
charges, decreased $6.0 million or 9.9% to $54.7 million for fiscal 1997
compared to $60.7 million in the prior year. EBITDA, decreased $9.1 or 9.7% to
$85.1 million. The decrease is primarily attributable to the higher operating,
selling, general and administrative expenses and the fiscal 1997 restructuring
charge partially offset by higher overall retail margins. EBITDA should not be
considered as an alternative to net income (as in indicator of operating
performance) or as an alternative to cash flow (as a measure of liquidity or
ability to service debt obligations) but provides additional information for
evaluating the Partnership's ability to pay the Minimum Quarterly Distribution.
FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995
REVENUES. Revenues increased $74.3 million or 11.7% to $707.9 million in
fiscal 1996 as compared to $633.6 million in fiscal 1995. The overall increase
is primarily attributable to higher retail volumes and wholesale volumes coupled
with increased retail and wholesale selling prices. Retail gallons sold
increased 7.5% or 39.6 million gallons to 566.9 million gallons as compared to
527.3 million gallons in fiscal 1995, while wholesale gallons sold increased
4.6% or 8.2 million gallons to 189.0 million gallons compared to 180.7 million
in the prior year. The increase in gallons sold is due to the colder
temperatures in all sections of the country, except for the West region.
GROSS PROFIT. Gross profit increased $15.5 million or 4.9% to $330.3
million for fiscal 1996 compared to $314.7 million in the prior year. The
increase in gross profit principally resulted from higher retail propane volumes
partially offset by lower retail margins resulting from increased product costs.
OPERATING EXPENSES. Operating expenses increased $6.1 million or 3.1% to
$203.4 million for fiscal year 1996 as compared to $197.3 million in the prior
year. Operating expenses increased due to higher delivery costs associated with
the higher gallon volumes and higher maintenance and product costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses, including the management fee charged to the Predecessor
Company, increased $4.8 million or 17.3% to $32.6 million for fiscal 1996
compared to $27.8 million in the prior year. Expenses increased due to a
nonrecurring charge of $2.3 million incurred in the fourth quarter as a result
of certain employee terminations. The increase is also attributable to higher
expenditures for the implementation of new employee training and customer
satisfaction programs.
OPERATING INCOME AND EBITDA. Operating income increased $2.8 million or
5.0% to $58.3 million for fiscal 1996 compared to $55.5 million in the prior
year. EBITDA increased $4.6 million or 5.1% to $94.2 million. The increase is
primarily attributable to the higher volume of retail gallons sold partially
offset by lower retail margins and an increase in operating and general and
administrative expenses. EBITDA should not be considered as an alternative to
net income (as in indicator of operating performance) or as an alternative to
cash flow (as a measure of liquidity or ability to service debt obligations) but
provides additional information for evaluating the Partnership's ability to pay
the Minimum Quarterly Distribution.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership believes that approximately $23.0 million of maintenance
capital expenditures will be required in fiscal year 1998 for repair and
replacement of property, plant and equipment. The Partnership expects to fund
these capital expenditures from cash flow from operations or from borrowings
under the working capital facility.
Due to the seasonal nature of the propane business, cash flows from
operating activities are greater during the winter and spring seasons as
customers pay for propane purchased during the heating season. For fiscal 1997,
net cash provided by operating activities decreased $0.4 million to $58.8
million compared to $59.2 million in fiscal 1996. Cash provided by operating
activities during fiscal 1997, reflects increases in cash from accounts
receivable of $23.1 million, prepaid and other current assets of $6.2 million
and inventories of $11.8 million principally due to lower sales volumes and a
resulting decline in propane purchases. These increases were offset by an
aggregate decrease in accounts payable, accrued interest and accrued employment
and benefit costs of $37.9 million and $4.3 million of cash expenditures
incurred in connection with the Partnership's restructuring.
Net cash used in investing activities was $20.7 million for fiscal 1997,
reflecting $24.9 million in capital expenditures and $1.8 million of payments
for acquisitions, offset by net proceeds of $6.0 million from the sale of
property, plant and equipment. Net cash used in investing activities was $52.4
million for fiscal 1996, consisting of capital expenditures of $25.9 million and
acquisition payments of $28.5 million, offset by proceeds from the sale of
property and equipment of $2.0 million. The decrease in cash used for
acquisition activities of $26.6 million primarily results from the Partnership's
fiscal 1997 emphasis on internal growth through improved customer retention and
marketing as compared to growth from acquisitions. The Partnership believes that
internal growth, given the high values being paid to acquire propane
distributors, is currently the more economical method of expanding its business.
The Partnership will, however, continue to pursue selective accretive
acquisitions during fiscal 1998.
For fiscal year 1996, net cash provided by operating activities increased
$5.5 million or 10.2% to $59.2 million compared to $53.7 million for fiscal year
1995. The increase is primarily attributable to an aggregate increase in
accounts payable, accrued interest and expenses and other noncurrent liabilities
totaling $53.9 million partially offset by an increase in accounts receivable,
inventories, prepaid expenses and decreased net income totaling $50.0 million
arising from an increase in the cost and volume of gallons sold and operating
under the Partnership structure for seven months of fiscal 1996.
Net cash used in investing activities was $22.3 million for fiscal year
1995, reflecting $21.4 million in capital expenditures and $5.8 million of
payments for the acquisition of new customer service centers offset by net
proceeds of $4.9 million from the sale of marginal performing customer service
center locations and other property and equipment.
Prior to March 5, 1996, the Predecessor Company's cash accounts had been
managed on a centralized basis by HM Holdings, Inc. ("HM Holdings"), a
wholly-owned affiliate of Hanson. Accordingly, cash receipts and disbursements
relating to the operations of Suburban Propane were received or funded by HM
Holdings. Net cash provided by financing activities, which are reflected as
an increase in predecessor equity, was $25.8 million during the five months
ended March 5, 1996 compared to $31.6 million of cash used by (reduction of
predecessor equity) during the year ended September 30, 1995.
In March 1996, the Operating Partnership issued $425.0 million aggregate
principal amount of Senior Notes with an interest rate of 7.54% for net cash
proceeds of $418.8 million. Also, the Partnership, by means of an initial public
offering and the exercise of an overallotment option by the underwriters, issued
21,562,500 Common Units for net cash proceeds of $413.6 million. The net
proceeds of the Notes and Common Units issuance (which totaled $832.4 million),
less a $5.6 million closing price adjustment paid by Quantum in connection with
the transactions and $97.7 million reflecting the retention of net accounts
receivable by Quantum, were used to acquire the propane assets from Quantum, pay
off the intercompany payables and make a special distribution to the General
Partner.
In an effort to reduce annual fees associated with unutilized credit
facilities, effective September 30, 1997, the Operating Partnership amended its
Bank Credit Facilities to reduce its acquisition facility to $25 million from
$100 million and retain its $75 million working capital facility. Borrowings
under the amended agreement will bear interest at a rate based upon either LIBOR
plus a margin, First Union National Bank's prime rate or the Federal Funds rate
plus 1/2 of 1%. An annual fee ranging from .20% to .25% based upon certain
financial tests will be payable quarterly whether or not borrowings occur. The
facilities, which expire on September 30, 2000, are unsecured on an equal and
ratable basis with the Operating Partnership's obligations under the Senior
Notes. At September 27, 1997, there were no amounts outstanding under the Bank
Credit Facilities.
As a result of lower than anticipated earnings for fiscal 1997 and the
costs associated with the restructuring efforts, the Partnership utilized $10.0
million of cash proceeds available under the Distribution Support Agreement
between the Partnership and the General Partner in connection with the payment
of the Minimum Quarterly Distribution on the Common Units with respect to the
third fiscal quarter of 1997. In addition, the Partnership received an
additional $12.0 million of cash proceeds under the Distribution Support
Agreement in November 1997 to support the Minimum Quarterly Distribution in
respect to the fourth fiscal quarter of 1997. The Partnership does not
anticipate utilizing proceeds available under the Distribution Support Agreement
with respect to the funding of the Minimum Quarterly Distribution for the first
quarter of fiscal 1998. The Distribution Support Agreement provides for a
maximum of approximately $44 million in cash in return for APUs ($22 million of
which has been utilized) to support the Partnership's Minimum Quarterly
Distributions to holders of Common Units through March 31, 2001. The Partnership
has not made a distribution on its Subordinated Units since the first fiscal
quarter of 1997 and does not intend to make a distribution to the Subordinated
Unitholder for the first fiscal quarter of 1998.
The Partnership will make distributions in an amount equal to all of its
Available Cash approximately 45 days after the end of each fiscal quarter to
holders of record on the applicable record dates. The Partnership has made
distributions to holders of its Common Units for each of the quarters in fiscal
1997.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Partnership's Consolidated Financial Statements and the Reports of
Independent Accountants thereon and the Supplementary Financial Information
listed on the accompanying Index to Financial Statement Schedules are hereby
incorporated by reference. See Item 7 for Selected Quarterly Financial Data.
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.
PARTNERSHIP MANAGEMENT
The Partnership Agreement provides that all management powers over the
business and affairs of the Partnership are exclusively vested in its Board of
Supervisors and, subject to the direction of the Board of Supervisors, the
officers of the Partnership. No Unitholder has any management power over the
business and affairs of the Partnership or actual or apparent authority to enter
into contracts on behalf of, or to otherwise bind, the Partnership. Three
independent Elected Supervisors, two Appointed Supervisors and two Management
Supervisors serve on the Board of Supervisors pursuant to the terms of the
Partnership Agreement.
The three Elected Supervisors serve on the Audit Committee with the
authority to review, at the request of the Board of Supervisors, specific
matters as to which the Board of Supervisors believes there may be a conflict of
interest in order to determine if the resolution of such conflict proposed by
the Board of Supervisors is fair and reasonable to the Partnership. Any matters
approved by the Audit Committee will be conclusively deemed to be fair and
reasonable to the Partnership, approved by all partners of the Partnership and
not a breach by the General Partner or the Board of Supervisors of any duties
they may owe the Partnership or the Unitholders. In addition, the Audit
Committee will review external financial reporting of the Partnership, will
recommend engagement of the Partnership's independent accountants and will
review the Partnership's procedures for internal auditing and the adequacy of
the Partnership's internal accounting controls.
BOARD OF SUPERVISORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The following table sets forth certain information with respect to the
members of the Board of Supervisors and executive officers of the Partnership as
of December 16, 1997. Officers are elected for one-year terms and Supervisors
are elected or appointed for three-year terms.
POSITION WITH THE
NAME AGE PARTNERSHIP
- ------------------------- --- ----------------------------------------
Mark A. Alexander....... 39 President and Chief Executive Officer;
Member of the Board of Supervisors (Management
Supervisor)
David R. Feheley........ 49 Senior Vice President -- Operations;
Member of the Board of Supervisors (Management
Supervisor)
Anthony M. Simonowicz... 46 Vice President and Chief Financial Officer
Michael M. Keating...... 44 Vice President -- Human Resources and
Administration
Kevin T. McIver......... 43 Vice President, General Counsel and Secretary
Thomas A. Nunan......... 64 Vice President -- Sales
Michael J. Dunn, Jr..... 48 Vice President - Procurement and Logistics
George H. Hempstead, II. 54 Member of the Board of Supervisors
(Appointed Supervisor)
John E. Lushefski....... 42 Member of the Board of Supervisors
(Appointed Supervisor)
John Hoyt Stookey....... 67 Member of the Board of Supervisors
(Chairman and Elected Supervisor)
Harold R. Logan, Jr..... 53 Member of the Board of Supervisors
(Elected Supervisor)
Dudley C. Mecum......... 62 Member of the Board of Supervisors
(Elected Supervisor)
Mr. Alexander serves as President and Chief Executive Officer and as a
Management Supervisor of the Partnership. Prior to October 1, 1996, he served as
Executive Vice Chairman and Chief Executive Officer of the Partnership. Mr.
Alexander was Senior Vice President -- Corporate Development of Hanson
Industries (Hanson's management division in the United States) from 1995 until
March 4, 1996, where he was responsible for mergers and acquisitions, real
estate and divestitures, and was Vice President of Acquisitions from 1989 to
1995. He was an Associate Director of Hanson from 1993 and a Director of Hanson
Industries from June 1995 until March 4, 1996.
Mr. Feheley serves as Senior Vice President -- Operations of the
Partnership and was appointed a Management Supervisor on October 1, 1996. Mr.
Feheley was Senior Vice President -- Operations of Suburban Propane from
September 1995 until March 4, 1996 and was an Area Vice President from October
1990 to September 1995.
Mr. Simonowicz serves as Vice President and Chief Financial Officer of
the Partnership. Mr. Simonowicz was Vice President -- Business Development of
the Partnership from March 1996 to March 1997. Mr. Simonowicz was Vice
President -- Business Development of Suburban Propane from September 1995 until
March 1996 and was Director -- Financial Planning and Analysis from 1991 to
September 1995. Mr. Simonowicz was employed as Controller at Lifecodes
Corporation (a genetic identification and research company), then a subsidiary
of Quantum, from 1989 to 1991.
Mr. Keating serves as Vice President -- Human Resources and Administration
of the Partnership. Mr. Keating was Director of Human Resources at Hanson
Industries from 1993 to July 1996 and was Director of Human Resources and
Corporate Personnel at Quantum from 1989 to 1993.
Mr. McIver serves as Vice President, General Counsel and Secretary of the
Partnership. He served as General Counsel and Secretary of the Partnership from
March 1996 to August 1996. Mr. McIver was General Counsel of Suburban Propane
from October 1994 until March 1996 and was chief counsel of Suburban Propane
from 1984.
Mr. Nunan serves as Vice President -- Sales of the Partnership. Mr. Nunan
was Vice President -- Sales of Suburban Propane from October 1990 until March
1996. He is currently a director of the National Propane Gas Association.
Mr. Dunn has served as Vice President -- Procurement and Logistics since
March 1997. Prior to joining the Partnership, Mr. Dunn was Vice President of
Commodity Trading for Goldman Sachs & Company, New York, NY since 1981.
Mr. Hempstead serves as an Appointed Supervisor of the Partnership. He is
also Vice President and Secretary and a Director of the General Partner. He has
served as Senior Vice President, Law and Administration of Millennium since
October 1996, as Senior Vice President, Law and Administration of Hanson
Industries from June 1995 to September 1996 as well as Senior Vice President and
General Counsel of Hanson Industries from 1993 to 1995 and General Counsel of
Hanson Industries from 1982 to 1993. He was an Associate Director of Hanson from
1990 to September 1996 and a Director of Hanson Industries from 1986 to
September 1996. He joined Hanson Industries in 1976.
Mr. Lushefski serves as an Appointed Supervisor of the Partnership. He is
also a Vice President and Director of the General Partner. He has served as
Senior Vice President and Chief Financial Officer of Millennium since October
1996. He was Senior Vice President and Chief Financial Officer of Hanson
Industries from June 1995 until October 1996. He was Vice President and Chief
Financial Officer of Peabody Holding Company, a Hanson subsidiary, from January
1991 to May 1995 and Vice President and Controller of Hanson Industries from
1990 to 1991. He originally joined Hanson Industries in 1985.
Mr. Stookey is an Elected Supervisor and Chairman of the Board of
Supervisors of the Partnership. He has been the non-executive Chairman and a
director of Quantum from the time it was acquired by Hanson on September 30,
1993 to October 31, 1995. From 1986 to September 30, 1993, he was the Chairman,
President and Chief Executive Officer of Quantum. He is also a director of
United States Trust Company of New York, ACX Technologies, Inc., Chesapeake
Corporation and Cypress Amax Minerals Company. Mr. Stookey served from 1989 to
1993 as an executive officer of Petrolane Incorporated, Petrolane Finance Corp.,
and QJV Corp., which companies were reorganized in July 1993 under the U.S.
Bankruptcy Code. These companies were affiliates of Quantum at the time of such
reorganization.
Mr. Logan is an Elected Supervisor of the Partnership. Mr. Logan is
Executive Vice President - Finance and Treasurer as well as a Director of
TransMontaigne Oil Company (a holding company formed to purchase companies
engaged in the marketing and distribution of petroleum products). From 1987 to
1995 he served as Senior Vice President of Finance and a Director of Associated
Natural Gas Corporation (an independent gatherer and marketer of natural gas,
natural gas liquids and crude oil which in 1994 was acquired by Panhandle
Eastern Corporation). Mr. Logan is also a director of Snyder Oil Corporation (an
oil and gas exploration and production company).
Mr. Mecum is an Elected Supervisor. Mr. Mecum is a partner of Capricorn
Holdings, LLC (a sponsor of and investor in leveraged buyouts). He was Chairman
of Mecum Associates Inc. (management consultants) from June 1996 to June 1997.
Mr. Mecum was a partner of G.L. Ohrstrom & Co. (a sponsor of and investor in
leveraged buyouts)from 1989 to June, 1996. He is also a director of Travelers
Group,Inc., Travelers/Aetna P&C Corp., Lyondell Petrochemical Company, Fingerhut
Companies, Inc., Dyncorp, Vicorp Restaurants, Inc. and Metris Industries, Inc.
ITEM 11. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of all compensation awarded or
paid to or earned by the chief executive officer and the four other most highly
compensated executive officers of the Partnership in fiscal 1997. Mr. Simonowicz
assumed the position of Vice President and Chief Financial Officer of the
Partnership in March 1997.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
RESTRICTED
NAME AND UNIT ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) AWARD(S)($)(2) COMPENSATION ($)(4)
------------------- ------ ----------- ----------- ------------ -----------------
Mark A. Alexander 1997 374,000 100,000 2,000,000 18,756
President and Chief Executive Officer 1996 196,538 20,417 3,000,000 1,610
David R. Feheley 1997 168,000 29,467 750,000 11,053
Senior Vice President-Operations 1996 135,000 7,425 500,000 139,050
1995 106,000 0 0 2,319
Anthony M. Simonowicz 1997 138,000 24,000 600,000 13,349
Vice President and Chief Financial Officer 1996 120,000 6,000 400,000 125,500
1995 97,766 0 0 2,291
Thomas A. Nunan 1997 145,000 19,358 (3) 9,850
Vice President -Sales 1996 135,000 17,542 102,000
1995 97,302 50,000
Kevin T. McIver 1997 145,000 19,333 275,000 4,350
Vice President and General 1996 138,000 6,210 325,000 143,140
Counsel 1995 131,553 0 0 3,963
(1) Bonuses are reported for the year earned, regardless of the year paid.
(2) The aggregate dollar value of Restricted Unit Awards was computed by
multiplying the number of Restricted Units granted by $20.50, the initial public
offering price of the Common Units. The Restricted Units are subject to a
bifurcated vesting procedure such that: (i) 25% of the units vest in equal
amounts on each of March 5, 1999, 2001, and 2003 (or upon a "change of
control" of the Partnership); and the remaining 75% vest automatically upon,
and in the same proportion as, the conversion of the Subordinated Units to
Common Units, which conversion cannot commence prior to April 1999 under the
Partnership Agreement (or upon a "change of control" of the Partnership). Until
such Restricted Units vest, their holders will not be entitled to any
distributions or allocations of income and loss, nor shall they have any voting
or other rights with respect to such common Units. At September 28, 1997, the
number of Restricted Units and the aggregate value thereof (calculated at a per
Unit price of $19.625, the closing price of Common Unit on September 27, 1997
as reported on the New York Stock Exchange) were 243,902 ($4,786,577) for Mr.
Alexander, 60,976 ( $1,196,654 ) for Mr. Feheley, 48,780 ($957,308) for Mr.
Simonowicz, and 29,268 ($574,385) for Mr. McIver.
(3) In lieu of participation in the Restricted Unit Plan, Mr. Nunan is entitled,
subject to certain conditions, to receive cash payments of $221,030 in December
1998, $141,610 in December 1999 and $131,132 in December 2000.
(4) These amounts include for year 1997 the following:
a. Health and welfare premiums for Messrs, Alexander, Feheley, Simonowicz and
Nunan. Mr. McIver does not participate in the Plan.
b. Vehicle allowances for Messrs, Alexander, Feheley and Simonowicz.
c. Matching contributions under the Suburban Retirement Savings and
Investment Plan for Messrs. Alexander, Feheley, Simonowicz, Nunan and
McIver.
RETIREMENT BENEFITS
The following table sets forth the annual benefits upon retirement at age 65
in 1997, without regard to statutory maximums, for various combinations of final
average earnings and lengths of service which may be payable to Messrs.
Alexander, Feheley, Simonowicz, Nunan, and McIver under the Pension Plan for
Eligible Employees of Suburban Propane, L.P. and Subsidiaries and the Suburban
Propane Company Supplemental Executive Retirement Plan. Each such Plan has been
assumed by the Partnership and each such person will be credited for service
earned under such plan to date. Messrs. Alexander, Feheley, Simonowicz, Nunan,
and McIver have 1 year, 21 years, 8 years, 9 years, and 14 years service under
the plans.
PENSION PLAN
ANNUAL BENEFIT FOR YEARS OF CREDITED SERVICE SHOWN (2)
FINAL 5-YEAR (1)
AVERAGE EARNINGS 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ---------------- -------- -------- -------- -------- -------- -------- --------
$100,000 8,109 16,218 24,327 32,436 40,545 48,654 56,763
$200,000 16,859 33,718 50,577 67,436 84,295 101,154 118,013
$300,000 25,609 51,218 76,827 102,436 128,045 153,654 179,263
$400,000 34,359 68,718 103,077 137,436 171,795 206,154 240,513
$500,000 43,109 86,218 129,327 172,436 215,545 258,654 301,763
1) The Plans' definition of earnings consists of base pay only.
2) Annual Benefits are computed on the basis of straight life annuity amounts.
The pension benefit is calculated as follows:
the sum of (a) plus (b) multiplied by (c) where (a) is that portion of
final average earnings up to 125% of social security Covered Compensation
times 1.4% and (b) is that portion of final average earnings in excess of
125% of social security Covered Compensation times 1.75% and (c) is
credited service up to a maximum of 35 years.
In addition, certain additional retirement and life insurance benefits are
payable to Mr. McIver pursuant to two Suburban Propane executive plans that were
in effect prior to Quantum's acquisition of Suburban Propane in 1983. Under the
Suburban Propane Deferred Compensation Plan, Mr. McIver is entitled, subject to
certain conditions set forth in the Plan, which include remaining in the
Partnership's employ until retirement, to receive a retirement supplement of
approximately $21,000 per year for a ten-year period subsequent to retirement.
Under the Suburban Propane Executive Death Benefit Plan, $100,000 of life
insurance proceeds, on an after tax basis, are payable to Mr. McIver's estate,
subject to the terms and conditions of the Plan, which include remaining in the
employ of the Partnership until retirement.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Partnership has adopted a non-qualified, unfunded supplemental
retirement plan known as the Supplemental Executive Retirement Plan. The purpose
of the Plan is to provide certain executive officers with a level of retirement
income from the Partnership, without regard to statutory maximums. Under the
Plan, a participant's annual benefit, assuming retirement at age 65, is equal to
(a) 1.4% of the participant's Average Final Compensation not in excess of 125%
of Covered Compensation plus (b) 1.75% of the participant's Average Final
Compensation in excess of 125% of Covered Compensation times (c) the
participant's years of benefit service with the Partnership (not to exceed 35)
minus (d) the Pension Offset. The defined terms in this paragraph will have the
same meanings as in the Plan or in the Partnership's qualified Retirement Plan.
Messrs. Alexander and Feheley currently participate in this Plan.
RESTRICTED UNIT PLAN
The Partnership has adopted a restricted unit plan (the "Restricted Unit
Plan") for executives, managers and Elected Supervisors of the Partnership. The
summary of the Restricted Unit Plan contained herein does not purport to be
complete and is qualified in its entirety by reference to the Restricted Unit
Plan, which has been filed as an exhibit to the Partnership's Registration
Statement on Form S-1 (Registration No. 33-80605).
Rights to acquire authorized but unissued Common Units of the Partnership
with an aggregate value of $15.0 million are available under the Restricted Unit
Plan for purposes of calculating the value of these Unit grants, a value of
$20.50 (the initial public offering price of the Common Units) has been
utilized. As of September 27, 1997, rights to acquire Common Units with an
aggregate value of $13.0 million (the "Initial Units") have been granted,
subject to the vesting conditions described below and subject to other customary
terms and conditions, as follows: (i) rights to acquire Common Units with an
aggregate value of $5.0 million have been allocated to Mr. Alexander, (ii)
rights to acquire Common Units with an aggregate value of $7.1 million were
allocated to other participants in the Plan who are officers or managers of the
Partnership's business, as determined by the Board of Supervisors or a
compensation committee thereof, and (iii) rights to acquire Common Units with an
aggregate value of $0.9 million were allocated among the three Elected
Supervisors.
The right to acquire the remaining $2.0 million of the $15.0 million
aggregate value of Initial Units have been reserved and may be allocated or
issued in the future to executives and managers on such terms and conditions
(including vesting conditions) as are described below or as the Board of
Supervisors, or a compensation committee thereof, shall determine. Without the
consent of the General Partner, such awards to executives or managers cannot be
made to prior award recipients except on terms and conditions substantially
identical to the awards previously received. Each Elected Supervisor
subsequently appointed or elected will receive rights to acquire Common Units
with a value of $0.3 million on the same terms and conditions as those granted
to the three initial Elected Supervisors.
The Initial Units are subject to a bifurcated vesting procedure such that
(i) twenty-five percent of the Initial Units will vest over time (or upon a
"change of control" of the Partnership as defined in the Restricted Unit Plan,
if earlier) with one-third of such units vesting at the end of the third, fifth
and seventh anniversaries of the consummation of the Partnership's initial
public offering, and (ii) the remaining seventy-five percent of the Initial
Units will vest automatically upon, and in the same proportions as, the
conversion of the Subordinated Units to Common Units (or upon a "change of
control" of the Partnership as defined in the Restricted Unit Plan, if earlier).
Upon vesting in accordance with the terms and conditions of the Restricted
Unit Plan, Common Units allocated to a plan participant will be issued to such a
participant. Until such allocated, but unissued, Common Units have vested and
have been issued to a participant, such participant shall not be entitled to any
distributions or allocations of income or loss and shall not have any voting or
other rights in respect of such Common Units.
The issuance of the Common Units pursuant to the Restricted Unit Plan is
intended to serve as a means of incentive compensation for performance and not
primarily as an opportunity to participate in the equity appreciation in respect
of the Common Units. Therefore, no consideration will be payable by the plan
participants upon vesting and issuance of the Common Units.
EMPLOYMENT AGREEMENTS
The Partnership entered into an employment agreement (the "Employment
Agreement") with Mr. Alexander ("Executive") which became effective March 5,
1996 and was amended effective October 23, 1997. The summary of such Employment
Agreement contained herein does not purport to be complete and is qualified in
its entirety by reference to the Employment Agreement.
Mr. Alexander's Employment Agreement has an initial term of three years but
automatically renews for successive one-year periods, unless earlier terminated
by the Partnership or by Mr. Alexander or otherwise terminated in accordance
with the Employment Agreement. The Employment Agreement for Mr. Alexander
provided for an initial base salary of $350,000. In addition, Mr. Alexander may
earn a bonus up to 100% of annual base salary (the "Maximum Annual Bonus") for
services rendered based upon certain performance criteria. The Employment
Agreement also provides for the opportunity to participate in benefit plans made
available to other senior executives and senior managers of the Partnership,
including the Restricted Unit Plan. The Partnership also provides Mr. Alexander
with term life insurance with a face amount equal to three times his annual base
salary.
Mr. Alexander will also participate in a non-qualified supplemental
retirement plan which provides retirement income which could not be provided
under the Partnership's qualified plans by reason of limitations contained in
the Internal Revenue Code. If a "change of control"(as defined in the Employment
Agreement)of the Partnership occurs and within six months prior thereto or at
any time subsequent to a change of control the Partnership terminates the
Executive's employment without "cause" or the Executive resigns with "good
reason", then the Executive will be entitled to (i) a lump sum severance payment
equal to three times the sum of his annual base salary in effect as of the date
of termination and the Maximum Annual Bonus, and (ii) medical benefits for three
years from the date of such termination. The Employment Agreement provides that
if any payment received by the Executive is subject to the 20% federal excise
tax under Section 4999 of the Code, the payment will be grossed up to permit the
Executive to retain a net amount on an after-tax basis equal to what he would
have received had the excise tax not been payable.
SEVERANCE PROTECTION PLAN FOR KEY EXECUTIVES
The Partnership has adopted a Severance Protection Plan which provides the
Partnership's officers and key employees with employment protection for one year
following a "change of control" as defined in the plan. This plan provides for
severance payments equal to sixty-five weeks of base pay and target bonus
following a change of control for such officers and key employees.
COMPENSATION OF SUPERVISORS
Mr. Stookey receives annual compensation of $75,000 for his services to the
Partnership. The other two Elected Supervisors receive $15,000 per year, plus
$1,000 per meeting of the Board of Supervisors or committee thereof attended. In
addition, each Elected Supervisor participates in the Restricted Unit Plan and
has received Unit Awards with a value of $0.3 million. All Elected Supervisors
receive reimbursement of reasonable out-of-pocket expenses incurred in
connection with meetings of the Board of Supervisors. The Partnership does not
expect to pay any additional remuneration to its employees (or employees of any
of its affiliates) or employees of the General Partner or any of its affiliates
for serving as members of the Board of Supervisors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth certain information as of December 5, 1997
regarding the beneficial ownership of Common and Subordinated Units by each
person or group known by the Partnership (based upon filings under Section 13(d)
or (g) under The Securities Exchange Act of 1934) to own beneficially more than
5% thereof, each member of the Board of Supervisors, each executive officer
named in the Summary Compensation table and all members of the Board of
Supervisors and executive officers as a group. Each individual or entity listed
below has sole voting and investment power over the Units reported, except as
noted below.
SUBURBAN PROPANE, L.P.
NAME AMOUNT AND NATURE OF PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- -------------- ------------------- --------------------- ---------
Common Units Mark A. Alexander 19,100 .089%
David R. Feheley 3,000 .014%
Anthony M. Simonowicz 2,000 .009%
Thomas A. Nunan 2,500 .012%
Kevin T. McIver 1,000 .005%
George H. Hempstead, III 0 --
John E. Lushefski 0 --
John Hoyt Stookey 10,000 .046%
Harold R. Logan, Jr. 2,500 .012%
Dudley C. Mecum 1,000 .005%
All Members of the Board
of Supervisors and Executive
Officers as a Group (12 persons) 41,100 .191%
Subordinated Units Millennium Chemicals Inc. 7,163,750 100.0%
99 Wood Avenue South
Iselin, New Jersey 08830
As executive officers of Millennium, Messrs. Hempstead and
Lushefski have shared voting and investment power over the
Subordinated Units. Messrs. Hempstead and Lushefski disclaim
beneficial ownership of the Subordinated Units.
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Partnership's directors and
executive officers to file initial reports of ownership and reports of changes
in ownership of the Company's Common Units with the Securities and Exchange
Commission. Directors and executive officers are required to furnish the
Partnership with copies of all Section 16(a) forms that they file. Based on a
review of these filings, the Partnership believes that all such filings were
made timely during the 1997 fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
RIGHTS OF THE GENERAL PARTNER
The General Partner owns all of the Subordinated Units, representing an
aggregate 24.4% limited partner interest in the Partnership. Millennium
Petrochemicals owns 100% of the capital stock of the General Partner. Through
the General Partner's ability, as general partner, to control the election of
the two Appointed Supervisors of the Partnership, its right as general partner
to approve certain Partnership actions, its ownership of all of the outstanding
Subordinated Units and its right to vote the Subordinated Units as a separate
class on certain matters, the General Partner and its affiliates have the
ability to exercise significant influence regarding management of the
Partnership.
COMPUTER SERVICES AGREEMENT WITH QUANTUM
The Partnership has entered into a Computer Services Agreement (the
"Computer Services Agreement") with Millennium Petrochemicals to utilize
Millennium Petrochemicals mainframe computer, which receives data and generates
customer bills, reports and information regarding the retail sales of the
Partnership. Pursuant to such agreement, the Partnership pays Millennium
Petrochemicals a monthly fee of $33,550. The Partnership believes these amounts
are no higher than would have been paid to a third party vendor for such
services. The Partnership is also required to reimburse Millennium
Petrochemicals for certain out-of-pocket expenses. Millennium Petrochemicals has
notified the Partnership of its intention to terminate the Computer Services
Agreement on or about March 31, 1998.
DISTRIBUTION SUPPORT AGREEMENT
The Partnership and the General Partner have entered into the Distribution
Support Agreement which is intended to enhance the Partnership's ability to make
the Minimum Quarterly Distribution on the Common Units during the Subordination
Period. Pursuant to the Distribution Support Agreement, the General Partner has
agreed to contribute cash, in exchange for APUs to enable the Partnership to
distribute the Minimum Quarterly Distribution up to a maximum of approximately
$44.3 million. Through December 5, 1997, the General Partner has contributed a
total of $22.0 million to the Partnership and received 220,000 APUs in
consideration thereof. Millennium (the "APU Guarantor") has agreed pursuant to
the Distribution Support Agreement to guarantee the General Partner's APU
contribution obligation. The Unitholders have no independent right separate and
apart from the Partnership to enforce the General Partner's or the APU
Guarantor's obligations under the Distribution Support Agreement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) 1. Financial Statements
See "Index to Financial Statements" set forth on Page F-1.
2. Financial Statement Schedule.
See "Index to Financial Statement Schedule" set forth on page S-1.
3. Exhibits
See "Index to Exhibits" set forth on page E-1.
Management Contracts and Compensatory Plans and Arrangements
- Employment Agreement dated as of March 5, 1996 between the
Operating Partnership and Mr. Alexander (filed as Exhibit 10.6
to the Partnership's Current Report on Form 8-K filed on April
29, 1996).
- First Amendment to Employment Agreement dated as of March 5,
1996 between the Operating Partnership and Mr. Alexander
entered into as of October 23, 1997 (filed as Exhibit 10.7
herewith).
- The Partnership's 1996 Restricted Unit Plan (filed as Exhibit
10.8 to the Partnership's Current Report on Form 8-K filed on
April 29, 1996).
- Form of Unit Grant Agreement pursuant to the Partnership's
1996 Restricted Unit Plan (filed as Exhibit 10.9 to the
Partnership's Current Report on Form 8-K filed on April 29,
1996).
- The Partnership's Supplemental Executive Retirement Plan
(filed as Exhibit 10.11 to the Partnership's Annual Report on
Form 10-K for the fiscal year ended September 28, 1996).
- The Partnership's Severance Protection Plan dated September
1996 (filed as Exhibit 10.12 to the Partnership's Annual
Report on Form 10-K for the fiscal year ended September 28,
1996).
(b) Reports on Form 8-K
Report on Form 8-K dated December 19, 1997, containing the
Partnership's press release dated December 19, 1997, with respect
to the sale of its 8.6% ownership interest in the Dixie Pipeline
Company.
SIGNATURES
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.
Suburban Propane Partners, L.P.
By: /S/ MARK A. ALEXANDER
-------------------------------
Mark A. Alexander
President, Chief Executive Officer
and Management Supervisor
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/S/ DAVID R. FEHELEY Management Supervisor December 22, 1997
- --------------------
(David R. Feheley)
/S/ GEORGE H. HEMPSTEAD, III Appointed Supervisor December 22, 1997
- ----------------------------
(George H. Hempstead, III)
/S/ JOHN E. LUSHEFSKI Appointed Supervisor December 22, 1997
- ---------------------
(John E. Lushefski)
/S/ JOHN HOYT STOOKEY Elected Supervisor December 22, 1997
- ---------------------
(John Hoyt Stookey)
/S/ HAROLD R. LOGAN, JR. Elected Supervisor December 22, 1997
- ------------------------
(Harold R. Logan, Jr.)
/S/ DUDLEY C. MECUM Elected Supervisor December 22, 1997
- -------------------
(Dudley C. Mecum)
/S/ ANTHONY M. SIMONOWICZ Vice President and Chief December 22, 1997
- -------------------------- Financial Officer of
(Anthony M. Simonowicz) Suburban Propane Partners, L.P.
/S/ EDWARD J. GRABOWIECKI Controller and Chief December 22, 1997
- ------------------------- Accounting Officer of
(Edward J. Grabowiecki) Suburban Propane Partners, L.P.
INDEX TO EXHIBITS
The exhibits listed on this Exhibit Index are filed as part of this report.
Exhibits required to be filed by Item 601 of Regulation S-K which are not listed
are not applicable.
EXHIBIT
NUMBER DESCRIPTION
------ -----------
* 3.1 Amended and Restated Agreement of Limited Partnership of the
Partnership dated as of March 4, 1996.
* 3.2 Amended and Restated Agreement of Limited Partnership of
the Operating Partnership dated as of March 4, 1996.
*** 10.1 Amended and Restated Credit Agreement dated as of
September 30, 1997 among the Operating Partnership, First Union
National Bank, as administrative agent, and certain banks.
* 10.2 Note Agreement dated as of February 28, 1996 among certain
investors and the Operating Partnership relating to $425
million aggregate principal amount of 7.54% Senior Notes due
June 30, 2011.
* 10.3 Contribution, Conveyance and Assumption Agreement dated as
of March 4, 1996 among the Partnership, the Operating
Partnership, Quantum, the General Partner and the Service
Company.
* 10.4 Computer Services Agreement dated as of March 5, 1996
between Quantum and the Operating Partnership.
* 10.5 Distribution Support Agreement dated as of March 5, 1996
among the Partnership, the General Partner and Millennium.
* 10.6 Employment Agreement dated as of March 5, 1996 between the
Operating Partnership and Mr. Alexander.
*** 10.7 First Amendment to Employment Agreement dated as of March 5,
1996 between the Operating Partnership and Mr. Alexander
entered into as of October 23, 1997.
* 10.8 The Partnership's 1996 Restricted Unit Plan.
* 10.9 Form of Unit Grant Agreement pursuant to the Partnership's 1996
Restricted Unit Plan.
E-1
EXHIBIT
NUMBER DESCRIPTION
------ -----------
** 10.11 The Partnership Supplemental Executive Retirement Plan
(effective as of March 5, 1996).
** 10.12 The Partnership's Severance Protection Plan dated September
1996.
** 21.1 Listing of Subsidiaries of the Partnership.
*** 23.1 Consent of Independent Accountants.
*** 27.1 Financial Data Schedule.
- --------------------------------------------------------------------------------
* Incorporated by reference to the same numbered Exhibit to the
Partnership's Current Report Form 8-K filed April 29, 1996.
** Incorporated by reference to the same numbered Exhibit to the
Partnership's Annual Report on Form 10-K for the fiscal year ended
September 28, 1996.
*** Filed herewith.
E-2
EXECUTION COPY
AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of September 30, 1997,
by and among
SUBURBAN PROPANE, L.P.,
as Borrower,
the Lenders referred to herein,
FIRST UNION NATIONAL BANK,
as Administrative Agent,
and
THE BANK OF NEW YORK,
as Documentation Agent
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS......................................................1
SECTION 1.01 Definitions............................................1
SECTION 1.02 General...............................................14
SECTION 1.03 Other Definitions and Provisions......................14
ARTICLE II CREDIT FACILITIES..............................................14
SECTION 2.01 Loans.................................................14
SECTION 2.02 Swingline Loans.......................................15
SECTION 2.03 Procedure for Advances of Loans.......................16
SECTION 2.04 Repayment of Loans....................................17
SECTION 2.05 Notes.................................................18
SECTION 2.06 Reductions of the Aggregate Commitment................18
SECTION 2.07 Termination of Credit Facilities; Extension
of Termination Date...................................19
ARTICLE III GENERAL LOAN PROVISIONS.......................................20
SECTION 3.01 Interest..............................................20
SECTION 3.02 Notice and Manner of Conversion or Continuation
of Loans..............................................22
SECTION 3.04 Manner of Payment.....................................22
SECTION 3.05 Crediting of Payments and Proceeds....................23
SECTION 3.06 Adjustments...........................................23
SECTION 3.07 Nature of Obligations of Lenders Regarding Extensions
of Credit; Assumption by the Administrative Agent.....23
SECTION 3.08 Changed Circumstances.................................24
SECTION 3.09 Indemnity.............................................25
SECTION 3.10 Capital Requirements..................................25
SECTION 3.11 Taxes.................................................25
SECTION 3.12 Duty to Mitigate; Assignment of Commitments Under
Certain Circumstances.................................27
ARTICLE IV CLOSING; CONDITIONS OF CLOSING AND BORROWING...................27
SECTION 4.01 Closing...............................................27
SECTION 4.02 Conditions to Closing and Initial Extensions of
Credit................................................27
SECTION 4.03 Conditions to All Loans...............................30
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BORROWER..................30
SECTION 5.01 Representations and Warranties........................30
SECTION 5.02 Survival of Representations and Warranties, Etc.......35
ARTICLE VI FINANCIAL INFORMATION AND NOTICES..............................35
SECTION 6.01 Financial Statements..................................35
SECTION 6.02 Officer's Compliance Certificate......................36
SECTION 6.03 Other Reports.........................................36
SECTION 6.04 Notice of Litigation and Other Matters................36
SECTION 6.05 Accuracy of Information...............................37
ARTICLE VII AFFIRMATIVE COVENANTS.........................................37
SECTION 7.01 Existence; Businesses and Properties..................37
SECTION 7.02 Insurance.............................................37
SECTION 7.03 Taxes.................................................38
SECTION 7.04 Employee Benefits.....................................38
SECTION 7.05 Access to Premises and Records; Confidentiality.......38
SECTION 7.06 Compliance with Laws..................................38
SECTION 7.07 Additional Guarantors.................................39
SECTION 7.08 Use of Proceeds.......................................39
SECTION 7.09 Partnership Documents.................................39
SECTION 7.10 Compliance with Environmental and Safety Laws.........39
SECTION 7.11 Preparation of Environmental Reports..................39
SECTION 7.12 Corporate Identity....................................39
SECTION 7.13 Federal Reserve Regulations...........................40
SECTION 7.14 Available Cash Reserves...............................40
SECTION 7.15 Further Assurances....................................40
SECTION 7.16 Year 2000 Compatibility...............................40
SECTION 7.17 Commodity Hedging Policy..............................40
ARTICLE VIII FINANCIAL COVENANTS..........................................41
SECTION 8.01 Interest Coverage Ratio...............................41
SECTION 8.02 Leverage Ratio........................................41
SECTION 8.03 Adjusted Consolidated Net Worth.......................41
ARTICLE IX NEGATIVE COVENANTS.............................................41
SECTION 9.01 Indebtedness..........................................41
SECTION 9.02 Liens.................................................43
SECTION 9.03 Sale and Lease-Back Transactions......................45
SECTION 9.04 Investments, Loans and Advances.......................45
SECTION 9.05 Mergers, Consolidations, Sales of Assets
and Acquisitions......................................46
SECTION 9.06 Restricted Payments...................................47
SECTION 9.07 Transactions with Affiliates..........................48
SECTION 9.08 Business of Borrower and Subsidiaries.................48
SECTION 9.09 Material Agreements; Tax Status.......................49
SECTION 9.10 Lease Obligations.....................................49
SECTION 9.11 Priority Indebtedness.................................49
SECTION 9.12 Certain Accounting Changes............................49
SECTION 9.13 Restrictive Agreements................................49
ARTICLE X DEFAULT AND REMEDIES............................................50
SECTION 10.01 Events of Default.....................................50
SECTION 10.02 Remedies..............................................51
SECTION 10.03 Rights and Remedies Cumulative; Non-Waiver; etc.......52
ARTICLE XI THE ADMINISTRATIVE AGENT.......................................52
SECTION 11.01 Appointment...........................................52
SECTION 11.02 Delegation of Duties..................................52
SECTION 11.03 Exculpatory Provisions................................52
SECTION 11.04 Reliance by the Administrative Agent..................53
SECTION 11.05 Notice of Default.....................................53
SECTION 11.06 Non-Reliance on the Administrative Agent and
Other Lenders.........................................53
SECTION 11.07 Indemnification.......................................54
SECTION 11.08 The Administrative Agent in Its Individual Capacity...54
SECTION 11.09 Resignation of the Administrative Agent; Successor
Administrative Agent..................................54
SECTION 11.10 Documentation Agent...................................54
ARTICLE XII MISCELLANEOUS.................................................55
SECTION 12.01 Notices...............................................55
SECTION 12.02 Expenses; Indemnity...................................56
SECTION 12.03 Set-off...............................................57
SECTION 12.04 Governing Law.........................................57
SECTION 12.05 Consent to Jurisdiction...............................57
SECTION 12.06 Binding Arbitration; Waiver of Jury Trial.............57
SECTION 12.07 Reversal of Payments..................................58
SECTION 12.08 Injunctive Relief; Punitive Damages...................58
SECTION 12.09 Accounting Matters....................................59
SECTION 12.10 Successors and Assigns; Participations................59
SECTION 12.11 Amendments, Waivers and Consents......................61
SECTION 12.12 Performance of Duties.................................62
SECTION 12.13 All Powers Coupled with Interest......................62
SECTION 12.14 Survival of Indemnities...............................62
SECTION 12.15 Titles and Captions...................................62
SECTION 12.16 Severability of Provisions............................62
SECTION 12.17 Counterparts..........................................62
SECTION 12.18 Term of Agreement.....................................62
EXHIBITS
Exhibit A-1 - Form of Revolving Credit Note
Exhibit A-2 - Form of Acquisition Loan Note
Exhibit A-3 - Form of Swingline Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Notice of Prepayment
Exhibit D - Form of Notice of Conversion/Continuation
Exhibit E - Form of Officer's Certificate
Exhibit F - Form of Assignment and Acceptance
Exhibit G - Form of Notice of Account Designation
Exhibit H - Form of Guarantee Agreement
Exhibit I - Distribution Support Agreement
Exhibit J - Senior Note Agreement
SCHEDULES
Schedule 1 - Lenders and Commitments
Schedule 5.01(a) - Jurisdictions of Organization and Qualification
Schedule 5.01(b) - Subsidiaries and Capitalization
Schedule 5.01(m) - Employee Relations
Schedule 5.01(t) - Indebtedness and Contingent Obligations
Schedule 5.01(u) - Litigation
Schedule 9.02 - Existing Liens
Schedule 9.04 - Existing Loans, Advances and Investments
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of the thirtieth day of
September, 1997, by and among SUBURBAN PROPANE, L.P., a limited partnership
organized under the laws of Delaware (the "Borrower"), the Lenders who are or
may become a party to this Agreement, FIRST UNION NATIONAL BANK, as
Administrative Agent for the Lenders and THE BANK OF NEW YORK, as Documentation
Agent.
STATEMENT OF PURPOSE
Pursuant to a Credit Agreement, dated as of February 28, 1996 (as
amended by the First Amendment, dated as of September 23, 1996, the
"Original Credit Agreement"), among the Borrower, the lenders party thereto (the
"Original Lenders") and The Chase Manhattan Bank, formerly known as Chemical
Bank ("Chase"), as Administrative Agent for the Original Lenders, the Original
Lenders have extended certain credit facilities to the Borrower. The Borrower
has requested, and the Lenders have agreed, to amend and restate the Original
Credit Agreement on the terms and conditions of this Agreement. In connection
with such amendment and restatement and as of the date hereof, the Lenders party
hereto shall constitute the Lenders hereunder and First Union National Bank will
become the Administrative Agent for the Lenders and Chase will have no further
duties or liabilities as Agent under the Original Credit Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, such parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 DEFINITIONS.
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The following terms when used in this Agreement shall have the
meanings assigned to them below:
"ACQUISITION LOAN" means any of the acquisition loans made by the
Lenders to the Borrower pursuant to Section 2.01(b).
"ACQUISITION LOAN COMMITMENT" means, as to any Lender, the obligation
of such Lender to make Acquisition Loans to the Borrower hereunder in an
aggregate principal or face amount at any time outstanding not to exceed the
amount so designated opposite such Lender's name on SCHEDULE 1 hereto, as the
same may be reduced or modified at any time or from time to time pursuant to the
terms hereof.
"ACQUISITION LOAN FACILITY" means the acquisition loan facility
established pursuant to Article II hereof.
"ACQUISITION LOAN NOTES" means the separate Acquisition Loan Notes made
by the Borrower payable to the order of each Lender, substantially in the form
of EXHIBIT A-2 hereto, evidencing the Acquisition Loan Facility, and any
amendments and modifications thereto, any substitutes therefor, and any
replacements, restatements, renewals or extension thereof, in whole or in part;
"Acquisition Loan Note" means any of such Notes.
"ADDITIONAL PARTNERSHIP UNITS" means the non-voting limited partnership
interests in the Parent contemplated by Section 5.6 of the Agreement of Limited
Partnership of the Parent and the Registration Statement.
"ADJUSTED CONSOLIDATED NET WORTH" means, with respect to the Borrower
and the Subsidiaries on a consolidated basis at any time, the sum at such time
of (a) Consolidated Net Worth of the Borrower and the Subsidiaries at such time
and (b) the aggregate amount of goodwill amortization recorded from and after
the "Effective Date" of the Original Credit Agreement, determined on a
Consolidated basis in accordance with GAAP.
"ADMINISTRATIVE AGENT" means First Union in its capacity as
Administrative Agent hereunder, and any successor thereto appointed pursuant to
Section 11.09.
"ADMINISTRATIVE AGENT'S OFFICE" means the office of the Administrative
Agent specified in or determined in accordance with the provisions of Section
12.01.
"AFFILIATE" means, with respect to any Person, any other Person (other
than a Subsidiary) which directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such first Person or any of its Subsidiaries. The term "control" means the
possession, directly or indirectly, of any other power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.
"AGGREGATE ACQUISITION LOAN COMMITMENT" means the aggregate amount of
the Lenders' Acquisition Loan Commitments hereunder, as such amount may be
reduced or modified at any time or from time to time pursuant to the terms
hereof. On the Closing Date, the Aggregate Acquisition Loan Commitment shall be
Twenty-Five Million Dollars ($25,000,000).
"AGGREGATE COMMITMENT" means the aggregate amount of the Lenders'
Commitments hereunder, as such amount may be reduced or modified at any time or
from time to time pursuant to the terms hereof. On the Closing Date, the
Aggregate Commitment shall be One Hundred Million Dollars ($100,000,000).
"AGGREGATE REVOLVING CREDIT COMMITMENT" means the aggregate amount of
the Lenders' Revolving Credit Commitments hereunder, as such amount may be
reduced or modified at any time or from time to time pursuant to the terms
hereof. On the Closing Date, the Aggregate Revolving Credit Commitment shall be
Seventy-Five Million Dollars ($75,000,000).
"AGREEMENT" means this Amended and Restated Credit Agreement, as
amended or modified from time to time.
"APPLICABLE LAW" means all applicable provisions of constitutions,
statutes, laws, rules, treaties, regulations and orders of all Governmental
Authorities and all orders and decrees of all courts and arbitrators.
"APPLICABLE MARGIN" shall have the meaning assigned thereto in Section
3.01(c).
"ASSIGNMENT AND ACCEPTANCE" shall have the meaning assigned thereto in
Section 12.10.
"AVAILABLE CASH" means, with respect to any fiscal quarter of the
Borrower:
(a) the sum of (i) all cash and cash equivalents of the
Borrower and the Subsidiaries on hand at the end of such quarter, and
(ii) all additional cash and cash equivalents of the Borrower and the
Subsidiaries on hand on the date of determination of Available Cash
with respect to such quarter resulting from borrowings hereunder and
purchases of Additional Partnership Units, in each case subsequent to
the end of such quarter, less
(b) the amount of cash reserves that is necessary or
appropriate in the reasonable discretion of the Board of Supervisors of
the Borrower to (i) provide for the proper conduct of the business of
the Borrower and the Subsidiaries (including reserves for future
capital expenditures) subsequent to such quarter, (ii) comply with
Applicable Law or any loan agreement (including, but not limited to,
this Agreement), security agreement, mortgage, debt instrument or other
agreement or obligation to which the Borrower or any Subsidiary is a
party or by which it is bound or its assets are subject and which is
permitted by the terms hereof or (iii) provide funds for distributions
to partners of the Parent and the General Partner in respect of any one
or more of the next four fiscal quarters; PROVIDED that the Board of
Supervisors shall not establish cash reserves pursuant to clause (iii)
if the effect of such reserves would be that the Parent is unable to
distribute the Minimum Quarterly Distribution on the Common Units with
respect to such quarter; and PROVIDED, FURTHER, that disbursements made
or cash reserves established, increased or reduced after the end of
such quarter but on or before the date of determination of Available
Cash with respect to such quarter shall be deemed to have been made,
established, increased or reduced, for purposes of determining
Available Cash, within such quarter if the Board of Supervisors of the
Borrower so determines.
In addition, without limitation or duplication of the foregoing,
Available Cash for any fiscal quarter shall reflect reserves equal to
(A) 50% of the interest projected to be paid on the Senior Notes, the
Refinancing Notes and any Loans outstanding or projected to be
outstanding hereunder in the next succeeding fiscal quarter and (B)
beginning with a date three fiscal quarters before a scheduled
principal payment date on the Senior Notes, the Refinancing Notes or
the Loans, 25% of the aggregate principal amount thereof due on any
such payment date in the third succeeding fiscal quarter, 50% of the
aggregate principal amount due on any such quarterly payment date in
the second succeeding fiscal quarter and 75% of the aggregate principal
amount due on any quarterly payment date in the next succeeding fiscal
quarter and (C) the aggregate amount deemed not to constitute
Designated Net Proceeds pursuant to the further proviso contained in
the definition of "Designated Net Proceeds". The foregoing reserves for
amounts to be paid at any time shall be reduced by the amount of the
Blocked Portion then in effect.
"BASE RATE" means, at any time, the higher of (a) the Prime Rate or (b)
the Federal Funds Rate PLUS 1/2 of 1%; each change in the Base Rate shall take
effect simultaneously with the corresponding change or changes in the Prime Rate
or the Federal Funds Rate.
"BASE RATE LOAN" means any Loan bearing interest at a rate based upon
the Base Rate as provided in Section 3.01(a).
"BLOCKED PORTION" shall have the meaning assigned to such term in
Section 2.01(c).
"BOARD OF SUPERVISORS" means, with respect to the Parent or the
Borrower, as the case may be, such Board of Supervisors as defined in the
Agreement of Limited Partnership of the Parent or the Agreement of Limited
Partnership of the Borrower, as applicable.
"BORROWER" means Suburban Propane, L.P. in its capacity as borrower
hereunder.
"BUSINESS" means the propane business, assets and liabilities of the
Borrower and its Subsidiaries.
"BUSINESS DAY" means (a) for all purposes other than as set forth in
clause (b) below, any day other than a Saturday, Sunday or legal holiday on
which banks in Charlotte, North Carolina and New York, New York, are open for
the conduct of their commercial banking business, and (b) with respect to all
notices and determinations in connection with, and payments of principal and
interest on, any LIBOR Rate Loan, any day that is a Business Day described in
clause (a) and that is also a day for trading by and between banks in Dollar
deposits in the London interbank market.
"CAPITAL ASSET" means, with respect to the Borrower and its
Subsidiaries, any asset that should, in accordance with GAAP, be classified and
accounted for as a capital asset on a Consolidated balance sheet of the Borrower
and its Subsidiaries.
"CAPITAL LEASE" means, with respect to the Borrower and its
Subsidiaries, any lease of any property that should, in accordance with GAAP, be
classified and accounted for as a capital lease on a Consolidated balance sheet
of the Borrower and its Subsidiaries.
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of such Person,
including any preferred stock, any limited or general partnership interest and
any limited liability company membership interest.
"CHANGE IN OWNERSHIP" means the occurrence, at any time prior to the
earlier of March 31, 2002 and the date upon which the last Subordinated Unit
shall have converted into a Common Unit in accordance with the terms for
conversion set forth in the Registration Statement of any of the following
events: (a) the Qualified Owners, alone or together, shall fail to own directly
or indirectly, beneficially and of record (i) 100% of the issued and outstanding
Capital Stock of the General Partner, (ii) 100% of the general partnership
interests in each of the Parent and the Borrower and (iii) any Subordinated Unit
not converted into a Common Unit, in each case free and clear of any and all
Liens (other than any Lien securing the payment of any taxes, assessments or
governmental charges or levies, either (A) not delinquent or (B) being contested
in good faith by appropriate legal or administrative proceedings and as to
which, to the extent required by GAAP, adequate reserves shall have been set
aside on the books of the Person whose assets are subject to such Lien); (b) a
majority of the seats (excluding vacant seats) on the Board of Supervisors of
the Parent or the Borrower should at any time after the Closing Date be occupied
by Persons who were not nominated by the General Partner, by a majority of the
Board of Supervisors of the Parent or the Borrower or by Persons so nominated;
or (c) a change in control with respect to the General Partner, the Parent, or
the Borrower (or similar event, however denominated) should occur under and as
defined in any indenture or agreement in respect of Indebtedness in an aggregate
outstanding principal amount in excess of $10,000,000 to which the General
Partner, the Parent, the Borrower or any Subsidiary is party.
"CLEANDOWN PERIOD" means a period of thirty (30) consecutive days
selected by the Borrower during each Fiscal Year.
"CLOSING DATE" means the date of this Agreement or such later Business
Day upon which each condition described in Article V shall be satisfied or
waived in all respects in a manner acceptable to the Administrative Agent, in
its sole discretion.
"CODE" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, each as amended or supplemented from time to time.
"COMMITMENT" means, as to any Lender, such Lender's Acquisition Loan
Commitment and Revolving Credit Commitment, as set forth opposite such Lender's
name on Schedule 1 hereto, as the same may be reduced or modified at any time or
from time to time pursuant to the terms hereof.
"COMMITMENT PERCENTAGE" means, as to any Lender at any time, the ratio
of (a) for Revolving Credit Loans, (i) the amount of the Revolving Credit
Commitment of such Lender to (ii) the Aggregate Revolving Credit Commitment of
all of the Lenders and (b) for Acquisition Loans, (i) the amount of the
Acquisition Loan Commitment of such Lender to (ii) the Aggregate Acquisition
Loan Commitment of all of the Lenders.
"COMMODITY HEDGING AGREEMENT" means any agreement with respect to a
commodity swap or other agreement regarding the hedging of commodity purchase
and sale exposure executed in connection with hedging the commodity purchase and
sale exposure of the Borrower, and any confirming letter executed pursuant to
such commodity hedging agreement, all as amended, restated or otherwise
modified.
"COMMON UNITS" means Common Units of the Parent representing limited
partner interests in the Parent.
"CONSOLIDATED" means, when used with reference to financial statements
or financial statement items of the Borrower and its Subsidiaries, such
statements or items on a consolidated basis in accordance with applicable
principles of consolidation under GAAP.
"CONSOLIDATED NET WORTH" means, with respect to any Person and its
Subsidiaries on a consolidated basis at any time, the lesser at such time of (a)
partners' capital or stockholders' equity, as applicable, of such Person and its
Subsidiaries at such time, determined on a consolidated basis in accordance with
GAAP, and (b) "Consolidated Net Worth" as defined in the Senior Note Agreement
of such Person and its Subsidiaries at such time.
"CONTINGENT OBLIGATION" means, with respect to the Borrower and its
Subsidiaries, without duplication, any obligation, contingent or otherwise, of
any such Person pursuant to which such Person has directly or indirectly
guaranteed any Indebtedness or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of any such Person (a) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Indebtedness or other
obligation (whether arising by virtue of partnership arrangements, by agreement
to keep well, to purchase assets, goods, securities or services, to take-or-pay,
or to maintain financial statement condition or otherwise) or (b) entered into
for the purpose of assuring in any other manner the obligee of such Indebtedness
or other obligation of the payment thereof or to protect such obligee against
loss in respect thereof (in whole or in part); PROVIDED, that the term
Contingent Obligation shall not include endorsements for collection or deposit
in the ordinary course of business.
"CREDIT FACILITIES" means the collective reference to the Revolving
Credit Facility and the Acquisition Loan Facility.
"DEFAULT" means any of the events specified in Section 10.01 which with
the passage of time, the giving of notice or any other condition, would
constitute an Event of Default.
"DESIGNATED NET PROCEEDS" means 100% of all proceeds in cash or cash
equivalents (including cash proceeds subsequently received in respect of noncash
consideration initially received), net of selling expenses (including reasonable
broker's fees or commissions, transfer and similar taxes, the Borrower's good
faith estimate of income taxes incurred in connection with the receipt of such
proceeds and appropriate reserves to be provided by the Borrower or any
Subsidiary as a reserve required in accordance with GAAP against any liabilities
associated with such sale, transfer or other disposition and retained by the
Borrower or such Subsidiary after such sale, transfer or disposition), from any
sale, transfer or other disposition (other than the sale of inventory in the
ordinary course) of any asset or assets of the Borrower or any Subsidiary
(including the sale or issuance of any Capital Stock of any Subsidiary) to any
Person in any transaction, transactions or related series of transactions;
PROVIDED, that the first $15,000,000 of such net proceeds received in any Fiscal
Year (the "Exempt Proceeds") shall not constitute Designated Net Proceeds;
PROVIDED FURTHER, that if the Borrower shall deliver a certificate of a
Responsible Officer to the Administrative Agent promptly following receipt of
any such proceeds in any Fiscal Year in excess of the Exempt Proceeds for such
Fiscal Year certifying that the Borrower intends to use any portion of such
excess proceeds to acquire productive assets in the same line of business as the
assets sold within 12 months of such receipt, such portion shall not constitute
Designated Net Proceeds except to the extent not so used within such 12-month
period.
"DESIGNATED NET INSURANCE/CONDEMNATION PROCEEDS" means 100% of all
insurance or condemnation proceeds received in cash or cash equivalents, net of
reasonable costs of proceedings in connection therewith and any settlement in
respect thereof, from any damage, destruction, condemnation or other taking
involving insurance or condemnation proceeds in excess of $100,000 with respect
to any single occurrence; PROVIDED, that the first $2,500,000 of such net
proceeds received in any Fiscal Year (the "Exempt Insurance/Condemnation
Proceeds") shall not constitute Designated Net Insurance/Condemnation Proceeds;
PROVIDED FURTHER, that if the Borrower shall deliver a certificate of a
Responsible Officer to the Administrative Agent promptly following receipt of
any such proceeds in any Fiscal Year in excess of the Exempt
Insurance/Condemnation Proceeds for such Fiscal Year certifying that the
Borrower intends to use any portion of such excess proceeds to restore, modify
or replace the properties or assets in respect of which such insurance or
condemnation proceeds were received within 12 months of such receipt, such
portion shall not constitute Designated Net Insurance/Condemnation Proceeds
except to the extent not so used within such 12-month period.
"DISTRIBUTION SUPPORT AGREEMENT" means the Distribution Support
Agreement dated as of March 5, 1996 by and among the General Partner, the Parent
and Millennium America, Inc., formerly known as Hanson America, Inc.
"DOLLARS" OR "$" means, unless otherwise qualified, dollars in lawful
currency of the United States.
"EBITDA" means, with respect to the Borrower and its Subsidiaries on a
Consolidated basis for any period, the Consolidated net income of the Borrower
and its Subsidiaries for such period, computed in accordance with GAAP, PLUS, to
the extent deducted in computing such Consolidated net income and without
duplication, the sum of (a) income tax expense, (b) Interest Expense, (c)
depreciation and amortization expense and (d) extraordinary losses during such
period MINUS, to the extent added in computing such Consolidated net income and
without duplication, extraordinary gains during such period.
"ELIGIBLE ASSIGNEE" means, with respect to any assignment of the
rights, interest and obligations of a Lender hereunder, a Person that is at the
time of such assignment (a) a commercial bank organized or licensed under the
laws of the United States or any state thereof, having combined capital and
surplus in excess of $500,000,000, (b) a finance company, insurance company or
other financial institution which in the ordinary course of business extends
credit of the type extended hereunder and that has total assets in excess of
$1,000,000,000, (c) already a Lender hereunder (whether as an original party to
this Agreement or as the assignee of another Lender) or an Affiliate or
Subsidiary thereof, (d) the successor (whether by transfer of assets, merger or
otherwise) to all or substantially all of the commercial lending business of the
assigning Lender, or (e) any other Person that has been approved in writing as
an Eligible Assignee by the Administrative Agent and, if no Default or Event of
Default exists and is continuing, the Borrower.
"EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which (a) is maintained for employees of the
Borrower or any ERISA Affiliate or (b) has at any time within the preceding six
years been maintained for the employees of the Borrower or any current or former
ERISA Affiliate.
"ENVIRONMENTAL AND SAFETY LAWS" means any and all federal, state and
local laws, statutes, ordinances, rules, regulations, permits, licenses,
approvals, interpretations and orders of courts or Governmental Authorities,
relating to the protection of human health (including, but not limited to
employee health and safety) or the environment, including, but not limited to,
requirements pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
the rules and regulations thereunder, each as amended or modified from time to
time.
"ERISA AFFILIATE" means any Person who together with the Borrower is
treated as a single employer within the meaning of Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b) of ERISA.
"ERISA EVENT" means (i) any "reportable event", as defined in Section
4043 of ERISA or the regulations issued thereunder, with respect to a Pension
Plan; (ii) the adoption of any amendment to a Pension Plan that would require
the provision of security pursuant to Section 401(a)(29) of the Code or Section
307 of ERISA; (iii) the existence with respect to any Pension Plan of an
"accumulated funding deficiency" (as defined in Section 412 of the Code or
Section 302 of ERISA), whether or not waived; (iv) the filing pursuant to
Section 412(d) of the Code or Section 303(d) of ERISA of an application for a
waiver of the minimum funding standard with respect to any Pension Plan; (v) the
incurrence of any liability under Title IV of ERISA with respect to the
termination of any Pension Plan or the withdrawal or partial withdrawal of the
Borrower or any of its ERISA Affiliates from any Pension Plan or Multiemployer
Plan; (vi) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a
plan administrator of any notice relating to the intention to terminate any
Pension Plan or Pension Plans or to appoint a trustee to administer any Pension
Plan; (vii) the receipt by the Borrower or any ERISA Affiliate of any notice
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA or the institution of proceedings to
terminate, or the appointment of a trustee with respect to, any Pension Plan by
the PBGC; (viii) the occurrence of a "prohibited transaction" with respect to
which the Borrower or any of its subsidiaries is a "disqualified person" (within
the meaning of Section 4975 of the Code) and with respect to which the Borrower
or any such subsidiary would be liable for the payment of an excise tax and (ix)
any other event or condition which would constitute grounds under Section
4042(a) of ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan.
"EURODOLLAR RESERVE PERCENTAGE" means, for any day, the percentage
(expressed as a decimal and rounded upwards, if necessary, to the next higher
1/100th of 1%) which is in effect for such day as prescribed by the Federal
Reserve Board (or any successor) for determining the maximum reserve requirement
(including without limitation any basic, supplemental or emergency reserves) in
respect of Eurocurrency liabilities or any similar category of liabilities for a
member bank of the Federal Reserve System in New York City.
"EVENT OF DEFAULT" means any of the events specified in Section 10.01;
PROVIDED that any requirement for passage of time, giving of notice, or any
other condition, has been satisfied.
"EXTENSIONS OF CREDIT" means, as to any Lender at any time, an amount
equal to the sum of the aggregate principal amount of all Loans made by such
Lender then outstanding.
"FDIC" means the Federal Deposit Insurance Corporation, or any
successor thereto.
"FEDERAL FUNDS RATE" means, the rate per annum (rounded upwards, if
necessary, to the next higher 1/100th of 1%) representing the daily effective
federal funds rate as quoted by the Administrative Agent and confirmed in
Federal Reserve Board Statistical Release H.15 (519) or any successor or
substitute publication selected by the Administrative Agent. If, for any reason,
such rate is not available, then "Federal Funds Rate" means a daily rate which
is determined, in the opinion of the Administrative Agent, to be the rate at
which federal funds are being offered for sale in the national federal funds
market at 9:00 a.m. (Charlotte time). Rates for weekends or holidays shall be
the same as the rate for the most immediate preceding Business Day.
"FINANCIAL OFFICER" of any Person shall mean the chief financial
officer, the treasurer or the principal accounting officer of such Person.
"FIRST UNION" means First Union National Bank, a national banking
association, and its successors.
"FISCAL YEAR" means the 52-week fiscal year of the Borrower and its
Subsidiaries ending on the last Saturday in September.
"GAAP" means generally accepted accounting principles, as recognized by
the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board, consistently applied and maintained on a consistent
basis for the Borrower and its Subsidiaries throughout the period indicated and
consistent with the prior financial practice of the Borrower and its
Subsidiaries.
"GENERAL PARTNER" means Suburban Propane GP, Inc., a Delaware
corporation and, on the Closing Date, a wholly-owned subsidiary of Millennium,
or any Person thereafter serving as successor general partner of both the
Borrower and the Parent, as permitted by the Agreement of Limited Partnership of
the Borrower and the Agreement of Limited Partnership of the Parent,
respectively.
"GOVERNMENTAL APPROVALS" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.
"GOVERNMENTAL AUTHORITY" means any nation, province, state or political
subdivision thereof, and any government or any Person exercising executive,
legislative, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"GUARANTEE" of or by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person (the "primary obligor")
(excluding endorsements of checks for collection or deposit in the ordinary
course of business) in any manner, whether directly or indirectly, and including
any obligation of such Person, direct or indirect, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness, (ii) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness of the
payment of such Indebtedness or (iii) to maintain working capital, equity
capital or other financial statement condition or liquidity of the primary
Obligor so as to enable the primary obligor to pay such Indebtedness.
"GUARANTEE AGREEMENT" shall mean the Guarantee Agreement, substantially
in the form of EXHIBIT H, to be entered into by each Subsidiary of the Borrower
(other than any foreign Subsidiary, Suburban Sales and Service, Inc. and Jackson
Vangas) for the benefit of the Lenders and the Administrative Agent.
"GUARANTOR" means each Subsidiary that is party to the Guarantee
Agreement.
"HEDGING AGREEMENT" means any agreement with respect to an interest
rate swap, collar, cap, floor or a forward rate agreement or other agreement
regarding the hedging of interest rate risk exposure executed in connection with
hedging the interest rate exposure of the Borrower under this Agreement, and any
confirming letter executed pursuant to such hedging agreement, all as amended,
restated or otherwise modified.
"INDEBTEDNESS" means, with respect to any Person, without duplication
(a) all obligations of such Person for borrowed money or with respect to
deposits or advances of any kind (including repurchase obligations), (b) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments or letters of credit in support of bonds, notes, debentures or
similar instruments, (c) all obligations of such Person upon which interest
charges are customarily paid, (d) all obligations of such Person under
conditional sale or other title retention agreement relating to property
purchased by such Person, (e) all obligations of such Person issued or assumed
as the deferred purchase price of property or services, (f) all obligations
under Capital Leases of such Person, (g) all obligations of others secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien on property or assets owned or acquired
by such Person, whether or not the obligations secured thereby have been
assumed, (h) all Guarantees of such Person, (i) all obligations of such Person
with respect to interest rate protection agreements (including without
limitation Hedging Agreements), foreign currency exchange agreements, Commodity
Hedging Agreements or other hedging arrangements (valued at the termination
value thereof computed in accordance with a method approved by the International
Swap Dealers Association and agreed to by such Person in the applicable Hedging
Agreement, if any), (j) all obligations of such Person as an account party in
respect of letters of credit (i) securing Indebtedness (other than a letter of
credit that would not constitute Indebtedness under clause (ii)) or (ii)
obtained for any purpose not in the ordinary course of business or not
consistent with past practices and (k) all obligations of such Person in respect
of bankers' acceptances; PROVIDED that accounts payable to suppliers incurred in
the ordinary course of business and paid in the ordinary course of business
consistent with past practices shall not constitute Indebtedness.
"INTEREST EXPENSE" means, with respect to any period, the sum of,
without duplication, gross interest expense and capitalized interest of the
Borrower and the Subsidiaries for such period minus interest income of the
Borrower and the Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP.
"INTEREST PERIOD" shall have the meaning assigned thereto in Section
3.01(b).
"INVESTMENT" means, as applied to any Person, any direct or indirect
purchase or other acquisition by such Person of stock or other securities of any
other Person, or any direct or indirect loan, advance or capital contribution by
such Person to any other Person and any other item which would be classified as
an "investment" on a balance sheet of such Person prepared in accordance with
GAAP, including without limitation any direct or indirect contribution by such
Person of property or assets to a joint venture, partnership or other business
entity in which such Person retains an interest (it being understood that a
direct or indirect purchase or other acquisition by such Person of assets of any
other Person (other than stock or other securities) shall not constitute an
"Investment" for purposes of this Agreement).
"JACKSON VANGAS" means Jackson Vangas, a Wyoming corporation.
"LENDER" means each Person executing this Agreement as a Lender set
forth on the signature pages hereto and each Person that hereafter becomes a
party to this Agreement as a Lender pursuant to Section 12.10.
"LENDERS' PORTION" means, with respect to any Designated Net Proceeds
or any Designated Net Insurance/Condemnation Proceeds, the ratio, expressed as a
percentage, in effect as of noon, Charlotte time, on the date on which such
Designated Net Proceeds or Designated Net Insurance/Condemnation Proceeds, as
applicable, are being applied pursuant to Section 2.04(f) and/or Section
2.06(b), of (i) the Aggregate Commitment to (ii) the sum of (x) the amount
referred to in clause (i) and (y) the aggregate principal amount at such time of
the Senior Notes.
"LENDING OFFICE" means, with respect to any Lender, the office of such
Lender maintaining such Lender's Commitment Percentage of the Loans.
"LIBOR" means the rate for deposits in Dollars for a period equal to
the Interest Period selected which appears on the Telerate Page 3750 at
approximately 11:00 a.m. London time, two (2) Business Days prior to the
commencement of the applicable Interest Period. If, for any reason, such rate is
not available, then "LIBOR" shall mean the rate per annum at which, as
determined by the Administrative Agent, Dollars in the amount of $5,000,000 are
being offered to leading banks at approximately 11:00 a.m. London time, two (2)
Business Days prior to the commencement of the applicable Interest Period for
settlement in immediately available funds by leading banks in the London
interbank market for a period equal to the Interest Period selected.
"LEVERAGE RATIO" means, on any date, the ratio of (a) Total
Indebtedness as of such date to (b) an amount equal to the aggregate amount of
EBITDA of the Borrower and its Subsidiaries for the period of four consecutive
fiscal quarters ended most recently on or prior to such date, determined on a
Consolidated basis in accordance with GAAP.
"LIBOR RATE" means a rate per annum (rounded upwards, if necessary, to
the next higher 1/100th of 1%) determined by the Administrative Agent pursuant
to the following formula:
LIBOR Rate = LIBOR
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1.00-Eurodollar Reserve Percentage
"LIBOR RATE LOAN" means any Loan bearing interest at a rate based upon
the LIBOR Rate as provided in Section 3.01(a).
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, Capital Lease or other
title retention agreement relating to such asset.
"LOAN" means any Revolving Credit Loan, Acquisition Loan or Swingline
Loan made to the Borrower pursuant to Section 2.01, and all such Loans
collectively as the context requires.
"LOAN DOCUMENTS" means, collectively, this Agreement, the Notes, any
Hedging Agreement executed by any Lender, the Guarantee Agreement and each other
document, instrument and agreement executed and delivered by the Borrower, its
Subsidiaries or their counsel in connection with this Agreement or otherwise
referred to herein or contemplated hereby, all as may be amended, restated or
otherwise modified.
"MATERIAL ADVERSE EFFECT" means (a) a materially adverse effect on the
business, assets, operations, prospects or financial condition of the Business,
the General Partner, the Parent, the Borrower or the Borrower and the
Subsidiaries taken as a whole, (b) any material impairment of the ability of the
Borrower or any Subsidiary to perform any of its Obligations under any Loan
Document or (c) any material impairment of the rights of or benefits available
to the Lenders or the Administrative Agent under any of the Loan Documents.
"MILLENNIUM" means Millennium America, Inc., a Delaware corporation.
"MINIMUM QUARTERLY DISTRIBUTION" means, with respect to each quarter,
the aggregate amount required (a) to pay each holder of Common Units and each
holder of Subordinated Units in respect of each Common Unit and each
Subordinated Unit the minimum quarterly distribution per Unit specified in the
Registration Statement and (b) to pay the General Partner an amount equal to
2.0% of such aggregate amount.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making, or
is accruing an obligation to make, contributions within the preceding six years.
"NOTES" means the collective reference to the Revolving Credit Notes,
the Acquisition Loan Notes and the Swingline Note; "Note" means any of such
Notes.
"NOTICE OF ACCOUNT DESIGNATION" shall have the meaning assigned thereto
in Section 2.03(b).
"NOTICE OF BORROWING" shall have the meaning assigned thereto in
Section 2.03(a).
"NOTICE OF CONVERSION/CONTINUATION" shall have the meaning assigned
thereto in Section 3.02.
"NOTICE OF PREPAYMENT" shall have the meaning assigned thereto in
Section 2.04(d).
"OBLIGATIONS" means, in each case, whether now in existence or
hereafter arising: (a) the principal of and interest on (including interest
accruing after the filing of any bankruptcy or similar petition) the Loans, (b)
all payment and other obligations owing by the Borrower to any Lender or the
Administrative Agent under any Hedging Agreement to which a Lender is a party
which is permitted under this Agreement and (c) all other fees and commissions
(including attorney's fees), charges, indebtedness, loans, liabilities,
financial accommodations, obligations, covenants and duties owing by the
Borrower to the Lenders or the Administrative Agent, of every kind, nature and
description, direct or indirect, absolute or contingent, due or to become due,
contractual or tortious, liquidated or unliquidated, and whether or not
evidenced by any note, and whether or not for the payment of money under or in
respect of this Agreement, any Note or any of the other Loan Documents.
"OFFICER'S COMPLIANCE CERTIFICATE" shall have the meaning assigned
thereto in Section 6.02.
"OTHER TAXES" shall have the meaning assigned thereto in Section 3.11
(b).
"PARENT" means Suburban Propane Partners, L.P., a Delaware limited
partnership.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency.
"PARTNERSHIP DOCUMENTS" means the Agreement of Limited Partnership of
the Parent, the Agreement of Limited Partnership of the Borrower and the
Distribution Support Agreement, in each case as in effect on the date hereof and
as the same may from time to time be amended, supplemented or otherwise modified
in accordance with the terms hereof and thereof.
"PENSION PLAN" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or
Section 412 of the Code and which (a) is maintained for employees of the
Borrower or any ERISA Affiliates or (b) has at any time within the preceding six
years been maintained for the employees of the Borrower or any of their current
or former ERISA Affiliates.
"PERMITTED BUSINESS ACQUISITION" means any acquisition of all or
substantially all the assets of, or all the shares or other equity interests in,
a Person or division or line of business of a Person (or any subsequent
investment made in a previously acquired Permitted Business Acquisition) if
immediately after giving effect thereto: (a) no Event of Default or Default or
Senior Note Default shall have occurred and be continuing or would result
therefrom, (b) all transactions related thereto shall be consummated in
accordance with applicable laws, (c) all the Capital Stock of any acquired or
newly formed corporation, partnership, association or other business entity is
owned directly by the Borrower or a domestic Wholly-Owned Subsidiary and such
acquired or newly formed Subsidiary shall have entered into the Guarantee
Agreement, (d) the Borrower and the Subsidiaries shall be in compliance, on a
pro forma basis after giving effect to such acquisition or formation, with the
covenants contained in Article VIII recomputed as at the last day of the most
recently ended fiscal quarter of the Borrower and the Subsidiaries as if such
acquisition had occurred on the first day of each relevant period for testing
such compliance, and, in the case of any transaction involving consideration
(whether cash or property, as valued at the time such transaction is
consummated) in excess of $5,000,000, the Borrower shall have delivered to the
Administrative Agent a certificate of a Responsible Officer to such effect,
together with all relevant financial information for such Subsidiary or assets
and calculations demonstrating such compliance, (e) any acquired or newly formed
Subsidiary shall not be liable for any Indebtedness (except for Indebtedness
permitted by Section 9.01) and (f) the Required Lenders shall have given their
prior written consent (which consent shall not be unreasonably withheld, taking
into consideration the merits of the acquisition) in the case of (i) any
acquisition outside the business currently conducted by the Borrower involving
consideration (whether cash or property, as valued at the time each investment
is made) in excess of $5,000,000 and (ii) any acquisition if as a result thereof
the aggregate consideration (whether cash or property, as valued at the time
each investment is made) for all acquisitions (net of return of capital of (but
not return on) investments in such acquisitions) would be in excess of
$25,000,000.
"PERSON" means an individual, corporation, partnership, association,
trust, business trust, joint venture, joint stock company, pool, syndicate, sole
proprietorship, unincorporated organization, Governmental Authority or any other
form of entity or group thereof.
"PRIME RATE" means, at any time, the rate of interest per annum
publicly announced from time to time by First Union as its prime rate. Each
change in the Prime Rate shall be effective as of the opening of business on the
day such change in the Prime Rate occurs. The parties hereto acknowledge that
the rate announced publicly by First Union as its Prime Rate is an index or base
rate and shall not necessarily be its lowest or best rate charged to its
customers or other banks.
"QUALIFIED OWNER" means:
(a) Millennium;
(b) at any time, the publicly-traded Person that owns or that
owned at any time after the Closing Date, directly or indirectly, 100%
of the issued and outstanding Capital Stock of Millennium; or
(c) the Person that (i) acquires from Millennium, or its
Subsidiary, (A) 100% of the issued and outstanding Capital Stock of the
General Partner (PROVIDED that the General Partner shall at all times
comply with the provisions of the Distribution Support Agreement,
including without limitation section 3.1 thereof) and (B) 100% of the
Subordinated Units and (ii) assumes from Millennium its obligations as
the "APU Guarantor" under the Distribution Support Agreement (as such
term is defined therein), in accordance with the provisions of section
4.3 thereof.
"REFINANCING NOTE AGREEMENT" means one or more indentures or agreements
pursuant to which Refinancing Notes are issued.
"REFINANCING NOTES" means one or more series of notes issued by the
Borrower, the net proceeds of which are used by the Borrower to redeem Senior
Notes.
"REGISTER" shall have the meaning assigned thereto in Section 12.10(d).
"REGISTRATION STATEMENT" means the prospectus filed with the
Registration Statement on Form S-1 (No. 333-11055) filed by the Parent with the
Securities and Exchange Commission on August 29, 1996 and declared effective as
of September 23, 1996.
"REQUIRED LENDERS" means, at any date, any combination of holders of at
least fifty-one percent (51%) of the aggregate unpaid principal amount of the
Notes (other than the Swingline Note), or if no amounts are outstanding under
the Revolving Credit Notes and the Acquisition Loan Notes, any combination of
Lenders whose Commitment Percentages for the Revolving Credit Loans and
Acquisition Loans on a combined basis aggregate at least fifty-one percent
(51%).
"RESPONSIBLE OFFICER" means, with respect to any Person, any executive
officer or Financial Officer of such Person and any other officer or similar
official thereof responsible for the administration of the obligations of such
Person in respect of this Agreement.
"RESTRICTED PAYMENT" means with respect to each of the Borrower and its
Subsidiaries (the "Covered Persons"), (a) in the case of any Covered Person that
is a partnership, (i) any payment or other distribution, direct or indirect, in
respect of any partnership interest in such Covered Person, except a
distribution payable solely in additional partnership interests in such Covered
Person, and (ii) any payment, direct or indirect, by such Covered Person on
account of the redemption, retirement, purchase or other acquisition of any
partnership interest in such or any other Covered Person, except to the extent
that such payment consists of additional partnership interests in such Covered
Person; (b) in the case of any Covered Person that is a corporation, (i) any
dividend or other distribution, direct or indirect on account of any shares of
any class of stock of such Covered Person then outstanding, except a dividend
payable solely in shares of stock of such Covered Person, and (ii) any payment,
direct or indirect, by such Covered Person on account of the redemption,
retirement, purchase or other acquisition of any shares of any class of stock of
such Covered Person then outstanding, or of any warrants, rights or options to
acquire any such shares, except to the extent that such payment consists of
shares of Capital Stock of such Covered Person; and (c) in the case of any other
Covered Person, any payment analogous to the prepayments referred to in clauses
(a) and (b) above.
"REVOLVING CREDIT COMMITMENT" means, as to any Lender, the obligation
of such Lender to make Revolving Credit Loans to the Borrower hereunder in an
aggregate principal or face amount at any time outstanding not to exceed the
amount so designated opposite such Lender's name on SCHEDULE 1 hereto, as the
same may be reduced or modified at any time or from time to time pursuant to the
terms hereof.
"REVOLVING CREDIT FACILITY" means the revolving credit facility
established pursuant to Article II hereof.
"REVOLVING CREDIT LOAN" means any of the revolving credit loans made by
the Lenders to the Borrower pursuant to Section 2.01(a).
"REVOLVING CREDIT NOTES" means the separate Revolving Credit Notes made
by the Borrower payable to the order of each Lender, substantially in the form
of EXHIBIT A-1 hereto, evidencing the Revolving Credit Facility, and any
amendments and modifications thereto, any substitutes therefor, and any
replacements, restatements, renewals or extension thereof, in whole or in part;
"Revolving Credit Note" means any of such Notes.
"SENIOR NOTE AGREEMENT" means collectively the note agreements pursuant
to which the Senior Notes were issued, dated as of February 28, 1996, as amended
from time to time in accordance with Section 9.09.
"SENIOR NOTE DEFAULT" means any payment default or any other event or
condition with respect to the Senior Notes or any Refinancing Note the effect of
which is to cause, or permit the holder or holders of the Senior Notes or any
Refinancing Note or a trustee under any Refinancing Note Agreement (with or
without the giving of notice, the lapse of time or both) to cause the Senior
Notes or any Refinancing Note to become due prior to its stated maturity.
"SENIOR NOTES" means the 7.54% Senior Notes, due 2011, of the Borrower.
"SOLVENT" means, as to the Borrower and its Subsidiaries on a
particular date, that any such Person (a) has capital sufficient to carry on its
business and transactions and all business and transactions in which it is about
to engage and is able to pay its debts as they mature, (b) owns property having
a value, both at fair valuation and at present fair saleable value, greater than
the amount required to pay its probable liabilities (including contingencies),
and (c) does not believe that it will incur debts or liabilities beyond its
ability to pay such debts or liabilities as they mature.
"SUBORDINATED UNITS" means Subordinated Units of the Parent
representing limited partner interests in the Parent.
"SUBSIDIARY" means as to any Person, any corporation, partnership or
other entity of which more than fifty percent (50%) of the outstanding capital
stock or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other managers of such corporation,
partnership or other entity is at the time, directly or indirectly, owned by or
the management is otherwise controlled by such Person (irrespective of whether,
at the time, capital stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency). Unless otherwise qualified references to "Subsidiary" or
"Subsidiaries" herein shall refer to those of the Borrower.
"SWINGLINE COMMITMENT" means Seven Million, Five Hundred Thousand
($7,500,000).
"SWINGLINE LENDER" means First Union in its capacity as swingline
lender hereunder.
"SWINGLINE LOAN" means the swingline loans made by the Swingline Lender
to the Borrower pursuant to Section 2.03.
"SWINGLINE NOTE" means the Swingline Note made by the Borrower payable
to the order of the Swingline Lender, substantially in the form of EXHIBIT A-3
hereto, evidencing the Swingline Facility, and any amendments and supplements
thereto, any substitutes therefor, and any replacements, restatements, renewals
or extension thereof, in whole or in part.
"SWINGLINE RATE" means the interest rate applicable to Swingline Loans,
as agreed upon from time to time by the Borrower and the Administrative Agent
pursuant to a written side letter agreement.
"SWINGLINE TERMINATION DATE" means the earlier to occur of (a) the
resignation of First Union as Agent in accordance with Section 11.09 and (b) the
Termination Date.
"TAXES" shall have the meaning assigned thereto in Section 3.11(a).
"TERMINATION DATE" means September 30, 2000, unless such date is
extended or the Credit Facilities are earlier terminated pursuant to Section
2.07.
"TOTAL INDEBTEDNESS" means, at any time, all Indebtedness of the
Borrower and its Subsidiaries at such time (other than Indebtedness described
under clauses (i) and (j) of the definition of "Indebtedness"), determined on a
Consolidated basis in accordance with GAAP.
"UNITED STATES" means the United States of America.
"WHOLLY-OWNED" means, with respect to a Subsidiary, a Subsidiary all of
the shares of capital stock or other ownership interests of which are, directly
or indirectly, owned or controlled by the Borrower and/or one or more of its
Wholly-Owned Subsidiaries.
"WITHDRAWAL LIABILITY" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02 GENERAL.
Unless otherwise specified, a reference in this Agreement to a particular
section, subsection, Schedule or Exhibit is a reference to that section,
subsection, Schedule or Exhibit of this Agreement. Wherever from the context it
appears appropriate, each term stated in either the singular or plural shall
include the singular and plural, and pronouns stated in the masculine, feminine
or neuter gender shall include the masculine, the feminine and the neuter. Any
reference herein to "Charlotte time" shall refer to the applicable time of day
in Charlotte, North Carolina.
SECTION 1.03 OTHER DEFINITIONS AND PROVISIONS.
(a) USE OF CAPITALIZED TERMS. Unless otherwise defined therein, all
capitalized terms defined in this Agreement shall have the defined meanings when
used in this Agreement, the Notes and the other Loan Documents or any
certificate, report or other document made or delivered pursuant to this
Agreement.
(b) MISCELLANEOUS. The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
ARTICLE II
CREDIT FACILITIES
SECTION 2.01 LOANS.
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(a) REVOLVING CREDIT COMMITMENTS. Subject to the terms and conditions
of this Agreement, each Lender severally agrees to make Revolving Credit Loans
to the Borrower from time to time from the Closing Date through the Termination
Date as requested by the Borrower in accordance with the terms of Section 2.03;
PROVIDED, that (a) the aggregate principal amount of all outstanding Revolving
Credit Loans (after giving effect to any amount requested) shall not exceed the
Aggregate Revolving Credit Commitment LESS the Swingline Loans, (b) the
principal amount of outstanding Revolving Credit Loans from any Lender to the
Borrower shall not at any time exceed such Lender's Revolving Credit Commitment
and (c) during each Cleandown Period, the aggregate principal amount of all
outstanding Revolving Credit Loans (after giving effect to any amount requested)
shall not exceed $25,000,000 LESS the Swingline Loans. Each Revolving Credit
Loan by a Lender shall be in a principal amount equal to such Lender's
Commitment Percentage of the aggregate principal amount of Revolving Credit
Loans requested on such occasion. Subject to the terms and conditions hereof,
the Borrower may borrow, repay and reborrow Revolving Credit Loans hereunder
until the Termination Date.
(b) ACQUISITION LOAN COMMITMENTS. Subject to the terms and conditions
of this Agreement, each Lender severally agrees to make Acquisition Loans to the
Borrower from time to time from the Closing Date through the Termination Date as
requested by the Borrower in accordance with the terms of Section 2.03;
PROVIDED, that (a) the aggregate principal amount of all outstanding Acquisition
Loans (after giving effect to any amount requested) shall not exceed the
Aggregate Acquisition Loan Commitment, and (b) the principal amount of
outstanding Acquisition Loans from any Lender to the Borrower shall not at any
time exceed such Lender's Acquisition Loan Commitment. Each Acquisition Loan by
a Lender shall be in a principal amount equal to such Lender's Commitment
Percentage of the aggregate principal amount of Acquisition Loans requested on
such occasion. Subject to the terms and conditions hereof, the Borrower may
borrow, repay and reborrow Acquisition Loans hereunder until the Termination
Date.
(c) BLOCKED PORTION OF REVOLVING CREDIT COMMITMENTS . The Borrower may
from time to time deliver a certificate of a Financial Officer of the Borrower
to the Administrative Agent designating a portion of the then-available
Revolving Credit Commitments as being unavailable except for the purpose of
funding items ("Reserve Items") specified in such certificate that would have
been reserved against pursuant to the definition of "Available Cash" but for the
specification of such amounts in such certificate. The aggregate amount of
Revolving Credit Commitments unavailable as a result of the delivery of such
certificates at any time shall be referred to as the "Blocked Portion" in effect
at such time. The Blocked Portion shall be reduced from time to time upon
receipt by the Administrative Agent of a certificate of a Financial Officer of
the Borrower certifying as to (a) the discharge of any portion of any Reserve
Item, (b) the establishment of a cash reserve in respect of any portion of any
Reserve Item, (c) the determination by the Board of Supervisors of the Borrower
that any reserve contemplated by clause (b) of the definition of "Available
Cash" may be reduced because the amount of the original reserve is no longer
necessary or appropriate by reason of a change in the anticipated timing or
amount of the item reserved against or (d) the delivery of a Notice of Borrowing
for a Revolving Credit Loan to be drawn under the Blocked Portion the proceeds
of which shall be used solely for the purpose of discharging any Reserve Item,
each of which reductions shall be in an amount equal to the amount of such
discharged portion, new cash reserve, adjustment to reserves or Revolving Credit
Loan, as applicable. Notwithstanding any other provision of this Agreement, at
no time shall any Revolving Credit Loan be made or any certificate increasing
the Blocked Portion become effective if as a result of the making of such
Revolving Credit Loan or the effectiveness of such increase the aggregate
principal amount of Revolving Credit Loans outstanding at such time would exceed
the difference between the aggregate amount of the Revolving Credit Commitments
in effect at such time and the amount of the Blocked Portion in effect at such
time.
SECTION 2.02 SWINGLINE LOANS.
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(a) AVAILABILITY. Subject to the terms and conditions of this
Agreement, the Swingline Lender agrees to make Swingline Loans to the Borrower
from time to time from the Closing Date to but not including the Swingline
Termination Date ; provided that the aggregate principal amount of all
outstanding Swingline Loans (after giving effect to any amount requested), shall
not exceed the lesser of (i) (A) during each Cleandown Period, $25,000,000 and
(B) at all other times, the Aggregate Revolving Credit Commitment, in either
case less the sum of the aggregate principal amount of all outstanding
Revolving Credit Loans and ( ii ) the Swingline Commitment. Each Lender
acknowledges that the aggregate principal amount of all outstanding Swingline
Loans made by the Swingline Lender, when taken together with the aggregate
principal of all outstanding Revolving Credit Loans made by such Swingline
Lender, may exceed such Swingline Lender's Revolving Credit Commitment.
(b) REFUNDING.
(i) Swingline Loans shall be reimbursed fully by the Lenders
on demand by the Swingline Lender. Such reimbursements shall be made by
the Lenders in accordance with their respective Commitment Percentages
with respect to Revolving Credit Loans and shall thereafter be
reflected as Revolving Credit Loans of the Lenders on the books and
records of the Agent; PROVIDED that no Lender shall be required to
reimburse any Swingline Loan if, after giving effect to such
reimbursement, the aggregate principal amount of such Lender's
Revolving Credit Loans outstanding would exceed such Lender's Revolving
Credit Commitment. Each Lender shall fund its respective Commitment
Percentage of Revolving Credit Loans as required to repay Swingline
Loans outstanding to the Swingline Lender upon demand by the Swingline
Lender but in no event later than 3:00 p.m. (Charlotte time) on the
date such demand is made if made on or before 1:00 p.m. (Charlotte
time) on such date and no later than 12:00 noon (Charlotte time) on the
next succeeding Business Day if demand therefor is made after 1:00 p.m.
(Charlotte time).
(ii) The Borrower shall pay to the Swingline Lender on demand
the amount of such Swingline Loans to the extent amounts received from
the Lenders are not sufficient to repay in full the outstanding
Swingline Loans requested or required to be refunded. In addition, the
Borrower hereby authorizes the Agent to charge any account maintained
by it with the Swingline Lender (up to the amount available therein) in
order to immediately pay the Swingline Lender the amount of such
Swingline Loans to the extent amounts received from the Lenders are not
sufficient to repay in full the outstanding Swingline Loans requested
or required to be refunded. If any portion of any such amount paid to
the Swingline Lender shall be recovered by or on behalf of the Borrower
from the Swingline Lender in bankruptcy or otherwise, the loss of the
amount so recovered shall be ratably shared among all the Lenders in
accordance with their respective Commitment Percentages with respect to
Revolving Credit Loans.
(iii) Each Lender acknowledges and agrees that its obligation
to refund Swingline Loans in accordance with the terms of this Section
2.02(b) is absolute and unconditional and shall not be affected by any
circumstance whatsoever; PROVIDED, that if prior to the refunding of
any outstanding Swingline Loans pursuant to this Section 2.02(b), one
of the events described in Section 10.01(i) or (j) shall have occurred,
each Lender will, on the date the applicable Revolving Credit Loan
would have been made, purchase an undivided participating interest in
the Swingline Loan to be refunded in an amount equal to its Commitment
Percentage (with respect to Revolving Credit Loans) of the aggregate
amount of such Swingline Loan. Each Lender will immediately transfer to
the Swingline Lender, in immediately available funds, the amount of its
participation and upon receipt thereof the Swingline Lender will
deliver to such Lender a certificate evidencing such participation
dated the date of receipt of such funds and for such amount. Whenever,
at any time after the Swingline Lender has received from any Lender
such Lender's participating interest in a Swingline Loan, the Swingline
Lender receives any payment on account thereof, the Swingline Lender
will distribute to such Lender its participating interest in such
amount (appropriately adjusted, in the case of interest payments, to
reflect the period of time during which such Lender's participating
interest was outstanding and funded).
SECTION 2.03 PROCEDURE FOR ADVANCES OF LOANS.
--------------------------------
(a) REQUESTS FOR BORROWING. The Borrower shall give the
Administrative Agent irrevocable prior written notice in the form attached
hereto as EXHIBIT B (a "Notice of Borrowing") not later than 11:00 a.m.
(Charlotte time) (i) on the same Business Day as each Base Rate Loan and each
Swingline Loan and (ii) at least three (3) Business Days before each LIBOR Rate
Loan, of its intention to borrow, specifying (A) the date of such borrowing,
which shall be a Business Day, (B) the amount of such borrowing, which shall
be (1) with respect to Revolving Credit Loans or Acquisition Loans in an
aggregate principal amount of $3,000,000 or a whole multiple of $500,000 in
excess thereof and (2) with respect to Swingline Loans in an aggregate principal
amount of $500,000 or a whole multiple of $250,000 in excess thereof, (C)
whether the Loans are to be LIBOR Rate Loans or Base Rate Loans, (D) in the case
of a LIBOR Rate Loan, the duration of the Interest Period applicable thereto,
(E) if such Loan is a Revolving Credit Loan or an Acquisition Loan and (F) if
such Loan is an Acquisition Loan, the aggregate principal amount of all then
outstanding Acquisition Loans. Notices received after 11:00 a.m.(Charlotte time)
shall be deemed received on the next Business Day. The Administrative Agent
shall promptly notify the Lenders of each Notice of Borrowing.
(b) DISBURSEMENT OF LOANS. Not later than 2:00 p.m. (Charlotte time)
on the proposed borrowing date, (i)each Lender will make available to the
Administrative Agent, for the account of the Borrower, at the office of the
Administrative Agent in funds immediately available to the Administrative Agent,
such Lender's Commitment Percentage (with respect to Revolving Credit Loans or
Acquisition Loans, as applicable) of the Loans to be made on such borrowing date
and (ii) the Swingline Lender will make available to the Agent, for the account
of the Borrower, at the office of the Administrative Agent in funds immediately
available to the Administrative Agent, the Swingline Loans to be made to the
Borrower on such borrowing date. The Borrower hereby irrevocably authorizes
the Administrative Agent to disburse the proceeds of each borrowing requested
pursuant to this Section 2.03 in immediately available funds by crediting
or wiring such proceeds to the deposit account of the Borrower identified in
the most recent Notice of Account Designation substantially in the form of
EXHIBIT G hereto (a "Notice of Account Designation") delivered by the Borrower
to the Administrative Agent or may be otherwise agreed upon by the Borrower and
the Administrative Agent from time to time. Subject to Section 3.07 hereof,
the Administrative Agent shall not be obligated to disburse the portion of the
proceeds of any Loan requested pursuant to this Section 2.03 to the extent that
any Lender has not made available to the Administrative Agent its Commitment
Percentage of such Loan.
SECTION 2.04 REPAYMENT OF LOANS.
-------------------
(a) REPAYMENT ON TERMINATION DATE. The Borrower shall repay the
outstanding principal amount of (i) the Revolving Credit Loans and the
Acquisition Loans, all in full on the Termination Date, if not sooner repaid,
and (ii) all Swingline Loans in accordance with Section 2.02(b), together, in
each case, with all accrued but unpaid interest thereon.
(b) MANDATORY REPAYMENT OF EXCESS REVOLVING CREDIT LOANS. If at any
time the outstanding principal amount of all Revolving Credit Loans PLUS the
Swingline Loans exceeds the Aggregate Revolving Credit Commitment, the Borrower
shall repay immediately upon notice from the Administrative Agent, by payment to
the Administrative Agent for the account of the Lenders, the Revolving Credit
Loans in an amount equal to such excess. Each such repayment shall be applied
first to the principal amount of outstanding Swingline Loans. Each such
repayment shall be accompanied by any amount required to be paid pursuant to
Section 3.09 hereof.
(c) MANDATORY REPAYMENT OF EXCESS ACQUISITION LOANS. If at any time
the outstanding principal amount of all Acquisition Loans exceeds the Aggregate
Acquisition Loan Commitment, the Borrower shall repay immediately upon notice
from the Administrative Agent, by payment to the Administrative Agent for the
account of the Lenders, the Acquisition Loans in an amount equal to such excess.
Each such repayment shall be accompanied by any amount required to be paid
pursuant to Section 3.09 hereof.
(d) OPTIONAL REPAYMENTS. The Borrower may at any time and from time to
time repay the Loans, in whole or in part, upon at least three(3) Business Days'
irrevocable notice to the Administrative Agent with respect to LIBOR Rate Loans
and one (1) Business Day irrevocable notice with respect to Base Rate Loans, in
the form attached hereto as EXHIBIT C (a "Notice of Prepayment") specifying
the date and amount of repayment and whether the repayment is of (i) Revolving
Credit Loans or Acquisition Loans or a combination thereof and, if of a
combination thereof, the amount allocable to each and (ii) LIBOR Rate Loans,
Base Rate Loans, or a combination thereof, and, if of a combination thereof,
the amount allocable to each. Upon receipt of such notice, the Administrative
Agent shall promptly notify each Lender. If any such notice is given, the
amount specified in such notice shall be due and payable on the date set forth
in such notice. Partial repayments shall be in an aggregate amount of: (i)
$3,000,000 or a whole multiple of $500,000 in excess thereof with respect to
Revolving Credit Loans and Acquisition Loans and (ii) $500,000 or a whole
multiple of $250,000 in excess thereof with respect to Swingline Loans. Each
such repayment shall be accompanied by any amount required to be paid pursuant
to Section 3.09 hereof.
(e) REPAYMENT; LIMITED INCURRENCE DURING CLEANDOWN PERIOD. During each
Fiscal Year, the Borrower shall select a Cleandown Period. On the first day of
each Cleandown Period, the Borrower shall repay any Revolving Credit Loans then
outstanding to the extent necessary to reduce the total amount of outstanding
Revolving Credit Loans to an amount not exceeding $25,000,00 LESS the Swingline
Loans. For the duration of each such Cleandown Period, the Borrower shall not
request, create or incur any Revolving Credit Loans to the extent that the
aggregate principal amount of all outstanding Revolving Credit Loans (after
giving effect to any amount requested, created or incurred) would exceed
$25,000,000 LESS the Swingline Loans.
(f) MANDATORY REPAYMENT OF ACQUISITION LOANS. On and after March 5,
1999, the Borrower shall apply the Lenders' Portion of the Designated Net
Proceeds and the Designated Net Insurance/Condemnation Proceeds, promptly upon
receipt thereof by the Borrower or any Subsidiary or upon the existence thereof,
as applicable, to repay Acquisition Loans outstanding at the time of such
receipt or existence.
(g) LIMITATION ON REPAYMENT OF LIBOR RATE LOANS . The Borrower may not
repay any LIBOR Rate Loan on any day other than on the last day of the Interest
Period applicable thereto unless such repayment is accompanied by any amount
required to be paid pursuant to Section 3.09 hereof.
SECTION 2.05 NOTES.
------
(a) REVOLVING CREDIT NOTES. Each Lender's Revolving Credit Loans and
the obligation of the Borrower to repay such Revolving Credit Loans shall be
evidenced by a Revolving Credit Note executed by the Borrower payable to the
order of such Lender representing the Borrower's obligation to pay such Lender's
Commitment or, if less, the aggregate unpaid principal amount of all Revolving
Credit Loans made and to be made by such Lender to the Borrower hereunder, PLUS
interest and all other fees, charges and other amounts due thereon. Each
Revolving Credit Note shall be dated the date hereof and shall bear interest on
the unpaid principal amount thereof at the applicable interest rate per annum
specified in Section 3.01.
(b) ACQUISITION LOAN NOTES. Each Lender's Acquisition Loans and the
obligation of the Borrower to repay such Acquisition Loans shall be evidenced by
a Acquisition Loan Note executed by the Borrower payable to the order of such
Lender representing the Borrower's obligation to pay such Lender's Acquisition
Loan Commitment or, if less, the aggregate unpaid principal amount of all
Acquisition Loans made and to be made by such Lender to the Borrower hereunder,
PLUS interest and all other fees, charges and other amounts due thereon. Each
Acquisition Loan Note shall be dated the date hereof and shall bear interest on
the unpaid principal amount thereof at the applicable interest rate per annum
specified in Section 3.01.
(c) SWINGLINE NOTE. The Swingline Loans and the obligation of the
Borrower to repay such Swingline Loans shall be evidenced by the Swingline Note
executed by the Borrower payable to the order of the Swingline Lender
representing the Borrower's obligation to the Swingline Lender the aggregate
unpaid principal amount of all Swingline Loans made and to be made by the
Swingline Lender to the Borrower hereunder, PLUS interest and all other fees,
charges and other amounts due thereon. The Swingline Note shall be dated the
date hereof and shall bear interest on the unpaid principal amount thereof at
the applicable Swingline Rate.
SECTION 2.06 REDUCTIONS OF THE AGGREGATE COMMITMENT.
---------------------------------------
(a) OPTIONAL PERMANENT REDUCTION. The Borrower shall have the right at
any time and from time to time, upon at least five (5) Business Days prior
written notice to the Administrative Agent, to permanently reduce, in whole
at any time or in part from time to time, without premium or penalty, (i) the
Aggregate Revolving Credit Commitment or (ii) the Aggregate Acquisition Loan
Commitment, in either such case in an aggregate principal amount not less than
$2,000,000 or any whole multiple thereof.
(b) MANDATORY PERMANENT REDUCTION OF ACQUISITION LOAN COMMITMENT . To
the extent that such amounts are not applied to repay Acquisition Loans pursuant
to Section 2.04(f), the Aggregate Acquisition Loan Commitment shall be
automatically and permanently reduced by the Lenders' Portion of the Designated
Net Proceeds and the Designated Net Insurance/Condemnation Proceeds, promptly
upon receipt thereof by the Borrower or any Subsidiary or upon the existence
thereof, as applicable.
(c) REQUIRED REPAYMENTS. Each reduction required or permitted pursuant
to this Section 2.06 shall be accompanied by a payment of principal sufficient
to reduce the aggregate outstanding applicable Extensions of Credit of the
Lenders after such reduction to the Aggregate Revolving Credit Commitment or
Aggregate Acquisition Loan Commitment, as applicable, as so reduced. Any
reduction of the Aggregate Revolving Credit Commitment or the Aggregate
Acquisition Loan Commitment to zero shall be accompanied by payment of all
outstanding Obligations and termination of the applicable Commitment and
applicable Credit Facility. If the reduction of the Aggregate Revolving Credit
Commitment or Acquisition Loan Commitment requires the repayment of any LIBOR
Rate Loan, such repayment shall be accompanied by any amount required to be
paid pursuant to Section 3.09 hereof.
SECTION 2.07 TERMINATION OF CREDIT FACILITIES; EXTENSION OF
TERMINATION DATE.
----------------------------------------------
(a) TERMINATION. The Credit Facilities shall terminate on the earliest
of (i) the Termination Date, (ii) the date of termination by the Borrower
pursuant to Section 2.06(a), and (iii) the date of termination by the
Administrative Agent on behalf of the Lenders pursuant to Section 10.02(a). It
is intended by the parties hereto that the Revolving Credit Facility and the
Acquisition Loan Facility shall terminate on the same date.
(b) EXTENSION OF TERMINATION DATE
(i) REQUEST FOR EXTENTION. Unless the Credit Facilities shall have been
terminated pursuant to clause (ii) or (iii) of Section 2.07(a), above,
the Borrower may, by notice to the Administrative Agent (which shall
promptly deliver a copy to each of the Lenders) not less than sixty
(60) days and not more than ninety (90) day prior to any anniversary of
the Closing Date (in each case, an "Anniversary Date"), request that
the Lenders extend the Termination Date for an additional one year to
the Anniversary Date next succeeding the Termination Date then in
effect; PROVIDED that the Borrower shall request an extension of the
Termination Date for both of the Revolving Credit Facility and the
Acquisition Loan Facility together and that both Credit Facilities
shall terminate on the same date.
(ii) LENDER APPROVAL PROCESS. Each Lender, acting in its sole
discretion, shall, by notice to the Borrower and the Administrative
Agent given not more than thirty (30) days after receipt of the
Borrower's extension request advise the Borrower and the Administrative
Agent whether or not such Lender agrees to such extension. If any
Lender does not reply within such thirty-day period, it shall be deemed
to have withheld its consent to such extension. Such extension shall
become effective upon three (3) Business Days after receipt by the
Administrative Agent of the consent of all of the Lenders, subject to
the Borrower's right to find a replacement Lender under Section 3.12(b)
for any non-consenting Lender prior to the related Anniversary Date.
Notwithstanding anything else herein to the contrary, if any Lender
(other than Lenders replaced by the Borrower pursuant to Section
3.12(b) prior to the related Anniversary Date) has not consented to
such requested extension, the Termination Date shall not be extended.
(iii) NO WAIVER. The election of any Lender to agree to an extension
shall not obligate any other Lender to agree to such extension and the
agreement by the Lenders to an extension shall not obligate the
Lenders, or any individual Lender, to agree to a subsequent extension.
The Borrower's right to request an extension under this Section 2.07(b)
shall continue irrespective of whether (A) the Borrower requested or
failed to request an extension on any prior Anniversary Date and (B)
the Lenders consented to or withheld their consent to any such previous
request.
ARTICLE III
GENERAL LOAN PROVISIONS
SECTION 3.01 INTEREST.
---------
(a) INTEREST RATE OPTIONS. Subject to the provisions of this Section
3.01, at the election of the Borrower, the aggregate unpaid principal balance
of (i) each Revolving Credit Loan and each Acquisition Loan shall bear interest
at the Base Rate or the LIBOR Rate PLUS, in each case, the Applicable Margin as
set forth below; PROVIDED that the LIBOR Rate shall not be available until three
(3) Business Days after the Closing Date and (ii) each Swingline Loan shall bear
interest at the Swingline Rate. The Borrower shall select the rate of interest
and Interest Period, if any, applicable to any Loan at the time a Notice of
Borrowing is given pursuant to Section 2.03 or at the time a Notice of
Conversion/Continuation is given pursuant to Section 3.02. Each Loan or portion
thereof bearing interest based on the Base Rate shall be a "Base Rate Loan",
each Loan or portion thereof bearing interest based on the LIBOR Rate shall be a
"LIBOR Rate Loan." Any Loan or any portion thereof as to which the Borrower has
not duly specified an interest rate as provided herein shall be deemed a Base
Rate Loan.
(b) INTEREST PERIODS. In connection with each LIBOR Rate Loan, the
Borrower, by giving notice at the times described in Section 3.01(a), shall
elect an interest period (each, an "Interest Period") to be applicable to such
Loan, which Interest Period shall be a period of one (1), two (2), three (3), or
six (6) months; PROVIDED that:
(i) the Interest Period shall commence on the date of
advance of or conversion to any LIBOR Rate Loan and, in the case of
immediately successive Interest Periods, each successive Interest
Period shall commence on the date on which the next preceding Interest
Period expires;
(ii) if any Interest Period would otherwise expire on a
day that is not a Business Day, such Interest Period shall expire on
the next succeeding Business Day; PROVIDED, that if any Interest Period
with respect to a LIBOR Rate Loan would otherwise expire on a day that
is not a Business Day but is a day of the month after which no further
Business Day occurs in such month, such Interest Period shall expire on
the next preceding Business Day;
(iii) any Interest Period with respect to a LIBOR Rate
Loan that begins on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the last
Business Day of the relevant calendar month at the end of such Interest
Period;
(iv) no Interest Period shall extend beyond the
Termination Date and Interest Periods shall be selected by the Borrower
so as to permit the Borrower to make mandatory reductions of the
Aggregate Revolving Credit Commitment or Aggregate Acquisition Loan
Commitment pursuant to Section 2.06 without payment of any amounts
pursuant to Section 3.09; and
(v) there shall be no more than ten (10) Interest
Periods outstanding at any time.
(c) APPLICABLE MARGIN. The Applicable Margin provided for in Section
3.01(a) with respect to the Loans (the "Applicable Margin") shall (i) on the
Closing Date equal the percentages set forth in the certificate delivered
pursuant to Section 4.02(d)(iv) and (ii) for each fiscal quarter thereafter be
determined by reference to the Leverage Ratio as of the end of the fiscal
quarter immediately preceding the delivery of the applicable Officer's
Compliance Certificate as follows:
LIBOR FACILITY
LEVEL LEVERAGE RATIO MARGIN FEE
- ----- -------------- ------ ---
(in basis points (bps))
I Greater than or equal 100.00 25.00
to 4.50 to 1.00
II Greater than or equal 75.00 25.00
to 3.75 to 1.00, but less
than 4.50 to 1.00
III Greater than or equal 52.50 22.50
to 3.00 to 1.00, but less
than 3.75 to 1.00
IV Less than 3.00 to 1.00 30.00 20.00
Adjustments, if any, in the Applicable Margin shall be made by the
Administrative Agent on the third (3rd) Business Day after receipt by the
Administrative Agent of quarterly financial statements for the Borrower and its
Subsidiaries and the accompanying Officer's Compliance Certificate setting forth
the Leverage Ratio of the Borrower and its Subsidiaries as of the most recent
fiscal quarter end. Subject to Section 3.01(d), in the event the Borrower fails
to deliver such financial statements and certificate within the time required by
Section 6.02 hereof, the Applicable Margin shall be the highest Applicable
Margin set forth above until the delivery of such financial statements and
certificate.
(d) DEFAULT RATE. Upon the occurrence and during the continuance of an
Event of Default, (i) the Borrower shall no longer have the option to request
LIBOR Rate Loans, (ii) all outstanding LIBOR Rate Loans shall bear interest at a
rate per annum two percent (2%) in excess of the rate then applicable to LIBOR
Rate Loans until the end of the applicable Interest Period and thereafter at a
rate equal to two percent (2%) in excess of the rate then applicable to Base
Rate Loans, and (iii) all outstanding Base Rate Loans shall bear interest at a
rate per annum equal to two percent (2%) in excess of the rate then applicable
to Base Rate Loans. Interest shall continue to accrue on the Notes after the
filing by or against the Borrower of any petition seeking any relief in
bankruptcy or under any act or law pertaining to insolvency or debtor relief,
whether state, federal or foreign.
(e) INTEREST PAYMENT AND COMPUTATION. Interest on each Base Rate Loan
shall be payable in arrears on the last Business Day of each calendar quarter
commencing December 31, 1997; interest on each LIBOR Rate Loan shall be payable
on the last day of each Interest Period applicable thereto, and if such Interest
Period extends over three (3) months, at the end of each three (3) month
interval during such Interest Period. All interest rates, fees and commissions
provided hereunder shall be computed on the basis of a 360-day year and assessed
for the actual number of days elapsed.
(f) MAXIMUM RATE. In no contingency or event whatsoever shall the
aggregate of all amounts deemed interest hereunder or under any of the Notes
charged or collected pursuant to the terms of this Agreement or pursuant to any
of the Notes exceed the highest rate permissible under any Applicable Law which
a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that such a court determines that the Lenders
have charged or received interest hereunder in excess of the highest applicable
rate, the rate in effect hereunder shall automatically be reduced to the
maximum rate permitted by Applicable Law and the Lenders shall at the
Administrative Agent's option promptly refund to the Borrower any interest
received by Lenders in excess of the maximum lawful rate or shall apply such
excess to the principal balance of the Obligations. It is the intent hereof
that the Borrower not pay or contract to pay, and that neither the
Administrative Agent nor any Lender receive or contract to receive, directly or
indirectly in any manner whatsoever, interest in excess of that which may be
paid by the Borrower under Applicable Law.
SECTION 3.02 NOTICE AND MANNER OF CONVERSION OR CONTINUATION OF LOANS.
---------------------------------------------------------
Provided that no Event of Default has occurred and is then
continuing, the Borrower shall have the option to (a) convert at any time all or
any portion of its outstanding Base Rate Loans in a principal amount equal to
$3,000,000 or any whole multiple of $500,000 in excess thereof into one or more
LIBOR Rate Loans or (b) upon the expiration of any Interest Period, (i) convert
all or any part of its outstanding LIBOR Rate Loans in a principal amount equal
to $3,000,000 or a whole multiple of $500,000 in excess thereof into Base Rate
Loans or (ii) continue such LIBOR Rate Loans as LIBOR Rate Loans. Whenever the
Borrower desires to convert or continue Loans as provided above, the Borrower
shall give the Administrative Agent irrevocable prior written notice in the form
attached as EXHIBIT D (a "Notice of Conversion/ Continuation") not later than
11:00 a.m. (Charlotte time) three (3) Business Days before the day on which a
proposed conversion or continuation of such Loan is to be effective specifying
(A) the Loans to be converted or continued, and, in the case of any LIBOR Rate
Loan to be converted or continued, the last day of the Interest Period therefor,
(B) the effective date of such conversion or continuation (which shall be a
Business Day), (C) the principal amount of such Loans to be converted or
continued, and (D) the Interest Period to be applicable to such converted or
continued LIBOR Rate Loan. The Administrative Agent shall promptly notify the
Lenders of such Notice of Conversion/Continuation.
SECTION 3.03 FEES.
-----
(a) FACILITY FEES. The Borrower shall pay to the Administrative Agent,
for the account of the Lenders, a non-refundable facility fee at a rate per
annum equal to the percentage set forth in Section 3.01 (c) times the
Aggregate Commitment, regardless of usage. The facility fee shall be payable in
arrears on the last Business Day of each calendar quarter during the term of
this Agreement commencing December 31, 1997, and on the Termination Date. Such
commitment fee shall be distributed by the Administrative Agent to the Lenders
PRO RATA in accordance with the Lenders' respective Commitment Percentages.
(b) ADMINISTRATIVE AGENT'S AND OTHER FEES. In order to compensate the
Administrative Agent for structuring and syndicating the Loans and for its
obligations hereunder, the Borrower agrees to pay to the Administrative Agent,
for its account, the fees set forth in the separate fee letter agreement
executed by the Borrower and the Administrative Agent dated August 15, 1997.
SECTION 3.04 MANNER OF PAYMENT.
------------------
Each payment by the Borrower on account of the principal of or
interest on the Loans or of any fee, commission or other amounts payable to the
Lenders under this Agreement or any Note shall be made not later than 1:00 p.m.
(Charlotte time) on the date specified for payment under this Agreement to the
Administrative Agent at the Administrative Agent's Office for the account of the
Lenders (other than as set forth below) PRO RATA in accordance with their
respective applicable Commitment Percentages, in Dollars, in immediately
available funds and shall be made without any set-off, counterclaim or deduction
whatsoever. Any payment received after such time but before 2:00 p.m. (Charlotte
time) on such day shall be deemed a payment on such date for the purposes of
Section 10.01, but for all other purposes shall be deemed to have been made on
the next succeeding Business Day. Any payment received after 2:00 p.m.
(Charlotte time) shall be deemed to have been made on the next succeeding
Business Day for all purposes. Upon receipt by the Administrative Agent of each
such payment, the Administrative Agent shall distribute to each Lender at its
address for notices set forth herein its PRO RATA share of such payment in
accordance with such Lender's applicable Commitment Percentage and shall wire
advice of the amount of such credit to each Lender. Each payment to the
Administrative Agent of Administrative Agent's fees or expenses shall be made
for the account of the Administrative Agent and any amount payable to any Lender
under Sections 3.08, 3.09, 3.10, 3.11 or 12.02 shall be paid to the
Administrative Agent for the account of the applicable Lender.
SECTION 3.05 CREDITING OF PAYMENTS AND PROCEEDS .
------------------------------------
In the event that the Borrower shall fail to pay any of the
Obligations when due and the Obligations have been accelerated pursuant to
Section 10.02, all payments received by the Lenders upon the Notes and the
other Obligations and all net proceeds from the enforcement of the Obligations
shall be applied first to all expenses then due and payable by the Borrower
hereunder, then to all indemnity obligations then due and payable by the
Borrower hereunder, then to all Administrative Agent's fees then due and
payable, then to all fees and commissions then due and payable, then to accrued
and unpaid interest on the Swingline Note, then to the unpaid principal
amount outstanding under the Swingline Note, then to accrued and unpaid interest
on the Revolving Credit Notes and Acquisition Loan Notes, in that order.
SECTION 3.06 ADJUSTMENTS.
------------
If any Lender (a "Benefitted Lender")shall at any time receive any
payment of all or part of its Extensions of Credit, or interest thereon, or if
any Lender shall at any time receive any collateral in respect to its Extensions
of Credit (whether voluntarily or involuntarily, by set-off or otherwise) in a
greater proportion than any such payment to and collateral received by any other
Lender, if any, in respect of such other Lender's Extensions of Credit, or
interest thereon, such Benefitted Lender shall purchase for cash from the other
Lenders such portion of each such other Lender's Extensions of Credit, or shall
provide such other Lenders with the benefits of any such collateral, or the
proceeds thereof, as shall be necessary to cause such Benefitted Lender to
share the excess payment or benefits of such collateral or proceeds ratably with
each of the Lenders; provided, that if all or any portion of such excess
payment or benefits is thereafter recovered from such Benefitted Lender, such
purchase shall be rescinded, and the purchase price and benefits returned to the
extent of such recovery, but without interest. The Borrower agrees that each
Lender so purchasing a portion of another Lender's Extensions of Credit may
exercise all rights of payment(including, without limitation, rights of set-off)
with respect to such portion as fully as if such Lender were the direct holder
of such portion.
SECTION 3.07 NATURE OF OBLIGATIONS OF LENDERS REGARDING
EXTENSIONS OF CREDIT; ASSUMPTION BY THE
ADMINISTRATIVE AGENT.
------------------------------------------
The obligations of the Lenders under this Agreement to make the
Loans are several and are not joint or joint and several. Unless the
Administrative Agent shall have received notice from a Lender prior to a
proposed borrowing date that such Lender will not make available to the
Administrative Agent such Lender's ratable portion of the amount to be borrowed
on such date (which notice shall not release such Lender of its obligations
hereunder), the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the proposed borrowing date in
accordance with Section 2.03(b) and the Administrative Agent may, in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If such amount is made available to the Administrative
Agent on a date after such borrowing date, such Lender shall pay to the
Administrative Agent on demand an amount, until paid, equal to the product of(a)
the amount of such Lender's applicable Commitment Percentage of such borrowing,
TIMES (b) the daily average Federal Funds Rate during such period as determined
by the Administrative Agent, TIMES (c) a fraction the numerator of which is the
number of days that elapse from and including such borrowing date to the date on
which such Lender's Commitment Percentage of such borrowing shall have become
immediately available to the Administrative Agent and the denominator of which
is 360. A certificate of the Administrative Agent with respect to any amounts
owing under this Section shall be conclusive, absent manifest error. If such
Lender's Commitment Percentage of such borrowing is not made available to the
Administrative Agent by such Lender within three (3) Business Days of such
borrowing date, the Administrative Agent shall be entitled to recover such
amount made available by the Administrative Agent with interest thereon at the
rate per annum applicable to Base Rate Loans hereunder, on demand, from the
Borrower. The failure of any Lender to make its applicable Commitment
Percentage of any Loan available shall not relieve it or any other Lender of its
obligation, if any, hereunder to make its applicable Commitment Percentage of
such Loan available on such borrowing date, but no Lender shall be responsible
for the failure of any other Lender to make its applicable Commitment Percentage
of such Loan available on the borrowing date.
SECTION 3.08 CHANGED CIRCUMSTANCES.
----------------------
(a) CIRCUMSTANCES AFFECTING LIBOR RATE AVAILABILITY . If with respect
to any Interest Period the Administrative Agent or any Lender (after
consultation with Administrative Agent) shall determine that, by reason of
circumstances affecting the foreign exchange and interbank markets generally,
deposits in eurodollars, in the applicable amounts are not being quoted via
Telerate Page 3750 or offered to the Administrative Agent or such Lender for
such Interest Period, then the Administrative Agent shall forthwith give notice
thereof to the Borrower. Thereafter, until the Administrative Agent notifies the
Borrower that such circumstances no longer exist, the obligation of the Lenders
to make LIBOR Rate Loans and the right of the Borrower to convert any Loan to or
continue any Loan as a LIBOR Rate Loan shall be suspended, and the Borrower
shall repay in full (or cause to be repaid in full) the then outstanding
principal amount of each such LIBOR Rate Loans together with accrued interest
thereon, on the last day of the then current Interest Period applicable to such
LIBOR Rate Loan or convert the then outstanding principal amount of each such
LIBOR Rate Loan to a Base Rate Loan as of the last day of such Interest Period.
(b) LAWS AFFECTING LIBOR RATE AVAILABILITY. If, after the date hereof,
the introduction of, or any change in, any Applicable Law or any change in the
interpretation or administration thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender(or any of their respective Lending Offices)
with any request or directive (whether or not having the force of law) of any
such Authority, central bank or comparable agency, shall make it unlawful or
impossible for any of the Lenders (or any of their respective Lending Offices)
to honor its obligations hereunder to make or maintain any LIBOR Rate Loan, such
Lender shall promptly give notice thereof to the Administrative Agent and the
Administrative Agent shall promptly give notice to the Borrower and the other
Lenders. Thereafter, until the Administrative Agent notifies the Borrower that
such circumstances no longer exist, (i) the obligations of the Lenders to make
LIBOR Rate Loans and the right of the Borrower to convert any Loan or continue
any Loan as a LIBOR Rate Loan shall be suspended and thereafter the Borrower may
select only Base Rate Loans hereunder, and (ii) if any of the Lenders may not
lawfully continue to maintain a LIBOR Rate Loan to the end of the then current
Interest Period applicable thereto as a LIBOR Rate Loan, the applicable
LIBOR Rate Loan shall immediately be converted to a Base Rate Loan for the
remainder of such Interest Period.
(c) INCREASED COSTS. If, after the date hereof, the introduction of, or
any change in, any Applicable Law, or in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any of the
Lenders(or any of their respective Lending Offices)with any request or directive
(whether or not having the force of law) of such Authority, central bank or
comparable agency;
(i) shall subject any of the Lenders (or any of their
respective Lending Offices) to any tax, duty or other charge with
respect to any Note or shall change the basis of taxation of payments
to any of the Lenders (or any of their respective Lending Offices) of
the principal of or interest on any Note or any other amounts due under
this Agreement in respect thereof (except for changes in the rate of
tax on the overall net income of any of the Lenders or any of their
respective Lending Offices imposed by the jurisdiction in which such
Lender is organized or is or should be qualified to do business or such
Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors
of the Federal Reserve System), special deposit, insurance or capital
or similar requirement against assets of, deposits with or for the
account of, or credit extended by any of the Lenders (or any of their
respective Lending Offices) or shall impose on any of the Lenders (or
any of their respective Lending Offices) or the foreign exchange and
interbank markets any other condition affecting any Note;
and the result of any of the foregoing is to increase the costs to any of the
Lenders of maintaining any LIBOR Rate Loan or to reduce the yield or amount of
any sum received or receivable by any of the Lenders under this Agreement or
under the Notes in respect of a LIBOR Rate Loan, then such Lender shall promptly
notify the Administrative Agent, and the Administrative Agent shall promptly
notify the Borrower of such fact and demand compensation therefor and, within
ten (10) Business Days after such notice by the Administrative Agent, the
Borrower shall pay to such Lender such additional amount or amounts as will
compensate such Lender or Lenders for such increased cost or reduction. The
Administrative Agent will promptly notify the Borrower of any event of which it
has knowledge which will entitle such Lender to compensation pursuant to this
Section 3.08(c); PROVIDED, that the Administrative Agent shall incur no
liability whatsoever to the Lenders or the Borrower in the event it fails to do
so. The amount of such compensation shall be determined, in the applicable
Lender's sole discretion, based upon the assumption that such Lender funded its
Commitment Percentage of the LIBOR Rate Loans in the London interbank Eurodollar
market and using any reasonable attribution or averaging methods which such
Lender deems appropriate and practical. A certificate of such Lender setting
forth the basis for determining such amount or amounts necessary to compensate
such Lender shall be forwarded to the Borrower through the Administrative Agent
and shall be conclusively presumed to be correct save for manifest error.
SECTION 3.09 INDEMNITY.
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The Borrower hereby indemnifies each of the Lenders against any
loss or expense which may arise or be attributable to each Lender's obtaining,
liquidating or employing deposits or other funds acquired to effect, fund or
maintain any Loan (a) as a consequence of any failure by the Borrower to make
any payment when due of any amount due hereunder in connection with a LIBOR Rate
Loan, (b) due to any failure of the Borrower to borrow on a date specified
therefor in a Notice of Borrowing or Notice of Continuation/Conversion or (c)
due to any payment, prepayment or conversion of any LIBOR Rate Loan on a date
other than the last day of the Interest Period therefor. The amount of such loss
or expense shall be determined, in the applicable Lender's sole discretion,
based upon the assumption that such Lender funded its Commitment Percentage of
the LIBOR Rate Loans in the London interbank and using any reasonable
attribution or averaging methods which such Lender deems appropriate and
practical. A certificate of such Lender setting forth the basis for determining
such amount or amounts necessary to compensate such Lender shall be forwarded to
the Borrower through the Administrative Agent and shall be conclusively presumed
to be correct save for manifest error.
SECTION 3.10 CAPITAL REQUIREMENTS.
---------------------
If either (a) the introduction of, or any change in, or in the
interpretation of, any Applicable Law or (b) compliance with any guideline or
request from any central bank or comparable agency or other Governmental
Authority (whether or not having the force of law), has or would have the effect
of reducing the rate of return on the capital of, or has affected or would
affect the amount of capital required to be maintained by, any Lender or any
corporation controlling such Lender as a consequence of, or with reference to
the Commitments and other commitments of this type, below the rate which the
Lender or such other corporation could have achieved but for such introduction,
change or compliance, then within five (5) Business Days after written demand by
any such Lender, the Borrower shall pay to such Lender from time to time as
specified by such Lender additional amounts sufficient to compensate such Lender
or other corporation for such reduction. A certificate as to such amounts
submitted to the Borrower and the Administrative Agent by such Lender, shall,
in the absence of manifest error, be presumed to be correct and binding for all
purposes.
SECTION 3.11 TAXES.
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(a) PAYMENTS FREE AND CLEAR. Any and all payments by the Borrower
hereunder or under the Notes shall be made free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholding, and all liabilities with respect thereto excluding, (i)
in the case of each Lender and the Administrative Agent, income and franchise
taxes imposed by the jurisdiction under the laws of which such Lender or the
Administrative Agent (as the case may be) is organized or is or should be
qualified to do business or any political subdivision thereof and (ii) in the
case of each Lender, income and franchise taxes imposed by the jurisdiction of
such Lender's Lending Office or any political subdivision thereof (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under any Note to any Lender or the Administrative Agent, (A) the
sum payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 3.11) such Lender or the Administrative Agent(as the case may
be) receives an amount equal to the amount such party would have received had no
such deductions been made, (B) the Borrower shall make such deductions, (C) the
Borrower shall pay the full amount deducted to the relevant taxing authority or
other authority in accordance with applicable law, and (D) the Borrower shall
deliver to the Administrative Agent evidence of such payment to the relevant
taxing authority or other authority in the manner provided in Section 3.11(d).
(b) STAMP AND OTHER TAXES. In addition, the Borrower shall pay any
present or future stamp, registration, recordation or documentary taxes or any
other similar fees or charges or excise or property taxes, levies of the United
States or any state or political subdivision thereof or any applicable foreign
jurisdiction which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, the
Loans, the other Loan Documents, or the perfection of any rights or security
interest in respect thereto (hereinafter referred to as "Other Taxes").
(c) INDEMNITY. The Borrower shall indemnify each Lender and the
Administrative Agent for the full amount of Taxes and Other Taxes (including,
without limitation, any Taxes and Other Taxes imposed by any jurisdiction on
amounts payable under this Section 3.11 ) paid by such Lender or the
Administrative Agent(as the case may be) and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted. Such
indemnification shall be made within thirty (30) days from the date such Lender
or the Administrative Agent (as the case may be) makes written demand therefor.
(d) EVIDENCE OF PAYMENT. Within thirty (30) days after the date of any
payment of Taxes or Other Taxes, the Borrower shall furnish to the
Administrative Agent, at its address referred to in Section 12.01, the original
or a certified copy of a receipt evidencing payment thereof or other evidence of
payment satisfactory to the Administrative Agent.
(e) DELIVERY OF TAX FORMS. Each Lender organized under the laws of a
jurisdiction other than the United States or any state thereof shall deliver to
the Borrower, with a copy to the Administrative Agent, on the Closing Date or
concurrently with the delivery of the relevant Assignment and Acceptance, as
applicable, (i) two United States Internal Revenue Service Forms 4224 or Forms
1001, as applicable (or successor forms) properly completed and certifying in
each case that such Lender is entitled to a complete exemption from withholding
or deduction for or on account of any United States federal income taxes, and
(ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable form,
as the case may be, to establish an exemption from United States backup
withholding taxes. Each such Lender further agrees to deliver to the Borrower,
with a copy to the Administrative Agent, a Form 1001 or 4224 and Form W-8 or
W-9, or successor applicable forms or manner of certification, as the case may
be, on or before the date that any such form expires or becomes obsolete or
after the occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrower, certifying in the case of a Form
1001 or 4224 that such Lender is entitled to receive payments under this
Agreement without deduction or withholding of any United States federal income
taxes (unless in any such case an event (including without limitation any change
in treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders such forms inapplicable or
the exemption to which such forms relate unavailable and such Lender notifies
the Borrower and the Administrative Agent that it is not entitled to receive
payments without deduction or withholding of United States federal income taxes)
and, in the case of a Form W-8 or W-9, establishing an exemption from United
States backup withholding tax. The Borrower shall not be required to pay any
additional amount to any non-U.S. Lender in respect of United States withholding
tax pursuant to Section 3.11(a) to the extent that the obligation to withhold
such tax existed at the time such non-U.S. Lender became a Lender hereunder,
unless such obligation would not have arisen but for a failure by such non-U.S.
Lender to deliver the documents referred to in this Section 3.11(e).
(f) SURVIVAL. Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 3.11 shall survive the payment in full of the
Obligations and the termination of the Commitments.
SECTION 3.12 DUTY TO MITIGATE; ASSIGNMENT OF COMMITMENTS
UNDER CERTAIN CIRCUMSTANCES.
----------------------------
(a) Any Lender (or Eligible Assignee) claiming any additional amounts
payable pursuant to Section 3.08, 3.10 or 3.11 shall use reasonable efforts
(consistent with legal and regulatory restrictions) to file any certificate or
document requested by the Borrower or to change the jurisdiction of its
applicable lending office if the making of such a filing or change would avoid
the need for or reduce the amount of any such additional amounts which may
thereafter accrue or avoid the circumstances giving rise to such exercise and
would not, in the sole determination of such Lender (or Eligible Assignee), be
otherwise disadvantageous to such Lender (or Eligible Assignee).
(b) In the event that any Lender shall have delivered a notice pursuant
to Section 3.08 or 3.10, or the Borrower shall be required to make additional
payments to any Lender under Section 3.11, or any Lender shall have failed to
advise the Borrower and the Administrative Agent of its agreement to extend the
Termination Date on or prior to the thirtieth (30th) day following any extension
request by the Borrower pursuant to Section 2.07(b), the Borrower shall have the
right, at its own expense (which shall include the assignment fee referred to in
Section 12.10), upon notice to such Lender and the Administrative Agent, to
require such Lender to transfer and assign without recourse (in accordance with
and subject to the restrictions contained in Section 12.10) all interests,
rights and obligations contained hereunder to another financial institution
(including any other Lender) approved by the Administrative Agent (which
approval shall not be unreasonably withheld) which shall assume such
obligations; PROVIDED that (i) no such assignment shall conflict with any law,
rule or regulation or order of any Governmental Authority and (ii) the assignee
or the Borrower, as the case may be, shall pay to the affected Lender in
immediately available funds on the date of such assignment the principal of and
interest accrued to the date of payment on the Loans made by it hereunder and
all other amounts accrued for its account or owed to it hereunder (including the
additional amounts asserted and payable pursuant to Section 3.08, 3.10 or 3.11,
if any).
ARTICLE IV
CLOSING; CONDITIONS OF CLOSING AND BORROWING
SECTION 4.01 CLOSING.
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The closing shall take place at the offices of Kennedy Covington
Lobdell & Hickman at 9:00 a.m. on September 30, 1997 or on such other date as
the parties hereto shall mutually agree.
SECTION 4.02 CONDITIONS TO CLOSING AND INITIAL EXTENSIONS OF
CREDIT.
-----------------------------------------------
The obligation of the Lenders to close this Agreement and to make
the initial Loan is subject to the satisfaction of each of the following
conditions:
(a) EXECUTED LOAN DOCUMENTS. This Agreement, the Notes, the Guarantee
Agreement and any other Loan Documents shall have been duly authorized,
executed and delivered to the Administrative Agent by the parties thereto, shall
be in full force and effect and no default shall exist thereunder, and the
Borrower shall have delivered original counterparts thereof to the
Administrative Agent.
(b) CLOSING CERTIFICATES; ETC.
(i) OFFICERS'S CERTIFICATE OF THE BORROWER. The Administrative
Agent shall have received a certificate from the chief executive
officer or chief financial officer of the Borrower, in form and
substance satisfactory to the Administrative Agent, to the effect that
all representations and warranties of the Borrower contained in this
Agreement and the other Loan Documents are true, correct and complete;
that the Borrower is not in violation of any of the covenants contained
in this Agreement and the other Loan Documents; that, after giving
effect to the transactions contemplated by this Agreement, no Default
or Event of Default has occurred and is continuing; and that the
Borrower has satisfied each of the closing conditions.
(ii) PARTNERSHIP DOCUMENTS; SECRETARY'S CERTIFICATES. The
Administrative Agent shall have received (A) a copy of each of the
Partnership Documents and the organizational documents of the General
Partner and each Subsidiary, certified by the Secretary or Assistant
Secretary of the Borrower, and such other documents as may be
reasonably required to evidence the authority of each of the General
Partner, the Borrower and each Subsidiary to enter into each Loan
Document and Partnership Document to which it is party and to complete
the transactions to which it is a party; (B) a certificate of the
Secretary or Assistant Secretary of the Borrower dated the Closing Date
and certifying with respect to each of the General Partner, the
Borrower and each Subsidiary (1) that attached thereto is a true and
complete copy of the by-laws or equivalent document of each of them in
effect on the Closing Date and at all times since a date prior to the
date of the resolutions described in clause (2) below, (2) that
attached thereto is a true and complete copy of resolutions duly
adopted by the respective governing boards of each of them authorizing
as applicable, the execution, delivery and performance of the Loan
Documents to which it is party and, in the case of the Borrower, the
borrowings hereunder, and that such resolutions have not been modified,
rescinded or amended and are in full force and effect, (3) that the
organizational documents of each of them have not been amended since
the date of the last amendment thereto shown on the certificate of good
standing attached thereto and (4) as to the incumbency and specimen
signature of each officer executing any Loan Document, Partnership
Document or any other document delivered in connection herewith on its
behalf; and (C) a certificate of another officer as to the incumbency
and specimen signature of such Secretary or Assistant Secretary
executing the certificate pursuant to (2) above.
(iii) CERTIFICATES OF GOOD STANDING. The Administrative Agent
shall have received long-form certificates as of a recent date of the
good standing of the Borrower the General Partner and each Subsidiary
under the laws of their respective jurisdictions of organization and
each other jurisdiction where any such Person is qualified to do
business and a certificate of the relevant taxing authorities of such
jurisdictions certifying that such Person has filed required tax
returns and owes no delinquent taxes.
(iv) OPINIONS OF COUNSEL. The Administrative Agent shall have
received favorable opinions of counsel to the Borrower addressed to the
Administrative Agent and the Lenders with respect to the Borrower, the
Guarantors, the Loan Documents and such other matters as the Lenders
shall request.
(v) TAX FORMS. The Administrative Agent shall have received
copies of the United States Internal Revenue Service forms required by
Section 3.11(e) hereof.
(vi) INSURANCE CERTIFICATE. The Administrative Agent shall
have received a detailed list of the Borrower's insurance then in
effect, stating the names of the insurance companies, the amounts and
rates of the insurance, the dates of the expiration thereof and the
properties and risks covered thereby.
(c) CONSENTS; DEFAULTS.
(i) GOVERNMENTAL AND THIRD PARTY APPROVALS. All necessary
approvals, authorizations and consents, if any be required, of any
Person, including without limitation the holders of the Senior Notes,
as applicable, and of all Governmental Authorities and courts having
jurisdiction with respect to the transactions contemplated by this
Agreement and the other Loan Documents shall have been obtained.
(ii) NO INJUNCTION, ETC. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or
proposed before any Governmental Authority to enjoin, restrain, or
prohibit, or to obtain substantial damages in respect of, or which is
related to or arises out of this Agreement or the other Loan Documents
or the consummation of the transactions contemplated hereby or thereby,
or which, in the Administrative Agent's discretion, would make it
inadvisable to consummate the transactions contemplated by this
Agreement and such other Loan Documents.
(iii) NO EVENT OF DEFAULT. No Default or Event of Default
shall have occurred and be continuing.
(d) FINANCIAL MATTERS.
(i) FINANCIAL STATEMENTS. The Administrative Agent shall have
received the most recent audited Consolidated financial statements of
the Borrower and its Subsidiaries, all in form and substance
satisfactory to the Administrative Agent.
(ii) FINANCIAL CONDITION CERTIFICATE. The Borrower shall have
delivered to the Administrative Agent a certificate, in form and
substance satisfactory to the Administrative Agent, and certified as
accurate by the chief executive officer or chief financial officer of
the Borrower, that the Borrower and each of its Subsidiaries are each
Solvent.
(iii) PAYMENT AT CLOSING; FEE LETTERS. There shall have been
paid by the Borrower to the Administrative Agent and the Lenders the
fees set forth or referenced in Section 3.03 and any other accrued and
unpaid fees or commissions due hereunder (including, without
limitation, legal fees and expenses), and to any other Person such
amount as may be due thereto in connection with the transactions
contemplated hereby, including all taxes, fees and other charges in
connection with the execution, delivery, recording, filing and
registration of any of the Loan Documents. The Administrative Agent
shall have received duly authorized and executed copies of the fee
letter agreement referred to in Section 3.03(c).
(iv) APPLICABLE MARGIN CERTIFICATE. The Borrower shall have
delivered to the Administrative Agent a certificate executed by the
chief financial officer or treasurer of the Borrower setting forth the
calculation of the Applicable Margin pursuant to Section 3.01(c).
(e) MISCELLANEOUS.
(i) NOTICE OF BORROWING; NOTICE OF ACCOUNT DESIGNATION. The
Administrative Agent shall have received a Notice of Borrowing from the
Borrower in accordance with Section 2.03(a), and a Notice of Account
Designation specifying the account or accounts to which the proceeds of
any loans made after the Closing Date are to be disbursed.
(ii) PROCEEDINGS AND DOCUMENTS. All opinions, certificates and
other instruments and all proceedings in connection with the
transactions contemplated by this Agreement shall be satisfactory in
form and substance to the Lenders. The Lenders shall have received
copies of all other instruments and other evidence as the Lender may
reasonably request, in form and substance satisfactory to the Lenders,
with respect to the transactions contemplated by this Agreement and the
taking of all actions in connection therewith.
(iii) SENIOR NOTES AND RELATED DOCUMENTS. The Borrower shall
have delivered to the Administrative Agent a true and correct copy of
the Senior Note Agreement and a true and correct copy of a specimen
Senior Note.
(iv) DISTRIBUTION SUPPORT AGREEMENT. The Borrower shall have
delivered to the Administrative Agent a true and correct copy of the
Distribution Support Agreement.
(v) RESIGNATION OF CHASE. The Administrative Agent shall have
received the written resignation of Chase as Administrative Agent under
the Original Credit Agreement.
(vi) PAYOFF LETTERS. The Administrative Agent shall have
received a pay-off letter from each lender under the Original Credit
Agreement that is not continuing as a Lender under this Agreement.
(vii) DUE DILIGENCE AND OTHER DOCUMENTS. The Borrower shall
have delivered to the Administrative Agent such other documents,
certificates and opinions as the Administrative Agent reasonably
requests, certified by a secretary or assistant secretary of the
Borrower as a true and correct copy thereof.
SECTION 4.03 CONDITIONS TO ALL LOANS.
------------------------
The obligations of the Lenders to make any Loan is subject to the
satisfaction of the following conditions precedent on the relevant borrowing or
issue date, as applicable:
(a) CONTINUATION OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained in Article V hereof or otherwise made by the Borrower
or any Subsidiary in any Loan Document shall be true and correct, in all
material respects, on and as of such borrowing or issuance date with the same
effect as if made on and as of such date.
(b) NO EXISTING DEFAULT. No Default or Event of Default shall have
occurred and be continuing hereunder on the borrowing date with respect to such
Loan or after giving effect to the Loans to be made on such date.
(c) OFFICER'S COMPLIANCE CERTIFICATE; ADDITIONAL DOCUMENTS. The
Administrative Agent shall have received the current Officer's Compliance
Certificate and each additional document, instrument, legal opinion or other
item of information reasonably requested by it.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
SECTION 5.01 REPRESENTATIONS AND WARRANTIES.
---------------------------------
To induce the Administrative Agent to enter into this Agreement and
the Lenders to make the Loans, the Borrower hereby represents and warrants to
the Administrative Agent and Lenders that:
(a) ORGANIZATION; POWER; QUALIFICATION. Each of the Borrower, its
Subsidiaries, the Parent and the General Partner is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation, has the power and authority to own its properties
and to carry on its business as now being and hereafter proposed to be conducted
and is duly qualified and authorized to do business in each jurisdiction in
which the character of its properties or the nature of its business requires
such qualification and authorization, except where the failure to so qualify
would not have a Material Adverse Effect. The jurisdictions in which the
Borrower and its Subsidiaries are organized and qualified to do business are
described on SCHEDULE 5.01(A).
(b) OWNERSHIP.
(i) Each Subsidiary of the Borrower is listed on SCHEDULE
5.01(B). The capitalization of the Borrower and its Subsidiaries
consists of the number of shares of stock or other ownership interests,
authorized, issued and outstanding, of such classes and series, with or
without par value, described on SCHEDULE 5.01(B). All outstanding
shares or other ownership interests have been duly authorized and
validly issued and are fully paid and nonassessable. The shareholders
or other equity owners of the Subsidiaries of the Borrower and the
number of shares or other ownership interests owned by each are
described on SCHEDULE 5.01(B). There are no outstanding warrants,
subscriptions, options, securities, instruments or other rights of any
type or nature whatsoever, which are convertible into, exchangeable for
or otherwise provide for or permit the issuance of capital stock or
other ownership interests of the Borrower or its Subsidiaries, except
as described on SCHEDULE 5.01(B).
(ii) The sole general partner of the Parent is the General
Partner, which owns a 1.0% general partnership interest in the Parent
and a limited partnership interest in the Parent of not less than
24.4%. The sole general partner of the Borrower is the General Partner,
which owns a 1.0101% general partnership interest in the Borrower and
is a wholly owned subsidiary of Millennium. The only limited partner of
the Borrower is the Parent, which owns a 98.9899% limited partnership
interest in the Borrower and the Borrower does not have any partners
other than the General Partner and the Parent.
(c) AUTHORIZATION OF AGREEMENT, LOAN DOCUMENTS AND BORROWING. Each of
the Borrower and its Subsidiaries has the right, power and authority and has
taken all necessary corporate and other action to authorize the execution,
delivery and performance of this Agreement and each of the other Loan Documents
to which it is a party in accordance with their respective terms. This Agreement
and each of the other Loan Documents have been duly executed and delivered by
the duly authorized officers of the Borrower and each of its Subsidiaries party
thereto, and each such document constitutes the legal, valid and binding
obligation of the Borrower or its Subsidiary party thereto, enforceable in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar state or federal
debtor relief laws from time to time in effect which affect the enforcement of
creditors' rights in general and the availability of equitable remedies.
(d) COMPLIANCE OF AGREEMENT, LOAN DOCUMENTS AND BORROWING WITH LAWS,
ETC. The execution, delivery and performance by the Borrower and its
Subsidiaries of the Loan Documents to which each such Person is a party, in
accordance with their respective terms, the borrowings hereunder and the
transactions contemplated hereby do not and will not, by the passage of time,
the giving of notice or otherwise, (i) require any Governmental Approval or
violate any Applicable Law relating to the Borrower or any of its Subsidiaries,
(ii) conflict with, result in a breach of or constitute a default under the
articles of incorporation, bylaws or other organizational documents of the
Borrower or any of its Subsidiaries or any indenture, agreement or other
instrument to which such Person is a party or by which any of its properties may
be bound or any Governmental Approval relating to such Person, or (iii) result
in or require the creation or imposition of any Lien upon or with respect to any
property now owned or hereafter acquired by such Person other than Liens arising
under the Loan Documents.
(e) COMPLIANCE WITH LAW; GOVERNMENTAL APPROVALS. Each of the Borrower
and its Subsidiaries (i) has all Governmental Approvals required by any
Applicable Law for it to conduct its business, each of which is in full force
and effect, is final and not subject to review on appeal and is not the subject
of any pending or, to the best of its knowledge, threatened attack by direct or
collateral proceeding, and (ii) is in compliance with each Governmental Approval
applicable to it and in compliance with all other Applicable Laws relating to it
or any of its respective properties, except, in each case, to the extent such
non-compliance would not have a Material Adverse Effect.
(f) TAX RETURNS AND PAYMENTS. Each of the Borrower, its Subsidiaries,
the General Partner and the Parent has duly filed or caused to be filed all
material federal, state and local tax returns required by Applicable Law to be
filed, and has paid, or made adequate provision for the payment of, all federal,
state, local and other taxes, assessments and governmental charges or levies
upon it and its property, income, profits and assets which are due and payable,
other than those the validity of which the Borrower, any Subsidiary, the General
Partner or the Parent is contesting in good faith by appropriate proceedings and
with respect to which the Borrower, such Subsidiary, the General Partner or the
Parent shall, to the extent required by GAAP, have set aside on its books
adequate reserves. No Governmental Authority has asserted any Lien or other
claim against the Borrower or Subsidiary thereof with respect to unpaid taxes
which has not been discharged or resolved. The charges, accruals and reserves on
the books of the Borrower and any of its Subsidiaries in respect of federal,
state, local and other taxes for all Fiscal Years and portions thereof since the
organization of the Borrower and any of its Subsidiaries are in the judgment of
the Borrower adequate, and the Borrower does not anticipate any additional taxes
or assessments for any of such years.
(g) INTELLECTUAL PROPERTY MATTERS. Each of the Borrower and its
Subsidiaries owns or possesses rights to use all franchises, licenses,
copyrights, copyright applications, patents, patent rights or licenses, patent
applications, trademarks, trademark rights, trade names, trade name rights,
copyrights and rights with respect to the foregoing which are required to
conduct its business. No event has occurred which permits, or after notice or
lapse of time or both would permit, the revocation or termination of any such
rights, and neither the Borrower nor any Subsidiary thereof is liable to any
Person for infringement under Applicable Law with respect to any such rights as
a result of its business operations.
(h) ENVIRONMENTAL AND SAFETY MATTERS. Each of the Business, the
Borrower, each Subsidiary, the General Partner and the Parent has complied in
all respects with all Environmental and Safety Laws except for violations that
either alone or in the aggregate could not reasonably be expected to result in a
Material Adverse Effect. None of the Business, the Borrower, any Subsidiary, the
General Partner or the Parent has received notice of any failure so to comply
which alone or together with any other such failure could reasonably be expected
to result in a Material Adverse Effect. None of the Business, the Borrower, any
Subsidiary, the General Partner or the Parent manages or handles any hazardous
wastes, hazardous substances, hazardous materials, toxic substances or toxic
pollutants referred to in or regulated by Environmental and Safety Laws in
violation of such laws or of any other applicable law where such violation could
reasonably be expected to result, individually or together with other
violations, in a Material Adverse Effect. To the best knowledge of the Borrower,
none of the Business, the Borrower, any Subsidiary, the General Partner or the
Parent has any liabilities or contingent liabilities relating to environmental
or employee health and safety matters (including on-site or off-site
contamination) which, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect.
(i) ERISA.
(i) The Borrower and each ERISA Affiliate is in material
compliance with all applicable provisions of ERISA and the regulations
and published interpretations thereunder and no ERISA Event has
occurred or is reasonably expected to occur that, when taken together
with all other ERISA Events could reasonably be expected to result in a
Material Adverse Effect.
(ii) Each Employee Benefit Plan that is intended to be
qualified under Section 401(a) of the Code has been determined by the
Internal Revenue Service to be so qualified, and each trust related to
such plan has been determined to be exempt under Section 501(a) of the
Code.
(iii) The present value of all benefit liabilities under each
Employee Benefit Plan (based on those assumptions used for purposes of
Statement of Financial Accounting Standards No. 87) did not, as of the
last annual valuation date applicable thereto, exceed by more than
$5,000,000 the fair market value of the assets of such Employee Benefit
Plan and the present value of all underfunded plans (based on those
assumptions used for purposes of Statement of Financial Accounting
Standards No. 87) did not, as of the last annual valuation dates
applicable thereto, exceed by more than $5,000,000 the fair market
value of the assets of all such underfunded Employee Benefit Plans.
(j) MARGIN STOCK. Neither the Borrower nor any Subsidiary thereof is
engaged principally or as one of its activities in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" (as each
such term is defined or used in Regulations G and U of the Board of Governors of
the Federal Reserve System). No part of the proceeds of any of the Loans will be
used for purchasing or carrying margin stock in violation of, or for any purpose
which violates, the provisions of Regulation G, T, U or X of such Board of
Governors.
(k) GOVERNMENT REGULATION. Neither the Borrower nor any Subsidiary
thereof is an "investment company" or a company "controlled" by an "investment
company" (as each such term is defined or used in the Investment Company Act of
1940, as amended) and neither the Borrower nor any Subsidiary thereof is, or
after giving effect to any Extension of Credit will be, subject to regulation
under the Public Utility Holding Company Act of 1935 or the Interstate Commerce
Act, each as amended, or any other Applicable Law which limits its ability to
incur or consummate the transactions contemplated hereby.
(l) AGREEMENTS. (i) None of the Business, the Borrower, any of the
Subsidiaries, the General Partner nor the Parent is a party to any agreement or
instrument or subject to any restriction in its partnership or corporate
organizational documents that (i) will have the effect of prohibiting or
restraining, or will impose adverse conditions upon, any of the transactions
contemplated hereby or the payment of dividends or the making of any loans,
investments or transfers by any Subsidiary to or in the Borrower or (ii) has
resulted or could reasonably be expected to result in a Material Adverse Effect.
(m) None of the Business, the Borrower, any of the Subsidiaries, the
General Partner or the Parent is in default in any manner, and there is no event
or condition which with notice or lapse of time or both would constitute such a
default or event of default, under any provision of any Senior Note, any
Refinancing Note, the Senior Note Agreement, any Refinancing Note Agreement, or
any indenture or other agreement or instrument evidencing Indebtedness, any
Contingent Obligation set forth on SCHEDULE 5.01(T) or any other material
agreement or instrument to which it is a party or by which it or any of its
properties or assets are or may be bound, where such default could reasonably be
expected to result in a Material Adverse Effect.
(n) EMPLOYEE RELATIONS. None of the Borrower and its Subsidiaries is,
except as set forth on SCHEDULE 5.01(M) party to any collective bargaining
agreement nor has any labor union been recognized as the representative of its
employees. There are no strikes against the Business, the Borrower or any
Subsidiary pending or, to the best knowledge of the Borrower, threatened, other
than strikes which, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. The hours worked and payments
made to employees of the Business, the Borrower, each Subsidiary, the General
Partner and the Parent have not been in violation of the Fair Labor Standards
Act or any other applicable law dealing with such matters except for violations
that either alone or in the aggregate could not reasonably be expected to result
in a Material Adverse Effect. All material payments due from the Business, the
Borrower, any Subsidiary, the General Partner and the Parent, or for which any
claim may be made against the Business, the Borrower, any Subsidiary, the
General Partner or the Parent, on account of wages and employee health and
welfare insurance and other benefits have been paid or accrued as a liability on
the books of the Business, the Borrower, such Subsidiary, the General Partner or
the Parent, as applicable, in compliance with GAAP.
(o) BURDENSOME PROVISIONS. Neither the Borrower nor any Subsidiary
thereof is subject to any Governmental Approval or Applicable Law which is so
unusual or burdensome as in the foreseeable future could be reasonably expected
to have a Material Adverse Effect. The Borrower and its Subsidiaries do not
presently anticipate that future expenditures needed to meet the provisions of
any statutes, orders, rules or regulations of a Governmental Authority will be
so burdensome as to have a Material Adverse Effect.
(p) FINANCIAL STATEMENTS. The (i) audited Consolidated balance sheets
of the Borrower and its Subsidiaries as of September 30, 1996 and the related
statements of income and retained earnings and cash flows for the Fiscal Years
then ended and (ii) unaudited Consolidated balance sheet of the Borrower and its
Subsidiaries as of June 28, 1997 and related unaudited interim statements of
revenue and retained earnings, copies of which have been furnished to the
Administrative Agent and each Lender, are complete and correct and fairly
present the assets, liabilities and financial position of the Borrower and its
Subsidiaries as at such dates, and the results of the operations and changes of
financial position for the periods then ended. All such financial statements,
including the related schedules and notes thereto, have been prepared in
accordance with GAAP. The Borrower and its Subsidiaries have no Indebtedness,
obligation or other unusual forward or long-term commitment which is not fairly
reflected in the foregoing financial statements or in the notes thereto.
(q) NO MATERIAL ADVERSE CHANGE. Since September 30, 1996, there has
been no material adverse change in the properties, business, operations,
prospects, or condition (financial or otherwise) of the Borrower and its
Subsidiaries and no event has occurred or condition arisen that could reasonably
be expected to have a Material Adverse Effect.
(r) SOLVENCY. As of the Closing Date and after giving effect to each
Extension of Credit made hereunder, the Borrower and each of its Subsidiaries
will be Solvent.
(s) TITLES TO PROPERTIES. Each of the Borrower and its Subsidiaries has
such title to the real property owned by it as is necessary or desirable to the
conduct of its business and valid and legal title to all of its material
personal property and assets, including, but not limited to, those reflected on
the balance sheets of the Borrower and its Subsidiaries delivered pursuant to
Section 5.01(o), except those which have been disposed of by the Borrower or its
Subsidiaries subsequent to such date which dispositions have been in the
ordinary course of business, of assets or properties no longer used or usable in
the conduct of its business or as otherwise expressly permitted hereunder.
(t) LIENS. None of the properties and assets of the Borrower or any
Subsidiary thereof is subject to any Lien, except Liens permitted pursuant to
Section 9.02. No financing statement under the Uniform Commercial Code of any
state which names the Borrower or any Subsidiary thereof or any of their
respective trade names or divisions as debtor and which has not been terminated,
has been filed in any state or other jurisdiction and neither the Borrower nor
any Subsidiary thereof has signed any such financing statement or any security
agreement authorizing any secured party thereunder to file any such financing
statement, except to perfect those Liens permitted by Section 9.02 hereof.
(u) INDEBTEDNESS AND CONTINGENT OBLIGATIONS. SCHEDULE 5.01(T) is a
complete and correct listing of all Indebtedness and Contingent Obligations of
the Borrower and its Subsidiaries in excess of $5,000,000.
(v) LITIGATION. Except as set forth on SCHEDULE 5.01(U), there are no
actions, suits or proceedings pending nor, to the knowledge of the Borrower,
threatened against or in any other way relating adversely to or affecting the
Borrower or any Subsidiary thereof or any of their respective properties in any
court or before any arbitrator of any kind or before or by any Governmental
Authority, except for actions, suits or proceedings that, if adversely
determined, could, individually or in the aggregate, not reasonably be expected
to result in a Material Adverse Effect.
(w) ABSENCE OF DEFAULTS. No event has occurred or is continuing which
constitutes a Default or an Event of Default, or which constitutes, or which
with the passage of time or giving of notice or both would constitute, a default
or event of default by the Borrower or any Subsidiary thereof under any
judgment, decree or order by which the Borrower or its Subsidiaries or any of
their respective properties may be bound or which would require the Borrower or
its Subsidiaries to make any payment thereunder prior to the scheduled maturity
date therefor.
(x) DISTRIBUTION SUPPORT AGREEMENT. Attached hereto as EXHIBIT I is a
true and correct copy of the Distribution Support Agreement. Except as set forth
in EXHIBIT I, there have been no amendments to the Distribution Support
Agreement and, to the best knowledge of the Borrower, no default or event of
default, or event or condition which with notice or lapse of time or both would
constitute such a default or event of default with respect to the parties
thereto exists.
(y) SENIOR NOTE AGREEMENT. Attached hereto as EXHIBIT J is a true and
correct copy of the Senior Note Agreement. Except as set forth in EXHIBIT J,
there have been no amendments to the Senior Note Agreement and no default or
event of default, or event or condition which with notice or lapse of time or
both would constitute such a default or event of default with respect to the
Borrower exists.
(z) ACCURACY AND COMPLETENESS OF INFORMATION. All written information,
reports and other papers and data produced by or on behalf of the Borrower or
any Subsidiary thereof and furnished to the Lenders were, at the time the same
were so furnished, complete and correct in all material respects. No document
furnished or written statement made to the Administrative Agent or the Lenders
by the Borrower or any Subsidiary thereof in connection with the negotiation,
preparation or execution of this Agreement or any of the Loan Documents contains
or will contain any untrue statement of a fact material to the creditworthiness
of the Borrower or its Subsidiaries or omits or will omit to state a fact
necessary in order to make the statements contained therein not misleading. The
Borrower is not aware of any facts which it has not disclosed in writing to the
Administrative Agent having a Material Adverse Effect, or insofar as the
Borrower can now foresee, could reasonably be expected to have a Material
Adverse Effect.
SECTION 5.02 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC .
-------------------------------------------------
All representations and warranties set forth in this Article V
and all representations and warranties contained in any certificate, or any of
the Loan Documents (including but not limited to any such representation or
warranty made in or in connection with any amendment thereto) shall constitute
representations and warranties made under this Agreement. All representations
and warranties made under this Agreement shall be made or deemed to be made at
and as of the Closing Date, shall survive the Closing Date and shall not be
waived by the execution and delivery of this Agreement, any investigation made
by or on behalf of the Lenders or any borrowing hereunder.
ARTICLE VI
FINANCIAL INFORMATION AND NOTICES
Until all the Obligations have been finally and indefeasibly paid and
satisfied in full and the Commitments terminated, unless consent has been
obtained in the manner set forth in Section 12.11 hereof, the Borrower will
furnish or cause to be furnished to the Administrative Agent and to the Lenders
at their respective addresses as set forth on SCHEDULE 1, or such other office
as may be designated by the Administrative Agent and Lenders from time to time:
SECTION 6.01 FINANCIAL STATEMENTS.
---------------------
(a) QUARTERLY FINANCIAL STATEMENTS. As soon as practicable and in any
event within fifty (50) days after the end of each of the first three fiscal
quarters, an unaudited Consolidated balance sheet of the Borrower and its
Subsidiaries as of the close of such fiscal quarter and unaudited Consolidated
statements of income, retained earnings and cash flows for the fiscal quarter
then ended and that portion of the Fiscal Year then ended, including the notes
thereto, all in reasonable detail setting forth in comparative form the
corresponding figures for the preceding Fiscal Year and prepared by the Borrower
in accordance with GAAP and, if applicable, containing disclosure of the effect
on the financial position or results of operations of any change in the
application of accounting principles and practices during the period, and
certified by the chief financial officer of the Borrower to present fairly in
all material respects the financial condition of the Borrower and its
Subsidiaries as of their respective dates and the results of operations of the
Borrower and its Subsidiaries for the respective periods then ended, subject to
normal year end adjustments.
(b) ANNUAL FINANCIAL STATEMENTS. As soon as practicable and in any
event within ninety-five (95) days after the end of each Fiscal Year, an audited
Consolidated balance sheet of the Borrower and its Subsidiaries as of the close
of such Fiscal Year and audited Consolidated statements of income, retained
earnings and cash flows for the Fiscal Year then ended, including the notes
thereto, all in reasonable detail setting forth in comparative form the
corresponding figures for the preceding Fiscal Year and audited by Price
Waterhouse LLP or other independent certified public accountants reasonably
acceptable to the Administrative Agent in accordance with GAAP and, if
applicable, containing disclosure of the effect on the financial position or
results of operation of any change in the application of accounting principles
and practices during the year, and accompanied by a report thereon by such
certified public accountants that is not qualified with respect to scope
limitations imposed by the Borrower or any of its Subsidiaries or with respect
to accounting principles followed by the Borrower or any of its Subsidiaries not
in accordance with GAAP.
SECTION 6.02 OFFICER'S COMPLIANCE CERTIFICATE .
------------------------------------
At each time financial statements are delivered pursuant to Sections
6.01 (a)or (b), a certificate of the chief financial officer or the treasurer of
the Borrower in the form of EXHIBIT E attached hereto (an "Officer's Compliance
Certificate").
SECTION 6.03 OTHER REPORTS.
--------------
(a) Promptly upon receipt thereof, copies of all reports, if any,
submitted to the Borrower or its Board of Directors by its independent public
accountants in connection with their auditing function, including, without
limitation, any management report and any management responses thereto;
(b) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by the
General Partner, the Parent, the Borrower or any Subsidiary with the Securities
and Exchange Commission or any Governmental Authority succeeding to any of or
all the functions of said Commission, or with any national securities exchange,
or distributed to the holders of Common Unit, as the case may be;
(c) concurrently with any delivery of any statement, report,
certificate or other material under Section 5A of the Senior Note Agreement that
has not otherwise been delivered to the Lenders, a copy of each such statement,
report, certificate or other material, which shall in the case of officers' and
accountants' certificates be addressed to the Lenders and provide the analogous
information and certifications in respect of the Loan Documents; and
(d) such other information regarding the operations, business affairs
and financial condition of the Borrower or any of its Subsidiaries as the
Administrative Agent or any Lender may reasonably request.
SECTION 6.04 NOTICE OF LITIGATION AND OTHER MATTERS.
-----------------------------------------
Prompt (but in no event later than ten (10)days after an officer of
the Borrower obtains knowledge thereof) telephonic and written notice of:
(a) the commencement of all proceedings and investigations by or before
any Governmental Authority and all actions and proceedings in any court or
before any arbitrator against or involving the Borrower or any Subsidiary
thereof or any of their respective properties, assets or businesses, which, if
adversely determined, could reasonably be expected to have a Material Adverse
Effect;
(b) any notice of any violation received by the Borrower or any
Subsidiary thereof from any Governmental Authority including, without
limitation, any notice of violation of Environmental and Safety Laws which in
any such case could reasonably be expected to have a Material Adverse Effect;
(c) any labor controversy that has resulted in a strike or other work
action against the Borrower or any Subsidiary thereof that could reasonably be
expected to have a Material Adverse Effect;
(d) any attachment, judgment, lien, levy or order exceeding $10,000,000
that may be assessed against the Borrower or any Subsidiary thereof;
(e) any Default, Event of Default or Senior Note Default or any event,
known to the Borrower, which constitutes or which with the passage of time or
giving of notice or both would constitute a default or event of default under
the Distribution Support Agreement;
(f) any event which makes any of the representations set forth in
Section 5.01 inaccurate in any respect; and
(g) any other development that has resulted in, or could reasonably be
expected to result in a Material Adverse Effect.
SECTION 6.05 ACCURACY OF INFORMATION.
------------------------
All written information, reports, statements and other papers and
data furnished by or on behalf of the Borrower to the Administrative Agent or
any Lender (other than financial forecasts) whether pursuant to this Article VI
or any other provision of this Agreement, or any of the Security Documents,
shall be, at the time the same is so furnished, complete and correct in all
material respects to the extent necessary to give the Administrative Agent or
any Lender complete, true and accurate knowledge of the subject matter based on
the Borrower's knowledge thereof.
ARTICLE VII
AFFIRMATIVE COVENANTS
Until all of the Obligations have been finally and indefeasibly paid
and satisfied in full and the Commitments terminated, unless consent has been
obtained in the manner provided for in Section 12.11, the Borrower will, and
will cause each of its Subsidiaries to:
SECTION 7.01 EXISTENCE; BUSINESSES AND PROPERTIES.
-------------------------------------
(i) Do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its legal existence and qualify
and remain qualified as a foreign entity in each jurisdiction in which
the failure to do so would have a Material Adverse Effect, except as
otherwise permitted by Section 9.05.
(ii) Do or cause to be done all things necessary to preserve,
renew and keep in full force and effect the rights, licenses, permits,
franchises, authorizations, patents, copyrights, trademarks and trade
names material to the conduct of its business; maintain and operate
such business in substantially the manner in which it is presently
conducted and operated; and at all times maintain and preserve all
property material to the conduct of such business and keep such
property in good repair, working order and condition and from time to
time make, or cause to be made, all needed and proper repairs,
renewals, additions, improvements and replacements thereto necessary in
order that the business carried on in connection therewith may be
properly conducted at all times.
SECTION 7.02 INSURANCE.
----------
Keep its insurable properties adequately insured at all times by
financially sound and reputable insurers; maintain such other insurance, to such
extent and against such risks, including fire and other risks insured against by
extended coverage, as is customary with similarly situated companies in the same
or similar businesses, including public liability insurance against claims for
personal injury or death or property damage occurring upon in, about or in
connection with the use of any properties owned occupied or controlled by it and
maintain such other insurance as may be required by Applicable Law; PROVIDED,
HOWEVER, that nothing in this Section 7.02 shall preclude the Borrower or any
Subsidiary from being self-insured to the extent customary with similarly
situated companies in the same or similar businesses.
SECTION 7.03 TAXES.
------
Pay and discharge promptly when due all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits or
in respect of its property, before the same shall become delinquent or in
default, as well as all lawful claims for labor, materials and supplies or
otherwise which, if unpaid, would give rise to a Lien upon such properties or
any part thereof; PROVIDED, HOWEVER, that such payment and discharge shall not
be required with respect to any such tax, assessment, charge, levy or claim so
long as the validity or amount thereof shall be contested in good faith by
appropriate proceedings and adequate reserves in respect thereof shall be
maintained in accordance with GAAP.
SECTION 7.04 EMPLOYEE BENEFITS.
------------------
(i) Comply in all material respects with the applicable provisions
of ERISA and the Code and (b) furnish to the Administrative Agent as soon as
possible after, and in any event within 10 days after any Responsible Officer of
the Borrower or any ERISA Affiliate knows or has reason to know that, any ERISA
Event has occurred that, alone or together with any other ERISA Events that have
occurred, could reasonably be expected to result in liability of the Borrower in
an aggregate amount exceeding $5,000,000, a statement of a Financial Officer
setting forth details as to such ERISA Event and the action, if any, that the
Borrower proposes to take with respect thereto.
SECTION 7.05 ACCESS TO PREMISES AND RECORDS; CONFIDENTIALITY.
------------------------------------------------
Maintain financial records in accordance with GAAP, and upon
reasonable notice permit representatives of the Lenders to have access to such
financial records and the premises of the Borrower or any Subsidiary at
reasonable times and to make such excerpts from such records as such
representatives deem necessary in connection with their evaluation of the
Borrower's ability to repay the Loans or any Subsidiary's ability to perform
its obligations under the Guarantee Agreement. Each Lender agrees to keep all
information obtained by it pursuant to this Section 7.05 and all other
non-public information delivered to it by the Borrower or any Subsidiary
pursuant to this Agreement confidential except to the extent that (i) disclosure
is made, subject to this confidentiality agreement, to Affiliates, officers,
directors, employees, agents and representatives of such Lender or to the
Administrative Agent or any other Lender,(ii) disclosure of such information is
made pursuant to applicable law, regulations, subpoena, judicial process or the
like or at the request of any regulatory authority to which it is subject or to
its counsel or auditors or in any legal proceeding arising out of this
Agreement, (iii) such information is or becomes publicly available other than
by such Lender's breach of this Section 7.05, (iv) disclosure is made to an
actual or prospective assignee or participant pursuant to Section 13.10 or (v)
such information becomes available to such Lender from a third party which, by
making such information available, has not, to such Lender's knowledge, breached
any obligation of confidentiality it may owe.
SECTION 7.06 COMPLIANCE WITH LAWS.
---------------------
Comply with all applicable laws, rules and regulations, and all
orders of any Governmental Authority, applicable to it or any of its property,
business, operations or transactions (including ERISA and all Environmental
and Safety Laws), except where the failure so to comply could not reasonably be
expected to result in a Material Adverse Effect, and provide prompt written
notice to the Lenders following the receipt of any notice of any violation of
any such laws, rules, regulations or orders from any Governmental Authority
charged with enforcing the same where such violation could reasonably be
expected to result in a Material Adverse Effect.
SECTION 7.07 ADDITIONAL GUARANTORS.
----------------------
The Borrower agrees to notify the Administrative Agent if at any
time the Borrower or any Subsidiary determines to acquire or form any Person
which would upon such acquisition or formation constitute a Subsidiary and to
cause any such newly acquired or formed Subsidiary to become a guarantor under
the Guarantee Agreement by the execution of documentation reasonably
satisfactory to the Administrative Agent immediately upon such acquisition or
formation.
SECTION 7.08 USE OF PROCEEDS.
----------------
Use the proceeds of the (a) Acquisition Loans solely to finance
Permitted Business Acquisitions in an aggregate amount not to exceed
$25,000,000, and (b) Revolving Credit Loans for working capital purposes,
including general partnership requirements of the Borrower and its Subsidiaries
and the payment of certain fees and expenses incurred in connection with the
transactions, PROVIDED that no such proceeds may be used to fund any Restricted
Payment other than proceeds of Revolving Credit Loans (i) made in any
four-fiscal-quarter period in an aggregate principal amount not in excess of the
lesser of (A) $29,300,000 and (B) two times the Minimum Quarterly Distribution
in effect as of the Closing Date and (ii) used solely for the purpose of funding
Restricted Payments to the Parent, the proceeds of each of which are in turn
used by the Parent solely for the purpose of paying (A) all or a portion of any
Minimum Quarterly Distribution and the related pro rata distribution to the
General Partner that could not be paid out of Available Cash but for the making
of such a Revolving Credit Loan or (B) reasonable expenses of the Parent which
may be funded with a Restricted Payment pursuant to clause (b) of Section 9.06.
SECTION 7.09 PARTNERSHIP DOCUMENTS.
----------------------
Perform and comply with, and cause each of the General Partner and
the Parent to perform and comply in all material respects with all its
obligations under each of the Partnership Documents to which it is a parry and
enforce and cause each of the General Partner and the Parent to enforce, in all
material respects, each such Partnership Document against each other party
thereto.
SECTION 7.10 COMPLIANCE WITH ENVIRONMENTAL AND SAFETY LAWS .
-------------------------------------------------
Comply, and use reasonable efforts to cause all lessees and other
Persons occupying its properties to comply, in all material respects with all
Environmental and Safety Laws and environmental permits applicable to its
operations and properties; obtain and renew all material environmental permits
necessary for its operations and properties; and conduct any necessary remedial
action in accordance with Environmental and Safety Laws; PROVIDED, however, that
neither the Borrower nor any of the Subsidiaries shall be required to undertake
any remedial action to the extent that its obligation to do so is being
contested in good faith and by proper proceedings and appropriate reserves are
being maintained under GAAP with respect to such circumstances.
SECTION 7.11 PREPARATION OF ENVIRONMENTAL REPORTS.
-------------------------------------
If a Default caused by reason of a breach of Sections 5.01(h) or
7.10 shall have occurred and be continuing, at the request of the Required
Lenders through the Administrative Agent, provide to Lenders within forty-five
(45) days after such request, at the expense of the Borrower, an environmental
site assessment report for the properties which are the subject of such Default
prepared by an environmental consulting firm acceptable to the Administrative
Agent and consented to by the Borrower (which consent shall not be unreasonably
withheld or delayed), indicating the presence or absence of hazardous materials
and the estimated cost of any compliance or remedial action in connection with
such properties.
SECTION 7.12 CORPORATE IDENTITY.
-------------------
Do or cause to be done (or refrain from doing or causing to be
done, as the case may be) all things necessary to ensure that the separate legal
identity of the Borrower will at all times be respected and that neither the
Borrower nor any of the Subsidiaries will be liable for any obligations,
contractual or otherwise, of the General Partner, the Parent or any other entity
in which the General Partner or the Parent owns any equity interest, except as
permitted under Section 9.06(b)or Section 9.07. Without limiting the foregoing,
the Borrower will (a) observe, and cause the General Partner and the Parent to
observe, all requirements, procedures and formalities necessary or advisable in
order that the Borrower will for all purposes be considered a validly existing
partnership separate and distinct from the General Partner, the Parent and their
other subsidiaries, (b) not permit any commingling of the assets of the General
Partner, the Parent or any of their other subsidiaries with assets of the
Borrower or any Subsidiary which would prevent the assets of the General
Partner, the Parent or any of their subsidiaries from being readily
distinguished from the assets of the Borrower and the Subsidiaries and (c) take
reasonable and customary actions to ensure that creditors of the General
Partner, the Parent and their other subsidiaries are aware that each such Person
is an entity separate and distinct from the Borrower and the Subsidiaries.
SECTION 7.13 FEDERAL RESERVE REGULATIONS.
------------------------------
In the event the Borrower or any Subsidiary shall use any proceeds
of Loans to acquire or carry any Margin Stock, the Borrower will not at any time
thereafter permit more than 25% of the value of the assets of the Borrower and
the Subsidiaries subject to the provisions of Section 9.02 or 9.05 to be Margin
Stock.
SECTION 7.14 AVAILABLE CASH RESERVES.
------------------------
The Borrower will maintain an amount of cash reserves that is
necessary or appropriate in the reasonable discretion of the Board of
Supervisors of the Borrower to (i)provide for the proper conduct of the business
of the Borrower and the Subsidiaries (including reserves for future capital
expenditures) subsequent to such quarter, (ii) comply with applicable law or any
loan agreement (including, but not limited to, this Agreement), security
agreement, mortgage, debt instrument or other agreement or obligation to which
the Borrower or any, Subsidiary is a party or by which it is bound or its assets
are subject and (iii) provide funds for distributions to partners of the Parent
and the General Partner in respect of any one or more of the next four quarters;
PROVIDED that the Board of Supervisors need not establish cash reserves pursuant
to clause (iii) if the effect of such reserves would be that the Parent is
unable to distribute the Minimum Quarterly Distribution on the Common Units with
respect to such quarter; and PROVIDED, FURTHER, that disbursements made or cash
reserves established, increased or reduced after the end of any quarter but on
or before the date of determination of Available Cash with respect to such
quarter shall be deemed to have been made, established, increased or reduced for
purposes of determining Available Cash, within such quarter if the Board of
Supervisors of the Company so determines. In addition, without limitation or
duplication of the foregoing, Available Cash for any fiscal quarter shall
reflect an amount of cash reserves equal to the reserves required pursuant to
the last sentence of the definition of "Available Cash".
SECTION 7.15 FURTHER ASSURANCES.
-------------------
Make, execute and deliver all such additional and further acts,
things, deeds and instruments as the Administrative Agent or any Lender may
reasonably require to document and consummate the transactions contemplated
hereby and to vest completely in and insure the Administrative Agent and the
Lenders their respective rights under this Agreement, the Notes and the other
Loan Documents.
SECTION 7.16 YEAR 2000 COMPATIBILITY.
------------------------
Take all action reasonably necessary to ensure that the
computer-based systems of the Borrower and its Subsidiaries are able to operate
and process effectively data that includes dates on and after January 1, 2000.
SECTION 7.17 COMMODITY HEDGING POLICY.
-------------------------
Deliver to the Administrative Agent, for the review and written
approval of the Required Lenders (which approval shall not be unreasonably
withheld), the Borrower's written commodity hedging policy. The Borrower shall
not amend such commodity hedging policy in any manner that increases the risk
exposure of the Borrower (including, without limitation, any increase of the
limits thereunder) without the prior written consent of the Required Lenders,
which consent shall not be unreasonably withheld.
ARTICLE VIII
FINANCIAL COVENANTS
Until all of the Obligations have been finally and indefeasibly paid
and satisfied in full and the Commitments terminated, unless consent has been
obtained in the manner set forth in Section 12.11 hereof, the Borrower and its
Subsidiaries on a Consolidated basis will not:
SECTION 8.01 INTEREST COVERAGE RATIO.
--------------------------
Permit the ratio of EBITDA to Interest Expense as of the end of any
fiscal quarter for the four-quarter-period ending as of such date to be less
than 2.50 to 1.00.
SECTION 8.02 LEVERAGE RATIO.
----------------
Permit the Leverage Ratio as of the end of any fiscal quarter to
be greater than 5.25 to 1.00.
SECTION 8.03 ADJUSTED CONSOLIDATED NET WORTH.
--------------------------------
Permit Adjusted Consolidated Net Worth at any time to be less than
$125,000,000.
ARTICLE IX
NEGATIVE COVENANTS
The Borrower covenants and agrees with each Lender that, from and after
the Closing Date so long as this Agreement shall remain in effect and until the
Commitments have been terminated and the principal of and interest on each Loan,
all Fees and all other expenses or amounts payable under any Loan Document have
been paid in full, unless the Required Lenders shall otherwise consent in
writing, the Borrower will not, and will not cause or permit any of the
Subsidiaries to:
SECTION 9.01 INDEBTEDNESS.
-------------
Incur, create, assume or permit to exist any Indebtedness, except:
(a) Indebtedness for borrowed money existing on the date hereof in an
aggregate principal amountnot in excess of $100,000;
(b) Indebtedness created hereunder and under the other Loan Documents;
(c) in the case of the Guarantors, the Guarantees under the Guarantee
Agreement and the Senior Note Agreement;
(d) in the case of the Borrower, the Senior Notes and Refinancing Notes
in an aggregate principal amount not in excess of the aggregate principal amount
of the Senior Notes redeemed using the net proceeds of such Refinancing Notes;
PROVIDED that, notwithstanding anything to the contrary in this Agreement or any
other Loan Document, no Refinancing Notes shall be issued (and no Indebtedness
shall be incurred under any Refinancing Note Agreement) unless: (i) concurrently
with the issuance of any Refinancing Notes, Senior Notes in a principal amount
equal to the principal amount of such Refinancing Notes shall have been redeemed
and canceled, at a price not in excess of 100% of the principal amount thereof
(plus any premium in respect of such redemption to the extent paid with the
proceeds of the contemporaneous issuance of Common Units of the Parent), (ii)
the terms of the Refinancing Notes and the Refinancing Note Agreement shall be
reasonably satisfactory to the Required Lenders (PROVIDED, HOWEVER, that the
terms of the Refinancing Notes and the Refinancing Note Agreement shall be
deemed to be satisfactory to the Required Lenders if the Refinancing Notes are
issued with substantially the same terms as the Senior Notes (other than any
changes thereto that are not adverse in any respect to the interests of the
Lenders)), (iii) the interest rate of the Refinancing Notes shall be a fixed,
non-increasing interest rate per annum not in excess of the rate payable in
respect of the Senior Notes, payable on a principal amount of the Refinancing
Notes not in excess of the gross proceeds of the sale thereof and interest on
the Refinancing Notes shall be payable not more frequently than interest is
payable on the Senior Notes and (iv) the Refinancing Notes shall mature not
earlier than the maturity date of the Senior Notes and shall not have a shorter
weighted average maturity than the Senior Notes;
(e) Indebtedness of the Borrower to the General Partner or an Affiliate
of the General Partner that is subordinated to the Obligations on terms
satisfactory to the Required Lenders and otherwise on terms satisfactory in all
respects to the Required Lenders;
(f) Indebtedness of the Borrower or any Wholly-Owned Subsidiary to any
Subsidiary or the Borrower,as the case may be;
(g) Indebtedness of the Borrower and the Subsidiaries owed to any
Person providing worker's compensation, health, disability or other employee
benefits or property, casualty or liability insurance to the Borrower or any
Subsidiary, pursuant to reimbursement or indemnification obligations to such
Person;
(h) Indebtedness of the Borrower or the Subsidiaries in respect of
performance bonds, bid bonds, appeal bonds, surety bonds and similar
obligations, in each case provided in the ordinary course of business, including
those incurred to secure health, safety and environmental obligations in the
ordinary course of business, and any extension, renewal or refinancing thereof
to the extent not provided to secure the repayment of other Indebtedness and to
the extent that the amount of refinancing Indebtedness is not greater than the
amount of Indebtedness being refinanced;
(i) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument drawn against insufficient
funds in the ordinary course of business; PROVIDED that such Indebtedness is
extinguished within two Business Days of its incurrence;
(j) Indebtedness of a Subsidiary acquired after the date hereof and
Indebtedness of a corporation merged or consolidated with or into the Borrower
or any Subsidiary after the date hereof, which Indebtedness in each case exists
at the time of such acquisition, merger, consolidation or conversion into a
Subsidiary and is not created in contemplation of such event and where such
acquisition, merger or consolidation is otherwise permitted by this Agreement;
PROVIDED that the aggregate principal amount of Indebtedness under this
paragraph (j) shall not at any time exceed $5,000,000;
(k) Indebtedness incurred, issued or assumed by the Borrower (i) to
finance the acquisitions, improvements or repairs (to the extent such
improvements and repairs may be capitalized on the books of the Borrower in
accordance with GAAP) of, or additions to, the property and assets of the
Borrower, or (ii) to replace, extend, renew, refund or refinance any such
Indebtedness; PROVIDED that:
(i) the aggregate principal amount of Indebtedness incurred in
connection with any such replacement, extension, renewal, refunding or
refinancing shall not exceed the outstanding principal amount of
Indebtedness so replaced, extended, renewed, refunded or refinanced;
(ii) the aggregate principal amount of Indebtedness incurred
under this clause (k) and outstanding at any time shall not exceed (A)
$25,000,000 plus (B) an amount equal to the aggregate net proceeds
received by the Borrower as consideration for the issuance by the
Borrower of additional partnership interests or as a capital
contribution in each case for the purpose of financing such
acquisitions, improvements, repairs or additions less (C) any amount of
excess proceeds used to permanently reduce the Commitments pursuant to
Section 2.06(a);
(iii) such Indebtedness is secured by a Lien on the property
or assets so acquired, improved or repaired and does not include a
negative pledge on any other assets of the Borrower or its
Subsidiaries;
(l) obligations described under clause (j) of the definition of
"Indebtedness" in an aggregate stated amount at any time outstanding, not in
excess of $5,000,000;
(m) obligations under Commodity Hedging Agreements respecting actual
volumes of propane inventory of the Borrower incurred as follows: (i) in
accordance with the Borrower's commodity hedging policy, upon approval of such
policy in accordance with in Section 7.17 and (ii) until such commodity hedging
policy has been approved as set forth in Section 7.17, in the ordinary course of
business, on a non-speculative basis and in a manner consistent with the
Borrower's past practices; and
(n) other unsecured Indebtedness of the Borrower in an aggregate
principal amount at any time outstanding not in excess of $5,000,000; PROVIDED,
HOWEVER, that no Indebtedness may be incurred, created, assumed or permitted to
exist if such insurance, creation, assumption or existence would violate the
provisions of the Senior Note Agreement or any Refinancing Note Agreement at the
time in effect.
SECTION 9.02 LIENS.
------
Create, incur, assume or permit to exist any Lien on any property
or assets (including stock or other securities of any Person, including any
Subsidiary) now owned or hereafter acquired by it or any income or revenues or
rights in respect or any thereof, or sell or transfer any account receivable or
any right in respect thereof, except:
(a) Liens on property or assets of the Borrower existing on the date
hereof and set forth in SCHEDULE 9.02; PROVIDED that such Liens shall secure
only those obligations that they secure on the date hereof and shall not apply
to any other property or assets of the Borrower or any Subsidiary;
(b) any Lien arising as a result of a transaction permitted under
Section 9.05(e).
(c) any Lien existing on any property or asset of the Borrower or any
Subsidiary prior to the acquisition thereof by the Borrower or any Subsidiary
securing Indebtedness permitted by Section 9.01(j); provided that (i) such Lien
is not created in contemplation of or in connection with such acquisition and
(ii) such Lien does not apply to any other property or asset of the Borrower or
any Subsidiary;
(d) Liens (other than any Lien imposed by ERISA) incurred and pledges
and deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance, old-age pensions, retiree health benefits
and other social security benefits and deposits securing liability to insurance
carriers under insurance or self-insurance arrangements in respect of such
obligations;
(e) Liens securing the performance of bids, tenders, leases, contracts
(other than for the repayment of borrowed money), statutory obligations surety,
customs and appeal bonds and other obligations of a like nature, incurred as an
incident to and in the ordinary course of business;
(f) Liens imposed by law, such as carriers', warehousemen's,
mechanics', materialmen's and vendors' liens, incurred in good faith in the
ordinary course of business and securing obligations which are not yet due or
which are being contested in good faith by appropriate proceedings as to which
the Borrower or a Subsidiary, as the case may be, shall have, to the extent
required by GAAP, set aside on its books adequate reserves,
(g) Liens securing the payment of taxes, assessments and governmental
charges or levies, either (i) not delinquent or (ii) being contested in good
faith by appropriate legal or administrative proceedings and as to which the
Borrower or a Subsidiary, as the case may be, shall have, to the extent required
by GAAP, set aside on its books adequate reserves;
(h) zoning restrictions, easements, licenses, reservations, provisions,
covenants, conditions, waivers, restrictions on the use of property or
irregularities of title (and with respect to leasehold interests, mortgages,
obligations, liens and other encumbrances incurred, created, assumed or
permitted to exist and arising by, through or under a landlord or owner of the
leased property, with or without consent of the lessee) which do not in the
aggregate materially detract from the value of its property or assets or
materially impair the use thereof in the operation of its business;
(i) Liens on the property or assets of any Subsidiary in favor of the
Borrower or any other Wholly-Owned Subsidiary;
(j) extensions, renewals and replacements of Liens referred to in
paragraphs (a) through (i) of this Section 9.02; PROVIDED that any such
extension, renewal or replacement Lien shall be limited to the property or
assets (or improvements thereon) covered by the Lien extended, renewed or
replaced and that the obligations secured by any such extension, renewal or
replacement Lien shall be in an amount not greater than the amount of the
obligations secured by the Lien extended, renewed or replaced;
(k) attachment or judgment Liens not giving rise to an Event of Default
and which are being contested in good faith by appropriate proceedings;
(l) leases or subleases of equipment to customers that do not
materially interfere with the conduct of the business of the Borrower and its
Subsidiaries taken as a whole;
(m) Liens consisting of interests of lessors under capital leases
permitted hereunder;
(n) any Lien created to secure all or any part of the purchase price,
or to secure Indebtedness incurred or assumed to pay all or any part of the
purchase price or cost of construction, of property acquired or constructed by
the Borrower or a Subsidiary after the date hereof; PROVIDED, that (i) any such
Lien shall be confined solely to the item or items of such property (or
improvement therein) so acquired or constructed and, if required by the terms of
the instrument creating such Lien, other property (or improvement thereon) which
is an improvement to such acquired or constructed property, (ii) any such Lien
shall be created contemporaneously with, or within ten (10) Business Days after,
the acquisition or construction of such property, and (iii) such Lien does not
exceed an amount equal to 85% (100% in the case of Capital Leases) of the fair
market value of such assets (as determined in good faith by the Board of
Supervisors of the Borrower) at the time of acquisition thereof;
(o) Liens securing Indebtedness permitted by Section 9.01(k); and
(p) Liens securing Indebtedness (including interests of lessors under
Capital Leases) permitted by Section 9.01, so long as immediately after giving
effect thereto, the aggregate amount of the Indebtedness secured by such Liens
shall not exceed 2.5% of Total Assets (as defined in the Senior Note Agreement).
Notwithstanding the foregoing, the Borrower will not, and will not permit any
Subsidiary to, create, assume or incur any Lien upon or with respect to any of
its proprietary software developed by or on behalf of the Borrower or its
Affiliates and necessary and useful for the conduct of the Business.
SECTION 9.03 SALE AND LEASE-BACK TRANSACTIONS.
---------------------------------
Enter into any arrangement, directly or indirectly, with any Person
whereby it shall sell or transfer any property, real or personal used or useful
in its business, whether now owned or hereafter acquired, and thereafter rent or
lease such property or other property which it intends to use for substantially
the same purpose or purposes as the property being sold or transferred, in an
aggregate amount not to exceed $25,000,000; PROVIDED that the Designated Net
Proceeds thereof shall be applied as a prepayment of the Acquisition Loans
and/or reduction of the Aggregate Acquisition Commitment as required pursuant to
Section 2.04(f) and 2.06(b).
SECTION 9.04 INVESTMENTS, LOANS AND ADVANCES.
--------------------------------
Directly or indirectly purchase or own any stock, obligations or
securities of, or any other interest in, or make any capital contribution to,
any Person, or make or permit to remain outstanding any loan or advance to, or
guarantee, endorse or otherwise be or become contingently liable, directly or
indirectly, in connection with the obligations of any Person, or make any other
Investment, except:
(a) Investments (i) arising out of loans and advances to
employees incurred in the ordinary course of business, (ii) arising out of
extensions of trade credit or advances to third parties in the ordinary course
of business and (iii) acquired by reason of the exercise of customary creditors'
rights upon default or pursuant to the bankruptcy, insolvency or reorganization
of a debtor;
(b) Guarantees that constitute Indebtedness to the extent
permitted by Sections 8.02, 8.03 and 9.01 and other Guarantees that are not
Guarantees of Indebtedness and are undertaken in the ordinary course of
business;
(c) Investments in (collectively, "Cash Equivalents")
(i) marketable obligations issued or unconditionally
guaranteed by the United States of America, or issued by any
agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within one
year or less from the date of acquisition thereof;
(ii) marketable direct obligations issued by any
state of the United States of America or any political
subdivision of any such state or any public instrumentality
thereof maturing within one year from the date of acquisition
thereof and having as at such date the highest rating
obtainable from either Standard & Poor's Rating Group or
Moody's Investors Service, Inc.;
(iii) commercial paper maturing no more than 270 days
from the date of creation thereof and having as at the date of
acquisition thereof one of the two highest ratings obtainable
from either Standard & Poor's Rating Group or Moody's
Investors Service, Inc.;
(iv) certificates of deposit maturing one year or
less from the date of acquisition thereof issued by commercial
banks incorporated under the laws of the United States of
America or any state thereof or the District of Columbia or
Canada or issued by the United States branch of any commercial
bank organized under the laws of any country in Western Europe
or Japan, with capital and stockholders' equity of at least
$500,000,000 (or the equivalent in the currency of such
country), (A) the commercial paper or other short term
unsecured debt obligations of which are as at such date rated
either A-2 or better (or comparably if the rating system is
changed) by Standard & Poor's Rating Group or Prime-2 or
better (or comparably if the rating system is changed) by
Moody's Investors Service, Inc. or (B) the long-term debt
obligations of which are as at such date rated either A or
better (or comparably if the rating system is changed) by
Standard & Poor's Rating Group or A-2 or better (or comparably
if the rating system is changed) by Moody's Investors Service,
Inc. ("Permitted Banks");
(v) Eurodollar time deposits having a maturity of
less than 270 days from the date of acquisition thereof
purchased directly from any Permitted Bank;
(vi) bankers' acceptances eligible for rediscount
under requirements of The Board of Governors of the Federal
Reserve System and accepted by Permitted Banks;
(vii) to the extent permitted under the Senior Note
Agreement, money market funds having assets of not less than
$500,000,000; and
(viii) obligations of the type described in clauses
(i), (ii), (iii), (iv) or (v) above purchased from a
securities dealer designated as a "primary dealer" by the
Federal Reserve Bank of New York or from a Permitted Bank as
counterparty to a written repurchase agreement obligating such
counterparty to repurchase such obligations not later than 14
days after the purchase thereof and which provides that the
obligations which are the subject thereof are held for the
benefit of the Borrower or a Subsidiary by a custodian which
is a Permitted Bank and which is not a counterparty to the
repurchase agreement in question;
(d) liabilities with respect to any Hedging Agreements or Commodities
Hedging Agreements;
(e) investments made by a Subsidiary in the Borrower; and
(f) the investment existing on the Closing Date of the Borrower in The
Dixie Pipeline Company (a Delaware corporation).
SECTION 9.05 MERGERS, CONSOLIDATIONS, SALES OF ASSETS AND
ACQUISITIONS.
--------------------------------------------
Merge into or consolidate with any other Person, or permit any
other Person to merge into or consolidate with it, or sell, transfer, lease or
otherwise dispose of (in one transaction or in a series of transactions) all or
any substantial part of its assets (whether now owned or hereafter acquired), or
purchase, lease or otherwise acquire (in one transaction or a series of
transactions) all or any substantial part of the assets of, or any division or
line of business of, any other Person, except that this Section 9.05 shall not
prohibit;
(a) the purchase and sale of inventory in the ordinary course of
business by the Borrower or any Subsidiary or the acquisition of facilities and
equipment in the ordinary course of business;
(b) if at the time thereof and immediately after giving effect thereto
no Event of Default or Default shall have occurred and be continuing (i) the
merger of any Subsidiary into the Borrower in a transaction in which the
Borrower is the surviving Person, or the merger or consolidation of any
Subsidiary with and into any other Wholly-Owned domestic Subsidiary, in each
case in a transaction in which no Person other than the Borrower or a Subsidiary
receives any consideration; and (ii) the merger of any other Person with and
into the Borrower or a Subsidiary if the Borrower or such Subsidiary is the
surviving entity and after giving effect to such transaction (A) the
Consolidated Net Worth of the Borrower and the Subsidiaries shall be not less
than the Consolidated Net Worth of the Borrower and its Subsidiaries immediate,
prior to such transaction, (B) substantially all the assets and business of the
Borrower and the Subsidiaries shall be located in the United States and (C) the
Borrower and the Subsidiaries shall be in compliance, on a pro forma basis after
giving effect to such transaction, with the covenants contained in Article VIII
recomputed as of the last day of the most recently ended fiscal quarter of the
Borrower and the Subsidiaries as if such transaction had occurred on the first
day of each relevant period for testing such compliance, and the Borrower shall
have delivered to the Administrative Agent an officer's certificate to such
effect, together with all relevant financial information and calculations
demonstrating such compliance;
(c) Permitted Business Acquisitions and other investments permitted by
Section 9.04;
(d) sales, leases or other dispositions of equipment or real property
of the Borrower or the Subsidiaries determined by the Board of Supervisors of
the Borrower or senior management of the Borrower to be no longer useful or
necessary in the operation of the business of the Borrower or the Subsidiaries;
PROVIDED that the Designated Net Proceeds shall be applied as a prepayment of
the Acquisition Loans and/or reduction of the Aggregate Acquisition Commitment
as required pursuant to Section 2.04(f) and Section 2.06(b); and
(e) sales, leases or other dispositions of property for consideration
(i) at least 80% of which consists of cash and the remainder of which consists
of investments permitted under Section 9.04 or (ii) consisting of cash and one
or more Permitted Business Acquisitions which the Board of Supervisors of the
Borrower shall have determined, as evidenced by a resolution thereof, have in
the aggregate a fair market value not less than the fair market value of the
property being sold, leased or otherwise disposed of; PROVIDED that the
Designated Net Proceeds shall be applied as a prepayment of the Acquisition
Loans and/or reduction of the Aggregate Acquisition Commitment as required
pursuant to Section 2.04(f) and Section 2.06(b); PROVIDED, FURTHER, that (i) no
issuance of the Capital Stock (or of any warrant, right or option to purchase or
otherwise acquire any such Capital Stock or any security convertible into or
exchangeable for any such Capital Stock) of any Subsidiary may be made to any
Person other than the Borrower or a Wholly-Owned domestic Subsidiary except for
the purpose of qualifying directors or in satisfaction of pre-emptive rights of
holders of minority interests which are triggered by an issuance of Capital
Stock to the Borrower or any Wholly-Owned domestic Subsidiary and (ii) no sale
may be made of the Capital Stock (or of any warrant, right or option to purchase
or otherwise acquire any such Capital Stock or any security convertible into or
exchangeable for any such Capital Stock) of any Subsidiary except in connection
with a sale, transfer or other disposition in which (i) simultaneously with such
sale, transfer or disposition, all the Capital Stock and Indebtedness of such
Subsidiary at the time owned by the Borrower and any other Subsidiary shall be
sold, transferred or disposed of as an entirety; (ii) in the case of any such
transaction involving value of $1,000,000 or more, the Board of Supervisors of
the Borrower shall have determined, as evidenced by a resolution thereof, that
the proposed sale, transfer or disposition of such Capital Stock and
Indebtedness is in the best interests of the Borrower; (iii) such Capital Stock
and Indebtedness are sold, transferred or otherwise disposed of to a Person for
cash or other consideration that would constitute an investment permitted under
Section 9.04 and, in the case of any such transaction involving value of
$1,000,000 or more, on terms reasonably determined by the Board of Supervisors
of the Borrower to be adequate and satisfactory; (iv) the Subsidiary being
disposed of shall not have any continuing investment in the Borrower or any
other Subsidiary not being simultaneously disposed of; and (v) such sale,
transfer or other disposition shall not otherwise be prohibited by this
Agreement.
SECTION 9.06 RESTRICTED PAYMENTS.
--------------------
The Borrower will not directly or indirectly declare, order, pay,
make or set apart any sum for any Restricted Payment, except that (a) the
Borrower may declare or order, and make, pay or set apart, once during each
fiscal quarter, a Restricted Payment in an amount not exceeding the sum of an
amount to be distributed by the Parent to its partners (including with respect
to Additional Partnership Units) promptly upon receipt from the Borrower plus an
amount equal to the proportionate distribution from the Borrower to the General
Partner in respect of such distribution, and (b) the Borrower may declare or
order, and make, pay or set apart, Restricted Payments to the General Partner
and the Parent to fund the payment by them of tax liabilities, legal, accounting
and other professional fees and expenses, compensation, fees and expenses of the
Elected Supervisors of the Parent (as defined in the Agreement of Limited of
Partnership of the Parent) and indemnification of and contribution to all
Persons entitled to indemnification or contribution under Section 7.13 of the
Agreement of Limited Partnership of the Parent (as in effect on the Closing
Date), any fees and expenses associated with registration statements filed with
the Securities and Exchange Commission and subsequent ongoing public reporting
requirements, and other liabilities, obligations or costs of the General Partner
or the Parent in each case to the extent actually incurred by the General
Partner or the Parent, as applicable, in connection with, arising from, or
relating to the Business or the Parent's ownership of Capital Stock of the
Borrower and the Subsidiaries; PROVIDED that (i) the aggregate amount of
Restricted Payments declared or ordered, or made, paid, or set apart in any
fiscal quarter shall not exceed Available Cash for the immediately preceding
fiscal quarter and (ii) no Default or Event of Default then exists and is
continuing, or would be caused by such Restricted Payment, and the Borrower and
it Subsidiaries shall be in compliance, on a PRO FORMA basis, with the covenants
contained in Article VIII recomputed as of the last day of the most recently
ended fiscal quarter of the Borrower and the Subsidiaries as if such action had
occurred on the first day of each relevant period for testing such compliance,
and the Borrower shall have delivered to the Administrative Agent an officer's
certificate to such effect, together with all relevant financial information and
calculations demonstrating such compliance. The Borrower will comply with the
reserve provisions required under the definition of Available Cash. The Borrower
will not, in any event, directly or indirectly declare, order, pay or make any
Restricted Payment except in cash. The Borrower will not permit any Subsidiary
to declare, order, pay or make any Restricted Payment or to set apart any sum or
property for any such purpose other than to (i) the Borrower or any Wholly-Owned
Subsidiary and (ii) so long as no Default or Event of Default shall have
occurred and be continuing or would be caused thereby, all holders of Capital
Stock of or other equity interests in such Subsidiary on a pro rata basis.
SECTION 9.07 TRANSACTIONS WITH AFFILIATES.
-----------------------------
Sell or transfer any assets to, or purchase or acquire any assets
from, or otherwise engage in any material transaction with, any Affiliate except
upon fair and reasonable terms no less favorable to the Borrower or any
Subsidiary than those that would prevail in an arm's-length transaction with a
Person which was not an Affiliate and in a transaction entered into in the
ordinary course of business and pursuant to the reasonable requirements at the
time of the Borrower or such Subsidiary; PROVIDED that this Section 9.07 shall
not apply to (a) Restricted Payments permitted under Section 9.06, (b)
indemnification of and contribution to all Persons entitled to indemnification
or contribution under Section 7.13 of the Agreement of Limited Partnership of
the Borrower (as in effect on the Closing Date) to the extent such
indemnification or contribution arises from business or activities in connection
with the Business (including securities issuances in connection with funding the
Business) or (c) transactions between the Borrower and any Wholly-Owned domestic
Subsidiary, or between Wholly-Owned domestic Subsidiaries or between
Wholly-Owned foreign Subsidiaries.
SECTION 9.08 BUSINESS OF BORROWER AND SUBSIDIARIES.
--------------------------------------
Engage at any time in any business or business activity other than
the business currently conducted by it and business activities reasonably
incidental thereto, except to the extent resulting from any acquisition
permitted under Section 9.04(g).
SECTION 9.09 MATERIAL AGREEMENTS; TAX STATUS.
--------------------------------
(a) (i) Directly or indirectly, make any payment, retirement,
repurchase or redemption on account of the principal of or directly or
indirectly prepay or defease any Indebtedness prior to the stated maturity date
of such Indebtedness (other than Indebtedness under the Loan Documents, Senior
Notes redeemed with the proceeds of Refinancing Notes or as required under
Section 4C of the Senior Note Agreement as in effect on the Closing Date or any
analogous provision under any Refinancing Note Agreement to the extent there is
no increase in the amount required to be redeemed), (ii) make any payment or
prepayment of any such Indebtedness that would violate the terms of this
Agreement or of such Indebtedness, any agreement or document evidencing, related
to or securing the payment or performance of such Indebtedness or any
subordination agreement or provision applicable to such Indebtedness or (iii)
pay in cash any amount in respect of any Indebtedness that may at the Borrower's
option be paid in kind.
(b) Amend or modify in any manner adverse to the Lenders, or grant any
waiver or release under (if such action shall be adverse to the Lenders), the
Distribution Support Agreement, any Partnership Document, the Senior Notes, the
Senior Note Agreement, any Refinancing Notes or any Refinancing Note Agreement
or terminate in any manner any Partnership Document, it being understood,
without limitation, that no modification that reduces principal, interest or
fees, premiums, make-wholes or penalty charges, or extends any scheduled or
mandatory payment, prepayment or redemption of principal or interest, or makes
less restrictive any agreement or waives any condition precedent or default, or
entails the incurrence of additional Indebtedness by the Borrower under the
Senior Notes, the Senior Note Agreement, any Refinancing Notes or any
Refinancing Note Agreement shall be adverse to the Lenders for purposes of this
Agreement; PROVIDED, that with respect to the incurrence of additional
Indebtedness, subsequent to such additional Indebtedness, the Borrower shall
remain in compliance with Sections 8.01, 8.02, 8.03 and 9.11 hereof and such
additional Indebtedness shall be on terms and conditions no more restrictive
than the terms and conditions contained in the Senior Note Agreement.
(c) Permit any Subsidiary to enter into any agreement or instrument
that by its terms restricts the payment of dividends or the making of cash
advances by such Subsidiary to the Borrower or any Subsidiary that is a direct
or indirect parent of such Subsidiary, other than those set forth in the Loan
Documents.
(d) Permit the Parent or the Borrower to be treated as an association
taxable as a corporation or otherwise to be taxed as an entity for Federal
income tax purposes.
SECTION 9.10 LEASE OBLIGATIONS.
------------------
Permit the aggregate obligations that are due and payable during
any fiscal year of the Borrower and the Subsidiaries under leases (other than
obligations under Capital Leases) to exceed $30,000,000 during such fiscal year.
SECTION 9.11 PRIORITY INDEBTEDNESS.
----------------------
The Borrower will not permit Priority Indebtedness (as defined in
the Senior Note Agreement) at any time to exceed 25% of Consolidated Net Worth
(as defined in the Senior Note Agreement).
SECTION 9.12 CERTAIN ACCOUNTING CHANGES.
---------------------------
Change its Fiscal Year end, or make any change in its accounting
treatment and reporting practices except as required by GAAP.
SECTION 9.13 RESTRICTIVE AGREEMENTS.
-----------------------
Enter into any Indebtedness which contains any covenants
(including, without limitation, a negative pledge on assets) more restrictive
than the provisions of Articles VII, VIII and IX hereof.
ARTICLE X
DEFAULT AND REMEDIES
SECTION 10.01 EVENTS OF DEFAULT.
------------------
Each of the following shall constitute an Event of Default, whatever the
reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment or order of any court
or any order, rule or regulation of any Governmental Authority or otherwise:
(a) DEFAULT IN PAYMENT OF PRINCIPAL OF LOANS. The Borrower shall
default in any payment of principal of any Loan or Note when and as due (whether
at maturity, by reason of acceleration or otherwise).
(b) OTHER PAYMENT DEFAULT. The Borrower shall default in the payment
when and as due (whether at maturity, by reason of acceleration or otherwise) of
interest on any Loan or Note or the payment of any other Obligation, and such
default shall continue unremedied for three (3) Business Days.
(c) MISREPRESENTATION. Any representation or warranty made or deemed to
be made by the Borrower or any of its Subsidiaries under this Agreement, any
Loan Document or any amendment hereto or thereto, shall prove to have been
incorrect or misleading in any material respect when made or deemed made.
(d) DEFAULT IN PERFORMANCE OF CERTAIN COVENANTS. The Borrower shall
default in the performance or observance of any covenant or agreement contained
in Section 6.04(e) or Articles VIII or IX of this Agreement.
(e) DEFAULT IN PERFORMANCE OF OTHER COVENANTS AND CONDITIONS. The
Borrower or any Subsidiary thereof shall default in the performance or
observance of any term, covenant, condition or agreement contained in this
Agreement (other than as specifically provided for otherwise in this Section
10.01) or any other Loan Document and such default shall continue for a period
of thirty (30) days after written notice thereof has been given to the Borrower
by the Administrative Agent.
(f) INDEBTEDNESS CROSS-DEFAULT. The Borrower or any of its Subsidiaries
shall (i) default in the payment of any Indebtedness (other than that evidenced
by the Notes; but including, without limitation, the Indebtedness evidenced by
the Senior Notes or any Refinancing Notes) the aggregate outstanding amount of
which Indebtedness is in excess of $10,000,000 beyond the period of grace if
any, provided in the instrument or agreement under which such Indebtedness was
created, or (ii) default in the observance or performance of any other agreement
or condition relating to any Indebtedness (other than that evidenced by the
Notes; but including, without limitation, the Indebtedness evidenced by the
Senior Notes or any Refinancing Notes) the aggregate outstanding amount of which
Indebtedness is in excess of $10,000,000 or contained in any instrument or
agreement evidencing, securing or relating thereto or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
(or a trustee or agent on behalf of such holder or holders) to cause, with the
giving of notice if required, any such Indebtedness to become due prior to its
stated maturity (any applicable grace period having expired).
(g) OTHER CROSS-DEFAULTS. (i) the Distribution Support Agreement shall
terminate, expire or otherwise be of no further force and effect or there shall
have occurred a default thereunder and such default shall continue for a period
of thirty (30) days without cure, or (ii) the Borrower or any of its
Subsidiaries shall default in the payment when due, or in the performance or
observance, of any obligation or condition of any material contract or agreement
unless, but only as long as, the existence of any such default is being
contested by the Borrower or such Subsidiary in good faith by appropriate
proceedings and adequate reserves in respect thereof have been established on
the books of the Borrower or such Subsidiary to the extent required by GAAP.
(h) CHANGE IN CONTROL. A Change in Ownership shall occur.
(i) VOLUNTARY BANKRUPTCY PROCEEDING. The Borrower or any Subsidiary
thereof shall (i) commence a voluntary case under the federal bankruptcy laws
(as now or hereafter in effect), (ii) file a petition seeking to take advantage
of any other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition for adjustment of debts, (iii) consent
to or fail to contest in a timely and appropriate manner any petition filed
against it in an involuntary case under such bankruptcy laws or other laws, (iv)
apply for or consent to, or fail to contest in a timely and appropriate manner,
the appointment of, or the taking of possession by, a receiver, custodian,
trustee, or liquidator of itself or of a substantial part of its property,
domestic or foreign, (v) admit in writing its inability to pay its debts as they
become due, (vi) make a general assignment for the benefit of creditors, or
(vii) take any corporate action for the purpose of authorizing any of the
foregoing.
(j) INVOLUNTARY BANKRUPTCY PROCEEDING. A case or other proceeding shall
be commenced against the Borrower or any Subsidiary thereof in any court of
competent jurisdiction seeking (i) relief under the federal bankruptcy laws (as
now or hereafter in effect) or under any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up or adjustment of
debts, or (ii) the appointment of a trustee, receiver, custodian, liquidator or
the like for the Borrower or any Subsidiary thereof or for all or any
substantial part of their respective assets, domestic or foreign, and such case
or proceeding shall continue undismissed or unstayed for a period of sixty (60)
consecutive days, or an order granting the relief requested in such case or
proceeding (including, but not limited to, an order for relief under such
federal bankruptcy laws) shall be entered.
(k) FAILURE OF AGREEMENTS. Any provision of this Agreement or of any
other Loan Document shall for any reason cease to be valid and binding on the
Borrower or any Subsidiary party thereto or any such Person shall so state in
writing, other than in accordance with the express terms hereof or thereof.
(l) ERISA EVENT. The occurrence of any ERISA Event that, when taken
together with all other ERISA Events that have occurred, results in or could
reasonably be expected to result in liability of the Borrower and its ERISA
Affiliates in an aggregate amount exceeding $10,000,000.
(m) JUDGMENT. A judgment or order for the payment of money which causes
the aggregate amount of all such judgments to exceed $10,000,000 in any Fiscal
Year shall be entered against the Borrower or any of its Subsidiaries by any
court and such judgment or order shall continue undischarged or unstayed for a
period of thirty (30) days.
SECTION 10.02 REMEDIES.
---------
Upon the occurrence of an Event of Default, with the consent of the
Required Lenders, the Administrative Agent may, or upon the request of the
Required Lenders, the Administrative Agent shall, by notice to the Borrower:
(a) ACCELERATION; TERMINATION OF FACILITIES. Declare the principal of
and interest on the Loans, the Notes at the time outstanding, and all other
amounts owed to the Lenders and to the Administrative Agent under this Agreement
or any of the other Loan Documents and all other Obligations, to be forthwith
due and payable, whereupon the same shall immediately become due and payable
without presentment, demand, protest or other notice of any kind, all of which
are expressly waived, anything in this Agreement or the other Loan Documents to
the contrary notwithstanding, and terminate the Credit Facilities and any right
of the Borrower to request borrowings thereunder; PROVIDED, that upon the
occurrence of an Event of Default specified in Section 10.01(j) or (k), the
Credit Facilities shall be automatically terminated and all Obligations shall
automatically become due and payable.
(b) RIGHTS OF COLLECTION. Exercise on behalf of the Lenders all of its
other rights and remedies under this Agreement, the other Loan Documents and
Applicable Law, in order to satisfy all of the Borrower's Obligations.
SECTION 10.03 RIGHTS AND REMEDIES CUMULATIVE; NON-WAIVER; ETC.
-------------------------------------------------
The enumeration of the rights and remedies of the Administrative
Agent and the Lenders set forth in this Agreement is not intended to be
exhaustive and the exercise by the Administrative Agent and the Lenders of any
right or remedy shall not preclude the exercise of any other rights or remedies,
all of which shall be cumulative, and shall be in addition to any other right or
remedy given hereunder or under the Loan Documents or that may now or hereafter
exist in law or in equity or by suit or otherwise. No delay or failure to take
action on the part of the Administrative Agent or any Lender in exercising any
right, power or privilege shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or privilege preclude
other or further exercise thereof or the exercise of any other right, power or
privilege or shall be construed to be a waiver of any Event of Default. No
course of dealing between the Borrower, the Administrative Agent and the
Lenders or their respective agents or employees shall be effective to change,
modify or discharge any provision of this Agreement or any of the other Loan
Documents or to constitute a waiver of any Event of Default.
ARTICLE XI
THE ADMINISTRATIVE AGENT
SECTION 11.01 APPOINTMENT.
------------
Notwithstanding the appointment of Chase pursuant to the Original
Credit Agreement, each of the Lenders hereby irrevocably designates and appoints
First Union as Administrative Agent of such Lender under this Agreement and the
other Loan Documents and each such Lender irrevocably authorizes First Union as
Administrative Agent for such Lender, to take such action on its behalf under
the provisions of this Agreement and the other Loan Documents and to exercise
such powers and perform such duties as are expressly delegated to the
Administrative Agent by the terms of this Agreement and such other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement or
such other Loan Documents, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein and therein, or any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or the other Loan Documents or otherwise exist against the
Administrative Agent.
SECTION 11.02 DELEGATION OF DUTIES.
---------------------
The Administrative Agent may execute any of its respective duties
under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Administrative Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by the Administrative Agent with reasonable care.
SECTION 11.03 EXCULPATORY PROVISIONS.
-----------------------
Neither the Administrative Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact, Subsidiaries or Affiliates shall be (a)
liable for any action lawfully taken or omitted to be taken by it or such Person
under or in connection with this Agreement or the other Loan Documents (except
for actions occasioned solely by its or such Person's own gross negligence or
willful misconduct), or (b) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by the Borrower or
any of its Subsidiaries or any officer thereof contained in this Agreement or
the other Loan Documents or in any certificate, report, statement or other
document referred to or provided for in, or received by the Administrative Agent
under or in connection with, this Agreement or the other Loan Documents or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or the other Loan Documents or for any failure of the Borrower
or any of its Subsidiaries to perform its obligations hereunder or thereunder.
The Administrative Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement, or to inspect the
properties, books or records of the Borrower or any of its Subsidiaries.
SECTION 11.04 RELIANCE BY THE ADMINISTRATIVE AGENT.
-------------------------------------
The Administrative Agent shall be entitled to rely, and shall be
fully protected in relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower), independent accountants and other experts
selected by the Administrative Agent. The Administrative Agent may deem and
treat the payee of any Note as the owner thereof for all purposes unless such
Note shall have been transferred in accordance with Section 12.10 hereof. The
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Agreement and the other Loan Documents unless it shall first
receive such advice or concurrence of the Required Lenders (or, when expressly
required hereby or by the relevant other Loan Document, all the Lenders) as it
deems appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action except for its own gross
negligence or willful misconduct. The Administrative Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement
and the Notes in accordance with a request of the Required Lenders (or, when
expressly required hereby, all the Lenders), and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the Lenders
and all future holders of the Notes.
SECTION 11.05 NOTICE OF DEFAULT.
------------------
The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder unless it
has received notice from a Lender or the Borrower referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default". In the event that the Administrative Agent receives such a
notice, it shall promptly give notice thereof to the Lenders. The Administrative
Agent shall take such action with respect to such Default or Event of Default as
shall be reasonably directed by the Required Lenders; PROVIDED that unless and
until the Administrative Agent shall have received such directions, the
Administrative Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Lenders.
SECTION 11.06 NON-RELIANCE ON THE ADMINISTRATIVE AGENT AND OTHER
LENDERS.
--------------------------------------------------
Each Lender expressly acknowledges that neither the Administrative
Agent nor any of its respective officers, directors, employees, agents,
attorneys-in-fact, Subsidiaries or Affiliates has made any representations or
warranties to it and that no act by the Administrative Agent hereinafter taken,
including any review of the affairs of the Borrower or any of its Subsidiaries,
shall be deemed to constitute any representation or warranty by the
Administrative Agent to any Lender. Each Lender represents to the Administrative
Agent that it has, independently and without reliance upon the Administrative
Agent or any other Lender, and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of the Borrower and its Subsidiaries and made its own decision
to make its Loans hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of the Borrower and its
Subsidiaries. Except for notices, reports and other documents expressly required
to be furnished to the Lenders by the Administrative Agent hereunder or by the
other Loan Documents, the Administrative Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, financial and other condition or
creditworthiness of the Borrower or any of its Subsidiaries which may come into
the possession of the Administrative Agent or any of its respective officers,
directors, employees, agents, attorneys-in-fact, Subsidiaries or Affiliates.
SECTION 11.07 INDEMNIFICATION.
----------------
The Lenders agree to indemnify the Administrative Agent in its
capacity as such and (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to the
respective amounts of their Commitment Percentages, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Notes)
be imposed on, incurred by or asserted against the Administrative Agent in any
way relating to or arising out of this Agreement or the other Loan Documents, or
any documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or any action taken or omitted by
the Administrative Agent under or in connection with any of the foregoing;
PROVIDED that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Administrative
Agent's bad faith, gross negligence or willful misconduct. The agreements in
this Section 11.07 shall survive the payment of the Notes and all other amounts
payable hereunder and the termination of this Agreement.
SECTION 11.08 THE ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY.
----------------------------------------------------
The Administrative Agent and its respective Subsidiaries and
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Borrower as though the Administrative Agent were not
an Administrative Agent hereunder. With respect to any Loans made or renewed by
it and any Note issued to it, the Administrative Agent shall have the same
rights and powers under this Agreement and the other Loan Documents as any
Lender and may exercise the same as though it were not an Administrative Agent,
and the terms "Lender" and "Lenders" shall include the Administrative Agent in
its individual capacity.
SECTION 11.09 RESIGNATION OF THE ADMINISTRATIVE AGENT; SUCCESSOR
ADMINISTRATIVE AGENT.
---------------------------------------------------
Subject to the appointment and acceptance of a successor as
provided below, the Administrative Agent may resign at any time by giving notice
thereof to the Lenders and the Borrower. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor Administrative
Agent, which successor shall have minimum capital and surplus of at least
$500,000,000. If no successor Administrative Agent shall have been so appointed
by the Required Lenders and shall have accepted such appointment within thirty
(30) days after the Administrative Agent's giving of notice of resignation, then
the Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which successor shall have minimum capital and surplus of
at least $500,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After any retiring Administrative Agent's resignation
hereunder as Administrative Agent, the provisions of this Section 11.09 shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Administrative Agent.
SECTION 11.10 DOCUMENTATION AGENT.
--------------------
The Documentation Agent shall have no liabilities, duties or
responsibilities arising under this Agreement other than those imposed upon it
in its capacity as a Lender.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01 NOTICES.
--------
(a) METHOD OF COMMUNICATION. Except as otherwise provided in this
Agreement, all notices and communications hereunder shall be in writing, or by
telephone subsequently confirmed in writing. Any notice shall be effective if
delivered by hand delivery or sent via telecopy, recognized overnight courier
service or certified mail, return receipt requested, and shall be presumed to be
received by a party hereto (i) on the date of delivery if delivered by hand or
sent by telecopy, (ii) on the next Business Day if sent by recognized overnight
courier service and (iii) on the third Business Day following the date sent by
certified mail, return receipt requested. A telephonic notice to the
Administrative Agent as understood by the Administrative Agent will be deemed to
be the controlling and proper notice in the event of a discrepancy with or
failure to receive a confirming written notice.
(b) ADDRESSES FOR NOTICES. Notices to any party shall be sent to it at
the following addresses, or any other address as to which all the other parties
are notified in writing.
If to the Borrower: Suburban Propane, L.P.
One Suburban Plaza
240 Route 10 West
P.O. Box 206
Whippany, New Jersey 07981-0206
Attention: Robert M. Plante
Telephone No.: 973-503-9110
Telecopy No.: 973-515-5996
With copies to: Weil Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attention: Marsha E. Simms, Esq.
Telephone No.: 212-310-8116
Telecopy No.: 212-310-8007
If to First Union as First Union National Bank
Administrative Agent: One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Telephone No.: 704-383-0281
Telecopy No.: 704-383-0288
With copies to: Kennedy Covington Lobdell & Hickman
NationsBank Corporate Center
Suite 4200
100 North Tryon Street
Charlotte, North Carolina 28202-4006
Attention: Jefferson W. Brown
Telephone No.: 704-331-7471
Telecopy No.: 704-331-7598
If to any Lender: To the Address set forth on SCHEDULE 1 hereto.
(c) ADMINISTRATIVE AGENT'S OFFICE. The Administrative Agent hereby
designates its office located at the address set forth above, or any subsequent
office which shall have been specified for such purpose by written notice to the
Borrower and Lenders, as the Administrative Agent's Office referred to herein,
to which payments due are to be made and at which Loans will be disbursed.
SECTION 12.02 EXPENSES; INDEMNITY.
--------------------
The Borrower will (a) pay all out-of-pocket expenses of the
Administrative Agent in connection with: (i) the preparation, execution and
delivery of this Agreement and each other Loan Document, whenever the same shall
be executed and delivered, including without limitation all out-of-pocket
syndication and due diligence expenses and reasonable fees and disbursements of
counsel for the Administrative Agent and (ii) the preparation, execution and
delivery of any waiver, amendment or consent by the Administrative Agent or the
Lenders relating to this Agreement or any other Loan Document, including without
limitation reasonable fees and disbursements of counsel for the Administrative
Agent, (b) pay all out-of-pocket expenses of the Administrative Agent and the
Lenders in connection with the administration and enforcement of any rights and
remedies of the Administrative Agent and Lenders under the Credit Facilities,
including consulting with appraisers, accountants, engineers, attorneys and
other Persons concerning the nature, scope or value of any right or remedy of
the Administrative Agent or any Lender hereunder or under any other Loan
Document or any factual matters in connection therewith, which expenses shall
include without limitation the reasonable fees and disbursements of such
Persons, and (c) defend, indemnify and hold harmless the Administrative Agent
and the Lenders, and their respective parents, Subsidiaries, Affiliates,
employees, agents, officers and directors, from and against any losses,
penalties, fines, liabilities, settlements, damages, costs and expenses,
suffered by any such Person in connection with any claim, investigation,
litigation or other proceeding (whether or not the Administrative Agent or
any Lender is a party thereto) and the prosecution and defense thereof, arising
out of or in any way connected with the Agreement, any other Loan Document or
the Loans, including without limitation reasonable attorney's and consultant's
fees, except to the extent that any of the foregoing directly result from the
gross negligence or willful misconduct of the party seeking indemnification
therefor.
SECTION 12.03 SET-OFF.
--------
In addition to any rights now or hereafter granted under Applicable
Law and not by way of limitation of any such rights, upon and after the
occurrence of any Event of Default and during the continuance thereof, the
Lenders and any assignee or participant of a Lender in accordance with Section
12.10 are hereby authorized by the Borrower at any time or from time to time,
without notice to the Borrower or to any other Person, any such notice being
hereby expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, time or demand, including, but not limited to,
indebtedness evidenced by certificates of deposit, whether matured or unmatured)
and any other indebtedness at any time held or owing by the Lenders, or any such
assignee or participant to or for the credit or the account of the Borrower
against and on account of the Obligations irrespective of whether or not (a) the
Lenders shall have made any demand under this Agreement or any of the other Loan
Documents or (b) the Administrative Agent shall have declared any or all of the
Obligations to be due and payable as permitted by Section 10.02 and although
such Obligations shall be contingent or unmatured.
SECTION 12.04 GOVERNING LAW.
--------------
This Agreement, the Notes and the other Loan Documents, unless
otherwise expressly set forth therein, shall be governed by, construed and
enforced in accordance with the laws of the State of New York.
SECTION 12.05 CONSENT TO JURISDICTION.
------------------------
The Borrower hereby irrevocably consents to the personal
jurisdiction of the state and federal courts located in New York County,
New York, in any action, claim or other proceeding arising out of any dispute in
connection with this Agreement, the Notes and the other Loan Documents, any
rights or obligations hereunder or thereunder, or the performance of such rights
and obligations. The Borrower hereby irrevocably consents to the service of a
summons and complaint and other process in any action, claim or proceeding
brought by the Administrative Agent or any Lender in connection with this
Agreement, the Notes or the other Loan Documents, any rights or obligations
hereunder or thereunder, or the performance of such rights and obligations, on
behalf of itself or its property, in the manner specified in Section 12.01.
Nothing in this Section 12.05 shall affect the right of the Administrative Agent
or any Lender to serve legal process in any other manner permitted by Applicable
Law or affect the right of the Administrative Agent or any Lender to bring any
action or proceeding against the Borrower or its properties in the courts of any
other jurisdictions.
SECTION 12.06 BINDING ARBITRATION; WAIVER OF JURY TRIAL.
------------------------------------------
(a) BINDING ARBITRATION. Upon demand of any party, whether made before
or within one hundred twenty (120) days after institution of any judicial
proceeding, any dispute, claim or controversy arising out of, connected with or
relating to the Notes or any other Loan Documents ("Disputes"), between or among
parties to the Notes or any other Loan Document shall be resolved by binding
arbitration as provided herein. Institution of a judicial proceeding by a party
does not waive the right of that party to demand arbitration hereunder. Disputes
may include, without limitation, tort claims, counterclaims, claims brought as
class actions, claims arising from Loan Documents executed in the future, or
claims concerning any aspect of the past, present or future relationships
arising out of or connected with the Loan Documents. Arbitration shall be
conducted under and governed by the Commercial Financial Disputes Arbitration
Rules (the "Arbitration Rules") of the American Arbitration Association and
Title 9 of the U.S. Code. All arbitration hearings shall be conducted in New
York, New York. The expedited procedures set forth in Rule 51, ET SEQ. of the
Arbitration Rules shall be applicable to claims of less than $1,000,000. All
applicable statutes of limitation shall apply to any Dispute. A judgment upon
the award may be entered in any court having jurisdiction. The panel from which
all arbitrators are selected shall be comprised of licensed attorneys. The
single arbitrator selected for expedited procedure shall be a retired judge from
the highest court of general jurisdiction, state or federal, of the state where
the hearing will be conducted, or, if no such judge is available, a retired
judge, with substantial appellate experience, from any appellate court of
general jurisdiction, state or federal, of such state. Notwithstanding the
foregoing, this paragraph shall not apply to any Hedging Agreement that is a
Loan Document.
(b) JURY TRIAL. TO THE EXTENT PERMITTED BY LAW, THE ADMINISTRATIVE
AGENT, EACH LENDER AND THE BORROWER HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING
ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR THE
OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
(c) PRESERVATION OF CERTAIN REMEDIES. Notwithstanding the preceding
binding arbitration provisions, the parties hereto and the other Loan Documents
preserve, without diminution, certain remedies that such Persons may employ or
exercise freely, either alone, in conjunction with or during a Dispute. Each
such Person shall have and hereby reserves the right to proceed in any court of
proper jurisdiction or by self help to exercise or prosecute the following
remedies: (i) all rights to foreclose against any real or personal property or
other security by exercising a power of sale granted in the Loan Documents or
under applicable law or by judicial foreclosure and sale, (ii) all rights of
self help including peaceful occupation of property and collection of rents, set
off, and peaceful possession of property, (iii) obtaining provisional or
ancillary remedies including injunctive relief (including, without limitation,
pursuant to Section 12.08), sequestration, garnishment, attachment, appointment
of receiver and in filing an involuntary bankruptcy proceeding, and (iv) when
applicable, a judgment by confession of judgment. Preservation of these remedies
does not limit the power of an arbitrator to grant similar remedies that may be
requested by a party in a Dispute.
SECTION 12.07 REVERSAL OF PAYMENTS.
---------------------
To the extent the Borrower makes a payment or payments to the
Administrative Agent for the ratable benefit of the Lenders or the
Administrative Agent receives any payment or proceeds of the collateral which
payments or proceeds or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, state or federal
law, common law or equitable cause, then, to the extent of such payment or
proceeds repaid, the Obligations or part thereof intended to be satisfied
shall be revived and continued in full force and effect as if such payment or
proceeds had not been received by the Administrative Agent.
SECTION 12.08 INJUNCTIVE RELIEF; PUNITIVE DAMAGES.
------------------------------------
(a) The Borrower recognizes that, in the event the Borrower fails to
perform, observe or discharge any of its obligations or liabilities under this
Agreement, any remedy of law may prove to be inadequate relief to the Lenders.
Therefore, the Borrower agrees that the Lenders, at the Lenders' option, shall
be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
(b) The Administrative Agent, Lenders and Borrower (on behalf of itself
and its Subsidiaries) hereby agree that no such Person shall have a remedy of
punitive or exemplary damages against any other party to a Loan Document and
each such Person hereby waives any right or claim to punitive or exemplary
damages that they may now have or may arise in the future in connection with any
Dispute, whether such Dispute is resolved through arbitration or judicially.
(c) The parties agree that they shall not have a remedy of punitive or
exemplary damages against any other party in any Dispute and hereby waive any
right or claim to punitive or exemplary damages they have now or which may arise
in the future in connection with any Dispute whether the Dispute is resolved by
arbitration or judicially.
SECTION 12.09 ACCOUNTING MATTERS.
-------------------
All financial and accounting calculations, measurements and
computations made for any purpose relating to this Agreement, including, without
limitation, all computations utilized by the Borrower or any Subsidiary thereof
to determine compliance with any covenant contained herein, shall, except as
otherwise expressly contemplated hereby or unless there is an express written
direction by the Administrative Agent to the contrary agreed to by the Borrower,
be performed in accordance with GAAP as in effect on the Closing Date. In the
event that changes in GAAP shall be mandated by the Financial Accounting
Standards Board, or any similar accounting body of comparable standing, or shall
be recommended by the Borrower's certified public accountants, to the extent
that such changes would modify such accounting terms or the interpretation or
computation thereof, such changes shall be followed in defining such accounting
terms only from and after the date the Borrower and the Lenders shall have
amended this Agreement to the extent necessary to reflect any such changes in
the financial covenants and other terms and conditions of this Agreement.
SECTION 12.10 SUCCESSORS AND ASSIGNS; PARTICIPATIONS
--------------------------------------
(a) BENEFIT OF AGREEMENT. This Agreement shall be binding upon and
inure to the benefit of the Borrower, the Administrative Agent and the Lenders,
all future holders of the Notes, and their respective successors and assigns,
except that the Borrower shall not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of each
Lender.
(b) ASSIGNMENT BY LENDERS. Each Lender may, with the consent of the
Administrative Agent and the Borrower, which consents shall not be unreasonably
withheld and not required of the Borrower upon the occurrence and continuation
of a Default or Event of Default, assign to one or more Eligible Assignees all
or a portion of its interests, rights and obligations under this Agreement
(including, without limitation, all or a portion of the Extensions of Credit at
the time owing to it and the Notes held by it); PROVIDED that:
(i) each such assignment shall be of a constant, and not a
varying, percentage of all the assigning Lender's rights and
obligations under this Agreement;
(ii) if less than all of the assigning Lender's Commitment is
to be assigned, the Commitment so assigned shall not be less than
$5,000,000;
(iii) the parties to each such assignment shall execute and
deliver to the Administrative Agent, for its acceptance and recording
in the Register, an Assignment and Acceptance in the form of EXHIBIT F
attached hereto (an "Assignment and Acceptance"), together with any
Note or Notes subject to such assignment;
(iv) such assignment shall not, without the consent of the
Borrower, require the Borrower to file a registration statement with
the Securities and Exchange Commission or apply to or qualify the Loans
or the Notes under the blue sky laws of any state;
(v) no consent of the Borrower or the Administrative Agent
shall be required for an assignment to an Affiliate or Subsidiary of
the assigning Lender; and
(vi) the assigning Lender shall pay to the Administrative
Agent an assignment fee of $3,000 upon the execution by such Lender of
the Assignment and Acceptance; PROVIDED that no such fee shall be
payable upon any assignment by a Lender to an Affiliate thereof.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, which effective date
shall be at least five (5) Business Days after the execution thereof, (A) the
assignee thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereby
and (B) the Lender thereunder shall, to the extent provided in such assignment,
be released from its obligations under this Agreement.
(c) RIGHTS AND DUTIES UPON ASSIGNMENT. By executing and delivering an
Assignment and Acceptance, the assigning Lender thereunder and the assignee
thereunder confirm to and agree with each other and the other parties hereto as
set forth in such Assignment and Acceptance.
(d) REGISTER. The Administrative Agent shall maintain a copy of each
Assignment and Acceptance delivered to it and a register for the recordation of
the names and addresses of the Lenders and the amount of the Extensions of
Credit with respect to each Lender from time to time (the "Register"). The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrower, the Administrative Agent and the Lenders may treat each Person
whose name is recorded in the Register as a Lender hereunder for all purposes of
this Agreement. The Register shall be available for inspection by the Borrower
or Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) ISSUANCE OF NEW NOTES. Upon its receipt of an Assignment and
Acceptance executed by an assigning Lender and an Eligible Assignee together
with any Note or Notes subject to such assignment and the written consent to
such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is substantially in the form of EXHIBIT F:
(i) accept such Assignment and Acceptance;
(ii) record the information contained therein in the Register;
(iii) give prompt notice thereof to the Lenders and the Borrower;
and
(iv) promptly deliver a copy of such Assignment and Acceptance
to the Borrower.
Within five (5) Business Days after receipt of notice, the Borrower shall
execute and deliver to the Administrative Agent, in exchange for the surrendered
Note or Notes, a new Note or Notes to the order of such Eligible Assignee in
amounts equal to the Commitment assumed by it pursuant to such Assignment and
Acceptance and a new Note or Notes to the order of the assigning Lender in an
amount equal to the Commitment retained by it hereunder. Such new Note or Notes
shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note or Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the form
of the assigned Notes delivered to the assigning Lender. Each surrendered Note
or Notes shall be canceled and returned to the Borrower.
(f) PARTICIPATIONS. Each Lender may sell participations to one or more
banks or other entities in all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Extensions of Credit and the Notes held by it); PROVIDED that:
(i) each such participation shall be in an amount not less
than $5,000,000;
(ii) such Lender's obligations under this Agreement
(including, without limitation, its Commitment) shall remain unchanged;
(iii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations;
(iv) such Lender shall remain the holder of the Notes held by
it for all purposes of this Agreement;
(v) the Borrower, the Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this
Agreement;
(vi) such Lender shall not permit such participant the right
to approve any waivers, amendments or other modifications to this
Agreement or any other Loan Document other than waivers, amendments or
modifications which would reduce the principal of or the interest rate
on any Loan, extend the term or increase the amount of the Commitment,
reduce the amount of any fees to which such participant is entitled,
extend any scheduled payment date for principal of any Loan or, except
as expressly contemplated hereby or thereby, release substantially all
of the Collateral; and
(vii) any such disposition shall not, without the consent of
the Borrower, require the Borrower to file a registration statement
with the Securities and Exchange Commission to apply to qualify the
Loans or the Notes under the blue sky law of any state.
(g) DISCLOSURE OF INFORMATION; CONFIDENTIALITY. The Administrative
Agent and the Lenders shall hold all non-public information with respect to the
Borrower obtained pursuant to the Loan Documents in accordance with their
customary procedures for handling confidential information. Any Lender may, in
connection with any assignment, proposed assignment, participation or proposed
participation pursuant to this Section 12.10, disclose to the assignee,
participant, proposed assignee or proposed participant, any information relating
to the Borrower furnished to such Lender by or on behalf of the Borrower;
PROVIDED, that prior to any such disclosure, each such assignee, proposed
assignee, participant or proposed participant shall agree with the Borrower or
such Lender to preserve the confidentiality of any confidential information
relating to the Borrower received from such Lender.
(h) CERTAIN PLEDGES OR ASSIGNMENTS. Nothing herein shall prohibit any
Lender from pledging or assigning any Note to any Federal Reserve Bank in
accordance with Applicable Law.
SECTION 12.11 AMENDMENTS, WAIVERS AND CONSENTS.
---------------------------------
Except as set forth below, any term, covenant, agreement or
condition of this Agreement or any of the other Loan Documents may be amended or
waived by the Lenders, and any consent given by the Lenders, if, but only if,
such amendment, waiver or consent is in writing signed by the Required Lenders
(or by the Administrative Agent with the consent of the Required Lenders) and
delivered to the Administrative Agent and, in the case of an amendment, signed
by the Borrower; PROVIDED, that no amendment, waiver or consent shall (a)
increase the amount or extend the time of the obligation of the Lenders to make
Loans (including without limitation pursuant to Section 2.07), (b) extend the
originally scheduled time or times of payment of the principal of any Loan or
the time or times of payment of interest on any Loan, (c) reduce the rate of
interest or fees payable on any Loan, (d) permit any subordination of the
principal or interest on any Loan, (e) terminate or cancel any Guarantee
Agreement or release any Guarantor from its obligations under a Guarantee
Agreement or (f) amend the provisions of Section 12.10(a), this Section 12.11
or the definition of Required Lenders, without the prior written consent of each
Lender. In addition, no amendment, waiver or consent to the provisions of (a)
Article XI shall be made without the written consent of the Administrative Agent
and (b) Article III without the written consent of the Issuing Lender.
SECTION 12.12 PERFORMANCE OF DUTIES.
----------------------
The Borrower's obligations under this Agreement and each of the
Loan Documents shall be performed by the Borrower at its sole cost and expense.
SECTION 12.13 ALL POWERS COUPLED WITH INTEREST.
---------------------------------
All powers of attorney and other authorizations granted to the
Lenders, the Administrative Agent and any Persons designated by the
Administrative Agent or any Lender pursuant to any provisions of this Agreement
or any of the other Loan Documents shall be deemed coupled with an interest and
shall be irrevocable so long as any of the Obligations remain unpaid or
unsatisfied or the Credit Facilities have not been terminated.
SECTION 12.14 SURVIVAL OF INDEMNITIES.
------------------------
Notwithstanding any termination of this Agreement, the indemnities
to which the Administrative Agent and the Lenders are entitled under the
provisions of this Article XII and any other provision of this Agreement and the
Loan Documents shall continue in full force and effect and shall protect the
Administrative Agent and the Lenders against events arising after such
termination as well as before.
SECTION 12.15 TITLES AND CAPTIONS.
--------------------
Titles and captions of Articles, Sections and subsections in this
Agreement are for convenience only, and neither limit nor amplify the provisions
of this Agreement.
SECTION 12.16 SEVERABILITY OF PROVISIONS.
----------------------------
Any provision of this Agreement or any other Loan Document which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such prohibition or
unenforceability without invalidating the remainder of such provision or the
remaining provisions hereof or thereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 12.17 COUNTERPARTS.
-------------
This Agreement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and shall be binding upon all
parties, their successors and assigns, and all of which taken together shall
constitute one and the same agreement.
SECTION 12.18 TERM OF AGREEMENT.
------------------
This Agreement shall remain in effect from the Closing Date
through and including the date upon which all Obligations shall have been
indefeasibly and irrevocably paid and satisfied in full. No termination of this
Agreement shall affect the rights and obligations of the parties hereto arising
prior to such termination.
[Signature pages to follow]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, all as of the day and year first
written above.
SUBURBAN PROPANE, L.P.
By /S/ROBERT M. PLANTE
----------------------
Name:ROBERT M. PLANTE
Title:TREASURER
FIRST UNION NATIONAL BANK,
as Administrative Agent and
as Lender
By: /S/ JAMES J. PETRONCHAK
----------------------------
Name: JAMES J. PETRONCHAK
Title : SENIOR VICE PRESIDENT
THE BANK OF NEW YORK,
as Documentation Agent and
as Lender
By: /S/ RANDOLPH E. J. MEDRANO
-------------------------------
Name: RANDOLPH E. J. MEDRANO
Title: VICE PRESIDENT
BANQUE PARIBAS
By: /S/ ROBERT G. CARINO
--------------------------
Name: ROBERT G. CARINO
Title: VICE PRESIDENT
By: /S/ MARY T. FINNEGAN
-------------------------
Name: MARY T. FINNEGAN
Title: DIRECTOR
ROYAL BANK OF CANADA
By: /S/ GIL J. BENARD
----------------------
Name: GIL J. BENARD
Title: SENIOR MANAGER
MELLON BANK
By: /S/ JOHN D. SABROSKE
-------------------------
Name: JOHN D. SABROSKE
Title: VICE PRESIDENT
THE FIRST NATIONAL BANK OF CHICAGO
By: /S/ STEPHEN E. MCDONALD
----------------------------
Name: STEPHEN E. MCDONALD
Title: FIRST VICE PRESIDENT
ABN AMRO BANK, N.V.
By: /S/ GEORGE M. DUGAN
------------------------
Name: GEORGE M. DUGAN
Title: VICE PRESIDENT
By: /S/ PAULINE MCHUGH
-----------------------
Name: PAULINE MCHUGH
Title: VICE PRESIDENT
CREDIT LYONNAIS NEW YORK BRANCH
By: /S/ MARY E. COLLIER
------------------------
Name: MARY E. COLLIER
Title: VICE PRESIDENT
SCHEDULE 1: LENDERS AND COMMITMENTS
COMMITMENT AND COMMITMENT PERCENTAGE
REVOLVING ACQUISITION
LENDER TOTAL CREDIT LOAN
- ------ ----- ------ ----
First Union National Bank $20,000,000 $15,000,000 $5,000,000
One First Union Center, TW-10 20.00% 20.00% 20.00%
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Telephone No.: (704) 383-0281
Facsimile No.: (704) 382-0288
The Bank of New York $16,000,000 $12,000,000 $4,000,000
One Wall Street 16.00% 16.00% 16.00%
New York, New York 10286
Attention: Randolph E.J. Medrano
Telephone No.: 212-635-6804
Facsimile No.: 212-635-7970
Banque Paribas $12,000,000 $9,000,000 $3,000,000
787 Seventh Avenue 12.00% 12.00% 12.00%
New York, New York 10019
Attention: Robert Carino
Vice President
Telephone No.: 212-841-2564
Facsimile No.: 212-841-2333
Credit Lyonnais New York Branch $12,000,000 $9,000,000 $3,000,000
Credit Lyonnais Building 12.00% 12.00% 12.00%
1301 Avenue of the Americas
New York, New York 10019-6022
Attention: Tom Randolph
Vice President
Telephone No.: 212-261-7431
Facsimile No.: 212-459-3179
The First National Bank of Chicago $12,000,000 $9,000,000 $3,000,000
153 West 51st Street 12.00% 12.00% 12.00%
Mail Suite 4000
New York, New York 10019
Attention: Stephen E. McDonald
First Vice President
Telephone No.: 212-373-1580
Facsimile No.: 212-373-1388
Mellon Bank $12,000,000 $9,000,000 $3,000,000
One Mellon Bank Center 12.00% 12.00% 12.00%
Pittsburgh, PA 15258-0001
Attention: John D. Sabroske
Vice President
Telephone No.: 412-234-0349
Facsimile No.: 412-234-8888
COMMITMENT AND COMMITMENT PERCENTAGE
REVOLVING ACQUISITION
LENDER TOTAL CREDIT LOAN
- ------ ----- ------ ----
ABN AMRO Bank N.V. $8,000,000 $6,000,000 $2,000,000
New York Branch 8.00% 8.00% 8.00%
500 Park Avenue
New York, New York 10022
Attention: George M. Dugan
Vice President
Telephone No.: 212-446-4263
Facsimile No.: 212-446-4237
Royal Bank of Canada $8,000,000 $6,000,000 $2,000,000
12450 Greenspoint Drive, Suite 1450 8.00% 8.00% 8.00%
Houston, Texas 77060
Attention: Gil Bernard, Senior Manager
Telephone No.: 281-874-5662
Facsimile No.: 281-874-0081
EXHIBIT 10.7
------------
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT DATED AS OF MARCH 5, 1996 BY AND BETWEEN
SUBURBAN PROPANE L.P.(THE "PARTNERSHIP") AND MARK A. ALEXANDER(THE "EXECUTIVE").
The Partnership and the Executive agree to amend Article 6 (Payment Upon
Termination) of the aforementioned Employment Agreement set forth below.
1.) Section 6.1 (CHANGE OF CONTROL) is deleted in its entirety and the
following is inserted in lieu thereof:
"6.1 CHANGE OF CONTROL. Subject to Section 6.4 hereof, in the
event that a Change of Control occurs during the Employment Term and
within six months prior thereto or at any time thereafter either the
Partnershi terminates the Executive's employment hereunder without
Cause (including pursuant to a Non-Renewal Notice) or the Executive
terminates his employment hereunder with Good Reason or the Executive
elects to terminate his employment hereunder during the six month
period commencing on the sixth month anniversary and ending on the
twelve month anniversary of a Change of Control, (a) the Partnership
shall pay to the Executive the sum of (i) the portion of the Base
Salary earned but unpaid as of the Date of Termination, (ii) the
Pro-rata Bonus (as defined below) and (iii) an amount equal to three
times the sum of (A) the Base Salary plus (B) the Maximum Annual Bonus
and (b) the Partnership shall provide to the Executive and his
dependents from the Date of Termination until the expiration of the
third anniversary of the Date of Termination (the "Severance Period"),
medical benefits substantially equivalent to the medical benefits
provided by the Partnership to senior executives and their dependents
during such period; PROVIDED, HOWEVER, that benefits otherwise
receivable by the Executive pursuant to clause (b) of this Section 6.1
shall be reduced to the extent comparable benefits are actually
provided to the Executive or his dependents by another party (and the
Executive shall report to the Partnership any benefits that are
actually provided to him); PROVIDED, FURTHER, that the Partnership's
obligation and the Executive's rights under clause (a) (ii) and (iii)
and clause (b) of this Section 6.1 shall terminate immediately upon the
occurrence of a Competition Event (as defined below)."
2.) Section 6.2. (GOOD REASON, TERMINATION WITHOUT CAUSE) is deleted in its
entirety and the following is inserted in lieu thereof;
"6.2 GOOD REASON, TERMINATION WITHOUT CAUSE. In the event that the
Executive terminates his employment for Good Reason or the Partnership
terminates the Executive's employment without Cause or has delivered a
Non-Renewal Notice to the Executive, then, subject to Section 6.4, the
Partnership shall, without duplication of any amounts paid or benefits
provided pursuant to Section 6.1, (a) pay to the Executive (i) all
earned but unpaid Base Salary as of the Date of Termination, (ii) the
Pro-rata Bonus and (iii) an amount equal to three times the Base Salary
and (b) provide to the Executive and his dependents, until the
expiration of three years from the Date of Termination (the "Severance
Period"), medical benefits substantially equivalent to the medical
benefits provided by the Partnership to senior executives and their
dependents during such period; PROVIDED, HOWEVER, that benefits
otherwise receivable by the Executive pursuant to clause (b) of this
Section 6.2 shall be reduced to the extent comparable benefits are
actually provided on the Executive's behalf by another party (and the
Executive shall report to the Partnership any benefits that are
actually provided to him); PROVIDED, FURTHER, that the Partnership's
obligation and the Executive's rights under clause (a)(ii) and (iii)
and clause (b) of this Section 6.2 shall terminate immediately upon the
occurrence of a Competition Event (as defined below)."
3.) This Amendment shall be effective as of the date set forth below.
Except as expressly modified hereby, the terms of the Employment
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment this 23rd day of
October, 1997.
Suburban Propane, L.P.
By:/S/ MICHAEL M. KEATING
-------------------------
Name:MICHAEL M. KEATING
-----------------------
Title:VICE PRESIDENT - HUMAN RESOURCES
--------------------------------------
/S/ MARK A. ALEXANDER
---------------------
Mark A. Alexander
INDEX TO FINANCIAL STATEMENTS
SUBURBAN PROPANE PARTNERS, L.P.AND SUBSIDIARIES
PAGE
Reports of Independent Accountants........................................ F-2
Consolidated Balance Sheets-September 27, 1997 and September 28, 1996..... F-4
Consolidated Statements of Operations -
Years Ended September 27, 1997, September 28, 1996 (Combined)
and September 30, 1995 (Predecessor).................................... F-5
March 5, 1996 through September 28, 1996
October 1, 1995 through March 4, 1996 (Predecessor)
Consolidated Statements of Cash Flows -
Year Ended September 27, 1997, September 28, 1996 (Combined)
and September 30, 1995 (Predecessor) ................................... F-7
March 5, 1996 through September 28, 1996 and
October 1, 1995 through March 4, 1996 (Predecessor)
Consolidated Statement of Partners' Capital -
Year Ended September 27, 1997
March 5, 1996 through September 28, 1996................................ F-9
Notes to Consolidated Financial Statements................................ F-10
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Supervisors and Unitholders of
Suburban Propane Partners, L.P.
In our opinion, the consolidated financial statements listed in the
indices referred to under Item 14(a) 1 and 2 and appearing on pages F-1 and S-1
present fairly, in all material respects, the financial position of Suburban
Propane Partners, L.P. and its subsidiaries (the "Partnership") at September 27,
1997 and September 28, 1996, and the results of its operations and its cash
flows for the year ended September 27, 1997 and the period March 5, 1996 to
September 28, 1996, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Partnership's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Morristown, NJ
October 22, 1997, except as to Note 14, which is as of December 22, 1997
F-2
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder
Quantum Chemical Corporation
In our opinion, the financial statements listed in the indices referred to
under Item 14(a) 1 and 2 and appearing on pages F-1 and S-1 present fairly, in
all material respects, the Suburban Propane division of Quantum Chemical
Corporation results of operations and cash flows for the period October 1, 1995
to March 4, 1996 and the year ended September 30, 1995, in conformity with
generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Morristown, NJ
October 22, 1997, except as to Note 14, which is as of December 22, 1997
F-3
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents ...................... $ 19,336 $ 18,931
Accounts receivable, less allowance for doubtful
accounts of $2,682 and $3,312, respectively 45,927 55,021
Inventories .................................... 31,915 40,173
Prepaid expenses and other current assets ...... 7,183 6,567
--------- ---------
Total current assets ...................... 104,361 120,692
Property, plant and equipment, net .................. 364,347 374,013
Net prepaid pension cost ............................ 48,598 47,514
Goodwill and other intangible assets, net ........... 249,790 255,948
Other assets ........................................ 9,311 9,257
--------- ---------
Total assets .............................. $ 776,407 $ 807,424
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable ............................... $ 37,785 $ 40,730
Accrued employment and benefit costs ........... 19,957 23,049
Accrued insurance .............................. 5,280 5,280
Customer deposits and advances ................. 12,795 8,242
Accrued interest ............................... 8,306 8,222
Other current liabilities ...................... 12,578 16,303
--------- ---------
Total current liabilities ................. 96,701 101,826
Long-term debt ...................................... 427,970 428,229
Postretirement benefits obligation .................. 81,896 81,374
Accrued insurance ................................... 18,468 19,456
Other liabilities ................................... 10,133 11,860
--------- ---------
Total liabilities ......................... 635,168 642,745
--------- ---------
Commitments and contingencies
Partners' capital:
Common unitholders ............................. 100,476 129,283
Subordinated unitholder ........................ 39,835 40,100
General Partner ................................ 12,830 3,286
Unearned compensation .......................... (11,902) (7,990)
--------- ---------
Total partners' capital ................... 141,239 164,679
--------- ---------
Total liabilities and partners' capital ... $ 776,407 $ 807,424
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
( in thousands, except per Unit amounts)
YEAR ENDED
------------------------------------------
SEPTEMBER 28, SEPTEMBER 30,
SEPTEMBER 27, 1996 1995
1997 (COMBINED) (PREDECESSOR)
------------ ------------- --------------
Revenues
Propane ............................... $700,767 $641,679 $570,064
Other ................................. 70,364 66,267 63,556
-------- -------- --------
771,131 707,946 633,620
-------- -------- --------
Costs and expenses
Cost of sales ......................... 436,795 377,692 318,896
Operating ............................. 209,799 203,426 197,348
Depreciation and amortization ......... 37,307 35,862 34,055
Selling, general and administrative
expenses ............................ 32,556 29,004 24,677
Management fee ........................ -- 1,290 3,100
Restructuring charge .................. 6,911 2,340 --
-------- -------- --------
723,368 649,614 578,076
-------- -------- --------
Income before interest expense and
income taxes ............................. 47,763 58,332 55,544
Interest expense, net ...................... 33,979 17,171 --
-------- -------- --------
Income before provision for income taxes ... 13,784 41,161 55,544
Provision for income taxes ................. 190 28,294 25,299
-------- -------- --------
Net income ............................ $ 13,594 $ 12,867 $ 30,245
======== ======== ========
General Partner's interest in net income ... $ 272
--------
Limited Partners' interest in net income ... $ 13,322
========
Net income per Unit ........................ $ 0.46
========
Weighted average number of Units outstanding 28,726
--------
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
( in thousands, except per Unit amounts)
OCTOBER 1, 1995 OCTOBER 1, 1995
THROUGH MARCH 5, 1996 THROUGH
SEPTEMBER 28, 1996 THROUGH MARCH 4, 1996
(COMBINED) SEPTEMBER 28, 1996 (PREDECESSOR)
---------- ------------------ -------------
Revenues
Propane ............................... $ 641,679 $ 289,058 $ 352,621
Other ................................. 66,267 34,889 31,378
--------- --------- ---------
707,946 323,947 383,999
Costs and expenses
Cost of sales ......................... 377,692 173,201 204,491
Operating ............................. 203,426 114,436 88,990
Depreciation and amortization ......... 35,862 21,046 14,816
Selling, general and administrative
expenses ............................. 29,004 16,388 12,616
Management fee ........................ 1,290 -- 1,290
Restructuring charge .................. 2,340 2,340 --
--------- --------- ---------
649,614 327,411 322,203
Income (loss) before interest expense
and income taxes ......................... 58,332 (3,464) 61,796
Interest expense, net ...................... 17,171 17,171 --
--------- --------- ---------
Income (loss) before provision
for income taxes ......................... 41,161 (20,635) 61,796
Provision for income taxes ................. 28,294 147 28,147
--------- --------- ---------
Net income (loss) ..................... $ 12,867 $ (20,782) $ 33,649
========= ========= =========
General Partner's interest in net loss ..... $ (416)
---------
Limited Partners' interest in net loss ..... $ (20,366)
=========
Net loss per Unit .......................... $ (0.71)
=========
Weighted average number of Units outstanding 28,726
---------
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
YEAR ENDED
-----------------------------------------------
SEPTEMBER 28, SEPTEMBER 30,
SEPTEMBER 27, 1996 1995
1997 (COMBINED) (PREDECESSOR)
------------- ------------- --------------
Cash flows from operating activities:
Net income .......................................... $ 13,594 $ 12,867 $ 30,245
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation ................................... 29,718 28,920 27,746
Amortization ................................... 7,589 6,942 6,309
Restructuring charge ........................... 6,911 2,340 --
(Gain) on disposal of property, plant
and equipment ................................ (774) (241) (1,492)
Changes in operating assets and liabilities,
net of acquisitions and dispositions:
Decrease/(increase) in accounts receivable ...... 9,094 (13,976) 6,173
Decrease/(increase) in inventories .............. 8,258 (3,510) 2,692
(Increase)/decrease in prepaid expenses
and other current assets ..................... (616) (5,565) 693
(Decrease)/increase in accounts payable ........ (2,945) 18,432 878
(Decrease)/increase in accrued employment
and benefit costs ............................. (5,031) 3,414 (1,199)
Increase in accrued interest ................... 84 8,222 --
Increase/(decrease) in other accrued liabilities (112) 5,417 (4,362)
Other noncurrent assets ............................. (1,138) (2,872) (1,372)
Deferred credits and other noncurrent liabilities ... (5,784) (1,194) (12,594)
--------- --------- ---------
Net cash provided by operating activities . 58,848 59,196 53,717
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures ............................... (24,888) (25,885) (21,359)
Acquisitions ....................................... (1,880) (28,529) (5,817)
Proceeds from the sale of property, plant
and equipment ..................................... 6,059 2,000 4,859
--------- --------- ---------
Net cash used in investing activities ..... (20,709) (52,414) (22,317)
--------- --------- ---------
Cash flows from financing activities:
Cash activity with parent, net ...................... -- 25,799 (31,562)
Proceeds from settlement with former parent ......... -- 5,560 --
Proceeds from debt placement ........................ -- 425,000 --
Proceeds from General Partner APU contribution ...... 10,000 -- --
Proceeds from Common Unit offering .................. -- 413,569 --
Debt repayment ...................................... (299) -- --
Debt placement and credit agreement expenses ........ -- (6,224) --
Cash distribution to General Partner ................ -- (832,345) --
Partnership distribution ............................ (47,435) (19,346) --
--------- --------- ---------
Net cash (used in) provided by financing activities (37,734) 12,013 (31,562)
--------- --------- ---------
Net Increase (decrease) in cash and cash equivalents ..... 405 18,795 (162)
Cash and cash equivalents at beginning of period ......... 18,931 136 298
--------- --------- ---------
Cash and cash equivalents at end of period ............... $ 19,336 $ 18,931 $ 136
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid for interest ............................. $ 32,836 $ 10,550 $ --
========= ========= =========
Non cash investing and financing activities
Assets acquired by incurring note payable ............. $ -- $ 3,528 $ --
========= ========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
OCTOBER 1, 1995 OCTOBER 1, 1995
THROUGH MARCH 5, 1996 THROUGH
SEPTEMBER 28, 1996 THROUGH MARCH 4, 1996
(COMBINED) SEPTEMBER 28, 1996 (PREDECESSOR)
---------- ------------------ -------------
Cash flows from operating activities:
Net income (loss) ..................................... $ 12,867 $ (20,782) $ 33,649
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operations:
Depreciation ..................................... 28,920 16,887 12,033
Amortization ..................................... 6,942 4,159 2,783
Restructuring charge ............................. 2,340 2,340 --
(Gain) on disposal of property, plant and
equipment ...................................... (241) (156) (85)
Changes in operating assets and liabilities, net of
acquisitions and dispositions:
(Increase)/decrease in accounts receivable ....... (13,976) 42,667 (56,643)
(Increase)/decrease in inventories ............... (3,510) (6,339) 2,829
(Increase) in prepaid expenses and
other current assets ............................ (5,565) (3,691) (1,874)
Increase in accounts payable ..................... 18,432 9,097 9,335
Increase in accrued employment
and benefit costs ............................... 3,414 1,111 2,303
Increase in accrued interest ..................... 8,222 8,222 --
Increase/(decrease) in other accrued liabilities . 5,417 8,947 (3,530)
Other noncurrent assets ............................... (2,872) (1,669) (1,203)
Deferred credits and other noncurrent liabilities ..... (1,194) 2,168 (3,362)
--------- --------- ---------
Net cash provided by (used in) operating activities 59,196 62,961 (3,765)
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures ................................. (25,885) (16,089) (9,796)
Acquisitions ......................................... (28,529) (15,357) (13,172)
Proceeds from the sale of property, plant
and equipment ...................................... 2,000 997 1,003
--------- --------- ---------
Net cash used in investing activities ....... (52,414) (30,449) (21,965)
--------- --------- ---------
Cash flows from financing activities:
Cash activity with parent, net ....................... 25,799 -- 25,799
Proceeds from settlement with former parent .......... 5,560 5,560 --
Proceeds from debt placement ......................... 425,000 425,000 --
Proceeds from Common Unit offering ................... 413,569 413,569 --
Debt placement and credit agreement expenses ......... (6,224) (6,224) --
Cash distribution to General Partner ................. (832,345) (832,345) --
Partnership distribution ............................. (19,346) (19,346) --
--------- --------- ---------
Net cash provided by (used in) financing activities 12,013 (13,786) 25,799
--------- --------- ---------
Net increase in cash and cash equivalents .................. 18,795 18,726 69
Cash and cash equivalents at beginning of period ........... 136 205 136
--------- --------- ---------
Cash and cash equivalents at end of period ................. $ 18,931 $ 18,931 $ 205
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid for interest ............................... $ 10,550 $ 10,550 $ --
========= ========= =========
Non cash investing and financing activities
Assets acquired by incurring note payable .............. $ 3,528 $ 3,528 $ --
========= ========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(IN THOUSANDS)
UNEARNED TOTAL
NUMBER OF UNITS GENERAL COMPENSATION PARTNERS'
COMMON SUBORDINATED COMMON SUBORDINATED PARTNER RESTRICTED UNITS CAPITAL
------ ------------ ------ ------------ ------- ---------------- -------
Balance at March 5, 1996 - - - - - -
Contribution in connection
with formation of the
Partnership and issuance
of Common Units 21,562 7,164 $ 150,488 $ 49,890 $ 4,089 $ 204,467
Partnership distribution (14,239) (4,720) (387) (19,346)
Grants under
Restricted Unit Plan 8,330 (8,330) -
Amortization of Restricted
Unit compensation - 340 340
Net Loss - - (15,296) (5,070) (416) - (20,782)
------ ------------ ------ ------------ ------- ---------------- -------
Balance at
September 28, 1996 21,562 7,164 129,283 40,100 3,286 (7,990) 164,679
Grants under
Restricted Unit Plan 4,313 (4,313) -
Partnership distribution (43,125) (3,582) (728) (47,435)
Amortization of Restricted
Unit compensation 401 401
APU Contribution
(100 Units) 10,000 10,000
Net Income - - 10,005 3,317 272 - 13,594
------ ------------ ------ ------------ ------- ---------------- ---------
Balance at
September 27, 1997 21,562 7,164 $ 100,476 $ 39,835 $12,830 $ (11,902) $ 141,239
====== ====== ========= ============ ======= ================ =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1997
(Dollars in thousands)
1. PARTNERSHIP ORGANIZATION AND FORMATION
Suburban Propane Partners, L.P. (the "Partnership") was formed on December 19,
1995 as a Delaware limited partnership. The Partnership and its subsidiary,
Suburban Propane, L.P. (the "Operating Partnership"), were formed to acquire and
operate the propane business and assets of the Suburban Propane Division of
Quantum Chemical Corporation (the "Predecessor Company"). In addition, Suburban
Sales & Service, Inc. (the "Service Company"), a subsidiary of the Operating
Partnership, was formed to acquire and operate the service work and appliance
and parts businesses of the Predecessor Company. The Partnership, the Operating
Partnership and the Service Company are collectively referred to hereinafter as
the "Partnership Entities." The Partnership Entities commenced operations on
March 5, 1996 (the "Closing Date") upon consummation of an initial public
offering of 18,750,000 Common Units representing limited partner interests in
the Partnership (the "Common Units"), the private placement of $425,000
aggregate principal amount of Senior Notes due 2011 issued by the Operating
Partnership (the "Senior Notes") and the transfer of all the propane assets
(excluding the net accounts receivable balance) of the Predecessor Company to
the Operating Partnership and the Service Company. On March 25, 1996, the
underwriters of the Partnership's initial public offering exercised an
overallotment option to purchase an additional 2,812,500 Common Units.
Suburban Propane GP, Inc. (the "General Partner") is a wholly-owned subsidiary
of Millennium Petrochemicals Inc., ("Millennium Petrochemicals"), formerly
Quantum Chemical Corporation ("Quantum") and serves as the general partner of
the Partnership and the Operating Partnership. Both the General Partner and
Millennium Petrochemicals are indirect wholly-owned subsidiaries of Millennium
Chemicals Inc. ("Millennium") which was formed as a result of Hanson PLC's (the
"Parent Company") demerger in October 1996. The General Partner holds a 1%
general partner interest in the Partnership and a 1.0101% general partner
interest in the Operating Partnership. In addition, the General Partner owns a
24.4% limited partner interest and a special limited partner interest in the
Partnership. The limited partner interest is evidenced by 7,163,750 Subordinated
Units and the special limited partner interest is evidenced by Additional
Partnership Units ("APUs") (See Notes 4 and 14). The General Partner has
delegated to the Partnership's Board of Supervisors all management powers over
the business and affairs of the Partnership Entities that the General Partner
possesses under applicable law.
The Partnership Entities are, and the Predecessor Company was, engaged in the
retail and wholesale marketing of propane and related appliances and services.
The Partnership believes it is the third largest retail marketer of propane in
the United States, serving more than 700,000 active residential, commercial,
industrial and agricultural customers from more than 350 customer service
centers in over 40 states. The Partnership's operations are concentrated in the
east and west coast regions of the United States. The retail propane sales
volume of the Partnership was approximately 541 million gallons during the
fiscal year ended September 27, 1997. Based on industry statistics, the
Partnership believes that its retail propane sales volume constitutes
approximately 6% of the domestic retail market for propane.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The consolidated financial statements present the
consolidated financial position, results of operations and cash flows of the
Partnership Entities and the Predecessor Company. All significant intercompany
transactions and accounts have been eliminated.
FISCAL PERIOD. The Partnership and the Predecessor Company's fiscal year ends
on the last Saturday nearest to September 30. Because the Partnership commenced
operations on the Closing Date, the accompanying statements of operations and
F-10
cash flows present the consolidated results of operations and cash flows of the
Partnership for the fiscal year ended September 27, 1997 and the period March 5,
1996 to September 28, 1996, and the results of operations and cash flows of the
Predecessor Company for the period October 1, 1995 to March 4, 1996 and the
fiscal year ended September 30, 1995. Solely for purposes of comparing the
results of operations of the Partnership and the Predecessor Company for the
years ended September 27, 1997, September 28, 1996 and September 30, 1995, the
statement of operations for the year ended September 28, 1996 is comprised of
the combined statements of operations of the Predecessor Company for the period
October 1, 1995 to March 4, 1996 and the Partnership for the period March 5,
1996 to September 28, 1996.
USE OF 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.
CASH EQUIVALENTS. The Partnership considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be cash
equivalents. The carrying amount approximates fair value because of the short
maturity of these instruments.
REVENUE RECOGNITION. Sales of propane are recognized at the time product is
shipped or delivered to the customer. Revenue from the sale of propane,
appliances and equipment is recognized at the time of sale or installation.
Revenue from repairs and maintenance is recognized upon completion of the
service.
INVENTORIES. Inventories are stated at the lower of cost or market. Cost is
determined using a weighted average method for propane and a specific
identification basis for appliances.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment are stated at cost.
Depreciation is determined for related groups of assets under the straight-line
method based upon their estimated useful lives as follows:
Buildings 40 Years
Building and land improvements 10-20 Years
Transportation equipment 5-30 Years
Storage facilities 30 Years
Equipment, primarily tanks and cylinders 3-40 Years
Expenditures for maintenance and routine repairs are expensed as incurred.
GOODWILL AND OTHER INTANGIBLE ASSETS. Goodwill and other intangible assets are
comprised of the following:
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
-------- --------
Goodwill $266,212 $265,292
Debt origination costs 6,224 6,224
Other, principally noncompete agreements 4,514 4,003
-------- --------
276,950 275,519
Less: Accumulated amortization 27,160 19,571
-------- --------
$249,790 $255,948
======== ========
Goodwill represents the excess of the purchase price over the fair value of net
assets acquired and is being amortized on a straight-line basis over forty years
from the date of acquisition.
F-11
Debt origination costs represent the costs incurred in connection with the
placement of the $425,000 of Senior Notes which is being amortized on a
straight-line basis over 15 years.
The Partnership periodically evaluates goodwill for impairment by calculating
the anticipated future cash flows attributable to its operations. Such expected
cash flows, on an undiscounted basis, are compared to the carrying values of the
tangible and intangible assets, and if impairment is indicated, the carrying
value of goodwill is adjusted. In the opinion of management, no impairment of
goodwill exists.
ACCRUED INSURANCE. Accrued insurance represents the estimated costs of known and
anticipated or unasserted claims under the Partnership's general and product,
workers' compensation and automobile insurance policies. Accrued insurance
provisions for unasserted claims arising from unreported incidents are based on
an analysis of historical claims data. For each claim, the Partnership records a
self-insurance provision up to the estimated amount of the probable claim or the
amount of the deductible, whichever is lower. Claims are generally settled
within 5 years of origination.
INCOME TAXES. As discussed in Note 1, the Partnership Entities consist of two
limited partnerships, the Partnership and the Operating Partnership, and one
corporate entity, the Service Company. For federal and state income tax
purposes, the earnings attributable to the Partnership and Operating Partnership
are included in the tax returns of the individual partners. As a result, no
recognition of income tax expense has been reflected in the Partnership's
consolidated financial statements relating to the earnings of the Partnership
and Operating Partnership. The earnings attributable to the Service Company are
subject to federal and state income taxes. Accordingly, the Partnership's
consolidated financial statements reflect income tax expense related to the
Service Company's earnings. Net earnings for financial statement purposes may
differ significantly from taxable income reportable to unitholders as a result
of differences between the tax basis and financial reporting basis of assets and
liabilities and the taxable income allocation requirements under the Partnership
agreement.
For federal income tax purposes, the Predecessor Company was included in the
consolidated tax return of a United States affiliate of the Parent Company. The
Predecessor Company's tax assets, liabilities, expenses and benefits result from
the tax effect of its transactions determined as if the Predecessor Company
filed a separate income tax return. The Predecessor Company's income taxes were
paid by an affiliate of the Parent Company in which income tax expense was
credited through an intercompany account.
Income taxes are provided based on the provisions of Financial Accounting
Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes," which requires recognition of deferred
tax assets and liabilities for the expected future tax consequences of events
that have been included in the financial statements and tax returns in different
years. Under this method, deferred income tax assets and liabilities are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.
UNIT-BASED COMPENSATION. The Partnership accounts for Unit-based compensation in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" and related interpretations. Upon issuance of Units
under the plan, unearned compensation equivalent to the market value of the
restricted Units is charged at the date of grant. The unearned compensation is
amortized ratably over the restricted periods. The unamortized unearned
compensation value is shown as a reduction of partners' capital in the
accompanying consolidated balance sheet.
NET INCOME (LOSS) PER UNIT. Net income (loss) per Unit is computed by dividing
net income (loss), after deducting the General Partner's 2% interest, by the
weighted average number of outstanding Common Units and Subordinated Units.
RECLASSIFICATIONS. Certain prior period balances have been reclassified to
conform with the current period presentation.
F-12
3. SUPPLEMENTAL UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated statements of
operations for the years ended September 28, 1996 and September 30, 1995 were
derived from the historical statements of operations of the Predecessor Company
for the period October 1, 1994 through March 4, 1996 and the consolidated
statement of operations of the Partnership from March 5, 1996 through September
28, 1996. The unaudited pro forma condensed consolidated statements of
operations were prepared to reflect the effects of the Partnership formation as
if it had been completed in its entirety as of October 1, 1994. However, these
statements do not purport to present the results of operations of the
Partnership had the Partnership formation actually been completed as of the
beginning of the periods presented. In addition, the unaudited pro forma
condensed consolidated financial statements of operations are not necessarily
indicative of the results of future operations of the Partnership.
PRO FORMA
SEPTEMBER 28, SEPTEMBER 30,
1996 1995
------------ -------------
Revenues
Propane $ 641,679 $ 570,064
Other 66,267 63,556
--------- ---------
707,946 633,620
--------- ---------
Cost and Expenses
Cost of sales 377,692 318,896
Operating 203,426 197,348
Depreciation and amortization 35,862 34,055
Selling, general and administrative expenses 29,004 24,677
Management fee 1,290 3,100
Restructuring charge 2,340 -
--------- ---------
649,614 578,076
--------- ---------
Income before interest expense and income taxes 58,332 55,544
Interest expense, net 31,197 32,045
--------- ---------
Income before provision for income taxes 27,135 23,499
Provision for income taxes 250 250
--------- ---------
Net income $ 26,885 $ 23,249
========= =========
General Partner's interest in net income $ 538 $ 465
--------- ---------
Limited Partners' interest in net income $ 26,347 $ 22,784
========= =========
Net income per Unit $ 0.92 $ 0.79
========= =========
Weighted average number of Units outstanding 28,726 28,726
========= =========
Significant pro forma adjustments reflected in the above data include the
following for each of the years presented:
a. An adjustment to interest expense to reflect the interest expense
associated with the Senior Notes and Bank Credit Facilities.
b. The elimination of the provision for income taxes, as income taxes will be
borne by the partners and not the Partnership, except for corporate income taxes
related to the Service Company.
c. The Partnership's management estimates that the incremental costs of
operating as a stand-alone entity would have approximated the management fee
paid to an affiliate of Hanson PLC. These incremental costs are estimated to be
$1,290 and $3,100 for the years ended September 28, 1996 and September 30, 1995.
F-13
4. DISTRIBUTIONS OF AVAILABLE CASH
The Partnership makes distributions to its partners with respect to each fiscal
quarter of the Partnership in an aggregate amount equal to its Available Cash
for such quarter. Available Cash generally means, with respect to any fiscal
quarter of the Partnership, all cash on hand at the end of such quarter less the
amount of cash reserves established by the Board of Supervisors in its
reasonable discretion for future cash requirements. These reserves are retained
for the proper conduct of the Partnership's business, the payment of debt
principal and interest and for distributions during the next four quarters.
Distributions by the Partnership in an amount equal to 100% of its Available
Cash will generally be made 98% to the Common and Subordinated Unitholders and
2% to the General Partner, subject to the payment of incentive distributions in
the event Available Cash exceeds the Minimum Quarterly Distribution ($.50) on
all units. To the extent there is sufficient Available Cash, the holders of
Common Units have the right to receive the Minimum Quarterly Distribution, plus
any arrearages, prior to the distribution of Available Cash to holders of
Subordinated Units. Common Units will not accrue arrearages for any quarter
after the Subordination Period (as defined below) and Subordinated Units will
not accrue any arrearages with respect to distributions for any quarter.
The Subordination Period will generally extend until the first day of any
quarter beginning after March 31, 2001 in respect of which (a) distributions of
Available Cash from Operating Surplus on the Common Units and the Subordinated
Units with respect to each of the three consecutive four-quarter periods
immediately preceding such date equaled or exceeded the sum of the Minimum
Quarterly Distribution on all of the outstanding Common Units and Subordinated
Units during such periods, (b) the Adjusted Operating Surplus generated during
each of the three consecutive four-quarter periods immediately preceding such
date equaled or exceeded the sum of the Minimum Quarterly Distribution on all of
the outstanding Common Units and Subordinated Units and related distribution on
the General Partner interest in the Partnership during such periods, and (c)
there are no outstanding Common Unit Arrearages. Upon expiration of the
Subordination Period, all remaining Subordinated Units will convert into Common
Units on a one-for-one basis and will thereafter participate pro rata with the
other Common Units in distributions of Available Cash.
In accordance with the Distribution Support Agreement among the Partnership, the
General Partner and Millennium, to enhance the Partnership's ability to
distribute the Minimum Quarterly Distribution on the Common Units, the General
Partner has agreed to contribute to the Partnership cash in exchange for APUs.
This obligation to purchase APUs remains in effect through March 31, 2001. The
General Partner's maximum contribution obligation is $43,600 or 436,000 APUs,
and is limited to the number of Common Units issued on the initial public
offering date plus common Units issued in connection with the related
underwriters over-allotment option exercised in full (i.e., 21,562,500 Common
Units). Issuance of additional Common Units will not cause an increase in the
General Partner's maximum contribution obligation. A wholly-owned subsidiary of
Millennium has unconditionally guaranteed the General Partner's APU contribution
obligation.
The APUs represent non-voting, limited partner Partnership interests with a
stated value per unit of $100. The APUs are not entitled to cash distributions
or allocations of any items of Partnership income, gain, loss, deduction or
credit.
The APUs are subject to quarterly mandatory redemption, in whole or in part, by
the Partnership pursuant to the order of priority for distributions from
Available Cash. During the Subordination Period, the APUs may only be redeemed
after distributions of Available Cash have been made on the Minimum Quarterly
Distribution on outstanding Common Units (including any arrearages), the related
distribution on the General Partner interest (including any unpaid amounts of
prior quarters), and the current quarter's Minimum Quarterly Distribution on
outstanding Subordinated Units. After the Subordination Period, the APUs may
only be redeemed after distributions of Available Cash have been made on the
current quarter's Minimum Quarterly Distribution on outstanding Common Units and
the current quarter's related distribution on the General Partner interest.
Upon dissolution of the Partnership, to the extent possible, the APUs will be
redeemed only after the Common and Subordinated unitholders and the General
Partner have received Unrecovered Capital, as defined by the partnership
agreement.
F-14
In August 1997, the General Partner contributed $10,000 to the Partnership in
exchange for 100,000 APUs. The proceeds were used to enhance the Partnership's
ability to distribute the Minimum Quarterly Distribution to Common unitholders
with respect to the third fiscal quarter of 1997.
See Note 14 for additional amounts contributed by the General Partner in
exchange for APUs with respect to the fourth fiscal quarter of 1997.
5. RELATED PARTY TRANSACTIONS
The Predecessor Company was provided management, treasury, insurance, employee
benefits, tax and accounting services by an affiliate of the former Parent
Company. As consideration for the services provided by the affiliate, the
Predecessor Company was charged an annual management fee based on a percentage
of revenue. In the opinion of management, the management fee allocation
represented a reasonable estimate of the cost of services provided by the
affiliate on behalf of the Predecessor Company. However, the fee was not
necessarily indicative of the level of expenses which might have been incurred
by the Predecessor Company operating on a stand-alone basis. Management fees for
the period October 1, 1995 to March 4, 1996 and the year ended September 30,
1995 were $1,290 and $3,100 respectively.
Pursuant to the Contribution, Conveyance and Assumption Agreement dated as of
March 4, 1996, between Millennium Petrochemicals and the Partnership (the
"Contribution Agreement"), Millennium Petrochemicals retained ownership of the
Predecessor Company's accounts receivable, net of allowance for doubtful
accounts, as of the Closing Date. The Partnership retained from the net proceeds
of the Common Unit offering cash in an amount equal to the net book value of
such accounts receivable. In accordance with the Contribution Agreement, the
Partnership agreed to collect such accounts receivable on behalf of Millennium
Petrochemicals which amounted to $97,700 as of the Closing Date. As of September
28, 1996, the Operating Partnership had satisfied its obligation to Millennium
Petrochemicals under such arrangement.
The Predecessor was provided computerized information services by Quantum under
an agreement which terminates on March 31, 1998. Charges related to these
services, included in selling, general and administrative expenses in the
accompanying statements of operations, were $148 and $1,731 for the period
October 1, 1995 to March 4, 1996 and the year ended September 30, 1995,
respectively.
Pursuant to a Computer Services Agreement (the "Services Agreement") dated as of
the Closing Date between Millennium Petrochemicals and the Partnership,
Millennium Petrochemicals permits the Partnership to utilize Millennium
Petrochemicals' mainframe computer for the generation of customer bills, reports
and information regarding the Partnership's retail sales. For the year ended
September 27, 1997 and the seven months ended September 28, 1996, the
Partnership incurred expenses of $384 and $218, respectively, under the Services
Agreement.
6. SELECTED BALANCE SHEET INFORMATION
Inventories consist of:
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
------------- -------------
Propane $ 27,753 $ 36,213
Appliances 4,162 3,960
-------- --------
$ 31,915 $ 40,173
======== ========
The Partnership enters into contracts to buy propane for supply purposes. Such
contracts generally have terms of less than one year, with propane costs based
on market prices at the date of delivery.
F-15
Property, plant and equipment consist of:
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
--------------- -------------
Land and improvements $ 29,345 $ 29,462
Buildings and improvements 46,785 43,909
Transportation equipment 56,532 48,470
Storage facilities 24,008 16,836
Equipment, primarily tanks and cylinders 323,382 321,323
--------- ---------
480,052 460,000
Less: accumulated depreciation 115,705 85,987
--------- ---------
$ 364,347 $ 374,013
========= =========
7. LONG-TERM DEBT AND BANK CREDIT FACILITIES
Long-term debt consists of:
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
------------- -------------
Senior Notes, 7.54%, due
June 30, 2011 $ 425,000 $ 425,000
Note Payable, 8%, due
in Annual Installments through 2006 3,229 3,528
--------- ---------
428,229 428,528
Less: current portion 259 299
--------- ---------
$ 427,970 $ 428,229
========= =========
On the Closing Date, the Operating Partnership issued $425,000 of Senior Notes
with an annual interest rate of 7.54%. The Operating Partnership's obligations
under the Senior Note Agreement are unsecured and will rank on an equal and
ratable basis with the Operating Partnership's obligations under the Bank Credit
Facilities discussed below. The Senior Notes will mature June 30, 2011, and
require semiannual interest payments which commenced June 30, 1996. The Note
Agreement requires that the principal be paid in equal annual payments of
$42,500 starting June 30, 2002.
At September 27, 1997, the Bank Credit Facilities consisted of a $100,000
acquisition facility (the "Acquisition Facility") and a $75,000 working capital
facility (the "Working Capital Facility"). The Operating Partnership's
obligations under the Bank Credit Facilities are unsecured on an equal and
ratable basis with the Operating Partnership's obligations under the Senior
Notes. The Bank Credit Facilities bear interest at a rate based upon either
LIBOR, Chemical Bank's prime rate or the Federal Funds effective rate plus 1/2
of 1% and in each case, plus a margin. In addition, an annual fee (whether or
not borrowings occur), is payable quarterly ranging from 0.125% to 0.375% based
upon certain financial tests.
On September 30, 1997, the Partnership amended and restated its Bank Credit
Facilities. The amended agreement provides for a $75,000 working capital
facility and a $25,000 acquisition facility. The Operating Partnership's
obligations, under the terms of the new agreement, will continue to be unsecured
on an equal and ratable basis with the Operating Partnership's obligations under
the Senior Notes. Borrowings under the amended agreement will bear interest at a
rate based upon either LIBOR plus a margin, First Union National Bank's prime
rate or the Federal Funds rate plus 1/2 of 1%. An annual fee ranging from .20%
to .25% based upon certain financial tests will be payable quarterly whether or
not borrowings occur. The new agreement expires September 30, 2000.
No amounts were outstanding under the Bank Credit Facilities as of September 27,
1997 and as of September 28, 1996.
F-16
The fair value of the Partnership's long-term debt is estimated based on the
current rates offered to the Partnership for debt of the same remaining
maturities. The carrying value of the Partnership's long-term debt approximates
its fair market value.
The Senior Note Agreement and Bank Credit Facilities contain various restrictive
and affirmative covenants applicable to the Operating Partnership, including (a)
maintenance of certain financial tests, (b) restrictions on the incurrence of
additional indebtedness, and (c) restrictions on certain liens, investments,
guarantees, loans, advances, payments, mergers, consolidations, distributions,
sales of assets and other transactions.
For the year ended September 27, 1997 and the period March 5, 1996 to September
28, 1996, interest expense was $34,330 and $18,772, respectively.
8. RESTRICTED UNIT PLAN
In 1996, the Partnership adopted the 1996 Restricted Unit Award Plan (the
"Restricted Unit Plan") which authorizes the issuance of Common Units with an
aggregate value of $15,000 (731,707 Common Units valued at the initial public
offering price of $20.50 per Unit) to executives, managers and Elected
Supervisors of the Partnership. Units issued under the Restricted Unit Plan are
subject to a bifurcated vesting procedure such that (a) twenty-five percent of
the issued Units will vest over time with one-third of such units vesting at the
end of each of the third, fifth and seventh anniversaries of the issuance date,
and (b) the remaining seventy-five percent of the Units will vest automatically
upon, and in the same proportions as, the conversion of Subordinated Units to
Common Units. Restricted Unit Plan participants are not eligible to receive
quarterly distributions or vote their respective Units until vested.
Restrictions generally limit the sale or transfer of the Units during the
restricted periods. The value of the restricted Unit is established by the
market price of the Common Unit at the date of grant. Restricted units are
subject to forfeiture in certain circumstances as defined in the Restricted Unit
Plan.
Following is a summary of activity in the Restricted Unit Plan:
UNITS VALUE PER UNIT
--------- --------------
OUTSTANDING, MARCH 5, 1996 - -
Awarded 388,533 $20.50
--------- -------
OUTSTANDING, SEPTEMBER 28, 1996 388,533 $20.50
Awarded 364,634 $18.41 - $21.63
Forfeited (119,019) $20.50
--------- ---------------
OUTSTANDING, SEPTEMBER 27, 1997 634,148 $18.41 - $21.63
========= ===============
For the year ended September 27, 1997 and the seven months ended September 28,
1996, the Partnership amortized $401 and $340 respectively, of unearned
compensation.
9. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
Concurrent with the Partnership formation, employees of the Predecessor Company
became employees of the Partnership and the Partnership assumed the Predecessor
Company's employee-related liabilities.
F-17
DEFINED BENEFIT PLANS
Prior to the Partnership formation, employees of the Predecessor Company
participated in two noncontributory defined benefit pension plans with
contributions being made by Millennium Petrochemicals and the assets being
maintained in the Hanson America Inc. Master Trust. Subsequent to the
Partnership formation, the two defined benefit plans were merged and the plan
assets were transferred into a separate trust maintained by the Partnership. The
trusts' assets consist primarily of common stock, fixed income securities and
real estate. As of September 28, 1996 the trust maintained by the Partnership
included Hanson ordinary shares which, at market value, comprised 1.9% of the
trust assets.
The benefits for the plan are based on years of service and the employee's
salary at or near retirement. Contributions to the defined benefit plan are made
by the Partnership in accordance with the Employee Retirement Income Security
Act of 1974 minimum funding standards plus additional amounts which may be
determined from time-to-time.
The following table sets forth the plan's actuarial assumptions:
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
------------- -------------
Weighted-average discount rate 7.25% 7.75%
Average rate of compensation increase 4.25% 4.25%
Weighted-average expected long-term rate of
return on plan assets 9.0% 9.0%
The following table sets forth the plan's funded status and net prepaid pension
cost:
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
------------- -------------
Actuarial present value of benefit obligation
Vested benefit obligation $137,872 $ 122,786
Non-vested benefit obligation 6,142 5,859
----------- ------------
Accumulated benefit obligation $144,014 $ 128,645
=========== ============
Projected benefit obligation $161,700 $ 140,535
Plan assets at fair value 198,594 172,773
----------- ------------
Plan assets in excess of projected
benefit obligation 36,894 32,238
Unrecognized prior service cost (1,067) -
Unrecognized net loss 12,771 15,276
----------- ------------
Net prepaid pension cost $ 48,598 $ 47,514
=========== ============
F-18
The net periodic pension income includes the following:
PERIOD PERIOD YEAR ENDED
YEAR ENDED MARCH 5, 1996 OCTOBER 1, 1995 SEPTEMBER 30,
SEPTEMBER 27, TO SEPTEMBER 28, TO MARCH 4, 1996 1995
1997 1996 (PREDECESSOR) (PREDECESSOR)
------------ ---------------- ---------------- --------------
Service cost-benefits earned
during the period $ 4,504 $ 2,616 $ 1,869 $ 4,322
Interest cost on projected benefit
obligation 10,364 5,748 4,106 9,308
Actual return on plan assets (41,491) (10,233) (7,310) (14,180)
Net amortization and deferral 25,540 310 221 --
--------- ---------- --------- --------
Net periodic pension income $ (1,083) $ (1,559) $ (1,114) $ (550)
========= ========== ========= ========
DEFINED CONTRIBUTION PENSION PLANS
The Partnership has defined contribution plans covering most employees.
Contributions and costs are a percent of the participating employees'
compensation. These amounts totaled $1,828, $1,103, $788 and $1,774 for the year
ended September 27, 1997, the seven months ended September 28, 1996, the five
months ended March 4, 1996 and the year ended September 30, 1995, respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Partnership provides postretirement health care and life insurance benefits
for certain retired employees. The Partnership employees hired prior to July
1993 are eligible for such benefits if they reach a specified retirement age
while working for the Partnership.
The Partnership does not fund its postretirement benefit plan. The following
table presents the plan's accrued postretirement benefit cost included in the
accompanying balance sheets at September 27, 1997 and September 28, 1996:
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
------------- -------------
Retirees $ 71,088 $ 76,769
Fully eligible active plan participants 7,639 2,160
Other active plan participants 18,797 11,776
--------- ---------
Accumulated postretirement benefit obligation 97,524 90,705
Unrecognized net loss (11,550) (5,660)
--------- ---------
Accrued postretirement benefit cost 85,974 85,045
Less: current portion 4,078 3,671
--------- ---------
Noncurrent liability $ 81,896 $ 81,374
========= =========
F-19
The net periodic postretirement benefit cost includes the following components:
YEAR ENDED
YEAR ENDED PERIOD MARCH 5, 1996 PERIOD OCTOBER 1, SEPTEMBER 30,
SEPTEMBER 27, TO SEPTEMBER 28, 1995 TO MARCH 4, 1995
1997 1996 1996(PREDECESSOR) (PREDECESSOR)
------------- -------------------- ----------------- -------------
Service cost $ 811 $ 473 $ 338 $ 730
Interest cost 3,074 918 656 1,174
------- ------- ------ ------
Net periodic postretirement
benefit cost $ 3,885 $ 1,391 $ 994 $1,904
======= ======= ====== ======
The accumulated postretirement benefit obligation was based on a 10% and 11%
increase in the cost of covered health care benefits for 1997 and 1996,
respectively. This rate is assumed to decrease gradually to 6% in 2003 and to
remain at that level thereafter. Increasing the assumed health care cost trend
rates by 1.0% in each year would increase the Partnership's accumulated
postretirement benefit obligation as of September 27, 1997 by $4,097 and the
aggregate of service and interest components of net periodic postretirement
benefit cost for the year ended September 27, 1997 by $14.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% and 8% at September 27, 1997 and
September 28, 1996, respectively.
10. RESTRUCTURING CHARGE
In March 1997, the Partnership announced that it was evaluating certain
long-term cost reduction strategies and organizational changes. As a result of
this effort, the Partnership reorganized its product procurement and logistics
group, redesigned its fleet and maintenance, field and corporate office
organizations, and identified facilities to be closed and impaired assets whose
carrying amounts would not be recovered. In support of this effort in June 1997,
the Partnership recorded a restructuring charge of $6,911, which included the
following:
Severance, other employee benefits and facility closure costs $5,076
Impaired asset write-down 1,835
------
$6,911
======
In fiscal 1996, the Partnership reorganized its corporate office and terminated
certain employees. As a result of this action, the Partnership recorded a $2,340
restructuring charge, comprised of severance and employee benefit costs.
At September 27, 1997, the remaining accruals related to the restructuring
charges totaled $4,566. For the year, cash expenditures totaled $4,285.
11. PREDECESSOR EQUITY
The predecessor equity account reflects the Predecessor Company's activity
between an affiliate of the former Parent Company for the period October 1, 1995
to March 4, 1996 and for the year ended September 30, 1995.
F-20
An analysis of the predecessor equity is as follows:
PERIOD OCTOBER 1, YEAR ENDED
1995 TO MARCH 4, SEPTEMBER 30,
1996 1995
----------------- -------------
Beginning balance $558,235 $559,552
-------- --------
Net income 33,649 30,245
-------- --------
Cash transfers, net (26,236) (99,845)
Amounts paid or accrued by parent on
behalf of the Predecessor Company,
net 52,035 68,283
-------- --------
Cash activity with parent, net 25,799 (31,562)
-------- --------
Ending balance $617,683 $558,235
======== ========
The predecessor equity account was non-interest bearing with no repayment terms
and included $449,749 and $265,625 in intercompany payables at March 4, 1996 and
September 30, 1995, respectively.
12. INCOME TAXES
As discussed in Note 2, the Partnership's earnings for federal and state income
tax purposes is included in the tax returns of the individual partners.
Accordingly, no recognition has been given to income taxes in the accompanying
financial statements of the Partnership except for earnings of the Service
Company which are subject to federal and state income taxes. The information
presented below relates to the Predecessor Company.
The provision for income taxes consists of the following:
PERIOD OCTOBER 1, YEAR ENDED
1995 TO MARCH 4, SEPTEMBER 30,
1996 1995
----------------- -------------
Current:
Federal $20,516 $18,458
State 5,809 5,216
-------- --------
$26,325 $23,674
Deferred 1,822 1,625
-------- --------
Total provision for income taxes $28,147 $25,299
======== ========
A reconciliation of the statutory federal tax rate to the Predecessor Company's
effective tax rate follows:
PERIOD YEAR ENDED
OCTOBER 1, 1995 SEPTEMBER 30,
TO MARCH 4, 1996 1995
---------------- -------------
Statutory federal tax rate 35.0% 35.0%
Difference in tax rate due to:
State income taxes, net of federal
income tax benefit 6.0% 6.0%
Goodwill 4.1% 4.1%
Other, net 0.5% 0.5%
-------- -------
Effective tax rate 45.6% 45.6%
======== =======
F-21
13. COMMITMENTS AND CONTINGENCIES
COMMITMENTS
The Partnership leases certain property, plant and equipment for various periods
under noncancelable leases. Rental expense under operating leases was $14,995,
$7,844, $5,603 and $11,563 for the year ended September 27, 1997, the seven
months ended September 28, 1996, the five months ended March 4, 1996 and the
year ended September 30, 1995, respectively.
Future minimum rental commitments under noncancelable operating lease agreements
as of September 27, 1997 are as follows:
FISCAL YEAR
1998 $11,333
1999 6,765
2000 3,701
2001 3,126
2002 and thereafter 7,948
CONTINGENCIES
As discussed in Note 2, the Partnership is self-insured for general and product,
workers' compensation and automobile liabilities up to predetermined amounts
above which third party insurance applies. At September 27, 1997 and September
28, 1996, accrued insurance liabilities amounted to $23,748 and $24,736,
respectively, representing the total estimated losses under these self-insurance
programs. These liabilities represent the gross estimated losses as no claims or
lawsuits, individually or in the aggregate, were estimated to exceed the
Partnership's deductibles and its insurance policies.
The Partnership is also involved in various legal actions which have arisen in
the normal course of business, including those relating to commercial
transactions and product liability. It is the opinion of management, based on
the advice of legal counsel, that the ultimate resolution of these matters will
not have a material adverse effect on the Partnership's financial position or
future results of operations, after considering its self-insurance liability for
known and unasserted self-insurance claims.
14. SUBSEQUENT EVENTS
In November 1997, the General Partner contributed $12,000 to the Partnership in
exchange for an additional 120,000 APUs. Such contributions were used to enhance
the Partnership's ability to distribute the Minimum Quarterly Distribution to
Common Unitholders with respect to the fourth fiscal quarter of 1997.
On December 22, 1997, the Partnership sold its ownership interest in the Dixie
Pipeline Company to Shell Western E&P, Inc. and Conoco Pipe Line Company for net
cash proceeds of approximately $13 million and realized a gain of approximately
$5 million.
F-22
INDEX TO FINANCIAL STATEMENT SCHEDULES
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
PAGE
----
Schedule 11 Valuation and Qualifying Accounts for the year
ended September 27, 1997, the period March 5,
1996 through September 28, 1996, October 1,
1995 through March 4, 1996 and for the year
ended September 30, 1995 S-2
S-1
SCHEDULE II
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
BALANCE AT CHARGED DEDUCTIONS BALANCE
BEGINNING TO COST/ OTHER (AMOUNTS AT END
OF PERIOD EXPENSES ADDITIONS CHARGED OFF) OF PERIOD
--------- -------- --------- ------------ ---------
YEAR ENDED SEPTEMBER 30, 1995
- -----------------------------
Allowance for doubtful accounts ... $ 3,462 $ 3,140 $ -- $ (3,440) $ 3,162
======= ======= ========= ======== =======
Accumulated amortization:
Goodwill ........................ $ 6,250 $ 6,309 $ -- $ -- $12,559
Other intangibles ............... $ -- $ 70 $ -- $ -- $ 70
------- ------- --------- -------- -------
Total ........... $ 6,250 $ 6,379 $ -- $ -- $12,629
======= ======= ========= ======== =======
OCTOBER 1, 1995 TO MARCH 4, 1996
- --------------------------------
Allowance for doubtful accounts ... $ 3,162 $ 1,510 $ -- $ (1,510) $ 3,162
======= ======= ========= ======== =======
Accumulated amortization:
Goodwill ........................ $12,559 $ 2,714 $ -- $ -- $15,273
Other intangibles ............... $ 70 $ 69 $ -- $ -- $ 139
------- ------- --------- -------- -------
Total ........... $12,629 $ 2,783 $ -- $ -- $15,412
======= ======= ========= ======== =======
MARCH 5, 1996 TO SEPTEMBER 28, 1996
- -----------------------------------
Allowance for doubtful accounts ... $ 3,162 $ 1,790 $ -- $ (1,640) $ 3,312
======= ======= ========= ======== =======
Accumulated amortization:
Goodwill ........................ $15,273 $ 3,716 $ -- $ -- $18,989
Other intangibles ............... $ 139 $ 443 $ -- $ -- $ 582
------- ------- --------- -------- -------
Total ........... $15,412 $ 4,159 $ -- $ -- $19,571
======= ======= ========= ======== =======
YEAR ENDED SEPTEMBER 27, 1997
- -----------------------------
Allowance for doubtful accounts ... $ 3,312 $ 4,569 $ -- $ (5,199) $ 2,682
======= ======= ========= ======== =======
Accumulated amortization:
Goodwill ........................ $18,989 $ 6,644 $ -- $ -- $25,633
Other intangibles ............... $ 582 $ 945 $ -- $ -- $ 1,527
------- ------- --------- -------- -------
Total ........... $19,571 $ 7,589 $ -- $ -- $27,160
======= ======= ========= ======== =======
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-10197) of Suburban Propane Partners, L.P. of our
reports dated October 22, 1997 appearing on pages F-2 and F-3 of this Annual
Report on Form 10-K. We also consent to the application of such reports to the
Financial Statement Schedule listed under Item 14(a) 2 of this Form 10-K when
such schedule is read in conjunction with the financial statements referred to
in our reports. The audits referred to in such reports also included this
schedule.
PRICE WATERHOUSE LLP
Morristown, NJ
December 22, 1997