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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 25, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the transition period from ______ to ______
Commission File Number: 1-14222
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SUBURBAN PROPANE PARTNERS, L.P.
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(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
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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
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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. [ ]
The aggregate market value as of December 15, 1999 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 ($16.56/unit),
was approximately $367,006,200. On December 15, 1999 there were outstanding
22,235,662 Common 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.................................................. 7
ITEM 3. LEGAL PROCEEDINGS........................................... 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 8
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS AND
RELATED UNITHOLDER MATTERS................................. 9
ITEM 6. SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA........... 10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............. 11
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK................................................ 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................ 21
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE........................ 21
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT......... 22
ITEM 11. EXECUTIVE COMPENSATION..................................... 25
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT............................................. 29
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............. 31
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K........................................ 32
Signatures........................................................... 34
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
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THIS ANNUAL REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
RELATING TO THE PARTNERSHIP'S FUTURE BUSINESS EXPECTATIONS AND PREDICTIONS AND
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. THESE FORWARD-LOOKING STATEMENTS
INVOLVE CERTAIN RISKS AND UNCERTAINTIES. IMPORTANT FACTORS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE DISCUSSED IN SUCH FORWARD-LOOKING
STATEMENTS ("CAUTIONARY STATEMENTS") INCLUDE, AMONG OTHER THINGS: THE IMPACT OF
WEATHER CONDITIONS ON THE DEMAND FOR PROPANE; FLUCTUATIONS IN THE UNIT COST OF
PROPANE; THE ABILITY OF THE PARTNERSHIP TO COMPETE WITH OTHER SUPPLIERS OF
PROPANE AND OTHER ENERGY SOURCES; THE ABILITY OF THE PARTNERSHIP TO RETAIN
CUSTOMERS; THE IMPACT OF ENERGY EFFICIENCY AND TECHNOLOGY ADVANCES ON THE DEMAND
FOR PROPANE; THE ABILITY OF MANAGEMENT TO CONTINUE TO CONTROL EXPENSES; THE
IMPACT OF REGULATORY DEVELOPMENTS ON THE PARTNERSHIP'S BUSINESS; THE IMPACT OF
LEGAL PROCEEDINGS ON THE PARTNERSHIP'S BUSINESS; AND THE PARTNERSHIP'S ABILITY
TO IMPLEMENT ITS EXPANSION STRATEGY AND TO INTEGRATE ACQUIRED BUSINESSES
SUCCESSFULLY. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS
ATTRIBUTABLE TO THE PARTNERSHIP OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY
QUALIFIED IN THEIR ENTIRETY BY SUCH CAUTIONARY STATEMENTS.
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 730,000 active residential, commercial,
industrial and agricultural customers from approximately 350 customer service
centers in over 40 states as of September 25, 1999. 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 524 million
gallons during the fiscal year ended September 25, 1999. Based on industry
statistics for calendar year 1997, the Partnership believes that its retail
propane sales volume constitutes approximately 5% of the domestic retail market
for propane.
The Partnership conducts its business principally through its subsidiary,
Suburban Propane, L.P. (the "Operating Partnership" and, together with the
Partnership, the "Partnerships"), a Delaware limited partnership. The
Partnership and the Operating Partnership were formed in 1995 to acquire and
operate the propane business and assets of Suburban Propane, a division of
Quantum Chemical Corporation (the "Predecessor Company"), then owned by Hanson
PLC ("Hanson"). The Predecessor Company had been continuously engaged in the
retail propane business since 1928 and had been owned by Quantum since 1983. 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, the Service Company and a corporate
entity engaged in retail operations subsequently acquired by the Operating
Partnership 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.
From March 5, 1996 through May 26, 1999, Suburban Propane GP, Inc. (the
"Former General Partner"), a wholly-owned indirect subsidiary of Millennium
Chemicals, Inc., ("Millennium"), served as the general partner of the
Partnership and Operating Partnership owning a 1% general partner interest in
the Partnership and a 1.0101% general partner interest in the Operating
Partnership. Millennium became a publicly traded company upon Hanson PLC's
spin-off of its chemical business, including its interests in the Partnership,
in October 1996. In addition, the Former General Partner owned a 24.4% limited
partner interest and a special limited partner interest in the Partnership. The
limited partner interest was evidenced by 7,163,750 Subordinated Units and the
special limited partner interest was evidenced by 220,000 Additional Partnership
Units ("APUs").
THE RECAPITALIZATION
On May 26, 1999, after receiving Unitholder approval, the Partnership
completed a recapitalization (the "Recapitalization"), pursuant to which, the
Partnership simplified its capital structure by, among other things, redeeming
all 7,163,750 outstanding Subordinated Units and all 220,000 outstanding APUs,
all of which were owned by the Former General Partner, for a total price of $69
million in cash. In connection with the Recapitalization, the Partnership's
Distribution Support Agreement with the Former General Partner was terminated
and replaced with a $21.6 million liquidity arrangement provided by the
Partnership under the Operating Partnership's Amended and Restated Credit
Agreement. Also, the quarterly distribution was increased to $.5125 per quarter
or $2.05 per year consisting of the existing Minimum Quarterly Distribution of
$.50 per Unit per quarter plus an additional $.0125 per Unit per quarter above
the Minimum Quarterly Distribution. Finally, the size of the Board of
Supervisors was reduced from seven to five members, with the three supervisors
elected by holders of Common Units representing a majority of the Board.
In addition, the Former General Partner sold its entire general partner
interests in the Partnership and the Operating Partnership, including its
incentive distribution rights in the Partnership ("IDRs"), to Suburban Energy
Services Group LLC, a new entity owned by senior management of the Partnership
(the "Successor General Partner"), for a total price of $6 million and the
Successor General Partner assumed the rights and duties of the Former General
Partner under the partnership agreements of the Partnership and the Operating
Partnership and was substituted as the new general partner of the Partnership
and the Operating Partnership. In connection with the Recapitalization and the
substitution of the Successor General Partner, the IDRs were amended to reduce
the Successor General Partner's right to receive distributions in excess of the
Minimum Quarterly Distribution and the Board of Supervisors was given the right
to convert the IDRs to Common Units after the fifth anniversary of the
Recapitalization. The Partnership Agreement and the Operating Partnership
Agreement were amended to permit and effect the Recapitalization and the
substitution of the Successor General Partner.
BUSINESS STRATEGY
Acquisitions during fiscal 1999 included one propane distributor and one
retail distributor of gas appliances, parts and related products for total
consideration of $4.3 million compared to five propane distributors acquired in
fiscal 1998 for total consideration of $6.0 million and five propane
distributors acquired during fiscal 1997 for total consideration of $1.7
million. Going forward, the Partnership intends to focus on extending or
consolidating its presence in strategically attractive markets primarily through
the acquisition of other propane distributors. At the same time, the Partnership
will continue to evaluate its existing operations to identify opportunities to
optimize its return on assets and selectively divest marginally operating
locations in slower growing markets.
In this regard, on November 8, 1999, the Partnership acquired from SCANA
Corporation the assets of SCANA Propane Gas, Inc., SCANA Propane Storage, Inc.,
SCANA Propane Supply, Inc., USA Cylinder Exchange, Inc., and C&T Pipeline, LLC
for $86.0 million plus working capital. SCANA Propane Gas, Inc. distributes
approximately 20 million gallons annually and services more than 40,000
customers in North and South Carolina. USA Cylinder Exchange, Inc., operates a
20-lb. propane cylinder refurbishing and refill center, selling to approximately
1,600 grocery and convenience stores. SCANA Propane Storage, Inc. owns a 60
million gallon storage cavern in Tirzah, South Carolina. C&T Pipeline, LLC owns
a 62 mile pipeline which connects the storage cavern to the Dixie Pipeline.
Then, on December 3, 1999, the Partnership sold 23 of its customer service
centers principally located in Georgia for $18.0 million plus working capital to
ProAm Southeast, Inc., a subsidiary of DQE, Inc.
Outside its core propane distribution business, the Partnership will seek
and develop retail and service business lines which can benefit from its
logistical skills, its national presence and its long experience in dealing with
residential consumers. To this end, the Partnership purchased Gas Connection,
Inc., a small company with six retail stores in and around Portland, Oregon,
which sells and installs gas grills, fireplaces, and related accessories and
supplies to both natural gas and propane users in February of 1999. During
fiscal 2000, the Partnership intends to add Gas Connection stores in the
Northwest and several Middle Atlantic states. The Partnership believes that Gas
Connection can serve as a solid platform on which to build a retail network that
will complement its core propane operations.
The Partnership also plans to continue to pursue internal growth of its
existing operations 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, natural gas
and fuel oil as an energy source, principally on the basis of price,
availability and portability.
Propane is more expensive than natural gas on an equivalent BTU basis in
locations served by natural gas, but serves as an alternative to natural gas in
rural and suburban areas where natural gas is unavailable or portability of
product is required. Historically, the expansion of natural gas into traditional
propane markets has been inhibited by the capital costs required to expand
pipeline and retail distribution systems. Although the extension of natural gas
pipelines tends to displace propane distribution in areas affected, the
Partnership believes that new opportunities for propane sales arise as more
geographically remote neighborhoods are developed. Propane is generally less
expensive to use than electricity for space heating, water heating, clothes
drying and cooking. Due to the current geographical diversity of the
Partnership's operations, fuel oil has not been a significant competitor. In
addition, propane and fuel oil compete to a lesser extent as a result of the
cost of converting from one to the other.
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 as of September 25, 1999. Based on industry statistics, the Partnership
believes that its retail sales volume constitutes approximately 5% 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 distributed propane through a nationwide retail
distribution network consisting of approximately 350 customer service centers in
over 40 states as of September 25, 1999. The Partnership's operations are
concentrated in the east and west coast regions of the United States. In fiscal
1999, the Partnership served more than 730,000 active customers. Approximately
two-thirds of the Partnership's retail propane volume has historically been 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 and stand alone retail centers, the Partnership
also sells, installs and services equipment related to its propane distribution
business, including heating and cooking appliances, hearth products and supplies
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 74.2% of the gallons sold by the Partnership in
fiscal 1999 were to retail customers: 28.2% to residential customers, 18.3% to
commercial customers, 11.0% to industrial customers (including 8.7% to engine
fuel customers), 5.0% to agricultural customers and 11.7% to other retail users.
The balance of approximately 25.8% were for risk management activities and
wholesale customers. Sales to residential customers in fiscal 1999 accounted for
approximately 52.2% 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 1999.
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 the newly acquired storage facility in
Tirzah, South Carolina), and coastal terminals to the Partnership's customer
service centers by a combination of common carriers, owner-operators and
railroad tank cars. (See Item 2 of this Report.)
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. Due to the low margin nature of the wholesale market
as compared to the retail market, the Partnership has reduced its emphasis on
wholesale marketing, and as such wholesale gallons during fiscal 1999 have
decreased.
PROPANE SUPPLY
The Partnership's propane supply is purchased from over 100 oil companies
and natural gas processors at more than 150 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 1999. Most of the propane purchased by the Partnership in fiscal
1999 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 25, 1999, Shell Oil
Company ("Shell") and Exxon Corporation ("Exxon") provided approximately 12% and
11%, 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 25, 1999. The
Partnership anticipates it will not renew its existing supply contract with
Exxon's Benicia, California refinery effective March 31, 2000. The Partnership
has identified alternative suppliers to replace the propane supply previously
acquired under this Exxon contract. See Item 7 of this Report for a discussion
of the Partnership's evaluation of its suppliers' readiness for Year 2000
compliance in the information services area.
The Partnership's product procurement and price risk management group seeks
to reduce the effect of price volatility on the Partnership's 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 forward and option contracts with various third
parties to purchase and sell product at fixed prices in the future. These
activities are monitored by management through enforcement of the Partnership's
Commodity Trading Policy. See Item 7A of this Report.
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.
In connection with the SCANA acquisition on November 8, 1999, the
Partnership further increased its storage capacity by approximately 60 million
gallons through the acquisition of a cavern in South Carolina. The majority of
the cavern's storage capacity is currently leased to third parties.
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; ENVIRONMENTAL AND SAFETY MATTERS
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.
Pursuant to the 1990 amendments to the Clean Air Act, the United States
Environmental Protection Agency ("EPA") required that risk management plans be
implemented at all locations storing over 10,000 pounds of propane. After
obtaining a stay of the deadline, the propane industry presented its position to
numerous legislators in Congress. On August 5, 1999, President Clinton signed
into law an amendment to the Clean Air Act, removing flammable substances,
including propane, from the list of substances regulated under the EPA's risk
management program when that substance is used as or held for sale as a fuel at
a retail facility. Based upon the amendment's definition of "retail facility"
the Partnership would only be required to comply with the risk management plan
requirement for those locations in which more than one-half of the income is
neither obtained from direct sales to end users nor at which more than one-half
of the fuel sold, by volume, is sold through a cylinder exchange program. The
Partnership anticipates that all of the implicated facilities will be in
compliance with the risk management plan requirement by or before the
aforementioned stay has been lifted.
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, including the recently enacted regulations regarding the
unloading of liquefied compressed gas cargo tank motor vehicles.
The Research and Special Programs Administration ("RSPA") of the U.S.
Department of Transportation had promulgated Final Rule HM-225 (49 CFR 171.5)
which intended to adopt temporary operating requirements for cargo tank motor
vehicles used to transport propane (the "Final Rule"). The Final Rule contained
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 unobstructed view requirement would have required either two
operators being in attendance during most customer deliveries or one attendant
remaining at a mid-point between the cargo tank vehicle and the customer tank, a
practice that the Partnership and the propane industry consider to be unsafe.
The Partnership and four other major propane marketers 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. In July 1998, RSPA
announced the establishment of an advisory committee for a negotiated rule
making regarding the matters addressed in the Final Rule. The negotiated rule
making resulted in the adoption of new regulations, acceptable to the
Partnership and the propane industry, regarding the unloading of liquefied
compressed gas cargo tank vehicles. The new regulations, which became effective
as of July 1, 1999, required the Partnership to modify the inspection and record
keeping procedures for the Partnership's cargo tank vehicles. A schedule of
compliance is set forth within the new regulations. The Partnership anticipates
that it will be in compliance with the pertinent regulations upon the respective
compliance dates. Based upon the adoption of the negotiated regulations, an
order dismissing the suit in the Western District of Missouri was filed by the
Court on July 23, 1999.
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 25, 1999 the Partnership had 3,179 full time employees, of
whom 317 were general and administrative (including fleet maintenance
personnel), 34 were transportation and product supply and 2,828 were customer
service center employees. Approximately 156 of such employees are represented by
8 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.
As of September 25, 1999, the Partnership owned approximately 68% of its
customer service center and satellite locations that it operated and leased 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.
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 25, 1999, the
Partnership had a fleet of approximately 6 transport truck tractors, of which 5
are owned by the Partnership, and 593 railroad tank cars, of which approximately
1% are owned by the Partnership. In addition, the Partnership utilizes
approximately 1,486 bobtail and rack trucks, of which approximately 66% are
owned by the Partnership and approximately 1,515 other delivery and service
vehicles, of which approximately 50% are owned by the Partnership. Vehicles that
are not owned by the Partnership are leased. As of September 25, 1999, the
Partnership owned approximately 917,000 customer storage tanks with typical
capacities of 100 to 500 gallons and approximately 98,000 portable cylinders
with typical capacities of 5 to 10 gallons.
On November 8, 1999, the Partnership acquired the assets of SCANA Propane
Gas. SCANA Propane Gas, Inc. owns twenty-two customer service centers, as well
as office buildings and warehouses, in the states of North and South Carolina.
SCANA Propane Gas, Inc. also owns 4 transport truck tractors, 24 cranes, 62
bobtail trucks, 98 other delivery and service vehicles and approximately 41,000
customer storage tanks with typical capacities of 100 to 500 gallons. SCANA
Propane Storage, Inc. owns and operates a 60 million gallon underground storage
cavern in Tirzah, South Carolina. USA Cylinder Exchange Inc. owns and operates
an automated cylinder refurbishing plant, 8 tractors and 13 delivery and service
vehicles. C&T Pipeline LLC owns and operates a 62 mile propane pipeline that
connects the underground storage cavern in Tirzah to the Dixie Pipeline.
On December 3, 1999, the Partnership sold 23 customer service centers
principally located in Georgia.
ITEM 3. LEGAL PROCEEDINGS.
LITIGATION
The Partnership's operations are subject to all operating hazards and
risks normally incidental to handling, storing, and delivering combustible
liquids such as propane. As a result, the Partnership has been, and is likely to
continue to be, a defendant in various legal proceedings and litigation arising
in the ordinary course of business. The Partnership is self-insured for general
and product, workers' compensation and automobile liabilities up to
predetermined amounts above which third party insurance applies. The Partnership
believes that the self-insured retentions and coverage it maintains are
reasonable and prudent. Although any litigation is inherently uncertain, based
on past experience, the information currently available to it, and the amount of
its self-insurance reserves for known and unasserted self-insurance claims
(which was approximately $23.1 million at September 25, 1999), the Partnership
does not believe that these pending or threatened litigation matters, or known
claims or known contingent claims, 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 25, 1999.
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. As of December 10, 1999, there were 1,060 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 Paid
----------------------- ----------------------
High Low
---- ---
1998 Fiscal Year
- ----------------
First Quarter $20.56 $15.38 $0.50
Second Quarter 20.00 17.50 0.50
Third Quarter 19.50 18.00 0.50
Fourth Quarter 20.00 17.56 0.50
1999 Fiscal Year
- ----------------
First Quarter $19.94 $17.13 $0.50
Second Quarter 20.13 18.00 0.50
Third Quarter 20.50 17.94 0.5125
Fourth Quarter 20.75 19.00 0.5125
2000 Fiscal Year
- ----------------
First Quarter
(through December 15, 1999) $20.63 $16.50 -
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 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
financial data 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. The dollar amounts in the
table below, except per Unit data, are in thousands.
PARTNERSHIP (a) PREDECESSOR COMPANY
---------------------------
MARCH 5, OCTOBER 1, YEAR
YEAR ENDED YEAR ENDED YEAR ENDED 1996 1995 ENDED
-------------------------------------- THROUGH THROUGH ----------
SEPT 25, SEPT 26, SEPT 27, SEPT 28, MARCH 4, SEPT 30,
1999 1998 1997 1996 1996 1995
---- ---- ---- ---- ---- ----
STATEMENT OF OPERATIONS DATA
Revenues ........................... $ 619,778 $ 667,287 $ 771,131 $ 323,947 $ 383,999 $ 633,620
Depreciation and
Amortization ....................... 34,906 36,531 37,307 21,046 14,816 34,055
Restructuring Charge ............... -- -- 6,911 2,340 -- --
Recapitalization Cost .............. 18,903 -- -- -- -- --
Income (Loss) Before Interest
Expense and Income Taxes ......... 53,272 68,814 47,763 (3,464) 61,796 55,544
Interest Expense, Net .............. 30,765 30,614 33,979 17,171 -- --
Provision for Income Taxes ......... 68 35 190 147 28,147 25,299
Net Income (Loss) .................. 22,439 38,165 13,594 (20,782) 33,649 30,245
Net Income (Loss) per Unit (b) ..... $ 0.83 $ 1.30 $ 0.46 $ (0.71) -- --
BALANCE SHEET DATA
(END OF PERIOD)
Current Assets ..................... $ 78,637 $ 132,781 $ 104,361 $ 120,692 $ 78,846
Total Assets ....................... 659,220 729,565 745,634 776,651 705,686
Current Liabilities ................ 103,006 91,550 96,701 101,826 69,872
Long-term Debt ..................... 427,634 427,897 427,970 428,229 --
Other Long-term liabilities ........ 60,194 62,318 79,724 81,917 77,579
Predecessor Equity ................. -- -- -- -- -- 558,235
Partners' Capital - General Partner 2,044 24,488 12,830 3,286 -- --
Partners' Capital - Limited Partners 66,342 123,312 128,409 161,393 -- --
STATEMENT OF CASH
FLOWS DATA
Cash Provided by
(Used in)
Operating Activities ............. $ 81,758 $ 70,073 $ 58,848 $ 62,961 $ (3,765) $ 53,717
Investing Activities ............. $ (12,241) $ 2,900 $ (20,709) $ (30,449) $ (21,965) $ (22,317)
Financing Activities ............. $(120,944) $ (32,490) $ (37,734) $ (13,786) $ 25,799 $ (31,562)
OTHER DATA
EBITDA (c) ......................... $ 88,178 $ 105,345 $ 85,070 $ 17,582 $ 76,612 $ 89,599
Capital Expenditures (d)
Maintenance and growth ............. $ 11,033 $ 12,617 $ 24,888 $ 16,089 $ 9,796 $ 21,359
Acquisitions ....................... $ 4,768 $ 4,041 $ 1,880 $ 15,357 $ 13,172 $ 5,817
Retail Propane
Gallons Sold .................... 524,276 529,796 540,799 257,029 309,871 527,269
Notes:
- ------
(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) Net income (loss) per Unit is computed by dividing the limited partners'
interest in net income (loss) by the number of weighted average Units
outstanding.
(c) EBITDA (earnings before interest, taxes, depreciation and amortization) is
defined as income (loss) before interest expense and income taxes 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 or superior to
generally accepted accounting principles, but provides additional
information for evaluating the Partnership's ability to pay the Minimum
Quarterly Distribution.
(d) The Partnership's capital expenditures fall generally into three
categories: (i) maintenance expenditures, which include expenditures for
repair and replacement of property, plant and equipment, (ii) growth
capital expenditures which include new propane tanks and other equipment to
facilitate expansion of the Partnership's customer base and operating
capacity; and (iii) 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 financial condition and
results of operations of the Partnership. The discussion should be read in
conjunction with the historical 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 sales of appliances and services. The Partnership believes it is the
third largest retail marketer of propane in the United States, serving more than
730,000 active residential, commercial, industrial and agricultural customers
from approximately 350 customer service centers in over 40 states. The
Partnership's annual retail propane sales volumes were approximately 524
million, 530 million and 541 million gallons during the fiscal years ended
September 25, 1999, September 26, 1998 and September 27, 1997, 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.
PRODUCT COSTS
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.
SEASONALITY
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.
WEATHER
Weather conditions have a significant impact on the demand for propane for
both heating and agricultural purposes. Many customers of the Partnership rely
heavily on propane as a heating fuel. Accordingly, the volume of propane sold is
directly affected by the severity of the winter weather which can vary
substantially from year to year.
SELECTED QUARTERLY FINANCIAL DATA
Due to the seasonality of the retail propane business, first and second
quarter revenues, gross profit and earnings are consistently greater than the
comparable third and fourth quarter results. The following presents the
Partnership's selected quarterly financial data for the last two fiscal years.
Fiscal 1999 (unaudited) (in thousands, except per Unit amounts)
First Quarter Second Quarter Third Quarter Fourth Quarter Fiscal 1999
------------- -------------- ------------- -------------- -----------
Revenues $ 161,216 $ 221,978 $ 121,905 $ 114,679 $ 619,778
Recapitalization Costs -- -- (18,903) -- (18,903)
Income (Loss) Before Interest
Expense and Income Taxes 23,963 54,777 (17,948) (7,520) 53,272
Net Income (Loss) 16,370 47,161 (25,293) (15,799) 22,439
Net Income (Loss) per Unit .56 1.61 (.93) (.70) .83
EBITDA 32,745 63,507 (9,259) 1,185 88,178
Retail Gallons Sold 137,603 195,045 103,893 87,735 524,276
Fiscal 1998 (unaudited) (in thousands, except per Unit amounts)
First Quarter Second Quarter Third Quarter Fourth Quarter Fiscal 1998
------------- -------------- ------------- -------------- -----------
Revenues $204,886 $230,429 $125,109 $106,863 $667,287
Income (Loss) Before Interest
Expense and Income Taxes 35,025 44,757 (2,925) (8,043) 68,814
Net Income (Loss) 26,901 37,011 (10,235) (15,512) 38,165
Net Income (Loss) per Unit .92 1.26 (.35) (.53) 1.30
EBITDA 44,317 53,930 6,154 944 105,345
Retail Gallons Sold 158,278 180,139 100,735 90,644 529,796
EBITDA (earnings before interest, taxes, depreciation and amortization) is
calculated as income (loss) before interest expense and income taxes 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 or superior to generally accepted accounting
principles, but provides additional information for evaluating the Partnership's
ability to pay the Minimum Quarterly Distribution. Because EBITDA excludes some,
but not all, items that affect net income and this measure may vary among
companies, the EBITDA data presented above may not be comparable to similarly
titled measures of other companies.
RESULTS OF OPERATIONS
FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998
- ---------------------------------------------
REVENUES. Revenues decreased $47.5 million or 7.1% to $619.8 million in
fiscal 1999 compared to $667.3 million in fiscal 1998. Revenues from retail
propane activities decreased $31.8 million or 6.1% to $491.6 million in fiscal
1999 compared to $523.4 million in fiscal 1998. This decrease is primarily
attributable to lower product costs which resulted in lower selling prices and,
to a lesser extent, a decrease in retail gallons sold.
Overall, higher nationwide inventories of propane, coupled with warmer than
normal temperatures during the winter of fiscal 1999, resulted in a significant
decrease in the cost of propane when compared to the winter of fiscal 1998.
Temperatures during fiscal 1999 were 8% warmer than normal and 1% warmer than
fiscal 1998, as reported by National Oceanic and Atmospheric Administration
("NOAA"). Temperatures during October through March of the fiscal 1999 heating
season were one of the warmest on record with temperatures being 9% warmer than
normal and 2% warmer than the prior year period.
Retail gallons sold decreased 1.0% or 5.5 million gallons to 524.3 million
gallons in fiscal 1999 compared to 529.8 million gallons in the prior year. The
decline in retail gallons sold is principally attributable to warmer
temperatures, principally during the winter heating season, in all areas of the
Partnership's operations.
Revenues from wholesale and risk management activities decreased $22.5
million or 29.9% to $52.7 million in fiscal 1999 compared to $75.2 million in
fiscal 1998. This decrease is attributed to lower product costs which resulted
in lower selling prices and to the Partnership's reduced emphasis on wholesale
marketing, due to the low margin nature of the wholesale market.
Other revenues increased 9.9% or $6.8 million to $75.5 million in fiscal
1999 compared to $68.7 million in fiscal 1998. The increase is attributable to
higher sales of appliances and related parts and an increase in
service/installation revenues associated with several retail growth initiatives.
OPERATING EXPENSES. Operating expenses remained consistent with fiscal 1999
amounting to $210.2 million compared to $210.4 million in fiscal 1998 as lower
payroll, benefits costs and vehicle fuel costs were offset by increased
operating expenses associated with several retail growth initiatives.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
decreased $0.8 million or 2.7% to $29.4 million in fiscal 1999 compared to $30.2
million in the prior year. Fiscal 1998 results reflect a $1.4 million write-off
of certain impaired information system assets and a $2.0 million charge related
to insurance claims for which insurance coverage was denied. Excluding these
non-recurring items, general and administrative expenses increased $2.6 million
or 9.7% in fiscal 1999, principally due to higher information system expenses
including costs incurred to address Y2K compliance and the absence of offsetting
dividend income of $0.8 million earned in the prior year on the sold investment
in the Dixie Pipeline Company.
RECAPITALIZATION COSTS. Results for fiscal 1999 reflect expenses of $18.9
million incurred in connection with the Partnership's recapitalization
transactions. Approximately $7.6 million of the recapitalization costs represent
amounts paid for financial advisory fees, proxy solicitation fees, legal,
accounting and tax service fees and $1.0 million paid to Millennium to extend
the scheduled closing date for the Recapitalization. The $7.6 million includes
approximately $0.3 million of expenses paid for purchase of the Former General
Partner's interests. Approximately $11.3 million of the recapitalization costs
reflect compensation expense recognized upon accelerated vesting of 673,165
issued and outstanding Restricted Units on the closing date of the
Recapitalization pursuant to the change of control provisions of the Restricted
Unit Plan. The Partnership also incurred approximately $1.8 million in fees and
expenses to amend its Senior Note Agreement. Such amount has been deferred and
is being amortized over the remaining term of the Senior Notes (approximately
11.5 years).
INCOME BEFORE INTEREST EXPENSE AND INCOME TAXES AND EBITDA. Results for the
fiscal year 1999 include $18.9 million of recapitalization costs. Results for
the fiscal year 1998 include a $5.1 million gain from the sale of an investment
in the Dixie Pipeline Co., a $1.8 million write-off of certain impaired assets
and a $2.0 million charge related to insurance claims for which insurance
coverage was denied. Excluding these one-time items from both periods, income
before interest expense and income taxes increased 6.9% or $4.7 million to $72.2
million compared to $67.5 million in the prior period. EBITDA, excluding the
one-time items from both periods, increased 2.9% or $3.0 million to $107.1
million compared to $104.1 million in the prior period.
The improvement in income before interest expense and income taxes and
EBITDA is primarily attributable to higher overall gross profit of $5.8 million,
partially offset by higher general and administrative expenses. The increase in
gross profit principally resulted from higher sales of appliances and related
parts and increased service/installation activities attributable to several
retail growth initiatives and an increase in gains realized on the Partnership's
product procurement and price risk management activities, including hedging
transactions. 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) but provides
additional information for evaluating the Partnership's ability to distribute
the Minimum Quarterly Distribution.
INTEREST EXPENSE. Net interest expense remained comparable at $30.8 million
in fiscal 1999 compared with $30.6 million in the prior year.
FISCAL YEAR 1998 COMPARED TO FISCAL YEAR 1997
- ---------------------------------------------
REVENUES. Revenues decreased $103.8 million or 13.5% to $667.3 million in
fiscal 1998 compared to $771.1 million in fiscal 1997. Revenues from retail
activities decreased $77.1 million or 12.8% to $523.4 million in fiscal 1998
compared to $600.5 million in fiscal 1997. This decrease is primarily
attributable to lower product costs which resulted in lower selling prices and,
to a lesser extent, a decrease in retail gallons sold.
Overall, higher nationwide inventories of propane, coupled with warmer than
normal temperatures during the winter of fiscal 1998, resulted in a significant
decrease in the cost of propane when compared to the winter of fiscal 1997.
Temperatures during fiscal 1998 were 4% warmer than normal and 4% warmer than
fiscal 1997, as reported by the NOAA, which is attributable to the El Nino
weather phenomenon. Temperatures during January and February of the fiscal 1998
heating season were the warmest on record according to the NOAA, which began
keeping records over 100 years ago.
Retail gallons sold decreased 2.0% or 11.0 million gallons to 529.8 million
gallons in fiscal 1998 compared to 540.8 million gallons in the prior year. The
decline in retail gallons sold is principally attributable to warmer
temperatures, principally during the winter heating season, in all areas of the
Partnership's operations.
Revenues from wholesale and risk management activities decreased $25.0
million or 25.0% to $75.2 million in fiscal 1998 compared to $100.2 million in
fiscal 1997. This decrease is attributed to the Partnership's reduced emphasis
on wholesale marketing, due to the low margin nature of the wholesale market.
The decrease in wholesale revenues was partially offset by the increase in the
Partnership's product procurement and price risk management activities which
began in the fourth quarter of fiscal 1997. Revenues from risk management
activities increased $5.6 million to $13.8 million in 1998 compared to $8.2
million in fiscal 1997. The gallons sold for risk management purposes in fiscal
1998 and 1997 were 40.8 million and 17.0 million, respectively.
OPERATING EXPENSES. Operating expenses decreased $6.9 million or 3.3% to
$202.9 million in fiscal year 1998 compared to $209.8 million in the prior year.
The decrease is primarily attributable to the continued favorable impact of
restructuring activities undertaken during 1997, principally lower payroll and
benefit costs.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $5.9 million or 24.3% to $30.2 million in fiscal 1998 compared to
$24.3 million in the prior year. The increase is primarily attributable to a
$1.4 million write-off of certain impaired information systems assets, an
increase in professional consulting services, primarily in the information
systems area, and a $2.0 million charge related to insurance claims for which
insurance coverage was denied. The $1.4 million write-off of impaired assets
principally represents software and implementation costs incurred under a
project to replace the Partnership's retail/sales system. The project was
aborted when the Partnership's management determined that the software did not
have the functionality and flexibility originally represented by the software
vendor. As such, the Partnership never installed the new software and is
continuing to use its existing retail/sales system. The Partnership is currently
evaluating alternatives to replace the retail/sales system. The insurance claim
resulted from the collapse of the Partnership's underground propane storage
cavern and associated fire that occurred in Hainesville, Texas in November 1995.
Third parties who owned interests in nearby oil and gas wells sued the
Partnership, Millennium, and other parties and claimed damage to the wells
resulting from the collapse of the underground cavern and alleged brine water
migration. The Partnership's insurance carrier denied coverage based upon the
pollution exclusion endorsement of its policy. The Partnership settled this
claim in December 1998 for $1.55 million, $0.3 million of which was paid by
Millennium.
INCOME BEFORE INTEREST EXPENSE AND INCOME TAXES AND EBITDA. Results for the
fiscal year 1998 include a $5.1 million gain from the sale of an investment in
the Dixie Pipeline Co. and a $1.8 million write-off of certain impaired assets.
Results for the prior year period include a restructuring charge of $6.9
million. Excluding these one-time items from both periods, income before
interest expense and income taxes increased 19.7% or $10.8 million to $65.5
million compared to $54.7 million in the prior period. EBITDA, excluding the
one-time items from both periods, increased 10.9% or $10.0 million to $102.0
million compared to $92.0 million in the prior period.
The improvement in income before interest expense and income taxes and
EBITDA is primarily attributable to higher overall gross profit and lower
operating expenses partially offset by higher general and administrative
expenses. The increase in gross profit principally resulted from overall higher
average propane unit margins and the expansion of the Partnership's product
procurement and price risk management activities, including hedging
transactions, partially offset by reduced volume of retail propane gallons sold.
The overall higher average propane unit margins were attributable to lower
product costs, resulting from a less volatile propane market during 1998 and
more favorable purchasing contracts which were not fully reflected in lower
retail selling prices. 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) but
provides additional information for evaluating the Partnership's ability to
distribute the Minimum Quarterly Distribution.
INTEREST EXPENSE. Net interest expense decreased $3.4 million to $30.6
million in fiscal 1998 compared with $34.0 million in the prior year. The
decrease is attributable to higher interest income on significantly increased
cash investments in fiscal 1998 resulting from higher net income, proceeds from
the sale of the Partnership's investment in the Dixie Pipeline Co. and, to a
lesser extent, improved working capital management and lower product costs.
RISK MANAGEMENT
The Partnership engages in hedging transactions to reduce the effect of
price volatility on its product costs and to help ensure the availability of
propane during periods of short supply. The Partnership is currently a party to
propane futures contracts on the New York Mercantile Exchange and enters into
forward and option agreements to purchase and sell propane at fixed prices in
the future. These activities are monitored by management through enforcement of
the Partnership's Commodity Trading Policy. Hedging does not always result in
increased product margins and the Partnership does not consider hedging
activities to be material to operations or liquidity for the years ended
September 25, 1999 and September 26, 1998. For additional information, see Item
7A of this Report.
LIQUIDITY AND CAPITAL RESOURCES
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. In fiscal 1999,
net cash provided by operating activities increased $11.7 million to $81.8
million compared to $70.1 million in fiscal 1998. The increase is primarily due
to higher net income of $8.3 million after excluding the non-recurring
Recapitalization costs of $18.9 million in fiscal 1999 and the $5.1 million gain
on the sale of an investment in fiscal 1998, and favorable changes in operating
assets and liabilities of $4.2 million, partially offset by lower depreciation
and amortization of $1.6 million. Changes in operating assets and liabilities
include an increase in accounts payable of $15.2 million primarily attributable
to changes in the timing and payment terms on propane purchases partially offset
by decreases in accounts receivable of $5.3 million, inventories of $1.7 million
and prepaid expenses of $2.3 million.
Net cash used in investing activities was $12.2 million in fiscal 1999,
reflecting $11.0 million in capital expenditures (including $3.2 million for
maintenance expenditures and $7.8 million to support the growth of operations)
and $4.8 million of payments for acquisitions, offset by net proceeds of $3.6
million from the sale of property, plant and equipment. Net cash provided by
investing activities was $2.9 million in fiscal 1998, consisting of capital
expenditures of $12.6 million (including $6.0 million for maintenance
expenditures and $6.6 million to support the growth of operations) and
acquisition payments of $4.0 million, offset by proceeds from the sale of
property and equipment of $6.5 million and $13.1 million from the sale of the
investment in the Dixie Pipeline Co.
Net cash used in financing activities for fiscal year 1999 was $120.9
million, reflecting $69.0 million paid to the Former General Partner to redeem
all outstanding Subordinated Units and APUs, $9.4 million of Recapitalization
costs, $2.1 million of net working capital borrowings under the Partnership's
Bank Credit Facilities and $44.6 million in Partnership distributions.
In fiscal 1998, net cash provided by operating activities increased $11.3
million to $70.1 million compared to $58.8 million in fiscal 1997. The increase
is primarily due to an increase in net income, exclusive of non-cash items, of
$11.2 million. Changes in operating assets and liabilities reflect decreases in
accounts receivable of $2.3 million, inventories of $6.3 million and accounts
payable of $3.5 million principally due to the lower cost of propane. These
decreases were partially offset by an increase in accrued employment and benefit
costs of $6.6 million reflecting higher performance-related payroll accruals and
an increase in deferred credits and other non-current liabilities of $3.0
million.
Net cash used in financing activities for fiscal year 1998 was $32.5
million, reflecting $44.2 million of Partnership distributions and $0.3 million
in debt repayments partially offset by $12.0 million in APU contributions
received from the Former General Partner.
For fiscal year 1997, net cash provided by operating activities decreased
$0.3 million or 0.6% to $58.8 million compared to $59.2 million for fiscal year
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 $4.9 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 financing activities for fiscal year 1997 was $37.7
million, reflecting $47.4 million of Partnership distributions and $0.3 million
in debt repayments partially offset by $10.0 million in APU contributions from
the Former General Partner.
In March 1996, the Operating Partnership issued $425.0 million aggregate
principal amount of Senior Notes with an interest rate of 7.54%. The Senior
Notes mature June 30, 2011. The Senior Note Agreement requires that the
principal be paid in equal annual payments of $42.5 million starting June 30,
2002.
As of September 25, 1999 and through November 8, 1999, the Partnership had
available a $25.0 million acquisition facility and a $75.0 million working
capital facility. Borrowings under the Bank Credit Facilities bore 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 .25%
to .50% based upon certain financial tests was payable quarterly whether or not
borrowings occurred. The Bank Credit Facilities, which were due to expire on
March 31, 2001, were unsecured on an equal and ratable basis with the Operating
Partnership's obligations under the Senior Notes. Borrowings under the Bank
Credit Facilities were $2.8 million and $0 as of September 25, 1999 and
September 26, 1998, respectively.
The Senior Note Agreement contains and the Bank Credit Facilities contained
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. The
Operating Partnership was in compliance with all covenants and terms as of
September 25, 1999.
In connection with the purchase of assets from SCANA on November 8, 1999
(See Note 14 - Subsequent Events), the Partnership replaced the Bank Credit
Facilities with a new $175 million Revolving Credit Agreement with a syndicate
of banks led by First Union National Bank as Administrative Agent. The Revolving
Credit Agreement consists of a $100.0 million acquisition facility and a $75.0
million working capital facility which expire on March 31, 2001. The Revolving
Credit Agreement provides for substantially the same borrowing terms, interest
rates, covenants and conditions as the Bank Credit Facilities.
The Revolving Credit Agreement provides the Partnership, at the
Partnership's option, the right to extend the expiration date from March 31,
2001 to December 31, 2001 provided that the maximum ratio of consolidated total
indebtedness to EBITDA (as defined in the Revolving Credit Agreement) will
decrease from 5.10 to 1.00 to 4.75 to 1.00 during the nine month extension
period.
The Partnership borrowed $97.0 million under the Revolving Credit
Agreement's acquisition facility to fund the SCANA acquisition consisting of
$86.0 million for the SCANA assets, $8.6 in acquired working capital and $2.4
million in related bank fees.
On December 3, 1999, the Partnership sold twenty-three customer service
centers located principally in Georgia for $18.0 million plus working capital.
The Partnership has utilized the proceeds of this sale to reduce amounts
outstanding under the Revolving Credit Agreement.
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 of $.50 per Unit to its Common Unitholders for the first and
second fiscal quarters of fiscal 1999 and a distribution of $.5125 per Unit for
the third and fourth fiscal quarters of fiscal 1999 consisting of $.50 in
Minimum Quarterly Distribution and an additional distribution of $.0125 per
Common Unit.
The Partnership's anticipated cash requirements for fiscal 2000 include
maintenance and growth capital expenditures of approximately $16.0 million for
the repair and replacement of property, plant and equipment and approximately
$41.1 million of interest payments on the Senior Notes and the Revolving Credit
Agreement. In addition, the Partnership intends to pay approximately $46.5
million in Minimum Quarterly Distributions and additional distributions to its
Common Unitholders and in distributions to its General Partner during fiscal
2000. Based on its current cash position, availability under the Revolving
Credit Agreement and expected cash from operating activities, the Partnership
expects to have sufficient funds to meet these obligations for fiscal 2000, as
well as all of its current obligations and working capital needs during fiscal
2000.
READINESS FOR YEAR 2000
The following disclosure is being made pursuant to the Year 2000 Readiness
and Disclosure Act of 1998.
Many information technology ("IT") and non-information technology
("non-IT") systems in use throughout the world today may not be able to properly
interpret date-related data from the year 1999 into the year 2000 (the "Y2K"
issue). As a result, the Y2K issue could have adverse consequences upon the
operations and information processing of many companies, including the
Partnership.
In the second half of 1997, the Partnership began to identify the Y2K
exposure of its IT systems by focusing upon those systems and applications it
considered critical to its ability to operate its business, supply propane to
its customers, and accurately account for those services. The critical systems
identified were the retail/sales, the human resources/payroll and the general
ledger/financial accounting systems. Based upon the reasonable assurances of the
software developers and vendors, the Partnership believes that it has replaced
the human resources/payroll and the general ledger/financial accounting systems
with Y2K compliant versions. In addition, the Partnership has, through the
services of a third party vendor, completed the remediation of its retail/sales
system, as well as the majority of the programs supporting this system.
The Partnership has also developed and implemented a comprehensive Y2K
project plan to identify and address both its non-critical IT and non-IT systems
that could potentially be impacted by Y2K. In conjunction with this plan and in
an effort to improve its business efficiency, the Partnership made the decision
to replace all its computer hardware and PC-based computer software, as well as
to migrate the majority of its network-based software to a server environment.
According to the reasonable representations of the manufacturers, software
developers and vendors, all of the newly purchased IT hardware and PC software
are functionally Y2K compliant.
The Partnership has assessed the non-IT systems utilized by its field
locations to determine the Y2K compliance of those systems. With limited
exceptions which have been addressed, the safety related devices at the
Partnership's field locations do not incorporate electronic components and, as
such, do not require Y2K remediation. The Partnership does not believe that the
failure of any of its non-IT systems at any field location would have a material
adverse impact upon it.
As of December 15, 1999, the Partnership has incurred approximately $1.3
million to address its Y2K issues. This figure does not include the amounts
spent to upgrade and replace computer hardware and PC-based software. The
Partnership does not view the foregoing costs as having a material impact upon
its overall financial position and has not delayed or eliminated any other
scheduled computer upgrades or replacements due to the Y2K compliance project.
The Partnership has completed the testing, as well as any required
remediation, of all its critical IT systems. In addition to testing the
individual systems, the Partnership has conducted an overall IT system Y2K
compliance test which was successful. During the second calendar quarter of
1999, the Partnership undertook a Business Risk Impact Analysis of its Y2K
exposure. Based upon the results of this analysis, the Partnership determined
that there was no need for a formal contingency plan due to the availability of
manual processes and procedures in response to a Y2K event.
While propane itself is not date-dependent, the supply, transportation and
consumption of propane is dependent upon third parties, beyond the control of
the Partnership, which may have systems potentially impacted by the Y2K issue.
The Partnership has contacted the 344 vendors/suppliers identified as being
significant to its business and to date has received 301 written responses
regarding Y2K from these parties. Within the group of significant
vendors/suppliers, 78 firms have been identified as critical to the
Partnership's business and all have responded in writing to the Partnership's
requests regarding Y2K. The responses received by the Partnership typically
outline Y2K compliance programs in effect at these firms and disclose
anticipated compliance dates ranging from the first to the fourth calendar
quarters of 1999. No vendor/supplier has, to date, indicated that it will not be
Y2K compliant by the fourth quarter of 1999. The Partnership has determined that
vendors/suppliers that have not provided a written response are not critical to
its business process and alternate vendors/suppliers have been identified. The
Partnership believes that by obtaining these responses, it has been able to
minimize any potential business interruption arising out of Y2K's impact upon
these vendors/suppliers. Further, although the Y2K failure of any one customer
will not have a material adverse effect upon the Partnership, if a significant
percentage of either its customers and/or vendors/suppliers fail in achieving
Y2K compliance, the Y2K issue may have a material adverse impact upon the
Partnership's operations.
Although the Partnership currently believes that its internal mission
critical IT and non-IT systems are Y2K compliant, it has taken steps to identify
and mitigate Y2K compliance issues with its vendors/suppliers and customers and
has adopted a Y2K contingency plan, the failure of a mission critical IT or
non-IT system or the combined failure of vendors/suppliers and/or customers to
achieve Y2K compliance could have a material adverse impact on the Partnership's
operations and financial condition.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of September 25, 1999, the Partnership was party to propane forward and
option contracts with various third parties and futures traded on the New York
Mercantile Exchange ("NYMEX"). Forward and future contracts provide that the
Partnership sell or acquire propane at a fixed price at fixed future dates. An
option contract allows, but does not require its holder to buy or sell propane
at a specified price during a specified time period; the writer of an option
contract must fulfill the obligation of the option contract, should the holder
choose to exercise the option. At expiration, the contracts are settled by the
delivery of propane to the respective party or are settled by the payment of a
net amount equal to the difference between the then current price of propane and
the fixed contract price. The contracts are entered into in anticipation of
market movements and to manage and hedge exposure to fluctuating propane prices
as well as to help ensure the availability of propane during periods of high
demand.
Market risks associated with the trading of futures, options and forward
contracts are monitored daily for compliance with the Partnership's trading
policy which includes volume limits for open positions. Open inventory positions
are reviewed and managed daily as to exposures to changing market prices.
MARKET RISK
The Partnership is subject to commodity price risk to the extent that
propane market prices deviate from fixed contract settlement amounts. Futures
contracts traded with brokers of the NYMEX require daily cash settlements in
margin accounts. Forward and option contracts are generally settled at the
expiration of the contract term.
CREDIT RISK
Futures contracts are guaranteed by the NYMEX and as a result have minimal
credit risk. The Partnership is subject to credit risk with forward and option
contracts to the extent the counterparties do not perform. The Partnership
evaluates the financial condition of each counterparty with which it conducts
business and establishes credit limits to reduce exposure to credit risk of
non-performance.
SENSITIVITY ANALYSIS
In an effort to estimate the Partnership's exposure to unfavorable market
price changes in propane related to its open inventory positions, the
Partnership developed a model which incorporated the following data and
assumptions:
A. The actual fixed price contract settlement amounts were utilized for
each of the future periods.
B. The estimated future market prices were derived from the New York
Mercantile Exchange for traded propane futures for each of the future periods as
of September 25, 1999.
C. The market prices determined in B above were adjusted adversely by a
hypothetical 10% change in the future periods and compared to the fixed contract
settlement amounts in A above to project the additional loss in earnings which
would be recognized for the respective scenario.
Based on the sensitivity analysis described above, the hypothetical 10%
adverse change in market prices for each of the future months for which a
future, forward and/or option contract exists indicate potential losses in
future earnings of $0.7 million, as of September 25, 1999.
The above hypothetical change does not reflect the worst case scenario.
Actual results may be significantly different depending on market conditions and
the composition of the open position portfolio.
As of September 25, 1999, the Partnership's open position portfolio
reflected a net long position (purchase) aggregating $17.2 million.
As of November 30, 1999, the posted price of propane at Mont Belvieu, Texas
(a major storage point) was 41 cents per gallon as compared to 44 cents per
gallon at September 25, 1999, representing a 7% decline. Such decline is
attributable to factors including warmer weather patterns, high national propane
inventory levels and decreases in the market price of crude oil.
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 included
herein. 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 and two Appointed Supervisors serve on the Board
of Supervisors pursuant to the terms of the Partnership Agreement, as amended.
The Appointed Supervisors are appointed by the Successor General Partner.
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 15, 1999. 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........... 41 President and Chief Executive Officer;
Member of the Board of Supervisors
(Appointed Supervisor)
Michael J. Dunn, Jr......... 50 Senior Vice President -- Member of the Board
of Supervisors (Appointed Supervisor)
David R. Eastin............. 41 Chief Operating Officer
Anthony M. Simonowicz....... 49 Vice President and Chief Financial Officer
Michael M. Keating.......... 46 Vice President -- Human Resources and
Administration
Edward J. Grabowiecki...... 37 Vice President, Controller and Chief
Accounting Officer
Jeffrey S. Jolly............ 47 Vice President and Chief Information Officer
Robert M. Plante............ 51 Vice President and Treasurer
Janice G. Meola............. 33 General Counsel and Secretary
John Hoyt Stookey........... 69 Member of the Board of Supervisors
(Chairman and Elected Supervisor)
Harold R. Logan, Jr......... 55 Member of the Board of Supervisors
(Elected Supervisor)
Dudley C. Mecum............. 64 Member of the Board of Supervisors
(Elected Supervisor)
Mark J. Anton............... 73 Supervisor Emeritus
Mr. Alexander serves as President and Chief Executive Officer of the
Partnership and as an Appointed Supervisor of the Board of Supervisors. 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.
Alexander also has served as the Chairman of the Board of Managers of Suburban
Energy Services Group LLC since May 1999. He is also a director-at-large of the
National Propane Gas Association and a member of its Executive Committee. He is
President of the Coalition for Competition in Rural Markets and Chairman of
Research and Development of the Advisory Committee for PERC.
Mr. Dunn serves as Senior Vice President and as an Appointed Supervisor of
the Partnership. Mr. Dunn was Vice President -- Procurement and Logistics of the
Partnership from March 1997 until June 1998. Prior to joining the Partnership,
Mr. Dunn was Vice President of Commodity Trading for Goldman Sachs & Company,
New York, NY since 1981. Mr. Dunn also has served on the Board of Managers of
Suburban Energy Services Group LLC since May 1999.
Mr. Eastin serves as the Chief Operating Officer of the Partnership. Prior
to joining the Partnership in May 1999, Mr. Eastin was employed by Star Gas
Propane LP since 1992 holding the positions of Vice President, Operations,
Director of Eastern Operations and Regional Manager. From 1980 to 1992, Mr.
Eastin served as Area Manager and District Manager at Ferrellgas Partners, L.P.
and its predecessor company, Buckeye Gas Products Company.
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. Simonowicz has served on the Board of Managers of Suburban Energy
Services LLC since July 1999.
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. Grabowiecki serves as Vice President, Controller and Chief Accounting
Officer of the Partnership. Mr. Grabowiecki served as Director of Accounting
Services of the Partnership from January 1996 to September 1996. Prior to
joining the Partnership, Mr. Grabowiecki was a regional controller for Discovery
Zone, Inc. from June 1993 to January 1996. Mr. Grabowiecki held several
positions at Ernst & Young from 1984 to 1993, including Senior Manager from 1992
to 1993.
Mr. Jolly serves as Vice President and Chief Information Officer of the
Partnership. He served as Chief Information Officer from May 1999 to the
present. He has served as Vice President Information Services since July 1997.
Mr. Jolly was employed as Vice President Information Systems at The Wood Company
from 1993 to 1997. From 1989 to 1993, he was employed by Johanna Dairies, Inc.
and Alpo Pet Foods Inc. for four and one years, respectively.
Mr. Plante serves as Vice President and Treasurer of the Partnership. He
has served as Vice President since October 1999 and as Treasurer since March
1996. Mr. Plante was Director of Financial Services from 1993 to 1996 and held
various other management positions with the organization since 1977.
Ms. Meola serves as General Counsel and Secretary of the Partnership. She
served as Counsel from July 1998 to May 1999. She was Associate Counsel from
September 1996 to July 1998. Prior to joining the Partnership, Ms. Meola was
employed as Environmental Counsel for the CNA Insurance Companies and its
predecessor, Continental Insurance Company, from 1994 to 1996. From 1992 to
1994, she was employed by Bumgardner, Hardin & Ellis as a litigation associate.
She served as a judicial clerk to the Honorable Arthur N. D'Italia, A.J.S.C.,
during the 1991 to 1992 court term.
Mr. Stookey has served as an Elected Supervisor and Chairman of the Board
of Supervisors of the Partnership since March 5, 1996. He served as 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 and ACX
Technologies, Inc.
Mr. Logan has served as an Elected Supervisor of the Partnership since
March 5, 1996. Mr. Logan has served as Executive Vice President -- Finance,
Treasurer and a Director of TransMontaigne Inc. since 1995. TransMontaigne Inc.
was formed to provide logistical services, i.e., pipeline, terminaling and
marketing to producers and end users of refined petroleum products. 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, from 1987 until 1995. Mr. Logan is also a director of Santa Fe
Snyder Corporation and Union Bankshares Ltd.
Mr. Mecum has served as an Elected Supervisor since June 1996. Mr. Mecum
has been a managing director of Capricorn Holdings, LLC (a sponsor of and
investor in leveraged buyouts) since 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. Mr. Mecum is also a director of Lyondell, Dyncorp., Vicorp
Restaurants, Inc., CITIGROUP, Travelers Property Casualty Corporation and CCC
Information Systems Inc.
Mr. Anton has served as Supervisor Emeritus of the Board of Supervisors of
the Partnership since January 1999. He is a former President, Chief Executive
Officer and Chairman of the Board of Directors of Suburban Propane Gas
Corporation and a former Executive Vice President of Quantum.
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Partnership's directors and executive officers and persons who own
more than ten percent of the Partnership's Common Units, to file with the
Securities and Exchange Commission (the "SEC") initial reports of ownership and
reports of changes in ownership of Common Units. Officers, directors and greater
than ten percent Unitholders are required by SEC regulations to furnish the
Partnership with copies of all Section 16(a) forms they file. To the
Partnership's knowledge, based solely on a review of the copies of such reports
furnished to the Partnership and representations that no other reports were
required, during the fiscal year ending September 25, 1999, all of the Section
16(a) filing requirements applicable to its officers, directors and greater than
ten percent beneficial owners were complied with except that reports for the
following supervisors and executive officers were not filed in a timely manner
in the years indicated: Mr. Stookey: one required Form 5 reporting one
transaction and one required Form 4 reporting one transaction in 1996 and 1999,
respectively; Mr. Logan: one required Form 5 reporting one transaction and one
required Form 4 reporting one transaction in 1996 and 1999, respectively; Mr.
Mecum: one required Form 4 reporting one transaction in 1999; Mr. Alexander: one
required Form 5 reporting one transaction, one required Form 5 reporting two
transactions, and one required Form 4 reporting three transactions in 1996,
1997, and 1999, respectively; Mr. Dunn: one required Form 4 reporting two
transactions in 1999; Mr. Grabowiecki: one required Form 5 reporting one
transaction and one required Form 4 reporting three transactions in 1997 and
1999, respectively; Mr. Keating: one required Form 5 reporting two transactions
and one required Form 4 reporting two transactions in 1997 and 1999,
respectively; Ms. Meola: one required Form 3 and Form 4 reporting one
transaction in 1999; Mr. Plante: one required Form 3, one required Form 5
reporting three transactions and one required Form 4 reporting four transactions
in 1996, 1997 and 1999, respectively; Mr. Simonowicz: one required Form 5
reporting one transaction, one required Form 5 reporting two transactions, and
one required Form 4 reporting two transactions in 1996, 1997, and 1999
respectively; and Mr. Anton: one required Form 3 in 1999. All Section 16(a)
forms referred to above have been filed as of the date of this Report.
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 for services rendered to the
Partnership during each of the last three fiscal years.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------- --------------------------
OTHER ALL
ANNUAL RESTRICTED OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS(1)($) COMPENSATION($) $ UNITS(2)(#) COMPENSATION(3)
- --------------------------- ---- ---------- ----------- --------------- ------------- ----------- ---------------
Mark A. Alexander 1999 400,000 400,000 - - - 95,000
President and Chief Executive Officer 1998 381,250 381,528 - - - 64,275
1997 375,000 100,000 - 1,953,000 97,561 4,500
Michael J. Dunn, Jr. 1999 225,000 191,250 - - - 48,024
Sr. Vice President 1998 178,000 153,177 - - - 31,561
1997 150,000 30,038 - 900,000 48,780 -
Anthony M. Simonowicz 1999 165,000 107,250 - - - 28,619
Vice President and Chief Financial 1998 154,000 100,000 - - - 20,337
Officer 1997 138,000 24,000 - 539,000 29,268 4,140
Jeffrey S. Jolly 1999 145,000 72,500 - 96,000 5,366 20,213
Vice President and Chief Information 1998 137,500 67,500 - 289,000 14,146 14,655
Officer 1997 33,750 - - - - -
Michael M. Keating 1999 140,000 70,000 - - - 19,837
Vice President, Human Resources and 1998 135,000 67,500 - - - 14,145
Administration 1997 130,000 16,000 - 594,000 29,268 4,050
(1) Bonuses are reported for the year earned, regardless of the year paid.
(2) The aggregate dollar value of Restricted Units was computed by multiplying
the number of Restricted Units granted by the closing market price on the date
of grant. These Restricted Units would have vested automatically upon the
Recapitalization under a "change of control" provision contained in the
Partnership's 1996 Restricted Unit Plan. Each executive officer, however, agreed
to surrender all of his Restricted Units, prior to their vesting upon the
Recapitalization, in exchange for an equal number of Common Units of the
Partnership. These Common Units were deposited into the Partnership's Benefits
Protection Trust (the "Benefits Protection Trust"), and are being held in such
trust and will be distributed to each executive in accordance with the terms of
the new compensation deferral plan of the Partnership and the Operating
Partnership described below. The number of Common Units held in the Benefits
Protection Trust at September 25, 1999 and the aggregate value thereof
calculated at a per Unit price of $19.88, the closing price of a Common Unit on
September 24, 1999 as reported on the New York Stock Exchange were 243,902
($4,848,772) for Mr. Alexander, 48,780 ($969,746) for Mr. Dunn, 48,780
($969,746) for Mr. Simonowicz, 19,512 ($387,899) for Mr. Jolly and 29,268
($581,848) for Mr. Keating. Quarterly distributions on the Common Units held in
the Benefits Protection Trust will be deposited into the trust and deferred by
each executive until the date the GP Loan (as hereinafter defined) is repaid in
full or the seventh anniversary of the Recapitalization closing, whichever date
the executive has chosen, but subject to the earlier distribution and forfeiture
provisions of the compensation deferral plan as described below.
(3) These amounts include the following:
a. Matching contributions under the Suburban Retirement Savings and
Investment Plan for Messrs. Alexander, Dunn, Simonowicz, Jolly and Keating.
b. Amounts awarded under Suburban Propane's 1996 Long-Term Incentive
Program.
1999 DEFERRAL PLAN
Under the terms of the Partnership's 1996 Restricted Unit Plan, the
substitution of the Successor General Partner as the general partner of the
Partnership resulted in a "change of control" that would have caused all
unvested Restricted Units to automatically vest. However, all of the executives
and key employees of the Partnership who became members of the Successor General
Partner and owned Restricted Units agreed to surrender such Restricted Units,
prior to vesting, in exchange for the right to participate in the Partnership's
Compensation Deferral Plan (the "Deferral Plan"). The Partnership deposited the
Common Units issued in exchange for Restricted Units into the Partnership's
Benefit Protection Trust, which was structured as a "rabbi" trust within the
meaning of the Internal Revenue Code of 1954, as amended. All cash distributions
made by the Partnership on Common Units held in the Benefits Protection Trust
are deposited into the Benefits Protection Trust.
Pursuant to the Deferral Plan, the members of the General Partner defer
receipt of their Common Units and related distributions until the date the
Successor General Partner's $6.0 million loan from Mellon Bank ("Mellon") used
to finance the acquisition of the Partnership's general partnership interests
from the Former General Partner (the "GP Loan") is repaid in full or the seventh
anniversary of the closing of the Recapitalization, whichever date the deferring
party may choose, but subject to the earlier distribution and forfeiture
provisions of the Deferral Plan. The members of the Successor General Partner
also defer receipt of $930,000 per year of quarterly distributions on deferred
Common Units to support the Partnership's Minimum Quarterly Distribution through
the fiscal quarter ending March 31, 2001. In addition, if the Operating
Partnership elects or is required to purchase the GP Loan from Mellon, the terms
of the Deferral Plan provide that all of the members' deferred Common Units may,
at the Partnership's or the Operating Partnership's discretion, be forfeited and
cancelled (and all of the related distributions may also be forfeited),
regardless of the amount paid by the Operating Partnership to purchase the GP
Loan. Notwithstanding the foregoing, if a "change of control" of the Partnership
occurs (as defined in the Deferral Plan), all of the deferred Common Units (and
related distributions) held in the trust automatically become distributable to
the members of the Successor General Partner. See "Certain Relationships and
Related Transactions".
RETIREMENT BENEFITS
The following table sets forth the annual benefits upon retirement at age
65 in 1999, without regard to statutory maximums, for various combinations of
final average earnings and lengths of service which may be payable to Messrs.
Alexander, Dunn, Simonowicz, Jolly and Keating 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, Dunn and Simonowicz, have 3
years, 2 years, 10 years, respectively, under both plans. Messrs. Jolly and
Keating have 2 years and 14 years, respectively, under the Pension Plan for
eligible employees of Suburban Propane, L.P. and subsidiaries.
PENSION PLAN
ANNUAL BENEFIT FOR YEARS OF CREDITED SERVICE SHOWN (1),(2),(3),(4)
Average
Earnings 5 Yrs. 10 Yrs. 15 Yrs. 20 Yrs. 25 Yrs. 30 Yrs. 35 Yrs.
- -------- ------ ------- ------- ------- ------- ------- -------
$100,000 8,027 16,054 24,080 32,107 40,134 48,161 56,188
$200,000 16,777 33,554 50,330 67,107 83,884 100,661 117,438
$300,000 25,527 51,054 76,580 102,107 127,634 153,161 178,688
$400,000 34,277 68,554 102,830 137,107 171,384 205,661 239,938
$500,000 43,027 86,054 129,080 172,107 215,134 258,161 301,188
(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.
(3) Effective January 1, 1998, the Plan was amended to a cash balance benefit
formula for current and future Plan participants. Initial account balances were
established based upon the actuarial equivalent value of the accrued 12/31/97
Prior Plan benefit. Annual interest credits and pay-based credits will be
credited to this account. The 1999 pay-based credits for Messrs. Alexander,
Dunn, Simonowicz, Jolly and Keating are 2.5%, 1.5%, 2.0%, 1.5% and 2.5%
respectively. Participants as of 12/31/97 will receive the greater of the cash
balance benefit and the Prior Plan benefit through the year 2002.
(4) In addition, a supplemental cash balance account was established equal to
the value of certain benefits related to retiree medical and vacation benefits.
An initial account value was determined for those active employees who were
eligible for retiree medical coverage as of April 1, 1998 equal to $415
multiplied by years of benefit service (maximum of 35 years). Future pay-based
credits and interest are credited to this account. The 1999 pay-based credits
for Messrs. Alexander, Dunn, Simonowicz, Jolly and Keating are 2.0%, 0.0%, 0.0%,
0.0% and 2.0% respectively. This account is payable in addition to the
"grandfathered benefit calculations".
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 highest average annual compensation for the 60
consecutive months in the last 120 months of benefit service affording the
highest such average, or during all months of benefit service is less than 60
months (the "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 amount of
the monthly accrued benefit payable as of the determination date (reduced to
reflect commencement of the benefit payable hereunder prior to the normal
retirement date) to the participant under Suburban's Pension Plan in the form of
a single life annuity, multiplied by twelve (the "Pension Offset"). Messrs.
Alexander, Dunn, and Simonowicz currently participate in this Plan. The
participants in the Plan waived their rights to receive lump sum, "change of
control" payments under the Plan solely in connection with the Recapitalization.
The Plan was amended as of April 14, 1999 to provide that a sale or transfer of
the General Partner of the Partnership would not constitute a "change of
control" under the Plan entitling its participants to lump sum payments.
LONG-TERM INCENTIVE PLAN
The Partnership has adopted a non-qualified, unfunded long-term incentive
plan for officers and key employees, effective October 1, 1997. Awards are based
on a percentage of base pay and are subject to the achievement of certain
performance contingencies, including the Partnership's ability to earn
sufficient funds and make cash distributions on its common units with respect to
each fiscal year. Awards vest over time with one-third vesting at the end of
years three, four, and five from the award date.
Long-Term Incentive Plan awards earned in fiscal year 1999 were as follows:
PERFORMANCE OR
OTHER PERIOD
AWARD UNTIL MATURATION POTENTIAL AWARDS UNDER PLAN
NAME FY 1999 OR PAYOUT THRESHOLD TARGET MAXIMUM
- ---- ------- ---------------- --------- ------ -------
Mark A. Alexander $90,000 3-5 Years $ 0 $60,000 $120,000
Michael J. Dunn, Jr. 43,031 3-5 Years 0 28,687 57,375
Anthony M. Simonowicz 24,131 3-5 Years 0 16,087 32,175
Jeffrey S. Jolly 16,313 3-5 Years 0 10,875 21,750
Michael M. Keating 15,750 3-5 Years 0 10,500 21,000
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 October 23, 1997 and April 14, 1999.
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
provides for an annual base salary of $400,000 as of September 25, 1999. 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. The Partnership also provides Mr. Alexander
with term life insurance with a face amount equal to three times his annual base
salary. Upon a change of control of the Partnership, Mr. Alexander is entitled
to receive (i) any earned but unpaid base salary; (ii) a pro-rata bonus, and
(iii) an amount equal to three times the sum of (a) base salary, plus (b) a
maximum annual bonus payment based on certain established financial goals and
personal performance.
The substitution of the Successor General Partner as the general partner
of the Partnership resulted in a change of control under the terms of Mr.
Alexander's employment agreement. As of April 14, 1999, Mr. Alexander and the
Operating Partnership entered into an amendment to his employment agreement
under which Mr. Alexander agreed to waive his right to receive a change of
control payment solely in connection with the Recapitalization. Mr. Alexander
also agreed in this amendment that upon completion of the Recapitalization, a
sale or transfer of the Successor General Partner after the Recapitalization
would not constitute a change of control under his Employment Agreement.
Mr. Alexander also participates 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 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 for such
officers and key employees following a change of control and termination of
employment. Pursuant to Severance Protection Agreements, Messrs. Dunn,
Simonowicz, Jolly and Keating as executive officers of the Partnership, have
been granted severance protection payments of 78 weeks of base pay and target
bonuses following a change in control and termination of employment in lieu of
participation in the Severance Protection Plan.
COMPENSATION OF SUPERVISORS
Mr. Stookey receives annual compensation of $75,000 for his services to the
Partnership. Mr. Logan and Mr. Mecum, the other two Elected Supervisors, receive
$50,000 per year and Mr. Mark J. Anton, who serves as Supervisor Emeritus,
receives $15,000 per year. In addition, each Elected Supervisor participated in
the Restricted Unit Plan and had received Unit Awards with a value of $0.3
million which vested and converted to Common Units in connection with the
Partnership's Recapitalization. All Elected Supervisors and the Supervisor
Emeritus 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
Compensation of the executive officers of the Partnership is determined by
the Compensation Committee of its Board of Supervisors. The Compensation
Committee is comprised of Messrs. Stookey, Logan and Mecum who are not officers
or employees of the Partnership.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth certain information as of December 15 , 1999
regarding the beneficial ownership of Common Units and Incentive Distribution
Rights 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. Except as set forth in
the notes to the table, the business address of each person in the table is c/o
the Partnership, 240 Route 10 West, Whippany, New Jersey 07981-0206. Each
individual or entity listed below has sole voting and investment power over the
Units reported, except as noted below.
In connection with the Recapitalization, the executives and key employees
of the Partnership who became members of the Successor General Partner and owned
Restricted Units surrendered such Restricted Units, prior to their vesting, in
exchange for an equal number of Common Units that were deposited into the
Benefits Protection Trust. These Common Units will be distributed to executives
and key employees on a deferred basis in accordance with the terms of the
Deferral Plan.
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 (a) 20,000 *
Michael J. Dunn, Jr. (a) 0 -
Anthony M. Simonowicz (a) 2,000 *
Jeffrey S. Jolly (a) 0 -
Michael M. Keating (a) 0 -
John Hoyt Stookey 24,634 *
Harold R. Logan, Jr. 17,134 *
Dudley C. Mecum 5,634 *
Mark J. Anton (c) 3,600 *
All Members of the Board
of Supervisors and Executive
Officers as a Group (14 persons) 73,452 *
Incentive
Distribution
Rights Suburban Energy Services Group LLC (a) N/A N/A
*Less than 1%.
(a) Excludes the following numbers of Common Units held in the Benefits
Protection Trust; Mr. Alexander: 243,902; Mr. Dunn: 48,780; Mr. Simonowicz:
48,780; Mr. Keating: 29,268 and Mr. Jolly: 19,512. The above individuals
have no voting or investment power over these Common Units. These
individuals have the following ownership interests in the Successor General
Partner: Mr. Alexander: 40.9%; Mr. Dunn: 8.2%; Mr. Simonowicz: 8.2%; Mr.
Keating: 4.9% and Mr. Jolly: 3.3%.
(b) Suburban Energy Services Group LLC is the General Partner. The business
address of Suburban Energy Services Group LLC is 240 Route 10 West,
Whippany, New Jersey 07981.
(c) Mr. Anton shares voting and investment power over these shares with his
wife.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
SUCCESSOR GENERAL PARTNER ARRANGEMENTS
In connection with the Partnership Recapitalization (See Note 9 - The
Recapitalization), the Successor General Partner acquired the general partner
interests, including its incentive distribution rights, in the Partnership from
Millennium Chemicals Inc. for $6.0 million ("the GP Loan") which was borrowed
under a private placement with Mellon Bank N.A. ("Mellon"). The Successor
General Partner is an entity owned by Senior Management of the Partnership. In
addition, the Partnership incurred expenses of $0.3 million to complete the
purchase of the general partner interest by the Successor General Partner.
Under the occurrence and continuance of an event of default, as defined in
the GP Loan, Mellon will have the right to cause the Partnership to purchase the
note evidencing the GP Loan (the "GP Note"). The Partnership has agreed to
maintain borrowing availability under its available lines of credit, which will
be sufficient to enable it to repurchase the GP Note in these circumstances. The
note evidencing the GP Loan will also cross-default to the Partnership's
obligations under its Senior Note Agreement and its Revolving Credit Agreement.
Upon a GP default, the Partnership will also have the right to purchase the GP
Note from Mellon.
If the Partnership elects or is required to purchase the GP Note from
Mellon, the Partnership has the right, exercisable in its sole discretion
pursuant to the Deferral Plan, to cause up to all of the Common Units deposited
in the trust related to the compensation deferral plan to be forfeited and
cancelled (and to cause all of the related distributions to be forfeited),
regardless of the amount paid by the Partnership to purchase the GP Note.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
1. (i) Financial Statements
See "Index to Financial Statements" set forth on page F-1.
(ii) Supplemental Financial Information
Balance Sheet Information of Suburban Energy Services Group LLC
See "Index to Supplemental Financial Information" set forth on page
F-22.
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 to the Partnership's
Annual Report on Form 10-K for the fiscal year ended September 27,
1997).
- Second Amendment to Employment Agreement dated as of March 5, 1996
between the Operating Partnership and Mr. Alexander entered into as
of April 14, 1999 (filed as Exhibit (10)(c) to the Partnership's
Quarterly Report on Form 10-Q for the fiscal quarter ended June 26,
1999).
- 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).
- Compensation Deferral Plan of Suburban Propane Partners, L.P. and
Suburban Propane, L.P., dated May 26, 1999 (filed as Exhibit
(10)(e) to the Partnership's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 26, 1999).
- Benefits Protection Trust dated May 26, 1999 by and between
Suburban Propane Partners, L.P. and First Union National Bank
(filed as Exhibit (10)(f) to the Partnership's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 26, 1999).
(b) Reports on Form 8-K
Report on Form 8-K dated September 29, 1999 announcing the Partnership's
agreement with SCANA Corporation to acquire the assets of SCANA Propane
Gas, Inc., SCANA Propane Storage, Inc., SCANA Propane Supply, Inc., USA
Cylinder Exchange, Inc. and C&T Pipeline, LLC for $86.0 million plus
working capital.
Report on Form 8-K dated November 17, 1999 announcing the Partnership's
consummation of its previously announced purchase of the assets of SCANA
Propane Gas, Inc., SCANA Propane Storage, Inc., SCANA Propane Supply, Inc.,
USA Cylinder Exchange, Inc. and C&T Pipeline, LLC for $86.0 million plus
working capital.
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 Appointed 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/ MICHAEL J. DUNN, JR. Appointed Supervisor December 22, 1999
- ----------------------------
(Michael J. Dunn, Jr.)
/s/ JOHN HOYT STOOKEY Elected Supervisor December 22, 1999
- ----------------------------
(John Hoyt Stookey)
/s/ HAROLD R. LOGAN, JR. Elected Supervisor December 22, 1999
- ----------------------------
(Harold R. Logan, Jr.)
/s/ DUDLEY C. MECUM Elected Supervisor December 22, 1999
- ----------------------------
(Dudley C. Mecum)
/s/ ANTHONY M. SIMONOWICZ Vice President and Chief December 22, 1999
- ---------------------------- Financial Officer of
(Anthony M. Simonowicz) Suburban Propane Partners, L.P.
/s/ EDWARD J. GRABOWIECKI Vice President, Controller December 22, 1999
- ---------------------------- and Chief Accounting Officer
(Edward J. Grabowiecki) of 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
------ -----------
D 2.1 Recapitalization Agreement dated as of November 27, 1998 by
and among the Partnership, the Operating Partnership, the
General Partner, Millennium and Suburban Energy Services Group
LLC.
A 3.1 Amended and Restated Agreement of Limited Partnership of the
Partnership dated as of March 4, 1996.
A 3.2 Amended and Restated Agreement of Limited Partnership of the
Operating Partnership dated as of March 4, 1996.
I 10.1 Credit Agreement dated as of November 8, 1999 by and among
Suburban Propane, L.P., the Lenders referred to therein and
First Union National Bank, as Administrative Agent.
A 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.
A 10.6 Employment Agreement dated as of March 5, 1996 between the
Operating Partnership and Mr. Alexander.
C 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.
F 10.8 Second Amendment to Employment Agreement dated as of March 5,
1996 between the Operating Partnership and Mr. Alexander
entered into as of April 14, 1999.
A 10.9 The Partnership's 1996 Restricted Unit Plan.
A 10.10 Form of Unit Grant Agreement pursuant to the Partnership's
1996 Restricted Unit Plan.
B 10.11 The Partnership Supplemental Executive Retirement Plan
(effective as of March 5, 1996).
B 10.12 The Partnership's Severance Protection Plan dated September
1996.
E 10.13 Suburban Propane L.P. Long-Term Incentive Program.
E-1
Exhibit
Number Description
------ -----------
G 10.14 Benefits Protection Trust dated May 26, 1999 by and between
Suburban Propane Partners, L.P. and First Union National Bank.
H 10.15 Compensation Deferral Plan of Suburban Propane Partners, L.P.
and Suburban Propane, L.P. dated May 26, 1999.
I 21.1 Listing of Subsidiaries of the Partnership.
I 23.1 Consent of Independent Accountants.
I 27.1 Financial Data Schedule.
- --------------------------------------------------------------------------------
A Incorporated by reference to the same numbered Exhibit to the Partnership's
Current Report Form 8-K filed April 29, 1996.
B 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.
C Incorporated by reference to the same numbered Exhibit to the Partnership's
Annual Report on Form 10-K for the fiscal year ended September 27, 1997.
D Incorporated by reference to Exhibit 2.1 to the Partnership's Form 8-K
filed December 3, 1998.
E 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, 1998.
F Incorporated by reference to Exhibit (10)(c) to the Partnership's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 26, 1999.
G Incorporated by reference to Exhibit (10)(f) to the Partnership's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 26, 1999.
H Incorporated by reference to Exhibit (10)(e) to the Partnership's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 26, 1999.
I Filed herewith.
E-2
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
dated as of November 10, 1999
by and among
SUBURBAN PROPANE, L.P.,
as Borrower,
the Lenders referred to herein,
FIRST UNION NATIONAL BANK,
as Administrative Agent,
BANK ONE, NA,
as Syndication Agent,
and
THE BANK OF NEW YORK, CREDIT LYONNAIS NEW YORK BRANCH, and ABN AMRO BANK N.V.,
as Managing Agents
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS........................................................1
SECTION 1.1 DEFINITIONS..............................................1
SECTION 1.2 GENERAL.................................................21
SECTION 1.3 OTHER DEFINITIONS AND PROVISIONS........................21
ARTICLE II THE CREDIT FACILITIES............................................21
SECTION 2.1 REVOLVING CREDIT LOANS..................................21
SECTION 2.2 SWINGLINE LOANS........................................ 22
SECTION 2.3 LIQUIDITY LOANS.........................................23
SECTION 2.4 ACQUISITION LOANS.......................................24
ARTICLE III LETTER OF CREDIT FACILITY.......................................24
SECTION 3.1 L/C COMMITMENT..........................................24
SECTION 3.2 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT.............25
SECTION 3.3 COMMISSIONS AND OTHER CHARGES...........................25
SECTION 3.4 L/C PARTICIPATIONS......................................26
SECTION 3.5 REIMBURSEMENT OBLIGATION OF THE BORROWER................27
SECTION 3.6 OBLIGATIONS ABSOLUTE....................................27
ARTICLE IV GENERAL LOAN PROVISIONS..........................................28
SECTION 4.1 PROCEDURE FOR ADVANCES OF LOANS.........................28
SECTION 4.2 REPAYMENT OF LOANS......................................29
SECTION 4.3 NOTES...................................................30
SECTION 4.4 LIMITATIONS ON INCURRENCE OF EXTENSIONS OF CREDIT.......30
SECTION 4.5 PERMANENT REDUCTION OF THE REVOLVING CREDIT COMMITMENT
AND THE ACQUISITION COMMITMENT..........................31
SECTION 4.6 TERMINATION OF CREDIT FACILITIES........................32
SECTION 4.7 INTEREST................................................32
SECTION 4.8 NOTICE AND MANNER OF CONVERSION OR CONTINUATION OF
LOANS...................................................35
SECTION 4.9 FEES....................................................35
SECTION 4.10 MANNER OF PAYMENT.......................................35
SECTION 4.11 CREDITING OF PAYMENTS AND PROCEEDS......................36
SECTION 4.12 ADJUSTMENTS.............................................36
SECTION 4.13 NATURE OF OBLIGATIONS OF LENDERS REGARDING EXTENSIONS OF
CREDIT; ASSUMPTION BY THE ADMINISTRATIVE AGENT.........37
SECTION 4.14 CHANGED CIRCUMSTANCES...................................37
SECTION 4.15 INDEMNITY...............................................39
SECTION 4.16 CAPITAL REQUIREMENTS....................................39
SECTION 4.17 TAXES...................................................40
SECTION 4.18 DUTY TO MITIGATE; ASSIGNMENT OF COMMITMENTS UNDER CERTAIN
CIRCUMSTANCES...........................................41
ARTICLE V CLOSING; CONDITIONS OF CLOSING AND BORROWING......................42
SECTION 5.1 CLOSING.................................................42
SECTION 5.2 CONDITIONS TO CLOSING AND INITIAL EXTENSIONS OF CREDIT..42
SECTION 5.3 CONDITIONS TO ALL EXTENSIONS OF CREDIT..................45
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE BORROWER...................46
SECTION 6.1 REPRESENTATIONS AND WARRANTIES..........................46
SECTION 6.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC.........52
ARTICLE VII FINANCIAL INFORMATION AND NOTICES...............................53
SECTION 7.1 FINANCIAL STATEMENTS....................................53
SECTION 7.2 OFFICER'S COMPLIANCE CERTIFICATE........................53
SECTION 7.3 OTHER REPORTS...........................................54
SECTION 7.4 NOTICE OF LITIGATION AND OTHER MATTERS..................54
SECTION 7.5 ACCURACY OF INFORMATION.................................55
ARTICLE VIII AFFIRMATIVE COVENANTS..........................................55
SECTION 8.1 EXISTENCE; BUSINESSES AND PROPERTIES....................55
SECTION 8.2 INSURANCE...............................................56
SECTION 8.3 TAXES...................................................56
SECTION 8.4 EMPLOYEE BENEFITS.......................................56
SECTION 8.5 ACCESS TO PREMISES AND RECORDS; CONFIDENTIALITY.........56
SECTION 8.6 COMPLIANCE WITH LAWS....................................57
SECTION 8.7 ADDITIONAL GUARANTORS...................................57
SECTION 8.8 USE OF PROCEEDS.........................................57
SECTION 8.9 PARTNERSHIP DOCUMENTS...................................57
SECTION 8.10 COMPLIANCE WITH ENVIRONMENTAL AND SAFETY LAWS...........57
SECTION 8.11 PREPARATION OF ENVIRONMENTAL REPORTS....................58
SECTION 8.12 CORPORATE IDENTITY......................................58
SECTION 8.13 FEDERAL RESERVE REGULATIONS.............................58
SECTION 8.14 AVAILABLE CASH RESERVES.................................58
SECTION 8.15 FURTHER ASSURANCES......................................59
SECTION 8.16 YEAR 2000 COMPATIBILITY.................................59
SECTION 8.17 COMMODITY HEDGING POLICY................................59
ARTICLE IX FINANCIAL COVENANTS..............................................59
SECTION 9.1 INTEREST COVERAGE RATIO.................................59
SECTION 9.2 LEVERAGE RATIO..........................................59
SECTION 9.3 ADJUSTED CONSOLIDATED NET WORTH.........................59
ARTICLE X NEGATIVE COVENANTS................................................60
SECTION 10.1 INDEBTEDNESS............................................60
SECTION 10.2 LIENS...................................................62
SECTION 10.3 SALE AND LEASE-BACK TRANSACTIONS........................64
SECTION 10.4 INVESTMENTS, LOANS AND ADVANCES.........................64
SECTION 10.5 MERGERS, CONSOLIDATIONS, SALES OF ASSETS AND
ACQUISITIONS............................................66
SECTION 10.6 RESTRICTED PAYMENTS.....................................67
SECTION 10.7 TRANSACTIONS WITH AFFILIATES............................68
SECTION 10.8 BUSINESS OF BORROWER AND SUBSIDIARIES...................68
SECTION 10.9 MATERIAL AGREEMENTS; TAX STATUS.........................69
SECTION 10.10 LEASE OBLIGATIONS.......................................69
SECTION 10.11 PRIORITY INDEBTEDNESS...................................70
SECTION 10.12 CERTAIN ACCOUNTING CHANGES..............................70
SECTION 10.13 MELLON NOTE PURCHASE....................................70
SECTION 10.14 RESTRICTIVE AGREEMENTS..................................70
ARTICLE XI [INTENTIONALLY OMITTED]..........................................70
ARTICLE XII DEFAULT AND REMEDIES............................................70
SECTION 12.1 EVENTS OF DEFAULT.......................................70
SECTION 12.2 REMEDIES................................................72
SECTION 12.3 RIGHTS AND REMEDIES CUMULATIVE; NON-WAIVER; ETC.........73
ARTICLE XIII THE ADMINISTRATIVE AGENT.......................................73
SECTION 13.1 APPOINTMENT.............................................73
SECTION 13.2 DELEGATION OF DUTIES....................................74
SECTION 13.3 EXCULPATORY PROVISIONS..................................74
SECTION 13.4 RELIANCE BY THE ADMINISTRATIVE AGENT....................74
SECTION 13.5 NOTICE OF DEFAULT.......................................75
SECTION 13.6 NON-RELIANCE ON THE ADMINISTRATIVE AGENT AND OTHER
LENDERS.................................................75
SECTION 13.7 INDEMNIFICATION.........................................76
SECTION 13.8 THE ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY.....76
SECTION 13.9 RESIGNATION OF THE ADMINISTRATIVE AGENT; SUCCESSOR
ADMINISTRATIVE AGENT....................................76
ARTICLE XIV MISCELLANEOUS...................................................77
SECTION 14.1 NOTICES.................................................77
SECTION 14.2 EXPENSES; INDEMNITY.....................................78
SECTION 14.3 SET-OFF.................................................79
SECTION 14.4 GOVERNING LAW...........................................79
SECTION 14.5 CONSENT TO JURISDICTION.................................79
SECTION 14.6 BINDING ARBITRATION; WAIVER OF JURY TRIAL...............79
SECTION 14.7 REVERSAL OF PAYMENTS....................................81
SECTION 14.8 INJUNCTIVE RELIEF; PUNITIVE DAMAGES.....................81
SECTION 14.9 ACCOUNTING MATTERS......................................81
SECTION 14.10 SUCCESSORS AND ASSIGNS; PARTICIPATIONS..................82
SECTION 14.11 AMENDMENTS, WAIVERS AND CONSENTS........................85
SECTION 14.12 PERFORMANCE OF DUTIES...................................85
SECTION 14.13 ALL POWERS COUPLED WITH INTEREST........................85
SECTION 14.14 SURVIVAL OF INDEMNITIES.................................85
SECTION 14.15 TITLES AND CAPTIONS.....................................85
SECTION 14.16 SEVERABILITY OF PROVISIONS..............................85
SECTION 14.17 COUNTERPARTS............................................86
SECTION 14.18 TERM OF AGREEMENT.......................................86
SECTION 14.19 INCONSISTENCIES WITH OTHER DOCUMENTS; INDEPENDENT EFFECT
OF COVENANTS............................................86
EXHIBITS
Exhibit A-1 - Form of Revolving Credit Note
Exhibit A-2 - Form of Acquisition Note
Exhibit A-3 - Form of Swingline Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Notice of Account Designation
Exhibit D - Form of Notice of Prepayment
Exhibit E - Form of Notice of Conversion/Continuation
Exhibit F - Form of Officer's Compliance Certificate
Exhibit G - Form of Assignment and Acceptance
Exhibit H - Form of Guarantee Agreement
Exhibit I - Senior Note Agreement
SCHEDULES
Schedule 1 - Lenders and Commitments
Schedule 6.1(a) - Jurisdictions of Organization and Qualification
Schedule 6.1(b) - Subsidiaries and Capitalization
Schedule 6.1(m) - Defaults
Schedule 6.1(n) - Employee Relations
Schedule 6.1(u) - Indebtedness and Contingent Obligations
Schedule 6.1(v) - Litigation
Schedule 10.2 - Existing Liens
CREDIT AGREEMENT, dated as of the 10th day of November, 1999, 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 hereto, in
their capacity as Lenders and in such other capacities as reflected on the
signature pages hereto, and FIRST UNION NATIONAL BANK, as Administrative Agent.
STATEMENT OF PURPOSE
The Borrower has requested, and the Lenders have agreed, to provide an
aggregate $175,000,000 credit facility for the purposes of (a) refinancing
indebtedness of the Borrower under the Second Amended and Restated Credit
Agreement dated as of May 26, 1999, among the Borrower, the financial
institutions named therein as Lenders, First Union, as Administrative Agent, and
The Bank of New York as Documentation Agent (as amended, the "EXISTING CREDIT
AGREEMENT"), (b) to provide financing for the proposed acquisition (the "SCANA
ACQUISITION") of substantially all of the assets of SCANA Propane Gas, Inc.,
SCANA Propane Supply, Inc., SCANA Propane Storage, Inc., USA Cylinder Exchange,
Inc. and C & T Pipeline, LLC (collectively, the "SCANA SELLERS") pursuant to the
terms of the Purchase and Sale Agreement dated as of September 27, 1999 (the
"SCANA ACQUISITION AGREEMENT") among the Borrower and the SCANA Sellers and (c)
to provide financing for future acquisitions and ongoing working capital
purposes.
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 1.1 DEFINITIONS. The following terms when used in this
Agreement shall have the meanings assigned to them below:
"ACQUISITION COMMITMENT" means, (a) as to any Lender, the obligation of
such Lender to make Acquisition Loans to the Borrower hereunder in an aggregate
principal 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, and (b)
as to all Lenders, the aggregate commitment of all Lenders to make Acquisition
Loans, as such amount may be reduced at any time from time to time pursuant to
the terms hereof. The Acquisition Commitment of all Lenders on the Closing Date
shall be One Hundred Million Dollars ($100,000,000).
"ACQUISITION COMMITMENT PERCENTAGE" means, as to any Lender at anytime,
the ratio of (a) the amount of the Acquisition Commitment of such Lender to (b)
the Acquisition Commitment of all of the Lenders.
"ACQUISITION FACILITY" means the acquisition loan facility established
pursuant to Article II hereof.
"ACQUISITION LOAN" means any of the acquisition loans made by the
Lenders to the Borrower pursuant to SECTION 2.4 and all such loans collectively
as the context requires.
"ACQUISITION NOTES" means the separate Acquisition Notes made by the
Borrower payable to the order of each Lender, substantially in the form of
EXHIBIT A-2 hereto, evidencing the Acquisition Facility, and any amendments and
modifications thereto, any substitutes therefor, and any replacements,
restatements, renewals or extension thereof, in whole or in part; "ACQUISITION
NOTE" means any of such Acquisition Notes.
"ADJUSTED CONSOLIDATED NET WORTH" means, with respect to the Borrower
and its Subsidiaries on a Consolidated basis at any time, the sum at such time
of (a) Consolidated Net Worth of the Borrower and its Subsidiaries at such time
and (b) the aggregate amount of goodwill amortization recorded from and after
the Effective Date (as defined in the Credit Agreement dated as of February 28,
1996 among the Borrower, the lenders party thereto and The Chase Manhattan Bank,
as administrative agent), determined on a Consolidated basis in accordance with
GAAP.
"ADJUSTED OPERATING SURPLUS" has the meaning assigned thereto in the
Parent Partnership Agreement, as in effect on the date hereof.
"ADMINISTRATIVE AGENT" means First Union in its capacity as
Administrative Agent hereunder, and any successor thereto appointed pursuant to
SECTION 13.9.
"ADMINISTRATIVE AGENT'S OFFICE" means the office of the Administrative
Agent specified in or determined in accordance with the provisions of SECTION
14.1.
"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 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 Seventy-Five Million Dollars
($175,000,000).
"AGREEMENT" means this Credit Agreement, as amended, restated,
supplemented or otherwise modified from time to time.
"APPLICABLE LAW" means all applicable provisions of constitutions,
statutes, laws, ordinances, rules, treaties, regulations, permits, licenses,
approvals, interpretations and orders of all Governmental Authorities and all
orders and decrees of all courts and arbitrators.
"APPLICABLE MARGIN" has the meaning assigned thereto in SECTION 4.7(C).
"APPLICATION" means an application, in the form specified by the
Issuing Lender from time to time, requesting the Issuing Lender to issue a
Letter of Credit.
"ARBITRATION RULES"has the meaning assigned thereto in SECTION 14.6(A).
"ASSIGNMENT AND ACCEPTANCE" has the meaning assigned thereto in SECTION
14.10.
"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 its Subsidiaries on hand at the end of such quarter and (ii) all
additional cash and cash equivalents of the Borrower and its Subsidiaries on
hand on the date of determination of Available Cash with respect to such quarter
resulting from borrowings hereunder, 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 its 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 succeeding 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 4.7(A).
"BENEFITED LENDER" has the meaning assigned thereto in SECTION 4.12.
"BLOCKED PORTION" has the meaning assigned thereto in SECTION 2.1(B).
"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 Parent
Partnership Agreement or the Borrower Partnership Agreement, as applicable.
"BORROWER" means Suburban Propane, L.P. in its capacity as borrower
hereunder.
"BORROWER PARTNERSHIP AGREEMENT" means the Second Amended and Restated
Agreement of Limited Partnership of the Borrower, as in effect on the date
hereof and as it may be amended, supplemented or otherwise modified from time to
time.
"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
Termination Date, of any of the following events: (a) any Person or group of
Persons, other than those Persons owning Capital Stock of the General Partner on
the Closing Date, shall acquire, directly or indirectly, (i) more than 50% of
the outstanding Capital Stock of the General Partner entitled to vote in the
election or removal of the members of the Board of Supervisors or (ii)
outstanding Capital Stock of the General Partner entitled to more than 50% of
the assets of the General Partner upon the dissolution or liquidation thereof,
(b) the General Partner shall fail to own directly or indirectly, beneficially
and of record, 100% of the general partner interests in each of the Parent and
the Borrower, (c) 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 (d) 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, on a collective basis, such
Lender's Acquisition 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 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 Acquisition 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.
"COMPENSATION DEFERRAL PLAN" means the Compensation Deferral Plan of
the Parent and the Borrower as in effect on the date hereof and as amended,
restated or supplemented from time to time in accordance with the provisions of
this Agreement.
"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
as in effect on the date hereof.
"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.
"COVERED PERSONS" has the meaning assigned thereto in the definition of
Restricted Payment.
"CREDIT FACILITIES" means the collective reference to the Revolving
Credit Facility, the Acquisition Facility and the L/C Facility.
"DEFAULT" means any of the events specified in SECTION 12.1, 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 twelve (12) months of receipt thereof, such portion shall not
constitute Designated Net Proceeds except to the extent not so used within such
twelve (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 $2,500,000 of such net
proceeds received in any Fiscal Year (the "EXEMPT INSURANCE/CONDEMNATION
PROCEEDS") shall not constitute Designated Net Insurance/Condemnation Proceeds;
PROVIDED FURTHER, that if the Borrower shall deliver a certificate of a
Responsible Officer to the Administrative Agent promptly following receipt of
any such proceeds in any Fiscal Year in excess of the Exempt
Insurance/Condemnation Proceeds for such Fiscal Year certifying that the
Borrower intends to use any portion of such excess proceeds to restore, modify
or replace the properties or assets in respect of which such insurance or
condemnation proceeds were received within twelve (12) months of such receipt,
such portion shall not constitute Designated Net Insurance/Condemnation Proceeds
except to the extent not so used within such twelve (12) month period.
"DISPUTEs" has the meaning set forth in SECTION 14.6(A).
"DISTRIBUTION SHORTFALL" means, at any time, the amount by which (a)
the Minimum Quarterly Distribution for the most recently ended period of four
fiscal quarters exceeds (b) Adjusted Operating Surplus for such period.
"DOLLARS" OR "$" 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, (d) extraordinary losses during such
period, (e) a one-time expense relating to the fees and expenses (including
non-cash compensation expenses) incurred in connection with the Recapitalization
in an aggregate amount not to exceed $20,000,000, of which not more than
$7,500,000 shall be cash expenses and (f) other cash restructuring charges, in
an aggregate amount not to exceed $5,000,000 during the term of the Credit
Facilities (including the term of the Existing Credit Agreement) 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 commercial bank organized under the
laws of any other country that is a member of the Organization of Economic
Cooperation and Development, or a political subdivision of any such country,
having combined capital and surplus in excess of $500,000,000, (c) 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, (d) 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, (e) 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 (f) 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 12.1;
PROVIDED that any requirement for passage of time, giving of notice, or any
other condition, has been satisfied.
"EXEMPT INSURANCE/CONDEMNATION PROCEEDS" has the meaning assigned such
term in the definition of Designated Net Insurance/Condemnation Proceeds.
"EXEMPT PROCEEDS" has the meaning assigned such term in the definition
of Designated Net Proceeds.
"EXISTING CREDIT AGREEMENT" has the meaning set forth in the Statement
of Purpose.
"EXTENSIONS OF CREDIT" means, as to any Lender at any time, an amount
equal to the sum of (a) the aggregate principal amount of all Revolving Credit
Loans made by such Lender then outstanding, (b) the aggregate principal amount
of all Liquidity Loans made by such Lender then outstanding, (c) the aggregate
principal amount of all Acquisition Loans made by such Lender then outstanding,
(d) such Lender's Commitment Percentage of the L/C Obligations then outstanding
and (e) such Lender's Commitment Percentage of the Swingline Loans 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" means, as to any Person, 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 Energy Services Group LLC, a Delaware
limited liability company.
"GENERAL PARTNER UNIT" means a unit representing a fractional part of
the General Partner's general partner interest in the Parent (which shall
exclude any limited partner or other interest that the General Partner may have
from time to time in the Parent).
"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" means 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 and Suburban Sales and Service, Inc.) for the
benefit of the Lenders and the Administrative Agent.
"GUARANTOR" means each Subsidiary that is party to the Guarantee
Agreement on the Closing Date together with any Subsidiary who becomes a party
to the Guarantee Agreement after the Closing Date in accordance with the terms
of SECTION 8.7.
"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 any
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 letters of
credit obtained in the ordinary course of business and consistent with past
practices) 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 its Subsidiaries for such period MINUS interest income of the
Borrower and its Subsidiaries for such period, determined on a Consolidated
basis in accordance with GAAP.
"INTEREST PERIOD" has the meaning assigned thereto in SECTION 4.7(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).
"ISP 98" means the International Standby Practices (1998 Revision,
effective January 1, 1999), International Chamber of Commerce Publication No.
590.
"ISSUING LENDER" means First Union, in its capacity as issuer of any
Letter of Credit, or any successor thereto.
"L/C COMMITMENT" means the lesser of (a) Fifteen Million Dollars
($15,000,000) and (b) the Revolving Credit Commitment.
"L/C FACILITY" means the letter of credit facility established pursuant
to Article III.
"L/C OBLIGATIONS" means at any time, an amount equal to the sum of (a)
the aggregate undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit which
have not then been reimbursed pursuant to SECTION 3.5.
"L/C PARTICIPANTS" means the collective reference to all the Lenders
other than the Issuing Lender.
"LENDER" means each Person executing this Agreement as a Lender
(including, without limitation, the Issuing Lender and the Swingline Lender
unless the context otherwise requires) set forth on the signature pages hereto
and each Person that hereafter becomes a party to this Agreement as a Lender
pursuant to SECTION 14.10.
"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 4.2(E), 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.
"LETTERS OF CREDIT" has the meaning assigned thereto in SECTION 3.1.
"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" means the rate of interest per annum determined on the basis of
the rate for deposits in Dollars in minimum amounts of at least $5,000,000 for a
period equal to the Interest Period selected which appears on the Dow Jones
Market Screen 3750 at approximately 11:00 a.m. London time, two (2) Business
Days prior to the first day of the applicable Interest Period (rounded upward,
if necessary, to the nearest one-sixteenth of one percent (1/16%)). If, for any
reason, such rate does not appear on Dow Jones Market Screen 3750, then "LIBOR"
shall be determined by the Administrative Agent to be the arithmetic average of
the rate per annum at which deposits in Dollars in minimum amounts of at least
$5,000,000 would be offered by first class banks in the London interbank market
to the Administrative Agent at approximately 11:00 a.m. London time, two (2)
Business Days prior to the first day 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. Each
calculation by the Administrative Agent of LIBOR shall be conclusive and binding
for all purposes, absent manifest error.
"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
----------------
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 4.7(A).
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, hypothecation 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.
"LIQUIDITY LOAN" means any Revolving Credit Loan designated as a
liquidity loan pursuant to SECTION 2.3.
"LIQUIDITY RESERVE AMOUNT" means:
(a) from the date hereof through December 31, 2000, Twenty Two Million
Dollars ($22,000,000) LESS the aggregate amount of Distributions Shortfalls that
have occurred from the date of this Agreement through, and including, the date
of determination; and
(b) from and after January 1, 2001, (i) the lesser of (A) Eleven
Million, Six Hundred Thousand Dollars ($11,600,000) and (B) the Liquidity
Reserve Amount on the Closing Date as reduced pursuant to the immediately
preceding clause (a) of this definition LESS (ii) to the extent not deducted
pursuant to such clause (a), the amount of the Distribution Shortfall, if any,
as of the end of the four fiscal quarter period ending December 31, 2000;
PROVIDED, that in no event shall the Liquidity Reserve Amount be less than zero.
"LOAN" means any Revolving Credit Loan, Acquisition Loan, Liquidity
Loan or Swingline Loan made to the Borrower pursuant to Article II, and all such
Loans collectively as the context requires.
"LOAN DOCUMENTS" means, collectively, this Agreement, the Notes, the
Applications, any Hedging Agreement with any Lender (to the extent such Hedging
Agreement is permitted hereunder), the Guarantee Agreement and each other
document, instrument, certificate 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, supplemented or otherwise modified from time to time.
"MANAGEMENT CASH RESERVE" means the cash available to be accelerated in
any quarter by the Parent or the Borrower from the Rabbi Trust in accordance
with Section 9.1(c) of the Compensation Deferral Plan to support the payment by
the Parent of the Minimum Quarterly Distribution for such quarter.
"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 its
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.
"MELLON LOAN AGREEMENT" means the Term Loan Agreement, dated May 26,
1999, between Mellon Bank, N.A. and the General Partner, as in effect on the
date hereof.
"MELLON NOTE" means that certain promissory note dated May 26, 1999 in
the original principal amount of $6,000,000 from the Borrower payable to the
order of Mellon Bank, N.A.
"MELLON NOTE DOCUMENTS" means the Mellon Note, the Mellon Note Purchase
Agreement, the Mellon Loan Agreement, and each security document or other
document relating thereto.
"MELLON NOTE PURCHASE AGREEMENT" means the Note Purchase Agreement,
dated May 26, 1999, between the Borrower and Mellon Bank, N.A., as in effect on
the date hereof.
"MINIMUM QUARTERLY DISTRIBUTION" means, with respect to each quarter,
the aggregate amount required by the Parent (a) to pay each holder of Common
Units $0.50 per Common Unit per quarter and (b) to pay the General Partner $0.50
per General Partner Unit per quarter, in each case subject to adjustment in
accordance with the Parent Partnership Agreement.
"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, or has accrued an obligation to make
contributions within the preceding six (6) years.
"NET DISTRIBUTION SHORTFALL" means, at any time, the Distribution
Shortfall as of such date MINUS the Management Cash Reserve as of such date.
"NOTES" means the collective reference to the Revolving Credit Notes,
the Liquidity Notes, the Acquisition Notes and the Swingline Note; "NOTE" means
any of such Notes.
"NOTICE OF ACCOUNT DESIGNATION" has the meaning assigned thereto in
SECTION 4.1(B).
"NOTICE OF BORROWING" has the meaning assigned thereto in SECTION 4.1
(A).
"NOTICE OF CONVERSION/CONTINUATION" has the meaning assigned thereto in
SECTION 4.8.
"NOTICE OF PREPAYMENT" has the meaning assigned thereto in SECTION 4.2
(C).
"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)
the L/C Obligations, (c) 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 (d) all other fees
and commissions (including attorney's fees), charges, indebtedness, loans,
liabilities, financial accommodations, obligations, covenants and duties owing
by the Borrower or any of its Subsidiaries to the Lenders or the Administrative
Agent, in each case under or in respect of this Agreement, any Note, any Letter
of Credit or any of the other Loan Documents 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, any Letter of Credit or any of the other
Loan Documents.
"OFFICER'S COMPLIANCE CERTIFICATE" has the meaning assigned thereto in
SECTION 7.2.
"OTHER TAXES" has the meaning assigned thereto in SECTION 4.17(B).
"PARENT" means Suburban Propane Partners, L.P., a limited partnership
organized under the laws of the State of Delaware.
"PARENT PARTNERSHIP AGREEMENT" means the Second Amended and Restated
Agreement of Limited Partnership of Suburban Propane Partners, L.P. as in effect
on the date hereof and as it may be amended, supplemented or otherwise modified
from time to time.
"PARENT SIDE LETTER" means that certain side letter agreement by and
between the Parent and the Administrative Agent dated of even date herewith.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency.
"PARTNERSHIP DOCUMENTS" means the Parent Partnership Agreement and the
Borrower Partnership 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 BANKS" has the meaning assigned to such term in SECTION 10.4
(C).
"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 its Subsidiaries shall be in compliance, on a
pro forma basis after giving effect to such acquisition or formation, with the
covenants contained in Article IX recomputed as at the last day of the most
recently ended fiscal quarter of the Borrower and its 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 10.1) 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; PROVIDED, that the SCANA Acquisition shall be considered a
Permitted Business Acquisition as of the Closing Date.
"PERSON" means an individual, corporation, limited liability company,
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.
"RABBI TRUST" means the trust established pursuant to the terms of the
Rabbi Trust Documents.
"RABBI TRUST AGREEMENT" means the Benefits Protection Trust between the
Parent and First Union National Bank, as Trustee thereunder, dated May 26, 1999.
"RABBI TRUST DOCUMENTS" means the Compensation Deferral Plan and the
Rabbi Trust Agreement.
"RECAPITALIZATION" means the recapitalization of the Parent pursuant to
the Amended and Restated Recapitalization Agreement dated as of March 15, 1999
by and among the Borrower, the Parent, Suburban Propane GP, Inc., the General
Partner and Millennium Petrochemicals, Inc.
"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" has the meaning assigned thereto in SECTION 14.10(D).
"REIMBURSEMENT OBLIGATION" means the obligation of the Borrower to
reimburse the Issuing Lender pursuant to SECTION 3.5 for amounts drawn under
Letters of Credit.
"REQUIRED LENDERS" means, at any date, any combination of Lenders whose
Commitments aggregate at least fifty-one percent (51%) of the Aggregate
Commitment or, if the Credit Facilities have been terminated pursuant to the
terms hereof, any combination of Lenders holding at least fifty-one percent
(51%) of the aggregate Extensions of Credit.
"RESERVE ITEMS" has the meaning set forth in SECTION 2.1(B).
"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 the Borrower and each of 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 (a) as to any Lender, the
obligation of such Lender to make Revolving Credit Loans to the Borrower
hereunder in an aggregate principal 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 and (b) as to all Lenders, the aggregate commitment of all
Lenders to make Revolving Credit Loans, as such amount may be increased or
reduced at any time or from time to time pursuant to the terms hereof. The
Revolving Credit Commitment of all Lenders on the Closing Date shall be
Seventy-Five Million Dollars ($75,000,000).
"REVOLVING CREDIT COMMITMENT PERCENTAGE" means, as to any Lender at any
time, the ratio of (a) the amount of the Revolving Credit Commitment of such
Lender to (b) the Revolving Credit Commitment of all Lenders.
"REVOLVING CREDIT FACILITY" means the revolving credit facility
established pursuant to SECTION 2.1(A).
"REVOLVING CREDIT LOAN" means any of the revolving credit loans made by
the Lenders to the Borrower pursuant to SECTION 2.1(A) and all such loans
collectively as the context requires.
"REVOLVING CREDIT NOTES" means the collective reference to the
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 Revolving Credit
Notes.
"SCANA ACQUISITION" has the meaning set forth in the Statement of
Purpose.
"SCANA ACQUISITION AGREEMENT" has the meaning set forth in the
Statement of Purpose.
"SCANA SELLERS" has the meaning set forth in the Statement of Purpose.
"SENIOR NOTE AGREEMENT" means, collectively, the note agreements
pursuant to which the Senior Notes were issued, dated as of February 28, 1996,
as amended by the Amendment No. 1 thereto, dated May 13, 1998, and the Amendment
No. 2 thereto, dated March 29, 1999, and as amended from time to time in
accordance with SECTION 10.9.
"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.
"SUBSIDIARY" means as to any Person, any corporation, partnership,
limited liability company 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, limited liability company 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
or other ownership interests of any other class or classes of such corporation,
partnership, limited liability company or other entity 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
Dollars ($7,500,000).
"SWINGLINE FACILITY" means the swingline facility established pursuant
to SECTION 2.2.
"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 2.2, and all such loans collectively as the
context requires.
"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 Loans, and any amendments, supplements and
modifications 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 Administrative Agent in accordance with SECTION
13.9 and (b) the Termination Date.
"TAXES" has the meaning assigned thereto in SECTION 4.17(A).
"TERMINATION DATE" has the meaning assigned thereto in SECTION 4.6.
"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.
"TRUST RESERVES" has the meaning assigned to such term in SECTION 4.4
(B).
"UNIFORM CUSTOMS" means the Uniform Customs and Practice for
Documentary Credits (1994 Revision), effective January, 1994, International
Chamber of Commerce Publication No. 500.
"UCC" means the Uniform Commercial Code as in effect in the State of
New York, as amended or modified from time to time.
"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 1.2 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 1.3 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
THE CREDIT FACILITIES
SECTION 2.1 REVOLVING CREDIT LOANS.
(a) Subject to the terms and conditions (including without limitation
SECTION 4.4) of this Agreement, and in reliance upon the representations and
warranties set forth herein, each Lender severally agrees to make Revolving
Credit Loans to the Borrower from time to time from the Closing Date to, but not
including, the Termination Date as requested by the Borrower in accordance with
the terms of SECTION 4.1; PROVIDED, that (i) the aggregate principal amount of
all outstanding Revolving Credit Loans (after giving effect to any amount
requested) shall not exceed the Revolving Credit Commitment LESS the sum of (A)
all outstanding Swingline Loans and L/C Obligations, (B) the Liquidity Reserve
Amount as of such date and (C) the Blocked Portion as of such date and (ii) 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
LESS such Lender's Revolving Credit Commitment Percentage of L/C Obligations and
outstanding Swingline Loans. Each Revolving Credit Loan by a Lender shall be in
a principal amount equal to such Lender's Revolving Credit 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) 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 2.2 SWINGLINE LOANS.
(a) AVAILABILITY. Subject to the terms and conditions (including
without limitation SECTION 4.4) of this Agreement, the Swingline Lender agrees
to make Swingline Loans to the Borrower from time to time from the Closing Date
through, 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) the
Revolving Credit Commitment LESS the sum of (A) all outstanding Revolving Credit
Loans and the L/C Obligations, (B) the Liquidity Reserve Amount as of such date
and (C) the Blocked Portion as of such date; 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 amount of all outstanding Revolving Credit Loans made by the
Swingline Lender, may exceed the 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 Revolving Credit Commitment
Percentages and shall thereafter be reflected as Revolving Credit Loans of the
Lenders on the books and records of the Administrative 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 Lenders Revolving Credit Commitment.
Each Lender shall fund its respective Revolving Credit 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
2:00 p.m. (Charlotte time) on the next succeeding Business Day after such demand
is made. No Lender's obligation to fund its respective Revolving Credit
Commitment Percentage of a Swingline Loan shall be affected by any other
Lender's failure to fund its Revolving Credit Commitment Percentage of a
Swingline Loan, nor shall any Lender's Revolving Credit Commitment Percentage be
increased as a result of any such failure of any other Lender to fund its
Revolving Credit Commitment Percentage of a Swingline Loan.
(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 Administrative Agent to charge any account maintained by the
Borrower 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 Revolving Credit Commitment
Percentages (unless the amounts so recovered by or on behalf of the Borrower
pertain to a Swingline Loan extended after the occurrence and during the
continuance of an Event of Default of which the Administrative Agent has
received notice in the manner required pursuant to SECTION 13.5 and which such
Event of Default has not been waived by the Required Lenders or the Lenders, as
applicable).
(iii) Each Lender acknowledges and agrees that its obligation
to refund Swingline Loans in accordance with the terms of this SECTION 2.2 is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including, without limitation, non-satisfaction of the conditions
set forth in Article V. Further, each Lender agrees and acknowledges that if
prior to the refunding of any outstanding Swingline Loans pursuant to this
SECTION 2.2, one of the events described in SECTION 12.1(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 Revolving Credit
Commitment Percentage 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 2.3 LIQUIDITY LOANS. Subject to the terms and conditions of
this Agreement, the Borrower may designate any Revolving Credit Loan at the time
of incurrence thereof as a Liquidity Loan; PROVIDED, that (a) a Distribution
Shortfall exists as of the end of the then most recently ended fiscal quarter;
(b) the Borrower shall have accelerated and obtained the full amount of the
Management Cash Reserve available as of the date of the occurrence of such
Distribution Shortfall; (c) the cumulative aggregate principal amount of all
Liquidity Loans incurred during the life of the Credit Facilities shall not
exceed $22,000,000; (d) the aggregate principal amount of Liquidity Loans
incurred in any fiscal quarter shall not exceed the lesser of (i) the amount of
the Net Distribution Shortfall as of the end of the preceding fiscal quarter and
(ii) $11,600,000 MINUS the relevant Management Cash Reserve; and (e) no
Liquidity Loan may be requested at any time when the Liquidity Reserve Amount is
less than $1.00.
SECTION 2.4 ACQUISITION LOANS. Subject to the terms and conditions
(including without limitation SECTION 4.4) of this Agreement, and in reliance
upon the representations and warranties set forth herein, each Lender severally
agrees to make Acquisition Loans to the Borrower from time to time from the
Closing Date to, but not including, the Termination Date as requested by the
Borrower in accordance with the terms of SECTION 4.1(A); PROVIDED, that (a) the
aggregate principal amount of all outstanding Acquisition Loans (after giving
effect to any amount requested) shall not exceed the Acquisition 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 Commitment. Each
Acquisition Loan by a Lender shall be in a principal amount equal to such
Lender's Acquisition Commitment Percentage of the aggregate principal amount of
Acquisition Loans requested or required on such occasion. Subject to the terms
and conditions hereof, the Borrower may borrow, repay and reborrow Acquisition
Loans hereunder until the Termination Date.
ARTICLE III
LETTER OF CREDIT FACILITY
SECTION 3.1 L/C COMMITMENT. Subject to the terms and conditions
(including without limitation SECTION 4.4) of this Agreement, the Issuing
Lender, in reliance on the agreements of the other Lenders set forth in SECTION
3.4(A), agrees to issue standby letters of credit ("LETTERS OF CREDIT") for the
account of the Borrower on any Business Day from the Closing Date to, but not
including, the Termination Date in such form as may be approved from time to
time by the Issuing Lender; PROVIDED, that the Issuing Lender shall have no
obligation to issue any Letter of Credit if, after giving effect to such
issuance, (a) the L/C Obligations would exceed the L/C Commitment or (b) the
aggregate principal amount of outstanding Revolving Credit Loans, PLUS the
aggregate principal amount of outstanding Swingline Loans, PLUS the aggregate
amount of L/C Obligations would exceed the Revolving Credit Commitment LESS the
Liquidity Reserve Amount and the Blocked Portion. Each Letter of Credit shall
(i) be denominated in Dollars in a minimum amount of $1,000,000, (ii) be a
standby letter of credit issued to support obligations of the Borrower or any of
its Subsidiaries, contingent or otherwise, incurred in the ordinary course of
business, (iii) have a term of no more than one year, (iv) expire on a date not
later than the Termination Date and that is otherwise satisfactory to the
Issuing Lender and (v) be subject to the Uniform Customs and/or ISP 98, as set
forth in the Application or as determined by the Issuing Lender and, to the
extent not inconsistent therewith, the laws of the State of New York. The
Issuing Lender shall not at any time be obligated to issue any Letter of Credit
hereunder if such issuance would conflict with, or cause the Issuing Lender or
any L/C Participant to exceed any limits imposed by, any Applicable Law.
References herein to "issue" and derivations thereof with respect to Letters of
Credit shall also include extensions or modifications of any existing Letters of
Credit, unless the context otherwise requires.
SECTION 3.2 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT. The Borrower
may from time to time request that the Issuing Lender issue a Letter of Credit
by delivering to the Issuing Lender at the Administrative Agent's Office an
Application therefor, completed to the satisfaction of the Issuing Lender, and
such other certificates, documents and other papers and information as the
Issuing Lender may request. Upon receipt of any Application, the Issuing Lender
shall process such Application and the certificates, documents and other papers
and information delivered to it in connection therewith in accordance with its
customary procedures and shall, subject to SECTION 3.1 and Article V, promptly
issue the Letter of Credit requested thereby (but in no event shall the Issuing
Lender be required to issue any Letter of Credit earlier than three (3) Business
Days after its receipt of the Application therefor and all such other
certificates, documents and other papers and information relating thereto) by
issuing the original of such Letter of Credit to the beneficiary thereof or as
otherwise may be agreed by the Issuing Lender and the Borrower. The Issuing
Lender shall promptly furnish to the Borrower a copy of such Letter of Credit
and promptly notify each Lender of the issuance and upon request by any Lender,
furnish to such Lender a copy of such Letter of Credit and the amount of such
Lender's L/C Participation therein.
SECTION 3.3 COMMISSIONS AND OTHER CHARGES.
(a) The Borrower shall pay to the Administrative Agent, for the account
of the Issuing Lender and the L/C Participants, a letter of credit commission
with respect to each Letter of Credit in an amount equal to the product of (i)
the average daily maximum amount available to be drawn during the relevant
quarter under such Letter of Credit and (ii) the Applicable Margin (determined
on a per annum basis). Such commission shall be payable quarterly in arrears on
the last Business Day of each calendar quarter and on the Termination Date. The
Administrative Agent shall, promptly following its receipt thereof, distribute
to the Issuing Lender and the L/C Participants all commissions received pursuant
to this SECTION 3.3(A) in accordance with their respective Revolving Credit
Commitment Percentages.
(b) In addition to the foregoing commission, the Borrower shall pay to
the Administrative Agent, for the account of the Issuing Lender, an issuance fee
with respect to each Letter of Credit in an amount equal to the product of (i)
the face amount of such Letter of Credit and (ii) one eighth of one percent
(0.125%). Such issuance fee shall be payable on the date of issuance of each
Letter of Credit and shall be non-refundable.
(c) In addition to the foregoing fees and commissions, the Borrower
shall pay or reimburse the Issuing Lender for such normal and customary costs
and expenses as are incurred or charged by the Issuing Lender in issuing,
effecting payment under, amending or otherwise administering any Letter of
Credit.
SECTION 3.4 L/C PARTICIPATIONS.
(a) The Issuing Lender irrevocably agrees to grant and hereby grants to
each L/C Participant, and, to induce the Issuing Lender to issue Letters of
Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase
and hereby accepts and purchases from the Issuing Lender, on the terms and
conditions hereinafter stated, for such L/C Participant's own account and risk
an undivided interest equal to such L/C Participant's Revolving Credit
Commitment Percentage in the Issuing Lender's obligations and rights under and
in respect of each Letter of Credit issued hereunder and the amount of each
draft paid by the Issuing Lender thereunder. Each L/C Participant
unconditionally and irrevocably agrees with the Issuing Lender that, if a draft
is paid under any Letter of Credit for which the Issuing Lender is not
reimbursed in full by the Borrower through a Revolving Credit Loan or otherwise
in accordance with the terms of this Agreement, such L/C Participant shall pay
to the Issuing Lender upon demand at the Issuing Lender's address for notices
specified herein an amount equal to such L/C Participant's Revolving Credit
Commitment Percentage of the amount of such draft, or any part thereof, which is
not so reimbursed.
(b) Upon becoming aware of any amount required to be paid by any L/C
Participant to the Issuing Lender pursuant to SECTION 3.4(A) in respect of any
unreimbursed portion of any payment made by the Issuing Lender under any Letter
of Credit, the Issuing Lender shall notify each L/C Participant of the amount
and due date of such required payment and such L/C Participant shall pay to the
Issuing Lender the amount specified on the applicable due date. If any such
amount is paid to the Issuing Lender after the date such payment is due, such
L/C Participant shall pay to the Issuing Lender on demand, in addition to such
amount, the product of (i) such amount, TIMES (ii) the daily average Federal
Funds Rate as determined by the Administrative Agent during the period from and
including the date such payment is due to the date on which such payment is
immediately available to the Issuing Lender, TIMES (iii) a fraction the
numerator of which is the number of days that elapse during such period and the
denominator of which is 360. A certificate of the Issuing Lender with respect to
any amounts owing under this SECTION 3.4(B) shall be conclusive in the absence
of manifest error. With respect to payment to the Issuing Lender of the
unreimbursed amounts described in this SECTION 3.4(B), if the L/C Participants
receive notice that any such payment is due (A) prior to 1:00 p.m. (Charlotte
time) on any Business Day, such payment shall be due that Business Day, and (B)
after 1:00 p.m. (Charlotte time) on any Business Day, such payment shall be due
on the following Business Day.
(c) Whenever, at any time after the Issuing Lender has made payment
under any Letter of Credit and has received from any L/C Participant its
Revolving Credit Commitment Percentage of such payment in accordance with this
SECTION 3.4, the Issuing Lender receives any payment related to such Letter of
Credit (whether directly from the Borrower or otherwise, or any payment of
interest on account thereof, the Issuing Lender will distribute to such L/C
Participant its PRO RATA share thereof; provided, that in the event that any
such payment received by the Issuing Lender shall be required to be returned by
the Issuing Lender, such L/C Participant shall return to the Issuing Lender the
portion thereof previously distributed by the Issuing Lender to it.
SECTION 3.5 REIMBURSEMENT OBLIGATION OF THE BORROWER. In the event of
any drawing under any Letter of Credit, the Borrower agrees to reimburse (either
with the proceeds of a Revolving Credit Loan as provided for in this SECTION 3.5
or with funds from other sources), in same day funds, the Issuing Lender on each
date on which the Issuing Lender notifies the Borrower of the date and amount of
a draft paid under any Letter of Credit for the amount of (a) such draft so paid
and (b) any amounts referred to in SECTION 3.3(C) incurred by the Issuing Lender
in connection with such payment. Unless the Borrower shall immediately notify
the Issuing Lender that the Borrower intends to reimburse the Issuing Lender for
such drawing from other sources or funds, the Borrower shall be deemed to have
timely given a Notice of Borrowing to the Administrative Agent requesting that
the Lenders make a Revolving Credit Loan bearing interest at the Base Rate on
such date in the amount of (a) such draft so paid and (b) any amounts referred
to in SECTION 3.3(C) incurred by the Issuing Lender in connection with such
payment, and the Lenders shall make a Revolving Credit Loan bearing interest at
the Base Rate in such amount, the proceeds of which shall be applied to
reimburse the Issuing Lender for the amount of the related drawing and costs and
expenses. Each Lender acknowledges and agrees that its obligation to fund a
Revolving Credit Loan in accordance with this SECTION 3.5 to reimburse the
Issuing Lender for any draft paid under a Letter of Credit is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including, without limitation, non-satisfaction of the conditions set forth in
SECTION 4.1(A) or Article V. If the Borrower has elected to pay the amount of
such drawing with funds from other sources and shall fail to reimburse the
Issuing Lender as provided above, the unreimbursed amount of such drawing shall
bear interest in the rate which would be payable on any outstanding Base Rate
Loans which were then overdue from the date such amounts become payable (whether
at stated maturity, by acceleration or otherwise) until payment in full.
SECTION 3.6 OBLIGATIONS ABSOLUTE. The Borrower's obligations under this
Article III (including without limitation the Reimbursement Obligation) shall be
absolute and unconditional under any and all circumstances and irrespective of
any set-off, counterclaim or defense to payment which the Borrower may have or
have had against the Issuing Lender or any beneficiary of a Letter of Credit or
any other Person. The Borrower also agrees that the Issuing Lender and the L/C
Participants shall not be responsible for, and the Borrower's Reimbursement
Obligation under SECTION 3.5 shall not be affected by, among other things, the
validity or genuineness of documents or of any endorsements thereon, even though
such documents shall in fact prove to be invalid, fraudulent or forged, or any
dispute between or among the Borrower and any beneficiary of any Letter of
Credit or any other party to which such Letter of Credit may be transferred or
any claims whatsoever of the Borrower against any beneficiary of such Letter of
Credit or any such transferee. The Issuing Lender shall not be liable for any
error, omission, interruption or delay in transmission, dispatch or delivery of
any message or advice, however transmitted, in connection with any Letter of
Credit, except for errors or omissions caused by the Issuing Lender's gross
negligence or willful misconduct. The Borrower agrees that any action taken or
omitted by the Issuing Lender under or in connection with any Letter of Credit
or the related drafts or documents, if done in the absence of gross negligence
or willful misconduct and in accordance with the standards of care specified in
ISP 98 or the Uniform Customs, as the case may be, and, to the extent not
inconsistent therewith, the UCC, shall be binding on the Borrower and shall not
result in any liability of the Issuing Lender or any L/C Participant to the
Borrower.
ARTICLE IV
GENERAL LOAN PROVISIONS
SECTION 4.1 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 (x) with respect to LIBOR
Rate Loans and Base Rate Loans, in an aggregate principal amount of $3,000,000
or a whole multiple of $500,000 in excess thereof, and (y) 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 such Loan is to be a Revolving Credit
Loan, Swingline Loan, Liquidity Loan or Acquisition Loan, (D) in the case of a
Revolving Credit Loan, Liquidity Loan or Acquisition Loan whether the Loans are
to be LIBOR Rate Loans or Base Rate Loans, and (E) in the case of a LIBOR Rate
Loan, the duration of the Interest Period applicable thereto. A Notice of
Borrowing 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,
as applicable, (A) such Lender's Revolving Credit Commitment Percentage of the
Revolving Credit Loans to be made on such borrowing date, and (B) such Lender's
Acquisition Commitment Percentage of the Acquisition Loan to be made on such
borrowing date and (ii) the Swingline 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,
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 4.1 in immediately
available funds by crediting or wiring such proceeds to the deposit account of
the Borrower identified in the most recent notice substantially in the form of
EXHIBIT C 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 4.13, the
Administrative Agent shall not be obligated to disburse the portion of the
proceeds of any Revolving Credit Loan, Liquidity Loan or Acquisition Loan
requested pursuant to this SECTION 4.1 to the extent that any Lender has not
made available to the Administrative Agent its Revolving Credit Commitment
Percentage, Liquidity Commitment Percentage or Acquisition Commitment
Percentage, as the case may be, of such Loan. Revolving Credit Loans to be made
for the purpose of refunding Swingline Loans shall be made by the Lenders as
provided in SECTION 2.2(B).
SECTION 4.2 REPAYMENT OF LOANS.
(a) REPAYMENT ON TERMINATION DATE. On the Termination Date, the
Borrower shall repay the outstanding principal amount of (i) all Revolving
Credit Loans, Liquidity Loans and Acquisition Loans in full, and (ii) to the
extent the Swingline Termination Date has not occurred, all Swingline Loans
together, in each case, with all accrued but unpaid interest thereon.
(b) MANDATORY REPAYMENT OF REVOLVING CREDIT LOANS AND ACQUISITION
LOANS. If at any time, as the case may be, (i) the outstanding principal amount
of all Revolving Credit Loans PLUS the sum of (A) all outstanding Swingline
Loans and L/C Obligations, (B) the Liquidity Reserve Amount as of such date and
(C) the Blocked Portion as of such date exceeds the 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
aggregate outstanding Revolving Credit Loans, Swingline Loans and L/C
Obligations in an amount equal to such excess with each such repayment applied
FIRST to the principal amount of outstanding Swingline Loans, SECOND to the
principal amount of outstanding Revolving Credit Loans and THIRD, with respect
to any Letters of Credit then outstanding, a payment of cash collateral into a
cash collateral account opened by the Borrower with the Administrative Agent,
for the benefit of the Lenders (such cash collateral to be applied in accordance
with SECTION 12.2(B)), and (ii) the outstanding principal amount of all
Acquisition Loans exceeds the Acquisition Commitment, the Borrower shall repay
immediately upon notice from the Administrative Agent, by payment to the
Administrative Agent for the account of the Lenders, 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 4.15.
(c) 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 and Swingline Loans, in the form attached hereto as EXHIBIT D (a "NOTICE
OF PREPAYMENT") specifying the date and amount of repayment and whether the
repayment is of a Revolving Credit Loan or Acquisition Loan, LIBOR Rate Loans,
Base Rate Loans, Swingline Loans or a combination thereof, and, if of a
combination thereof, the amount allocable to each; PROVIDED, that any repayment
of Revolving Credit Loans shall be applied first to the repayment of any
outstanding Liquidity Loans and then any remaining amounts shall be applied to
repayment of any Revolving Credit Loans that are not Liquidity Loans. 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 $3,000,000 or a whole multiple of $500,000 in
excess thereof with respect to LIBOR Rate Loans and Base Rate Loans and $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 4.15.
(d) MANDATORY REPAYMENT OF REVOLVING CREDIT LOANS. The Borrower shall
apply the proceeds of the Management Cash Reserve received pursuant to the terms
of SECTION 4.4(B) to repay outstanding Liquidity Loans, if any, and then any
remaining amounts shall be applied to repayment of any outstanding Revolving
Credit Loans that are not Liquidity Loans.
(e) MANDATORY REPAYMENT OF ACQUISITION LOANS. The Borrower shall apply
the Lender's 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 the
Acquisition Loans outstanding at the time of such receipt or existence.
(f) 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 4.15.
SECTION 4.3 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 separate Revolving Credit Note executed by the Borrower payable
to the order of such Lender representing the Borrower's obligation to pay such
Lender's Revolving Credit 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 4.7.
(b) ACQUISITION NOTES. Each Lender's Acquisition Loans and the
obligation of the Borrower to repay such Acquisition Loans shall be evidenced by
an Acquisition Note executed by the Borrower payable to the order of such Lender
representing the Borrowers 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 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 4.7.
(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 4.4 LIMITATIONS ON INCURRENCE OF EXTENSIONS OF CREDIT.
Notwithstanding anything else herein to the contrary, the Borrower's ability to
request and incur, and the Lenders' and the Issuing Lender's obligation to make,
Extensions of Credit shall be limited as follows:
(a) SUSPENSION UPON DISTRIBUTION SHORTFALL. Upon the occurrence of any
Distribution Shortfall, the Borrower's right to request, and the Lenders' and
the Issuing Lender's obligation to make, Extensions of Credit under this
Agreement shall be automatically suspended until the Borrower shall have caused
an acceleration of and shall have received the full amount of the Management
Cash Reserve available as of the date of such occurrence.
(b) SUSPENSION UPON EXERCISE OF MELLON PUT RIGHTS. Upon the exercise of
any right under the Mellon Note Purchase Agreement to cause the Borrower to
purchase the Mellon Note, the Borrower's right to request, and the Lenders' and
the Issuing Lender's obligation to make, Extensions of Credit under this
Agreement shall be automatically suspended until the Borrower or the Parent
shall have caused an acceleration of and the Borrower shall have received the
payment of all available accumulated distributions under the Rabbi Trust
Documents as provided in Section 9.1(a) of the Compensation Deferral Plan (the
"TRUST RESERVES") in an amount up to the lesser of (i) the full purchase price
of the Mellon Note, and (ii) the entire amount of the Trust Reserves.
(c) 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 the Extensions of Credit then
outstanding to the extent necessary to reduce the total amount of outstanding
Extensions of Credit to an amount not exceeding the sum of (i) $15,000,000 PLUS
(ii) the aggregate principal amount of all outstanding Liquidity Loans PLUS
(iii) the aggregate principal amount of all outstanding Acquisition Loans. For
the duration of each such Cleandown Period, the Borrower shall not request,
create or incur any Extensions of Credit to the extent that the aggregate
principal amount of all outstanding Extensions of Credit (after giving effect to
any amount requested, created or incurred) would exceed the sum of (i)
$15,000,000 PLUS (ii) the aggregate principal amount of all outstanding
Liquidity Loans PLUS (iii) the aggregate principal amount of all outstanding
Acquisition Loans.
SECTION 4.5 PERMANENT REDUCTION OF THE REVOLVING CREDIT
COMMITMENT AND THE ACQUISITION COMMITMENT.
(a) VOLUNTARY REDUCTION. The Borrower shall have the right at any time
and from time to time, upon at least three (3) Business Days prior written
notice to the Administrative Agent, to permanently reduce, without premium or
penalty, (i) (A) at any time, the entire Acquisition Commitment or, (B) if the
Liquidity Reserve Amount is less than one dollar ($1.00), the entire Revolving
Credit Commitment or (ii) portions of the (A) Revolving Credit Commitment to an
amount not less than the Liquidity Reserve Amount or (B) the Acquisition
Commitment, from time to time, in each case, in an aggregate principal amount
not less than $2,000,000 or any whole multiple in excess thereof.
(b) MANDATORY PERMANENT REDUCTION OF ACQUISITION LOAN COMMITMENT. The
Acquisition 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, to the extent
that such amounts are not applied to repay Acquisition Loans pursuant to SECTION
4.2(E); PROVIDED, that no such reduction shall be required to the extent that
such reduction would reduce the Acquisition Commitment below $25,000,000.
(c) REPAYMENT OF EXCESS LOANS. Each permanent reduction permitted or
required pursuant to this SECTION 4.5 and, as applicable, SECTION 4.6 shall be
(i) with respect to outstanding Revolving Credit Loans and L/C Obligations, be
accompanied by a payment of principal sufficient to reduce the aggregate
outstanding Revolving Credit Loans and L/C Obligations, of the Lenders after
such reduction to the Revolving Credit Commitment as so reduced and if the
Revolving Credit Commitment as so reduced is less than the aggregate amount of
all outstanding L/C Obligations, the Borrower shall be required to deposit in a
cash collateral account opened by the Administrative Agent an amount equal to
the aggregate then undrawn and unexpired amount of such L/C Obligations, and
(ii) with respect to Acquisition Loans be accompanied by a payment of principal
sufficient to reduce the aggregate outstanding Acquisition Loans of the Lenders
after such reduction to the Acquisition Commitment as so reduced. Any reduction
of the Revolving Credit Commitment or the Acquisition Commitment, as the case
may be, to zero shall be accompanied by payment of all outstanding Obligations
(and, with respect to a reduction of the Revolving Credit Commitment, the
furnishing of cash collateral satisfactory to the Administrative Agent for all
L/C Obligations) and shall result in the termination of the Revolving Credit
Commitment and the Revolving Credit Facility and the Liquidity Facility, and the
Acquisition Commitment and the Acquisition Facility, as the case may be. Such
cash collateral shall be applied in accordance with SECTION 12.2(b). If the
reduction of the Revolving Credit Commitment or the Acquisition Commitment, as
applicable, requires the repayment of any LIBOR Rate Loan, such repayment shall
be accompanied by any amount required to be paid pursuant to SECTION 4.15.
SECTION 4.6 TERMINATION OF CREDIT FACILITIES. The Credit Facilities
shall terminate and each of the Revolving Credit Commitment and the Acquisition
Commitment shall be automatically reduced to zero on the earliest of (a) March
31, 2001, (b) the date of termination by the Borrower pursuant to SECTION
4.5(A), and (c) the date of termination by the Administrative Agent on behalf of
the Lenders pursuant to SECTION 12.2(A) (the "TERMINATION DATE"); PROVIDED,
that, if no Event of Default has occurred and is then continuing, the Borrower
may extend the date set forth in clause (a) above to December 31, 2001 by
providing the Administrative Agent and each of the Lenders with a written notice
of such extension not more than sixty (60) days and not fewer than thirty (30)
days prior to March 31, 2001. It is intended by the parties hereto that the
Revolving Credit Facility, the L/C Facility and the Acquisition Facility shall
terminate on the same date.
SECTION 4.7 INTEREST.
(a) INTEREST RATE OPTIONS. Subject to the provisions of this SECTION
4.7, 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 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 LIBOR Rate Loan at the time a Notice of
Borrowing is given pursuant to SECTION 4.1(A) or at the time a Notice of
Conversion/Continuation is given pursuant to SECTION 4.8. Each Loan or portion
thereof bearing interest based on the Base Rate shall be a "BASE RATE LOAN", and
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 4.7(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 Acquisition
Commitment pursuant to SECTION 4.4(C), without payment of any amounts pursuant
to SECTION 4.15; 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
4.7(A) with respect to the Loans (the "APPLICABLE MARGIN") shall (i) on the
Closing Date and for the period ending June 30, 2000, be at Level I 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:
LEVEL LEVERAGE RATIO LIBOR MARGIN BASE MARGIN FACILITY
- ----- -------------- ------------ ----------- --------
(%) (%) FEE(%)
--- --- ------
I Greater than or equal to 4.50 to 1.00 2.00 1.00 0.500
II Greater than or equal to 3.75 to 1.75 0.75 0.500
1.00, but less than 4.50 to 1.00
III Greater than or equal to 3.00 to 1.50 0.50 0.375
1.00, but less than 3.75 to 1.00
IV Less than 3.00 to 1.00 1.25 0.25 0.375
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 4.7(D), in the event the Borrower fails
to deliver such financial statements and certificate within the time required by
SECTION 7.2, the Applicable Margin shall be the highest Applicable Margin set
forth above until the delivery of such financial statements and certificate.
(d) DEFAULT RATE. Subject to SECTION 12.3, 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 or Swingline 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, (iii) all
outstanding Swingline Loans shall bear interest at a rate per annum equal to two
percent (2%) in excess of the rate then applicable to Swingline Loans and (iv)
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, 1999; 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 4.8 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 E (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 4.9 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 4.7(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, 1999 and on the Termination Date. Such facility 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. 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 October 25, 1999.
SECTION 4.10 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 12.1, 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 4.14, 4.15, 4.16, 4.17 OR 14.2 shall
be paid to the Administrative Agent for the account of the applicable Lender.
SECTION 4.11 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 12.2, 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 to the
Swingline Lender, then to the unpaid principal amount outstanding under the
Swingline Note to the Swingline Lender, then to accrued and unpaid interest on
the Revolving Credit Notes (applied first to Liquidity Loans and then to other
Revolving Credit Loans), Acquisition Notes and the Reimbursement Obligation (pro
rata in accordance with all such amounts due), then to the principal amount of
the Revolving Credit Notes, the Acquisition Notes and Reimbursement Obligation
(pro rata in accordance with all such amounts due) and then to the cash
collateral account described in SECTION 12.2(B) to the extent of any L/C
Obligations then outstanding, in that order.
SECTION 4.12 ADJUSTMENTS. If any Lender (a "BENEFITTED LENDER") shall
at any time receive any payment of all or part of the Obligations owing to it,
or interest thereon, or if any Lender shall at any time receive any collateral
in respect to the Obligations owing to it (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 the Obligations
owing to such other Lender, 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 4.13 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 and issue or participate in Letters of
Credit 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 4.1(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 not made available by such Lender in accordance with the terms
hereof, 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 amount not made available by such Lender in accordance
with the terms hereof 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 4.13
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 available its Commitment Percentage of any Loan requested by the
Borrower shall not relieve it or any other Lender of its obligation, if any,
hereunder to make its 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 Commitment Percentage of such Loan available on the borrowing
date.
SECTION 4.14 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, Letter of Credit or Application 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, Letter of Credit or Application 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 issuing or participating in
Letters of Credit 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 or Letter of Credit or Application, 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 4.14(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 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 4.15 INDEMNITY. 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
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 4.16 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 4.17 TAXES.
(a) PAYMENTS FREE AND CLEAR. Any and all payments by the Borrower
hereunder or under the Notes or the Letters of Credit 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 or Letter of Credit 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 4.17) 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 4.17(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 Letters of Credit, 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 4.17) 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 14.1, 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 4.17(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 4.17(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 4.17 shall survive the payment in full of the
Obligations and the termination of the Commitments.
SECTION 4.18 DUTY TO MITIGATE; ASSIGNMENT OF COMMITMENTS UNDER
CERTAIN CIRCUMSTANCES.
(a) Any Lender (or Eligible Assignee) claiming any additional amounts
payable pursuant to SECTION 4.14, 4.15 OR 4.17 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 4.14 or 4.16 or the Borrower shall be required to make additional
payments to any Lender under SECTION 4.17, the Borrower shall have the right, at
its own expense (which shall include the assignment fee referred to in SECTION
14.9), 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 14.9) 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, or transfer of, 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 4.14, 4.16 OR 4.17, if any).
ARTICLE V
CLOSING; CONDITIONS OF CLOSING AND BORROWING
SECTION 5.1 CLOSING. The closing shall take place at the offices of
Kennedy Covington Lobdell & Hickman, L.L.P., Charlotte, North Carolina at 9:00
a.m. on November 10, 1999 or on such other date and at such other place as the
parties hereto shall mutually agree.
SECTION 5.2 CONDITIONS TO CLOSING AND INITIAL EXTENSIONS OF CREDIT. The
obligations of the Lenders to close this Agreement and to make the initial Loan
and issue the initial Letters of Credit are 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) OFFICER'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 certificate of the Secretary or
Assistant Secretary of the Borrower and each Subsidiary dated the Closing Date
and certifying with respect to the Borrower and each Subsidiary (1) that
attached thereto is a true and complete copy of the organizational documents and
all amendments thereto of each of them, certified as of a recent date by the
appropriate Governmental Authority in its jurisdiction of organization, (2) that
attached thereto is a true and complete copy of the partnership agreement,
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 (3) below, (3) 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, (4) 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 (5) 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 (A) 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 and each Subsidiary under the laws of their respective
jurisdictions of organization 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
4.17(E).
(vi) INSURANCE CERTIFICATE. The Administrative Agent shall
have received a detailed schedule 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, the unit holders
and board approvals of the Parent and the General Partner, as applicable, and of
all Governmental Authorities and courts having jurisdiction with respect to the
transactions contemplated by this Agreement, the SCANA Acquisition 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 4.9 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.
(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 4.1(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) SCANA ACQUISITION AGREEMENT. There shall not have been
any material modification, amendment, supplement or waiver to the SCANA
Acquisition Agreement without the prior written consent of the Administrative
Agent, including any modification, amendment, supplement or waiver relating to
the amount or type of consideration to be paid in connection with the
transactions contemplated by the SCANA Acquisition Agreement or the contents of
any disclosure schedules and exhibits; and the Administrative Agent shall have
received a final executed copy of the SCANA Acquisition Agreement, together with
all exhibits and schedules thereto, certified as such by an officer of the
Borrower.
(iv) POWER OF ATTORNEY; PARENT SIDE LETTER. The Borrower shall
have received a power of attorney from the Parent, in form and substance
acceptable to the Administrative Agent, a copy of which shall have been
delivered to the Administrative Agent, and the Parent shall have executed and
delivered to the Administrative Agent the Parent Side Letter, which such side
letter shall be on terms and conditions satisfactory to the Administrative
Agent.
(v) DUE DILIGENCE AND OTHER DOCUMENTS. The Administrative
Agent shall have completed, to its satisfaction, all legal and business due
diligence with respect to any aspect to the transactions relating to (i) the
Borrower, Parent and the General Partner and (ii) the SCANA Acquisition,
including, without limitation, environmental due diligence satisfactory to the
Administrative Agent to include a third party assessment of the storage cavern
and pipeline to be acquired, and 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. To the extent
requested, the Administrative Agent shall have received, reviewed, and approved
in its reasonable satisfaction any other agreement not specifically referenced
herein, the terms of which such agreements govern the future management and
operations of the Borrower.
(vi) CONSUMMATION OF SCANA ACQUISITION. The transactions
contemplated by the SCANA Acquisition Agreement shall be consummated prior to or
simultaneously with the initial borrowing under this Agreement and each of the
conditions set forth therein shall have been satisfied, without any waiver or
amendment thereof.
SECTION 5.3 CONDITIONS TO ALL EXTENSIONS OF CREDIT. The obligations of
the Lenders to make any Extension of Credit 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 VI 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 (i) on the borrowing date with respect to
such Loan or after giving effect to the Loans to be made on such date or (ii) or
the issue date with respect to such Letter of Credit or after giving affect to
such Letters of Credit 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 VI
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
SECTION 6.1 REPRESENTATIONS AND WARRANTIES. To induce the
Administrative Agent and Lenders to enter into this Agreement and to induce the
Lenders to make the Extensions of Credit, the Borrower hereby represents and
warrants to the Administrative Agent and Lenders both before and after giving
effect to the transactions contemplated hereunder 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 6.1(A).
(b) OWNERSHIP.
(i) Each Subsidiary of the Borrower is listed on Part I of
SCHEDULE 6.1(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 Part I of SCHEDULE 6.1(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 its
Subsidiaries of the Borrower and the number of shares or other ownership
interests owned by each are described on Part I of SCHEDULE 6.1(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 Part I of SCHEDULE 6.1(B).
(ii) The sole general partner of the Parent is the General
Partner, which owns 224,625 General Partner Units, representing in the aggregate
a 1.0% general partner interest in the Parent. The sole general partner of the
Borrower is the General Partner, which owns a 1.0101% general partner interest
in the Borrower. The only limited partner of the Borrower is the Parent, which
owns a 98.9899% limited partner interest in the Borrower and the Borrower does
not have any partners other than the General Partner and the Parent. Each
General Partner Unit is entitled to share pro rata with the Common Units in all
distributions by the Parent.
(iii) As of the Closing Date, the Capital Stock of the General
Partner is owned by such Persons and in such amounts as listed on Part II of
SCHEDULE 6.1(B).
(iv) The Rabbi Trust owns of record 553,896 Common Units,
free and clear of any Liens.
(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 the regulations 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 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 its
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) NO DEFAULTS. None of the Business, the Borrower, any of its
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 6.1(M) 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 6.1(N), 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 26, 1998 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 26, 1999 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 26, 1998 there has been
no material adverse change in the properties, business, operations, prospects,
or condition (financial or otherwise) of the Borrower and its Subsidiaries,
taken as a whole, 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 6.1(p), 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 10.2. 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 10.2. The
Obligations hereunder are senior unsecured obligations of the Borrower which
rank PARI PASSU with the Senior Notes.
(u) INDEBTEDNESS AND CONTINGENT OBLIGATIONS. SCHEDULE 6.1(U) 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 6.1(V), 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) REPRESENTATIONS AND WARRANTIES FROM OTHER DOCUMENTS. As of the
Closing Date, each of the representations and warranties made in the SCANA
Acquisition Agreement by the Borrower and, to the Borrower's knowledge, by each
other Person party thereto is true and correct in all respects.
(y) [Intentionally Omitted]
(z) SENIOR NOTE AGREEMENT. Attached hereto as EXHIBIT I is a true and
correct copy of the Senior Note Agreement, including all amendments thereto. 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.
(aa) YEAR 2000 COMPLIANCE. The Borrower and its Subsidiaries have
initiated a review and assessment of all areas within any of their business and
that could be adversely affected by the "Year 2000 Problem" (that is, the risk
that computer applications used by the Borrower and its Subsidiaries may be
unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999) and (ii) developed
a plan and timeline for addressing the Year 2000 Problem on a timely basis.
Based on the foregoing, the Borrower and its Subsidiaries believe that all
computer applications that are material to its or any of its Subsidiaries'
business and operations are reasonably expected on a timely basis to be able to
perform properly date-sensitive functions for all dates before and after January
1, 2000 (that is, be "year 2000 compliant"), except to the extent that a failure
to do so could not reasonably be expected to have Material Adverse Effect.
(bb) 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 6.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All
representations and warranties set forth in this Article VI 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 VII
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 14.11, 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 7.1 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
PriceWaterhouseCoopers 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 7.2 OFFICER'S COMPLIANCE CERTIFICATE. At each time financial
statements are delivered pursuant to SECTIONS 7.1(A) or (B), a certificate of
the chief financial officer or the treasurer of the Borrower in the form of
EXHIBIT F attached hereto (an "OFFICER'S COMPLIANCE Certificate").
SECTION 7.3 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;
(d) written notice of any action or decision by the Board of
Supervisors of the Parent to change the amount of the Minimum Quarterly
Distribution or not to pay all or any portion of the Minimum Quarterly
Distribution, which notice shall be delivered within three (3) Business Days
after such action or decision; and
(e) 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 7.4 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;
(f) any event which makes any of the representations set forth in
SECTION 6.1 inaccurate in any respect;
(g) any other development that has resulted in, or could reasonably be
expected to result in a Material Adverse Effect; and
(h) any notice received under or in connection with the Mellon Note
Purchase Agreement 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 any of the Mellon Note Documents.
SECTION 7.5 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 VII or any other provision of this Agreement,
or any other of the Loan 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 VIII
AFFIRMATIVE COVENANTS
Until 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 14.11, the Borrower will, and
will cause each of its Subsidiaries to:
SECTION 8.1 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 10.5.
(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 8.2 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 8.2
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 8.3 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 8.4 EMPLOYEE BENEFITS. Comply in all material respects with the
applicable provisions of ERISA and the Code and 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 8.5 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 8.5 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 8.5, (iv)
disclosure is made to an actual or prospective assignee or participant pursuant
to SECTION 14.10 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 8.6 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 8.7 ADDITIONAL GUARANTORS. 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 8.8 USE OF PROCEEDS. Use the proceeds of (a) the Revolving
Credit Loans for working capital and general partnership purposes of the
Borrower and its Subsidiaries, including, without limitation, (i) to refinance
indebtedness of the Borrower under the Existing Credit Agreement, (ii) to
finance Restricted Payments to the Parent (and related pro rata Restricted
Payments to the General Partner) to enable the Parent to pay the Minimum
Quarterly Distribution and reasonable expenses of the Parent as set forth in
SECTION 10.6(B), (iii) to make required payments under the Mellon Documents to
the extent permitted under SECTION 10.13 and (iv) payment of fees and expenses
incurred in connection with this Agreement, and (b) the Acquisition Loans to
finance Permitted Business Acquisitions.
SECTION 8.9 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 8.10 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 its 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 8.11 PREPARATION OF ENVIRONMENTAL REPORTS. If a Default caused
by reason of a breach of SECTIONS 6.1(H) OR 8.10 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 8.12 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 its 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 10.6(B) OR SECTION 10.7.
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 its 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 its Subsidiaries.
SECTION 8.13 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 its Subsidiaries subject to the
provisions of SECTION 10.2 or 10.5 to be Margin Stock.
SECTION 8.14 AVAILABLE CASH RESERVES. 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 its 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 paragraph of the definition of "Available Cash".
SECTION 8.15 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 8.16 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. At the request of the Administrative Agent,
the Borrower shall provide reasonable assurances satisfactory to the
Administrative Agent of the Borrower's Year 2000 compatibility.
SECTION 8.17 COMMODITY HEDGING POLICY. The Borrower shall not amend the
Borrower's existing 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 IX
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 14.11, the Borrower and its
Subsidiaries on a Consolidated basis will not:
SECTION 9.1 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 9.2 LEVERAGE RATIO. Permit the Leverage Ratio as of the end of
any fiscal quarter to be greater than 5.10 to 1.00; PROVIDED, that if the
Borrower shall elect to extend the Termination Date pursuant to SECTION 4.6,
permit the Leverage Ratio as of the end of any fiscal quarter after March 31,
2001 to be greater than 4.75 to 1.00.
SECTION 9.3 ADJUSTED CONSOLIDATED NET WORTH. Permit Adjusted
Consolidated Net Worth at any time to be less than $50,000,000.
ARTICLE X
NEGATIVE 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 14.11, the Borrower will not, and
will not cause or permit any of its Subsidiaries to:
SECTION 10.1 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 amount not 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 arising out of the Mellon Note
Purchase Agreement as in effect on the date hereof;
(f) Indebtedness of the Borrower and its Subsidiaries for standby
letters of credit relating to obligations described in SECTIONS 10.1(H) AND (I),
below, in an aggregate amount at any time not to exceed $35,000,000, exclusive
of any stand by Letters of Credit issued by the Issuing Lender pursuant to the
terms of this Agreement;
(g) Indebtedness of the Borrower or any Wholly-Owned Subsidiary
to any Subsidiary or the Borrower, as the case may be;
(h) Indebtedness of the Borrower and its 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;
(i) Indebtedness of the Borrower or its 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;
(j) 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 (2) Business Days of its incurrence;
(k) 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 (k) shall not at any time exceed $5,000,000;
(l) 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 (l) 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 4.5;
(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;
(m) 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;
(n) obligations under Commodity Hedging Agreements respecting actual
volumes of propane inventory of the Borrower incurred in accordance with the
Borrower's commodity hedging policy, previously approved by the Lenders; and
(o) 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 10.2 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 10.2; 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 10.5(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 10.1(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 10.2; 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 10.1(L); and
(p) Liens securing Indebtedness (including interests of lessors under
Capital Leases) permitted by SECTION 10.1, 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 10.3 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
Acquisition Commitment as required pursuant to SECTION 4.2(E) AND 4.5(B).
SECTION 10.4 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 9.2, 9.3 AND 10.1 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;
(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 fourteen (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; and
(e) investments made by a Subsidiary in the Borrower.
SECTION 10.5 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 10.5 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 its 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 its Subsidiaries
shall be located in the United States and (C) the Borrower and its Subsidiaries
shall be in compliance, on a pro forma basis after giving effect to such
transaction, with the covenants contained in Article IX recomputed as of the
last day of the most recently ended fiscal quarter of the Borrower and its
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 10.4;
(d) sales, leases or other dispositions of equipment or real property
of the Borrower or its 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 its Subsidiaries;
PROVIDED that the Designated Net Proceeds shall be applied as a prepayment of
the Acquisition Loans and/or reduction of the Acquisition Commitment as required
pursuant to SECTION 4.2(E) and SECTION 4.5(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 10.4 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 Acquisition Commitment as required pursuant to
SECTION 4.2(E) and SECTION 4.5(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 10.4 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 10.6 RESTRICTED PAYMENTS. 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 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 Parent Partnership Agreement) and indemnification of and
contribution to all Persons entitled to indemnification or contribution under
Section 8.14 of the Parent Partnership Agreement (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 its 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 IX recomputed as of the last day of the most recently ended
fiscal quarter of the Borrower and its 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 10.7 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 10.7 shall not apply to (a) Restricted Payments permitted
under SECTION 10.6, (b) indemnification of and contribution to all Persons
entitled to indemnification or contribution under Section 7.14 of the Borrower
Partnership Agreement (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 10.8 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 10.5.
SECTION 10.9 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
SCANA Acquisition Agreement, any Partnership Document, the Senior Notes, the
Senior Note Agreement, any Refinancing Notes or any Refinancing Note Agreement,
Section 9 of the Compensation Deferral Plan, Sections 2 or 3 of the Rabbi Trust
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 9.1, 9.2, 9.3 AND 10.11 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 10.10 LEASE OBLIGATIONS. Permit the aggregate obligations that
are due and payable during any fiscal year of the Borrower and its Subsidiaries
under leases (other than obligations under Capital Leases) to exceed $30,000,000
during such fiscal year.
SECTION 10.11 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 10.12 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 10.13 MELLON NOTE PURCHASE. Make any payment of or set aside
for payment any cash, property or securities pursuant to the Mellon Note
Purchase Agreement except at such time as (a) no Default or Event of Default
exists or would be caused thereby, (b) an Event of Default (as defined in the
Mellon Loan Agreement) has occurred pursuant to Section 7.01(a), (h) or (i) of
the Mellon Loan Agreement, and (c) (i) the Borrower has received a notice of
exercise from the Lender (as defined in the Mellon Note Purchase Agreement) of
its right to require the Borrower to purchase the Mellon Note thereunder or (ii)
the Borrower desires to purchase the Mellon Note and the Required Lenders have
consented in writing in advance to such purchase.
SECTION 10.14 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 VIII, IX and X.
ARTICLE XI
[INTENTIONALLY OMITTED]
ARTICLE XII
DEFAULT AND REMEDIES
SECTION 12.1 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 AND REIMBURSEMENT
OBLIGATIONS. The Borrower shall default in any payment of principal of any Loan,
Note or Reimbursement Obligation 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, Note or Reimbursement Obligation 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, the
SCANA Acquisition 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 7.1, 7.2, 7.4(E) or Articles IX or X 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
12.1) 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 or any Reimbursement Obligation; 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 or any Reimbursement Obligation; 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. 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 OWNERSHIP. 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 any
provision 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 12.2 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 CREDIT FACILITIES. Declare the
principal of and interest on the Loans, the Notes and the Reimbursement
Obligations 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 (including, without limitation, all L/C Obligations, whether or not
the beneficiaries of the then outstanding Letters of Credit shall have presented
the documents required thereunder) 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 or Letters of Credit thereunder; PROVIDED,
that upon the occurrence of an Event of Default specified in SECTION 12.1(I) or
(j), the Credit Facilities shall be automatically terminated and all Obligations
shall automatically 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 in any other Loan Document to the contrary notwithstanding.
(b) LETTERS OF CREDIT. With respect to all Letters of Credit with
respect to which presentment for honor shall not have occurred at the time of an
acceleration pursuant to SECTION 12.2(a), require the Borrower at such time to
deposit in a cash collateral account with the Administrative Agent an amount
equal to the aggregate then undrawn and unexpired amount of such Letters of
Credit. Amounts held in such cash collateral account shall be applied by the
Administrative Agent to the payment of drafts drawn under such Letters of
Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay the
other Obligations. After all such Letters of Credit shall have expired or been
fully drawn upon, the Reimbursement Obligation shall have been satisfied and all
other Obligations shall have been paid in full, the balance, if any, in such
cash collateral account shall be returned to the Borrower.
(c) 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 12.3 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 XIII
THE ADMINISTRATIVE AGENT
SECTION 13.1 APPOINTMENT. 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 for the term hereof 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. Any reference to the
Administrative Agent in this Article XIII shall be deemed to refer to the
Administrative Agent solely in its capacity as Administrative Agent and not in
its capacity as a Lender.
SECTION 13.2 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 13.3 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 13.4 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 14.10. 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 13.5 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 (or, when expressly required hereby, all the 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, except to the extent that other provisions of this Agreement expressly
require that any such action be taken or not be taken only with the consent and
authorization or the request of the Lenders or Required Lenders, as applicable.
SECTION 13.6 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 and issue or participate in Letter of Credit 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 13.7 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 or any Reimbursement Obligation) 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 13.7 shall survive the payment of the Notes, any Reimbursement
Obligation and all other amounts payable hereunder and the termination of this
Agreement.
SECTION 13.8 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 and with respect to any Letter of Credit issued by it or participated in
by 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 13.9 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 13.9 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.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 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.: 973-503-9041
With copies to: Weil, Gotshal & Manges LLP
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-4
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,
L.L.P.
NationsBank Corporate Center
Suite 4200
100 North Tryon Street
Charlotte, North Carolina 28202-4006
Attention: J. Donnell Lassiter
Telephone No.: 704-331-7444
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 and
Letters of Credit issued.
SECTION 14.2 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 14.3 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 14.10 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 12.2 and although such Obligations shall be contingent or unmatured.
Notwithstanding the preceding sentence, each Lender agrees to notify the
Borrower and the Administrative Agent after any such set-off and application;
PROVIDED, that the failure to give such notice shall not affect the validity of
such set-off and application.
SECTION 14.4 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 14.5 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 14.1.
Nothing in this SECTION 14.5 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 14.6 BINDING ARBITRATION; WAIVER OF JURY TRIAL.
(a) BINDING ARBITRATION. Upon demand of any party, whether made before
or 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, disputes as to whether a matter is
subject to arbitration, 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.
Notwithstanding anything foregoing to the contrary, any arbitration proceeding
demanded hereunder shall begin within ninety (90) days after such demand thereof
and shall be concluded within one-hundred twenty (120) days after such demand.
These time limitations may not be extended unless a party hereto shows cause for
extension and then such extension shall not exceed a total of sixty (60) days.
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. The
parties hereto do not waive any applicable Federal or state substantive law
except as provided herein. 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 APPLICABLE 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 14.8), 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 14.7 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 14.8 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, the Lenders and the 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 14.9 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
Required 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 14.10 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 and
the other Loan Documents (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 G 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 G:
(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 or Reimbursement Obligation, 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; provided, that the
Administrative Agent may disclose information relating to this Agreement to Gold
Sheets and other similar bank trade publications, such information to consist of
deal terms and other information customarily found in such publications and
provided further, that the Administrative Agent and Lenders may disclose any
such information to the extent such disclosure is required by law or requested
by any regulatory authority. Any Lender may, in connection with any assignment,
proposed assignment, participation or proposed participation pursuant to this
SECTION 14.10, 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 14.11 AMENDMENTS, WAIVERS AND CONSENTS. Except as set forth
below or as specifically provided in any Loan Document, 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 or issue or participate in Letters of Credit
(including without limitation pursuant to SECTION 3.5), (b) reduce or forgive
the principal amount of any Loan or Reimbursement Obligation, (c) extend the
originally scheduled time or times of payment of the principal of any Loan or
Reimbursement Obligation or the time or times of payment of interest on any
Loan, (d) reduce the rate of interest or fees payable on any Loan or
Reimbursement Obligation or any fee or commission with respect thereto, (e)
permit any subordination of the principal or interest on any Loan or
Reimbursement Obligation, (f) permit any assignment (other than as specifically
permitted or contemplated in this Agreement) of any of the Borrower's rights and
obligations hereunder, (g) terminate or cancel any Guarantee Agreement or
release any Guarantor from its obligations under a Guarantee Agreement or (h)
amend the provisions of SECTION 14.10(A), this SECTION 14.11 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 XIII
shall be made without the written consent of the Administrative Agent and (b)
Article III without the written consent of the Issuing Lender.
SECTION 14.12 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 14.13 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 14.14 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 XIV 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 14.15 TITLES AND CAPTIONS. Titles and captions of Articles,
Sections and subsections in, and the table of contents of, this Agreement are
for convenience only, and neither limit nor amplify the provisions of this
Agreement.
SECTION 14.16 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 14.17 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 14.18 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 or in respect of any provision
of this Agreement which survives such termination.
SECTION 14.19 INCONSISTENCIES WITH OTHER DOCUMENTS; INDEPENDENT
EFFECT OF COVENANTS.
(a) In the event there is a conflict or inconsistency between this
Agreement and any other Loan Document, the terms of this Agreement shall
control.
(b) The Borrower expressly acknowledges and agrees that each covenant
contained in Articles VIII, IX or X shall be given independent effect.
Accordingly, the Borrower shall not engage in any transaction or other act
otherwise permitted under any covenant contained in Articles VIII, IX or X if,
before or after giving effect to such transaction or act, the Borrower shall or
would be in breach of any other covenant contained in Articles VIII, IX or X.
[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: VICE PRESIDENT AND TREASURER
----------------------------------
FIRST UNION NATIONAL BANK,
as Administrative Agent, as Lender, as
Swingline Lender and as Issuing Lender
By: /S/ STEPHEN M. RIDDELL
----------------------------------------
Name: STEPHEN M. RIDDELL
-----------------------------------
Title: VICE PRESIDENT
----------------------------------
THE BANK OF NEW YORK,
as Managing Agent and as Lender
By: /S/ RANDOLPH E. J. MEDRANO
----------------------------------------
Name: RANDOLPH E. J. MEDRANO
-----------------------------------
Title: VICE PRESIDENT
----------------------------------
BANK ONE, NA (MAIN OFFICE CHICAGO),
as Syndication Agent and as Lender
By: /S/ ROBERT MCMILLAN
----------------------------------------
Name: ROBERT MCMILLAN
-----------------------------------
Title: ASSISTANT VICE PRESIDENT
----------------------------------
ABN AMRO BANK N.V., as Managing Agent
and as Lender
By: /S/ GEORGE M. DUGAN
----------------------------------------
Name: GEORGE M. DUGAN
-----------------------------------
Title: VICE PRESIDENT
----------------------------------
By: /S/ PATRICIA CHRISTY
----------------------------------------
Name: PATRICIA CHRISTY
-----------------------------------
Title: ASSISTANT VICE PRESIDENT
----------------------------------
CREDIT LYONNAIS NEW YORK BRANCH,
as Managing Agent and as Lender
By: /S/ MARY E. COLLIER
----------------------------------------
Name: MARY E. COLLIER
-----------------------------------
Title: SENIOR VICE PRESIDENT AND MANAGER
----------------------------------
INDEX TO FINANCIAL STATEMENTS
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
PAGE
----
Reports of Independent Accountants F-2
Consolidated Balance Sheets-September 25, 1999 and September 26, 1998 F-3
Consolidated Statements of Operations -
Years Ended September 25, 1999, September 26, 1998
and September 27, 1997 F-4
Consolidated Statements of Cash Flows -
Years Ended September 25, 1999, September 26, 1998
and September 27, 1997 F-5
Consolidated Statements of Partners' Capital -
Years Ended September 25, 1999, September 26, 1998 and
September 27, 1997 F-6
Notes to Consolidated Financial Statements F-7
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(i) and 2 and appearing on page F-1 present
fairly, in all material respects, the financial position of Suburban Propane
Partners, L.P. and its subsidiaries (the "Partnership") at September 25, 1999
and September 26, 1998, and the results of their operations and their cash flows
for the three fiscal years in the period ended September 25, 1999, 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.
PricewaterhouseCoopers LLP
Florham Park, NJ
October 21, 1999, except for Note 14,
which is as of December 3, 1999
F-2
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
SEPTEMBER 25, SEPTEMBER 26,
1999 1998
------------- -------------
ASSETS
Current assets:
Cash & cash equivalents .................................. $ 8,392 $ 59,819
Accounts receivable, less allowance for doubtful accounts
of $2,089 and $2,382, respectively ....................... 37,620 39,134
Inventories .............................................. 29,727 29,962
Prepaid expenses and other current assets ................ 2,898 3,866
--------- ---------
Total current assets ............................. 78,637 132,781
Property, plant and equipment, net ........................... 325,224 343,828
Net prepaid pension cost ..................................... 33,498 34,556
Goodwill & other intangibles assets, net ..................... 213,963 214,782
Other assets ................................................. 7,898 3,618
--------- ---------
Total assets ................................... $ 659,220 $ 729,565
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable ......................................... $ 40,068 $ 31,315
Accrued employment and benefit costs ..................... 19,629 20,926
Short-term borrowings .................................... 2,750 --
Accrued insurance ........................................ 5,120 4,830
Customer deposits and advances ........................... 17,774 16,241
Accrued interest ......................................... 8,250 8,198
Other current liabilities ................................ 9,415 10,040
--------- ---------
Total current liabilities ...................... 103,006 91,550
Long-term debt ............................................... 427,634 427,897
Postretirement benefits obligation ........................... 34,394 35,980
Accrued insurance ............................................ 18,009 16,574
Other liabilities ............................................ 7,791 9,764
--------- ---------
Total liabilities .............................. 590,834 581,765
--------- ---------
Partners' capital:
Common Unitholders ....................................... 66,342 84,847
Subordinated Unitholder .................................. -- 49,147
General Partner .......................................... 2,044 24,488
Unearned compensation .................................... -- (10,682)
Deferred compensation trust .............................. (10,712) --
Common Units held in trust, at cost ...................... 10,712 --
--------- ---------
Total partners' capital ........................ 68,386 147,800
--------- ---------
Total liabilities and partners' capital ........ $ 659,220 $ 729,565
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per Unit amounts)
Year Ended
-------------------------------------------
September 25, September 26, September 27,
1999 1998 1997
------------- ------------- -------------
Revenues
Propane ........................................ $ 544,265 $ 598,599 $ 700,767
Other .......................................... 75,513 68,688 70,364
--------- --------- ---------
619,778 667,287 771,131
--------- --------- ---------
Costs and expenses
Cost of sales .................................. 273,109 326,440 436,795
Operating ...................................... 210,217 210,415 218,034
Depreciation and amortization .................. 34,906 36,531 37,307
General and administrative expenses ............ 29,371 30,177 24,321
Recapitalization costs ......................... 18,903 -- --
Gain on sale of investment in Dixie Pipeline Co. -- (5,090) --
Restructuring charge ........................... -- -- 6,911
--------- --------- ---------
566,506 598,473 723,368
Income before interest expense and
provision for income taxes ..................... 53,272 68,814 47,763
Interest expense, net .............................. 30,765 30,614 33,979
--------- --------- ---------
Income before provision for income taxes ........... 22,507 38,200 13,784
Provision for income taxes ......................... 68 35 190
--------- --------- ---------
Net income ..................................... $ 22,439 $ 38,165 $ 13,594
========= ========= =========
General Partner's interest in net income ........... $ 449 $ 763 $ 272
--------- --------- ---------
Limited Partners' interest in net income ........... $ 21,990 $ 37,402 $ 13,322
========= ========= =========
Basic and diluted net income per Unit .............. $ 0.83 $ 1.30 $ 0.46
========= ========= =========
Weighted average number of Units outstanding ....... 26,563 28,726 28,726
--------- --------- ---------
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended
-------------------------------------------
September 25, September 26, September 27,
1999 1998 1997
------------- ------------- -------------
Cash flows from operating activities:
Net income ............................................................ $ 22,439 $ 38,165 $ 13,594
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation ..................................................... 26,989 29,166 29,718
Amortization ..................................................... 7,917 7,365 7,589
Restructuring charge ............................................. -- -- 6,911
(Gain) on sale of investment ..................................... -- (5,090) --
(Gain) on disposal of property, plant and
equipment ...................................................... (578) (1,391) (774)
Recapitalization costs ........................................... 18,903 -- --
Changes in operating assets and liabilities, net of acquisitions and
dispositions:
Decrease in accounts receivable .................................. 1,514 6,793 9,094
Decrease in inventories .......................................... 235 1,953 8,258
Decrease/(increase) in prepaid expenses and other
current assets .................................................. 968 3,317 (616)
Increase/(decrease) in accounts payable .......................... 8,753 (6,470) (2,945)
(Decrease)/increase in accrued employment
and benefit costs ............................................... (855) 1,595 (5,031)
Increase/(decrease) in accrued interest .......................... 52 (108) 84
Increase/(decrease) in other accrued liabilities ................. 1,198 458 (112)
Other noncurrent assets ............................................... (4,086) (2,853) (1,138)
Deferred credits and other noncurrent liabilities ..................... (1,691) (2,827) (5,784)
--------- --------- ---------
Net cash provided by operating activities ................... 81,758 70,073 58,848
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures ................................................. (11,033) (12,617) (24,888)
Acquisitions ......................................................... (4,768) (4,041) (1,880)
Proceeds from sale of investment ..................................... -- 13,090 --
Proceeds from sale of property, plant and equipment, net ............. 3,560 6,468 6,059
--------- --------- ---------
Net cash (used in) provided by investing activities ......... (12,241) 2,900 (20,709)
--------- --------- ---------
Cash flows from financing activities:
Debt repayments ...................................................... (695) (260) (299)
Short-term borrowings ................................................ 2,750 -- --
Proceeds from General Partner APU contribution ....................... -- 12,000 10,000
Redemption of Subordinated Units and APUs ............................ (69,000) -- --
Payment of recapitalization costs .................................... (9,367) -- --
Partnership distribution ............................................. (44,632) (44,230) (47,435)
--------- --------- ---------
Net cash (used in) financing activities ..................... (120,944) (32,490) (37,734)
Net (decrease)/increase in cash and cash equivalents ....................... (51,427) 40,483 405
Cash and cash equivalents at beginning of period ........................... 59,819 19,336 18,931
--------- --------- ---------
Cash and cash equivalents at end of period ................................. $ 8,392 $ 59,819 $ 19,336
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid for interest ............................................... $ 32,602 $ 32,659 $ 32,836
========= ========= =========
Non-cash investing and financing activities
Assets acquired by incurring note payable ............................ $ -- $ 250 $ --
========= ========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(IN THOUSANDS)
COMMON DEFERRED UNEARNED TOTAL
NUMBER OF UNITS GENERAL UNITS IN COMPENSATION COMPENSATION PARTNERS'
COMMON SUBORDINATED COMMON SUBORDINATED PARTNER TRUST TRUST RESTRICTED UNITS CAPITAL
------ ------------ -------- ------------ ------- -------- ------------ ---------------- ---------
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
Net grants forfeited under
Restricted Unit Plan ............ (594) 594 --
Partnership distribution ........ (43,125) (1,105) (44,230)
Amortization of Restricted
Unit compensation ............... 626 626
APU contribution (120 Units) .... 12,000 12,000
Net Income ...................... -- -- 28,090 9,312 763 -- -- -- 38,165
------ ------------ -------- ------------ ------- -------- ------------ ---------------- ---------
Balance at September 26, 1998 ...21,562 7,164 84,847 49,147 24,488 (10,682) 147,800
Net grants issued under
Restricted Unit Plan ............ 1,154 (1,154) --
Partnership distribution ........ (43,739) (893) (44,632)
Amortization of Restricted
Unit compensation ............... 443 443
Recapitalization transactions ... 674 (7,164) 17,273 (64,330) (22,000) 10,712 (10,712) 11,393 (57,664)
Net Income ...................... -- -- 6,807 15,183 449 -- -- -- 22,439
------ ------------ -------- ------------ ------- -------- ------------ ---------------- ---------
Balance at September 25, 1999 ...22,236 -- $ 66,342 $ -- $ 2,044 $ 10,712 $ (10,712) $ -- $ 68,386
====== ============ ======== ============ ======= ======== ============ ================ =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 25, 1999
(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 Suburban Propane, a 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, the Service Company and a corporate operating entity subsequently
acquired by the Operating Partnership 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
over-allotment option to purchase an additional 2,812,500 Common Units.
From the Closing Date through May 26, 1999, Suburban Propane GP, Inc. (the
"General Partner"), a wholly-owned indirect subsidiary of Millennium Chemicals,
Inc. ("Millennium"), served as the general partner of the Partnership and
Operating Partnership owning a 1% general partner interest in the Partnership
and a 1.0101% general partner interest in the Operating Partnership. Millennium
became a publicly traded company upon Hanson PLC's spin-off of its chemical
business, including its interests in the Partnership, in October 1996. In
addition, the General Partner owned a 24.4% limited partner interest and a
special limited partner interest in the Partnership. The limited partner
interest was evidenced by 7,163,750 Subordinated Units and the special limited
partner interest was evidenced by 220,000 Additional Partnership Units ("APUs").
On May 26, 1999, the Partnership completed a recapitalization (the
"Recapitalization") which included the redemption of the Subordinated Units and
APUs from the General Partner, and the general partner was replaced with a new
General Partner, Suburban Energy Services Group LLC (the "Successor General
Partner"), owned by Senior Management of the Partnership (See Note 9 - The
Recapitalization).
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 730,000 active residential, commercial,
industrial and agricultural customers from approximately 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 524 million gallons during the
fiscal year ended September 25, 1999. Based on industry statistics, the
Partnership believes that its retail propane sales volume constitutes
approximately 5% of the domestic retail market for propane.
F-7
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. All significant intercompany transactions and accounts have been
eliminated.
FISCAL PERIOD. The Partnership's fiscal year ends on the last Saturday nearest
to September 30.
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.
FINANCIAL INSTRUMENTS. The Partnership routinely uses propane futures and
forward contracts to reduce the risk of future price fluctuations and to help
ensure supply during periods of high demand. Gains and losses on futures and
forward contracts designated as hedges are deferred and recognized in cost of
sales as a component of the product cost for the related hedged transaction. In
order for a future or forward contract to be accounted for as a hedge, the item
to be hedged must expose the Partnership to price risk and the future or forward
must reduce such price risk. As the Partnership is subject to propane market
pricing and the propane forwards and futures highly correlate with changes in
the market price of propane, hedge accounting is often utilized. The Partnership
accounts for financial instruments which do not meet the hedge criteria or for
hedging transactions which are terminated, under the mark or market rules which
require gains or losses to be immediately recognized in earnings. In the
Consolidated Statement of Cash Flows, cash flows from qualifying hedges are
classified in the same category as the cash flows from the items being hedged.
Net realized gains and losses for fiscal years 1999, 1998 and 1997 and
unrealized gains and losses on open positions as of September 25, 1999 and
September 26, 1998, respectively, were not material.
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 standard cost basis
for appliances, which estimates average cost.
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 while
betterments are capitalized as additions to the related assets and depreciated
over the asset's remaining useful life.
F-8
GOODWILL AND OTHER INTANGIBLE ASSETS. Goodwill and other intangible assets are
comprised of the following:
September 25, September 26,
1999 1998
------------- -------------
Goodwill $242,230 $237,812
Debt origination costs 8,024 6,224
Other, principally noncompete agreements 4,948 5,076
------------- -------------
255,202 249,112
Less: accumulated amortization 41,239 34,330
------------- -------------
$213,963 $214,782
============= =============
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 periods
ranging from twenty to forty years from the date of acquisition.
Debt origination costs represent the costs incurred in connection with the
placement of and the subsequent amendment to the $425,000 of Senior Notes which
are 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 two
corporate entities, including 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
corporate entities are subject to federal and state income taxes. Accordingly,
the Partnership's consolidated financial statements reflect income tax expense
related to the corporate entities' 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.
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.
F-9
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, and makes the pro forma
information disclosures required under the provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation". 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 sheets. As a result of the May 26, 1999 Recapitalization, all
unamortized compensation was earned and expense of $11,393 was recorded. As of
September 25, 1999 there were no Units outstanding under the Restricted Unit
Plan.
NET INCOME (LOSS) PER UNIT. Basic net income (loss) per limited partner 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. Diluted net income (loss) per limited partner 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,
Subordinated Units, and the time vested Restricted Units granted under the
Restricted Unit Award Plan.
New Accounting Standards. In fiscal 1999, the Partnership adopted SFAS No. 130,
"Reporting Comprehensive Income" ("Statement No. 130") which did not have an
impact on the financial statements. Statement No. 130 requires entities to
report comprehensive income (the total of net income and all other non-owner
changes in partners' capital) either below net income in the statement of
operations, in a separate statement of comprehensive income or within the
statement of partners' capital.
In fiscal 1999, the Partnership adopted SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits" ("Statement No. 132").
Statement No. 132 standardizes the disclosure requirements for pensions and
other postretirement benefits, and requires additional information on changes in
benefit obligations and fair values of plan assets. It does not change the
measurement or recognition of pensions or other postretirement benefits. (See
Note 8 - Pension Plans and Other Postretirement Benefits.)
In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("Statement No. 133"). Statement No. 133 requires
entities to record derivatives as assets or liabilities on the balance sheet and
to measure them at fair value. FASB has delayed this standard's effective date
for one year, as such it will be adopted by the Partnership in fiscal year 2001.
Management is currently evaluating the impact this statement may have on the
Partnership's financial statements.
RECLASSIFICATIONS. Certain prior period balances have been reclassified to
conform with the current period presentation.
3. 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 Unitholders and 2% to the General
Partner, subject to the payment of incentive distributions in the event
Available Cash exceeds a target distribution of $0.55 per Unit per quarter as
defined in the Partnership Agreement. Common Units will be entitled to
arrearages if the full Minimum Quarterly Distribution is not paid with respect
to any quarter through the fiscal quarter ending March 31, 2001.
F-10
Effective with the completion of the Recapitalization (See Note 9 - The
Recapitalization), the Distribution Support Agreement among the Partnership, the
General Partner and Millennium, which was used to enhance the Partnership's
ability to distribute the Minimum Quarterly Distribution on Common Units, was
terminated and replaced by a $22,000 liquidity subfacility provided by the
Partnership under the Partnership's Bank Credit Facilities (See Note 6 -
Long-Term Debt and Bank Credit Facilities). Under the Distribution Support
Agreement, the General Partner had agreed to contribute to the Partnership cash
in exchange for APUs. In connection with the Recapitalization, the Partnership
redeemed all the outstanding APUs representing $22,000 that the General Partner
had previously contributed under the Distribution Support Agreement.
The Partnership has paid the Minimum Quarterly Distribution on all outstanding
Common Units during each quarter of fiscal 1999. In conjunction with the
Recapitalization, the Partnership has increased the quarterly distribution to
Unitholders from $.50 to $.5125 per quarter effective for the fiscal quarter
ended June 26, 1999. The total amount consists of the existing Minimum Quarterly
Distribution of $.50 per Unit per quarter plus an additional $0.0125 per Unit
per quarter above the Minimum Quarterly Distribution.
4. RELATED PARTY TRANSACTIONS
In connection with the Partnership's Recapitalization (See Note 9 - The
Recapitalization), the Successor General Partner acquired the general partner
interests from Millennium Chemicals Inc. for $6,000 ("the GP Loan") which was
borrowed under a private placement with Mellon Bank N.A. ("Mellon"). In
addition, the Partnership incurred expenses of $300 to complete the purchase of
the general partner interest by the Successor General Partner.
Under the occurrence and continuance of an event of default, as defined in the
GP Loan, Mellon will have the right to cause the Partnership to purchase the
note evidencing the GP Loan ("the GP Note"). The Partnership has agreed to
maintain borrowing availability under its available lines of credit, which will
be sufficient to enable it to repurchase the GP Note in these circumstances. The
note evidencing the GP Loan will also cross-default to the obligations of the
Partnership's obligations under its Senior Note Agreement and its Revolving
Credit Agreement. Upon a GP default, the Partnership also will have the right to
purchase the GP Note from Mellon.
If the Partnership elects or is required to purchase the note from Mellon, the
Partnership has the right, exercisable in its sole discretion pursuant to the
new compensation deferral plan established for the members of the Successor
General Partner, to cause up to all of the Common Units deposited in the trust
(amounting to $10,712 as of September 25, 1999) related to the compensation
deferral plan to be forfeited and cancelled (and to cause all of the related
distributions to be forfeited), regardless of the amount paid by the Partnership
to purchase the GP Note.
Pursuant to a Computer Services Agreement (the "Services Agreement") dated as of
the Closing Date between Millennium and the Partnership, Millennium permitted
the Partnership to utilize Millennium's mainframe computer for the generation of
customer bills, reports and information regarding the Partnership's retail
sales. The Services Agreement was terminated effective April 3, 1998 at which
time the Partnership began utilizing the services of an unrelated third party
provider. For the years ended September 26, 1998 and September 27, 1997, the
Partnership incurred expenses of $202 and $384, respectively, under the Services
Agreement.
F-11
5. SELECTED BALANCE SHEET INFORMATION
Inventories consist of:
September 25, September 26,
1999 1998
------------- -------------
Propane $24,367 $ 25,248
Appliances 5,360 4,714
------------- ------------
$29,727 $ 29,962
============= ============
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.
Property, plant and equipment consist of:
September 25, September 26,
1999 1998
------------- -------------
Land and improvements $ 27,892 $ 28,425
Buildings and improvements 49,838 47,937
Transportation equipment 55,541 56,126
Storage facilities 24,923 24,386
Equipment, primarily tanks
and cylinders 335,568 328,623
------------- -------------
493,762 485,497
Less: accumulated depreciation 168,538 141,669
------------- -------------
$325,224 $343,828
============= =============
6. LONG-TERM DEBT AND BANK CREDIT FACILITIES
Long-term debt consists of:
September 25, September 26,
1999 1998
------------- -------------
Senior Notes, 7.54%,
due June 30, 2011 $425,000 $425,000
Note payable, 8%, due in annual
installments through 2006 2,670 2,947
Other long-term liabilities 267 273
------------ -------------
427,937 428,220
Less: current portion 303 323
------------ -------------
$427,634 $427,897
============ =============
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 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.
F-12
At September 25, 1999, the Bank Credit Facilities consisted of a
$75,000 working capital facility and a $25,000 acquisition facility. In
addition, the Bank Credit Facilities provide for a $22,000 liquidity subfacility
for the payment of the Minimum Quarterly Distribution under certain
circumstances. The Operating Partnership 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 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 0.25% to 0.50%, based upon certain financial tests, is payable
quarterly whether or not borrowings occur. As of September 25, 1999, such fee
was 0.50%.
As of September 25, 1999 and September 26, 1998, $2,750 and $0, respectively,
were outstanding under the Bank Credit Facilities.
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 (including maintaining minimum net worth
of $50,000), (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.
7. 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 were
subject to a bifurcated vesting procedure such that (a) twenty-five percent of
the issued Units were to 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 were to vest
automatically upon, and in the same proportions as, the conversion of
Subordinated Units to Common Units. Restricted Unit Plan participants were 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. According to the change of control provisions of the Restricted Unit Plan,
all outstanding Restricted Units on the closing date of the Recapitalization
vested and converted into Common Units.
Following is a summary of activity in the Restricted Unit Plan:
Units Value Per Unit
--------- --------------
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
Awarded 97,556 $19.91
Forfeited (109,893) $18.41 - $21.63
--------- --------------
F-13
OUTSTANDING, SEPTEMBER 26, 1998 621,811 $18.41 - $21.63
Awarded 74,143 $17.88 - $19.06
Forfeited (22,789) $17.88 - $19.91
Vested and converted to Common Units (673,165) $17.88 - $21.63
--------- --------------
OUTSTANDING, SEPTEMBER 25, 1999 -0- $ -0-
========= ==============
For the year ended September 25, 1999, the Partnership amortized $443 of
unearned compensation and recorded an expense of $11,393 related to the
accelerated vesting on the closing date of the Recapitalization which is
included in recapitalization costs in the accompanying statements of operations
(See Note 9 - The Recapitalization). For the years ended September 26, 1998 and
September 27, 1997, the Partnership amortized $626 and $401, respectively, of
unearned compensation. As of September 25, 1999, 58,542 Units remain available
for future award under the Restricted Unit Plan.
The Partnership will amend the Restricted Unit Plan to eliminate the bifurcated
vested procedures and substitute a five-year time vesting procedure prior to
granting additional Units under the Restricted Unit Plan.
8. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
DEFINED BENEFIT PLANS
Effective January 1, 1998, the Partnership, in connection with its overall
restructuring efforts to implement long-term cost reduction strategies, modified
certain employee benefit plans.
In this regard, the Partnership amended its noncontributory defined benefit
pension plan to provide for a cash balance format as compared to a final average
format which was in effect prior to January 1, 1998. The cash balance format is
designed to evenly spread the growth of a participant's earned retirement
benefit throughout his/her career as compared to the final average pay format,
under which a greater portion of employee benefits were earned toward the latter
stages of one's career. The Partnership also terminated its postretirement
benefit plan for all eligible employees retiring after March 1, 1998. All active
and eligible employees who were to receive benefits under the postretirement
plan subsequent to March 1, 1998, were provided a settlement by increasing their
accumulated benefits under the cash balance pension plan.
The Partnership has accounted for the restructuring of the above-noted benefit
plans as a reduction in the postretirement plan benefit obligation (retaining
only the obligation related to employees retired on or before March 1, 1998) and
as a corresponding decrease in the net prepaid pension cost with a net
difference of $300, after costs associated with such restructuring, being
recognized as a gain in the accompanying statement of operations for the year
ended September 26, 1998.
The Partnership has a noncontributory defined benefit pension plan covering all
eligible employees of the Partnership who have met certain requirements as to
age and length of service. Contributions are made to a trust maintained by the
Partnership.
F-14
The trust's assets consist primarily of common stock, fixed income securities
and real estate. 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.
September 25, September 26,
1999 1998
------------- -------------
The following table sets forth the
plan's actuarial assumptions:
Weighted-average discount rate 7.50% 6.50%
Average rate of compensation increase 3.50% 3.50%
Weighted-average expected long-term
rate of return on plan assets 9.0% 9.0%
The following table provides a
reconciliation of benefit obligations:
Benefit obligation at beginning of
year $178,785 $161,700
Service cost 5,673 5,038
Interest cost 11,107 11,698
Actuarial (gain) loss (19,723) 9,273
Benefits paid (19,909) (22,264)
Amendments - (1,052)
Effect of plan change - 14,392
--------- ----------
Benefit obligation at end of year $155,933 $178,785
========= ==========
The following table provides a reconciliation of plan assets:
Fair value of plan assets at
beginning of year $179,090 $198,594
Actual return on plan assets 18,800 2,760
Benefits paid (19,909) (22,264)
--------- ----------
Fair value of plan assets at
end of year $177,981 $179,090
========= ==========
The following table provides a reconciliation of the funded status of the plan:
Funded status $ 22,048 $ 305
Unrecognized prior service cost (1,723) (1,933)
Unrecognized net actuarial loss 13,173 36,184
--------- ----------
Prepaid benefit cost $ 33,498 $ 34,556
========= ==========
F-15
The net periodic pension expense/(income) includes the following:
Year Ended Year Ended Year Ended
September 25, September 26, September 27,
1999 1998 1997
------------- ------------- -------------
Service cost $ 5,674 $ 5,038 $ 4,504
Interest cost 11,107 11,698 10,364
Expected return on plan
assets (16,254) (16,901) (15,839)
Amortization of prior service
cost (210) (185) (112)
Recognized net actuarial loss 741 - -
Plan amendment - 14,392 -
------------- ------------- -------------
Net periodic pension
expense/(income) $ 1,058 $ 14,042 $ (1,083)
============= ============= =============
DEFINED CONTRIBUTION PENSION PLAN
The Partnership has a defined contribution plan covering most employees.
Contributions and costs are a percent of the participating employees'
compensation. These amounts totaled $1,331, $1,923 and $1,828 for the years
ended September 25, 1999, September 26, 1998 and September 27, 1997,
respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Partnership provides postretirement health care and life insurance benefits
for certain retired employees. Partnership employees hired prior to July 1993
and that retired prior to March 1998 are eligible for such benefits if they
reached a specified retirement age while working for the Partnership. The
Partnership does not fund its postretirement benefit plan.
September 25, September 26,
1999 1998
------------- -------------
The following table provides a
reconciliation of benefit obligations:
Benefit obligation at beginning
of year $ 41,447 $ 66,751
Service cost 136 474
Interest cost 2,581 2,645
Actuarial (gain) (1,772) (683)
Benefits paid (3,505) (3,484)
Amendments (79) (6,359)
Effect of plan change - (17,897)
------------- -------------
Benefit obligation at end of year $ 38,808 $ 41,447
============= =============
The following table provides a
reconciliation of the funded status
of the plan:
Funded status $ (38,808) $ (41,447)
Unrecognized prior service cost (5,188) (5,823)
Unrecognized net actuarial loss 6,097 8,153
------------- -------------
Accrued benefit liability $ (37,899) $ (39,117)
Less: Current portion 3,505 3,137
------------- -------------
Noncurrent liability $ 34,394 $ 35,980
============= =============
F-16
The net periodic postretirement benefit expense/(income) includes the following
components:
Year Ended Year Ended Year Ended
September 25, September 26, September 27,
1999 1998 1997
------------- ------------- -------------
Service cost $ 136 $ 474 $ 811
Interest cost 2,581 2,645 3,074
Amortization of prior
service cost (714) (536) -
Recognized net actuarial loss 284 184 -
Plan amendment - (15,367) -
------------- ------------- -------------
Net periodic
postretirement benefit
expense/(income) $ 2,287 $(12,600) $3,885
============= ============= =============
The accumulated postretirement benefit obligation was based on an 8% and 9%
increase in the cost of covered health care benefits for 1999 and 1998,
respectively. This rate is assumed to decrease gradually to 5.5% in 2002 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 benefit obligation
as of September 25, 1999 by $90 and the aggregate of service and interest
components of accumulated postretirement net periodic postretirement benefit
cost for the year ended September 25, 1999 by $1,230.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% and 6.5% at September 25, 1999 and
September 26, 1998, respectively.
9. THE RECAPITALIZATION
On May 26, 1999, after receiving Unitholder approval, the Partnership completed
the Recapitalization contemplated by its November 27, 1998 Recapitalization
Agreement with Millennium, the General Partner and the Successor General
Partner. The elements of the Recapitalization included:
o The redemption by the Partnership of all 7,163,750 Subordinated Units and
220,000 APUs, which were owned by the General Partner, for $69,000 in
cash.
o The substitution of the Successor General Partner as the new general
partner of the Partnership and the Operating Partnership following its
purchase of the combined 2% general partner interests in the Partnership
and the Operating Partnership and the incentive distribution rights in the
Partnership for $6,000 in cash (the "GP Interest Purchase").
o The amendment of the Senior Note, Bank Credit Facilities and the
partnership agreements of the Partnership and the Operating Partnership to
permit and effect the Recapitalization and to reduce the distribution
levels that apply to the incentive distribution rights of the Successor
General Partner.
o The termination of the Distribution Support Agreement among the
Partnership, the General Partner and Millennium and its replacement with a
liquidity arrangement provided by the Partnership under the Bank Credit
Facilities, as amended.
o An increase in the quarterly distribution to the Partnership's Unitholders
from $0.50 to $0.5125 per Unit per quarter (from $2.00 to $2.05 per Unit
per year), effective for the fiscal quarter ended June 26, 1999. The total
amount consists of the existing Minimum Quarterly Distribution of $0.50
per Unit per quarter plus an additional $0.0125 per Unit per quarter above
the Minimum Quarterly Distribution.
F-17
The Partnership incurred expenses of $18,903 in connection with the
Recapitalization transactions of which $7,567 represents cash expenses and
$11,336 represents non-cash expenses associated with the accelerating vesting of
Restricted Units. The redemption price and the costs of the Recapitalization
were funded entirely from available cash on hand.
The Successor General Partner borrowed the $6,000 purchase price for the GP
Interest Purchase from Mellon, N.A. In connection with the GP Loan, the
Operating Partnership entered into a purchase agreement with Mellon under which
the Operating Partnership is required to purchase the note evidencing the GP
Loan in the event of a default under the GP Loan by the Successor General
Partner.
The Successor General Partner is owned by Senior Management of the Partnership
who had previously been granted Restricted Units under the Partnership's
Restricted Unit Plan. These individuals surrendered 553,896 Restricted Units
representing substantially all of their Restricted Units, before they vested
(according to their terms, the Restricted Units vested and converted into Common
Units on completion of the Recapitalization) in exchange for the right to
participate in a new compensation deferral plan of the Partnership and the
Operating Partnership. The Partnership deposited into a trust on behalf of these
individuals 553,896 Common Units. Pursuant to the new compensation deferral
plan, these individuals have deferred receipt of these Common Units and related
distributions by the Partnership until the date the GP Loan is repaid in full or
the seventh anniversary of the date the Recapitalization is completed, whichever
they may choose, but subject to the earlier distribution and forfeiture
provisions of the compensation deferral plan. The value of the Common Units
deposited in the trust and the related deferred compensation trust liability are
reflected in the accompanying consolidated balance sheet at September 25, 1999
as components of Partners' Capital.
10.RESTRUCTURING CHARGE
In fiscal 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 maintenance, field support 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, the
Partnership recorded a restructuring charge of $6,911.
In connection with this restructuring initiative, the Partnership terminated 307
employees and paid termination benefits of $1,591 and $2,500 in fiscal years
1997 and 1998, respectively, which were charged against the restructuring
liability. In addition, the Partnership paid $985 in fiscal 1997, primarily
related to the closure of excess facilities which was charged against the
restructuring liability. The 1997 restructuring includes a charge of $1,835 for
impaired assets consisting of $1,235 in information system assets and $600 in
excess fleet vehicles. The impaired asset write-offs reflect the remaining book
value of certain information system assets as management believed the assets to
be technologically obsolete with a minimal fair market value and, in the case of
vehicles, the difference between the estimated trade-in value and book value.
11.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 corporate
entities which are subject to federal and state income taxes.
F-18
12.COMMITMENTS AND CONTINGENCIES
COMMITMENTS
The Partnership leases certain property, plant and equipment for various periods
under noncancelable leases. Rental expense under operating leases was $18,018,
$16,993 and $14,995 for the years ended September 25, 1999, September 26, 1998
and September 27, 1997, respectively.
Future minimum rental commitments under noncancelable operating lease agreements
as of September 25, 1999 are as follows:
Fiscal Year
-----------
2000 $15,506
2001 12,139
2002 9,936
2003 8,963
2004 and thereafter 9,261
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 25, 1999 and September
26, 1998, accrued insurance liabilities amounted to $23,129 and $21,404,
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 on 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.
13.SALE OF INVESTMENT
In December 1997, the Partnership sold its minority interest in the Dixie
Pipeline Company, which owns and operates a propane pipeline, for net cash
proceeds of $13,090 and realized a gain of $5,090.
14.SUBSEQUENT EVENTS
On November 8, 1999, the Partnership acquired the assets of SCANA Propane Gas,
Inc., SCANA Propane Storage, Inc., SCANA Propane Supply, Inc., USA Cylinder
Exchange, Inc., and C&T Pipeline, LLC from SCANA Corp. for $86,000 plus working
capital. SCANA Propane Gas, Inc. distributes approximately 20 million gallons
annually and services more than 40,000 customers from 22 customer service
centers in North and South Carolina. USA Cylinder Exchange, Inc. operates an
automated 20-lb. propane cylinder refurbishing and refill center in Hartsville,
South Carolina, selling to approximately 1,600 grocery and convenience stores in
the Carolinas, Georgia and Tennessee. SCANA Propane Storage, Inc. owns a 60
million gallon storage cavern in Tirzah, South Carolina which is connected to
the Dixie Pipeline by the 62 mile propane pipeline owned by C&T Pipeline, LLC.
The acquisition will be accounted for using the purchase method of accounting.
Accordingly, the purchase price will be allocated to the assets and liabilities
based on their estimated values and the balance of the purchase price will be
recorded as goodwill. The Partnership is currently in the process of preparing
the purchase price allocation and determining the useful lives of the assets
acquired. In connection with the acquisition,
F-19
the Partnership replaced its former Bank Credit Facilities with a new $175,000
Revolving Credit Agreement with a syndicate of banks led by First Union National
Bank as Administrative Agent. The Revolving Credit Agreement consists of a
$100,000 acquisition facility and a $75,000 working capital facility which
expire on March 31, 2001. The Revolving Credit Agreement provides for
substantially the same terms and conditions as the former credit facilities.
The Revolving Credit Agreement provides the Partnership, at the Partnership's
option, the right to extend the expiration date from March 31, 2001 to December
31, 2001 provided that the maximum ratio of consolidated total indebtedness to
EBITDA (as defined in the Credit Agreement) will decrease from 5.10 to 1.00 to
4.75 to 1.00 during the nine month extension period.
The Partnership borrowed $97,000 under the acquisition facility to fund the
SCANA acquisition, consisting of $86,000 for the SCANA assets, $8,600 in
acquired working capital and $2,400 in related bank fees.
On December 3, 1999 the Partnership sold 23 customer service centers principally
located in Georgia for cash proceeds of $18,000 plus working capital.
F-20
INDEX TO SUPPLEMENTAL FINANCIAL STATEMENTS
SUBURBAN ENERGY SERVICES GROUP LLC
PAGE
----
Report of Independent Accountants F-22
Consolidated Balance Sheet - September 25, 1999 F-23
Notes to Consolidated Balance Sheet F-24
F-21
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Stockholders of
Suburban Energy Services Group LLC
In our opinion, the accompanying consolidated balance sheet presents fairly, in
all material respects, the financial position of Suburban Energy Services Group
LLC at September 25, 1999 in conformity with generally accepted accounting
principles. This financial statement is the responsibility of the Company's
management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this statement in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the balance
sheet is free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the balance sheet,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall balance sheet presentation. We believe
that our audit of the balance sheet provides a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Florham Park, NJ
October 21, 1999
F-22
SUBURBAN ENERGY SERVICES GROUP LLC
BALANCE SHEET
SEPTEMBER 25, 1999
(in thousands)
ASSETS
Current assets:
Cash & cash equivalents $ 23
-------
Total current assets 23
Investment in Suburban Propane Partners L.P. 2,044
Goodwill, net 3,278
-------
Total assets $ 5,345
=======
LIABILITIES
Current Liabilities:
Current portion of note payable $ 460
Interest payable 50
-------
Total current liabilities 510
Note payable $ 5,425
-------
Total liabilities $ 5,935
-------
Stockholders' Deficit:
Common stock, $1 par value, 2,000 shares issued and outstanding $ 2
Accumulated deficit (592)
-------
Total stockholders' deficit (590)
-------
Total liabilities and stockholders' deficit $ 5,345
=======
The accompanying notes are an integral part of this balance sheet.
F-23
SUBURBAN ENERGY SERVICES GROUP LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(Dollars in thousands)
1. ORGANIZATION AND FORMATION
Suburban Energy Services Group LLC (the "Company") was formed on October
26, 1998 as a limited liability company pursuant to the Delaware Limited
Liability Company Act. It was formed to purchase the general partner interests
from Suburban Propane GP, Inc. (the "Former General Partner"), a wholly-owned
indirect subsidiary of Millennium Chemicals, Inc., and become the successor
general partner. The Company purchased and owns a 1% general partner interest in
Suburban Propane Partners L.P. and a 1.0101% general partner interest in
Suburban Propane L.P., a wholly owned subsidiary of Suburban Propane Partners
L.P.
Suburban Propane Partners L.P. is a publicly traded Master Limited
Partnership traded on the New York Stock Exchange and is engaged in the retail
and wholesale marketing of propane and related appliances and services.
The Company acquired the general partner interests from Millennium
Chemicals, Inc. on May 26, 1999 (the "Closing Date") for $6,000 which was
borrowed under a private placement with Mellon Bank, N.A. ("Mellon").
The Company is owned by executives and key employees of Suburban Propane
L.P. Each owner has contributed their pro-rata share of $2 as their initial
capital contribution. The Company plans to repay the $6,000 borrowing from its
general partner distributions to be received from Suburban Propane Partners L.P.
and from capital contributions from its owners.
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The accompanying financial statements and related
notes present the financial position of the Company as of September 25, 1999.
The financial statements have been prepared in accordance with Generally
Accepted Accounting Principles.
INVESTMENT IN SUBURBAN PROPANE PARTNERS L.P. As previously noted, the
Company acquired a combined 2% general partner interest in Suburban Propane
Partners L.P. on the Closing Date. The Company accounts for its investment under
the equity method of accounting whereby the Company recognizes in income 2% of
Suburban Propane Partners L.P. consolidated net income (loss) and reduces its
investment balance to the extent of partnership distributions the Company
receives from Suburban Propane Partners L.P.
GOODWILL. The company recorded goodwill on the Closing Date of $3,305
representing the excess of the $6,000 purchase price over the carrying value of
the General Partner's capital account reflected on the books of Suburban Propane
Partners L.P. The Company amortizes goodwill over a forty-year period utilizing
the straight-line method. Accumulated amortization at September 25, 1999
amounted to $27.
3. NOTE PAYABLE
On the Closing Date, the Company borrowed $6,000 under a loan agreement
(the "GP Loan") with Mellon to finance the purchase of the general partner
interests held by the Former General Partner. The GP Loan is secured by a pledge
of the General Partner interests held by the Company.
F-24
The GP Loan has a term of five years from the Closing Date and requires
interest to be paid at a rate equal to LIBOR plus 2% with such interest to be
paid no less frequently than quarterly. The GP Loan maturities for each of the
next five years are $460 in 2000, $1,030 in 2001, $1,600 in 2002, $1,600 in 2003
and $1,195 in 2004.
The GP Loan contains various covenants limiting the ability of the Company
to (i) incur indebtedness, (ii) grant liens, (iii) acquire assets, other than
the general partner interests, and (iv) merge, consolidate or sell its assets.
Upon the occurrence and continuance of an event of default under the GP
Loan, Mellon will have the right to cause Suburban Propane L.P. to purchase the
note evidencing the GP Loan (the "GP Note"). Suburban Propane L.P. has agreed to
maintain borrowing availability under its available lines of credit, which will
be sufficient to enable it to repurchase the GP Note in these circumstances. The
GP Note will also cross-default to the obligations of Suburban Propane L.P.'s
obligations under its Senior Note Agreement and its Credit Agreement. Upon a GP
Default, Suburban Propane L.P. also will have the right to purchase the GP Note
from Mellon.
F-25
Index to Financial Statement Schedules
Suburban Propane Partners, L.P. and Subsidiaries
PAGE
----
Schedule II Valuation and Qualifying Accounts for the years ended
September 25, 1999, September 26, 1998 and
September 27, 1997. 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 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
========== ========= ========= ============ =========
Restructuring reserves $ 2,340 $ 6,911 $ - $ (4,685) $ 4,566
========== ========= ========= ============ =========
YEAR ENDED SEPTEMBER 26, 1998
- -----------------------------
Allowance for doubtful accounts $ 2,682 $ 2,642 $ - $ (2,942) $ 2,382
========== ========= ========= ============ =========
Accumulated amortization:
Goodwill $ 25,633 $ 6,134 $ - $ - $ 31,767
Other intangibles $ 1,527 $ 1,036 $ - $ - $ 2,563
---------- --------- --------- ------------ ---------
Total $ 27,160 $ 7,170 $ - $ - $ 34,330
========== ========= ========= ============ =========
Restructuring reserves $ 4,566 $ - $ - $ (4,566) $ -
========== ========= ========= ============ =========
YEAR ENDED SEPTEMBER 25, 1999
- -----------------------------
Allowance for doubtful accounts $ 2,382 $ 2,601 $ - $ (2,894) $ 2,089
========== ========= ========= ============ =========
Accumulated amortization:
Goodwill $ 31,767 $ 5,977 $ - $ - $ 37,744
Other intangibles $ 2,563 $ 1,076 $ - $ (144) $ 3,495
---------- --------- --------- ------------ ---------
Total $ 34,330 $ 7,053 $ - $ (144) $ 41,239
========== ========= ========= ============ =========
S-2
EXHIBIT 21.1
------------
SUBSIDIARIES OF SUBURBAN PROPANE PARTNERS, L.P.
Suburban Propane, L.P., a Delaware limited partnership
Suburban Sales & Service, Inc., a Delaware corporation
Gas Connection Inc., an Oregon corporation
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
report dated October 21, 1999, except for Note 14, which is as of December 3,
1999, appearing on page F-2 of this Annual Report on Form 10-K. We also consent
to the application of such report 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 report. The audits referred to
in such report also included this schedule. We also consent to the incorporation
by reference in such registration statement of our report dated October 21, 1999
on the financial statement of Suburban Energy Services Group LLC appearing on
page F-22 of this Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Florham Park, NJ
December 22, 1999