FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 29, 2004
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 1-11727
ENERGY TRANSFER PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 73-1493906
(state or other jurisdiction or (I.R.S. Employer
incorporation or organization) Identification No.)
2838 WOODSIDE STREET
DALLAS, TEXAS 75204
(Address of principal
executive offices
and zip code)
(918) 492-7272
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [x] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [x] No [ ]
At April 11, 2004, the registrant had units outstanding as follows:
Energy Transfer Partners, L.P. 27,919,974 Common Units
7,721,542 Class D Units
FORM 10-Q
ENERGY TRANSFER PARTNERS, L.P.
TABLE OF CONTENTS
Pages
-----
PART I FINANCIAL INFORMATION......................................................................... 1
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
Consolidated Balance Sheets -
February 29, 2004
August 31, 2003 (Energy Transfer Company)
and August 31, 2003 (Predecessor Heritage) ............................................... 2
Consolidated Statements of Operations -
Three months and six months ended February 29, 2004
Three months and five months ended February 28, 2003 (Energy Transfer Company)
Three months and six months ended February 28, 2003 (Predecessor Heritage)................ 4
Consolidated Statements of Comprehensive Income -
Three months and six months ended February 29, 2004
Three months and five months ended February 28, 2003 (Energy Transfer Company)
Three months and six months ended February 28, 2003 (Predecessor Heritage)................ 5
Consolidated Statement of Partners' Capital -
Six months ended February 29, 2004........................................................ 6
Consolidated Statements of Cash Flows -
Six months ended February 29, 2004
Five months ended February 28, 2003 (Energy Transfer Company)
Six months ended February 28, 2003 (Predecessor Heritage)................................. 7
Notes to Consolidated Financial Statements.................................................... 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................................................... 35
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK............................................................................... 55
ITEM 4. CONTROLS AND PROCEDURES....................................................................... 56
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS..................................................... 57
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.............................................................. 57
SIGNATURE
i
PART I - FINANCIAL INFORMATION
The financial statements presented herein for the three months and six months
ended February 29, 2004 include the results of operations for Energy Transfer
Company for the period from December 1, 2003 and September 1, 2003,
respectively, through February 29, 2004, and for Heritage Propane Partners, L.P.
(referenced herein as Predecessor Heritage) only for the period from January 20,
2004 to February 29, 2004. Thus, the results of operations do not represent the
entire results of operations for Predecessor Heritage for the three and six
months ended February 29, 2004, as they do not include the results of operations
of Predecessor Heritage for the period prior to the Energy Transfer Transaction
on January 20, 2004.
1
ITEM 1. FINANCIAL STATEMENTS
ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
(unaudited)
February 29, August 31, August 31,
2004 2003 2003
----------- --------------- -------------
(Energy Transfer (Predecessor
(see Note 2) Company) Heritage)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 110,601 $ 53,122 $ 7,117
Marketable securities 2,126 - 3,044
Accounts receivable, net of allowance for doubtful accounts 247,811 105,987 35,879
Accounts receivable from related companies 3,856 - -
Inventories 37,576 3,947 45,274
Deposits paid to vendors 1,106 19,053 -
Exchanges receivable 1,597 1,373 -
Price risk management asset 3,311 928 -
Prepaid expenses and other 6,887 770 2,824
----------- ----------- -------------
Total current assets 414,871 185,180 94,138
PROPERTY, PLANT AND EQUIPMENT, net 928,052 391,264 426,588
INVESTMENT IN AFFILIATES 7,902 6,844 8,694
GOODWILL 284,240 13,409 156,595
INTANGIBLES AND OTHER ASSETS, net 96,566 5,406 52,824
----------- ----------- -------------
Total assets $ 1,731,631 $ 602,103 $ 738,839
=========== =========== =============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Working capital facility $ 65,488 $ - $ 26,700
Accounts payable 230,219 114,198 43,690
Accounts payable to related companies 15,046 820 6,255
Exchanges payable 1,704 1,410 -
Accrued and other current liabilities 39,076 19,655 35,573
Price risk management liabilities 2,254 823 -
Income taxes payable 867 2,567 500
Current maturities of long-term debt 29,937 30,000 38,309
----------- ----------- -------------
Total current liabilities 384,591 169,473 151,027
LONG-TERM DEBT, less current maturities 685,460 196,000 360,762
DEFERRED TAXES 112,325 55,385 -
OTHER NONCURRENT LIABILITIES 3,601 157 -
MINORITY INTERESTS 761 - 4,002
----------- ----------- -------------
1,186,738 421,015 515,791
----------- ----------- -------------
2
ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
(unaudited)
February 29, August 31, August 31,
2004 2003 2003
----------- --------------- -------------
(Energy Transfer (Predecessor
(see Note 2) Company) Heritage)
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
Common Unitholders (27,897,734 and 6,628,817 units authorized,
issued and outstanding at February 29, 2004 and August 31,
2003, respectively) 312,856 180,896 221,207
Class C Unitholders (1,000,000 and 0 units authorized, issued
and outstanding at February 29, 2004 and August 31, 2003,
respectively) - - -
Class D Unitholders (7,721,542 and 0 authorized, issued and
outstanding at February 29, 2004 and August 31, 2003) 211,883 - -
Treasury Units - Class E Unitholders (4,426,916 and 0
authorized, issued and outstanding at February 29,
2004 and August 31, 2003, respectively) - - -
Special Units (3,742,515 and 0 authorized, issued and
outstanding at February 29, 2004 and August 31, 2003) - - -
General Partner 17,703 192 2,190
Accumulated other comprehensive income (loss) 2,451 - (349)
----------- ----------- -------------
Total partners' capital 544,893 181,088 223,048
----------- ----------- -------------
Total liabilities and partners' capital $ 1,731,631 $ 602,103 $ 738,839
=========== =========== =============
The accompanying notes are an integral part of these consolidated financial
statements.
3
ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit and unit data)
(unaudited)
Three Three Three Months
Months Months Months Six Months Five Months Six Months
Ended Ended Ended Ended Ended Ended
February February February February February February
29, 2004 28, 2003 28, 2003 29, 2004 28, 2003 28, 2003
---------- ----------- ----------- ----------- ---------- ----------
(Energy (Energy
Transfer (Predecessor Transfer (Predecessor
(see Note 2) Company) Heritage) (see Note 2) Company) Heritage)
REVENUES:
Midstream and transportation $ 488,291 $ 201,440 $ - $ 903,277 $ 277,293 $ -
Affiliated - midstream - 2,667 - - 5,066 -
Propane 132,453 - 232,922 132,453 - 328,319
Other 8,543 - 16,887 8,543 - 34,950
---------- ----------- ---------- ---------- ---------- ----------
Total revenues 629,287 204,107 249,809 1,044,273 282,359 363,269
---------- ----------- ---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of products sold 534,513 174,504 128,420 917,062 241,825 185,440
Operating expenses 27,470 5,452 45,237 32,910 7,548 78,630
Depreciation and amortization 9,472 2,811 9,447 13,619 4,461 18,713
Selling, general and
administrative 6,381 4,286 4,320 11,261 5,873 7,177
Realized and unrealized
(gains)
losses on derivatives (7,168) 4,828 - (10,202) 6,693 -
---------- ----------- ---------- ---------- ---------- ----------
Total costs and expenses 570,668 191,881 187,424 964,650 266,400 289,960
---------- ----------- ---------- ---------- ---------- ----------
OPERATING INCOME 58,619 12,226 62,385 79,623 15,959 73,309
OTHER INCOME (EXPENSE):
Interest, net (8,895) (3,542) (9,317) (12,647) (4,951) (18,613)
Equity in earnings of
affiliates 180 71 970 327 1,443 1,183
Gain on disposal of assets 31 - 88 28 - 155
Other 227 36 (2,268) 233 68 (2,546)
---------- ----------- ---------- ---------- ---------- ----------
INCOME BEFORE MINORITY
INTERESTS AND INCOME
TAXES 50,162 8,791 51,858 67,564 12,519 53,488
Minority interests (175) - (821) (175) - (947)
---------- ----------- ---------- ---------- ---------- ----------
INCOME BEFORE INCOME
TAXES 49,987 8,791 51,037 67,389 12,519 52,541
Income taxes 748 952 1,285 2,457 952 1,285
---------- ----------- ---------- ---------- ---------- ----------
NET INCOME 49,239 7,839 49,752 64,932 11,567 51,256
GENERAL PARTNER'S INTEREST IN
NET INCOME 2,304 157 723 2,617 231 956
---------- ----------- ---------- ---------- ---------- ----------
LIMITED PARTNERS' INTEREST IN
NET INCOME $ 46,935 $ 7,682 $ 49,029 $ 62,315 $ 11,336 $ 50,300
========== =========== ========== ========== ========== ==========
BASIC NET INCOME PER LIMITED
PARTNER UNIT $ 2.38 $ 1.16 $ 3.03 $ 4.74 $ 1.71 $ 3.15
========== =========== ========== ========== ========== ==========
BASIC AVERAGE NUMBER OF UNITS
OUTSTANDING 19,686,563 6,621,737 16,165,602 13,154,150 6,621,737 15,990,010
========== =========== ========== ========== ========== ==========
DILUTED NET INCOME PER LIMITED
PARTNER UNIT $ 2.38 $ 1.16 $ 3.03 $ 4.73 $ 1.71 $ 3.14
========== =========== ========== ========== ========== ==========
DILUTED AVERAGE NUMBER OF
UNITS OUTSTANDING 19,711,458 6,621,737 16,207,002 13,178,848 6,621,737 16,026,860
========== =========== ========== ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
4
ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, unaudited)
Three Months Three Months Three Months Six Months Five Months Six Months
Ended Ended Ended Ended Ended Ended
February February February February February February
29, 2004 28, 2003 28, 2003 29, 2004 28, 2003 28, 2003
------------- ------------ ------------ ---------- ----------- ----------
(Energy (Energy
Transfer (Predecessor Transfer (Predecessor
(see Note 2) Company) Heritage) (see Note 2) Company) Heritage)
Net income $ 49,239 $ 7,839 $ 49,752 $ 64,932 $ 11,567 $ 51,256
Other comprehensive income
Reclassification adjustment
for gains on derivative
instruments included in net
income (6,381) - (427) (5,900) - (427)
Reclassification adjustment
for losses on
available-for-sale
securities included in net
income - - 2,376 - - 2,376
Change in value of derivative
instruments 9,729 - 957 8,730 - 957
Change in value of
available-for-sale securities (379) - (9) (379) - (9)
--------- ------------ --------- --------- ----------- --------
Comprehensive income $ 52,208 $ 7,839 $ 52,649 $ 67,383 $ 11,567 $ 54,153
========= ============ ========= ========= =========== ========
RECONCILIATION OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance, beginning of period $ (518) $ - $ (3,652) $ - $ - $ (3,652)
Current period reclassification
to earnings (6,381) - 1,949 (5,900) - 1,949
Current period change 9,350 - 948 8,351 - 948
--------- ------------ ---------- --------- ----------- --------
Balance, end of period $ 2,451 $ - $ (755) $ 2,451 $ - $ (755)
========== ============ ========== ========= =========== =========
The accompanying notes are an integral part of these consolidated financial
statements.
5
ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(in thousands, except unit data)
(unaudited)
Number of Units
------------------------------------------------------------
Class E
Common Class C Class D Treasury Special Common Class C
---------- --------- --------- ---------- --------- --------- -------
BALANCE, AUGUST 31, 2003 6,628,817 - - - $ 180,896 $ -
Distribution to parent - - - - (209,264) -
Merger with Predecessor
Heritage 16,495,833 1,000,000 7,721,542 3,742,515 116,236 -
Purchase of Treasury Units - - - (4,426,916) - - -
Issuance of Common Units 9,200,000 - - - 334,835 -
Conversion of Class E (4,426,916) - - 4,426,916 - (157,340) -
units
General Partner capital
contribution - - - - (1,027) -
Net change in accumulated
other comprehensive
income per accompanying
statements - - - - - -
Net income - - - - 48,520 -
---------- --------- --------- ---------- --------- --------- -------
BALANCE, FEBRUARY 29, 2004 27,897,734 1,000,000 7,721,542 - 3,742,515 $ 312,856 $ -
========== ========= ========= ========== ========= ========= =======
Accumulated
Other
Class E General Comprehensive
Class D Treasury Special Partner Income Total
---------- --------- --------- ---------- --------- ---------
BALANCE, AUGUST 31, 2003 $ - $ - $ - $ 192 $ - $ 181,088
Distribution to parent - - - - (209,264)
Merger with Predecessor
Heritage 198,372 - - (1,957) - 312,651
Purchase of Treasury Units - (157,340) - - - (157,340)
Issuance of Common Units - - - - - 334,835
Conversion of Class E - 157,340 - - - -
units
General Partner capital
contribution (284) - - 16,851 - 15,540
Net change in accumulated
other comprehensive
income per accompanying
statements - - - - 2,451 2,451
Net income 13,795 - - 2,617 - 64,932
---------- --------- --------- ---------- --------- ---------
BALANCE, FEBRUARY 29, 2004 $ 211,883 $ - $ - $ 17,703 $ 2,451 $ 544,893
========== ========= ========= ========== ========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
6
ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Five Months Six Months
Ended Ended Ended
February February February
29, 2004 28, 2003 28, 2003
------------ ------------ ------------
(Energy
Transfer (Predecessor
(see Note 2) Company) Heritage)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 64,932 $ 11,567 $ 51,256
Reconciliation of net income to net cash provided by
operating activities-
Depreciation and amortization 13,619 4,461 18,713
Provision for loss on accounts receivable 84 - 1,511
Loss on write down of marketable securities - - 2,400
Gain on disposal of assets (28) - (155)
Deferred compensation on restricted units and long-term
incentive plan - - 620
Undistributed earnings of affiliates (474) (1,443) (1,183)
Deferred income taxes (400) (1,351) -
Other, net - (82) -
Minority interests (213) - 582
Changes in assets and liabilities, net of effect of
acquisitions:
Accounts receivable (74,390) (60,981) (60,298)
Accounts receivable from related companies (3,345) (4,132) -
Inventories 50,813 (44) 21,045
Deposits paid to vendors 17,947 (1,800) -
Exchanges receivable (224) (1,938) -
Prepaid and other expenses 799 - 3,568
Intangibles and other assets (50) 12,360 (41)
Accounts payable 13,873 47,114 21,704
Accounts payable to related companies 1,524 - 1,160
Exchanges payable 294 987 -
Accrued and other current liabilites (15,299) 112 (6,388)
Income taxes payable (1,700) 827 500
Price risk management liabilities, net 1,878 4,193 -
------------ ------------ ------------
Net cash provided by operating activities 69,640 9,850 54,994
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisitions, net of cash acquired (165,577) (332,148) (21,170)
Capital expenditures (45,086) (3,567) (16,510)
Proceeds from the sale of assets 353 10,056 2,078
------------ ------------ ------------
Net cash used in investing activities (210,310) (325,659) (35,602)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 332,672 246,000 107,650
Principal payments on debt (283,955) (12,500) (102,247)
Net proceeds from issuance of Common Units 334,835 - -
Capital contribution from General Partner 15,540 108,723 -
Distributions to parent (196,708) - -
Debt issuance costs (4,235) (6,462) -
Unit distributions - - (20,810)
Other - - 153
------------ ------------ ------------
Net cash provided by/ (used) in financing activities 198,149 335,761 (15,254)
------------ ------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS 57,479 19,952 4,138
CASH AND CASH EQUIVALENTS, beginning of period 53,122 - 4,596
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 110,601 $ 19,952 $ 8,734
============ ============ ============
7
ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Five Months Six Months
Ended Ended Ended
February 29, February 28, February 28,
2004 2003 2003
------------ ------------ ------------
(Energy
Transfer (Predecessor
(see Note 2) Company) Heritage)
NONCASH FINANCING ACTIVITIES:
Notes payable incurred on noncompete agreements $ - $ - $ 772
============ ============ ============
Issuance of Common Units in connection with certain
acquistions $ - $ - $ 15,000
============ ============ ============
General Partner capital contribution $ 1,311 $ - $ -
============ ============ ============
Distributions payable to parent $ 12,556 - $ -
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 9,050 $ 2,943 $ 18,302
============ ============ ============
Cash paid during the period for income taxes $ 4,157 $ 2,500 $ -
============ ============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
8
ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except unit and per unit data)
(unaudited)
1. OPERATIONS AND ORGANIZATION:
ENERGY TRANSFER TRANSACTION
On January 20, 2004, Heritage Propane Partners, L.P., ("Heritage") and La Grange
Energy, L.P. ("La Grange Energy") completed the series of transactions whereby
La Grange Energy contributed its subsidiary, La Grange Acquisition, L.P. and its
subsidiaries who conduct business under the assumed name of Energy Transfer
Company, ("ETC") (the "ETC Transaction") to Heritage in exchange for cash of
$300,000 less the amount of Energy Transfer Company debt in excess of $151,500,
less ETC's accounts payable and other specified liabilities, plus agreed upon
capital expenditures paid by La Grange Energy relating to the ETC business prior
to closing, $433,909 of Heritage Common and Class D Units, and the repayment of
the ETC debt of $151,500. In conjunction with the ETC Transaction and prior to
the contribution of ETC to Heritage, ETC distributed its cash and accounts
receivables to La Grange Energy and an affiliate of La Grange Energy contributed
an office building to ETC. La Grange Energy also received 3,742,515 Special
Units as consideration for certain assets described as the Bossier Pipeline. In
the event the Bossier Pipeline does not become commercially operational by
December 1, 2004, the Special Units will no longer be considered outstanding and
will not be entitled to any rights afforded any other of Heritage's units. In
accordance with Statement of Financial Accounting Standards No. 141, Business
Combinations ("SFAS 141") no value has been recorded with respect to the Special
Units.
Simultaneously with the ETC Transaction, La Grange Energy obtained control of
Heritage by acquiring all of the interest in U.S. Propane, L.P., ("U.S.
Propane") the General Partner of Heritage, and U.S. Propane, L.P.'s general
partner, U.S. Propane, L.L.C., from subsidiaries of AGL Resources, Atmos Energy
Corporation, TECO Energy, Inc. and Piedmont Natural Gas Company, Inc. for
$30,000 (the "General Partner Transaction"). In conjunction with the General
Partner Transaction, U.S. Propane L.P. contributed its 1.0101% General Partner
interest in Heritage Operating, L.P. ("Heritage Operating") to Heritage in
exchange for an additional 1% General Partner interest in Heritage.
Simultaneously with these transactions, Heritage purchased the outstanding stock
of Heritage Holdings, Inc. ("HHI") for $100,000.
Concurrent with the ETC Transaction, ETC borrowed $325,000 from financial
institutions and Heritage raised $355,948 of gross proceeds through the sale of
9,200,000 Common Units at an offering price of $38.69 per unit. The net proceeds
were used to finance the transaction and for general partnership purposes.
ACCOUNTING TREATMENT OF THE ENERGY TRANSFER TRANSACTION
The ETC Transaction was accounted for as a reverse acquisition in accordance
with SFAS 141. Although Heritage is the surviving parent entity for legal
purposes, ETC is the acquirer for accounting purposes. As a result, ETC's
historical financial statements are now the historical financial statements of
the registrant. The operations of Heritage prior to the ETC Transaction are
referred to as Predecessor Heritage. The assets and liabilities of Predecessor
Heritage have been recorded at fair value to the extent acquired by ETC through
its acquisition of the General Partner and limited partner interests of Heritage
of approximately 35.4%, determined in accordance with Emerging Issues Task Force
(EITF) 90-13 Accounting for Simultaneous Common Control Mergers and SFAS 141.
The assets and liabilities of Energy Transfer have been recorded at historical
cost. Although the partners' capital accounts of ETC became the capital accounts
of the Partnership, Predecessor Heritage's partnership structure and partnership
units survive. Accordingly, the partners' capital accounts of ETC have been
restated based on the general partner interests and units received by La Grange
Energy in the ETC Transaction. The acquisition of Heritage Holdings by Heritage
was accounted for as a capital transaction as the primary asset held by Heritage
Holdings is 4,426,916 Common Units of Heritage. Following the acquisition of
Heritage Holdings by Heritage, these Common Units were converted to Class E
Units. The Class E Units are recorded as treasury units in the unaudited
consolidated financial statements.
If the Bossier Pipeline becomes commercially operational prior to December 1,
2004, which entitles the Partnership or its subsidiaries to receive payment
under the transportation contract, the Special Units will convert to Common
9
Units if the conversion is approved by the Common Unitholders. Costs incurred
to construct the Bossier Pipeline are recorded at its historical cost. The
issuance of the additional Common Units upon the conversion of the Special Units
will adjust the percent of Heritage acquired by La Grange Energy in the ETC
Transaction and will result in an additional fair value step-up being recorded
in accordance with EITF 90-13. If the Special Units are converted to Common
Units, ETC will have acquired approximately 41.5% of Heritage, and approximately
$38,000 additional step-up in the fair value of the assets and liabilities of
Heritage will be recorded.
The excess purchase price over Predecessor Heritage's cost was determined as
follows:
Net book value of Predecessor Heritage at January 20, 2004 $ 238,944
Historical goodwill at January 20, 2004 (170,500)
Equity investment from public offering 355,948
Treasury Class E Unit purchase (157,340)
-------------
267,052
Percent of Heritage acquired by La Grange Energy 35.4%
-------------
Equity interest acquired $ 94,536
=============
Fair market value of Limited Partner Units 651,170
Purchase price of General Partner Interest 30,000
Equity investment from public offering 355,948
Treasury Class E Unit purchase (157,340)
-------------
879,778
Percent of Heritage acquired by La Grange Energy 35.4%
-------------
Fair value of equity acquired 311,441
Net book value of equity acquired 94,536
-------------
Excess purchase price over Predecessor Heritage cost $ 216,905
=============
The excess purchase price over Predecessor Heritage cost was allocated as
follows:
Property, plant and equipment (25 year life) $ 34,513
Customer lists (15 year life) 13,641
Trademarks 10,366
Goodwill 158,385
-------------
$ 216,905
=============
The purchase accounting allocations recorded as of February 29, 2004 are
preliminary. However, management does not believe there will be material
modifications to the purchase price allocations except when the Special Units
are converted to Common Units upon completion of the Bossier pipeline project
and approval of the Common Unitholders.
SUBSEQUENT DEVELOPMENTS
On February 12, 2004, the Board of Directors of Heritage's General Partner voted
to change the name of Heritage to Energy Transfer Partners, L.P., and began
trading on the New York Stock Exchange under the ticker symbol "ETP". The name
change and new ticker symbol were effective March 1, 2004.
BUSINESS OPERATIONS
In order to simplify the obligations of Energy Transfer Partners, L.P. (the
"Partnership") under the laws of several jurisdictions in which it conducts
business, the Partnership's activities are conducted through two subsidiary
operating partnerships, La Grange Acquisition, L.P. ("La Grange Acquisition"), a
Texas limited partnership which is engaged in midstream natural gas operations,
and Heritage Operating, L.P. ("Heritage Operating"), a Delaware limited
partnership which is engaged in retail and wholesale propane operations
(collectively the "Operating Partnerships"). The Partnership and the Operating
Partnerships are collectively referred to in this report as "Energy Transfer."
La Grange Acquisition owns and operates approximately 4,500 miles of natural gas
gathering and transportation pipelines with an aggregate throughput capacity of
2.5 billion cubic feet of natural gas per day, with natural gas treating and
processing plants located in Texas, Oklahoma, and Louisiana. Its major asset
groups consist of the Southeast Texas System, Elk City System and Oasis
pipeline. The Southeast Texas System has a throughput capacity of 260 MMcf/d.
10
The system has 2,500 miles of pipeline with 1,050 wells connected, the La Grange
processing plant, and 5 natural gas treating facilities. The Elk City System has
a throughput capacity of 170 MMcf/d. The system has 315 miles of pipeline with
300 wells connected, the Elk City processing plant, and a treating facility. The
583 mile long Oasis pipeline, which connects the West Texas Waha Hub to the Katy
Texas Tailgate, has a throughput capacity of 830 MMcf/d.
Heritage Operating sells propane and propane-related products to more than
650,000 active residential, commercial, industrial, and agricultural customers
in 31 states. Heritage Operating is also a wholesale propane supplier in the
United States and in Canada, the latter through its participation in MP Energy
Partnership. MP Energy Partnership is a Canadian partnership in which the
Partnership owns a 60% interest, engaged in lower-margin wholesale distribution
and in supplying Heritage Operating's northern U.S. locations. Heritage
Operating buys and sells financial instruments for its own account through its
wholly owned subsidiary, Heritage Energy Resources, L.L.C. ("Resources").
The accompanying financial statements should be read in conjunction with the
consolidated financial statements of Heritage Propane Partners, L.P. and
subsidiaries ("Predecessor Heritage") as of August 31, 2003, and the notes
thereto included in the registrant's Form 10-K filed with the Securities and
Exchange Commission on November 26, 2003, the combined financial statements of
ETC as of August 31, 2003, and the notes thereto included in the registrant's
Prospectus Supplement on Form 424(b)(2) filed with the Securities and Exchange
Commission on January 14, 2004. The accompanying financial statements include
only normal recurring accruals and all adjustments that the Partnership
considers necessary for a fair presentation. Due to the seasonal nature of the
Partnership's propane business, the results of propane operations for interim
periods are not necessarily indicative of the results to be expected from these
operations for a full year.
2. PRESENTATION OF FINANCIAL INFORMATION:
The accompanying financial statements for the three and six month periods ended
February 29, 2004 include the results of operations for ETC beginning September
1, 2003 and December 1, 2003, respectively, consolidated with the results of
operations of Heritage Operating and HHI beginning January 20, 2004. The
financial statements for the fiscal period including January 20, 2004 do not
include the complete results of operations for both ETC and Predecessor Heritage
for such periods, as they include the results of operations of Predecessor
Heritage only for the period from January 20, 2004 to February 29, 2004. The
financial statements of ETC are the financial statements of the registrant, as
ETC was deemed the accounting acquirer. ETC was formed on October 1, 2002, and
has an August 31, year-end. ETC's predecessor entities had a December 31
year-end. Accordingly, ETC's 11-month period ended August 31, 2003 was treated
as a transition period under the rules of the Securities and Exchange Commission
and therefore, only a five-month period is presented for the period ended
February 28, 2003. The accompanying combined financial statements of ETC as of
August 31, 2003 and the three and five months ended February 28, 2003 present
the combined financial statements of La Grange Acquisition and subsidiaries
after the elimination of significant intercompany balances and transactions.
During the eleven months ended August 31, 2003, ETC owned the Southeast Texas
System and the Elk City System. From October 1, 2002 through December 27, 2002,
ETC also owned a 50% equity interest in Oasis Pipe Line Company, which owns the
Oasis pipeline. After December 27, 2002, ETC owned a 100% interest in Oasis Pipe
Line Company. In addition, on December 27, 2002, an affiliate of La Grange
Energy's general partner contributed to ETC its marketing business (ET Company
I) and its investment in the Vantex System, the Rusk County Gathering System,
the Whiskey Bay System and the Chalkley Transmission System.
11
The following unaudited pro forma consolidated results of operations are
presented as if Oasis Pipe Line Company and ET Company I were wholly owned at
the beginning of the periods presented and the transaction with Heritage and ETC
had been made at the beginning of the periods presented.
Six Months Five Months
Three Months Ended Ended Ended
February 29, February 28, February 29, February 28,
2004 2003 2004 2003
-------------- -------------- -------------- -------------
REVENUES:
Midstream and transportation $ 488,291 $ 225,672 $ 903,277 $ 337,964
Propane Operations 269,777 232,922 374,508 328,319
Other 19,120 16,887 38,115 34,949
-------------- -------------- -------------- -------------
Total revenues 777,188 475,481 1,315,900 701,232
COSTS AND EXPENSES:
Cost of products sold -
Midstream and Transportation 457,928 192,712 840,478 287,631
Propane Operations 153,581 123,552 214,680 175,731
Other 5,199 4,868 10,470 9,709
Operating expenses 51,903 51,361 95,384 87,796
Depreciation and amortization 15,759 13,641 30,174 25,840
Selling, general and
administrative 13,268 9,070 21,315 14,361
Realized and unrealized
(gains) losses on derivatives (7,168) 4,828 (10,202) 6,693
-------------- -------------- -------------- -------------
Total costs and expenses 690,470 400,032 1,202,299 607,761
OPERATING INCOME 86,718 75,449 113,601 93,471
OTHER INCOME (EXPENSE)
Interest, net (14,424) (13,873) (27,284) (25,504)
Equity in earnings of
affiliates 457 (533) 823 1,054
Gain on disposal of assets 31 - 28 -
Other 206 (81) 168 (489)
-------------- -------------- -------------- -------------
INCOME BEFORE MINORITY INTERESTS
AND INCOME TAXES
72,988 60,962 87,336 68,532
Minority interests 367 317 516 432
-------------- -------------- -------------- -------------
INCOME BEFORE INCOME TAXES 72,621 60,645 86,820 68,100
Income Taxes 1,841 3,777 4,722 6,173
-------------- -------------- -------------- -------------
NET INCOME 70,780 56,868 82,098 61,927
GENERAL PARTNER'S INTEREST
IN NET INCOME 2,113 1,796 3,659 2,565
-------------- -------------- -------------- -------------
LIMITED PARTNERS' INTEREST
IN NET INCOME $ 68,667 $ 55,072 $ 78,439 $ 59,362
============== ============== ============== =============
BASIC EARNINGS PER LIMITED
PARTNER UNIT $ 1.94 $ 1.65 $ 2.22 $ 1.79
============== ============== ============== =============
BASIC AVERAGE NUMBER OF UNITS
OUTSTANDING 35,478,745 33,340,069 35,296,097 35,161,396
============== ============== ============== =============
DILUTED EARNINGS PER
LIMITED PARTNER UNIT $ 1.93 $ 1.65 $ 2.22 $ 1.79
============== ============== ============== =============
DILUTED AVERAGE NUMBER OF UNITS
OUTSTANDING 35,503,640 33,364,569 35,320,795 33,185,896
============== ============== ============== =============
12
VOLUMES
Midstream
Natural gas MMBtu/d 968,000 432,000 946,000 412,000
NGLs bbls/d 12,600 10,200 13,800 12,400
Transportation
Natural gas MMBtu/d 873,000 816,000 831,000 846,000
Propane operations (in gallons) 177,447 166,622 256,088 243,343
Retail propane 3,379 5,467 6,673 10,357
Domestic wholesale 23,006 25,358 35,175 42,553
Foreign wholesale
The pro forma consolidated results of operations include adjustments to give
effect to depreciation on the step-up of property, plant and equipment,
amortization of customer lists, interest expense on acquisition debt, and
certain other adjustments. The unaudited pro forma information is not
necessarily indicative of the results of operations that would have occurred had
the transactions been made at the beginning of the periods presented or the
future results of the combined operations.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BALANCE SHEET DETAIL:
PRINCIPLES OF CONSOLIDATION
Prior to the merger with Heritage, Energy Transfer Company was the assumed name
of a group of entities under common control consisting of La Grange Acquisition,
L.P. and a series of its limited partner investees. La Grange Acquisition is a
Texas limited partnership formed on October 1, 2002 and was 99.9% owned by its
limited partner, La Grange Energy, L.P., and 0.1% owned by its general partner,
LA GP, LLC. La Grange Acquisition is the 99.9% limited partner of ETC Gas
Company, Ltd., ETC Texas Pipeline, Ltd., ETC Processing, Ltd., and ETC
Marketing, Ltd. and a 99% limited partner of ETC Oasis Pipe Line, L.P. and ET
Company I, Ltd. (collectively, the "Operating Companies"). The general partners
of La Grange Acquisition, La Grange Energy, and the Operating Companies were
ultimately owned and controlled by members of management, a private equity
investor fund, and a group of institutional investors. La Grange Acquisition and
the Operating Companies conducted business under the name Energy Transfer
Company. The historical financial statements of Energy Transfer Company present
the accounts of La Grange Acquisition and the Operating Companies (collectively
"Energy Transfer Company" or "ETC") on a combined basis as entities under common
control. The accompanying combined financial statements of ETC as of August 31,
2003 and the three and five months ended February 28, 2003, include the accounts
of La Grange Acquisition and the Operating Companies after the elimination of
significant intercompany balances and transactions. Further, La Grange
Acquisition's limited partner investments in each of the Operating Companies
were eliminated against the Operating Companies' limited partner's capital. From
October 2002 through December 2002, ETC owned a 20% interest in the Nustar Joint
Venture. Effective December 27, 2002, ETC owned a 50% interest in Vantex Gas
Pipeline Company, LLC, and a 49.5% interest in Vantex Energy Services, Ltd.
These investments are accounted for under the equity method. All significant
intercompany transactions have been eliminated. Prior to December 27, 2002, when
the remaining 50% of Oasis Pipe Line Company ("Oasis") capital stock was
redeemed, ETC accounted for its 50% ownership in Oasis under the equity method.
After December 27, 2002, Oasis became a wholly owned subsidiary of ETC. La
Grange Acquisition and the Operating Companies were contributed by La Grange
Energy to Heritage and, thus, after the January 2004 ETC Transaction, La Grange
Acquisition, L.P. and the Operating Companies under La Grange Acquisition,
became wholly owned subsidiaries of the Partnership.
Predecessor Heritage's financial statements include the accounts of its
subsidiaries, including Heritage Operating and its subsidiaries. At August 31,
2003, Predecessor Heritage accounted for its 50% partnership interest in
Bi-State Propane, ("Bi-State") a propane retailer in the states of Nevada and
California, under the equity method. On December 24, 2003, Predecessor Heritage
acquired the remaining 50% of Bi-State that it did not previously own, thereby
making Bi-State a wholly owned subsidiary of Predecessor Heritage.
After the ETC Transaction, the consolidated financial statements of the
registrant include the accounts of its subsidiaries, including the Operating
Partnerships and HHI. A minority interest liability and minority interest
expense is recorded for all partially owned subsidiaries. All significant
intercompany transactions and accounts have been eliminated in consolidation.
13
For purposes of maintaining partner capital accounts, the Partnership Agreement
of Energy Transfer Partners, L.P. (the "Partnership Agreement") specifies that
items of income and loss shall generally be allocated among the partners in
accordance with their percentage interests (see footnote 8). Normal allocations
according to percentage interests are made, however, only after giving effect to
any priority income allocations in an amount equal to the incentive
distributions that are allocated 100% to the General Partner.
REVENUE RECOGNITION
Revenues for sales of natural gas, natural gas liquids ("NGLs") including
propane, and propane appliances, parts, and fittings are recognized at the later
of the time of delivery of the product to the customer or the time of sale or
installation. Revenue from service labor, including transportation, treating,
compression, and gas processing, is recognized upon completion of the service.
Transportation capacity payments are recognized when earned in the period the
capacity was made available. Tank rent is recognized ratably over the period it
is earned.
SHIPPING AND HANDLING COSTS
In accordance with the Emerging Issues Task Force Issue 00-10, Accounting for
Shipping and Handling Fees and Costs, the Partnership has classified all
deductions from producer payments for natural gas, compression and treating,
which can be considered handling costs, as revenue. The Partnership does not
separately charge shipping and handling costs of propane to customers.
COSTS AND EXPENSES
Costs of products sold include actual cost of fuel sold adjusted for the effects
of qualifying cash flow hedges, propane storage fees and inbound freight on
propane, and the cost of appliances, parts, and fittings. Operating expenses
include all costs incurred to provide products to customers, including
compensation for operations personnel, insurance costs, vehicle maintenance,
advertising costs, shipping and handling costs related to propane, purchasing
costs, and plant operations. Selling, general and administrative expenses
include all corporate expenses and compensation for corporate personnel.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all cash on hand, demand deposits, and
investments with original maturities of three months or less. The Partnership
considers cash equivalents to include short-term, highly liquid investments that
are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value.
MARKETABLE SECURITIES
Marketable securities owned by the Partnership are classified as
available-for-sale securities and are reflected as a current asset on the
consolidated balance sheet at their fair value. Unrealized holding losses of
$379 for the three and six months ended February 29, 2004, and $0 for the three
and six months ended February 28, 2003, respectively, and $9 for the three and
six months ended February 28, 2003 for Predecessor Heritage were recorded
through accumulated other comprehensive income based on the market value of the
securities.
ACCOUNTS RECEIVABLE
The Partnership's midstream and transportation operations deal with
counterparties that are typically either investment grade or are otherwise
secured with a letter of credit or other form of security (corporate guaranty or
prepayment). Management reviews midstream and transportation accounts receivable
balances each week. Credit limits are assigned and monitored for all
counterparties of the midstream and transportation operations. Bad debt expense
related to these receivables is recognized at the time an account is deemed
uncollectible. There were no bad debts recognized in the midstream and
transportation accounts receivable during the three or six months ended February
29, 2004 or the three and five months ended February 28, 2003.
The Partnership grants credit to its customers for the purchase of propane and
propane-related products. Also included in accounts receivable are trade
accounts receivable arising from the Partnership's retail and wholesale propane
operations and receivables arising from Resources' liquids marketing activities.
Accounts receivable for
14
retail and wholesale propane and liquids marketing activities are recorded as
amounts billed to customers less an allowance for doubtful accounts. The
allowance for doubtful accounts is based on management's assessment of the
realizability of customer accounts. Management's assessment is based on the
overall creditworthiness of the Partnership's customers and any specific
disputes. Accounts receivable consisted of the following:
February 29, August 31, August 31,
2004 2003 2003
------------- --------------- -------------
(Energy Transfer (Predecessor
Company) Heritage)
Accounts receivable midstream and
transportation $ 144,902 $ 105,987 $ -
Accounts receivable retail and wholesale
propane 89,161 - 35,383
Accounts receivable liquids marketing 13,832 - 4,000
Less - allowance for doubtful accounts 84 - 3,504
------------- ------------- -------------
Total, net $ 247,811 $ 105,987 $ 35,879
============= ============= =============
The activity in the allowance for doubtful accounts consisted of the following:
Six Five Six
Months Ended Months Ended Months Ended
February 29, February 28, February 28,
2004 2003 2003
------------- --------------- -------------
(Energy Transfer (Predecessor
Company) Heritage)
Balance, beginning of the period $ - $ - $ 2,504
Provision for loss on accounts
receivable 84 - 1,511
Accounts receivable written off, net
of recoveries - - (511)
------------- ------------- --------------
Balance, end of period $ 84 $ - $ 3,504
============= ============= ==============
INVENTORIES
Inventories are valued at the lower of cost or market. The cost of propane
inventories is determined using weighted-average cost of propane delivered to
the customer service locations, and includes storage fees and inbound freight
costs, while the cost of appliances, parts, and fittings is determined by the
first-in, first-out method. Inventories consisted of the following:
February 29, August 31, August 31,
2004 2003 2003
-------------- ---------------- ------------
(Energy Transfer (Predecessor
Company) Heritage)
Propane and other NGLs $ 25,519 $ 1,876 $ 34,544
Appliances, parts and fittings and other 12,057 2,071 10,730
-------------- ---------------- -----------
Total inventories $ 37,576 $ 3,947 $ 45,274
============== ================ ===========
DEPOSITS
Deposits are paid to vendors in the midstream and transportation business as
pre-payments for natural gas deliveries in the following month. The Partnership
makes pre-payments when the volume of business with a vendor exceeds the
Partnership's credit limit, and/or when it is economically beneficial to do so.
Deposits with vendors for gas purchases were $0 and $16,962 as of February 29,
2004 and August 31, 2003, respectively. The Partnership also has deposits with
derivative counterparties of $1,106 and $2,091 as of February 29, 2004 and
August 31, 2003, respectively.
15
Deposits are received from midstream and transportation customers as
pre-payments for natural gas deliveries in the following month and deposits from
propane customers as security for future propane use. Pre-payments and security
deposits may also be required when customers exceed their credit limits or do
not qualify for open credit. Deposits received from customers were $6,213 and
$11,600 as of February 29, 2004 and August 31, 2003, respectively and are
recorded as accrued and other current liabilities on the Partnership's
consolidated balance sheets. Predecessor Heritage's deposits received from
customers were $2,137 as of August 31, 2003.
EXCHANGES
Exchanges consist of natural gas and NGL delivery imbalances with others. These
amounts turn over monthly and Management believes the cost approximates market
value. Accordingly, these volumes are valued at market prices and are recorded
as exchanges receivable or exchanges payable on the Partnership's consolidated
balance sheets.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. Expenditures for maintenance and repairs that do not
add capacity or extend the useful life are expensed as incurred. Expenditures to
refurbish assets that either extend the useful lives of the asset or prevent
environmental contamination are capitalized and depreciated over the remaining
useful life of the asset. Additionally, the Partnership capitalizes certain
costs directly related to the installation of company-owned propane tanks, and
construction of assets including internal labor costs, interest and engineering
costs. Upon disposition or retirement of pipeline components or natural gas
plant components, any gain or loss is recorded to accumulated depreciation. When
entire pipeline systems, gas plants or other property and equipment are retired
or sold, any gain or loss is included in operations.
The Partnership reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of such assets may
not be recoverable. If such a review should indicate that the carrying amount of
long-lived assets is not recoverable, the Partnership reduces the carrying
amount of such assets to fair value. No impairment of long-lived assets was
recorded during the periods presented.
Components and useful lives of property, plant and equipment were as follows:
February 29, August 31, August 31,
2004 2003 2003
----------- ----------- --------
(Energy
Transfer (Predecessor
Company) Heritage)
Land and improvements $ 26,055 $ 992 $ 21,937
Buildings and improvements (10 to 30 years) 30,563 987 30,843
Pipelines and equipment (10 to 65 years) 401,613 382,517 -
Bulk storage, equipment and facilities (3 to 30 years) 47,072 - 43,340
Tanks and other equipment (5 to 30 years) 316,472 - 327,193
Vehicles (5 to 10 years) 48,637 - 76,239
Right of way (20 to 65 years) 4,923 4,057 -
Furniture and fixtures (3 to 10 years) 6,649 - 11,164
Linepack 5,176 5,176 -
Other (5 to 10 years) 5,942 3,675 3,578
---------- ---------- ----------
893,102 397,404 514,294
Less - Accumulated depreciation (25,485) (13,261) (99,563)
---------- ---------- ----------
867,617 384,143 414,731
Plus - Construction work-in-process 60,435 7,121 11,857
---------- ---------- ----------
Property, plant and equipment, net $ 928,052 $ 391,264 $ 426,588
========== ========== ==========
The Partnership accounts for expected future costs associated with its
obligation to perform site reclamation and dismantle facilities of abandoned
pipelines under Statement of Accounting Standards No. 143, Accounting for Asset
Retirement Obligations, ("SFAS 143"). If a reasonable estimate of the fair value
of an abandonment obligation can be made, SFAS 143 requires the Partnership to
record a liability (an asset retirement obligation or ARO) on the consolidated
balance sheets in other non-current liabilities and to capitalize the asset
retirement cost in the period in
16
which the retirement obligation is incurred. In general, the amount of an ARO
and the associated costs capitalized will be equal to the estimated future cost
to satisfy the abandonment obligation using current prices after discounting the
future cost back to the date that the abandonment obligation was incurred using
the credit-adjusted risk-free rate for the Partnership. After recording these
amounts, the ARO will be accreted to its future estimated value using the
credit-adjusted risk-free rate and the additional capitalized costs will be
depreciated on a straight line basis over the productive life of the related
assets. The Partnership had an ARO of approximately $3,544 recorded in the
consolidated balance sheet as of February 29, 2004. The Partnership acquired all
of its operating assets subsequent to the effective date of SFAS 143; therefore
there is no cumulative effect of adopting SFAS 143.
No assets are legally restricted for purposes of settling the Partnership's
AROs. A reconciliation of the beginning and ending aggregate carrying amount of
the Partnership's ARO for the six months ended February 29, 2004 is as follows:
Balance as of August 31, 2003 $ -
Liabilities incurred 3,500
Liabilities settled -
Accretion expense 44
Revision in estimated abandonment costs -
-----------
Balance as of February 29, 2004 $ 3,544
===========
INTANGIBLES AND OTHER ASSETS
Intangibles and other assets are stated at cost net of amortization computed on
the straight-line method. The Partnership eliminates from its balance sheet any
fully amortized intangibles and the related accumulated amortization. Components
and useful lives of intangibles and other assets were as follows:
February 29, 2004 August 31, 2003 August 31, 2003
--------------------------- ---------------------------- ------------------------
Gross Gross Gross
Carrying Accumulated Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization Amount Amortization
---------- ------------- ----------- ------------ ------------- ------------
(Energy Transfer Company) (Predecessor Heritage)
Amortized intangible assets -
Noncompete agreements
(5 to 15 years) $ 27,667 $ (466) $ - $ - $ 42,742 $ (15,893)
Customer lists (15 40,454 (418) - - 28,378 (6,356)
years) Financing costs
(3 to 15 years) 14,124 (4,175) 5,724 (2,464) 4,225 (1,995)
Consulting agreements
(2 to 7 years) 132 (5) - - 517 (367)
Other (10 years) 478 (119) 477 (92) - -
---------- ------------- ----------- ------------- ------------- ------------
Total 82,855 (5,183) 6,201 (2,556) 75,862 (24,611)
Unamortized intangible assets -
Trademarks 17,827 - - - 1,309 -
Other assets 1,067 - 1,761 - 264 -
---------- ------------- ----------- ----------- ------------- ------------
Total intangibles and
other assets $ 101,749 $ (5,183) $ 7,962 $ (2,556) $ 77,435 $ (24,611)
========== ============= =========== =========== ============= ============
Aggregate amortization expense of intangible assets was $663 and $2,627 for the
three and six months ended February 29, 2004, respectively and, $833 and $1,027
for the three and five months ended February 28, 2003, respectively. Predecessor
Heritage's aggregate amortization expense was $1,909 and $3,946 for the three
and six months ended February 28, 2003, respectively.
GOODWILL
Goodwill is associated with acquisitions made for the Partnership's midstream
and domestic retail propane segments. There is no goodwill associated with the
transportation segment. Of the $284,240 balance in goodwill, $16,500 is expected
to be tax deductible. Goodwill is tested for impairment annually in accordance
with Statement of Accounting Standards No. 142, Goodwill and Other Intangible
Assets, ("SFAS 142"). The changes in the carrying amount of goodwill for the six
months ended February 29, 2004 were as follows:
17
Midstream Retail Propane Total
----------------- ----------------- -----------------
Balance as of August 31, 2003 $ 13,409 $ - $ 13,409
Goodwill acquired during the year - 270,831 270,831
Impairment losses - - -
----------------- ----------------- -----------------
Balance as of February 29, 2004 $ 13,409 $ 270,831 $ 284,240
================= ================= =================
ACCRUED AND OTHER CURRENT LIABILITIES
Accrued and other current liabilities consisted of the following:
February 29, August 31, August 31,
2004 2003 2003
----------- ----------- -----------
(Energy
Transfer (Predecessor
Company) Heritage)
Interest payable $ 5,954 $ 1,014 $ 4,485
Wages, payroll taxes and employee
benefits 11,788 2,702 4,932
Deferred tank rent 4,861 - 4,080
Customer deposits 6,213 11,600 2,137
Taxes other than income 4,019 2,460 2,405
Environmental 500 633 -
Advanced budget payments and unearned
revenue 4,589 - 15,417
Other 1,152 1,246 2,117
---------- ---------- ----------
Accrued and other current liabilities $ 39,076 $ 19,655 $ 35,573
========== ========== ==========
INCOME TAXES
Energy Transfer Partners is a limited partnership. As a result, The
Partnership's earnings or losses for federal and state income tax purposes are
included in the tax returns of the individual partners. 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.
Oasis, HHI and certain other of the Partnership's subsidiaries are taxable
corporations and follow the liability method of accounting for income taxes in
accordance with Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes (SFAS 109). Under SFAS 109, deferred income taxes are recorded
based upon differences between the financial reporting and tax bases of assets
and liabilities and are measured using the enacted tax rates and laws that will
be in effect when the underlying assets are received and liabilities settled.
18
INCOME PER LIMITED PARTNER UNIT
Basic net income per limited partner unit is computed by dividing net income,
after considering the General Partner's interest, by the weighted average number
of Common and Class D Units outstanding. Diluted net income per limited partner
unit is computed by dividing net income, after considering the General Partner's
interest, by the weighted average number of Common and Class D Units outstanding
and the weighted average number of restricted units ("Phantom Units") granted
under the Restricted Unit Plan. A reconciliation of net income and weighted
average units used in computing basic and diluted net income per unit is as
follows:
Three Months Three Months Three Months Six Months Five Months Six Months
Ended Ended Ended Ended Ended Ended
February 29 February 28 February 28 February 29 February 28 February 28
2004 2003 2003 2004 2003 2003
------------ ------------ ------------ ------------ ------------ ------------
(Energy (Energy
Transfer (Predecessor Transfer (Predecessor
Company) Heritage) Company) Heritage)
BASIC NET INCOME PER LIMITED
PARTNER UNIT:
Limited Partners' interest in
net income $ 46,935 $ 7,682 $ 49,029 $ 62,315 $ 11,336 $ 50,300
========== ========== ========== ========== ========== ===========
Weighted average limited
partner units 19,686,563 6,621,737 16,165,602 13,154,150 6,621,737 15,990,010
========== ========== ========== ========== ========== ==========
Basic net income per limited
partner unit $ 2.38 $ 1.16 $ 3.03 $ 4.74 $ 1.71 $ 3.15
========== ========== ========== ========== ========== ===========
DILUTED NET INCOME PER
LIMITED PARTNER UNIT:
Limited partners' interest in
net income $ 46,935 $ 7,682 $ 49,029 $ 62,315 $ 11,336 $ 50,300
========== ========== ========== ========== ========== ===========
Weighted average limited
partner units 19,686,563 6,621,737 16,165,602 13,154,150 6,621,737 15,990,010
Dilutive effect of phantom units 24,895 - 41,400 24,698 - 36,850
---------- ---------- ---------- ---------- ---------- -----------
Weighted average limited
partner units, assuming
dilutive effect of phantom
units 19,711,458 6,621,737 16,207,002 13,178,848 6,621,737 16,026,860
========== ========== ========== ========== ========== ===========
Diluted net income per
limited partner unit $ 2.38 $ 1.16 $ 3.03 $ 4.73 $ 1.71 $ 3.14
========== ========== ========== ========== =========== ===========
STOCK BASED COMPENSATION PLANS
The Partnership follows the fair value recognition provisions of Statement of
Financial Accounting Standards No. 123 Accounting for Stock-based Compensation
(SFAS 123).
RESTRICTED UNIT PLAN
The General Partner has adopted the Amended and Restated Restricted Unit Plan
dated August 10, 2000, amended February 4, 2002 as the Second Amended and
Restated Restricted Unit Plan (the "Restricted Unit Plan"), for certain
directors and key employees of the General Partner and its affiliates. The
Restricted Unit Plan covers rights to acquire 146,000 Common Units. The right to
acquire the Common Units under the Restricted Unit Plan, including any
forfeiture or lapse of rights is available for grant to key employees on such
terms and conditions (including vesting conditions) as the Compensation
Committee of the General Partner shall determine. Each director who is not a
member of management or an owner of the General Partner automatically receives a
Director's grant with respect to 500 Common Units on each September 1 that such
person continues as a director. Newly elected directors who are not members of
management or an owner of the General Partner are also entitled to receive a
grant with respect to 2,000 Common Units upon election or appointment to the
Board. Generally, the rights to acquire the Common Units will vest upon the
later to occur of the three-year anniversary of the grant date, or on such terms
as the Compensation Committee may establish, which may include the achievement
of performance objectives. In the event of a "change of control" (as defined in
the Restricted Unit Plan), all rights to acquire Common Units pursuant to the
Restricted Unit Plan will immediately vest.
19
Pursuant to the ETC Transaction, the change of control provisions of the
Restricted Unit Plan were triggered, resulting in the early vesting of 21,600
units by Predecessor Heritage. Individuals holding 4,500 grants waived their
rights to early vesting under the change of control provisions. Compensation
expense on the units that vested was recognized by Predecessor Heritage.
The issuance of the Common Units pursuant to the Restricted Unit Plan is
intended to serve as a means of incentive compensation for performance and not
primarily as an opportunity to participate in the equity appreciation in respect
of the Common Units. Therefore, no consideration will be payable by the plan
participants upon vesting and issuance of the Common Units. As of February 29,
2004, 6,500 restricted units were outstanding and 12,300 were available for
grants to non-employee directors and key employees. There was no deferred
compensation expense recognized for the three and six months ended February 29,
2004, or for the three and five months ended February 28, 2003.
LONG-TERM INCENTIVE PLAN
Effective September 1, 2000, Predecessor Heritage adopted a long-term incentive
plan whereby Common Units were awarded based on achieving certain targeted
levels of Distributed Cash (as defined in the Long Term Incentive Plan) per
unit. Awards under the program were made starting in 2003 based upon the average
of the prior three years' Distributed Cash per unit. A minimum of 250,000 Common
Units and if certain targeted levels are achieved, a maximum of 500,000 Common
Units will be awarded.
Pursuant to the Energy Transfer Transaction, the change of control provisions in
each of the employment agreements of the participants in the plan triggered the
minimum award, less any amounts previously earned and any amounts that had not
been designated for award, resulting in the issuance of 150,018 units by
Predecessor Heritage. Compensation expense on the units that vested was
recognized by Predecessor Heritage and no deferred compensation expense was
recognized for the three and six months ended February 29, 2004, or the three
and five months ended February 28, 2003.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Some of the more significant estimates made by
management include, but are not limited to, allowances for doubtful accounts,
the fair value of derivative hedging instruments, price risk management assets
and liabilities, useful lives for depreciation and amortization, purchase
accounting allocations and subsequent realizability of intangible assets, the
amount of the Partnership's ARO and general business and medical self-insurance
reserves. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform with the 2004
presentation. These reclassifications have no impact on net income or total
partners' capital.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Partnership applies Financial Accounting Standards Board Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities (SFAS 133) as
amended. This statement requires that all derivatives be recognized in the
balance sheet as either an asset or liability measured at fair value. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the statement of operations and
requires that a company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting treatment.
The Partnership utilizes various exchange-traded and over-the-counter commodity
financial instrument contracts to limit its exposure to margin fluctuations in
natural gas and NGL prices. These contracts consist primarily of futures
20
and swaps. Generally, management has previously elected not to apply hedge
accounting to these contracts, therefore, the net gain or loss arising from
marking to market these derivative instruments was previously recognized in
earnings as unrealized gains and losses on the statement of operations. However,
in the quarter ended February 29, 2004, the Partnership designated various
futures and certain associated basis contracts outstanding as cash flow hedging
instruments in accordance with SFAS 133. The effective portion of the hedge gain
or loss is initially reported as a component of other comprehensive income and
is subsequently reclassified into earnings when the instrument settles. The
ineffective portion of the gain or loss is reported in earnings immediately. As
of February 29, 2004, these instruments had a net fair value of $2,737, which
was recorded as price risk management assets and liabilities on the balance
sheet through other comprehensive income. The Partnership reclassified into
earnings gains of $7,004 and $6,961 for the three and six months ended February
29, 2004, respectively, that were previously reported in accumulated other
comprehensive income (loss). The amount of hedge ineffectiveness recognized in
income was a gain of $25 and a loss of $42 for the three and six months ended
February 29, 2004, respectively. There were no such financial instruments for
the three and five months ended February 28, 2003.
The Partnership also entered into an interest rate swap agreement for the
purpose of mitigating the interest rate risk associated with the La Grange
Acquisition Term Note. The interest rate swap agreement is used to manage a
portion of the exposure to changing interest rates by converting floating rate
debt to fixed rate debt. The swap had a fair value of $93 and $807 as of
February 29, 2004 and August 31, 2003, respectively which is recorded as price
risk management assets on the balance sheet. The Partnership reclassified into
earnings through interest expense, losses of $623 and $1,061 for the three and
six months ended February 29, 2004 that were previously reported in accumulated
other comprehensive income (loss).
In the course of normal operations, the Partnership routinely enters into
contracts such as forward physical contracts for the purchase and sale of
natural gas, propane, and other NGLs that qualify for and are designated as a
normal purchase and sales contracts. Such contracts are exempted from the fair
value accounting requirements of SFAS 133 and are accounted for using
traditional accrual accounting.
The market prices used to value the financial derivative transactions reflect
management's estimates considering various factors including closing exchange
and over-the-counter quotations, and the time value of the underlying
commitments. The values are adjusted to reflect the potential impact of
liquidating a position in an orderly manner over a reasonable period of time
under present market conditions.
RECENTLY ISSUED ACCOUNTING STANDARDS
In May 2003, the FASB issued Statement No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity (SFAS 150). SFAS
150 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within the scope
of SFAS 150 as a liability (or an asset in some circumstances). This statement
is effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. The Partnership adopted the provisions of SFAS
150 as of September 1, 2003. The adoption did not have a material impact on the
Partnership's consolidated financial position or results of operations.
In January 2003, the Financial Accounting Standards Board issued Financial
Accounting Standards Board Interpretation No. 46, Consolidation of Variable
Interest Entities (FIN 46). The interpretation was revised in December 2003. As
revised, FIN 46 addresses consolidation of business enterprise of variable
interest entities. FIN 46 was effective immediately for all variable interest
entities created after January 31, 2003 and for the first fiscal year or interim
period ending after March 15, 2004 for variable interest entities in which an
enterprise holds a variable interest that it acquired before February 1, 2003.
The implementation of FIN 46 did not have a significant impact on the
Partnership's financial position or results of operations.
21
4. ACQUISITIONS:
In October 2002, La Grange Acquisition purchased certain operating assets from
Aquila Gas Pipeline, primarily natural gas gathering, treating and processing
assets in Texas and Oklahoma. The assets acquired and purchase price allocation
were as follows:
Materials and supplies $ 1,626
Other assets 194
Property, plant and equipment 213,374
Investment in Oasis 41,670
Investment in Nustar Joint Venture 9,600
Accrued expenses (2,788)
--------------
Total $ 263,676
==============
At the closing of the acquisition of Aquila Gas Pipeline's assets, $5,000 was
put into escrow until such time that proper consents and conveyance could be
achieved related to a sales contract. It was later determined that it was
unlikely that a proper conveyance could be achieved which resulted in the
escrowed amount of $5,000 being returned to La Grange Acquisition during the
period ended August 31, 2003. The return of the $5,000 purchase price reduced La
Grange Acquisition's basis in property, plant and equipment.
On December 27, 2002, Oasis Pipe Line Company redeemed the remaining 50% of its
capital stock owned by Dow Hydrocarbons Resources, Inc. for $87,000, and
cancelled the stock. La Grange Acquisition, L.P. now owns 100% of the capital
stock of Oasis Pipe Line Company.
Also, on December 27, 2002, ETC Holdings, LP, a limited partner of La Grange
Energy, contributed ET Company I to the Partnership. The investment in the
Vantex system was included in the assets contributed.
5. WORKING CAPITAL FACILITY AND LONG-TERM DEBT:
Long-term debt consists of the following:
February 29, August 31, August 31,
2004 2003 2003
------------ -------------- ------------
(Energy Transfer (Predecessor
Company) Heritage)
1996 8.55% Senior Secured Notes $ 96,000 $ - $ 96,000
1997 Medium Term Note Program:
7.17% Series A Senior Secured Notes 12,000 - 12,000
7.26% Series B Senior Secured Notes 18,000 - 20,000
6.50% Series C Senior Secured Notes 2,143 - 2,143
2000 and 2001 Senior Secured Promissory Notes:
8.47% Series A Senior Secured Notes 12,800 - 16,000
8.55% Series B Senior Secured Notes 32,000 - 32,000
8.59% Series C Senior Secured Notes 27,000 - 27,000
8.67% Series D Senior Secured Notes 58,000 - 58,000
8.75% Series E Senior Secured Notes 7,000 - 7,000
8.87% Series F Senior Secured Notes 40,000 - 40,000
7.21% Series G Senior Secured Notes 19,000 - 19,000
7.89% Series H Senior Secured Notes 8,000 - 8,000
7.99% Series I Senior Secured Notes 16,000 - 16,000
Term Loan Facility 325,000 226,000 -
-
22
Senior Revolving Acquisition Facility 21,228 - 24,700
Notes Payable on noncompete agreements with interest
imputed at rates averaging 7.38%, due in installments
through 2010, collateralized by a first security lien on
certain assets of Heritage Operating 19,690 - 20,110
Other 1,536 - 1,118
Current maturities of long-term debt (29,937) (30,000) (38,309)
---------- ------------ ----------
$ 685,460 $ 196,000 $ 360,762
========== ============ ==========
Maturities of the Senior Secured Notes, the Medium Term Note Program and the
Senior Secured Promissory Notes (the "Notes") are as follows:
1996 8.55% Senior Secured Notes:
mature at the rate of $12,000 on June 30 in
each of the years 2002 to and including 2011.
Interest is paid semi-annually.
1997 Medium Term Note Program:
Series A Notes: mature at the rate of $2,400 on November 19 in
each of the years 2005 to and including 2009.
Interest is paid semi-annually.
Series B Notes: mature at the rate of $2,000 on November 19 in
each of the years 2003 to and including 2012.
Interest is paid semi-annually.
Series C Notes: mature at the rate of $714 on March 13 in each
of the years 2000 to and including 2003, $357
on March 13, 2004, $1,073 on March 13, 2005,
and $357 in each of the years 2006 and 2007.
Interest is paid semi-annually.
2000 and 2001 Senior Secured Promissory Notes:
Series A Notes: mature at the rate of $3,200 on August 15 in
each of the years 2003 to and including 2007.
Interest is paid quarterly.
Series B Notes: mature at the rate of $4,571 on August 15 in
each of the years 2004 to and including 2010.
Interest is paid quarterly.
Series C Notes: mature at the rate of $5,750 on August 15 in
each of the years 2006 to and including 2007,
$4,000 on August 15, 2008 and $5,750 on August
15, 2009 to and including 2010. Interest is
paid quarterly.
Series D Notes: mature at the rate of $12,450 on August 15 in
each of the years 2008 and 2009, $7,700 on
August 15, 2010, $12,450 on August 15, 2011
and $12,950 on August 15, 2012. Interest is
paid quarterly.
Series E Notes: mature at the rate of $1,000 on August 15 in
each of the years 2009 to and including 2015.
Interest is paid quarterly.
Series F Notes: mature at the rate of $3,636 on August 15 in
each of the years 2010 to and including 2020.
Interest is paid quarterly.
Series G Notes: mature at the rate of $3,800 on May 15 in each
of the years 2004 to and including 2008.
Interest is paid quarterly. $7.5 million of
these notes were retired during the fiscal
year ended August 31, 2003.
Series H Notes: mature at the rate of $727 on May 15 in each
of the years 2006 to and including 2016.
Interest is paid quarterly. $19.5 million of
these notes were retired during the fiscal
year ended August 31, 2003.
Series I Notes: mature in one payment of $16,000 on May 15,
2013. Interest is paid quarterly.
All receivables, contracts, equipment, inventory, general intangibles, cash
concentration accounts, and the capital stock of Heritage Operating and its
subsidiaries secure the Senior Secured, Medium Term, and Senior Secured
Promissory Notes. In addition to the stated interest rate for the Notes, the
Partnership is required to pay an
23
additional 1% per annum on the outstanding balance of the Notes until such time
the Notes achieve investment grade status.
Effective January 20, 2004, La Grange Acquisition entered into the Second
Amended and Restated Credit Agreement. The terms of the Agreement are as
follows:
A $325,000 Term Loan Facility that matures on January 18, 2008.
Interest is paid quarterly and is based on the LIBOR rate plus 3% which
was 4.10% at February 29, 2004. The Term Loan Facility is secured by
substantially all of the La Grange Acquisition's assets.
A $175,000 Revolving Credit Facility is available through January 18,
2008. Amounts borrowed under the La Grange Acquisition Credit Facility
bear interest at a rate based on either a Eurodollar rate, or a prime
rate. The maximum commitment fee payable on the unused portion of the
facility is 0.50%. The facility is fully secured by substantially all
of La Grange Acquisition's assets. As of February 29, 2004, there were
no amounts outstanding under the Revolving Credit Facility, and $10,875
in letters of credit outstanding which reduce the amount available for
borrowing under the Revolving Credit Facility. Letters of Credit under
the Revolving Credit Facility may not exceed $40,000.
Effective December 31, 2003, Heritage Operating entered into the Second Amended
and Restated Credit Agreement. The terms of the Agreement are as follows:
A $75,000 Senior Revolving Working Capital Facility is available
through December 31, 2006. Amounts borrowed under the Working Capital
Facility bear interest at a rate based on either a Eurodollar rate or a
prime rate. The amounts outstanding at February 29, 2004 were
Eurodollar rate loans. The weighted average interest rate was 2.9738%
for the amount outstanding at February 29, 2004. The maximum commitment
fee payable on the unused portion of the facility is 0.50%. Heritage
Operating must reduce the principal amount of working capital
borrowings to $10,000 for a period of not less than 30 consecutive days
at least one time during each fiscal year. All receivables, contracts,
equipment, inventory, general intangibles, cash concentration accounts,
and the capital stock of Heritage Operating's subsidiaries secure the
Senior Revolving Working Capital Facility. As of February 29, 2004, the
Senior Revolving Working Capital Facility had a balance outstanding of
$65,488. A $5,000 Letter of Credit issuance is available to Heritage
Operating for up to 30 days prior to the maturity date of the Working
Capital Facility. Letter of Credit Exposure plus the Working Capital
Loan cannot exceed the $75,000 maximum Working Capital Facility.
Heritage Operating had no outstanding Letters of Credit at February 29,
2004.
A $75,000 Senior Revolving Acquisition Facility is available through
December 31, 2006, at which time the outstanding amount must be paid in
full. Amounts borrowed under the Acquisition Credit Facility bear
interest at a rate based on either a Eurodollar rate or a prime rate.
The amounts outstanding at February 29, 2004 were Eurodollar rate
loans. The weighted average interest rate was 2.9738% for the amount
outstanding at February 29, 2004. The maximum commitment fee payable on
the unused portion of the facility is 0.50%. All receivables,
contracts, equipment, inventory, general intangibles, cash
concentration accounts, and the capital stock of Heritage Operating's
subsidiaries secure the Senior Revolving Acquisition Facility. As of
February 29, 2004, the Senior Revolving Acquisition Facility had a
balance outstanding of $21,228.
The agreements for each of the Senior Secured Notes, Medium Term Note Program,
Senior Secured Promissory Notes, and the Operating Partnerships' bank credit
facilities contain customary restrictive covenants applicable to the Operating
Partnerships, including limitations on substantial disposition of assets,
changes in ownership of the Operating Partnerships, the level of additional
indebtedness and creation of liens. These covenants require the Operating
Partnerships to maintain ratios of Consolidated Funded Indebtedness to
Consolidated EBITDA (as these terms are similarly defined in the bank credit
facilities and the Note Agreements) of not more than, 4.75 to 1 for Heritage
Operating and 4.00 to 1 for La Grange Acquisition and Consolidated EBITDA to
Consolidated Interest Expense (as these terms are similarly defined in the bank
credit facilities and the Note Agreements) of not less than 2.25 to 1 for
Heritage Operating and 2.75 to 1 for La Grange Acquisition. The Consolidated
EBITDA used to determine these ratios is calculated in accordance with these
debt agreements. For purposes of calculating the ratios
24
under the bank credit facilities and the Note Agreements, Consolidated EBITDA is
based upon the Operating Partnerships' EBITDA, as adjusted for the most recent
four quarterly periods, and modified to give pro forma effect for acquisitions
and divestures made during the test period and is compared to Consolidated
Funded Indebtedness as of the test date and the Consolidated Interest Expense
for the most recent twelve months. These debt agreements also provide that the
Operating Partnerships may declare, make, or incur a liability to make,
restricted payments during each fiscal quarter, if: (a) the amount of such
restricted payment, together with all other restricted payments during such
quarter, do not exceed Available Cash with respect to the immediately preceding
quarter; (b) no default or event of default exists before such restricted
payments; and (c) each Operating Partnership's restricted payment is not greater
than the product of each Operating Partnership's Percentage of Aggregate
Available Cash multiplied by the Aggregate Partner Obligations (as these terms
are similarly defined in the bank credit facilities and the Note Agreements).
The debt agreements further provide that Heritage Operating's Available Cash is
required to reflect a reserve equal to 50% of the interest to be paid on the
notes and in addition, in the third, second and first quarters preceding a
quarter in which a scheduled principal payment is to be made on the notes,
Available Cash is required to reflect a reserve equal to 25%, 50%, and 75%,
respectively, of the principal amount to be repaid on such payment dates.
Failure to comply with the various restrictive and affirmative covenants of the
Operating Partnerships' bank credit facilities and the Note Agreements could
negatively impact the Operating Partnerships' ability to incur additional debt
and/or the Partnership's ability to pay distributions. The Operating
Partnerships are required to measure these financial tests and covenants
quarterly and were in compliance with all requirements, tests, limitations, and
covenants related to the Senior Secured Notes, Medium Term Note Program and
Senior Secured Promissory Notes, and the bank credit facilities at February 29,
2004.
6. INCOME TAXES:
The components of the deferred tax liability were as follows:
February 29, 2004 August 31, 2003
----------------- ----------------
(Energy Transfer
Company)
Deferred Tax Liabilities-
Property, plant and equipment $ 112,627 $ 55,736
Other (302) (351)
------------- -------------
$ 112,325 $ 55,385
============= =============
7. COMMITMENTS AND CONTINGENCIES:
COMMITMENTS
Certain property and equipment is leased under noncancelable leases, which
require fixed monthly rental payments and expire at various dates through 2020.
Rental expense under these leases totaled approximately $616 and $844 for the
three and six months ended February 29, 2004, respectively, and $245 and $393
for the three and five months ended February 28, 2003, respectively, and has
been included in operating expenses in the accompanying statements of
operations. Predecessor Heritage's rental expense under these leases was
approximately $754 and $1,470 for the three and six months ended February 28,
2003. Certain of these leases contain renewal options and also contain
escalation clauses, which are accounted for on a straight-line basis over the
minimum lease term. Fiscal year future minimum lease commitments for such leases
are $3,912 in 2004; $3,751 in 2005; $1,731 in 2006; $940 in 2007; $532 in 2008
and $842 thereafter.
The Partnership has forward commodity contracts, which will be settled by
physical delivery. Short-term contracts, which expire in less than one year,
require delivery up to 39 million MMBtu per day. Long-term contracts total
require delivery of up to 157 MMBtu per day. The long-term contracts run through
July 2013.
The Partnership has entered into several propane purchase and supply commitments
with varying terms as to quantities and prices, which expire at various dates
through March 2004.
25
La Grange Acquisition in the normal course of business, purchases, processes and
sells natural gas pursuant to long-term contracts. Such contracts contain terms
that are customary in the industry. The Partnership believes that such terms are
commercially reasonable and will not have a material adverse effect on the
Partnership's financial position or results of operations.
BOSSIER PIPELINE EXTENSION
The Partnership has signed long-term agreements with several parties committing
firm transportation volumes into the new Bossier Pipeline system, which is
currently under construction by the Partnership and will connect East Texas
production into the Katy hub near Houston. Those commitments include an
agreement with XTO Energy, Inc. to deliver approximately 200 MMcf/d of natural
gas into the pipeline. The term of the XTO agreement runs nine years, beginning
when the Bossier Pipeline extension becomes operational, currently scheduled to
occur in mid-2004.
LITIGATION
On June 16, 2003, Guadalupe Power Partners, L.P. ("GPP") sought and obtained a
Temporary Restraining Order against Oasis Pipe Line Company. In their pleadings,
GPP alleged unspecified monetary damages for the period from February 25, 2003
to June 16, 2003 and sought to prevent Oasis Pipe Line Company from implementing
flow control measures to reduce the flow of gas to their power plant at varying
hourly rates. Oasis Pipe Line Company filed a counterclaim against GPP asking
for damages and a declaration that the contract was terminated as a result of
the breach by GPP. Oasis Pipe Line Company Texas, L.P. and GPP agreed to a
"stand still" order and referred this dispute to binding arbitration. The
arbitration panel was selected and discovery was conducted in advance of a
hearing before the arbitration panel. The hearing before the panel commenced on
December 9, 2003. The arbitration was completed with a ruling favorable to the
Oasis Pipe Line Company Texas, L.P. on the contract issues involved, but with no
damages awarded to either party.
The Partnership is a party to various legal proceedings and/or regulatory
proceedings incidental to its business. Certain claims, suits and complaints
arising in the ordinary course of business have been filed or are pending
against the Partnership. In the opinion of management, all such matters are
either covered by insurance, are without merit or involve amounts, which, if
resolved unfavorably, would not have a significant effect on the financial
position or results of operations of the Partnership. Once management determines
that information pertaining to a legal proceeding indicates that it is probable
that a liability has been incurred, an accrual is established equal to
management's estimate of the likely exposure. For matters that are covered by
insurance, the Partnership accrues the related deductible. As of February 29,
2004 and August 31, 2003, an accrual of $1,996 and $112, respectively, was
recorded as accrued and other current liabilities on the Partnership's
consolidated balance sheets. As of August 31, 2003, Predecessor Heritage had an
accrual of $941 that was recorded as accrued and other current liabilities.
ENVIRONMENTAL
The Partnership's operations are subject to extensive federal, state and local
environmental laws and regulations that require expenditures for remediation at
operating facilities and waste disposal sites. Although the Partnership believes
its operations are in substantial compliance with applicable environmental laws
and regulations, risks of additional costs and liabilities are inherent in the
natural gas pipeline and processing business, and there can be no assurance that
significant costs and liabilities will not be incurred. Moreover, it is possible
that other developments, such as increasingly stringent environmental laws,
regulations and enforcement policies thereunder, and claims for damages to
property or persons resulting from the operations, could result in substantial
costs and liabilities. Accordingly, the Partnership has adopted policies,
practices, and procedures in the areas of pollution control, product safety,
occupational health, and the handling, storage, use, and disposal of hazardous
materials to prevent material environmental or other damage, and to limit the
financial liability, which could result from such events. However, some risk of
environmental or other damage is inherent in the natural gas pipeline and
processing business, as it is with other entities engaged in similar businesses.
In conjunction with the acquisition of the Texas and Oklahoma natural gas
gathering and gas processing assets from Aquila Gas Pipeline, Aquila, Inc.
agreed to indemnify La Grange Acquisition, for any environmental liabilities
that arose from operations of the assets purchased prior to October 1, 2002.
Aquila also agreed to indemnify the Partnership for 50% of any environmental
liabilities that arose from operations of the Oasis Pipe Line Company assets
purchased prior to October 1, 2002.
26
Petroleum-based contamination or environmental wastes are known to be located on
or adjacent to six sites, on which the Partnership presently has, or formerly
had, operations. These sites were evaluated at the time of their acquisition. In
all cases, remediation operations have been or will be undertaken by others, and
in all six cases, Predecessor Heritage obtained indemnification for expenses
associated with any remediation from the former owners or related entities. The
Partnership has not been named as a potentially responsible party at any of
these sites, nor has the Partnership's operations contributed to the
environmental issues at these sites. Accordingly, no amounts have been recorded
in the Partnership's February 29, 2004 balance sheet. Additionally, no amount
was recorded in Predecessor Heritage's August 31, 2003 balance sheet. Based on
information currently available to the Partnership, such projects are not
expected to have a material adverse effect on the Partnership's financial
condition or results of operations.
In July 2001, Predecessor Heritage acquired a company that had previously
received a request for information from the U.S. Environmental Protection Agency
(the "EPA") regarding potential contribution to a widespread groundwater
contamination problem in San Bernardino, California, known as the Newmark
Groundwater Contamination. Although the EPA has indicated that the groundwater
contamination may be attributable to releases of solvents from a former military
base located within the subject area that occurred long before the facility
acquired by Predecessor Heritage was constructed, it is possible that the EPA
may seek to recover all or a portion of groundwater remediation costs from
private parties under the Comprehensive Environmental Response, Compensation,
and Liability Act (commonly called "Superfund"). Based upon information
currently available to the Partnership, it is not believed that the
Partnership's liability if such action were to be taken by the EPA would have a
material adverse effect on the Partnership's financial condition or results of
operations.
Environmental exposures and liabilities are difficult to assess and estimate due
to unknown factors such as the magnitude of possible contamination, the timing
and extent of remediation, the determination of the Partnership's liability in
proportion to other parties, improvements in cleanup technologies and the extent
to which environmental laws and regulations may change in the future. Although
environmental costs may have a significant impact on the results of operations
for any single period, the Partnership believes that such costs will not have a
material adverse effect on its financial position. As of February 29, 2004 and
August 31, 2003, an accrual of $500 and $633 was recorded in the Partnership's
balance sheet to cover any material environmental liabilities that were not
covered by the environmental indemnifications.
8. PRICE RISK MANAGEMENT ASSETS AND LIABILITIES:
COMMODITY PRICE RISK
The Partnership is exposed to market risks related to the volatility of natural
gas and NGL prices. To reduce the impact of this price volatility, the
Partnership primarily uses derivative commodity instruments (futures and swaps)
to manage its exposures to fluctuations in margins. The fair value of all
derivatives that are designated and documented as cash flow hedges and
determined to be effective are recorded through other comprehensive income until
the settlement month. At the end of the settlement month, any gain or loss
previously recorded in other comprehensive income (loss) is recognized in the
income statement. Unrealized gains or losses on derivatives that do not meet the
requirements for hedge accounting are recognized in the statement of operations.
The Partnership's derivative instruments were as follows at February 29, 2004:
Notional
Volume Fair
Commodity MMBTU Maturity Value
--------- ----------- -------- -----------
Basis Swaps IFERC/Nymex Gas 45,685,000 2004 $ (2,538)
Basis Swaps IFERC/Nymex Gas 57,637,500 2004 3,563
----------
$ 1,025
Swing Swaps IFERC Gas
Swing Swaps IFERC Gas 102,035,000 2004-2005 $ (2,334)
64,340,000 2004-2005 2,057
----------
$ (277)
Futures Nymex Gas 3,525,000 2004-2005 $ (232)
Futures Nymex Gas 145,222,507 2004-2005 1,691
----------
$ 1,459
27
Estimates related to the Partnership's gas marketing activities are sensitive to
uncertainty and volatility inherent in the energy commodities markets and actual
results could differ from these estimates. The Partnership believes it is
protected from the volatility in the energy commodities markets because it does
not have unbalanced positions. Long-term physical contracts are tied to index
prices. System gas, which is also tied to index prices, will provide the gas
required by the Partnership's long-term physical contracts. When third-party gas
is required to supply long-term contracts, a hedge is put in place to protect
the margin on the contract. Financial contracts, which are not tied to physical
delivery, will be offset with financial contracts to balance the Partnership's
positions.
INTEREST RATE RISK
The Partnership is exposed to market risk for changes in interest rates related
to its bank credit facilities. An interest rate swap agreement is used to manage
a portion of the exposure related to LaGrange Acquisition's Term Loan Facility
to changing interest rates by converting floating rate debt to fixed-rate debt.
On October 9, 2002, La Grange Acquisition, L.P. entered into an interest rate
swap agreement to manage its exposure to changes in interest rates. The interest
rate swap has a notional value of $75 million and matures on October 9, 2005.
Under the terms of the interest rate swap agreement, the Partnership will pay a
fixed rate of 2.76% and will receive three-month LIBOR with quarterly settlement
commencing on January 9, 2003. Management has elected to designate the swap as a
hedge for accounting purposes. The value of the interest rate swap at February
29, 2004 and August 31, 2003 is an asset of $93 and $807, respectively.
The following represents gain (loss) on derivative activity:
Three Three
Months Months Six Months Five Months
Ended Ended Ended Ended
February 29, February 28, February 29, February 28,
2004 2003 2004 2003
------------ ------------ ------------ ------------
(Energy (Energy
Transfer Transfer
Company) Company)
Realized and unrealized gain (loss) on
derivative activities recognized in
earnings $ (7,168) $ 4,828 $(10,202) $ 6,693
Realized loss on interest rate swap
included in interest expense $ (623) $ (242) $ (1,061) $ (350)
9. PARTNER'S CAPITAL:
UNITS
Common Units, Class D Units, Special Units, Class E Units and Class C Units
represent limited partner interests in the Partnership that entitle the holders
thereof to the rights and privileges specified in the Partnership Agreement, as
amended. As of February 29, 2004, there were issued and outstanding 27,897,734
Common Units and 7,721,542 Class D Units representing, an aggregate 98% limited
partner interest in the Partnership. Except as described below, the Common Units
and Class D Units generally participate pro rata in the Partnership's income,
gains, losses, deductions, credits, and distributions. There are also 4,426,916
Class E Units outstanding that are entitled to receive distributions in
accordance with their terms, 3,742,515 Special Units outstanding that receive no
distributions until the Bossier Pipeline becomes commercially operational, and
1,000,000 Class C Units outstanding that are entitled only to participate in
distributions that are attributable to the net amount received by the
Partnership in connection with the SCANA litigation (defined below).
No person is entitled to preemptive rights in respect of issuances of securities
by the Partnership, except that U.S. Propane, has the right to purchase
sufficient partnership securities to maintain its general partner equity
interest in the Partnership.
Common Units. The Partnership's Common Units are registered under the Securities
Act of 1933 and are listed for trading on the New York Stock Exchange. Each
holder of a Common Unit is entitled to one vote per unit on all
28
matters presented to the Limited Partners for a vote except that holders of
Common Units acquired by La Grange Energy in connection with the ETC Transaction
will be entitled to vote upon the proposal to change the terms of the Class D
Units and Special Units in the same proportion as the votes cast by the holders
of the Common Units other than La Grange Energy with respect to the proposals.
In addition, if at any time any person or group (other than the Partnership's
General Partner and its affiliates) owns beneficially 20% or more of all Common
Units, any Common Units owned by that person or group may not be voted on any
matter and are not considered to be outstanding when sending notices of a
meeting of Unitholders (unless otherwise required by law), calculating required
votes, determining the presence of a quorum or for other similar purposes under
the Partnership Agreement. The Common Units are entitled to distributions of
Available Cash as described below under "Quarterly Distributions of Available
Cash."
Class C Units. The 1,000,000 Class C Units were issued to Heritage Holdings in
August 2000 in conjunction with the transaction with U.S. Propane and the change
of control of the Partnership's General Partner in conversion of that portion of
Heritage Holding's Incentive Distribution Rights that entitled it to receive any
distribution attributable to the net amount received by the Partnership in
connection with the settlement, judgment, award or other final nonappealable
resolution of specified litigation filed by the Partnership prior to the
transaction with U.S. Propane, which is referred to as the "SCANA litigation."
The Class C Units have zero initial capital account balance and were distributed
by Heritage Holdings to its former stockholders in connection with the
transaction with U.S. Propane. All decisions of the Partnership's General
Partner relating to the SCANA litigation are determined by a special litigation
committee consisting of one or more independent directors of the Partnership's
General Partner. As soon as practicable after the time that the Partnership or
its affiliates receive any final cash or other payment as a result of the
resolution of the SCANA litigation, the special litigation committee will
determine the aggregate net amount of these proceeds distributable by the
Partnership after deducting from the amounts received all costs and expenses
incurred by the Partnership and its affiliates in connection with the SCANA
litigation and any cash reserves necessary or appropriate to provide for
operating expenditures. Following this determination, the distributable proceeds
will be deemed to be "Available Cash" under the Partnership Agreement and will
be distributed as described below under "Quarterly Distributions of Available
Cash." The amount of distributable proceeds that would normally be distributed
to holders of Incentive Distribution Rights will instead be distributed to the
holders of the Class C Units, pro rata. The Class C Units do not have any rights
to share in any of the Partnership's assets or distributions upon dissolution
and liquidation of the Partnership, except to the extent that any such
distributions consist of proceeds from the SCANA litigation to which the class C
Unitholders would have otherwise been entitled. The Class C Units do not have
the privilege of conversion into any other unit and do not have any voting
rights except to the extent provided by law, in which case each Class C Unit
will be entitled to one vote.
Class D Units. The Class D Units generally have voting rights that are identical
to the voting rights of the Common Units and vote with the Common Units as a
single class on each matter, except that the Class D Units are entitled to vote
upon a proposal to approve (a) a change in the terms of the Partnership's Class
D Units to provide that each Class D Unit is convertible into one Common Unit
and (b) the issuance of additional Common Units upon such conversion (the
"Listing Proposal") and the Special Unit Proposal in the same proportion as the
votes cast by the holders of the Common Units. Each Class D Unit was initially
entitled to receive 100% of the quarterly amount distributed on each Common
Unit, for each quarter, provided that the Class D Units will be subordinated to
the Common Units with respect to the payment of the minimum quarterly
distribution for such quarter (and any arrearage in the payment of the minimum
quarterly distribution for all prior quarters). If the Listing Proposal is not
approved by the Partnership's Unitholders within six months following the
closing of the ETC Transaction, then the terms of the Class D Units will be
changed such that each Class D Unit will be entitled to receive 115% of the
quarterly amount distributed on each Common Unit on a pari passu basis with
distributions on the Common Units.
In the event of the Partnership's dissolution and liquidation, each Class D Unit
was initially entitled to receive 100% of the amount distributed on each Common
Unit, but only after each Common Unit has received an amount equal to its
capital account, plus the minimum quarterly distribution for the quarter, plus
any arrearages in the minimum quarterly distribution with respect to prior
quarters. If however, the Partnership's Unitholders do not approve the Listing
Proposal within six months following the closing of the ETC Transaction, then
each Class D Unit is entitled upon liquidation to receive 115% of the amount
distributed to each Common Unit on a pari passu basis with liquidating
distributions on the Common Units.
Class E Units. In conjunction with the Partnership's purchase of the capital
stock of Heritage Holdings, the 4,426,916 Common Units held by Heritage Holdings
were converted into 4,426,916 Class E Units. The Class E
29
Units generally do not have any voting rights and are not entitled to vote on
the proposals to make the Class D Units and Special Units convertible into
Common Units. These Class E Units are entitled to aggregate cash distributions
equal to 11.1% of the total amount of cash distributed to all Unitholders,
including the Class E Unitholders, up to $2.82 per unit per year. Distributions
on the Class E Units are taxable income to HHI. In the event of the
Partnership's termination and liquidation, the Class E Units will be allocated
1% of any gain upon liquidation and will be allocated any loss upon liquidation
to the same extent as Common Units. After the allocation of such amounts, the
Class E Units will be entitled to the balance in their capital accounts, as
adjusted for such termination and liquidation. The Class E Units are treated as
treasury stock for accounting purposes because they are owned by the
Partnership's wholly owned subsidiary, HHI. Because the Class E Units are not
entitled to receive any allocation of partnership income, gain, loss, deduction
or credit that is attributable to the Partnership's ownership of HHI, such
amounts will instead be allocated to the General Partner in accordance with its
respective interest and the remainder to the Partnership's Unitholders other
than the holders of Class E Units, pro rata. In the event the Partnership's
distributions exceed $2.82 per unit annually, all such amount in excess thereof
will be available for distribution to Unitholders other than the holders of
Class E Units in proportion to their respective interests.
Special Units. The Special Units were issued as consideration for the Bossier
Pipeline and its related contracts acquired in the ETC Transaction. The Special
Units generally do not have any voting rights but are entitled to vote on the
Special Unit Proposal to change their terms in the same proportion as the votes
cast by the holders of the Common Units. The Special Units are not entitled to
share in partnership distributions, however, following Unitholder approval of
the Special Unit Proposal and upon the Bossier Pipeline becoming commercially
operational, which is expected to occur in mid-2004, each Special Unit will
immediately be convertible into one Common Unit. If the Special Unit Proposal is
not approved by the Partnership's Unitholders prior to the time the Bossier
Pipeline becomes commercially operational, then each Special Unit will be
entitled to receive 115% of the quarterly amount distributed on each Common Unit
on a pari passu basis with distributions on Common Units, unless subsequently
converted into Common Units. Until the Special Unit Proposal is approved, the
Special Units are entitled to receive an assignment of the Bossier Contracts
that had been committed at the time of the closing of the ETC Transaction, in
the event of the Partnership's dissolution and liquidation. If the Special Unit
Proposal is not approved prior to the time the Bossier Pipeline becomes
commercially operational, then in the event of the Partnership's dissolution and
liquidation, each Special Unit will be entitled to receive 100% of the amount
distributed on each Common Unit on a pari passu basis with liquidating
distributions on the Common Units. If the Bossier Pipeline does not become
operational by December 1, 2004 and, as a result, a party to one of the Bossier
Contracts exercises rights to acquire the Bossier Pipeline under its
transportation contract, the Special Units will no longer be considered
outstanding and will not be entitled to any rights afforded any other of the
Partnership's units.
Incentive Distribution Rights. Incentive Distribution Rights represent the
contractual right to receive an increasing percentage of quarterly distributions
of Available Cash from operating surplus after the minimum quarterly
distribution has been paid. Please read "Quarterly Distributions of Available
Cash" below. The General Partner owns all of the Incentive Distribution Rights,
except that in conjunction with the August 2000 transaction with U.S. Propane,
the Partnership issued 1,000,000 Class C Units to HHI, its general partner at
that time, in conversion of that portion of HHI's Incentive Distribution Rights
that entitled it to receive any distribution made by the Partnership of funds
attributable to the net amount received in connection with the settlement,
judgment, award or other final nonappealable resolution of the SCANA litigation.
The Class C Units were distributed by HHI to its former shareholders. Any amount
payable on the Class C Units in the future will reduce the amount otherwise
distributable to holders of Incentive Distribution Rights at the time the
distribution of such litigation proceeds is made and will not reduce the amount
distributable to holders of Common Units. No payments to date have been made on
the Class C Units.
QUARTERLY DISTRIBUTIONS OF AVAILABLE CASH
The Partnership Agreement requires that the Partnership will distribute all of
its Available Cash to its Unitholders and its General Partner within 45 days
following the end of each fiscal quarter, subject to the payment of incentive
distributions to the holders of Incentive Distribution Rights to the extent that
certain target levels of cash distributions are achieved. The term Available
Cash generally means, with respect to any fiscal quarter of the Partnership, all
cash on hand at the end of such quarter, plus working capital borrowings after
the end of the quarter, less reserves established by the General Partner in its
sole discretion to provide for the proper conduct of the Partnership's business,
to comply with applicable laws or any debt instrument or other agreement, or to
provide funds for future distributions to partners with respect to any one or
more of the next four quarters. Available Cash is more fully defined in the
Partnership Agreement.
30
Distributions by the Partnership in an amount equal to 100% of Available Cash
will generally be made 98% to the Common, Class D, and Class E Unitholders and
2% to the General Partner, subject to the payment of incentive distributions to
the General Partner to the extent that certain target levels of cash
distributions are achieved.
On October 15, 2003, Predecessor Heritage paid a quarterly distribution of $0.65
per unit, or $2.60 per unit annually to Unitholders of record at the close of
business on October 8, 2003. On January 14, 2004, Predecessor Heritage paid a
quarterly distribution of $0.65 per unit, or $2.60 per unit annually to
Unitholders of record at the close of business on December 30, 2003. On March
23, 2004, the Partnership declared a cash distribution for the second quarter
ended February 29, 2004 of $0.70 per unit, or $2.80 per unit annually, payable
on April 14, 2004 to Unitholders of record at the close of business on April 2,
2004. In addition to these quarterly distributions, the General Partner received
quarterly distributions for its general partner interest in the Partnership, and
incentive distributions to the extent the quarterly distribution exceeded $0.55
per unit. The total amount of distributions declared for the second quarter
ended February 29, 2004 on Common Units, the Class D Units, the general partner
interests and the Incentive Distribution Rights totaled $19.6 million, $5.4
million and $1.9 million, respectively. All such distributions were made from
Available Cash from Operating Surplus.
Following the transaction with Energy Transfer, the Partnership currently
distributes Available Cash, excluding any available cash to be distributed to
the Class C Unitholders, as follows:
- First, 98% to the Common, Class D and Class E Unitholders in
accordance with their percentage interests, and 2% to our General
Partner, until each Common Unit has received $0.50 for that
quarter;
- Second, 98% to all Common, Class D and Class E Unitholders in
accordance with their percentage interests, and 2% to our General
Partner, until each Common Unit has received $0.55 for that
quarter;
- Third, 85% to all Common, Class D and Class E Unitholders in
accordance with their percentage interests, and 15% to our General
Partner, until each Common Unit has received $0.635 for that
quarter;
- Fourth, 75% to all Common, Class D and Class E Unitholders in
accordance with their percentage interests, and 25% to our General
Partner, until each Common Unit has received $0.825 for that
quarter;
- Thereafter, 50% to all Common, Class D and Class E Unitholders in
accordance with their percentage interests, and 50% to our General
Partner.
Notwithstanding the foregoing, the Class D Units will be subordinated to the
Common Units with respect to the payment of the minimum quarterly distribution
and any arrearage in the payment of the minimum quarterly distribution for all
prior quarters and the distributions on each Class E Unit may not exceed $2.82
per year. Please read "Partner's Capital" above for a discussion of the Class C
Units and the percentage interests in distributions of the different classes of
units.
If the Unitholders do not approve changing the terms of the Class D Units and
Special Units within six months of the closing of the ETC Transaction to provide
that these units are convertible into Common Units and the Bossier Pipeline is
commercially operational, then the Partnership will distribute available cash,
excluding any available cash to be distributed to the Class C Unitholders, as
follows:
- First, 98% to the Common, Class D, Class E and Special Unitholders
in accordance with their percentage interests, and 2% to our
General Partner, with each Class D and Special Unit receiving 115%
of the amount distributed on each Common Unit, until each Common
Unit has received $0.50 for that quarter;
- Second, 98% to all Common, Class D, Class E and Special
Unitholders in accordance with their percentage interests, and 2%
to our General Partner, with each Class D and Special Unit
receiving 115% of the amount distributed on each Common Unit,
until each Common Unit has received $0.55 for that quarter;
31
- Third, 85% to all Common, Class D, Class E and Special Unitholders
in accordance with their percentage interests, and 15% to our
General Partner, with each Class D and Special Unit receiving 115%
of the amount distributed on each Common Unit, until each Common
Unit has received $0.635 for that quarter;
- Fourth, 75% to all Common, Class D, Class E and Special
Unitholders in accordance with their percentage interests, and 25%
to our General Partner, with each Class D and Special Unit
receiving 115% of the amount distributed on each Common Unit,
until each Common Unit has received $0.825 for that quarter;
- Thereafter, 50% to all Common, Class D, Class E and Special
Unitholders in accordance with their percentage interests, with
each Class D and Special Unit receiving 115% of the amount
distributed on each Common Unit, and 50% to our General Partner.
Notwithstanding the foregoing, the distributions to the Class E Unitholders may
not exceed $2.82 per year. Please read "Partners' Capital" above for a
discussion of the Class C Units and the percentage interests in distributions of
the different classes of units
10. RETIREMENT BENEFITS:
The Partnership has a defined contribution plan for virtually all employees of
La Grange Acquisition with discretionary matching. Pursuant to the plan,
employees of La Grange Acquisition can defer a portion of their compensation and
contribute it to a deferred account. No matching contributions were made to this
plan by Energy Transfer Company through February 29, 2004.
The Partnership also sponsors a defined contribution profit sharing and 401(k)
savings plan, which covers all employees of Heritage Operating subject to
service period requirements. Contributions are made to the plan at the
discretion of the Board of Directors and are allocated to eligible employees as
of the last day of the plan year based on their pro rata share of total
contributions. Employer matching contributions are calculated using a
discretionary formula based on employee contributions. The Partnership made
matching contributions of $303 to the 401(k) savings plan for the three and six
months ended February 29, 2004.
11. RELATED PARTY TRANSACTIONS:
Accounts payable to related companies as of February 29, 2004 includes $12,500
due from La Grange Acquisition to La Grange Energy. This amount represents the
balance of funds due to La Grange Energy related to the ETC Transaction that
have not yet been distributed.
12. REPORTABLE SEGMENTS:
The Partnership's financial statements reflect six reportable segments: La
Grange Acquisition's midstream and transportation operations, Heritage
Operating's domestic retail and domestic wholesale operations, the foreign
wholesale operations of MP Energy Partnership, and the liquids marketing
activities of Resources. The operations which focus on the gathering,
compression, treating, processing, transportation and marketing of natural gas,
primarily at the Southeast Texas System and Elk City Systems, generate revenue
primarily by the volumes of natural gas gathered, compressed, treated,
processed, transported, purchased and sold through the Partnership's pipeline
(excluding Oasis Pipe Line) and gathering systems and the level of natural gas
and NGL prices. The transportation operations focus on transporting natural gas
through the Partnership's Oasis Pipe Line. Revenue is generated from fees
charged to customers to reserve firm capacity on or move gas on the pipeline on
an interruptible basis. The fee structure is derived from the gas price
differential between the Waha and Katy hubs. A monetary fee, and/or fuel
retention are components of the fee structure. Excess fuel retained after
consumption is valued at the first of the month Katy tailgate price and
strategically sold when market prices are high.
The Partnership's retail and wholesale fuel segments sell products and services
to retail and wholesale customers. Intersegment sales by the foreign wholesale
segment to the domestic segment are priced in accordance with the partnership
agreement of MP Energy Partnership. The Partnership manages these segments
separately as each segment involves different distribution, sale, and marketing
strategies. Selling, general and administrative expenses are allocated to the
midstream and transportation operating segments, however, the Partnership
evaluates the
12
performance of its other operating segments based on operating income exclusive
of selling, general, and administrative expenses of $1,500 for the three and six
months ended February 29, 2004, and $0 for the three and five months ended
February 28, 2003. Predecessor Heritage's selling, general and administrative
expenses were $4,320 and $7,177 for the three and six months ended February 28,
2003. Investment in affiliates and equity in earnings (losses) of affiliates
relates primarily to The Partnership's investment in Vantex Gas Pipeline Company
and Vantex Energy Services, Ltd, and is part of the midstream segment. In
addition, the Partnership's two largest customers' revenues are included in the
midstream segment's revenues. The following table presents the unaudited
financial information by segment for the following periods:
Three Months Three Months Three Months Six Months Five Months Six Months
Ended Ended Ended Ended Ended Ended
February 29, February 28, February 28, February 29, February 28, February 28,
2004 2003 2003 2004 2003 2003
----------- ------------ ------------ ------------ ----------- -----------
(Energy Transfer (Predecessor (Energy Transfer (Predecessor
Company) Heritage) Company) Heritage)
Midstream
Natural gas MMBtu/d 968,000 390,000 - 946,000 336,000 -
NGLs bbls/d 12,600 9,990 - 13,800 12,000 -
Transportation
Natural gas MMBtu/d 873,000 763,000 - 831,000 787,000 -
Propane gallons
(in thousands)
Domestic retail fuel 84,435 - 166,622 84,435 - 243,343
Domestic wholesale
fuel 1,291 - 5,467 1,291 - 10,357
Foreign wholesale fuel
Affiliated 18,587 - 17,452 18,587 - 37,832
Unaffiliated 11,876 - 25,358 11,876 - 42,553
Elimination (18,587) - (17,452) (18,587) - (37,832)
-------- --------- ----------- ----------- ----------- -----------
Total gallons 97,602 - 197,447 97,602 - 296,253
======== ========= =========== =========== =========== ===========
Three Months Three Months Three Months Six Months Five Months Six Months
Ended Ended Ended Ended Ended Ended
February 29, February 28, February 28, February 29, February 28, February 28,
2004 2003 2003 2004 2003 2003
----------- ------------ ------------ ------------ ----------- -----------
(Energy Transfer (Predecessor (Energy Transfer (Predecessor
Company) Heritage) Company) Heritage)
Revenues:
Midstream $ 477,712 $ 197,518 $ - $ 883,010 $ 275,770 $ -
Eliminations (7,378) (1,189) (11,866) (1,189)
Transportation 17,957 7,778 - 32,133 7,778 -
Domestic retail fuel 121,981 - 212,704 121,981 - 296,754
Domestic wholesale fuel 1,284 - 4,345 1,284 - 6,755
Foreign wholesale fuel
Affiliated 471 - 27,424 471 - 37,832
Unaffiliated 9,188 - 15,873 9,188 - 24,810
Eliminations (471) - (27,424) (471) - (37,832)
Liquids marketing, net 309 - 352 309 - 1,059
Other 8,234 - 16,535 8,234 - 33,891
--------- ---------- ----------- ---------- ----------- ------------
Total $ 629,287 $ 204,107 $ 249,809 $1,044,273 $ 282,359 $ 363,269
========= ========== =========== ========== =========== ============
Cost of sales:
Midstream $ 457,947 $ 172,626 $ - $ 842,565 $ 239,947 $ -
Eliminations (7,378) (1,189) - (11,866) (1,189) -
Transportation 7,359 3,067 - 9,779 3,067 -
Domestic retail fuel 65,065 - 104,878 65,065 - 146,499
Domestic wholesale fuel 1,111 - 3,927 1,111 - 6,060
Foreign wholesale fuel 8,292 14,747 8,291 - 23,172
Other 2,117 - 4,868 2,117 - 9,709
--------- ---------- ---------- ---------- ----------- ------------
Total Cost of Sales $ 534,513 $ 174,504 $ 128,420 $ 917,062 $ 241,825 $ 185,440
======== ========== =========== ========== =========== ============
33
Operating Income
Midstream $ 16,484 $ 8,316 $ - $ 30,508 $ 12,049 $ -
Transportation 6,665 3,910 - 13,645 3,910 -
Domestic retail 36,204 - 66,277 36,204 - 79,713
Domestic wholesale fuel (231) - (885) (231) - (1,369)
Foreign wholesale fuel
Affiliated 169 - 374 169 - 484
Unaffiliated 894 - 1,121 894 - 1,627
Elimination (169) - (374) (169) - (484)
Liquids marketing 103 - 192 103 - 515
--------- ---------- ----------- ---------- ----------- ------------
Total $ 60,119 $ 12,226 $ 66,705 $ 81,123 $ 15,959 $ 80,486
========= ========== =========== ========== =========== ============
Three Months Three Months Three Months Six Months Five Months Six Months
Ended Ended Ended Ended Ended Ended
February 29, February 28, February 28, February 29, February 28, February 28,
2004 2003 2003 2004 2003 2003
----------- ------------ ------------ ------------ ----------- -----------
(Energy Transfer (Predecessor (Energy Transfer (Predecessor
Company) Heritage) Company) Heritage)
Gain on Disposal of
Assets:
Midstream $ 28 $ - $ - $ 25 $ - $ -
Transportation - - - - - -
Domestic retail propane 3 - 84 3 - 164
Domestic wholesale
propane - - 4 - - (9)
--------- ---------- ----------- ---------- ---------- -----------
Total $ 31 $ - $ 88 $ 28 $ - $ 155
========= ========== =========== ========== ========== ===========
Minority Interest
Expense:
Corporate $ - $ - $ 508 $ - $ - $ 522
Foreign wholesale
propane 175 - 313 175 - 425
--------- ---------- ----------- ---------- ---------- -----------
Total $ 175 $ - $ 821 $ 175 $ - $ 947
========= ========== =========== ========== ========== ===========
Three Months Three Months Three Months Six Months Five Months Six Months
Ended Ended Ended Ended Ended Ended
February 29, February 28, February 28, February 29, February 28, February 28,
2004 2003 2003 2004 2003 2003
----------- ------------ ------------ ------------ ----------- -----------
(Energy Transfer (Predecessor (Energy Transfer (Predecessor
Company) Heritage) Company) Heritage)
Depreciation and
amortization:
Midstream $ 3,230 $ 2,535 $ - $ 6,321 $ 4,185 $ -
Transportation 1,156 276 - 2,212 276 -
Domestic retail propane 5,016 - 9,318 5,016 - 18,451
Domestic wholesale
propane 67 - 124 67 - 252
Foreign wholesale
propane 3 - 5 3 - 10
------------ ------------ ----------- ---------- ------------ -----------
Total $ 9,472 $ 2,811 $ 9,447 $ 13,619 $ 4,461 $ 18,713
============ ============ =========== ========== ============ ===========
Interest Expense net of
interest income
Midstream $ 4,369 $ 3,440 $ - $ 7,675 $ 4,849 $ -
Transportation 1,718 102 - 3,761 102 -
Eliminations (1,536) - (3,133) - -
Domestic retail propane 4,344 - 9,317 4,344 - 18,613
------------ ------------ ----------- ---------- ------------ -----------
Total $ 8,895 $ 3,542 $ 9,317 $ 12,647 $ 4,951 $ 18,613
============ ============ =========== ========== ============ ===========
Income tax expense
Midstream $ - $ (1) $ - $ $ (1) $ -
Transportation 700 953 - 2,409 953 -
Domestic retail propane 48 - 1,285 48 1,285
------------ ------------ ----------- ---------- ------------ -----------
Total $ 748 $ 952 $ 1,285 $ 2,457 $ 952 $ 1,285
============ ============ =========== ========== ============ ===========
34
February 29, August 31, August 31,
2004 2003 2003
------------ ---------- ----------
(Energy
Transfer (Predecessor
Company) Heritage)
Total Assets:
Midstream $ 604,569 $ 415,962 $ -
Transportation 176,133 189,007 -
Domestic retail propane 897,299 - 691,900
Domestic wholesale propane 8,196 - 12,197
Foreign wholesale propane 10,933 - 13,912
Liquids marketing 13,905 - 4,474
Corporate 20,596 - 16,356
Elimination - (2,866) -
---------- ---------- ----------
Total $1,731,631 $ 602,103 $ 738,839
========== ========== ==========
Six Months Five Months Six Months
Ended Ended Ended
February 29, February 28, February 28,
2004 2003 2003
----------- ----------- ------------
(Energy
Transfer (Predecessor
Company) Heritage)
Additions to property, plant
and equipment including
acquisitions:
Midstream $ 33,294 $ 4,461 $ -
Transportation 38 9 -
Domestic retail propane 494,754 $ - 46,723
Domestic wholesale propane 4,251 - 166
Foreign wholesale propane 89 - -
Corporate - - 699
-------- -------- --------
Total $532,426 $ 4,470 $ 47,558
======== ======== ========
Corporate assets include vehicles, office equipment and computer software for
the use of administrative personnel. These assets are not allocated to segments.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Energy Transfer Partners, L.P. (the "Registrant" or "Partnership"), is a
Delaware limited partnership. The Partnership's Common Units are listed on the
New York Stock Exchange under the symbol "ETP". The Partnership's business
activities are primarily conducted through its subsidiaries, La Grange
Acquisition, L.P, a Texas limited partnership, and Heritage Operating, L.P., a
Delaware limited partnership (the "Operating Partnerships"). The Partnership and
the Operating Partnerships are sometimes referred to collectively in this report
as "Energy Transfer."
The following is a discussion of the historical financial condition and results
of operations of the Partnership and its subsidiaries, and should be read in
conjunction with the Partnership's historical consolidated financial statements
and accompanying notes thereto included elsewhere in this Quarterly Report on
Form 10-Q.
FORWARD-LOOKING STATEMENTS
CERTAIN MATTERS DISCUSSED IN THIS REPORT, EXCLUDING HISTORICAL INFORMATION, AS
WELL AS SOME STATEMENTS BY THE PARTNERSHIP IN PERIODIC PRESS RELEASES AND SOME
ORAL STATEMENTS OF ENERGY TRANSFER PARTNERS OFFICIALS DURING PRESENTATIONS ABOUT
THE PARTNERSHIP, INCLUDE CERTAIN "FORWARD-LOOKING" STATEMENTS WITHIN THE MEANING
OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934. STATEMENTS USING WORDS SUCH AS "ANTICIPATE," "BELIEVE,"
"INTEND," "PROJECT," "PLAN," "CONTINUE," "ESTIMATE," "FORECAST," "MAY," "WILL,"
OR SIMILAR EXPRESSIONS HELP IDENTIFY FORWARD-LOOKING STATEMENTS. ALTHOUGH THE
PARTNERSHIP BELIEVES SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON REASONABLE
ASSUMPTIONS AND CURRENT EXPECTATIONS AND PROJECTIONS ABOUT FUTURE EVENTS, NO
ASSURANCE CAN BE GIVEN THAT EVERY OBJECTIVE WILL BE REACHED.
35
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM ANY RESULTS PROJECTED, FORECASTED,
ESTIMATED OR EXPRESSED IN FORWARD-LOOKING STATEMENTS SINCE MANY OF THE FACTORS
THAT DETERMINE THESE RESULTS ARE SUBJECT TO UNCERTAINTIES AND RISKS, DIFFICULT
TO PREDICT, AND BEYOND MANAGEMENT'S CONTROL. SUCH FACTORS INCLUDE:
- THE GENERAL ECONOMIC CONDITIONS IN THE UNITED STATES OF AMERICA AS WELL
AS THE GENERAL ECONOMIC CONDITIONS AND CURRENCIES IN FOREIGN COUNTRIES;
- THE AMOUNT OF NATURAL GAS TRANSPORTED ON ENERGY TRANSFER'S PIPELINES
AND GATHERING SYSTEMS;
- THE LEVEL AND THROUGHPUT IN ENERGY TRANSFER'S NATURAL GAS PROCESSING
AND TREATING FACILITIES;
- THE FEES ENERGY TRANSFER CHARGES AND THE MARGINS REALIZED FOR ITS
SERVICES;
- THE PRICES AND MARKET DEMAND FOR, AND THE RELATIONSHIP BETWEEN, NATURAL
GAS AND NGLS;
- ENERGY PRICES GENERALLY;
- THE PRICE OF PROPANE TO THE CONSUMER COMPARED TO THE PRICE OF
ALTERNATIVE AND COMPETING FUELS;
- THE GENERAL LEVEL OF PETROLEUM PRODUCT DEMAND AND THE AVAILABILITY AND
PRICE OF PROPANE SUPPLIES;
- THE LEVEL OF DOMESTIC OIL AND NATURAL GAS PRODUCTION;
- THE AVAILABILITY OF IMPORTED OIL AND NATURAL GAS;
- THE ABILITY TO OBTAIN ADEQUATE SUPPLIES OF PROPANE FOR RETAIL SALE IN
THE EVENT OF AN INTERRUPTION IN SUPPLY OR TRANSPORTATION AND THE
AVAILABILITY OF CAPACITY TO TRANSPORT PROPANE TO MARKET AREAS;
- ACTIONS TAKEN BY FOREIGN OIL AND GAS PRODUCING NATIONS;
- THE POLITICAL AND ECONOMIC STABILITY OF PETROLEUM PRODUCING NATIONS;
- THE EFFECT OF WEATHER CONDITIONS ON DEMAND FOR OIL, NATURAL GAS AND
PROPANE;
- THE WEATHER IN OUR OPERATING AREAS;
- AVAILABILITY OF LOCAL, INTRASTATE AND INTERSTATE TRANSPORTATION
SYSTEMS;
- THE CONTINUED ABILITY TO FIND AND CONTRACT FOR NEW SOURCES OF NATURAL
GAS SUPPLY;
- AVAILABILITY AND MARKETING OF COMPETITIVE FUELS;
- THE IMPACT OF ENERGY CONSERVATION EFFORTS;
- ENERGY EFFICIENCIES AND TECHNOLOGICAL TRENDS;
- THE EXTENT OF GOVERNMENTAL REGULATION AND TAXATION;
- HAZARDS OR OPERATING RISKS INCIDENTAL TO THE TRANSPORTING, TREATING AND
PROCESSING OF NATURAL GAS AND NGLS OR TO THE TRANSPORTING, STORING AND
DISTRIBUTING OF PROPANE THAT MAY NOT BE FULLY COVERED BY INSURANCE;
- THE MATURITY OF THE PROPANE INDUSTRY AND COMPETITION FROM OTHER PROPANE
DISTRIBUTORS;
- COMPETITION FROM OTHER MIDSTREAM COMPANIES;
36
- LOSS OF KEY PERSONNEL;
- LOSS OF KEY NATURAL GAS PRODUCERS OR THE PROVIDERS OF FRACTIONATION
SERVICES;
- REDUCTIONS IN THE CAPACITY OR ALLOCATIONS OF THIRD PARTY PIPELINES THAT
CONNECT WITH ENERGY TRANSFER'S PIPELINES AND FACILITIES;
- THE EFFECTIVENESS OF RISK-MANAGEMENT POLICIES AND PROCEDURES AND THE
ABILITY OF ENERGY TRANSFER'S LIQUIDS MARKETING COUNTERPARTIES TO
SATISFY THEIR FINANCIAL COMMITMENTS AND THE NONPAYMENT OR
NONPERFORMANCE BY ITS CUSTOMERS ;
- THE AVAILABILITY AND COST OF CAPITAL AND ENERGY TRANSFER'S ABILITY TO
ACCESS CERTAIN CAPITAL SOURCES;
- CHANGES IN LAWS AND REGULATIONS TO WHICH WE ARE SUBJECT, INCLUDING TAX,
ENVIRONMENTAL, TRANSPORTATION AND EMPLOYMENT REGULATIONS;
- THE COSTS AND EFFECTS OF LEGAL AND ADMINISTRATIVE PROCEEDINGS;
- THE ABILITY TO SUCCESSFULLY IDENTIFY AND CONSUMMATE STRATEGIC
ACQUISITIONS AT PURCHASE PRICES THAT ARE ACCRETIVE TO THE PARTNERSHIP'S
FINANCIAL RESULTS; AND
- RISKS ASSOCIATED WITH THE CONSTRUCTION OF NEW PIPELINES AND TREATING
AND PROCESSING FACILITIES OR ADDITIONS TO ENERGY TRANSFER'S EXISTING
PIPELINES AND FACILITIES.
ENERGY TRANSFER TRANSACTION
On January 20, 2004, Heritage Propane Partners, L.P., ("Heritage") and La Grange
Energy, L.P. ("La Grange Energy") completed the series of transactions whereby
La Grange Energy contributed its subsidiary, La Grange Acquisition, L.P. and its
subsidiaries who conduct business under the assumed name of Energy Transfer
Company, ("ETC") (the "ETC Transaction") to Heritage in exchange for cash of
$300,000 less the amount of Energy Transfer Company debt in excess of $151,500,
less ETC's accounts payable and other specified liabilities, plus agreed upon
capital expenditures paid by La Grange Energy relating to the ETC business prior
to closing, $433,909 of Heritage Common and Class D Units, and the repayment of
the ETC debt of $151,500. In conjunction with the ETC Transaction and prior to
the contribution of ETC to Heritage, ETC distributed its cash and accounts
receivables to La Grange Energy and an affiliate of La Grange Energy contributed
an office building to ETC. La Grange Energy also received 3,742,515 Special
Units as consideration for certain assets described as the Bossier Pipeline. In
the event the Bossier Pipeline does not become commercially operational by
December 1, 2004, the Special Units will no longer be considered outstanding and
will not be entitled to any rights afforded any other of Heritage's units. In
accordance with Statement of Financial Accounting Standards No. 141, Business
Combinations ("SFAS 141") no value has been recorded with respect to the Special
Units.
Simultaneously with the ETC Transaction, La Grange Energy obtained control of
Heritage by acquiring all of the interest in U.S. Propane, L.P., ("U.S.
Propane") the General Partner of Heritage, and U.S. Propane, L.P.'s general
partner, U.S. Propane, L.L.C., from subsidiaries of AGL Resources, Atmos Energy
Corporation, TECO Energy, Inc. and Piedmont Natural Gas Company, Inc. for
$30,000 (the "General Partner Transaction"). In conjunction with the General
Partner Transaction, U.S. Propane L.P. contributed its 1.0101% General Partner
interest in Heritage Operating, L.P. ("Heritage Operating") to Heritage in
exchange for an additional 1% General Partner interest in Heritage.
Simultaneously with these transactions, Heritage purchased the outstanding stock
of Heritage Holdings, Inc. ("HHI") for $100,000.
Concurrent with the ETC Transaction, ETC borrowed $325,000 from financial
institutions and Heritage raised $355,948 of gross proceeds through the sale of
9,200,000 Common Units at an offering price of $38.69 per unit. The net proceeds
were used to finance the transaction and for general partnership purposes.
The ETC and General Partner transactions affect the comparability of the
financial statements for the three and six months ended February 29, 2004 to the
three and five months ended February 28, 2003 because the consolidated financial
statements of the Partnership for the six months ended February 29, 2004 include
the three and six month
37
results for ETC and subsidiaries and the results of Heritage Operating and
subsidiaries and HHI only for the period from January 20, 2004 through February
29, 2004. The financial statements of ETC for the three and five months ended
February 28, 2003 reflect only the results of ETC and subsidiaries, and the
financial statements of Predecessor Heritage reflect the results of Heritage
Operating, L.P. and its subsidiaries (see note 3 to the Partnership's
consolidated financial statements.) The changes in the line items discussed
below are a result of these transactions.
GENERAL
The ETC Transaction was accounted for as a reverse acquisition in accordance
with SFAS 141. Although Heritage is the surviving parent entity for legal
purposes, ETC is the acquirer for accounting purposes. As a result, ETC's
historical financial statements will be the historical financial statements of
the registrant. The operations of Heritage prior to the ETC Transaction are
referred to as Predecessor Heritage.
ENERGY TRANSFER COMPANY
Midstream segment
The Partnership's midstream and transportation segments are operated by La
Grange Acquisition and its subsidiaries. These segments commenced operations in
October 2002 with ETC's acquisition of the natural gas gathering, processing and
transportation assets previously owned by Aquila, Inc. The assets acquired from
Aquila include the Southeast Texas system and the Oklahoma system as well as a
50% equity interest in the Oasis Pipe Line Company ("Oasis"). ETC purchased the
remaining 50% interest in Oasis on December 27, 2002. The equity method of
accounting was used to account for our Oasis pipeline from October 1, 2002
through December 27, 2002 at which time it became a fully consolidated
subsidiary.
ETC owns and operates approximately 4,500 miles of natural gas gathering and
transportation pipelines with an aggregate throughput capacity of 2.5 billion
cubic feet of natural gas per day, with natural gas treating and processing
plants located in Texas, Oklahoma, and Louisiana. Its major asset groups consist
of the Southeast Texas System, Elk City System and Oasis pipeline. The Southeast
Texas System has a throughput capacity of 260 MMcf/d. The system has 2,500 miles
of pipeline with 1,050 wells connected, the La Grange processing plant, and 5
natural gas treating facilities. The Elk City System has a throughput capacity
of 170 MMcf/d. The system has 315 miles of pipeline with 300 wells connected,
the Elk City processing plant, and a treating facility. The 583 mile long Oasis
pipeline, which connects the West Texas Waha Hub to the Katy Texas Tailgate, has
a throughput capacity of 830 MMcf/d.
Results from the midstream segment are determined primarily by the volumes of
natural gas gathered, compressed, treated, processed, purchased and sold through
ETC's pipeline and gathering systems and the level of natural gas and NGL
prices. ETC generates its midstream revenues and its gross margins principally
under fee-based arrangements or other arrangements. Under fee-based
arrangements, ETC receives a fee for natural gas gathering, compressing,
treating or processing services. The revenue it earns from these arrangements is
directly related to the volume of natural gas that flows through its systems and
is not directly dependent on commodity prices.
ETC also utilizes other types of arrangements in its midstream segment,
including (i) discount-to-index price arrangements which involve purchases of
natural gas at either (1) a percentage discount to a specified index price, (2)
a specified index price less a fixed amount or (3) a percentage discount to a
specified index price less an additional fixed amount, (ii)
percentage-of-proceeds arrangements under which ETC gathers and processes
natural gas on behalf of producers, selling the resulting residue gas and NGL
volumes at market prices and remitting to producers an agreed upon percentage of
the proceeds based on an index price, and (iii) keep-whole arrangements where
ETC gathers natural gas from the producer, processes the natural gas and sells
the resulting NGLs to third parties at market prices. In many cases, ETC
provides services under contracts that contain a combination of more than one of
the arrangements described above. The terms of ETC's contracts vary based on gas
quality conditions, the competitive environment at the time the contracts are
signed and customer requirements. Its contract mix may change as a result of
changes in producer preferences, expansion in regions where some types of
contracts are more common and other market factors.
ETC's ownership of the Oasis pipeline allows it to elect not to process natural
gas at the La Grange processing plant when processing margins are unfavorable.
ETC can bypass the La Grange processing plant and deliver natural gas meeting
pipeline quality specifications by blending rich natural gas from the Southeast
Texas System with lean natural gas transported on the Oasis pipeline. ETC can
also generally bypass the Elk City processing plant. The
38
natural gas supplied to the Elk City System has a relatively low NGL content and
does not require processing to meet pipeline quality specifications. During
periods of unfavorable processing margins, ETC can bypass the Elk City
processing plant and deliver the natural gas directly into connecting pipelines.
For the six months ended February 29, 2004, ETC's utilization of capacity at its
Southeast Texas System processing and treating facilities were approximately 59%
and 21% respectively. A portion of the excess capacity at the Southeast Texas
System processing facility was directly attributable to ETC's election to not
process or treat natural gas and deliver natural gas directly into the Oasis
pipeline in order to take advantage of high natural gas prices relative to NGL
prices. Additionally, in September 2003, ETC enhanced its utilization by moving
an idle 145 MMcf/d treating facility from the Southeast Texas System to the Elk
City System to take advantage of additional natural gas volumes.
ETC conducts its marketing operations through its producer services business, in
which ETC markets the natural gas that flows through its assets, which ETC
refers to as on-system gas, and attracts other customers by marketing volumes of
natural gas that do not move through its assets, which ETC refers to as
off-system gas. For both on-system and off-system gas, ETC purchases natural gas
from natural gas producers and other supply points and sells that natural gas to
utilities, industrial consumers, other marketers and pipeline companies, thereby
generating gross margins based upon the difference between the purchase and
resale prices.
Most of ETC's marketing activities involve the marketing of its on-system gas.
For the six months ended February 29, 2004, ETC marketed approximately 487
MMcf/d of natural gas, 52% of which was on-system gas. Substantially all of its
on-system marketing efforts involve natural gas that flows through either the
Southeast Texas System or the Oasis pipeline. ETC markets only a small amount of
natural gas that flows through the Elk City System.
For its off-system gas, ETC purchases gas or acts as an agent for small
independent producers that do not have marketing operations. ETC develops
relationships with natural gas producers, which facilitates its purchase of
their production on a long-term basis. ETC believes that this business provides
it with strategic insights and valuable market intelligence, which may impact
its expansion and acquisition strategy.
Transportation segment
Results from ETC's transportation segment are determined primarily by the amount
of capacity ETC's customers reserve as well as the actual volume of natural gas
that flows through the Oasis pipeline. Under Oasis pipeline customer contracts,
ETC charges its customers (i) a demand fee, which is a fixed fee for the
reservation of an agreed amount of capacity on the Oasis pipeline for a
specified period of time and which obligates the customer to pay ETC even if the
customer does not transport natural gas on the Oasis pipeline, (ii) a
transportation fee, which is based on the actual throughput of natural gas by
the customer on the Oasis pipeline, or a combination of both, generally payable
monthly.
For the six months ended February 29, 2004 and February 28, 2003 ETC transported
approximately 38% and 34%, respectively of its natural gas volumes on the Oasis
pipeline pursuant to long-term contracts. Its long-term contracts have a term of
one year or more. ETC also enters into short-term contracts with terms of less
than one year in order to utilize the capacity that is available on the Oasis
pipeline after taking into account the capacity reserved under ETC's long-term
contracts. For the six months ended February 29, 2004 and February 28, 2003 the
Oasis pipeline fees accounted for approximately 67% and 68%, respectively of
ETC's fee-based gross margin.
HERITAGE OPERATING
The Partnership's propane related segments are operated by Heritage Operating
and its subsidiaries who are engaged in the sale, distribution and marketing of
propane and other related products through its domestic retail, domestic
wholesale and foreign wholesale propane segments, (the propane segments) and
also through the liquids marketing activity of Resources. Predecessor Heritage
derived and Heritage Operating derives its revenue primarily from the retail
propane marketing segment. The General Partner believes that Predecessor
Heritage was, and the Partnership is now, the fourth largest retail marketer of
propane in the United States, based on retail gallons sold. The Partnership
serves more than 650,000 propane customers in from over 300 customer service
locations in 31 states.
The retail propane segment is a margin-based business in which gross profits
depend on the excess of sales price over propane supply cost. The market price
of propane is often subject to volatile changes as a result of supply or other
market conditions over which the Partnership will have no control. Product
supply contracts are one-year
39
agreements subject to annual renewal and generally permit suppliers to charge
posted prices (plus transportation costs) at the time of delivery or the current
prices established at major delivery points. Since rapid increases in the
wholesale cost of propane may not be immediately passed on to retail customers,
such increases could reduce gross profits. The Partnership generally has
attempted to reduce price risk by purchasing propane on a short-term basis. The
Partnership has on occasion purchased significant volumes of propane during
periods of low demand, which generally occur during the summer months, at the
then current market price, for storage both at its Three months ended customer
service locations and in major storage facilities for future resale.
The retail propane business of the Partnership consists principally of
transporting propane purchased in the contract and spot markets, primarily from
major fuel suppliers, to its customer service locations and then to propane
tanks located on the customers' premises, as well as to portable propane
cylinders. In the residential and commercial markets, propane is primarily used
for space heating, water heating, and cooking. In the agricultural market,
propane is primarily used for crop drying, tobacco curing, poultry brooding, and
weed control. In addition, propane is used for certain industrial applications,
including use as an engine fuel to power vehicles and forklifts and as a heating
source in manufacturing and mining processes.
Since its formation in 1989, Predecessor Heritage grew primarily through
acquisitions of retail propane operations and, to a lesser extent, through
internal growth. Since its inception through January 19, 2004, Predecessor
Heritage completed 105 acquisitions for an aggregate purchase price
approximating $720 million.
The Partnership's propane distribution business is largely seasonal and
dependent upon weather conditions in its service areas. Propane sales to
residential and commercial customers are affected by winter heating season
requirements. Historically, approximately two-thirds of Predecessor Heritage's
retail propane volume and in excess of 80% of Predecessor Heritage's EBITDA, as
adjusted is attributable to sales during the six-month peak-heating season of
October through March. This generally results in higher operating revenues and
net income in the propane segments during the period from October through March
of each year and lower operating revenues and either net losses or lower net
income during the period from April through September of each year.
Consequently, sales and operating profits for the propane segments are
concentrated in the first and second fiscal quarters, however, cash flow from
operations is generally greatest during the second and third fiscal quarters
when customers pay for propane purchased during the six-month peak-heating
season. Sales to industrial and agricultural customers are much less weather
sensitive.
A substantial portion of the Partnership's propane is used in the
heating-sensitive residential and commercial markets causing the temperatures
realized in the Partnership's areas of operations, particularly during the
six-month peak-heating season, to have a significant effect on its financial
performance. In any given area, sustained warmer-than-normal temperatures will
tend to result in reduced propane use, while sustained colder-than-normal
temperatures will tend to result in greater propane use. The Partnership uses
information on normal temperatures in understanding how temperatures that are
colder or warmer than normal affect historical results of operations and in
preparing forecasts of future operations.
The retail propane segment's gross profit margins are not only affected by
weather patterns, but also vary according to customer mix. For example, sales to
residential customers generate higher margins than sales to certain other
customer groups, such as commercial or agricultural customers. Wholesale propane
segment's margins are substantially lower than retail margins. In addition,
propane gross profit margins vary by geographical region. Accordingly, a change
in customer or geographic mix can affect propane gross profit without
necessarily affecting total revenues.
Amounts discussed below reflect 100% of the results of MP Energy Partnership
(the foreign wholesale propane segment). MP Energy Partnership is a general
partnership in which Heritage Operating owns a 60% interest. Because MP Energy
Partnership is primarily engaged in lower-margin wholesale distribution, its
contribution to the Partnership's net income is not significant and the minority
interest of this partnership is excluded from the EBITDA, as adjusted
calculation.
THREE MONTHS ENDED FEBRUARY 29, 2004 COMPARED TO THE THREE MONTHS ENDED FEBRUARY
28, 2003
Volumes. Total volumes of natural gas sales, NGL sales including propane, and
natural gas transported by the Partnerships' midstream, transportation, retail
propane, domestic wholesale propane, and foreign wholesale propane segments for
the three months ended February 29, 2004 and February 28, 2003 are as follows:
40
Three months ended
------------------------------------------
February 29, February 28, February 28,
2004 2003 2003
------------ ------------ ------------
(Energy
Transfer (Predecessor
Company) Heritage)
Midstream
Natural gas MMBtu/d 968,000 390,000 -
NGLs bbls/d 12,600 9,900 -
Transportation
Natural gas MMBtu/d 873,000 763,000 -
Propane (gallons in thousands)
Retail Propane 84,435 - 166,622
Domestic wholesale propane 1,291 - 5,467
Foreign wholesale Propane (net) 11,876 - 25,358
The Partnership's midstream natural gas sales volume increased 578,000
MMBtu/d from 390,000 MMBtu/d to 968,000 MMBtu/d for the three months ended
February 29, 2004 compared to the three months ended February 28, 2003. The
increase in natural gas sales volume is a result of the Partnership's expanded
marketing efforts, enhanced relationships with producers and expanded credit
facilities with commodity counter-parties which lead to both higher throughput
on existing contracts and additional new contracts for natural gas sales
volumes.
Midstream NGL sales volume increased from 9,900 bbls/d to 12,600
bbls/d, for the three months ended February 29, 2004 an increase of 2,700 bbls/d
from the volumes sold in the three months ended February 28, 2003. The greater
NGL sales volumes were due to more favorable gas processing margins which
provided the Partnership with a better economic benefit from extracting NGLs
from the natural gas stream rather than by-passing its processing plants.
Transportation volume for the three months ended February 29, 2004 was
873,000 MMBtu/d, an increase of 110,000 MMBtu/d from the 763,000 MMBtu/d for the
three months ended February 28, 2003. The combination of a widening basis
differential between the Waha and Katy natural gas pricing hubs and additional
volumes on the west and middle segments of the pipeline system provided
producers an incentive to transport increased volumes of natural gas to a more
attractive marketplace.
Total retail propane, domestic wholesale propane, and foreign wholesale
propane gallons sold during the three months ended February 29, 2004 were 97.6
million with no retail propane gallons reflected in the three months ended
February 28, 2003. These propane volumes reflect only the amounts sold after the
ETC Transaction (from January 20, 2004 through February 29, 2004). As a
comparison, had the ETC Transaction occurred at the beginning of the periods
presented, Predecessor Heritage would have reflected pro forma volumes of 177.4
million retail gallons for the three months ended February 29, 2004 and actual
volumes of 166.6 million gallons for the three months ended February 28, 2003.
Of the 10.8 million gallon increase reflected by Predecessor Heritage, 9.9
million gallons is the result of volumes added through acquisitions, and 0.9
million gallons is the result of temperatures being an average of 4.6% colder in
the three months ended February 29, 2004 compared to the same period last year.
Also, as a comparison, Predecessor Heritage would have reflected a pro forma 3.4
million and 23.0 million domestic and foreign wholesale gallons, respectively
for the second quarter of fiscal 2004 as compared to actual volumes of 5.5
million and 25.4 million domestic and foreign wholesale gallons for the second
quarter of fiscal 2003. The decrease of 2.1 million domestic wholesale gallons
is primarily due to the loss of two commercial customers to alternative fuel
sources. The decrease in foreign gallons is due to an exchange contract that was
in effect during the three months ended February 28, 2003, which was not
economical to renew during the three months ended February 29, 2004.
Revenues. Total revenues for the three months ended February 29, 2004
were $629.3 million, an increase of $425.2 million, as compared to $204.1
million in the three months ended February 28, 2003. Of the increase,
41
$141.0 million is due to the ETC Transaction. This revenue reflects the full
three months of ETC's revenue consolidated with the revenue of Heritage
Operating after the ETC Transaction (from January 20, 2004 through February 29,
2004). If the ETC Transaction had occurred at the beginning of the periods
presented, total revenue would have been $777.2 million for the three months
ended February 29, 2004 as compared to $475.5 million for the three months ended
February 28, 2003.
Midstream revenues for the three months ended February 29, 2004 were
$470.3 million compared to $196.3 million for the three-month period ended
February 28, 2003, an increase of $274.0 million. The Partnership's midstream
segment experienced significant growth due to the Partnership's enhanced and
matured business relationships with commodity counter-parties. Of the revenue
increase of $274.0 million, $267.6 million is due to additional sales volumes,
$2.0 million is due to increases in commodity prices and $4.4 million is due to
additional fee based revenue along the midstream assets.
Transportation revenues were $18.0 million for the three months ended
February 29, 2004 compared to $7.8 million for the three months ended February
28, 2003. The increase of $10.2 million is primarily due to the increased
volumes to take advantage of the natural gas price difference between the Waha
and Katy market hubs. The three months ended February 29, 2004 also included a
full quarter of the operations of Oasis Pipeline Company as a wholly owned
subsidiary, which was not included in the three months ended February 28, 2003.
For the three months ended February 29, 2004, the Partnership had
domestic retail propane revenues of $122.0 million, U.S. wholesale revenues of
$1.3 million, foreign wholesale revenues of $9.2 million, other domestic
revenues of $8.2 million and net liquids marketing activities of $0.3 million,
an increase of 100% with no propane revenues reflected in the three months ended
February 28, 2003. These revenues reflect only the amounts earned after the ETC
Transaction (from January 20, 2004 through February 29, 2004). As a comparison,
for the three months ended February 29, 2004, Predecessor Heritage would have
reflected retail revenues of $249.1 million as compared to $212.7 million in the
three months ended February 28, 2003. Of the increase, $13.9 million was a
result of the increase in volumes sold by customer service locations added
through acquisitions, $21.2 million was due to higher selling prices, and $1.3
million was the result of increase in gallons sold due to the colder
temperatures described above. Domestic wholesale revenues would have been $3.0
million as compared to $4.3 million for the three months ended February 28,
2003; reflecting a $1.9 million decrease due to the lost commercial customers
described above, offset by a $0.6 million increase due to higher selling prices
in the domestic wholesale segment. Foreign wholesale revenues would have been
$17.7 million as compared to $15.9 million for the three months ended February
28 2003. The increase of $1.8 million is the result of a $3.6 million increase
due to higher selling prices offset by a $1.8 million decrease in due to
decreased volumes sold described above. Other domestic revenues would have been
$18.3 million compared to $16.5 million for the three months ended February 28,
2003; and net liquids marketing activities would have reflected $0.9 million as
compared to $0.4 million for the three months ended February 28, 2003.
Cost of Products Sold. Total cost of products sold increased to $534.5
million for the three months ended February 29, 2004 as compared to $174.5
million for the three months ended February 28, 2003. Of the $360.0 million
increase, $76.6 million is due to the ETC Transaction. This cost of products
sold reflects the full three months of ETC's cost of products sold consolidated
with the cost of products sold of Heritage Operating after the ETC Transaction
(from January 20, 2004 through February 29, 2004). If the ETC Transaction had
occurred at the beginning of the periods presented, total cost of products sold
would have been $616.7 million for the three months ended February 29, 2004 as
compared to $321.1 million for the three months ended February 28, 2003.
Midstream cost of sales increased $279.2 million to $450.6 million for
the three months ended February 29, 2004 compared to $171.4 million for the
three months ended February 28, 2003. Midstream cost of sales increased
proportionally with midstream revenue as the Partnership's business
relationships with commodity counter-parties matured throughout the period. Of
the $279.2 million increase, $251.0 million relates to increased purchase volume
and $28.2 million relates to increased commodity prices.
Transportation cost of sales increased $4.2 million to $7.3 million in
the three months ended February 29, 2004 compared to $3.1 million in the
three-month period ended February 28, 2003. The Partnership received a greater
amount of shipper's natural gas due to increased volumes, to compensate for fuel
used in operating the pipeline. These greater retained volumes together with
higher natural gas prices increased the cost of sales activity generated from
the sale of excess inventory or the recognition, either positive or negative, of
the unaccounted fuel within the pipeline system.
42
For the three months ended February 29, 2004, the Partnership had
domestic retail propane cost of sales of $65.1 million, U.S. wholesale cost of
sales of $1.1 million, foreign wholesale cost of sales of $8.3 million, and
other domestic cost of sales of $2.1 million an increase of 100% with no propane
cost of sales reflected in the three months ended February 28, 2003. These costs
reflect only the amounts that were incurred after the ETC Transaction (from
January 20, 2004 through February 29, 2004). As a comparison, for the three
months ended February 29, 2004, Predecessor Heritage would have reflected retail
cost of sales of $134.9 million as compared to $104.9 million in the three
months ended February 28, 2003. Of the $30.0 million increase, $8.2 million was
due to an increase in volumes sold as described above and $21.8 was due to
higher product costs this fiscal quarter. U.S. wholesale cost of sales would
have been $2.6 million as compared to $3.9 million for the three months ended
February 28, 2003. Of the decrease, $1.6 million was due to lost volumes
described above offset by a $0.3 million increase related to higher product
costs. Foreign wholesale cost of sales would have reflected an increase of $1.3
million to $16.1 million as compared to $14.8 million for the three months ended
February 28, 2003, of which, $2.9 million represents the increase of product
cost, offset by a decrease of $1.6 million due to decreased volumes described
above. Other cost of sales would have been $5.2 million as compared to $4.8
million for the three months ended February 28, 2003.
Gross Profit. Total gross profit for the three months ended February
29, 2004 was $94.8 million as compared to $29.6 million for the three months
ended February 28, 2003. This gross profit reflects the full three months of
ETC's gross profit consolidated with the gross profit of Heritage Operating
after the ETC Transaction (from January 20, 2004 through February 29, 2004). If
the ETC Transaction had occurred at the beginning of the periods presented,
total gross profit would have been $160.5 million for the three months ended
February 29, 2004 as compared to $154.4 million for the three months ended
February 28, 2003.
The midstream segment generated a gross profit of $19.7 million for the
three months ended February 29, 2004, as compared to $24.9 million in the three
months ended February 28, 2003. This increase is due to the changes in revenues
and cost of sales described above.
Transportation gross profit was $10.6 for the three months ended
February 29, 2004 as compared to $4.7 million for the three months ended
February 28, 2003 as a result of the changes is transportation revenues and
expenses described above.
For the three months ended February 29, 2004, the Partnership had
domestic retail propane gross profit of $56.9 million, U.S. wholesale gross
profit of $0.2 million, foreign wholesale gross profit of $0.9 million, other
domestic gross profit of $6.1 million, and a liquids marketing gross profit of
$0.3 million, an increase of 100% with no propane cost of sales reflected in the
three months ended February 28, 2003. These gross profits reflect only the
amounts that were incurred after the ETC Transaction (from January 20, 2004
through February 29, 2004). As a comparison, for the three months ended February
29, 2004, Predecessor Heritage would have reflected retail gross profit of
$114.2 million as compared to $107.8 million in the three months ended February
28, 2003, U.S. wholesale gross profit of $0.4 million as compared to $0.4
million for the three months ended February 28, 2003, foreign wholesale gross
profit of $1.6 million as compared to $1.1 million for the three months ended
February 28 2003, other gross profit of $13.1 million compared to $11.7 million
for the three months ended February 28, 2003, and liquids marketing gross profit
of $0.9 million as compared to $0.4 million for the three months ended February
28, 2003. The increase of $0.5 million is due to more favorable market positions
and market conditions experienced in the three months ended February 29, 2004
compared to the three months ended February 28, 2003.
Operating Expenses. Operating expenses were $27.5 million, an increase of
$22.0 million for the three months ended February 29, 2004 as compared to $5.5
million for the three months ended February 28, 2003. Of the increase, $22.3
million is a result of the addition of the retail propane, domestic wholesale
propane, foreign wholesale propane, and liquids marketing operating expenses
included in the February 29, 2004 operating expenses as a result ETC
Transaction. The remaining decrease of $0.3 million is primarily the result of
the reduction in operating expense in the transportation segment's reduction in
environmental expense during the three months ending February 29, 2004 as
compared to the three months ending February 28, 2003. These operating expenses
reflect the full three months of ETC's operating expenses consolidated with the
operating expenses of Heritage Operating after the ETC Transaction (from January
20, 2004 through February 29, 2004). If the ETC Transaction had occurred at the
beginning of the periods presented, total operating expenses would have been
$51.9 million for the three months ended February 29, 2004 as compared to $51.4
million for the three months ended February 28, 2003.
43
Selling, General and Administrative. Selling, general and administrative
expenses were $6.4 million for the three months ended February 29, 2004,
compared to $4.3 million for the three-month period ended February 28, 2003. The
increase of $2.1 is comprised of $1.5 million due to the ETC Transaction
described above and $0.6 million due to the selling, general and administrative
expenses of Oasis being included in the entire three-month period ended February
29, 2004, that were consolidated only from December 27, 2002 to February 28,
2003 in the three months ended February 28, 2003. These selling, general and
administrative expenses reflect the full three months of ETC's selling, general
and administrative expenses consolidated with the selling, general and
administrative expenses of Heritage Operating after the ETC Transaction (from
January 20, 2004 through February 29, 2004). If the ETC Transaction had occurred
at the beginning of the periods presented, total selling, general and
administrative expenses would have been $13.3 million for the three months ended
February 29, 2004 as compared to the $9.1 million for the three months ended
February 28, 2003. The increase of $4.2 million includes approximately $4.5
million in transaction costs associated with the ETC Transaction.
Depreciation and Amortization. Depreciation and amortization was $9.5
million in the three months ended February 29, 2004 as compared to $2.8 million
in the three months ended February 28, 2003. Of the increase, $5.1 million is
due to the ETC Transaction described above and the remaining $1.6 million is
primarily due to a full three-month consolidation of Oasis during the three
months ended February 29, 2004 and higher deprecation due to the purchase
accounting step up of Oasis' assets. This depreciation and amortization reflects
the full three months of ETC's depreciation and amortization consolidated with
the depreciation and amortization of Heritage Operating after the ETC
Transaction (from January 20, 2004 through February 29, 2004). If the ETC
Transaction had occurred at the beginning of the periods presented, total
depreciation and amortization would have been $15.8 million for the three months
ended February 29, 2004 as compared to the $13.6 million for the three months
ended February 28, 2003.
Operating Income. For the three months ended February 29, 2004, the
Partnership had operating income of $58.6 million as compared to operating
income of $12.2 million for the three months ended February 28, 2003. This
increase is primarily due the changes in revenues, cost of sales and operating
expenses described above. This operating income reflects the full three months
of ETC's operating income consolidated with the operating income of Heritage
Operating after the ETC Transaction (from January 20, 2004 through February 29,
2004). If the ETC Transaction had occurred at the beginning of the periods
presented, total operating income would have been $86.7 million for the three
months ended February 29, 2004 as compared to the $75.4 million for the three
months ended February 28, 2003.
Interest Expense. Interest expense increased $5.4 million for the three
months ended February 29, 2004 to $8.9 million from $3.5 million for the same
three-month period last year. Of this increase, $4.3 million is due to the ETC
transaction and the remaining $1.1 million increase is primarily the result of
an increase in debt level as a result of the ETC transaction and additional debt
incurred related to the purchase of the Oasis pipeline on December 27, 2002.
This interest expense reflects the full three months of ETC's interest expense
consolidated with the interest expense of Heritage Operating after the ETC
Transaction (from January 20, 2004 through February 29, 2004). If the ETC
Transaction had occurred at the beginning of the periods presented, total
interest expense would have been $14.4 million for the three months ended
February 29, 2004 as compared to the $13.9 million for the three months ended
February 28, 2003.
Income Taxes. Income taxes for the three months ended February 29, 2004
were $0.7 million as compared to $1.0 million for the three months ended
February 28, 2003. If the ETC Transaction had occurred at the beginning of the
periods presented, income taxes would have been $1.8 million for the three
months ended February 29, 2004 as compared to the $3.8 million for the three
months ended February 28, 2003.
Net Income. For the three-month period ended February 29, 2004, the
Partnership recorded net income of $49.2 million, an increase of $41.4 million
as compared to net income for the three months ended February 28, 2003 of $7.8
million. The increase is primarily a result of the ETC Transaction and other
operating conditions described above. This net income reflects the full three
months of ETC's net income consolidated with the net income of Heritage
Operating after the ETC Transaction (from January 20, 2004 through February 29,
2004). If the ETC Transaction had occurred at the beginning of the periods
presented, total net income would have been $70.8 million for the three months
ended February 29, 2004 as compared to the $56.9 million for the three months
ended February 28, 2003.
EBITDA, as adjusted. EBITDA, as adjusted increased $53.0 million to
$68.1 million for the three months ended February 29, 2004, as compared to
EBITDA, as adjusted of $15.1 million for the three months ended
44
February 28, 2003. This increase is due to the ETC Transaction and operating
performance described above. This EBITDA, as adjusted reflects the full three
months of ETC's EBITDA, as adjusted consolidated with the EBITDA, as adjusted of
Heritage Operating after the ETC Transaction (from January 20, 2004 through
February 29, 2004). Predecessor Heritage would have reported EBITDA, as adjusted
of $76.0 million for the three months ended February 29, 2004 compared to $73.0
million for the three months ended February 28, 2003. If the ETC Transaction had
occurred at the beginning of the period presented, total EBITDA, as adjusted
would have been $103.8 million for the three months ended February 29, 2004,
which includes the effect of $3.3 million of transaction costs, net of non-cash
compensation, which were expensed due to the ETC Transaction. EBITDA, as
adjusted for the three months ended February 28, 2004 and February 28, 2003 is
computed as follows:
NET INCOME RECONCILIATION
(in millions)
Three Months Ended
---------------------------------------------------------------------------
February 29, February 29, February 28, February 28, February 28,
2004 2004 2003 2003 2003
------------ ------------ ------------ ----------- ------------
(Energy
Transfer (Predecessor
(Pro Forma) Company) (Pro forma) Heritage)
Net income $ 49.2 $ 70.8 $ 7.8 $ 56.9 $ 49.8
Depreciation and amortization 9.5 15.8 2.8 13.6 9.4
Interest 8.9 14.4 3.5 13.9 9.3
Taxes 0.7 1.8 1.0 3.8 1.3
Non-cash compensation expense - 1.1 - 0.3 0.3
Other expense (income) (0.2) (0.2) - - 2.3
Depreciation, amortization, and
interest of investee - 0.1 - 0.2 0.2
Minority interests - - - - 0.5
Less : Gain on disposal of assets - - - - (0.1)
------------- ------------ ------------ ------------ ----------
EBITDA, as adjusted (a) $ 68.1 $ 103.8 $ 15.1 $ 88.7 $ 73.0
============ ============ ============ ============ ==========
(a) EBITDA, as adjusted is defined as the Partnership's earnings before
interest, taxes, depreciation, amortization and other non-cash items,
such as compensation charges for unit issuances to employees, gain or
loss on disposal of assets, and other expenses. We present EBITDA, as
adjusted, on a Partnership basis which includes both the general and
limited partner interests. Non-cash compensation expense represents
charges for the value of the Common Units awarded under the
Partnership's compensation plans that have not yet vested under the
terms of those plans and are charges which do not, or will not, require
cash settlement. Non-cash income such as the gain arising from our
disposal of assets is not included when determining EBITDA, as
adjusted. EBITDA, as adjusted (i) is not a measure of performance
calculated in accordance with generally accepted accounting principles
and (ii) should not be considered in isolation or as a substitute for
net income, income from operations or cash flow as reflected in our
consolidated financial statements.
EBITDA, as adjusted is presented because such information is relevant
and is used by management, industry analysts, investors, lenders and
rating agencies to assess the financial performance and operating
results of the Partnership's fundamental business activities.
Management believes that the presentation of EBITDA, as adjusted is
useful to lenders and investors because of its use in the propane
industry and for master limited partnerships as an indicator of the
strength and performance of the Partnership's ongoing business
operations, including the ability to fund capital expenditures, service
debt and pay distributions. Additionally, management believes that
EBITDA, as adjusted provides additional and useful information to the
Partnership's investors for trending, analyzing and benchmarking the
operating results of the Partnership from period to period as compared
to other companies that may have different financing and capital
structures. The presentation of EBITDA, as adjusted allows investors to
view the Partnership's performance in a manner similar to the methods
used by management and provides additional insight to the Partnership's
operating results.
EBITDA, as adjusted is used by management to determine our operating
performance, and along with other data as internal measures for setting
annual operating budgets, assessing financial performance of the
45
Partnership's numerous business locations, as a measure for evaluating
targeted businesses for acquisition and as a measurement component of
incentive compensation. The Partnership has a large number of business
locations located in different regions of the United States. EBITDA, as
adjusted can be a meaningful measure of financial performance because
it excludes factors which are outside the control of the employees
responsible for operating and managing the business locations, and
provides information management can use to evaluate the performance of
the business locations, or the region where they are located, and the
employees responsible for operating them. To present EBITDA, as
adjusted on a full Partnership basis, we add back the minority interest
of the general partner because net income is reported net of the
general partner's minority interest. Our EBITDA, as adjusted includes
non-cash compensation expense which is a non-cash expense item
resulting from our unit based compensation plans that does not require
cash settlement and is not considered during management's assessment of
the operating results of the Partnership's business. By adding these
non-cash compensation expenses in EBITDA, as adjusted allows management
to compare the Partnership's operating results to those of other
companies in the same industry who may have compensation plans with
levels and values of annual grants that are different than the
Partnership's. Other expenses include other finance charges and other
asset non-cash impairment charges that are reflected in the
Partnership's operating results but are not classified in interest,
depreciation and amortization. We do not include gain on the sale of
assets when determining EBITDA, as adjusted since including non-cash
income resulting from the sale of assets increases the performance
measure in a manner that is not related to the true operating results
of the Partnership's business. In addition, Heritage's debt agreements
contain financial covenants based on EBITDA, as adjusted. For a
description of these covenants, please read note 4 of this Form 10-Q.
There are material limitations to using a measure such as EBITDA, as
adjusted, including the difficulty associated with using it as the sole
measure to compare the results of one company to another, and the
inability to analyze certain significant items that directly affect a
company's net income or loss. In addition, the Partnership's
calculation of EBITDA, as adjusted may not be consistent with similarly
titled measures of other companies and should be viewed in conjunction
with measurements that are computed in accordance with GAAP. EBITDA, as
adjusted for the periods described herein is calculated in the same
manner as presented by the Partnership in the past. Management
compensates for these limitations by considering EBITDA, as adjusted in
conjunction with its analysis of other GAAP financial measures, such as
gross profit, net income (loss), and cash flow from operating
activities.
SIX MONTHS ENDED FEBRUARY 29, 2004 COMPARED TO THE FIVE MONTHS ENDED FEBRUARY
28, 2003
Volume. Total volumes of natural gas sales, NGL sales including propane, and
natural gas transported by the Partnership's midstream, transportation, retail
propane, domestic wholesale propane, and foreign wholesale propane segments for
the six months ended February 29, 2004 and February 28, 2003 are as follows:
Six months Five months Six months
ended ended ended
February 29, February 28, February 28,
2004 2003 2003
------------ ------------ -------------
(Energy
Transfer (Predecessor
Company) Heritage)
Midstream
Natural gas MMBtu/d 946,000 336,000 -
NGLs bbls/d 13,800 12,000 -
Transportation
Natural gas MMBtu/d 831,000 787,000 -
Propane (gallons in thousands)
Retail Propane 84,435 - 243,343
Domestic wholesale propane 1,291 - 10,357
Foreign wholesale Propane (net) 11,876 - 42,553
46
The Partnership's midstream natural gas sales volume increased 610,000
MMBtu/d from 336,000 MMBtu/d to 946,000 MMBtu/d for the six months ended
February 29, 2004 compared to the five months ended February 28, 2003. The
increase in natural gas sales volume is a result of the Partnership's expanded
marketing efforts, enhanced relationships with producers and expanded credit
facilities with commodity counter-parties which lead to both higher throughput
on existing contracts and additional new contracts for natural gas sales
volumes.
Midstream NGL sales volume increased from 12,000 bbls/d to 13,800
bbls/d, an increase of 1,800 bbls/d for over volumes sold in the five months
ended February 28, 2003. The greater NGL sales volumes were due to more
favorable gas processing margins which provided the Partnership with a better
economic benefit from extracting NGLs from the natural gas stream rather than
by-passing its processing plants.
Transportation volume for the six months ended February 29, 2004 was
831,000 MMBtu/d, an increase of 44,000 MMBtu/d from the 787,000 MMBtu/d for the
five months ended February 28, 2003. The combination of a widening basis
differential between the Waha and Katy natural gas pricing hubs and additional
volumes on the west and middle segments of the pipeline system provided
producers an incentive to transport increased volumes of natural gas to a more
attractive marketplace.
Total retail propane gallons sold in the six months ended February 29,
2004 were 84.4 million gallons, with no retail propane gallons reflected in the
five months ended February 28, 2003. The difference in retail gallons sold is
due to the Energy Transfer transaction described above. The Partnership also
sold approximately 1.3 million and 11.9 domestic and foreign wholesale gallons,
respectively in this six months ended February 29 2004, with no domestic or
foreign wholesale gallons reflected for the five months ended February 28 2003.
As a comparison, Predecessor Heritage would have reflected pro forma volumes of
256.1 million retail gallons for the six months ended February 29, 2004 and
actual volumes of 243.3 million gallons for the six months ended February 28,
2003. Of the 12.8 million gallon increase, 16.8 million gallons are the result
of volumes sold by customer service locations added through acquisitions, offset
by a decrease of 4.0 million gallons that were weather related. While the
Partnership experienced temperatures that were slightly colder in the six months
ended February 29, 2004 compared to the same six months last year in its western
operations, the Partnership's northern and southern operations were warmer than
last year. The southern and northern operations generate the Partnership's
highest propane sales. Also, as a comparison, Predecessor Heritage would have
reflected a pro forma 6.7 million and 35.2 million domestic and foreign
wholesale gallons, respectively for the six months ended February 29, 2004 as
compared to actual volumes of 10.4 million and 42.6 million domestic and foreign
wholesale gallons for the six months ended February 28, 2003. The 3.7 million
gallon decrease in domestic wholesale gallons is primarily the result of the
loss of two commercial customers to alternative fuel sources, and the 7.4
million gallon decrease in foreign wholesale volumes is due to an exchange
contract that was in effect during the six months ended February 28, 2003, which
was not economical to renew during the six months ended February 29, 2004.
Revenues. Total revenues for the six months ended February 29, 2004
were $1,044.3 million, an increase of $761.9 million, as compared to $282.4
million in the five months ended February 28, 2003. These revenues reflect the
full six months of ETC's revenues consolidated with the revenues of Heritage
Operating after the ETC Transaction (from January 20, 2004 through February 29,
2004). Had the ETC Transaction occurred at the beginning of the periods
presented, total revenue would have been $1,316 million for the six months ended
February 29, 2004 as compared to the $701.2 million for the five months ended
February 28, 2003.
The current period's midstream revenues were $871.2 million compared to
$274.6 million for the five-month period ended February 28, 2003, an increase of
$596.6 million. The Partnership's midstream segment experienced significant
growth due to enhanced and matured business relationships with commodity
counter-parties. Of the revenue increase of $596.6 million, $573.3 million is
due to additional sales volumes, $12.8 million is due to increases in commodity
prices and $10.5 million is due to additional fee based revenue along the
midstream assets.
Transportation revenues were $32.1 million for the six months ended
February 29, 2004 compared to $7.8 million for the five months ended February
28, 2003. The increase of $24.3 million is in part due to the fact that the
transportation segment's revenue for the five months ending February 28, 2003
does not reflect revenue prior to January 2003 as the Oasis pipeline was
accounted for under the equity method of accounting prior to this time period.
The transportation segment's revenue is sensitive to the natural gas price
difference between the Waha and Katy market hubs. The average basis differential
was $0.182/MMBtu for the six months ending February 29, 2004 as compared to
$0.154/MMBtu for the five months ending February 28, 2003, an increase of
$0.028/MMBtu or 18.2%.
47
For the six months ended February 29, 2004, the Partnership had
domestic retail propane revenues of $122.0 million, U.S. wholesale revenues of
$1.3 million, foreign wholesale revenues of $9.2 million, other domestic
revenues of $8.2 million and net liquids marketing activities of $0.3 million
with no propane revenues reflected in the five months ended February 28, 2003.
These revenues reflect only the amounts earned after the ETC Transaction (from
January 20, 2004 through February 29, 2004). As a comparison, for the six months
ended February 29, 2004, Predecessor Heritage would have reflected retail
revenues of $343.5 million as compared to $296.8 million in the six months ended
February 28, 2003. Of the $46.7 million increase; $22.5 million is due to the
increase in volumes sold by customer service locations added through
acquisitions, $29.6 million is due to higher selling prices, offset by a
decrease of $5.4 million due to the decrease in weather related volumes
described above. Domestic wholesale revenues would have been $5.3 million as
compared to $6.7 million for the six months ended February 28, 2003. Of the
decrease, $2.9 million is due to the lost commercial customers described above;
offset by a $1.5 million increase related to higher selling prices. Foreign
wholesale revenues would have been $25.7 million as compared to $24.8 million
for the six months ended February 28 2003; due to a $6.3 million increase
related to higher selling prices offset by a decrease of $5.4 million due to the
decrease in volumes described above. Other domestic revenues would have been
$37.2 million compared to $33.9 million for the six months ended February 28,
2003; and net liquids marketing activities would have been $0.9 million as
compared to $1.1 million for the six months ended February 28, 2003. This
decrease is primarily due to a decrease in the number and volumes of contracts
sold offset by more favorable market conditions and positions in the six months
ended February 29, 2004 compared to the six months ended February 28, 2003.
Cost of Products Sold. Total cost of products sold increased to $917.1
million for the six months ended February 29, 2004 as compared to $241.8 million
for the five months ended February 28, 2003. These costs of sales reflect the
full six months of ETC's cost of sales consolidated with the cost of sales of
Heritage Operating after the ETC Transaction (from January 20, 2004 through
February 29, 2004). Had the ETC Transaction occurred at the beginning of the
periods presented, total cost of sales would have been $1.1 billion for the six
months ended February 29, 2004 as compared to the $473.1 million for the five
months ended February 28, 2003.
Midstream cost of sales increased $592.0 million to $830.7 million for
the six months ended February 29, 2004 compared to $238.7 million for the five
months ended February 28, 2003. Midstream cost of sales increased proportionally
with Midstream revenue as our business relationships with commodity
counter-parties matured throughout the period. Of the $592.0 million increase,
$533.8 million relates to increased purchase volume and $58.2 million relates to
increased commodity prices.
Transportation cost of sales increased $6.7 million to $9.8 million in
the six months ended February 29, 2004 compared to $3.1 million in the five
months ended February 28, 2003 The transportation segment generally retains a
portion of each shipper's gas to compensate for fuel used in operating the
pipeline. The actual usage of gas can differ from the amount retained from
transportation customers. Cost of sales activity from the transportation segment
is typically generated from the sale of excess inventory or the recognition,
either positive or negative, of the unaccounted fuel within the pipeline system.
For the six months ended February 29, 2004, the Partnership had
domestic retail propane cost of sales of $65.1 million, U.S. wholesale cost of
sales of $1.1 million, foreign wholesale cost of sales of $8.3 million, and
other domestic cost of sales of $2.1 million with no propane cost of sales
reflected in the five months ended February 28, 2003. These costs reflect only
the amounts that were incurred after the ETC Transaction (from January 20, 2004
through February 29, 2004). As a comparison, for the six months ended February
29, 2004, Predecessor Heritage would have reflected retail cost of sales of
$186.5 million as compared to $146.5 million in the six months ended February
28, 2003. Of the $40.0 million increase, $9.3 million reflects changes in
volumes described above and $30.7 reflects the increase due to higher selling
prices. Domestic wholesale cost of sales would have been $4.7 million as
compared to $6.1 million for the six months ended February 28, 2003. Of the
decrease, $2.6 million is due to volume decreases described above offset by $1.2
million increase due to increased selling prices. Foreign wholesale cost of
sales would have been $23.5 million as compared to $23.2 million for the six
months ended February 28, 2003. Of the increase, $5.2 million is related to
higher selling prices offset by a decrease of $4.9 million due to volume
decreases described above. Other cost of sales would have been $10.5 million as
compared to $9.6 million for the six months ended February 28, 2003.
Gross Profit. Total gross profit for the six months ended February 29,
2004 increased by $86.7 million to $127.2 million as compared to $40.5 million
for the five months ended February 28, 2003. This gross profit reflects the full
six months of ETC's gross profit consolidated with the gross profit of Heritage
Operating after the ETC Transaction (from January 20, 2004 through February 29,
2004). Had the ETC Transaction occurred at the
48
beginning of the periods presented, total gross profit would have been $250.3
million for the six months ended February 29, 2004 as compared to the $228.2
million for the five months ended February 28, 2003.
Midstream gross profit was $40.5 million for the six months ended
February 29, 2004, as compared to $35.9 million in the five months ended
February 28, 2003. This increase is attributable to the increases in revenues
and cost of sales described above.
Transportation gross profit was $22.3 million for the six months ended
February 29, 2004 compared to $4.7 million for the five months ended February
28, 2003. The increase of $17.6 million is attributable to the increases in
revenues and cost of sales described above.
For the six months ended February 29, 2004, the Partnership had
domestic retail propane gross profit of $56.9 million, U.S. wholesale gross
profit of $0.2 million, foreign wholesale gross profit of $0.9 million, other
domestic gross profit of $6.1 million, and a liquids marketing gross profit of
$0.3 million with no propane cost of sales reflected in the five months ended
February 28, 2003. These gross profits reflect only the amounts earned after the
ETC Transaction (from January 20, 2004 through February 29, 2004). As a
comparison, for the six months ended February 29, 2004, Predecessor Heritage
would have reflected retail gross profit of $157.0 million as compared to $150.3
million in the six months ended February 28, 2003; U.S. wholesale gross profit
of $0.6 million as compared to $0.7 million for the six months ended February
28, 2003; foreign wholesale gross profit of $2.2 million as compared to $1.6
million for the six months ended February 28 2003; other gross profit of $26.7
million compared to $24.2 million for the six months ended February 28, 2003,
and liquids marketing gross profit of $0.9 million s compared to $1.1 million
for the six months ended February 28, 2003.
Operating Expenses. Operating expenses increased $25.4 million to $32.9
million for the six months ended February 29, 2004 as compared to $7.5 million
for the five months ended February 28, 2003. Of the increase, $22.3 million is
the result of the ETC Transaction described above. The remaining increase of
$3.2 million is due to the effect of reporting for a six-month period as opposed
to a five-month period and the consolidation of the Oasis pipeline operating
expenses for the full six months ended February 29, 2004 which were only
included for the last two of the five months ended February 28, 2003. These
operating expenses reflect the full six months of ETC's operating expenses
consolidated with the operating expenses of Heritage Operating after the ETC
Transaction (from January 20, 2004 through February 29, 2004). Had the ETC
Transaction occurred at the beginning of the periods presented, total operating
expenses would have been $95.4 million for the six months ended February 29,
2004 as compared to the $87.8 million for the five months ended February 28,
2003.
Selling, General and Administrative. Selling, general and administrative
expenses were $11.3 million for the six months ended February 29, 2004 compared
to $5.9 million for the five months ended February 28, 2003. Of this increase is
$1.6 million is due to the ETC Transaction described above. These selling,
general and administrative expenses reflect the full six months of ETC's
selling, general and administrative expenses consolidated with the selling,
general and administrative expenses of Heritage Operating after the ETC
Transaction (from January 20, 2004 through February 29, 2004). Had the ETC
Transaction occurred at the beginning of the periods presented, total selling,
general and administrative expenses would have been $21.3 million for the six
months ended February 29, 2004 as compared to the $14.4 million for the five
months ended February 28, 2003. Selling general and administrative expenses for
the five months ending February 28, 2003 does not include expenses from Oasis
from October 2002 through December 2002 as Oasis was accounted for under the
equity method of accounting during this time period. The impact of the Oasis
consolidation in the six months ending February 29, 2004 was an additional $0.6
million in selling, general and administrative expense for the six months ending
February 29, 2004 as compared to the five months ending February 28, 2003. The
increase is also a reflection of a $1.2 million impact due to a six-month
reporting period for the six months ending February 29, 2004 compared to a
five-month reporting period for the five months ending February 28, 2003. In
addition, ETC's employee incentive expense increased $1.9 million during the six
months ending February 29, 2004 as compared to the five months ending February
28, 2003 due to overall improved financial results of ETC. The pro forma
increase also includes approximately $4.5 million in transaction costs related
to the ETC Transaction.
Depreciation and Amortization. Depreciation and amortization was $13.6
million for the six months ended February 29, 2004, compared to $4.5 in the five
months ended February 28, 2003. Of the increase, $5.1 million is due to the ETC
Transaction. The remaining $4.0 million increase is attributable to higher
depreciation on stepped up assets and the full consolidation of Oasis during the
six months ending February 29, 2004 compared to Oasis's equity method accounting
treatment for three out of five months for the five month period ending February
28, 2003, $0.9 million is due to an additional month in the reporting period for
the six months ending February 29, 2004
49
as compared to the five months ending February 28, 2003, and the impact of other
asset additions increased the Partnership's depreciation expense by $0.9 million
for the six months ending February 29, 2004 as compared to the five months
ending February 28, 2003. This depreciation and amortization reflects the full
six months of ETC's depreciation and amortization consolidated with the
depreciation and amortization of Heritage Operating after the ETC Transaction
(from January 20, 2004 through February 29, 2004). Had the ETC Transaction
occurred at the beginning of the periods presented, total depreciation and
amortization would have been $30.2 million for the six months ended February 29,
2004 as compared to the $25.8 million for the five months ended February 28,
2003.
Operating Income. For the six months ended February 29, 2004, the
Partnership had operating income of $79.6 million for the six months ended
February 29, 2004 as compared to operating income of $16.0 million for the five
months ended February 28, 2003. This increase is primarily due the ETC
Transaction and changes in revenues and expenses described above. This operating
income reflects the full six months of ETC's operating income consolidated with
the operating income of Heritage Operating after the ETC Transaction (from
January 20, 2004 through February 29, 2004). If the ETC Transaction had occurred
at the beginning of the periods presented, total operating income would have
been $113.6 million for the six months ended February 29, 2004 as compared to
$93.5 million for the five months ended February 28, 2003.
Interest Expense. Interest expense was $12.6 million for the six months
ended February 29, 2004 as compared to $5.0 million for the five months ended
February 28, 2003. Of the increase, $4.3 million is the result of the ETC
Transaction. The remaining $3.3 million increase is primarily the result of an
increase in debt level as a result of the ETC transaction and additional debt
incurred related to the purchase of the Oasis pipeline on December 27, 2002.
This interest expense reflects the full six months of ETC's interest expense
consolidated with the interest expense of Heritage Operating after the ETC
Transaction (from January 20, 2004 through February 29, 2004). If the ETC
Transaction had occurred at the beginning of the periods presented, total
interest expense would have been $27.3 million for the six months ended February
29, 2004 as compared to $25.5 million for the five months ended February 28,
2003.
Income Taxes. Income tax expense was $2.5 million for the six months
ended February 29, 2004 compared to $1.0 million for the five months ended
February 28, 2003. If the ETC Transaction had occurred at the beginning of the
periods presented, total income taxes would have been $4.7 million for the six
months ended February 29, 2004 as compared to $6.2 million for the five months
ended February 28, 2003.
Net Income. For the six month period ended February 29, 2004, the
Partnership had net income of $64.9 million, an increase of $53.3 million, as
compared to a net income for the five months ended February 28, 2003 of $11.6
million. The increase is primarily a result of the ETC Transaction and other
operating conditions described above. This net income reflects the full six
months of ETC's net income consolidated with the net income of Heritage
Operating after the ETC Transaction (from January 20, 2004 through February 29,
2004). If the ETC Transaction had occurred at the beginning of the periods
presented, total net income would have been $82.1 million for the six months
ended February 29, 2004 as compared to the $61.9 million for the five months
ended February 28, 2003.
EBITDA, as adjusted. EBITDA, as adjusted increased $72.7 million to $93.4
million for the six months ended February 29 2004 as compared to EBITDA, as
adjusted of $21.9 million for the five months ended February 28, 2003. This
increase is due to the ETC Transaction and operating performance described
above. This EBITDA, as adjusted reflects the full six months of ETC's EBITDA, as
adjusted consolidated with the EBITDA, as adjusted of Heritage Operating after
the ETC Transaction (from January 20, 2004 through February 29, 2004).
Predecessor Heritage would have had EBITDA, as adjusted of $92.5 for the six
months ended February 29, 2004 compared to EBITDA, as adjusted of $93.8 million
for the six months ended February 28, 2003. If the ETC Transaction had occurred
at the beginning of the periods presented, total EBITDA, as adjusted would have
been $145.6 million for the six months ended February 29, 2004 as compared to
the $121.0 million for the five months ended February 28, 2003, which includes
the effect of $3.3 million of transaction costs, net of non-cash compensation,
which were expensed due to the ETC Transaction. EBITDA, as adjusted is computed
as follows:
50
Six
Months
(in millions) Six Months Ended Five Months Ended Ended
----------------------------- ---------------------------- -----------
February 29, February 29, February 28, February 28, February 28,
2004 2004 2003 2003 2003
------------ ------------ ------------ ------------ -----------
(Energy
Transfer (Predecessor
(Pro forma) Company) (Pro forma) Heritage)
NET INCOME RECONCILIATION
Net income $ 64.9 $ 82.1 $ 11.6 $ 61.9 $ 51.3
Depreciation and amortization 13.6 30.2 4.5 25.8 18.7
Interest 12.6 27.3 4.9 25.5 18.6
Taxes 2.5 4.7 0.9 6.2 1.3
Non-cash compensation expense - 1.2 - 0.6 0.6
Other expense (income) (0.2) (0.2) - 0.5 2.5
Depreciation, amortization, and
interest of investee - 0.3 - 0.5 0.5
Minority interests - - - - 0.5
Less : Gain on disposal of assets - - - (0.2)
------------- ------------ ------------ ------------ -----------
EBITDA, as adjusted $ 93.4 $ 145.6 $ 21.9 $ 121.0 $ 93.8
============= ============ ============ ============ ===========
LIQUIDITY AND CAPITAL RESOURCES
The ability of the Partnership to satisfy its obligations will depend on its
future performance, which will be subject to prevailing economic, financial,
business and weather conditions, and other factors, many of which are beyond
management's control.
Future capital requirements of the Partnership's business will generally consist
of:
- maintenance capital expenditures which include capital expenditures
made to connect additional wells to the Partnership's natural gas
systems in order to maintain or increase throughput on existing assets;
- growth capital expenditures, mainly for customer propane tanks to
expand and constructing new pipelines, processing plants and treating
plants; and
- acquisition capital expenditures including acquisition of new pipeline
systems and propane operations.
The Partnership believes that cash generated from the operations of its
businesses will be sufficient to meet anticipated maintenance capital
expenditures, which the Partnership anticipates would be approximately $15.5
million on a pro forma basis for fiscal 2004 (if the ETC transaction had
happened on September 1, 2003) for the propane operations and $10.0 million for
the midstream and transportation operations. The Partnership will and
Predecessor Heritage had initially financed all capital requirements by cash
flows from operating activities. To the extent the Partnership's future capital
requirements exceed cash flows from operating activities:
- maintenance capital expenditures will be financed by the proceeds of
borrowings under the working capital facility of Heritage Operating and
the new Energy Transfer credit facility described below, which will be
repaid by subsequent season reductions in inventory and accounts
receivable:
- growth capital expenditures will be financed by the proceeds of
borrowings under the working capital facility of Heritage Operating and
by the new Energy Transfer credit facility; and
- acquisition capital expenditures will be financed by the proceeds of
borrowings under the acquisition facility of Heritage Operating and by
the new Energy Transfer credit facility, other lines of credit,
long-term debt, the issuance of additional Common Units or a
combination thereof.
The assets utilized in the Operating Partnerships do not typically require
lengthy manufacturing process time or complicated, high technology components.
Accordingly, the Partnership does not have any significant financial
51
commitments for maintenance capital expenditures. In addition, the Partnership
does not experience any significant increases attributable to inflation in the
cost of these assets.
The Partnership anticipates that it will continue to invest significant amounts
of capital to construct and acquire midstream and transportation assets. For
example, the Partnership is in the process of constructing the Bossier Pipeline
connecting its Katy pipeline in Grimes County to natural gas supplies in east
Texas. The Partnership anticipates that the remaining capital expenditures for
the Bossier Pipeline will be approximately $34 million. The Bossier Pipeline is
expected to complete by mid-2004.
Cash paid for acquisitions of $165.6 million, is the cash paid in the ETC
Transaction including $100 million for the purchase of Heritage Holdings, Inc.
In addition to the $22.3 million of cash expended for acquisitions of retail
propane operations by Predecessor Heritage for the period ended January 19,
2004, $17.9 million of Common Units and $2.4 million of non-competes were issued
and $3.8 of liabilities were assumed in connection with certain acquisitions.
Operating Activities. Cash provided by operating activities during the six
months ended February 29, 2004, was $69.6 million as compared to cash provided
by operating activities of $9.8 million for the five-month period ended February
28, 2003. The net cash provided by operations for the six months ended February
29, 2004 consisted of net income of $64.9 million, non-cash charges of $12.6
million, principally depreciation and amortization, and a decrease in working
capital of $7.9 million.
Investing Activities. Cash used in investing activities during the six months
ended February 29, 2004 of $210.3 million is comprised of the ETC Transaction
acquisition expenditure amount of $165.6 million, which includes $100 million
for the purchase of Heritage Holdings, Inc., and $10.3 million invested for
maintenance and $34.8 million for growth needed to sustain operations at current
levels and for customer propane tanks to support growth of operations. Cash used
in investing activities also includes proceeds from the sale of idle property of
$0.4 million.
Financing Activities. Cash received from financing activities during the six
months ended February 29, 2004 of $198.1 million resulted mainly from the Second
Amended and Restated Credit Agreement entered into on January 20, 2004 by La
Grange Acquisition in connection with the ETC Transaction. The proceeds of
$325.0 were used to retire $226.0 million of debt outstanding at the time of the
ETC Transaction, satisfy ETC's accounts payable and other specified liabilities
as they became due and fund certain other expenses in connection with the ETC
Transaction. The net decrease in Heritage Operating's Bank Facility was $50.3
million since the ETC Transaction. The Partnership raised $334.8 million of net
proceeds through the sale of 9,200,000 Common Units at an offering price of
$38.69 per unit. The total of the proceeds were used to finance the ETC
Transaction and for general partnership purposes. Proceeds from the equity
offering and La Grange Acquisition's Second Amended and Restated Credit
Agreement funded a total distribution of $196.7 million to La Grange Energy in
connection with the terms of the ETC Transaction. The General Partner made a
contribution of $15.6 million to maintain their 2% General Partners' interest.
FINANCING AND SOURCES OF LIQUIDITY
Upon consummation of the Energy Transfer Transaction, the Partnership maintains
separate credit facilities for each of Heritage Operating and La Grange
Acquisition. Each credit facility is secured only by the assets of the operating
partnership that it finances, and neither operating partnership nor its
subsidiaries will guarantee the debt of the other operating partnership.
Energy Transfer Facilities
La Grange Acquisition has a $325 million Term Loan Facility that matures on
January 18, 2008. Interest is paid quarterly and is based on the LIBOR rate plus
3% which was 4.10% at February 29, 2004. The Term Loan Facility is secured by
substantially all of the La Grange Acquisition's assets. A $175 million
Revolving Credit Facility is available through January 18, 2008. Amounts
borrowed under the La Grange Acquisition Credit Facility bear interest at a rate
based on either a Eurodollar rate or a prime rate. The maximum commitment fee
payable on the unused portion of the facility is 0.50%. The facility is fully
secured by substantially all of La Grange Acquisition's assets. As of February
29, 2004, there were no amounts outstanding under the Revolving Credit Facility,
and $10.9
52
million in letters of credit outstanding which reduce the amount available for
borrowing under the Revolving Credit Facility. Letters of Credit under the
Revolving Credit Facility may not exceed $40 million.
Heritage Operating Facilities
Effective December 31, 2003, Heritage Operating entered into the Second Amended
and Restated Credit Agreement. A $75 million Senior Revolving Working Capital
Facility is available through December 31, 2006. Amounts borrowed under the
Working Capital Facility bear interest at a rate based on either a Eurodollar
rate, or a prime rate. The amounts outstanding at February 29, 2004 were
Eurodollar rate loans. The weighted average interest rate was 2.9738% for the
amount outstanding at February 29, 2004. The maximum commitment fee payable on
the unused portion of the facility is 0.50%. Heritage Operating must reduce the
principal amount of working capital borrowings to $10 million for a period of
not less than 30 consecutive days at least one time during each fiscal year. All
receivables, contracts, equipment, inventory, general intangibles, cash
concentration accounts, and the capital stock of Heritage Operating's
subsidiaries secure the Senior Revolving Working Capital Facility. As of
February 29, 2004, the Senior Revolving Working Capital Facility had a balance
outstanding of $65.5 million. A $5 million Letter of Credit issuance is
available to Heritage Operating for up to 30 days prior to the maturity date of
the Working Capital Facility. Letter of Credit Exposure plus the Working Capital
Loan cannot exceed the $75 million maximum Working Capital Facility. Heritage
Operating had no outstanding Letters of Credit at February 29, 2004.
A $75 million Senior Revolving Acquisition Facility is available through
December 31, 2006, at which time the outstanding amount must be paid in full.
Amounts borrowed under the Acquisition Credit Facility bear interest at a rate
based on either a Eurodollar rate or a prime rate. The amounts outstanding at
February 29, 2004 were Eurodollar rate loans. The weighted average interest rate
was 2.9738% for the amount outstanding at February 29, 2004. The maximum
commitment fee payable on the unused portion of the facility is 0.50%. All
receivables, contracts, equipment, inventory, general intangibles, cash
concentration accounts, and the capital stock of Heritage Operating's
subsidiaries secure the Senior Revolving Acquisition Facility. As of February
29, 2004, the Senior Revolving Acquisition Facility had a balance outstanding of
$21.2 million.
Cash Distributions
The Partnership will use its cash provided by operating and financing activities
from the Operating Partnerships to provide distributions to the Partnership's
Unitholders. Under the Partnership Agreement, the Partnership will distribute to
its partners within 45 days after the end of each fiscal quarter, an amount
equal to all of its Available Cash for such quarter. Available cash generally
means, with respect to any quarter of the Partnership, all cash on hand at the
end of such quarter less the amount of cash reserves established by the General
Partner in its reasonable discretion that is necessary or appropriate to provide
for future cash requirements. The Partnership's commitment to its Unitholders is
to distribute the increase in its cash flow while maintaining prudent reserves
for the Partnership's operations. Predecessor Heritage paid all quarterly
distributions since its inception in 1996 up to and including the quarterly
distribution of $0.65 per unit paid on January 14, 2004. Predecessor Heritage
had raised its quarterly distribution over the years from $0.50 per unit in 1996
to $0.65 per unit as of the quarterly distribution paid on January 14, 2004. On
March 23, 2004, the Partnership announced that it raised the quarterly
distribution to $0.70 per unit (an annualized rate of $2.80) an increase of
$0.05 per unit (an annualized increase of $0.20 per unit). The distribution is
payable on April 14, 2004 to Unitholders of record as of April 2, 2004. The
current distribution includes incentive distributions payable to the General
Partner to the extent the quarterly distribution exceeds $0.55 per unit (an
annualized rate of $2.20).
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Interest Rate Exposure
Heritage Operating has little cash flow exposure due to rate changes for
long-term debt obligations. The Heritage Operating had $86.7 million of variable
rate debt outstanding as of February 29, 2004 through its Bank Credit Facility
described elsewhere in this report. The balance outstanding in the Bank Credit
Facility generally fluctuates throughout the year. A theoretical change of 1% in
the interest rate on the balance outstanding at February 29, 2004 would result
in an approximate $867 thousand change in annual net income. Heritage primarily
enters debt obligations to support general corporate purposes including capital
expenditures and working capital needs. Heritage Operating's long-term debt
instruments were typically issued at fixed interest rates. When these debt
obligations mature, Heritage Operating may refinance all or a portion of such
debt at then-existing market interest rates which may be more or less than the
interest rates on the maturing debt.
53
La Grange Acquisition is exposed to market risk for changes in interest rates
related to its term note. An interest rate swap agreement is used to manage a
portion of the exposure to changing interest rates by converting floating rate
debt to fixed-rate debt. The interest rate swap has a notional value of $75
million and matures in October 2005. Under the terms of the interest rate swap
agreement, Energy Transfer pays a fixed rate of 2.76% and receives three-month
LIBOR. Management has elected to designate the swap as a hedge for accounting
purposes. The swap had a fair value of $93 and $807 as of February 29, 2004
and August 31, 2003, respectively which is recorded as price risk management
assets or liabilities on the balance sheet.
The agreements for each of the Senior Secured Notes, Medium Term Note Program,
Senior Secured Promissory Notes, and the Operating Partnerships' bank credit
facilities contain customary restrictive covenants applicable to the Operating
Partnerships, including limitations on substantial disposition of assets,
changes in ownership of the Operating Partnerships, the level of additional
indebtedness, and creation of liens. These covenants require the Operating
Partnerships to maintain ratios of Consolidated Funded Indebtedness to
Consolidated EBITDA (as these terms are similarly defined in the bank credit
facilities and the Note Agreements) of not more than, 4.75 to 1 and 4.00 to 1
and Consolidated EBITDA to Consolidated Interest Expense (as these terms are
similarly defined in the bank credit facilities and the Note Agreements) of not
less than 2.25 to 1 and 2.75 to 1 for Heritage Operating and La Grange
Acquisition, respectively. The Consolidated EBITDA used to determine these
ratios is calculated in accordance with these debt agreements. For purposes of
calculating the ratios under the bank credit facilities and the Note Agreements,
Consolidated EBITDA is based upon the Operating Partnerships' EBITDA, as
adjusted for the most recent four quarterly periods, and modified to give pro
forma effect for acquisitions and divestures made during the test period and is
compared to Consolidated Funded Indebtedness as of the test date and the
Consolidated Interest Expense for the most recent twelve months. These debt
agreements also provide that the Operating Partnerships may declare, make, or
incur a liability to make, restricted payments during each fiscal quarter, if:
(a) the amount of such restricted payment, together with all other restricted
payments during such quarter, do not exceed Available Cash with respect to the
immediately preceding quarter; (b) no default or event of default exists before
such restricted payments; and (c) each Operating Partnership's restricted
payment is not greater than the product of each Operating Partnership's
Percentage of Aggregate Available Cash multiplied by the Aggregate Partner
Obligations (as these terms are similarly defined in the bank credit facilities
and the Note Agreements). The debt agreements further provide that Heritage
Operating's Available Cash is required to reflect a reserve equal to 50% of the
interest to be paid on the notes and in addition, in the third, second and first
quarters preceding a quarter in which a scheduled principal payment is to be
made on the notes, Available Cash is required to reflect a reserve equal to 25%,
50%, and 75%, respectively, of the principal amount to be repaid on such payment
dates.
Failure to comply with the various restrictive and affirmative covenants of the
Operating Partnerships' bank credit facilities and the Note Agreements could
negatively impact the Operating Partnerships' ability to incur additional debt
and/or the Partnership's ability to pay distributions. The Operating
Partnerships are required to measure these financial tests and covenants
quarterly and were in compliance with all requirements, tests, limitations, and
covenants related to the Senior Secured Notes, Medium Term Note Program and
Senior Secured Promissory Notes, and the bank credit facilities at February 29,
2004.
See Note 5 - "Working Capital Facility and Long-Term Debt" to the Consolidated
Financial Statements located elsewhere in this report for further discussion of
the long-term classifications and the maturity dates and interest rates related
to long-term debt.
Commodity Price Risk
Commodity price risk arises from the risk of price changes in the propane
inventory that Heritage Operating buys and sells. The market price of propane is
often subject to volatile changes as a result of market conditions over which
management will have no control. In the past, price changes had generally been
passed along to Predecessor Heritage's customers to maintain gross margins,
mitigating the commodity price risk. In order to help ensure that adequate
supply sources are available to Heritage Operating during periods of high
demand, Heritage Operating will and Predecessor Heritage did, from time to time,
purchase significant volumes of propane during periods of low demand, which
generally occur during the summer months, at the then current market price, for
storage both at its customer service centers and in major storage facilities,
and for future delivery.
Energy Transfer's primary market risk is commodity price risk in its inventory
and exchange positions, forward physical contracts and commodity derivative
positions.
54
Energy Transfer's inventory and exchange position is generally not material and
the imbalances turn over monthly. Inventory imbalances generally arise when
actual volumes delivered differ from nominated amounts or due to other timing
differences. Energy Transfer attempts to balance its purchases and sales each
month to prevent inventory imbalances from occurring and if necessary attempts
to clear any imbalance that arises in the following month. As a result, the
volumes involved are generally not significant and turn over quickly. Because
Energy Transfer believes that the cost approximates the market value at the end
of each month, Energy Transfer has adopted a policy of valuing inventory and
imbalances at market value at the end of each month.
Market and Credit Risk
Heritage Operating will also attempt to minimize the effects of market price
fluctuations for its propane supply by entering into certain financial
contracts. In order to manage a portion of its propane price market risk,
Heritage Operating may use and Predecessor Heritage used, contracts for the
forward purchase of propane, propane fixed-price supply agreements, and
derivative commodity instruments such as price swap and option contracts. Swap
instruments are a contractual agreement to exchange obligations of money between
the buyer and seller of the instruments as propane volumes during the pricing
period are purchased. Swaps are tied to a fixed price bid by the buyer and a
floating price determination for the seller based on certain indices at the end
of the relevant trading period. Call options would give the Heritage Operating
the right, but not the obligation, to buy a specified number of gallons of
propane at a specified price at any time until a specified expiration date.
Heritage Operating may enter and Predecessor Heritage did enter into these
financial instruments to hedge pricing on the projected propane volumes to be
purchased during each of the one-month periods during the projected heating
season.
At February 29,2004, Heritage Operating had no outstanding propane hedges.
Heritage Operating will continue to monitor propane prices and may enter into
propane hedges in the future. Inherent in the portfolio from Resources liquids
marketing activities are certain business risks, including market risk and
credit risk. Market risk is the risk that the value of the portfolio will
change, either favorably or unfavorably, in response to changing market
conditions. Credit risk is the risk of loss from nonperformance by suppliers,
customers, or financial counter parties to a contract. Management takes an
active role in managing and controlling market and credit risk and has
established control procedures, which are reviewed on an ongoing basis.
Management monitors market risk through a variety of techniques, including
routine reporting to senior management. Heritage Operating attempts to minimize
credit risk exposure through credit policies and periodic monitoring procedures,
as did Predecessor Heritage.
Energy Transfer enters into forward physical commitments as a convenience to its
customers or to take advantage of market opportunities. Energy Transfer
generally attempts to mitigate any market exposure to its forward commitments by
either entering into offsetting forward commitments or financial derivative
positions. Energy Transfer enters into commodity derivative contracts to manage
its exposure to commodity prices for both natural gas and NGLs. Energy Transfer
is diligent in attempting to ensure that it issues credit only to credit-worthy
counterparties. However, its purchase and resale of gas exposes Energy Transfer
to significant credit risk because the margin on any sale is generally a very
small percentage of the total sales price. Therefore, a credit loss can be very
large relative to Energy Transfer's overall profitability. Historically, Energy
Transfer's credit losses have not been significant.
All derivatives that are designated and documented as hedges are presented as
other comprehensive income until the settlement month. At the end of the
settlement month, any gain or loss previously recorded in other comprehensive
income is recognized in the income statement. Gains or losses on derivatives not
designated as hedges are recognized in the month in which they occur. The
Partnership's derivative instruments were as follows at February 29, 2004:
55
Notional
Volume Fair
Commodity MMBTU Maturity Value
--------- ----------- -------- ----------
Basis Swaps IFERC/Nymex Gas 45,685,000 2004 $ (2,538)
Basis Swaps IFERC/Nymex Gas 57,637,500 2004 3,563
----------
$ 1,025
Swing Swaps IFERC Gas
Swing Swaps IFERC Gas 102,035,000 2004-2005 $ (2,334)
64,340,000 2004-2005 2,057
----------
$ (277)
Futures Nymex Gas 3,525,000 2004-2005 $ (232)
Futures Nymex Gas 145,222,507 2004-2005 1,691
----------
$ 1,459
Estimates related to the Partnership's gas marketing activities are sensitive to
uncertainty and volatility inherent in the energy commodities markets and actual
results could differ from these estimates. The Partnership believes it is
protected from the volatility in the energy commodities markets because it does
not have unbalanced positions. Long-term physical contracts are tied to index
prices. System gas, which is also tied to index prices, will provide the gas
required by the Partnership's long-term physical contracts. When third-party gas
is required to supply long-term contracts, a hedge is put in place to protect
the margin on the contract. Financial contracts, which are not tied to physical
delivery, will be offset with financial contracts to balance the Partnership's
positions.
The following represents gain (loss) on derivative activity:
Three Months Three Months Six Months Five Months
Ended Ended Ended Ended
February 29, February 28, February 29, February 28,
2004 2003 2004 2003
------------ ------------ ------------ ------------
(Energy (Energy
Transfer Transfer
(in thousands) Company) Company)
Realized and unrealized gain (loss)
on derivative activities recognized
in earnings $ (7,168) $ 4,828 $(10,202) $ 6,693
Realized gain (loss) on interest rate
swap included in interest expense $ (623) $ (242) $ (1,061) $ (350)
ITEM 4. CONTROLS AND PROCEDURES
The Partnership maintains controls and procedures designed to ensure that
information required to be disclosed in the reports that the Partnership files
or submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
of the SEC. An evaluation was performed under the supervision and with the
participation of the Partnership's management, including the Chief Executive
Officers of the General Partner of the Partnership, of the effectiveness of the
design and operation of the Partnership's disclosure controls and procedures (as
such terms are defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act).
Based upon that evaluation, management, including the Chief Executive Officers
of the General Partner of the Partnership, concluded that the Partnership's
disclosure controls and procedures were adequate and effective as of February
29, 2004. There have been no change in the Partnership's internal controls over
financial reporting (as defined in Rule 13(a) - 15 or Rule 15d - 15(f) of the
Exchange Act) or in other factors during the Partnership's fiscal quarter
covered by this report that has materially affected, or is reasonably likely to
materially affect, the Partnership's internal controls over financial reporting,
and there have been no corrective actions with respect to significant
deficiencies and material weaknesses in our internal controls.
56
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On January 20, 2004, the Partnership issued 9,200,000 Common Units, with a
net value of $334.8 million in an underwritten public offering at a public
offering price of $38.69 per unit. This sale included the exercise of the
underwriters' over-allotment option to purchase an additional 1,200,000 Common
Units. The proceeds of the units were used for the ETC transaction and for
general partnership purposes.
In connection with the ETC Transaction on January 20, 2004, the Partnership
issued 4,419,177 Common Units, 7,721,452 Class D Units, and 3,742,515 Special
Units to La Grange Energy, L.P. All of the foregoing Units were not registered
with the Securities and Exchange Commission under the Securities Act of 1933 by
virtue of an exemption under Section 4(2) thereof.
As a result of the ETC Transaction, on January 20, 2004, the Partnership issued
21,600 Common Units to employees that had previously received awards under the
terms of the Partnership's Restricted Unit Plan and 150,018 Common Units to
executive officers under the terms of the Partnership's Long-Term Incentive
Compensation Plan. All of the foregoing Units were not registered with the
Securities and Exchange Commission under the Securities Act of 1933 by virtue of
an exemption under Section 4(2) thereof.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits listed on the following Exhibit Index are filed as part of this
Report. Exhibits required by Item 601 of Regulation S-K, but which are not
listed below, are not applicable.
Exhibit
Number Description
------- ---------------------------------------------------------------------------
(1) 3.1 Agreement of Limited Partnership of Heritage Propane Partners, L.P.
(10) 3.1.1 Amendment No. 1 to Amended and Restated Agreement of Limited Partnership of
Heritage Propane Partners, L.P.
(16) 3.1.2 Amendment No. 2 to Amended and Restated Agreement of Limited Partnership of
Heritage Propane Partners, L.P.
(19) 3.1.3 Amendment No. 3 to Amended and Restated Agreement of Limited Partnership of
Heritage Propane Partners, L.P.
(19) 3.1.4 Amendment No. 4 to Amended and Restated Agreement of Limited Partnership of
Heritage Propane Partners, L.P.
* 3.1.5 Amendment No. 5 to Amended and Restated Agreement of Limited Partnership of
Heritage Propane Partners, L.P.
* 3.1.6 Amendment No. 6 to Amended and Restated Agreement of Limited Partnership of
Heritage Propane Partners, L.P.
(1) 3.2 Agreement of Limited Partnership of Heritage Operating, L.P.
(12) 3.2.1 Amendment No. 1 to Amended and Restated Agreement of Limited Partnership of
Heritage Operating, L.P.
57
Exhibit
Number Description
------- ------------------------------------------------------------------------------------
(19) 3.2.2 Amendment No. 2 to Amended and Restated Agreement of Limited Partnership of Heritage
Operating, L.P.
* 3.2.3 Amendment No. 3 to Amended and Restated Agreement of Limited Partnership of Heritage
Operating, L.P.
* 3.3 Amended Certificate of Limited Partnership of Energy Transfer Partners, L.P.
(18) 3.4 Amended Certificate of Limited Partnership of Heritage Operating, L.P.
(20) 4.1 Registration Rights Agreement for Limited Partner Interests of Heritage Propane
Partners, L.P.
* 4.2 Unitholder Rights Agreement dated January 20, 2004 among Heritage Propane Partners,
L.P., Heritage Holdings, Inc., TAAP LP and La Grange Energy, L.P.
(1) 10.2 Form of Note Purchase Agreement (June 25, 1996)
(3) 10.2.1 Amendment of Note Purchase Agreement (June 25, 1996) dated as of July 25, 1996
(4) 10.2.2 Amendment of Note Purchase Agreement (June 25, 1996) dated as of March 11, 1997
(6) 10.2.3 Amendment of Note Purchase Agreement (June 25, 1996) dated as of October 15, 1998
(8) 10.2.4 Second Amendment Agreement dated September 1, 1999 to June 25, 1996 Note Purchase
Agreement
(11) 10.2.5 Third Amendment Agreement dated May 31, 2000 to June 25, 1996 Note Purchase Agreement
and November 19, 1997 Note Purchase Agreement
(10) 10.2.6 Fourth Amendment Agreement dated August 10, 2000 to June 25, 1996 Note Purchase
Agreement and November 19, 1997 Note Purchase Agreement
(13) 10.2.7 Fifth Amendment Agreement dated as of December 28, 2000 to June 25, 1996 Note
Purchase Agreement, November 19, 1997 Note Purchase Agreement and August 10, 2000
Note Purchase Agreement
* 10.2.8 Sixth Amendment Agreement dated as of December 28, 2000 to June 25, 1996 Note
Purchase Agreement, November 19, 1997 Note Purchase Agreement and August
10, 2000 Note Purchase Agreement
(1) 10.3 Form of Contribution, Conveyance and Assumption Agreement among Heritage Holdings,
Inc., Heritage Propane Partners, L.P. and Heritage Operating, L.P.
(1) ** 10.6 Restricted Unit Plan
(4) ** 10.6.1 Amendment of Restricted Unit Plan dated as of October 17, 1996
(12) ** 10.6.2 Amended and Restated Restricted Unit Plan dated as of August 10, 2000
(18)** 10.6.3 Second Amended and Restated Restricted Unit Plan dated as of February 4, 2002
(12) ** 10.8 Employment Agreement for R. C. Mills dated as of August 10, 2000
58
Exhibit
Number Description
------- ------------------------------------------------------------------------------------
(18) 10.8.1 Consent to Assignment of Employment Agreement for R.C. Mills dated February 3, 2002
* 10.8.2 Termination of Employment Agreement for R. C. Mills dated as of August 10, 2000
(12)** 10.10 Employment Agreement for H. Michael Krimbill dated as of August 10, 2000
(18) 10.10.1 Consent to Assignment of Employment Agreement for H. Michael Krimbill dated February
3, 2002
* 10.10.2 Termination of Employment Agreement for H. Michael Krimbill dated as of August 10,
2000
(12)** 10.11 Employment Agreement for Bradley K. Atkinson dated as of August 10, 2000
(18) 10.11.1 Consent to Assignment of Employment Agreement for Bradley K. Atkinson dated
February 3, 2002
* 10.11.2 Termination of Employment Agreement for Bradley K. Atkinson dated as of August 10,
2000
(7) 10.12 First Amended and Restated Revolving Credit Agreement between Heritage Service Corp.
and Banks Dated May 31, 1999
(16) 10.12.1 First Amendment to First Amended and Restated Revolving Credit Agreement, dated
October 15, 1999
(16) 10.12.2 Second Amendment to First Amended and Restated Revolving Credit Agreement, dated
August 10, 2000
(16) 10.12.3 Third Amendment to First Amended and Restated Revolving Credit Agreement, dated
December 28, 2000
(16) 10.12.4 Fourth Amendment to First Amended and Restated Revolving Credit Agreement, dated
July 16, 2001
(12)** 10.13 Employment Agreement for Mark A. Darr dated as of August 10, 2000
(18) 10.13.1 Consent to Assignment of Employment Agreement for Mark A. Darr dated February 3,
2002
* 10.13.2 Termination of Employment Agreement for Mark A. Darr dated as of August 10, 2000
(12)** 10.14 Employment Agreement for Thomas H. Rose dated as of August 10, 2000
(18) 10.14.1 Consent to Assignment of Employment Agreement for Thomas H. Rose dated February 3,
2002
* 10.14.2 Termination of Employment Agreement for Thomas H. Rose dated as of August 10, 2000
(12)** 10.15 Employment Agreement for Curtis L. Weishahn dated as of August 10, 2000
(18) 10.15.1 Consent to Assignment of Employment Agreement for Curtis L. Weishahn dated February
3, 2002
* 10.15.2 Termination of Employment Agreement for Curtis L. Weishahn dated as of August 10,
2000
59
Exhibit
Number Description
------- ------------------------------------------------------------------------------------
(5) 10.16 Note Purchase Agreement dated as of November 19, 1997
(6) 10.16.1 Amendment dated October 15, 1998 to November 19, 1997 Note Purchase Agreement
(8) 10.16.2 Second Amendment Agreement dated September 1, 1999 to November 19, 1997 Note
Purchase Agreement and June 25, 1996 Note Purchase Agreement
(9) 10.16.3 Third Amendment Agreement dated May 31, 2000 to November 19, 1997 Note Purchase
Agreement and June 25, 1996 Note Purchase Agreement
(10) 10.16.4 Fourth Amendment Agreement dated August 10, 2000 to November 19, 1997 Note Purchase
Agreement and June 25, 1996 Note Purchase Agreement
(13) 10.16.5 Fifth Amendment Agreement dated as of December 28, 2000 to June 25, 1996 Note
Purchase Agreement, November 19, 1997 Note Purchase Agreement and August 10, 2000
Note Purchase Agreement
(26) 10.16.6 Sixth Amendment Agreement dated as of November 18, 2003 to June 25, 1996 Note
Purchase Agreement, November 19, 1997 Note Purchase Agreement and August 10, 2000
Note Purchase Agreement
(10) 10.17 Contribution Agreement dated June 15, 2000 among U.S. Propane, L.P., Heritage
Operating, L.P. and Heritage Propane Partners, L.P.
(10) 10.17.1 Amendment dated August 10, 2000 to June 15, 2000 Contribution Agreement
(10) 10.18 Subscription Agreement dated June 15, 2000 between Heritage Propane Partners, L.P.
and individual investors
(10) 10.18.1 Amendment dated August 10, 2000 to June 15, 2000 Subscription Agreement
(16) 10.18.2 Amendment Agreement dated January 3, 2001 to the June 15, 2000 Subscription Agreement.
(17) 10.18.3 Amendment Agreement dated October 5, 2001 to the June 15, 2000 Subscription Agreement.
(10) 10.19 Note Purchase Agreement dated as of August 10, 2000
(13) 10.19.1 Fifth Amendment Agreement dated as of December 28, 2000 to June 25, 1996 Note
Purchase Agreement, November 19, 1997 Note Purchase Agreement and August 10, 2000
Note Purchase Agreement
(14) 10.19.2 First Supplemental Note Purchase Agreement dated as of May 24, 2001 to the
August 10, 2000 Note Purchase Agreement
(26) 10.19.3 Sixth Amendment Agreement dated as of December 28, 2000 to June 25, 1996 Note
Purchase Agreement, November 19, 1997 Note Purchase Agreement and August 10, 2000
Note Purchase Agreement
(15) 10.20 Stock Purchase Agreement dated as of July 5, 2001 among the shareholders of
ProFlame, Inc. and Heritage Holdings, Inc.
(15) 10.21 Stock Purchase Agreement dated as of July 5, 2001 among the shareholders of
Coast Liquid Gas, Inc. and Heritage Holdings, Inc.
60
Exhibit
Number Description
------- ------------------------------------------------------------------------------------
(15) 10.22 Agreement and Plan of Merger dated as of July 5, 2001 among California Western Gas
Company, the Majority Stockholders of California Western Gas Company signatories
thereto, Heritage Holdings, Inc. and California Western Merger Corp.
(15) 10.23 Agreement and Plan of Merger dated as of July 5, 2001 among Growth Properties,
the Majority Shareholders signatories thereto, Heritage Holdings, Inc. and Growth
Properties Merger Corp.
(15) 10.24 Asset Purchase Agreement dated as of July 5, 2001 among L.P.G. Associates, the
Shareholders of L.P.G. Associates and Heritage Operating, L.P.
(15) 10.25 Asset Purchase Agreement dated as of July 5, 2001 among WMJB, Inc., the
Shareholders of WMJB, Inc. and Heritage Operating, L.P.
(15) 10.25.1 Amendment to Asset Purchase Agreement dated as of July 5, 2001 among WMJB, Inc.,
the Shareholders of WMJB, Inc. and Heritage Operating, L.P.
(18) 10.26 Assignment, Conveyance and Assumption Agreement between U.S. Propane, L.P. and
Heritage Holdings, Inc., as the former General Partner of Heritage Propane Partners,
L.P. dated as of February 4, 2002
(18) 10.27 Assignment, Conveyance and Assumption Agreement between U.S. Propane, L.P. and
Heritage Holdings, Inc., as the former General Partner of Heritage Operating, L.P.,
dated as of February 4, 2002
(22) 10.28 Assignment for Contribution of Assets in Exchange for Partnership Interest dated
December 9, 2002 amount V-1 Oil Co., the shareholders of V-1 Oil Co., Heritage Propane
Partners, L.P. and Heritage Operating, L.P.
(23)** 10.29 Employment Agreement for Michael L. Greenwood dated as of July 1, 2002
* 10.29.1 Termination of Employment Agreement for Michael L. Greenwood dated as of July 1, 2002
(24) 10.30 Acquisition Agreement dated November 6, 2003 among the owners of U.S. Propane, L.P.
and U.S. Propane, L.L.C. and La Grange Energy, L.P.
(24) 10.31 Contribution Agreement dated November 6, 2003 among La Grange Energy, L.P. and
Heritage Propane Partners, L.P. and U.S. Propane, L.P.
(25) 10.31.1 Amendment No. 1 dated December 7, 2003 to Contribution Agreement dated November 6,
2003 among La Grange Energy, L.P. and Heritage Propane Partners, L.P. and U.S.
Propane, L.P.
(24) 10.32 Stock Purchase Agreement dated November 6, 2003 among the owners of Heritage Holdings,
Inc. and Heritage Propane Partners, L.P.
(*) 10.33 Second Amended and Restated Credit Agreement among Heritage Operating, L.P. and the
Banks dated December 31, 2003
(*) 10.34 Second Amended and Restated Credit Agreement among La Grange Acquisition, L.P. and Banks
dated January 20, 2004
(21) 21.1 List of Subsidiaries
61
Exhibit
Number Description
------- -----------------------------------------------------------------------------------
(*) 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
(*) 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
(*) 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(*) 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
------------------
(1) Incorporated by reference to the same numbered Exhibit to Registrant's
Registration Statement of Form S-1, File No. 333-04018, filed with the
Commission on June 21, 1996.
(2) Incorporated by reference to Exhibit 10.11 to Registrant's Registration
Statement on Form S-1, File No. 333-04018, filed with the Commission on
June 21, 1996.
(3) Incorporated by reference to the same numbered Exhibit to Registrant's
Form 10-Q for the quarter ended November 30, 1996.
(4) Incorporated by reference to the same numbered Exhibit to Registrant's
Form 10-Q for the quarter ended February 28, 1997.
(5) Incorporated by reference to the same numbered Exhibit to Registrant's
Form 10-Q for the quarter ended May 31, 1998.
(6) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-K for the year ended August 31, 1998.
(7) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-Q for the quarter ended May 31, 1999.
(8) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-K for the year ended August 31, 1999.
(9) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-Q for the quarter ended May 31, 2000.
(10) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 8-K dated August 23, 2000.
(11) File as Exhibit 10.16.3.
(12) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-K for the year ended August 31, 2000.
(13) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-Q for the quarter ended February 28, 2001.
(14) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-Q for the quarter ended May 31, 2001.
62
(15) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 8-K dated August 15, 2001.
(16) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-K for the year ended August 31, 2001.
(17) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-Q for the quarter ended November 30, 2001.
(18) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-Q for the quarter ended February 28, 2002.
(19) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-Q for the quarter ended May 31, 2002.
(20) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 8-K dated February 4, 2002.
(21) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-K for the year ended August 31, 2002.
(22) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 8-K dated January 6, 2003.
(23) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-Q for the quarter ended November 30, 2002.
(24) Incorporated by reference to the same numbered Exhibit to Registrant's
Form 10-K for the year ended August 31, 2003
(25) Incorporated by reference to the same numbered Exhibit to Registrant's
Form 10-Q for the quarter ended November 30, 2003).
(26) Filed as Exhibit 10.2.8 herewith
(*) Filed herewith.
(**) Denotes a management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
The Partnership filed five reports on Form 8-K during the three months
ended February 28, 2003:
Form 8-K dated December 10, 2003, was filed to provide the press
release dated December 4, 2003 announcing the Partnership's receipt of
consents and approvals from lenders, required to be obtained prior to
the ETC Transaction.
Form 8-K filed December 17, 2003 to provide additional information
regarding the ETC Transaction, including information relating to the
terms of the transaction, information relating to the business of
Energy Transfer, historical financial information relating to Energy
Transfer and related entities and pro forma financial statements. This
information was filed in order to update the Partnership's Registration
Statement on Form S-4 as filed with the Securities and Exchange
Commission on November 17, 1997 (Registration No. 333-40407) pursuant
to which the Partnership issues common units from time to time in
connection with acquisitions.
Form 8-K/A was filed January 21, 2004 announcing the closing of the ETC
Transaction and to provide unaudited pro forma combined financial
statements of Heritage which give pro forma effect to the ETC
transaction as if the transaction had occurred on August 31, 2003.
63
Form 8-K dated January 28, 2004 was filed to provide the press release
announcing that the underwriters in the Partnership's January 20, 2004
equity offering had exercised their over-allotment option and purchased
an additional 1,200,000 Common Units.
Form 8-K filed on February 4, 2004 reporting a change in the
registrant's independent auditor that resulted from the ETC
Transaction. At the date of the ETC Transaction, Ernst & Young LLP was
the independent auditor for Energy Transfer Company, and Grant Thornton
LLP was the independent auditor for the Partnership. On February 3,
2004, the Partnership's Audit Committee dismissed Ernst & Young LLP and
appointed Grant Thornton LLP to serve as the Registrant's independent
auditors for the current fiscal year ending August 31, 2004.
64
SIGNATURE
Pursuant to the requirements 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.
ENERGY TRANSFER PARTNERS, L.P.
By: U.S. Propane, L.P.., General Partner
By: U.S. Propane, L.L.C., General Partner
Date: April 14, 2004 By: /s/ H. Michael Krimbill
-------------------------------------
H. Michael Krimbill
(President and officer duly authorized
to sign on behalf of the registrant)
65
INDEX TO EXHIBITS
Exhibit
Number Description
------- ---------------------------------------------------------------------------
(1) 3.1 Agreement of Limited Partnership of Heritage Propane Partners, L.P.
(10) 3.1.1 Amendment No. 1 to Amended and Restated Agreement of Limited Partnership of
Heritage Propane Partners, L.P.
(16) 3.1.2 Amendment No. 2 to Amended and Restated Agreement of Limited Partnership of
Heritage Propane Partners, L.P.
(19) 3.1.3 Amendment No. 3 to Amended and Restated Agreement of Limited Partnership of
Heritage Propane Partners, L.P.
(19) 3.1.4 Amendment No. 4 to Amended and Restated Agreement of Limited Partnership of
Heritage Propane Partners, L.P.
* 3.1.5 Amendment No. 5 to Amended and Restated Agreement of Limited Partnership of
Heritage Propane Partners, L.P.
* 3.1.6 Amendment No. 6 to Amended and Restated Agreement of Limited Partnership of
Heritage Propane Partners, L.P.
(1) 3.2 Agreement of Limited Partnership of Heritage Operating, L.P.
(12) 3.2.1 Amendment No. 1 to Amended and Restated Agreement of Limited Partnership of
Heritage Operating, L.P.
Exhibit
Number Description
------- ------------------------------------------------------------------------------------
(19) 3.2.2 Amendment No. 2 to Amended and Restated Agreement of Limited Partnership of Heritage
Operating, L.P.
* 3.2.3 Amendment No. 3 to Amended and Restated Agreement of Limited Partnership of Heritage
Operating, L.P.
* 3.3 Amended Certificate of Limited Partnership of Energy Transfer Partners, L.P.
(18) 3.4 Amended Certificate of Limited Partnership of Heritage Operating, L.P.
(20) 4.1 Registration Rights Agreement for Limited Partner Interests of Heritage Propane
Partners, L.P.
* 4.2 Unitholder Rights Agreement dated January 20, 2004 among Heritage Propane Partners,
L.P., Heritage Holdings, Inc., TAAP LP and La Grange Energy, L.P.
(1) 10.2 Form of Note Purchase Agreement (June 25, 1996)
(3) 10.2.1 Amendment of Note Purchase Agreement (June 25, 1996) dated as of July 25, 1996
(4) 10.2.2 Amendment of Note Purchase Agreement (June 25, 1996) dated as of March 11, 1997
(6) 10.2.3 Amendment of Note Purchase Agreement (June 25, 1996) dated as of October 15, 1998
(8) 10.2.4 Second Amendment Agreement dated September 1, 1999 to June 25, 1996 Note Purchase
Agreement
(11) 10.2.5 Third Amendment Agreement dated May 31, 2000 to June 25, 1996 Note Purchase Agreement
and November 19, 1997 Note Purchase Agreement
(10) 10.2.6 Fourth Amendment Agreement dated August 10, 2000 to June 25, 1996 Note Purchase
Agreement and November 19, 1997 Note Purchase Agreement
(13) 10.2.7 Fifth Amendment Agreement dated as of December 28, 2000 to June 25, 1996 Note
Purchase Agreement, November 19, 1997 Note Purchase Agreement and August 10, 2000
Note Purchase Agreement
* 10.2.8 Sixth Amendment Agreement dated as of December 28, 2000 to June 25, 1996 Note
Purchase Agreement, November 19, 1997 Note Purchase Agreement and August
10, 2000 Note Purchase Agreement
(1) 10.3 Form of Contribution, Conveyance and Assumption Agreement among Heritage Holdings,
Inc., Heritage Propane Partners, L.P. and Heritage Operating, L.P.
(1) ** 10.6 Restricted Unit Plan
(4) ** 10.6.1 Amendment of Restricted Unit Plan dated as of October 17, 1996
(12) ** 10.6.2 Amended and Restated Restricted Unit Plan dated as of August 10, 2000
(18)** 10.6.3 Second Amended and Restated Restricted Unit Plan dated as of February 4, 2002
(12) ** 10.8 Employment Agreement for R. C. Mills dated as of August 10, 2000
Exhibit
Number Description
------- ------------------------------------------------------------------------------------
(18) 10.8.1 Consent to Assignment of Employment Agreement for R.C. Mills dated February 3, 2002
* 10.8.2 Termination of Employment Agreement for R. C. Mills dated as of August 10, 2000
(12)** 10.10 Employment Agreement for H. Michael Krimbill dated as of August 10, 2000
(18) 10.10.1 Consent to Assignment of Employment Agreement for H. Michael Krimbill dated February
3, 2002
* 10.10.2 Termination of Employment Agreement for H. Michael Krimbill dated as of August 10,
2000
(12)** 10.11 Employment Agreement for Bradley K. Atkinson dated as of August 10, 2000
(18) 10.11.1 Consent to Assignment of Employment Agreement for Bradley K. Atkinson dated
February 3, 2002
* 10.11.2 Termination of Employment Agreement for Bradley K. Atkinson dated as of August 10,
2000
(7) 10.12 First Amended and Restated Revolving Credit Agreement between Heritage Service Corp.
and Banks Dated May 31, 1999
(16) 10.12.1 First Amendment to First Amended and Restated Revolving Credit Agreement, dated
October 15, 1999
(16) 10.12.2 Second Amendment to First Amended and Restated Revolving Credit Agreement, dated
August 10, 2000
(16) 10.12.3 Third Amendment to First Amended and Restated Revolving Credit Agreement, dated
December 28, 2000
(16) 10.12.4 Fourth Amendment to First Amended and Restated Revolving Credit Agreement, dated
July 16, 2001
(12)** 10.13 Employment Agreement for Mark A. Darr dated as of August 10, 2000
(18) 10.13.1 Consent to Assignment of Employment Agreement for Mark A. Darr dated February 3,
2002
* 10.13.2 Termination of Employment Agreement for Mark A. Darr dated as of August 10, 2000
(12)** 10.14 Employment Agreement for Thomas H. Rose dated as of August 10, 2000
(18) 10.14.1 Consent to Assignment of Employment Agreement for Thomas H. Rose dated February 3,
2002
* 10.14.2 Termination of Employment Agreement for Thomas H. Rose dated as of August 10, 2000
(12)** 10.15 Employment Agreement for Curtis L. Weishahn dated as of August 10, 2000
(18) 10.15.1 Consent to Assignment of Employment Agreement for Curtis L. Weishahn dated February
3, 2002
* 10.15.2 Termination of Employment Agreement for Curtis L. Weishahn dated as of August 10,
2000
Exhibit
Number Description
------- ------------------------------------------------------------------------------------
(5) 10.16 Note Purchase Agreement dated as of November 19, 1997
(6) 10.16.1 Amendment dated October 15, 1998 to November 19, 1997 Note Purchase Agreement
(8) 10.16.2 Second Amendment Agreement dated September 1, 1999 to November 19, 1997 Note
Purchase Agreement and June 25, 1996 Note Purchase Agreement
(9) 10.16.3 Third Amendment Agreement dated May 31, 2000 to November 19, 1997 Note Purchase
Agreement and June 25, 1996 Note Purchase Agreement
(10) 10.16.4 Fourth Amendment Agreement dated August 10, 2000 to November 19, 1997 Note Purchase
Agreement and June 25, 1996 Note Purchase Agreement
(13) 10.16.5 Fifth Amendment Agreement dated as of December 28, 2000 to June 25, 1996 Note
Purchase Agreement, November 19, 1997 Note Purchase Agreement and August 10, 2000
Note Purchase Agreement
(26) 10.16.6 Sixth Amendment Agreement dated as of November 18, 2003 to June 25, 1996 Note
Purchase Agreement, November 19, 1997 Note Purchase Agreement and August 10, 2000
Note Purchase Agreement
(10) 10.17 Contribution Agreement dated June 15, 2000 among U.S. Propane, L.P., Heritage
Operating, L.P. and Heritage Propane Partners, L.P.
(10) 10.17.1 Amendment dated August 10, 2000 to June 15, 2000 Contribution Agreement
(10) 10.18 Subscription Agreement dated June 15, 2000 between Heritage Propane Partners, L.P.
and individual investors
(10) 10.18.1 Amendment dated August 10, 2000 to June 15, 2000 Subscription Agreement
(16) 10.18.2 Amendment Agreement dated January 3, 2001 to the June 15, 2000 Subscription Agreement.
(17) 10.18.3 Amendment Agreement dated October 5, 2001 to the June 15, 2000 Subscription Agreement.
(10) 10.19 Note Purchase Agreement dated as of August 10, 2000
(13) 10.19.1 Fifth Amendment Agreement dated as of December 28, 2000 to June 25, 1996 Note
Purchase Agreement, November 19, 1997 Note Purchase Agreement and August 10, 2000
Note Purchase Agreement
(14) 10.19.2 First Supplemental Note Purchase Agreement dated as of May 24, 2001 to the
August 10, 2000 Note Purchase Agreement
(26) 10.19.3 Sixth Amendment Agreement dated as of December 28, 2000 to June 25, 1996 Note
Purchase Agreement, November 19, 1997 Note Purchase Agreement and August 10, 2000
Note Purchase Agreement
(15) 10.20 Stock Purchase Agreement dated as of July 5, 2001 among the shareholders of
ProFlame, Inc. and Heritage Holdings, Inc.
(15) 10.21 Stock Purchase Agreement dated as of July 5, 2001 among the shareholders of
Coast Liquid Gas, Inc. and Heritage Holdings, Inc.
Exhibit
Number Description
------- ------------------------------------------------------------------------------------
(15) 10.22 Agreement and Plan of Merger dated as of July 5, 2001 among California Western Gas
Company, the Majority Stockholders of California Western Gas Company signatories
thereto, Heritage Holdings, Inc. and California Western Merger Corp.
(15) 10.23 Agreement and Plan of Merger dated as of July 5, 2001 among Growth Properties,
the Majority Shareholders signatories thereto, Heritage Holdings, Inc. and Growth
Properties Merger Corp.
(15) 10.24 Asset Purchase Agreement dated as of July 5, 2001 among L.P.G. Associates, the
Shareholders of L.P.G. Associates and Heritage Operating, L.P.
(15) 10.25 Asset Purchase Agreement dated as of July 5, 2001 among WMJB, Inc., the
Shareholders of WMJB, Inc. and Heritage Operating, L.P.
(15) 10.25.1 Amendment to Asset Purchase Agreement dated as of July 5, 2001 among WMJB, Inc.,
the Shareholders of WMJB, Inc. and Heritage Operating, L.P.
(18) 10.26 Assignment, Conveyance and Assumption Agreement between U.S. Propane, L.P. and
Heritage Holdings, Inc., as the former General Partner of Heritage Propane Partners,
L.P. dated as of February 4, 2002
(18) 10.27 Assignment, Conveyance and Assumption Agreement between U.S. Propane, L.P. and
Heritage Holdings, Inc., as the former General Partner of Heritage Operating, L.P.,
dated as of February 4, 2002
(22) 10.28 Assignment for Contribution of Assets in Exchange for Partnership Interest dated
December 9, 2002 amount V-1 Oil Co., the shareholders of V-1 Oil Co., Heritage Propane
Partners, L.P. and Heritage Operating, L.P.
(23)** 10.29 Employment Agreement for Michael L. Greenwood dated as of July 1, 2002
* 10.29.1 Termination of Employment Agreement for Michael L. Greenwood dated as of July 1, 2002
(24) 10.30 Acquisition Agreement dated November 6, 2003 among the owners of U.S. Propane, L.P.
and U.S. Propane, L.L.C. and La Grange Energy, L.P.
(24) 10.31 Contribution Agreement dated November 6, 2003 among La Grange Energy, L.P. and
Heritage Propane Partners, L.P. and U.S. Propane, L.P.
(25) 10.31.1 Amendment No. 1 dated December 7, 2003 to Contribution Agreement dated November 6,
2003 among La Grange Energy, L.P. and Heritage Propane Partners, L.P. and U.S.
Propane, L.P.
(24) 10.32 Stock Purchase Agreement dated November 6, 2003 among the owners of Heritage Holdings,
Inc. and Heritage Propane Partners, L.P.
(*) 10.33 Second Amended and Restated Credit Agreement among Heritage Operating, L.P. and the
Banks dated December 31, 2003
(*) 10.34 Second Amended and Restated Credit Agreement among La Grange Acquisition, L.P. and Banks
dated January 20, 2004
(21) 21.1 List of Subsidiaries
Exhibit
Number Description
------- -----------------------------------------------------------------------------------
(*) 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
(*) 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
(*) 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(*) 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
------------------
(1) Incorporated by reference to the same numbered Exhibit to Registrant's
Registration Statement of Form S-1, File No. 333-04018, filed with the
Commission on June 21, 1996.
(2) Incorporated by reference to Exhibit 10.11 to Registrant's Registration
Statement on Form S-1, File No. 333-04018, filed with the Commission on
June 21, 1996.
(3) Incorporated by reference to the same numbered Exhibit to Registrant's
Form 10-Q for the quarter ended November 30, 1996.
(4) Incorporated by reference to the same numbered Exhibit to Registrant's
Form 10-Q for the quarter ended February 28, 1997.
(5) Incorporated by reference to the same numbered Exhibit to Registrant's
Form 10-Q for the quarter ended May 31, 1998.
(6) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-K for the year ended August 31, 1998.
(7) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-Q for the quarter ended May 31, 1999.
(8) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-K for the year ended August 31, 1999.
(9) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-Q for the quarter ended May 31, 2000.
(10) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 8-K dated August 23, 2000.
(11) File as Exhibit 10.16.3.
(12) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-K for the year ended August 31, 2000.
(13) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-Q for the quarter ended February 28, 2001.
(14) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-Q for the quarter ended May 31, 2001.
(15) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 8-K dated August 15, 2001.
(16) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-K for the year ended August 31, 2001.
(17) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-Q for the quarter ended November 30, 2001.
(18) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-Q for the quarter ended February 28, 2002.
(19) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-Q for the quarter ended May 31, 2002.
(20) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 8-K dated February 4, 2002.
(21) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-K for the year ended August 31, 2002.
(22) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 8-K dated January 6, 2003.
(23) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-Q for the quarter ended November 30, 2002.
(24) Incorporated by reference to the same numbered Exhibit to Registrant's
Form 10-K for the year ended August 31, 2003
(25) Incorporated by reference to the same numbered Exhibit to Registrant's
Form 10-Q for the quarter ended November 30, 2003).
(26) Filed as Exhibit 10.2.8 herewith
(*) Filed herewith.
(**) Denotes a management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
The Partnership filed five reports on Form 8-K during the three months
ended February 28, 2003:
Form 8-K dated December 10, 2003, was filed to provide the press
release dated December 4, 2003 announcing the Partnership's receipt of
consents and approvals from lenders, required to be obtained prior to
the ETC Transaction.
Form 8-K filed December 17, 2003 to provide additional information
regarding the ETC Transaction, including information relating to the
terms of the transaction, information relating to the business of
Energy Transfer, historical financial information relating to Energy
Transfer and related entities and pro forma financial statements. This
information was filed in order to update the Partnership's Registration
Statement on Form S-4 as filed with the Securities and Exchange
Commission on November 17, 1997 (Registration No. 333-40407) pursuant
to which the Partnership issues common units from time to time in
connection with acquisitions.
Form 8-K/A was filed January 21, 2004 announcing the closing of the ETC
Transaction and to provide unaudited pro forma combined financial
statements of Heritage which give pro forma effect to the ETC
transaction as if the transaction had occurred on August 31, 2003.
EXHIBIT 3.1.5
AMENDMENT NO. 5
TO
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
HERITAGE PROPANE PARTNERS, L.P.
This Amendment (this "Amendment") to the Amended and Restated Agreement
of Limited Partnership of Heritage Propane Partners, L.P., a Delaware limited
partnership (the "Partnership"), dated as of June 27, 1996, as amended as of
August 9, 2000, January 5, 2001, October 5, 2001 and February 4, 2002 (as so
amended, the "Partnership Agreement"), is entered into effective as of January
15, 2004, by U.S. Propane, L.P., a Delaware limited partnership ("U.S.
Propane"), as the general partner of the Partnership, on behalf of itself and
the Limited Partners of the Partnership. Capitalized terms used but not defined
herein are used as defined in the Partnership Agreement.
RECITALS
WHEREAS, Section 5.6 of the Partnership Agreement provides that the
General Partner, without the approval of any Limited Partner except as otherwise
provided in the Partnership Agreement, may, for any Partnership purpose, at any
time or from time to time, issue additional Partnership Securities for such
consideration and on such terms and conditions as shall be established by the
General Partner in its sole discretion; and
WHEREAS, Section 13.1(d)(i) of the Partnership Agreement provides that
the General Partner, without the approval of any Partner, may amend any
provision of the Partnership Agreement (to reflect a change that, in the
discretion of the General Partner, does not adversely affect the Unitholders in
any material respect); and
WHEREAS, the General Partner has in the exercise of its discretion
determined that the changes to the Partnership Agreement set forth in Sections
1, 12 and 13 of the Amendment will not adversely affect the Unitholders in any
material respect; and
WHEREAS, Section 13.1(g) of the Partnership Agreement provides that the
General Partner, without the approval of any Partner (subject to Section 5.7 of
the Partnership Agreement), may amend any provision of the Partnership Agreement
to reflect an amendment that, in the discretion of the General Partner, is
necessary or advisable in connection with the authorization of issuance of any
class or series of Partnership Securities pursuant to Section 5.6 of the
Partnership Agreement; and
WHEREAS, the Partnership has entered into a Contribution Agreement,
dated as of November 6, 2003, among the Partnership, U.S. Propane and La Grange
Energy, L.P., a Texas limited partnership ("La Grange"), as the Contributor (the
"Contribution Agreement"); and
Amendment No. 5--Execution Copy
WHEREAS, the Contribution Agreement obligates the Partnership to issue
limited partner interests to be designated as Class D Units and Special Units
having the terms set forth in this Amendment; and
WHEREAS, the General Partner has determined that the creation of the
new classes of Partnership Securities provided for in this Amendment (the "Class
D Units" and the "Special Units") will be in the best interests of the
Partnership and beneficial to the Limited Partners, including the holders of the
Common Units; and
WHEREAS, the Partnership has entered into a Stock Purchase Agreement,
dated as of November 6, 2003 (the "HHI Stock Purchase Agreement"), among the
Partnership and the Sellers named therein to acquire all of the capital stock of
Heritage Holdings, Inc. ("HHI"), which will, following the consummation of the
transactions contemplated therein, become, directly or indirectly, a wholly
owned subsidiary of the Partnership; and
WHEREAS, HHI owns as of the date hereof, 4,426,916 Common Units,
representing limited partner interests in the Partnership (the "HHI Units"); and
WHEREAS, the Partnership desires to convert the HHI Units to a new
class of Partnership Securities, such conversion to be effective immediately
after, and without any further action, the closing of the transactions under the
HHI Stock Purchase Agreement, which new class of Partnership Securities shall be
designated as Class E Units having the terms set forth in this Amendment (the
"Class E Units"), which Class E Units will, upon the occurrence of specified
events, convert automatically, without further action required by the
Partnership, U.S. Propane or any other Person, back into Common Units; and
WHEREAS, the General Partner has determined that the creation of the
Class E Units provided for in this Amendment (the "Class E Units") will be in
the best interests of the Partnership and beneficial to the Limited Partners,
including the holders of the Common Units; and
WHEREAS, the Class D Units, the Special Units, and the Class E Units,
upon issuance, will have rights to distributions or in liquidation as set forth
herein; and
WHEREAS, the issuance of the Class D Units, the Special Units, and the
Class E Units complies with the requirements of the Partnership Agreement; and
WHEREAS, in connection with the transactions contemplated by the
Contribution Agreement, the General Partner proposes to (i) convert its 1.0101%
general partner interest in Heritage Operating, L.P., a Delaware limited
partnership (the "Operating Partnership"), into a 0.0% general partner interest
and a 1.0101% limited partner interest in the Operating Partnership and (ii)
transfer its 1.0101% limited partner interest in the Operating Partnership to
the Partnership in exchange for an additional 1% general partner interest in the
Partnership (the "Additional General Partner Interest"); and
Amendment No. 5--Execution Copy 2
WHEREAS, the General Partner has determined that the creation and
issuance of the Additional General Partner Interest will be in the best
interests of the Partnership and beneficial to the Limited Partners, including
the holders of the Common Units; and
WHEREAS, the General Partner has determined, pursuant to Section
13.1(g) of the Partnership Agreement, that the amendments to the Partnership
Agreement set forth herein are necessary or advisable in connection with the
authorization of the issuances of the Common Units, Class D Units, Special Units
and Additional General Partner Interest; and
NOW, THEREFORE, the Partnership Agreement is hereby amended as follows:
AMENDMENT
Section 1. Units Held by Subsidiary of a Group Member. The second
sentence of Section 7.12 of the Partnership Agreement shall not be applicable to
Common Units, Subordinated Units, or Class E Units held directly by a Subsidiary
of any Group Member (i) if such Common Units, Subordinated Units, or Class E
Units were held by the entity at the time such entity became a Subsidiary of the
Group Member, or (ii) if such Common Units, Subordinated Units, or Class E Units
were converted into or from Common Units, Subordinated Units or Class E Units
held by the entity at the time such entity became a Subsidiary of the Group
Member.
Section 2. Establishment of Terms of Class D Units. There is hereby
created a series of Units to be designated as "Class D Units," consisting of a
total of 7,721,542 Class D Units and having the following terms and conditions:
A. Prior to the conversion of the Class D Units as provided in
Section 3 or Section 5 hereof, unless amended pursuant to Section 4 hereof:
(i) all items of Partnership income, gain, loss,
deduction and credit shall be made to the Class D
Units to the same extent as such items would be so
allocated if such Class D Units were Subordinated
Units that were then Outstanding and the
Subordination Period had not ended; and
(ii) the Class D Units shall have the right to share in
Partnership distributions and shall have rights upon
dissolution and liquidation of the Partnership,
including the right to share in any liquidating
distributions, in each case to the same extent as if
such Class D Units were Subordinated Units that were
then Outstanding and the Subordination Period had not
ended.
B. The Class D Units will not have the privilege of conversion as
set forth in either Section 5.8 or Section 11.4 of the Partnership Agreement
(and neither Section 5.8 nor Section 11.4 shall apply to the Class D Units);
rather, the Class D Units will be converted only pursuant to the provisions of
Section 3 or Section 5 hereof. A Class D
Amendment No. 5--Execution Copy 3
Unit that has converted into a Common Unit shall be subject to the provisions of
Section 6.7(b) of the Partnership Agreement as if the Class D Unit was a
Subordinated Unit.
C. The Class D Units will have such voting rights pursuant to the
Partnership Agreement as such Class D Units would have if they were Common Units
that were then Outstanding except that, with respect to any proposal submitted
to the Partnership's Unitholders pursuant to Section 3 or Section 7 hereof for a
vote or consent, all of the Class D Units Outstanding as of the record date for
such vote or consent shall be deemed to have voted or given consent, without any
action necessary on the part of any holder of Class D Units, (i) in favor of
such proposal in the same proportion as all Common Units entitled to vote and
Outstanding as of the record date for such vote or consent are voted, or for
which consent is given, in favor of such proposal, and (ii) against such
proposal in the same proportion as all Common Units entitled to vote and
Outstanding as of the record date for such vote or consent are voted against
such proposal, or for which consent to such proposal is affirmatively denied.
Each Class D Unit will be entitled to one vote on each matter with respect to
which such Class D Unit is entitled to be voted.
D. The Class D Units will be evidenced by certificates in such
form as the General Partner may approve and, subject to the satisfaction of any
applicable legal and regulatory requirements, may be assigned or transferred in
a manner identical to the assignment and transfer of other Units.
E. The General Partner will act as registrar and transfer agent
for the Class D Units.
Section 3. Vote of Holders of Partnership Securities After Issuance of
Class D Units. The Partnership shall, as promptly as practicable following the
issuance of any Class D Units, take such actions as may be necessary or
appropriate to submit to a vote or consent of its securityholders the approval
of a change in the terms of the Class D Units to provide that each Class D Unit
is convertible into one Common Unit (subject to appropriate adjustment in the
event of any split-up, combination or similar event affecting the Common Units),
effective upon approval of the issuance of additional Common Units in accordance
with the following sentence, and in the event that such approval is not obtained
upon the solicitation of such vote or consent, the Partnership shall take such
action as may be necessary or appropriate to resubmit to a vote or consent of
its securityholders the approval of such change in the terms of the Class D
Units until such approval is obtained, provided that the Partnership shall not
be obligated to resubmit such matter for approval more than once in any 6-month
period. The vote or consent required for such approval will be the requisite
vote required under the Partnership Agreement and under New York Stock Exchange
rules or staff interpretations for listing of the Common Units that would be
issued upon any such conversion. Upon receipt of the required vote or consent,
each Class D Unit shall be entitled to be converted by the holder thereof into
one Common Unit (subject to appropriate adjustment in the event of any split-up,
combination or similar event affecting the Common Units).
Amendment No. 5--Execution Copy 4
Section 4. Amendment of Terms of Class D Units in Certain Events. If
the Partnership's securityholders do not approve a change in the terms of the
Class D Units to provide that they are convertible as provided in Section 3
hereof by the requisite vote of the Partnership's securityholders occurring on
or before, or occurring after provided that the matter has been submitted for
approval of the securityholders in documents filed with the Securities and
Exchange Commission prior to, the date that is 6 months following the date of
the closing of the transactions contemplated by the Contribution Agreement,
then, effective as of the next succeeding day (the "Class D Distribution
Increase Day"), Section 2(A) hereof will be deleted and replaced in its
entirety, automatically and without further action, with the following:
A. "Prior to the date upon which the Class D Units are entitled
to be converted as provided in Section 3 hereof:
(i) all allocations of items of Partnership income, gain,
loss, deduction and credit shall be allocated to the
Class D Units based on 115% of that which would be
allocated to the Common Units so that the amount
thereof allocated to each Class D Unit will be 115%
of the amount thereof allocated to each Common Unit,
and the allocations to Class D Units shall have the
same order of priority relative to allocations on the
Common Units; and
(ii) the Class D Units shall have the right to share in
Partnership distributions based on 115% of the amount
of any Partnership distribution that would be made to
each Common Unit so that the amount of any
Partnership distribution to each Class D Unit will
equal 115% of the amount of such distribution to each
Common Unit, and the right of holders of Class D
Units to receive distributions shall have the same
order of priority relative to distributions on the
Common Units; and
(iii) the Class D Units shall have rights upon dissolution
and liquidation of the Partnership, including the
right to share in any liquidating distributions, that
are based on 115% of the liquidating distributions
that would be made to the Common Units so that the
amount of any liquidating distribution to each Class
D Unit will equal 115% of the amount of such
distribution to each Common Unit, and the rights of
the Class D Units upon dissolution and liquidation of
the Partnership shall have the same order of priority
relative to the rights of the Common Units."
B. Concurrently with the distribution made in accordance with
Section 6.3(a) of the Partnership Agreement of Available Cash first occurring
after the Class D Distribution Increase Day (as defined above), with respect to
the Quarter in which the conversion of the Class D Units is effected in
accordance with the preceding sentence, a distribution shall be paid to each
holder of record of the Class D Units as of the effective
Amendment No. 5--Execution Copy 5
date of such conversion, with the amount of such distribution for each
Outstanding Class D Unit to be equal to the product of (a) 115% of the amount to
be distributed in respect of such Quarter to each Common Unit times (b) a
fraction, of which (i) the numerator is the number of days in such Quarter up to
but excluding the date of such conversion, and (ii) the denominator is the total
number of days in such Quarter (the foregoing amount being referred to as an
"Excess Payment"). For the taxable year in which an Excess Payment is made, each
holder of a Class D Unit shall be allocated items of gross income with respect
to such taxable year in an amount equal to the Excess Payment distributed to it.
Section 5. Change of New York Stock Exchange Rules or Interpretations.
If at any time (i) the rules of the New York Stock Exchange or the New York
Stock Exchange staff interpretations of such rules are changed, or (ii) facts
and circumstances arise so that no vote or consent of securityholders of the
Partnership is required as a condition to the listing of the Common Units that
would be issued upon any conversion of any Class D Units into Common Units as
provided in Section 3 hereof, the terms of such Class D Units will be changed so
that each such Class D Unit is converted (without further action or any vote of
any securityholders of the Partnership) into one Common Unit (subject to
appropriate adjustment in the event of any split-up, combination or similar
event affecting the Common Units).
Section 6. Establishment of Terms of Special Units. There is hereby
created a series of Units to be designated as "Special Units," consisting of a
total of 3,742,515 Special Units and having the following terms and conditions:
A. Prior to the date upon which the Special Units are entitled to
be converted as provided in Section 8 or Section 10 hereof, unless amended
pursuant to Section 9 hereof:
(i) no items of Partnership income, gain, loss, deduction
and credit shall be made to the Special Units until
such time as the conversion of the Special Units to
Common Units provided for in Section 8 hereof occurs.
(ii) the Special Units shall not have the right to share
in Partnership distributions and shall have no rights
upon dissolution and liquidation of the Partnership,
and will not be entitled to share in any liquidating
distributions until such time as the conversion of
the Special Units to Common Units provided for in
Section 8 hereof occurs, provided, however, that in
the event of a dissolution and liquidation of the
Partnership prior to the time such Special Units are
converted, the holders of Special Units shall receive
an assignment of the Bossier Contracts and all
rights, obligations, and benefits thereto.
B. The Special Units will have no other privilege of conversion
under any of the provisions of the Partnership Agreement other than as set forth
in Section 8 or Section
Amendment No. 5--Execution Copy 6
10 hereof. A Special Unit that has converted into a Common Unit shall be subject
to the provisions of Section 6.7(b) of the Partnership Agreement as if the
Special Unit was a Subordinated Unit.
C. The Special Units will have no voting rights pursuant to the
Partnership Agreement except with respect to the vote required by Section 7
hereof, and except to the extent that the Delaware Act gives the Special Units a
vote as a class on any matter; and each Special Unit will be entitled to one
vote on each matter with respect to which such Special Unit is entitled to be
voted. With respect to any proposal submitted to the Partnership's Unitholders
pursuant to Section 7 hereof for a vote or consent, all of the Special Units
Outstanding as of the record date for such vote or consent shall be deemed to
have voted or given consent, without any action necessary on the part of any
holder of Special Units, (i) in favor of such proposal in the same proportion as
all Common Units entitled to vote and Outstanding as of the record date for such
vote or consent are voted, or for which consent is given, in favor of such
proposal, and (ii) against such proposal in the same proportion as all Common
Units entitled to vote and Outstanding as of the record date for such vote or
consent are voted against such proposal, or for which consent to such proposal
is affirmatively denied.
D. The Special Units will be evidenced by certificates in such
form as the General Partner may approve and, subject to the satisfaction of any
applicable legal and regulatory requirements, may be assigned or transferred in
a manner identical to the assignment and transfer of other Units.
E. The General Partner will act as registrar and transfer agent
for the Special Units.
Section 7. Vote of Holders of Partnership Securities After Issuance of
Special Units. The Partnership shall, as promptly as practicable following the
issuance of any Special Units, and at such times as the Partnership shall submit
for approval the conversion of the Class D Units as provided in Section 3
hereof, take such actions as may be necessary or appropriate to submit to a vote
or consent of its securityholders the approval of the conversion of the Special
Units into Common Units as provided in Section 8 hereof. The vote or consent
required for such approval will be the requisite vote required under the
Partnership Agreement and under New York Stock Exchange rules or staff
interpretations for listing of the Common Units that would be issued upon any
such conversion. Upon receipt of the required vote or consent, each Special Unit
shall be entitled to be converted by the holder thereof into one Common Unit
(subject to appropriate adjustment in the event of any split up, combination or
similar event affecting the Common Units), without further action, upon
complying with the provisions of Section 8 hereof.
Section 8. Conversion of the Special Units to Common Units. The Special
Units have been issued in connection with the acquisition of assets by the
Partnership designated as the Bossier Pipeline. In conjunction with the
Partnership's acquisition of the Bossier Pipeline, the Partnership has acquired,
directly or through its subsidiaries, all
Amendment No. 5--Execution Copy 7
rights under the Joint Marketing Agreement dated July 11, 2003 between a
subsidiary of La Grange and TXU Fuel Company (the "TXU Contract"), the Firm
Intrastate Gas Transportation Agreement dated June 4, 2003 between a subsidiary
of La Grange and XTO Energy, Inc. (the "XTO Contract") and the Firm Intrastate
Gas Transportation Agreement dated October 1, 2003 between a subsidiary of La
Grange and Anadarko Energy Services Company (the "Anadarko Contract")
(collectively the TXU Contract, the XTO Contract and the Anadarko Contract are
the "Bossier Contracts") which provide for the owner and operator of the Bossier
Pipeline to receive certain payments for the transportation of natural gas and
natural gas liquids upon completion of the Bossier Pipeline and it reaching
commercially operational status, or such similar term or provision, that
qualifies the La Grange subsidiary that is a party thereto to receive the
payments set forth in each of the Bossier Contracts.
A. On the date following the day the Partnership or any of its
subsidiaries qualifies to receive the payments under each and every one of the
Bossier Contracts defined herein, each Special Unit shall be entitled to be
converted by the holder thereof into one Common Unit, and upon such conversion
shall be entitled to all benefits and rights afforded to a Common Unit,
including the rights to distributions.
B. In the event the Bossier Pipeline fails to become commercially
operational by December 1, 2004, triggering the provisions of Section 3(B) of
the XTO Contract, and XTO Energy, Inc. acquires the Bossier Pipeline pursuant
thereto, the Special Units shall no longer be considered to be Outstanding and
shall not be entitled to any rights afforded any other of the Partnership's
Units, except that any funds received by the Partnership under such provision
that exceed the capital expenditures incurred and paid by the Partnership or any
of its subsidiaries shall be allocated and paid to the holders of Special Units
Pro Rata.
Section 9. Amendment of Terms of the Special Units in Certain Events.
In the event that the Partnership's securityholders do not approve a change in
the terms of the Special Units to provide that they are convertible as provided
in Section 7 hereof by the requisite vote of the Partnership's securityholders
prior to the time that such Special Units shall qualify for the conversion
pursuant to Section 8 hereof, then, effective as of the next succeeding day (the
"Special Unit Distribution Increase Day"), Section 6(A) hereof will be deleted
and replaced in its entirety, automatically and without further action, with the
following:
A. "Prior to the approval of the conversion of the Special Units
as provided in Section 7 hereof, and upon qualifying for the automatic
conversion set forth in Section 8 hereof:
(i) all allocations of items of Partnership income, gain,
loss, deduction and credit shall be allocated to the
Special Units based on 115% of that which would be
allocated to the Common Units so that the amount
thereof allocated to each Special Unit will be 115%
of the amount thereof allocated to each Common Unit,
and the
Amendment No. 5--Execution Copy 8
allocations to Special Units shall have the same
order of priority relative to allocations on the
Common Units; and
(ii) the Special Units shall have the right to share in
Partnership distributions based on 115% of the amount
of any Partnership distribution that would be made to
each Common Unit so that the amount of any
Partnership distribution to each Special Unit will
equal 115% of the amount of such distribution to each
Common Unit, and the right of holders of Special
Units to receive distributions shall have the same
order of priority relative to distributions on the
Common Units; and
(iii) the Special Units shall have rights upon dissolution
and liquidation of the Partnership, including the
right to share in any liquidating distributions, in
each case to the same extent as if such Special Units
were Common Units."
Section 10. Change of New York Stock Exchange Rules or Interpretations.
If at any time (i) the rules of the New York Stock Exchange or the New York
Stock Exchange staff interpretations of such rules are changed, or (ii) facts
and circumstances arise so that no vote or consent of securityholders of the
Partnership is required as a condition to the listing of the Common Units that
would be issued upon any conversion of any Special Units into Common Units as
provided in Section 8 hereof, the terms of such Special Units will be changed so
that each such Special Unit is converted (without further action or any vote of
any securityholders of the Partnership) into one Common Unit (subject to
appropriate adjustment in the event of any split up, combination or similar
event affecting the Common Units) subject to the provisions of Section 8 hereof.
Section 11. Establishment of Terms of Class E Units. After the closing
of the transactions contemplated by the HHI Stock Purchase Agreement, each HHI
Unit shall be converted into one whole Unit of a newly created series of Units
hereby designated as "Class E Units," consisting of a total of 4,426,916 Class E
Units and having the following terms and conditions:
A. The definition of the term "Unitholders" and "Units" in the
Partnership Agreement are hereby deleted and replaced in their entirety with the
following:
"`Unitholders' means the holders of Common Units, Subordinated
Units, Class D Units and Class E Units."
"`Unit' means a Partnership Interest of a Limited Partner or
Assignee in the Partnership and shall include Common Units,
Subordinated Units, Class D Units, Special Units and Class E Units, but
shall not include (x) the general partner interest in the Partnership
or (y) Incentive Distribution Rights."
Amendment No. 5--Execution Copy 9
B. The "Class E Percentage" with respect to the Class E Units for
any date shall be equal to 11.1% multiplied by the quotient obtained by dividing
(A) the number of Class E Units Outstanding on such date, by (B) 4,426,916.
C. The Class E Units shall not be entitled to receive any
allocation of any item of Partnership income, gain, loss, deduction or credit
attributable to the Partnership's ownership of HHI (the "HHI Items"), and such
HHI Items (which shall not be included in the computation of Net Income, Net
Loss, Net Termination Gain or Net Termination Loss for any taxable year while
any Class E Units remain Outstanding) shall instead be specially allocated to
the General Partner in an amount equal to the General Partner's Percentage
Interest of such HHI Items and the remainder to the Unitholders (other than the
holders of Class E Units) Pro Rata.
D. The Class E Percentage of any Net Income to be allocated to
the Unitholders pursuant to Section 6.1(a)(iii) of the Partnership Agreement
shall be allocated to the Class E Units and the remaining portion of such Net
Income shall be allocated to the Unitholders (other than the holders of Class E
Units) in proportion to their relative Percentage Interests; provided, that the
amount of Net Income allocated to each Class E Unit for each taxable year shall
not exceed the product of (A) the aggregate cash amount distributed to such
Class E Unit pursuant to Article VI of the Partnership Agreement for such
taxable year, multiplied by (B) the quotient obtained by dividing (I) the
Partnership's Net Income allocated to the Unitholders (including the holders of
the Class E Units) for such taxable year by (II) the aggregate cash amount
distributed (excluding HHI Distributions) to the Unitholders (including the
holders of the Class E Units) pursuant to Article VI for such taxable year.
E. The Class E Percentage of any Net Losses to be allocated to
the Unitholders pursuant to Section 6.1(b)(ii) of the Partnership Agreement
shall be allocated to the Class E Units and the remaining portion of such Net
Losses shall be allocated to the Unitholders (other than the holders of Class E
Units) in proportion to their relative Percentage Interests; provided, that Net
Losses shall not be allocated pursuant to Section 6.1(b)(ii) to the extent that
such allocation would cause any Unitholder to have a deficit balance in its
Adjusted Capital Account at the end of such taxable year (or increase any
existing deficit balance in its Adjusted Capital Account);
F. The Class E Units shall be allocated 1% of any Net Termination
Gain, and shall be allocated Net Termination Loss to the same extent as the
Common Units;
G. For each taxable year, no portion of any Partnership cash
distribution attributable to any distribution or dividend received by the
Partnership from HHI or the proceeds of any sale of the capital stock of HHI
(such Partnership distributions, the "HHI Distributions") shall be distributed
to the Class E Units;
H. The Class E Units shall be entitled to receive the Class E
Percentage of the portion of any Partnership distributions (other than HHI
Distributions) to be made to the Unitholders pursuant to Article VI of the
Partnership Agreement and the remaining
Amendment No. 5--Execution Copy 10
portion of the Available Cash to be distributed shall be made to the Unitholders
(other than the holders of Class E Units) in proportion to their relative
Percentage Interests; provided, that the aggregate Partnership distributions
made to each Class E Unit for each taxable year shall not exceed $2.82;
I. The Class E Units shall not have any voting rights except with
respect to (i) the vote required by Section 3 and Section 7 hereof, and in each
such instance only to the extent allowed by the New York Stock Exchange, and
(ii) except to the extent that the Delaware Act gives the Class E Units a vote
as a class on any matter. With respect to any matter on which the Class E Units
are entitled to vote, each Class E Unit will be entitled to one vote on such
matter.
J. Effective concurrently with the closing of the transactions
contemplated by the HHI Stock Purchase Agreement, the HHI Units will constitute
the "Collateral" under the terms of the Pledge Agreement dated January 20, 2004
(the "Pledge Agreement"), between the Partnership and TAAP LP ("NewLP"). After
such closing and after giving effect to the conversion of the HHI Units into
Class E Units pursuant to Section 11 hereof, all Class E Units will constitute
the "Collateral" under the Pledge Agreement. Upon receipt by the Partnership of
NewLP's notice given in accordance with Section 4.04(c) of the Pledge Agreement,
each Class E Unit then held as "Collateral" under the Pledge Agreement shall be
convertible into a number of Common Units equal to $100 million divided by the
average of the closing sales prices of the Common Units as reported in the Wall
Street Journal - Corporate Transactions for the 20 consecutive trading days
ending on the date of such notice divided by the number of then Outstanding
Class E Units. Immediately prior to any sale, foreclosure in lieu of sale,
lease, assignment or other disposal of any Class E Units by NewLP pursuant to
Section 4.04(c) of the Pledge Agreement, the Class E Units shall be converted
automatically, and without further action required by the Partnership or its
securityholders, other than issuing to NewLP a new Unit certificate for such
Common Units, into the number of Common Units as determined above.
K. The Class E Units will have no other privilege of conversion
under any of the provisions of the Partnership Agreement other than as set forth
in Section 11(J) hereof. A Class E Unit that has converted into a Common Unit
pursuant to Section 11(J) hereof shall be subject to the provisions of Section
6.7(b) of the Partnership Agreement as if the Class E Unit was a Subordinated
Unit, provided, however, that U.S. Propane undertakes and agrees to take all
actions required under Section 6.7(b) of the Partnership Agreement on or before
the close of business after the end of the 10-day period or 2-day period, as
applicable, that commences upon receipt by the Partnership from NewLP of the
notice given pursuant to Section 4.04(c) of the Pledge Agreement, so that the
Common Units into which the Class E Units are converted pursuant to this Section
11(K) may be issued in accordance with Section 6.7(b) of the Partnership
Agreement immediately after such 10-day period or 2-day period, as the case may
be.
L. The Class E Units will be evidenced by certificates in such
form as the General Partner may approve and, subject to the satisfaction of any
applicable legal and
Amendment No. 5--Execution Copy 11
regulatory requirements, may be assigned or transferred in a manner identical to
the assignment and transfer of other Units.
M. The General Partner will act as registrar and transfer agent
for the Class E Units.
N. No amendment to Section 11 hereof shall be made without the
approval of NewLP during such time as the Pledge Agreement shall be in effect.
Section 12. Deletion of Section 7.3(c) of the Partnership Agreement.
Section 7.3(c) of the Partnership Agreement is hereby deleted.
Section 13. Modification of Voting Rights of Certain Common Units. The
voting rights of the Common Units to be issued to LaGrange pursuant to the
Contribution Agreement (the "LaGrange Common Units") shall be modified from the
voting rights that would otherwise be applicable to such Common Units pursuant
to the Partnership Agreement such that, with respect to any proposal submitted
to the Partnership's securityholders pursuant to Section 3 or Section 7 hereof
for a vote or consent, all of the LaGrange Common Units Outstanding as of the
record date for such vote or consent shall be deemed to have voted or given
consent, without any action necessary on the part of any holder of LaGrange
Common Units, (i) in favor of such proposal in the same proportion as all Common
Units entitled to vote and Outstanding as of the record date for such vote or
consent (excluding the LaGrange Common Units) are voted, or for which consent is
given, in favor of such proposal and (ii) against such proposal in the same
proportion as all Common Units entitled to vote and Outstanding as of the record
date for such vote or consent (excluding the LaGrange Common Units) are voted
against such proposal or for which consent to such proposal is affirmatively
denied.
Section 14. Establishment of Terms of Additional General Partner
Interest. There is hereby created the Additional General Partner Interest having
the following terms and conditions:
A. The Additional General Partner Interest shall be entitled to
the same relative rights and benefits and shall be subject to the same relative
obligations and burdens as the general partner interest of the General Partner
immediately prior to this Amendment, and to give effect to these terms of the
Additional General Partner Interest, the following amendments to the Partnership
Agreement are hereby adopted, effective as of the time of the issuance of the
Additional General Partner Interest as evidenced by an instrument executed by
the General Partner acknowledging the issuance of the Additional General Partner
Interest:
(i) The definition of "Percentage Interest" in Section
1.1 is amended (i) to change "1%" to "2%" and to
change "99%" to "98%" and (ii) to add the phrase
"(other than the Additional General Partner
Interest)" after the phrase "Partnership Securities"
in clause (c) thereof.
Amendment No. 5--Execution Copy 12
(ii) Section 5.2 is amended to change "1/99th" to
"2/98th."
(iii) Section 6.1(c)(i) is amended (i) to change "99%" to
"98%" in each of clauses (B), (C) and (D), (ii) to
change "1%" to "2%" in each of clauses (B), (C) and
(D), (iii) to change "85.8673%" to "85%," "13.1327%"
to "13%" and "1%" to "2%" in clause (E), (iv) to
change "75.7653%" to "75%", "23.2347%" to "23%" and
"1%" to "2%" in clause (F) and (v) to change
"50.5102%" to "50%", "48.4898%" to "48%" and "1%" to
"2%" in clause (G).
(iv) Section 6.1(c)(ii) is amended (i) to change "99%" to
"98%" and "1%" to "2%" in clause (A) and (ii) to
change "99%" to "98%" and "1%" to "2%" in clause (B).
(v) Section 6.1(d)(iii)(A) is amended to change "1/99th"
to "2/98th."
(vi) Section 6.4(a) is amended to (i) to change "99%" to
"98%" in each of clauses (i), (ii), (iii) and (iv),
(ii) to change "1%" to "2%" in each of clauses (i),
(ii), (iii) and (iv), (iii) to change "85.8673%" to
"85%," "13.1327%" to "13%" and "1%" to "2%" in clause
(v), (iv) to change "75.7653%" to "75%", "23.2347%"
to "23%" and "1%" to "2%" in clause (vi) and (v) to
change "50.5102%" to "50%", "48.4898%" to "48%" and
"1%" to "2%" in clause (vii).
(vii) Section 6.4(b) is amended to (i) to change "99%" to
"98%" in each of clauses (i) and (ii), (ii) to change
"1%" to "2%" in each of clauses (i) and (ii), (iii)
to change "85.8673%" to "85%," "13.1327%" to "13%"
and "1%" to "2%" in clause (iii), (iv) to change
"75.7653%" to "75%", "23.2347%" to "23%" and "1%" to
"2%" in clause (iv) and (v) to change "50.5102%" to
"50%", "48.4898%" to "48%" and "1%" to "2%" in clause
(v).
(viii) Section 6.5 is amended to change "99%" to "98%" and
"1%" to "2%" in each place where such items appear.
(ix) Section 7.9(b) is amended to change "1%" to "2%".
(x) Section 11.3(c) is amended (i) to change "99%" to
"98%" and "1%" to "2%" and (ii) to change "1/99th" to
"2/98th."
Section 15. Ratification of Partnership Agreement. Except as expressly
modified and amended herein, all of the terms and conditions of the Partnership
Agreement shall remain in full force and effect.
Section 16. Governing Law. This Amendment will be governed by and
construed in accordance with the laws of the State of Delaware.
Amendment No. 5--Execution Copy 13
Section 17. Counterparts. This Amendment may be executed in
counterparts, all of which together shall constitute an agreement binding on all
the parties hereto, notwithstanding that all such parties are not signatories to
the original or the same counterpart.
[SIGNATURE PAGE FOLLOWS]
Amendment No. 5--Execution Copy 14
IN WITNESS WHEREOF, this Amendment has been executed as of the date
first written above. GENERAL PARTNER:
U.S. Propane, L.P.
By: U.S. Propane, L.L.C.
its General Partner
By:_____________________________________
H. Michael Krimbill
President and Chief Executive Officer
LIMITED PARTNERS:
All Limited Partners now and hereafter admitted as limited partners of
the Partnership, pursuant to Powers of Attorney now and hereafter executed in
favor of, and granted and delivered to, the General Partner.
By: U.S. Propane, L.L.C., General Partner of
U.S. Propane, L.P., General Partner, as
attorney-in-fact for all Limited Partners
pursuant to the Powers of Attorney granted
pursuant to Section 2.6 of the Partnership
Agreement.
By:_________________________________________
H. Michael Krimbill
President and Chief Executive Officer
Amendment No. 5--Execution Copy 15
EXHIBIT 3.1.6
AMENDMENT NO. 6
TO
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
HERITAGE PROPANE PARTNERS, L.P.
This Amendment (this "Amendment") to the Amended and Restated Agreement
of Limited Partnership of Heritage Propane Partners, L.P., a Delaware limited
partnership (the "Partnership"), dated as of June 27, 1996, as amended as of
August 9, 2000, January 5, 2001, October 5, 2001, February 4, 2002 and January
15, 2004 (as so amended, the "Partnership Agreement"), is entered into effective
as of February 13, 2004, by U.S. Propane, L.P., a Delaware limited partnership
("U.S. Propane"), as the general partner of the Partnership, on behalf of itself
and the Limited Partners of the Partnership. Capitalized terms used but not
defined herein are used as defined in the Partnership Agreement.
RECITALS
WHEREAS, Section 13.1(a) of the Partnership Agreement provides that the
General Partner, without the approval of any Partner, may amend any provision of
the Partnership Agreement to reflect a change in the name of the Partnership;
and
NOW, THEREFORE, the Partnership Agreement is hereby amended as follows:
AMENDMENT
Section 1. Name. The first sentence of Section 2.2 of the Partnership
Agreement shall be amended to change the name of the Partnership to "Energy
Transfer Partners, L.P."
Section 2. Ratification of Partnership Agreement. Except as expressly
modified and amended herein, all of the terms and conditions of the Partnership
Agreement shall remain in full force and effect.
Section 3. Governing Law. This Amendment will be governed by and
construed in accordance with the laws of the State of Delaware.
Section 4. Counterparts. This Amendment may be executed in
counterparts, all of which together shall constitute an agreement binding on all
the parties hereto, notwithstanding that all such parties are not signatories to
the original or the same counterpart.
[SIGNATURE PAGE FOLLOWS]
Amendment NO. 6--Execution Copy 2
IN WITNESS WHEREOF, this Amendment has been executed as of the date
first written above.
GENERAL PARTNER:
U.S. Propane, L.P.
By: U.S. Propane, L.L.C.
its General Partner
By:___________________________________
Ray C. Davis
Co-Chairman and Co-Chief Executive
Officer
By:___________________________________
Kelcy L. Warren
Co-Chairman and Co-Chief Executive
Officer
LIMITED PARTNERS:
All Limited Partners now and hereafter admitted as limited partners of
the Partnership, pursuant to Powers of Attorney now and hereafter executed in
favor of, and granted and delivered to, the General Partner.
By: U.S. Propane, L.L.C., General Partner of
U.S. Propane, L.P., General Partner, as
attorney-in-fact for all Limited Partners
pursuant to the Powers of Attorney granted
pursuant to Section 2.6 of the Partnership
Agreement.
By:_________________________________________
Ray C. Davis
Co-Chairman and Co-Chief Executive
Officer
By:_________________________________________
Kelcy L. Warren
Co-Chairman and Co-Chief Executive
Officer
EXHIBIT 3.2.3
AMENDMENT NO. 3
TO
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
HERITAGE OPERATING, L.P.
This Amendment No. 3 (this "Amendment") to the Amended and Restated
Agreement of Limited Partnership of Heritage Operating, L.P., a Delaware limited
partnership (the "Partnership"), dated as of June 27, 1996 and amended as of
August 10, 2000 and February 4, 2002 (as so amended, the "Partnership
Agreement") is entered into effective as of January 15, 2004 by U.S. Propane,
L.P., a Delaware limited partnership ("U.S. Propane"), as the general partner of
the Partnership, and Heritage Propane Partners, L.P., a Delaware limited
partnership (the "MLP"), as a limited partner of the Partnership. Capitalized
terms used but not defined herein shall have the meanings ascribed thereto in
the Partnership Agreement.
RECITALS
WHEREAS, this Amendment has been approved by the requisite vote of the
Partners of the Partnership and the MLP;
WHEREAS, the MLP and U.S. Propane have entered into a Contribution
Agreement, dated as of November 6, 2003 (the "Contribution Agreement"), among
the MLP, U.S. Propane and the parties named therein as Contributors, pursuant to
which the Contributors have agreed, subject to the terms and conditions therein,
to contribute certain interests owned by the Contributors to the MLP;
WHEREAS, in conjunction with the transactions required to be taken to
accommodate the interests contributed to the MLP pursuant to the Contribution
Agreement, the MLP, as the sole limited partner of the Partnership, and U.S.
Propane, as the sole general partner of the Partnership, hereby desire to effect
the actions taken herein;
WHEREAS, the MLP proposes to Transfer a .001% limited partner interest
in the Partnership (the "New OLP Interest") to Heritage LP, Inc., a wholly owned
Subsidiary of the MLP, and U.S. Propane, as the general partner of the
Partnership, and the MLP, as the sole limited partner of the Partnership at the
time of the Transfer, have consented to such Transfer and the admission of
Heritage LP, Inc. as an Additional Limited Partner pursuant to the provisions of
Section 7.3(a) and Section 10.4 of the Partnership Agreement;
WHEREAS, concurrently with the Transfer described above, U.S. Propane
proposes to convert its 1.0101% general partner interest in the Partnership (the
"General Partner Interest") into a 0.0% general partner interest (the "Retained
General Partner Interest") and a 1.0101% limited partner interest in the
Partnership (the "Transferred OLP Interest"), and the Partnership desires to
cause such conversion;
Amendment No. 3-Execution Copy
WHEREAS, U.S. Propane, as the general partner of the Partnership, and
the MLP, as the sole Limited Partner of the Partnership at the time of such
conversion, have consented to the conversion of the General Partner Interest
pursuant to the provisions of Section 4.2 and Section 4.3 of the Partnership
Agreement;
WHEREAS, U.S. Propane proposes to Transfer the Transferred OLP Interest
to the MLP, and U.S. Propane, as the general partner of the Partnership, and the
MLP, as the sole limited partner of the Partnership at the time of the Transfer,
have consented to the Transfer of the Transferred OLP Interest pursuant to the
provisions of Section 4.3 of the Partnership Agreement;
WHEREAS, MLP proposes to Transfer its entire limited partner interest
in the Partnership, consisting of a 99.999% limited partner interest in the
Partnership (the "MLP OLP Interest") to Heritage ETC, L.P., a Delaware limited
partnership ("New OLP"), and U.S. Propane, as the general partner of the
Partnership, and the MLP, as the sole limited partner of the Partnership at the
time of the Transfer, have consented to such Transfer and the admission of New
OLP as an Additional Limited Partner pursuant to the provisions of Section
7.3(a) and Section 10.4 of the Partnership Agreement;
NOW, THEREFORE, the Partnership Agreement is hereby amended as follows:
SECTION 1. Conversion of the General Partner Interest. The provisions
of Section 4.2 and Section 11.3 of the Partnership Agreement are hereby amended,
to the extent applicable, to permit the conversion of the General Partner
Interest into the Retained General Partner Interest and the Transferred OLP
Interest, and, upon effectiveness of this Amendment, (i) the General Partner
Interest shall be converted into the Retained General Partner Interest and the
Transferred OLP Interest, (ii) the Capital Account with respect to the General
Partner Interest shall Transfer in its entirety to the Transferred OLP Interest,
and a new Capital Account shall be maintained with respect to the Retained
General Partner Interest pursuant to Section 5.5 of the Partnership Agreement;
(iii) the definition of "Percentage Interest" in Section 1.1 of the Partnership
Agreement shall be amended to change "1.0101%" to "0.0%", and (iv) Section 5.3
of the Partnership Agreement shall be amended to delete the second and third
sentences thereof and to add a new second sentence in replacement thereof that
reads as follows: "The General Partner may, but shall not be obligated to, make
additional Capital Contributions to the Partnership."
SECTION 2. Transfer of the New OLP Interest. The provisions of Section
4.3 of the Partnership Agreement are hereby amended to permit the Transfer of
the New OLP Interest to Heritage LP, Inc., and, following such Transfer,
Heritage LP, Inc. shall be admitted as an Additional Limited Partner pursuant to
the provisions of Section 10.4 of the Partnership Agreement.
SECTION 3. Transfer of the Transferred OLP Interest. The provisions of
Section 4.2, Section 4.3 and Section 11.3 of the Partnership Agreement are
hereby amended to permit (i) the conversion of the General Partner Interest into
the General Partner Interest and the Transferred OLP Interest and (ii) the
Transfer of the Transferred OLP Interest to the MLP, in each case without
compliance with the provisions thereof.
Amendment No. 3-Execution Copy - 2 -
SECTION 4. Transfer of the MLP OLP Interest. The provisions of Section
4.3 of the Partnership Agreement are hereby amended to permit the Transfer of
the MLP OLP Interest from MLP to New OLP and, following such Transfer, New OLP
shall be admitted as an Additional Limited Partner with respect to the MLP OLP
Interest pursuant to the provisions of Section 10.4 of the Partnership
Agreement.
SECTION 5. Ratification of Partnership Agreement. Except as expressly
modified and amended herein, all of the terms and conditions of the Partnership
Agreement shall remain in full force and effect.
SECTION 6. Governing Law. This Amendment shall be construed in
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of law.
SECTION 7. Counterparts. This Amendment may be executed in
counterparts, all of which together shall constitute an agreement binding on all
the parties hereto, notwithstanding that all such parties are not signatories to
the original or the same counterpart.
IN WITNESS WHEREOF, this Amendment has been executed as of the date
first written above.
U.S. PROPANE, L.P.
By: U.S. Propane, L.L.C.
its general partner
By:_________________________________
H. Michael Krimbill
President and Chief Executive
Officer
Amendment No. 3-Execution Copy - 3 -
LIMITED PARTNERS:
Heritage Propane Partners, L.P.
By: U.S. Propane, L.P.
its general partner
By: U.S. Propane, L.L.C.
its general partner
By:______________________________
H. Michael Krimbill
President and Chief Executive
Officer
Amendment No. 3-Execution Copy - 4 -
WHEREAS, U.S. Propane, as the general partner of the Partnership, and
the MLP, as the sole Limited Partner of the Partnership at the time of such
conversion, have consented to the conversion of the General Partner Interest
pursuant to the provisions of Section 4.2 and Section 4.3 of the Partnership
Agreement;
WHEREAS, U.S. Propane proposes to Transfer the Transferred OLP Interest
to the MLP, and U.S. Propane, as the general partner of the Partnership, and the
MLP, as the sole limited partner of the Partnership at the time of the Transfer,
have consented to the Transfer of the Transferred OLP Interest pursuant to the
provisions of Section 4.3 of the Partnership Agreement;
WHEREAS, MLP proposes to Transfer its entire limited partner interest
in the Partnership, consisting of a 99.999% limited partner interest in the
Partnership (the "MLP OLP Interest") to Heritage ETC, L.P., a Delaware limited
partnership ("New OLP"), and U.S. Propane, as the general partner of the
Partnership, and the MLP, as the sole limited partner of the Partnership at the
time of the Transfer, have consented to such Transfer and the admission of New
OLP as an Additional Limited Partner pursuant to the provisions of Section
7.3(a) and Section 10.4 of the Partnership Agreement;
NOW, THEREFORE, the Partnership Agreement is hereby amended as follows:
SECTION 1. Conversion of the General Partner Interest. The provisions
of Section 4.2 and Section 11.3 of the Partnership Agreement are hereby amended,
to the extent applicable, to permit the conversion of the General Partner
Interest into the Retained General Partner Interest and the Transferred OLP
Interest, and, upon effectiveness of this Amendment, (i) the General Partner
Interest shall be converted into the Retained General Partner Interest and the
Transferred OLP Interest, (ii) the Capital Account with respect to the General
Partner Interest shall Transfer in its entirety to the Transferred OLP Interest,
and a new Capital Account shall be maintained with respect to the Retained
General Partner Interest pursuant to Section 5.5 of the Partnership Agreement;
(iii) the definition of "Percentage Interest" in Section 1.1 of the Partnership
Agreement shall be amended to change "1.0101%" to "0.0%", and (iv) Section 5.3
of the Partnership Agreement shall be amended to delete the second and third
sentences thereof and to add a new second sentence in replacement thereof that
reads as follows: "The General Partner may, but shall not be obligated to, make
additional Capital Contributions to the Partnership."
SECTION 2. Transfer of the New OLP Interest. The provisions of Section
4.3 of the Partnership Agreement are hereby amended to permit the Transfer of
the New OLP Interest to Heritage LP, Inc., and, following such Transfer,
Heritage LP, Inc. shall be admitted as an Additional Limited Partner pursuant to
the provisions of Section 10.4 of the Partnership Agreement.
SECTION 3. Transfer of the Transferred OLP Interest. The provisions of
Section 4.2, Section 4.3 and Section 11.3 of the Partnership Agreement are
hereby amended to permit (i) the conversion of the General Partner Interest into
the General Partner Interest and the Transferred OLP Interest and (ii) the
Transfer of the Transferred OLP Interest to the MLP, in each case without
compliance with the provisions thereof.
Amendment No. 3-Execution Copy - 2 -
EXHIBIT 4.2
UNITHOLDER RIGHTS AGREEMENT
BY AND AMONG
HERITAGE PROPANE PARTNERS, L.P.,
HERITAGE HOLDINGS, INC.,
TAAP LP
AND
LA GRANGE ENERGY, L.P.
JANUARY 20, 2004
Unitholder Rights Agreement
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions............................................................... 2
ARTICLE 2
REGISTRATION RIGHTS
Section 2.1 Demand Registrations of HHI Holders....................................... 6
Section 2.2 Demand Registrations of Acquirer Holders.................................. 9
Section 2.3 Shelf Registration Rights of NewLP........................................ 12
Section 2.4 Piggyback Registrations................................................... 13
Section 2.5 General................................................................... 16
Section 2.6 Issuer Reports............................................................ 18
Section 2.7 Information To Be Furnished By The Holders................................ 19
Section 2.8 Suspension Of Offering Pending Prospectus Supplement Or Amendment......... 19
Section 2.9 Registration Expenses..................................................... 20
Section 2.10 Underwritten Offerings.................................................... 20
Section 2.11 Indemnification........................................................... 21
ARTICLE 3
WAIVER OF REGISTRATION RIGHTS
ARTICLE 4
EFFECTIVE TIME AND TERM OF THIS AGREEMENT
ARTICLE 5
MISCELLANEOUS
Section 5.1 Specific Enforcement...................................................... 24
Section 5.2 Severability.............................................................. 24
Section 5.3 Amendments................................................................ 24
Section 5.4 Descriptive Headings...................................................... 25
Section 5.5 Counterparts.............................................................. 25
Section 5.6 Notices................................................................... 25
Section 5.7 Governing Law............................................................. 26
Section 5.8 Successors And Assigns.................................................... 27
Section 5.9 Entire Agreement.......................................................... 27
Unitholder Rights Agreement
UNITHOLDER RIGHTS AGREEMENT
This Unitholder Rights Agreement (the "Agreement") is made and entered
into as of January 20, 2004, by and between Heritage Propane Partners, L.P., a
Delaware limited partnership (the "Issuer"), Heritage Holdings, Inc., a Delaware
corporation ("HHI"), TAAP LP, a Delaware limited partnership ("NewLP") and La
Grange Energy, L.P., a Texas limited partnership ("Acquirer").
RECITALS
WHEREAS, HHI currently owns 4,426,916 Common Units (as defined below);
WHEREAS, U.S. Propane, L.P., a Delaware limited partnership ("U.S.
Propane"), is the general partner of the Issuer and currently owns 180,028
Common Units;
WHEREAS, TECO Propane Ventures, LLC, a Delaware limited liability
company ("TECO"), AGL Propane Services, Inc. and AGL Energy Corporation, each a
Delaware corporation (collectively, "AGL"), Piedmont Propane Company, a North
Carolina corporation ("Piedmont"), and United Cities Propane Gas, Inc., a
Tennessee corporation ("United"), collectively own, directly or indirectly, 100%
of the partner interests in U.S. Propane;
WHEREAS, TECO, AGL, Piedmont and United (collectively, the "Utilities")
have entered into an Acquisition Agreement, dated as of November 6, 2003 (the
"Acquisition Agreement"), with U.S. Propane, U.S. Propane, L.L.C., a Delaware
limited liability company, and Acquirer pursuant to which it is contemplated
that Acquirer will acquire 100% of the partner interests in U.S. Propane and
100% of the member interests in U.S. Propane, L.L.C.;
WHEREAS, the Issuer and Acquirer have entered into a Contribution
Agreement, dated as of November 6, 2003 (the "Contribution Agreement"), pursuant
to which specified mid-stream assets of Acquirer and certain of its subsidiaries
would be contributed to the Issuer, the Issuer would pay Acquirer as
consideration therefor cash, Common Units, Class D Units and Special Units;
WHEREAS, the Utilities have entered into a Stock Purchase Agreement,
dated as of November 6, 2003 (the "Stock Purchase Agreement"), with the Issuer
pursuant to which the Issuer shall acquire all of the outstanding capital stock
of HHI and the Issuer would pay cash and deliver a promissory note (the "Note")
as consideration therefore, and the payment under the Note shall be secured by a
pledge of 4,426,916 Class E Units, such Class E Units, and any Common Units into
which such Class E Units are converted pursuant to the Partnership Agreement,
(the "Pledged Units") owned by HHI (the "Pledge Agreement");
WHEREAS, prior to the closing under the Acquisition Agreement, U.S.
Propane will transfer to NewLP, among other things, all right, title and
interest of U.S. Propane to the 180,028 Common Units currently owned by U.S.
Propane;
WHEREAS, the obligations of Acquirer to consummate the transactions
contemplated by the Contribution Agreement are subject to the satisfaction of
the conditions to the consummation
Unitholder Rights Agreement 1
of the transactions contemplated by the Acquisition Agreement and the Stock
Purchase Agreement; and
WHEREAS, it is a condition to the consummation of the transactions
contemplated by the Acquisition Agreement that the Issuer and the other parties
hereto execute and deliver this Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions.
As used in this Agreement, the following terms shall have the following
meanings:
"Acquirer Demand Registration" shall have the meaning assigned to such
term in Section 2.2(a).
"Acquirer Holders" means Acquirer and any person or entity who is
assigned rights under this Agreement as permitted by Section 5.8 hereof.
"Acquirer Maximum Demand Registration Quantity" shall have the meaning
assigned to such term in Section 2.1(a).
"Acquirer Permitted Interruption" is defined in Section 2.2(g) of this
Agreement.
"Acquirer Registrable Units" means (i) any Common Units purchased by
Acquirer on the date hereof pursuant to the terms of the Contribution Agreement
(including any Common Units issued upon conversion of the Class D Units and the
Special Units issued pursuant to the Contribution Agreement), (ii) any Common
Units contributed to Acquirer on or prior to the date of this Agreement, (iii)
any Common Units held by an Acquirer Holder who is assigned rights under this
Agreement pursuant to Section 5.8 hereof, and (iii) any Common Units or other
securities issued or issuable with respect to the Acquirer Registrable Units
referred to in clause (i) or (ii) above by way of a Common Unit distribution or
Common Unit split, in connection with a combination of Common Units or in
connection with any recapitalization, merger, consolidation or other
reorganization of the Issuer. As to any particular Acquirer Registrable Units,
such Acquirer Registrable Units shall cease to be Acquirer Registrable Units
upon the earliest to occur of the following events: (i) a Registration Statement
covering such Acquirer Registrable Units has been declared effective by the
Commission and such Acquirer Registrable Units being disposed of in accordance
with such effective Registration Statement, (ii) such Acquirer Registrable Units
are eligible for sale to the public pursuant to Rule 144 (or any similar
provision then in force) under the Securities Act without being subject to the
volume and manner of sale restrictions contained therein, (iii) such Acquirer
Registrable Units have been otherwise transferred by such Acquirer Holder and
new certificates for such securities not bearing a legend restricting further
transfer have been delivered by the Issuer or its transfer agent and the
subsequent disposition of such securities do not require registration or
qualification under the
Unitholder Rights Agreement 2
Securities Act or any similar state law then in force, or (iv) such Acquirer
Registrable Units cease to be Outstanding for purposes of the Partnership
Agreement.
"Acquisition Agreement" is defined in the Recitals to this Agreement.
"Agreement" is defined in the introductory paragraph to this Agreement.
"Blue Sky Filing" is defined in Section 2.11(a) of this Agreement.
"Blue Sky Laws" means the state securities laws or "blue sky" laws of
the states and territories of the United States.
"Business Day" means a day that is not a Saturday, a Sunday, or a day
on which banking institutions in New York, New York are required to be closed.
"Class D Units" means the Class D Units representing limited partner
interests of the Issuer, the terms of which are set forth in Amendment No. 5 to
the Partnership Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Units" has the meaning specified in the Partnership Agreement.
"Contribution Agreement" is defined in the Recitals to this Agreement.
"Demand Registration" means any of a HHI Demand Registration or an
Acquirer Demand Registration.
"Effective Time" is defined in Article 4 of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"General Partner" means the Person serving as the general partner of
the Issuer at the time the determination is made.
"Governmental Authority" means a federal, state, local or foreign
governmental authority; a state, province, commonwealth, territory or district
thereof; a county or parish; a city, town, township, village or other
municipality; a district, ward or other subdivision of any of the foregoing; any
executive, legislative or other governing body of any of the foregoing; any
agency, authority, board, department, system, service, office, commission,
committee, council or other administrative body of any of the foregoing; any
court or other judicial body; and any officer, official or other representative
of any of the foregoing.
"HHI Demand Registration" shall have the meaning assigned to such term
in Section 2.1(a) hereof.
"HHI Holders" means HHI and any person or entity who is assigned (or it
deemed to have been assigned) rights under this Agreement by HHI or an assignee
thereof as permitted by Section 5.8 hereof.
Unitholder Rights Agreement 3
"HHI Maximum Demand Registration Quantity" shall have the meaning
assigned to such term in Section 2.1(a) hereof.
"HHI Permitted Interruption" is defined in Section 2.1(g) of this
Agreement.
"HHI Registrable Units" means (i) any Common Units owned by HHI on the
date hereof, (ii) any Common Units held by an HHI Holder who is assigned rights
under this Agreement pursuant to Section 5.8 hereof, (iii) any Common Units
acquired by NewLP (or its successor or assign) pursuant to the Pledge Agreement,
and (iv) any Common Units or other securities issued or issuable with respect to
the HHI Registrable Units referred to in clause (i), (ii) or (iii) above by way
of a Common Unit distribution or Common Unit split, in connection with a
combination of Common Units or in connection with any recapitalization, merger,
consolidation or other reorganization of the Issuer. As to any particular HHI
Registrable Units, such HHI Registrable Units shall cease to be HHI Registrable
Units upon the earliest to occur of the following events: (i) a Registration
Statement covering such HHI Registrable Units has been declared effective by the
Commission and such HHI Registrable Units being disposed of in accordance with
such effective Registration Statement, (ii) such HHI Registrable Units are
eligible for sale to the public pursuant to Rule 144 (or any similar provision
then in force) under the Securities Act without being subject to the volume and
manner of sale restrictions contained therein, (iii) such HHI Registrable Units
have been otherwise transferred by such HHI Holder and new certificates for such
securities not bearing a legend restricting further transfer have been delivered
by the Issuer or its transfer agent and the subsequent disposition of such
securities do not require registration or qualification under the Securities Act
or any similar state law then in force, or (iv) such HHI Registrable Units cease
to be Outstanding for purposes of the Partnership Agreement.
"Holders" means the HHI Holders and the Acquirer Holders.
"Issuer" is defined in the introductory paragraph to this Agreement.
"Issuer Registration" means any registration of Common Units for sale
under the Securities Act by the Issuer excluding registrations for Common Units
to be issued in connection with any employee benefit plan or a merger,
consolidation or other business combination registered on Form S-4 or Form S-8
(or any successor form thereto).
"NewLP" is defined in the preamble to this Agreement and includes any
person or entity who is assigned rights of NewLP under this Agreement as
permitted by Section 5.8 of this Agreement.
"NewLP Common Units" means 180,028 Common Units owned by NewLP as of
the date of this Agreement.
"NewLP Permitted Interruption" is defined in Section 2.3(b) of this
Agreement.
"Officer's Certificate" means a certificate signed by the Chief
Executive Officer of the Issuer.
Unitholder Rights Agreement 4
"Outstanding" means, with respect to Units of any class, all Units of
such class that are issued by the Partnership and reflected as outstanding on
the Partnership's books and records as of the date of determination.
"Partnership Agreement" means the Amended and Restated Agreement of
Limited Partnership of the Issuer, as amended by Amendments No. 1, No. 2, No. 3,
No. 4 and No. 5 thereto, and as same may be further amended from time to time
pursuant to the terms thereof.
"Permitted Interruption" means an Acquirer Permitted Interruption,
NewLP Permitted Interruption or HHI Permitted Interruption, as applicable.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization or government (including any agency or political
subdivision thereof).
"Piggyback Registration" is defined in Section 2.4 of this Agreement.
"Proceedings" means all proceedings, actions, claims, suits,
investigations and inquiries by or before any arbitrator or Governmental
Authority.
"Registrable Units" means the HHI Registrable Units and the Acquirer
Registrable Units.
"Registration Expenses" is defined in Section 2.9(a) of this Agreement.
"Registration Statement" means any registration statement of the Issuer
that covers any of the Registrable Units pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
"Rule 144" means Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the Commission.
"Rule 144A" means Rule 144A under the Securities Act, as such Rule may
be amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the Commission.
"Rule 415" means Rule 415 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Six Month Anniversary" means the date that is six months from the
Effective Time.
"Special Units" means the Special Units representing limited partner
interests of the Issuer, the terms of which are set forth in Amendment No. 5 to
the Partnership Agreement.
Unitholder Rights Agreement 5
"2000 Registration Rights Agreement" means the Registration Rights
Agreement, dated as of August 10, 2000, among the Issuer and the other parties
named therein.
"Unitholders" means holders of limited partnership interests of the
Issuer.
"Units" means Common Units and any other securities issued or issuable
with respect to Common Units by way of a Common Unit distribution or Common Unit
split, in connection with a Common Unit contribution or in connection with any
recapitalization, merger, consolidation or other reorganization.
ARTICLE 2
REGISTRATION RIGHTS
Section 2.1 Demand Registrations of HHI Holders.
(a) General. Subject to the restrictions on demand
registrations set forth in Section 2.1(g) hereof, upon the written request of
any of the HHI Holders that the Issuer effect the registration under the
Securities Act of not less than 500,000 HHI Registrable Units (or, if the HHI
Holders collectively own less than 500,000 HHI Registrable Units, not less than
250,000 HHI Registrable Units; (as such numbers are appropriately adjusted to
reflect any Unit split, Unit dividend or Unit combination) and specifying the
intended method of disposition thereof, which request may be submitted at any
time commencing on or after the Effective Time, the Issuer will give prompt
written notice of such request to all other Holders and to all other Persons, if
any, who have contractual rights to request that any of their shares of Units be
piggybacked onto any registration form proposed to be used to register the
Registrable Units so requested by such HHI Holder(s), and thereupon the Issuer
will, subject to the provisions of this Agreement, use its reasonable commercial
efforts to include in the registration under the Securities Act the following:
(i) the HHI Registrable Units which such HHI
Holder(s) have requested the Issuer to register pursuant to the request made in
accordance with the provisions above; and
(ii) all other HHI Registrable Units which the
Holders thereof have requested in writing that the Issuer register, provided,
that such request (A) specifies the intended method of disposition of such
Registrable Units and (B) is given to the Issuer within 15 days after the
receipt of the aforesaid written notice by the Issuer;
(iii) all other Registrable Units which the other
Holders have requested in writing that the Issuer register, provided, that such
request (A) specifies the intended method of disposition of such Registrable
Units and (B) is given to the Issuer within 15 days after the receipt of the
aforesaid written notice by the Issuer; and, provided further, that the other
Holders shall have no right to include other Registrable Units in the
registration if such registration is the first HHI Demand Registration; and
(iv) all other Units which Persons having
contractual registration rights with respect to such Units have requested in
writing that the Issuer register, provided, that such
Unitholder Rights Agreement 6
request (A) specifies the intended method of disposition of such Units and (B)
is given to the Issuer within 15 days after the receipt of the aforesaid written
notice by the Issuer;
all to the extent requisite to permit the intended disposition of the HHI
Registrable Units and other Units of the Issuer to be so registered; provided,
however, that the aggregate maximum number of HHI Registrable Units that the
Issuer shall be obligated to register pursuant to any individual registration
requested pursuant to this Section 2.1(a) (referred to herein as a "HHI Demand
Registration") shall be 1,000,000 Common Units (as such number is appropriately
adjusted to reflect any Unit split, Unit dividend or Unit combination)(the "HHI
Maximum Demand Registration Quantity").
(b) Number of Demand Registrations. Subject to the
provisions of Section 2.1(a) hereof, the HHI Holders shall be entitled to
request a total of three Demand Registrations; provided, that the HHI Holders
shall not be entitled to request a HHI Demand Registration pursuant to Section
2.1(a) more than once in any 12-month period; and further provided, that if
NewLP (or its successor(s) or assign(s)) succeeds to ownership of any of the HHI
Registrable Units pursuant to the Pledge Agreement, NewLP (or its successor(s)
or assign(s), as the case may be) shall have the right as an HHI Holder to
request a total of two Demand Registrations (provided that any request pursuant
to this proviso by NewLP (or its successor(s) or assign(s)) shall,
notwithstanding any other provision of this Agreement, not be subject to any
maximum number of Common Units and not more than one such Demand Registration
may be requested in any 12-month period.
(c) Registration of Other Securities. Whenever the Issuer
shall effect a HHI Demand Registration pursuant to Section 2.1(a) hereof in
connection with a proposed underwritten offering of HHI Registrable Units owned
by any of the HHI Holders, no securities other than Common Units shall be
included among the securities covered by such registration unless (i) the
managing underwriter(s) of such offering shall have advised the Issuer in
writing that the inclusion of such other securities would not adversely affect
the marketing of the HHI Registrable Units requested to be included therein
pursuant to clauses (i) and (ii) of Section 2.1(a) or (ii) any HHI Holder(s)
requesting such registration shall have consented in writing to the inclusion of
such other securities.
(d) Registration Statement Form. An HHI Demand
Registration shall be on such appropriate registration form of the Commission
(i) as shall be selected by the Issuer and shall be acceptable to the HHI
Holders and (ii) as shall permit the disposition of such HHI Registrable Units
in accordance with the intended method or methods of disposition specified in
the HHI Holders' request for such registration, which may include a filing
subject to Rule 415. The Issuer agrees to include in any such registration
statement all information with respect to the HHI Holders that, in the opinion
of counsel to the HHI Holders or counsel to the Issuer, is required to be
included.
(e) Effective Registration Statement. A registration
requested pursuant to Section 2.1(a) hereof shall not be deemed to have been
effected and will not be considered a HHI Demand Registration which may be
requested pursuant to this Agreement if (i) a registration statement with
respect thereto has not become effective under the Securities Act or if the
request for the HHI Demand Registration is withdrawn prior to effectiveness,
(ii) after it has become
Unitholder Rights Agreement 7
effective, either (A) it does not remain effective for a period of at least 90
days (unless the HHI Registrable Units registered thereunder have been sold or
disposed of prior to the expiration of such 90-day period) or (B) such
registration is interfered with by any stop order, injunction or other order or
requirement of the Commission or other governmental agency or court for any
reason and has not thereafter become effective (iii) the conditions to closing
specified in any underwriting agreement entered into in connection with such
registration are not satisfied or waived other than solely by reason of the
failure or refusal of any HHI Holder to satisfy or perform a condition to such
closing or (iv) the HHI Holder(s) are not able to register all of the HHI
Registrable Units requested to be included in such HHI Demand Registration in
compliance with the provisions of Section 2.1(a) or Section 2.1(b). In any
event, the Issuer shall pay all Registration Expenses (as defined below) in
connection with any such registration initiated but deemed not effected in
accordance with the immediately preceding sentence.
(f) Priority on Demand Registrations. With respect to any
HHI Demand Registration that is proposed to involve an underwritten offering as
the intended method of disposition of HHI Registrable Units as specified in the
request for such registration, if the managing underwriter(s) of such proposed
underwritten offering advise the Issuer in writing that in their opinion the
number of Units proposed to be included in any such proposed underwritten
offering exceeds the number of Units which can reasonably be underwritten and
sold in such offering without adversely affecting the marketing of the HHI
Registrable Units requested to be included therein pursuant to clauses (i) and
(ii) of Section 2.1(a) (taking into account the intended method of disposition,
the quantity of HHI Registrable Units requested to be included in such
registration by the HHI Holder(s), the proposed timing of such offering and such
other factors as such managing underwriter(s) deem appropriate), the Issuer
shall advise the HHI Holders of the underwriters' advice and, if the Persons who
requested registration under clauses (i) and (ii) of Section 2.1(a) elect to
proceed with the offering, the Issuer shall include in such registration only
the number of Units, if any, held by parties other than the HHI Holders which in
the opinion of such managing underwriter(s) can be reasonably underwritten and
sold without adversely affecting the marketing of the HHI Registrable Units, and
such number of Units shall be allocated among the HHI Holders, the other Holders
and such other Persons requesting registration of their Units pursuant to
contractual registration rights so as to include (i) first, the HHI Registrable
Units requested to be included therein by any of the HHI Holders up to but not
to exceed the HHI Maximum Demand Registration Quantity (allocated among all HHI
Holders requesting to include HHI Registrable Units in such registration in
proportion, as nearly as practicable, to the number of HHI Registrable Units
requested by each such Person to be included in such registration; (ii) second,
if any Person entitled to "piggyback" registration rights under the 2000
Registration Rights Agreement has requested to include Units in such
registration pursuant to clause (iv) of Section 2.1(a), the Units so requested
to be included; (iii) third, the Registrable Units requested to be included in
such registration pursuant to clause (iii) of Section 2.1(a) (allocated among
all such Holders requesting to include Registrable Units in the registration in
proportion, as nearly as practicable, to the number of Registrable Units
requested by each such Holder to be included in such registration); and (iv)
fourth, other Units requested to be included in such registration pursuant to
clause (iv) of Section 2.1(a) (allocated among all Persons requesting to include
Units in the registration in proportion, as nearly as practicable, to the number
of Units requested by each such Person to be included in such registration).
Unitholder Rights Agreement 8
(g) Restrictions on Demand Registrations. The Issuer may
postpone (such postponement is referred to herein as a "HHI Permitted
Interruption") for a reasonable period of time (not to exceed 90 days in any
12-month period) the filing or the effectiveness of a registration statement for
a HHI Demand Registration (including a "shelf" registration statement filed on
Form S-3 in conjunction with Rule 415) if, at the time it receives a request for
such registration (i) the Issuer is conducting or is about to conduct an
offering of Units and the Issuer is advised by the investment banking firm
engaged by the Issuer to conduct the offering that such offering would be
affected adversely by the registration so demanded and the Issuer furnishes an
Officer's Certificate to that effect or (ii) the General Partner shall determine
in good faith that such offering will interfere with a pending or contemplated
financing, merger, acquisition, sale of assets, recapitalization or other
similar corporate action of the Issuer and the Issuer furnishes an Officer's
Certificate to that effect. Until the expiration of such HHI Permitted
Interruption, the Issuer shall not file or permit the effectiveness of a
registration statement for a demand registration on behalf of Holders other than
the HHI Holders. After such HHI Permitted Interruption, the Issuer shall effect
such registration as promptly as practicable without further request from the
HHI Holders unless such request has been withdrawn.
(h) Selection of Underwriters. The HHI Holders who have
requested a Demand Registration pursuant to clauses (i) and (ii) of Section
2.1(a), shall have the right to select such managing underwriter(s) as shall be
reasonably acceptable to the Issuer to administer the offering of the HHI
Registrable Units, as the case may be, for which an HHI Demand Registration is
requested. The HHI Holders shall, in their sole discretion, negotiate the terms
of the underwriters' fees and expenses, the underwriting discount and commission
and the transfer taxes.
Section 2.2 Demand Registrations of Acquirer Holders.
(a) General. Subject to the restrictions on demand
registrations set forth in Section 2.2(g) hereof, upon the written request of
the Acquirer Holders of not less than 50% of the Acquirer Registrable Units then
outstanding that the Issuer effect the registration under the Securities Act of
not less than 500,000 Acquirer Registrable Units (as such number is
appropriately adjusted to reflect any Unit split, Unit dividend or Unit
combination) and specifying the intended method of disposition thereof, which
request may be submitted at any time commencing on or after the Six Month
Anniversary, the Issuer will give prompt written notice of such request to all
other Holders and to all other Persons, if any, who have contractual rights to
request that any of their shares of Units be piggybacked onto any registration
form proposed to be used to register the Registrable Units so requested by the
Acquirer Holders, and thereupon the Issuer will, subject to the provisions of
this Agreement, use its reasonable commercial efforts to include in the
registration under the Securities Act the following:
(i) the Acquirer Registrable Units which the
Acquirer Holders have requested the Issuer to register pursuant to the request
made in accordance with the provisions above;
(ii) all other Acquirer Registrable Units which
the Acquirer Holders have requested in writing that the Issuer register,
provided, that such request (A) specifies the
Unitholder Rights Agreement 9
intended method of disposition of such Acquirer Registrable Units and (B) is
given to the Issuer within 15 days after the receipt of the aforesaid written
notice by the Issuer;
(iii) all other Registrable Units which the other
Holders have requested in writing that the Issuer register, provided, that such
request (A) specifies the intended method of disposition of such Acquirer
Registrable Units and (B) is given to the Issuer within 15 days after the
receipt of the aforesaid written notice by the Issuer; provided further, that
the other Holders shall have no right to include other Registrable Units in the
registration if such registration is the first Acquirer Demand Registration; and
(iv) all other Units which Persons having
contractual registration rights with respect to such Units have requested in
writing that the Issuer register, provided, that such request (A) specifies the
intended method of disposition of such Units and (B) is given to the Issuer
within 15 days after the receipt of the aforesaid written notice by the Issuer;
all to the extent requisite to permit the intended disposition of the Acquirer
Registrable Units and other equity securities of the Issuer to be so registered;
provided, however, that the aggregate maximum number of Acquirer Registrable
Units that the Issuer shall be obligated to register pursuant to any
registration requested by the Acquirer Holders pursuant to this Section 2.2(a)
(referred to herein as a "Acquirer Demand Registration") shall be 1,000,000
Common Units (as such number is appropriately adjusted to reflect any Unit
split, Unit dividend or Unit combination) (the "Acquirer Maximum Demand
Registration Quantity").
(b) Number of Demand Registrations. Subject to the
provisions of Section 2.2(a) hereof, the Acquirer Holders shall be entitled to
request three Demand Registrations; provided, that the Acquirer Holders shall
not be entitled to request an Acquirer Demand Registration pursuant to Section
2.2(a) more than once in any 12-month period.
(c) Registration of Other Securities. Whenever the Issuer
shall effect an Acquirer Demand Registration pursuant to Section 2.2(a) hereof
in connection with a proposed underwritten offering of Acquirer Registrable
Units owned by Acquirer Holders, no securities other than Common Units shall be
included among the securities covered by such registration unless (i) the
managing underwriter(s) of such offering shall have advised the Issuer in
writing that the inclusion of such other securities would not adversely affect
the marketing of the Acquirer Registrable Units requested to be included therein
pursuant to clauses (i) and (ii) of Section 2.2(a) or (ii) the Acquirer Holders
shall have consented in writing to the inclusion of such other securities.
(d) Registration Statement Form. An Acquirer Demand
Registration shall be on such appropriate registration form of the Commission
(i) as shall be selected by the Issuer and shall be acceptable to the Acquirer
Holders whose Acquirer Registrable Units are to be included therein and (ii) as
shall permit the disposition of such Acquirer Registrable Units in accordance
with the intended method or methods of disposition specified in the Acquirer
Holders' request for such registration, which may include a filing subject to
Rule 415. The Issuer agrees to include in any such registration statement all
information with respect to the Acquirer Holders whose Acquirer Registrable
Units are to be included therein that, in the opinion of counsel to the Acquirer
Holders or counsel to the Issuer, is required to be included.
Unitholder Rights Agreement 10
(e) Effective Registration Statement. A registration
requested pursuant to Section 2.2(a) hereof shall not be deemed to have been
effected and will not be considered a Acquirer Demand Registration which may be
requested pursuant to this Agreement if (i) a registration statement with
respect thereto has not become effective under the Securities Act or if the
request for the Acquirer Demand Registration is withdrawn prior to
effectiveness, (ii) after it has become effective, either (A) it does not remain
effective for a period of at least 90 days (unless the Acquirer Registrable
Units registered thereunder have been sold or disposed of prior to the
expiration of such 90-day period) or (B) such registration is interfered with by
any stop order, injunction or other order or requirement of the Commission or
other Governmental Authority or court for any reason and has not thereafter
become effective or (iii) the conditions to closing specified in any
underwriting agreement entered into in connection with such registration are not
satisfied or waived other than solely by reason of the failure or refusal of any
Acquirer Holder to satisfy or perform a condition to such closing. In any event,
the Issuer shall pay all Registration Expenses (as defined below) in connection
with any such registration initiated but deemed not effected in accordance with
the immediately preceding sentence.
(f) Priority on Demand Registrations. With respect to any
Acquirer Demand Registration that is proposed to involve an underwritten
offering as the intended method of disposition of Acquirer Registrable Units as
specified in the Acquirer Holders' request, if the managing underwriter(s) of
such proposed underwritten offering advise the Issuer in writing that in their
opinion the number of Units proposed to be included in any such proposed
underwritten offering exceeds the number of Units which can reasonably be
underwritten and sold in such offering without adversely affecting the marketing
of the Acquirer Registrable Units requested to be included therein pursuant to
clauses (i) and (ii) of Section 2.2(a) (taking into account the intended method
of disposition, the quantity of Acquirer Registrable Units requested to be
included in such registration by the Acquirer Holders, the proposed timing of
such offering and such other factors as such managing underwriter(s) deem
appropriate), the Issuer shall advise the Acquirer Holders of the underwriters'
advice and, if the Acquirer Holders elect to proceed with the offering, the
Issuer shall include in such registration only the number of Units, if any, held
by parties other than the Acquirer Holders which in the opinion of such managing
underwriter(s) can be reasonably underwritten and sold without adversely
affecting the marketing of the Acquirer Registrable Units, and such number of
Units shall be allocated among the Acquirer Holders, the other Holders and such
other Persons requesting registration of their Units pursuant to contractual
registration rights so as to include (i) first, the Acquirer Registrable Units
requested to be included therein by the Acquirer Holders up to but not to exceed
the Acquirer Maximum Demand Registration Quantity (allocated among all Acquirer
Holders requesting to include Acquirer Registrable Units in the underwriting in
proportion, as nearly as practicable, to the number of Acquirer Registrable
Units requested by each such Acquirer Holder to be included in such
registration); (ii) second, if any Person entitled to "piggyback" registration
rights under the 2000 Registration Rights Agreement has requested to include
Units in such registration pursuant to clause (iv) of Section 2.2(a), the Units
so requested to be included; (iii) third, the Registrable Units requested to be
included in such registration pursuant to clause (iii) of Section 2.2(a)
(allocated among all such Holders requesting to include Registrable Units in the
registration in proportion, as nearly as practicable, to the number of
Registrable Units requested by each such Holder to be included in such
registration); and (iv) fourth, other Units requested to be included in such
registration pursuant to clause (iv) of Section 2.2(a) (allocated among all
Unitholder Rights Agreement 11
Persons requesting to include Units in the underwriting in proportion, as nearly
as practicable, to the number of Units requested by each such Person to be
included in such registration).
(g) Restrictions on Demand Registrations. The Issuer may
postpone (such postponement is referred to herein as an "Acquirer Permitted
Interruption") for a reasonable period of time the filing or the effectiveness
of a registration statement for an Acquirer Demand Registration (including a
"shelf" registration statement filed on Form S-3 in conjunction with Rule 415)
if, at the time it receives a request for such registration (i) the Issuer is
engaged in any active program for repurchase of Units and furnishes an Officer's
Certificate to that effect, (ii) the Issuer is conducting or is about to conduct
an offering of Units and the Issuer is advised by the investment banking firm
engaged by the Issuer to conduct the offering that such offering would be
affected adversely by the registration so demanded and the Issuer furnishes an
Officer's Certificate to that effect or (iii) the General Partner shall
determine in good faith that such offering will interfere with a pending or
contemplated financing, merger, acquisition, sale of assets, recapitalization or
other similar corporate action of the Issuer and the Issuer furnishes an
Officer's Certificate to that effect. Until the expiration of such Acquirer
Permitted Interruption, the Issuer shall not file or permit the effectiveness of
a registration statement for a demand registration on behalf of Holders other
than the Acquirer Holders. After such Acquirer Permitted Interruption, the
Issuer shall effect such registration as promptly as practicable without further
request from the Acquirer Holders unless such request has been withdrawn.
(h) Selection of Underwriters. The Acquirer Holders who
have requested a Demand Registration pursuant to clauses (i) and (ii) of Section
2.21(a) shall have the right to select such managing underwriter(s) as shall be
reasonably acceptable to the Issuer to administer the offering of the Acquirer
Registrable Units for which an Acquirer Demand Registration is requested. The
Acquirer Holders shall, in their sole discretion, negotiate the terms of the
underwriters' fees and expenses, the underwriting discount and commission and
the transfer taxes.
Section 2.3 Shelf Registration Rights of NewLP.
(a) General. The Issuer shall cause its Registration
Statement on Form S-3 in conjunction with Rule 415 (Registration No.
333-107324), which was declared effective under the Securities Act by the
Commission on November 6, 2003 (the "Shelf Registration Statement"), to remain
effective at all times under the Securities Act for a period of at least 150
days after the Effective Time (unless the NewLP Common Units registered
thereunder have been sold or disposed of prior to the expiration of such 150-day
period), so that NewLP may utilize such Shelf Registration Statement with
respect to the NewLP Common Units (a "NewLP Shelf Registration").
Notwithstanding anything herein to the contrary, such 150-day period shall be
extended by the duration of each NewLP Permitted Interruption. As soon as
practicable following the 150th day (as same may be extended in accordance with
the immediately preceding sentence) after the Effective Time, the Issuer and
NewLP shall take such action as is necessary to cause the Shelf Registration
Statement to be amended to (i) withdraw the NewLP Common Units from the Shelf
Registration Statement and (ii) cause NewLP to cease to be a "selling
unitholder" thereunder, and NewLP shall have no further rights with respect to
registration of the NewLP Common Units by the Issuer under the Securities Act.
Unitholder Rights Agreement 12
(b) Restrictions on NewLP Registration. The Issuer may
postpone (such postponement is referred to herein as a "NewLP Permitted
Interruption") for a reasonable period of time (not to exceed 150 days in any
12-month period) the filing or the effectiveness of a registration statement or
any necessary supplement to the prospectus thereunder for a NewLP Shelf
Registration if, at the time it receives a request for such registration (i) the
Issuer is conducting or about to conduct an offering of Units and the Issuer is
advised by the investment banking firm engaged by the Issuer to conduct the
offering that such offering would be affected adversely by the registration so
demanded and the Issuer furnishes an Officer's Certificate to that effect or
(ii) the General Partner shall determine in good faith that such offering will
interfere with a pending or contemplated financing, merger, acquisition, sale of
assets, recapitalization or other similar corporate action of the Issuer and the
Issuer furnishes an Officer's Certificate to that effect. Until the expiration
of such NewLP Permitted Interruption, the Issuer shall not file or permit the
effectiveness of a registration statement for a demand registration on behalf of
Holders. After such NewLP Permitted Interruption, the Issuer shall effect such
registration as promptly as practicable without further request from NewLP
unless such request has been withdrawn.
Section 2.4 Piggyback Registrations.
(a) General. If, at any time commencing at the Effective
Time, (i) the Issuer proposes to register any Common Units for sale under the
Securities Act (including any registration of Common Units pursuant to the
exercise of contractual registration rights by Persons other than the Holders
but excluding registrations for Common Units to be issued in connection with any
employee benefit plan or a merger, consolidation or other business combination
registered on Form S-4 or Form S-8 (or any successor form thereto)) and (ii) the
registration form to be used may be used for the registration of Registrable
Units (a "Piggyback Registration"), the Issuer shall give prompt written notice
(in any event within 10 business days after its receipt of notice of any
exercise of other registration rights) to the Holders of its intention to effect
such a registration and shall include in such registration, subject to the
limitations set forth in this Section 2.4, all of the Registrable Units with
respect to which the Issuer receives from the Holders a written request for
inclusion therein within 10 days after the Holders' receipt of the Issuer's
notice (5 days if the Issuer gives telephonic notice to the Holders, with
written confirmation to follow promptly thereafter via overnight delivery,
stating that (i) such registration will be on Form S-3 (or any successor form)
and (ii) such shorter period of time is required because of a planned filing
date), which request shall specify the number of the Registrable Units proposed
to be disposed of by such Holder and the intended method of disposition thereof.
If the Issuer elects, prior to effectiveness, not to proceed with a primary
registration of its Common Units, it shall not be obligated to register any
Registrable Units.
(b) Priority on Primary Registrations. If a Piggyback
Registration relates to an Issuer Registration and the managing underwriter(s)
of such offering advise the Issuer in writing that in their opinion the number
of Units requested to be included in such offering exceeds the number which can
reasonably be sold in such offering without adversely affecting the marketing of
the Units intended to be sold by the Issuer (taking into account the intended
method of disposition, the quantity of Units desired to be offered and sold by
the Issuer in such offering, the proposed timing of the offering and such other
factors as such managing underwriter(s) deem appropriate), then the Issuer shall
include in such registration only the
Unitholder Rights Agreement 13
number of Units, if any, held by parties other than the Issuer which in the
opinion of such managing underwriter(s) can be reasonably underwritten and sold
without adversely affecting the marketing of the Units proposed to be sold by
the Issuer, and such number of Units shall be allocated among the Issuer, the
Holders and such other Persons requesting registration of their Units pursuant
to contractual registration rights so as to include (i) first, the Units that
the Issuer proposes to sell; (ii) second, in the event that any Person entitled
to "piggyback" registration rights under the 2000 Registration Rights Agreement
has requested to include Units in such registration pursuant to Section 2.4(a),
the Units so requested to be included; (iii) third, Registrable Units requested
to be included in such registration pursuant to Section 2.4(a) by the Holders
(with the Registrable Units to be so included in such registration to be
allocated among the Holders requesting to include their Registrable Units in
such proportion, as nearly as practicable, to the number of Registrable Units
requested by each such Holder to be included in such registration; (iv) fourth,
Units requested to be included in such registration by other Persons having
contractual registration rights (with Units allocated for purposes of this
clause (iv) among such other Persons in proportion, as nearly as practicable, to
the number of Units requested by each such person to be included in such
registration), and; (iv) among such other Persons in proportion, as nearly as
practicable, to the number of Units requested by each such Person to be included
in such registration). If the managing underwriter(s) of such offering
subsequently advises the Issuer in writing that the number of Units which can be
reasonably underwritten and sold without adversely affecting the marketing of
the Units intended to be sold by the Issuer exceeds the number of Units
initially included in the registration, the Issuer shall include in the
registration such number of additional Units that the managing underwriter(s)
advise can be reasonably underwritten and sold without adversely affecting the
marketing of the Units intended to be sold by the Issuer, and such additional
Units shall be allocated among the Issuer, the Holders and such other Persons
requesting registration of their Units in the same manner as specified above in
this Section 3(b) as if such additional Units had been included initially in the
registration.
(c) Priority on Secondary Registrations. If a Piggyback
Registration relates to a proposed underwritten secondary offering of Units on
behalf of holders of the Issuer's securities other than the Holders and the
managing underwriter(s) of such offering advise the Issuer in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can reasonably be underwritten and sold in
such offering without adversely affecting the marketing of the Units proposed to
be sold by the Unitholders exercising demand registration rights (taking into
account the intended method of disposition, the quantity of Units desired to be
sold by such Unitholders in such offering, the proposed timing of such offering
and such other factors as such managing underwriter(s) deem appropriate), then
the Issuer shall include in such registration only the number of Units, if any,
held by parties other than the Unitholders of the Issuer exercising demand
registration rights which in the opinion of such managing underwriter(s) can be
reasonably underwritten and sold without adversely affecting the marketing of
the Units proposed to be sold by the Unitholders exercising demand registration
rights, and such number of Units shall be allocated among the Issuer, the
Holders and such other Persons requesting registration of their Units so as to
include (i) first, if such registration is being made on behalf of other
Unitholders of the Issuer exercising demand registration rights, then the
securities so requested to be included therein in accordance with such demand
registration rights; (ii) second, if any Person entitled to "piggyback"
registration rights under the 2000 Registration Rights Agreement has requested
to include Units in such registration
Unitholder Rights Agreement 14
pursuant to Section 2.4(a), the Units so requested to be included; (iii) third,
Registrable Units requested to be included in such registration pursuant to
Section 2.4(a) by the Holders (with the Registrable Units to be so included in
such registration to be allocated among the Holders requesting to include their
Registrable Units in such proportion, as nearly as practicable, to the number of
Registrable Units requested by each such Holder to be included in such
registration), and; (iv) fourth, the Units requested to be included in such
registration by other Persons having contractual registration rights (with Units
allocated for purposes of this clause (iv) among such Persons in proportion, as
nearly as practicable, to the number of Units requested by each such Person to
be included in such registration). If the managing underwriter of such offering
subsequently advises the Issuer in writing that the number of Units which can be
sold exceeds the number of Units initially included in the registration, the
Issuer shall include in the registration such number of additional Units that
the managing underwriter(s) advise can be reasonably underwritten and sold
without adversely affecting the marketing of the Units proposed to be sold by
the Unitholders exercising demand registration rights, and such additional Units
shall be allocated among the Issuer, the Holders and such other Persons
requesting registration of their Units in the same manner as specified above in
this Section 2.4(c) as if such additional Units had been included initially in
the registration.
(d) Other Registrations. If (i) the Issuer has previously
filed a registration statement with respect to any of the Registrable Units
pursuant to any of Sections 2.1(a), 2.2(a) or 2.3(a) hereof and (ii) such
previous registration has not been withdrawn or abandoned, the Issuer shall not
file or cause to be effective any other registration of any of its equity
securities or securities convertible or exchangeable into or exercisable for its
equity securities under the Securities Act (except on Form S-8 or S-4 or any
successor form), whether on its own behalf or at the request of any holder or
holders of such securities, until a period of at least 90 days has elapsed from
the effective date of such previous registration; provided, however, that this
Section 2.4(d) shall not prohibit (i) the Issuer from filing a "shelf"
registration statement on Form S-3 in conjunction with Rule 415 (or any other
registration form that is available for use in conjunction with Rule 415) with
respect to offerings of securities from time to time under Rule 415 or (ii) the
Issuer or any selling Unitholder from making any offering of securities
thereunder, in either event during the 90-day period referred to above in this
Section 2.4(d).
(e) Piggyback Not A Demand Registration. If the Holder's
participation in a registration is pursuant to a Piggyback Registration in
connection with an underwritten primary registration on behalf of the Issuer as
described in any of Section 2.4(a) hereof, then such participation by the
Holders shall not count as a Demand Registration of the Holders permitted under
Sections 2.1(a), 2.2(a) or 2.3(a) hereof.
Unitholder Rights Agreement 15
Section 2.5 General.
(a) Holdback Agreements. Each of the Holders agrees not
to effect any public sale or public distribution of equity securities of the
Issuer, or any securities convertible into or exchangeable or exercisable for
equity securities of the Issuer, including, without limitation, sales pursuant
to Rule 144 (or any similar rule then in effect), during the 10 days prior to,
and the 90 days beginning on, the effective date of any Issuer Registration,
Demand Registration or any Piggyback Registration relating to an underwritten
offering in which Units or securities of the Issuer convertible into or
exchangeable for Common Units are included (except as part of such underwritten
registration) unless the underwriters managing the underwritten offering
otherwise agree.
(b) Agreement by the Issuer. The Issuer agrees not to
effect any public sale or distribution of its equity securities, or any
securities convertible into or exchangeable or exercisable for its equity
securities, during the 10 days prior to and during the 90 days beginning on the
effective date of any underwritten Demand Registration or any underwritten
Piggyback Registration in which shares of Registrable Units are included unless
the underwriters managing the registered public offering otherwise agree.
(c) Registration Procedures. Whenever a Holder requests
registration pursuant to this Agreement, the Issuer shall use its reasonable
commercial efforts to effect the registration of Registrable Units for which
registration is requested in accordance with the intended method of disposition
thereof, and pursuant thereto the Issuer shall as expeditiously as possible:
(i) prepare and file with the Commission a
registration statement with respect to such securities and use its reasonable
commercial efforts to cause such registration statement to become effective as
soon thereafter as possible;
(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 90 days after such
registration statement has become effective under the Securities Act, provided,
that the Issuer shall have no obligation pursuant to this Agreement to maintain
the effectiveness of such registration statement after the sale of the
securities registered thereunder or after the 90th day following the date such
registration statement has become effective under the Securities Act (other than
a "shelf" registration statement filed on Form S-3, the effectiveness of which
shall be maintained until the earlier to occur of (A) the sale of the securities
requested thereunder and (B) the 365th day following the date such shelf
registration statement has become effective under the Securities Act, provided,
that if a Permitted Interruption prior to such date has lasted more than 45
days, then such date shall be extended by the number of days by which any
Permitted Interruption has lasted more than 45 days) the date the Holders of
Registrable Securities registered for sale thereunder agree that the
effectiveness need not be maintained), and shall comply with the provisions of
the Securities Act with respect to the disposition of all securities owned by
the Holder that are covered by such registration statement during such period in
accordance with the intended methods of disposition by the Holder;
Unitholder Rights Agreement 16
(iii) furnish to such Holder such number of copies
of such registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each preliminary
prospectus) and such other documents as the Holder may request in order to
facilitate the disposition of the shares of Registrable Units owned by such
Holder;
(iv) use its reasonable commercial efforts to
register or qualify such shares of Registrable Units under such other securities
or Blue Sky Laws of such jurisdictions as such Holder reasonably requests
(provided, that the Issuer will not be required to (A) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this sub-clause (iv), (B) subject itself to taxation in any such
jurisdiction or (C) consent to general service of process in such jurisdiction);
(v) provide a transfer agent and registrar for
all such Registrable Units no later than the effective date of such registration
statement;
(vi) obtain a "cold comfort" letter from the
Issuer's independent public accountants in customary form, covering such matters
of the type customarily covered by "cold comfort" letters delivered to
underwriters; and obtain an opinion of counsel for the Issuer in customary form,
covering such matters of the type customarily covered in opinions of legal
counsel delivered to underwriters;
(vii) if underwriters are engaged in connection
with any registration referred to in this Agreement, the Issuer shall provide
indemnification, representations, covenants, opinions, and other assurances to
the underwriters in form and substance reasonably satisfactory to such
underwriter;
(viii) notify such Holder and the managing
underwriters, if any, promptly, and (if requested by any such Person) confirm
such advice in writing, (A) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and, with respect to a registration
statement or any post-effective amendment, when the same has become effective,
(B) of any request by the Commission for amendments or supplements to a
registration statement or related prospectus or for additional information, (C)
of the issuance by the Commission of any stop order suspending the effectiveness
of a registration statement or the initiation of any proceedings for that
purpose, (D) of the receipt by the Issuer of any notification with respect to
the suspension of the qualification of any of the registrable securities for
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose, (E) of the happening of any event which requires the making of any
changes in a registration statement or related prospectus so that such documents
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances under which such
statements are made, and (F) of the Issuer's reasonable determination that a
post-effective amendment to a registration statement would be required;
(ix) notify such Holder at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the occurrence of any event as a result of which the prospectus included
in such registration statement contains an untrue statement of a
Unitholder Rights Agreement 17
material fact or omits any fact necessary to make the statements therein not
misleading, in light of the circumstances under which such statements were made,
and, at the request of such Holder, the Issuer shall prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such shares such amended or supplemented prospectus shall not contain an
untrue statement of a material fact or omit to state any fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading;
(x) if requested by the managing underwriters or
such Holder, incorporate in a prospectus supplement or post-effective amendment
such information as the managing underwriter(s) and such Holder agree should be
included therein relating to the sale and distribution of Registrable Units,
including, without limitation, information with respect to the number of
Registrable Units being sold to such underwriters, the purchase price being paid
therefor by such underwriters and with respect to any other terms of the
underwritten (or best efforts underwritten) offering of the Registrable Units to
be sold in such offering; make all required filings of such prospectus
supplement or post-effective amendment as soon as notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and
supplement or make amendments to any registration statement if requested by such
Holder or any underwriter of such shares;
(xi) furnish to such Holder and each managing
underwriter, without charge, such signed copies of the registration statement or
statements and any post-effective amendment thereto, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits (including those incorporated by reference) as such Holder or
managing underwriter may reasonably request;
(xii) cooperate with such Holder and the managing
underwriter(s), if any, to facilitate the timely preparation and delivery of
certificates representing shares to be sold and not bearing any restrictive
legends unless required by applicable law; and enable such shares to be in such
denominations and registered in such names as the managing underwriter(s) may
request at least two business days prior to any sale of shares to the
underwriters;
(xiii) in the case of an underwritten offering,
enter into such customary agreements (including underwriting agreements in
customary form) and take all such other actions as such Holder or the
underwriter(s), if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Units; and
(xiv) make available for inspection by such
Holder, any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Issuer, and cause the Issuer's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement.
Section 2.6 Issuer Reports. The Issuer shall timely file all reports
required to be filed by it under the Securities Act and the Exchange Act and the
General Rules and Regulations promulgated by the Commission thereunder, and take
such further reasonable action as may be
Unitholder Rights Agreement 18
necessary or appropriate for the Issuer to use Form S-2 or S-3 (or any similar
registration form hereafter adopted by the Commission) to register the
Registrable Units for sale thereon.
Section 2.7 Information To Be Furnished By The Holders. In connection
with any registration of Registrable Units hereunder, the Issuer may require the
Holder(s) whose securities are being registered to furnish the Issuer with such
information regarding such Holder and the distribution of such Registrable Units
as the Issuer may from time to time reasonably request in writing in order to
comply with the Securities Act. Each such Holder agrees to notify the Issuer as
promptly as practicable of any inaccuracy or change in information previously
furnished to the Issuer or of the occurrence of any event in either case as a
result of which any prospectus relating to such registration contains untrue
statements of a material fact regarding such Holder or the distribution of such
Registrable Units or omits to state any material fact regarding such Holder or
the distribution of such Registrable Units or omits to state any material fact
regarding such Holder or the distribution of such Registrable Units required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which such statements were made, and to
promptly furnish to the Issuer any additional information required to correct
and update any previously furnished information or required such that such
prospectus shall not contain, with respect to such Holder or the distribution of
such Registrable Units, an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which such
statements are made.
Section 2.8 Suspension Of Offering Pending Prospectus Supplement Or
Amendment. Each of the Holders agrees that, upon receipt of any notice from the
Issuer of the occurrence of any event of the kind described in Section
2.5(c)(viii)(B), (C), (D), (E) or (F) hereof, such Holder will forthwith
discontinue disposition of the Registrable Units covered by such registration
statement or prospectus until such Holder's receipt of the copies of the
supplemented or amended prospectus relating to such registration statement or
prospectus, or until it is advised in writing by the Issuer that the use of the
applicable prospectus may be resumed, and has received copies of any additional
or supplemental filings which are incorporated by reference in such prospectus,
and, if so directed by the Issuer, such Holder will deliver to the Issuer all
copies, other than permanent file copies then in such Holder's possession, of
the prospectus covering the Registrable Units current at the time of receipt of
such notice.
Unitholder Rights Agreement 19
Section 2.9 Registration Expenses.
(a) General. All expenses incident to the Issuer's
performance and execution of Demand Registrations or Piggyback Registrations,
and the Issuer's performance of or compliance with this Agreement, including,
without limitation, all registration and filing fees, fees and expenses of
compliance with securities or Blue Sky Laws, expenses and fees for listing the
securities on the appropriate securities exchanges, all internal expenses, the
expense of any annual audit or quarterly review, printing expenses, messenger
and delivery expenses, fees and disbursements of counsel for the Issuer and all
independent certified public accountants (including the expenses of any special
audit and "cold comfort" letters required by or incident to such performance),
and fees and costs of underwriters (excluding discounts and commissions and fees
of underwriters, selling brokers, dealer managers or similar securities industry
professionals relating to the distribution of the Registrable Units) and other
Persons retained by the Issuer (all such expenses being herein called
"Registration Expenses"), shall be borne by the Issuer.
(b) Payment for Holder Counsel Fees. In connection with
any Demand, Registration or Piggyback Registration, each of the Holders will be
responsible for the fees and disbursements of any law firm or law firms chosen
by such Holders to represent them.
(c) Payment of Expenses by the Holders. Each of the
Holders agrees to pay the underwriters' fees and expenses, the underwriters'
discounts and commissions and the commissions and fees, if any, payable in
respect of selling brokers, dealer managers or similar securities industry
professionals, and transfer taxes allocable to the registration of such Holder's
securities so included in any Demand Registration or Piggyback Registration
pursuant to this Agreement.
Section 2.10 Underwritten Offerings.
(a) Underwriting Agreement. In any underwritten offering
by a Holder pursuant to a registration requested under any of Sections 2.1(a),
2.2(a) or 2.3(a) or 2.4(a) hereof, the Issuer shall enter into an underwriting
agreement which shall be reasonably satisfactory in form and substance to such
Holder and the underwriters and which shall contain representations, warranties
and agreements (including indemnification agreements to the effect and
consistent with that provided in Section 2.11 hereof) as are customarily
included by an issuer in underwriting agreements with respect to primary
distributions. Each of the Holders whose Registrable Units are included in any
registration shall be a party to such underwriting agreement and may, at its
option, require that any or all of the representations and warranties by, and
the other agreements on the part of, the Issuer to and for the benefit of such
underwriters shall also be made to and for the benefit of such Holder and that
any or all of the conditions precedent to the obligations of such underwriters
under such underwriting agreement be conditions precedent to the obligations of
such Holder.
(b) Condition to Participation and Qualifications to
Obligations Under Registration Covenants. The obligations of the Issuer to use
its reasonable commercial efforts to cause the Registrable Units to be
registered under the Securities Act are subject to each of the conditions that
none of the Holders may participate in any underwritten offering hereunder
Unitholder Rights Agreement 20
unless such Holder (a) agrees to sell the Registrable Units on the basis
provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
Section 2.11 Indemnification.
(a) By the Issuer. In the event of any registration of
any Registrable Units under the Securities Act, the Issuer will, and hereby
does, indemnify and hold harmless, to the fullest extent permitted by law, each
Holder whose Registrable Units are included therein, its directors and officers,
each other Person who participates as an underwriter in the offering or sale of
such securities and each other Person, if any, who controls such seller or any
such underwriter within the meaning of the Securities Act, against any and all
losses, claims, damages, liabilities and expenses, joint or several, (or actions
or proceedings, whether commenced or threatened, in respect thereof) to which
they or any of them may become subject under the Securities Act or any other
statute or common law, including any amount paid in settlement of any
litigation, commenced or threatened, and to reimburse them for any legal or
other expenses incurred by them in connection with investigating any claims and
defending any actions, insofar as any such losses, claims, damages, liabilities,
expenses or actions arise out of or are based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement relating to the sale of such securities or any post-effective
amendment thereto or in any filing made in connection with the qualification of
the offering under Blue Sky or other securities laws or jurisdictions in which
the Registrable Units are offered ("Blue Sky Filing"), or the omission or
alleged omission to state therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading or (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus, if used prior to the
effective date of such registration statement (unless such statement is
corrected in the final prospectus and the Issuer has previously furnished copies
thereof to each of such Holders and the underwriters), or contained in the final
prospectus (as amended or supplemented if the Issuer shall have filed with the
Commission, and furnished to such Holders and the underwriters of such offering
copies thereof, prior to the written confirmation of any sale to the Person
asserting liability, any amendment thereof or supplement thereto) if used within
the period during which the Issuer is required to keep the registration
statement to which such prospectus relates current, or the omission or alleged
omission to state therein (if so used) a material fact necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the indemnification agreement
contained herein shall not (i) apply to such losses, claims, damages,
liabilities, expenses or actions arising out of, or based upon, any such untrue
statement or alleged untrue statement, or any such omission or alleged omission,
if such statement or omission was made in reliance upon and in conformity with
information furnished to the Issuer by any of the Holders or such underwriter
specifically for use in connection with preparation of the registration
statement, any preliminary prospectus or final prospectus contained in the
registration statement, any such amendment or supplement thereto or any Blue Sky
Filing or (ii) inure to the benefit of any underwriter or any Person controlling
such underwriter, to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of such Person's
failure to send or give a copy of the final prospectus, as the same may be then
Unitholder Rights Agreement 21
supplemented or amended, to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Units to such Person if such statement
or omission was corrected in such final prospectus. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
such seller or any such director, officer or controlling Person and shall
survive the transfer of such securities by such seller.
(b) By the Holders. The Issuer may require, as a
condition to including any Registrable Units in any registration statement filed
pursuant to any of Sections 2.1, 2.2, 2.3 or 2.4 hereof, that the Issuer shall
have received an undertaking satisfactory to it from each of the Holders whose
Registrable Units are to be included therein, to indemnify and hold harmless (in
the same manner and to the same extent as set forth in Section 2.11(a) hereof)
the Issuer, its General Partner, each director of the General Partner, each
officer of the General Partner and each other Person, if any, who controls the
Issuer within the meaning of the Securities Act, with respect to any untrue
statement or alleged untrue statement in, or omission or alleged omission from,
such registration statement, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, if such statement or
omission was made in reliance upon and in conformity with information furnished
to the Issuer by such Holder specifically for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, amendment or
supplement. Such indemnity shall remain in full force and effect, regardless of
any investigation made by or on behalf of the Issuer or any such director,
officer or controlling Person and shall survive the transfer of such securities
by such seller.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in Sections 2.11(a) or 2.11(b) hereof, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action, provided, that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under Sections 2.11(a) or 2.11(b) hereof, as the case may be, except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
the indemnifying party shall be entitled to participate in and, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, to
assume the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. In the event that
the indemnifying party advises an indemnified party that it will contest a claim
for indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such Person of its election to
defend, settle or compromise, at its sole cost and expense, any action,
proceeding or claim (or discontinues its defense at any time after it commences
such defense), then the indemnified party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and until
the indemnifying party elects in writing to assume and does so assume the
defense of any such claim, proceeding or action, the indemnified party's costs
and expenses arising out of the
Unitholder Rights Agreement 22
defense, settlement or compromise of any such action, claim or proceeding shall
be losses subject to indemnification hereunder. The indemnified party shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
indemnified party which relates to such action or claim. The indemnifying party
shall keep the indemnified party fully apprised at all times as to the status of
the defense or any settlement negotiations with respect thereto. If the
indemnifying party elects to defend any such action or claim, then the
indemnified party shall be entitled to participate in such defense with counsel
of its choice at its sole cost and expense. If the indemnifying party does not
assume such defense, the indemnified party shall keep the indemnifying party
apprised at all times as to the status of the defense; provided, however, that
the failure to keep the indemnifying party so informed shall not affect the
obligations of the indemnifying party hereunder. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation.
(d) Contribution. If the indemnification provided for in
or pursuant to Sections 2.11(a) or 2.11(b) hereof is due in accordance with the
terms thereof, but is held by a court to be unavailable or unenforceable in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified Person as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses as well as the relative benefits
received by the indemnifying party on the one hand and of the relative benefits
of the indemnified party on the other hand. The relative fault of the
indemnifying party on the one hand and of the indemnified Person on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the indemnifying
party or by the indemnified party, by such party's relative intent, knowledge,
access to information and opportunity to correct or prevent such statement, or
omission. The relative benefits of the indemnifying party and the indemnified
party shall be determined by reference to, among other things, the net proceeds
received by each such party from the offering and sale of Units.
ARTICLE 3
EXCLUSIVITY AND WAIVER OF REGISTRATION RIGHTS
NewLP hereby acknowledges and agrees that the rights granted to NewLP
pursuant to this Agreement are the sole and exclusive rights of NewLP with
respect to the registration of NewLP Common Units and HHI Registrable Units. If
NewLP succeeds to ownership of any of the HHI Registrable Units pursuant to the
terms of the Pledge Agreement, Acquirer hereby agrees to waive and relinquish,
for itself and on behalf of their Affiliates, all rights of Acquirer
Unitholder Rights Agreement 23
and their Affiliates under Section 7.13 of the Partnership Agreement and this
Agreement until such time as the Pledged Units are no longer HHI Registrable
Units.
ARTICLE 4
EFFECTIVE TIME AND TERM OF THIS AGREEMENT
This Agreement will be effective for all purposes as of the closing of
the transactions effected pursuant to the Contribution Agreement (the "Effective
Time") and will continue in full force and effect until the first to occur of
(i) the fifth anniversary of the Effective Time and (ii) the date that all of
the Holders shall have sold or otherwise disposed of all right, title and
interest in their Registrable Units in compliance with applicable law and the
applicable terms and provisions of this Agreement, provided, however, that no
such termination shall affect the waiver under Article 3 hereof which shall
continue in full force and effect thereafter. This Agreement will terminate and
be of no further force or effect upon any termination of the Contribution
Agreement.
ARTICLE 5
MISCELLANEOUS
Section 5.1 Specific Enforcement. Each party acknowledges and agrees
that the other party could be irreparably damaged in the event any of the
provisions of this Agreement were not performed by the party required to perform
the same in accordance with their specific terms or were otherwise breached.
Each party accordingly agrees that the other party shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to specifically enforce the terms and provisions thereof in any
court of the United States or any state thereof having jurisdiction, in addition
to any remedy to which a party may be entitled at law or equity.
Section 5.2 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void, or unenforceable, the remainder of the terms, provisions,
covenants and restrictions shall remain in full force and effect and shall in no
way be affected, impaired or invalidated. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such
which may be hereafter declared invalid, void or unenforceable.
Section 5.3 Amendments. This Agreement contains the entire
understanding of the parties with respect to the registration of Registrable
Units, and may be amended only by an agreement in writing signed by (i) the
Issuer, (ii) if any HHI Registrable Units then remain outstanding, a majority of
the HHI Registrable Units and (iii) if any Acquirer Registrable Units then
remain outstanding, a majority of the Acquirer Registrable Units. The provisions
of Section 2.3 of this Agreement may be amended only by an agreement signed in
writing by the Issuer and NewLP. Notwithstanding the consent requirements set
forth in the previous sentence, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Holders of Registrable Units whose securities are being sold pursuant
to a registration statement and that does not directly or indirectly affect,
impair, limit or compromise the rights of other Holders of Registrable Units may
be given by Holders of at least a majority in
Unitholder Rights Agreement 24
aggregate number of the Registrable Units being tendered or being sold by such
Holders pursuant to such registration statement and, provided further, that no
such modification, amendment or waiver under this sentence may treat any Holder
more adversely than any other Holder without such Holder's written consent.
Section 5.4 Descriptive Headings. Descriptive headings are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
Section 5.5 Counterparts. For the convenience of the parties, any
number of counterparts of this Agreement may be executed by one or more parties
hereto and each such executed counterpart shall be, and shall be deemed to be,
an original instrument.
Section 5.6 Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein and all legal process in
regard hereto shall be validly given, made or served, if in writing and
delivered personally, by facsimile transmission (except for legal process) or
sent by registered mail, postage prepaid, to the Holders at the addresses set
forth on the signature pages hereto (or at such other addresses as shall be
specified by any such Holder by like notice) or to any of the other Parties at
the addresses (or at such other addresses as shall be specified by the Parties
by like notice) set forth below:
(a) If to NewLP:
TAAP LP
___________________________________
___________________________________
Attention:___________________________
Facsimile:___________________________
with a copy to
Andrews Kurth LLP
600 Travis Street
Suite 4200
Houston, Texas 77002
Attention: G. Michael O'Leary
Facsimile: (713) 220-4285
(b) If to Acquirer:
c/o ETC Holdings, LP
2838 Woodside Street
Dallas, Texas
Attention: Clay Kutch
Facsimile: (214) 981-0701
Unitholder Rights Agreement 25
with a copy to:
Thompson & Knight L.L.P.
1700 Pacific Avenue
Suite 3300
Dallas, Texas 75201
Attention: Jeffrey A. Zlotky
Facsimile: (214) 969-1751
(c) If to the Issuer or HHI:
Heritage Propane Partners, L.P.
8801 South Yale
Suite 310
Tulsa, Oklahoma 74137
(918) 492-7272
Attention: Michael Krimbill
Facsimile: (918) 493-7290
with a copy to:
Doerner, Saunders, Daniel & Anderson L.L.P.
320 South Boston Avenue
Suite 500
Tulsa, Oklahoma 74103
(918) 591-5207 Attention: Robert A.
Burk Facsimile: (918) 591-5360
and
Thompson & Knight L.L.P.
1700 Pacific Avenue
Suite 3300
Dallas, Texas 75201
Attention: Jeffrey A. Zlotky
Facsimile: (214) 969-1751
Notice given by facsimile shall be deemed delivered on the day the sender
receives facsimile confirmation that such notice was received at the facsimile
number of the addressee. Notice given by mail as set out above shall be deemed
delivered three days after the date the same is postmarked.
Section 5.7 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. EACH OF THE PARTIES
HERETO AGREES TO SUBMIT TO THE JURISDICTION OF
Unitholder Rights Agreement 26
THE STATE OR FEDERAL COURTS OF THE STATE OF TEXAS IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
Section 5.8 Successors And Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent holders of the Registrable Units; provided,
however, that nothing herein shall be deemed to permit any assignment, transfer
or other disposition of Registrable Units in violation of the terms hereof or
any other agreement to which the parties may be subject; and provided further,
that Holders of Registrable Units may not assign their rights under this
Agreement except in connection with a transfer of Registrable Units and then
only insofar as relates to such Registrable Units. If any transferee of any
Holder shall acquire Registrable Units, in any manner, whether by operation of
law or otherwise, such Registrable Units shall be held subject to all of the
terms of this Agreement, and by taking and holding such Registrable Units, such
Person shall be conclusively deemed to have agreed to be bound by and to perform
all of the terms and provisions of this Agreement, and such Person shall be
entitled to receive the benefits hereof. If NewLP (or any of its successor(s) or
assign(s)) succeeds to ownership of any of the HHI Registrable Units pursuant to
the terms of the Pledge Agreement, HHI shall concurrently with the succession by
NewLP (or such successor(s) or assign(s)) to ownership of such HHI Registrable
Units be deemed to have assigned to NewLP (or such successor(s) or assign(s), as
the case may be) its rights under this Agreement with respect to the Pledged
Units then owned by NewLP pursuant to the terms of the Pledge Agreement and such
units shall continue to be "HHI Registrable Units" and NewLP (or such
successor(s) or assign(s), as the case may be) shall be an "HHI Holder" for all
purposes under this Agreement as if it were originally named an HHI Holder
herein.
Section 5.9 Entire Agreement. This Agreement, together with the
schedules and exhibits hereto, constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof and supercedes all
prior agreements, both written and oral, among the parties hereto with respect
to the subject matter hereof.
Unitholder Rights Agreement 27
IN WITNESS WHEREOF, the Issuer and HHI have caused this Agreement to be
duly executed by their respective officers, each of whom is duly and validly
authorized and empowered, all as of the day and year first above written.
HERITAGE PROPANE PARTNERS, L.P.
By: U.S. PROPANE, L.P.
ITS GENERAL PARTNER
By: U.S. PROPANE, L.L.C.
ITS GENERAL PARTNER
By:___________________________________
Name:
Title:
HERITAGE HOLDINGS, INC.
By:___________________________________
Name:
Title:
TAAP LP
By: TAAP GP LLC
ITS GENERAL PARTNER
By:___________________________________
Name:
Title:
LA GRANGE ENERGY, L.P.
By: LE GP, LLC
ITS GENERAL PARTNER
By:___________________________________
Name:
Title:
Unitholder Rights Agreement
EXHIBIT 10.2.8
HERITAGE OPERATING, L.P.
SIXTH AMENDMENT AGREEMENT
Re: Note Purchase Agreement dated as of June 25, 1996
Note Purchase Agreement dated as of November 19, 1997
Note Purchase Agreement dated as of August 10, 2000
Dated as of
November 18, 2003
To each of the Holders named
in Schedule 1 to this Sixth
Amendment Agreement
Ladies and Gentlemen:
Reference is made to
(i) the Note Purchase Agreement dated as of June
25, 1996 (the "Original 1996 Agreement"), among Heritage Operating,
L.P., a Delaware limited partnership (the "Company") and the Purchasers
named in the Purchaser Schedule attached thereto, as amended by a
letter agreement (the "Letter Agreement") dated July 25, 1996, a First
Amendment Agreement (the "First Amendment Agreement") dated as of
October 15, 1998, a Second Amendment Agreement (the "Second Amendment
Agreement") dated as of September 1, 1999, a Third Amendment Agreement
(the "Third Amendment Agreement") dated as of May 31, 2000, a Fourth
Amendment Agreement (the "Fourth Amendment Agreement") dated as of
August 10, 2000, and a Fifth Amendment Agreement (the "Fifth Amendment
Agreement") dated as of December 28, 2000 (said Original 1996
Agreement, as amended by the Letter Agreement, the First Amendment
Agreement, the Second Amendment Agreement, the Third Amendment
Agreement, the Fourth Amendment Agreement and the Fifth Amendment
Agreement, being hereinafter referred to as the "Outstanding 1996
Agreement") under and pursuant to which the Company issued, and there
are presently outstanding, $96,000,000 aggregate principal amount of
its 8.55% Senior Secured Notes due June 30, 2011 (the "1996 Notes");
and
(ii) the Note Purchase Agreement dated as of
November 19, 1997 (the "Original 1997 Agreement"), among the Company
and the Purchasers named in the Initial Purchaser Schedule attached
thereto, as amended by the First Amendment Agreement dated as of
October 15, 1998, a Second Amendment Agreement (the "Second Amendment
Agreement") dated as of September 1, 1999, a Third Amendment Agreement
(the "Third Amendment Agreement") dated as of May 31, 2000, a Fourth
Amendment Agreement (the "Fourth Amendment Agreement") dated August 10,
2000 and a Fifth Amendment Agreement (the "Fifth Amendment Agreement")
dated as of December 28, 2000 (said Original 1997 Agreement, as so
amended by the First Amendment Agreement, the Second Amendment
Agreement, the Third Amendment Agreement, the Fourth Amendment
Agreement and the Fifth Amendment Agreement, being hereinafter referred
to as the "Amended Original 1997 Agreement"), under and pursuant to
which the Company issued, and there are presently outstanding,
$12,000,000 aggregate principal amount of its 7.17% Series A Senior
Secured Notes due November 19, 2009 (the "Series A Notes") and
$20,000,000 aggregate principal amount of its 7.26% Series B Senior
Secured Notes due November 19, 2012 (the "Series B Notes"), as
supplemented by the First Supplemental Note Purchase Agreement dated as
of March 13, 1998 (the "First Supplemental Agreement") among the
Company and the Purchasers named in the Supplemental Purchaser Schedule
attached thereto, under and pursuant to which the Company issued, and
there are presently outstanding, $2,142,857, aggregate principal amount
of its 6.50% Series C Senior Secured Notes due March 13, 2007 (the
"Series C Notes") (the Amended Original 1997 Agreement as supplemented
by the First Supplemental Agreement is hereinafter sometimes referred
to as the "Outstanding 1997 Agreement"); and
(iii) the Note Purchase Agreement dated as of
August 10, 2000 (the "Original 2000 Agreement"), among the Company and
the Purchasers named in the Initial Purchaser Schedule attached
thereto, as amended by the Fifth Amendment Agreement (the "Fifth
Amendment Agreement") dated as of December 28, 2000 (said Original 2000
Agreement, as so amended by the Fifth Amendment Agreement, being
hereinafter referred to as the "Amended Original 2000 Agreement") under
and pursuant to which the Company issued, and there are presently
outstanding, (a) $12,800,000 aggregate principal amount of its 8.47%
Series A Senior Secured Notes due August 15, 2007 (the "2000 Series A
Notes"), (b) $32,000,000 aggregate principal amount of its 8.55% Series
B Senior Secured Notes due August 15, 2010 (the "2000 Series B Notes"),
(c) $27,000,000 aggregate principal amount of its 8.59% Series C Senior
Secured Notes due August 15, 2010 (the "2000 Series C Notes"), (d)
$58,000,000 aggregate principal amount of its 8.67% Series D Senior
Secured Notes due August 15, 2012 (the "2000 Series D Notes"), (e)
$7,000,000 aggregate principal amount of its 8.75% Series E Senior
Secured Notes due August 15, 2015 (the "2000 Series E Notes"), (f)
$40,000,000 aggregate principal amount of its 8.87% Series F Senior
Secured Notes due August 15, 2020 (the "2000 Series F Notes")"), as
supplemented by the First Supplemental Note Purchase Agreement dated as
of May 24, 2001 (the "First Supplemental Agreement") among the Company
and the Purchasers named in the Supplemental Purchaser Schedule
attached thereto, under and pursuant to which the Company issued, and
there are presently outstanding, (i) $19,000,000 aggregate principal
amount of its 7.21% Series G Senior Secured Notes due May 15, 2008 (the
"2001 Series G Notes"), (ii) $8,000,000 aggregate principal amount of
its 7.89% Series H Senior Secured Notes due May 15, 2016 (the "2001
Series H Notes") and (iii) $16,000,000 aggregate principal amount to
its 7.99% Series I Senior Secured Notes due May 15, 2013 (the "2001
Series I Notes") (the
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Amended Original 2000 Agreement as supplemented by the First
Supplemental Agreement is hereinafter sometimes referred to as the
"Outstanding 2000 Agreement").
The Outstanding 1996 Agreement, the Outstanding 1997 Agreement and the
Outstanding 2000 Agreement are hereinafter sometimes collectively referred to as
the "Outstanding Agreements". The 1996 Notes, Series A Notes, Series B Notes,
Series C Notes, Series D Notes, Series E Notes, 2000 Series A Notes, 2000 Series
B Notes, 2000 Series C Notes, 2000 Series D Notes, 2000 Series E Notes, 2000
Series F Notes, 2001 Series G Notes, 2001 Series H Notes and 2001 Series I Notes
are hereinafter sometimes collectively referred to as the "Outstanding Notes."
Capitalized terms used herein without definition shall have the respective
meanings assigned to such terms in the Outstanding Agreements.
The Company now desires to amend, waive and modify certain provisions
of the Outstanding Agreements. You are the owner and holder of the Outstanding
Notes set forth opposite your name on Schedule 1 hereto. The Company hereby
requests that, from and after the satisfaction of each of the conditions to
effectiveness set forth in Article III below, said amendments, waivers and
modifications shall be deemed to have been given and said Outstanding Agreements
shall be amended in the respects, but only in the respects, hereinafter set
forth.
ARTICLE I
AMENDMENTS TO OUTSTANDING AGREEMENTS
I-A. Section 4 of each of the Outstanding Agreements is hereby amended
by (i) inserting into the introduction paragraph thereof the phrase "and Section
4J (with respect to all Notes without regard to Series)" immediately following
the phrase "and Section 4C (with respect to all Notes without regard to Series)"
and (ii) inserting the following new Section 4J immediately following Section 4I
thereof as follows (provided that with respect to the Outstanding 1996
Agreement, in addition to the foregoing, Section 4H shall be inserted as
"[RESERVED]."):
"Section 4J. Contingent Payments on Cap Ex Difference. (i) By
no later than the 30th day following the delivery of financial
information pursuant to clause (ii) of Section 5A, if the Company has
determined that Cap Ex Difference exists as of the last day of the then
ended Fiscal Year of the Company, the Company will offer to prepay (at
the price specified below and upon notice as provided in clause (ii) of
this Section 4J) a principal amount of the outstanding Notes and other
Parity Debt (other than Indebtedness permitted by Section 6B(ii)), if
any, on a pro rata basis, in an amount equal to the Cap Ex Difference.
Each offer to prepay the Notes pursuant to Section 4J(i) shall be made
at a price equal to 100% of the principal amount of the Notes to be
prepaid, plus interest thereon to the prepayment date plus the
Yield-Maintenance Amount, if any, thereon.
(ii) If at any time there is Cap Ex Difference, the
Company will give written notice as provided in Section 11I (which
shall be in the form of an
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Officer's Certificate) to the holders of the Notes not later than 30th
day following the delivery of financial information pursuant to clause
(ii) of Section 5A, stating that any holder failing to elect not to
accept the offer shall be deemed to have accepted such offer and (a)
setting forth in reasonable detail all calculations required to
determine the amount of Cap Ex Difference and the amount of the Cap Ex
Difference which is allocable to each Note (the "Cap Ex Allocable
Proceeds"), determined by applying the Cap Ex Difference allocable to
the Notes, pro rata among all Notes outstanding on the date such
prepayment is to be made according to the aggregate then unpaid amounts
of the Notes, and the Yield-Maintenance Amount, if any, and (b) stating
that the Company irrevocably offers to prepay on the date specified in
such notice, which shall not be less than 25 nor more than 45 days
after the date of such notice, a principal amount of each outstanding
Note equal to the amount of Cap Ex Difference allocated to such Note as
described above, plus such Note's share of the Cap Ex Difference
allocable to any other Note the holder of which elects on a timely
basis not to accept the Company's offer (collectively, the "Cap Ex
Non-Accepting Holders"). Such notice shall also indicate that any Cap
Ex Accepting Holder that fails to elect not to accept the Cap Ex Pro
Rata Option shall be deemed to have accepted such option as set forth
below.
(iii) Each holder of a Note electing not to accept an offer
to prepay given pursuant to this Section 4J shall make such election by
notice delivered to the Company at least 10 days prior to the date of
prepayment specified in the notice given by the Company pursuant to
clause (ii) of this Section 4J. Each other holder of a Note
(collectively, the "Cap Ex Accepting Holders") shall be deemed to
accept the Company's offer to the extent of its Cap Ex Allocable
Proceeds and shall be deemed to have accepted an agreement (the "Cap Ex
Pro Rata Option") to have prepaid, in addition to the Cap Ex Allocable
Proceeds allocable to such Note (up to the total Cap Ex Allocable
Proceeds), all or any part of the balance of the principal amount of
such Note using the Cap Ex Allocable Proceeds that would have been paid
to the Cap Ex Non-Accepting Holders; provided that any Cap Ex Accepting
Holder may elect not to agree to the Cap Ex Pro Rata Option by notice
delivered to the Company at least 5 days prior to the date of
prepayment specified in the notice given by the Company pursuant to
clause (ii) of this Section 4J.
(iv) Upon receipt of all timely notices from Cap Ex
Non-Accepting Holders and Cap Ex Accepting Holders pursuant to this
Section 4J, the Company shall allocate the Cap Ex Allocable Proceeds
and that portion of the Cap Ex Allocable Proceeds that had been
allocated to the Notes of such Cap Ex Non-Accepting Holders among the
Notes of Cap Ex Accepting Holders in proportion to the respective Cap
Ex Allocable Proceeds allocable to the Notes of Cap Ex Accepting
Holders (after giving effect to any Cap Ex Pro Rata Option). Where the
portion of the Cap Ex Allocable Proceeds thus allocated to the Note of
a Cap Ex Accepting Holder would exceed the maximum principal amount of
such Note which such Cap Ex Accepting Holder has agreed to have prepaid
(including,
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without limitation, pursuant to a Cap Ex Pro Rata Option), such excess
shall be allocated among the Notes of Cap Ex Accepting Holders who have
agreed to accept prepayments (including, without limitation, pursuant
to a Cap Ex Pro Rata Option) in amounts which still exceed the amount
of prepayments previously allocated to them; and such allocation shall
be repeated as many times as shall be necessary until (a) the Cap Ex
Allocable Proceeds have been fully allocated or (b) it is no longer
possible to allocate the Cap Ex Allocable Proceeds without exceeding
the maximum principal amounts of Notes which all Cap Ex Accepting
Holders respectively have agreed to have prepaid (including, without
limitation, pursuant to all the Cap Ex Pro Rata Options).
(v) The principal amount of any Notes with respect to
which an offer to prepay pursuant to this Section 4J has been made and
not rejected shall become due and payable on the date specified in the
notice of such offer given by the Company pursuant to clause (ii) of
this Section 4J. It is understood that all Cap Ex Allocable Proceeds
not applied to the prepayment of the Notes or to the payment of Parity
Debt pursuant to this Section 4J shall be moneys of the Company and may
be used by the Company in such ever manner determined by the Company
and in accordance with this Agreement."
1-B. Section 5A(i) is hereby deleted in its entirety and the following
shall be inserted in lieu thereof:
"(i) as soon as practicable and in any event within 50
days after the end of each quarterly period in each fiscal year, (a)
consolidated statements of income, partners' capital and cash flows of
the Company and its Subsidiaries for such quarterly period and (in the
case of the second and third quarterly periods) for the period from the
beginning of the current fiscal year to the end of such quarterly
period, and consolidated balance sheets of the Company and its
Subsidiaries as at the end of such quarterly period, setting forth in
each case, in comparative form figures for the corresponding period in
the preceding fiscal year, all in reasonable detail and satisfactory in
form to the Required Holder(s) and certified by an authorized financial
officer of the Company as presenting fairly, in all material respects,
the information contained therein (except for the absence of footnotes
and subject to changes resulting from normal year-end adjustments), in
accordance with GAAP, and (b) a copy of the Quarterly Report on Form
10-Q of the Master Partnership for such quarterly period filed with the
Commission;
1-C. Section 5A(ii) is hereby deleted in its entirety and the following
shall be inserted in lieu thereof:
"(ii) as soon as practical and in any event within 95 days
after the end of each fiscal year, (a) consolidated statements of
income and cash flows and a consolidated statement of partners' capital
(or stockholders' equity, as applicable) of the Company and its
Subsidiaries for such year, and consolidated balance sheets of the
Company and its Subsidiaries, as at the end of such year, setting
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forth in each case, in comparative form corresponding consolidated
figures from the preceding annual audit, all in reasonable detail and
reported on by Grant Thornton LLP, or other independent public
accountants of recognized national standing selected by the Company
whose report shall be without limitation as to the scope of the audit,
(b) consolidated statements of income and cash flows and a consolidated
statement of partners' capital (or stockholders' equity, as applicable)
of the Master Partnership and its Subsidiaries for such year, and
consolidated balance sheets of the Master Partnership and its
Subsidiaries, as at the end of such year, setting forth in each case,
in comparative form corresponding consolidated figures from the
preceding annual audit, all in reasonable detail and reported on by
Grant Thornton LLP, or other independent public accountants of
recognized national standing selected by the Master Partnership whose
report shall be without limitation as to the scope of the audit
(provided that such report shall not include within the scope of the
audit the consolidating statements required by clause (c)); provided,
however, that at any time when the Master Partnership shall be subject
to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, delivery within the time period specified above of copies of the
Annual Report on Form 10-K of the Master Partnership for such fiscal
year prepared in compliance with the requirements therefor and filed
with the Commission shall be deemed to satisfy the requirements of this
clause (b) if all such statements required to be delivered pursuant to
this clause (b) with respect to the Master Partnership and its
Subsidiaries are included in such Form 10-K, or (c) consolidating
statements of income and cash flows and a consolidating statement of
partners' capital (or stockholders' equity, as applicable) of the
Master Partnership and its Subsidiaries for such year, certified by an
authorized financial officer of the Master Partnership as presenting
fairly, in all material respects, the information contained therein, in
accordance with GAAP (except for the absence of footnotes); provided,
however, that at any time when the Master Partnership shall be subject
to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, delivery within the time period specified above of copies of the
Annual Report on Form 10-K of the Master Partnership for such fiscal
year prepared in compliance with the requirements therefor and filed
with the Commission shall be deemed to satisfy the requirements of this
clause (c) if all such statements required to be delivered pursuant to
this clause (c) with respect to the Master Partnership and its
Subsidiaries are included in such Form 10-K;"
1-D. Section 5A(ix) is hereby amended by inserting the phrase ",
Aggregate Available Cash and the Aggregate Partner Obligations, together with a
calculation of the Company's Percentage of Aggregate Available Cash" immediately
following the phrase "the amount of Available Cash".
1-E. Section 5A is hereby amended by (i) deleting the word "and" at the
end of subsection (xi) thereof, (ii) deleting the "." at the end of subsection
(xii) thereof and inserting in lieu thereof the phrase "; and" and (iii)
inserting the following new subsection (xiii) immediately following subsection
(xii) thereof as follows:
-6-
"(xiii) as soon as reasonably practicable,
and in any event within 5 Business Days after a Responsible Officer
obtains knowledge that the holder of any secured indebtedness or other
indebtedness has given any notice to La Grange or any subsidiary
thereof or taken any other action with respect to a claimed event of
default or condition of the type referred to in Section 7A(xviii), a
written statement of such Responsible Officer describing, to the best
knowledge of such Responsible Officer, such notice or other action in
reasonable detail and the action which La Grange has taken, is taking
and proposes to take with respect thereto."
1-F. Section 5 of each of the Outstanding Agreements is hereby amended
by inserting the following new Sections 5S, 5T and 5U immediately following
Section 5R thereof as follows:
"Section 5S. Capital Expenditures. The Company will make
Capital Expenditures during each Fiscal Year, beginning with its Fiscal
Year ending on August 31, 2004, in an aggregate amount of not less than
$20,000,000 in assets utilized in the Business (the "Minimum Cap Ex
Funding Amount"); provided, however, that to the extent the Company
does not make Capital Expenditures in each Fiscal Year in an amount
equal to at least the Minimum Cap Ex Funding Amount, the Company will
apply the difference (but only if the difference is positive and equals
or exceeds $1,000,000) (the "Cap Ex Difference") between (i) the
Minimum Cap Ex Funding Amount and (ii) the actual Capital Expenditures
of the Company for that Fiscal Year in assets utilized in the Business,
to the prepayment of outstanding Notes in accordance with Section 4J.
"Section 5T. Maintenance of Separateness. (i) The Company
will:
(a) maintain books and records separate from those of
any other Person, including any of its partnership interest
holders or any Affiliate or Subsidiary;
(b) maintain its assets in such a manner that it is
not more costly or difficult to segregate, identify or
ascertain such assets;
(c) observe all corporate formalities;
(d) hold itself out to creditors and the public as a
legal entity separate and distinct from any other Person,
including any of its partnership interest holders and its
Affiliates and Subsidiaries;
(e) conduct its business in its name or in business
names or trade names of the Company or its Subsidiaries and
use separate stationary, invoices and checks; and
(f) not assume, guarantee or pay the debts or
obligations of or hold itself out as being available to
satisfy the obligations of any other Person,
-7-
including any of its partnership interest holders and its
Affiliates and Subsidiaries, except as is expressly permitted
by the terms of this Agreement.
(ii) To the extent that the Company shares the same
officers or other employees as any of its Affiliates, the salaries of
and the expenses relating to providing benefits to such officers and
employees shall be fairly allocated among such entities, and each such
entity shall bear its fair share of the salary and benefit costs
associated with all such common officers and employees.
(iii) To the extent that the Company jointly contracts with
any of its Affiliates to do business with vendors or service providers
or to share overhead expenses, the costs incurred in doing so shall be
allocated fairly among such entities, and each such entity shall bear
its fair share of such costs. To the extent that the Company contracts
or does business with vendors or service providers where the goods and
services are partially for the benefit of an Affiliate, the costs
incurred in doing so shall be fairly allocated to or among such
entities for whose benefit the goods and services are provided, and
each such entity shall bear its fair share of such costs.
(iv) To the extent that the Company or its Affiliates have
offices in the same location, there shall be a fair and appropriate
allocation of overhead costs among them, and each such entity shall
bear its fair share of such expenses.
"Section 5U. Debt Rating. The Company will use its best
efforts to obtain on commercially reasonable terms a long-term debt
rating of the Notes from a Rating Agency by no later than June 30,
2004. However, if the Company, in the reasonable judgment of its
management, believes it would not receive an investment grade long-term
debt rating prior to June 30, 2004, then the Company shall have the
right to postpone the receipt of a long-term debt rating of the Notes
until December 31, 2004. Notwithstanding the foregoing, the Company
shall obtain a long-term debt rating of the Notes from a Rating Agency
by not later than December 31, 2004 and shall maintain a long-term debt
rating thereafter."
I-G. Section 6(A)(i) of each of the Outstanding Agreements is hereby
deleted in its entirety and the following shall be inserted in lieu thereof:
"(i) Ratio of Consolidated Funded Indebtedness to
Consolidated EBITDA. The ratio as of the end of any fiscal quarter of
Consolidated Funded Indebtedness to Consolidated EBITDA to exceed the
ratio set forth below with respect to such fiscal quarter:
Fiscal Quarters Ending Ratio
- ------------------------------------------- ------------
November 30, 2003 through November 30, 2004 4.75 to 1.00
February 28, 2005 and thereafter 4.50 to 1.00"
-8-
I-H. Section 6(A)(iii) of each of the Outstanding Agreements is hereby
deleted in its entirety and the following shall be inserted in lieu thereof:
"(iii) Ratio of Adjusted Consolidated Funded Indebtedness to
Adjusted Consolidated EBITDA. The ratio as at the end of any fiscal
quarter of Adjusted Consolidated Funded Indebtedness to Adjusted
Consolidated EBITDA to exceed to exceed the ratio set forth below with
respect to such fiscal quarter:
Fiscal Quarters Ending Ratio
- ----------------------------------------- ------------
November 30, 2003 through August 31, 2005 5.25 to 1.00
November 30, 2005 and thereafter 5.00 to 1.00"
I-I. Section 6(B)(ii) of each of the Outstanding Agreements is hereby
amended by deleting the dollar amount of "$65,000,000" and inserting in lieu
thereof the dollar amount of "$75,000,000".
I-J. Section 6E(v)(iii) of each of the Outstanding Agreements is hereby
amended by inserting the phrase ", including Investments in La Grange and its
Subsidiaries which shall not at any time exceed $1,000,000" immediately
following the phrase "Investments permitted under this subclause (iii) shall not
at any time exceed $12,500,000".
I-K. Section 6(F) of each of the Outstanding Agreements is hereby
amended by inserting the following sentences immediately following subclause
(ii) as follows:
"Notwithstanding the foregoing, the Company will not directly or
indirectly declare, order or pay Restricted Payments, individually or
in the aggregate, for any fiscal quarter in an amount greater than the
product of (i) the Company's Percentage of Aggregate Available Cash
times (ii) the Aggregate Partner Obligations; provided, however, if at
any time the Notes are rated "BBB" (or its equivalent) or better by a
Rating Agency, the foregoing limitation set forth in this sentence
shall not apply to the Company so long as such rating remains in
effect.
I-L. Section 6(H) of each of the Outstanding Agreements is hereby
amended by deleting the phrase "as more fully described in the Memorandum".
I-M. Section 6(I)(iii) of each of the Outstanding Agreements is hereby
amended by inserting the phrase "and Section 6E(v)(iii) with respect to
Investments in La Grange or its Subsidiaries" immediately following the phrase
"making of an Investment pursuant to Section 6E(i)".
1-N. Section 6 of each of the Outstanding Agreements is hereby amended
by inserting the following new Section 6N immediately following Section 6M
thereof as follows:
-9-
"Section 6N. Commingling of Deposit Accounts and Accounts. The
Company will not, nor will it permit any of its Subsidiaries to,
commingle their respective deposit accounts or accounts with the
deposit accounts or accounts of La Grange or any of its Subsidiaries."
1-O. Section 7A of each of the Outstanding Agreements is hereby amended
by (i) deleting the "." at the end of subsection (xvii) thereof and inserting in
lieu thereof the phrase "; or" and (ii) inserting the following new subsection
(xviii) immediately following subsection (xvii) thereof as follows:
"(xviii) an event of default under any agreement
governing secured indebtedness of La Grange relating to (a)
bankruptcy, reorganization, compromise, arrangement,
insolvency, readjustment of debt, dissolution or liquidation
or similar law with respect to La Grange or any of its
subsidiaries, beyond any period of grace provided with respect
thereto in such agreement, (b) non-payment of such secured
indebtedness or any other indebtedness of LaGrange or any of
its subsidiaries, subject to the minimum dollar amount
threshold of such indebtedness set forth in such agreement,
provided that such non-payment continues for a period of 3
business days beyond any period of grace provided with respect
thereto in such agreement, unless, prior to the end of the 3
business day period, the lenders party to such agreement have
accelerated the maturity of such indebtedness thereunder or
blocked the payment or otherwise limited the payment by La
Grange of any scheduled "restricted payment" distribution in
respect of any partnership or other equity interest in La
Grange, in which case such 3 business-day period shall no
longer apply, or (c) any financial covenant default with
respect to La Grange which has not been cured, waived or
amended within 45 days of the date on notice of such default
was given to the lenders party to such agreement, unless,
prior to the end of the 45-day period, the lenders party to
such agreement shall have blocked the payment or otherwise
limited the payment by La Grange of any scheduled "restricted
payment" distribution in respect of any partnership or other
equity interest in La Grange or shall have accelerated the
maturity of such indebtedness, in which case such 45-day
period shall no longer apply.
I-P. Section 10B of each of the Outstanding Agreements is hereby
amended by deleting the definitions of "Acquisition Facility," "Current
Management," "Revolving Working Capital Facility" and "Specified Entities"
contained therein and inserting in lieu thereof the following definitions in the
appropriate alphabetical positions:
"Acquisition Facility" shall mean the acquisition revolving
credit facility of the Company provided for in the Credit Agreement for
the purpose of financing acquisitions and improvements and repairs in
the aggregate principal amount not to exceed $75,000,000.
-10-
"Current Management" shall mean not less than two of the
following: James E. Bertelsmeyer, R.C. Mills, H. Michael Krimbill,
Bradley K. Atkinson, Michael L. Greenwood, Ray C. Davis, Kelcy L.
Warren, together with the heirs of, and trusts for the benefit of
family members controlled by, any such executive manager."
"Revolving Working Capital Facility" shall mean the revolving
credit facility of the Company provided for in the Credit Agreement for
working capital and other general partnership purposes in an aggregate
principal amount not to exceed $75,000,000 at any time outstanding.
"Specified Entities" shall mean any one or combination of the
following: (i) La Grange Energy, L.P., a Texas limited partnership, any
Wholly-Owned Subsidiary thereof, or a Successor thereto, and (ii) any
Permitted GP Entity."
I-Q. Subsection (a) of the definition of "Contracted Dollar" contained
in Section 10B of each of the Outstanding Agreements is hereby amended by
deleting the dollar amount of "$50,000,000" and substituting therefor the dollar
amount of "$75,000,000".
I-R. Section 10B of each of the Outstanding Agreements is hereby
amended by inserting the definitions of "Aggregate Available Cash," "Aggregate
Partner Obligations," "Cap Ex Accepting Holders," "Cap Ex Allocable Proceeds,"
"Cap Ex Difference," "Cap Ex Non-Accepting Holders," "Cap Ex Pro Rata Option,"
"Capital Expenditures," "La Grange," "La Grange Acquisition," "Minimum Cap Ex
Funding Amount," "Percentage of Aggregate Available Cash," "Permitted GP Entity"
and "Rating Agency" in the appropriate alphabetical positions:
"Aggregate Available Cash" shall mean, with respect to any
fiscal quarter of the Company and of La Grange, the aggregate amount of
Available Cash of both the Company and its Subsidiaries and of La
Grange and its Subsidiaries (which for purposes of this Agreement,
shall be calculated using the definition of "Available Cash" set forth
in this Agreement, except that (i) all references therein to the
"Company" shall be deemed for purposes of this calculation only
references to La Grange and (ii) the last sentence of that definition
for purposes of this calculation only shall be modified to refer to
reserves established by La Grange with respect to indebtedness on the
same bases as set forth in that definition).
"Aggregate Partner Obligations" shall mean, with respect to
any fiscal quarter of the General Partner and the Master Partnership,
the aggregate amount of payment obligations of each of the General
Partner and the Master Partnership, including, without limitation, the
Minimum Quarterly Distribution (as defined in the Agreement of Limited
Partnership of the Master Partnership) on all Units with respect to
such fiscal quarter.
"Cap Ex Accepting Holders" shall have the meaning specified in
Section 4J(iii).
-11-
"Cap Ex Allocable Proceeds" shall have the meaning specified
in Section 4J(ii).
"Cap Ex Difference" shall have the meaning specified in
Section 5S.
"Cap Ex Non-Accepting Holders" shall have the meaning
specified in Section 4J(ii).
"Cap Ex Pro Rata Option" shall have the meaning specified in
Section 4J(iii).
"Capital Expenditures" shall mean, without duplication, with
respect to the Company and its Subsidiaries, any amounts expended,
incurred or obligated to be expended during or in respect of a period
for any improvement, maintenance or purchase for value of any asset
that should be classified on a consolidated balance sheet of such
Person prepared in accordance with GAAP as a fixed or capital asset
(including capitalized costs in respect of intellectual property)."
"La Grange" means La Grange Acquisition, L.P., a Texas limited
partnership.
"La Grange Acquisition" means, collectively, (i) the
acquisition by La Grange Energy, L.P. of the equity interests of U.S.
Propane, all in accordance with the Acquisition Agreement dated as of
November 6, 2003, as amended or modified, and (ii) the acquisition by
the Master Partnership of substantially all of the assets of La Grange
and its Subsidiaries and the other transactions contemplated in
connection therewith, all in accordance with the Contribution Agreement
dated as of November 6, 2003, as amended or modified.
"Minimum Cap Ex Funding Amount" shall have the meaning
specified in Section 5S.
"Percentage of Aggregate Available Cash" shall mean, with
respect to any fiscal quarter of the Company, the percentage determined
by multiplying (i) a fraction consisting of a numerator equal to the
Company's Available Cash for that period and a denominator equal to the
Aggregate Available Cash by (ii) 100.
"Permitted GP Entity" shall mean any one or combination of (i)
Persons or a group of related persons (as such terms are defined in the
Exchange Act) who directly or indirectly beneficially own (as such term
is defined in Rule 13d-3 promulgated under the Exchange Act) the
Capital Stock of the General Partner immediately following the
consummation of the La Grange Acquisition, and (ii) Current Management
or group of related persons (as so defined) including Current
Management."
"Rating Agency" shall mean at least one of Standard & Poor's
Ratings Services, a division of the McGraw-Hill Companies, Moody's
Investors Service, Inc. or Fitch Ratings and any of their respective
successors and assigns.
-12-
ARTICLE II
WAIVER, MODIFICATIONS AND AMENDMENTS
II-A. The Required Holders of Notes outstanding under each of the
Outstanding Agreements hereby (i) waive compliance by the Company with respect
to Section 6M(ii) of each of the Outstanding Agreements in connection with
amendments to each of the Partnership Documents necessary to permit La Grange
Energy, L.P. to be substituted, directly or indirectly, as the sole equity
holder(s) of U.S. Propane and (ii) agree and acknowledge that each of the
Partnership Documents, as modified and amended, shall constitute the
"Partnership Agreement" and the "Partnership Documents" for purposes of each of
the Outstanding Agreements.
II-B. The Required Holders of Notes outstanding under each of the
Outstanding Agreements hereby agree and acknowledge that Section 8B of each of
the Outstanding Agreements shall be deemed modified to reflect the transactions
contemplated by this Sixth Amendment Agreement upon the occurrence of such
actions.
II-C. From the effective date of this Sixth Amendment Agreement in
accordance with the terms and conditions of Article III hereof (the "Effective
Date") until such date as the Notes are rated not less than "BBB-" (or a
comparable rating) by a Rating Agency (an "Investment Grade Rating"), the
interest rate per annum specified in each Note issued heretofore and outstanding
as of the Effective Date shall increase by 100 basis points (1.00%) (which 100
basis points (1.00%) shall be referred to herein as the "Non-Investment Grade
Interest Increase"); provided, however, that if, at any time, two or more Rating
Agencies shall have given long-term debt ratings to the Notes and such ratings
fall within different rating categories (after giving effect to numerical or
other qualifiers), the lower rating (i.e. worse) of a Rating Agency will control
for purposes of the foregoing. After the Non-Investment Grade Interest Increase
becomes applicable, (a) if at any time the Notes are rated an Investment Grade
Rating by each Rating Agency, the interest rate on the unpaid balance thereof,
commencing on the date of such rating change, shall revert to the interest rate
per annum specified in such Note and interest on such Note shall not include the
Non-Investment Grade Interest Increase and (b) if at any time the Notes are not
rated an Investment Grade Rating by any Rating Agency, the interest rate on the
unpaid balance thereof, commencing on the date of such rating change, shall be
the interest rate per annum specified in such Note and increased by the
Non-Investment Grade Interest Increase. In addition to (and not in limitation
of) the Non-Investment Grade Interest Increase described in the foregoing
sentences, if at any time that the highest debt rating of the Notes shall be
rated "B+" or lower (i.e. worse) by any Rating Agency, the interest rate of each
Note issued heretofore and outstanding as of the date of such rating change
shall increase by 100 basis points (1.00%), but only for so long as such rating
of "B+" or lower shall remain in effect. In furtherance of the foregoing, the
parties to this Sixth Amendment Agreement hereby agree and acknowledge that the
forms of Notes attached to each of the Outstanding Agreements are hereby amended
and modified with respect to all Notes issued after the date of the
effectiveness of this Sixth Amendment Agreement to include the above paragraph
and interest shall continue to be calculated as provided in each of the
Outstanding Agreements. All Outstanding Notes issued prior to the date of the
effectiveness of this Sixth Amendment Agreement will remain in their current
form; provided that, at the request of any holder of the Outstanding Notes, the
Company will execute and deliver to each such holder an attachment (the
"Sticker") setting forth the
-13-
provisions of this Section II-C, which Sticker shall be attached to each
Outstanding Note held by such holder; and, provided, further, that the failure
to attach such Sticker to any Outstanding Note shall not affect the validity or
binding effect of this Section II-C.
ARTICLE III
CONDITIONS OF EFFECTIVENESS
The effectiveness of this Sixth Amendment Agreement (and each of the
amendments contained herein) is subject to the satisfaction of the following
conditions:
(a) the Required Holders under each of the Outstanding
Agreements shall have consented to this Sixth Amendment Agreement as
evidenced by their execution thereof;
(b) the requisite percentage of lenders under the Credit
Agreement (the "Lenders") shall have agreed to all amendments to the
Credit Agreement necessary to effect this Sixth Amendment Agreement and
a copy thereof shall have been provided to the holders of the
Outstanding Notes. In the event the Company agrees that the Lenders or
holders of any of the Outstanding Notes shall be granted any additional
or more restrictive financial or negative covenants or events of
default than the financial or negative covenants or events of default
that are imposed on the Company under the Outstanding Agreements, as
amended hereby, the Company agrees that the holders of all other
Outstanding Notes shall also be granted such more restrictive covenants
or events of defaults;
(c) upon the satisfaction of subclause (a), each of the
holders of the Outstanding Notes shall have received an amendment fee
from the Company in an amount equal to 0.25% of the aggregate principal
amount of the Outstanding Notes held by such holder (the "Amendment
Fee") and a Responsible Officer of the Company shall have certified to
each such holder (the truth and the accuracy of which certification
shall constitute a condition of effectiveness of this Sixth Amendment
Agreement) that the Lenders have received no amendment fees or other
consideration (including increase in coupon) greater than the Amendment
Fee; and
(d) Winston & Strawn LLP shall have delivered a
non-consolidation opinion as to the Company and La Grange, which
opinion shall be in a form and substance satisfactory to the holders of
the Outstanding Notes and their counsel.
Notwithstanding the foregoing, no amendment, waiver or modification set
forth in this Sixth Amendment Agreement (other than (i) the amendments set forth
in Sections I-I and I-Q above, (ii) the new Section 5-U set forth in Section I-F
above, (iii) the amendment set forth in Section I-G above, (iv) the amendment of
the definitions of "Acquisition Facility" and "Revolving Working Capital
Facility" set forth in Section I-P above and (v) the payment of the Amendment
Fee described in (c) above, which shall become effective on the date on which
the conditions described in (a), (b) and (without duplication) (c) are
satisfied) shall become effective
-14-
or be given full force and effect until the consummation of the acquisition by
the Master Partnership of substantially all of the assets of La Grange and its
subsidiaries and the other transactions contemplated in connection therewith,
all in accordance with the terms and conditions of the Contribution Agreement
dated as of November 6, 2003 (as amended or modified, the "La Grange Closing").
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
In order to induce the holders of the Notes to enter into this Sixth
Amendment Agreement, the Company represents and warrants that (a) no Default or
Event of Default has occurred and is continuing; and (b) after giving effect to
this Sixth Amendment Agreement, no Event of Default shall have occurred.
The Company hereby agrees and covenants that promptly after, and in any
event no later than the fifth (5th) Business Day following the La Grange
Closing, each of the holders of the Outstanding Notes shall have received a
closing fee from the Company in an amount equal to 0.125% of the aggregate
principal amount of the Outstanding Notes held by such holder (the "Closing
Fee") and a Responsible Officer of the Company shall have certified to each such
holder that the Lenders have received no closing fees or other consideration
(including increase in coupon) greater than the Closing Fee.
ARTICLE V
MISCELLANEOUS
V-A. If the foregoing is acceptable to you, kindly note your acceptance
in the space provided below and upon satisfaction of the conditions to
effectiveness set forth in Article III above, your consent to this Sixth
Amendment Agreement shall be deemed to have been given and the Outstanding
Agreements shall be amended as set forth above.
V-B. This Sixth Amendment Agreement may be executed by the parties
hereto individually, or in any combination of the parties hereto in several
counterparts, all of which taken together shall constitute one and the same
Sixth Amendment Agreement.
V-C. Except as amended hereby, all of the representations, warranties,
provisions, covenants, terms and conditions of the Outstanding Agreements shall
remain unaltered and in full force and effect and the Outstanding Agreements, as
amended hereby, are in all respects agreed to, ratified and confirmed by the
Company. The Company acknowledges and agrees that the granting of amendments
herein shall not be construed as establishing a course of conduct on the part of
the holders of the Outstanding Notes upon which the Company may rely at any time
in the future.
V-D. Upon the effectiveness of this Sixth Amendment Agreement, each
reference in each Outstanding Agreement and in other documents describing or
referencing such Outstanding Agreement to "this Agreement," "hereunder,"
"hereof," "herein," or words of like import referring to such Outstanding
Agreement, shall mean and be a referenced to such Outstanding Agreement as
amended hereby.
-15-
[signature pages immediately follow]
-16-
Very truly yours,
HERITAGE OPERATING, L.P.
By: U.S. Propane L.P., General Partner
By: U.S. Propane, L.L.C., General
Partner
By: _____________________________________
Its: _____________________________________
The foregoing Sixth Amendment Agreement and the amendments referred to
therein are hereby accepted and agreed to as of November 18, 2003, and the
undersigned hereby confirms that on November 18, 2003 it held the aggregate
principal amount of Outstanding Notes of the Company set forth on Schedule 1
hereto and that on the date of execution hereof it continues to hold such
Outstanding Notes.
JOHN HANCOCK LIFE INSURANCE COMPANY
(FORMERLY KNOWN AS JOHN HANCOCK MUTUAL
LIFE INSURANCE COMPANY)
By: _____________________________________
Its: ____________________________________
JOHN HANCOCK VARIABLE LIFE INSURANCE
COMPANY
By: _____________________________________
Its: ____________________________________
MELLON BANK, N.A., solely in its capacity as
Trustee for the Long-Term Investment Trust
(as directed by John Hancock Life Insurance
Company), and not in its individual capacity
By: _____________________________________
Its: ____________________________________
SIGNATURE 6 LIMITED
By: John Hancock Life Insurance Company, as
Portfolio Advisor
By: _____________________________________
Its: ____________________________________
The foregoing Sixth Amendment Agreement and the amendments referred to
therein are hereby accepted and agreed to as of November 18, 2003, and the
undersigned hereby confirms that on November 18, 2003 it held the aggregate
principal amount of Outstanding Notes of the Company set forth on Schedule 1
hereto and that on the date of execution hereof it continues to hold such
Outstanding Notes.
JOHN HANCOCK LIFE INSURANCE COMPANY
By: _____________________________________
Its: ____________________________________
JOHN HANCOCK VARIABLE LIFE INSURANCE
COMPANY
By: _____________________________________
Its: ____________________________________
MELLON BANK, N.A., solely in its capacity as
Trustee for the Bell Atlantic Master Trust
(as directed by John Hancock Life Insurance
Company), and not in its individual capacity
By: _____________________________________
Its: ____________________________________
MELLON BANK, N.A., solely in its capacity as
Trustee for the Long-Term Investment Trust
(as directed by John Hancock Life Insurance
Company), and not in its individual capacity
By: _____________________________________
Its: ____________________________________
The foregoing Sixth Amendment Agreement and the amendments referred to
therein are hereby accepted and agreed to as of November 18, 2003, and the
undersigned hereby confirms that on November 18, 2003 it held the aggregate
principal amount of Outstanding Notes of the Company set forth on Schedule 1
hereto and that on the date of execution hereof it continues to hold such
Outstanding Notes.
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: David L. Babson & Company, Inc.
its Investment Advisor
By: _____________________________________
Its: ____________________________________
C.M. LIFE INSURANCE COMPANY
c/o Massachusetts Mutual Life Insurance Company
By: David L. Babson & Company, Inc.
its Investment Advisor
By: _____________________________________
Its: ____________________________________
The foregoing Sixth Amendment Agreement and the amendments referred to
therein are hereby accepted and agreed to as of November 18, 2003, and the
undersigned hereby confirms that on November 18, 2003 it held the aggregate
principal amount of Outstanding Notes of the Company set forth on Schedule 1
hereto and that on the date of execution hereof it continues to hold such
Outstanding Notes.
PRINCIPAL LIFE INSURANCE COMPANY
(fka Principal Mutual Life Insurance Company)
By: Principal Capital Management, LLC,
its authorized signatory
By: _____________________________________
Its: ____________________________________
By: _____________________________________
Its: ____________________________________
The foregoing Sixth Amendment Agreement and the amendments referred to
therein are hereby accepted and agreed to as of November 18, 2003, and the
undersigned hereby confirms that on November 18, 2003 it held the aggregate
principal amount of Outstanding Notes of the Company set forth on Schedule 1
hereto and that on the date of execution hereof it continues to hold such
Outstanding Notes.
NEW YORK LIFE INSURANCE COMPANY
By: _____________________________________
Its: ____________________________________
NEW YORK LIFE INSURANCE AND
ANNUITY CORPORATION
By: New York Life Investment Management,
its Investment Manager
By: _____________________________________
Its: ____________________________________
The foregoing Sixth Amendment Agreement and the amendments referred to
therein are hereby accepted and agreed to as of November 18, 2003, and the
undersigned hereby confirms that on November 18, 2003 it held the aggregate
principal amount of Outstanding Notes of the Company set forth on Schedule 1
hereto and that on the date of execution hereof it continues to hold such
Outstanding Notes.
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By: _____________________________________
Its: ____________________________________
The foregoing Sixth Amendment Agreement and the amendments referred to
therein are hereby accepted and agreed to as of November 18, 2003, and the
undersigned hereby confirms that on November 18, 2003 it held the aggregate
principal amount of Outstanding Notes of the Company set forth on Schedule 1
hereto and that on the date of execution hereof it continues to hold such
Outstanding Notes.
J. ROMEO & CO.
By: _____________________________________
Its: ____________________________________
The foregoing Sixth Amendment Agreement and the amendments referred to
therein are hereby accepted and agreed to as of November 18, 2003, and the
undersigned hereby confirms that on November 18, 2003 it held the aggregate
principal amount of Outstanding Notes of the Company set forth on Schedule 1
hereto and that on the date of execution hereof it continues to hold such
Outstanding Notes.
PACIFIC LIFE INSURANCE COMPANY
(formerly Pacific Mutual Life Insurance Company)
By: _____________________________________
Its: ____________________________________
By: _____________________________________
Its: ____________________________________
PACIFIC LIFE INSURANCE COMPANY
By: _____________________________________
Its: ____________________________________
By: _____________________________________
Its: ____________________________________
The foregoing Sixth Amendment Agreement and the amendments referred to
therein are hereby accepted and agreed to as of November 18, 2003, and the
undersigned hereby confirms that on November 18, 2003 it held the aggregate
principal amount of Outstanding Notes of the Company set forth on Schedule 1
hereto and that on the date of execution hereof it continues to hold such
Outstanding Notes.
PHOENIX HOME LIFE MUTUAL INSURANCE
COMPANY
By: _____________________________________
Its: ____________________________________
PHOENIX HOME LIFE MUTUAL INSURANCE
COMPANY, PHOENIX INVESTMENT PARTNERS, LTD.
By: _____________________________________
Its: ____________________________________
The foregoing Sixth Amendment Agreement and the amendments referred to
therein are hereby accepted and agreed to as of November 18, 2003, and the
undersigned hereby confirms that on November 18, 2003 it held the aggregate
principal amount of Outstanding Notes of the Company set forth on Schedule 1
hereto and that on the date of execution hereof it continues to hold such
Outstanding Notes.
RELIASTAR LIFE INSURANCE COMPANY
By: _____________________________________
Its: ____________________________________
RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK
By: _____________________________________
Its: ____________________________________
The foregoing Sixth Amendment Agreement and the amendments referred to
therein are hereby accepted and agreed to as of November 18, 2003, and the
undersigned hereby confirms that on November 18, 2003 it held the aggregate
principal amount of Outstanding Notes of the Company set forth on Schedule 1
hereto and that on the date of execution hereof it continues to hold such
Outstanding Notes.
HARE & CO.
By: _____________________________________
Its: ____________________________________
The foregoing Sixth Amendment Agreement and the amendments referred to
therein are hereby accepted and agreed to as of November 18, 2003, and the
undersigned hereby confirms that on November 18, 2003 it held the aggregate
principal amount of Outstanding Notes of the Company set forth on Schedule 1
hereto and that on the date of execution hereof it continues to hold such
Outstanding Notes.
BOST & CO.
By: _____________________________________
Its: ____________________________________
By: _____________________________________
Its: ____________________________________
The foregoing Sixth Amendment Agreement and the amendments referred to
therein are hereby accepted and agreed to as of November 18, 2003, and the
undersigned hereby confirms that on November 18, 2003 it held the aggregate
principal amount of Outstanding Notes of the Company set forth on Schedule 1
hereto and that on the date of execution hereof it continues to hold such
Outstanding Notes.
ALLSTATE LIFE INSURANCE COMPANY
By: _____________________________________
Its: ____________________________________
By: _____________________________________
Its: ____________________________________
ALLSTATE INSURANCE COMPANY
By: _____________________________________
Its: ____________________________________
The foregoing Sixth Amendment Agreement and the amendments referred to
therein are hereby accepted and agreed to as of November 18, 2003, and the
undersigned hereby confirms that on November 18, 2003 it held the aggregate
principal amount of Outstanding Notes of the Company set forth on Schedule 1
hereto and that on the date of execution hereof it continues to hold such
Outstanding Notes.
MAC & CO.
By: _____________________________________
Its: ____________________________________
The foregoing Sixth Amendment Agreement and the amendments referred to
therein are hereby accepted and agreed to as of November 18, 2003, and the
undersigned hereby confirms that on November 18, 2003 it held the aggregate
principal amount of Outstanding Notes of the Company set forth on Schedule 1
hereto and that on the date of execution hereof it continues to hold such
Outstanding Notes.
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By: CIGNA Investments, Inc. (authorized agent)
By: _____________________________________
Its: ____________________________________
The foregoing Sixth Amendment Agreement and the amendments referred to
therein are hereby accepted and agreed to as of November 18, 2003, and the
undersigned hereby confirms that on November 18, 2003 it held the aggregate
principal amount of Outstanding Notes of the Company set forth on Schedule 1
hereto and that on the date of execution hereof it continues to hold such
Outstanding Notes.
LIFE INSURANCE COMPANY OF NORTH AMERICA
By: CIGNA Investments, Inc. (authorized agent)
By: _____________________________________
Its: ____________________________________
The foregoing Sixth Amendment Agreement and the amendments referred to
therein are hereby accepted and agreed to as of November 18, 2003, and the
undersigned hereby confirms that on November 18, 2003 it held the aggregate
principal amount of Outstanding Notes of the Company set forth on Schedule 1
hereto and that on the date of execution hereof it continues to hold such
Outstanding Notes.
CLARICA LIFE INSURANCE COMPANY-U.S.
By: _____________________________________
Its: ____________________________________
By: _____________________________________
Its: ____________________________________
The foregoing Sixth Amendment Agreement and the amendments referred to
therein are hereby accepted and agreed to as of November 18, 2003, and the
undersigned hereby confirms that on November 18, 2003 it held the aggregate
principal amount of Outstanding Notes of the Company set forth on Schedule 1
hereto and that on the date of execution hereof it continues to hold such
Outstanding Notes.
GENERAL ELECTRIC CAPITAL ASSURANCE COMPANY
By: GE ASSET MANAGEMENT INCORPORATED,
its investment advisor
By: _____________________________________
Its: Vice President - Private Investments
The foregoing Sixth Amendment Agreement and the amendments referred to
therein are hereby accepted and agreed to as of November 18, 2003, and the
undersigned hereby confirms that on November 18, 2003 it held the aggregate
principal amount of Outstanding Notes of the Company set forth on Schedule 1
hereto and that on the date of execution hereof it continues to hold such
Outstanding Notes.
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
By: _____________________________________
Its: ____________________________________
The foregoing Sixth Amendment Agreement and the amendments referred to
therein are hereby accepted and agreed to as of November 18, 2003, and the
undersigned hereby confirms that on November 18, 2003 it held the aggregate
principal amount of Outstanding Notes of the Company set forth on Schedule 1
hereto and that on the date of execution hereof it continues to hold such
Outstanding Notes.
METROPOLITAN LIFE INSURANCE COMPANY
By: _____________________________________
Its: ____________________________________
The foregoing Sixth Amendment Agreement and the amendments referred to
therein are hereby accepted and agreed to as of November 18, 2003, and the
undersigned hereby confirms that on November 18, 2003 it held the aggregate
principal amount of Outstanding Notes of the Company set forth on Schedule 1
hereto and that on the date of execution hereof it continues to hold such
Outstanding Notes.
NATIONWIDE LIFE INSURANCE COMPANY
By: _____________________________________
Its: ____________________________________
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
By: _____________________________________
Its: ____________________________________
NATIONWIDE MUTUAL FIRE INSURANCE COMPANY
By: _____________________________________
Its: ____________________________________
NATIONWIDE MUTUAL INSURANCE COMPANY
By: _____________________________________
Its: ____________________________________
The foregoing Sixth Amendment Agreement and the amendments referred to
therein are hereby accepted and agreed to as of November 18, 2003, and the
undersigned hereby confirms that on November 18, 2003 it held the aggregate
principal amount of Outstanding Notes of the Company set forth on Schedule 1
hereto and that on the date of execution hereof it continues to hold such
Outstanding Notes.
PRINCIPAL LIFE INSURANCE COMPANY
By: Principal Capital Management, LLC,
a Delaware limited liability company,
its authorized signatory
By: _____________________________________
Its: ____________________________________
By: _____________________________________
Its: ____________________________________
The foregoing Sixth Amendment Agreement and the amendments referred to
therein are hereby accepted and agreed to as of November 18, 2003, and the
undersigned hereby confirms that on November 18, 2003 it held the aggregate
principal amount of Outstanding Notes of the Company set forth on Schedule 1
hereto and that on the date of execution hereof it continues to hold such
Outstanding Notes.
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
By: _____________________________________
Its: ____________________________________
By: _____________________________________
Its: ____________________________________
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
By: _____________________________________
Its: ____________________________________
By: _____________________________________
Its: ____________________________________
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
By: _____________________________________
Its: ____________________________________
By: _____________________________________
Its: ____________________________________
SCHEDULE 1
PRINCIPAL AMOUNT AND
SERIES OF OUTSTANDING
NAME OF HOLDER NOTES HELD AS OF
OF OUTSTANDING NOTES NOVEMBER 18, 2003
- ----------------------------------------------------------------------- --------------------------------
John Hancock Life Insurance Company $ 10,400,000 1996 Notes
John Hancock Life Insurance Company $ 6,400,000 1996 Notes
John Hancock Variable Life Insurance Company $ 800,000 1996 Notes
Mellon Bank, N.A., solely in its capacity as $ 768,000 1996 Notes
Trustee for the Bell Atlantic Master Trust
(as directed by John Hancock Life Insurance Company)
Mellon Bank, N.A., solely in its capacity as $ 1,632,000 1996 Notes
Trustee for the Long-Term Investment Trust
(as directed by John Hancock Life Insurance Company)
Massachusetts Mutual Life Insurance Company $ 12,000,000 1996 Notes
Principal Life Insurance Company (f/k/a $ 12,000,000 1996 Notes
Principal Mutual Life Insurance Company)
New York Life Insurance Company $ 10,000,000 1996 Notes
Teachers Insurance and Annuity Association of America $ 10,000,000 1996 Notes
Bost & Co. c/o Mellon Bank $ 8,000,000 1996 Notes
J. Romeo & Co. c/o Chase Manhattan Bank $ 2,800,000 1996 Notes
J. Romeo & Co. c/o Chase Manhattan Bank $ 3,200,000 1996 Notes
Pacific Mutual Life Insurance Company (Nominee: Mac & Co.) $ 4,400,000 1996 Notes
Phoenix Home Life Mutual Insurance Company $ 4,000,000 1996 Notes
Hare & Co. c/o Bank of New York $ 2,400,000 1996 Notes
Protective Life Insurance Company (c/o Hare & Co. c/o Bank of New York, $ 4,000,000 1996 Notes
as nominee)
Allstate Insurance Company $ 1,600,000 1996 Notes
Allstate Life Insurance Company $ 1,600,000 1996 Notes
MAC & Co. $ 12,000,000 Series A Notes
New York Life Insurance Company $5,000,000 Series B Notes
New York Life Insurance and $7,000,000 Series B Notes
Annuity Corporation
MAC & Co. $8,000,000 Series B Notes
Allstate Life Insurance Company $2,142,857 Series C Notes
Clarica Life Insurance Company-U.S. $ 2,400,000 Series 2000 A Notes
Nationwide Life Insurance Company $ 4,000,000 Series 2000 A Notes
Nationwide Life and Annuity Insurance Company $ 800,000 Series 2000 A Notes
Nationwide Mutual Fire Insurance Company $ 1,600,000 Series 2000 A Notes
Nationwide Mutual Insurance Company $ 1,600,000 Series 2000 A Notes
Sun Life Assurance Company of Canada $ 1,200,000 Series 2000 A Notes
Sun Life Insurance and Annuity Company of New York $ 1,200,000 Series 2000 A Notes
CIG & Co. (on behalf of Connecticut General Life $1,000,000 Series 2000 B Notes
Insurance Company)
CIG & Co. (on behalf of Connecticut General Life $500,000 Series 2000 B Notes
Insurance Company)
CIG & Co. (on behalf of Connecticut General Life $3,500,000 Series 2000 B Notes
Insurance Company)
CUDD & Co. (on behalf of The Guardian Life $7,000,000 Series 2000 B Notes
Insurance Company of America)
MAC & Co. (on behalf of Pacific Life Insurance Company) $15,000,000 Series 2000 B Notes
ReliaStar Life Insurance Company $2,000,000 Series 2000 B Notes
Northern Life Insurance Company $3,000,000 Series 2000 B Notes
GE Edison Life Insurance Company $27,000,000 Series 2000 C Notes
CIG & Co. (on behalf of Connecticut General $3,300,000 Series 2000 D Notes
Life Insurance Company)
CIG & Co. (on behalf of Connecticut General $3,000,000 Series 2000 D Notes
Life Insurance Company)
CIG & Co. (on behalf of Life Insurance Company $3,200,000 Series 2000 D Notes
of North America)
CUDD & Co. (on behalf of The Guardian Life $7,500,000 Series 2000 D Notes
Insurance Company of America)
Metropolitan Life Insurance Company $30,000,000 Series 2000 D Notes
MAC & Co. $2,000,000 Series 2000 D Notes
Principal Life Insurance Company $5,000,000 Series 2000 D Notes
ReliaStar Life Insurance Company of New York $2,000,000 Series 2000 D Notes
ReliaStar Life Insurance Company $2,000,000 Series 2000 D Notes
Principal Life Insurance Company $7,000,000 Series 2000 E Notes
John Hancock Life Insurance Company (General Account) $25,000,000 Series 2000 F Notes
John Hancock Life Insurance Company (Closed Block) $3,000,000 Series 2000 F Notes
John Hancock Variable Life Insurance Company $1,000,000 Series 2000 F Notes
Mellon Bank, N.A., Trustee for the Bell Atlantic $2,000,000 Series 2000 F Notes
Master Trust
Mellon Bank, N.A. Trustee under the Long-Term $2,000,000 Series 2000 F Notes
Investment Trust dated October 1, 1996
Sun Life Assurance Company of Canada (U.S.) $5,000,000 Series 2000 F Notes
John Hancock Life Insurance Company $1,900,000 Series 2000 F Notes
John Hancock Variable Life Insurance Company $100,000 Series 2000 F Notes
General Electric Capital Assurance Company (nominee is SALKELD & CO.) $5,000,000 Series 2001 G Notes
Connecticut General Life Insurance Company $7,000,000 Series 2001 G Notes
C.M. Life Insurance Company c/o Massachusetts Mutual Life Insurance $1,000,000 Series 2001 G Notes
Company
Massachusetts Mutual Life Insurance Company $6,000,000 Series 2001 G Notes
Hare & Co. $3,000,000 Series 2001 H Notes
Phoenix Home Life Universal Portfolio $1,500,000 Series 2001 H Notes
PHL Confederated Life Insurance Company $1,500,000 Series 2001 H Notes
Phoenix Home Life General Account/Closed Block Portfolio $2,000,000 Series 2001 H Notes
General Electric Capital Assurance Company (nominee is SALKELD & CO.) $16,000,000 Series 2001 I Notes
EXHIBIT 10.8.2
TERMINATION AGREEMENT
(MILLS)
The undersigned (the "Employee"), in consideration of the payment of
one (1) year's Base Salary, does hereby agree to the termination of his
Employment Agreement dated August 10, 2000 with Heritage Holdings, Inc., as
assigned to U.S. Propane, L.P. effective as of the closing of the Contribution
Agreement dated November 6, 2003 between LaGrange Energy L.P. and each of
Heritage Propane Partners, L.P. and Heritage Operating, L.P.
This Agreement may be executed in one or more counterparts and by
original or facsimile signatures delivered by the parties to the other, each of
which shall be deemed an original, but all of which constitute one and the same
document.
The parties hereto agree that the Employee shall continue as an at will
employee.
Dated January 20, 2004.
U. S. PROPANE, L.P.
By U.S. Propane, L.L.C., General Partner
By:______________________________________
Its: President
__________________________________________
R.C. Mills
"Employee"
EXHIBIT 10.10.2
TERMINATION AGREEMENT
(KRIMBILL)
The undersigned (the "Employee"), in consideration of the payment of
one (1) year's Base Salary, does hereby agree to the termination of his
Employment Agreement dated August 10, 2000 with Heritage Holdings, Inc., as
assigned to U.S. Propane, L.P. effective as of the closing of the Contribution
Agreement dated November 6, 2003 between LaGrange Energy L.P. and each of
Heritage Propane Partners, L.P. and Heritage Operating, L.P.
This Agreement may be executed in one or more counterparts and by
original or facsimile signatures delivered by the parties to the other, each of
which shall be deemed an original, but all of which constitute one and the same
document.
The parties hereto agree that the Employee shall continue as an at will
employee.
Dated January 20, 2004.
U. S. PROPANE, L.P.
By U.S. Propane, L.L.C., General Partner
By: ____________________________________
Its: Vice President
_____________________________________
H. Michael Krimbill
"Employee"
EXHIBIT 10.11.2
TERMINATION AGREEMENT
(ATKINSON)
The undersigned (the "Employee"), in consideration of the payment of
one (1) year's Base Salary, does hereby agree to the termination of his
Employment Agreement dated August 10, 2000 with Heritage Holdings, Inc., as
assigned to U.S. Propane, L.P. effective as of the closing of the Contribution
Agreement dated November 6, 2003 between LaGrange Energy L.P. and each of
Heritage Propane Partners, L.P. and Heritage Operating, L.P.
This Agreement may be executed in one or more counterparts and by
original or facsimile signatures delivered by the parties to the other, each of
which shall be deemed an original, but all of which constitute one and the same
document.
The parties hereto agree that the Employee shall continue as an at will
employee.
Dated January 20, 2004.
U. S. PROPANE, L.P.
By U.S. Propane, L.L.C., General Partner
By: ____________________________________
Its: President
_____________________________________
Bradley K. Atkinson
"Employee"
EXHIBIT 10.13.2
TERMINATION AGREEMENT
(DARR)
The undersigned (the "Employee"), in consideration of the payment of
one (1) year's Base Salary, does hereby agree to the termination of his
Employment Agreement dated August 10, 2000 with Heritage Holdings, Inc., as
assigned to U.S. Propane, L.P. effective as of the closing of the Contribution
Agreement dated November 6, 2003 between LaGrange Energy L.P. and each of
Heritage Propane Partners, L.P. and Heritage Operating, L.P.
This Agreement may be executed in one or more counterparts and by
original or facsimile signatures delivered by the parties to the other, each of
which shall be deemed an original, but all of which constitute one and the same
document.
The parties hereto agree that the Employee shall continue as an at will
employee.
Dated January 20, 2004.
U. S. PROPANE, L.P.
By U.S. Propane, L.L.C., General Partner
By: ____________________________________
Its: President
______________________________________
Mark A. Darr
"Employee"
EXHIBIT 10.14.2
TERMINATION AGREEMENT
(ROSE)
The undersigned (the "Employee"), in consideration of the payment of
one (1) year's Base Salary, does hereby agree to the termination of his
Employment Agreement dated August 10, 2000 with Heritage Holdings, Inc., as
assigned to U.S. Propane, L.P. effective as of the closing of the Contribution
Agreement dated November 6, 2003 between LaGrange Energy L.P. and each of
Heritage Propane Partners, L.P. and Heritage Operating, L.P.
This Agreement may be executed in one or more counterparts and by
original or facsimile signatures delivered by the parties to the other, each of
which shall be deemed an original, but all of which constitute one and the same
document.
The parties hereto agree that the Employee shall continue as an at will
employee.
Dated January 20, 2004.
U. S. PROPANE, L.P.
By U.S. Propane, L.L.C., General Partner
By: _____________________________________
Its: President
________________________________________
Thomas H. Rose
"Employee"
EXHIBIT 10.15.2
TERMINATION AGREEMENT
(WEISHAHN)
The undersigned (the "Employee"), in consideration of the payment of
one (1) year's Base Salary, does hereby agree to the termination of his
Employment Agreement dated August 10, 2000 with Heritage Holdings, Inc., as
assigned to U.S. Propane, L.P. effective as of the closing of the Contribution
Agreement dated November 6, 2003 between LaGrange Energy L.P. and each of
Heritage Propane Partners, L.P. and Heritage Operating, L.P.
This Agreement may be executed in one or more counterparts and by
original or facsimile signatures delivered by the parties to the other, each of
which shall be deemed an original, but all of which constitute one and the same
document.
The parties hereto agree that the Employee shall continue as an at will
employee.
Dated January 20, 2004.
U. S. PROPANE, L.P.
By U.S. Propane, L.L.C., General Partner
By: ____________________________________
Its: President
________________________________________
Curtis L. Weishahn
"Employee"
EXHIBIT 10.29.1
TERMINATION AGREEMENT
(GREENWOOD)
The undersigned (the "Employee"), in consideration of the payment of
one (1) year's Base Salary, does hereby agree to the termination of his
Employment Agreement dated July 1, 2001 with U.S. Propane, L.P. effective as of
the closing of the Contribution Agreement dated November 6, 2003 between
LaGrange Energy L.P. and each of Heritage Propane Partners, L.P. and Heritage
Operating, L.P.; provided, however, Employee retains the vested right to receive
20,000 Common Units on or about July 24, 2005.
This Agreement may be executed in one or more counterparts and by
original or facsimile signatures delivered by the parties to the other, each of
which shall be deemed an original, but all of which constitute one and the same
document.
The parties hereto agree that the Employee shall continue as an at will
employee.
Dated January 20, 2004.
U. S. PROPANE, L.P.
By U.S. Propane, L.L.C., General Partner
By: ________________________________________
Its: President
___________________________________________
Michael L. Greenwood
"Employee"
EXHIBIT 10.33
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
DATED AS OF DECEMBER 31, 2003
BETWEEN AND AMONG
HERITAGE OPERATING, L.P.,
A DELAWARE LIMITED PARTNERSHIP
"BORROWER"
AND
THE BANKS NOW OR HEREAFTER SIGNATORY PARTIES HERETO, AS LENDERS
"BANKS"
AND
BANK OF OKLAHOMA, NATIONAL ASSOCIATION
AS "ADMINISTRATIVE AGENT" AND CO-LEAD ARRANGER FOR THE BANKS,
AND
BANK ONE, NA,
AS "CO-AGENT" AND CO-LEAD ARRANGER" FOR THE BANKS
TABLE OF CONTENTS
ARTICLE I DEFINITIONS; ACCOUNTING PRINCIPLES, TERMS AND DEFINITIONS; CONSTRUCTION.................... 1
1.1 Definitions......................................................................................... 1
1.2 Accounting Principles, Terms and Determinations..................................................... 28
1.3 Construction........................................................................................ 28
ARTICLE II THE CREDITS................................................................................ 29
2.1 Acquisition Facility................................................................................ 29
2.1.1 Acquisition Loan.............................................................................. 29
2.1.2 Maximum Amount of Acquisition Credit.......................................................... 29
2.1.3 Acquisition Loan Borrowing Requests........................................................... 29
2.1.4 Acquisition Loan Account: Acquisition Notes.................................................. 30
2.2 Working Capital Facility............................................................................ 30
2.2.1 Working Capital Loan.......................................................................... 30
2.2.2 Maximum Amount of Working Capital Credit...................................................... 31
2.2.3 Working Capital Borrowing Requests............................................................ 31
2.2.4 Working Capital Loan Account: Working Capital Notes........................................... 31
2.3 Letters of Credit................................................................................... 32
2.3.1 Issuance of Letters of Credit................................................................. 32
2.3.2 Requests for Letters of Credit................................................................ 32
2.3.3 Form and Expiration of Letters of Credit...................................................... 32
2.3.4 Banks' Participation in Letters of Credit..................................................... 33
2.3.5 Presentation.................................................................................. 33
2.3.6 Payment of Drafts............................................................................. 33
2.3.7 Uniform Customs and Practice.................................................................. 33
2.3.8 Subrogation................................................................................... 35
2.3.9 Modification, Consent, etc.................................................................... 35
2.4 Application of Proceeds............................................................................. 35
2.4.1 Acquisition Loan.............................................................................. 35
2.4.2 Working Capital Loan.......................................................................... 35
2.4.3 Letters of Credit............................................................................. 36
2.4.4 Specifically Prohibited Applications.......................................................... 36
2.5 Nature of Obligations of Banks to Make Extensions of Credit......................................... 36
ARTICLE III INTEREST; EURODOLLAR PRICING OPTIONS; FEES................................................. 36
3.1 Interest............................................................................................ 36
3.2 Eurodollar Pricing Options.......................................................................... 36
3.2.1 Election of Eurodollar Pricing Options........................................................ 36
i
3.2.2 Notice to Banks and Borrower.................................................................. 37
3.2.3 Selection of Eurodollar Interest Periods...................................................... 37
3.2.4 Additional Interest........................................................................... 38
3.2.5 Violation of Bank Legal Requirements......................................................... 38
3.2.6 Funding Procedure............................................................................. 38
3.3 Commitment Fees..................................................................................... 39
3.3.1 Acquisition Financing Facility................................................................ 39
3.3.2 Working Capital Facility...................................................................... 39
3.4 Letter of Credit Fees............................................................................... 39
3.5 Reserve Requirements................................................................................ 40
3.6 Taxes............................................................................................... 40
3.7 Capital Adequacy.................................................................................... 41
3.8 Regulatory Changes.................................................................................. 41
3.9 Computations of Interest and Fees................................................................... 41
3.10 Loan Fees........................................................................................... 42
3.11 Administrative Agent's Fees......................................................................... 42
ARTICLE IV PAYMENT.................................................................................... 42
4.1 Payment at Maturity................................................................................. 42
4.2 Contingent Required Prepayments..................................................................... 42
4.2.1 Excess Credit Exposure........................................................................ 42
4.2.2 Letter of Credit Exposure..................................................................... 42
4.2.3 Contingent Prepayments on Disposition, Loss of Assets,
Merger or Change of Control................................................................... 42
4.2.4 Prepayment Procedure for Contingent Prepayments............................................... 43
4.3 Scheduled Required Payments/Prepayments............................................................. 44
4.3.1 Payments on the Acquisition Loan.............................................................. 44
4.3.2 Working Capital Loan.......................................................................... 44
4.4 Voluntary Prepayments............................................................................... 44
4.5 Letters of Credit................................................................................... 45
4.6 Reborrowing Application of Payments, etc............................................................ 45
4.6.1 Reborrowing................................................................................... 45
4.6.2 Order of Application.......................................................................... 45
4.6.3 Payment with Accrued Interest, etc............................................................ 45
4.6.4 Payments for Banks............................................................................ 45
ARTICLE V SECURITY................................................................................... 46
5.1 Collateral.......................................................................................... 46
ii
5.2 Intercreditor Agreement............................................................................. 46
ARTICLE VI...................................................................................................... 46
6.1 Conditions Precedent to Initial Working Capital Loan and Initial Acquisition Loan................... 46
(ii) Representations and Warranties................................................................... 47
(iii) Certificates..................................................................................... 47
(iv) Proceedings...................................................................................... 47
(v) Notes............................................................................................ 47
(vi) Security Agreement............................................................................... 47
(vii) Opinions......................................................................................... 48
(viii) UCC Releases/Other Information.................................................................. 48
(ix) Other Information and Closing Documents.......................................................... 48
(x) Assignments/Replacement of BankBoston............................................................ 48
(xi) Co-Agent......................................................................................... 48
6.2 Conditions Precedent to All Loans................................................................... 48
ARTICLE VII COVENANTS............................................................................... 49
7A. Affirmative Covenants............................................................................... 49
7A.1 Financial Statements.......................................................................... 49
7A.2 Inspection of Property........................................................................ 53
7A.3 Covenant to Secure Notes Equally.............................................................. 53
7A.4 Partnership or Corporate Existence, etc.; Compliance with Laws................................ 54
7A.5 Payment of Taxes and Claims................................................................... 54
7A.6 Compliance with ERISA......................................................................... 55
7A.7 Maintenance and Sufficiency of Properties..................................................... 55
7A.8 Insurance..................................................................................... 55
7A.9 Environmental Laws............................................................................ 56
7A.10 Operative Agreements.......................................................................... 56
7A.11 After-Acquired Property....................................................................... 56
7A.12 Further Assurances............................................................................ 57
7A.13 Books and Accounts............................................................................ 57
7A.14 Available Cash Reserves....................................................................... 57
7A.15 Parity Debt................................................................................... 58
7A.16 Maintenance of Separateness................................................................... 58
7B. Negative Covenants.................................................................................. 59
7B.1 Financial Ratios.............................................................................. 59
7B.2 Indebtedness.................................................................................. 60
7B.3 Liens......................................................................................... 63
7B.4 Priority Debt................................................................................. 66
7B.5 Loans, Advances, Investments and Contingent Liabilities....................................... 66
7B.6 Restricted Payments........................................................................... 68
7B.7 Consolidation, Merger, Sale of Assets......................................................... 68
7B.8 Business...................................................................................... 71
7B.9 Transactions with Affiliates.................................................................. 71
iii
7B.10 Subsidiary Stock and Indebtedness............................................................. 71
7B.11 Payment of Dividends by Subsidiaries......................................................... 72
7B.12 Sales of Receivables.......................................................................... 72
7B.13 Material Agreements; Tax Status............................................................... 72
7B.14 Commingling of Deposit Accounts and Accounts.................................................. 73
ARTICLE VIII REPRESENTATIONS, COVENANTS AND WARRANTIES............................................... 73
8.1 Organization........................................................................................ 73
8.2 Partnership Interests............................................................................... 73
8.3 Qualification....................................................................................... 74
8.4 Financial Statements................................................................................ 74
8.5 Actions Pending..................................................................................... 74
8.6 Changes............................................................................................. 74
8.7 Outstanding Indebtedness............................................................................ 74
8.8 Transfer of Assets and Business; Title to Properties................................................ 75
8.9 Taxes............................................................................................... 76
8.10 Compliance with Other Instruments; Solvency......................................................... 76
8.11 Governmental Consent................................................................................ 77
8.12 Use of Proceeds..................................................................................... 77
8.13 ERISA............................................................................................... 77
8.14 Environmental Compliance............................................................................ 77
8.15 Pre-emptive Rights.................................................................................. 78
8.16 Disclosure.......................................................................................... 79
8.17 Federal Reserve Regulations......................................................................... 79
8.18 Investment Borrower Act............................................................................. 79
8.19 Public Utility Holding Company Act.................................................................. 79
ARTICLE IX EVENTS OF DEFAULT.......................................................................... 79
9.1 Acceleration........................................................................................ 79
9.2 Remedies............................................................................................ 83
9.3 Other Remedies...................................................................................... 83
ARTICLE X LOAN OPERATIONS............................................................................ 84
10.1 Interests in Loans/Commitments...................................................................... 84
10.2 Administrative Agent's Authority to Act............................................................. 84
iv
10.3 Borrower to Pay Administrative Agent................................................................ 85
10.4 Bank Operations for Advances, Letters of Credit..................................................... 85
10.4.1 Advances.......................................................................................... 85
10.4.2 Letters of Credit................................................................................. 85
10.4.3 Administrative Agent to Allocate Payments......................................................... 85
10.4.4 Delinquent Banks; Nonperforming Banks............................................................. 86
10.5 Sharing of Payments................................................................................. 87
10.6 Amendments, Consents, Waivers....................................................................... 87
10.7 Administrative Agent's Resignation.................................................................. 88
10.8 Concerning the Agents............................................................................... 89
10.8.1 Action in Good Faith.............................................................................. 89
10.8.2 No Implied Duties................................................................................. 89
10.8.3 Validity.......................................................................................... 89
10.8.4 Compliance........................................................................................ 90
10.8.5 Employment Agents and Counsel..................................................................... 90
10.8.6 Reliance on Documents and Counsel................................................................. 90
10.8.7 Agents' Reimbursement............................................................................. 90
10.9 Rights as a Bank................................................................................... 90
10.10 Independent Credit Decision......................................................................... 91
10.11 Indemnification..................................................................................... 91
10.12 Procedure for Increases and Additional Banks........................................................ 91
ARTICLE XI ASSIGNMENTS/PARTICIPATIONS................................................................. 92
11 Successors and Assigns; Bank Assignment and Participations.......................................... 92
11.1 Assignments by Banks................................................................................ 92
11.1.1 Assignees and Assignment Procedures............................................................... 92
11.1.2 Terms of Assignment and Acceptance................................................................ 93
11.1.3 Register.......................................................................................... 94
11.1.4 Acceptance of Assignment and Assumption........................................................... 94
11.1.5 Federal Reserve Bank.............................................................................. 95
11.1.6 Further Assurances................................................................................ 95
11.2 Credit Participants................................................................................. 95
11.3 Replacement of Bank................................................................................. 96
ARTICLE XII MISCELLANEOUS........................................................................... 97
12.1 Notices.......................................................................................... 97
12.2 Place of Payment................................................................................. 97
12.3 Survival of Agreements........................................................................... 98
v
12.4 Parties in Interest.............................................................................. 98
12.5 Governing Law and Jurisdiction................................................................... 98
12.6 Submission to Jurisdiction....................................................................... 98
12.7 Maximum Interest Rate............................................................................ 98
12.8 No Waiver; Cumulative Remedies................................................................... 98
12.9 Costs............................................................................................ 99
12.10 Waiver of Jury................................................................................... 99
12.11 Full Agreement................................................................................... 99
12.12 Headings......................................................................................... 99
12.13 Severability..................................................................................... 99
12.14 Exceptions to Covenants.......................................................................... 99
12.15 Conflict with Security Documents................................................................. 100
12.16 Confidentiality.................................................................................. 100
12.17 Existing Credit Agreement........................................................................ 100
12.18 USA PATRIOT Act Notice........................................................................... 100
12.19 Not a Reportable Transaction..................................................................... 101
12.20 Counterparts..................................................................................... 101
EXHIBITS
Exhibit 2.1.3 - Acquisition Loan Borrowing Requests
Exhibit 2.1.4 - Acquisition Notes
Exhibit 2.2.3 - Working Capital Borrowing Requests
Exhibit 2.2.4 - Working Capital Notes
Exhibit 2.3.2 - Requests for Letters of Credit
Exhibit 10.12 - Procedure of Increase and Additional Banks
SCHEDULES
Schedule 7B.3 - Liens
Schedule 7B.5 - Investments
Schedule 8.2 - Subsidiaries
Schedule 8.3 - List of States
Schedule 8.7 - Indebtedness
Schedule 10.1 - Lenders Schedule
Schedule 8.8 - Property Exceptions
vi
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December
31, 2003 (this "Agreement"), is entered into between and among HERITAGE
OPERATING, L.P., a Delaware limited partnership (the "Borrower"), the various
Persons signatory parties hereto, as lenders, (together with each other Person
that becomes a Bank pursuant to Section 11 collectively referred to herein as
the "Banks"), and BANK OF OKLAHOMA, NATIONAL ASSOCIATION ("BOk"), as
administrative agent and co-lead arranger for the Banks (in such capacity the
"Administrative Agent"), and Bank One, NA("Bank One"), as co-agent and co-lead
arranger for the Banks (in such capacity the "Co-Agent") .
ARTICLE I
DEFINITIONS; ACCOUNTING PRINCIPLES,
TERMS AND DEFINITIONS; CONSTRUCTION
1.1 Definitions. Capitalized terms are used in this Agreement with
the specific meanings defined below in this Section 1.1.
"Acquired Debt" means with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Subsidiary of such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidiary of such specified Person
and (ii) Indebtedness encumbering any asset acquired by such specified Person.
"Acquisition/Capex Due Diligence Package" is defined in Section 2.1.3.
"Acquisition Facility" means the agreement of the Banks herein to make
the Acquisition Loan.
"Acquisition Loan Account" is defined in Section 2.1.4.
"Acquisition Loan" is defined in Section 2.1.4.
"Acquisition Notes" is defined in Section 2.1.4.
"Additional Banks" shall mean any Person that hereafter becomes a
signatory Party hereto as a lender to Borrower hereunder.
"Additional Parity Debt" means Indebtedness of the Borrower that both
(a) is permitted under Section 7B.2(xiv) hereof or is incurred with the consent
of the Requisite Percentage of the Banks and (b) constitutes "Additional Parity
Debt" as defined in the Note Purchase Agreements and the Intercreditor
Agreement.
"Adjusted Consolidated EBITDA" shall mean, as of any date of
determination for any applicable period, Consolidated EBITDA calculated:
(x) with respect to the consolidated group comprised of
the General Partner, the Master Partnership and the Borrower and its
Subsidiaries (rather than with respect to the consolidated group
comprised of the Borrower and its Subsidiaries), and
(y) as if the terms "Consolidated Non-Cash Charges",
"Consolidated Net Income", "Consolidated Interest Expense",
"Consolidated Income Tax Expense", "Asset Sale", and "Asset
Acquisition", were calculated with respect to the consolidated group
comprised of the General Partner, the Master Partnership the Borrower
and their respective Subsidiaries (rather than with respect to the
consolidated group comprised of the Borrower and its Subsidiaries).
"Adjusted Consolidated Funded Indebtedness" shall mean Consolidated
Funded Indebtedness calculated with respect to the consolidated group comprised
of the General Partner, the Master Partnership, and the Borrower and their
Subsidiaries (rather than with respect to the consolidated group comprised of
the Borrower and its Subsidiaries).
"Administrative Agent" means BOk in its capacity as administrative
agent for the Banks hereunder, as well as its successors and assigns in such
capacity pursuant to Section 10.7.
"Affected Bank" is defined in Section 11.3.
"Affiliate" means, with respect to any Person any other Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with, such Person, except a Subsidiary of such Person. A Person shall be
deemed to control a corporation if such Person (i) possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such corporation, whether through the ownership of voting
securities, by contract or otherwise or (ii) owns at least 5% of the Voting
Stock of a corporation. As applied to the Borrower, "Affiliate" includes the
General Partner and the Master Partnership.
"Agent" means collectively the Administrative Agent and the Co-Agent.
"Agreement" means this Agreement as from time to time amended, modified
and in effect.
"Aggregate Available Cash" shall mean, with respect to any fiscal
quarter of the Borrower and of La Grange, the aggregate amount of Available Cash
of both the Borrower and its Subsidiaries and of La Grange and its Subsidiaries
(which for purposes of this Agreement insofar as La Grange is concerned, shall
be calculated using the definition of "Available Cash" set forth in this
Agreement, except that (i) all references therein to the "Borrower" shall be
deemed for purposes of this calculation only references to La Grange and (ii)
the last sentence of such definition for purposes of this calculation only shall
be modified to refer to reserves established by La Grange with respect to
indebtedness on the same bases as set forth in such definition).
2
"Aggregate Partner Obligations" shall mean, with respect to any fiscal
quarter of the General Partner and the Master Partnership, the aggregate amount
of payment obligations of each of the General Partner and the Master
Partnership, including, without limitation, the Minimum Quarterly Distribution
(as defined in the Agreement of Limited Partnership of the Master Partnership)
on all Units thereof with respect to such fiscal quarter.
"Allocable Proceeds" means, with respect to Excess Sale Proceeds or
Excess Taking Proceeds, as the case may be, to be applied on any date pursuant
to Sections 4.2.3(i) and 4.2.3(ii), the principal amount thereof available to
prepay the Acquisition Notes determined by allocating such Excess Sale Proceeds
or Excess Taking Proceeds, as the case may be, pro rata among the holders of all
Acquisition Notes, the Private Placement Notes and other Parity Debt (other than
Indebtedness permitted by Section 7B.2(ii)), if any, according to the aggregate
principal amounts of the Acquisition Notes, the Private Placement Notes and such
other Parity Debt outstanding on the date the applicable prepayment is to be
made in accordance with Sections 4.2.3(i) and 4.2.3(ii).
"Annual Clean-Up" is defined in Section 2.2.2.
"Applicable Commitment Fee Percentage" means, with respect to any
Margin Period, the applicable percentage set forth below:
(i) if the Leverage Ratio on the Financial Statement
Delivery Date beginning such Margin Period was less than 3.25 to 1.0,
0.375%;
(ii) if the Leverage Ratio on the Financial Statement
Delivery Date beginning such Margin Period was equal to or greater than
3.25 to 1.0 but less than 3.75 to 1.0, 0.450%; and
(iii) if the Leverage Ratio on the Financial Statement
Delivery Date beginning such Margin Period was equal to or greater than
3.75 to 1.0, 0.50%.
Notwithstanding the foregoing, if any of the financial
statements required pursuant to Section 7A.1(i) of this Credit
Agreement are not delivered within the time periods specified in
Section 7A.1(i), the Applicable Commitment Fee Percentage shall be
0.50% until the date such financial statements are delivered.
"Applicable Margin" means with respect to any Eurodollar Loan or with
respect to any Base Rate Loan, the rate of interest per annum determined as set
forth below:
(i) if the Leverage Ratio on the Financial Statement
Delivery Date (as defined in the Credit Agreement) commencing such
Margin Period was less than 3.25 to 1.0, the Applicable Margin will be
1.625% for Eurodollar Loans and zero for Base Rate Loans;
(ii) if the Leverage Ratio on the Financial Statement
Delivery Date commencing such Margin Period was equal to or greater
than
3
3.25 to 1.0 but less than 3.75 to 1.0, the Applicable Margin will be
1.875% for Eurodollar Loans and zero for Base Rate Loans;
(iii) if the Leverage Ratio on the Financial Statement
Delivery Date commencing such Margin Period was equal to or greater
than 3.75 to 1.0 but less than 4.25 to 1.0, the Applicable Margin will
be 2.125% for Eurodollar Loans and zero for Base Rate Loans;
(iv) if the Leverage Ratio on the Financial Statement
Delivery Date commencing such Margin Period was equal to or greater
than 4.25 to 1.0 but less than 4.50 to 1.0, the Applicable Margin will
be 2.250% for Eurodollar Loans and zero for Base Rate Loans;
(v) if the Leverage Ratio on the Financial Statement
Delivery Date commencing such Margin Period was equal to or greater
than 4.50 to 1.0 but less than 4.75 to 1.0, the Applicable Margin will
be 2.50% for Eurodollar Loans and 0.125% for Base Rate Loans; and
(vi) if the Leverage Ratio on the Financial Statement
Delivery Date commencing such Margin Period was equal to or greater
than 4.75 to 1.0, the Applicable Margin will be 2.50% for Eurodollar
Loans and 0.250% for Base Rate Loans.
Notwithstanding the foregoing, if any of the financial
statements required pursuant to Section 7A.1(i) of this Credit
Agreement are not delivered within the time periods specified in
Section 7A.1(i) thereof, the Applicable Margin shall be the Applicable
Margin set forth in clause (vi) above until the date such financial
statements are delivered.
"Applicable Rate" means, at any date:
(i) the sum of (a) with respect to each Eurodollar Loan,
the sum of the Applicable Margin in effect on such date plus the
Eurodollar Rate relating to such Eurodollar Loan; (b) with respect to
each Base Rate Loan, the sum of the Applicable Margin in effect on such
date plus the Base Rate relating to such Base Rate Loan; and
(ii) an additional two percentage points (2%) effective on
the day the Administrative Agent notifies the Borrower that the
interest rates hereunder are increasing as a result of the occurrence
and continuance of an Event of Default until such time as (A) such
Event of Default is no longer continuing or (B) such Event of Default
is deemed no longer to exist, in each case pursuant to Article IX
hereof.
"Arvest" shall mean Arvest Bank, a state banking corporation.
"Asset Acquisition" means (i) an Investment by the Borrower or any
Subsidiary of the Borrower in any other Person pursuant to which such Person
shall become a Subsidiary of the Borrower or shall be merged with or into the
Borrower or any Subsidiary of the Borrower, (ii)
4
the acquisition by the Borrower or any Subsidiary of the Borrower of the assets
of any Person which constitute all or substantially all of the assets of such
Person or (iii) the acquisition by the Borrower or any Subsidiary of the
Borrower of any division or line of business of any Person (other than a
Subsidiary of the Borrower).
"Asset Sale" is defined in Section 7B.7(iii).
"Assets" is defined in the second opening paragraph of the Note
Purchase Agreements, as in effect on the date hereof.
"Assignment and Acceptance" is defined in Section 11.1.1.
"Attributable Debt" means, with respect to any Sale and Lease-Back
Transaction not involving a Capitalized Lease Obligation, as of any date of
determination, the total obligation (discounted to present value at the rate of
interest implicit in the lease included in such transaction) of the lessee for
rental payments (other than accounts required to be paid on account of property
taxes, maintenance, repairs, insurance, assessments, utilities, operating and
labor costs and other items which do not constitute payments for property
rights) during the remaining portion of the term (including extensions which are
at the sole option of the lessor) of the lease included in such transaction (in
the case of any lease which is terminable by the lessee upon the payment of a
penalty, such rental obligation shall also include the amount of such penalty,
but no rent shall be considered as required to be paid under such lease
subsequent to the first date upon which it may be so terminated).
"Available Cash" means, with respect to any fiscal quarter of the
Borrower, (i) the sum of (a) all cash and cash equivalents thereof and its
Subsidiaries on hand at the end of such quarter and (b) all additional cash and
cash equivalents thereof and its Subsidiaries on hand on the date of
determination of Available Cash with respect to such quarter resulting from
borrowings for working capital purposes made subsequent to the end of such
quarter, less (ii) the amount of any cash reserves that is necessary or
appropriate in the reasonable discretion of the General Partner thereof to (a)
provide for the proper conduct of the business thereof and its Subsidiaries
(including reserves for future capital expenditures) subsequent to such quarter,
(b) comply with applicable law or any loan agreement, security agreement,
mortgage, debt instrument or other agreement or obligation to which the Borrower
or any Subsidiary thereof is a party or by which it is bound or its assets are
subject (including the Loan Documents) and (c) provide funds for distributions
to partners of the Master Partnership and the General Partner thereof in respect
of any one or more of the next four quarters; provided that the General Partner
thereof need not establish cash reserves pursuant to clause (c) if the effect of
such reserves would be that the Master Partnership is unable to distribute the
Minimum Quarterly Distribution (as defined in the Agreement of Limited
Partnership of the Master Partnership) on all Common Units with respect to such
quarter; and provided, further, that disbursements made by the Borrower, or a
Subsidiary of the Borrower, 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 General Partner thereof so determines. In addition,
without limiting the foregoing, Available Cash for any fiscal quarter shall
reflect reserves equal
5
to (A) 50% of the interest projected to be paid on the Private Placement Notes
in the next succeeding fiscal quarter plus (B) beginning with a date three
fiscal quarters before a scheduled principal payment date on the Private
Placement Notes, 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 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, plus (C) the Unused Proceeds Reserve
as of the date of determination, provided that the foregoing reserves for
amounts to be paid on the Private Placement Notes shall be reduced by the
aggregate amount of advances available to the Borrower, from responsible
financial institutions under binding irrevocable (x) credit or financing
commitments (which are subject to no conditions which the Borrower is unable to
meet) including this Agreement, and (y) letters of credit (which are subject to
no conditions which the Borrower is unable to meet), in each case, to be used to
refinance such amounts, to the extent such amounts could be borrowed and remain
outstanding under Sections 7B.1 and 7B.2 of this Agreement.
"Bank" means each of the Persons listed as Banks on the signature page
hereto, including each of BOk, Bank One, Arvest, Fifth Third, MidFirst, Local
and US Bank in its capacity as a Bank, and such other Persons who may from time
to time own a Percentage Interest in the Credit Obligations, but the term "Bank"
shall not include any Credit Participant.
"Bank Legal Requirement" means any present or future requirement
imposed upon any of the Banks or the Borrower and its Subsidiaries by any law,
statute, rule, regulation, directive, order, decree, guideline (or any
interpretation thereof by courts or of administrative bodies) of the United
States of America, or any jurisdiction in which any Eurodollar Office is located
or any state or political subdivision of any of the foregoing, or by any board,
governmental or administrative agency, central bank or monetary authority of the
United States of America, any jurisdiction in which any Eurodollar Office is
located, or any political subdivision of any of the foregoing. any such
requirement imposed on any of the Banks not having the force of law shall be
deemed to be a Bank Legal Requirement if such Bank reasonably believes that
compliance therewith is in the best interest of such Bank.
"Bank One" means Bank One, NA..
"Banking Day" means any day other than Saturday, Sunday or a day on
which banks in Tulsa, Oklahoma are authorized or required by law or other
governmental action to close and, if such term is used with reference to a
Eurodollar Pricing Option, any day on which dealings are effected in the
Eurodollars in question by first-class banks in the inter-bank Eurodollar
markets in New York, New York.
"Bankruptcy Law" is defined in clause (viii) of Section 9.1.
"Base Rate" means, on any date, the greater (i) the rate of interest
announced by JPMorgan Chase Bank, National Association, New York, New York, or
such other financial institution that is the primary banking subsidiary of
JPMorgan Chase & Co., as its Base Rate or (ii) the sum of 1/2% plus the Federal
Funds Rate.
6
"Base Rate Loan" means each portion of the Loan bearing interest
determined by reference to the Base Rate.
"Bi-State" means Heritage-Bi State LLC, a Delaware limited liability
company.
"BOk" has the meaning specified in the introduction to this Agreement.
"Business" shall mean each of (i) the business of wholesale and retail
sales, storage, transportation and distribution of propane gas, providing
repair, installation and maintenance services for propane heating systems; the
sale and distribution of propane-related supplies and equipment (including
appliances); the generation, transportation, sale, distribution and marketing
relating thereto of propane-powered fuel cells, or the power generated therefrom
and equipment related thereto, and (ii) the business of purchasing, gathering,
treating, processing, marketing, sales, storage, transportation, fractionation
and distribution of natural gas and natural gas liquids and other related energy
services.
"Capital Stock" means, with respect to any Person, any and all shares,
units representing interests, participations, rights in or other equivalents
(however designated) of such Person's capital stock, including, with respect to
partnerships, partnership interests (whether general or limited) and any other
interest or participation that confers upon a Person the right to receive a
share of the profits and losses of, or distributions of assets of, such
partnership, and any rights (other than debt securities convertible into capital
stock), warrants or options exchangeable for or convertible into such capital
stock.
"Capitalized Lease Obligation" means any rental obligation which under
GAAP would be required to be capitalized on the books of the Borrower or any of
its Subsidiaries, taken at the amount thereof accounted for as indebtedness (net
of interest expense) in accordance with such principles.
"Cash Equivalents" is defined in Section 7B.5(iii).
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et seq., as the
same may be amended from time to time.
"Certificates and Stock Powers" is defined in Section 6.1(vi).
"Change of Control" means the acquisition by any Person or group of
related persons (as such terms are defined in the Exchange Act) (other than the
Current Management or group of related persons (as so defined) including the
Current Management) of beneficial ownership of more than 50% of the Units.
"Closing Date" means the effective date of this Agreement and each
other date on which any extension of credit is made pursuant to Section 2.1, 2.2
or 2.3.
"Code" means the Internal Revenue Code of 1986, as amended.
7
"Collateral" is defined in the Security Agreement, provided, however,
that Collateral shall not include for any purpose under this Agreement or any
other Loan Document any property subject to a Lien incurred pursuant to clause
(i), (vii) or (viii) of Section 7B.3 or any renewals of any such Lien pursuant
to clause (xiv) of Section 7B.3 unless the Indebtedness secured by such Lien
shall have been paid or discharged.
"Collateral Agent" shall mean Wilmington Trust Company, a Delaware
trust company, in its capacity as collateral agent under the Intercreditor and
Agency Agreement and its successors and assigns in such capacity under Section
11 thereof.
"Commission" means the United States Securities and Exchange
Commission.
"Commitments" means, with respect to any Bank, such Bank's obligations
to extend the credit facilities contemplated by Section 2. The original
Commitments are set forth in Section 10.1 and the current Commitments are
recorded from time to time in the Register.
"Common Units" shall mean common units representing a limited
partnership interest in the Master Partnership and the Borrower on a combined
basis.
"Consolidated Debt Service" means, as of any date of determination, the
total amount payable by the Borrower and its Subsidiaries on a consolidated
basis during the four consecutive calendar quarters next succeeding the date of
determination, in respect of scheduled principal and interest payments with
respect to Indebtedness of the Borrower and its Subsidiaries outstanding on such
date of determination, after giving effect to any Indebtedness proposed on such
date to be incurred and to the substantially concurrent repayment of any other
Indebtedness (a) including actual payments under Capitalized Lease Obligations,
(b) assuming, in the case of Indebtedness (other than Indebtedness referred to
in clause (c) below) bearing interest at fluctuating interest rates which cannot
be determined in advance, that the rate actually in effect on such date will
remain in effect throughout such period, (c) including only actual interest (but
not principal) payments associated with the Indebtedness incurred pursuant to
Section 7B.2(ii) and 7B.2(v) during the most recent four consecutive calendar
quarters and (d) treating the principal amount of all Indebtedness outstanding
as of such date of determination under a revolving credit or similar agreement
(other than the Indebtedness incurred pursuant to Section 7B.2(ii) and Section
7B.2(v)) as maturing and becoming due and payable on the scheduled maturity date
or dates thereof (including the maturity of any payment required by any
commitment reduction or similar amortization provision), without regard to any
provision permitting such maturity date to be extended (except for such
extensions as may be made in the sole discretion of the borrower thereunder and
without any conditions that remain to be fulfilled by the borrower or waived by
the lender thereunder). See Section 1.2.
"Consolidated EBITDA" means, as of any date of determination for any
applicable period, (1) the sum of, without duplication, the amounts for such
period, taken as a single accounting period, of (a) Consolidated Net Income and
(b) to the extent deducted in the determination of Consolidated Net Income,
after excluding amounts attributable to minority interests in Subsidiaries and
without duplication, (i) Consolidated Non-Cash Charges, (ii) Consolidated
Interest Expense and (iii) Consolidated Income Tax Expense less (2) any non-cash
8
items increasing Consolidated Net Income for such period to the extent that such
items constitute reversals of a Consolidated Non-Cash Charge for a previous
period and which were included in the computation of Consolidated EBITDA for
such previous period pursuant to the provisions of the preceding clause (1).
Consolidated EBITDA shall be calculated after giving effect, on a pro forma
basis and in accordance with GAAP, to, without duplication, any Asset Sales or
Asset Acquisitions (including without limitation any Asset Acquisition giving
rise to the need to make such calculation as a result of the Borrower or one of
its Subsidiaries incurring, assuming or otherwise being liable for Acquired
Debt) occurring during the period commencing on the first day of such period to
and including the date of the transaction (the "Reference Period"), as if such
Asset Sale or Asset Acquisition occurred on the first day of the Reference
Period; provided, however, that Consolidated EBITDA generated by an acquired
business or asset shall be determined by the actual gross profit (revenues minus
cost of goods sold) of such acquired business or asset during the immediately
preceding four full fiscal quarters in the Reference Period minus the pro forma
expenses that would have been incurred by the Borrower and its Subsidiaries in
the operation of such acquired business or asset during such period computed on
the basis of personnel expenses for employees retained or to be retained by the
Borrower and its Subsidiaries in the operation of such acquired business or
asset and non-personnel costs and expenses incurred by the Borrower and its
Subsidiaries in the operation of the Borrower's business at similarly situated
facilities of the Borrower or any of its Subsidiaries (as determined in good
faith by the General Partner determined (a) on the basis of 100% that amount for
the period of upon reasonable assumptions). As used herein, but only for
purposes of Sections 7B.1(i) and (ii), Consolidated EBITDA shall be determined
(a) on the basis of 100% of that amount for the period of the four most recent
fiscal quarters ending on or prior to the date of determination or (b) 50% of
that amount for the period of the eight most recent fiscal quarters ending on or
prior to the date of determination, whichever is higher. For all other purposes
hereof, Consolidated EBITDA shall be based upon that amount determined over the
four most recent fiscal quarters ending on or prior to the date of determination
(or, as the case may be, for which financial statements have been or are
required to be delivered to the Banks pursuant to Section 7B.1(i) and (ii)). See
Section 1.2.
"Consolidated Funded Indebtedness" means, as of any date of
determination, the aggregate amount of Indebtedness of the Borrower and its
Subsidiaries outstanding on that date and maturing in more than 12 months,
including the Private Placement Notes and borrowings under the Acquisition
Facility (including current maturities of any such Indebtedness).
Notwithstanding anything to the contrary contained herein, Consolidated Funded
Indebtedness shall not include borrowings under the Working Capital Facility to
the extent permitted under the Note Purchase Agreements.
"Consolidated Income Tax Expense" means, with respect to the Borrower
and its Subsidiaries, for any period, the provision for federal, state, local
and foreign income taxes of the Borrower and its Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP. See Section 1.2.
"Consolidated Interest Expense" means as of any date of determination
for any applicable period, without duplication, the sum of (i) the interest
expense of the Borrower and its Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP,
9
including without limitation (a) any amortization of debt discount, (b) the net
cost under Interest Rate Agreements, (c) the interest portion of any deferred
payment obligation, (d) all commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance financing and (e)
all accrued interest and (ii) the interest component of Capitalized Lease
Obligations paid, accrued or scheduled to be paid or accrued by the Borrower and
its Subsidiaries during such period as determined on a consolidated basis in
accordance with GAAP. In computing Consolidated Interest Expense for purposes of
clause (ii) of Section 7B.1, the applicable period for the determination thereof
shall be the four most recent fiscal quarters ending on or prior to the date of
determination. See Section 1.2.
"Consolidated Net Income" means the net income of the Borrower and its
Subsidiaries, as determined on a consolidated basis in accordance with GAAP and
after provision for minority interests and as adjusted to exclude (i) net
after-tax extraordinary gains or losses, (ii) net after-tax gains or losses
attributable to Asset Sales, (iii) the net income or loss of any Person which is
not a Subsidiary of the Borrower and which is accounted for by the equity method
of accounting, provided that Consolidated Net Income shall include the amount of
cash dividends or distributions actually paid to the Borrower or any Subsidiary
of the Borrower, (iv) the net income or loss prior to the date of acquisition of
any Person combined with the Borrower or any Subsidiary of the Borrower in a
pooling of interest, (v) the net income of any Subsidiary of the Borrower to the
extent that dividends or distributions of such net income are not at the date of
determination permitted by the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or other regulation and (vi)
the cumulative effect of any changes in accounting principles. See Section 1.2.
"Consolidated Net Worth" means, with respect to any Person, at any date
of determination, the total partners' capital (in the case of a partnership) or
stockholders' equity (in the case of a corporation) of such Person at such date,
as would be shown on a consolidated balance sheet of such Person and its
Subsidiaries, if any, prepared in accordance with GAAP. See Section 1.2.
"Consolidated Non-Cash Charges" means with respect to the Borrower and
its Subsidiaries, for any period, the aggregate depreciation and amortization,
in each case reducing Consolidated Net Income of the Borrower and its
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP. See Section 1.2.
"Consolidated Pro Forma Maximum Debt Service" means, as of any date of
determination, the maximum amount payable by the Borrower and its Subsidiaries
on a consolidated basis during all periods of four consecutive calendar
quarters, commencing with the calendar quarter in which such date of
determination occurs and ending June 30, 2011, in respect of scheduled principal
and interest payments with respect to all Indebtedness of the Borrower and its
Subsidiaries outstanding on such date of determination, after giving effect to
any Indebtedness proposed on such date to be incurred and to the substantially
concurrent repayment of any other Indebtedness (a) including all payments under
Capitalized Lease Obligations, (b) assuming, in the case of Indebtedness (other
than Indebtedness referred to in clause (c) below) bearing interest at
fluctuating interest rates which cannot be determined in advance, that the rate
actually in effect on such date will remain in effect throughout such period,
(c) including only
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actual interest (but not principal) payments associated with the Indebtedness
incurred pursuant to Section 7B.2 during the most recent four consecutive
calendar quarters and (d) treating the principal amount of all Indebtedness
outstanding as of such date of determination under a revolving credit or similar
agreement (other than the Indebtedness incurred pursuant to Section 7B.2 as
maturing and becoming due and payable on the scheduled maturity date or dates
thereof (including the maturity of any payment required by any commitment
reduction or similar amortization provision), without regard to any provision
permitting such maturity date to be extended (except for such extensions as may
be made in the sole discretion of the borrower thereunder and without any
conditions that remain to be fulfilled by the borrower or waived by the lender
thereunder). See Section 1.2.
"Consolidated Tangible Net Worth" means, with respect to any Person, at
any date of determination, the then Consolidated Net Worth of Person minus the
net book value of all assets of such Person and its Subsidiaries, if any, (after
deducting any reserves applicable thereto), which would be shown as intangible
assets on a consolidated balance sheet of such Person and its Subsidiaries, if
any, as of such time prepared in accordance with GAAP. See Section 1.2.
"Contribution Agreement" collectively shall mean the Contribution,
Conveyance and Assumption Agreement, dated as of June 28, 1996, among the other
signatories thereto, in connection with the transactions contemplated by the
Existing Credit Agreement and the Contribution Agreement, dated as of November
6, 2003, among the signatory parties thereto in connection with the La Grange
Acquisition, as each of the same may from time to time be amended, supplemented,
restated or otherwise modified in accordance with the terms thereof and hereof.
"Control Event" means:
(i) the execution of any written agreement to which the
Borrower or any Affiliate of the Borrower is a party which could
reasonably be expected to result in a Change of Control.
(ii) the commencement (as such term is used in Rule
14d-2(a) under the Exchange Act as in effect on the date of the
Closing) of a tender offer by any person (as such term is used in
Section 13(d) and Section 14(d)(2) of the Exchange Act as in effect on
the date of the Closing) or related person constituting a group (as
such term issued in Rule 13d-5 under the Exchange Act as in effect on
the date of the Closing) for units which would result in such person or
group owning, directly or indirectly, more than 50% of the outstanding
Units.
"Conveyance Agreements" shall mean (a) the Contribution Agreement and
(b) each of the individual bills of sale and other conveyance documents
delivered to the Borrower pursuant to the Contribution Agreement in each case as
the same may from time to time be amended, supplemented or otherwise modified in
accordance with the terms thereof and hereof.
"Credit Obligations" means all present and future liabilities,
obligations and Indebtedness of the Borrower or any of its Subsidiaries owing to
the Administrative Agent, the Co-Agent or
11
any Bank under or in connection with this Agreement or any other Loan Document,
including obligations in respect of principal, interest, reimbursement
obligations under Letters of Credit and Interest Rate Agreements provided by a
Bank (or an Affiliate of a Bank), commitment fees, Letter of Credit fees,
amounts provided for in Sections 3.2.4, 3.5, 3.6, 3.7, 3.8 and 3.10 and any
other fees, charges, indemnities and expenses from time to time owing hereunder
or under any other Loan Documents (whether accruing before or after the
commencement of proceedings under any Bankruptcy Law).
"Credit Participant" is defined in Section 11.2.
"Current Management" shall mean (a) either H. Michael Krimbill or
Michael L. Greenwood and (b) any one (1) of the following: James E.
Bertelsmeyer, R.C. Mills, Bradley K. Atkinson, Ray C. Davis or Kelcy L. Warren,
together with the heirs of, and trusts for the benefit of family members
controlled by, any such executive manager described in (a) or (b) hereof.
"Departing Bank" shall mean Harris Trust and Savings Bank.
"Environmental Laws" means all applicable federal, state, local and
foreign laws, rules or regulations as amended from time to time, relating to
emissions, discharges, releases, threatened releases, removal, remediation or
abatement of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances or wastes into or in the environment (including without
limitation air, surface water, ground water or land), or otherwise used in
connection with the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, toxic or
hazardous substances or wastes, as defined under such applicable laws.
"Equity Interest" means, with respect to any Person, any capital stock
issued by such Person, regardless of class or designation, or any limited or
general partnership interest in such Person, regardless of designation, and all
warrants, options, purchase rights, conversion or exchange rights, voting
rights, calls or claims of any character with respect thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA Event" means (i) any "reportable event", as defined in Section
4043 of ERISA or the regulations issued thereunder, with respect to a Plan; (ii)
the adoption of any amendment to a 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 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 Plan; (v) the incurrence of any liability under
Title IV of ERISA with respect to the termination of any Plan or the withdrawal
or partial withdrawal of the Borrower or any of its ERISA Affiliates from any
12
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 Plan or Plans or to appoint a trustee to administer
any 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; and (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 such Subsidiary would be
liable for the payment of an excise tax.
"Eurodollars" means, with respect to any Bank, deposits of United
States Funds in a non-United States office or an international banking facility
of such Bank.
"Eurodollar Basic Rate" means, for any Eurodollar Interest Period, the
rate of interest at which Eurodollar deposits in an amount comparable to the
Percentage Interest of BOk in the portion of a Loan as to which a Eurodollar
Pricing Option has been elected and which have a term corresponding to such
Eurodollar Interest Period are offered to the Administrative Agent by first
class banks in the inter-bank Eurodollar market for delivery in immediately
available funds at a Eurodollar Office on the first day of such Eurodollar
Interest Period as determined by the Administrative Agent at approximately 10:00
a.m. (Tulsa, Oklahoma time) two Banking Days prior to the date upon which such
Eurodollar Interest Period is to commence (which determination by the
Administrative Agent shall, in the absence of manifest error, be conclusive) and
as furnished promptly thereafter by the Administrative Agent.
"Eurodollar Interest Period" means any period, selected as provided in
Section 3.2.1, of one or three months, commencing on any Banking Day and ending
on the corresponding date in the subsequent calendar month so indicated (or, if
such subsequent calendar month has no corresponding date, on the last day of
such subsequent calendar month); provided, however, that subject to Section
3.2.3, if any Eurodollar Interest Period so selected would otherwise begin or
end on a date which is not a Banking Day, such Eurodollar Interest Period shall
instead begin or end, as the case may be, on the immediately preceding or
succeeding Banking Day as determined by the Administrative Agent in accordance
with the then current banking practice in the inter-bank Eurodollar market with
respect to Eurodollar deposits at the applicable Eurodollar Office, which
determination by the Administrative Agent shall, in the absence of manifest
error, be conclusive.
"Eurodollar Loan" means each portion of the Loan bearing interest
determined by reference to the Eurodollar Rate.
"Eurodollar Office" means such non-United States office or
international banking facility of any Bank as the Administrative Agent may from
time to time select.
"Eurodollar Pricing Options" means the options granted pursuant to
Section 3.2.1 to have the interest on any portion of a Loan computed on the
basis of a Eurodollar Rate.
13
"Eurodollar Rate" for any Eurodollar Interest Period means the rate,
rounded upward to the nearest 1/100%, obtained by dividing (a) the Eurodollar
Basic Rate for such Eurodollar Interest Period by (b) an amount equal to 1 minus
the Eurodollar Reserve Rate; provided, however, that if at any time during such
Eurodollar Interest Period the Eurodollar Reserve Rate applicable to any
outstanding Eurodollar Pricing Option changes, the Eurodollar Rate for such
Eurodollar Interest Period shall automatically be adjusted to reflect such
change, effective as of the date of such change.
"Eurodollar Reserve Rate" means the stated maximum rate (expressed as a
decimal) of all reserves (including any basic, supplemental, marginal or
emergency reserve or any reserve asset), if any, as from time to time in effect,
required by any Bank Legal Requirement to be maintained by any Bank against (a)
"Eurocurrency liabilities" as specified in Regulation D of the Board of
Governors of the Federal Reserve System applicable to Eurodollar Pricing
Options, (b) any other category of liabilities that includes Eurodollar deposits
by reference to which the interest rate on portions of a Loan subject to
Eurodollar Pricing Options is determined, (c) the principal amount of or
interest on any portion of the Loan subject to a Eurodollar Pricing Option or
(d) any other category of extensions of credit, or other assets, that includes
loan subject to a Eurodollar Pricing Option by a non-United States office of any
of the Banks to United States residents, in each case without the benefits of
credits for prorations, exceptions or offsets that may be available to a Lender.
"Event of Default" means any of the events specified in Section 9.1,
provided that there has been satisfied any requirement in connection with such
event for the giving of notice, or the lapse of time, or the happening of any
further condition, event or act, and "Default" shall mean any of such events,
whether or not any such requirement has been satisfied.
"Excess Proceeds" is defined in Section 4.2.4.
"Excess Sale Proceeds" is defined in Section 7B.7(iii)(c)(ii).
"Excess Taking Proceeds" is defined in Section 4.2.3(ii).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Credit Agreement" means the Credit Agreement dated as of June
25, 1996, as amended by the First Amendment to Credit Agreement dated as of July
25, 1996, the Second Amendment to Credit Agreement dated as of February 28,
1997, the Third Amendment to Credit Agreement dated as of September 30, 1997,
the Fourth Amendment to Credit Agreement dated as of November 18, 1997, and the
Fifth Amendment to Credit Agreement dated as of November 13, 1998, as replaced
and restated by the First Amended and Restated Credit Agreement dated as of May
31, 1999, between and among Borrower, BOk, Firstar Bank, N.A. ("Firstar"), and
Local, and BOk, as Administrative Agent, and Firstar, as Co-Agent, as amended by
the First Amendment to First Amended and Restated Credit Agreement dated as of
October 15, 1999, between and among Borrower, BOk, Firstar and
14
Local, and BOk, as Administrative Agent and Firstar, as Co-Agent, as amended by
the Second Amendment to First Amended and Restated Credit Agreement dated as of
May 31, 2000, between and among Borrower, BOk, Firstar and Local, and BOk, as
Administrative Agent, and Firstar, as Co-Agent, as amended by the Third
Amendment to First Amended and Restated Credit Agreement dated as of August 10,
2000, between and among Borrower, BOk, Firstar, Local and Harris, as lenders,
and BOk, as Administrative Agent and Firstar, as Co-Agent, as further amended by
the Fourth Amendment to First Amended and Restated Credit Agreement dated as of
December 28, 2000, between and among Borrower, BOk, Firstar, Local and Harris
Trust and Savings Bank ("Harris"), as lenders, the Administrative Agent and the
Co-Agent, as further amended by the Fifth Amendment to the First Amended and
Restated Credit Agreement dated as of July 16, 2001, between and among Borrower,
BOk, Firstar, Local and Harris, as lenders, and BOk, as Administrative Agent,
and Firstar, as Co-Agent, and as further amended by the Sixth Amendment to the
First Amended and Restated Credit Agreement dated as of October 1, 2003, between
and among Borrower, BOk, U.S. Bank National Association, successor to Firstar,
Local and Harris, as lenders, and BOk, as Administrative Agent, and US Bank, as
Co-Agent.
"Federal Funds Rate" means, for any day, the rate equal to the weighted
average (rounded upward to the nearest 1/8%) of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged by
federal funds brokers, (i) as such weighted average is published for such day
(or, if such day is not a Banking Day, for the immediately preceding Banking
Day) by the Federal Reserve Bank of New York or (ii) if such rate is not so
published for such Banking Day, as determined by the Administrative Agent using
any reasonable means of determination. Each determination by the Administrative
Agent of the Federal Funds Rate shall, in the absence of manifest error, be
conclusive.
"Fifth Third" shall mean Fifth Third State Bank.
"Final Maturity Date" means December 31, 2006.
"Financial Statement Delivery Date" means each date on which financial
statements are to be delivered pursuant to Section 7A.1(i) and (ii),
respectively.
"Financing Statements" shall have the meaning specified in Section
6.1(vi).
"Fixed Charges" shall mean scheduled principal and interest payments
and payments due under Capitalized Lease Obligations.
"Foreign Trade Regulations" means (i) any act that prohibits or
restricts, or empowers the President or any executive agency of the United
States of America to prohibit or restrict, exports to or financial transactions
with any foreign country or foreign national, (ii) the regulations with respect
to certain prohibited foreign trade transactions set forth at 22 C.F.R. parts
120-130 and 31 C.F.R. Part 500 and (iii) any order, regulation, ruling,
interpretation, direction, instruction or notice relating to any of the
foregoing.
"Funding Liability" means (a) any Eurodollar deposit which was used (or
deemed by Section 3.2.6 to have been used) to fund any portion of a Loan subject
to a Eurodollar Pricing Option, and (b) any portion of a Loan subject to a
Eurodollar Pricing Option funded (or deemed by Section 3.2.6 to have been
funded) with the proceeds of any such Eurodollar deposit.
15
"GAAP" is defined in Section 1.2.
"General Partner" means U.S. Propane in its capacity as the general
partner of the Borrower.
"Governmental Authority" means any governmental agency, authority,
instrumentality or regulatory body, other than a court or other tribunal, in
each case whether federal, state, local or foreign.
"Guaranty" means, with respect to any Person, any direct or indirect
liability, contingent or otherwise, of such Person with respect to any
Indebtedness of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed (otherwise than for collection or
deposit in the ordinary course of business) or discounted or sold with recourse
by such Person, or in respect of each such Person is otherwise directly or
indirectly liable, including, without limitation, any such obligation in effect
guaranteed by such Person through any agreement (contingent or otherwise) to
purchase, repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise), or to maintain the solvency or any balance sheet or other
financial condition of the obligor of such obligation, or to make payment for
any products, materials or supplies or for any transportation or services
regardless of the non-delivery or non-furnishing thereof, in any such case if
the purpose or intent of such agreement is to provide assurance that such
obligation will be paid or discharged, or that any agreements relating thereto
will be complied with, or that the holders of such obligation will be protected
against loss in respect thereof. The amount of any Guaranty shall be equal to
the outstanding principal amount of the obligation guaranteed or such lesser
amount to which the maximum exposure of the guarantor shall have been
specifically limited.
"Hazardous Substance" means any substance so designated pursuant to
CERCLA, asbestos, petroleum, urea formaldehyde insulation and petroleum
by-products (other than propane).
"Heritage Service" means Heritage Service Corp., a Delaware
corporation.
"Heritage Service Credit Agreement" means the First Amended and
Restated Revolving Credit Agreement dated as of May 31, 1999, between and among
Heritage Service, as borrower, the Banks, as lenders, the Administrative Agent
and the Co-Agent, as amended from time to time, including, without limitation,
that certain Fourth Amendment thereto dated as of July 16, 2001.
"Indebtedness" shall mean, with respect to any Person, without
duplication,
(a) any indebtedness for borrowed money, all obligations
upon which interest charges are customarily paid and all obligations
evidenced by any bond, note, debenture or other similar instrument
which such Person has directly or indirectly created, incurred or
assumed;
16
(b) all obligations of others secured by any Lien in
respect of property owned by such Person, whether or not such Person
has assumed or become liable for the payment of such indebtedness;
provided that the amount of such Indebtedness, if such Person has not
assumed the same or become liable therefor, shall in no event be deemed
to be greater than the fair market value from time to time of the
property subject to such Lien;
(c) any indebtedness, whether or not for borrowed money
(excluding trade payables and accrued expenses arising in the ordinary
course of business), with respect to which such Person has become
directly or indirectly liable and which represents the deferred
purchase price (or a portion thereof) or has been incurred to finance
the purchase price (or a portion thereof) of any property or service or
business acquired by such Person, whether by purchase, consolidation,
merger or otherwise;
(d) the principal component of any Capitalized Lease
Obligations to the extent such obligations would, in accordance with
GAAP, appear on a balance sheet of such Person;
(e) all Attributable Debt of such Person in respect of
Sale and Lease-Back Transactions not involving a Capitalized Lease
Obligation;
(f) all Redeemable Capital Stock of such Person valued at
the greater of its voluntary or involuntary maximum fixed repurchase
price plus accrued dividends;
(g) any Preferred Stock of any Subsidiary of such Person
valued at the liquidation preference thereof, or any mandatory
redemption payment obligations in respect thereof plus, in either case,
accrued dividends thereon;
(h) any indebtedness of the character referred to in
clause (a), (b), (c), (d), (e), (f) or (g) of this definition deemed to
be extinguished under GAAP but for which such Person remains legally
liable;
(i) any indebtedness of any other Person of the character
referred to in clause (a), (b), (c), (d), (e), (f), (g) or (h) of this
definition with respect to which the Person whose Indebtedness is being
determined has become liable by way of a Guaranty;
(j) all obligations, contingent or fixed, of such person
as an account party in respect of letters of credit (other than letters
of credit incurred in the ordinary course of business and consistent
with past practice);
(k) all liabilities of such Person in respect of unfunded
vested benefits under pension plans (determined on a net basis for all
such plans) and all asserted withdrawal liabilities of such Person or a
commonly controlled entity to a Multiemployer Plan;
(l) Swaps (other than Interest Rate Agreements);
17
(m) all obligations of such Person in respect of bankers'
acceptances (other than in respect of accounts payable to suppliers
incurred in the ordinary course of business consistent with past
practice); and
(n) any amendment, supplement, modification, deferral,
renewal, extension or refunding of any liability of the types referred
to in clauses (a) through (m) above.
For purposes hereof, the "maximum fixed repurchase price" of any
Redeemable Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable Capital Stock as if
such Redeemable Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to this Agreement and if such price
is based upon, or measured by, the fair market value of such Redeemable Capital
Stock, such fair market value shall be determined in good faith by the board of
directors or a similar governing body of the issuer of such Redeemable Capital
Stock.
"Intercreditor Agreement" means the Intercreditor and Agency Agreement
among the Purchasers of the Private Placement Notes, the initial Administrative
Agent (BankBoston) and the Collateral Agent dated as of June 25, 1996, as
amended, supplemented or modified from time to time in connection with the
transactions and modifications contemplated by this Agreement.
"Interest Coverage" means, as of any date, a ratio equal to the ratio
of (a) the Consolidated EBITDA of the Borrower for the period of four
consecutive fiscal quarters of the Borrower ending with the most recent fiscal
quarter for which the Borrower has delivered to the Banks, or is required under
Section 7A.1(i) to have delivered to the Banks, financial statements of the
Borrower to (b) the Consolidated Interest Expense of the Borrower for such
period of four consecutive fiscal quarters.
"Interest Rate Agreement" shall mean any fully matched interest rate
Swap entered into with the intent to protect the Borrower against fluctuations
in interest rates and entered into as a bona fide hedging arrangement and not
for purposes of investment or speculation.
"Investment" shall mean, 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 so long as
such assets are all used in the Business). For the purposes of Section 7B.5(v),
the amount involved in Investments made during any period shall be the aggregate
cost to the Borrower and its Subsidiaries of all such Investments made during
such period, determined in accordance with GAAP, but without regard to
unrealized increases or decreases in value, or write-ups, write-downs or
write-offs, of such Investments and without regard to the existence of any
undistributed earnings or accrued
18
interest with respect thereto accrued after the respective dates on which such
Investments were made, less any net return of capital realized during such
period upon the sale, repayment or other liquidation of such Investments
(determined in accordance with GAAP, but without regard to any amounts received
during such period as earnings (in the form of dividends not constituting a
return of capital, interest or otherwise) on such Investments or as loans from
any Person in whom such Investments have been made). See Section 1.2(i).
"Investment Limit" shall have the meaning specified in Section 7B.5(v).
"La Grange" means La Grange Acquisition, L.P., a Texas limited
partnership, a subsidiary of the Master Partnership, together with all of its
existing and hereafter formed or acquired direct or indirect subsidiaries.
"La Grange Acquisition" means, collectively, (i) the acquisition by La
Grange Energy, L. P. of the equity interests of U.S. Propane, all in accordance
with the Acquisition Agreement dated as of November 6, 2003, as amended or
modified, and (ii) the acquisition by the Master Partnership of substantially
all of the assets of La Grange and its Subsidiaries and the other transactions
contemplated in connection therewith, all in accordance with the Contribution
Agreement dated as of November 6, 2003, as amended and modified.
"La Grange Credit Agreement" means the loan/credit agreement, as
amended, modified, supplemented or restated from time to time, governing the
establishment and administration of certain senior credit term loan and senior
revolving credit loan credit facilities in the maximum aggregate amount of
$450,000,000 being extended to La Grange, as borrower, by Fleet Securities, Inc.
and Wachovia Capital Markets, LLC, as joint lead arrangers, and Fleet National
and Wachovia Bank National Association and the group of additional investors to
become signatory parties thereto, as lenders.
"La Grange Partnership Agreement" means the Agreement of Limited
Partnership of La Grange as in effect on the Closing Date of the La Grange
Credit Agreement or thereafter executed by the signatory parties thereto, and as
the same may from time to time be amended, supplemented or otherwise modified in
accordance with the terms thereof.
"Legal Requirement" shall mean any law, statute, ordinance, decree,
requirement, order, judgment, rule or regulation (or published official
interpretation of any of the foregoing by any Governmental Authority) of any
Governmental Authority.
"Lending Officer" means each of such individuals whom the
Administrative Agent may designate by notice to the Borrower from time to time
as an officer who may receive telephone requests for borrowings under Section
2.1.3 and 2.2.3.
"Letter of Credit" is defined in Section 2.3.1.
"Letter of Credit Exposure" means, at any date, the sum of (a) the
aggregate face amount of all drafts that may then or thereafter be presented by
beneficiaries under all Letters of Credit
19
then outstanding, plus (b) the aggregate face amount of all drafts that the
Letter of Credit Issuer has previously accepted under Letters of Credit but has
not paid.
"Letter of Credit Issuer" means, for any Letter of Credit, BOk or, in
the event BOk does not for any reason issue a requested Letter of Credit,
another Bank designated by the Administrative Agent to issue such Letter of
Credit in accordance with Section 2.3.
"Leverage Ratio" means, as of any date, a ratio equal to the ratio of
(a) the Consolidated Funded Indebtedness of the Borrower as of the last day of
the most recent fiscal quarter of the Borrower for which the Borrower has
delivered to the Banks, or is required under Section 7A.1(i) to have delivered
to the Banks, a consolidated balance sheet of the Borrower to (b) the
Consolidated EBITDA of the Borrower for the period of four consecutive fiscal
quarters ended on such last day.
"Liabilities" is defined in the second opening paragraph of the Note
Purchase Agreements in effect on the date hereof.
"Lien" means any mortgage, pledge, security interest, encumbrance,
contractual deposit arrangement, lien (statutory or otherwise) or charge of any
kind (including any agreement to give any of the foregoing, any conditional sale
or other title retention agreement, any lease in the nature thereof, and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction) or any other type of preferential
arrangement for the purpose, or having the effect, of protecting a creditor
against loss or securing the payment or performance of an obligation.
"Loan" means each of the Working Capital Loan and the Acquisition Loan.
"Loan Documents" means this Agreement, the Intercreditor Agreement, the
Security Documents, the Service Revolver Notes and each agreement of Heritage
Service governing or securing the Service Revolver Notes.
"Local" shall mean Local Oklahoma Bank.
"Margin Period" means each period commencing on (and including) the
first day of any fiscal quarter of the Borrower and ending on (and including)
the earlier of (i) the last day of such fiscal quarter of the Borrower, or (ii)
the Final Maturity Date with respect to the Working Capital Loans.
"Margin Stock" means "margin stock" within the meaning of Regulation G,
T, U or X of the Board of Governors of the Federal Reserve System.
"Master Partnership" means Heritage Propane Partners, L.P., a Delaware
limited partnership.
"Material Adverse Effect" means (i) a material adverse effect on the
business, assets or financial condition of the Borrower or the Borrower and its
Subsidiaries taken as a whole after
20
giving effect to the Transactions, (ii) a material impairment of the ability of
the Borrower or any Subsidiary of the Borrower to perform any of its obligations
under the Loan Documents to which it is a party or (iii) a material adverse
effect on the enforceability of any of the Loan Documents.
"Maximum Amount of Acquisition Credit" is defined in Section 2.1.2.
"Maximum Amount of Working Capital Credit" is defined in Section 2.2.2.
"Memorandum" means the memorandum dated May, 1996, prepared by
Prudential Securities for use in connection with the Borrower's private
placement of the Private Placement Notes.
"MidFirst" shall mean MidFirst Bank.
"Multiemployer Plan" means a "multiemployer plan" as defined in section
4001(a)(3) of ERISA.
"Net Proceeds" means the proceeds of any sale of assets in the form of
cash or cash equivalents including payments in respect of deferred payment
obligations when received in the form of cash or cash equivalents net of (i)
brokerage commissions and other fees and expenses related to such sale, (ii)
provisions for any taxes payable as a result of such sale, (iii) amounts
required to be paid to any Person (other than the Borrower or any Subsidiary of
the Borrower) owning a beneficial interest in the assets sold, (iv) appropriate
amounts to be provided by the Borrower or any Subsidiary of the Borrower, as the
case may be, as a reserve required in accordance with GAAP against any
liabilities associated with such sale of assets and retained by the Borrower or
any Subsidiary of the Borrower, as the case may be, after such sale and (v)
amounts required to be applied to the repayment of Indebtedness (other than the
Private Placement Notes and amounts due under the Working Capital Facility or
Acquisition Facility) secured by a Lien on the assets sold.
"Non-Compete Obligations" is defined in Section 7B.3(viii).
"Noncompliance Event" means either or both of the following:
(a) failure of the Borrower to maintain a Leverage Ratio
that is (i) equal to or less than 4.75 to 1 from November 30, 2003
through November 30, 2004, and (ii) equal to or less than 4.50 to 1
from February 28, 2005 and thereafter; and
(b) failure of the Borrower to maintain Interest Coverage
that is equal to or greater than 2.25 to 1.
"Nonperforming Bank" is defined in Section 10.4.4.
"Note Purchase Agreements" means that certain (i) Note Purchase
Agreement between and among Heritage, Borrower and the Note Purchasers named in
the Purchaser Schedule annexed as Schedule I thereto dated as of June 25, 1996,
as amended, modified, supplemented or
21
restated from time to time, (ii) Note Purchase Agreement between and among
Borrower, Heritage and the Note Purchasers named in the Initial Purchaser
Schedule annexed thereto dated as of November 19, 1997, as amended, modified,
supplemented or restated from time to time, and (iii) Note Purchase Agreement
dated as of August 10, 2000, between and among Heritage, Borrower and the Note
Purchasers annexed as Scheduled I thereto, as amended, modified, supplemented or
restated from time to time.
"Note Purchasers" mean the purchasers of the Private Placement Notes.
"Notes" means the Working Capital Notes and the Acquisition Notes.
"Obligations" means and include any and all: (i) indebtedness,
obligations and liabilities of the Borrower to the Banks incurred or which may
be incurred or purportedly incurred hereafter pursuant to the terms of this
Agreement or any of the other Loan Documents, and any replacements, amendments,
extensions, renewals, substitutions, amendments and increases in amount thereof,
including such amounts as may be evidenced by the Notes and all lawful interest,
late charges, loan closing fees, service fees, origination/facility fees,
commitment fees, fees in lieu of balances, letter of credit processing and
issuance fees and other charges, and all reasonable costs and expenses incurred
in connection with the preparation, filing and recording of the Loan Documents,
including reasonable attorneys fees and legal expenses; (ii) all reasonable
costs and expenses paid or incurred by the Banks and/or either Agent or the
Collateral Agent, including reasonable attorneys fees, in enforcing or
attempting to enforce collection of any Indebtedness and in enforcing or
realizing upon or attempting to enforce or realize upon any collateral or
security for any Indebtedness, including interest on all sums so expended by the
Banks and/or either Agent or the Collateral Agent accruing from the date upon
which such expenditures are made until paid, at an annual rate equal to the
Default Rate; and (iii) all sums expended by the Banks and/or either Agent or
the Collateral Agent in curing any Event of Default or Default of the Borrower
under the terms of this Agreement, the other Loan Documents or any other writing
evidencing or securing the payment of the Notes together with interest on all
sums so expended by the Banks and/or either Agent or the Collateral Agent
accruing from the date upon which such expenditures are made until paid, at an
annual rate equal to the Default Rate; and (iv) indebtedness, obligations and
liabilities of the Borrower arising out of the Note Purchase Agreements,
including, without limitation, that evidenced by the Private Placement Notes.
"Officer's Certificate" shall mean, as to any corporation, a
certificate executed on its behalf by the Chairman of the Board of Directors (if
an officer) or its President or one of its Vice Presidents, and its Treasurer,
or Controller, or one of its Assistant Treasurers or Assistant Controllers, and,
as to the Master Partnership or the Borrower, a certificate executed on behalf
of the Master Partnership or the Borrower, as the case may be, by its general
partner in a manner which would qualify such certificate (a) if such general
partner were a corporation, as an Officer's Certificate of such general partner
hereunder or (b) if such general partner were a partnership or other entity, as
a certificate executed on its behalf by Persons authorized to do so pursuant to
the constituting documents of such partnership or other entity.
22
"Operative Agreements" means the Contribution Agreement, the other
Conveyance Agreements, the Partnership Agreement and the La Grange Partnership
Agreement.
"Overdue Reimbursement Rate" means, at any date, the highest Applicable
Rate then in effect.
"Parity Debt" means Indebtedness of the Borrower (a) (other than the
Notes) incurred in accordance with clauses (i), (ii) and (iii) of Section 7B.2
and (b) Additional Parity Debt.
"Partnership Agreement" means the Agreement of Limited Partnership of
the Borrower as in effect on the Closing Date, and as the same may from time to
time be amended, supplemented or otherwise modified in accordance with the terms
thereof.
"Partnership Documents" means the Agreement of Limited Partnership of
the Master Partnership and the Partnership Agreement, in each case as in effect
on the Closing Date and as the same may from time to time be amended,
supplemented or otherwise modified in accordance with the terms hereof and
thereof.
"Payment Date" means the last Banking Day of each March, June,
September and December occurring after the Initial Closing Date.
"PBGC" means the Pension Benefit Guaranty Corporation or any
Governmental Authority succeeding to any of its functions.
"Percentage Interest" is defined in Section 10.1.
"Percentage of Aggregate Available Cash" shall mean, with respect to
any fiscal quarter of the Borrower, the percentage determined by multiplying (i)
a fraction consisting of a numerator equal to the Borrower's Available Cash for
that period and a denominator equal to the Aggregate Available Cash by (ii) 100.
"Performing Bank" is defined in Section 10.4.4.
"Permits" is defined in Section 8.8.
"Permitted Banks" is defined in Section 7B.5.
"Permitted GP Entity" shall mean shall mean any one or combination of
(i) Persons or a group of unrelated persons (as such terms are defined in the
Exchange Act) who directly or indirectly beneficially own (as such term is
defined in Rule 13d-3 promulgated under the Exchange Act) the Capital Stock of
the General Partner immediately following consummation of the La Grange
Acquisition, and (ii) Current Management or group of related persons (as so
defined) including Current Management.
"Person" means and includes an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a government
or any department or agency thereof.
23
"Plan" means any "employee pension benefit plan" as such term is
defined in Section 3 of ERISA (other than a Multiemployer Plan) subject to the
provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of
ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if
such plan were terminated, would under Section 4069 of ERISA be deemed to be) an
"employer" as defined in Section 3(5) of ERISA.
"Preferred Stock" means, as applied to the Capital Stock of any Person,
Capital Stock of any class or classes (however designated), which is preferred
as to the payment of distributions or dividends, or upon any voluntary or
involuntary liquidation or dissolution of such Person, over shares or units of
Capital Stock of any other class of such Person.
"Priority Debt" means as of any date of determination, the sum, without
duplication, of (i) Indebtedness of the Subsidiaries of the Borrower (other than
Indebtedness owed to the Borrower or another Wholly-Owned Subsidiary), plus (ii)
Indebtedness of the Borrower and its Subsidiaries secured by Liens permitted by
clauses (i) and (vii) of Section 7B.3 and any renewals of such Liens permitted
by clause (xiv) of Section 7B.3
"Property" means any interest in any kind of property or asset whether
real, personal, or mixed, or tangible or intangible.
"PUHCA" is defined in Section 8.19.
"Private Placement Notes" means (i) the $120,000,000 senior secured
notes issued pursuant to the Memorandum, sold to the Purchasers and described
and defined in the Note Purchase Agreement dated as of June 25, 1996, as
amended, (ii) the $47,000,000 senior secured notes described and defined in the
Note Purchase Agreement dated as of November 19, 1997, as amended, and (iii) the
$250,000,000 senior secured notes described and defined in the Note Purchase
Agreement dated as of August 10, 2000, as amended.
"Redeemable Capital Stock" means, as of any date of determination, any
shares of any class or series of Capital Stock, that, either by the terms
thereof, by the terms of any security into which such shares are convertible or
exchangeable or by contract or otherwise, are or upon the happening of an event
or passage of time would be, required to be redeemed prior to the stated
maturity with respect to the principal of any Loans or are redeemable at the
option of the holder thereof at any time prior to the stated maturity of any
Loans, or are convertible into or exchangeable for Indebtedness at any time
prior to the stated maturity of any Loans.
"Register" is defined in Section 11.1.3.
"Replacement Bank" is defined in Section 11.3.
"Required Banks" means, with respect to any approval, consent,
modification, waiver or other action to be taken by the Administrative Agent or
the Banks under the Loan Documents which require action by the Required Banks,
such Banks that own at least 66-2/3% of the Percentage Interests; provided,
however, that with respect to any matters referred to in the
24
proviso to Section 10.6, Required Banks means such Banks as own at least the
respective portions of the Percentage Interests required by Section 10.6.
"Responsible Officer" means the chief executive officer, chief
operating officer, chief financial officer or chief accounting officer of the
Borrower or any other officer of the Borrower involved principally in its
financial administration or its controllership function.
"Restricted Payment" means any payment or other distribution, direct or
indirect, in respect of any partnership or other equity interest in the
Borrower, except a distribution payable solely in additional partnership or
other equity interests in the Borrower, and any payment, direct or indirect on
account of the redemption, retirement, purchase or other acquisition of any
partnership or other equity interest in the Borrower.
"Sale and Lease-Back Transaction" means, with respect to any Person (a
"Transferor"), any arrangement (other than between the Borrower and a
Wholly-Owned Restricted Subsidiary or between Wholly-Owned Restricted
Subsidiaries) whereby (a) property (the "Subject Property") has been or is to be
disposed of by such Transferor to any other Person with the intention on the
part of such Transferor of taking back a lease of such Subject Property pursuant
to which the rental payments are calculated to amortize the purchase price of
such Subject Property substantially over the useful life of such Subject
Property, and (b) such Subject Property is in fact so leased by such Transferor
or an Affiliate of such Transferor.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" shall mean the Security Agreement from the
Borrower and U.S. Propane (formerly Heritage), as debtors and assignors, to the
Collateral Agent, for the benefit of the Banks and the Note Purchasers, as
secured parties, encumbering the Collateral described therein and covered
thereby.
"Security Documents" shall mean the Security Agreement, the
Certificates and Stock Powers and the Financing Statements.
"Senior Debt" shall mean Indebtedness of the Borrower which is not
expressed to be junior or subordinate to any other Indebtedness of the Borrower.
"Service Revolver Notes" shall mean those certain promissory notes from
Heritage Service payable to the order of the Banks as more particularly
described in the Heritage Service Credit Agreement.
"Significant Subsidiary Group" shall mean any Subsidiary of the
Borrower, or any group of Subsidiaries of the Borrower, which at any time of
determination account for (or in the case of a recently formed or acquired
Subsidiary would have so accounted for on a pro forma basis) more than 5% of
consolidated operating revenues of the Borrower and its Subsidiaries for the
fiscal year most recently ended or more than 5% of consolidated total assets of
the Borrower and its Subsidiaries as of the end of the most recently ended
fiscal quarter, in each case computed in accordance with GAAP.
25
"Specified Entities" shall mean, (A) until such time as the La Grange
Acquisition is consummated, any one or more of the following entities: (i) Atmos
Energy Corporation, (ii) Piedmont Natural Gas Company, Inc., (iii) AGL
Resources, Inc., and (iv) TECO Energy, Inc., or a Successor to any entity
referred to in clause (i), (ii), (iii) or (iv) of this definition, and (B) from
and after the consummation of the La Grange Acquisition, any one or combination
of the following: (i) La Grange, any Wholly-Owned Subsidiary thereof, or a
Successor thereto, and (ii) any Permitted GP Entity.
"Subsidiary" shall mean, with respect to any Person, any corporation,
limited liability company, partnership, joint venture, association, trust or
other entity of which (or in which) more than 50% of (a) the issued and
outstanding Capital Stock having ordinary voting power to elect a majority of
the board of directors of such corporation (irrespective of whether at the time
Capital Stock of any other class or classes of such corporation shall or might
have voting power upon the occurrence of any contingency), (b) the interests in
the capital or profits of such partnership, limited liability company, joint
venture or association with ordinary voting power to elect a majority of the
board of directors (or Persons performing similar functions) of such
partnership, limited liability company, joint venture or association, or (c) the
beneficial interests in such trust or other entity with ordinary voting power to
elect a majority of the board of trustees (or Persons performing similar
functions) of such trust or other entity, is at the time directly or indirectly
owned or controlled by such Person, by such Person and one or more of its other
Subsidiaries, or by one or more of such Person's other Subsidiaries. For the
purposes of any computation under Section 6A or clause (xiii) of Section 6B, the
defined terms Consolidated Debt Service, Consolidated EBITDA, Consolidated
Funded Indebtedness, Consolidated Interest Expense and Consolidated Pro Forma
Maximum Debt Service shall be calculated on the basis that Bi-State is a
Subsidiary of the Borrower, but only as long as the Borrower shall own 50% or
more of the interests in the capital or profits of Bi-State with ordinary voting
power to elect a majority of the board of directors (or Persons performing
similar functions) thereof.
"Successor" shall mean, with respect to the Specified Entity, any
entity in which the holders of the Capital Stock of such Specified Entity
outstanding immediately prior to a consolidation, acquisition or merger
involving such Specified Entity hold, directly or indirectly through
Wholly-Owned Subsidiaries, at least a majority of the Capital Stock immediately
after such consolidation, acquisition or merger.
"Swaps" shall mean, with respect to any Person, payment obligations
(fixed or contingent) with respect to interest rate swap agreements, interest
rate cap agreements, interest rate collar agreements, currency swaps and similar
obligations obligating such Person to make payments, whether periodically or
upon the happening of a contingency. For the purposes of this Agreement, the
amount of the obligation under any Swap shall be the amount determined in
respect thereof as of the end of the then most recently ended fiscal quarter of
such Person, based on the assumption that such Swap had terminated at the end of
such fiscal quarter, and in making such determination, if any agreement relating
to such Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
26
"Tax" means any present or future tax, levy, duty, impost, deduction,
withholding or other charges of whatever nature at any time required by any Bank
Legal Requirement (i) to be paid by any Bank or (ii) to be withheld or deducted
from any payment otherwise required hereby to be made to any Bank, in each case
on or with respect to its obligations hereunder, the Loan, any payment in
respect of the Credit Obligations or any Funding Liability not included in the
foregoing; provided, however, that the term "Tax" shall not include taxes
imposed upon or measured by the net income of such Bank (other than withholding
taxes) or franchise taxes.
"Total Assets" means, as of any date of determination, the consolidated
total assets of the Borrower and its Subsidiaries as would be shown on a
consolidated balance sheet of the Borrower and its Subsidiaries prepared in
accordance with GAAP as of that date. See Section 1.2(i).
"Tulsa Office" means the principal banking office of BOk in Tulsa,
Oklahoma.
"UCC" means the Uniform Commercial Code.
"Uniform Customs and Practice" is defined in Section 2.3.7.
"United States" or "U.S." means the United States of America.
"United States Funds" means such coin or currency of the United States
as at the time shall be legal tender therein for the payment of public and
private debts.
"Units" shall mean, collectively, the Common Units and each other
limited partnership interest which may be issued from time to time and which are
entitled by their terms to receive distributions.
"Unused Proceeds Reserve" means, as of any date of determination, all
amounts theretofore offered to prepay Parity Debt under Section 7B.7(iii)(c)(ii)
and to prepay Notes under Section 4.2, the prepayment of which was declined by
the applicable lenders, less the portion of such amounts theretofore applied by
the Borrower to operations or capital expenditures in connection with the
conduct of the Borrower's business.
"Unutilized Taking Proceeds" means, as of any date, any insurance or
condemnation proceeds (net of the reasonable costs of proceedings in connection
therewith and settlements in respect thereof) in excess of $100,000 with respect
to any single occurrence that were received by the Borrower or any of its
Subsidiaries in respect of any damage, destruction, condemnation or other taking
of all or any portion of the properties or assets of the Borrower or any of its
Subsidiaries and that have not been reinvested by the Borrower or any of its
Subsidiaries within a period of twelve months after such receipt in the
restoration, modification or replacement of the properties or assets in respect
of which such insurance or condemnation proceeds were received.
"U.S. Bank" shall mean U. S Bank National Association.
27
"USPLLC" shall mean U.S. Propane, LLC, a Delaware limited liability
company, the general partner of U.S. Propane.
"U.S. Propane" means U.S. Propane, L.P., a Delaware limited
partnership, and successor to Heritage Holdings, Inc., a Delaware corporation
("Heritage").
"Voting Stock" means, with respect to any corporation, any shares of
stock of such corporation the holders of which are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
"Wholly-Owned" means, as applied to any Subsidiary of any Person, a
Subsidiary at least 98% (by vote or value) of the outstanding Equity Interests
(other than directors' qualifying shares, if required by law) of all classes,
taken together as a whole, of which are at the time owned by such Person or by
one or more of its Wholly-Owned Subsidiaries or by such Person and one or more
of its Wholly-Owned Subsidiaries.
"Withdrawal Liability" shall mean 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.
"Working Capital Facility" means the agreement of the Banks herein to
make Working Capital Loan and to provide for the issuance of Letters of Credit.
"Working Capital Loan Account" is defined in Section 2.2.4.
"Working Capital Loan" is defined in Section 2.2.4.
"Working Capital Notes" is defined in Section 2.2.4.
1.2 Accounting Principles, Terms and Determinations. All
references in this Agreement to "generally accepted accounting principles" or to
"GAAP" shall be deemed to refer to generally accepted accounting principles in
effect in the United States at the time of application thereof, but subject to
the provisions of this Section 1.2. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all determinations with
respect to accounting matters hereunder shall be made, and all unaudited
financial statements and certificates and reports as to financial matters
required to be prepared hereunder shall be prepared in accordance with generally
accepted accounting principles, applied on a basis consistent with the most
recent audited consolidated financial statements of the Borrower and its
Subsidiaries delivered pursuant to clause (ii) of Section 7A.1.
1.3 Construction. Except as otherwise explicitly specified to the
contrary or unless the context clearly requires otherwise, (i) the capitalized
term "Section" refers to sections of this Agreement, (ii) the capitalized term
"Exhibit" refers to exhibits to this Agreement, (iii) references to a particular
Article Section include all subsections thereof, (iv) the word
28
"including" shall be construed as "including without limitation", (v) terms
defined in the UCC and not otherwise defined herein have the meaning provided
under the UCC, (vi) references to a particular statute or regulation include all
rules and regulations thereunder and any successor statute, regulation or rules,
in each case as from time to time in effect and (vii) references to a particular
Person include such Person's successors and assigns to the extent not prohibited
by this Agreement and the other Loan Documents. References to "the date hereof"
mean the date first set forth above.
ARTICLE II
THE CREDITS
2.1 Acquisition Facility.
2.1.1 Acquisition Loan. Subject to all the terms and
conditions of this Agreement and so long as no Default exists, from
time to time on and after the Closing Date and prior to the Final
Maturity Date, the Banks will, severally in accordance with their
respective Percentage Interests, make loans to the Borrower in such
amounts as may be requested by the Borrower in accordance with Section
2.1.3, constituting in part, a refinancing of the Acquisition Loan
previously governed by the Existing Credit Agreement. The sum of the
aggregate principal amount of loans made under this Section 2.1.1 at
any one time outstanding shall in no event exceed the Maximum Amount of
Acquisition Credit.
2.1.2 Maximum Amount of Acquisition Credit. The term
"Maximum Amount of Acquisition Credit" means, on any date on or prior
to the Final Maturity Date, the remainder of (x) the lesser of (a)
$75,000,000 or (b) the aggregate Acquisition Loan Commitments described
in Section 10.1, as amended from time to time, or such lesser amount as
the Borrower may specify from time to time by notice from Borrower to
the Administrative Agent.
2.1.3 Acquisition Loan Borrowing Requests. The Borrower may
from time to time request a loan under Section 2.1.1 by providing to a
Lending Officer of the Administrative Agent either a notice in writing
or telephonic notice promptly confirmed in writing. Such notice must be
not later than noon (Tulsa, Oklahoma time) three (3) Banking Days prior
to the requested funding date for a Eurodollar Loan, otherwise two (2)
Business Days prior to the requested funding date for such loan. The
notice must specify (a) the amount of the requested loan (which shall
be not less than $500,000 and in integral multiples of $100,000 in
excess thereof) and (b) the requested funding date therefor (which
shall be a Banking Day). Each such notice shall be accompanied by (i) a
memorandum from the Chief Financial Officer of Borrower's general
partner summarizing the proposed acquisition or capital expenditures to
be financed by the advance, (ii) in the case of an acquisition a
complete copy of the signed letter of intent (with all exhibits or
schedules thereto to the extent available); provided, however, Borrower
shall not make a loan request under Section 2.1.1 for any acquisition
of a Business described in clause (ii) of the definition thereof for an
amount in excess of
29
$20,000,000 without the prior written consent of the Required Banks,
(iii) a full and complete copy of the Borrower's internal acquisition
or capital expenditure model (in general form, content and detail as
utilized by the Borrower for similar acquisitions or capital
expenditures prior to the Closing Date) and, in the case of borrowings
hereunder relating to acquisitions or capital expenditures costing in
excess of $1,000,000 and in each other case in which the Required Banks
shall so request, calculations demonstrating Borrower's continued
compliance with the financial ratios of Section 7B.1(i) and (ii) hereof
as of and following the closing of such proposed acquisition or capital
expenditure (utilizing, for the purpose of such demonstration, and
subject to the calculation of Consolidated EBITDA resulting from such
proposed Asset Acquisition, including adjustments permitted thereby,
the financial statements of the Borrower and of the acquired business
or asset for the most recent period of twelve consecutive months (as
opposed to the immediately preceding four full fiscal quarters) for
which such statements are available), and (iv) a full, completed copy
of the confidential business questionnaire in the form as utilized by
Borrower prior to the Closing Date (collectively the "Acquisition/Capex
Due Diligence Packet"). Upon receipt of such notice, the Administrative
Agent will promptly inform each other Bank (by telephone or otherwise).
Each such loan will be made at the Administrative Agent's Tulsa Office
by depositing the amount thereof to the Acquisition Loan Account of the
Borrower with the Administrative Agent. In connection with each such
loan, the Borrower shall furnish to the Administrative Agent a
certificate in substantially the form of Exhibit 2.1.3.
2.1.4 Acquisition Loan Account: Acquisition Notes. The
Administrative Agent will establish on its books an internal
acquisition loan account for the Borrower (the "Acquisition Loan
Account") for administrative purposes only, which such Administrative
Agent shall administer as follows: (a) the Administrative Agent shall
add to the Acquisition Loan Account, and the Acquisition Loan Account
shall evidence, the principal amount of all loans from time to time
made by the Banks to the Borrower pursuant to Section 2.1.1 and (b) the
Administrative Agent shall reduce the Acquisition Loan Account by the
amount of all payments made on account of the Obligation evidenced by
the Acquisition Loan Account. The aggregate principal amount of the
Indebtedness from time to time evidenced by the Acquisition Loan
Account is referred to as the "Acquisition Loan." The Acquisition Loan
shall be deemed owed to each Bank severally in accordance with such
Bank's Percentage Interest, and all payments credited to the
Acquisition Loan Account shall be for the account of each Bank in
accordance with its Percentage Interest. The Borrower's obligations to
pay each Bank's Percentage Interest in the Acquisition Loan shall be
evidenced by a separate note of the Borrower in substantially the form
of Exhibit 2.1.4 (the "Acquisition Notes"), payable to each Bank in
maximum principal amount equal to such Bank's Percentage Interest in
the total Commitments constituting the Acquisition Facility.
2.2 Working Capital Facility.
2.2.1 Working Capital Loan. Subject to all the terms and
conditions of this Agreement and so long as no Default exists, from
time to time on and after the Closing Date and prior to the Final
Maturity Date with respect to the Working Capital Loan the
30
Banks will, severally in accordance with their respective Percentage
Interests, make loans to the Borrower in such amounts as may be
requested by the Borrower in accordance with Section 2.2.3,
constituting in part, a refinancing of the Working Capital Loans
previously governed by the Existing Credit Agreement. The sum of the
aggregate principal amount of loans made under this Section 2.2.1 at
any one time outstanding plus the Letter of Credit Exposure shall in no
event exceed the Maximum Amount of Working Capital Credit.
2.2.2 Maximum Amount of Working Capital Credit. The term
"Maximum Amount of Working Capital Credit" means, on any date, the
lesser of (a) $75,000,000 minus the outstanding principal balance on
the Indebtedness permitted by Section 7B.2(v) or such lesser amount as
the Borrower may specify from time to time by notice from the Borrower
to the Administrative Agent, or (b) the aggregate Working Capital Loan
Commitments described in Section 10.1, as amended from time to time;
provided that the aggregate outstanding principal amount of Working
Capital Loan shall be reduced to $10,000,000 (excluding undrawn amounts
on Letters of Credit issued pursuant to Section 2.3) for a period of
not less than 30 consecutive calendar days at least one time during
each fiscal year of the Borrower (the "Annual Clean-Up"). Failure by
the Borrower to comply with the provisions of the Annual Clean-Up shall
constitute a failure to pay the Loans when due and an Event of Default
under Section 9.1.
2.2.3 Working Capital Borrowing Requests. The Borrower may
from time to time request a loan under Section 2.2.1 by providing to a
Lending Officer of the Administrative Agent, either a notice in writing
or telephonic notice promptly confirmed in writing. Such notice must be
not later than noon (Tulsa, Oklahoma time) on the Banking Day of the
requested advance date for such loan. The notice must specify (a) the
amount of the requested loan (which shall be not less than $100,000 and
in integral multiples of $50,000 in excess thereof) and (b) the
requested advance date therefor (which shall be a Banking Day). Upon
receipt of such notice, such Administrative Agent will promptly inform
each other Bank (by telephone or otherwise). Each such loan will be
made at the Administrative Agent's Tulsa Office by depositing the
amount thereof to the Borrower's Working Capital Loan Account with the
Administrative Agent. In connection with each such loan, the Borrower
shall furnish to the Administrative Agent, a certificate in
substantially the form of Exhibit 2.2.3.
2.2.4 Working Capital Loan Account: Working Capital Notes.
The Administrative Agent, will establish on its books an internal
working capital loan account for the Borrower (the "Working Capital
Loan Account"), for administrative purposes only, which such
Administrative Agent shall administer as follows: (a) such
Administrative Agent shall add to the Working Capital Loan Account, and
the Working Capital Loan Account shall evidence, the principal amount
of all loans made from time to time by the Banks to the Borrower
pursuant to Section 2.2.1 and (b) such Administrative Agent shall
reduce the Working Capital Loan Account by the amount of all payments
made on account of the Indebtedness evidenced by the Working Capital
Loan Account. The aggregate principal amount of the Indebtedness
evidenced by the Working Capital Loan Account is referred to as the
"Working Capital Loan." The Working Capital Loan
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shall be deemed owed to each Bank severally in accordance with such
Bank's Percentage Interest, and all payments credited to the working
Capital Loan Account shall be for the account of each Bank in
accordance with its Percentage Interest. The Borrower's obligations to
pay each Bank's Percentage Interest in the Working Capital Loan shall
be evidenced by a separate note of the Borrower in substantially the
form of Exhibit 2.2.4 (the "Working Capital Notes"), payable to each
Bank in maximum principal amount equal to such Bank's Percentage
Interest in the total Commitments constituting the Working Capital
Facility.
2.3 Letters of Credit.
2.3.1 Issuance of Letters of Credit. Subject to all the
terms and conditions of this Agreement and so long as no Default
exists, from time to time on and after the Closing Date and prior to 30
days prior to the Final Maturity Date with respect to the Working
Capital Loan, the Letter of Credit Issuer will issue for the account of
the Borrower one or more irrevocable documentary or standby letters of
credit (the "Letters of Credit"). Letter of Credit Exposure plus the
Working Capital Loan shall in no event exceed the Maximum Amount of
Working Capital Credit. Letter of Credit Exposure shall in no event
exceed $5,000,000.
2.3.2 Requests for Letters of Credit. The Borrower may from
time to time request a Letter of Credit to be issued by providing to
the Letter of Credit Issuer (and the Administrative Agent if the Letter
of Credit Issuer is not the Administrative Agent) a notice which is
actually received not less than one (1) Banking Day prior to the
requested issuance date for such Letter of Credit specifying (a) the
amount of the requested Letter of Credit, (b) the beneficiary thereof,
(c) the requested issuance date and (d) the principal terms of the text
for such Letter of Credit. Each Letter of Credit will be issued by
forwarding it to the Borrower or to such other Person as directed in
writing by the Borrower. In connection with the issuance of any Letter
of Credit, the Borrower shall furnish to the Letter of Credit Issuer
(and the Administrative Agent if the Letter of Credit Issuer is not the
Administrative Agent) a certificate in substantially the form of
Exhibit 2.3.2. and any customary application forms required by the
Letter of Credit Issuer.
2.3.3 Form and Expiration of Letters of Credit. Each Letter
of Credit issued under this Section 2.3 and each draft accepted or paid
under such a Letter of Credit shall be issued, accepted or paid, as the
case may be, by the Letter of Credit Issuer at its principal office. No
Letter of Credit shall provide for the payment of drafts drawn
thereunder, and no draft shall be payable, at a date which is later
than the earlier of (a) the date twelve months after the date of
issuance or (b) 15 days prior to the Final Maturity Date with respect
to the Working Capital Loans. Each Letter of Credit and each draft
accepted under a Letter of Credit shall be in such form and minimum
amount, and shall contain such terms, as the Letter of Credit Issuer
and the Borrower may agree upon at the time such Letter of Credit is
issued, including a requirement of not less than three Banking Days
after presentation of a draft before payment must be made thereunder.
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2.3.4 Banks' Participation in Letters of Credit. Upon the
issuance of any Letter of Credit, a participation therein, in an amount
equal to each Bank's Percentage Interest, shall automatically be deemed
granted by the Letter of Credit Issuer to each Bank on the date of such
issuance and the Banks shall automatically be obligated, as set forth
in Section 10.4, to reimburse the Letter of Credit Issuer to the extent
of their respective Percentage Interests for all obligations incurred
by the Letter of Credit Issuer to third parties in respect of such
Letter of Credit not reimbursed by the Borrower. The Letter of Credit
Issuer will send to each Bank (and the Administrative Agent if the
Letter of Credit Issuer is not the Administrative Agent) a confirmation
regarding the participations in Letters of Credit outstanding during
such month.
2.3.5 Presentation. The Letter of Credit Issuer may accept
or pay any draft presented to it, regardless of when drawn and whether
or not negotiated, if such draft, the other required documents and any
transmittal advice are presented to the Letter of Credit Issuer and
dated on or before the expiration date of the Letter of Credit under
which such draft is drawn. Except insofar as instructions actually
received may be given by the Borrower in writing expressly to the
contrary with regard to, and prior to, the Letter of Credit Issuer's
issuance of any Letter of Credit for the account of the Borrower and
such contrary instructions are reflected in such Letter of Credit, to
the maximum extent permitted by law the Letter of Credit Issuer may
honor as complying with the terms of the Letter of Credit and with this
Agreement any drafts or other documents otherwise in order signed or
issued by an administrator, executor, conservator, trustee in
bankruptcy, debtor in possession, assignee for benefit of creditors,
liquidator, receiver or other legal representative of the party
authorized under such Letter of Credit to draw or issue such drafts or
other documents.
2.3.6 Payment of Drafts. At such time as a Letter of Credit
Issuer makes any payment on a draft presented or accepted under a
Letter of Credit, the Borrower will on demand pay to such Letter of
Credit Issuer in immediately available funds the amount of such
payment. Unless the Borrower shall otherwise pay to the Letter of
Credit Issuer the amount required by the foregoing sentence, such
amount shall be considered a loan under Section 2.2.1 and part of the
Working Capital Loan.
2.3.7 Uniform Customs and Practice. The Uniform Customs and
Practice for Documentary Credits (1993 Revision), International Chamber
of Commerce Publication No. 500, and any subsequent revisions thereof
approved by a Congress of the International Chamber of Commerce and
adhered to by the Letter of Credit Issuer (the "Uniform Customs and
Practice"), shall be binding on the Borrower and the Letter of Credit
Issuer except to the extent otherwise provided herein, in any Letter of
Credit or in any other Loan Document. Anything in the Uniform Customs
and Practice to the contrary notwithstanding:
(a) Neither the Borrower nor any beneficiary of
any Letter of Credit shall be deemed an agent of any Letter of
Credit Issuer.
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(b) With respect to each Letter of Credit,
neither any Letter of Credit Issuer nor its correspondents
shall be responsible, except to the extent required by law,
for or shall have any duty to ascertain:
(i) the genuineness of any signature;
(ii) the validity, form, sufficiency,
accuracy, genuineness or legal effect of any
endorsements;
(iii) delay in giving, or failure to
give, notice of arrival, notice of refusal of
documents or of discrepancies in respect of which any
Letter of Credit Issuer refuses the documents or any
other notice, demand or protest;
(iv) the performance by any beneficiary
under any Letter of Credit of such beneficiary's
obligations to the Borrower;
(v) inaccuracy in any notice received
by the Letter of Credit Issuer;
(vi) the validity, form, sufficiency,
accuracy, genuineness or legal effect of any
instrument, draft, certificate or other document
required by such Letter of Credit to be presented
before payment of a draft, or the office held by or
the authority of any Person signing any of the same;
or
(vii) failure of any instrument to bear
any reference or adequate reference to such Letter of
Credit, or failure of any Person to note the amount
of any instrument on the reverse of such Letter of
Credit or to surrender such Letter of Credit or to
forward documents in the manner required by such
Letter of Credit.
(c) Except as otherwise required by law, the
occurrence of any of the events referred to in the Uniform
Customs and Practice or in the preceding clauses of this
Section 2.3.7 shall not affect or prevent the vesting of any
of the Letter of Credit Issuer's rights or powers hereunder or
the Borrower's obligation to make reimbursement of amounts
paid under any Letter of Credit or any draft accepted
thereunder.
(d) The Borrower will promptly examine (i) each
Letter of Credit (and any amendments thereof) sent to it by a
Letter of Credit Issuer and (ii) all instruments and documents
delivered to it from time to time by such Letter of Credit
Issuer. The Borrower will notify the Letter of Credit Issuer
of any claim of noncompliance by notice actually received
within three Banking Days after receipt of any of the
foregoing documents, the Borrower being conclusively deemed to
have waived any such claim against such Letter of Credit
Issuer and its correspondents unless such notice is given. The
Letter of Credit Issuer shall have
34
no obligation or responsibility to send any such Letter of
Credit or any such instrument or document to the Borrower.
(e) In the event of any conflict between the
provisions of this Agreement and the Uniform Customs and
Practice and Article 5 of the Uniform Commercial Code, the
provisions of this Agreement shall govern to the maximum
extent permitted by applicable law.
2.3.8 Subrogation. Subject to the terms of the
Intercreditor Agreement, upon any payment by a Letter of Credit Issuer
under any Letter of Credit and until the reimbursement of such Letter
of Credit Issuer by the Borrower with respect to such payment, the
Letter of Credit Issuer shall be entitled to be subrogated to, and to
acquire and retain, the rights which the Person to whom such payment is
made may have against the Borrower, all for the benefit of the Banks.
Subject to the terms of the Intercreditor Agreement, the Borrower will
take such action as the Letter of Credit Issuer may reasonably request,
including requiring the beneficiary of any Letter of Credit to execute
such documents as the Letter of Credit Issuer may reasonably request,
to assure and confirm to the Letter of Credit Issuer such subrogation
and such rights, including the rights, if any, of the beneficiary to
whom such payment is made in accounts receivable, inventory and other
properties and assets of the Borrower.
2.3.9 Modification, Consent, etc. If the Borrower requests
or consents in writing to any modification or extension of any Letter
of Credit, or waives any failure of any draft, certificate or other
document to comply with the terms of such Letter of Credit, and if the
Letter of Credit Issuer consents thereto, the Letter of Credit Issuer
shall be entitled to rely on such request, consent or waiver. This
Agreement shall be binding upon the Borrower with respect to such
Letter of Credit as so modified or extended, and with respect to any
action taken or omitted by such Letter of Credit Issuer pursuant to any
such request, consent or waiver.
2.4 Application of Proceeds.
2.4.1 Acquisition Loan. The Borrower will apply the
proceeds of the Acquisition Loan solely to finance acquisitions
permitted pursuant to Section 2.1 and to finance capital expenditures
for additions or improvements to the assets of the Borrower (as
distinguished from maintenance capital expenditures).
2.4.2 Working Capital Loan. The Borrower will apply the
proceeds of the Working Capital Loan for working capital and other
lawful purposes of the Borrower and its Subsidiaries; provided,
however, that at no time shall more than $500,000 of the outstanding
principal amount of the Working Capital Loan have been applied to the
purposes of financing acquisitions permitted pursuant to Section 2.1
and/or capital expenditures for additions or improvements to the Assets
of the Borrower (as distinguished from maintenance capital
expenditures).
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2.4.3 Letters of Credit. Letters of Credit shall be issued
only for lawful purposes of the Borrower and its Subsidiaries.
2.4.4 Specifically Prohibited Applications. The Borrower
will not, directly or indirectly, apply any part of the proceeds of any
extension of credit made pursuant to the Loan Documents to purchase or
to carry Margin Stock or to any transaction prohibited by the Foreign
Trade Regulations, by other Bank Legal Requirements of applicable to
the Banks or by the Loan Documents.
2.5 Nature of Obligations of Banks to Make Extensions of Credit.
The Banks' obligations to extend credit under this Agreement, including without
limitation, to refinance the credit facilities previously governed by the
Existing Credit Agreement, are several and are not joint or joint and several.
If on the date any Loans are to be made, any Bank shall fail to perform its
obligations under this Agreement, the aggregate amount of Commitments to make
the extensions of credit under this Agreement shall be reduced by the amount of
unborrowed Commitments of the Bank so failing to perform and the Percentage
Interests shall be appropriately adjusted. Banks that have not failed to perform
their obligations to make the extensions of credit contemplated by Section 2
may, if any such Bank so desires, assume, in such proportions as such Banks may
agree, the obligations of any Bank who has so failed and the Percentage
Interests shall be appropriately adjusted. The provisions of this Section 2.5
shall not affect the rights of the Borrower against any Bank failing to perform
its obligations hereunder.
ARTICLE III
INTEREST; EURODOLLAR PRICING OPTIONS; FEES
3.1 Interest. Each Loan shall accrue and bear interest at a rate
per annum which shall at all times equal its Applicable Rate. Prior to any
stated or accelerated maturity of any Loan, the Borrower will, on the last day
of each month, commencing January 31, 2004, pay the accrued and unpaid interest
on the portion of such Loan which was not subject to a Eurodollar Pricing
Option. On the last day of each Eurodollar Interest Period or on any earlier
termination of any Eurodollar Pricing Option, the Borrower will pay the accrued
and unpaid interest on the portion of such Loan which was subject to the
Eurodollar Pricing Option which expired or terminated on such date. On the Final
Maturity Date or the earlier accelerated maturity of any Loan, the Borrower will
pay all accrued and unpaid interest on such Loan, including any accrued and
unpaid interest on any portion of such Loan which is subject to a Eurodollar
Pricing Option. Upon the occurrence and during the continuance of an Event of
Default, the Banks may require accrued interest to be payable on demand or at
regular intervals more frequent than each Payment Date. All payments of interest
hereunder shall be made to the Administrative Agent, for the account of each
Bank in accordance with such Bank's Percentage Interest.
3.2 Eurodollar Pricing Options.
3.2.1 Election of Eurodollar Pricing Options. Subject to
all of the terms and conditions hereof and so long as no Default
exists, the Borrower may from time to time, by irrevocable notice to
the Administrative Agent, actually received not less than two (2)
36
Banking Days prior to the commencement of the Eurodollar Interest
Period selected in such notice, elect to have such portion of a Loan as
the Borrower may specify in such notice accrue and bear interest during
the Eurodollar Interest Period so selected at the Applicable Rate
computed on the basis of the Eurodollar Rate. No such election shall
become effective:
(i) if, prior to the commencement of any such
Eurodollar Interest Period, the Administrative Agent
determines that (i) the electing or granting of the Eurodollar
Pricing Option in question would violate a Bank Legal
Requirement, (ii) Eurodollar deposits in an amount comparable
to the principal amount of the Loan as to which such
Eurodollar Pricing Option has been elected and which have a
term corresponding to the proposed Eurodollar Interest Period
are not readily available in the inter-bank Eurodollar market,
or (iii) by reason of circumstances affecting the inter-bank
Eurodollar market, adequate and reasonable methods do not
exist for ascertaining the interest rate applicable to such
deposits for the proposed Eurodollar Interest Period; or
(ii) if any Bank shall have advised the
Administrative Agent, by telephone or otherwise at or prior to
noon (Tulsa, Oklahoma time) on the Banking Day immediately
prior to the commencement of such proposed Eurodollar Interest
Period (and shall have subsequently confirmed in writing)
that, after reasonable efforts to determine the availability
of such Eurodollar deposits, such Bank reasonably anticipates
that Eurodollar deposits in an amount equal to the Percentage
Interest of such Bank in the portion of such Loan as to which
such Eurodollar Pricing Option has been elected and which have
a term corresponding to the Eurodollar Interest Period in
question will not be offered in the Eurodollar market to such
Bank at a rate of interest that does not exceed the
anticipated Eurodollar Basic Rate.
3.2.2 Notice to Banks and Borrower. The Administrative
Agent, will promptly inform each Bank (by telephone or otherwise) of
each notice received by it from the Borrower pursuant to Section 3.2.1
and of the Eurodollar Interest Period specified in such notice. Upon
determination by the Administrative Agent of the Eurodollar Rate for
such Eurodollar Interest Period or in the event such election shall not
become effective, the Administrative Agent, will promptly notify the
Borrower and each Bank (by telephone or otherwise) of the Eurodollar
Rate so determined or why such election did not become effective, as
the case may be.
3.2.3 Selection of Eurodollar Interest Periods. Eurodollar
Interest Periods shall be selected so that:
(i) the minimum portion of a Loan subject to any
Eurodollar Pricing Option shall be $1,000,000 and in integral
multiple of $100,000 in excess thereof;
(ii) no more than a total of fifteen (15)
Eurodollar Pricing Options shall be outstanding at any one
time with respect to the Loans;
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(iii) no Eurodollar Interest Period with respect
to any part of a Loan subject to a Eurodollar Pricing Option
shall expire later than its applicable Final Maturity Date.
3.2.4 Additional Interest. If any portion of a Loan subject
to a Eurodollar Pricing Option is repaid, or any Eurodollar Pricing
Option is terminated for any reason (including acceleration of
maturity), on a date which is prior to the last Banking Day of the
Eurodollar Interest Period applicable to such Eurodollar Pricing
Option, the Borrower will pay to the Administrative Agent, for the
account of each Bank in accordance with such Bank's Percentage
Interest, in addition to any amounts of interest otherwise payable
hereunder, an amount equal to the present value (calculated in
accordance with this Section 3.2.4) of interest for the unexpired
portion of such Eurodollar Interest Period on the portion of such Loan
so repaid, or as to which a Eurodollar Pricing Option was so
terminated, at a per annum rate equal to the excess, if any, of (a) the
rate applicable to such Eurodollar Pricing Option minus, (b) the lowest
rate of interest obtainable by the Administrative Agent upon the
purchase of debt securities customarily issued by the Treasury of the
United States of America which have a maturity date approximating the
last Banking Day of such Eurodollar Interest Period. The present value
of such additional interest shall be calculated by discounting the
amount of such interest for each day in the unexpired portion of such
Eurodollar Interest Period from such day to the date of such repayment
or termination at a per annum interest rate equal to the interest rate
determined pursuant to clause (b) of the preceding sentence, and by
adding all such amounts for all such days during such period. The
determination by the Administrative Agent of such amount of interest
shall, in the absence of manifest error, be conclusive. For purposes of
this Section 3.2.4, if any portion of a Loan which was to have been
subject to a Eurodollar Pricing Option is not outstanding on the first
day of the Eurodollar Interest Period applicable to such Eurodollar
Pricing Option other than for reasons described in Section 3.2.1, the
Borrower shall be deemed to have terminated such Eurodollar Pricing
Option.
3.2.5 Violation of Bank Legal Requirements. If any Bank
Legal Requirement shall prevent any Bank from funding or maintaining
through the purchase of deposits in the interbank Eurodollar market any
portion of a Loan subject to a Eurodollar Pricing Option or otherwise
from giving effect to such Bank's obligations as contemplated by
Section 3.2, (a) the Administrative Agent, may by notice to the
Borrower terminate all of the affected Eurodollar Pricing Options, (b)
the portion of such Loan subject to such terminated Eurodollar Pricing
Options shall immediately bear interest thereafter at the Applicable
Rate computed on the basis of the Base Rate and (c) the Borrower shall
make any payment required by Section 3.2.4.
3.2.6 Funding Procedure. The Banks may fund any portion of
a Loan subject to a Eurodollar Pricing Option out of any funds
available to the Banks. Regardless of the source of the funds actually
used by any of the Banks to fund any portion of such Loan subject to a
Eurodollar Pricing Option, however, all amounts
38
payable hereunder, including the interest rate applicable to any such
portion of the Loan and the amounts payable under Sections 3.2.4, 3.5,
3.6, 3.7 and 3.8, shall be computed as if each Bank had actually funded
such Bank's Percentage Interest in such portion of such Loan through
the purchase of deposits in such amount of the type by which the
Eurodollar Basic Rate was determined with a maturity the same as the
applicable Eurodollar Interest Period relating thereto and through the
transfer of such deposits from an office of the Bank having the same
location as the applicable Eurodollar Office to one of such Bank's
offices in the United States of America.
3.3 Commitment Fees.
3.3.1 Acquisition Financing Facility. In consideration of
the Banks' Commitments to make the extensions of credit provided for in
Section 2.1, while such commitments are outstanding, the Borrower will
pay to the Administrative Agent, for the account of the Banks in
accordance with the Banks' respective Percentage Interests, within five
(5) Banking Days following the end of each fiscal quarter of the
Borrower, an amount equal to interest computed at the rate per annum
equal to the Applicable Commitment Fee Percentage multiplied by the
amount by which (a) the average daily Maximum Amount of Acquisition
Credit during the Margin Period or portion thereof ending on the last
day of such fiscal quarter exceeded (b) the average daily Acquisition
Loan during such Margin Period or portion thereof.
3.3.2 Working Capital Facility. In consideration of the
Banks' commitments to make the extension of credit provided for in
Section 2.2 while such commitments are outstanding, the Borrower will
pay to the Administrative Agent, for the account of the Banks in
accordance with the Banks' respective Percentage Interests, within five
(5) Banking Days following the end of each fiscal quarter of the
Borrower and on the Final Maturity Date with respect to the Working
Capital Loan, an amount equal to interest computed at the rate per
annum equal to the Applicable Commitment Fee Percentage multiplied by
the amount by which (a) the average daily Maximum Amount of Working
Capital Credit during the Margin Period or portion thereof ending on
the last day of such fiscal quarter or Final Maturity Date exceeded (b)
the average daily Working Capital Loan during such Margin Period or
portion thereof.
3.4 Letter of Credit Fees. The Borrower will pay to the
Administrative Agent, for the account of each of the Banks (including any Letter
of Credit Issuer), in accordance with the Banks' respective Percentage
Interests, on the last day of each Margin Period, a Letter of Credit fee equal
to the Applicable Margin for Eurodollar Loans in effect for such Margin Period
on the average daily Letter of Credit Exposure during such Margin Period;
together with an additional fee equal to 1/8% per annum on the Letter of Credit
Exposure shall be paid solely to the respective Letter of Credit Issuer. The
Borrower also will pay to each Letter of Credit Issuer customary service charges
and expenses for its services in connection with the Letters of Credit issued by
it at the times and in the amounts from time to time in effect in accordance
with its general rate structure, including fees and expenses relating to
issuance, amendment, negotiation, cancellation and similar operations.
39
3.5 Reserve Requirements. If any Bank Legal Requirement shall (a)
impose, modify, increase or deem applicable any insurance assessment, reserve,
special deposit or similar requirement against any Funding Liability or the
Letters of Credit, (b) impose, modify, increase or deem applicable any other
requirement or condition with respect to any Funding Liability or the Letters of
Credit, or (c) change the basis of taxation of Funding Liabilities or payments
in respect of any Letter of Credit (other than changes in the rate of taxes
measured by the overall net income of such Bank) and the effect of any of the
foregoing shall be to increase the cost to any Bank of issuing, making, funding
or maintaining its respective Percentage Interest in any portion of a Loan
subject to a Eurodollar Pricing Option or any Letter of Credit, to reduce the
amounts received or receivable by such Bank under this Agreement or to require
such Bank to make any payment or forego any amounts otherwise payable to such
Bank under this Agreement, then, within 15 days after the receipt by the
Borrower of a certificate from such Bank setting forth why it is claiming
compensation under this Section 3.5 and computations (in reasonable detail) of
the amount thereof, the Borrower shall pay to the Administrative Agent, for the
account of such Bank such additional amounts as are specified by such Bank in
such certificate as sufficient to compensate such Bank for such increased cost
or such reduction, together with interest at the Overdue Reimbursement Rate on
such amount from the 15th day after receipt of such certificate until payment in
full thereof; provided, however, that the foregoing provisions shall not apply
to any Tax or to any reserves which are included in computing the Eurodollar
Reserve Rate. The determination by such Bank of the amount of such costs shall,
in the absence of manifest error, be conclusive.
3.6 Taxes. All payments of the Credit Obligations shall be made
without set-off or counterclaim and free and clear of any deductions, including
deductions for Taxes, unless the Borrower is required by law to make such
deductions. If (a) any Bank shall be subject to any Tax with respect to any
payment of the Credit Obligations or its obligations hereunder or (b) the
Borrower shall be required to withhold or deduct any Tax on any payment on the
Credit Obligations, within 15 days after the receipt by the Borrower of a
certificate from such Bank setting forth why it is claiming compensation under
this Section 3.6 and computations (in reasonable detail) of the amount thereof,
the Borrower shall pay to the Administrative Agent, for such Bank's account such
additional amount as is necessary to enable such Bank to receive the amount of
Tax so imposed on the Bank's obligations hereunder or the full amount of all
payments which it would have received on the Credit Obligations (including
amounts required to be paid under Sections 3.5, 3.7, 3.8 and this Section 3.6)
in the absence of such Tax, as the case may be, together with interest at the
Overdue Reimbursement Rate on such amount from the 15th day after receipt of
such certificate until payment in full thereof. Whenever Taxes must be withheld
by the Borrower with respect to any payments of the Credit Obligations, the
Borrower shall promptly furnish to the Administrative Agent for the account of
the applicable Bank official receipts (to the extent that the relevant
governmental authority delivers such receipts) evidencing payment of any such
Taxes so withheld. If the Borrower fails to pay any such Taxes when due or fails
to remit to the Administrative Agent, for the account of the applicable Bank the
required receipts evidencing payment of any such Taxes so withheld or deducted,
the Borrower shall indemnify the affected Bank for any incremental Taxes and
interest or penalties that may become payable by such Bank as a result of any
such failure. The determination by such Bank of the amount of such Tax and the
basis therefor shall, in the absence of manifest error, be conclusive. The
Borrower shall be entitled to replace any such Bank in accordance with Section
11.3.
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3.7 Capital Adequacy. If any Bank shall determine that compliance
by such Bank with any Bank Legal Requirement regarding capital adequacy of banks
or bank holding companies has or would have the effect of reducing the rate of
return on the capital of such Bank and its Affiliates as a consequence of such
Bank's commitment to make the extensions of credit contemplated hereby, or such
Bank's maintenance of the extensions of credit contemplated hereby, to a level
below that which such Bank could have achieved but for such compliance (taking
into consideration the policies of such Bank and its Affiliates with respect to
capital adequacy immediately before such compliance and assuming that the
capital of such Bank and its Affiliates was fully utilized prior to such
compliance) by an amount deemed by such Bank to be material, then, within 15
days after the receipt by the Borrower of a certificate from such Bank setting
forth why it is claiming compensation under this Section 3.7 and computations
(in reasonable detail) of the amount thereof, the Borrower shall pay to the
Administrative Agent, for the account of such Bank such additional amounts as
shall be sufficient to compensate such Bank for such reduced return, together
with interest at the Overdue Reimbursement Rate on each such amount from the
15th day after receipt of such certificate until payment in full thereof. The
determination by such Bank of the amount to be paid to it and the basis for
computation thereof shall, in the absence of manifest error, be conclusive. In
determining such amount, such Bank may use any reasonable averaging, allocation
and attribution methods. The Borrower shall be entitled to replace any such Bank
in accordance with Section 11.3.
3.8 Regulatory Changes. If any Bank shall determine that (a) any
change in any Bank Legal Requirement (including any new Bank Legal Requirement)
after the date hereof shall directly or indirectly (i) reduce the amount of any
sum received or receivable by such Bank with respect to a Loan or the Letters of
Credit or the return to be earned by such Bank on such Loan or the Letters of
Credit, (ii) impose a cost on such Bank or any Affiliate of such Bank that is
attributable to the making or maintaining of, or such Bank's commitment to make,
its portion of such Loan or the Letters of Credit, or (iii) require such Bank or
any Affiliate of such Bank to make any payment on, or calculated by reference
to, the gross amount of any amount received by such Bank under any Credit
Document, and (b) such reduction, increased cost or payment shall not be fully
compensated for by an adjustment in the Applicable Rate or the Letter of Credit
fees, then, within 15 days after the receipt by the Borrower of a certificate
from such Bank setting forth why it is claiming compensation under this Section
3.8 and computations (in reasonable detail) of the amount thereof, the Borrower
shall pay to such Bank such additional amounts as such Bank determines will,
together with any adjustment in the Applicable Rate, fully compensate for such
reduction, increased cost or payment, together with interest on such amount from
the 15th day after receipt of such certificate until payment in full thereof at
the Overdue Reimbursement Rate. The determination by such Bank of the amount to
be paid to it and the basis for computation thereof hereunder shall, in the
absence of manifest error, be conclusive. In determining such amount, such Bank
may use any reasonable averaging and attribution methods.
3.9 Computations of Interest and Fees. For purposes of this
Agreement, interest, commitment fees and Letter of Credit fees (and any other
amount expressed as interest or such fees) shall be computed on the basis of a
360-day year for actual days elapsed. If any payment required by this Agreement
becomes due on any day that is not a Banking Day, such payment shall, except as
otherwise provided in the Eurodollar Interest Period, be made on the next
41
succeeding Banking Day. If the due date for any payment of principal is extended
as a result of the immediately preceding sentence, interest shall be payable for
the time during which payment is extended at the Applicable Rate, and any letter
of credit fees payable pursuant to Section 3.4 shall be payable for the full
number of days such applicable Letter of Credit is outstanding.
3.10 Loan Fees. Concurrent with the Closing Date, the Borrower
shall pay to each Bank in immediately available funds a non-refundable and fully
earned loan fee in an amount equal to 0.35% (35 basis points) of the aggregate
amount of each such Bank's Commitments issued pursuant to this Agreement.
3.11 Administrative Agent's Fees. The Borrower shall pay to the
Administrative Agent, for the Administrative Agent's own account, an annual fee
in the amount of $25,000, payable quarterly (in the amount of $6,250) in arrears
following the close of each calendar quarter by the Administrative Agent's debit
to Borrower's operating account, concerning which quarterly debit therefrom
Borrower hereby authorizes the Administrative Agent to automatically effect
without the necessity of any further or other approval from the Borrower.
ARTICLE IV
PAYMENT
4.1 Payment at Maturity. On the Final Maturity Date with respect
to each tranche or any accelerated maturity of such Loan, the Borrower will pay
to the Administrative Agent, for the account of the Banks an amount equal to the
remaining aggregate principal amount of such Tranche then outstanding, together
with all accrued and unpaid interest thereon and all other Credit Obligations
then outstanding.
4.2 Contingent Required Prepayments.
4.2.1 Excess Credit Exposure. If at any time the
Acquisition Loan or the Working Capital Loan exceeds the limit set
forth in Section 2.1.2 or 2.2.2, respectively, the Borrower shall
within three Banking Days pay the amount of such excess to the
Administrative Agent, for the account of the Banks.
4.2.2 Letter of Credit Exposure. If at any time the Letter
of Credit Exposure exceeds the limit set forth in Section 2.3.1, the
Borrower shall cash-collateralize such excess within three (3) Banking
Days by paying the amount of such excess to the Administrative Agent,
for the account of the Banks to be applied as provided in Section 4.5.
4.2.3 Contingent Prepayments on Disposition, Loss of
Assets, Merger or Change of Control.
(i) If at any time the Borrower or any of its
Subsidiaries disposes of assets or issues or sells Capital
Stock of any Subsidiary with the result that there are Excess
Sale
42
Proceeds, and the Borrower does not apply such Excess Sale
Proceeds in the manner described in Section
7B.7(iii)(c)(ii)(x), the Borrower will prepay (at the price of
the principal amount prepaid plus accrued interest thereon and
any amount owing with respect thereto under Section 3.2.4 and
upon notice as provided in Section 4.2.4) a principal amount
of the outstanding Acquisition Notes equal to the Allocable
Proceeds.
(ii) In the event of any damage to, or
destruction, condemnation or other taking of, all or any
portion of the properties or assets of the Borrower or any of
its Subsidiaries, to the extent that the Borrower or any such
Subsidiary receives insurance or condemnation proceeds with
the result that Unutilized Taking Proceeds exceed $2,500,000
in respect of any fiscal year (such excess amount being herein
called "Excess Taking Proceeds"), the Borrower will prepay (at
the price of the principal amount prepaid plus accrued
interest thereon and any amount owing with respect thereto
under Section 3.2.4 and upon notice as provided in Section
4.2.4) a principal amount of the outstanding Acquisition Notes
equal to the Allocable Proceeds.
(iii) (a) If at any time any Responsible Officer
has knowledge of the occurrence of any Control Event, the
Borrower will give notice as provided in Section 4.4 of such
Control Event to the Administrative Agent. Upon the occurrence
of a Control Event, the Borrower will not take any voluntary
action that consummates or finalizes the Control Event
resulting from such Control Event unless contemporaneously
with such action, the Borrower prepays all Notes in accordance
with this Section 4.2.3(iii) and upon notice as provided in
Section 4.2.4 at the price of the principal amount thereof
plus accrued interest thereon and any amount owing with
respect thereto under Section 3.2.4.
(b) The obligation of the Borrower to prepay
Acquisition Notes pursuant to the offer required by paragraph
(a) of this clause (iii) and accepted in accordance with
Section 4.2.4 is subject to the consummation of the Control
Event in respect of which any such offer and acceptance shall
have been made. In the event that such Control Event does not
occur on or before the proposed prepayment date in respect
thereof, the prepayment shall be deferred until and shall be
made on the date on which such Control Event occurs. The
Borrower shall keep the Administrative Agent reasonably and
timely informed of (i) any such deferral of the date of
prepayment, (ii) the date on which such Control Event and the
prepayment are expected to occur, and (iii) any determination
by the Borrower that efforts to effect such resulting Control
Event have ceased or been abandoned (in which case the
Borrower shall have no further obligation hereunder to prepay
the Acquisition Notes in respect of such Control Event).
4.2.4 Prepayment Procedure for Contingent Prepayments.
(i) If at any time there are unapplied Excess
Sale Proceeds or Excess Taking Proceeds (such unapplied
amounts being "Excess Proceeds"), and the Borrower is required
to prepay the Acquisition Notes with such Excess Proceeds
43
pursuant to clause (i) or (ii) of Section 4.2.3, the Borrower
will give written notice as provided in Section 12.1 (which
shall be in the form of an Officers' Certificate) to the Banks
not later than twelve months after the date of the applicable
Asset Sale or the end of the twelve month period following
receipt of the applicable Unutilized Taking Proceeds, as the
case may be, and (a) setting forth in reasonable detail all
calculations required to determine the amount of Excess
Proceeds, (b) setting forth the aggregate amount of the
Allocable Proceeds and the amount of the Allocable Proceeds
which is allocable to each Acquisition Note, determined by
applying the Allocable Proceeds pro rata among all Acquisition
Notes outstanding on the date such prepayment is to be made
according to the aggregate then unpaid amounts of the
Acquisition Notes, and in reasonable detail the calculations
used in determining such amounts, and (c) stating that the
Borrower will prepay on the date specified in such notice,
which shall not be less than 25 nor more than 45 days after
the date of such notice, a principal amount of each
outstanding Acquisition Note equal to the amount of Allocable
Proceeds allocated to such Acquisition Note as described in
clause (b) above.
(ii) If at any time the Borrower is required to
prepay the Notes following the occurrence of a Control Event,
the Borrower will give written notice as provided in Section
12.1 (which shall be in the form of an Officer's Certificate)
to the Banks not later than five Business Days following such
Control Event, (a) setting forth in reasonable detail the
facts and circumstances underlying such Control Event known to
it, and (b) stating that the Borrower will prepay on the date
the Control Event occurs.
4.3 Scheduled Required Payments.
4.3.1 Acquisition Loan. On the Final Maturity Date, the
Borrower shall pay all outstanding principal of the Acquisition Loan.
4.3.2 Working Capital Loan. The Borrower shall (i) prepay
the Working Capital Loan when necessary to comply with the Annual
Clean-Up requirement set forth in Section 2.2.2, and (ii) on the Final
Maturity Date, pay all outstanding principal of the Working Capital
Loan.
4.4 Voluntary Prepayments. In addition to the prepayments required
by Sections 4.2 and 4.3, the Borrower may from time to time prepay all or any
portion of the Loans (in a minimum amount of $50,000 and an integral multiple of
$50,000), without premium or penalty of any type (except as provided in Section
3.2.4 with respect to the early termination of Eurodollar Pricing Options). The
Borrower shall give the Administrative Agent at least one Banking Day prior
notice of its intention to prepay, specifying the date of payment, the total
amount of the Loans to be paid on such date and the amount of interest to be
paid with such prepayment.
44
4.5 Letters of Credit. If at the time of any Event of Default or
on the stated or any accelerated maturity of the Credit Obligations the Banks
shall be obligated in respect of a Letter of Credit or a draft accepted under a
Letter of Credit, the Borrower immediately will either:
(a) prepay such obligation by depositing with the
Administrative Agent, an amount of cash sufficient to
cash-collateralize such Letter of Credit Exposure, or
(b) deliver to the Administrative Agent, a standby letter
of credit (designating such Administrative Agent as beneficiary and
issued by a bank and on terms reasonably acceptable to such
Administrative Agent),
in each case in an amount equal to the portion of the then Letter of Credit
Exposure issued for the account of the Borrower. Any such cash so deposited and
the cash proceeds of any draw under any standby letter of credit so furnished,
including any interest thereon, shall be returned by such Administrative Agent
to the Borrower only when, and to the extent that, the amount of such cash held
by such Administrative Agent exceeds the Letter of Credit Exposure at a time
when no Default exists; provided, however, that if an Event of Default occurs
and the Credit Obligations become or are declared immediately due and payable,
such Administrative Agent may apply such cash, including any interest thereon,
to the payment of any of the Credit Obligations as provided in the Intercreditor
Agreement.
4.6 Reborrowing Application of Payments.
4.6.1 Reborrowing. The amounts of the Acquisition Loan and
the Working Capital Loan prepaid pursuant to Section 4.2.1, 4.3.2 or
4.4 may be reborrowed from time to time, in the case of the Acquisition
Loan in accordance with Section 2.1 and in the case of the Working
Capital Loan prior to its Final Maturity Date, in accordance with
Section 2.2 and subject to the limits set forth therein.
4.6.2 Order of Application. Each prepayment of the Loan
made pursuant to Section 4.2.1 shall be applied to the Working Capital
Loan or the Acquisition Loan, as appropriate. Each prepayment of the
Loan made pursuant to Section 4.2.3(i) or (ii) shall be applied to the
Acquisition Loan. Any amounts of the Acquisition Loan prepaid pursuant
to the preceding sentence may not be reborrowed.
4.6.3 Payment with Accrued Interest. Upon all prepayments
of a Loan, the Borrower shall pay to the Administrative Agent, the
principal amount to be prepaid, together with unpaid interest in
respect thereof accrued to the date of prepayment and any amount owing
with respect thereto under Section 3.2.4. Notice of prepayment having
been given in accordance with Section 4.4, and whether or not notice is
given of prepayments pursuant to Sections 4.2 and 4.3, the amount
specified to be prepaid shall become due and payable on the date
specified for prepayment.
4.6.4 Payments for Banks. All payments of principal
hereunder shall be made to the Administrative Agent, for the account of
the Banks in accordance with the Banks' respective Percentage
Interests.
45
ARTICLE V
SECURITY
5.1 Collateral. The repayment of the Indebtedness shall be secured
by the Collateral as more particularly described and defined in the Security
Documents previously executed and delivered pursuant to the terms, provisions
and conditions of the Existing Credit Agreement, the Liens and priorities
thereof which shall continue in full force and effect without any interruption
thereof whatsoever subject to the Intercreditor Agreement.
The Borrower hereby acknowledges that all of the Collateral is granted
as security for the repayment of all Obligations, including as evidenced by the
Notes, the Private Placement Notes and the notes, if any, evidencing other
Parity Debt. The Liens granted, created and perfected (including the priorities
thereof subject to the Intercreditor Agreement) by virtue of the Existing Credit
Agreement and the Security Documents therein described and defined are hereby
ratified, confirmed and continued without interruption and re-granted by the
Borrower in favor of the Collateral Agent in all respects as continuing security
for the Obligations, including as evidenced by the Notes, the Private Placement
Notes and the notes, if any, evidencing other Parity Debt subject to the terms
and provisions of the Intercreditor Agreement. If one or more of such Notes,
Private Placement Notes or other Parity Debt notes are paid in full or
satisfied, but any portion of the Indebtedness evidenced by such note remains
unsatisfied, the Collateral Agent may retain its security interest in all of the
Collateral on behalf of the Secured Parties described therein until the
remaining Indebtedness secured thereby is paid in full, even if the value of the
Collateral far exceeds the amount of such outstanding Indebtedness secured
thereby.
5.2 Intercreditor Agreement. The Banks and the Co-Agent hereby
authorize the Administrative Agent to execute and deliver such supplements,
amendments or modifications to the Intercreditor Agreement to the Collateral
Agent. Borrower confirms that any setoffs shared under the terms of the
Intercreditor Agreement (including without limitation Section 13(c) thereof)
with the Note Purchaser of the Private Placement Notes or the holders of any
Additional Parity Debt, to the extent of the portions so shared, will not be
deemed to pay down the Loan evidenced by the Notes.
ARTICLE VI
CONDITIONS PRECEDENT AND SUBSEQUENT TO LOANS
6.1 Conditions Precedent to Initial Working Capital Loan and
Initial Acquisition Loan. The obligation of the Banks to make the initial
Working Capital Loan and the initial Acquisition Loan is subject to the
satisfaction of all of the following conditions on or prior to the Closing Date
(in addition to the other terms and conditions set forth herein):
(i) No Default. There shall exist no Event of Default,
Noncompliance Event or Default on the Closing Date.
46
(ii) Representations and Warranties. The representations,
warranties and covenants set forth in Article VIII shall be true and
correct on and as of the Closing Date, with the same effect as though
made on and as of the Closing Date unless such representation or
warranty relates only to an earlier date.
(iii) Certificates. The Borrower shall have delivered or
caused to be delivered to the Administrative Agent Certificates, dated
as of the Closing Date, and signed by the President or Vice President
and the Secretary of USPLLC and the General Partner, respectively,
certifying (a) to the matters covered by the conditions specified in
subsections (i) and (ii) of this Section 6.1, (b) that the Borrower and
the Master Partnership have performed and complied with all agreements
and conditions required to be performed or complied with by them prior
to or on the Closing Date, (c) to the name and signature of each
officer of USPLLC and the General Partner, respectively, authorized to
execute and deliver the Loan Documents for and on behalf of the
Borrower and any other documents, certificates or writings and to
borrow under this Agreement, and (iv) to such other matters in
connection with this Agreement which the Banks shall determine to be
advisable. The Banks may conclusively rely on such Certificates until
Agent receives notice in writing to the contrary.
(iv) Proceedings. On or before the Closing Date, all
partnership proceedings of the Borrower shall be taken in connection
with the transactions contemplated by the Loan Documents and shall be
satisfactory in form and substance to the Banks and Administrative
Agent's counsel; and the Agents shall have received certified copies,
in form and substance satisfactory to the Banks and Agents' counsel, of
the partnership agreements and certificates of the Borrower and the
Certificate of Limited Partnership Agreement of the General Partner and
the Articles of Organization/Certificate of Formation and Operating
Agreement of USPLLC, as adopted, authorizing the execution and delivery
of the Loan Documents, the borrowings under this Agreement, and the
ratification, confirmation and regranting of the security interests in
the Collateral pursuant to the Security Agreement, to secure the
payment of the Indebtedness.
(v) Notes. The Borrower shall have delivered the Notes
payable to the order of the respective Banks, to the Administrative
Agent, in each case appropriately executed.
(vi) Security Agreement. The Borrower shall have ratified
and confirmed its delivery to the Collateral Agent of such supplement
to amendment or restatement of the Security Agreement executed in
connection with the Existing Credit Agreement, appropriately executed
by the Borrower and Heritage, and dated as of the Closing Date,
together with such financing statements (UCC or otherwise)
(collectively, the "Financing Statements"), and other documents as
shall be necessary and appropriate to continue the perfection of the
Collateral Agent's security interests in the Collateral covered by said
Security Agreement, including, without limitation, the Security
Agreement, and such certificates representing shares of Capital Stock
included in the Collateral and proper stock powers with respect thereto
duly endorsed in blank (collectively, the "Certificates and Stock
Powers").
47
(vii) Opinions. The Agents shall have received from
Borrower's counsel, (i) Doerner, Saunders, Daniel & Anderson, L.L.P., a
favorable written closing opinion addressed to the Agents for the
benefit of the Banks with respect to this Agreement, satisfactory in
form and substance to the Administrative Agent's counsel including,
without limitation, an opinion that all notices to or consents of the
Collateral Agent or the Note Purchasers as required by the transactions
contemplated by this Agreement have been duly obtained and are in full
force and effect and (ii) a copy of the executed non-consolidation
opinion of Winston & Strawn, L.L.P., addressed to the Note Purchasers
listed on Schedule A attached thereto.
(viii) UCC Releases/Other Information. The Administrative
Agent shall have received a written payoff statement from any other
secured party of record concerning any of the Collateral together with
applicable UCC terminations of record of all such existing security
interest liens pertaining to the Collateral or any part thereof.
(ix) Other Information and Closing Documents. The
Administrative Agent shall have received such other consents,
information, documents, agreements and assurances as shall be
reasonably requested by the Banks, including, without limitation,
appropriate consents and approvals to the issuance of the Notes and the
Commitments and the Intercreditor Agreement, as amended and modified,
shall have been duly executed by all parties thereto and delivered to
the Collateral Agent.
(x) Assignments/Replacement of Banks. Each Departing Bank
shall have surrendered its Notes to BOk, as Administrative Agent, and
each of Bank One, Fifth Third, MidFirst and Arvest (as Banks not party
signatories to the Existing Credit Agreement) and as applicable, the
other Banks, shall have paid to such Administrative Agent in
immediately available funds an amount equal to their respective
Percentage Interest in the outstanding principal balance of such
Departing Bank of the Loan assigned hereunder thereto by the Departing
Bank, for concurrent remittance by the Administrative Agent to the
Departing Bank.
(xi) Co-Agent. U.S. Bank shall have submitted the
resignation as Co-Agent and Bank One shall be named successor Co-Agent.
6.2 Conditions Precedent to All Loans. The Banks shall not be
obligated to make any additional Loan advance(s) or to issue any Letters of
Credit after the Closing Date (i) if at such time any Event of Default or any
Noncompliance Event shall have occurred or any Default shall have occurred and
be continuing; or (ii) if any of the representations, warranties and covenants
contained in Article VIII of this Agreement shall be false or untrue in any
material respect on the date of such advance or issue, as if made on such date
(unless such representation or warranty relates only to an earlier date). Each
request by the Borrower for an additional Working Capital Loan or Acquisition
Loan shall constitute a representation by the Borrower that there is not at the
time of such request an Event of Default, a Noncompliance Event or a Default,
and that all representations, warranties and covenants in Article VIII of this
Agreement are true and correct on and as of the date of each such applicable
Loan request or request for a Letter of Credit.
48
ARTICLE VII
COVENANTS
The Borrower hereby covenants and agrees with the Banks that, comply
with the terms and provisions of this Article VII.
7A. Affirmative Covenants.
7A.1 Financial Statements. The Borrower will maintain, and
will cause each of its Subsidiaries to maintain, a system of accounting
established and administered in accordance with GAAP. The Borrower
covenants that it will deliver to each Bank:
(i) as soon as practicable and in any event
within 50 days after the end of each quarterly period in each
fiscal year, (a) consolidated statements of income, partners'
capital and cash flows of the Borrower and its Subsidiaries
for such quarterly period and (in the case of the second,
third and fourth quarterly periods) for the period from the
beginning of the current fiscal year to the end of such
quarterly period, and consolidated balance sheets of the
Borrower and its Subsidiaries as at the end of such quarterly
period, setting forth in each case with respect to financial
statements delivered as of any date and for any period after
the Closing Date, in comparative form figures for the
corresponding period in the preceding fiscal year, all in
reasonable detail and satisfactory in form to the Required
Banks and certified by an authorized financial officer of the
Borrower as presenting fairly, in all material respects, the
information contained therein (except for the absence of
footnotes and subject to changes resulting from normal
year-end adjustments), in accordance with GAAP, and (b) a copy
of the Quarterly Report on Form 10-Q of the Master Partnership
for such quarterly period filed with the Commission;
(ii) as soon as practicable and in any event
within 95 days after the end of each fiscal year, (a)
consolidated and consolidating statements of income and cash
flows and a consolidated and consolidating statement of
partners' capital (or stockholders' equity, as applicable) of
the Borrower and its Subsidiaries for such year, and
consolidated and consolidating balance sheets of the Borrower
and its Subsidiaries, as at the end of such year, setting
forth in each case with respect to financial statements
delivered as of any date and for any period after the Closing
Date, in comparative form corresponding consolidated and,
where applicable, consolidating figures from the preceding
annual audit, all in reasonable detail and, as to the
consolidated statements, reported on by Grant Thornton, LLP,
or other independent public accountants of recognized national
standing selected by the Borrower whose report shall be
without limitation as to the scope of the audit, (b)
consolidating statements of income and cash flows and a
consolidating statement of partners' capital (or stockholder
equity, as applicable) of the Master Partnership and its
Subsidiaries for such year and consolidated balance sheets of
the Master
49
Partnership and its Subsidiaries, as at the end of such year,
setting forth in each case, in comparative form corresponding
consolidated figures from the preceding annual audit, all in
reasonable detail and reported on by Grant Thornton LLP, or
other independent public accountants of recognized national
standing selected by the Master Partnership whose report shall
be without limitation as to the scope of the audit (provided
that such report shall not include within the scope of the
audit the consolidating statements required by clause (c));
provided, however, that at any time when the Master
Partnership shall be subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, delivery within the
time period specified above of copies of the Annual Report on
Form 10-K of the Master Partnership for such fiscal year
prepared in compliance with the requirements therefor and
filed with the Commission shall be deemed to satisfy the
requirements of this clause (b) if all such statements
required to be delivered pursuant to this clause (b) with
respect to the Master Partnership and its Subsidiaries are
included in such Form 10-K, or (c) consolidating statements of
income and cash flows and a consolidating statement of
partners' capital (or stockholders' equity, as applicable) of
the Master Partnership and its Subsidiaries for such year,
certified by an authorized financial officer of the Master
Partnership as presenting fairly, in all material respects,
the information contained therein, in accordance with GAAP
(except for the absence of footnotes); provided, however, that
at any time when the Master Partnership shall be subject to
the reporting requirements of Section 13 or 15(d) of the
Exchange Act delivery within the time period specified above
of copies of the Annual Report on Form 10-K of the Master
Partnership for such fiscal year prepared in compliance with
the requirements therefor and filed with the Commission shall
be deemed to satisfy the requirements of this clause (c) if
all such statements required to be delivered pursuant to this
clause (c) with respect to the Master Partnership and its
Subsidiaries are included in such Form 10-K and such reports
are delivered separately by the Borrower together with such
Form 10-K and such reports;
(iii) promptly upon receipt thereof by the
Borrower, copies of all reports submitted to the Borrower by
independent public accountants in connection with each
special, annual or interim audit of the books of the Borrower
or any Subsidiary thereof made by such accountants, including
without limitation the comment letter submitted by each such
accountant to management in connection with their annual
audit;
(iv) promptly upon transmission thereof, copies
of (a) all financial statements, proxy statements, notices and
reports as the Borrower or the Master Partnership shall send
or make available to the public Unitholders of the Master
Partnership, (b) all registration statements (without
exhibits), all prospectuses and all reports which the Borrower
or the Master Partnership files with the Commission (or any
governmental body or agency succeeding to the functions of the
Commission), (c) all press releases and other similar written
statements made available by the Borrower or the Master
Partnership to the public concerning material developments in
the business of the Borrower or the Master Partnership,
50
as the case may be, and (d) all reports, notices and other
similar written statements sent or made available by the
Borrower or the Master Partnership to any holder of its
Indebtedness pursuant to the terms of any agreement, indenture
or other instrument evidencing such Indebtedness, including
without limitation the Credit Agreement, except to the extent
the same substantive information is already being provided
pursuant to this Section 7A.1;
(v) as soon as reasonably practicable, and in
any event within 5 Business Days after a Responsible Officer
obtains knowledge that any Default or Event of Default has
occurred, a written statement of such Responsible Officer
setting forth details of such Default or Event of Default and
the action which the Borrower has taken, is taking and
proposes to take with respect thereto;
(vi) as soon as reasonably practicable, and in
any event within 5 Business Days after a Responsible Officer
obtains knowledge of (a) the occurrence of an adverse
development with respect to any litigation or proceeding
involving the Borrower or any of its Subsidiaries which in the
reasonable judgment of the Borrower could reasonably be
expected to have a Material Adverse Effect or (b) the
commencement of any litigation or proceeding involving the
Borrower or any of its Subsidiaries which in the reasonable
judgment of the Borrower could reasonably be expected to have
a Material Adverse Effect, a written notice of such
Responsible Officer describing in reasonable detail such
commencement of, or adverse development with respect to, such
litigation or proceeding;
(vii) as soon as possible after, and in any event
within 10 Business Days after any Responsible Officer of the
Borrower or any ERISA Affiliate knows or has reason to know
that, any ERISA Event has occurred or is expected to occur
that, alone or together with any other ERISA Events that have
occurred, in the opinion of the principal financial officer of
the Borrower could reasonably be expected to result in
liability of the Borrower in an aggregate amount exceeding
$2,000,000, a statement setting forth a detailed description
of such ERISA Event and the action, if any, that the Borrower
or any ERISA Affiliate has taken, is taking or proposes to
take or cause to be taken with respect thereto (together with
a copy of any notice, report or other written communication
filed with or given to or received from the PBGC, the Internal
Revenue Service or the Department of Labor with respect to
such event or condition);
(viii) as soon as reasonably practicable, and in
any event within five Business Days after a Responsible
Officer obtains knowledge of a violation or alleged violation
of any Environmental Law or the presence or release of any
Hazardous Substance within, on, from, relating to or affecting
any property, which in the reasonable judgment of the Borrower
could reasonably be expected to have a Material Adverse
Effect, notice thereof, and upon request, copies of relevant
documentation;
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(ix) together with each delivery of financial
information pursuant to clause (i) or clause (ii) of this
Section 7A.1, a statement setting forth, together with
computations in reasonable detail, the amount of Available
Cash, Aggregate Available Cash and the Aggregate Partner
Obligations, together with a calculation of the Borrower's
Percentage of Aggregate Available Cash as of the date of the
balance sheet contained therein and the amounts of all Net
Proceeds, Excess Sale Proceeds, Unutilized Taking Proceeds and
Unused Proceeds Reserves held by the Borrower at the end of
the applicable quarterly period or fiscal year, as the case
may be;
(x) as soon as reasonably practicable, and in
any event within 5 Business Days after a Responsible Officer
obtains knowledge that the holder of any Note has given any
notice to the Borrower or any Subsidiary thereof or taken any
other action with respect to a claimed Default or Event of
Default under this Agreement or any other Loan Documents, or
that any Person has given any notice to the Borrower or any
such Subsidiary or taken any other action with respect to a
claimed default or event or condition of the type referred to
in [Section 9.1A(iii), Event of Default] a written statement
of such Responsible Officer describing such notice or other
action in reasonable detail and the action which the Borrower
has taken, is taking and proposes to take with respect
thereto;
(xi) prior to the Closing Date and within 45 days
after the end of each calendar year ending thereafter,
commencing with the year ending December 31, 2003, a report
prepared by the Borrower or its broker or agent (a) setting
forth the insurance maintained pursuant to Section 7A.8, and
including, without limitation, the amounts thereof, the names
of the insurers and the property, hazards and risks covered
thereby, and certifying that all premiums with respect to the
policies described in such report then due thereon have been
paid and that the same are in full force and effect, (b)
setting forth all self-insurance maintained by the Borrower
pursuant to Section 7A.8 and (c) certifying that such
insurance or self insurance complies with the requirements of
such Section 7A.8;
(xii) with reasonable promptness, such other
information and data (financial or other) as from time to time
may be reasonably requested by any Bank; and
(xiii) as soon as reasonably practicable, and in
any event within 5 Business Days after a Responsible Officer
obtains knowledge that the holder of any secured indebtedness
or other indebtedness has given any notice to La Grange or any
Subsidiary thereof or taken any other action with respect to a
claimed event of default or condition of the type referred to
in Section 9.1(xviii), a written statement of such Responsible
Officer describing, to the best knowledge of such Responsible
Officer, such notice or other action in reasonable detail and
the action which La Grange has taken, is taking and proposes
to take with respect thereto.
52
Together with each delivery of financial statements required by clauses
(i) and (ii) above, the Borrower will deliver to each holder of Notes
an Officers' Certificate (I) stating that the signers have reviewed the
terms of this Agreement and the other Loan Documents, and have made, or
caused to be made under their supervision, a review in reasonable
detail of the transactions and condition of the Borrower and its
Subsidiaries during the accounting period covered by such financial
statements, and that no Default or Event of Default has occurred and is
continuing, or, if any such Default or Event of Default then exists,
specifying the nature and approximate period of existence thereof and
what action the Borrower has taken or is taking or proposes to take
with respect thereto, (II) specifying the amount available at the end
of such accounting period for Restricted Payments in compliance with
Section 7B.6 and showing in reasonable detail all calculations required
in arriving at such amount, (III) demonstrating (with computations in
reasonable detail) compliance at the end of such accounting period by
the Borrower and its Subsidiaries with the provisions of Sections 4.6,
7B.1, 7B.2, 7B.3, 7B.4, 7B.5(v), 7B.7(i)(b), 7B.7(i)(c), 7B.7(iii) and
7B.12, and (IV) if not specified in the related financial statements
being delivered pursuant to clauses (i) and (ii) above, specifying the
aggregate amount of interest paid or accrued by, and aggregate rental
expenses of, the Borrower and its Subsidiaries, and the aggregate
amount of depreciation, depletion and amortization charged on the books
of the Borrower and its Subsidiaries, during the fiscal period covered
by such financial statements.
Together with each delivery of financial statements required
by clause (ii) above, the Borrower will deliver a certificate of such
accountants stating that they have reviewed the terms of this Agreement
and the other Loan Documents and that in making the audit necessary for
their report on such financial statements, they have obtained no
knowledge of any Event of Default or Default, or, if they have obtained
knowledge of any Event of Default or Default, specifying the nature and
period of existence thereof. Such accountants, however, shall not be
liable to anyone by reason of their failure to obtain knowledge of any
Event of Default or Default which would not be disclosed in the course
of an audit conducted in accordance with generally accepted auditing
standards.
7A.2 Inspection of Property. The Borrower will permit any
Person designated in writing by the Administrative Agent or the
Required Lenders, at the Borrower's expense during the continuance of a
Default or Event of Default and otherwise at such holder's expense, to
visit and inspect any of the properties of the Borrower and its
Subsidiaries, to examine the corporate books and financial records of
the Borrower and its Subsidiaries and make copies thereof or extracts
therefrom and to discuss the affairs, finances and accounts of any of
such partnerships or corporations with the principal officers of the
Borrower and its independent public accountants, all at such reasonable
times and as often as such holder may reasonably request. The Borrower
hereby authorizes, and agrees to cause each of its Subsidiaries to
authorize, its and their independent public accountants to discuss with
such Person the affairs, finances and accounts of the Borrower and its
Subsidiaries in accordance with this Section 7A.2.
7A.3 Covenant to Secure Notes Equally. If the Borrower or
any of its Subsidiaries shall create or assume any Lien upon any of its
property or assets, whether
53
now owned or hereafter acquired, other than Liens permitted by the
provisions of Sections 7B.3 and 7B.4 (unless prior written consent to
the creation or assumption thereof shall have been obtained pursuant to
Section 10.6), the Borrower will make or cause to be made effective
provision whereby the Notes will be contemporaneously secured by such
Lien equally and ratably with any and all other Indebtedness thereby
secured so long as any such other Indebtedness shall be so secured
(including, without limitation, the provision of any financial
accommodations extended to the holders of such other Indebtedness in
connection with the release of such Lien and/or the sale of any
property subject thereto), it being understood that the provision of
such equal and ratable security shall not constitute a cure or waiver
of any related Event of Default.
7A.4 Partnership or Corporate Existence; Compliance with
Laws.
(i) Except as otherwise expressly permitted in
accordance with Section 7B.7 or 7B.11, (a) the Borrower will
at all times preserve and keep in full force and effect its
partnership existence and its status as a partnership not
taxable as a corporation for U.S. federal income tax purposes,
(b) the Borrower will cause each of its Subsidiaries to keep
in full force and effect its partnership or corporate
existence, as the case may be, and (c) the Borrower will, and
will cause each of its Subsidiaries to, at all times preserve
and keep in full force and effect all of its material rights
and franchises; provided, however, that the partnership or
corporate existence of any Subsidiary, and any right or
franchise of the Borrower or any Subsidiary, may be terminated
notwithstanding this Section 7A.4 if such termination (x) is
in the best interest of the Borrower and the Subsidiaries, (y)
is not disadvantageous to the holders of the Notes in any
material respect and (z) could not reasonably be expected to
have a Material Adverse Effect.
(ii) The Borrower will, and will cause each of
its Subsidiaries to, at all times comply with all laws,
regulations and statutes (including without limitation any
zoning or building ordinances or code or Environmental Laws)
applicable to it except for any failure to so comply which,
individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
(iii) The Borrower will notify the Bank a
reasonable time prior to the adoption of any amendment to the
Partnership Agreement, the Partnership Documents, the Note
Purchase Agreements or any Operative Agreement and will
include in that notice a reasonably detailed description of
such amendment and the intended effects thereof.
7A.5 Payment of Taxes and Claims. The Borrower will, and
will cause each of its Subsidiaries to, pay all taxes, assessments and
other governmental charges imposed upon it or any of its Subsidiaries,
or any of its or its Subsidiaries' properties or assets or in respect
of any of its or any of its Subsidiaries' franchises, business, income
or profits when the same become due and payable, and all claims
(including without limitation claims for labor, services, materials and
supplies) for sums which have become due and payable and which by law
have or might become a Lien upon any of its or any of its
54
Subsidiaries' properties or assets; provided that no such tax,
assessment, charge or claim need be paid if it is being contested in
good faith by appropriate proceedings promptly initiated and diligently
conducted and if such reserves or other appropriate provision, if any,
as shall be required by GAAP shall have been made therefor and be
adequate in the good faith judgment of the Board of Directors of the
General Partner.
7A.6 Compliance with ERISA. The Borrower will, and will
cause its Subsidiaries to, comply in all material respects with the
provisions of ERISA and the Code applicable to the Borrower and its
Subsidiaries and their respective employee benefit programs.
7A.7 Maintenance and Sufficiency of Properties.
(i) The Borrower will maintain or cause to be
maintained in good repair, working order and condition,
ordinary wear and tear excepted, all properties used in the
business of the Borrower and its Subsidiaries and from time to
time will make or cause to be made all appropriate repairs,
renewals and replacements thereof, all to the extent necessary
to avoid a Material Adverse Effect.
(ii) The Borrower will maintain and will cause to
be maintained as employees of the Borrower and its
Subsidiaries such number of individuals, having appropriate
skills, as may be necessary from time to time to sustain
continuous operation of the Business at the time. Except as
described on Schedule 8.8, the Borrower will continue and will
cause its Subsidiaries to continue to own or have valid rights
to use all of the Assets constituting personal or intellectual
property (including without limitation computer equipment,
computer software and other intellectual property) reasonably
necessary for the operation of the Business, in each case
subject to no Liens except such as are permitted by Section
7B.3.
7A.8 Insurance.
(i) The Borrower will, and will cause its
Subsidiaries to, at its or their expense, at all times
maintain, or cause to be maintained, with financially sound
and reputable insurers, insurance with respect to their
properties and business with coverages comparable to those
generally carried by companies of similar size that conduct
the same or similar business and have similar properties in
the same general areas in which the Borrower conducts its
business; provided, however, that the Borrower may maintain a
system of self-insurance in an amount not exceeding an amount
as is customary for companies with established reputations
engaged in the same or similar business and owning and
operating similar properties.
55
(ii) The Borrower will, and will cause each of
its Subsidiaries to, pay as and when the same become due and
payable the premiums for all insurance policies that the
Borrower and its Subsidiaries are required to maintain
hereunder.
7A.9 Environmental Laws. The Borrower will, and will cause
each of its Subsidiaries to:
(i) comply with all applicable Environmental
Laws and any permit, license, or approval required under any
Environmental Law, except for failures to so comply which
could not reasonably be expected to have a Material Adverse
Effect;
(ii) store, use, release, or dispose of any
Hazardous Substance at any property owned or leased by the
Borrower or any of its Subsidiaries in a manner which could
not reasonably be expected to have a Material Adverse Effect;
(iii) avoid committing any act or omission which
would cause any Lien to be asserted against any property owned
by the Borrower or any of its Subsidiaries pursuant to any
Environmental Law, except where such Lien could not reasonably
be expected to have a Material Adverse Effect;
(iv) use, handle or store any propane in
compliance, in all material respects, with all applicable
laws.
7A.10 Operative Agreements. The Borrower will perform and
comply with all of its obligations under each of the Operative
Agreements to which it is a party, will enforce each such Operative
Agreement against each other party thereto and will not accept the
termination of any such Operative Agreement or any amendment or
supplement thereof or modification or waiver thereunder, unless any
such failure to perform, comply or enforce or any such acceptance could
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
7A.11 After-Acquired Property. From and after the date of
the Closing, the Borrower will, and will cause each of its Subsidiaries
to, execute and deliver such amendments to the Security Agreement,
execute and deliver such instruments and agreements (including, without
limitation, such Certificates and Stock Powers) and execute and cause
to be duly recorded, published, registered or filed in the appropriate
jurisdictions such Financing Statements, as shall be necessary to grant
to the Collateral Agent a valid, perfected, first priority security
interest, subject to Liens permitted by the Security Agreement in any
asset acquired by the Borrower or any Subsidiary of the Borrower
(including, without limitation, the Capital Stock of any Subsidiary)
after the Closing, to the extent such asset would have been included in
the Collateral granted at the Closing had the Borrower or one of its
Subsidiaries owned such asset as of the Closing. The Borrower will pay
or cause to be paid all taxes, fees and other governmental charges in
connection with the execution, delivery, recording, publishing,
registration and filing of such documents and instruments in such
places.
56
7A.12 Further Assurances. At any time and from time to time
promptly, the Borrower shall, at its expense, execute and deliver to
each Bank and the Collateral Agent such instruments and documents, and
take such further action, as the holders of the Notes may from time to
time reasonably request, in order to further carry out the intent and
purpose of this Agreement and the other Loan Documents and to
establish, perfect, preserve and protect the rights, interests and
remedies created, or intended to be created, in favor of the Banks, and
including, without limitation, the execution and delivery of
Certificates and the delivery of Stock Powers and the execution,
delivery, recordation and filing of Financing Statements and
continuation statements under the Uniform Commercial Code of any
applicable jurisdiction, and the delivery of satisfactory opinions of
counsel.
7A.13 Books and Accounts. The Borrower will, and will cause
each of its Subsidiaries to, maintain proper books of record and
account in which full, true and proper entries shall be made of its
transactions and set aside on its books from its earnings for each
fiscal year all such proper reserves as in each case shall be required
in accordance with GAAP.
7A.14 Available Cash Reserves. The Borrower will maintain
an amount of cash reserves that is necessary or appropriate in the
reasonable discretion of the General Partner 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,
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 (including the Loan
Documents) and (iii) provide funds for distributions to partners of the
Master Partnership and the General Partner in respect of any one or
more of the next four quarters; provided that the General Partner need
not establish cash reserves pursuant to clause (iii) if the effect of
such reserves would be that the Master Partnership is unable to
distribute the Minimum Quarterly Distribution (as defined in the
Agreement of Limited Partnership of the Master Partnership) on all
Common Units with respect to such quarter; and provided, further, that
disbursements made by the Borrower or a Subsidiary of the Borrower 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 General Partner so determines. In
addition, without limiting the foregoing, Available Cash for any fiscal
quarter shall reflect cash reserves equal to (x) 50% of the interest
projected to be paid on the Private Placement Notes in the next
succeeding fiscal quarter, plus (y) beginning with a date three fiscal
quarters before a scheduled principal payment date on the Private
Placement Notes, 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 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, plus (z) the Unused Proceeds Reserve as of the date of
determination; provided that the foregoing
57
reserves for amounts to be paid on the Private Placement Notes shall be
reduced by the aggregate amount of advances available to the Borrower
from responsible financial institutions under binding, irrevocable (a)
credit or financing commitments (which are subject to no conditions
which the Borrower is unable to meet) and (b) letters of credit (which
are subject to no conditions which the Borrower is unable to meet), in
each case to be used to refinance such amounts to the extent such
amounts could be borrowed and remain outstanding under Sections
7B.2(ii) and 7B.2(iii).
7A.15 Parity Debt.
(i) The Borrower shall ensure that the lenders
from time to time in respect of any outstanding Parity Debt
shall, in the documents governing the terms of such
Indebtedness, (a) recognize the existence and validity of the
obligations represented by the Notes and (b) agree to refrain
from making or asserting any claim that the Loan Documents or
the obligations represented by the Notes are invalid or not
enforceable in accordance with its and their terms as a result
of the circumstances surrounding the incurrence of such
obligations.
(ii) Each Bank and each other Person that becomes
a Bank, as evidenced by its acceptance of its Notes, (a)
acknowledges the existence and validity of the obligations of
the Borrower and Heritage under the Note Purchase Agreements
(and any replacement, extension, renewal, refunding or
refinancing thereof permitted by Section 7B.2, as the case may
be) and (b) agrees to refrain from making or asserting any
claim that such obligations or the instruments governing the
terms thereof are invalid or not enforceable in accordance
with its and their terms as a result of the circumstances
surrounding the incurrence of such obligations.
7A.16 Maintenance of Separateness.
(i) The Borrower will:
(a) maintain books and records separate
from those of any other Person, including any of its
partnership interest holders or any Affiliate or
Subsidiary;
(b) maintain its assets in such a
manner that it is not more costly or difficult to
segregate, identify or ascertain such assets;
(c) observe all corporate formalities;
(d) hold itself out to creditors and
the public as a legal entity separate and distinct
from any other Person, including any of its
partnership interest holders and its Affiliates and
Subsidiaries;
58
(e) conduct its business in its name or
in business names or trade names of the Borrower or
its Subsidiaries and use separate stationery,
invoices and checks; and
(f) not assume, guarantee or pay the
debts or obligations of or hold itself out as being
available to satisfy the obligations of any other
Person, including any of its partnership interest
holders and its Affiliates and Subsidiaries, except
as is expressly permitted by the terms of this
Agreement.
(ii) To the extent that the Borrower shares the
same officers or other employees as any of its Affiliates, the
salaries of and the expenses relating to providing benefits to
such officers and employees shall be fairly allocated among
such entities, and each such entity shall bear its fair share
of the salary and benefit costs associated with all such
common officers and employees.
(iii) To the extent that the Borrower jointly
contracts with any of its Affiliates to do business with
vendors or service providers or to share overhead expenses,
the costs incurred in doing so shall be allocated fairly among
such entities, and each such entity shall bear its fair share
of such costs. To the extent that the Borrower contracts or
does business with vendors or service providers where the
goods and services are partially for the benefit of an
Affiliate, the costs incurred in doing so shall be fairly
allocated to or among such entities for whose benefit the
goods and services are provided, and each such entity shall
bear its fair share of such costs.
(iv) To the extent that the Borrower or its
Affiliates have offices in the same location, there shall be a
fair and appropriate allocation of overhead costs among them,
and each such entity shall bear its fair share of such
expenses.
7B. Negative Covenants.
7B.1 Financial Ratios.
(i) Ratio of Consolidated EBITDA to Consolidated
Interest Expense. The Borrower will not permit the ratio, as
of the last day of any fiscal quarter of the Borrower, of
Consolidated EBITDA to Consolidated Interest Expense to be
less than 2.25 to 1;
(ii) Ratio of Consolidated Funded Indebtedness to
Consolidated EBITDA. The Borrower will not permit the ratio,
as of the end of any fiscal quarter of Borrower, of
Consolidated Funded Indebtedness to Consolidated EBITDA to
exceed (a) 4.75 to 1 from November 30, 2003, through November
30, 2004, or (b) 4.50 to 1 from February 28, 2005, and
thereafter;
59
(iii) Ratio of Adjusted Consolidated Funded
Indebtedness to Adjusted Consolidated EBITDA. Borrower will
not permit the ratio, as of the end of any fiscal quarter of
Borrower, of Adjusted Consolidated Funded Indebtedness to
Adjusted Consolidated EBITDA to exceed (a) 5.25 to 1.00 from
November 30, 2003, through August 31, 2005, or (b) 5.00 to 1
on November 30, 2005, and thereafter.
Notwithstanding any of the provisions of this
Agreement the Borrower will not, and will not permit any
Subsidiary to, enter into any transaction pursuant to Section
7B.2, clauses (vii), (viii) and (xiv)(b) of Section 7B.3,
Section 7B.6, of clauses (i)(b), (i)(c), (ii)(b) and (iii) of
Section 7B.7, (x) if after giving effect to any such
transaction a Noncompliance Event, Default or Event of Default
exists or (y) if the consummation of any such transaction
would result in a violation of any clause of this Section 7B.1
or a Noncompliance Event, calculated for such purpose as of
the date on which such transaction were to be consummated both
immediately before and after giving effect to the consummation
thereof; provided, however, that in the case of transactions
pursuant to Section 7B.7, the calculation shall be made on a
pro forma basis in accordance with GAAP after giving effect to
any such transaction, with the ratio recomputed as at the last
day of the most recently ended fiscal quarter of the Borrower
as if such transaction had occurred on the first day of the
relevant four quarter period.
7B.2 Indebtedness. The Borrower will not, and will not
permit any of its Subsidiaries to, create, incur, assume, or otherwise
become directly or indirectly liable with respect to, any Indebtedness,
except (subject to the provisions of Section 7B.4):
(i) the Borrower may become and remain liable
with respect to Indebtedness evidenced by the Notes and
Indebtedness incurred in connection with any extension,
renewal, refunding or refinancing of Indebtedness evidenced by
the Private Placement Notes, provided that the principal
amount of such Indebtedness shall not exceed the principal
amount of the Indebtedness evidenced by the Private Placement
Notes, together with any accrued interest and Yield
Maintenance Amount with respect thereto, being extended,
renewed, refunded or refinanced and (y) such Indebtedness may
not have an average life to maturity shorter than the
remaining average life to maturity of the Indebtedness being
extended, renewed, refunded or refinanced;
(ii) the Borrower may become and remain liable
with respect to Indebtedness incurred under the Working
Capital Facility and any Indebtedness incurred for such
purpose which replaces, extends, renews, refunds or refinances
all of such Indebtedness (in the case of a replacement,
refunding or refinancing, so long as the Acquisition Facility
also is replaced, refunded or refinanced in whole; provided
that the aggregate principal amount of Indebtedness permitted
under this clause (ii) shall not at any time exceed an amount
equal to (x) $20,000,000 less (y) the amount of Indebtedness,
if any, outstanding under the revolving working capital
facility permitted by clause (v) of this Section 7B.2;
60
(iii) the Borrower may become and remain liable
with respect to Indebtedness incurred by the Borrower under
the Acquisition Facility and any Indebtedness incurred for
such purpose which replaces, extends, renews, refunds or
refinances all of such Indebtedness (in the case of a
replacement refunding or refinancing, so long as the Working
Capital Facility also is replaced, refunded or refinanced in
whole); and up to $3,000,000 of Indebtedness owing from time
to time to the Seller(s) in Asset Acquisitions provided that
the aggregate principal amount of Indebtedness permitted under
this clause (iii) shall not at any time exceed the lesser of
$30,000,000 or the sum of the outstanding balance of such
Seller(s) Asset Acquisitions debt referenced above (in no
event in excess of $3,000,000) plus the aggregate Acquisition
Loan Commitments described in Section 10.1, as amended from
time to time;
(iv) any Subsidiary of the Borrower may become
and remain liable with respect to Indebtedness of such
Subsidiary owing to the Borrower or to a Wholly-Owned
Subsidiary of the Borrower;
(v) Heritage Service may remain liable with
respect to Indebtedness incurred under the Heritage Service
Credit Agreement and any Indebtedness incurred for any
permitted purpose which replaces, extends, renews, refunds or
refinances such Indebtedness evidenced by the Service Revolver
Notes, in whole or in part; provided that the aggregate
principal amount of Indebtedness permitted under this clause
(v) shall not at any time exceed $1,000,000;
(vi) the Borrower and any of its Subsidiaries may
become and remain liable with respect to Indebtedness relating
to any business, property or assets acquired by or contributed
to the Borrower or such Subsidiary or which is secured by a
loan on any property or assets acquired by or contributed to
the Borrower or such Subsidiary to the extent such
Indebtedness existed at the time such business, property or
assets were so acquired or contributed, and if such
Indebtedness is secured by such property or assets, such
security interest does not extend to or cover any other
property of the Borrower or any of its Subsidiaries; provided
that (a) immediately after giving effect to such acquisition
or contribution, the Borrower could incur at least $1.00 of
additional Indebtedness pursuant to clause (xiv) of this
Section 7B.2 and (b) such Indebtedness was not incurred in
anticipation of such acquisition or contribution;
(vii) the Company and any of its Subsidiaries may
become and remain liable with respect to 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 2
Business Days of its incurrence;
(viii) M-P Energy Partnership may become and remain
liable with respect to Indebtedness in an aggregate principal
amount not to exceed
61
$3,000,000, and the Borrower may become and remain liable with
respect to Guarantees of such Indebtedness of M-P Energy
Partnership and of Indebtedness of Bi State Propane, provided
that the aggregate amount of all Guarantees permitted by this
clause (viii) shall not exceed $5,000,000;
(ix) [INTENTIONALLY LEFT BLANK]
(x) any Person that after the Closing Date
becomes a Subsidiary of the Borrower may become and remain
liable with respect to any Indebtedness to the extent such
Indebtedness existed at the time such Person became a
Subsidiary; provided that (a) immediately after giving effect
to such Person becoming a Subsidiary of the Borrower, the
Borrower could incur at least $1.00 of additional Indebtedness
in compliance with clause (xiv) of this Section 7B.2 and (b)
such Indebtedness was not incurred in anticipation of such
Person becoming a Subsidiary of the Borrower;
(xi) the Borrower and any of its Subsidiaries may
become and remain liable with respect to Indebtedness owed to
any person providing workers' compensation, health, disability
or other employee benefits or property, casualty or liability
insurance to the Borrower or any of its Subsidiaries, pursuant
to reimbursement or indemnification obligations to such
person;
(xii) the Borrower and any of its Subsidiaries may
become and remain liable with respect to Indebtedness 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;
(xiii) the Borrower may become and remain liable
with respect to Indebtedness incurred in respect of
Capitalized Lease Obligations and Non-Compete Obligations;
provided, that the Lien in respect thereof is permitted by
clause (viii) of Section 7B.3; and
(xiv) the Borrower and its Subsidiaries may become
and remain liable with respect to Indebtedness not exceeding
$100,000,000 in aggregate principal amount at any time
outstanding, in addition to that otherwise permitted by the
other clauses of this Section 7B.2, if (1) the stated maturity
of such Indebtedness (including all scheduled amortizations of
principal thereof) shall not be earlier than the last Final
Maturity Date in effect on the date of incurrence of such
Indebtedness and (2) on the date the Borrower or any of its
Subsidiaries becomes liable with respect to any such
additional Indebtedness and immediately after giving effect
thereto and to the substantially concurrent repayment of any
other Indebtedness (a) the ratio of Consolidated EBITDA to
Consolidated Debt Service
62
is equal to or greater than 2.50 to 1.0 and (b) the ratio of
Consolidated EBITDA to Consolidated Pro Forma Maximum Debt
Service is equal to or greater than 1.25 to 1.0 and (c) no
Default, Event of Default or Noncompliance Event shall exist.
7B.3 Liens. The Borrower will not, and will not permit any
of its Subsidiaries to, create, assume, incur or suffer to exist any
Lien upon or with respect to any of its properties or assets, whether
now owned or hereafter acquired, or any income or profits therefrom
(whether or not provision is made for the equal and ratable securing of
the Notes in accordance with the provisions of Section 7A.3), except:
(i) Liens existing on the Initial Closing Date
hereof on the property and assets of the Borrower or any of
its Subsidiaries as described in Schedule 7B.3;
(ii) Liens for taxes, assessments or other
governmental charges the payment of which is not yet due and
payable or the validity of which is being contested in good
faith in compliance with Section 7A.5;
(iii) attachment or judgment Liens not giving rise
to an Event of Default and with respect to which the
underlying action has been appealed or is being contested in
good faith in compliance with Section 7A.5;
(iv) Liens of lessors, landlords, carriers,
vendors, mechanics, materialmen, warehousemen, repairmen and
other like Liens incurred in the ordinary course of business
the payment of which is not yet due or which is being
contested in good faith in compliance with Section 7A.5, in
each case not incurred or made in connection with the
borrowing of money, the obtaining of advances or credit or the
payment of the deferred purchase price of property, provided
that such Liens do not materially interfere with the conduct
of the business of the Borrower and its Subsidiaries taken as
a whole;
(v) Liens (other than any Lien imposed by ERISA)
incurred and pledges and deposits made in the ordinary course
of business (a) in connection with workers' compensation,
unemployment insurance, old age pensions, retiree health
benefits and other types of social security, or (b) to secure
(or to obtain letters of credit that do not constitute
Indebtedness and that secure) the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases,
performance bonds, contracts and other similar obligations, in
each case not incurred or made in connection with the
borrowing of money or the obtaining of advances or credit
provided that such Liens do not materially interfere with the
conduct of the business of the Borrower and its Subsidiaries
taken as a whole;
(vi) 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
63
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;
(vii) Liens existing on any property of a Person
at the time such Person becomes a Subsidiary of the Borrower
or existing at the time of acquisition upon any property
acquired by the Borrower or any of its Subsidiaries at the
time such property is so acquired, through purchase, merger or
consolidation or otherwise (whether or not the Indebtedness
secured thereby shall have been assumed); provided, however,
that in the case of any such Lien (1) such Lien shall at all
times be confined solely to any such property and, if required
by the terms of the instrument creating such Lien, other
property which is an improvement to such acquired property,
(2) such Lien was not created in anticipation of such
transaction, and (3) the Indebtedness secured by such Lien
shall be permitted under Section 7B.2;
(viii) Liens created to secure all or any part of
the purchase price, or to secure Indebtedness (other than
Parity Debt) 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 any of its Subsidiaries
after the Closing Date or to secure obligations incurred in
consideration of non-compete agreements ("Non-Compete
Obligations") entered into in connection with any such
acquisition, including an acquisition complying with clause
(b)(y) of Section 7B.9; provided that (a) any such Lien shall
be confined solely to the item or items of such property (or
improvement thereon) 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 (and, in
the case of any Lien securing Non-Compete Obligations, shall
also be limited to (x) such items of property as acquired
which are not of the character included in the definition of
Collateral and (y) such additional items of the property so
acquired, having a total fair market value (as determined in
good faith by the Board of Directors of the General Partner)
for the sum of (x) and (y) that is not more than the amount of
the Non-Compete Obligations so secured), (b) such item or
items of property so acquired and subject to such Lien are not
required to become part of the Collateral under the terms of
the Security Agreement, (c) any such Lien shall be created
contemporaneously with, or within 180 days after, the
acquisition or construction of such property, and (d) such
Lien does not exceed an amount equal to 85% of the fair market
value (100% in the case of Capitalized Lease Obligations and
35% in the case of Non-Compete Obligations) of such property
(as determined in good faith by the Board of Directors of the
General Partner) at the time of acquisition thereof and (e)
after giving effect to such Lien no Noncompliance Event,
Default or Event of Default shall exist;
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(ix) Liens on property or assets of any
Subsidiary of the Borrower securing Indebtedness of such
Subsidiary owing to the Borrower or a Wholly-Owned Subsidiary;
(x) leases or subleases of equipment to
customers which do not materially interfere with the conduct
of the business of the Borrower and its Subsidiaries taken as
a whole;
(xi) easements, exceptions or reservations in any
property of the Borrower or any Subsidiary granted or reserved
for the purpose of pipelines, roads, the removal of oil, gas,
coal or other minerals, and other like purposes, or for the
joint or common use of real property, facilities and
equipment, which are incidental to, and do not materially
interfere with, the ordinary conduct of the business of the
Borrower or any of its Subsidiaries;
(xii) Liens (other than Liens securing
Indebtedness) on the property or assets of any Subsidiary of
the Borrower in favor of the Borrower or any other
Wholly-Owned Subsidiary of the Borrower;
(xiii) Liens on the property or assets of Heritage
Service Corp. securing the Indebtedness permitted by clause
(v) of Section 7B.2 provided that (a) any such Lien shall at
all times be contained to property or assets having an
aggregate fair market value not exceeding $2,000,000 and (b)
such indebtedness permitted by clause (v) of Section 7B.2 is
owed to one or more of the Banks;
(xiv) Liens created by any of the Security
Documents securing (a) Indebtedness evidenced by the Notes,
the Acquisition Credit or the Working Capital Credit) and (b)
Additional Parity Debt; and
(xv) any Lien renewing, extending or refunding
any Lien permitted by this Section 7B.3, provided that (a) the
principal amount of the Indebtedness secured by any such Lien
shall not exceed the principal amount of such Indebtedness
outstanding immediately prior to the renewal, extension or
refunding of such Lien and (b) no assets encumbered by any
such Lien other than the assets encumbered immediately prior
to such renewal, extension or refunding shall be encumbered
thereby.
Notwithstanding the foregoing, the Borrower will not, and will
not permit any of its Subsidiaries to, create, assume or incur any Lien
upon or with respect to (a) any Subsidiary stock held by the Borrower
or any other Subsidiary of the Borrower, or (b) any of its proprietary
software developed by or on behalf of the Borrower or its Affiliates
necessary and useful for the conduct of the Business. No Lien permitted
under this Section 7B.3 shall result in over-collateralization except
as required by conventional practice for specific types of borrowings.
65
7B.4 Priority Debt. The Borrower will not permit Priority
Debt, at any time, to exceed the sum of (i) $5,000,000 plus (ii) 10% of
the then Consolidated Tangible Net Worth of the Borrower and its
Subsidiaries(but only to the extent such Consolidated Tangible Net
Worth is positive). The provisions of this Section 7B.4 are further
limitations on Priority Debt that shall otherwise be permitted by
Section 7B.1, 7B.2 or 7B.3.
7B.5 Loans, Advances, Investments and Contingent
Liabilities. The Borrower will not, and will not permit any of its
Subsidiaries to, 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, 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:
(i) the Borrower or any of its Subsidiaries may
make and own Investments (w) consisting of Units issued for
purposes of making acquisitions, (x) arising out of loans and
advances to employees incurred in the ordinary course of
business, and consisting of advances to pay reimbursable
expenditures, (y) arising out of extensions of trade credit or
advances to third parties in the ordinary course of business
and (z) acquired by reason of the exercise of customary
creditors' rights upon default or pursuant to the bankruptcy,
insolvency or reorganization of a debtor;
(ii) Guarantees that constitute Indebtedness to
the extent permitted by Sections 7B.1 and 7B.2 and other
Guarantees that are not Guarantees of Indebtedness and are
undertaken in the ordinary course of business;
(iii) investment in (collectively, "Cash
Equivalents")
(a) 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 one year or less from
the date of acquisition thereof,
(b) 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.,
(c) commercial paper maturing no more
than 270 days from the date of creation thereof and
having as at the date of acquisition thereof
66
one of the two highest ratings obtainable from either
Standard & Poor's Rating Group or Moody's Investors
Service, Inc.,
(d) certificates of deposit maturing
one year or less from the date of acquisition thereof
(1) 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 A2 or better (or comparably if the
rating system is changed) by Moody's Investors
Service, Inc.("Permitted Banks") or (2) issued by BOk
in an aggregate amount for all such certificates of
deposit issued by BOk not to exceed $1,000,000,
(e) Eurodollar time deposits having a
maturity of less than 270 days from the date of
acquisition thereof purchased directly from any
Permitted Bank,
(f) bankers' acceptances eligible for
rediscount under requirements of The Board of
Governors of the Federal Reserve System and accepted
by Permitted Banks, and
(g) obligations of the type described
in clause (a), (b), (c), (d) or (e) above purchased
from a securities dealer designated as a "primary
dealer" by the Federal Reserve Bank of New York or
from a Permitted Bank as counterparty to a written
repurchase agreement obligating such counterparty to
repurchase such obligations not later than 14 days
after the purchase thereof and which provides that
the obligations which are the subject thereof are
held for the benefit of the Borrower or any of its
Subsidiaries by a custodian which is a Permitted Bank
and which is not a counterparty to the repurchase
agreement in question;
(iv) the Borrower or any of its Subsidiaries may
acquire Capital Stock or other ownership interests of a Person
(i) located in the United States of America or Canada, (ii)
incorporated or otherwise formed pursuant to the laws of the
United States of America or Canada or any state or province
thereof or the District of Columbia and (iii) engaged in
substantially the same business as the Borrower which Person
at the time of such acquisition is, or as a result thereof
becomes, a Subsidiary of the Borrower;
67
(v) the Borrower or any of its Subsidiaries may
make and own Investments (in addition to Investments permitted
by clauses (i), (ii), (iii), and (iv) of this Section 7B.5) in
any Person incorporated or otherwise formed pursuant to the
laws of the United States of America or Canada or any state or
province thereof or the District of Columbia; provided,
however, that (i) the sum of (a) the aggregate amount of all
such Investments made by the Borrower and its Subsidiaries
following the Closing Date which are outstanding pursuant to
this clause (v) plus (b) all other Investments held by the
Borrower and its Subsidiaries which are outstanding as of the
Closing Date and listed on Schedule 7B.5 shall not at any date
of determination exceed $10,000,000 (the "Investment Limit");
(ii) the representation in Section 8.18 shall be true and
correct as of the date of determination; and (iii) the
aggregate amount of all such Investments made by the Borrower
and its Subsidiaries and outstanding pursuant to this clause
(v) in Persons engaged in a business which is not
substantially the same as a line of business described in
Section 7B.8 shall not at any date exceed $12,500,000,
including Investments in La Grange and its Subsidiaries which
shall not at any time exceed $1,000,000 and (iv) no Investment
pursuant to this clause (v) may be made unless if after giving
effect thereto no Default or Event of Default exists;
(vi) the Borrower may make and become liable with
respect to any Interest Rate Agreements; and
(vii) any Subsidiary of the Borrower may make
Investments in the Borrower or in a Wholly-Owned Subsidiary of
the Borrower.
7B.6 Restricted Payments. The Borrower will not directly
or indirectly declare, order, pay, make or set apart any sum for any
Restricted Payment, except that the Borrower may declare or order, and
make, pay or set apart, during each fiscal quarter a Restricted Payment
if (i) such Restricted Payment together with all other Restricted
Payments during such fiscal quarter, do not in the aggregate exceed the
amount of Available Cash with respect to the immediately preceding
quarter, and (ii) no Default, Event of Default or Noncompliance Event
exists before or immediately after any such proposed action and
Borrower shall be in pro forma compliance with the financial covenants
of Section 7B.1(i), (ii) and (iii). Notwithstanding the foregoing, the
Borrower will not directly or indirectly declare, order or pay
Restricted Payments, individually or in the aggregate, for any fiscal
quarter in an amount greater than the product of (i) the Borrower's
Percentage of Aggregate Available Cash times (ii) the Aggregate Partner
Obligations.
7B.7 Consolidation, Merger, Sale of Assets. The Borrower
will not, and will not permit any of its Subsidiaries to, directly or
indirectly,
(i) consolidate with or merge into any other
Person or permit any other Person to consolidate with or merge
into it, except that:
68
(a) any Subsidiary of the Borrower may
consolidate with or merge into the Borrower or a
Wholly-Owned Subsidiary of the Borrower if the
Borrower or a Wholly-Owned Subsidiary of the
Borrower, as the case may be, shall be the surviving
Person; and
(b) any entity (other than a Subsidiary
of the Borrower) may consolidate with or merge into
the Borrower or a Subsidiary if the Borrower or a
Subsidiary of the Borrower, as the case may be, shall
be the surviving Person and if, immediately after
giving effect to such transaction, (i) the Borrower
and its Subsidiaries (x) shall not have a
Consolidated Net Worth, determined in accordance with
GAAP applied on a basis consistent with the
consolidated financial statements of the Borrower
most recently delivered pursuant to Section 7A.1, of
less than the Consolidated Net Worth of the Borrower
immediately prior to the effectiveness of such
transaction, satisfaction of this requirement to be
set forth in reasonable detail in an Officers'
Certificate delivered to each holder of a Note at the
time of such transaction, and (y) could incur at
least $1.00 of additional Indebtedness in compliance
with Section 7B.1 and clause (xiv) of Section 7B.2,
(ii) substantially all of the assets of the Borrower
and its Subsidiaries, taken as a whole, shall be
located and substantially all of their business shall
be conducted within the continental United States of
America or Canada and (iii) no Default, Event of
Default or Noncompliance Event shall exist and be
continuing;
(ii) sell, lease, abandon or otherwise dispose of
all or substantially all its assets, except that any
Subsidiary of the Borrower may sell, lease or otherwise
dispose of all or substantially all its assets to the Borrower
or to a Wholly-Owned Subsidiary of the Borrower; or
(iii) sell, lease, convey, abandon or otherwise
dispose of (including, without limitation, in connection with
a Sale and Lease-Back Transaction) any of its assets (except
in a transaction permitted by clause (i)(a), (i)(b), (i)(c),
(ii)(a) or (ii)(b) of this Section 7B.7 or sales of inventory
in the ordinary course of business consistent with past
practice) or issue or sell Capital Stock of any Subsidiary of
the Borrower, whether in a single transaction or a series of
related transactions (each of the foregoing non-excepted
transactions, an "Asset Sale"), unless:
(a) immediately after giving effect to
such proposed disposition no Default, Event of
Default or Noncompliance Event shall exist and be
continuing, satisfaction of this requirement to be
set forth in reasonable detail in an Officer's
Certificate delivered to each holder of a Note at the
time of such transaction in the case of any Asset
Sale involving assets that generates EBITDA and such
Asset Sale involves consideration of $250,000 or
more;
69
(b) such sale or other disposition is for cash
consideration or for consideration consisting of not less than
75% cash and not more than 25% interest-bearing promissory
notes; provided, that the 75% limitation referred to in this
clause (b) shall not apply to any Asset Sale consisting solely
of a sale or other disposition of land and buildings for an
interest bearing promissory note as long as the amount of such
promissory note does not exceed $250,000;
(c) one of the following two conditions must be
satisfied:
(i) (x) the aggregate Net Proceeds of
all assets so disposed of (whether or not leased
back) over the immediately preceding 12-month period
does not exceed $3,000,000 and (y) the aggregate Net
Proceeds of all assets so disposed of (whether or not
leased back) from the Closing Date through the date
of such disposition does not exceed $10,000,000; or
(ii) in the event that such Net Proceeds
(less the amount thereof previously applied in
accordance with clause (x) of this clause (c)(ii))
exceeds the limitations determined pursuant to
clauses (x) and (y) of clause (c)(i) of this Section
7B.7 (such excess amount being herein called "Excess
Sale Proceeds"), the Borrower shall within 12
calendar months of the date on which such Net
Proceeds exceeded any such limitation, cause an
amount equal to such Excess Sale Proceeds to be
applied (x) to the acquisition of assets in
replacement of the assets so disposed of or of assets
which may be productively used in the United States
of America or Canada in the conduct of the Business,
or (y) to the extent not applied pursuant to the
immediately preceding clause (x), to offer to make
prepayments on the Notes pursuant to Section 4.2.3
hereto and, allocated on the basis specified for such
prepayments in the definition of Allocable Proceeds,
to offer to repay other Parity Debt (other than
Indebtedness under Section 7B.2 (ii) or that by its
terms does not permit such offer to be made); and
(d) the Borrower shall have delivered to the
Noteholders a Certificate of the Board of Directors of the
General Partner, certifying that such sale or other
disposition is for fair value and is in the best interests of
the Borrower.
Notwithstanding the foregoing, Asset Sales shall not be deemed to
include (1) any transfer of assets or issuance or sale of Capital Stock by the
Borrower or any of its Subsidiaries to the Borrower or a Wholly-Owned Subsidiary
of the Borrower, (2) any transfer of assets or issuance or sale of Capital Stock
by the Borrower or any of its Subsidiaries to any Person in exchange for, or the
Net Proceeds of which are applied
70
within 12 months to the purchase of, other assets used in a line of business
permitted under Section 7B.8 and having a fair market value (as determined in
good faith by the Board of Directors of the General Partner) not less than that
of the assets so transferred or Capital Stock so issued or sold and (3) any
transfer of assets pursuant to an Investment permitted by Section 7B.5.
7B.8 Business. The Borrower will not and will not permit
any of its Subsidiaries to engage in any line of business if as a
result thereof the Borrower and its Subsidiaries would not be
principally and predominately engaged in the Business and related
general and administrative operations, as more fully described in the
Memorandum and subject in all respects to the provisions of clause
(iii) of the proviso to Section 7B.5(v).
7B.9 Transactions with Affiliates. The Borrower will not,
and will not permit any of its Subsidiaries to, directly or indirectly,
engage in any transaction with any Affiliate unless (i) (a) such
transaction is on fair and reasonable terms that are no less favorable
to the Borrower or such Subsidiary, as the case may be, than those
which would be obtained in an arm's-length transaction from a Person
other than an Affiliate and (b) such transaction is entered into in the
ordinary course of business and pursuant to the reasonable requirements
at the time of the Borrower's or such Subsidiary's operations, or (y)
such transaction involves the acquisition by the Borrower from the
General Partner of assets formerly owned by an entity, the Capital
Stock of which was purchased by the General Partner, which acquisition
is for a substantially equivalent value as the value of such purchase
consummated within ten days after the consummation of such purchase, as
long as such transaction otherwise would be permitted hereunder had the
Borrower acquired such assets directly from such entity (including, for
example, the acquisition by the Borrower from the General Partner of
assets formerly owned by Kingston Propane, Inc.) (ii) such transaction
is in connection with the incurrence of Indebtedness pursuant to
Section 7B.2(viii), (iii) such transaction is in connection with the
making of an Investment pursuant to Section 7B.5(i) and Section
7B.5(v)(iii) with respect to Investments in La Grange or its
Subsidiaries, (iv) such transaction is a Restricted Payment permitted
by Section 7B.6, (v) such transaction involves performance under the
Contribution Agreement (substantially in the form in effect on the
Closing Date), (vi) such transaction involves indemnification and
contribution under Section 7.7 of the Partnership Agreement (as said
section is in effect on the Closing Date), to the extent such
indemnification or contribution arises from operations or activities in
connection with the Business (including securities issuances in
connection with funding the Business) or (vii) such transaction is a
specific transaction described in the Registration Statement.
7B.10 Subsidiary Stock and Indebtedness.
(i) The Borrower will not permit any of its
Subsidiaries directly or indirectly to issue or sell any
Equity Interest of such Subsidiary of the Borrower to any
Person other than the Borrower or a Wholly-Owned Subsidiary of
the Borrower except (a) for the purpose of qualifying
directors or (b) in satisfaction of
71
pre-emptive rights of holders of minority interests which are
triggered by an issuance of Equity Interests to the Borrower
or a Subsidiary of the Borrower and permit such holders to
maintain their pro rata interests.
(ii) The Borrower will not directly or indirectly
sell, assign, pledge or otherwise dispose of any Equity
Interest in or any Indebtedness of any of its Subsidiaries,
and will not permit any of its Subsidiaries directly or
indirectly to sell, assign, pledge or otherwise dispose of any
Equity Interest in or any Indebtedness of any other Subsidiary
of the Borrower except to the Borrower or a Wholly-Owned
Subsidiary of the Borrower, unless (a) simultaneously with
such sale, transfer or disposition, all of the Equity
Interests (other than an Equity Interest representing less
than 2% of the outstanding Equity Interests of all classes of
such Subsidiary taken together, provided that such Equity
Interest is considered an Investment pursuant to Section
7B.5(v) and is permitted thereunder) or Indebtedness of such
Subsidiary owned by the Borrower and its Subsidiaries is sold,
transferred or disposed of as an entirety, (b) the Board of
Directors of the General Partner shall have determined, as
evidenced by a resolution thereof, that the proposed sale,
transfer or disposition of such Equity Interests or
Indebtedness is in the best interests of the Borrower, (c)
such Equity Interests or Indebtedness are sold, transferred or
otherwise disposed of for cash or Cash Equivalents or other
assets used in a line of business permitted by Section 7B and
having a fair market value (as determined in good faith by the
Board of Directors of the General Partner) not less than that
of the Equity Interests or Indebtedness so transferred, to a
Person upon terms deemed by the Board of Directors of the
General Partner to be acceptable, (d) the Subsidiary being
sold, transferred or otherwise disposed of shall not have any
continuing investment in the Borrower or any Subsidiary of the
Borrower not being so sold, transferred or disposed and (e)
such sale, transfer or disposition is permitted by Section
7B.7.
7B.11 Payment of Dividends by Subsidiaries. The Borrower
will not, and will not permit any of its Subsidiaries to, be subject to
or enter into any agreement which restricts the ability of any
Subsidiary of the Borrower to declare or pay any dividend to the
Borrower, to make any distribution on any Equity Interest of such
Subsidiary to the Borrower, or to lend money to the Borrower.
7B.12 Sales of Receivables. The Borrower will not, and will
not permit any of its Subsidiaries to, discount, pledge, sell (with or
without recourse), or otherwise sell for less than face value thereof
any of its accounts or notes receivable, except for sales of
receivables (i) without recourse which are seriously past due and which
have been substantially written off as uncollectible or collectible
only after extended delays, or (ii) made in connection with the sale of
a business but only with respect to the receivables directly generated
by the business so sold.
7B.13 Material Agreements; Tax Status. The Borrower will
not:
72
(i) amend or directly or indirectly modify in
any manner the definitions of "Allocable Proceeds" or "Excess
Proceeds" of the Note Purchase Agreements or any similar
provisions of any agreement applicable to any extensions,
renewals or refundings thereof as Parity Debt under the
provisions of paragraph 7B.2(i);
(ii) amend or modify in any manner adverse to the
holders of the Notes, or grant any waiver or release under (if
such action shall be adverse to the holders of the Notes), any
Partnership Document, any notes evidencing Parity Debt or any
agreement relating to Parity Debt 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 releases away any security, or waives any
condition precedent or default shall be adverse to the holders
of the Notes for purposes of this Agreement; or
(iii) permit the Master Partnership 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.
7B.14 Commingling of Deposit Accounts and Accounts. The
Borrower will not, nor will it permit any of its Subsidiaries to,
commingle their respective deposit accounts or accounts with the
deposit accounts of La Grange or any of its Subsidiaries.
ARTICLE VIII
REPRESENTATIONS, COVENANTS AND WARRANTIES
The Borrower represents, covenants and warrants as follows:
8.1 Organization. The Borrower is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite partnership power and authority to own and
operate its properties (including without limitation the assets owned and
operated by it), to conduct its business, to enter into this Agreement and the
other Loan Documents to which it is a party and the Operative Agreements and to
carry out the terms of this Agreement, the Notes, such other Loan Documents and
Operative Agreements. Each Subsidiary of the Borrower is duly organized, validly
existing and in good standing under the laws of its state of organization and
has all requisite power and authority to own and operate its properties
(including without limitation the assets owned and operated by it).
8.2 Partnership Interests. The sole general partner of the
Borrower is U.S. Propane. The sole general partner of U.S. Propane is USPLLC. At
the Closing Date, the Borrower does not have any Subsidiary other than the
Subsidiaries of the Borrower as set forth on Schedule 8.2 or any Investments in
any Person (other than as set forth on Schedules 7B.5 or 8.2 or Investments of
the types described in Section 7B.5(i), (ii), (iii) or (vi)).
73
8.3 Qualification. The Borrower is duly qualified or registered
and is in good standing as a foreign limited partnership for the transaction of
business, and each of the Subsidiaries of the Borrower is duly qualified or
registered and is in good standing as a foreign corporation or partnership, as
the case may be, for the transaction of business, in the states and to the
extent listed in Schedule 8.3, and, except as reflected on Schedule 8.3, on the
Closing Date there are no other jurisdictions in which the nature of their
respective activities or the character of the properties they own, lease or use
makes such qualification or registration necessary and in which the failure so
to qualify or to be so registered would have a Material Adverse Effect. The
Borrower has taken all necessary partnership action to authorize the execution,
delivery and performance by it of this Agreement, the other Financing Documents
to which it is a party and the Operative Agreements. The Borrower has duly
executed and delivered each of this Agreement, the other Loan Documents and the
Operative Agreements to which it is a party, and each of such documents and
agreements and the Notes and the Security Documents constitute the legal, valid
and binding obligation of the Borrower enforceable against it in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, moratorium or similar laws affecting creditors' rights generally and
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
8.4 Financial Statements. The Borrower has delivered to the
Administrative Agent complete and correct copies of the audited financial
statements of the Borrower as of August 31, 2003, together with any unaudited
financial statements available or provided to the Borrower for periods after
August 31, 2003. Such financial statements have been prepared in accordance with
GAAP and fairly present in all material respects the financial position of the
Borrower as of the close of the applicable period covered thereby.
8.5 Actions Pending. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Borrower, threatened against the
Borrower or the General Partner or any of the Subsidiaries of the Borrower, or
any properties or rights of the Borrower or the General Partner or any of the
Subsidiaries of the Borrower, by or before any court, arbitrator or
administrative or governmental body (i) which questions the validity or
enforceability of this Agreement, the Notes, any other Financing Document or any
Operative Agreement or any action to be taken pursuant to this Agreement, the
Notes, any other Loan Document or any Operative Agreement or (ii) which could
reasonably be expected to result in a Material Adverse Effect.
8.6 Changes. Except as contemplated by this Agreement, the Notes,
the other Financing Documents or the Operative Agreements or as described in the
Registration Statement or the Memorandum, (i) neither the Borrower nor any of
the Subsidiaries of the Borrower has incurred any material liabilities or
obligations, direct or contingent, nor entered into any material transaction, in
each case other than in the ordinary course of business, and (ii) there has not
been any material adverse change in or effect on the business, assets, financial
condition (including as reflected on the audited financial statements for August
31, 2003) or prospects of the Borrower or any of the Subsidiaries of the
Borrower.
8.7 Outstanding Indebtedness. Other than the Credit Obligations
represented by the Notes, neither the Borrower nor any of the Subsidiaries of
the Borrower as set forth on Schedule
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8.2 has outstanding any Indebtedness except as set forth on Schedule 8.7 and any
such Indebtedness which is indicated in Schedule 8.7 to be paid in full on the
Closing Date will be paid in full at the time of Closing. There exists no
default under the provisions of any instrument evidencing such Indebtedness or
of any agreement relating thereto. On the Closing Date, no instrument or
agreement to which the Borrower or any of the Subsidiaries of the Borrower is a
party or by which the Borrower, any such Subsidiary, or their respective
properties is bound (other than this Agreement and the Note Purchase Agreements
and other than as indicated in Schedule 8.7) will contain any restriction on the
incurrence by the Operating Partnership or any of the Subsidiaries of the
Borrower of additional Indebtedness.
8.8 Transfer of Assets and Business; Title to Properties.
(i) Except as set forth on Schedule 8.8, the Borrower and
the Subsidiaries of the Borrower will at the Closing Date be in
possession of, and operating in compliance with, all franchises,
grants, authorizations, approvals, licenses, permits, easements,
rights-of-way, consents, certificates and orders (collectively, the
"Permits") required (a) to own, lease or use its properties (including
without limitation to own, lease or use the Assets owned, leased or
used by it) and (b) considering all such Permits in the possession of,
and complied with by, the Borrower and its Subsidiaries taken together,
to permit the conduct of the Business as now conducted and proposed to
be conducted, except for those Permits (x) which are routine and
administrative in nature and are expected in the reasonable judgment of
the Borrower to be obtained or given in the ordinary course of business
from time to time after the Closing Date, and (y) which, if not
obtained or given, would not, individually or in the aggregate, present
a reasonable likelihood of having a Material Adverse Effect,
(ii) Except as set forth on Schedule 8.8, on and after the
Closing Date, the Borrower and the Subsidiaries of the Borrower will
have, (i) good and marketable title to, or valid leasehold interests
in, all of the Assets constituting real property except for defects in,
or lack of recorded, title and exceptions to leasehold interests that
either alone or in the aggregate could not reasonably be expected to
result in a Material Adverse Effect, and (ii) good and sufficient title
to, or valid rights to use, all of the Assets constituting personal
property reasonably necessary for the operation of such personal
property as it is used on the date hereof and proposed to be used in
the Business, in each case subject to no Liens except such as are
permitted by Section 7B.3. The Assets owned by the Borrower and the
Subsidiaries of the Borrower will be all of the assets and properties
reasonably necessary to enable the Borrower and its Subsidiaries to
conduct the Business on the Closing Date. Subject to such exceptions as
would not, individually or in the aggregate, present a reasonable
likelihood of having a Material Adverse Effect (A) on the date hereof
the Borrower and its Subsidiaries enjoy, peaceful and undisturbed
possession under all leases and subleases necessary in any material
respect for the conduct of the Business, and (B) all such leases and
subleases are valid and subsisting and are in full force and effect.
None of the properties or assets of the Borrower or any of the
Subsidiaries of the Borrower is subject to any Lien other than Liens
that would be permitted hereunder.
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8.9 Taxes. On the Closing Date each of the Operating Partnership
and its Subsidiaries will have filed all federal, state and other income tax
returns which, to the knowledge of the Borrower, are required to be filed or
will have properly filed for extensions of time for the filing thereof, and has
paid all taxes, assessments and other governmental charges levied upon it or any
of its properties, assets, income or franchises as shown to be due on such
returns, except those which are not past due or are being contested in good
faith in compliance with Section 7A.5. The Borrower is a limited partnership not
subject to taxation with respect to its income or gross receipts under
applicable state laws and that is treated as a pass-through entity for U.S.
federal income tax purposes.
8.10 Compliance with Other Instruments; Solvency.
(i) On the Closing Date, immediately prior to the
completion of the transactions contemplated by this Agreement, the
Notes, the other Loan Documents and the Operative Agreements), neither
the Borrower nor any of the Subsidiaries of the Borrower will be in
violation of (a) any provision of its certificate or articles of
incorporation or other constitutive documents or its by-laws, (b) any
provision of any agreement or instrument to which it is a party or by
which any of its properties is bound or (c) any applicable law,
ordinance, rule or regulation of any Governmental Authority or any
applicable order, judgment or decree of any court, arbitrator or
Governmental Authority except (in the case of clauses (b) and (c) above
only) for such violations which would not, individually or in the
aggregate, present a reasonable likelihood of having a Material Adverse
Effect.
(ii) The execution, delivery and performance of this
Agreement, the Notes, the other Loan Documents and the Operative
Agreements, and the completion of the transactions contemplated by the
Registration Statement to occur prior to the Closing Date (including
without limitation the transactions contemplated by this Agreement, the
Notes, the other Loan Documents and the Operative Agreements) will not
violate (a) any provision of the certificate or articles of
incorporation or other constitutive documents or by-laws of the
Borrower, the General Partner or any of the Subsidiaries of the
Borrower, (b) any applicable law, ordinance, rule or regulation of any
Governmental Authority or any applicable order, judgment or decree of
any court, arbitrator or Governmental Authority, or (c) any provision
of any agreement or instrument to which the Borrower, the General
Partner or any of the Subsidiaries of the Borrower is a party or by
which any of its properties is bound.
(iii) Upon completion of the transactions contemplated by
this Agreement, the Notes, the other Loan Documents and the Operative
Agreements), none of the Borrower, the General Partner or any
Subsidiary of the Borrower shall (a) be insolvent, (b) be engaged or
about to engage in business or a transaction at a time the Borrower,
the General Partner or any Subsidiary of the Borrower could be viewed
as having unreasonably small capital, or (c) intend to incur, or
believe that it would incur, debts that would be beyond its ability to
pay as such debts matured.
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8.11 Governmental Consent. No consent, approval or authorization
of, or declaration or filing with, any Governmental Authority is required for
the valid execution, delivery and performance of this Agreement, the Notes, the
other Loan Documents or the Operative Agreements.
8.12 Use of Proceeds. None of the proceeds of the Loans will be
used, directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any margin stock (as defined in Section 8.17
hereof) or for the purpose of maintaining, reducing or retiring any indebtedness
which was originally incurred to purchase or carry any stock that is currently a
margin stock or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of such Regulation U or X. The Borrower nor
anyone acting on their respective behalfs has taken or will take any action
which might cause this Agreement or the Notes to violate Regulation U,
Regulation T or any other regulation of the Board of Governors of the Federal
Reserve System or to violate the Exchange Act, in each case as in effect now or
as the same may hereafter be in effect.
8.13 ERISA. The Borrower and their respective ERISA Affiliates is
in compliance in all material respects with the applicable provisions of ERISA
and the Code and the regulations and published interpretations thereunder. No
ERISA Event has occurred or is reasonably expected to occur that, when taken
together with all other such ERISA Events, could reasonably be expected to
result in a Material Adverse Effect. The present value of all benefit
liabilities under each 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 $2,000,000 the
fair market value of the assets of such Plan, and the present value of all
benefit liabilities 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
$2,000,000 the fair market value of the assets of all such underfunded Plans.
8.14 Environmental Compliance.
(i) Except where the failure to be in compliance could
not present a reasonable likelihood of having a Material Adverse
Effect, as of the date hereof the Borrower and each Subsidiary of the
Borrower is in compliance with all Environmental Laws applicable to it
and to the Business or Assets. The Borrower and each Subsidiary of the
Borrower is in compliance with all franchises, grants, authorizations,
permits, licenses, and approvals required under Environmental Laws,
except for any non-compliance or failure to obtain such Permits which
could not reasonably be expected to have a Material Adverse Effect. The
Borrower has caused U.S. Propane or the Master Partnership to submit
timely and complete applications to renew any expired or expiring
Permits required pursuant to any Environmental Law, except for any
non-compliance or failure to obtain such permits which could not
reasonably be expected to have a Material Adverse Effect. All reports,
documents, or other submissions required by Environmental Laws to be
submitted by the Borrower to any Governmental Authority or Person have
been filed by or on behalf of the Borrower, except where the failure to
do so would not present a reasonable likelihood of having a Material
Adverse Effect.
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(ii) (a) There is no Hazardous Substance present at any of
the real property currently owned or leased by the Borrower or any of
the Subsidiaries of the Borrower except to the extent that such
presence could not reasonably be expected to have a Material Adverse
Effect, and (b) to the knowledge of the Borrower, there was no
Hazardous Substance present at any of the real property formerly owned
or leased by U.S. Propane or the Master Partnership during the period
of ownership or leasing by such Person; and with respect to such real
property and subject to the same knowledge and temporal qualifiers
concerning Hazardous Substances with respect to formerly owned or
leased real properties, there has not occurred (x) any release, or to
the knowledge of the Borrower, any threatened release of a Hazardous
Substance, or (y) any discharge or, to the knowledge of the Borrower,
any threatened discharge of any Hazardous Substance into the ground,
surface or navigable waters which discharge or threatened discharge
violates any federal, state, local or foreign laws, rules or
regulations concerning water pollution.
(iii) Neither the Borrower nor any of the Subsidiaries of
the Borrower has disposed of, transported, or arranged for the
transportation or disposal of any Hazardous Substance where such
disposal, transportation, or arrangement would give rise to liability
pursuant to CERCLA or any analogous state statute other than any such
liabilities that could not reasonably be expected to have a Material
Adverse Effect.
(iv) Except as disclosed to the Banks in writing, (a) no
Lien has been asserted by any Governmental Authority or person
resulting from the use, spill, discharge, removal, or remediation of
any Hazardous Substance with respect to any real property currently
owned or leased by U.S. Propane or the Master Partnership or the
Borrower, and (b) to the knowledge of the Borrower, no such Lien was
asserted with respect to any of the real property formerly owned or
leased by Heritage during the period of ownership or leasing of the
real property by such Person.
(v) (a) There are no underground storage tanks,
asbestos-containing materials, polychlorinated biphenyls, or urea
formaldehyde insulation at any of the real property currently owned or
leased by the Borrower in violation of any Environmental Law, and (b)
to the knowledge of the Borrower, there were no underground storage
tanks, asbestos-containing materials, polychlorinated biphenyls, or
urea formaldehyde insulation at any of the real property formerly owned
or leased by U.S. Propane or the Master Partnership in violation of any
Environmental Law during the period of ownership or leasing of such
real property by such Person.
(vi) As of the date hereof, any propane is stored, used
and handled by the Borrower and the Subsidiaries of the Borrower in
compliance with all applicable Environmental Laws except for any
storage, use or handling of propane that could not reasonably be
expected to have a Material Adverse Effect.
8.15 Pre-emptive Rights. There are no pre-emptive rights to which a
holder of a minority interest in any Subsidiary of the Borrower is entitled.
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8.16 Disclosure. This Agreement, the Notes, the other Loan
Documents, the Operative Agreements, the Memorandum and any other document,
certificate or statement furnished to any Bank by or on behalf of the Borrower,
the General Partner or their respective Subsidiaries or Affiliates, in
connection herewith, taken together, do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under
which they were made, not misleading. There is no fact known to the Borrower
which has or in the future could reasonably be expected to have (so far as the
Borrower can now foresee) a Material Adverse Effect and which has not been set
forth in this Agreement or in the other documents, certificates and statements
furnished to each the Banks hereunder by or on behalf of the Borrower.
8.17 Federal Reserve Regulations. Neither the Borrower nor the
Subsidiary of the Borrower will, directly or indirectly, use any of the proceeds
of any Loan for the purpose, whether immediate, incidental or ultimate, of
buying a "margin stock" or of maintaining, reducing or retiring any indebtedness
originally incurred to buy a stock that is currently a "margin stock", or for
any other purpose which might constitute this transaction a "purpose credit"
which is secured "directly or indirectly by margin stock", in each case within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System (12 C.F.R. 207, as amended), or otherwise take or permit to be taken any
action which would involve a violation of such Regulation U or of Regulation X
(12 C.F.R. 224, as amended) or any other applicable regulation of such Board. No
indebtedness being retired, directly or indirectly, out of the proceeds of the
Loans will be incurred for the purpose of buying or carrying any stock which is
currently a "margin stock", and the Borrower neither owns or has any present
intention of acquiring any amount of such "margin stock".
8.18 Investment Borrower Act. None of the Borrower or any
Subsidiary of the Borrower is an "investment Borrower", or a Borrower
"controlled" by an "investment Borrower", within the meaning of the Investment
Borrower Act of 1940, as amended.
8.19 Public Utility Holding Company Act. The Borrower, the General
Partner and each Subsidiary of the Borrower is exempt from all of the provisions
of the Public Utility Holding Company Act of 1935, as amended (the "PUHCA") and
the rules thereunder other than Section 9(a)(2) thereof based upon a no-action
letter from the Commission dated June 19, 1996.
ARTICLE IX
EVENTS OF DEFAULT
9.1 Acceleration. If any of the following conditions or events
("Events of Default") shall occur and be continuing for any reason whatsoever
(and whether such occurrence shall be voluntary or involuntary or come about or
be effected by operation of law or otherwise):
(i) the Borrower defaults in the payment of any principal
of on any Note when the same becomes due and payable, either by the
terms thereof or otherwise as herein provided; or
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(ii) the Borrower defaults in the payment of any interest
on any Note for more than 5 days after the same becomes due and
payable; or
(iii) the Borrower or any Subsidiary of the Borrower
(whether as primary obligor or as guarantor or other surety) defaults
in any payment of principal of or interest on any Parity Debt or any
other Indebtedness other than the Notes (including without limitation
any Capitalized Lease Obligation, any obligation under a conditional
sale or other title retention agreement, any obligation issued or
assumed as full or partial payment for property whether or not secured
by a purchase money mortgage or any obligation under notes payable or
drafts accepted representing extensions of credit), beyond any period
of grace provided with respect thereto, or the Borrower or any
Subsidiary of the Borrower fails to perform or observe any other
agreement or term or condition contained in any agreement under which
any such obligation is created (or if any other event thereunder or
under any such agreement shall occur and be continuing) and the effect
of such failure or other event is to cause, or to permit the holder or
holders of such Indebtedness (or a trustee on behalf of such holder or
holders) to cause, such obligation to become due or to be repurchased
prior to any stated maturity, provided that the aggregate amount of all
Indebtedness as to which such a default (payment or other) shall occur
and be continuing or such a failure or other event causing or
permitting acceleration (or resale to the Borrower or any Subsidiary of
the Borrower) shall occur and be continuing exceeds $2,000,000;
provided, further, that no waiver, modification or amendment relating
to any such a default (payment or other) or such a failure or other
event with respect to any Parity Debt or agreement or instrument
relating to any Parity Debt shall be effective for purposes of this
clause (iii) if any consideration (other than the payment of reasonable
attorney's fees) is given, directly or indirectly, by the Borrower or
any of its Subsidiaries or Affiliates in respect thereof, unless
substantially the same consideration is given to the holders of the
Notes; or
(iv) any representation or warranty made in any writing by
or on behalf of the Borrower, General Partner or the Master Partnership
in this Agreement, any other Loan Document or any instrument furnished
pursuant to this Agreement or any Loan Document shall prove to have
been false or incorrect in any material respect on the date as of which
made; or
(v) the Borrower fails to perform, observe or comply with
any agreement contained in Sections 7B.1 through 7B.14; or
(vi) the Borrower fails to perform or observe any other
agreement, term or condition contained in this Agreement or the other
Loan Documents and such failure shall not be remedied within 30 days
after any Responsible Officer obtains actual knowledge or notice
thereof; or
(vii) the General Partner, the Borrower or any Significant
Subsidiary Group makes an assignment for the benefit of creditors or is
generally not paying its debts as such debts become due; or
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(viii) any decree or order for relief in respect of the
General Partner, the Borrower or any Significant Subsidiary Group is
entered under any bankruptcy, reorganization, compromise, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar
law, whether now or hereafter in effect (herein called the "Bankruptcy
Law"), of any jurisdiction; or
(ix) The General Partner, the Borrower or any Significant
Subsidiary Group petitions or applies to any tribunal for, or consents
to, the appointment of, or taking possession by, a trustee, receiver,
custodian, liquidator or similar official of the General Partner, the
Borrower or any Significant Subsidiary Group, or of any substantial
part of the assets of the General Partner, the Borrower or any
Significant Subsidiary Group, or commences a voluntary case under the
Bankruptcy Law of the United States or any proceedings (other than
proceedings for the voluntary liquidation and dissolution of the
General Partner, the Borrower or any Significant Subsidiary Group)
relating to the General Partner, the Borrower or any Significant
Subsidiary Group under the Bankruptcy Law of any other jurisdiction; or
(x) any such petition or application is filed, or any
such proceedings are commenced, against the General Partner, the
Borrower or any Significant Subsidiary Group and the General Partner,
the Borrower or any Significant Subsidiary Group by any act indicates
its approval thereof, consents thereto or acquiesces therein, or an
order, judgment or decree is entered appointing any such trustee,
receiver, custodian, liquidator or similar official, or approving the
petition in any such proceedings, and such order, judgment or decree
remains unstayed and in effect for more than 30 days; or
(xi) a judgment or judgments for the payment of money in
excess of $2,000,000 in the aggregate (except to the extent covered by
insurance as to which the insurer has acknowledged in writing its
obligation to cover in full) shall be rendered against the Borrower or
any Subsidiary of the Borrower and either (i) enforcement proceedings
have been commenced by any creditor upon such judgment or order or (ii)
within 45 days after entry thereof, such judgment is not discharged or
execution thereof stayed pending appeal, or within 45 days after the
expiration of any such stay, such judgment is not discharged; or
(xii) any order, judgment or decree is entered in any
proceedings against the General Partner, the Borrower or any
Significant Subsidiary Group decreeing the dissolution of the General
Partner, the Borrower or any Significant Subsidiary Group and such
order, judgment or decree remains unstayed and in effect for more than
30 days or any other event occurs that results in the termination,
dissolution or winding up of the Borrower, subject to Section 7B.7, the
General Partner or any Significant Subsidiary Group; or
(xiii) any order, judgment or decree is entered in any
proceedings against the Borrower or any of its Subsidiaries decreeing a
split-up of the Borrower or such Subsidiary which requires the
divestiture of assets representing a substantial part, or the
81
divestiture of the stock of a Subsidiary of the Borrower whose assets
represent a substantial part of the consolidated assets of the Borrower
and its Subsidiaries (determined in accordance with GAAP) or which
requires the divestiture of assets, or stock of a Subsidiary of the
Borrower, which shall have contributed a substantial part of the
Consolidated Net Income of the Borrower and its Subsidiaries for any of
the three fiscal years then most recently ended, and such order,
judgment or decree shall not be dismissed or execution thereon stayed
pending appeal or review within 45 days after entry thereof, or in the
event of such a stay, such order, judgment or decree shall not be
dismissed within 45 days after such stay expires; or
(xiv) any of the Security Documents shall at any time, for
any reason cease to be in full force and effect or shall fail to
constitute a valid, perfected first priority Lien with respect to the
Collateral subject to Liens permitted by the Security Agreement or
shall be declared to be null and void in whole or in any material
respect (i.e., relating to the validity or priority of the Liens
created by the Security Documents or the remedies available thereunder)
by the judgment of any court or other Governmental Authority having
jurisdiction in respect thereof, or if the validity or the
enforceability of any of the Security Documents shall be contested by
or on behalf of the Borrower, or the Borrower shall renounce any of the
Security Documents, or deny that it is bound by the terms of any of the
Security Documents; or
(xv) any of the events described in clauses (a), (b), (c)
or (d) shall occur: (a) the General Partner shall be engaged in any
business or activities other than those permitted by the Partnership
Agreement as in effect from time to time and in accordance with
Section 7B.8, or (b) U.S. Propane ceases to be the sole general partner
of the Borrower or the Master Partnership, or (c) the Specified
Entities shall own, directly or indirectly through Wholly-Owned
Subsidiaries, in the aggregate less than 51% of the Capital Stock of
the General Partner; or (d) a Change of Control during not more than
any twelve (12) month consecutive period of time.
(xvi) an ERISA Event shall have occurred that, when taken
together with all other such ERISA Events that have occurred, could
reasonably be expected to result in liability of the Borrower and its
ERISA Affiliates in an aggregate amount exceeding $2,000,000; or
(xvii) an event of default under any of the Security
Documents has occurred and is continuing; or
(xviii) the occurrence of an event of default under the La
Grange Credit Agreement or any other agreement governing secured
indebtedness of La Grange relating to (a) bankruptcy, reorganization,
compromise, arrangement, insolvency, readjustment of debt, dissolution
or liquidation or similar law with respect to La Grange or any of its
Subsidiaries, beyond any period of grace provided with respect thereto
in such agreement, (b) non-payment of such secured indebtedness or any
other indebtedness of LaGrange or any of its Subsidiaries, subject to
the minimum dollar amount threshold of such indebtedness set forth in
such agreement, provided that such non-payment continues
82
for a period of 3 business days beyond any period of grace provided
with respect thereto in such agreement, unless, prior to the end of the
3 business day period, the lenders party to such agreement have
accelerated the maturity of such indebtedness thereunder or blocked the
payment or otherwise limited the payment by La Grange of any scheduled
"restricted payment" distribution in respect of any partnership or
other equity interest in La Grange, in which case such 3 business-day
period shall no longer apply, or (c) any financial covenant default
with respect to La Grange which has not been cured, waived or amended
within 45 days of the date on notice of such default was given to the
lenders party to such agreement, unless, prior to the end of the 45-day
period, the lenders party to such agreement shall have blocked the
payment or otherwise limited the payment by La Grange of any scheduled
"restricted payment" distribution in respect of any partnership or
other equity interest in La Grange or shall have accelerated the
maturity of such indebtedness, in which case such 45 day period shall
no longer apply.
9.2 Remedies. Upon the occurrence of any Event of Default referred
to in (viii), (ix) or (x) of this Section 9.1 the Commitments shall immediately
terminate and the Notes and all other Indebtedness shall be immediately due and
payable, without further notice of any kind. Upon the occurrence of any other
Event of Default, and without prejudice to any right or remedy of the Banks
under this Agreement or the Loan Documents or under applicable Law of under any
other instrument or document delivered in connection herewith, the Banks may (i)
declare the Commitments terminated or (ii) declare the Commitments terminated
and declare the Notes and the other Indebtedness, or any part thereof, to be
forthwith due and payable, whereupon the Notes and the other Indebtedness, or
such portion as is designated by the Banks shall forthwith become due and
payable, without presentment, demand, notice or protest of any kind, all of
which are hereby expressly waived by the Borrower. No delay or omission on the
part of the Banks in exercising any power or right hereunder or under the Notes,
the Loan Documents or under applicable law shall impair such right or power or
be construed to be a waiver of any default or any acquiescence therein, nor
shall any single or partial exercise by the Banks of any such power or right
preclude other or further exercise thereof or the exercise of any other such
power or right by the Banks. In the event that all or part of the Indebtedness
becomes or is declared to be forthwith due and payable as herein provided, the
Banks shall have the right to set off the amount of all the Indebtedness of the
Borrower owing to the Banks against, and shall have, and is hereby granted by
the Borrower, a lien upon and security interest in, all property of each of the
Borrower in the Banks' possession at or subsequent to such default, regardless
of the capacity in which the Banks possess such property, including but not
limited to any balance or share of any deposit, collection or agency account.
After Default all proceeds received by the Banks may be applied to the
Indebtedness in such order of application and such proportions as the Banks, in
their discretion, shall choose. At any time after the occurrence of any Event of
Default, the Banks may, at their option, cause an audit of any and/or all of the
books, records and documents of the Borrower to be made by auditors satisfactory
to the Banks at the expense of the Borrower. The Banks also shall have, and may
exercise, each and every right and remedy granted to them for default under the
terms of the Security Documents and the other Loan Documents.
9.3 Other Remedies. If any Event of Default or Default shall occur
and be continuing, the holder of any Note may proceed to protect and enforce its
rights under this
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Agreement and such Note by exercising such remedies as are available to such
holder in respect thereof under applicable law, either by suit in equity or by
action at law, or both, whether for specific performance of any covenant or
other agreement contained in this Agreement or in aid of the exercise of any
power granted in this Agreement. No remedy conferred in this Agreement upon the
holder of any Note is intended to be exclusive of any other remedy, and each and
every such remedy shall be cumulative and shall be in addition to every other
remedy conferred herein or now or hereafter existing at law or in equity or by
statute or otherwise.
ARTICLE X
LOAN OPERATIONS
10.1 Interests in Loans/Commitments. The percentage interest of
each Bank in the Loans and Letters of Credit, and the Commitments, shall be
computed based on the maximum principal amount for each Bank as set forth below
(the "Lenders Schedule"):
MAXIMUM MAXIMUM WORKING MAXIMUM
ACQUISITION LOAN CAPITAL LOAN COMMITMENTS PERCENTAGE
BANK COMMITMENTS COMMITMENTS AMOUNT INTEREST
---- ----------- ----------- ------ --------
BOK $16,000,000 $16,000,000 $ 32,000,000 22.535%
Bank One $15,000,000 $15,000,000 $ 30,000,000 21.127%
MidFirst $10,000,000 $10,000,000 $ 20,000,000 14.085%
Local $ 7,500,000 $ 7,500,000 $ 15,000,000 10.563%
Fifth Third $ 7,500,000 $ 7,500,000 $ 15,000,000 10.563%
Arvest $ 2,500,000 $ 2,500,000 $ 5,000,000 3.521%
US Bank $12,500,000 $12,500,000 $ 25,000,000 17.606%
TOTAL $71,000,000 $71,000,000 $142,000,000 100.000%
The Lenders Schedule percentage interests, as from time to time in effect and
reflected in the Register, are referred to as the "Percentage Interests" with
respect to all or any portion of the Loans and Letters of Credit, and the
Commitments.
10.2 Administrative Agent's Authority to Act. Each of the Banks
appoints and authorizes BOk to act for the Banks as Administrative Agent in
connection with the transactions contemplated by this Agreement and the other
Loan Documents on the terms set forth herein. In acting hereunder, such
Administrative Agent is acting for the account of BOk to the extent of its
Percentage Interest and for the account of each other Bank to the extent of such
Bank's Percentage Interest, and all action in connection with the enforcement
of, or the exercise of any remedies (other than the Banks' rights of set-off as
provided herein or in any other Loan Document) in respect of the Loans and the
Indebtedness shall be taken by such Administrative Agent.
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10.3 Borrower to Pay Administrative Agent. The Borrower shall be
fully protected in making all payments in respect of the Notes evidencing the
Credit Obligations to the Administrative Agent, in relying upon consents,
modifications and amendments executed by such Administrative Agent purportedly
on the Banks' behalf, and in dealing with such Administrative Agent as herein
provided. Upon three (3) Business Days notice, such Administrative Agent may
charge the accounts of the Borrower, on the dates when the amounts thereof
become due and payable, with the amounts of the principal of and interest on the
Loans, including any amounts paid by such Administrative Agent to third parties
under Letters of Credit or drafts presented thereunder, commitment fees, Letter
of Credit issuance fees and processing/application fees pertaining thereto and
all other fees and amounts owing under any Loan Document.
10.4 Bank Operations for Advances, Letters of Credit.
10.4.1 Advances. On the funding date for each Loan, each
Bank shall advance to the Administrative Agent in immediately available
funds such Bank's Percentage Interest in the portion of a Loan advanced
on such funding date prior to 12:00 noon (Tulsa, Oklahoma time). If
such funds are not received at such time, but all applicable conditions
set forth in Article VI have been satisfied, each Bank authorizes and
requests such Administrative Agent to advance for the Bank's account,
pursuant to the terms hereof, the Bank's respective Percentage Interest
in such portion of such Loan and agrees to reimburse such
Administrative Agent in immediately available funds for the amount
thereof prior to 3:00 p.m. (Tulsa, Oklahoma time) on the day any
portion of such Loan is advanced hereunder; provided, however, that
such Administrative Agent is not authorized to make any such advance
for the account of any Bank who has previously notified the
Administrative Agent in writing that such Bank will not be performing
its obligations to make further advances hereunder; and provided,
further, that such Administrative Agent shall be under no obligation to
make any such advance.
10.4.2 Letters of Credit. Each of the Banks authorizes and
requests each Letter of Credit Issuer to issue the Letters of Credit
provided for in Section 2.3 and agrees to purchase a participation in
each of such Letters of Credit in an amount equal to its Percentage
Interest in the amount of each such Letter of Credit. Promptly upon the
request of any Letter of Credit Issuer, each Bank shall reimburse such
Letter of Credit Issuer in immediately available funds for such Bank's
Percentage Interest in the amount of all obligations to third parties
incurred by the Letter of Credit Issuer in respect of each Letter of
Credit and each draft accepted under a Letter of Credit to the extent
not timely reimbursed by the Borrower. Each Letter of Credit Issuer
will notify each Bank (and the Administrative Agent if the
Administrative Agent is not the Letter of Credit Issuer) of the
issuance of each Letter of Credit, the amount and date of payment of
any draft drawn or accepted under a Letter of Credit and whether in
connection with the payment of any such draft the amount thereof was
added to the Working Capital Loan or was reimbursed by the Borrower.
10.4.3 Administrative Agent to Allocate Payments. All
payments of principal and interest in respect of the extensions of
credit made pursuant to this Agreement,
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reimbursement of amounts paid by each Letter of Credit Issuer to third
parties under Letters of Credit or drafts presented thereunder,
commitment fees, Letter of Credit issuance fees and other fees under
this Agreement (except for the standard Letter of Credit
application/processing fees of any Letter of Credit Issuer and any fees
due to the Administrative Agent), which shall not be shared by the
Banks shall, as a matter of convenience, be made by the Borrower to the
applicable Letter of Credit Issuer or the applicable Agent, as the case
may be. The share of each Bank shall be credited to such Bank by the
Administrative Agent, in immediately available funds in such manner
that the principal amount of the Loans constituting Credit Obligations
to be paid shall be paid proportionately in accordance with the Banks'
respective Percentage Interests in such Loans, except as otherwise
provided in this Agreement. Under no circumstances shall any Bank be
required to produce or present its Notes as evidence of its interests
in the Loans constituting Credit Obligations in any action or
proceeding relating to the Loans constituting Credit Obligations.
10.4.4 Delinquent Banks; Nonperforming Banks. In the event
that any Bank fails to reimburse the Administrative Agent, pursuant to
Section 10.4.1 for the Percentage Interest of such Bank (a "Delinquent
Bank") in any credit advanced by such Administrative Agent pursuant
hereto, overdue amounts (the "Delinquent Payment") due from the
Delinquent Bank to such Administrative Agent shall bear interest,
payable by the Delinquent Bank on demand, at a per annum rate equal to
(a) the Federal Funds Rate for the first three days overdue and (b) the
sum of two percentage points (2%) plus the Federal Funds Rate for any
longer period. Such interest shall be payable to such Administrative
Agent for its own account for the period commencing on the date of the
Delinquent Payment and ending on the date the Delinquent Bank
reimburses such Administrative Agent on account of the Delinquent
Payment (to the extent not paid by the Borrower as provided below) and
the accrued interest thereon (the "Delinquency Period"), whether
pursuant to the assignments referred to below or otherwise. Upon notice
by such Administrative Agent, the Borrower will pay to such
Administrative Agent the principal (but not the interest) portion of
the Delinquent Payment. During the Delinquency Period, in order to make
reimbursements for the Delinquent Payment and accrued interest thereon,
the Delinquent Bank shall be deemed to have assigned to such
Administrative Agent all interest, commitment fees and other payments
made by the Borrower under Articles II, III and IV hereof that would
have thereafter otherwise been payable under the Loan Documents to the
Delinquent Bank. During any other period in which any Bank is not
performing its obligations to extend credit under Article II hereof (a
"Nonperforming Bank"), the Nonperforming Bank shall be deemed to have
assigned to each Bank that is not a Nonperforming Bank (a "Performing
Bank") such Performing Banks' respective Percentage Interest in all
principal and other payments made by the Borrower that would have
thereafter otherwise been payable thereunder to the Nonperforming Bank.
Such Administrative Agent shall credit a portion of such payments to
each Performing Bank in an amount equal to the Percentage Interest of
such Performing Bank in an amount equal to the Percentage Interest of
such Performing Bank divided by one minus the Percentage Interest of
the Nonperforming Bank until the respective portions of the Loans owed
to all the Banks are the same as the Percentage Interests of the Banks
immediately prior to the failure of the Nonperforming Bank to
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perform its obligations under Article II hereof. The foregoing
provisions shall be in addition to any other remedies the
Administrative Agent, the Performing Banks or the Borrower may have
under law or equity against the Delinquent Bank as a result of the
Delinquent Payment or against the Nonperforming Bank as a result of its
failure to perform its obligations under Article II hereof.
10.5 Sharing of Payments. To the extent permitted by applicable
Bank Legal Requirements and subject to the provisions of the Intercreditor
Agreement, each Bank agrees that (i) if by exercising any right of set-off or
counterclaim or otherwise, it shall receive payment of (a) a proportion of the
aggregate amount due with respect to its Percentage Interest in the Loans and
Letter of Credit Exposure which is greater than (b) the proportion received by
any other Bank in respect of the aggregate amount due with respect to such other
Bank's Percentage Interest in the Loans and Letter of Credit Exposure and (ii)
if such inequality shall continue for more than 10 days, the Bank receiving such
proportionately greater payment shall purchase participations in the Percentage
Interests in the Loans and Letter of Credit Exposure held by the other Banks,
and such other adjustments shall be made from time to time (including rescission
of such purchases of participations in the event the unequal payment originally
received is recovered from such Bank through bankruptcy proceedings or
otherwise), as may be required so that all such payments of principal and
interest with respect to the Loans and Letter of Credit Exposure held by the
Banks shall be shared by the Banks pro rata in accordance with their respective
Percentage Interests; provided, however, that this Section 10.5 shall not impair
the right of any Bank to exercise any right of set-off or counterclaim it may
have and to apply the amount subject to such exercise to the payment of
Indebtedness of Borrower other than Borrower's Indebtedness with respect to the
Loans and Letter of Credit Exposure. Each Bank that grants a participation in
the Loans and Commitments to a Credit Participant shall require as a condition
to the granting of such participation that such Participant agree to share
payments received in respect of the Indebtedness as provided in this Section
10.5. The provisions of this Section 10.5 are for the sole and exclusive benefit
of the Banks and no failure of any Bank to comply with the terms hereof shall be
available to either Borrower as a defense to the payment of the Loans.
10.6 Amendments, Consents, Waivers. Except as otherwise set forth
herein, the Administrative Agent may (and upon the written request of the
Required Banks the Administrative Agent shall) take or refrain from taking any
action under this Agreement or any other Loan Document, including giving its
written consent to any modification of or amendment to and waiving in writing
compliance with any covenant or condition in this Agreement or any other Loan
Document or any Default or Event of Default, all of which actions shall be
binding upon all of the Banks; provided, however, that:
(i) Without the written consent of the Banks owning at
least two thirds (2/3) of the Percentage Interests (other than
Delinquent Banks during the existence of a Delinquency Period so long
as such Delinquent Bank is treated the same as the other Banks with
respect to any actions enumerated below), no written modification of,
amendment to, consent with respect to, waiver of compliance with or
waiver of a Default under, any of the Loan Documents shall be made,
including without limitation, Sections
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7B.1 through 7B.14 of this Agreement, the related defined terms or this
Section 10.6(i) shall be made.
(ii) Without the written consent of such Banks as own 100%
of the Percentage Interests (other than Delinquent Banks during the
existence of a Delinquency Period so long as such Delinquent Bank is
treated the same as the other Banks with respect to any actions
enumerated below):
(a) No reduction shall be made in (A) the amount
of principal of any of the Loans or reimbursement obligations
for payments made under Letters of Credit, (B) the interest
rate on the Loans or (C) the Letter of Credit issuance fees
(excluding, however, Letter of Credit processing/application
fees, the amount of which shall be within the sole discretion
of each Letter of Credit Issuer) or commitment (non-usage)
fees.
(b) No change shall be made in the stated time
of payment of all or any portion of any of the Loans or
interest thereon or reimbursement of payments made under
Letters of Credit or fees relating to any of the foregoing
payable to all of the Banks and no waiver shall be made of any
Default under Section 9.1(i) and (ii) hereof.
(c) No increase shall be made in the amount, or
extension of the term, of either Commitment beyond that
provided for under Article II.
(d) Except as otherwise provided in the
Intercreditor Agreement, no alteration shall be made of the
Banks' rights of set-off contained herein or in the other Loan
Documents.
(e) Except as otherwise provided in the
Intercreditor Agreement, no release of any Collateral shall be
made (except that the Collateral Agent may release particular
items of Collateral in dispositions permitted by the Security
Documents in accordance with the terms and provisions of the
Intercreditor Agreement and may release all Collateral upon
payment in full of the Loans evidenced by the Notes and
termination of the Commitments together with payment of all of
the Private Placement Notes and Parity Debt without the
written consent of the Banks).
(f) No amendment to or modification of this
Section 10.6(ii) shall be made.
10.7 Administrative Agent's Resignation. The Administrative Agent
may resign at any time by giving at least 30 days' prior written notice of its
intention to do so to each other of the Banks and the Borrower and upon the
appointment by the Required Banks of a successor Administrative Agent
satisfactory to the Borrower. If no successor Administrative Agent shall have
been so appointed and shall have accepted such appointment within 45 days after
the retiring Administrative Agent's giving of such notice of resignation, then
the retiring
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Administrative Agent may with the consent of the Borrower, which shall not be
unreasonably withheld, appoint a successor Administrative Agent which shall be a
bank or a trust company organized under the laws of the United States of America
or any state thereof and having a combined capital, surplus and undivided profit
of at least $50,000,000; provided, however, that any successor Administrative
Agent appointed under this sentence may be removed upon the written request of
the Required Banks, which request shall also appoint a successor Administrative
Agent satisfactory to the Borrower. Upon the appointment of a new Administrative
Agent hereunder, the term "Administrative Agent" shall for all purposes of this
Agreement thereafter mean such successor. After any retiring Administrative
Agent's resignation hereunder as an Administrative Agent, or the removal
hereunder of any successor Administrative Agent, the provisions of this
Agreement shall continue to inure to the benefit of such Administrative Agent as
to any actions taken or omitted to be taken by it while it was an Administrative
Agent under this Agreement.
10.8 Concerning the Agents.
10.8.1 Action in Good Faith. The Agents and their respective
officers, directors, employees and agents shall be under no liability
to any of the Banks or to any future holder of any interest in the
Indebtedness for any action or failure to act taken or suffered in good
faith, and any action or failure to act in accordance with an opinion
of its counsel shall conclusively be deemed to be in good faith. The
Agents shall in all cases be entitled to rely, and shall be fully
protected in relying, on instructions given to the Agents by the
Required Holders of the Notes evidencing the Indebtedness as provided
in this Agreement.
10.8.2 No Implied Duties. The Agents shall have and may
exercise such powers as are specifically delegated to the Agents under
this Agreement or any other Loan Document together with all other
powers incidental thereto. The Agents shall have no implied duties to
any Person or any obligation to take any action under this Agreement or
any other Loan Document except for action specifically provided for in
this Agreement or any other Loan Document to be taken by the Agents.
Before taking any action under this Agreement or any other Loan
Document, the Agents may request an appropriate specific indemnity
satisfactory to it from each Bank in addition to the general indemnity
provided for in Section 10.11. Until the Agents have received such
specific indemnity, the Agents shall not be obligated to take (although
such Agent may in its sole discretion take) any such action under this
Agreement or any other Loan Document. Each Bank confirms that the
Agents do not have a fiduciary relationship to them under the Loan
Documents. The Borrower and its Subsidiaries party hereto confirm that
neither the Agents nor any other Bank has a fiduciary relationship to
them under the Loan Documents.
10.8.3 Validity. The Agents shall not be responsible to any
Bank or any future holder of any interest in the Loans and Indebtedness
(a) for the legality, validity, enforceability or effectiveness of this
Agreement or any other Loan Document, (b) for any recitals, reports,
representations, warranties or statements contained in or made in
connection with this Agreement or any other Loan Document, (c) for the
existence or
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value of any assets included in any security for the Loans and
Indebtedness, (d) for the effectiveness of any Lien purported to be
included in the Collateral, (e) for the specification or failure to
specify any particular assets to be included in the Collateral, or (f)
unless the Agents shall have failed to comply with Section 10.8.1, for
the perfection of the security interests in the Collateral.
10.8.4 Compliance. The Agents shall not be obligated to
ascertain or inquire as to the performance or observance of any of the
terms of this Agreement or any other Loan Document; and in connection
with any extension of credit under this Agreement or any other Loan
Document, the Agents shall be fully protected in relying on a
certificates of the Borrower as to the fulfillment by the Borrower of
any conditions to such extension of credit.
10.8.5 Employment Agents and Counsel. The Agents may execute
any of their respective duties as Agents under this Agreement or any
other Loan Document by or through employees, agents and
attorneys-in-fact and shall not be responsible to any of the Banks, the
Borrower for the default or misconduct of any such Agents or
attorneys-in-fact selected by the Agent acting in good faith. The
Agents shall be entitled to advice of counsel concerning all matters
pertaining to the agency hereby created and its duties hereunder or
under any other Loan Document.
10.8.6 Reliance on Documents and Counsel. The Agents shall
be entitled to rely, and shall be fully protected in relying, upon any
affidavit, certificate, cablegram, consent, instrument, letter, notice,
order, document, statement, telecopy, telegram, telex or teletype
message or writing reasonably believed in good faith by the Agents to
be genuine and correct and to have been signed, sent or made by the
Person in question, including any telephonic or oral statement made by
such Person, and, with respect to legal matters, upon an opinion or the
advice of counsel selected by such Agent.
10.8.7 Agents' Reimbursement. Each of the Banks severally
agrees to reimburse the Agents, in the amount of such Bank's Percentage
Interest, for any reasonable expenses not reimbursed by the Borrower
(without limiting the obligation of the Borrower to make such
reimbursement): (a) for which the Agents are entitled to reimbursement
by the Borrower under this Agreement or any other Loan Document, and
(b) after the occurrence of a Default, for any other reasonable
expenses incurred by the Agents on the Banks' behalf in connection with
the enforcement of the Banks' rights under this Agreement or any other
Loan Document.
10.9 Rights as a Bank. With respect to any Loan(s) or advance(s)
extended by it hereunder, each of the Agents shall have the same rights,
obligations and powers hereunder as any other Bank and may exercise such rights
and powers as though it were not an Agent, and unless the context otherwise
specifies, the Agents shall be treated in their respective individual capacities
as though they were not the Agents hereunder. Without limiting the generality of
the foregoing, the Percentage Interest of each Agent shall be included in any
computations of Percentage Interests. Each Agent and its Affiliates may accept
deposits from, lend money to, act as trustee for and generally engage in any
kind of banking or trust business with the Borrower, any of its Subsidiaries or
any Affiliate of any of them and any Person who may do business with or own an
equity interest in the Borrower,
90
any of its Subsidiaries or any Affiliate of any of them, all as if such Agent
were not one of the Agents and without any duty to account therefor to the other
Banks.
10.10 Independent Credit Decision. Each of the Banks acknowledges
that it has independently and without reliance upon either of the Agents, based
on the financial statements and other documents referred to in Section 8.4, on
the other representations and warranties contained herein and on such other
information with respect to the Borrower and its Subsidiaries as such Bank
deemed appropriate, made such Bank's own credit analysis and decision to enter
into this Agreement and to make the extensions of credit provided for hereunder.
Each Bank represents to the Agents that such Bank will continue to make its own
independent credit and other decisions in taking or not taking action under this
Agreement or any other Loan Document. Each Bank expressly acknowledges that
neither the Agents nor any of their respective officers, directors, employees,
Agents, attorneys-in-fact or Affiliates has made any representations or
warranties to such Bank, and no act by either of the Agents taken under this
Agreement or any other Loan Document, including any review of the affairs of the
Borrower and its Subsidiaries, shall be deemed to constitute any representation
or warranty by either of the Agents. Except for notices, reports and other
documents expressly required to be furnished to each Bank by the Administrative
Agent under this Agreement or any other Loan Document, the Agents shall not have
any duty or responsibility to provide any Bank with any credit or other
information concerning the business, operations, property, condition, financial
or otherwise, or creditworthiness of the Borrower or any Subsidiary which may
come into the possession of either of the Agents or any of their respective
officers, directors, employees, agents, attorneys-in-fact or Affiliates.
10.11 Indemnification. The holders of the Indebtedness shall
indemnify the Agents and their respective officers, directors, employees and
Agents (to the extent not reimbursed by the Borrower and without limiting the
obligation of the Borrower to do so), pro rata in accordance with their
respective Percentage Interests, 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 be
imposed on, incurred by or asserted against either of the Agents or such Persons
relating to or arising out of this Agreement, any other Loan Document, the
transactions contemplated hereby or thereby, or any action taken or omitted by
either of the Agents in connection with any of the foregoing; provided, however,
that the foregoing shall not extend to actions or omissions which are taken by
either or both of the Agents with gross negligence or willful misconduct.
10.12 Procedure for Commitment Increases and Additional Banks. This
Agreement permits certain increases in a Bank's Commitments and the admission of
Additional Banks providing new Commitments, it being acknowledged that the
existing aggregate Maximum Commitment Amount of the Banks listed in the Lenders
Schedule is $142,000,000 and that this Agreement (without further amendment or
modification) contemplates and permits Commitments in the aggregate maximum
amount of $150,000,000. Any amendment hereto for such an increase or addition
shall be in the form attached hereto as Exhibit 10.12 and shall only require the
written signatures of the Administrative Agent, the Borrower and the Bank(s)
being
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added or increasing their Commitments. In addition, within a reasonable time
after the effective date of any increase, the Administrative Agent shall, and is
hereby authorized and directed to, revise the Lenders Schedule reflecting such
increase and shall distribute such revised Lenders Schedule to each of the Banks
and the Borrowers, whereupon such revised Lenders Schedule shall replace the old
Lenders Schedule and become part of this Agreement. On the Business Day
following any such increase, all outstanding Base Rate Loans shall be
reallocated among the Banks (including any newly added Banks) in accordance with
the Banks' respective revised Percentage Interests. Eurodollar Loans shall not
be reallocated among the Banks prior to the expiration of the applicable
Eurodollar Interest Period in effect at the time of any such increase.
ARTICLE XI
ASSIGNMENTS/PARTICIPATIONS
11. Successors and Assigns; Bank Assignment and Participations.
Any reference in this Agreement to any party hereto shall be deemed to include
the successors and assigns of such party, and all covenants and agreements by or
on behalf of the Borrower, the Agents or the Banks that are contained in this
Agreement or any other Loan Documents shall bind and inure to the benefit of
their respective successors and assigns; provided, however, that (a) the
Borrower may not assign its rights or obligations under this Agreement except
for mergers or liquidations permitted by Section 7B.7, and (b) the Banks shall
be not entitled to assign their respective Percentage Interests in the Loans
evidenced by the Notes hereunder except as set forth below in this Section 11.
11.1 Assignments by Banks.
11.1.1 Assignees and Assignment Procedures. Each Bank may
(i) without the consent of the Agents or the Borrower if the proposed
assignee is already a Bank hereunder or a Wholly Owned Subsidiary of
the same corporate parent of which the assigning Bank is a Subsidiary,
or (ii) otherwise with the consents of the Agents and (so long as no
Event of Default exists) the Borrower (which consents will not be
unreasonably withheld), in compliance with applicable laws in
connection with such assignment, assign to one or more commercial banks
or other financial institutions (each, an "Assignee") all or a portion
of its interests, rights and obligations under this Agreement and the
other Loan Documents, including all or a portion, which need not be pro
rata among the Loans and the Letter of Credit Exposure, of its
Commitments, the portion of the Loans and Letter of Credit Exposure at
the time owing to it and the Notes held by it, but excluding its rights
and obligations as one of the Agents; provided, however, that:
(i) the aggregate amount of the Commitments of
the assigning Bank subject to each such assignment to any
Assignee other than another Bank (determined as of the date
the Assignment and Acceptance with respect to such assignment
is delivered to the Administrative Agent) shall be not less
than $1,000,000 and in increments of $500,000; and
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(ii) the parties to each such assignment shall
execute and deliver to the Administrative Agent an Assignment
and Acceptance (the "Assignment and Acceptance") in the form
satisfactory to the Administrative Agent and the Collateral
Agent, together with the Note or Notes subject to such
assignment and a processing and recordation fee of $500
payable to the Administrative Agent by the assigning Bank or
the Assignee.
Upon acceptance and recording pursuant to Section
11.1.4, from and after the effective date specified in each
Assignment and Acceptance (which effective date shall be at
least five (5) Banking Days after the execution thereof unless
waived in writing by the Administrative Agent):
(A) the Assignee shall be a party
hereto and, to the extent provided in such Assignment
and Acceptance, have the rights and obligations of a
Bank under this Agreement; and
(B) the assigning Bank shall, to the
extent provided in such assignment, be released from
its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Bank's rights
and obligations under this Agreement, such Bank shall
cease to be a party hereto but shall continue to be
entitled to the benefits of the Applicable Rate
provisions hereof, as well as to any fees accrued for
its account hereunder and not yet paid).
11.1.2 Terms of Assignment and Acceptance. By executing and
delivering an Assignment and Acceptance, the assigning Bank and
Assignee shall be deemed to confirm to and agree with each other and
the other parties hereto as follows:
(a) other than the representation and warranty
that it is the legal and beneficial owner of the interest
being assigned thereby free and clear of any adverse claim,
such assigning Bank makes no representation or warranty and
assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with
this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this
Agreement, any other Loan Document or any other instrument or
document furnished pursuant hereto;
(b) such assigning Bank makes no representation
or warranty and assumes no responsibility with respect to the
financial condition of the Borrower and its Subsidiaries or
the performance or observance by the Borrower or any of its
Subsidiaries of any of its obligations under this Agreement,
any other Loan Document or any other instrument or document
furnished pursuant hereto;
(c) such Assignee confirms that it has received
a copy of this Agreement, together with copies of the most
recent quarterly or annual financial statements delivered
pursuant to Section 7A.1 and such other documents and
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information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and
Acceptance;
(d) such Assignee will independently and without
reliance upon the Administrative Agent, such assigning Bank or
any other Bank, and based on such documents and information as
it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this
Agreement;
(e) such Assignee appoints and authorizes the
Administrative Agent to take such action as the Administrative
Agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Administrative Agent by the
terms hereof, together with such powers as are reasonably
incidental thereto; and
(f) such Assignee agrees that it will perform in
accordance with the terms of this Agreement all the
obligations which are required to be performed by it as a
Bank.
11.1.3 Register. The Administrative Agent, shall maintain at
its main Tulsa, Oklahoma, banking office a register (the "Register")
for the recordation of (a) the names and addresses of the Banks and the
Assignees which assume rights and obligations pursuant to an assignment
under Section 11.1.1, (b) the Percentage Interest of each such Bank as
set forth in Section 11.1 and (c) the amount of the Loans and Letter of
Credit Exposure owing to each Bank from time to time. The entries in
the Register shall be conclusive, in the absence of manifest error, and
the Borrower, BOK, as such Administrative Agent and the Banks may treat
each Person whose name is registered therein for all purposes as a
party to this Agreement. The Register shall be available for inspection
by the Borrower or any Bank at any reasonable time and from time to
time upon reasonable prior notice.
11.1.4 Acceptance of Assignment and Assumption. Upon its
receipt of a completed Assignment and Acceptance executed by an
assigning Bank and an Assignee, in exchange for the Notes subject to
such assignment, together with the Note or Notes subject to such
assignment, and the processing and recordation fee referred to in
Section 11.1.1, the Administrative Agent shall (a) accept such
Assignment and Acceptance, (b) record the information contained therein
in the Register and (c) give prompt notice thereof to the Borrower.
Within five (5) Business Days after receipt of notice, the Borrower, at
its own expense, 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 Assignee in a principal amount equal to the
applicable Commitments and Loans assumed by it pursuant to such
Assignment and Acceptance and, if the assigning Bank has retained
Commitments and Loans, a new Note or Notes to the order of such
assigning Bank in a principal amount equal to the applicable
Commitments and its Percentage Interest in the Loans retained by it.
Such new Note or Notes shall be in an aggregate principal amount equal
to the aggregate principal amount of such surrendered Note or Notes,
and shall be dated the date of the surrendered Note or Notes which it
or they replace. All such Notes so replaced shall be delivered by the
Administrative Agent to the Borrower or,
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alternatively, at such Administrative Agent's election, marked
appropriately to evidence the replacement thereof by such replacement
Note(s).
11.1.5 Federal Reserve Bank. Notwithstanding the foregoing
provisions of this Section 11, any Bank may at any time pledge or
assign all or any portion of such Bank's rights under this Agreement
and the other Loan Documents to a Federal Reserve Bank; provided,
however, that no such pledge or assignment shall release such Bank from
such Bank's obligations hereunder or under any other Loan Document.
11.1.6 Further Assurances. The Borrower and its Subsidiaries
shall sign such documents and take such other actions from time to time
reasonably requested by an Assignee to enable it to share in the
benefits of the rights created by the Loan Documents.
11.2 Credit Participants. Each Bank may, without the consent of the
Borrower and with the consent of the Administrative Agent, in compliance with
applicable laws in connection with such participation, sell to one or more
commercial banks or other financial institutions (each a "Credit Participant")
participations in all or a portion of its interests, rights and obligations
under this Agreement and the other Loan Documents (including all or a portion of
its Commitments, the Loans and Letter of Credit exposure owing to it and the
Notes held by it); provided, however, that:
(i) such Bank's obligations under this Agreement shall
remain unchanged;
(ii) such Bank shall remain solely responsible to the
other parties hereto for the performance of such obligations;
(iii) the Credit Participant shall be entitled to the
benefit of any cost protection provisions contained in the Credit
Agreement, but shall not be entitled to receive any greater payment
thereunder than the selling Bank would have been entitled to receive
with respect to the interest so sold if such interest had not been
sold; and
(iv) the Borrower, the Administrative Agent and the other
Banks shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this
Agreement, and such Bank shall retain the sole right as one of the
Banks to vote with respect to the enforcement of the obligations of the
Borrower relating to the Loans and Letter of Credit Exposure and the
approval of any amendment, modification or waiver of any provision of
this Agreement (other than amendments, modifications, consents or
waivers described in Section 10.6(ii)).
Borrower agrees, to the fullest extent permitted by applicable law,
that any Credit Participant and any Bank purchasing a participation
from another Bank pursuant to Section 11.1 may exercise all rights of
payment (including the right of set-off), with respect to its
participation as fully as if such Credit Participant or such Bank were
the direct creditor of the Borrower and a Bank hereunder in the amount
of such participation. Upon receipt of notice of the address of each
Credit Participant, the Borrower shall thereafter supply such Credit
Participants with the same information and reports
95
communicated to the Banks. The Borrower hereby acknowledges and agrees
that Credit Participants shall be deemed a holder of the applicable
Notes to the extent of their respective participation, and the Borrower
hereby waives its right, if any, to offset amounts owing to the
Borrower from the Banks against each Credit Participant's portion of
the applicable Notes.
11.3 Replacement of Bank. In the event that any Bank or, to the
extent applicable, any Credit Participant (the "Affected Bank"):
(a) fails to perform its obligations to fund any portion
of the Loans or to issue any Letter of Credit when required to do so by
the terms of the Loan Documents, or fails to provide its portion of any
Eurodollar Pricing Option pursuant to Section 3.2.1 or on account of a
Bank Legal Requirement as contemplated by Section 3.2.5;
(b) demands payment under the Reserve provisions of
Section 3.5, the Tax provisions of Section 3.6, the Capital Adequacy
provisions of Section 3.7 or the Regulatory Change provisions in
Section 3.8 in an amount the Borrower deems materially in excess of the
amounts with respect thereto demanded by the other Banks; or
(c) refuses to consent to a proposed amendment,
modification, waiver or other action requiring consent of the holders
of 100% of the Percentage Interests under Section 10.6(ii) that is
consented to by the other Banks;
then, so long as no Event of Default exists, the Borrower shall have the right
to seek a replacement Bank which is reasonably satisfactory to the
Administrative Agent (the "Replacement Bank"). The Replacement Bank shall
purchase the interests of the Affected Bank in the Loans, Letters of Credit and
its Commitments and shall assume the obligations of the Affected Bank hereunder
and under the other Loan Documents upon execution by the Replacement Bank of an
Assignment and Acceptance and the tender by it to the Affected Bank of a
purchase price agreed between it and the Affected Bank (or, if they are unable
to agree, a purchase price in the amount of the Affected Bank's Percentage
Interest in the Loans and Letter of Credit Exposure, or appropriate credit
support for contingent amounts included therein, and all other outstanding
Credit Obligations then owed to the Affected Bank). Such assignment by the
Affected Bank shall be deemed an early termination of any Eurodollar Pricing
Option to the extent of the Affected Bank's portion thereof, and the Borrower
will pay to the Affected Bank any resulting amounts due under Section 3.2.4.
Upon consummation of such assignment, the Replacement Bank shall become party to
this Agreement as a signatory hereto and shall have all the rights and
obligations of the Affected Bank under this Agreement and the other Loan
Documents with a Percentage Interest equal to the Percentage Interest of the
Affected Bank, the Affected Bank shall be released from its obligations
hereunder and under the Loan Documents, and no further consent or action by any
party shall be required. Upon the consummation of such assignment, the Borrower,
the Administrative Agent and the Affected Bank shall make appropriate
arrangements so that a new Note or Notes are issued to the Replacement Bank. The
Borrower shall sign such documents and take such other actions reasonably
requested by the Replacement Bank to enable it to share in the benefits of the
rights created by the Loan Documents. Until the consummation of an assignment in
accordance with the foregoing
96
provisions of this Section 11.3, the Borrower shall continue to pay the Affected
Bank any Loan Obligations as they become due and payable.
ARTICLE XII
MISCELLANEOUS
12.1 Notices. Unless otherwise provided herein, all notices,
requests, consents and demands shall be in writing and shall be either
hand-delivered (by courier or otherwise) or mailed by certified mail, postage
prepaid, or sent by facsimile transmission (confirmed as aforesaid) to the
respective addresses specified below, or, as to any party, to such other address
as may be designated by it in notice to the other parties in accordance with
this Section 12.1:
If to the Borrower, to:
Heritage Operating, L.P.
8801 South Yale Avenue, Suite 310
Tulsa, Oklahoma 74137
Attention: Chief Financial Officer
FAX: (918) 493-7290
If to the Banks, to:
Bank of Oklahoma, National Association
P. O. Box 2300
Bank of Oklahoma Tower
One Williams Center
Tulsa, Oklahoma 74192
Attention: Energy Department - 8th Floor
FAX: (918) 588-6880
The Administrative Agent, is hereby designated and appointed and shall serve as
notice agent for all of the Banks insofar as notices hereunder are concerned and
notice to the Administrative Agent shall be deemed notice to each of the Banks
with the same force and effect as if each such Bank were individually notified
in accordance herewith. All notices, requests, consents and demands hereunder
will be effective when hand-delivered to the applicable notice address set forth
above or when mailed by certified mail, postage prepaid, addressed as aforesaid.
12.2 Place of Payment. All sums payable hereunder shall be paid in
immediately available funds to the Administrative Agent, at its Tulsa, Oklahoma
main banking offices, or at such other place as such Administrative Agent shall
notify the Borrower in writing. If any interest, principal or other payment
falls due on a date other than a Business Day, then (unless otherwise provided
herein) such due date shall be extended to the next succeeding Business Day, and
such extension of time will in such case be included in computing interest, if
any, in connection with such payment.
97
12.3 Survival of Agreements. All covenants, agreements,
representations and warranties made herein shall survive the execution and the
delivery of Loan Documents. All statements contained in any certificate or other
instrument delivered by the Borrower hereunder shall be deemed to constitute
representations and warranties by the Borrower.
12.4 Parties in Interest. All covenants, agreements and obligations
contained in this Agreement shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto, except that the
Borrower may not assign their rights or obligations hereunder without the prior
written consent of the Banks.
12.5 Governing Law and Jurisdiction. This Agreement and the Notes
shall be deemed to have been made or incurred and delivered under the laws of
the State of Oklahoma and shall be construed and enforced in accordance with and
governed by the Laws of Oklahoma.
12.6 SUBMISSION TO JURISDICTION. THE BORROWER HEREBY CONSENTS TO
THE JURISDICTION OF ANY OF THE LOCAL, STATE, AND FEDERAL COURTS LOCATED WITHIN
TULSA COUNTY, OKLAHOMA AND WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED ON
IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY
SUCH COURT AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON ANY OF THEM,
AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY MAIL OR MESSENGER
DIRECTED TO ANY OF THEM AT THE ADDRESS SET FORTH IN SUBSECTION 12.1 HEREOF AND
THAT SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL
RECEIPT OR THREE (3) BUSINESS DAYS AFTER MAILED OR DELIVERED BY MESSENGER.
12.7 Maximum Interest Rate. Regardless of any provision herein, the
Banks shall never be entitled to receive, collect or apply, as interest on the
Indebtedness any amount in excess of the maximum rate of interest permitted to
be charged by the Banks by applicable Law, and, in the event the Banks shall
ever receive, collect or apply, as interest, any such excess, such amount which
would be excessive interest shall be applied to other Indebtedness and then to
the reduction of principal; and, if all other Indebtedness and principal are
paid in full, then any remaining excess shall forthwith be paid to the Borrower.
12.8 No Waiver; Cumulative Remedies. No failure to exercise, and no
delay in exercising, on the part of the Banks, any right, power or privilege
hereunder or under any other Loan Document or applicable Law shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege of the Banks. The rights and remedies herein provided are cumulative
and not exclusive of any other rights or remedies provided by any other
instrument or by law. No amendment, modification or waiver of any provision of
this Agreement or any other Loan Document shall be effective unless the same
shall be in writing and signed by the Banks. No notice to or demand on the
Borrower in any case shall entitle the Borrower to any other or further notice
or demand in similar or other circumstances.
98
12.9 Costs. The Borrower agrees to pay to the Banks on demand all
reasonable costs, fees and expenses (including without limitation reasonable
attorneys fees and legal expenses) incurred or accrued by the Banks in
connection with the negotiation, preparation, execution, delivery, filing,
recording, facilitation, administration and enforcement of this Agreement, the
Notes, the Security Documents, the Intercreditor Agreement and the other Loan
Documents, or any amendment, waiver, consent, supplement, restatement or
modification hereof or hereto or thereto or thereof, or any enforcement thereof
or otherwise relating to this Agreement. The Borrower further agrees that the
fees and expenses of the Banks, including the Agents, incurred in connection
with the negotiation and preparation of this Agreement and the other Loan
Documents shall be paid regardless of whether or not the transactions provided
for in this Agreement are eventually closed and regardless of whether or not any
or all sums evidenced by the Notes are advanced to the Borrower by the Banks.
12.10 WAIVER OF JURY. BORROWER FULLY, VOLUNTARILY AND EXPRESSLY
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED (OR WHICH MAY IN THE FUTURE BE DELIVERED) IN
CONNECTION HEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT, THE NOTES OR THE SECURITY DOCUMENTS. BORROWER
AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.
Borrower acknowledges that it have been informed by the Agents that the
provisions of this Section 12.10 constitute a material inducement upon which
each of the Banks has relied and will rely in entering into this Agreement and
the other Loan Documents, and that Borrower has reviewed the provisions of this
Section 12.10 with its legal counsel. Any of the Banks, the Agents or the
Borrower may file an original counterpart or copy of this Section 12.10 with any
court or Tribunal as written evidence of the express consent of the Borrower,
the Agents and the Banks to the waiver of their rights to trial by jury.
12.11 Full Agreement. This Agreement and the other Loan Documents
contain the full agreement of the parties and supersede all negotiations and
agreements prior to the date hereof.
12.12 Headings. The article and section headings of this Agreement
are for convenience of reference only and shall not constitute a part of the
text hereof nor alter or otherwise affect the meaning hereof.
12.13 Severability. The unenforceability or invalidity as determined
by a court of competent jurisdiction, of any provision or provisions of this
Agreement shall not render unenforceable or invalid any other provision or
provisions hereof.
12.14 Exceptions to Covenants. The Borrower shall not be deemed to
be permitted to take any action or fail to take any action which is permitted as
an exception to any of the covenants contained herein or which is within the
permissible limits of any of the covenants
99
contained herein if such action or omission would result in the breach of any
other covenant contained herein.
12.15 Conflict with Security Documents. To the extent the terms and
provisions of any of the Security Documents are in conflict with the terms and
provisions hereof, this Agreement shall be deemed controlling.
12.16 Confidentiality. Each Bank will make no disclosure of
confidential information furnished to it by the Borrower or any of its
Subsidiaries unless such information shall have become public, except:
(i) in connection with operations under or the
enforcement of this Agreement or any other Loan Document;
(ii) pursuant to any statutory or regulatory requirement
or any mandatory court order, subpoena or other legal process;
(iii) to any parent or corporate Affiliate of such Bank or
to any Credit Participant, proposed Credit Participant or proposed
Assignee; provided, however, that any such Person shall agree to comply
with the restrictions set forth in this Section 12.16 with respect to
such information;
(iv) to its independent counsel, auditors and other
professional advisors with an instruction to such Person to keep such
information confidential; and
(v) with the prior written consent of the Borrower, to
any other Person.
12.17 Existing Credit Agreement. This Agreement amends,
modifies and replaces the Existing Credit Agreement in all respects and
refinances the Obligations defined therein; provided, however the liens
and the priorities thereof granted in the Existing Credit Agreement and
the Security Documents therein described and defined (including the
Security Agreement) are hereby ratified, confirmed and continued in
full force and effect for all purposes without any interruption
whatsoever.
12.18 USA PATRIOT Act Notice. IMPORTANT INFORMATION ABOUT
PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government fight the
funding of terrorism and money laundering activities, federal law
requires all financial institutions to obtain, verify, and record
information that identifies each person or entity that opens an
account, including any deposit account, treasury management account,
loan, other extension of credit, or other financial services product.
What this means for borrowers: When a borrower opens an account, the
Bank will ask for the borrower's name, residential address, tax
identification number, and other information that will allow the Bank
to identify the borrower, including the borrower's date of birth if the
borrower is an individual. The Bank may also ask, if the borrower is an
individual, to see the borrower's driver's license or other identifying
documents, and, if the borrower is not an individual, to see the
borrower's legal organizational documents or other identifying
documents. The Bank will verify and record the information the
100
Bank obtains from the borrower pursuant to the USA PATRIOT Act, and
will maintain and retain that record in accordance with the regulations
promulgated under the USA PATRIOT Act.
12.19 Not a Reportable Transaction. The parties signatory
hereto acknowledge and stipulate and the Borrower represents to the
Administrative Agent, the Co-Agent and the Banks that the transactions
contemplated by this Agreement do not constitute a "Reportable Event"
as that term is described and defined in regulations of the Treasury
Department of the United States.
12.20 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute
one and the same instrument. Delivery of an executed counterpart of a
signature page of this Agreement by telecopier or facsimile shall be as
effective as delivery of a manually executed counterpart hereof.
SIGNATURE PAGES TO FOLLOW
101
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Tulsa, Oklahoma, effective as of the day and year
first above written.
"Borrower"
HERITAGE OPERATING, L.P., a
Delaware limited partnership
By: U.S. Propane, L.P., a Delaware
limited partnership, its
general partner
By: U.S. Propane, L.L.C., a
Delaware limited liability
company, its general
partner
By: _______________________
Michael L. Greenwood
Vice President and
Chief Financial Officer
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Tulsa, Oklahoma, effective as of the day and year
first above written.
"Banks"
BANK OF OKLAHOMA, NATIONAL
ASSOCIATION
By_______________________
T. Coy Gallatin,
Senior Vice President
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Tulsa, Oklahoma, effective as of the day and year
first above written.
LOCAL OKLAHOMA BANK
By________________________
Name:_____________________
Title:____________________
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Tulsa, Oklahoma, effective as of the day and year
first above written.
MIDFIRST BANK
By________________________
Name:_____________________
Title:____________________
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Tulsa, Oklahoma, effective as of the day and year
first above written.
BANK ONE, NA
By________________________
Name:_____________________
Title:____________________
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Tulsa, Oklahoma, effective as of the day and year
first above written.
ARVEST BANK
By________________________
Name:_____________________
Title:____________________
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Tulsa, Oklahoma, effective as of the day and year
first above written.
U.S. BANK NATIONAL ASSOCIATION
By____________________________
Name:_________________________
Title:________________________
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Tulsa, Oklahoma, effective as of the day and year
first above written.
FIFTH THIRD BANK
By________________________
Name:_____________________
Title:____________________
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Tulsa, Oklahoma, effective as of the day and year
first above written.
"Administrative Agent"
BANK OF OKLAHOMA, NATIONAL
ASSOCIATION
By________________________
T. Coy Gallatin,
Senior Vice President
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Tulsa, Oklahoma, effective as of the day and year
first above written.
"Co-Agent"
__________________________
By________________________
Name:_____________________
Title:____________________
EXHIBIT 10.34
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
LA GRANGE ACQUISITION, L.P.,
as Borrower,
FLEET NATIONAL BANK,
as Administrative Agent,
FLEET SECURITIES, INC. and WACHOVIA CAPITAL MARKETS, LLC
as Joint Lead Arrangers and Book Runners,
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Syndication Agent,
THE ROYAL BANK OF SCOTLAND PLC and BNP PARIBAS,
as Co-Documentation Agents,
BANK OF SCOTLAND,
as Senior Managing Agent,
U.S. BANK NATIONAL ASSOCIATION and FORTIS CAPITAL CORP.,
as Co-Agents
and CERTAIN FINANCIAL INSTITUTIONS,
as Lenders
$175,000,000 Revolving Credit Facility
$325,000,000 Term Loan Facility
January 20, 2004
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
TABLE OF CONTENTS
ARTICLE I - Definitions and References........................................................................... 1
Section 1.1. Defined Terms................................................................................ 1
Section 1.2. Exhibits and Schedules; Additional Definitions............................................... 22
Section 1.3. Amendment of Defined Instruments............................................................. 22
Section 1.4. References and Titles........................................................................ 23
Section 1.5. Calculations and Determinations.............................................................. 23
Section 1.6. Joint Preparation; Construction of Indemnities and Releases.................................... 23
ARTICLE II - The Loans........................................................................................... 24
Section 2.1. Commitments to Lend; Notes................................................................... 24
Section 2.2. Requests for New Loans....................................................................... 25
Section 2.3. Continuations and Conversions of Existing Loans.............................................. 26
Section 2.4. Use of Proceeds.............................................................................. 27
Section 2.5. Optional Prepayments of Loans................................................................ 27
Section 2.6. Mandatory Prepayments........................................................................ 28
Section 2.7. Letters of Credit............................................................................ 28
Section 2.8. Requesting Letters of Credit................................................................. 29
Section 2.9. Reimbursement and Participations............................................................. 29
Section 2.10. No Duty to Inquire.......................................................................... 31
Section 2.11. LC Collateral............................................................................... 32
Section 2.12. Interest Rates and Fees; Reduction in Commitment............................................ 33
ARTICLE III - Payments to Lenders................................................................................ 34
Section 3.1. General Procedures........................................................................... 34
Section 3.2. Capital Reimbursement........................................................................ 35
Section 3.3. Increased Cost of Eurodollar Loans or Letters of Credit...................................... 35
Section 3.4. Notice; Change of Applicable Lending Office.................................................. 36
Section 3.5. Availability................................................................................. 36
Section 3.6. Funding Losses............................................................................... 36
Section 3.7. Reimbursable Taxes........................................................................... 37
Section 3.8. Replacement of Lenders....................................................................... 38
ARTICLE IV - Conditions Precedent to Credit...................................................................... 38
Section 4.1. Documents to be Delivered.................................................................... 38
Section 4.2. Contemporaneous Closings..................................................................... 40
Section 4.3. Additional Conditions Precedent.............................................................. 41
ARTICLE V - Representations and Warranties....................................................................... 41
Section 5.1. No Default................................................................................... 42
Section 5.2. Organization and Good Standing............................................................... 42
Section 5.3. Authorization................................................................................ 42
Section 5.4. No Conflicts or Consents..................................................................... 42
Section 5.5. Enforceable Obligations...................................................................... 42
Section 5.6. Initial Financial Statements................................................................. 42
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
i
Section 5.7. Other Obligations and Restrictions........................................................... 43
Section 5.8. Full Disclosure.............................................................................. 43
Section 5.9. Litigation................................................................................... 44
Section 5.10. Labor Disputes and Acts of God.............................................................. 44
Section 5.11. ERISA Plans and Liabilities................................................................. 44
Section 5.12. Compliance with Laws........................................................................ 44
Section 5.13. Environmental Laws.......................................................................... 45
Section 5.14. Names and Places of Business................................................................ 47
Section 5.15. Borrower's Subsidiaries..................................................................... 47
Section 5.16. Title to Properties; Licenses............................................................... 47
Section 5.17. Government Regulation....................................................................... 47
Section 5.18. Insider..................................................................................... 47
Section 5.19. Solvency.................................................................................... 48
Section 5.20. Credit Arrangements......................................................................... 48
Section 5.21. Consummation of Transaction................................................................. 48
ARTICLE VI - Affirmative Covenants............................................................................... 48
Section 6.1. Payment and Performance...................................................................... 48
Section 6.2. Books, Financial Statements and Reports...................................................... 48
Section 6.3. Other Information and Inspections............................................................ 51
Section 6.4. Notice of Material Events and Change of Address.............................................. 52
Section 6.5. Maintenance of Properties.................................................................... 53
Section 6.6. Maintenance of Existence and Qualifications.................................................. 53
Section 6.7. Payment of Trade Liabilities, Taxes, etc..................................................... 53
Section 6.8. Insurance.................................................................................... 54
Section 6.9. Performance on Borrower's Behalf............................................................. 54
Section 6.10. Interest.................................................................................... 54
Section 6.11. Compliance with Agreements and Law.......................................................... 54
Section 6.12. Environmental Matters; Environmental Reviews................................................ 54
Section 6.13. Evidence of Compliance...................................................................... 55
Section 6.14. Agreement to Deliver Security Documents..................................................... 55
Section 6.15. Perfection and Protection of Security Interests and Liens................................... 55
Section 6.16. Bank Accounts; Offset....................................................................... 55
Section 6.17. Guaranties of Subsidiaries.................................................................. 56
Section 6.18. Compliance with Agreements.................................................................. 56
Section 6.19. Rents....................................................................................... 56
Section 6.20. Operating Practices......................................................................... 57
Section 6.21 Regarding the Systems........................................................................ 57
Section 6.22 Maintenance of Separateness.................................................................. 58
ARTICLE VII - Negative Covenants................................................................................. 59
Section 7.1. Indebtedness................................................................................. 59
Section 7.2. Limitation on Liens.......................................................................... 60
Section 7.3. Hedging Contracts............................................................................ 61
Section 7.4. Limitation on Mergers, Issuances of Securities............................................... 62
Section 7.5. Limitation on Sales of Property.............................................................. 63
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
ii
Section 7.6. Limitation on Dividends and Redemptions...................................................... 64
Section 7.7. Limitation on Investments and New Businesses................................................. 64
Section 7.8. Limitation on Credit Extensions.............................................................. 65
Section 7.9. Transactions with Affiliates................................................................. 65
Section 7.10. Prohibited Contracts....................................................................... 65
Section 7.11. Open Position; Trading...................................................................... 65
Section 7.12. Deposit Accounts............................................................................ 66
Section 7.13. Commingling of Deposit Accounts and Accounts................................................ 66
Section 7.14. Financial Covenants.......................................................................... 66
ARTICLE VIII - Events of Default and Remedies.................................................................... 66
Section 8.1. Events of Default............................................................................ 67
Section 8.2. Remedies..................................................................................... 70
Section 8.3. Application of Proceeds after Acceleration................................................... 70
ARTICLE IX - Administrative Agent................................................................................ 70
Section 9.1. Appointment and Authority.................................................................... 70
Section 9.2. Exculpation, Administrative Agent's Reliance, Etc............................................ 71
Section 9.3. Credit Decisions............................................................................. 71
Section 9.4. Indemnification.............................................................................. 71
Section 9.5. Rights as Lender............................................................................. 72
Section 9.6. Sharing of Set-Offs and Other Payments....................................................... 72
Section 9.7. Investments.................................................................................. 73
Section 9.8. Benefit of Article IX........................................................................ 73
Section 9.9. Resignation.................................................................................. 73
Section 9.10. Other Agents................................................................................ 74
ARTICLE X - Miscellaneous........................................................................................ 74
Section 10.1. Waivers and Amendments; Acknowledgments..................................................... 74
Section 10.2. Survival of Agreements; Cumulative Nature................................................... 76
Section 10.3. Notices..................................................................................... 76
Section 10.4. Payment of Expenses; Indemnity.............................................................. 77
Section 10.5. Joint and Several Liability; Parties in Interest; Assignments; Replacement Notes............ 78
Section 10.6. Confidentiality............................................................................. 81
Section 10.7. Governing Law; Submission to Process........................................................ 81
Section 10.8. Limitation on Interest...................................................................... 82
Section 10.9. Termination; Limited Survival............................................................... 83
Section 10.10. Severability............................................................................... 83
Section 10.11. Counterparts; Fax.......................................................................... 83
Section 10.12. Waiver of Jury Trial, Punitive Damages, etc................................................ 84
Section 10.13. Restatement.................................................................................. 84
Section 10.14. Special Provisions........................................................................... 84
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
iii
Schedules and Exhibits:
Schedule 1 - Lender Schedule
Schedule 2 - Disclosure Schedule
Schedule 3 - Security Schedule
Schedule 4 - Insurance Schedule
Exhibit A-1 - Revolver Promissory Note
Exhibit A-2 - Term Promissory Note
Exhibit B - Borrowing Notice
Exhibit C - Continuation/Conversion Notice
Exhibit D - Assignment and Acceptance Agreement
Exhibit E - Letter of Credit Application and Agreement
Exhibit F - Certificate Accompanying Financial Statements
Exhibit G - Opinion of Counsel for Restricted Persons
Exhibit H - Environmental Compliance Certificate
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
iv
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT is made as of January
20, 2004, by and among LA GRANGE ACQUISITION, L.P. ("Borrower"), a Texas limited
partnership, and FLEET NATIONAL BANK, as administrative agent, FLEET SECURITIES,
INC. and WACHOVIA CAPITAL MARKETS, LLC, as joint lead arrangers and book
runners, WACHOVIA BANK, NATIONAL ASSOCIATION, as syndication agent, THE ROYAL
BANK OF SCOTLAND PLC and BNP PARIBAS, as co-documentation agents, BANK OF
SCOTLAND, as senior managing agent, U.S. BANK NATIONAL ASSOCIATION and FORTIS
CAPITAL CORP., as co-agents, and the Lenders referred to below.
W I T N E S S E T H:
In consideration of the mutual covenants and agreements contained
herein and in consideration of the loans which may hereafter be made by Lenders
to, and the Letters of Credit that may hereafter be issued by the LC Issuer for
the account of, Borrower, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto do
hereby agree as follows:
ARTICLE I - Definitions and References
Section 1.1 Defined Terms. As used in this Agreement, each of the
following terms has the meaning given to such term in this Section 1.1 or in the
sections and subsections referred to below:
"Acquisition Agreement" means that certain Acquisition Agreement dated
November 6, 2003 among La Grange Energy and General Partner.
"Additional Indebtedness" means Indebtedness for borrowed money other
than Indebtedness described in Section 7.1.
"Adjusted Consolidated EBITDA" means, as of any date of determination
for any applicable period, Consolidated EBITDA calculated (x) with respect to
the Consolidated group comprised of General Partner and Master Partnership and
its Subsidiaries (rather than with respect to the Consolidated group comprised
of Borrower and its Subsidiaries), and (y) as if the term "Consolidated Net
Income" were calculated with respect to the Consolidated group comprised of
General Partner and Master Partnership and its Subsidiaries (rather than with
respect to the Consolidated group comprised of Borrower and its Subsidiaries).
"Adjusted Consolidated Funded Indebtedness" means Consolidated Funded
Indebtedness calculated with respect to the Consolidated group comprised of
General Partner and Master Partnership and its Subsidiaries (rather than with
respect to the Consolidated group comprised of Borrower and its Subsidiaries).
"Administrative Agent" means Fleet National Bank, as Administrative
Agent hereunder, and its successors in such capacity.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
1
"Affiliate" means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person; provided that a
Person shall not be treated as an Affiliate solely as a result of the ownership
of equity interests in such Person by Natural Gas Partners, if Ray Davis and
Kelcy Warren have no direct or indirect interest in such Person. A Person shall
be deemed to be "controlled by" any other Person if such other Person possesses,
directly or indirectly, power
(a) to vote 20% or more of the securities (on a fully
diluted basis) having ordinary voting power for the election of
directors or managing general partners; or
(b) to direct or cause the direction of the management
and policies of such Person whether by contract or otherwise.
"Aggregate Available Cash" means, with respect to any Fiscal Year, the
sum of (i) the Available Cash of Borrower and its Subsidiaries with respect to
such Fiscal Year (but not less than zero) plus (ii) the "available cash" (as
defined in the Heritage Note Purchase Agreements as in effect on the date of
this Agreement) of Heritage OLP and its Subsidiaries with respect to such Fiscal
Year (but not less than zero).
"Aggregate Partner Obligations" means, with respect to any Fiscal Year,
the aggregate amount of payment obligations of the Master Partnership,
including, without limitation, the Minimum Quarterly Distribution (as defined in
the Partnership Agreement) on all Units with respect to such Fiscal Year.
"Agreement" means this Second Amended and Restated Credit Agreement.
"Applicable Lending Office" means, with respect to each Lender, such
Lender's Domestic Lending Office in the case of Base Rate Loans and such
Lender's Eurodollar Lending Office in the case of Eurodollar Loans.
"Applicable Leverage Level" means the level set forth below that
corresponds to the applicable Leverage Ratio:
Applicable
Leverage Level Leverage Ratio
- -------------- --------------
Level I greater than or equal to 3.25 to 1.0
Level II greater than or equal to 2.50 to 1.0
but less than 3.25 to 1.0
Level III greater than or equal to 2.00 to 1.0
but less than 2.50 to 1.0
Level IV less than 2.00 to 1.00
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
2
On the date hereof the Applicable Leverage Level shall be Level I. The Leverage
Ratio shall be determined quarterly after the date hereof from time to time by
Administrative Agent within two (2) Business Days after Administrative Agent's
receipt of Borrower's Consolidated financial statements for the immediate
preceding Fiscal Quarter beginning with its receipt of the financial statements
for the Fiscal Quarter ended February 28, 2004. The Applicable Leverage Level
shall become effective upon such determination of the Leverage Ratio by
Administrative Agent and shall remain effective until the next such
determination by Administrative Agent of the Leverage Ratio.
"Available Cash" means, with respect to any Fiscal Quarter: (1) the
sum, without duplication, of (a) all cash and Cash Equivalents of Borrower and
its Subsidiaries on hand at the end of such Fiscal Quarter (including any
reserves that have been established by Borrower to provide for the payment of
distributions with respect to such Fiscal Quarter) and (b) all additional cash
and Cash Equivalents of Borrower and its Subsidiaries on hand on the date of
determination of Available Cash with respect to such Fiscal Quarter resulting
from borrowings for working capital purposes made subsequent to the end of such
Fiscal Quarter, less (2) the amount of any cash reserves that the General
Partner determines in its reasonable discretion in accordance with the
Partnership Agreement to be necessary or appropriate to (a) provide for the
proper conduct of the business of Borrower and its Subsidiaries (including
reserves for future capital expenditures) subsequent to such Fiscal Quarter, (b)
comply with applicable law or any loan agreement, security agreement, mortgage,
debt instrument or other agreement or obligation to which Borrower or any of its
Subsidiaries is a party or by which it is bound or its assets are subject and
(c) provide funds from cash and Cash Equivalents of Borrower and its
Subsidiaries for distributions to partners of Master Partnership in respect of
any one or more of the next four Fiscal Quarters; provided that disbursements
made by Borrower or a Subsidiary of Borrower of cash reserves established,
increased or reduced after the end of such Fiscal Quarter but on or before the
date of determination of Available Cash with respect to such Fiscal Quarter
shall be deemed to have been made, established, increased or reduced for
purposes of determining Available Cash, within such Fiscal Quarter if General
Partner so determines. In addition, without limiting the foregoing, Available
Cash for any Fiscal Quarter shall reflect reserves equal to the Unused Proceeds
Amount as of the date of determination.
"Base Rate" means the higher of (a) the variable per annum rate of
interest so designated from time to time by Administrative Agent as its "prime
rate," or (b) the Federal Funds Rate plus one-half percent (0.5%) per annum. The
"prime rate" is a reference rate and does not necessarily represent the lowest
or best rate being charged to any customer. Changes in the Base Rate resulting
from changes in the "prime rate" shall take place immediately without notice or
demand of any kind.
"Base Rate Loan" means a Loan which does not bear interest at the
Eurodollar Rate.
"Base Rate Margin" means, on any day, the percent per annum set forth
below based on the Applicable Leverage Level in effect on such day.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
3
Applicable Leverage Level Base Rate Margin
Level I 1.750%
Level II 1.375%
Level III 1.000%
Level IV 0.750%
Changes in the applicable Base Rate Margin will occur automatically without
prior notice as changes in the Applicable Leverage Level occur. Administrative
Agent will give notice promptly to Borrower and Lenders of changes in the Base
Rate Margin.
"Borrower" means La Grange Acquisition, L.P., a Texas limited
partnership.
"Borrower's Percentage of Aggregate Available Cash" means, with respect
to any Fiscal Quarter, the percentage determined by multiplying (a) a fraction
consisting of a numerator equal to Borrower's Available Cash for such Fiscal
Quarter and a denominator equal to the Aggregate Available Cash, by (b) 100.
"Borrowing" means (a) a borrowing of new Loans of a single Type
pursuant to Section 2.2 or (b) a Continuation or Conversion of all or a portion
of an existing Revolver Loan (whether alone or as a combination with a new
Revolver Loan) or all or a portion of an existing Term Loan into a single Type
(and, in the case of Eurodollar Loans, with the same Interest Period) pursuant
to Section 2.3.
"Borrowing Notice" means a written or telephonic request, or a written
confirmation, made by Borrower which meets the requirements of Section 2.2.
"Bossier Project" means the construction by Borrower of the
approximately 78 mile natural gas pipeline extension from Limestone County,
Texas that will connect with Borrower's existing infrastructure at the hub in
Katy, Texas.
"Business Day" means any day, other than a Saturday, Sunday or day
which shall be in the Commonwealth of Massachusetts a legal holiday or day on
which banking institutions are required or authorized to close. Any Business Day
in any way relating to Eurodollar Loans (such as the day on which an Interest
Period begins or ends) must also be a day on which commercial banks settle
payments in London.
"Capital Lease" means a lease with respect to which the lessee is
required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"Capital Lease Obligation" means, with respect to any Person and a
Capital Lease, the amount of the obligation of such Person as the lessee under
such Capital Lease which would, in accordance with GAAP, appear as a liability
on a balance sheet of such Person.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
4
"Cash Equivalents" means Investments in:
(a) marketable obligations, maturing within 12 months after acquisition
thereof, issued or unconditionally guaranteed by the United States of America or
an instrumentality or agency thereof and entitled to the full faith and credit
of the United States of America;
(b) demand deposits and time deposits (including certificates of
deposit) maturing within 12 months from the date of deposit thereof, (i) with
any office of any Lender or (ii) with a domestic office of any national or state
bank or trust company which is organized under the Laws of the United States of
America or any state therein, which has capital, surplus and undivided profits
of at least $500,000,000, and whose long-term certificates of deposit are rated
BBB+ or Baa1 or better, respectively, by either Rating Agency;
(c) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in subsection (a) above entered
into with (i) any Lender or (ii) any other commercial bank meeting the
specifications of subsection (b) above;
(d) open market commercial paper, maturing within 270 days after
acquisition thereof, which are rated at least P-1 by Moody's or A-1 by S&P; and
(e) money market or other mutual funds substantially all of whose
assets comprise securities of the types described in subsections (a) through (d)
above.
"CE/PA Revolver Loans" means Revolver Loans used for (a) capital
expenditures, including the Bossier Project, or (b) Permitted Acquisitions.
"CE/PA Sublimit" means a sublimit for CE/PA Revolver Loans of
$150,000,000.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response, Compensation
and Liability Information System List of the Environmental Protection Agency.
"Change of Control" means the existence of any of the following: (i)
General Partner shall be engaged in any business or activities other than those
permitted by the Partnership Agreement, as amended, (ii) General Partner shall
not be the sole legal and beneficial owner (within the meaning of Rule 13d-3
under the Exchange Act) of all of the general partner interests of Master
Partnership, (iii) the Control Group shall not be in Control of General Partner,
(iv) Master Partnership, either directly or indirectly through ownership of the
Intermediate Entities, shall cease to be the sole legal and beneficial owner of
all of the Equity interests of LA GP or the Borrower, (v) LA GP shall cease to
be the sole general partner of Borrower, (vi) any Person or group of Persons
acting in concert as a partnership or other group, other than the Control Group,
shall be the legal or beneficial owner (within the meaning of Rule 13d-3 of the
Exchange Act) of more than 50% of the combined voting power of the then total
partnership interests (including all securities that are convertible into
partnership interests) of Master Partnership, or (vii) neither Ray Davis, Kelcy
Warren nor any individual that has replaced either of such
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
5
individuals and has been approved by the Administrative Agent in its sole
discretion, shall be members of the executive management team of General
Partner. As used herein "Control" means (i) with respect to a corporation or
limited liability company, the legal and beneficial ownership (as defined above)
of a majority of the securities (on a fully diluted basis) having ordinary
voting power for the election of directors, managers, or managing members of
such entity; (ii) with respect to a limited partnership with a corporation or
limited liability company as a general partner, the Control of such general
partner, (iii) with respect to a limited partnership with a limited partnership
as general partner, the Control of the general partner of the limited
partnership that acts as general partner and the legal and beneficial ownership
(as defined above) of limited partnership securities (on a fully diluted basis)
having the ordinary power sufficient for the removal or selection of the general
partner of such limited partnership or the possession of control over the
removal and selection of the general partner of such limited partnership by
voting agreement or other agreement binding upon the other limited partners of
such limited partnership; and (iv) with respect to a general partnership, the
legal and beneficial ownership (as defined above) of all the partnership
securities. As used herein "Control Group" means a group of Persons that
includes Ray Davis or Kelcy Warren or a limited partnership or other Person
managed by Natural Gas Partners, which group includes only (A) Ray Davis, (B)
Kelcy Warren, (C) Persons owned by or established for the benefit of such
individuals or their respective heirs at law (such as entities or trusts
established for estate planning purposes), or (D) limited partnerships or other
Persons managed by Natural Gas Partners.
"Closing Date" means the date on which all of the conditions precedent
set forth in Sections 4.1 and 4.2 shall have been satisfied or waived.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, together with all rules and regulations promulgated with respect thereto.
"Collateral" means all property of any kind which is subject to a Lien
in favor of Lenders (or in favor of Administrative Agent for the benefit of
Lenders) or which, under the terms of any Security Document, is purported to be
subject to such a Lien, in each case granted or created to secure all or part of
the Obligations.
"Commission" means the United States Securities Exchange Commission.
"Commitment Fee Rate" means, on any day, the percent per annum set
forth below based on the Applicable Leverage Level in effect on such day.
Applicable Leverage Level Commitment Fee Rate
Level I 0.500%
Level II, Level III or Level IV 0.375%
Changes in the applicable Commitment Fee Rate will occur automatically without
prior notice as changes in the Applicable Leverage Level occur. Administrative
Agent will give notice promptly to Borrower and Lenders of changes in the
Commitment Fee Rate.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
6
"Commitment Period" means the period from and including the date hereof
until January 18, 2008 (or, if earlier, the day on which (i) the obligation of
Lenders to make Loans hereunder and the obligation of LC Issuer to issue Letters
of Credit hereunder have terminated or (ii) the Notes first become due and
payable in full, whichever shall first occur).
"Common Units" shall mean common units representing a limited
partnership interest in Master Partnership.
"Compliance Certificate" means Exhibit F hereto.
"Consolidated" refers to the consolidation of any Person, in accordance
with GAAP, with its properly consolidated subsidiaries. References herein to a
Person's Consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.
"Consolidated EBITDA" means, for any period, the sum of (1) the
Consolidated Net Income of Borrower and its Consolidated Subsidiaries during
such period, plus (2) all Consolidated Interest Expense which was deducted in
determining such Consolidated Net Income, plus (3) all income taxes (including
any franchise taxes to the extent based upon net income) which were deducted in
determining such Consolidated Net Income, plus (4) all depreciation and
amortization (including amortization of good will and debt issue costs) and any
other non-cash charges which were deducted in determining such Consolidated Net
Income, plus (5) one time costs incurred in connection with the closing of this
Agreement and the Transactions up to the amount of $10,000,000, minus (6) all
non-cash items of income which were included in determining such Consolidated
Net Income. If, since the beginning of the four Fiscal Quarter period ending on
the date for which Consolidated EBITDA is determined, any Restricted Person
shall have made any asset disposition or acquisition, shall have consolidated or
merged with or into Person (other than another Restricted Person), or shall have
made any disposition of a Restricted Person or an acquisition of a Person that
becomes a Restricted Person, Consolidated EBITDA shall be calculated giving pro
forma effect thereto as if the disposition, acquisition, consolidation or merger
had occurred on the first day of such period. Such pro forma effect shall be
determined (i) in good faith by the chief financial officer, principal
accounting officer or treasurer of Borrower and acceptable to Administrative
Agent, and (ii) without giving effect to any anticipated or proposed change in
operations, revenues, expenses or other items included in the computation of
Consolidated EBITDA, except (A) cost reductions specifically identified at the
time of disposition, acquisition, consolidation or merger that are attributable
to personnel reductions, non-recurring maintenance costs, environmental costs,
and allocated corporate overhead costs to the extent approved by Administrative
Agent and (B) otherwise with the consent of Majority Lenders. Unless or until
the Bossier Project shall have been sold or transferred (other than to another
Restricted Person) or abandoned, with respect to each Fiscal Quarter beginning
prior to the earlier of (i) September 1, 2004 or (ii) the 60th day following the
commencement of commercial operations of the Bossier Project, Consolidated
EBITDA for such Fiscal Quarter shall be increased by the amount of $6,250,000
and shall be decreased by the portion of Consolidated EBITDA, if any, derived
from the operation of the Bossier Project during such Fiscal Quarter
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
7
"Consolidated Funded Indebtedness" means as of any date, the sum of the
following (without duplication): (i) all Indebtedness which is classified as
"long-term indebtedness" on a Consolidated balance sheet of Borrower and its
Consolidated Subsidiaries prepared as of such date in accordance with GAAP and
any current maturities and other principal amount in respect of such
Indebtedness due within one year but which was classified as "long-term
indebtedness" at the creation thereof, (ii) indebtedness for borrowed money of
Borrower and its Consolidated Subsidiaries outstanding under a revolving credit
or similar agreement, notwithstanding the fact that any such borrowing is made
within one year of the expiration of such agreement, and (iii) Indebtedness in
respect of Capital Leases of Borrower and its Consolidated Subsidiaries.
"Consolidated Interest Expense" means, for any period, all interest
paid or accrued during such period on, and all fees and related charges in
respect of, Indebtedness (including amortization of original issue discount and
the interest component of any deferred payment obligations and Capital Lease
Obligations) which was deducted in determining Consolidated Net Income during
such period.
"Consolidated Net Income" means, for any period, Borrower's and its
Consolidated Subsidiaries' gross revenues for such period, minus Borrower's and
its Consolidated Subsidiaries' expenses and other proper charges against income
(including taxes on income to the extent imposed), determined on a Consolidated
basis after eliminating earnings or losses attributable to outstanding minority
interests and excluding the net earnings or losses of any Person other than a
Subsidiary in which Borrower or any of its Subsidiaries has an ownership
interest. Consolidated Net Income shall not include (i) any gain or loss from
the sale of assets other than in the ordinary course of business, (ii) any
extraordinary gains or losses, or (iii) any non-cash gains or losses resulting
from mark to market activity as a result of SFAS 133. Consolidated Net Income
for any period shall include any cash dividends and distributions actually
received during such period from any Person other than a Subsidiary in which
Borrower or any of its Subsidiaries has an ownership interest.
"Continuation/Conversion Notice" means a written or telephonic request,
or a written confirmation, made by Borrower which meets the requirements of
Section 2.3.
"Continue," "Continuation," and "Continued" shall refer to the
continuation pursuant to Section 2.3 hereof of a Eurodollar Loan as a Eurodollar
Loan from one Interest Period to the next Interest Period.
"Contribution Agreement" means that certain Contribution Agreement of
dated as of November 6, 2003 between La Grange Energy and Master Partnership.
"Convert," "Conversion," and "Converted" shall refer to a conversion
pursuant to Section 2.3 or Article III of one Type of Loan into another Type of
Loan.
"Default" means any Event of Default and any default, event or
condition which would, with the giving of any requisite notices and the passage
of any requisite periods of time, constitute an Event of Default.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
8
"Default Rate" means, at the time in question, (i) two percent (2%) per
annum plus the applicable Eurodollar Rate Margin plus the Eurodollar Rate then
in effect for any Eurodollar Loan (up to the end of the applicable Interest
Period), (ii) two percent (2%) per annum plus the applicable Base Rate Margin
plus the Base Rate for each Base Rate Loan or Matured LC Obligation, or (iii)
two percent (2%) per annum plus the applicable Letter of Credit Fee Rate for
each Letter of Credit; provided, however, the Default Rate shall never exceed
the Highest Lawful Rate
"Default Rate Period" means any period during which an Event of Default
is continuing.
"Disclosure Schedule" means Schedule 2 hereto.
"Dollars" and "$" means the lawful currency of the United States of
America, except where otherwise specified.
"Domestic Lending Office" means, with respect to any Lender, the office
of such Lender specified as its "Domestic Lending Office" in the Lender Schedule
hereto, or such other office as such Lender may from time to time specify to
Borrower and Administrative Agent; with respect to LC Issuer, the office,
branch, or agency through which it issues Letters of Credit; and, with respect
to Administrative Agent, the office, branch, or agency through which it
administers this Agreement.
"Eligible Transferee" means a Person which either (a) is a Lender or an
Affiliate of a Lender, or (b) is consented to as an Eligible Transferee by
Administrative Agent and, so long as no Default or Event of Default is
continuing, by Borrower, which consents in each case will not be unreasonably
withheld (provided that no Person organized outside the United States may be an
Eligible Transferee if Borrower would be required to pay withholding taxes on
interest or principal owed to such Person).
"Environmental Laws" means any and all Laws relating to the environment
or to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment including ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.
"Equity" means shares of capital stock or a partnership, profits,
capital or member interest, or options, warrants or any other right to
substitute for or otherwise acquire the capital stock or a partnership, profits,
capital or member interest of any Person.
"Equity Contribution" means any contribution to the equity capital of
any Person whether or not occurring in connection with the issuance or sale of
Equity by such Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
9
"ERISA Affiliate" means each Restricted Person and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control that, together with such Restricted Person,
are treated as a single employer under Section 414 of the Code.
"ERISA Plan" means any employee pension benefit plan subject to Title
IV of ERISA maintained by any ERISA Affiliate with respect to which any
Restricted Person has a fixed or contingent liability.
"Eurodollar Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Eurodollar Lending Office" on the Lender
Schedule hereto (or, if no such office is specified, its Domestic Lending
Office), or such other office of such Lender as such Lender may from time to
time specify to Borrower and Administrative Agent.
"Eurodollar Loan" means a Loan that bears interest at a rate based upon
the Eurodollar Rate.
"Eurodollar Rate" means, as applicable to any Eurodollar Loan within a
Borrowing and with respect to the related Interest Period therefor, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) as determined
on the basis of offered rates for deposits in U.S. dollars, for a period of time
comparable to such Interest Period which appears on Telerate Page 3750 (or any
successor page) as of 11:00 a.m. London time on the day that is two Business
Days preceding the first day of such Interest Period; provided, however, if the
rate described above does not appear on the Telerate system on any applicable
interest determination date, the Eurodollar Rate shall be the rate (rounded
upwards as described above, if necessary) for deposits in dollars for a period
substantially equal to such Interest Period on the Reuters Page "LIBO" (or such
other page as may replace the LIBO Page on that service for the purpose of
displaying such rates), as of 11:00 a.m. (London time), on the date that is two
Business Days preceding the first day of such Interest Period; provided,
however, if more than one rate is specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates (rounded upwards,
if necessary, to the nearest 1/1000 of 1%). If both the Telerate and Reuters
system are unavailable, then the Eurodollar Rate for that date will be
determined on the basis of the offered rates for deposits in U.S. dollars for a
period of time comparable to such Interest Period which are offered by four
major banks in the London interbank market at approximately 11:00 a.m. London
time, on the day that is two Business Days preceding the first day of such
Interest Period as selected by Administrative Agent. The principal London office
of each of the four major London banks will be requested to provide a quotation
of its U.S. dollar deposit offered rate. If at least two such quotations are
provided, the rate for that date will be the arithmetic mean of the quotations.
If fewer than two quotations are provided as requested, the rate for that date
will be determined on the basis of the rates quoted for loans in U.S. dollars to
leading European banks for a period of time comparable to such Interest Period
offered by major banks in New York City at approximately 11:00 a.m. New York
City time, on the day that is two Business Days preceding the first day of such
Interest Period. In the event that Administrative Agent is unable to obtain any
such quotation as provided above, it will be deemed that the Eurodollar Rate
pursuant to such Eurodollar Loan cannot be determined. In the event that the
Board of Governors of the Federal Reserve System shall impose a Reserve
Percentage with respect to
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
10
Eurodollar deposits of any Lender, then for any period during which such Reserve
Percentage shall apply, the Eurodollar Rate shall be equal to the amount
determined above divided by an amount equal to 1 minus the Reserve Percentage.
"Reserve Percentage" means the maximum aggregate reserve requirement (including
all basic, supplemental, marginal, special, emergency and other reserves) which
is imposed on member banks of the Federal Reserve System against "Euro-currency
Liabilities" as defined in Regulation D. Without limiting the effect of the
foregoing, the Reserve Percentage shall reflect any other reserves required to
be maintained by such member banks with respect to (a) any category of
liabilities which includes deposits by reference to which the Eurodollar Rate is
to be determined, or (b) any category of extensions of credit or other assets
which include Eurodollar Loans. The Eurodollar Rate for any Eurodollar Loan
shall change whenever the Reserve Percentage changes.
"Eurodollar Rate Margin" means, on any day, the percent per annum set
forth below based on the Applicable Leverage Level in effect on such day.
Applicable Leverage Level Eurodollar Rate Margin
Level I 3.000%
Level II 2.625%
Level III 2.250%
Level IV 2.000%
Changes in the applicable Eurodollar Rate Margin will occur automatically
without prior notice as changes in the Applicable Leverage Level occur.
Administrative Agent will give notice promptly to Borrower and Lenders of
changes in the Eurodollar Rate Margin.
"Event of Default" has the meaning given to such term in Section 8.1.
"Excess Sale Proceeds" shall have the meaning set forth in Section
7.5(d).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Credit Agreement" means that certain Amended and Restated
Credit Agreement dated as of December 27, 2002 among Borrower, Administrative
Agent and the financial institutions party thereto, as amended or supplemented
to the date hereof.
"Exiting Lender" means any Lender (as defined in the Existing Credit
Agreement) that does not execute and deliver this Agreement, and does not have
any commitments under this Agreement with respect to Revolver Loans, Term Loans
or Letters of Credit.
"Facility Usage" means, at the time in question, the aggregate amount
of outstanding Loans and LC Obligations at such time.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/1000th of one percent) equal to the
weighted average of the rates on
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
11
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the Federal
Reserve Bank of New York on the Business Day next succeeding such day, provided
that (i) if the day for which such rate is to be determined is not a Business
Day, the Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Business Day as so published on the next succeeding
Business Day, and (ii) if such rate is not so published for any day, the Federal
Funds Rate for such day shall be the average rate quoted to Administrative Agent
on such day on such transactions as determined by Administrative Agent.
"First Purchase Payables" means the unpaid amount of any payable
obligation related to the purchase of Hydrocarbon Inventory by Borrower which
Administrative Agent determines will be secured by a statutory Lien, including
but not limited to the statutory Liens, if any, created under the laws of Texas,
New Mexico, Oklahoma or any other state.
"Fiscal Quarter" means a three-month period ending on the last day of
November, February, May and August. With respect to any period prior to the
completion of four full Fiscal Quarters after the date of this Agreement (with
respect to which Borrower's fiscal quarters had been on a calendar quarter
basis), all calculations and determinations shall be made as if the actual
fiscal quarter of Borrower during such period had been the three month periods
ended on the last day of November, February, May and August.
"Fiscal Year" means a twelve month period ending on August 31.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the Financial Accounting Standards
Board (or any generally recognized successor) and which, in the case of Borrower
and its Consolidated Subsidiaries, are applied for all periods after the date
hereof in a manner consistent with the manner in which such principles and
practices were applied to the Initial Financial Statements. If any change in any
accounting principle or practice is required by the Financial Accounting
Standards Board (or any such successor) in order for such principle or practice
to continue as a generally accepted accounting principle or practice, all
reports and financial statements required hereunder with respect to Borrower or
with respect to Borrower and its Consolidated Subsidiaries may be prepared in
accordance with such change, but all calculations and determinations to be made
hereunder may be made in accordance with such change only after notice of such
change is given to each Lender, and Borrower and Majority Lenders agree to such
change insofar as it affects the accounting of Borrower or of Borrower and its
Consolidated Subsidiaries.
"General Partner" means U.S. Propane, L.P., a Delaware limited
partnership
"Guarantors" means any Person who has guaranteed some or all of the
Obligations and who has been accepted by Administrative Agent as a Guarantor and
any Subsidiary of Borrower, which now or hereafter executes and delivers a
guaranty to Administrative Agent pursuant to Section 6.17.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
12
"Hazardous Materials" means any substances regulated under any
Environmental Law, whether as pollutants, contaminants, or chemicals, or as
industrial, toxic or hazardous substances or wastes, or otherwise.
"Hedging Contract" means (a) any agreement providing for options,
swaps, floors, caps, collars, forward sales or forward purchases involving
interest rates, commodities or commodity prices, equities, currencies, bonds, or
indexes based on any of the foregoing, (b) any option, futures or forward
contract traded on an exchange, and (c) any other derivative agreement or other
similar agreement or arrangement.
"Heritage Note Purchase Agreements" means collectively, (a) the Note
Purchase Agreement dated as of June 25, 1996, among Heritage OLP and the
purchasers named therein, as amended and supplemented; (b) the Note Purchase
Agreement dated as of November 19, 1997, among Heritage OLP and the purchasers
named therein, as amended and supplemented; and (c) the Note Purchase Agreement
dated as of August 10, 2000 among Heritage OLP and the purchasers named therein,
as amended and supplemented.
"Heritage OLP" means Heritage Operating, L.P., a Delaware limited
partnership.
"Highest Lawful Rate" means, with respect to each Lender Party to whom
Obligations are owed, the maximum nonusurious rate of interest that such Lender
Party is permitted under applicable Law to contract for, take, charge, or
receive with respect to such Obligations. All determinations herein of the
Highest Lawful Rate, or of any interest rate determined by reference to the
Highest Lawful Rate, shall be made separately for each Lender Party as
appropriate to assure that the Loan Documents are not construed to obligate any
Person to pay interest to any Lender Party at a rate in excess of the Highest
Lawful Rate applicable to such Lender Party.
"HHI" means Heritage Holdings, Inc., a Delaware corporation.
"Hydrocarbon Inventory" means natural gas and all other gaseous
hydrocarbons including the liquid products of processing and any other natural
gas liquids.
"Indebtedness" of any Person means its Liabilities (without
duplication) in any of the following categories:
(a) Liabilities for borrowed money,
(b) Liabilities constituting an obligation to pay the deferred
purchase price of property or services,
(c) Liabilities evidenced by a bond (other than Liabilities in
respect of surety bonds issued in the ordinary cause of business), debenture,
note or similar instrument,
(d) Liabilities (other than reserves for taxes and reserves for
contingent obligations) which (i) would under GAAP be shown on such Person's
balance sheet as a liability and (ii) are payable more than one year from the
date of creation or incurrence thereof,
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
13
(e) Liabilities arising under Hedging Contracts (on a net basis to
the extent netting is provided for in the applicable Hedging Contract),
(f) Liabilities constituting principal under Capital Leases,
(g) Liabilities arising under conditional sales or other title
retention agreements,
(h) Liabilities owing under direct or indirect guaranties of
Liabilities of any other Person or otherwise constituting obligations to
purchase or acquire or to otherwise protect or insure a creditor against loss in
respect of Liabilities of any other Person (such as obligations under working
capital maintenance agreements, agreements to keep-well, or agreements to
purchase Liabilities, assets, goods, securities or services), but excluding
endorsements in the ordinary course of business of negotiable instruments in the
course of collection,
(i) Liabilities consisting of an obligation to purchase or redeem
securities or other property, if such Liabilities arise out of or in connection
with the sale or issuance of the same or similar securities or property (for
example, repurchase agreements, mandatorily redeemable preferred stock and
sale/leaseback agreements),
(j) Liabilities with respect to letters of credit or applications
or reimbursement agreements therefor,
(k) Liabilities with respect to banker's acceptances, or
(l) Liabilities with respect to obligations to deliver goods or
services in consideration of advance payments therefor;
provided, however, that the "Indebtedness" of any Person shall not include
Liabilities that were incurred in the ordinary course of business by such Person
on ordinary trade terms to vendors, suppliers or other Persons providing goods
and services for use by such Person in the ordinary course of its business,
unless and until (i) such Liabilities are outstanding more than 120 days after
the date the respective goods are delivered or the respective services are
rendered, and (ii) such Person is not in good faith contesting such Liabilities
by appropriate proceedings, if required, or is not maintaining adequate reserves
with respect to such Liabilities on its books in accordance with GAAP.
"Initial Borrower Financial Statements" means (a) the unaudited
quarterly Consolidated financial statements of Borrower as of September 30,
2003, and (b) the audited annual financial statements of Borrower as of August
31, 2003.
"Initial Financial Statements" means (a) the Initial Borrower Financial
Statements, (b) the Initial Master Partnership Financial Statements, and (c) the
Initial Pro Forma Financial Statements.
"Initial Master Partnership Financial Statements" means (a) the
unaudited quarterly Consolidated financial statements of Master Partnership as
of November 30, 2003, and (b) the audited annual financial statements of Master
Partnership as of August 31, 2003.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
14
"Initial Pro Forma Financial Statements" means (a) the pro forma
balance sheet of Borrower and its Consolidated Subsidiaries as of December 31,
2003 and the pro forma statements of total earnings and cash flows of Borrower
and its Consolidated Subsidiaries for the 12 month period ended as of December
31, 2003, giving effect to the Transactions as if the Transactions had been
consummated on such date, and reflecting results of operations on a pro forma
basis satisfactory to Administrative Agent, and (b) the pro forma combined
financial statements of Master Partnership and its Subsidiaries, including
Borrower and its Subsidiaries, as of August 31, 2003, giving effect to the
Transactions as if the Transactions had been consummated on such date, as
included in the Form S-3 Registration Statement of the Master Partnership as
amended and filed with the Commission as of January 9, 2004.
"Initial Projections" means (a) a business and financial plan for
Borrower and its Subsidiaries (in form reasonably satisfactory to Administrative
Agent), prepared or caused to be prepared by a senior financial officer of
Borrower, setting forth the financial projections and budgets of Borrower for
each of the four annual periods beginning January 1, 2004, 2005, 2006 and 2007,
and (b) a Consolidated business and financial plan for Master Partnership and
its Subsidiaries (in form reasonably satisfactory to Administrative Agent),
prepared or caused to be prepared by a senior financial officer of General
Partner, setting forth the financial projections and budgets of Borrower for
each of the four annual periods beginning January 1, 2004, 2005, 2006 and 2007.
"Insurance Schedule" means Schedule 4 attached hereto.
"Interest Period" means, with respect to each particular Eurodollar
Loan in a Borrowing, the period specified in the Borrowing Notice or
Continuation/Conversion Notice applicable thereto, beginning on and including
the date specified in such Borrowing Notice or Continuation/Conversion Notice
(which must be a Business Day), and ending one, two, three, six or, if available
to each Lender, twelve months thereafter, as Borrower may elect in such notice;
provided that: (a) any Interest Period which would otherwise end on a day which
is not a Business Day shall be extended to the next succeeding Business Day
unless such Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Business Day; (b) any Interest
Period which begins on the last Business Day in 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 in a calendar
month; and (c) notwithstanding the foregoing, no Interest Period may be selected
that would end after the last day of the Commitment Period.
"Intermediate Entities" means Heritage ETC, L.P., which is a Delaware
limited partnership, a wholly owned subsidiary of Master Partnership and the
owner of all of the limited partnership interests in Borrower, and Heritage ETC
GP, L.L.C., which is a Delaware limited liability company, a wholly owned
subsidiary of Master Partnership and the owner of all of the general partnership
interests in Heritage ETC, L.P.
"Investment" means any investment made, directly or indirectly in any
Person, whether by acquisition of shares of capital stock, indebtedness or other
obligations or securities or by
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
15
loan, advance, capital contribution or otherwise and whether made in cash, by
the transfer of property or by any other means.
"LA GP" means LA GP LLC, a Texas limited liability company and the
general partner of Borrower.
"La Grange Energy" means La Grange Energy, L.P., a Texas limited
partnership.
"Law" means any statute, law, regulation, ordinance, rule, treaty,
judgment, order, decree, permit, concession, franchise, license, agreement or
other governmental restriction of the United States or any state or political
subdivision thereof or of any foreign country or any department, state, province
or other political subdivision thereof.
"LC Application" means any application for a Letter of Credit hereafter
made by Borrower to LC Issuer.
"LC Collateral" has the meaning given to such term in Section 2.11(a).
"LC Issuer" means Fleet National Bank, in its capacity as the issuer of
Letters of Credit hereunder, and its successors in such capacity. Administrative
Agent may, with the consent of Borrower and the Lender in question, appoint any
Lender hereunder as an LC Issuer in place of or in addition to Fleet National
Bank.
"LC Obligations" means, at the time in question, the sum of all Matured
LC Obligations plus the maximum amounts which LC Issuer might then or thereafter
be called upon to advance under all Letters of Credit then outstanding.
"Lender Hedging Obligations" means all obligations arising from time to
time under Hedging Contracts entered into from time to time between Borrower or
any of its Subsidiaries and a counterparty that is a Lender or an Affiliate of a
Lender; provided (a) that if such counterparty ceases to be a Lender hereunder
or an Affiliate of a Lender hereunder, Lender Hedging Obligations shall only
include such obligations to the extent arising from transactions entered into at
the time such counterparty was a Lender hereunder or an Affiliate of a Lender
hereunder, and (b) that for any of the forgoing to be included within "Lender
Hedging Obligations" hereunder, the applicable counterparty and Borrower must
have provided Administrative Agent written notice of the existence thereof
certifying that such transaction is a Lender Hedging Obligation and is not
prohibited under this Agreement.
"Lender Parties" means Administrative Agent, LC Issuer, and all
Lenders.
"Lender Schedule" means Schedule 1 hereto, as it may be revised
pursuant to Section 10.5(c)(iii).
"Lenders" means each signatory hereto (other than Borrower and any
Restricted Person that is a party hereto), including Fleet National Bank, in its
capacity as a Lender hereunder rather than as Administrative Agent and LC
Issuer, and Wachovia Bank, in its capacity as a Lender
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
16
hereunder rather than as Syndication Agent, and the successors and each
permitted assign of each such party as holder of a Note.
"Letter of Credit" means any letter of credit issued by LC Issuer
hereunder.
"Letter of Credit Fee Rate" means, on any day, the percent per annum
set forth below based on the Applicable Leverage Level in effect on such day.
Applicable Leverage Level LC Fee Rate
Level I 3.000%
Level II 2.625%
Level III 2.250%
Level IV 2.000%
Changes in the applicable Letter of Credit Fee Rate will occur automatically
without prior notice as changes in the Applicable Leverage Level occur.
Administrative Agent will give notice promptly to Borrower and Lenders of
changes in the Letter of Credit Fee Rate.
"Leverage Ratio" means, as of any date of determination, the ratio of
(a) Consolidated Funded Indebtedness to (b) Consolidated EBITDA for the four
Fiscal Quarter period most recently ended prior to the date of determination for
which financial statements contemplated by Section 6.2(a) or (b) are available
to Borrower.
"Liabilities" means, as to any Person, all indebtedness, liabilities
and obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent, and whether or not required to be considered liabilities pursuant to
GAAP.
"Lien" means, with respect to any property or assets, any right or
interest therein of a creditor to secure Liabilities owed to it or any other
arrangement with such creditor which provides for the payment of such
Liabilities out of such property or assets or which allows such creditor to have
such Liabilities satisfied out of such property or assets prior to the general
creditors of any owner thereof, including any lien, mortgage, security interest,
pledge, deposit, production payment, rights of a vendor under any title
retention or conditional sale agreement or lease substantially equivalent
thereto, tax lien, mechanic's or materialman's lien, or any other charge or
encumbrance for security purposes, whether arising by Law or agreement or
otherwise, but excluding any right of offset which arises without agreement in
the ordinary course of business. "Lien" also means any filed financing
statement, any registration of a pledge (such as with an issuer of
uncertificated securities), or any other arrangement or action which would serve
to perfect a Lien described in the preceding sentence, regardless of whether
such financing statement is filed, such registration is made, or such
arrangement or action is undertaken before or after such Lien exists.
"Loans" means the Revolver Loans and the Term Loans.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
17
"Loan Documents" means this Agreement, the Notes, the Security
Documents, the Letters of Credit, the LC Applications, and all other agreements,
certificates, documents, instruments and writings at any time delivered in
connection herewith or therewith (exclusive of term sheets and commitment
letters).
"Maintenance Capital Expenditures" means, for any period, all amounts
properly classified as capital expenditures under GAAP for maintenance of or
repair or replacement of existing assets during such period or that are incurred
to maintain existing operations, excluding all costs associated with new well
hook-ups.
"Majority Lenders" means any Lenders whose aggregate Percentage Shares
equal or exceed fifty-one percent (51%).
"Master Partnership" means Heritage Propane Partners, L.P., a Delaware
limited partnership.
"Material Adverse Change" means a material and adverse change, from the
state of affairs presented in the Initial Borrower Financial Statements or as
represented or warranted in any Loan Document, to (a) Borrower's Consolidated
financial condition, (b) Borrower's Consolidated operations, properties or
prospects, considered as a whole, (c) Borrower's ability to timely pay the
Obligations, or (d) the enforceability of the material terms of any Loan
Document.
"Material Adverse Effect" means (a) with respect to Borrower, (i) a
material adverse effect on the financial condition, operations, properties or
prospects of Borrower and Restricted Persons, taken as a whole, after giving
effect to the Transactions, (ii) a material impairment of the ability of any
Restricted Person to perform any of its obligations under the Loan Documents to
which it is a party, or (iii) a material adverse effect on the enforceability of
any of the Loan Documents, and (b) with respect to any other Person, a material
adverse effect on the financial condition, operations, properties or prospects
of such Person and its Subsidiaries, taken as a whole.
"Matured LC Obligations" means all amounts paid by LC Issuer on drafts
or demands for payment drawn or made under or purported to be under any Letter
of Credit and all other amounts due and owing to LC Issuer under any LC
Application for any Letter of Credit, to the extent the same have not been
repaid to LC Issuer (with the proceeds of Loans or otherwise).
"Maturity Date" means January 18, 2008.
"Maximum Facility Amount" means the sum of $500,000,000.
"Moody's" means Moody's Investors Service, Inc., or its successor.
"Net Sale Proceeds" shall have the meaning set forth in Section 7.5(d).
"Notes" means all Revolver Notes and all Term Notes.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
18
"Obligations" means all Liabilities from time to time owing by any
Restricted Person to any Lender Party under or pursuant to any of the Loan
Documents, including all LC Obligations. "Obligation" means any part of the
Obligations.
"Partnership Agreement" means the Agreement of Limited Partnership of
Master Partnership as in effect on the date of this Agreement.
"Percentage Share" means, with respect to any Lender, the percentage
obtained by dividing (a) the sum of the unpaid principal balance of such
Lender's Term Loans at the time in question plus such Lender's Revolver
Commitment (or, if such Lender's Revolver Commitment has been terminated, the
unpaid principal balance of such Lender's Revolver Loans) by (b) the sum of the
aggregate unpaid principal balance of all Term Loans at such time plus the
Revolver Commitment of all Lenders (or, if the Revolver Commitment of all
Lenders has been terminated, the unpaid principal balance of the Revolver
Loans).
"Permitted Acquisitions" means (A) the acquisition of all of the
capital stock or other equity interest in a Person (exclusive of director
qualifying shares and other equity interests required to be held by an Affiliate
to comply with a requirement of Law) or (B) any other acquisition of all or a
substantial portion of the business, assets or operations of a Person (whether
in a single transaction or a series of related transactions) or (C) a merger or
consolidation of any Person with or into a Restricted Person so long as the
survivor is or becomes a Restricted Person upon consummation thereof (and
Borrower is the survivor, if it is a party); provided, that (i) prior to and
after giving effect to such acquisition no Default or Event of Default shall
have occurred and be continuing; (ii) all representations and warranties
contained in the Loan Documents shall be true and correct as if restated
immediately following the consummation of such acquisition; and (iii)
substantially all of such business, assets and operations so acquired, or of the
Person so acquired, consist of Hydrocarbon Inventory marketing, gathering,
transmission, processing, treating and pipeline operations.
"Permitted HHI Investments" means: (a) a loan in an amount not to
exceed $50,000,000 to HHI for the sole purpose of repaying the Seller Note
delivered pursuant to the Stock Purchase Agreement, such loan to be evidenced by
a promissory note on terms reasonably satisfactory to the Administrative Agent,
or (b) the Subscription Agreement, described in the Disclosure Schedule, between
HHI and Oasis Pipeline Company as such Subscription Agreement exists on the date
of this Agreement and purchases of shares of HHI required to be made pursuant
thereto.
"Permitted Inventory Liens" means any Lien, and the amount of any
Liability secured thereby, on Hydrocarbon Inventory which would be a Permitted
Lien under Section 7.2(ii)(b) (so long as such Lien is inchoate) or Section
7.2(ii)(d).
"Permitted Investments" means:
(a) Cash Equivalents,
(b) Investments now owned or hereafter acquired in Dorado joint
venture,
(c) Investments by Borrower in any Wholly Owned Subsidiary of Borrower,
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
19
(d) Permitted HHI Investments, or
(e) Investment in VanTex Energy Services, Ltd., VanTex Gas Pipeline
Company, LLC and VES Inc. described in the Disclosure Schedule.
"Permitted Lien" has the meaning given to such term in Section 7.2.
"Permitted Reinvestment" has the meaning given to such term in Section
7.5(d)(iii).
"Permitted Subordinated Debt" means unsecured Indebtedness of Borrower
(a) that by its express terms provides that it ranks subordinate or junior in
right of payment to the payment and performance of the Obligations on terms
acceptable to Majority Lenders, (b) incurred solely to finance working capital
and capital expenditures related to Hydrocarbon Inventory gathering,
transmission, processing, treating and pipeline operations, (c) in an aggregate
amount outstanding at any time not to exceed an amount consented to by Majority
Lenders pursuant to a written notification thereof from such Majority Lenders to
Borrower, and (d) otherwise in form, substance and on terms acceptable to
Administrative Agent and Majority Lenders.
"Person" means an individual, corporation, partnership, limited
liability company, association, joint stock company, trust or trustee thereof,
estate or executor thereof, unincorporated organization or joint venture,
Tribunal, or any other legally recognizable entity.
"Rating Agency" means either S&P or Moody's.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect.
"Release" has the meaning given such term in 42 U.S.C. Section
9601(22).
"Restricted Person" means any of LA GP, Borrower and each Subsidiary of
Borrower.
"Revolver Commitment" means the amount of $175,000,000, as such amount
may be reduced from time to time as provided in Section 2.6 or as such amount
may be reduced by Borrower from time to time as provided in Section 2.12. Each
Lender's Revolver Commitment shall be the amount set forth for such Lender on
the Lender Schedule.
"Revolver Facility Usage" means, at the time in question, the aggregate
amount of outstanding Revolver Loans and LC Obligations at such time.
"Revolver Loan" has the meaning given such term in Section 2.1(a).
"Revolver Note" has the meaning given such term in Section 2.1(a).
"Revolver Percentage" means, with respect to any Lender, the percentage
set forth as such Lender's Revolver Percentage, if any, on the Lender Schedule
hereto.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
20
"S&P" means Standard & Poor's Ratings Services (a division of McGraw
Hill, Inc.) or its successor.
"Security Documents" means the instruments listed in the Security
Schedule and all other security agreements, deeds of trust, mortgages, chattel
mortgages, pledges, guaranties, financing statements, continuation statements,
extension agreements and other agreements or instruments now, heretofore, or
hereafter delivered by any Restricted Person to Administrative Agent in
connection with this Agreement or any transaction contemplated hereby to secure
or guarantee the payment of any part of the Obligations or Lender Hedging
Obligations or the performance of any Restricted Person's other duties and
obligations under the Loan Documents.
"Security Schedule" means Schedule 3 hereto.
"Stock Purchase Agreement" means that certain Stock Purchase Agreement
dated November 6, 2003 by and among General Partner, certain Sellers named
therein, and Master Partnership.
"Subordinated Units" shall mean subordinated units representing all of
the limited partnership interest in Master Partnership not represented by Common
Units.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, limited liability company, joint venture, or other
business or corporate entity, enterprise or organization which is directly or
indirectly (through one or more intermediaries) controlled or owned more than
fifty percent by such Person.
"Subsidiary GP" means LG PL, LLC, LGM LLC and ETC Oasis GP, LLC, each a
Texas limited liability company and a general partner of a Subsidiary of the
Borrower.
"Syndication Agent" means Wachovia Bank, National Association, as
syndication agent, and its successors in such capacity.
"Systems" means all gathering systems, transmission pipelines, plants,
compressors, storage facilities, injection stations, terminals, trucking
operations, pumps and heaters, and the equipment, fixtures and improvements
located thereon or used in connection therewith, in which any Restricted Person
owns an interest.
"Term Commitment" means $325,000,000. Each Lender's Term Commitment
shall be the amount set forth for such Lender on the Lender Schedule.
"Term Loan" has the meaning given such term in Section 2.1(b).
"Term Note" has the meaning given such term in Section 2.1(b).
"Termination Event" means (a) the occurrence with respect to any ERISA
Plan of (i) a reportable event described in Sections 4043(c)(5) or (6) of ERISA
or (ii) any other reportable event described in Section 4043(c) of ERISA other
than a reportable event not subject to the provision for 30-day notice to the
Pension Benefit Guaranty Corporation pursuant to a waiver by
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
21
such corporation under Section 4043(a) of ERISA, or (b) the withdrawal of any
ERISA Affiliate from an ERISA Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, or (c) the
filing of a notice of intent to terminate any ERISA Plan or the treatment of any
ERISA Plan amendment as a termination under Section 4041 of ERISA, or (d) the
institution of proceedings to terminate any ERISA Plan by the Pension Benefit
Guaranty Corporation under Section 4042 of ERISA, or (e) any other event or
condition which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any ERISA Plan.
"Transactions" means, collectively, the transactions contemplated by
the Transaction Documents.
"Transaction Documents" means, collectively, (a) the Acquisition
Agreement, (b) the Contribution Agreement, and (c) the Stock Purchase Agreement.
"Tribunal" means any government, any arbitration panel, any court or
any governmental department, commission, board, bureau, agency or
instrumentality of the United States of America or any state, province,
commonwealth, nation, territory, possession, county, parish, town, township,
village or municipality, whether now or hereafter constituted or existing.
"Type" means, with respect to any Loans, the characterization of such
Loans as either Base Rate Loans or Eurodollar Loans.
"UCC" means the Uniform Commercial Code as in effect in the State of
New York from time to time.
"Units" shall mean, collectively, the Common Units and the Subordinated
Units.
"Unused Proceeds Amount" has the meaning given in Section 7.5.
"Wholly Owned Subsidiary" means any Subsidiary of a Person, all of the
issued and outstanding stock, limited liability company membership interests, or
partnership interests of which (including all rights or options to acquire such
stock or interests) are directly or indirectly (through one or more
Subsidiaries) owned by such Person, excluding any general partner interests
owned, directly or indirectly, by General Partner in any such Subsidiary that is
a partnership, in each case such general partner interests not to exceed two
percent (2%) of the aggregate ownership interests of any such partnership and
directors' qualifying shares if applicable.
Section 1.2 Exhibits and Schedules; Additional Definitions. All
Exhibits and Schedules attached to this Agreement are a part hereof for all
purposes. Reference is hereby made to the Security Schedule for the meaning of
certain terms defined therein and used but not defined herein, which definitions
are incorporated herein by reference.
Section 1.3 Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein the terms defined in this
Agreement which refer to a particular agreement, instrument or document also
refer to and include all renewals, extensions,
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
22
modifications, amendments and restatements of such agreement, instrument or
document, provided that nothing contained in this section shall be construed to
authorize any such renewal, extension, modification, amendment or restatement.
Section 1.4 References and Titles. All references in this Agreement to
Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Exhibits and
Schedules to any Loan Document shall be deemed incorporated by reference in such
Loan Document. References to any document, instrument, or agreement (a) shall
include all exhibits, schedules, and other attachments thereto, and (b) shall
include all documents, instruments, or agreements issued or executed in
replacement thereof. Titles appearing at the beginning of any subdivisions are
for convenience only and do not constitute any part of such subdivisions and
shall be disregarded in construing the language contained in such subdivisions.
The words "this Agreement," "this instrument," "herein," "hereof," "hereby,"
"hereunder" and words of similar import refer to this Agreement as a whole and
not to any particular subdivision unless expressly so limited. The phrases "this
section" and "this subsection" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
limitation." Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires. Accounting terms have the meanings assigned to them by GAAP, as
applied to the entity to which such terms refer. References to "days" shall mean
calendar days, unless the term "Business Day" is used. Unless otherwise
specified, references herein to any particular Person also refer to its
successors and permitted assigns.
Section 1.5 Calculations and Determinations. All calculations under the
Loan Documents of interest chargeable with respect to Eurodollar Loans and of
fees shall be made on the basis of actual days elapsed (including the first day
but excluding the last) and a year of 360 days. All calculations under the Loan
Documents of interest chargeable with respect to Base Rate Loans shall be made
on the basis of actual days elapsed (including the first day but excluding the
last) and a year of 365 or 366 days, as appropriate. Each determination by a
Lender Party of amounts to be paid under Article III or any other matters which
are to be determined hereunder by a Lender Party (such as any Eurodollar Rate,
Business Day, Interest Period, or Reserve Percentage) shall, in the absence of
manifest error, be conclusive and binding. Unless otherwise expressly provided
herein or unless Majority Lenders otherwise consent all financial statements and
reports furnished to any Lender Party hereunder shall be prepared and all
financial computations and determinations pursuant hereto shall be made in
accordance with GAAP, subject to the last sentence of the definition of GAAP.
Section 1.6 Joint Preparation; Construction of Indemnities and
Releases. This Agreement and the other Loan Documents have been reviewed and
negotiated by sophisticated parties with access to legal counsel and no rule of
construction shall apply hereto or thereto which would require or allow any Loan
Document to be construed against any party because of its role in drafting such
Loan Document. All indemnification and release provisions of this
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
23
Agreement shall be construed broadly (and not narrowly) in favor of the Persons
receiving indemnification or being released.
ARTICLE II - The Loans and Letters of Credit
Section 2.1 Commitments to Lend; Notes.
(a) Revolver Loans. Subject to the terms and conditions hereof,
each Lender agrees to make loans to Borrower (herein called such Lender's
"Revolver Loans") upon Borrower's request from time to time during the
Commitment Period, provided that (i) subject to Sections 3.3, 3.4 and 3.6, all
Lenders are requested to make Loans of the same Type in accordance with their
respective Revolver Percentages and as part of the same Borrowing, (ii) after
giving effect to such Revolver Loans, the Revolver Facility Usage does not
exceed the Revolver Commitment, and (iii) if such Revolver Loans are CE/PA
Revolver Loans, after giving effect to such CE/PA Revolver Loans, the aggregate
amount of all outstanding CE/PA Revolver Loans does not exceed the CE/PA
Sublimit. The aggregate amount of all Revolver Loans in any Borrowing must be
equal to $500,000 or any higher integral multiple of $100,000. Borrower may have
no more than five (5) Borrowings of Eurodollar Loans that are Revolver Loans
outstanding at any time. The obligation of Borrower to repay to each Lender the
aggregate amount of all Revolver Loans made by such Lender, together with
interest accruing in connection therewith, shall be evidenced by a single
promissory note (herein called such Lender's "Revolver Note") made by Borrower
payable to the order of such Lender in the form of Exhibit A-1 with appropriate
insertions. The amount of principal owing on any Lender's Revolver Note at any
given time shall be the aggregate amount of all Revolver Loans theretofore made
by such Lender minus all payments of principal theretofore received by such
Lender on such Revolver Note. Interest on each Revolver Note shall accrue and be
due and payable as provided herein and therein. Each Revolver Note shall be due
and payable as provided herein and therein, and shall be due and payable in full
on the last day of the Commitment Period. Subject to the terms and conditions of
this Agreement, Borrower may borrow, repay, and reborrow under this Section
2.1(a). Unless otherwise directed by Borrower at the time of repayment, any
repayment of principal of Revolver Loans shall be applied, first, to reduce the
principal amount of CE/PA Revolver Loans, and then to the principal amount of
the Revolver Loans other than CE/PA Revolver Loans.
(b) Term Loans. Subject to the terms and conditions hereof
(including Section 10.14), each Lender agrees to make a single advance to
Borrower (herein called such Lender's "Term Loans") on the Closing Date in the
amount of such Lender's Term Commitment set forth on the Lender Schedule,
provided that the aggregate amount of all Term Loans does not exceed the total
Term Commitment. Term Loans shall consist of Base Rate Loans or Eurodollar
Loans, or a combination thereof as Borrower may request in writing as provided
in Section 2.2 or as otherwise provided in Section 2.3; provided that Borrower
may have no more than five (5) Borrowings of Eurodollar Loans that are Term
Loans outstanding at any time. The obligation of Borrower to repay to each
Lender the amount of the Term Loan made by such Lender, together with interest
accruing in connection therewith, shall be evidenced by a single promissory note
(herein called such Lender's "Term Note") made by Borrower payable to the order
of such Lender in the form of Exhibit A-2 with appropriate insertions. The
amount of principal owing on any Lender's Term Note at any given time shall be
the amount of such Lender's Term Loan
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
24
minus all payments of principal theretofore received by such Lender on such Term
Note. Interest on each Term Note shall accrue and be due and payable as provided
herein and therein. Each Term Note shall be due and payable as provided herein
and therein, and shall be due and payable in full on the Maturity Date. No
portion of any Term Loan that has been repaid may be reborrowed.
Section 2.2 Requests for New Loans. Borrower must give to
Administrative Agent written notice (or telephonic notice promptly confirmed in
writing) of any requested Borrowing of Loans to be funded by Lenders. Each such
notice constitutes a "Borrowing Notice" hereunder and must:
(a) specify (i) the aggregate amount of any such Borrowing of Base
Rate Loans and the date on which such Base Rate Loans are to be advanced, or
(ii) the aggregate amount of any such Borrowing of Eurodollar Loans, the date on
which such Eurodollar Loans are to be advanced (which shall be the first day of
the Interest Period which is to apply thereto), and the length of the applicable
Interest Period;
(b) in the case of the Loans on the Closing Date, specify whether
the Loans are Revolver Loans or Term Loans; and
(c) if applicable, designate Revolver Loans as CE/PA Revolver
Loans; and
(d) be received by Administrative Agent not later than 1:00 p.m.,
Boston, Massachusetts time, on (i) the day on which any such Base Rate Loans are
to be made, or (ii) the third Business Day preceding the day on which any such
Eurodollar Loans are to be made.
Each such written request or confirmation must be made in the form and substance
of the "Borrowing Notice" attached hereto as Exhibit B, duly completed. Each
such telephonic request shall be deemed a representation, warranty,
acknowledgment and agreement by Borrower as to the matters which are required to
be set out in such written confirmation. Upon receipt of any such Borrowing
Notice, Administrative Agent shall give each Lender prompt notice of the terms
thereof. If all conditions precedent to such new Loans have been met, each
Lender will on the date requested promptly remit to Administrative Agent at
Administrative Agent's office in Boston, Massachusetts the amount of such
Lender's Loan in immediately available funds, and upon receipt of such funds,
unless to its actual knowledge any conditions precedent to such Loans have been
neither met nor waived as provided herein, Administrative Agent shall promptly
make such Loans available to Borrower. Unless Administrative Agent shall have
received prompt notice from a Lender that such Lender will not make available to
Administrative Agent such Lender's new Loan, Administrative Agent may in its
discretion assume that such Lender has made such Loan available to
Administrative Agent in accordance with this section and Administrative Agent
may if it chooses, in reliance upon such assumption, make such Loan available to
Borrower. If and to the extent such Lender shall not so make its new Loan
available to Administrative Agent, such Lender and Borrower severally agree to
pay or repay to Administrative Agent within three days after demand the amount
of such Loan together with interest thereon, for each day from the date such
amount was made available to Borrower until the date such amount is paid or
repaid to Administrative Agent, with interest at (i) the Federal
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
25
Funds Rate, if such Lender is making such payment and (ii) the interest rate
applicable at the time to the other new Loans made on such date, if Borrower is
making such repayment. If neither such Lender nor Borrower pays or repays to
Administrative Agent such amount within such three-day period, Administrative
Agent shall be entitled to recover from Borrower, on demand, in lieu of the
interest provided for in the preceding sentence, interest thereon at the Default
Rate, calculated from the date such amount was made available to Borrower. The
failure of any Lender to make any new Loan to be made by it hereunder shall not
relieve any other Lender of its obligation hereunder, if any, to make its new
Loan, but no Lender shall be responsible for the failure of any other Lender to
make any new Loan to be made by such other Lender.
Section 2.3 Continuations and Conversions of Existing Loans. Borrower
may make the following elections with respect to Term Loans or Revolver Loans
already outstanding: to Convert, in whole or in part, Base Rate Loans to
Eurodollar Loans, to Convert, in whole or in part, Eurodollar Loans to Base Rate
Loans on the last day of the Interest Period applicable thereto, and to
Continue, in whole or in part, Eurodollar Loans beyond the expiration of such
Interest Period by designating a new Interest Period to take effect at the time
of such expiration. In making such elections, Borrower may combine existing
Loans made pursuant to separate Borrowings into one new Borrowing or divide
existing Loans made pursuant to one Borrowing into separate new Borrowings,
provided that (i) Borrower may have no more than five (5) Borrowings of
Eurodollar Loans that are Revolver Loans or five (5) Borrowings of Eurodollar
Loans that are Term Loans outstanding at any time and (ii) no combinations may
be made between Borrowings constituting Revolver Loans on the one hand and
Borrowings constituting Term Loans on the other hand. To make any such election,
Borrower must give to Administrative Agent written notice (or telephonic notice
promptly confirmed in writing) of any such Conversion or Continuation of
existing Loans, with a separate notice given for each new Borrowing. Each such
notice constitutes a "Continuation/Conversion Notice" hereunder and must:
(a) specify the existing Loans which are to be Continued or
Converted;
(b) specify (i) the aggregate amount of any Borrowing of Base Rate
Loans into which such existing Loans are to be Continued or Converted and the
date on which such Continuation or Conversion is to occur, or (ii) the aggregate
amount of any Borrowing of Eurodollar Loans into which such existing Loans are
to be Continued or Converted, the date on which such Continuation or Conversion
is to occur (which shall be the first day of the Interest Period which is to
apply to such Eurodollar Loans), and the length of the applicable Interest
Period; and
(c) be received by Administrative Agent not later than 1:00 p.m.,
Boston, Massachusetts time, on (i) the day on which any such Continuation or
Conversion to Base Rate Loans is to occur, or (ii) the third Business Day
preceding the day on which any such Continuation or Conversion to Eurodollar
Loans is to occur.
Each such written request or confirmation must be made in the form and substance
of the "Continuation/Conversion Notice" attached hereto as Exhibit C, duly
completed. Each such telephonic request shall be deemed a representation,
warranty, acknowledgment and agreement
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
26
by Borrower as to the matters which are required to be set out in such written
confirmation. Upon receipt of any such Continuation/Conversion Notice,
Administrative Agent shall give each Lender prompt notice of the terms thereof.
Each Continuation/Conversion Notice shall be irrevocable and binding on
Borrower. During the continuance of any Default, Borrower may not make any
election to Convert existing Loans into Eurodollar Loans or Continue existing
Loans as Eurodollar Loans beyond the expiration of their respective and
corresponding Interest Period then in effect. If (due to the existence of a
Default or for any other reason) Borrower fails to timely and properly give any
Continuation/Conversion Notice with respect to a Borrowing of existing
Eurodollar Loans at least three days prior to the end of the Interest Period
applicable thereto, such Eurodollar Loans, to the extent not prepaid at the end
of such Interest Period, shall automatically be Converted into Base Rate Loans
at the end of such Interest Period. No new funds shall be repaid by Borrower or
advanced by any Lender in connection with any Continuation or Conversion of
existing Loans pursuant to this section, and no such Continuation or Conversion
shall be deemed to be a new advance of funds for any purpose; such Continuations
and Conversions merely constitute a change in the interest rate, Interest Period
or Type applicable to already outstanding Loans.
Section 2.4 Use of Proceeds. Borrower shall use all proceeds of the
Term Loans (i) to refinance the term loans and the revolving loans under the
Existing Credit Agreement and (ii) to pay in the ordinary course, on or after
the Closing Date, the current liabilities of Borrower existing on the Closing
Date, (iii) to finance a portion of the Transactions, (iv) to provide working
capital after giving effect to the Transactions, and (v) to pay the
out-of-pocket expenses incurred and fees payable in respect of the Transactions
and this Agreement. Borrower shall use the proceeds of all Revolver Loans (i) to
pay the out-of-pocket expenses incurred and fees payable in respect of the
Transactions and this Agreement, (ii) to the extent of Revolver Loans designated
as CE/PA Revolver Loans, for capital expenditures, including the Bossier
Project, and Permitted Acquisitions, (iii) for working capital purposes, and
(iv) for general business purposes not specified in clauses (i), (ii) and (iii)
of this sentence. Borrower may use the proceeds of the Term Loans or the
Revolver Loans to fund a loan to HHI pursuant to clause (a) of the definition of
Permitted HHI Investments. Borrower shall use all Letters of Credit solely for
the purposes specified in Section 2.7(e). In no event shall any Loan or any
Letter of Credit be used (i) directly or indirectly by any Person for personal,
family, household or agricultural purposes, (ii) for the purpose, whether
immediate, incidental or ultimate, of purchasing, acquiring or carrying any
"margin stock" (as such term is defined in Regulation U promulgated by the Board
of Governors of the Federal Reserve System) or (iii) to extend credit to others
directly or indirectly for the purpose of purchasing or carrying any such margin
stock. Borrower represents and warrants that Borrower is not engaged
principally, or as one of Borrower's important activities, in the business of
extending credit to others for the purpose of purchasing or carrying such margin
stock.
Section 2.5 Optional Prepayments of Loans. Borrower may, upon three
Business Days' notice to Administrative Agent (which notice shall be
irrevocable, and Administrative Agent will promptly give notice to the other
Lenders), from time to time and without premium or penalty (other than
Eurodollar Loan breakage costs, if any) prepay the Loans, in whole or in part,
so long as the aggregate amounts of all partial prepayments of principal on the
Loans equals $200,000 or any higher integral multiple of $100,000. Each
prepayment of principal under this
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
27
section shall be accompanied by all interest then accrued and unpaid on the
principal so prepaid. Any principal or interest prepaid pursuant to this section
shall be in addition to, and not in lieu of, all payments otherwise required to
be paid under the Loan Documents at the time of such prepayment.
Section 2.6 Mandatory Prepayments.
(a) Upon receipt of Net Sale Proceeds that are Excess Sale
Proceeds, Borrower will immediately apply such Excess Sale Proceeds (i) first,
prepay a principal amount of the outstanding Term Loans equal to the Excess Sale
Proceeds and (ii) next, to the extent such Excess Sale Proceeds exceed the
principal amount of the Term Loans, repay the Revolver Loans.
(b) If at any time any Restricted Person shall incur any
Additional Indebtedness, Borrower will (i) first, prepay a principal amount of
the outstanding Term Loans equal to the net cash proceeds (net of underwriters',
purchasers' or arrangers' discounts, commissions and fees, legal, accountancy,
registration, or printing fees and expenses and other fees and expenses incurred
in connection with such offering to be paid or reimbursed by the issuer and net
of any taxes, if any, paid or payable as a result thereof) of such Additional
Indebtedness and (ii) next, to the extent such net cash proceeds exceed the
principal amount of the Term Loans, repay the Revolver Loans. The foregoing
shall not be construed to permit the incurrence of Indebtedness not otherwise
permitted by Section 7.1.
(c) If at any time any Restricted Person shall receive any cash
Equity Contribution (other than contributions from Borrower or a Subsidiary of
Borrower), Borrower will (i) first, prepay a principal amount of the outstanding
Term Loans equal to fifty percent (50%) of the net cash proceeds thereof (net of
underwriters' or purchasers' discounts and commissions, legal, accountancy,
registration, or printing fees and expenses and other fees and expenses incurred
in connection with an offering of Equity to be paid or reimbursed by the issuer
and net of any taxes, if any, paid or payable as a result thereof) and (ii)
next, to the extent that such fifty percent (50%) of net cash proceeds exceeds
the principal amount of the Term Loans, repay the Revolver Loans.
Section 2.7 Letters of Credit. Subject to the terms and conditions
hereof, during the Commitment Period Borrower may request LC Issuer to issue,
amend, or extend the expiration date of, one or more Letters of Credit, provided
that:
(a) after taking such Letter of Credit into account, the aggregate
amount of all outstanding LC Obligations does not exceed $40,000,000;
(b) after taking such Letter of Credit into account, the Revolver
Facility Usage does not exceed the Revolver Commitment at such time;
(c) the expiration date of such Letter of Credit is prior to the
earlier of (i) (A) 75 days after the issuance thereof if issued for the purposes
set forth in clause (e)(i) of this Section, or (B) 365 days after the issuance
thereof if issued for the purposes set forth in clause (e)(ii) of this Section,
and (ii) 30 days prior to the end of the Commitment Period;
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
28
(d) the issuance of such Letter of Credit will be in compliance
with all applicable governmental restrictions, policies, and guidelines and will
not subject LC Issuer to any cost which is not reimbursable under Article III;
(e) such Letter of Credit is (i) related to the purchase or
exchange by Borrower of Hydrocarbon Inventory or (ii) used to satisfy or secure
bonding requirements arising in the ordinary course of business (all such
Letters of Credit for the purposes set forth in this clause (e)(ii) shall not
exceed an aggregate amount at any one time outstanding of $5,000,000) and, in
either case, is in form and upon terms as shall be acceptable to LC Issuer in
its sole and absolute discretion;
(f) all other conditions in this Agreement to the issuance of such
Letter of Credit have been satisfied.
LC Issuer will honor any such request if the foregoing conditions (a) through
(f) (in the following Section 2.8 called the "LC Conditions") have been met as
of the date of issuance, amendment, or extension of such Letter of Credit.
Section 2.8 Requesting Letters of Credit. Borrower must make written
application for any Letter of Credit at least two Business Days before the date
on which Borrower desires for LC Issuer to issue such Letter of Credit. By
making any such written application, unless otherwise expressly stated therein,
Borrower shall be deemed to have represented and warranted that the LC
Conditions described in Section 2.7 will be met as of the date of issuance of
such Letter of Credit. Each such written application for a Letter of Credit must
be made in writing in the form and substance of Exhibit E, the terms and
provisions of which are hereby incorporated herein by reference (or in such
other form as may mutually be agreed upon by LC Issuer and Borrower). If all LC
Conditions for a Letter of Credit have been met as described in Section 2.7 on
any Business Day before 1:00 p.m., Boston, Massachusetts time, LC Issuer will
issue such Letter of Credit on the same Business Day at LC Issuer's Domestic
Lending Office. If the LC Conditions are met as described in Section 2.7 on any
Business Day on or after 1:00 p.m., Boston, Massachusetts time, LC Issuer will
issue such Letter of Credit on the next succeeding Business Day at LC Issuer's
Domestic Lending Office. If any provisions of any LC Application conflict with
any provisions of this Agreement, the provisions of this Agreement shall govern
and control.
Section 2.9 Reimbursement and Participations.
(a) Reimbursement. Each Matured LC Obligation shall constitute a
loan by LC Issuer to Borrower. Borrower promises to pay to LC Issuer, or to LC
Issuer's order, on demand, the full amount of each Matured LC Obligation
together with interest thereon (i) at the Base Rate plus the Base Rate Margin to
and including the second Business Day after the Matured LC Obligation is
incurred and (ii) at the Default Rate applicable to Base Rate Loans on each day
thereafter.
(b) Letter of Credit Advances. If the beneficiary of any Letter of
Credit makes a draft or other demand for payment thereunder then Borrower may,
during the interval between the
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
29
making thereof and the honoring thereof by LC Issuer, request Lenders to make
Revolver Loans to Borrower in the amount of such draft or demand, which Revolver
Loans shall be made concurrently with LC Issuer's payment of such draft or
demand and shall be immediately used by LC Issuer to repay the amount of the
resulting Matured LC Obligation. Such a request by Borrower shall be made in
compliance with all of the provisions hereof, provided that for the purposes of
the first sentence of Section 2.1, the amount of such Revolver Loans shall be
considered, but the amount of the Matured LC Obligation to be concurrently paid
by such Revolver Loans shall not be considered.
(c) Participation by Lenders. LC Issuer irrevocably agrees to
grant and hereby grants to each Lender, and - to induce LC Issuer to issue
Letters of Credit hereunder - each Lender irrevocably agrees to accept and
purchase and hereby accepts and purchases from LC Issuer, on the terms and
conditions hereinafter stated and for such Lender's own account and risk an
undivided interest equal to such Lender's Revolver Percentage of LC Issuer's
obligations and rights under each Letter of Credit issued hereunder and the
amount of each Matured LC Obligation paid by LC Issuer thereunder. Each Lender
unconditionally and irrevocably agrees with LC Issuer that, if a Matured LC
Obligation is paid under any Letter of Credit for which LC Issuer is not
reimbursed in full by Borrower in accordance with the terms of this Agreement
and the related LC Application (including any reimbursement by means of
concurrent Revolver Loans or by the application of LC Collateral), such Lender
shall (in all circumstances and without set-off or counterclaim) pay to LC
Issuer on demand, in immediately available funds at LC Issuer's address for
notices hereunder, such Lender's Revolver Percentage of such Matured LC
Obligation (or any portion thereof which has not been reimbursed by Borrower).
Each Lender's obligation to pay LC Issuer pursuant to the terms of this
subsection is irrevocable and unconditional. If any amount required to be paid
by any Lender to LC Issuer pursuant to this subsection is paid by such Lender to
LC Issuer within three Business Days after the date such payment is due, LC
Issuer shall in addition to such amount be entitled to recover from such Lender,
on demand, interest thereon calculated from such due date at the Federal Funds
Rate. If any amount required to be paid by any Lender to LC Issuer pursuant to
this subsection is not paid by such Lender to LC Issuer within three Business
Days after the date such payment is due, LC Issuer shall in addition to such
amount be entitled to recover from such Lender, on demand, interest thereon
calculated from such due date at the Base Rate plus the Base Rate Margin.
(d) Distributions to Participants. Whenever LC Issuer has in
accordance with this section received from any Lender payment of such Lender's
Revolver Percentage of any Matured LC Obligation, if LC Issuer thereafter
receives any payment of such Matured LC Obligation or any payment of interest
thereon (whether directly from Borrower or by application of LC Collateral or
otherwise, and excluding only interest for any period prior to LC Issuer's
demand that such Lender make such payment of its Revolver Percentage), LC Issuer
will distribute to such Lender its Revolver Percentage of the amounts so
received by LC Issuer; provided, however, that if any such payment received by
LC Issuer must thereafter be returned by LC Issuer, such Lender shall return to
LC Issuer the portion thereof which LC Issuer has previously distributed to it.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
30
(e) Calculations. A written advice setting forth in reasonable
detail the amounts owing under this section, submitted by LC Issuer to Borrower
or any Lender from time to time, shall be conclusive, absent manifest error, as
to the amounts thereof.
Section 2.10 No Duty to Inquire.
(a) Drafts and Demands. LC Issuer is authorized and instructed to
accept and pay drafts and demands for payment under any Letter of Credit without
requiring, and without responsibility for, any determination as to the existence
of any event giving rise to said draft, either at the time of acceptance or
payment or thereafter. LC Issuer is under no duty to determine the proper
identity of anyone presenting such a draft or making such a demand (whether by
tested telex or otherwise) as the officer, representative or agent of any
beneficiary under any Letter of Credit, and payment by LC Issuer to any such
beneficiary when requested by any such purported officer, representative or
agent is hereby authorized and approved. Borrower releases each Lender Party
from, and agrees to hold each Lender Party harmless and indemnified against, any
liability or claim in connection with or arising out of the subject matter of
this section, WHICH INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR
CLAIM IS IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY LENDER PARTY, provided only that no
Lender Party shall be entitled to indemnification for that portion, if any, of
any liability or claim which is proximately caused by its own individual gross
negligence or willful misconduct, as determined in a final judgment.
(b) Extension of Maturity. If the maturity of any Letter of Credit
is extended by its terms or by Law or governmental action, if any extension of
the maturity or time for presentation of drafts or any other modification of the
terms of any Letter of Credit is made at the request of Borrower, or if the
amount of any Letter of Credit is increased at the request of Borrower, this
Agreement shall be binding upon all Restricted Persons with respect to such
Letter of Credit as so extended, increased or otherwise modified, with respect
to drafts and property covered thereby, and with respect to any action taken by
LC Issuer, LC Issuer's correspondents, or any Lender Party in accordance with
such extension, increase or other modification.
(c) Transferees of Letters of Credit. If any Letter of Credit
provides that it is transferable, LC Issuer shall have no duty to determine the
proper identity of anyone appearing as transferee of such Letter of Credit, nor
shall LC Issuer be charged with responsibility of any nature or character for
the validity or correctness of any transfer or successive transfers, and payment
by LC Issuer to any purported transferee or transferees as determined by LC
Issuer is hereby authorized and approved, and Borrower releases each Lender
Party from, and agrees to hold each Lender Party harmless and indemnified
against, any liability or claim in connection with or arising out of the
foregoing, WHICH INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR
CLAIM IS IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY LENDER PARTY, provided only that no
Lender Party shall be entitled to
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
31
indemnification for that portion, if any, of any liability or claim which is
proximately caused by its own individual gross negligence or willful misconduct,
as determined in a final judgment.
Section 2.11 LC Collateral.
(a) Acceleration of LC Obligations. If the Obligations or any part
thereof become immediately due and payable pursuant to Section 8.1 then, unless
the Administrative Agent, acting on the instruction of Majority Lenders, shall
otherwise specifically elect to the contrary (which election may thereafter be
retracted by the Administrative Agent, acting on the instruction of Majority
Lenders, at any time), all LC Obligations shall become immediately due and
payable without regard to whether or not actual drawings or payments on the
Letters of Credit have occurred, and Borrower shall be obligated to pay to LC
Issuer immediately an amount equal to the aggregate LC Obligations which are
then outstanding to be held as LC Collateral. Nothing in this subsection shall,
however, limit or impair any rights which LC Issuer may have under any other
document or agreement relating to any Letter of Credit, LC Collateral or LC
Obligation, including any LC Application, or any rights which any Lender Party
may have to otherwise apply any payments by Borrower and any LC Collateral under
Section 3.1.
(b) Investment of LC Collateral. Pending application thereof, all
LC Collateral shall be invested by LC Issuer in such Cash Equivalents as LC
Issuer may choose in its sole discretion. All interest on (and other proceeds
of) such Investments shall be reinvested or applied to Matured LC Obligations or
other Obligations which are due and payable. When all Obligations have been
satisfied in full, including all LC Obligations, all Letters of Credit have
expired or been terminated, and all of Borrower's reimbursement obligations in
connection therewith have been satisfied in full, LC Issuer shall release any
remaining LC Collateral. Borrower hereby assigns and grants to LC Issuer for the
benefit of Lenders a continuing security interest in all LC Collateral paid by
it to LC Issuer, all Investments purchased with such LC Collateral, and all
proceeds thereof to secure its Matured LC Obligations and its Obligations under
this Agreement, each Note, and the other Loan Documents, and Borrower agrees
that such LC Collateral, Investments and proceeds shall be subject to all of the
terms and conditions of the Security Documents. Borrower further agrees that LC
Issuer shall have all of the rights and remedies of a secured party under the
UCC with respect to such security interest and that an Event of Default under
this Agreement shall constitute a default for purposes of such security
interest.
(c) Payment of LC Collateral. If Borrower is required to provide
LC Collateral for any reason but fails to do so as required, LC Issuer or
Administrative Agent may without prior notice to Borrower or any other
Restricted Person provide such LC Collateral (whether by application of proceeds
of other Collateral, by transfers from other accounts maintained with LC Issuer,
or otherwise) using any available funds of Borrower or any other Person also
liable to make such payments, and LC Issuer or Administrative Agent will give
notice thereof to Borrower promptly after such application or transfer. Any such
amounts which are required to be provided as LC Collateral and which are not
provided on the date required shall, for purposes of each Security Document, be
considered past due Obligations owing hereunder, and LC Issuer is hereby
authorized to exercise its respective rights under each Security Document to
obtain such amounts.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
32
Section 2.12 Interest Rates and Fees; Reduction in Commitment.
(a) Interest Rates. Unless the Default Rate shall apply, (i) each
Base Rate Loan shall bear interest on each day outstanding at the Base Rate plus
the Base Rate Margin in effect on such day and (ii) each Eurodollar Loan shall
bear interest on each day during the related Interest Period at the related
Eurodollar Rate plus the Eurodollar Rate Margin in effect on such day. During a
Default Rate Period, all Loans shall bear interest on each day outstanding at
the applicable Default Rate. The interest rate shall change whenever the
applicable Base Rate, the Base Rate Margin, the Eurodollar Rate or the
Eurodollar Rate Margin changes. In no event shall the interest rate on any Loan
exceed the Highest Lawful Rate.
(b) Commitment Fees. In consideration of each Lender's commitment
to make Revolver Loans, Borrower will pay to Administrative Agent for the
account of each Lender a commitment fee determined on a daily basis equal to the
Commitment Fee Rate in effect on such day times such Lender's Revolver
Percentage of the unused portion of the Revolver Commitment on each day during
the Commitment Period, determined for each such day by deducting from the amount
of the Revolver Commitment at the end of such day the Revolver Facility Usage.
This commitment fee shall be due and payable in arrears on the last day of each
Fiscal Quarter and at the end of the Commitment Period.
(c) Reduction in Revolver Commitment. Borrower shall have the
right from time to time to permanently reduce the Revolver Commitment, provided
that (i) notice of such reduction is given not less than two Business Days prior
to such reduction, (ii) the resulting Revolver Commitment is not less than the
Revolver Facility Usage, and (iii) each partial reduction shall be in an amount
at least equal to $1,000,000 and in multiples of $500,000 in excess thereof.
(d) Letter of Credit Fees. In consideration of LC Issuer's
issuance of any Letter of Credit, Borrower agrees to pay to Administrative
Agent, for the account of all Lenders in accordance with their respective
Revolver Percentages, a letter of credit fee equal to the Letter of Credit Fee
Rate (or the Default Rate during the Default Rate Period) applicable each day
times the face amount of such Letter of Credit. Such fee will be calculated on
the face amount of each Letter of Credit outstanding on each day at the above
applicable rates and will be payable in arrears on the last day of each Fiscal
Quarter. In addition, Borrower will pay to LC Issuer a minimum administrative
issuance fee equal to the greater of $150 or one-eighth percent (0.125%) per
annum of the face amount of each letter of credit and such other fees and
charges customarily charged by the LC Issuer in respect of any issuance,
amendment or negotiation of any Letter of Credit in accordance with the LC
Issuer's published schedule of such charges effective as of the date of such
amendment or negotiation.
(e) Administrative Agent's Fees. In addition to all other amounts
due to Administrative Agent under the Loan Documents, Borrower will pay fees to
Administrative Agent as described in a letter agreement of even date herewith
between Administrative Agent and Borrower.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
33
ARTICLE III - Payments to Lenders
Section 3.1 General Procedures. Borrower will make each payment which
it owes under the Loan Documents to Administrative Agent for the account of the
Lender Party to whom such payment is owed in lawful money of the United States
of America, (unless otherwise expressly provided in this Agreement), without
set-off, deduction or counterclaim, and in immediately available funds. Each
such payment must be received by Administrative Agent not later than noon,
Boston, Massachusetts time, on the date such payment becomes due and payable.
Any payment received by Administrative Agent after such time will be deemed to
have been made on the next following Business Day. Should any such payment
become due and payable on a day other than a Business Day, the maturity of such
payment shall be extended to the next succeeding Business Day, and, in the case
of a payment of principal or past due interest, interest shall accrue and be
payable thereon for the period of such extension as provided in the Loan
Document under which such payment is due. Each payment under a Loan Document
shall be due and payable at the place provided therein and, if no specific place
of payment is provided, shall be due and payable at the place of payment of
Administrative Agent's Note. When Administrative Agent collects or receives
money on account of the Obligations, Administrative Agent shall promptly
distribute all money so collected or received, and each Lender Party shall apply
all such money so distributed, as follows:
(a) first, for the payment of all Obligations which are then due
(and if such money is insufficient to pay all such Obligations, first to any
reimbursements due Administrative Agent under Section 6.9 or 10.4 and then to
the partial payment of all other Obligations then due in proportion to the
amounts thereof, or as Lender Parties shall otherwise agree);
(b) then for the prepayment of amounts owing under the Loan
Documents (other than principal on the Notes) if so specified by Borrower;
(c) then for the prepayment of principal on the Notes, together
with accrued and unpaid interest on the principal so prepaid, and then held as
LC Collateral pursuant to Section 2.11(c); and
(d) last, for the payment or prepayment of any other Obligations.
All payments applied to principal or interest on any Note shall be applied first
to any interest then due and payable, then to principal then due and payable,
and last to any prepayment of principal and accrued interest thereon in
compliance with Sections 2.5 and 2.6, as applicable. All distributions of
amounts described in any of subsections (b), (c) or (d) above shall be made by
Administrative Agent pro rata to each Lender Party then owed Obligations
described in such subsection in proportion to all amounts owed to all Lender
Parties which are described in such subsection; provided that if any Lender then
owes payments to LC Issuer for the purchase of a participation under Section
2.9(c) or to Administrative Agent under Section 9.4, any amounts otherwise
distributable under this section to such Lender shall be deemed to belong to LC
Issuer or Administrative Agent, respectively, to the extent of such unpaid
payments, and Administrative Agent shall apply such amounts to make such unpaid
payments rather than distribute such
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
34
amounts to such Lender. Administrative Agent shall be required to make payments
to each Lender by wire transfer to such Lender's Applicable Lending Office.
Section 3.2 Capital Reimbursement. If either (a) the introduction or
implementation of or the compliance with or any change in or in the
interpretation of any Law, or (b) the introduction or implementation of or the
compliance with any request, directive or guideline from any central bank or
other governmental authority (whether or not having the force of Law) affects or
would affect the amount of capital required or expected to be maintained by any
Lender Party or any corporation controlling any Lender Party, then, within five
Business Days after demand by such Lender Party, Borrower will pay to
Administrative Agent for the benefit of such Lender Party, from time to time as
specified by such Lender Party, such additional amount or amounts which such
Lender Party shall determine to be appropriate to compensate such Lender Party
or any corporation controlling such Lender Party in light of such circumstances,
to the extent that such Lender Party reasonably determines that the amount of
any such capital would be increased or the rate of return on any such capital
would be reduced by or in whole or in part based on the existence of the face
amount of such Lender Party's Loans, Letters of Credit, participations in
Letters of Credit or commitments under this Agreement.
Section 3.3 Increased Cost of Eurodollar Loans or Letters of Credit. If
any applicable Law (whether now in effect or hereinafter enacted or promulgated,
including Regulation D) or any interpretation or administration thereof by any
governmental authority charged with the interpretation or administration thereof
(whether or not having the force of Law):
(a) shall change the basis of taxation of payments to any Lender
Party of any principal, interest, or other amounts attributable to any
Eurodollar Loan or Letter of Credit or otherwise due under this Agreement in
respect of any Eurodollar Loan or Letter of Credit (other than taxes imposed on,
or measured by, the overall net income of such Lender Party or any Applicable
Lending Office of such Lender Party by any jurisdiction in which such Lender
Party or any such Applicable Lending Office is located); or
(b) shall change, impose, modify, apply or deem applicable any
reserve, special deposit or similar requirements in respect of any Eurodollar
Loan or any Letter of Credit (excluding those for which such Lender Party is
fully compensated pursuant to adjustments made in the definition of Eurodollar
Rate) or against assets of, deposits with or for the account of, or credit
extended by, such Lender Party; or
(c) shall impose on any Lender Party or the interbank eurocurrency
deposit market any other condition affecting any Eurodollar Loan or Letter of
Credit, the result of which is to increase the cost to any Lender Party of
funding or maintaining any Eurodollar Loan or of issuing any Letter of Credit or
to reduce the amount of any sum receivable by any Lender Party in respect of any
Eurodollar Loan or Letter of Credit by an amount deemed by such Lender Party to
be material,
then such Lender Party shall promptly notify Administrative Agent and Borrower
in writing of the happening of such event and of the amount required to
compensate such Lender Party for such event (on an after-tax basis, taking into
account any taxes on such compensation),
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
35
whereupon (i) Borrower shall, within five Business Days after demand therefor by
such Lender Party, pay such amount to Administrative Agent for the account of
such Lender Party and (ii) Borrower may elect, by giving to Administrative Agent
and such Lender Party not less than three Business Days' notice, to Convert all
(but not less than all) of any such Eurodollar Loans into Base Rate Loans.
Section 3.4 Notice; Change of Applicable Lending Office. A Lender Party
shall notify Borrower of any event occurring after the date of this Agreement
that will entitle such Lender Party to compensation under Section 3.2, 3.3 or
3.5 hereof as promptly as practicable, but in any event within 90 days, after
such Lender Party obtains actual knowledge thereof; provided, that (i) if such
Lender Party fails to give such notice within 90 days after it obtains actual
knowledge of such an event, such Lender Party shall, with respect to
compensation payable pursuant to Section 3.2, 3.3 or 3.5 in respect of any costs
resulting from such event, only be entitled to payment under Section 3.2, 3.3 or
3.5 hereof for costs incurred from and after the date 90 days prior to the date
that such Lender Party does give such notice and (ii) such Lender Party will
designate a different Applicable Lending Office for the Loans affected by such
event if such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Lender Party, be
disadvantageous to such Lender Party, except that such Lender Party shall have
no obligation to designate an Applicable Lending Office located in the United
States of America. Each Lender Party will furnish to Borrower a certificate
setting forth the basis and amount of each request by such Lender Party for
compensation under Section 3.2, 3.3 or 3.5 hereof.
Section 3.5 Availability. If (a) any change in applicable Laws, or in
the interpretation or administration thereof of or in any jurisdiction
whatsoever, domestic or foreign, shall make it unlawful or impracticable for any
Lender Party to fund or maintain Eurodollar Loans or to issue or participate in
Letters of Credit, or shall materially restrict the authority of any Lender
Party to purchase or take offshore deposits of dollars (i.e., "eurodollars"), or
(b) any Lender Party determines that matching deposits appropriate to fund or
maintain any Eurodollar Loan are not available to it, or (c) any Lender Party
determines that the formula for calculating the Eurodollar Rate does not fairly
reflect the cost to such Lender Party of making or maintaining loans based on
such rate, then, upon notice by such Lender Party to Borrower and Administrative
Agent, Borrower's right to elect Eurodollar Loans from such Lender Party (or, if
applicable, to obtain Letters of Credit) shall be suspended to the extent and
for the duration of such illegality, impracticability or restriction and all
Eurodollar Loans of such Lender Party which are then outstanding or are then the
subject of any Borrowing Notice and which cannot lawfully or practicably be
maintained or funded shall immediately become or remain, or shall be funded as,
Base Rate Loans of such Lender Party. Borrower agrees to indemnify each Lender
Party and hold it harmless against all costs, expenses, claims, penalties,
liabilities and damages which may result from any such change in Law,
interpretation or administration. Such indemnification shall be on an after-tax
basis, taking into account any taxes imposed on the amounts paid as indemnity.
Section 3.6 Funding Losses. In addition to its other obligations
hereunder, Borrower will indemnify each Lender Party against, and reimburse each
Lender Party on demand for, any loss or expense incurred or sustained by such
Lender Party (including any loss or expense
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
36
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by a Lender Party to fund or maintain Eurodollar Loans), as a result of
(a) any payment or prepayment (whether or not authorized or required hereunder)
of all or a portion of a Eurodollar Loan on a day other than the day on which
the applicable Interest Period ends, (b) any payment or prepayment, whether or
not required hereunder, of a Loan made after the delivery, but before the
effective date, of a Continuation/Conversion Notice, if such payment or
prepayment prevents such Continuation/Conversion Notice from becoming fully
effective, (c) the failure of any Loan to be made or of any
Continuation/Conversion Notice to become effective due to any condition
precedent not being satisfied or due to any other action or inaction of any
Restricted Person, or (d) any Conversion (whether or not authorized or required
hereunder) of all or any portion of any Eurodollar Loan into a Base Rate Loan or
into a different Eurodollar Loan on a day other than the day on which the
applicable Interest Period ends. Such indemnification shall be on an after-tax
basis, taking into account any taxes imposed on the amounts paid as indemnity.
Section 3.7 Reimbursable Taxes. Borrower covenants and agrees that:
(a) Borrower will indemnify each Lender Party against and
reimburse each Lender Party for all present and future stamp and other taxes,
duties, levies, imposts, deductions, charges, costs, and withholdings whatsoever
imposed, assessed, levied or collected on or in respect of this Agreement or any
Eurodollar Loans or Letters of Credit (whether or not legally or correctly
imposed, assessed, levied or collected), excluding, however, any taxes imposed
on or measured by the overall net income of Administrative Agent or such Lender
Party or any Applicable Lending Office of such Lender Party (or franchise or
equivalent taxes) by any jurisdiction in which such Lender Party or any such
Applicable Lending Office is located (all such non-excluded taxes, levies, costs
and charges being collectively called "Reimbursable Taxes" in this section).
Such indemnification shall be on an after-tax basis, taking into account any
taxes imposed on the amounts paid as indemnity.
(b) All payments on account of the principal of, and interest on,
each Lender Party's Loans and Note, and all other amounts payable by Borrower to
any Lender Party hereunder, shall be made in full without set-off or
counterclaim and shall be made free and clear of and without deductions or
withholdings of any nature by reason of any Reimbursable Taxes, all of which
will be for the account of Borrower. In the event of Borrower being compelled by
Law to make any such deduction or withholding from any payment to any Lender
Party, Borrower shall pay on the due date of such payment, by way of additional
interest, such additional amounts as are needed to cause the amount receivable
by such Lender Party after such deduction or withholding to equal the amount
which would have been receivable in the absence of such deduction or
withholding. If Borrower should make any deduction or withholding as aforesaid,
Borrower shall within 60 days thereafter forward to such Lender Party an
official receipt or other official document evidencing payment of such deduction
or withholding.
(c) If Borrower is ever required to pay any Reimbursable Tax with
respect to any Eurodollar Loan, Borrower may elect, by giving to Administrative
Agent and such Lender Party not less than three Business Days' notice, to
Convert all (but not less than all) of any such Eurodollar Loan into a Base Rate
Loan, but such election shall not diminish Borrower's obligation to pay all
Reimbursable Taxes.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
37
(d) Notwithstanding the foregoing provisions of this section,
Borrower shall be entitled, to the extent it is required to do so by Law, to
deduct or withhold (and not to make any indemnification or reimbursement for)
income or other similar taxes imposed by the United States of America (other
than any portion thereof attributable to a change in federal income tax Laws
effected after the date hereof) from interest, fees or other amounts payable
hereunder for the account of any Lender Party, other than a Lender Party (i) who
is a U.S. person for Federal income tax purposes or (ii) who has the Prescribed
Forms on file with Administrative Agent (with copies provided to Borrower) for
the applicable year to the extent deduction or withholding of such taxes is not
required as a result of the filing of such Prescribed Forms, provided that if
Borrower shall so deduct or withhold any such taxes, it shall provide a
statement to Administrative Agent and such Lender Party, setting forth the
amount of such taxes so deducted or withheld, the applicable rate and any other
information or documentation which such Lender Party may reasonably request for
assisting such Lender Party to obtain any allowable credits or deductions for
the taxes so deducted or withheld in the jurisdiction or jurisdictions in which
such Lender Party is subject to tax. As used in this section, "Prescribed Forms"
means such duly executed forms or statements, and in such number of copies,
which may, from time to time, be prescribed by Law and which, pursuant to
applicable provisions of (x) an income tax treaty between the United States and
the country of residence of the Lender Party providing the forms or statements,
(y) the Code, or (z) any applicable rules or regulations thereunder, permit
Borrower to make payments hereunder for the account of such Lender Party free of
such deduction or withholding of income or similar taxes.
Section 3.8 Replacement of Lenders. If any Lender Party seeks
reimbursement for increased costs under Sections 3.2 through 3.7, then within
ninety days thereafter - provided no Event of Default then exists - Borrower
shall have the right (unless such Lender Party withdraws its request for
additional compensation) to replace such Lender Party by requiring such Lender
Party to assign its Loans and Notes and its commitments hereunder to an Eligible
Transferee reasonably acceptable to Administrative Agent and Borrower, provided
that: (i) all Obligations of Borrower owing to such Lender Party being replaced
(including such increased costs and any breakage costs with respect to any
outstanding Eurodollar Loans), but excluding principal and accrued interest on
the Notes being assigned) shall be paid in full to such Lender Party
concurrently with such assignment, and (ii) the replacement Eligible Transferee
shall purchase the Note being assigned by paying to such Lender Party a price
equal to the principal amount thereof plus accrued and unpaid interest and
accrued and unpaid commitment fees thereon. In connection with any such
assignment Borrower, Administrative Agent, such Lender Party and the replacement
Eligible Transferee shall otherwise comply with Section 10.5. Notwithstanding
the foregoing rights of Borrower under this section, however, Borrower may not
replace any Lender Party which seeks reimbursement for increased costs under
Section 3.2 through 3.7 unless Borrower is at the same time replacing all Lender
Parties which are then seeking such compensation.
ARTICLE IV - Conditions Precedent to Credit
Section 4.1 Documents to be Delivered. No Lender has any obligation to
make its first Loan, and LC Issuer has no obligation to issue the first Letter
of Credit unless Administrative Agent shall have received all of the following,
at Administrative Agent's office in
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
38
Boston, Massachusetts, duly executed and delivered and in form, substance and
date satisfactory to Administrative Agent and Syndication Agent:
(a) This Agreement and any other documents that Lenders are to
execute in connection herewith.
(b) Each Note.
(c) Each Security Document listed in the Security Schedule.
(d) Certain certificates including:
(i) An "Omnibus Certificate" of the secretary and of the
president of LA GP, which shall contain the names and signatures of the
officers of LA GP authorized to execute Loan Documents and which shall
certify to the truth, correctness and completeness of the following
exhibits attached thereto: (1) a copy of resolutions duly adopted by
the Board of Directors of LA GP and in full force and effect at the
time this Agreement is entered into, authorizing the execution of this
Agreement and the other Loan Documents delivered or to be delivered in
connection herewith and the consummation of the transactions
contemplated herein and therein, (2) a copy of the charter documents of
each Restricted Person and all amendments thereto, certified by the
appropriate official of such Restricted Person's jurisdiction of
organization, and (3) a copy of any bylaws, agreement of limited
partnership or operating agreement of each Restricted Person; and
(ii) A certificate of the president and of the chief financial
officer of LA GP, regarding satisfaction of Section 4.3(a) through (d).
(e) A certificate (or certificates) of the due formation, valid
existence and good standing of each Restricted Person in its respective
jurisdiction of organization, issued by the appropriate authorities of such
jurisdiction, and certificates of each Restricted Person's good standing and due
qualification to do business, issued by appropriate officials in any
jurisdictions in which such Restricted Person owns property subject to Security
Documents.
(f) Documents similar to those specified in subsections (d)(i) and
(e) of this section with respect to each Guarantor and the execution by it of
its guaranty of Borrower's Obligations.
(g) A favorable opinion of Vinson & Elkins L.L.P., counsel to
Restricted Persons, substantially in the form set forth in Exhibit G, and a
favorable opinion of local counsel to Administrative Agent for the state of
Oklahoma satisfactory to Administrative Agent.
(h) The Initial Financial Statements and Initial Projections.
(i) Certificates or binders evidencing Restricted Persons'
insurance in effect on the date hereof accompanied by a certificate of an
appropriate officer confirming that the insurance is in effect as of such date.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
39
(j) Copies of such permits and approvals regarding the property
and business of Restricted Persons as Administrative Agent may request.
(k) Payment of all commitment, facility, agency and other fees
required to be paid to any Lender pursuant to any Loan Documents or any
commitment or fee agreement heretofore entered into.
(l) A certificate of the chief financial officer of LA GP (i)
certifying the Initial Pro Forma Financial Statements of Borrower delivered
pursuant to clause (h) above and reflecting pro forma compliance with each event
specified in Section 7.14, and (ii) certifying that Borrower's Consolidated
EBITDA for the twelve month period ended September 30, 2003 was not less than
$90,000,000.
(m) A certificate of the chief financial officer of General
Partner certifying the Initial Pro Forma Financial Statements of Master
Partnership delivered pursuant to clause (h) above and reflecting pro forma
compliance with each event specified in Section 7.14.
(n) Borrower shall have delivered to Administrative Agent copies
of all charter or other formation documents of Master Partnership and the
Intermediate Entities.
Section 4.2 Contemporaneous Closings. No Lender has any obligation to
make its first Loan, and LC Issuer has no obligation to issue its first Letter
of Credit, unless contemporaneously with the first Loan or Letter of Credit
hereunder the following conditions have been met in form and substance
satisfactory to Administrative Agent and Syndication Agent:
(a) All Transactions contemplated by the Transaction Documents
shall have been consummated in compliance with each of the terms and conditions
thereof. No amendment, modification or waiver shall have been made to any of the
Transaction Documents except as shall have been approved by Administrative Agent
and Syndication Agent.
(b) After giving effect to the consummation of the Transactions,
all representations and warranties made in any Loan Document shall be true on
and as of such date.
(c) Master Partnership shall have received proceeds of an issuance
of Common Units on or after December 31, 2003 in an amount of not less than
$200,000,000 (prior to the payment of applicable discounts, fees, expenses and
commissions).
(d) Administrative Agent shall have received a certificate of
General Partner confirming compliance with the requirements of Section 4.2 (a),
(b) and (c), with attached copies of the Transaction Documents, each certified
as being true, correct and complete.
(e) All obligations under the Existing Credit Agreement shall have
been paid in full, except to the extent they are continued under this Agreement
with respect to any Lender.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
40
Section 4.3 Additional Conditions Precedent. No Lender has any
obligation to make any Loan (including its first), and LC Issuer has no
obligation to issue any Letter of Credit (including its first), unless the
following conditions precedent have been satisfied:
(a) All representations and warranties made by any Restricted
Person in any Loan Document shall be true on and as of the date of such Loan or
the date of issuance of such Letter of Credit as if such representations and
warranties had been made as of the date of such Loan or the date of issuance of
such Letter of Credit except to the extent that such representation or warranty
was made as of a specific date or updated, modified or supplemented as of a
subsequent date with the consent of Majority Lenders.
(b) No Default shall exist at the date of such Loan or the date of
issuance of such Letter of Credit.
(c) (i) No Material Adverse Change shall have occurred, (ii) no
event or circumstance shall have occurred that would reasonably be expected to
cause a Material Adverse Change, (iii) no material adverse change shall have
occurred in the consolidated financial condition, business, operations, assets
or prospects of the Master Partnership and (iv) no event or circumstance shall
have occurred that would reasonably be expected to cause a material adverse
change in the consolidated financial condition, business, operations, assets or
prospects of the Master Partnership, other than, in the case of clauses (iii)
and (iv), changes resulting solely from general, regional, industry-wide, or
economy-wide developments.
(d) Each Restricted Person shall have performed and complied with
all agreements and conditions required in the Loan Documents to be performed or
complied with by it on or prior to the date of such Loan or the date of issuance
of such Letter of Credit.
(e) The making of such Loan or the issuance of such Letter of
Credit shall not be prohibited by any Law and shall not subject any Lender or
any LC Issuer to any penalty or other onerous condition under or pursuant to any
such Law.
(f) Administrative Agent shall have received all documents and
instruments which Administrative Agent has then reasonably requested, in
addition to those described in Section 4.1 (including opinions of legal counsel
for Restricted Persons and Administrative Agent; corporate documents and
records; documents evidencing governmental authorizations, consents, approvals,
licenses and exemptions; and certificates of public officials and of officers
and representatives of Borrower and other Persons), as to (i) the accuracy and
validity of or compliance with all representations, warranties and covenants
made by any Restricted Person in this Agreement and the other Loan Documents,
(ii) the satisfaction of all conditions contained herein or therein, and (iii)
all other matters pertaining hereto and thereto. All such additional documents
and instruments shall be satisfactory to Administrative Agent in form, substance
and date.
ARTICLE V - Representations and Warranties
To confirm each Lender's understanding concerning Restricted Persons
and Restricted Persons' businesses, properties and obligations and to induce
each Lender to enter into this
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
41
Agreement and to extend credit hereunder, Borrower represents and warrants to
each Lender that:
Section 5.1 No Default. No Restricted Person is in default in the
performance of any of the covenants and agreements contained in any Loan
Document. No event has occurred and is continuing which constitutes a Default.
Section 5.2 Organization and Good Standing. Each Restricted Person is
duly organized, validly existing and in good standing under the Laws of its
jurisdiction of organization, having all powers required to carry on its
business and enter into and carry out the transactions contemplated hereby. Each
Restricted Person is duly qualified, in good standing, and authorized to do
business in all other jurisdictions wherein the character of the properties
owned or held by it or the nature of the business transacted by it makes such
qualification necessary except where the failure to so qualify has not had, and
could not reasonably be expected to have, a Material Adverse Effect.
Section 5.3 Authorization. Each Restricted Person has duly taken all
action necessary to authorize the execution and delivery by it of the Loan
Documents to which it is a party and to authorize the consummation of the
transactions contemplated thereby and the performance of its obligations
thereunder. Borrower is duly authorized to borrow funds hereunder.
Section 5.4 No Conflicts or Consents. The execution and delivery by the
various Restricted Persons of the Loan Documents to which each is a party, the
performance by each of its obligations under such Loan Documents, and the
consummation of the transactions contemplated by the various Loan Documents, do
not and will not (i) conflict with any provision of (1) any Law, (2) the
organizational documents of any Restricted Person or any of its Affiliates, or
(3) any agreement, judgment, license, order or permit applicable to or binding
upon any Restricted Person or any of its Affiliates, (ii) result in the
acceleration of any Indebtedness owed by any Restricted Person or any of its
Affiliates, or (iii) result in or require the creation of any Lien upon any
assets or properties of any Restricted Person or any of its Affiliates except as
expressly contemplated in the Loan Documents. Except as expressly contemplated
in the Loan Documents or disclosed in the Disclosure Schedule, no permit,
consent, approval, authorization or order of, and no notice to or filing,
registration or qualification with, any Tribunal or third party is required in
connection with the execution, delivery or performance by any Restricted Person
of any Loan Document or to consummate any transactions contemplated by the Loan
Documents. No Restricted Person is in breach of or in default under any
instrument, license or other agreement applicable to or binding upon such
Restricted Person, which breach or default has had, or could reasonably be
expected to have, a Material Adverse Effect.
Section 5.5 Enforceable Obligations. This Agreement is, and the other
Loan Documents when duly executed and delivered will be, legal, valid and
binding obligations of each Restricted Person which is a party hereto or
thereto, enforceable in accordance with their terms except as such enforcement
may be limited by bankruptcy, insolvency or similar Laws of general application
relating to the enforcement of creditors' rights.
Section 5.6 Initial Financial Statements.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
42
(a) Borrower has heretofore delivered to each Lender true, correct
and complete copies of the Initial Financial Statements.
(b) The Initial Borrower Financial Statements fairly present
Borrower's Consolidated and consolidating financial position at the date thereof
and the Consolidated and consolidating results of Borrower's operations for the
periods thereof, and in the case of the annual Initial Borrower Financial
Statements, Consolidated cash flows for the period thereof. Since the date of
the annual Initial Borrower Financial Statements, no Material Adverse Change has
occurred, except as reflected in the quarterly Initial Borrower Financial
Statements or in the Disclosure Schedule. All Initial Borrower Financial
Statements were prepared in accordance with GAAP.
(c) To the knowledge of Borrower, the Initial Master Partnership
Financial Statements fairly present Master Partnership's Consolidated and
consolidating financial position at the date thereof and the Consolidated and
consolidating results of Master Partnership's operations for the period thereof.
Since the date of the Initial Master Partnership Financial Statements, no
Material Adverse Change has occurred, except as reflected in the Disclosure
Schedule. To the knowledge of Borrower, all Initial Master Partnership Financial
Statements were prepared in accordance with GAAP.
(d) All Initial Pro Forma Financial Statements of Borrower were
prepared in good faith in accordance with GAAP based upon assumptions specified
therein with such pro forma adjustments as have been specified therein. The
Initial Projections of Borrower were prepared in good faith based upon
assumptions specified therein with such pro forma adjustments as have been
accepted by Administrative Agent.
(e) To the knowledge of Borrower, all Initial Pro Forma Financial
Statements of Master Partnership were prepared in good faith in accordance with
GAAP based upon assumptions specified therein with such pro forma adjustments as
have been specified therein. To the knowledge of Borrower, the Initial
Projections of Master Partnership were prepared in good faith based upon
assumptions specified therein with such pro forma adjustments as have been
accepted by Administrative Agent.
Section 5.7 Other Obligations and Restrictions. No Restricted Person
has any outstanding Liabilities of any kind (including contingent obligations,
tax assessments, and unusual forward or long-term commitments) that exceed
$1,000,000 in the aggregate and not shown in the Initial Financial Statements,
disclosed in the Disclosure Schedule or otherwise permitted under Section 7.1.
Each Restricted Person has paid all taxes, assessments, and other governmental
charges or levies imposed upon it or upon its income, profits or property,
except to the extent that any of the foregoing is not yet due or is being in
good faith contested as permitted by Section 6.7.
Section 5.8 Full Disclosure. No written certificate, statement or other
information delivered herewith or heretofore by any Restricted Person to any
Lender in connection with the negotiation of this Agreement or in connection
with any transaction contemplated hereby contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements contained herein or therein, in light of the circumstances under
which they
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
43
were made, not misleading as of the date made or deemed made. All written
information furnished after the date hereof by or on behalf of any Restricted
Person to Administrative Agent or any Lender Party in connection with this
Agreement and the other Loan Documents and the transactions contemplated hereby
and thereby will be true, complete and accurate in every material respect in
light of the circumstances in which made, or based on reasonable estimates on
the date as of which such information is stated or certified. There is no fact
known to any Restricted Person that has not been disclosed to each Lender in
writing which could cause a Material Adverse Change.
Section 5.9 Litigation. Except as disclosed in the Initial Financial
Statements or in the Disclosure Schedule and except for matters that could not
reasonably be expected to exceed $1,000,000 (net of insurance) in the aggregate:
(i) there are no actions, suits or legal, equitable, arbitrative or
administrative proceedings pending, or to the knowledge of any Restricted Person
threatened, against any Restricted Person or affecting any Collateral
(including, without limitation, any which challenge or otherwise pertain to any
Restricted Person's title to any Collateral) before any Tribunal, and (ii) there
are no outstanding judgments, injunctions, writs, rulings or orders by any such
Tribunal against any Restricted Person or any Restricted Person's stockholders,
partners, directors or officers or affecting any Collateral.
Section 5.10 Labor Disputes and Acts of God. Except as disclosed in the
Disclosure Schedule, neither the business nor the properties of any Restricted
Person has been affected by any fire, explosion, accident, strike, lockout or
other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of
the public enemy or other casualty (whether or not covered by insurance), which
has had, or could reasonably be expected to have, a Material Adverse Effect.
Section 5.11 ERISA Plans and Liabilities. All currently existing ERISA
Plans are listed in the Disclosure Schedule. Except as disclosed in the Initial
Financial Statements or in the Disclosure Schedule, no Termination Event has
occurred with respect to any ERISA Plan and all ERISA Affiliates are in
compliance with ERISA in all material respects. No ERISA Affiliate is required
to contribute to, or has any other absolute or contingent liability in respect
of, any "multiemployer plan" as defined in Section 4001 of ERISA. Except as set
forth in the Disclosure Schedule: (i) no "accumulated funding deficiency" (as
defined in Section 412(a) of the Code exists with respect to any ERISA Plan,
whether or not waived by the Secretary of the Treasury or his delegate, and (ii)
the current value of each ERISA Plan's benefits does not exceed the current
value of such ERISA Plan's assets available for the payment of such benefits by
more than $500,000.
Section 5.12 Compliance with Laws. Except as set forth in the
Disclosure Schedule, each Restricted Person has all permits, licenses and
authorizations required in connection with the conduct of its businesses, except
to the extent failure to have any such permit, license or authorization has not
had, and could not reasonably be expected to have, a Material Adverse Effect.
Each Restricted Person is in compliance with the terms and conditions of all
such permits, licenses and authorizations, and is also in compliance with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any Law or in
any regulation, code, plan, order, decree, judgment,
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
44
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, except to the extent failure to comply has not had, and could not
reasonably be expected to have, a Material Adverse Effect. Without limiting the
foregoing, each Restricted Person (i) has filed and maintained all tariffs
applicable to its business with each applicable agency, (ii) and all such
tariffs are in compliance with all Laws administered or promulgated by each
applicable agency and (iii) has imposed charges on its customers in compliance
with such tariffs, all contracts applicable to its business and all applicable
Laws. As used herein, "agency" includes the Federal Energy Regulatory Commission
and each other US federal, state, or local governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over any Restricted
Person or its properties.
Section 5.13 Environmental Laws. Without limiting the provisions of
Section 5.12 and except as set forth in the Disclosure Schedule:
(a) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed, and, to Borrower's knowledge, no investigation or
review is pending or threatened by any Tribunal or any other Person with respect
to any of the following which in the aggregate has had, or could reasonably be
expected to have, a Material Adverse Effect (i) any alleged generation,
treatment, storage, recycling, transportation, disposal, or Release of any
Hazardous Materials, either by any Restricted Person or on any property owned by
any Restricted Person, (ii) any remedial action which might be needed to respond
to any such alleged generation, treatment, storage, recycling, transportation,
disposal, or Release, or (iii) any alleged failure by any Restricted Person to
have any permit, license or authorization required in connection with the
conduct of its business or with respect to any such generation, treatment,
storage, recycling, transportation, disposal, or Release.
(b) No Restricted Person otherwise has any known material
contingent liability in connection with any alleged generation, treatment,
storage, recycling, transportation, disposal, or Release of any Hazardous
Materials.
(c) No Restricted Person has handled any Hazardous Materials,
other than as a generator, on any properties now or previously owned or leased
by any Restricted Person to an extent that such handling has had, or could
reasonably be expected to have, a Material Adverse Effect.
(d) Except to the extent that the following in the aggregate has
not had, and could not reasonably be expected to have, a Material Adverse
Effect:
(i) no PCBs are or have been present at any properties
now or previously owned or leased by any Restricted
Person;
(ii) no asbestos is or has been present at any properties
now or previously owned or leased by any Restricted
Person;
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
45
(iii)there are no underground storage tanks for Hazardous
Materials, active or abandoned, at any properties now
or previously owned or leased by any Restricted Person;
and
(iv) no Hazardous Materials have been Released at, on or
under any properties now or previously owned or leased
by any Restricted Person.
(e) No Restricted Person has transported or arranged for the
transportation of any Hazardous Material to any location which is listed on the
National Priorities List under CERCLA, any location listed for possible
inclusion on the National Priorities List by the Environmental Protection Agency
in CERCLIS, nor, except to the extent that has not had, and could not reasonably
be expected to have, a Material Adverse Effect, any location listed on any
similar state list or which is the subject of federal, state or local
enforcement actions or other investigations which may lead to claims against any
Restricted Person for clean-up costs, remedial work, damages to natural
resources or for personal injury claims, including, but not limited to, claims
under CERCLA.
(f) No property now or previously owned or leased by any
Restricted Person is listed or proposed for listing on the National Priority
list promulgated pursuant to CERCLA, in CERCLIS, nor, except to the extent that
has not had, and could not reasonably be expected to have, a Material Adverse
Effect, on any similar state list of sites requiring investigation or clean-up.
(g) There are no Liens arising under or pursuant to any
Environmental Laws on any of the real properties or properties owned or leased
by any Restricted Person, and no government actions of which Borrower is aware
have been taken or are in process which could subject any of such properties to
such Liens; nor to the knowledge of Borrower, is any Restricted Person required
to place any notice or restriction relating to the presence of Hazardous
Materials at any properties owned by such Restricted Person in any deed to such
properties.
(h) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses for ground water or soil contamination
relating to the Release of Hazardous Materials conducted by or which are in the
possession of any Restricted Person in relation to any properties or facility
now or previously owned or leased by any Restricted Person which have not been
made available to Administrative Agent.
(i) All Restricted Persons are conducting their businesses in
material compliance with all applicable Environmental Laws, and have and are in
compliance with all licenses and permits required under any such Laws, unless
failure to so comply has not had, and could not reasonably be expected to have,
a Material Adverse Effect; (ii) none of the operations or properties of Borrower
or any of its Subsidiaries is the subject of federal, or local investigation
evaluating whether any material remedial action is needed to respond to a
release of any Hazardous Materials into the environment or to the improper
storage or disposal (including storage or disposal at offsite locations) of any
Hazardous Materials, unless such remedial action has not had, and could not
reasonably be expected to have, a Material Adverse Effect; and (iii) no
Restricted Person has filed any notice under any Law indicating that any such
Person is
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
46
responsible for the improper release into the environment, or the improper
storage or disposal, of any material amount of any Hazardous Materials or that
any Hazardous Materials have been improperly released, or are improperly stored
or disposed of, upon any property of any such Person, unless such failure so to
comply has not had, and could not reasonably be expected to have, a Material
Adverse Effect.
Section 5.14 Names and Places of Business. No Restricted Person has,
during the preceding five years, had, been known by, or used any other trade or
fictitious name, except as disclosed in the Disclosure Schedule. Except as
otherwise indicated in the Disclosure Schedule, the chief executive office and
principal place of business of each Restricted Person are (and for the preceding
five years have been) located at the address of Borrower set out in Section
10.3. Except as indicated in the Disclosure Schedule or otherwise disclosed in
writing to Administrative Agent, no Restricted Person has any other office or
place of business.
Section 5.15 Borrower's Subsidiaries. Borrower does not presently have
any Subsidiary or own any stock in any other corporation or association except
those listed in the Disclosure Schedule or disclosed to Administrative Agent in
writing. Neither Borrower nor any Restricted Person is a member of any general
or limited partnership, limited liability company, joint venture or association
of any type whatsoever except those listed in the Disclosure Schedule or
disclosed to Administrative Agent in writing. Borrower owns, directly or
indirectly, the equity membership or partnership interest in each of its
Subsidiaries which is indicated in the Disclosure Schedule or as disclosed to
Administrative Agent in writing.
Section 5.16 Title to Properties; Licenses. Each Restricted Person has
good and defensible title to all of its material properties and assets, free and
clear of all Liens other than Permitted Liens and of all impediments to the use
of such properties and assets in such Restricted Person's business. Each
Restricted Person possesses all licenses, permits, franchises, patents,
copyrights, trademarks and trade names, and other intellectual property (or
otherwise possesses the right to use such intellectual property without
violation of the rights of any other Person) which are necessary to carry out
its business as presently conducted and as presently proposed to be conducted
hereafter, and no Restricted Person is in violation in any material respect of
the terms under which it possesses such intellectual property or the right to
use such intellectual property unless such failure or violation has not had, and
could not reasonably be expected to have, a Material Adverse Effect.
Section 5.17 Government Regulation. Neither Borrower nor any other
Restricted Person owing Obligations is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Investment
Company Act of 1940 (as any of the preceding acts have been amended) or any
other Law which regulates the incurring by such Person of Indebtedness,
including Laws relating to common contract carriers or the sale of electricity,
gas, steam, water or other public utility services.
Section 5.18 Insider. No Restricted Person, nor any Person having
"control" (as that term is defined in 12 U.S.C. Section 375b(9) or in
regulations promulgated pursuant thereto) of any Restricted Person, is a
"director" or an "executive officer" or "principal shareholder" (as those terms
are defined in 12 U.S.C. Section 375b(8) or (9) or in regulations promulgated
pursuant thereto)
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
47
of any Lender, of a bank holding company of which any Lender is a Subsidiary or
of any Subsidiary of a bank holding company of which any Lender is a Subsidiary.
Section 5.19 Solvency. Upon giving effect to the issuance of the Notes,
the execution of the Loan Documents by Borrower and each Guarantor and the
consummation of the transactions contemplated hereby, (i) Borrower and each
Guarantor will be solvent (as such term is used in applicable bankruptcy,
liquidation, receivership, insolvency or similar Laws), and the sum of
Borrower's and each Guarantor's absolute and contingent liabilities, including
the Obligations or guarantees thereof, shall not exceed the fair market value of
such Restricted Person's assets, and (ii) Borrower's and each Guarantor's
capital should be adequate for the businesses in which such Restricted Person is
engaged and intends to be engaged. Neither Borrower nor any Restricted Person
has incurred (whether under the Loan Documents or otherwise), nor does any
Restricted Person intend to incur or believe that it will incur, debts which
will be beyond its ability to pay as such debts mature.
Section 5.20 Credit Arrangements. Except as set forth on the Disclosure
Schedule, neither Master Partnership nor any of its Subsidiaries (other than any
Restricted Person) (for purposes of this Section, the "related party") is party
to or subject to any credit agreement, loan agreement, indenture, purchase
agreement, guaranty or other arrangement providing for or otherwise relating to
any Indebtedness or any extension of credit (or commitment for any extension of
credit) that requires, by a covenant of such related party or otherwise, such
related party to limit or restrict any action of any Restricted Person or that
obligates such related party to cause any Restricted Person to take any action
(other than (i) limitations or restrictions on transactions or dealings between
any related party or any Restricted Person, and (ii) provisions of the type
contained in the Heritage Note Purchase Agreements as in effect on the date of
this Agreement).
Section 5.21 Consummation of Transaction. The Transactions have been
consummated in accordance with the Transaction Documents.
ARTICLE VI - Affirmative Covenants
To conform with the terms and conditions under which each Lender is
willing to have credit outstanding to Borrower, and to induce each Lender to
enter into this Agreement and extend credit hereunder, Borrower covenants and
agrees that until the full and final payment of the Obligations and the
termination of this Agreement, unless Majority Lenders, or all Lenders as
required under Section 10.1, have previously agreed otherwise:
Section 6.1 Payment and Performance. Each Restricted Person will pay
all amounts due under the Loan Documents, to which it is a party, in accordance
with the terms thereof and will observe, perform and comply with every covenant,
term and condition expressed in the Loan Documents to which it is a party.
Section 6.2 Books, Financial Statements and Reports. Each Restricted
Person will at all times maintain full and accurate books of account and
records. Borrower will maintain and will cause its Subsidiaries to maintain a
standard system of accounting, will maintain its Fiscal
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
48
Year, and will furnish the following statements and reports to each Lender at
Borrower's expense:
(a) As soon as available, and in any event within ninety-five (95)
days after (i) August 31, 2004 and (ii) the end of each Fiscal Year thereafter,
(A) complete Consolidated financial statements of Borrower together with all
notes thereto, prepared in reasonable detail in accordance with GAAP, together
with an unqualified opinion, based on an audit using generally accepted auditing
standards, by KPMG Peat Marwick LLP, or other independent certified public
accountants selected by General Partner and acceptable to Administrative Agent,
stating that such Consolidated financial statements have been so prepared and
(B) supporting unaudited consolidating balance sheets, consolidating statements
of income and cash flows and consolidating statement of partners' capital (or
stockholders' equity, as applicable) of each other Restricted Person. These
financial statements shall contain a Consolidated and consolidating balance
sheet as of the end of such Fiscal Year and Consolidated and consolidating
statements of earnings for such Fiscal Year. Such Consolidated financial
statements shall set forth in comparative form the corresponding figures for the
preceding Fiscal Year (or comparable period). In addition, at the time of
delivery of such statements, Borrower will furnish a certificate signed by such
accountants (A) stating that they have read this Agreement, (B) confirming the
calculations made by Borrower showing compliance (or non-compliance) at the end
of such Fiscal Year with the requirements of Section 7.14, and (C) further
stating that in making their examination and reporting on the Consolidated
financial statements described above they obtained no knowledge of any Default
existing at the end of such Fiscal Year, or, if they did so conclude that a
Default existed, specifying its nature and period of existence.
(b) As soon as available, and in any event no later than January
30, 2004 with respect to the Fiscal Quarter ended on November 30, 2003, and
within fifty (50) days after the end of each Fiscal Quarter thereafter, (i)
Borrower's Consolidated balance sheet as of the end of such Fiscal Quarter and
Borrower's Consolidated statements of income, partners' capital and cash flows
for such Fiscal Quarter and for the period from the beginning of the then
current Fiscal Year to the end of such Fiscal Quarter, and (ii) supporting
consolidating balance sheets and statements of income of each other Restricted
Person, all in reasonable detail and prepared in accordance with GAAP, subject
to changes resulting from normal year-end adjustments. Such Consolidated
financial statements shall set forth in comparative form the corresponding
figures for the preceding Fiscal Year. In addition Borrower will, together with
each such set of financial statements and each set of financial statements
furnished under subsection (a) of this section, furnish a certificate in the
form of Exhibit F, signed on behalf of Borrower by the chief financial officer,
principal accounting officer or treasurer of General Partner, stating that such
financial statements are accurate and complete in all material respects
(subject, in the case of Fiscal Quarter-end statements, to normal year-end
adjustments), stating that he has reviewed the Loan Documents, containing
calculations showing compliance (or non-compliance) at the end of such Fiscal
Quarter with the requirements of Section 7.14, and stating that no Default
exists at the end of such Fiscal Quarter or at the time of such certificate or
specifying the nature and period of existence of any such Default.
(c) As soon as practical and in any event within ninety five (95)
days after the end of each Fiscal Year, (i) complete Consolidated financial
statements of Master Partnership, together
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
49
with all notes thereto, setting forth in each case, in comparative form,
corresponding Consolidated figures from the preceding annual audit, all in
reasonable detail supported by Grant Thornton LLP, or other independent public
accountants of recognized national standing selected by Master Partnership,
whose report shall be without limitation as to the scope of the audit (provided
that such report shall not include within the scope of the audit the
consolidating statements required by clause (ii)); provided however, that at any
time when Master Partnership shall be subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, delivery within the time period
specified above of copies of the Annual Report on Form 10-K of Master
Partnership for such Fiscal Year prepared in compliance with the requirements
therefor and filed with the Commission shall be deemed to satisfy the
requirements of this clause (c)(i), and (ii) if requested by Administrative
Agent, consolidating balance sheets, statements of income and cash flows and a
consolidating statement of partners' capital (or stockholders' equity, as
applicable) of Master Partnership and its Subsidiaries for such Fiscal Year,
setting forth, in each case, in comparative form, figures for the preceding
Fiscal Year, certified by an authorized financial officer of Master Partnership
as presenting fairly, in all material respects, the information contained
therein, in accordance with GAAP (except for the absence of footnotes).
(d) As soon as practical and in any event within fifty (50) days
after the end of each Fiscal Quarter, (i) Master Partnership's Consolidated
balance sheet as of the end of such Fiscal Quarter and Master Partnership's
Consolidated statements of income, partners' capital and cash flows for such
Fiscal Quarter for the period from the beginning of the current Fiscal Year to
the end of such Fiscal Quarter, setting forth in each case, in comparative form,
figures for the corresponding period in the preceding Fiscal Year, all in
reasonable detail and satisfactory in form to Administrative Agent and certified
by an authorized financial officer of Master Partnership as presenting fairly,
in all material respects, the information contained therein (except for the
absence of footnotes and subject to changes resulting from normal year-end
adjustments), in accordance with GAAP; provided however, that at any time when
Master Partnership shall be subject to the reporting requirements of Section 13
or 15(d) of the Exchange Act, delivery within the time period specified above of
copies of the Quarterly Report on Form 10-Q of Master Partnership for such
Fiscal Quarter prepared in accordance with the requirements therefor and filed
with the Commission shall be deemed to satisfy the requirements of this clause
(d)(i), and (ii) if requested by Administrative Agent, consolidating balance
sheets and statements of income of Master Partnership and its Subsidiaries for
such Fiscal Quarter, setting forth in each case, in comparative form, figures
for the corresponding period in the preceding Fiscal Year, all in reasonable
detail and satisfactory in form to Administrative Agent and certified by an
authorized financial officer of Master Partnership as presenting fairly, in all
material respects, the information contained therein (except for the absence of
footnotes and subject to changes resulting from normal year-end adjustments), in
accordance with GAAP.
(e) As soon as available, and in any event within one hundred
twenty (120) days after the end of each Fiscal Year, a business and financial
plan for Borrower (in form reasonably satisfactory to Administrative Agent),
prepared or caused to be prepared by a senior financial officer thereof, setting
forth for the first year thereof, quarterly financial projections and budgets
for Borrower, and thereafter yearly financial projections during the Commitment
Period.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
50
(f) As soon as available, and in any event within thirty (30) days
after the end of each Fiscal Year, an environmental compliance certificate
signed by the president or chief executive officer of General Partner in the
form attached hereto as Exhibit H. Further, if requested by Administrative
Agent, Restricted Persons shall permit and cooperate with an environmental and
safety review made in connection with the operations of Restricted Persons'
properties one time during each Fiscal Year, by consultants selected by
Administrative Agent and reasonably acceptable to Borrower, which review shall,
if requested by Administrative Agent, be arranged and supervised by
environmental legal counsel for Administrative Agent, and the reasonable cost
and expense of such consultant shall be paid by Borrower. The consultant shall
render a verbal or written report, as specified by Administrative Agent, based
upon such review at Restricted Persons' cost and expense and, if in writing, a
copy thereof will be provided to Restricted Persons.
(g) Concurrently with the annual renewal of Restricted Persons'
insurance policies, Restricted Persons shall at their own cost and expense, if
requested by Administrative Agent in writing, cause a certificate or report to
be issued by Administrative Agent's professional insurance consultants or other
insurance consultants satisfactory to Administrative Agent certifying that
Restricted Persons' insurance for the next succeeding year after such renewal
(or for such longer period for which such insurance is in effect) complies with
the provisions of this Agreement and the Security Documents.
(h) By 10:00 a.m., Boston Massachusetts time, the first Monday of
each Fiscal Quarter, a report on a mark to market basis of all Hedging Contracts
in respect of commodities or purchase, sale or other contracts related to
commodities that are not priced on an index that eliminates price risk as of the
close of business on the previous Friday, and together with such report a
complete list of all net realized losses on any contracts of that type for the
prior twelve months in form satisfactory to Administrative Agent.
(i) As soon as available, and in any event no later than the time
of delivery of the financial statements under Section 6.2(b), a report setting
forth volumes, prices and margins for all marketing, gathering and processing
activities of Borrower and its Subsidiaries, in form satisfactory to
Administrative Agent.
(j) As soon as available, and in any event no later than the time
of delivery of the financial statements under Section 6.2(b), reports of
commodity price-risk mitigation activities (which shall include all Lender
Hedging Obligation positions), plant operating statements, capital expenditures,
and other acquisitions and divestitures of Borrower and its Subsidiaries, in
form satisfactory to Administrative Agent.
Section 6.3 Other Information and Inspections. Each Restricted Person
will furnish to each Lender any information which Administrative Agent or any
Lender may from time to time reasonably request concerning any covenant,
provision or condition of the Loan Documents or any matter in connection with
Restricted Persons' businesses and operations. Each Restricted Person will
permit representatives appointed by Administrative Agent (including independent
accountants, auditors, agents, attorneys, appraisers and any other Persons) to
visit and inspect during normal business hours any of such Restricted Person's
property, including its books of
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51
account, other books and records, and any facilities or other business assets,
and to make extra copies therefrom and photocopies and photographs thereof, and
to write down and record any information such representatives obtain, and each
Restricted Person shall permit Administrative Agent or its representatives to
investigate and verify the accuracy of the information furnished to
Administrative Agent or any Lender in connection with the Loan Documents and to
discuss all such matters with its officers, employees and, upon prior notice to
Borrower, its representatives. Without limitation of the foregoing, within
ninety (90) days after the Closing Date and on each anniversary of the Closing
Date, and in addition once during each Fiscal Year, if requested by
Administrative Agent at the instruction of Majority Lenders, Borrower shall
permit commercial financial examiners appointed by Administrative Agent to
conduct a commercial finance examination of the business and assets of
Restricted Persons and in connection with such examination to have full access
to and the right to examine, audit, make abstracts and copies from, and inspect
Restricted Persons' records, files, books of account and all other documents,
instruments and agreements to which a Restricted Person is a party. Borrower
shall pay all reasonable costs and expenses of Administrative Agent associated
with any such examination.
Section 6.4 Notice of Material Events and Change of Address. Each
Restricted Person will notify each Lender Party, not later than five (5)
Business Days after any executive officer of Restricted Persons has knowledge
thereof, stating that such notice is being given pursuant to this Agreement, of:
(a) the occurrence of any Material Adverse Change,
(b) the occurrence of any Default,
(c) the acceleration of the maturity of any Indebtedness owed by
any Restricted Person or of any default by any Restricted Person under any
indenture, mortgage, agreement, contract or other instrument to which any of
them is a party or by which any of them or any of their properties is bound, if
such acceleration or default could cause a Material Adverse Change,
(d) the occurrence of any Termination Event,
(e) Under any Environmental Law, any claim of $1,000,000 or more,
any notice of potential liability which might reasonably be expected to exceed
such amount, or any other material adverse claim asserted against any Restricted
Person or with respect to any Restricted Person's properties taken as a whole,
(f) the filing of any suit or proceeding, or the assertion in
writing of a claim against any Restricted Person or with respect to any
Restricted Person's properties in which an adverse decision could reasonably be
expected to have a Material Adverse Effect, and
(g) the occurrence of any event of default by Master Partnership
or any of its Subsidiaries in the payment or performance of (i) any material
obligations such Person is required to pay or perform under the terms of any
indenture, mortgage, deed of trust, security agreement, lease, and franchise, or
other agreement, contract or other instrument or obligation to which it is a
party or by which it or any of its properties is bound, to the extent such
default or event of default could reasonably be expected to have a Material
Adverse Effect in the
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52
consolidated financial condition, business, operations, assets or prospects of
the Master Partnership, or (ii) any Indebtedness.
Upon the occurrence of any of the foregoing (other than with respect to Master
Partnership and its Subsidiaries (other than Restricted Persons)), Restricted
Persons will take all necessary or appropriate steps to remedy promptly any such
Material Adverse Effect, Default, acceleration, default, or Termination Event,
to protect against any such adverse claim, to defend any such suit or
proceeding, and to resolve all controversies on account of any of the foregoing.
Restricted Persons will also notify Administrative Agent and Administrative
Agent's counsel in writing at least twenty Business Days prior to the date that
any Restricted Person changes its name or its location under the Uniform
Commercial Code, furnishing with such notice any necessary financing statement
amendments or requesting Administrative Agent and its counsel to prepare the
same.
Section 6.5 Maintenance of Properties. Each Restricted Person will
maintain, preserve, protect, and keep all Collateral and all other property used
or useful in the conduct of its business in good condition (ordinary wear and
tear excepted) and in compliance with all applicable Laws, and will from time to
time make all repairs, renewals and replacements needed to enable the business
and operations carried on in connection therewith to be promptly and
advantageously conducted at all times.
Section 6.6 Maintenance of Existence and Qualifications. Each
Restricted Person will maintain and preserve its existence and its rights and
franchises in full force and effect and will qualify to do business in all
states or jurisdictions where required by applicable Law, except where the
failure so to qualify has not had, and could not reasonably be expected to have,
a Material Adverse Effect.
Section 6.7 Payment of Trade Liabilities, Taxes, etc. Each Restricted
Person will (a) timely file all required tax returns including any extensions;
(b) timely pay all taxes, assessments, and other governmental charges or levies
imposed upon it or upon its income, profits or property; (c) except with respect
to purchases of Hydrocarbon Inventory, within one hundred twenty (120) days
after the date such goods are delivered or such services are rendered, pay all
Liabilities owed by it on ordinary trade terms to vendors, suppliers and other
Persons providing goods and services used by it in the ordinary course of its
business; (d) pay all Liabilities owed by it to sellers of Hydrocarbon Inventory
on or before the thirty-fifth (35th) day following the last day of the month in
which such Hydrocarbon Inventory was delivered or, if later, the due date for
such Liability that may be specified in the purchase agreement for such
Hydrocarbon Inventory (provided such amounts that are customarily paid following
the submission of invoices have been properly invoiced to such Restricted Person
for at least twenty-five (25) days), (e) pay and discharge when due all other
Liabilities now or hereafter owed by it, other than royalty payments suspended
in the ordinary course of business; and (f) maintain appropriate accruals and
reserves for all of the foregoing in accordance with GAAP. Each Restricted
Person may, however, delay paying or discharging any of the foregoing so long as
it is in good faith contesting the validity thereof (or the amount thereof that
remains unpaid) by appropriate proceedings, if necessary, and has set aside on
its books adequate cash reserves therefor in amounts that are required by GAAP.
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53
Section 6.8 Insurance. Each Restricted Person shall at all times
maintain insurance for its property in accordance with the Insurance Schedule
which insurance shall be by financially sound and reputable insurers. Each
Restricted Person will maintain any additional insurance coverage as described
in the respective Security Documents. Upon demand by Administrative Agent any
insurance policies covering Collateral shall be endorsed (a) to provide for
payment of losses to Administrative Agent as its interests may appear, (b) to
provide that such policies may not be canceled or reduced or affected in any
material manner for any reason without fifteen days prior notice to
Administrative Agent, and (c) to provide for any other matters specified in any
applicable Security Document or which Administrative Agent may reasonably
require. Each Restricted Person shall at all times maintain insurance against
its liability for injury to persons or property in accordance with the Insurance
Schedule, which insurance shall be by financially sound and reputable insurers.
Without limiting the foregoing, each Restricted Person shall at all time
maintain liability insurance in accordance with the Insurance Schedule.
Section 6.9 Performance on Borrower's Behalf. If any Restricted Person
fails to pay any taxes, insurance premiums, expenses, attorneys' fees or other
amounts it is required to pay under any Loan Document, Administrative Agent may
pay the same after notice of such payment by Administrative Agent is given to
Borrower. Borrower shall immediately reimburse Administrative Agent for any such
payments and each amount paid by Administrative Agent shall constitute an
Obligation owed hereunder which is due and payable on the date such amount is
paid by Administrative Agent.
Section 6.10 Interest. Borrower hereby promises to each Lender to pay
interest at the Default Rate on all Obligations (including Obligations to pay
fees or to reimburse or indemnify any Lender) which Borrower has in this
Agreement promised to pay to such Lender and which are not paid when due. Such
interest shall accrue from the date such Obligations become due until they are
paid.
Section 6.11 Compliance with Agreements and Law. Each Restricted Person
will perform all material obligations it is required to perform under the terms
of each indenture, mortgage, deed of trust, security agreement, lease, and
franchise, and each agreement, contract or other instrument or obligation to
which it is a party or by which it or any of its properties is bound. Each
Restricted Person will conduct its business and affairs in compliance with all
Laws applicable thereto and will maintain in good standing all licenses that may
be necessary or appropriate to carry on its business, except for failures so to
comply that have not had, and could not reasonably be expected to have, a
Material Adverse Effect.
Section 6.12 Environmental Matters; Environmental Reviews.
(a) Each Restricted Person will comply in all material respects
with all Environmental Laws now or hereafter applicable to such Restricted
Person as well as all contractual obligations and agreements with respect to
environmental remediation or other environmental matters and shall obtain, at or
prior to the time required by applicable Environmental Laws, all environmental,
health and safety permits, licenses and other authorizations necessary for its
operations and will maintain such authorizations in full force and effect.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
54
(b) Each Restricted Person will promptly furnish to Administrative
Agent all written notices of violation, orders, claims, citations, complaints,
penalty assessments, suits or other proceedings received by any Restricted
Person or General Partner, or of which it has notice, pending or threatened
against any Restricted Person, the potential liability of which exceeds or might
reasonably be expected to exceed $1,000,000 or could reasonably be expected to
have a Material Adverse Effect if resolved adversely against any Restricted
Person, by any governmental authority with respect to any alleged violation of
or non-compliance with any Environmental Laws or any permits, licenses or
authorizations in connection with its ownership or use of its properties or the
operation of its business.
(c) Each Restricted Person will promptly furnish to Administrative
Agent all requests for information, notices of claim, demand letters, and other
notifications, received by any Restricted Person or General Partner in
connection with its ownership or use of its properties or the conduct of its
business, relating to potential responsibility with respect to any investigation
or clean-up of Hazardous Material at any location, the potential liability of
which exceeds or might reasonably be expected to exceed $1,000,000 or could
reasonably be expected to have a Material Adverse Effect if resolved adversely
against any Restricted Person.
Section 6.13 Evidence of Compliance. Each Restricted Person will
furnish to each Lender at such Restricted Person's expense all evidence which
Administrative Agent from time to time reasonably requests in writing as to the
accuracy and validity of or compliance with all representations, warranties and
covenants made by any Restricted Person in the Loan Documents, the satisfaction
of all conditions contained therein, and all other matters pertaining thereto.
Section 6.14 Agreement to Deliver Security Documents. Restricted
Persons will deliver to further secure the Obligations and any Lender Hedging
Obligations whenever requested by Administrative Agent in its sole and absolute
discretion, deeds of trust, mortgages, chattel mortgages, security agreements,
financing statements and other Security Documents in form and substance
satisfactory to Administrative Agent for the purpose of granting, confirming,
and perfecting first and prior liens or security interests in any real or
personal property now owned or hereafter acquired by any Restricted Person.
Section 6.15 Perfection and Protection of Security Interests and Liens.
Each Restricted Person will from time to time deliver to Administrative Agent
any financing statements, continuation statements, extension agreements and
other documents, properly completed and executed (and acknowledged when
required) by Restricted Persons in form and substance satisfactory to
Administrative Agent, which Administrative Agent requests for the purpose of
perfecting, confirming, or protecting any Liens or other rights in Collateral
securing any Obligations.
Section 6.16 Bank Accounts; Offset. To secure the repayment of the
Obligations, each Restricted Person hereby grants to each Lender a security
interest, a lien, and a right of offset, each of which shall be in addition to
all other interests, liens, and rights of any Lender at common Law, under the
Loan Documents, or otherwise, and each of which shall be upon and against (a)
any and all moneys, securities or other property (and the proceeds therefrom) of
such
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
55
Restricted Person now or hereafter held or received by or in transit to any
Lender from or for the account of such Restricted Person, whether for
safekeeping, custody, pledge, transmission, collection or otherwise, (b) any and
all deposits (general or special, time or demand, provisional or final) of such
Restricted Person with any Lender, and (c) any other credits and claims of such
Restricted Person at any time existing against any Lender, including claims
under certificates of deposit. At any time and from time to time during the
continuance of any Event of Default, each Lender is hereby authorized to
foreclose upon, or to offset against the Obligations then due and payable (in
either case without notice to any Restricted Person), any and all items herein
above referred to. The remedies of foreclosure and offset are separate and
cumulative, and either may be exercised independently of the other without
regard to procedures or restrictions applicable to the other.
Section 6.17 Guaranties of Subsidiaries. Each Subsidiary of Borrower
now existing or created, acquired or coming into existence after the date hereof
shall execute and deliver to Administrative Agent an absolute and unconditional
guaranty of the timely repayment of the Obligations and the due and punctual
performance of the obligations of Borrower hereunder, which guaranty shall be
satisfactory to Administrative Agent in form and substance. Each Subsidiary of
Borrower existing on the date hereof shall duly execute and deliver such a
guaranty prior to the making of any Loan hereunder. Borrower will cause each of
its Subsidiaries to deliver to Administrative Agent, simultaneously with its
delivery of such a guaranty, written evidence satisfactory to Administrative
Agent and its counsel that such Subsidiary has taken all corporate, limited
liability company or partnership action necessary to duly approve and authorize
its execution, delivery and performance of such guaranty and any other documents
which it is required to execute.
Section 6.18 Compliance with Agreements. Each Restricted Person shall
observe, perform or comply with any agreement with any Person or any term or
condition of any instrument, if such agreement or instrument is materially
significant to such Restricted Person or to Restricted Persons on a Consolidated
basis or materially significant to any Guarantor, unless any such failure to so
observe, perform or comply is remedied within the applicable period of grace (if
any) provided in such agreement or instrument.
Section 6.19 Rents. By the terms of the various Security Documents,
certain Restricted Persons are and will be assigning to Administrative Agent,
for the benefit of Lender Parties, all of the "Rents" (as defined therein)
accruing to the property covered thereby. Notwithstanding any such assignments,
so long as no Default has occurred and is continuing, (i) such Restricted
Persons may continue to receive and collect from the payors of such Rents all
such Rents, subject, however, to the Liens created under the Security Documents,
which Liens are hereby affirmed and ratified, and free and clear of such Liens,
use the proceeds of the Rents, and (ii) Administrative Agent will not notify the
obligors of such Rents or take any other action to cause proceeds thereof to be
remitted to Administrative Agent. Upon the occurrence of a Default,
Administrative Agent may exercise all rights and remedies granted under the
Security Documents, including the right to obtain possession of all Rents then
held by such Restricted Persons or to receive directly from the payors of such
Rents all other Rents until such time as such Default is no longer continuing.
If Administrative Agent shall receive any Rent proceeds from any payor at any
time other than during the continuance of a Default, then it shall notify
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
56
Borrower thereof and (i) upon request and pursuant to the instructions of
Borrower, it shall, if no Default is then continuing, remit such proceeds to the
Borrower and (ii) at the request and expense of Borrower, execute and deliver a
letter to such payors confirming Restricted Persons' right to receive and
collect Rents until otherwise notified by Administrative Agent. In no case shall
any failure, whether purposed or inadvertent, by Administrative Agent to collect
directly any such Rents constitute in any way a waiver, remission or release of
any of its rights under the Security Documents, nor shall any release of any
Rents by Administrative Agent to such Restricted Persons constitute a waiver,
remission, or release of any other Rents or of any rights of Administrative
Agent to collect other Rents thereafter.
Section 6.20 Operating Practices. Each Restricted Person shall operate
its business in a manner that is consistent with the policies and procedures
approved by the board of directors of General Partner and in effect on, and
delivered to Administrative Agent and Lenders prior to, the date hereof, and
revisions thereto referred to in the following sentence. Borrower shall review
such policies and procedures at least annually, and shall promptly recommend to
the board of directors of General Partner such revisions to such policies and
procedures as may be recommended by Restricted Persons' or, upon consultation
with Borrower and its consultants and at the request of Administrative Agent,
Administrative Agent's third party consultants, to remedy deficiencies in
internal controls, and Borrower shall promptly provide a report to Lenders
regarding such policies and procedures, including such policies and procedures
which the board of directors of General Partner could adopt and has adopted.
Section 6.21 Regarding the Systems. Each Restricted Person will cause
to be maintained in full force and effect all easements, rights of way,
servitudes, leases, and other agreements necessary to the operations of the
Systems and will properly and timely pay all rents and other payments due under
the provisions thereof. No Restricted Person will permit any of the Systems to
be subject to any contractual or other arrangement for gathering, transporting,
storage or other services (except for contractual or other arrangements existing
on the date of this Agreement which represent not more than two percent (2%) of
the Consolidated annual revenue of Borrower) (i) whereby payment is or can be
deferred for a substantial period after the month in which performance occurred
or is or can be made other than in cash, (ii) which is not on a bona fide
arms-length basis and at commercial reasonable prices, on terms which are
customary in the industry, or (iii) for which prepayments have been received
other than prepayments for services to be performed and settled within 60 days
after the date of such prepayment in the ordinary course of business. No
Restricted Person will permit to exist any imbalances in respect to the Systems
except for those imbalances incurred in the ordinary course of business that are
settled within 60 days after the end of the month in which such imbalance
occurs. No Restricted Person will permit to exist curtailment of services in
connection with the Systems other than as required by applicable Laws or as a
result of events of force majeure. Restricted Persons will use reasonable
efforts to cure any events of force majeure. No Restricted Person will permit to
exist any contract in connection with the Systems for consideration or other
terms in contravention of applicable Laws and will not receive consideration
other than in accordance with applicable contracts and applicable Laws. Each
Restricted Person will cause all material equipment, improvements, fixtures and
other tangible personal property forming a part of the Systems to remain located
on the real property constituting part of the Systems except for (i) portions
thereof temporarily located elsewhere in the course of normal operations of the
Systems, (ii)
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57
temporary relocation of meters, treatment units, and other equipment at storage
locations and on terms acceptable to Administrative Agent, and (iii) sales or
disposals permitted by Section 7.5. Each Restricted Person will at all times
cause to be maintained all material governmental licenses and permits necessary
or appropriate to own and operate the Systems. No Restricted Person will permit
any Systems or any material part thereof to be leased to a third party, to cease
to operate (except as a result of customary events of force majeure) or to be
abandoned.
Section 6.22 Maintenance of Separateness.
(a) Borrower will, and will cause each other Restricted Person to:
(i) maintain books and records separate from those of any
other Person, including any of its partnership interest
holders or any Affiliate or Subsidiary;
(ii) maintain its assets in such a manner that it is not more
costly or difficult to segregate, identify or ascertain such
assets; and
(iii) observe all organizational formalities.
(b) Borrower and the other Restricted Persons, collectively, will:
(i) hold themselves out to creditors and the public as
separate and distinct from any other Person, including General
Partner, Master Partnership and their Subsidiaries (other than
Restricted Persons);
(ii) conduct their business in their respective names or in
business names or trade names of the Borrower, and use
stationary, invoices and checks separate from those of General
Partner, Master Partnership and their Subsidiaries (other than
Restricted Persons); and
(iii) not assume, guarantee or pay the debts or obligations of
or hold themselves out as being available to satisfy the
obligations of any other Person, including General Partner,
Master Partnership and their Subsidiaries (other than
Restricted Persons), except as is expressly permitted by the
terms of this Agreement.
(c) To the extent that Borrower or any other Restricted Person
shares the same officers or other employees as any of its Affiliates (other than
another Restricted Person), the salaries of and expenses relating to providing
benefits to such officers and employees shall be fairly allocated among such
entities, and each such entity shall bear its fair share of the salary and
benefit costs associates with all such common officers and employees.
(d) To the extent that Borrower or any other Restricted Person
jointly contracts with any of its Affiliates (other than another Restricted
Person) to do business with vendors or service providers or to share overhead
expenses, the costs incurred in doing so shall be allocated fairly among such
entities and each such entity shall bear its fair share of such costs. To the
extent that Borrower or any other Restricted Person contracts or does business
with vendors or service providers where the goods and services are partially for
the benefit of an Affiliate (other than
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58
another Restricted Person), the costs incurred in doing so shall be fairly
allocated to or among such entities for whose benefit the goods and services are
provided, and each such entity shall bear its fair share of such costs.
(e) To the extent that Borrower or any other Restricted Person
have officers in the same location as any of its Affiliates, (other than another
Restricted Person), there shall be a fair and appropriate allocation of overhead
costs among them, and each such entity shall bear its fair share of such
expenses.
ARTICLE VII - Negative Covenants
To conform with the terms and conditions under which each Lender is
willing to have credit outstanding to Borrower, and to induce each Lender to
enter into this Agreement and make the Loans, Borrower covenants and agrees that
until the full and final payment of the Obligations and the termination of this
Agreement, unless Majority Lenders, or all Lenders as required under Section
10.1, have previously agreed otherwise:
Section 7.1 Indebtedness. No Restricted Person will in any manner owe
or be liable for Indebtedness except:
(a) the Obligations;
(b) Indebtedness of Borrower arising under Hedging Contracts
permitted under Section 7.3;
(c) Indebtedness of any Restricted Person owing to another
Restricted Person;
(d) guaranties by Borrower of trade payables of any of its
Subsidiaries incurred and paid in the ordinary course of business on ordinary
trade terms;
(e) Permitted Subordinated Debt;
(f) 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 2 Business Days after its incurrence;
(g) Indebtedness owed to any Person providing workers'
compensation, health, disability or other employee benefits or property,
casualty or liability insurance to any Restricted Person in the ordinary course
of business, pursuant to reimbursement or indemnification obligations to such
Person;
(h) Indebtedness 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
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59
(i) other Indebtedness of Borrower not to exceed in the aggregate
principal amount of $5,000,000 at any one time outstanding.
Section 7.2 Limitation on Liens. No Restricted Person will create,
assume or permit to exist (i) any Lien upon any accounts, inventory, cash or
investment securities which constitute Collateral except (A) Permitted Inventory
Liens, (B) statutory Liens in respect of First Purchase Payables, (C) Liens
described in clauses (a), (c), (e) and (f) of clause (ii) below, and (D) any
other Liens expressly permitted to encumber such Collateral under any Security
Document covering such Collateral or (ii) any Lien upon any of the properties or
assets, other than such Collateral described in clause (i) above which it now
owns or hereafter acquires except the following (Liens, to the extent permitted
by this Section, herein called "Permitted Liens"):
(a) Liens created pursuant to this Agreement or the Security
Documents and Liens existing on the date of this Agreement and listed in the
Disclosure Schedule.
(b) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or the validity of which is being contested
in good faith and by appropriate proceedings, if necessary, for which adequate
reserves are maintained on the books of any Restricted Person in accordance with
GAAP;
(c) pledges or deposits of cash or securities under worker's
compensation, unemployment insurance or other social security legislation;
(d) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, landlord's, or other like Liens (including, without limitation,
Liens on property of any Restricted Person in the possession of storage
facilities, pipelines or barges) arising in the ordinary course of business for
amounts which are not more than 60 days past due or the validity of which is
being contested in good faith and by appropriate proceedings, if necessary, and
for which adequate reserves are maintained on the books of any Restricted Person
in accordance with GAAP;
(e) Liens on cash margin collateral securing only Hedging
Contracts permitted under Section 7.3;
(f) deposits of cash or securities to secure the performance of
bids, trade contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the use
of real property or minor imperfections in title thereto which, in the
aggregate, are not material in amount, and which do not in any case materially
detract from the value of the property subject thereto or interfere with the
ordinary conduct of the business of any Restricted Person;
(h) Liens in respect of operating leases and Capital Leases
permitted under Section 7.1 covering only the property subject thereto;
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60
(i) rights reserved to or vested in any governmental authority by
the terms of any right, power, franchise, grant, license or permit, or by any
provision of law, to revoke or terminate any such right, power, franchise,
grant, license or permit or to condemn or acquire by eminent domain or similar
process;
(j) rights reserved to or vested by Law in any governmental
authority to in any manner, control or regulate in any manner any of the
properties of any Restricted Person or the use thereof or the rights and
interests of any Restricted Person therein, in any manner under any and all
Laws;
(k) rights reserved to the grantors of any properties of any
Restricted Person, and the restrictions, conditions, restrictive covenants and
limitations, in respect thereto, pursuant to the terms, conditions and
provisions of any rights-of-way agreements, contracts or other agreements
therewith;
(l) inchoate Liens in respect of pending litigation or with
respect to a judgment which has not resulted in an Event of Default under
Section 8.1; and
(m) Liens existing on any property of a Person at the time such
Person becomes a Restricted Person or existing at the time of acquisition upon
any property acquired by the purchase, merger or consolidation or otherwise
(whether or not the Indebtedness secured thereby shall have been assumed);
provided, however, that in the case of any such Lien (i) such Lien shall at all
times be confined solely to any such property and, if required by the terms of
the instrument creating such Lien, other property which is an improvement to
such acquired property, (ii) such Lien was not created in anticipation of such
transaction, and (iii) the Indebtedness secured by such Lien shall be permitted
under Section 7.1.
Section 7.3 Hedging Contracts. No Restricted Person will be a party to
or in any manner be liable on:
(a) any Hedging Contract, except:
(i) Hedging Contracts entered into by Borrower with the
purpose and effect of fixing interest rates on a principal amount of
indebtedness of Borrower that is accruing interest at a variable rate;
provided that (A) the aggregate notional amount of such contracts never
exceeds one hundred percent (100%) of the anticipated outstanding
principal balance of the Indebtedness to be hedged by such contracts or
an average of such principal balances calculated using a generally
accepted method of matching interest swap contracts to declining
principal balances, (B) the floating rate index of each such contract
generally matches the index used to determine the floating rates of
interest on the corresponding Indebtedness to be hedged by such
contract and (C) each such contract is with a counterparty or has a
guarantor of the obligation of the counterparty who (unless such
counterparty is a Lender or an Affiliate of any Lender at the time such
contract is entered into) at the time the contract is made has
long-term unsecured and unenhanced debt obligations rated BBB+ or Baa1
or better, respectively, by either Rating Agency or is otherwise
acceptable to Majority Lenders.
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61
(ii) Hedging Contracts by a Restricted Person with the purpose
and effect of fixing the price for Hydrocarbon Inventory not to exceed
100% of Projected Open Hydrocarbon Inventory for the current month and
future months; provided, that each such contract is with a counterparty
or has a guarantor of the obligation of the counterparty who (unless
such counterparty is a Lender or an Affiliate of any Lender at the time
such contract is entered into) at the time the contract is made has
long-term unsecured and unenhanced debt obligations rated BBB+ or Baa1
or better, respectively, by either Rating Agency or is otherwise
acceptable to Majority Lenders. "Projected Open Hydrocarbon Inventory"
means (A) the Hydrocarbon Inventory held by such Restricted Person for
which price risk is not otherwise substantially eliminated, or (B) the
Hydrocarbon Inventory anticipated to be acquired and received, or
anticipated to be sold and delivered, by such Restricted Person
(including, without limitation, natural gas liquids from processing by
a Restricted Person), with such volume and period as corresponds to the
volume and period under such Hedging Contract, for which price risk is
not otherwise substantially eliminated (such as Hydrocarbon Inventory
to be acquired or sold under any contract that is priced on index that
substantially eliminates price risk for such Hydrocarbon Inventory).
(b) any commodity, interest rate, currency or other swap, option,
collar or other derivative transaction pursuant to which any Restricted Person
speculates on the movement of commodity prices, securities prices, interest
rates, financial markets, currency markets or other items; provided, that
nothing contained in this sentence shall prohibit any Restricted Person from
entering into non-speculative transactions permitted by Section 7.3(a).
Section 7.4 Limitation on Mergers, Issuances of Securities. Except as
expressly provided in this section, no Restricted Person will (a) enter into any
transaction of merger or consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), or acquire all or a
substantial portion of the business, assets or operations of a Person (whether
in a single transaction or a series of related transactions) of, or capital
stock of, or be a party to any acquisition of, any Person, except (i) Permitted
Investments and (ii) Permitted Acquisitions; or (b) sell, transfer, lease,
exchange, alienate or otherwise dispose of, in one transaction or a series of
transactions, any part of its business or property, whether now owned or
hereafter acquired, except for sales or transfers not prohibited under Section
7.5 hereof. Any Person, other than Borrower, that is a Subsidiary of a
Restricted Person may, however, be merged into or consolidated with (i) another
Subsidiary of such Restricted Person, so long as a Restricted Person is the
surviving business entity, or (ii) such Restricted Person, so long as such
Restricted Person is the surviving business entity. Borrower will not issue any
securities other than (i) limited partnership interests and any options or
warrants giving the holders thereof only the right to acquire such interests,
(ii) general partnership interests issued to LA GP and (iii) debt securities
permitted by Section 7.1. No Subsidiary of Borrower will issue any additional
shares of its capital stock or other securities or any options, warrants or
other rights to acquire such additional shares or other securities except a
direct Subsidiary of a Restricted Person may issue additional shares or other
securities to such Restricted Person or to Borrower so long as such Subsidiary
is a Wholly Owned Subsidiary of Borrower after giving effect thereto. No
Subsidiary of Borrower which is a partnership will allow any diminution of
Borrower's interest (direct or indirect) therein.
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62
Section 7.5 Limitation on Sales of Property. No Restricted Person will
sell, transfer, lease, exchange, alienate or dispose of any Collateral or any of
its other assets or properties or any material interest therein except:
(a) equipment and other personal property and fixtures that are
either (i) obsolete for their intended purposes and disposed of in the ordinary
course of business, or (ii) replaced by personal property or fixtures of
comparable suitability owned by such Restricted Person free and clear of all
Liens except Permitted Liens;
(b) inventory which is sold in the ordinary course of business on
ordinary trade terms;
(c) sales or transfers, subject to the Security Documents, by a
Person (other than Borrower) that is a Subsidiary of a Restricted Person to such
Restricted Person or to a Wholly Owned Subsidiary of such Restricted Person; and
(d) sales, transfers or other dispositions of other property for
fair consideration that are in the best interests of Borrower and do not and
will not materially impair or diminish the value of any Restricted Person's
financial condition, business or operations; provided that:
(i) prior to and immediately after giving effect to such
proposed sale no Default or Event of Default shall exist and be
continuing, and the consummation of any such transaction would not
result in a violation of Section 7.14, calculated for such purpose as
of the date on which such sale is to be consummated on a pro forma
basis after giving effect to any such sale, with Consolidated EBITDA
calculated as at the last day of the most recently ended Fiscal Quarter
as if such sale had occurred on the first day of the relevant four
quarter period;
(ii) such sale is for consideration consisting of not less
than 90% cash;
(iii) the proceeds of such sale, net of legal fees and other
fees and expenses incurred in connection with such sale (the "Net Sale
Proceeds"), shall have been applied as follows: (x) within one hundred
twenty (120) days after the date of such receipt of Net Sale Proceeds
to a Permitted Reinvestment, or (y) to the extent Net Sale Proceeds
have not been applied pursuant to the immediately preceding clause (x),
such amount (the "Excess Sale Proceeds") shall have been applied to
prepay the Term Loans and Revolver Loans as provided in Section 2.6(b)
(as used herein, "Permitted Reinvestment" means capital assets that
will become a part of the Restricted Persons' Hydrocarbon Inventory
marketing, gathering, transmission, processing, treating and pipeline
operations, excluding Maintenance Capital Expenditures, and well hook
up costs;
(iv) upon receipt of Net Sale Proceeds by a Restricted Person
and until the application thereof as provided in clause (iii)(x) or (y)
(such amount herein called the "Unused Proceeds Amount"), such
Restricted Person shall either, or in combination equal to the total of
such Net Sale Proceeds, both (A) maintain such Net Sale Proceeds in a
segregated account with Administrative Agent or (B) apply such Net Sale
Proceeds to prepay the Revolver Loans but without reduction of the
Revolver Commitment; and
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63
(v) Administrative Agent shall have received an officer's
certificate, satisfactory to Administrative Agent, at least 30 days
prior to the consummation of such sale setting forth in reasonable
detail satisfaction of the requirements of clauses (i) and (ii) of this
Section 7.5 (d) and the calculation of the projected Net Sale Proceeds.
Any proceeds of insurance in respect of casualty to property that Borrower has
determined (which determination must be made with reasonable promptness
following such casualty) will not be applied to the repair or replacement
thereof in accordance with the Security Documents shall be treated as Net Sale
Proceeds upon such determination. No Restricted Person will sell, transfer or
otherwise dispose of capital stock of or interest in any of its Subsidiaries
except to Borrower or a Wholly Owned Subsidiary of Borrower. No Restricted
Person will discount, sell, pledge or assign any notes payable to it, accounts
receivable or future income. So long as no Default then exists, Administrative
Agent will, at Borrower's request and expense, execute a release, satisfactory
to Borrower and Administrative Agent, of any Collateral so sold, transferred,
leased, exchanged, alienated or disposed of pursuant to clauses (a), (b) or (d)
of this Section. No Restricted Person will engage in "trading" of Hydrocarbon
Inventory or in the purchase or sale of Hydrocarbon Inventory other than
pipeline loss allowance and physical gains.
Section 7.6 Limitation on Dividends and Redemptions. No Restricted
Person will declare or pay any dividends on, or make any other distribution in
respect of, any class of its capital stock or any partnership, limited liability
company or other interest in it, nor will any Restricted Person directly or
indirectly make any capital contribution of any nature to or purchase, redeem,
acquire or retire any shares of the capital stock of or partnership or limited
liability company interests in any Restricted Person (whether such interests are
now or hereafter issued, outstanding or created), or cause or permit any
reduction or retirement of the capital stock of any Restricted Person, while any
Loan or commitment hereunder is outstanding. Notwithstanding the foregoing, (i)
Subsidiaries of a Restricted Person shall not be restricted, directly or
indirectly, from declaring and paying dividends or making any other
distributions to such Restricted Person, and to such Subsidiary's Subsidiary GP
pursuant to and in accordance with such Subsidiary's partnership agreement, (ii)
no Restricted Person shall be restricted from making capital contributions of
any nature to a Wholly Owned Subsidiary of such Restricted Person, and (iii) so
long as Borrower shall be in pro forma compliance with each covenant set forth
in Section 7.14 prior to and after giving effect to any distribution, and so
long as no Event of Default has occurred and is continuing or would result
therefrom, Borrower may declare or order and make, pay or set apart, during each
Fiscal Quarter, a distribution in respect of its partnership interests if such
distribution, together with all other such distributions during such Fiscal
Quarter do not exceed Available Cash for the immediately preceding Fiscal
Quarter.
Section 7.7 Limitation on Investments and New Businesses. No Restricted
Person will (a) make any expenditure or commitment or incur any obligation or
enter into or engage in any transaction except in the ordinary course of
business, (b) engage directly or indirectly in any business or conduct any
operations except in connection with or incidental to its present businesses and
operations, (c) make any acquisitions of or capital contributions to or other
Investments in any Person, other than Permitted Investments, or (d) make any
other acquisitions of properties or assets except in the ordinary course of
business; provided that the forgoing shall not prohibit any Restricted Person
from making any acquisition of assets consisting of capital
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64
assets that will become a part of the Restricted Persons' Hydrocarbon Inventory
marketing, gathering, transmission, processing, treating and pipeline operations
or any acquisition that is permitted by the terms of this Agreement including
Permitted Acquisitions. All transactions permitted under the foregoing
subsections (a) through (d), inclusive, are subject to Section 7.5. LA GP will
not engage in any business other than the ownership of the general partnership
interest of the Borrower.
Section 7.8 Limitation on Credit Extensions. Except for Permitted
Investments and Hedging Contracts permitted under Section 7.3(a) hereof, no
Restricted Person will extend credit, make advances or make loans other than
normal and prudent extensions of credit to customers buying goods and services
in the ordinary course of business or to another Restricted Person in the
ordinary course of business, which extensions shall not be for longer periods
than those extended by similar businesses operated in a normal and prudent
manner.
Section 7.9 Transactions with Affiliates. No Restricted Person will
engage in any material transaction with any of its Affiliates except: (a)
transactions among Borrower and Wholly Owned Subsidiaries of Borrower, subject
to the other provisions of this Agreement, (b) Permitted HHI Investments, and
(c) transactions entered into in the ordinary course of business of such
Restricted Person on terms which are no less favorable to such Restricted Person
than those which would have been obtainable at the time in arm's-length
transactions with Persons other than such Affiliates.
Section 7.10 Prohibited Contracts. Except as expressly provided for in
the Loan Documents and as described in the Disclosure Schedule, no Restricted
Person will, directly or indirectly, enter into, create, or otherwise allow to
exist any contract or other consensual restriction on the ability of any
Subsidiary of Borrower to: (a) pay dividends or make other distributions to
Borrower, (b) redeem equity interests held in it by Borrower, (c) repay loans
and other indebtedness owing by it to Borrower, or (d) transfer any of its
assets to Borrower. No Restricted Person will, directly or indirectly, enter
into, create, or otherwise allow to exist any contract or other consensual
restriction on the ability of any Restricted Person to create Liens on any of
its assets or property to secure the Obligations. No Restricted Person will
enter into any "take-or-pay" contract or other contract or arrangement for the
purchase of goods or services which obligates it to pay for such goods or
service regardless of whether they are delivered or furnished to it other than
contracts for pipeline capacity or for services in either case reasonably
anticipated to be utilized in the ordinary course of business. No Restricted
Person will amend or permit any amendment to any contract or lease which
releases, qualifies, limits, makes contingent or otherwise detrimentally affects
the rights and benefits of Administrative Agent or any Lender under or acquired
pursuant to any Security Documents. No ERISA Affiliate will incur any obligation
to contribute to any "multiemployer plan" as defined in Section 4001 of ERISA
that is subject to Title IV of ERISA.
Section 7.11 Open Position; Trading. No Restricted Person shall at any
time hold any inventory (excluding any inventory classified as a long term asset
and working inventory not held for resale) or enter into or be obligated under
any purchase or sale contract that is not priced on an index that eliminates
price risk, in either case for which there is not an offsetting sale or purchase
agreement, an offsetting physical inventory position (excluding inventory
classified as
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65
a long term asset and working inventory not held for resale), or an offsetting
Hedging Contract, in each case that eliminates price risk, provided that any
such offsetting agreement, inventory or Hedging Contract shall also eliminate
any unusual or speculative basis risk. No Restricted Person shall fail to settle
within thirty (30) days after the occurrence thereof, any pipeline delivery or
receipt imbalance position or any other imbalance position. However, Restricted
Persons may have such inventory, such purchase or sale obligations, and such
imbalance positions not otherwise permitted by the forgoing sentences of this
Section 7.11; provided, that the aggregate liability of Restricted Persons on
same does not exceed $5,000,000 at any one time. No Restricted Person will
engage in trading, purchasing, selling or exchanging Hydrocarbon Inventory or
any contract therefor except incidental to the business of gathering,
transmitting, blending, storing or marketing by Restricted Persons.
Section 7.12 Deposit Accounts. No Restricted Person shall at any time
maintain any Deposit Account at any Bank (as such terms are defined in Article 9
of the UCC) other than Administrative Agent, except for Deposit Accounts whose
deposits do not at any time exceed the aggregate amount of $1,500,000. No
proceeds of Accounts or other Collateral shall be deposited (whether by check,
wire transfer or lock-box service arrangement) in any Deposit Account other than
a Deposit Account maintained at Administrative Agent or an account subject to an
account access control agreement satisfactory to Administrative Agent.
Section 7.13 Commingling of Deposit Accounts and Accounts. Borrower
will not, nor will it permit any of its Subsidiaries to, commingle their
respective Deposit Accounts or Accounts with the Deposit Accounts or Accounts of
(i) Heritage OLP or any of its Subsidiaries or (ii) Master Partnership or any of
the Intermediate Entities.
Section 7.14 Financial Covenants.
(a) Interest Coverage Ratio. The ratio of Consolidated EBITDA for
each period of four consecutive Fiscal Quarters, to Consolidated Interest
Expense for such period, will never be less than 2.75 to 1.0.
(b) Leverage Ratio. (i) At the end of each Fiscal Quarter, (ii) on
each date on which Borrower makes a distribution permitted under Section 7.6,
and (iii) on the date of each Permitted Acquisition, both immediately prior to
and after giving effect to the consummation thereof, the Leverage Ratio will not
be greater than 4.0 to 1.0.
(c) Adjusted Consolidated Funded Indebtedness to Consolidated
EBITDA. (i) At the end of each Fiscal Quarter, (ii) on each date on which
Borrower makes a distribution permitted under Section 7.6, and (iii) on the date
of each Permitted Acquisition, both immediately prior to and after giving effect
to the consummation thereof, the ratio of Adjusted Consolidated Funded
Indebtedness to Adjusted Consolidated EBITDA will not be greater than (a) 5.25
to 1.0 on any applicable date of determination from the Closing Date and prior
to November 30, 2005, and (b) 5.0 to 1.0 on any applicable date of determination
thereafter.
ARTICLE VIII - Events of Default and Remedies
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66
Section 8.1 Events of Default. Each of the following events constitutes
an Event of Default under this Agreement:
(a) Any Restricted Person fails to pay the principal component of
any Loan or any reimbursement obligation with respect to any Letter of Credit
when due and payable, whether at a date for the payment of a fixed installment
or as a contingent or other payment becomes due and payable or as a result of
acceleration or otherwise;
(b) Any Restricted Person fails to pay any Obligation (other than
the Obligations in subsection (a) above), whether at a date for the payment of a
fixed installment or as a contingent or other payment becomes due and payable or
as a result of acceleration or otherwise, within three Business Days after the
same becomes due;
(c) Any event defined as a "default" or "event of default" in any
Loan Document occurs, and the same is not remedied within the applicable period
of grace (if any) provided in such Loan Document;
(d) Any Restricted Person fails to duly observe, perform or comply
with any covenant, agreement or provision of Section 6.7(d) and such failure
remains unremedied for ten (10) days; or any Restricted Person fails to duly
observe, perform or comply with any covenant, agreement or provision of Section
6.4, Section 6.21 or Article VII;
(e) Any Restricted Person fails (other than as referred to in
subsections (a), (b), (c) or (d) above) to duly observe, perform or comply with
any covenant, agreement, condition or provision of any Loan Document to which it
is a party, and such failure remains unremedied for a period of thirty (30) days
after notice of such failure is given by Administrative Agent to Borrower;
(f) Any representation or warranty previously, presently or
hereafter made in writing by or on behalf of any Restricted Person in connection
with any Loan Document shall prove to have been false or incorrect in any
material respect on any date on or as of which made;
(g) Any Loan Document at any time ceases to be valid, binding and
enforceable as warranted in Section 5.5 for any reason other than its release or
subordination by Lenders or Administrative Agent (as permitted under Section
10.1);
(h) Any Restricted Person shall default in the payment when due of
any principal of or interest on any of its other Indebtedness in excess of
$1,500,000 in the aggregate (other than Indebtedness the validity of which is
being contested in good faith by appropriate proceedings and for which adequate
reserves with respect thereto are maintained on the books of such Restricted
Person in accordance with GAAP), or any event specified in any note, agreement,
indenture or other document evidencing or relating to any such Indebtedness
shall occur if the effect of such event is to cause, or (with the giving of any
notice or the lapse of time or both) to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause, such Indebtedness to become due, or to be prepaid in full (whether by
redemption, purchase, offer to purchase or otherwise), prior to its stated
maturity;
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67
(i) Either (i) any "accumulated funding deficiency" (as defined in
Section 412(a) of the Code) in excess of $1,000,000 exists with respect to any
ERISA Plan, whether or not waived by the Secretary of the Treasury or his
delegate, or (ii) any Termination Event occurs with respect to any ERISA Plan
and the then current value of such ERISA Plan's benefit liabilities exceeds the
then current value of such ERISA Plan's assets available for the payment of such
benefit liabilities by more than $1,000,000 (or in the case of a Termination
Event involving the withdrawal of a substantial employer, the withdrawing
employer's proportionate share of such excess exceeds such amount);
(j) Any Restricted Person:
(i) has entered against it of a judgment, decree or order for
relief by a Tribunal of competent jurisdiction in an involuntary
proceeding commenced under any applicable bankruptcy, insolvency or
other similar Law of any jurisdiction now or hereafter in effect,
including the federal Bankruptcy Code, as from time to time amended, or
has any such proceeding commenced against it, in each case, which
remains undismissed for a period of sixty days; or
(ii) commences a voluntary case under any applicable
bankruptcy, insolvency or similar Law now or hereafter in effect,
including the federal Bankruptcy Code, as from time to time amended; or
applies for or consents to the entry of an order for relief in an
involuntary case under any such Law; or makes a general assignment for
the benefit of creditors; or is generally unable to pay (or admits in
writing its inability to so pay) its debts as such debts become due; or
takes corporate or other action to authorize any of the foregoing; or
(iii) has entered against it the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of all or a substantial part of its
assets in a proceeding brought against or initiated by it, and such
appointment or taking possession is neither made ineffective nor
discharged within sixty days after the making thereof, or such
appointment or taking possession is at any time consented to, requested
by, or acquiesced to by it; or
(iv) has entered against it the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of any part of the Collateral in a
proceeding brought against or initiated by it, and such appointment or
taking possession is neither made ineffective nor discharged within
sixty days after the making thereof, or such appointment or taking
possession is at any time consented to, requested by, or acquiesced to
by it; or
(v) has entered against it a final judgment for the payment of
money in excess of $1,500,000 (in each case not covered by insurance
satisfactory to Administrative Agent in its discretion), unless the
same is discharged within thirty days after the date of entry thereof
or an appeal or appropriate proceeding for review thereof is taken
within such period and a stay of execution pending such appeal is
obtained; or
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68
(vi) suffers a writ or warrant of attachment or any similar
process to be issued by any Tribunal against all or any substantial
part of its assets or any part of the Collateral, and such writ or
warrant of attachment or any similar process is not stayed or released
within thirty days after the entry or levy thereof or after any stay is
vacated or set aside;
(k) Any Change of Control occurs;
(l) Borrower directly or indirectly declares, orders or pays any
dividend on, any distribution in respect of, or any purchase, redemption,
acquisition or retirement of, any partnership or other equity interest in
Borrower, individually or in the aggregate, for any Fiscal Year in an amount
greater than the product of (i) Borrower's Percentage of Aggregate Available
Cash, multiplied by (ii) the Aggregate Partner Obligations;
(m) Master Partnership or any of the Intermediate Entities shall
incur any Indebtedness that is secured or has a weighted average life or
maturity of less than six (6) months after the Maturity Date; or
(n) Any event of default under any agreement governing secured
indebtedness of Heritage OLP relating to (i) bankruptcy, reorganization,
compromise, arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law with respect to Heritage OLP or any of its
Subsidiaries, beyond any period of grace provided with respect thereto in such
agreement, or (ii) non-payment of such secured indebtedness or any other
indebtedness of Heritage OLP or any of its Subsidiaries, subject to the minimum
dollar amount threshold of such indebtedness set forth in such agreement,
provided that such non-payment continues for a period of three (3) Business Days
beyond any period of grace provided with respect thereto in such agreement,
unless, prior to the end of the three (3) Business Day period the lenders party
to such agreement have accelerated the maturity of such indebtedness thereunder
or blocked the payment or otherwise limited the payment by Heritage OLP of any
scheduled "restricted payment" distribution in respect of any partnership or
other equity interest in Heritage OLP, in which case such three (3) Business Day
period shall no longer apply.
Upon the occurrence of an Event of Default described in subsection (j)(i),
(j)(ii) or (j)(iii) of this section with respect to Borrower, all of the
Obligations shall thereupon be immediately due and payable, without demand,
presentment, notice of demand or of dishonor and nonpayment, protest, notice of
protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Borrower and each Restricted Person who at any time
ratifies or approves this Agreement. Upon any such acceleration, any obligation
of any Lender to make any further Loans and any obligation of LC Issuer to issue
Letters of Credit hereunder shall be permanently terminated. During the
continuance of any other Event of Default, Administrative Agent at any time and
from time to time may with the consent of Majority Lenders (and upon written
instructions from Majority Lenders, Administrative Agent shall), without notice
to Borrower or any other Restricted Person, do either or both of the following:
(1) terminate any obligation of Lenders to make Loans hereunder and any
obligation of LC Issuer to issue Letters of Credit hereunder, and (2) declare
any or all of the Obligations immediately due and payable, and all such
Obligations shall thereupon be immediately due and payable, without demand,
presentment, notice of
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69
demand or of dishonor and nonpayment, protest, notice of protest, notice of
intention to accelerate, declaration or notice of acceleration, or any other
notice or declaration of any kind, all of which are hereby expressly waived by
Borrower and each Restricted Person who at any time ratifies or approves this
Agreement.
Section 8.2 Remedies. If any Default shall occur and be continuing,
each Lender Party may protect and enforce its rights under the Loan Documents by
any appropriate proceedings, including proceedings for specific performance of
any covenant or agreement contained in any Loan Document, and each Lender Party
may enforce the payment of any Obligations due it or enforce any other legal or
equitable right which it may have. All rights, remedies and powers conferred
upon Lender Parties under the Loan Documents shall be deemed cumulative and not
exclusive of any other rights, remedies or powers available under the Loan
Documents or at Law or in equity.
Section 8.3 Application of Proceeds after Acceleration. If
Administrative Agent collects or receives money on account of the Obligations
after the acceleration of the Obligations as provided in Section 8.1,
Administrative Agent shall distribute all money so collected or received:
(a) first to any reimbursements due Administrative Agent hereunder
or under any of the Security Documents; and
(b) then ratably to the payment of the Obligations, including LC
Obligations (and among the outstanding Obligations in the manner provided in
Section 3.1), and the Lender Hedging Obligations.
Administrative Agent shall have no responsibility to determine the existence or
amount of Lender Hedging Obligations and may reserve from the application of
amounts under this Section amounts distributable in respect of Lender Hedging
Obligations until it has received evidence satisfactory to it of the existence
and amount of such Lender Hedging Obligations.
ARTICLE IX - Administrative Agent
Section 9.1 Appointment and Authority. Each Lender Party hereby
irrevocably authorizes Administrative Agent, and Administrative Agent hereby
undertakes, to receive payments of principal, interest and other amounts due
hereunder as specified herein and to take all other actions and to exercise such
powers under the Loan Documents as are specifically delegated to Administrative
Agent by the terms hereof or thereof, together with all other powers reasonably
incidental thereto. The relationship of Administrative Agent to the other Lender
Parties is only that of one commercial lender acting as administrative agent for
others, and nothing in the Loan Documents shall be construed to constitute
Administrative Agent a trustee or other fiduciary for any Lender Party or any
holder of any participation in a Note nor to impose on Administrative Agent
duties and obligations other than those expressly provided for in the Loan
Documents. With respect to any matters not expressly provided for in the Loan
Documents and any matters which the Loan Documents place within the discretion
of Administrative Agent, Administrative Agent shall not be required to exercise
any discretion or take any action, and it
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70
may request instructions from Lenders with respect to any such matter, in which
case it shall be required to act or to refrain from acting (and shall be fully
protected and free from liability to all Lender Parties in so acting or
refraining from acting) upon the instructions of Majority Lenders (including
itself) or all Lenders, if required, provided, however, that Administrative
Agent shall not be required to take any action which exposes it to a risk of
personal liability that it considers unreasonable or which is contrary to the
Loan Documents or to applicable Law. Upon receipt by Administrative Agent from
Borrower of any communication calling for action on the part of Lenders or upon
notice from Borrower or any Lender to Administrative Agent of any Default or
Event of Default, Administrative Agent shall promptly notify each other Lender
thereof.
Section 9.2 Exculpation, Administrative Agent's Reliance, Etc. Neither
Administrative Agent nor any of its directors, officers, agents, attorneys, or
employees shall be liable for any action taken or omitted to be taken by any of
them under or in connection with the Loan Documents, INCLUDING THEIR NEGLIGENCE
OF ANY KIND, except that each shall be liable for its own gross negligence or
willful misconduct. Without limiting the generality of the foregoing,
Administrative Agent (a) may treat the payee of any Note as the holder thereof
until Administrative Agent receives written notice of the assignment or transfer
thereof in accordance with this Agreement, signed by such payee and in form
satisfactory to Administrative Agent; (b) may consult with legal counsel
(including counsel for Borrower), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any other
Lender Party and shall not be responsible to any other Lender Party for any
statements, warranties or representations made in or in connection with the Loan
Documents; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of the
Loan Documents on the part of any Restricted Person or to inspect the property
(including the books and records) of any Restricted Person; (e) shall not be
responsible to any other Lender Party for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of any Loan Document or any
instrument or document furnished in connection therewith; (f) may rely upon the
representations and warranties of each Restricted Person or Lender Party in
exercising its powers hereunder; and (g) shall incur no liability under or in
respect of the Loan Documents by acting upon any notice, consent, certificate or
other instrument or writing (including any facsimile, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper Person or Persons.
Section 9.3 Credit Decisions. Each Lender Party acknowledges that it
has, independently and without reliance upon any other Lender Party, made its
own analysis of Borrower and the transactions contemplated hereby and its own
independent decision to enter into this Agreement and the other Loan Documents.
Each Lender Party also acknowledges that it will, independently and without
reliance upon any other Lender Party and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Loan Documents.
Section 9.4 Indemnification. EACH LENDER AGREES TO INDEMNIFY
ADMINISTRATIVE AGENT (TO THE EXTENT NOT REIMBURSED BY BORROWER WITHIN TEN (10)
DAYS AFTER DEMAND) FROM AND AGAINST SUCH LENDER'S PERCENTAGE SHARE OF ANY AND
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71
ALL LIABILITIES, OBLIGATIONS, CLAIMS, LOSSES, DAMAGES, PENALTIES, FINES,
ACTIONS, JUDGMENTS, SUITS, SETTLEMENTS, COSTS, EXPENSES OR DISBURSEMENTS
(INCLUDING REASONABLE FEES OF ATTORNEYS, ACCOUNTANTS, EXPERTS AND ADVISORS) OF
ANY KIND OR NATURE WHATSOEVER (IN THIS SECTION COLLECTIVELY CALLED "LIABILITIES
AND COSTS") WHICH TO ANY EXTENT (IN WHOLE OR IN PART) MAY BE IMPOSED ON,
INCURRED BY, OR ASSERTED AGAINST ADMINISTRATIVE AGENT GROWING OUT OF, RESULTING
FROM OR IN ANY OTHER WAY ASSOCIATED WITH ANY OF THE COLLATERAL, THE LOAN
DOCUMENTS AND THE TRANSACTIONS AND EVENTS (INCLUDING THE ENFORCEMENT THEREOF) AT
ANY TIME ASSOCIATED THEREWITH OR CONTEMPLATED THEREIN (WHETHER ARISING IN
CONTRACT OR IN TORT OR OTHERWISE AND INCLUDING ANY VIOLATION OR NONCOMPLIANCE
WITH ANY ENVIRONMENTAL LAWS BY ANY PERSON OR ANY LIABILITIES OR DUTIES OF ANY
PERSON WITH RESPECT TO HAZARDOUS MATERIALS FOUND IN OR RELEASED INTO THE
ENVIRONMENT).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY OR CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT
ACT OR OMISSION OF ANY KIND BY ADMINISTRATIVE AGENT,
provided only that no Lender shall be obligated under this section to indemnify
Administrative Agent for that portion, if any, of any liabilities and costs
which is proximately caused by Administrative Agent's own individual gross
negligence or willful misconduct, as determined in a final judgment. Cumulative
of the foregoing, each Lender agrees to reimburse Administrative Agent promptly
upon demand for such Lender's Percentage Share of any costs and expenses to be
paid to Administrative Agent by Borrower under Section 10.4(a) to the extent
that Administrative Agent is not timely reimbursed for such expenses by Borrower
as provided in such section. As used in this section the term "Administrative
Agent" shall refer not only to the Person designated as such in Section 1.1 but
also to each director, officer, agent, attorney, employee, representative and
Affiliate of such Person.
Section 9.5 Rights as Lender. In its capacity as a Lender,
Administrative Agent shall have the same rights and obligations as any Lender
and may exercise such rights as though it were not Administrative Agent.
Administrative Agent may accept deposits from, lend money to, act as trustee
under indentures of, and generally engage in any kind of business with any
Restricted Person or their Affiliates, all as if it were not Administrative
Agent hereunder and without any duty to account therefor to any other Lender.
Section 9.6 Sharing of Set-Offs and Other Payments. Each Lender Party
agrees that if it shall, whether through the exercise of rights under Security
Documents or rights of banker's lien, set off, or counterclaim against Borrower
or otherwise, obtain payment of a portion of the aggregate Obligations owed to
it which, taking into account all distributions made by Administrative Agent
under Section 3.1, causes such Lender Party to have received more than it would
have received had such payment been received by Administrative Agent and
distributed pursuant to Section 3.1, then (a) it shall be deemed to have
simultaneously purchased and shall be obligated to purchase interests in the
Obligations as necessary to cause all Lender Parties to
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72
share all payments as provided for in Section 3.1, and (b) such other
adjustments shall be made from time to time as shall be equitable to ensure that
Administrative Agent and all Lender Parties share all payments of Obligations as
provided in Section 3.1; provided, however, that nothing herein contained shall
in any way affect the right of any Lender Party to obtain payment (whether by
exercise of rights of banker's lien, set-off or counterclaim or otherwise) of
indebtedness other than the Obligations. Borrower expressly consents to the
foregoing arrangements and agrees that any holder of any such interest or other
participation in the Obligations, whether or not acquired pursuant to the
foregoing arrangements, may to the fullest extent permitted by Law and, subject
to the provisions of Section 6.16, exercise any and all rights of banker's lien,
set-off, or counterclaim as fully as if such holder were a holder of the
Obligations in the amount of such interest or other participation. If all or any
part of any funds transferred pursuant to this section is thereafter recovered
from the seller under this section which received the same, the purchase
provided for in this section shall be deemed to have been rescinded to the
extent of such recovery, together with interest, if any, if interest is required
pursuant to the order of a Tribunal to be paid on account of the possession of
such funds prior to such recovery.
Section 9.7 Investments. Whenever Administrative Agent in good faith
determines that it is uncertain about how to distribute to Lender Parties any
funds which it has received, or whenever Administrative Agent in good faith
determines that there is any dispute among Lender Parties about how such funds
should be distributed, Administrative Agent may choose to defer distribution of
the funds which are the subject of such uncertainty or dispute. If
Administrative Agent in good faith believes that the uncertainty or dispute will
not be promptly resolved, or if Administrative Agent is otherwise required to
invest funds pending distribution to Lender Parties, Administrative Agent shall
invest such funds pending distribution; all interest on any such Investment
shall be distributed upon the distribution of such Investment and in the same
proportion and to the same Persons as such Investment. All moneys received by
Administrative Agent for distribution to Lender Parties (other than to the
Person who is Administrative Agent in its separate capacity as a Lender Party)
shall be held by Administrative Agent pending such distribution solely as
Administrative Agent for such Lender Parties, and Administrative Agent shall
have no equitable title to any portion thereof.
Section 9.8 Benefit of Article IX. The provisions of this Article are
intended solely for the benefit of Lender Parties, and no Restricted Person
shall be entitled to rely on any such provision or assert any such provision in
a claim or defense against any Lender (other than in relation to the reference
to Section 6.16 contained in Section 9.6 or the right to reasonably approve a
successor Administrative Agent under Section 9.9). Lender Parties may waive or
amend such provisions as they desire without any notice to or consent of
Borrower or any other Restricted Person.
Section 9.9 Resignation. Administrative Agent may resign at any time by
giving written notice thereof to Lenders and Borrower. Each such notice shall
set forth the date of such resignation. Upon any such resignation Majority
Lenders shall have the right to appoint a successor Administrative Agent,
subject to the approval of Borrower, unless a Default has occurred and is
continuing, which approval will not be unreasonably withheld. A successor must
be appointed for any retiring Administrative Agent, and such Administrative
Agent's resignation
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
73
shall become effective when such successor accepts such appointment. If, within
thirty days after the date of the retiring Administrative Agent's resignation,
no successor Administrative Agent has been appointed and has accepted such
appointment, then the retiring Administrative Agent may appoint a successor
Administrative Agent, which shall be a commercial bank organized or licensed to
conduct a banking or trust business under the Laws of the United States of
America or of any state thereof. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, the retiring
Administrative Agent shall be discharged from its duties and obligations under
this Agreement and the other Loan Documents. After any retiring Administrative
Agent's resignation hereunder the provisions of this Article IX shall continue
to inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under the Loan Documents.
Section 9.10 Other Agents. The Persons identified herein as the Joint
Lead Arrangers and Book Runners, the Syndication Agent, the Co-Documentation
Agents, the Senior Managing Agent, and the Co-Agents (collectively the
"Co-Agents"), in such capacities, shall not have any duties or responsibilities
or incur any liabilities in such agency capacities (as opposed to its capacity
as a Lender) under or in connection with this Agreement or under any of the
other Loan Documents. The relationship between Borrower, on the one hand, and
the Co-Agents and Administrative Agent, on the other hand, shall be solely that
of borrower and lender. None of the Co-Agents shall have any fiduciary
responsibilities to Borrower or any of its Affiliates. None of the Co-Agents
undertakes any responsibility to Borrower or any of its respective Affiliates to
review or inform Borrower of any matter in connection with any phase of
Borrower's or such Affiliate's business or operations.
ARTICLE X - Miscellaneous
Section 10.1 Waivers and Amendments; Acknowledgments.
(a) Waivers and Amendments. No failure or delay (whether by course
of conduct or otherwise) by any Lender in exercising any right, power or remedy
which such Lender Party may have under any of the Loan Documents shall operate
as a waiver thereof or of any other right, power or remedy, nor shall any single
or partial exercise by any Lender Party of any such right, power or remedy
preclude any other or further exercise thereof or of any other right, power or
remedy. No waiver of any provision of any Loan Document and no consent to any
departure therefrom shall ever be effective unless it is in writing and signed
as provided below in this section, and then such waiver or consent shall be
effective only in the specific instances and for the purposes for which given
and to the extent specified in such writing. No notice to or demand on any
Restricted Person shall in any case of itself entitle any Restricted Person to
any other or further notice or demand in similar or other circumstances. This
Agreement and the other Loan Documents set forth the entire understanding
between the parties hereto with respect to the transactions contemplated herein
and therein and supersede all prior discussions and understandings with respect
to the subject matter hereof and thereof, and no waiver, consent, release,
modification or amendment of or supplement to this Agreement or the other Loan
Documents shall be valid or effective against any party hereto unless the same
is in writing and signed by (i) if such party is Borrower or a Restricted
Person, by Borrower or such Restricted Person, (ii) if such party is
Administrative Agent or LC Issuer, by such party, and (iii) if such
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
74
party is a Lender, by such Lender or by Administrative Agent on behalf of
Lenders with the written consent of Majority Lenders, (which consent has already
been given as to the termination of the Loan Documents as provided in Section
10.9). Notwithstanding the foregoing or anything to the contrary herein,
Administrative Agent shall not, without the prior consent of each individual
Lender, execute and deliver on behalf of such Lender any waiver or amendment
which would: (1) waive any of the conditions specified in Article IV (provided
that Administrative Agent may in its discretion withdraw any request it has made
under Section 4.3(f)), (2) increase the Percentage Share of any such Lender or
the maximum amount any such Lender is committed to fund in respect of Letter of
Credit Obligations and Loans or subject such Lender to any additional
obligations (other than pursuant to Section 10.5(c)), (3) reduce any fees
payable to such Lender hereunder, or the principal of, or interest on, such
Lender's Note, or change any date fixed for any payment of any such fees or
interest, (4) reduce any principal amount payable under Section 2.6, change the
date for any such payment, or extend the Maturity Date, (5) amend this Section
10.1(a) or the definitions herein of "Majority Lenders" or "Percentage Share" or
otherwise change the aggregate amount of Percentage Shares which is required for
Administrative Agent, Lenders or any of them to take any particular action under
the Loan Documents, (6) release Borrower from its obligation to pay such
Lender's Note or any Guarantor from its guaranty of such payment, (7) release
any Collateral, except such releases relating to sales of property permitted
under Section 7.5, (8) create additional restrictions on participations,
assignments or transfers by a Lender, or (9) amend the definition of "Interest
Period" to permit Interest Periods of greater than six months unless such period
is subject to availability to each Lender.
(b) Acknowledgments and Admissions. Borrower hereby represents,
warrants, acknowledges and admits that (i) it has been advised by counsel in the
negotiation, execution and delivery of the Loan Documents to which it is a
party, (ii) it has made an independent decision to enter into this Agreement and
the other Loan Documents to which it is a party, without reliance on any
representation, warranty, covenant or undertaking by Administrative Agent or any
other Lender Party, whether written, oral or implicit, other than as expressly
set out in this Agreement or in another Loan Document delivered on or after the
date hereof, (iii) there are no representations, warranties, covenants,
undertakings or agreements by any Lender Party as to the Loan Documents except
as expressly set out in this Agreement or in another Loan Document delivered on
or after the date hereof, (iv) no Lender Party has any fiduciary obligation
toward Borrower with respect to any Loan Document or the transactions
contemplated thereby, (v) the relationship pursuant to the Loan Documents
between Borrower and the other Restricted Persons, on one hand, and each Lender
Party, on the other hand, is and shall be solely that of debtor and creditor,
respectively, (vi) no partnership or joint venture exists with respect to the
Loan Documents between any Restricted Person and any Lender Party, (vii)
Administrative Agent is not Borrower's Administrative Agent, but Administrative
Agent for Lenders, (viii) should an Event of Default or Default occur or exist,
each Lender Party will determine in its sole discretion and for its own reasons
what remedies and actions it will or will not exercise or take at that time,
(ix) without limiting any of the foregoing, Borrower is not relying upon any
representation or covenant by any Lender Party, or any representative thereof,
and no such representation or covenant has been made, that any Lender Party
will, at the time of an Event of Default or Default, or at any other time,
waive, negotiate, discuss, or take or refrain from taking any action permitted
under the Loan Documents with respect to any such Event of Default or
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
75
Default or any other provision of the Loan Documents, and (x) all Lender Parties
have relied upon the truthfulness of the acknowledgments in this section in
deciding to execute and deliver this Agreement and to become obligated
hereunder.
(c) Representation by Lenders. Each Lender hereby represents that
it will acquire its Note for its own account in the ordinary course of its
commercial lending business; however, the disposition of such Lender's property
shall at all times be and remain within its control and, in particular and
without limitation, such Lender may sell or otherwise transfer its Note, any
participation interest or other interest in its Note, or any of its other rights
and obligations under the Loan Documents subject to compliance with Sections
10.5(b) through (f), inclusive, and applicable Law.
(d) Joint Acknowledgment. THIS WRITTEN AGREEMENT AND THE OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 10.2 Survival of Agreements; Cumulative Nature. All of
Restricted Persons' various representations, warranties, covenants and
agreements in the Loan Documents shall survive the execution and delivery of
this Agreement and the other Loan Documents and the performance hereof and
thereof, including the making or granting of the Loans and the delivery of the
Notes and the other Loan Documents, and shall further survive until all of the
Obligations are paid in full to each Lender Party and all of Lender Parties'
obligations to Borrower are terminated. All statements and agreements contained
in any certificate or other instrument delivered by any Restricted Person to any
Lender Party under any Loan Document shall be deemed representations and
warranties by Borrower or agreements and covenants of Borrower under this
Agreement. The representations, warranties, indemnities, and covenants made by
Restricted Persons in the Loan Documents, and the rights, powers, and privileges
granted to Lender Parties in the Loan Documents, are cumulative, and, except for
expressly specified waivers and consents, no Loan Document shall be construed in
the context of another to diminish, nullify, or otherwise reduce the benefit to
any Lender Party of any such representation, warranty, indemnity, covenant,
right, power or privilege. In particular and without limitation, no exception
set out in this Agreement to any representation, warranty, indemnity, or
covenant herein contained shall apply to any similar representation, warranty,
indemnity, or covenant contained in any other Loan Document, and each such
similar representation, warranty, indemnity, or covenant shall be subject only
to those exceptions which are expressly made applicable to it by the terms of
the various Loan Documents.
Section 10.3 Notices. All notices, requests, consents, demands and
other communications required or permitted under any Loan Document shall be in
writing, unless otherwise specifically provided in such Loan Document (provided
that Administrative Agent may give telephonic notices to the other Lender
Parties), and shall be deemed sufficiently given or furnished if delivered by
personal delivery, by facsimile or other electronic transmission, by
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
76
delivery service with proof of delivery, or by registered or certified United
States mail, postage prepaid, to Borrower and Restricted Persons at the address
of Borrower specified on the signature pages hereto and to each Lender Party at
its address specified on the signature pages hereto (unless changed by similar
notice in writing given by the particular Person whose address is to be
changed). Any such notice or communication shall be deemed to have been given
(a) in the case of personal delivery or delivery service, as of the date of
first attempted delivery during normal business hours at the address provided
herein, (b) in the case of facsimile or other electronic transmission, upon
receipt, or (c) in the case of registered or certified United States mail, three
days after deposit in the mail; provided, however, that no Borrowing Notice or
Continuation/Conversion Notice shall become effective until actually received by
Administrative Agent.
Section 10.4 Payment of Expenses; Indemnity.
(a) Payment of Expenses. Whether or not the transactions
contemplated by this Agreement are consummated, Borrower will promptly (and in
any event, within 30 days after any invoice or other statement or notice) pay:
(i) all transfer, stamp, mortgage, documentary or other similar taxes,
assessments or charges levied by any governmental or revenue authority in
respect of this Agreement or any of the other Loan Documents or any other
document referred to herein or therein, (ii) all reasonable costs and expenses
incurred by or on behalf of Administrative Agent (including attorneys' fees,
consultants' fees and engineering fees, travel costs and miscellaneous expenses)
in connection with (1) the negotiation, preparation, execution and delivery of
the Loan Documents, and any and all consents, waivers or other documents or
instruments relating thereto, (2) the filing, recording, refiling and
re-recording of any Loan Documents and any other documents or instruments or
further assurances required to be filed or recorded or refiled or re-recorded by
the terms of any Loan Document, (3) the borrowings hereunder and other action
reasonably required in the course of administration hereof, (4) monitoring or
confirming (or preparation or negotiation of any document related to) any
Restricted Person's compliance with any covenants or conditions contained in
this Agreement or in any Loan Document, and (iii) all reasonable costs and
expenses incurred by or on behalf of any Lender Party (including attorneys'
fees, consultants' fees and accounting fees) in connection with the defense or
enforcement of any of the Loan Documents (including this section), any attempt
to cure any breach thereunder by any Restricted Person or the defense of any
Lender Party's exercise of its rights thereunder. In addition to the foregoing,
until all Obligations have been paid in full, Borrower will also pay or
reimburse Administrative Agent for all reasonable out-of-pocket costs and
expenses of Administrative Agent or its agents or employees in connection with
the continuing administration of the Loans and the related due diligence of
Administrative Agent, including travel and miscellaneous expenses and fees and
expenses of Administrative Agent's outside counsel, reserve engineers and
consultants engaged in connection with the Loan Documents.
(b) Indemnity. Borrower agrees to indemnify each Lender Party,
upon demand, from and against any and all liabilities, obligations, claims,
losses, damages, penalties, fines, actions, judgments, suits, settlements,
costs, expenses or disbursements (including reasonable fees of attorneys,
accountants, experts and advisors) of any kind or nature whatsoever (in this
section collectively called "liabilities and costs") which to any extent (in
whole or in part) may be
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
77
imposed on, incurred by, or asserted against such Lender Party growing out of,
resulting from or in any other way associated with any of the Collateral, the
Loan Documents and the transactions and events (including the enforcement or
defense thereof) at any time associated therewith or contemplated therein
whether arising in contract or in tort or otherwise and including any violation
or noncompliance with any Environmental Laws by any Lender Party or any other
Person or any liabilities or duties of any Lender Party or any other Person with
respect to Hazardous Materials found in or released into the environment).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY OR CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT
ACT OR OMISSION OF ANY KIND BY ANY LENDER PARTY,
provided only that no Lender Party shall be entitled under this section to
receive indemnification for that portion, if any, of any liabilities and costs
which is proximately caused by its own individual gross negligence or willful
misconduct, as determined in a final judgment. If any Person (including Borrower
or any of its Affiliates) ever alleges such gross negligence or willful
misconduct by any Lender Party, the indemnification provided for in this section
shall nonetheless be paid upon demand, subject to later adjustment or
reimbursement, until such time as a court of competent jurisdiction enters a
final judgment as to the extent and effect of the alleged gross negligence or
willful misconduct. As used in this section the term "Lender Party" shall refer
not only to each Person designated as such in Section 1.1 but also to each
director, officer, agent, trustee, attorney, employee, representative and
Affiliate of such Persons.
Section 10.5 Joint and Several Liability; Parties in Interest;
Assignments; Replacement Notes.
(a) All Obligations which are incurred by two or more Restricted
Persons shall be their joint and several obligations and liabilities. All
grants, covenants and agreements contained in the Loan Documents shall bind and
inure to the benefit of the parties thereto and their respective successors and
permitted assigns; provided, however, that no Restricted Person may assign or
transfer any of its rights or delegate any of its duties or obligations under
any Loan Document without the prior consent of all Lenders. Neither Borrower nor
any Affiliates of Borrower shall directly or indirectly purchase or otherwise
retire any Obligations owed to any Lender nor will any Lender accept any offer
to do so, unless each Lender shall have received substantially the same offer
with respect to the same Percentage Share of the Obligations owed to it. If
Borrower or any Affiliate of Borrower at any time purchases some but less than
all of the Obligations owed to all Lender Parties, such purchaser shall not be
entitled to any rights of any Lender under the Loan Documents unless and until
Borrower or its Affiliates have purchased all of the Obligations.
(b) No Lender shall sell any participation interest in its
commitment hereunder or any of its rights under its Loans or under the Loan
Documents to any Person unless the agreement between such Lender and such
participant at all times provides: (i) that such participation exists
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78
only as a result of the agreement between such participant and such Lender and
that such transfer does not give such participant any right to vote as a Lender
or any other direct claims or rights against any Person other than such Lender,
(ii) that such participant is not entitled to payment from any Restricted Person
under Sections 3.2 through 3.6 of amounts in excess of those payable to such
Lender under such sections (determined without regard to the sale of such
participation), and (iii) unless such participant is an Affiliate of such
Lender, that such participant shall not be entitled to require such Lender to
take any action under any Loan Document or to obtain the consent of such
participant prior to taking any action under any Loan Document, except for
actions which would require the consent of all Lenders under subsection (a) of
Section 10.1. No Lender selling such a participation shall, as between the other
parties hereto and such Lender, be relieved of any of its obligations hereunder
as a result of the sale of such participation. Each Lender which sells any such
participation to any Person (other than an Affiliate of such Lender) shall give
prompt notice thereof to Administrative Agent and Borrower; provided, however,
that no liability shall arise if any Lender fails to give such notice to
Borrower.
(c) Except for sales of participations under the immediately
preceding subsection, no Lender shall make any assignment or transfer of any
kind of its commitments or any of its rights under its Loans or under the Loan
Documents, except for assignments to an Eligible Transferee, or, subject to the
provisions of subsection (g) below, to an Affiliate and then only if such
assignment is made in accordance with the following requirements:
(i) Each such assignment shall apply to all Obligations owing
to the assignor Lender hereunder and to the unused portion of the
assignor Lender's commitments, so that after such assignment is made
the assignor Lender shall have a fixed (and not a varying) Percentage
Share in its Loans and Notes and be committed to make that Percentage
Share of all future Loans, the assignee shall have a fixed Percentage
Share in such Loans and Notes and be committed to make that Percentage
Share of all future Loans, and the Percentage Share of the Maximum
Facility Amount of each of the assignor (if not an assignment of all of
its Obligations and commitments) and of the assignee shall equal or
exceed $1,000,000 (provided, that all amounts assigned shall be
aggregated in calculating the $1,000,000 minimum in the event of
simultaneous assignments to or from two or more Affiliates).
(ii) The parties to each such assignment shall execute and
deliver to Administrative Agent, for its acceptance and recording in
the "Register" (as defined below in this section), an Assignment and
Acceptance in the form of Exhibit D, appropriately completed, together
with the Note subject to such assignment and a processing fee payable
by such assignor Lender (and not at Borrower's expense) to
Administrative Agent of $3,500. Upon such execution, delivery, and
payment and upon the satisfaction of the conditions set out in such
Assignment and Acceptance, then (i) Borrower shall issue new Notes to
such assignor and assignee upon return of the old Notes to Borrower,
and (ii) as of the "Settlement Date" specified in such Assignment and
Acceptance the assignee thereunder shall be a party hereto and a Lender
hereunder and Administrative Agent shall thereupon deliver to Borrower
and each Lender a revised Schedule 1
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79
hereto showing the revised Percentage Shares of such assignor Lender and such
assignee Lender and the Percentage Shares of all other Lenders.
(iii) Each assignee Lender that is not a United States person
(as such term is defined in Section 7701(a)(30) of the Code) for
Federal income tax purposes, shall (to the extent it has not already
done so) provide Administrative Agent and Borrower with the "Prescribed
Forms" referred to in Section 3.7(d).
(d) Any Lender may at any time pledge all or any portion of its
Loan and Note (and related rights under the Loan Documents including any portion
of its Note) to any of the twelve (12) Federal Reserve Banks organized under
Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or
enforcement thereof shall release any such Lender from its obligations under any
of the Loan Documents; provided that all related costs, fees and expenses in
connection with any such pledge shall be for the sole account of such Lender.
(e) By executing and delivering an Assignment and Acceptance, each
assignee Lender thereunder will be confirming to and agreeing with Borrower,
Administrative Agent and each other Lender Party that such assignee understands
and agrees to the terms hereof, including Article IX hereof.
(f) Administrative Agent shall maintain a copy of each Assignment
and Acceptance and a register for the recordation of the names and addresses of
Lenders and the Percentage Shares of, and principal amount of the Loans owing
to, each Lender from time to time (in this section called the "Register"). The
entries in the Register shall be conclusive, in the absence of manifest error,
and Borrower and each Lender Party may treat each Person whose name is recorded
in the Register as a Lender Party hereunder for all purposes. The Register shall
be available for inspection by Borrower or any Lender Party at any reasonable
time and from time to time upon reasonable prior notice.
(g) Any Lender may assign or transfer its commitment or its rights
under its Loans or under the Loan Documents to (i) any Affiliate that is
wholly-owned direct or indirect subsidiary of such Lender or of any Person that
wholly owns, directly or indirectly, such Lender, or (ii) if such Lender is a
fund that invests in bank loans, any other fund that invests in bank loans and
is advised or managed by (A) the same investment advisor as any Lender or (B)
any Affiliate of such investment advisor that is a wholly-owned direct or
indirect subsidiary of any Person that wholly owns, directly or indirectly, such
investment advisor, subject to the following additional conditions:
(x) any right of such Lender assignor (if assignor remains a Lender)
and such assignee to vote as a Lender, or any other direct claims or
rights against any other Persons, shall be uniformly exercised or
pursued in the manner that such Lender assignor would have so exercised
such vote, claim or right if it had not made such assignment or
transfer;
(y) such assignee shall not be entitled to payment from any Restricted
Person under Sections 3.2 through 3.7 of amounts in excess of those
payable to such Lender assignor under such sections (determined without
regard to such assignment or transfer); and
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
80
(z) if such Lender assignor assigns or transfers to such assignee any
of such Lender's commitment, such assignee may become primarily liable
for such commitment, but such assignment or transfer shall not relieve
or release such Lender from such commitment.
(h) Upon receipt of an affidavit reasonably satisfactory to
Borrower of an officer of any Lender as to the loss, theft, destruction or
mutilation of its Note or any Security Document which is not of public record,
and, in the case of any such loss, theft, destruction or mutilation, upon
cancellation of such Note or such Security Document, Borrower will execute and
deliver, in lieu thereof, a replacement Note in the same principal amount
thereof and otherwise of like tenor (or each Restricted Person a party to any
such Security Document will execute and deliver a replacement Security Document
of like tenor).
Section 10.6 Confidentiality. Each Lender Party agrees (on behalf of
itself and each of its Affiliates, and each of its and their directors,
officers, agents, attorneys, employees, and representatives) that it (and each
of them) will take all reasonable steps to keep confidential any non-public
information supplied to it by or at the direction of any Restricted Person so
identified when delivered, provided, however, that this restriction shall not
apply to (a) information which has at the time in question entered the public
domain, (b) information which is required to be disclosed by Law (whether valid
or invalid) of any Tribunal, (c) any disclosure to any Lender Party's
Affiliates, auditors, attorneys, or agents, (d) any disclosure to any other
Lender Party or to any purchaser or prospective purchaser of participations or
other interests in any Loan or Loan Document (provided each such Person first
agrees to hold such information in confidence on the terms provided in this
section), or (e) any disclosure in the course of enforcing its rights and
remedies during the existence of an Event of Default.
Section 10.7 Governing Law; Submission to Process. EXCEPT TO THE EXTENT
THAT THE LAW OF ANOTHER JURISDICTION IS EXPRESSLY ELECTED IN A LOAN DOCUMENT,
THE LOAN DOCUMENTS SHALL BE DEEMED CONTRACTS AND INSTRUMENTS MADE UNDER THE LAWS
OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND THE LAWS OF THE UNITED
STATES OF AMERICA. BORROWER HEREBY AGREES THAT ANY LEGAL ACTION OR PROCEEDING
AGAINST BORROWER WITH RESPECT TO THIS AGREEMENT, THE NOTES OR ANY OF THE LOAN
DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AS LENDER PARTIES MAY
ELECT, AND, BY EXECUTION AND DELIVERY HEREOF, BORROWER ACCEPTS AND CONSENTS FOR
ITSELF AND IN RESPECT TO ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. BORROWER AGREES THAT
SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK SHALL APPLY TO THE LOAN DOCUMENTS AND WAIVES ANY RIGHT TO STAY OR
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
81
TO DISMISS ANY ACTION OR PROCEEDING BROUGHT BEFORE SAID COURTS ON THE BASIS OF
FORUM NON CONVENIENS. IN FURTHERANCE OF THE FOREGOING, BORROWER HEREBY
IRREVOCABLY DESIGNATES AND APPOINTS CORPORATION SERVICE COMPANY, 80 STATE
STREET, ALBANY, NEW YORK 12207, AS AGENT OF BORROWER TO RECEIVE SERVICE OF ALL
PROCESS BROUGHT AGAINST BORROWER WITH RESPECT TO ANY SUCH PROCEEDING IN ANY SUCH
COURT IN NEW YORK, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY BORROWER TO BE
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. COPIES OF ANY SUCH PROCESS SO
SERVED SHALL ALSO, IF PERMITTED BY LAW, BE SENT BY REGISTERED MAIL TO BORROWER
AT ITS ADDRESS SET FORTH BELOW, BUT THE FAILURE OF BORROWER TO RECEIVE SUCH
COPIES SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS AS AFORESAID.
BORROWER SHALL FURNISH TO LENDER PARTIES A CONSENT OF CORPORATION SERVICE
COMPANY AGREEING TO ACT HEREUNDER PRIOR TO THE EFFECTIVE DATE OF THIS AGREEMENT.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER PARTIES TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER PARTIES TO
BRING PROCEEDINGS AGAINST BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. IF
FOR ANY REASON CORPORATION SERVICE COMPANY SHALL RESIGN OR OTHERWISE CEASE TO
ACT AS BORROWER'S AGENT, BORROWER HEREBY IRREVOCABLY AGREES TO (A) IMMEDIATELY
DESIGNATE AND APPOINT A NEW AGENT ACCEPTABLE TO ADMINISTRATIVE AGENT TO SERVE IN
SUCH CAPACITY AND, IN SUCH EVENT, SUCH NEW AGENT SHALL BE DEEMED TO BE
SUBSTITUTED FOR CORPORATION SERVICE COMPANY FOR ALL PURPOSES HEREOF AND (B)
PROMPTLY DELIVER TO AGENT THE WRITTEN CONSENT (IN FORM AND SUBSTANCE
SATISFACTORY TO ADMINISTRATIVE AGENT) OF SUCH NEW AGENT AGREEING TO SERVE IN
SUCH CAPACITY.
Section 10.8 Limitation on Interest. Lender Parties, Restricted Persons
and any other parties to the Loan Documents intend to contract in strict
compliance with applicable usury Law from time to time in effect. In furtherance
thereof such Persons stipulate and agree that none of the terms and provisions
contained in the Loan Documents shall ever be construed to create a contract to
pay, for the use, forbearance or detention of money, interest in excess of the
maximum amount of interest permitted to be contracted for, charged, or received
by applicable Law from time to time in effect. Neither any Restricted Person nor
any present or future guarantors, endorsers, or other Persons hereafter becoming
liable for payment of any Obligation shall ever be liable for unearned interest
thereon or shall ever be required to pay interest thereon in excess of the
maximum amount that may be lawfully contracted for, charged, or received under
applicable Law from time to time in effect, and the provisions of this Section
10.8 shall
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
82
control over all other provisions of the Loan Documents which may be in conflict
or apparent conflict herewith. Lender Parties expressly disavow any intention to
contract for, charge, or receive excessive unearned interest or finance charges
in the event the maturity of any Obligation is accelerated. If (a) the maturity
of any Obligation is accelerated for any reason, (b) any Obligation is prepaid
and as a result any amounts held to constitute interest are determined to be in
excess of the legal maximum, or (c) any Lender or any other holder of any or all
of the Obligations shall otherwise collect moneys which are determined to
constitute interest which would otherwise increase the interest on any or all of
the Obligations to an amount in excess of that permitted to be contracted for,
charged or received by applicable Law then in effect, then all sums determined
to constitute interest in excess of such legal limit shall, without penalty, and
to the extent permitted by applicable Law be promptly applied to reduce the then
outstanding principal of the related Obligations or, at such Lender's or
holder's option, promptly returned to Borrower or other payor thereof upon such
determination. In determining whether or not the interest paid or payable, under
any specific circumstance, exceeds the maximum amount permitted under applicable
Law, Lender Parties and Restricted Persons (and any other payors thereof) shall
to the greatest extent permitted under applicable Law, (i) characterize any
non-principal payment as an expense, fee or premium rather than as interest,
(ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread the total amount of interest throughout the entire
contemplated term of the instruments evidencing the Obligations in accordance
with the amounts outstanding from time to time thereunder and the maximum legal
rate of interest from time to time in effect under applicable Law in order to
lawfully charge the maximum amount of interest permitted under applicable Law.
Section 10.9 Termination; Limited Survival. In its sole and absolute
discretion Borrower may at any time that no Obligations are owing or outstanding
elect in a written notice delivered to Administrative Agent to terminate this
Agreement. Upon receipt by Administrative Agent of such a notice, if no
Obligations are then owing or outstanding this Agreement and all other Loan
Documents shall thereupon be terminated and the parties thereto released from
all prospective obligations thereunder. Notwithstanding the foregoing or
anything herein to the contrary, any waivers or admissions made by any
Restricted Person in any Loan Document, any Obligations under Sections 3.2
through 3.6, and any obligations which any Person may have to indemnify or
compensate any Lender Party shall survive any termination of this Agreement or
any other Loan Document. At the request and expense of Borrower, Administrative
Agent shall prepare and execute all necessary instruments to reflect and effect
such termination of the Loan Documents. Administrative Agent is hereby
authorized to execute all such instruments on behalf of all Lenders, without the
joinder of or further action by any Lender.
Section 10.10 Severability. If any term or provision of any Loan
Document shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable Law.
Section 10.11 Counterparts; Fax. This Agreement may be separately
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to
constitute one and the same Agreement. This Agreement
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
83
and the Loan Documents may be validly executed and delivered by facsimile or
other electronic transmission.
Section 10.12 Waiver of Jury Trial, Punitive Damages, etc. RESTRICTED
PERSONS AND LENDER PARTIES MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE
OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR LENDERS
TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND MAKE THE LOANS.
BORROWER AND EACH LENDER PARTY HEREBY FURTHER (A) IRREVOCABLY WAIVES, TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER
IN ANY SUCH LITIGATION ANY "SPECIAL DAMAGES," AS DEFINED BELOW, (B) CERTIFIES
THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY
HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (C)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.
AS USED IN THIS SECTION, "SPECIAL DAMAGES" INCLUDES ALL SPECIAL, CONSEQUENTIAL,
EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE
ANY PAYMENTS OR FUNDS WHICH ANY PARTY HERETO HAS EXPRESSLY PROMISED TO PAY OR
DELIVER TO ANY OTHER PARTY HERETO.
Section 10.13 Restatement. This Agreement amends and restates the
Existing Credit Agreement in its entirety. Borrower hereby agrees that (i) the
Indebtedness outstanding under the Existing Credit Agreement and all accrued and
unpaid interest thereon and (ii) all accrued and unpaid fees under the Existing
Credit Agreement shall be deemed to be outstanding under and governed by this
Agreement. Borrower hereby acknowledges, warrants, represents and agrees that
this Agreement is not intended to be, and shall not be deemed or construed to
be, a novation or release of the Existing Credit Agreement.
Section 10.14 Special Provisions.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
84
(a) From and after the Closing Date, (i) each Exiting Lender shall
cease to be a party to this Agreement, (ii) no Exiting Lender shall have any
obligations or liabilities under this Agreement with respect to the period from
and after the Closing Date and, without limiting the foregoing, no Exiting
Lender shall have any Revolver Commitment or Term Commitment under this
Agreement or any participation on any Letter of Credit outstanding hereunder,
and (iii) no Exiting Lender shall have any rights under the Existing Credit
Agreement, this Agreement or any other Loan Document (other than rights under
the Existing Credit Agreement expressly stated to survive the termination of the
Existing Credit Agreement and the repayment of amounts outstanding thereunder).
(b) Lenders (that are Lenders under the Existing Credit Agreement)
hereby waive any requirements for notice of prepayment, minimum amounts of
prepayments of the loans thereunder, ratable reductions of the commitments of
Lenders under the Existing Credit Agreement and ratable payments on account of
the principal or interest of any loan under the Existing Credit Agreement to the
extent that any such prepayment, reductions or payments are required to ensure
that, upon the effectiveness of this Agreement, the Revolver Loans of Lenders
shall be outstanding on a ratable basis in accordance with their respective
Percentage Shares.
(c) Lenders hereby authorize the Administrative Agent and the
Borrower to request Borrowings from Lenders, to make prepayments of Revolver
Loans (as defined in the Existing Credit Agreement) and to reduce commitments
under the Existing Credit Agreement among Lenders (as defined in the Existing
Credit Agreement) in order to ensure that, upon the effectiveness of this
Agreement and satisfaction of all conditions precedent under Article IV, the
Revolver Loans of Lenders shall be outstanding on a ratable basis in accordance
with their respective Percentage Shares and no such Borrowing, prepayment or
reduction shall violate any provisions of the Existing Credit Agreement or this
Agreement. Lenders hereby confirm that, from and after the Closing Date, all
participations of Lenders in respect of Letters of Credit outstanding hereunder
pursuant to subsection 2.9(c) shall be based upon the Percentage Shares of the
Lenders (after giving effect to this Agreement).
(d) Effective as of the Closing Date, Borrower hereby terminates
in full the commitments of the Exiting Lenders under the Existing Credit
Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
85
IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.
BORROWER: LA GRANGE ACQUISITION,L.P.
By: LA GP, LLC, its general partner
By: ______________________________
Ray C. Davis
Co-Chief Executive Officer
Address for Borrower:
2838 Woodside Street
Dallas, Texas 75204
Attention: Lon Kile
Telephone: 214-981-0700
Fax: 214-981-0701
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
FLEET NATIONAL BANK,
Administrative Agent, LC Issuer and
a Lender
By: ______________________________
Allison Rossi
Director
Address:
100 Federal Street
Boston, Massachusetts 02110
Attention: Allison Rossi
Mail Code: MADE 10008A
Telephone: (617) 434-9061
Fax: (617)434-3652
FLEET SECURITIES, INC.,
Joint Lead Arranger and Book Runner
By: ______________________________
Jeffrey Bloomquist
Vice President
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
WACHOVIA BANK, NATIONAL
ASSOCIATION,
as Syndication Agent and a Lender
By: ______________________________
David E. Humphreys
Vice President
Address:
1001 Fannin Street, Suite 2255
Houston, TX 77002
Attention: David Humphreys
Telephone: (713) 346-2717
Fax: (713) 650-6354
WACHOVIA CAPITAL MARKETS, LLC,
Joint Lead Arranger and Book Runner
By: ______________________________
David E. Humphreys
Vice President
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THE ROYAL BANK OF SCOTLAND PLC,
as Co-Documentation Agent and
aLender
By: ______________________________
Name: Adam Pettifer
Title: Senior Vice President
Address:
101 Park Avenue
New York, New York 10178
Attention: Chris Clarke
Telephone: (212) 401-1406
Fax: (212) 401-1494:
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
BNP PARIBAS,
as Co-Documentation Agent and a
Lender
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
Address:
919 Third Avenue
New York, New York
Attention: Coryn Lantin
Telephone: (212) 471-6631
Fax: (212) 841-2683
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
BANK OF SCOTLAND,
as Senior Managing Agent and a
Lender
By: ______________________________
Joseph Fratus
First Vice President
Address:
565 Fifth Avenue
New York, New York 10017
Attention: Shirley Vargas
Telephone: (212) 450-0875
Fax: (212) 450-2807
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
FORTIS CAPITAL CORP.,
as Co-Agent and a Lender
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
Address:
15455 North Dallas Parkway, Suite
1400
Addison, Texas 75001
Attention: Casey Lowary
Telephone: (214) 953-9308
Fax: (214) 754-5982
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
U.S. BANK NATIONAL ASSOCIATION,
as Co-Agent and a Lender
By: ______________________________
Name:
Title:
Address:
918 17TH Street DNCOBB3E
Denver, Colorado 80202
Attention: Mark Thompson
Telephone: (303) 585-4213
Fax: (303) 585-4362
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
BMO NESBITT BURNS FINANCING, INC.,
Lender
By: ______________________________
Cahal Carmody
Vice President
Address:
700 Louisiana Street, Suite 4400
Houston, Texas 77002
Attention: Cahal Carmody
Telephone: (713) 546-9750
Fax: (713)23-4007
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
AUSTRALIA AND NEW ZEALAND BANKING
GROUP LIMITED,
as a Lender
By: ______________________________
Name: R. Scott McInnis
Title: Country Head - USA
Address: 177 Avenue of the Americas
New York, NY 10036
Attention: Joel Kaplan
Telephone: (212) 801 9894
Fax: (212) 536 9294
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
BANK ONE, NA,
as a Lender
By: ______________________________
Name:
Title:
Address:
1 Bank One Plaza, Suite IL 1-0010
Chicago, Illinois 60670
Attention: Jim Moore
Telephone: (312) 385-7057
Fax: (312) 385-7096
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
COMERICA BANK,
as a Lender
By:
---------------------------------
Michele L. Jones
Vice President - Texas Division
Address:
1601 Elm Street, 2nd Floor
Dallas, Texas 75201
Attention: Michele L. Jones
Telephone: (214) 969-6563
Fax: (214) 969-6561
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
KEY BANK NATIONAL ASSOCIATION,
as a Lender
By:
---------------------------------
Name: Kevin D. Smith
Title: Vice President
Address:
127 Public Square
Cleveland, Ohio 44114
Attention: Melissa Pelham
Telephone: (216) 689-0206
Fax: (216) 689-5962
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
WEST LB AG, New York Branch
as a Lender
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
Address: 1211 Ave of Americas
New York, New York 10036
Attention: Jeffrey S. Davidson
Telephone: 212-852-6204
Fax: 212-597-1106
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
COMPASS BANK,
as a Lender
By:
---------------------------------
Dorothy Marchand
Senior Vice President
Address:
24 Greenway Plaza, Suite 1400A
Houston, Texas 77046
Attention: Dorothy Marchand
Telephone: (713) 968-8272
Fax: (713) 968-8292
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
UFJ BANK LIMITED,
as a Lender
By:
---------------------------------
Name: L. J. Perenyi
Title: Vice President
Address: Structured Finance Department
55 East 52nd Street, 26th Floor
New York, NY 10055
Attention: Seiji Tate
Telephone: 212-339-6235
Fax: 212-754-2368
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
HSH NORDBANK, AG, NEW YORK BRANCH,
as a Lender
By:
---------------------------------
Name:
Title:
Address:
590 Madison Avenue
New York, New York, 10022
Attention: Rohan Singh
Telephone: (212) 407-6042
Fax: (212) 407-6033
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
NATEXIS BANQUES POPULAIRES,
as a Lender
By:
---------------------------------
Daniel Payer
Vice President
By:
---------------------------------
Louis P. Laville, III
Vice President
Address:
Houston Representative Office
333 Clay Street, Suite 4340
Houston, Texas 77002
Attention: Daniel Payer
Telephone: (713) 759-9495
Fax: (713) 571-6167
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
BANK OF AMERICA, N.A.
as a Lender
By:
---------------------------------
Steven A. Mackenzie
Vice President - Credit Products
Address:
910 Main Street, 67th Floor
Dallas, Texas 75202
Attention: Steven A. Mackenzie
Telephone: (214) 209-3680
Fax: (214) 209-3140
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
GUARANTY BANK
as a Lender
By:
---------------------------------
Jim R. Hamilton
Senior Vice President
Address:
1100 NE Loop 410
San Antonio, Texas78209
Attention: Jim R. Hamilton
Telephone: (210) 930-2926
Fax: (210) 930-1783
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
STERLING BANK,
as a Lender
By:
---------------------------------
Name: C. Scott Wilson
Title: Vice President
Address: 2550 North Loop West, Suite 100
Houston, Texas 77092
Attention: Cheri Allen - Administrator
Telephone: (713) 507-7918
Fax: (713) 507-7948
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
ALLIED IRISH BANKS P.L.C,
as a Lender
By:
---------------------------------
Name:
Title:
Address:
405 Park Avenue, 2nd Floor
New York, New York 10022
Attention: Vaughn Buck / Aidan Lanigan
Telephone: (212) 515-6768 / (212) 515-6837
Fax: (212) 339-8325
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
SCHEDULE 1
LENDER SCHEDULE
Lender: FLEET NATIONAL BANK
Lender's Revolver Commitment: $ 26,075,000
Lender's Term Commitment: $ 92,675,000
Revolver Percentage: 14.9%
Domestic Lending Office:
100 Federal Street
Boston, Massachusetts 02110
Attention: Allison Rossi
Mail Code: MADE 10008A
Telephone: (617) 434-9061
Fax: (617) 434-3652
Eurodollar Lending Office:
Same.
Notices:
Same.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
A-1
SCHEDULE 1
LENDER SCHEDULE
Lender: WACHOVIA BANK, NATIONAL ASSOCIATION
Lender's Revolver Commitment: $ 26,075,000
Lender's Term Commitment: $ 10,675,000
Revolver Percentage: 14.9%
Domestic Lending Office:
1001 Fannin Street, Suite 2255
Houston, TX 77002
Attention: David Humphreys
Telephone: (713) 346-2717
Fax: (713) 650-6354
Eurodollar Lending Office:
Same.
Notices:
Same.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
A-2
SCHEDULE 1
LENDER SCHEDULE
Lender: THE ROYAL BANK OF SCOTLAND PLC
Lender's Revolver Commitment: $ 10,500,000
Lender's Term Commitment: $ 19,500,000
Revolver Percentage: 6.0%
Domestic Lending Office:
101 Park Avenue
New York, New York 10178
Attention: Sheila Shaw
Telephone: (212) 401-1406
Fax: (212) 401-1494
Eurodollar Lending Office:
Same.
Notices:
600 Travis Street, Suite 6070
Houston, Texas 77002
Attention: Chris Clarke
Telephone: (713) 221-2400
Fax: (713) 221-2430
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
A-3
SCHEDULE 1
LENDER SCHEDULE
Lender: BNP PARIBAS
Lender's Revolver Commitment: $ 10,500,000
Lender's Term Commitment: $ 19,500,000
Revolver Percentage: 6.0%
Domestic Lending Office:
919 Third Avenue
New York, New York 10022
Attention: Coryn Lantin
Telephone: (212) 471-6631
Fax: (212) 841-2683
Eurodollar Lending Office:
Same.
Notices:
1200 Smith Street, Suite 3100
Houston, Texas 77002
Attention: Brian Malone
Telephone: (713) 982-1100
Fax: (713) 659-6915
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
A-4
SCHEDULE 1
LENDER SCHEDULE
Lender: BANK OF SCOTLAND
Lender's Revolver Commitment: $ 11,200,000
Lender's Term Commitment: $ 20,800,000
Revolver Percentage: 6.4%
Domestic Lending Office:
565 Fifth Avenue
New York, New York 10017
Attention: Shirley Vargas
Telephone: (212) 450-0800
Fax: (212) 450-2806
Eurodollar Lending Office:
Same.
Notices:
One City Centre
1021 Main Street, Suite 1370
Houston, Texas 77002
Attention: Justin Alexander / Rex McSwain
Telephone: (713) 650-0212 / (713) 650-0636
Fax: (713) 651-9714
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
A-5
SCHEDULE 1
LENDER SCHEDULE
Lender: FORTIS CAPITAL CORP.
Lender's Revolver Commitment: $ 10,150,000
Lender's Term Commitment: $ 18,850,000
Revolver Percentage: 5.8%
Domestic Lending Office:
15455 North Dallas Parkway, Suite 1400
Addison, Texas 75001
Attention: Casey Lowary
Telephone: (214) 953-9303
Fax: (214) 754-5982
Eurodollar Lending Office:
Same.
Notices:
Same.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
A-6
SCHEDULE 1
LENDER SCHEDULE
Lender: U.S. BANK NATIONAL ASSOCIATION
Lender's Revolver Commitment: $ 10,150,000
Lender's Term Commitment: $ 18,850,000
Revolver Percentage: 5.8%
Domestic Lending Office:
918 17TH Street DNCOBB3E
Denver, Colorado 80202
Attention: Mark Thompson
Telephone: (303) 585-4213
Fax: (303) 585-4362
Eurodollar Lending Office:
Same.
Notices:
Same.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
A-7
SCHEDULE 1
LENDER SCHEDULE
Lender: BMO NESBITT BURNS FINANCING, INC.
Lender's Revolver Commitment: $ 7,000,000
Lender's Term Commitment: $ 13,000,000
Revolver Percentage: 4.0%
Domestic Lending Office:
700 Louisiana Street, Suite 4400
Houston, Texas 77002
Attention: Cahal Carmody
Telephone: (713) 546-9750
Fax: (713) 23-4007
Eurodollar Lending Office:
Same.
Notices:
Same.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
A-8
SCHEDULE 1
LENDER SCHEDULE
Lender: AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
Lender's Revolver Commitment: $ 8,050,000
Lender's Term Commitment: $ 14,950,000
Revolver Percentage: 4.6%
Domestic Lending Office:
1177 Avenue of the Americas, 6th Floor
New York, New York 10036
Attention: Joel Kaplan
Telephone: (212) 801-9894
Fax: (212) 536-9294
Eurodollar Lending Office:
Same.
Notices:
Same.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
A-9
SCHEDULE 1
LENDER SCHEDULE
Lender: BANK ONE, NA
Lender's Revolver Commitment: $ 7,000,000
Lender's Term Commitment: $ 13,000,000
Revolver Percentage: 4.0%
Domestic Lending Office:
1 Bank One Plaza, Suite IL 1-0010
Chicago, Illinois 60670
Attention: Jim Moore
Telephone: (312) 385-7057
Fax: (312) 385-7096
Eurodollar Lending Office:
Same.
Notices:
910 Travis Street, TX2-4375
Houston, Texas 77002
Attention: Jeanie Gonzalez / Pete Torres
Telephone: (713) 751-6174 / (713) 751-6214
Fax: (713) 751-3982
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
A-10
SCHEDULE 1
LENDER SCHEDULE
Lender: COMERICA BANK
Lender's Revolver Commitment: $ 7,000,000
Lender's Term Commitment: $ 13,000,000
Revolver Percentage: 4.0%
Domestic Lending Office:
1601 Elm Street, 2nd Floor
Dallas, Texas 75201
Attention: Michele L. Jones
Telephone: (214) 969-6563
Fax: (214) 969-6561
Eurodollar Lending Office:
Same.
Notices:
Same.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
A-11
SCHEDULE 1
LENDER SCHEDULE
Lender: KEY BANK NATIONAL ASSOCIATION
Lender's Revolver Commitment: $ 4,900,000
Lender's Term Commitment: $ 9,100,000
Revolver Percentage: 2.8%
Domestic Lending Office:
127 Public Square
Cleveland, Ohio 44114
Attention: Melissa Pelham
Telephone: (216) 689-0206
Fax: (216) 689-5962
Eurodollar Lending Office:
Same.
Notices:
601 108th Avenue, NE 5th Floor
Bellevue, Washington 98009
Telephone: (425) 709-4579
Fax: (425) 709-4587
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
A-12
SCHEDULE 1
LENDER SCHEDULE
Lender: WEST LB AG, NEW YORK BRANCH
Lender's Revolver Commitment: $ 4,900,000
Lender's Term Commitment: $ 9,100,000
Revolver Percentage: 2.8%
Domestic Lending Office:
1211 Avenue of the Americas
New York, New York 10036
Attention: Jeffrey S. Davidson
Telephone: (212) 852-6204
Fax: (212) 597-1106
Eurodollar Lending Office:
Same.
Notices:
1211 Avenue of the Americas
New York, New York 10036
Attention: Cheryl Wilson
Telephone: (212) 852-6152
Fax: (212) 302-7946
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
A-13
SCHEDULE 1
LENDER SCHEDULE
Lender: COMPASS BANK
Lender's Revolver Commitment: $ 6,300,000
Lender's Term Commitment: $ 11,700,000
Revolver Percentage: 3.6%
Domestic Lending Office:
24 Greenway Plaza, Suite 1400A
Houston, Texas 77046
Attention: Dorothy Marchand
Telephone: (713) 968-8272
Fax: (713) 968-8292
Eurodollar Lending Office:
Same.
Notices:
Same.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
A-14
SCHEDULE 1
LENDER SCHEDULE
Lender: UFJ BANK LIMITED
Lender's Revolver Commitment: $ 4,550,000
Lender's Term Commitment: $ 8,450,000
Revolver Percentage: 2.6%
Domestic Lending Office:
55 East 52nd Street
New York, New York 10055
Attention: Seiji Tate
Telephone: (212) 339-6235
Fax: (212) 754-2368
Eurodollar Lending Office:
Same
Notices:
1200 Smith Street, Suite 2265
Houston, Texas 77002
Attention: Lad Perenyi
Telephone: (713) 654-9970
Fax: (713) 654-1462
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
A-15
SCHEDULE 1
LENDER SCHEDULE
Lender: HSH NORDBANK, AG, NEW YORK BRANCH
Lender's Revolver Commitment: $ 4,550,000
Lender's Term Commitment: $ 8,450,000
Revolver Percentage: 2.6%
Domestic Lending Office:
590 Madison Avenue
New York, New York, 10022
Attention: Rohan Singh
Telephone: (212) 407-6042
Fax: (212) 407-6033
Eurodollar Lending Office:
Same.
Notices:
Same.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
A-16
SCHEDULE 1
LENDER SCHEDULE
Lender: NATEXIS BANQUES POPULAIRES
Lender's Revolver Commitment: $ 3,500,000
Lender's Term Commitment: $ 6,500,000
Revolver Percentage: 2.0%
Domestic Lending Office:
Houston Representative Office
333 Clay Street, Suite 4340
Houston, Texas 77002
Attention: Daniel Payer
Telephone: (713) 759-9495
Fax: (713) 571-6167
Eurodollar Lending Office:
Same.
Notices:
Same, with a copy to:
1251 Avenue of the Americas, 34th Floor
New York, New York 10020
Attention: Stacey Caruth
Fax: (212) 872-5160
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
A-17
SCHEDULE 1
LENDER SCHEDULE
Lender: BANK OF AMERICA, N.A.
Lender's Revolver Commitment: $ 2,450,000
Lender's Term Commitment: $ 4,550,000
Revolver Percentage: 1.4%
Domestic Lending Office:
910 Main Street, 67th Floor
Dallas, Texas 75202
Attention: Steven A. Mackenzie
Telephone: (214) 209-3680
Fax: (214) 209-3140
Eurodollar Lending Office:
Same.
Notices:
Same.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
A-18
SCHEDULE 1
LENDER SCHEDULE
Lender: GUARANTY BANK
Lender's Revolver Commitment: $ 3,500,000
Lender's Term Commitment: $ 6,500,000
Revolver Percentage: 2.0%
Domestic Lending Office:
1100 NE Loop 410
San Antonio, Texas78209
Attention: Jim R. Hamilton
Telephone: (210) 930-2926
Fax: (210) 930-1783
Eurodollar Lending Office:
Same.
Notices:
8333 Douglas Avenue
Dallas, Texas 75225
Attention: Kim Thompson
Telephone: (214) 360-2609
Fax: (214) 360-5109
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
A-19
SCHEDULE 1
LENDER SCHEDULE
Lender: STERLING BANK
Lender's Revolver Commitment: $ 3,150,000
Lender's Term Commitment: $ 5,850,000
Revolver Percentage: 1.8%
Domestic Lending Office:
2550 North Loop West, Suite 100
Houston, Texas 77092
Attention: C. Scott Wilson
Telephone: (713) 577-7918
Fax: (713) 577-7948
Eurodollar Lending Office:
Same.
Notices:
Same.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
A-20
SCHEDULE 1
LENDER SCHEDULE
Lender: ALLIED IRISH BANKS P.L.C.
Lender's Revolver Commitment: $ 3,500,000
Lender's Term Commitment: $ 0
Revolver Percentage: 2.0%
Domestic Lending Office:
Bankcentre,
Ballsbridge
Dublin 4
Ireland
Attention:
Telephone: 011 353 1 6411324
Fax: 011 353 1 6089795
Eurodollar Lending Office:
Same.
Notices:
405 Park Avenue, 2nd Floor
New York, New York 10022
Attention: Vaughn Buck / Aidan Lanigan
Telephone: (212) 515-6768 / (212) 515-6837
Fax: (212) 339-8325
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
A-21
SCHEDULE 2
DISCLOSURE SCHEDULE
Section 5.4. No Conflict or Consents:
None.
Section 5.6. Initial Financial Statements:
None.
Section 5.7. Other Obligations and Restrictions:
None.
Section 5.9. Litigation:
None
Section 5.10. Labor Disputes and Acts of God:
None.
Section 5.11. ERISA Plans and Liabilities:
None.
Section 5.12. Compliance with Laws:
None.
Section 5.13 Environmental Laws:
None.
Section 5.14. Names and Places of Business:
a. Fictitious name(s):
The Restricted Person(s) have the following fictitious names:
ETC Oklahoma Pipeline, Ltd. - ETC Oklahoma Pipeline, L.P.
ETC Marketing, Ltd. - ETC Marketing, L.P.
LaGrange Acquisition, L.P. - Energy Transfer Company
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
1
b. Principal Place of Business:
The Restricted Person(s) have the following additional principal places of
business:
None.
c. Other offices:
The Restricted Person(s) have the following additional offices:
LaGrange Acquisition, L.P.
800 E. Sonterra Blvd.
Suite 400
San Antonio, TX 78258
ETC Oklahoma Pipeline, Ltd.
Business Office
7134 S. Yale
Tulsa, OK 74136
ETC Oklahoma Pipeline, Ltd.
Elk City Plant
Rt 4 Box 28-4 Hwy 6
Elk City, OK 73644
ETC Texas Pipeline, Ltd.
Giddings Office
3945 E Austin St
Hwy 290 E
Giddings, TX 78942
ETC Texas Pipeline, Ltd.
Grimes County Plant
County Road 180
Anderson, TX 77830
ETC Texas Pipeline, Ltd.
Hallettsville Treating Plant 1.25 mi W of Hwy 77 on FM 318
Halletsville, TX 77964
ETC Texas Pipeline, Ltd.
Holland Creek Plant
2277 County Road 246
Navasota, TX 77868-0969
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
2
ETC Texas Pipeline, Ltd.
La Grange Plant
7307 N US Hwy 77
LaGrange, TX 78945
ETC Texas Pipeline, Ltd.
Latium Treating Plant
Washington City, TX
ETC Texas Pipeline, Ltd.
Navasota Plant Site & Field Office
11386 County Road 419
Grimes, Texas 77868-0969
ETC Texas Pipeline, Ltd.
Snook Office
12935 FM 50
LaGrange, TX 78945
ETC Texas Pipeline, Ltd.
Somerville Plant & Office
1218 FM 1361
Burleson, TX 77879
ETC Marketing, Ltd.
Trucking Operations Office
1218 FM 1361
Burleson, TX 77879
ETC Texas Pipeline, Ltd.
LaGrange Field Office
7234 N US Hwy 77
LaGrange, TX 78945
ETC Oasis, L.P.
911 Main Street, Suite 300
Kansas City, MO 64105
ETC Oasis, L.P.
1100 Walnut, Suite 3300
Kansas City, MO 64106
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
3
ETC Oasis, L.P.
20 West 9th Street
Kansas City, MO 64105
Oasis Pipe Line Company Texas, L.P.
12012 Wickchester Lane, Suite 540
Houston, TX 77079
Section 5.15 Borrower's Subsidiaries:
Borrower owns all of the limited liability company interests in LG PL,
LLC; LGM, LLC; ETC Oasis GP, LLC; Five-Dawaco, LLC and TETC, LLC
Borrower directly owns the 99.9% limited partnership interests, and LG
PL, LLC owns the .1% general partnership interest, in the following
entities:
ETC Gas Company, Ltd.
ETC Texas Pipeline, Ltd.
ETC Oklahoma Pipeline, Ltd.
ETC Texas Processing, Ltd.
Borrower directly owns the 99.9% limited partnership interests in the
following entities and LGM, LLC; ETC Oasis GP, LLC; and Five-Dawaco,
LLC, respectively, own the .1% general partnership interest in such
entities:
ETC Marketing, Ltd.
ETC Oasis, L.P.
ET Company I, Ltd.
ET Company I, Ltd. directly owns the 99% limited partnership interests,
and Five-Dawaco LLC owns the 1% general partnership interest, in the
following entities:
Whiskey Bay Gathering Company, Ltd.
Whiskey Bay Gas Company, Ltd.
Chalkley Transmission Company, Ltd.
ET Company I, Ltd. directly owns the 99% limited partnership interest,
and TETC, LLC owns the 1% general partnership interest, in Texas Energy
Transfer Company, Ltd.
ETC Oasis, L.P. directly owns all of the outstanding shares of Oasis
Pipe Line Company.
Oasis Pipeline Company owns all of the outstanding shares of the
following entities:
Oasis Pipe Line Finance Company
Oasis Partner Company
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
4
Oasis Pipe Line Management Company
Oasis Partner Company owns the 99% limited partnership interest, and
Oasis Pipe Line Management Company owns the 1% general partnership
interest, in Oasis Pipe Line Company Texas L.P.
ETC Gas Company owns a 50% interest in South Texas Gathering and
Treating Joint Venture.
ETC Company I, Ltd. owns a direct or indirect 50% interest in VanTex
Energy Services, Ltd., VanTex Gas Pipeline Company, LLC and VES Inc.
Section 5.20. Credit Agreements
None.
Section 7.2. Limitation on Liens
None.
Section 7.10. Prohibit Contracts
None.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
5
SCHEDULE 3
SECURITY SCHEDULE
1. Second Amended and Restated Guaranty by ETC Gas Company, Ltd., ETC
Texas Pipeline, Ltd., ETC Oklahoma Pipeline, Ltd., ETC Marketing, Ltd.,
ETC Oasis, L.P., Texas Energy Transfer Company, Ltd., Whiskey Bay
Gathering Company, Ltd., Whiskey Bay Gas Company, Ltd., Chalkley
Transmission Company, Ltd., ET Company I, Ltd., Oasis Pipe Line
Company, Oasis Pipe Line Company Texas, L.P., Oasis Pipe Line Finance
Company, Oasis Partner Company, Oasis Pipe Line Management Company, LA
GP, LLC, LG PL, LLC, LGM, LLC, ETC Oasis GP, LLC, FIVE-DAWACO, LLC,
TETC, LLC, and ETC Texas Processing, Ltd. in favor of Administrative
Agent.
2. Second Amended and Restated Pledge Agreement by Borrower in favor of
Administrative Agent (Partnership Pledge).
3. Second Amended and Restated Pledge Agreement by Borrower in favor of
Administrative Agent (LLC Pledge).
4. Second Amended and Restated Security Agreement by Borrower in favor of
Administrative Agent.
5. Second Amended and Restated Pledge Agreement by LA GP, LLC, LG PL, LLC,
LGM, LLC, ETC Oasis GP, LLC, Oasis Pipe Line Management Company,
FIVE-DAWACO, LLC, TETC, LLC, ET Company I, Ltd., and Oasis Partner
Company in favor of Administrative Agent.
6. Second Amended and Restated Security Agreement by ETC Marketing, Ltd.,
Oasis Pipe Line Company, Texas Energy Transfer Company, Ltd., Whiskey
Bay Gathering Company, Ltd., Whiskey Bay Gas Company, Ltd., Chalkley
Transmission Company, Ltd., ET Company I, Ltd., ETC Oasis, L.P., Oasis
Pipe Line Management Company, Oasis Pipe Line Finance Company, Oasis
Partner Company and ETC Gas Company, Ltd. in favor of Administrative
Agent.
7. Amended and Restated Stock Pledge Agreement by ETC Oasis, L.P. and
Oasis Pipe Line Company in favor of Administrative Agent.
8. First Amended and Restated Deed of Trust, Mortgage, Assignment,
Security Agreement, Fixture Filing and Financing Statement by ETC Texas
Pipeline, Ltd. and ETC Oklahoma Pipeline, Ltd., ETC Texas Processing,
Ltd. and Oasis Pipe Line Texas L.P. in favor of Administrative Agent.
9. UCC-1 Financing Statements relating to the foregoing Security
Documents.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
1
SCHEDULE 4
INSURANCE SCHEDULE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
1
EXHIBIT A-1
PROMISSORY NOTE
[REVOLVER NOTE]
$_________________ __________, 200__
FOR VALUE RECEIVED, the undersigned, La Grange Acquisition, L.P., a
Texas limited partnership (herein called "Borrower"), hereby promises to pay to
the order of ________________________________________________, a ____________
(herein called "Lender"), the principal sum of _________________________ Dollars
($ ________________), or, if greater or less, the aggregate unpaid principal
amount of the Revolver Loans made under this Note by Lender to Borrower pursuant
to the terms of the Credit Agreement (as hereinafter defined), together with
interest on the unpaid principal balance thereof as hereinafter set forth, both
principal and interest payable as herein provided in lawful money of the United
States of America at the offices of Administrative Agent under the Credit
Agreement, 100 Federal Street, Boston, Massachusetts, or at such other place as
from time to time may be designated by the holder of this Note.
This Note (a) is issued and delivered under that certain Second Amended
and Restated Credit Agreement dated January 20, 2004, among Borrower, Fleet
National Bank, as Administrative Agent, and the lenders (including Lender)
referred to therein (herein, as from time to time supplemented, amended or
restated, called the "Credit Agreement"), and is a "Revolver Note" as defined
therein, (b) is subject to the terms and provisions of the Credit Agreement,
which contains provisions for payments and prepayments hereunder and
acceleration of the maturity hereof upon the happening of certain stated events,
(c) is secured by and entitled to the benefits of certain Security Documents (as
identified and defined in the Credit Agreement), and (d) is given in renewal and
restatement of certain Indebtedness described in the Credit Agreement. Payments
on this Note shall be made and applied as provided herein and in the Credit
Agreement. Reference is hereby made to the Credit Agreement for a description of
certain rights, limitations of rights, obligations and duties of the parties
hereto and for the meanings assigned to terms used and not defined herein and to
the Security Documents for a description of the nature and extent of the
security thereby provided and the rights of the parties thereto.
For the purposes of this Note, the following terms have the meanings
assigned to them below:
"Base Rate Payment Date" means (i) the last day of each March,
June, September and December, beginning March 31, 2004, and (ii) any
day on which past due interest or principal is owed hereunder and is
unpaid. If the terms hereof or of the Credit Agreement provide that
payments of interest or principal hereon shall be deferred from one
Base Rate Payment Date to another day, such other day shall also be a
Base Rate Payment Date.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
1
"Eurodollar Rate Payment Date" means, with respect to any
Eurodollar Loan: (i) the day on which the related Interest Period ends
and, if such Interest Period is six or twelve months in length, each
date specified by Administrative Agent that is approximately three, six
or nine months (as applicable) after such Interest Period begins, and
(ii) any day on which past due interest or past due principal is owed
hereunder with respect to such Eurodollar Loan and is unpaid. If the
terms hereof or of the Credit Agreement provide that payments of
interest or principal with respect to such Eurodollar Loan shall be
deferred from one Eurodollar Rate Payment Date to another day, such
other day shall also be a Eurodollar Rate Payment Date.
The principal amount of this Note, together with all interest accrued
hereon, shall be due and payable in full on the Maturity Date.
Unless the Default Rate shall apply, (i) each Base Rate Loan shall bear
interest on each day outstanding at the Base Rate plus the applicable Base Rate
Margin in effect on such day and (ii) each Eurodollar Loan shall bear interest
on each day during the related Interest Period at the related Eurodollar Rate
plus the applicable Eurodollar Rate Margin in effect on such day. During a
Default Rate Period, all Loans shall bear interest on each day outstanding at
the Default Rate. The interest rate shall change whenever the applicable Base
Rate, the applicable Base Rate Margin, the applicable Eurodollar Rate or the
applicable Eurodollar Rate Margin changes. In no event shall the interest rate
on any Loan exceed the Highest Lawful Rate.
Notwithstanding the foregoing paragraph and all other provisions of
this Note, in no event shall the interest payable hereon, whether before or
after maturity, exceed the maximum interest which, under applicable Law, may be
charged on this Note, and this Note is expressly made subject to the provisions
of the Credit Agreement which more fully set out the limitations on how interest
accrues hereon.
On each Base Rate Payment Date, Borrower shall pay to the holder hereof
all unpaid interest which has accrued on the Base Rate Loans to but not
including such Base Rate Payment Date. On each Eurodollar Rate Payment Date
relating to such Eurodollar Loan, Borrower shall pay to the holder hereof all
unpaid interest which has accrued on such Eurodollar Loan to but not including
such Eurodollar Rate Payment Date. All interest on past due principal of and
past due interest on the Loan shall be due and payable daily as it accrues.
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is proved,
established or collected in any court or in any bankruptcy, receivership, debtor
relief, probate or other court proceedings, Borrower and all endorsers, sureties
and guarantors of this Note jointly and severally agree to pay reasonable
attorneys' fees and collection costs to the holder hereof in addition to the
principal and interest payable hereunder.
Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration of
the maturity of this Note, diligence in collecting, the bringing of any suit
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
2
against any party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this Note or in any
of its terms, provisions and covenants, or any releases or substitutions of any
security, or any delay, indulgence or other act of any trustee or any holder
hereof, whether before or after maturity.
THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK , EXCEPT TO THE EXTENT THE SAME
ARE GOVERNED BY APPLICABLE FEDERAL LAW.
LA GRANGE ACQUISITION, L.P.
By: LA GP, LLC, its general partner
By:
---------------------------
Name:
Title:
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
3
EXHIBIT A-2
PROMISSORY NOTE
[TERM NOTE]
$_________________ __________, 200__
FOR VALUE RECEIVED, the undersigned, La Grange Acquisition, L.P., a
Texas limited partnership (herein called "Borrower"), hereby promises to pay to
the order of ________________________________________________, a ____________
(herein called "Lender"), the principal sum of _________________________ Dollars
($ ________________), or, if greater or less, the aggregate unpaid principal
amount of the Term Loans made under this Note by Lender to Borrower pursuant to
the terms of the Credit Agreement (as hereinafter defined), together with
interest on the unpaid principal balance thereof as hereinafter set forth, both
principal and interest payable as herein provided in lawful money of the United
States of America at the offices of Administrative Agent under the Credit
Agreement, 100 Federal Street, Boston, Massachusetts, or at such other place as
from time to time may be designated by the holder of this Note.
This Note (a) is issued and delivered under that certain Second Amended
and Restated Credit Agreement dated January 20, 2004, among Borrower, Fleet
National Bank, as Administrative Agent, and the lenders (including Lender)
referred to therein (herein, as from time to time supplemented, amended or
restated, called the "Credit Agreement"), and is a "Term Note" as defined
therein, (b) is subject to the terms and provisions of the Credit Agreement,
which contains provisions for payments and prepayments hereunder and
acceleration of the maturity hereof upon the happening of certain stated events,
(c) is secured by and entitled to the benefits of certain Security Documents (as
identified and defined in the Credit Agreement), and (d) is given in renewal and
restatement of certain Indebtedness described in the Credit Agreement. Payments
on this Note shall be made and applied as provided herein and in the Credit
Agreement. Reference is hereby made to the Credit Agreement for a description of
certain rights, limitations of rights, obligations and duties of the parties
hereto and for the meanings assigned to terms used and not defined herein and to
the Security Documents for a description of the nature and extent of the
security thereby provided and the rights of the parties thereto.
For the purposes of this Note, the following terms have the meanings
assigned to them below:
"Base Rate Payment Date" means (i) the last day of each March,
June, September and December, beginning March 31, 2004, and (ii) any
day on which past due interest or principal is owed hereunder and is
unpaid. If the terms hereof or of the Credit Agreement provide that
payments of interest or principal hereon shall be deferred from one
Base Rate Payment Date to another day, such other day shall also be a
Base Rate Payment Date.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
1
"Eurodollar Rate Payment Date" means, with respect to any
Eurodollar Loan: (i) the day on which the related Interest Period ends
and, if such Interest Period is six or twelve months in length, each
date specified by Administrative Agent that is approximately three, six
or nine months (as applicable) after such Interest Period begins, and
(ii) any day on which past due interest or past due principal is owed
hereunder with respect to such Eurodollar Loan and is unpaid. If the
terms hereof or of the Credit Agreement provide that payments of
interest or principal with respect to such Eurodollar Loan shall be
deferred from one Eurodollar Rate Payment Date to another day, such
other day shall also be a Eurodollar Rate Payment Date.
The principal amount of this Note, together with all interest accrued
hereon, shall be due and payable in full on the Maturity Date.
Unless the Default Rate shall apply, (i) each Base Rate Loan shall bear
interest on each day outstanding at the Base Rate plus the applicable Base Rate
Margin in effect on such day and (ii) each Eurodollar Loan shall bear interest
on each day during the related Interest Period at the related Eurodollar Rate
plus the applicable Eurodollar Rate Margin in effect on such day. During a
Default Rate Period, all Loans shall bear interest on each day outstanding at
the Default Rate. The interest rate shall change whenever the applicable Base
Rate, the applicable Base Rate Margin, the applicable Eurodollar Rate or the
applicable Eurodollar Rate Margin changes. In no event shall the interest rate
on any Loan exceed the Highest Lawful Rate.
Notwithstanding the foregoing paragraph and all other provisions of
this Note, in no event shall the interest payable hereon, whether before or
after maturity, exceed the maximum interest which, under applicable Law, may be
charged on this Note, and this Note is expressly made subject to the provisions
of the Credit Agreement which more fully set out the limitations on how interest
accrues hereon.
On each Base Rate Payment Date, Borrower shall pay to the holder hereof
all unpaid interest which has accrued on the Base Rate Loans to but not
including such Base Rate Payment Date. On each Eurodollar Rate Payment Date
relating to such Eurodollar Loan, Borrower shall pay to the holder hereof all
unpaid interest which has accrued on such Eurodollar Loan to but not including
such Eurodollar Rate Payment Date. All interest on past due principal of and
past due interest on the Loan shall be due and payable daily as it accrues.
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is proved,
established or collected in any court or in any bankruptcy, receivership, debtor
relief, probate or other court proceedings, Borrower and all endorsers, sureties
and guarantors of this Note jointly and severally agree to pay reasonable
attorneys' fees and collection costs to the holder hereof in addition to the
principal and interest payable hereunder.
Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration of
the maturity of this Note, diligence in collecting, the bringing of any suit
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
2
against any party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this Note or in any
of its terms, provisions and covenants, or any releases or substitutions of any
security, or any delay, indulgence or other act of any trustee or any holder
hereof, whether before or after maturity.
THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THE SAME ARE
GOVERNED BY APPLICABLE FEDERAL LAW.
LA GRANGE ACQUISITION, L.P.
By: LA GP, LLC, its general partner
By:
---------------------------
Name:
Title:
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
3
EXHIBIT B
BORROWING NOTICE
Reference is made to that certain Second Amended and Restated Credit
Agreement dated as of January 20, 2004 (as from time to time amended, the
"Agreement"), by and among La Grange Acquisition, L.P. ("Borrower"), Fleet
National Bank, as Administrative Agent, and certain financial institutions
("Lenders"). Terms which are defined in the Agreement are used herein with the
meanings given them in the Agreement. Pursuant to the terms of the Agreement,
Borrower hereby requests Lenders to make [Revolver/Term] Loans to Borrower in
the aggregate principal amount of $ __________ and specifies ____________, ____,
as the date Borrower desires for Lenders to make such [Revolver/Term] Loans and
for Administrative Agent to deliver to Borrower the proceeds thereof. [Such
Revolver Loans are hereby designated as CE/PA Revolver Loans.]
Type of Loans: [Eurodollar Loans][Base Rate Loans]
Length of Interest Periods for Eurodollar Loan (1, 2, 3, 6 or 12
months)
To induce Lenders to make such [Revolver/Term] Loans, Borrower hereby
represents, warrants, acknowledges, and agrees to and with Administrative Agent
and each Lender that:
(a) The officer of LA GP signing this instrument is the duly
elected, qualified and acting officer of LA GP as indicated below such
officer's signature hereto having all necessary authority to act for
Borrower in making the request herein contained.
(b) The representations and warranties made by any Restricted
Person in the Agreement and the other Loan Documents are true and
correct on and as of the date hereof (except to the extent that the
facts on which such representations and warranties are based have been
changed by the extension of credit under the Agreement or to the extent
that such representation or warranty was made as of a specific date or
updated, modified or supplemented, as of a subsequent date with the
consent of Majority Lenders), with the same effect as though such
representations and warranties had been made on and as of the date
hereof.
(c) There does not exist on the date hereof any condition or
event which constitutes a Default which has not been waived in writing
as provided in Section 10.1(a) of the Agreement; nor will any such
Default exist upon Borrower's receipt and application of the Loans
requested hereby. Borrower will use the Loans hereby requested in
compliance with Section 2.4 of the Agreement.
(d) (i) No Material Adverse Change shall have occurred, (ii)
no event or circumstance shall have occurred that would reasonably be
expected to cause a Material Adverse Change, (iii) no material adverse
change shall have occurred in the consolidated financial condition,
business, operations, assets or prospects of the Master Partnership and
(iv) no event or circumstance shall have occurred that would reasonably
be expected to cause a material adverse change in the consolidated
financial condition, business, operations, assets or prospects of the
Master Partnership, other than, in each case,
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
1
changes resulting solely from general, regional, industry-wide, or
economy-wide developments.
(e) Except to the extent waived in writing as provided in
Section 10.1(a) of the Agreement, each Restricted Person has performed
and complied with all agreements and conditions in the Agreement
required to be performed or complied with by such Restricted Person on
or prior to the date hereof, and each of the conditions precedent to
Loans contained in the Agreement remains satisfied.
(f) The Revolver Facility Usage, after the making of the Loans
requested hereby, will not be in excess of the Revolver Commitment on
the date requested for the making of such Loans.
(g) The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any
course of dealing, or by any other means not provided for in Section
10.1(a) of the Agreement. The Agreement and the other Loan Documents
are hereby ratified, approved, and confirmed in all respects.
The officer of LA GP signing this instrument hereby certifies that, to
the best of his knowledge after due inquiry, the above representations,
warranties, acknowledgments, and agreements of Borrower are true, correct and
complete in all material respects.
IN WITNESS WHEREOF, this instrument is executed as of ___________,____.
LA GRANGE ACQUISITION, L.P.
By: LA GP, LLC, its general partner
By:
-----------------------------
Name:
Title:
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
2
EXHIBIT C
CONTINUATION/CONVERSION NOTICE
Reference is made to that certain Second Amended and Restated Credit
Agreement dated as of January 20, 2004 (as from time to time amended, the
"Agreement"), by and among La Grange Acquisition, L.P. ("Borrower"), Fleet
National Bank, as Administrative Agent, and certain financial institutions
("Lenders"). Terms which are defined in the Agreement are used herein with the
meanings given them in the Agreement.
Borrower hereby requests a conversion or continuation of existing
[Term] [Revolver] Loans into a new Borrowing pursuant to Section 2.3 of the
Agreement as follows:
Existing Borrowing(s) of [Term] [Revolver] Loans to be Continued or
Converted:
$______________ of Eurodollar Loans with Interest Period
ending ________________
$______________ of Base Rate Loans
Aggregate amount of new [Term] [Revolver] Borrowing: $________________
Type of Loans in new Borrowing: ________________
Date of Continuation or Conversion: ________________
Length of Interest Period for Eurodollar
Loans (1, 2, 3, 6 or 12 months): ________ months
Borrower hereby represents, warrants, acknowledges, and agrees to and
with each Lender that:
(a) The officer of LA GP signing this instrument is the duly
elected, qualified and acting officer of LA GP as indicated below such
officer's signature hereto having all necessary authority to act for
Borrower in making the request herein contained.
(b) There does not exist on the date hereof any condition or
event which constitutes a Default which has not been waived in writing
as provided in Section 10.1(a) of the Agreement; nor will any such
Default exist upon Borrower's receipt and application of the Loans
requested hereby.
(c) The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any
course of dealing, or by any other means not provided for in Section
10.1(a) of the Agreement. The Agreement and the other Loan Documents
are hereby ratified, approved, and confirmed in all respects.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
1
The officer of LA GP signing this instrument hereby certifies that, to
the best of his knowledge after due inquiry, the above representations,
warranties, acknowledgments, and agreements of Borrower are true, correct and
complete in all material respects.
IN WITNESS WHEREOF, this instrument is executed as of ___________,____.
LA GRANGE ACQUISITION, L.P.
By: LA GP, LLC, its general partner
By:
-----------------------------
Name:
Title:
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
2
EXHIBIT D
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Second Amended and Restated Credit Agreement
dated as of January 20, 2004 (the "Credit Agreement") among La Grange
Acquisition, L.P., a Texas limited partnership (the "Borrower"), the Lenders (as
defined in the Credit Agreement) and Fleet National Bank, as Administrative
Agent for the Lenders (the "Administrative Agent"). Terms defined in the Credit
Agreement are used herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule 1 agree as
follows:
1. The Assignor hereby sells and assigns to the Assignee, without
recourse and without representation or warranty except as expressly set forth
herein, and the Assignee hereby purchases and assumes from the Assignor, an
interest in and to the Assignor's rights and obligations under the Credit
Agreement and the other Loan Documents as of the date hereof equal to the
percentage interest specified on Schedule 1 of all outstanding rights and
obligations under the Credit Agreement and the other Loan Documents. After
giving effect to such sale and assignment, the Assignee's Commitment and the
amount of the Loans owing to the Assignee will be as set forth on Schedule 1.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Documents
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Loan Documents or any other instrument or document furnished
pursuant thereto; (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Restricted Person
or the performance or observance by any Restricted Person of any of its
obligations under the Loan Documents or any other instrument or document
furnished pursuant thereto; and (iv) attaches the Note held by the Assignor and
requests that Administrative Agent exchange such Note for new Notes in an amount
equal to the Commitment assumed by the Assignee pursuant hereto and to the
Assignor in an amount equal to the Commitment retained by the Assignor.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 6.2 thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (ii) agrees that it will, independently and without
reliance upon Administrative Agent, the Assignor 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 decisions in taking or not taking action under
the Credit Agreement; (iii) appoints and authorizes Administrative Agent to take
such action as agent on its behalf and to exercise such powers and discretion
under the Credit Agreement as are delegated to Administrative Agent by the terms
thereof, together with such powers and discretion as are reasonably incidental
thereto; (iv) agrees that it will perform in accordance with their terms all of
the obligations that by the
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
1
terms of the Credit Agreement are required to be performed by it as a Lender;
and (v) attaches any U.S. Internal Revenue Service or other forms required under
Section 3.7(d).
4. Following the execution of this Assignment and Acceptance, it will
be delivered to Administrative Agent for acceptance and recording by
Administrative Agent. The effective date for this Assignment and Acceptance (the
"Effective Date") shall be the date of acceptance hereof by Administrative
Agent, unless otherwise specified on Schedule 1.
5. Upon such acceptance and recording by Administrative Agent, as of
the Effective Date, (i) the Assignee shall be a party to the Credit Agreement
and, to the extent provided in this Assignment and Acceptance, have the rights
and obligations of a Lender thereunder and (ii) the Assignor shall, to the
extent provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by Administrative Agent, from and
after the Effective Date, Administrative Agent shall make all payments under the
Credit Agreement and the Notes in respect of the interest assigned hereby
(including, without limitation, all payments of principal, interest and
commitment fees with respect thereto) to the Assignee. The Assignor and Assignee
shall make all appropriate adjustments in payments under the Credit Agreement
and the Notes for periods prior to the Effective Date directly between
themselves.
7. This Assignment and Acceptance shall be governed by, and construed
in accordance with, the Laws of the State of New York.
8. This Assignment and Acceptance 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 all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of this Assignment
and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule
1 to this Assignment and Acceptance to be executed by their officers thereunto
duly authorized as of the date specified thereon.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
2
SCHEDULE 1
to
ASSIGNMENT AND ACCEPTANCE
Revolver Percentage assigned: __%
Assignee's Commitment:
Assignee's Term Loan: $____________
Assignee's Revolver Percentage of Maximum
Revolver Facility Amount: $____________
Assignee's Outstanding Term Loan: $____________
Principal amount of Term Note payable to Assignee: $____________
Principal amount of Revolver Note payable to Assignee: $____________
Effective Date (if other than date
of acceptance by Administrative Agent): ________, 200__
[NAME OF ASSIGNOR], as Assignor
By: ______________________________
Name:
Title:
Dated:_________, ____
[NAME OF ASSIGNEE], as Assignee
By: ______________________________
Name:
Title:
Domestic Lending Office:
Eurodollar Lending Office:
* This date should be no earlier than five Business Days after the
delivery of this Assignment and Acceptance to Administrative Agent.
1 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Accepted [and Approved] **
this ___ day of ___________, ____
FLEET NATIONAL BANK
By: ______________________________
Name:
Title:
[Approved this ____ day
of ____________, ____
LA GRANGE ACQUISITION, L.P.
By: LA GP, LLC, its general partner
By: _____________________________]**
Name:
Title:
** Required if the Assignee is an Eligible Transferee solely by reason of
subsection (b) of the definition of "Eligible Transferee."
2 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
EXHIBIT E
LETTER OF CREDIT APPLICATION AND AGREEMENT
1 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
EXHIBIT F
CERTIFICATE ACCOMPANYING
FINANCIAL STATEMENTS
Reference is made to that certain Second Amended and Restated Credit
Agreement dated as of January 20, 2004 (as from time to time amended, the
"Agreement"), by and among La Grange Acquisition, L.P. ("Borrower"), Fleet
National Bank, as Administrative Agent, and certain financial institutions
("Lenders"), which Agreement is in full force and effect on the date hereof.
Terms which are defined in the Agreement are used herein with the meanings given
them in the Agreement.
This Certificate is furnished pursuant to Section 6.2(b) of the
Agreement. Together herewith Borrower is furnishing to Administrative Agent and
each Lender Borrower's *[audited/unaudited] financial statements (the "Financial
Statements") as at ____________ (the "Reporting Date"). Borrower hereby
represents, warrants, and acknowledges to Administrative Agent and each Lender
that:
(a) the officer of LA GP signing this instrument is the duly
elected, qualified and acting ____________ of LA GP and as such is LA
GP's [chief financial officer/principal accounting officer];
(b) the Financial Statements are accurate and complete in all
material respects [(subject, in the case of such unaudited financial
statements to normal year-end adjustments)] and satisfy the
requirements of the Agreement;
(c) attached hereto is a schedule of calculations showing
Borrower's compliance as of the Reporting Date with the requirements of
Section 7.14(a), Section 7.14(b), and Section 7.14(c) of the Agreement
*[and Borrower's non-compliance as of such date with the requirements
of Section(s) 7.14 ___ of the Agreement];
(d) on the Reporting Date Borrower was, and on the date hereof
is, in full compliance with the disclosure requirements of Sections
6.4, 5.14 or 5.15 of the Agreement, and no Default otherwise existed on
the Reporting Date or otherwise exists on the date of this instrument
*[except for Default(s) under Section(s) ____________ of the Agreement,
which *[is/are] more fully described on a schedule attached hereto].
The officer of LA GP signing this instrument hereby certifies that
he/she has reviewed the Loan Documents and the Financial Statements and has
otherwise undertaken such inquiry as is in his/her opinion necessary to enable
him/her to express an informed opinion with respect to the above
representations, warranties and acknowledgments of Borrower and, to the best of
his/her knowledge, such representations, warranties, and acknowledgments are
true, correct and complete in all material respects.
1 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
IN WITNESS WHEREOF, this instrument is executed as of ____________,____.
LA GRANGE ACQUISITION, L.P.
By: LA GP, LLC, its general partner
By: ______________________________
Name:
Title:
General Partner hereby represents and warrants to Administrative Agent and each
Lender that the Financial Statements are accurate and complete in all material
respects *[(subject, in the case of such unaudited financial statements to
normal year-end adjustments)].
U.S. PROPANE, L.P.
By: U.S. PROPANE LLC
By: _____________________________
Name:
Title:
2 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
EXHIBIT G
OPINION OF COUNSEL FOR RESTRICTED PERSONS
[LETTERHEAD OF VINSON & ELKINS L.L.P.]
January 20, 2004
Fleet National Bank, as Administrative Agent
100 Federal Street
Energy & Utilities, MADE 10008A
Boston, Massachusetts 02110
Ladies and Gentlemen:
We have acted as counsel for Heritage Propane Partners, L.P. ("Heritage
L.P."), a limited partnership organized under the laws of the State of Delaware,
in connection with certain aspects of the transaction contemplated by the
Underwriting Agreement (as defined in Schedule I hereto). At the request of
Heritage L.P., we are furnishing this opinion letter to you pursuant to Section
4.1(g) of the Credit Agreement (as defined in Schedule I hereto). Unless
otherwise defined herein, capitalized terms used herein have the meanings
assigned to such terms in the Credit Agreement. Also, terms defined in Schedule
I hereto have the same meanings when used in the body of this opinion letter.
Other terms that are defined in the Uniform Commercial Code as in effect on the
date hereof in the State of New York (the "New York UCC") have the same meaning
when used herein unless otherwise indicated by the context in which such terms
are so used. Unless otherwise indicated, references to the "UCC" shall mean (i)
with respect to the validity, creation or attachment of a security interest
granted by the Security Documents other than the Mortgage, the New York UCC,
(ii) with respect to a security interest granted by the Mortgage, the Uniform
Commercial Code as in effect on the date hereof in the State of Texas (the
"Texas UCC"), and (iii) with respect to the perfection of a security interest,
the New York UCC, the Texas UCC and the Uniform Commercial Code as in effect on
the date hereof in the State of Delaware (the "Delaware UCC"), as applicable.
For convenience, all references to specific articles, parts, sections or
subsections of the UCC are made by using the corresponding citations to the New
York UCC.
In rendering the opinions set forth below, we have reviewed execution
copies, or copies of original counterparts of the documents listed in Schedule I
hereto. The documents listed in Section A of Schedule I hereto are referred to
herein as the "Principal Documents". The entities listed below are collectively
referred to as "Principal Parties" and each, individually, as a "Principal
Party".
(i) La Grange Acquisition, L.P., a limited partnership organized
under the laws of Texas ("Borrower"),
(ii) ETC Gas Company, Ltd., a limited partnership organized under
the laws of Texas ("ETC Gas"),
1 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Fleet National Bank, as Administrative Agent
January 20, 2004
Page 2
(iii) ETC Marketing, Ltd., a limited partnership organized under the
laws of Texas ("ETC Marketing"),
(iv) ETC Oasis, L.P., a limited partnership organized under the
laws of Delaware ("ETC Oasis"),
(v) ETC Oasis GP, LLC, a limited liability company organized under
the laws of Texas ("ETC Oasis GP"),
(vi) ETC Oklahoma Pipeline, Ltd., a limited partnership organized
under the laws of Texas ("ETC Oklahoma"),
(vii) ETC Texas Pipeline, Ltd., a limited partnership organized
under the laws of Texas ("ETC Texas"),
(viii) ETC Texas Processing, Ltd., a limited partnership organized
under the laws of Texas ("ETC Texas Processing"),
(ix) Five Dawaco, LLC, a limited liability company organized under
the laws of Texas ("DAWACO"),
(x) LA GP, LLC, a limited liability company organized under the
laws of Texas ("LA GP"),
(xi) LG PL, LLC, a limited liability company organized under the
laws of Texas ("LG PL"),
(xii) LGM, LLC, a limited liability company organized under the laws
of Texas ("LGM"),
(xiii) ET Company I, Ltd., a limited partnership organized under the
laws of Texas ("ET Co. I"),
(xiv) Texas Energy Transfer Company, Ltd., a limited partnership
organized under the laws of Texas ("TX Energy Transfer"),
(xv) Whiskey Bay Gathering Company, Ltd., a limited partnership
organized under the laws of Texas ("Whiskey Bay Gathering"),
(xvi) Whiskey Bay Gas Company, Ltd., a limited partnership organized
under the laws of Texas ("Whiskey Bay Gas"),
(xvii) Chalkley Transmission Company, Ltd., a limited partnership
organized under the laws of Texas ("Chalkley"),
(xviii) TETC, LLC, a limited liability company organized under the
laws of Texas ("TETC"),
(xix) Oasis Pipe Line Company, a corporation organized under the
laws of Delaware ("Oasis Pipe Line"),
(xx) Oasis Pipe Line Finance Company, a corporation organized under
the laws of Delaware ("Oasis Finance"),
(xxi) Oasis Partner Company, a corporation organized under the laws
of Delaware ("Oasis Partner"),
(xxii) Oasis Pipe Line Management Company, a corporation organized
under the laws of Delaware ("Oasis Management"), and
2 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Fleet National Bank, as Administrative Agent
January 20, 2004
Page 3
(xxiii) Oasis Pipe Line Company Texas L.P., a limited partnership
organized under the laws of Texas ("Oasis Pipe Line TX").
In rendering the opinions set forth below, we have reviewed such other
records, certificates and documents as we have deemed appropriate for the
purposes of such opinions. As to any facts material to our opinions, we have
made no independent investigation of such facts and have relied, to the extent
that we deem such reliance proper, upon statements of public officials and
officers or other representatives of Heritage L.P. and the Principal Parties and
on the representations and warranties set forth in the Principal Documents. We
have also reviewed and relied upon one or more certificates of officers or other
representatives of the Principal Parties certifying that (a) no Principal Party
is a party to or bound by any loan agreement, indenture, mortgage or similar
agreement relating to Indebtedness in excess of $50,000 (other than a Principal
Document), and (b) no Principal Party is subject to any administrative order
binding upon such Principal Party or to any pending legal proceeding, or any
legal proceeding threatened in writing, affecting such Principal Party or any of
its properties before any court, governmental agency or arbitrator seeking to
affect the enforceability or performance by any Principal Party of the Principal
Documents or the transactions contemplated thereby.
In rendering the opinions expressed below, we have assumed the legal
capacity of all natural persons, the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, and the conformity
to authentic original documents of all documents submitted to us as copies,
which assumptions we have not independently verified. In addition, we have
assumed that (i) each party to the Principal Documents is a corporation,
partnership, limited liability company or other entity duly organized and
validly existing under the laws of the jurisdiction of its organization; (ii)
the execution, delivery and performance by each Principal Party of the Principal
Documents to which it is a party do not conflict with or result in the breach of
any document or instrument binding on it; (iii) the execution, delivery and
performance by each Principal Party of the Principal Documents to which it is a
party do not contravene any provision of any law, rule or regulation applicable
to any of them (except that we have not made such assumption with respect to
Applicable Laws (as defined below) applicable to the Principal Parties, as to
which we express our opinions in paragraph 5); (iv) no authorization, approval,
consent, order, license, franchise, permit or other action by, and no notice to
or filing with, any Tribunal or any other third party is required for the due
execution, delivery and performance by each Principal Party of the Principal
Documents to which it is a party that has not been duly obtained or made and
that is not in full force and effect (except that we have not made such
assumption with respect to Governmental Approvals (as defined below) required to
be obtained or taken by the Principal Parties as to which we express our opinion
in paragraph 6); (v) the Principal Documents constitute valid, binding and
enforceable obligations of each party thereto (other than the Principal
Parties); and (vi) the laws of any jurisdiction other than the laws that are the
subject of this opinion letter do not adversely affect the opinions set forth
below. With respect to our opinions expressed below, we have assumed that the
transactions contemplated in the Principal Documents bears a reasonable
relationship to New York within the meaning of Section 35.51 of the Texas
Business and Commerce Code. With respect to certain of the
3 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Fleet National Bank, as Administrative Agent
January 20, 2004
Page 4
foregoing matters as they relate to the Principal Parties, please refer to the
opinion letter, dated as of the date hereof, delivered to you by Hunton &
Williams.
Based upon the foregoing, and subject to the assumptions,
qualifications, exceptions and limitations set forth herein, it is our opinion
that:
1. Each Principal Party (a) has the corporate, partnership or
limited liability company, as applicable, power and authority to execute,
deliver and perform its obligations under each Principal Document to which it is
a party, (b) has taken all corporate, partnership or limited liability company,
as applicable, action necessary to authorize the execution, delivery and
performance of such Principal Document, and (c) has duly executed and delivered
each such Principal Document.
2. Based solely on the certificates of public officials listed in
Section D of Schedule I hereto, each Principal Party is in good standing and
duly authorized to do business, or is active, as applicable, in each state for
which such a certificate has been obtained for such Principal Party.
3. At the time of the closing of the transaction contemplated by
the Principal Documents, LA GP is the sole general partner of Borrower; Heritage
ETC, L.P. is the sole limited partner of Borrower; Heritage ETC GP, L.L.C. is
the sole general partner of Heritage ETC, L.P.; ETC Oasis GP is the sole general
partner of ETC Oasis; LG PL is the sole general partner of ETC Gas, ETC Texas,
ETC Oklahoma and ETC Texas Processing; LGM is the sole general partner of ETC
Marketing; TETC is the sole general partner of TX Energy Transfer; DAWACO is the
sole general partner of ET Co. I, Whiskey Bay Gathering, Whiskey Bay Gas and
Chalkley; Oasis Management is the sole general partner of Oasis Pipe Line TX;
Borrower is the sole limited partner of ETC Gas, ETC Texas, ETC Oklahoma, ETC
Texas Processing, ETC Marketing, ETC Oasis and ET Co. I; ET Co. I is the sole
limited partner of TX Energy Transfer, Whiskey Bay Gathering, Whiskey Bay Gas
and Chalkley; Heritage ETC, L.P. is the sole member of LA GP; the Borrower is
the sole member of LGM, LG PL, ETC Oasis GP, DAWACO, and TETC.
4. Each Principal Document to which each Principal Party is a
party constitutes the valid and binding obligation of such Principal Party
enforceable against such Principal Party in accordance with its terms.
5. The execution and delivery by each Principal Party of each
Principal Document to which it is a party do not, and the performance by such
Principal Party of its obligations thereunder will not, (a) violate, as
applicable, the articles or certificate of incorporation, bylaws, limited
partnership agreement, limited liability company agreement, limited liability
company articles of organization or regulations of such Principal Party, or (b)
result in any violation by the Principal Parties of any Applicable Laws (as
defined below).
"Applicable Laws" means the UCC, the General Corporation Law of the
State of Delaware, the Delaware Revised Uniform Limited Partnership
Act, the Texas
4 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Fleet National Bank, as Administrative Agent
January 20, 2004
Page 5
Revised Limited Partnership Act, those laws, rules and regulations of
the State of New York, the State of Texas and the United States of
America and the rules and regulations adopted thereunder, that, in our
experience, are normally applicable to transactions of the type
contemplated by the Principal Documents. However, the term "Applicable
Laws" does not include, and we express no opinion with regard to (i)
any state or federal laws, rules or regulations relating to: (A)
pollution or protection of the environment; (B) zoning, land use,
building or construction; (C) occupational safety and health or other
similar matters; (D) labor, employee rights and benefits, including the
Employee Retirement Income Security Act of 1974, as amended; (E) except
as expressly provided in the second sentence of paragraph 7 below, the
regulation of utilities, including the Public Utility Regulatory Policy
Act of 1978, as amended; (F) antitrust and trade regulation; (G) tax;
(H) except as expressly provided in paragraph 7 below, securities,
including, without limitation, federal and state securities laws, rules
or regulations; (I) corrupt practices, including, without limitation,
the Foreign Corrupt Practices Act of 1977; and (J) copyrights, patents
and trademarks, and (ii) any laws, rules or regulations of any county,
municipality or similar political subdivision or any agency or
instrumentality thereof.
6. No Governmental Approval (as defined below) which has not been
obtained or taken and is not in full force and effect, is required to be
obtained or taken by any Principal Party to authorize, or is required in
connection with, the execution and delivery by any Principal Party of each
Principal Document to which it is a party or the performance by any Principal
Party of its obligations thereunder, except (a) the filing of the Financing
Statements in the applicable Filing Offices, (b) filings that may be required to
continue the effectiveness of the Financing Statements, (c) filings of the
Mortgage referenced in paragraph 11 hereof, and (d) any filings necessary with
regard to future liens or mortgages required to be granted under the Principal
Documents.
"Governmental Approvals" means any consent, approval, license,
authorization or validation of, or filing, recording or registration
with, any Tribunal pursuant to any Applicable Laws (as defined in
paragraph 5 above).
7. No Principal Party is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended. No Principal Party is a "holding company," a
"public-utility company," or a "subsidiary company" of a "holding company"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
8. With respect to each Security Document, the provisions of such
Security Document are effective to create in favor of the Administrative Agent
to secure (with respect to each Security Documents other than the Mortgage) the
"Secured Obligations" (as defined in such Security Document) and (with respect
to the Mortgage) the "secured indebtedness" (as defined in the Mortgage), a
valid security interest in all of the right, title and interest of each
Principal Party that is a party to such Security Document in and to that portion
of the Collateral (as defined in
5 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Fleet National Bank, as Administrative Agent
January 20, 2004
Page 6
such Security Document) in which a security interest may be created under
Article 9 of the applicable UCC without giving effect to the laws referred to in
Section 9-201(b) and (c) thereof (the "Article 9 Collateral").
9. Upon the proper filing of each unfiled Financing Statement (as
described in Section C of Schedule I hereto) in the applicable Filing Office
identified for such unfiled Financing Statement in Section C of Schedule I
hereto, such filings, together with the existing filings of each presently filed
Financing Statement (as described in Section C of Schedule I hereto) in the
Filing Office identified for such presently filed Financing Statement in Section
C of Schedule I hereto, will result in the perfection of the security interest
in favor of the Administrative Agent in that portion of the Article 9 Collateral
described in such Financing Statements in which the Principal Parties named as
debtors in such Financing Statements have an interest, to the extent that
perfection of a security interest in the Article 9 Collateral may be perfected
by the filing of a financing statement under the UCC in effect in the State in
which such Filing Office is located. For purposes of our opinion set forth in
this paragraph 9 with respect to the Delaware UCC, we have based such opinion
solely on our review of the generally available compilations of Article 9 of the
Delaware UCC and we have not reviewed any other laws of the State of Delaware or
retained or relied on any opinion or advice of Delaware counsel.
10. With respect to that portion of the Article 9 Collateral
consisting of the certificated securities identified in Exhibit A to the Oasis
Entities Stock Pledge Agreement, upon the Administrative Agent's taking
possession in the State of New York of such certificates, properly endorsed to
the Administrative Agent or in blank, the security interest of the
Administrative Agent therein is perfected by "control" (within the meaning of
Section 8-106 of the New York UCC).
11. The Mortgage is in a form to create a valid lien in favor of
the Trustee thereunder, to secure the secured indebtedness referred to therein,
covering the "Deed of Trust Mortgaged Properties" (as defined in the Mortgage),
to the extent the Deed of Trust Mortgaged Properties constitute, under Texas
law, real property located in the State of Texas. The form of the Mortgage
contains provisions sufficient to allow the Trustee thereunder to exercise its
non-judicial power of sale remedy. A fully executed, original counterpart of the
Mortgage is required to be notarized, filed, and recorded in the appropriate
real estate records of the offices of the County Clerks of the Texas counties in
which the real properties described in the Mortgage are located, in order to
perfect the lien granted thereunder covering such Deed of Trust Mortgaged
Properties. Once the Mortgage is properly filed and recorded, no further or
subsequent filing or refiling will be necessary in order to continue the
existence or perfection of the lien referred to in the first sentence of this
paragraph, except that in the event any indebtedness secured by the Mortgage has
not been paid before the expiration of four years from the date provided for
therein or in the Notes, as appropriate, for payment of such indebtedness, an
extension agreement with respect to the Mortgage, providing for the renewal or
extension of such indebtedness, should be executed by the Mortgagor, Trustee,
and Administrative Agent thereunder and notarized, filed, and recorded in the
same records of each office in which the Mortgage has been filed prior to the
expiration of such four-year period.
6 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Fleet National Bank, as Administrative Agent
January 20, 2004
Page 7
12. In a properly presented case before a court of competent
jurisdiction in the State of Texas, or a federal court applying Texas law, such
court should recognize and give full force and effect to the choice of the laws
of the State of New York as the governing law of each of the Principal Documents
that choose New York law as the governing law thereof, except to the extent that
the perfection and the effect of perfection or non-perfection of the security
interest in the Collateral (as defined in each such Security Document) are
governed by the laws of a jurisdiction other than the State of New York.
13. In a properly presented case before a court of competent
jurisdiction in the State of New York, or a federal court applying New York law,
such court would honor the parties' choice of the laws of the State of New York
as the law governing the Principal Documents that choose New York law as the
governing law thereof (to the extent set forth in such Principal Documents).
In rendering the foregoing opinions, we have also assumed, with your
permission, and without independent investigation on our part, the following:
A. With respect to our opinions set forth in paragraphs 8 through
10 above, we have assumed that each Principal Party has, or has the power to
transfer, rights in the properties in which it is purporting to grant a security
interest sufficient for attachment of such security interest within the meaning
of Section 9-203 of the UCC.
B. With respect to our opinions set forth in paragraphs 8 through
10 above, we have assumed that the Administrative Agent and Lenders have
acquired their interests in the Article 9 Collateral for value within the
meaning of Section 9-203 of the UCC.
C. With respect to our opinions set forth in paragraphs 8 through
10 above, we have assumed the descriptions of collateral contained in, or
attached as schedules, exhibits or attachments to, the Security Documents and
the Financing Statements sufficiently describe (for the purposes of the
attachment and perfection of security interests) the collateral intended to be
covered thereby; provided, that, the foregoing assumption shall not apply to (a)
the description in the Oasis Entities Stock Pledge Agreement and the Financing
Statements of the certificated securities referred to in paragraph 10 of this
opinion letter, and (b) except for any commercial tort claim or cooperative
interest, collateral identified by a type of collateral defined in Article 9 of
the UCC and, with respect to the Financing Statements, collateral described as
being all of the property of the applicable debtor. With respect to our opinions
set forth in paragraph 11 above, we have made no examination of, and express no
opinion with respect to, the accuracy and sufficiency of the description of any
portion of the Deed of Trust Mortgaged Properties, nor with respect to title
thereto.
D. With respect to our opinion set forth in paragraph 9 above, we
have relied on the articles or certificate of incorporation, limited liability
company agreement, limited liability company articles of organization or
regulations, or limited partnership agreement, as applicable, and on
certificates of public officials or officers or other representatives of the
Principal Parties as to the authenticity of such documents as the basis for
determining that (i) the name of each
7 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Fleet National Bank, as Administrative Agent
January 20, 2004
Page 8
Principal Party, as set forth in subparagraphs (i) through (xxiii) of the second
paragraph of this opinion letter, is the correct legal name of such Principal
Party, (ii) the correct organizational identification number of such Principal
Party is as set forth on the Financing Statements and (iii) that each Principal
Party is solely organized under the laws of the State identified above in
subparagraphs (i) through (xxiii) of the second paragraph of this opinion letter
as such Principal Party's jurisdiction of organization. In addition, we have
assumed that the Financing Statements heretofore filed were duly authorized to
be filed in the applicable Filing Offices by the Principal Parties named as
debtors therein.
E. With respect to our opinions set forth in paragraph 10 above,
we have assumed that such certificated securities will at all times be held by
the Administrative Agent in the State of New York.
The opinions set forth above are subject to the following
qualifications and exceptions:
(a) Our opinions above are subject to, and may be limited by,
bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other
laws now or hereafter in effect relating to or affecting enforcement of
creditors' rights generally and by general principles of equity (including,
without limitation, concepts of materiality, reasonableness, good faith and fair
dealing, and the possible unavailability of specific performance), regardless of
whether such enforcement is considered in a proceeding in equity or at law.
(b) We express no opinion with respect to the validity or
enforceability of the following provisions to the extent that they are contained
in the Principal Documents: (i) provisions releasing, exculpating or exempting a
party from, or requiring indemnification or contribution of a party for,
liability for its own negligence or to the extent that the same are inconsistent
with public policy; (ii) provisions purporting to waive, subordinate or not give
effect to rights to notice, demands, legal defenses or other rights or benefits
that cannot be waived, subordinated or rendered ineffective under applicable
law; (iii) provisions purporting to provide remedies inconsistent with the UCC
to the extent the UCC is applicable; (iv) provisions purporting to render void
and of no effect any transfers of a Principal Party's rights in any collateral
in violation of the terms of the Principal Documents; (v) other than with
respect to our opinions set forth in paragraphs 8 through 10 above, provisions
relating to the creation, attachment, perfection or enforceability of any
security interest; (vi) provisions relating to powers of attorney, severability
or set-offs; (vii) provisions stating that a guarantee will not be affected by a
modification of the obligation guaranteed in cases in which that modification
materially changes the nature or amount of such obligation; (viii) provisions
restricting access to courts or purporting to affect the jurisdiction or venue
of courts (other than the courts of the State of New York with respect to
Principal Documents governed by the laws of the State of New York, to the extent
permitted by Section 5-1402 of the General Obligations Law of the State of New
York); (ix) provisions relating to waiver of jury trial; (x) provisions
purporting to exclude conflicts-of-law rules; (xi) provisions pursuant to which
a party agrees that a judgment rendered by a court or other tribunal in one
jurisdiction may be enforced in any other jurisdiction; and (xii) provisions
providing that decisions by a party are conclusive or may be made in its sole
discretion. In addition to the foregoing, our opinion set forth in paragraph 4
is further subject to
8 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Fleet National Bank, as Administrative Agent
January 20, 2004
Page 9
the qualification that certain remedies, waivers and other provisions of the
Mortgage or guaranties of the Guarantors may not be enforceable; nevertheless,
such unenforceability will not render the Mortgage or such guaranties invalid as
a whole nor preclude: (1) the judicial enforcement of the obligation of the
Borrower and the Guarantors to repay the principal, together with interest
thereon (to the extent not deemed a penalty), as provided in the Notes; (2) the
acceleration of the obligation of the Borrower and the Guarantors to repay such
principal, together with such interest, upon a default by the Borrower in the
payment of such principal or interest or upon a material default in any other
material provision of the Mortgage or such guaranties; and (c) the judicial
foreclosure, or if the Lenders elect to so pursue, the non-judicial foreclosure
(i.e., pursuant to the power of sale as specified in the Mortgage), in
accordance with Applicable Law and the Mortgage, of the lien on the Deed of
Trust Mortgaged Properties, upon maturity of the Notes or upon an acceleration
described in clause (2) above.
(c) With respect to our opinion in paragraph 13, and insofar as
our opinion set forth in paragraph 4 above relates to the enforceability under
New York law of the provisions of the Principal Documents choosing New York law
as the governing law thereof, such opinions are rendered in reliance upon the
Act of July 19, 1984, ch. 421, 1984 McKinney's Sess. Law of N.Y. 1406 (codified
at N.Y. Gen. Oblig. Law Sections 5-1401 (McKinney 1989)) (the "Act") and are
subject to the qualifications that such enforceability (i) as specified in the
Act, does not apply to the extent provided to the contrary in subsection two of
Section 1-105 of the New York UCC, (ii) may be limited by public policy
considerations of any jurisdiction in which enforcement of such provisions is
sought, and (iii) is subject to any U.S. Constitutional requirement under the
Full Faith and Credit Clause or the Due Process Clause thereof or the exercise
of any applicable judicial discretion in favor of another jurisdiction.
(d) Our opinion in paragraph 5, with respect to Texas law, takes
into account and is based on and qualified by our opinion in paragraph 12.
(e) Our opinion in paragraph 12 is based on Section 35.51 of the
Texas Business and Commerce Code, which Section to our knowledge has never been
judicially construed.
(f) Certain of the remedial provisions with respect to the Article
9 Collateral under the Security Documents to sell or offer for sale the Article
9 Collateral may be subject to compliance with applicable state and federal
securities laws. Without limiting the foregoing, we hereby advise you, in
connection with our opinion in paragraph 11 above, that Sections 51.003, 51.004
and 51.005 of the Texas Property Code, and Sections 1301(3) and 1371 of the New
York Real Property Acts Law (McKinney 1979) contain certain limitations on
recovery of deficiencies after foreclosure.
(g) In the case of property which becomes Article 9 Collateral
after the date hereof, our opinion in paragraph 8 above, as to the creation and
validity of the security interests therein described, is subject to the effect
of Section 552 of the Federal Bankruptcy Code, which limits the extent to which
property acquired by a debtor after the commencement of a case under the Federal
Bankruptcy Code may be subject to such security interest arising from a security
agreement entered into by the debtor before the commencement of such case.
9 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Fleet National Bank, as Administrative Agent
January 20, 2004
Page 10
(h) We express no opinion as to Article 9 Collateral that is
subject to a state statute or a statute, regulation or treaty of the United
States referred to in Section 9-311(a) of the UCC.
(i) With respect to our opinion in paragraph 9 above, we express
no opinion as to the perfection of a security interest in any items of
collateral that are or are to become fixtures, as-extracted collateral or timber
to be cut.
(j) With respect to our opinions set forth in paragraphs 8 through
10 above, we express no opinion as to the priority of any security interest. Our
opinions set forth in paragraphs 8 and 9 above with respect to the Mortgage are
limited to collateral located in the State of Texas.
(k) We express no opinion herein regarding the enforceability of
any provision in a Principal Document that purports to prohibit, restrict or
condition the assignment of such Principal Document to the extent that such
restriction on assignability is governed by Sections 9-406 through 9-409 of the
New York UCC or the Texas UCC.
(l) With respect to our opinions set forth in paragraphs 8 through
10 above, the attachment and perfection of the Administrative Agent's security
interest in proceeds is limited to the extent set forth in Section 9-315 of the
UCC.
(m) We express no opinion as to any actions that may be required
to be taken periodically under the UCC or under any other applicable law in
order for the effectiveness of the Financing Statements or perfection of any
security interest to be maintained.
(n) With respect to our opinions set forth in paragraphs 3 and
5(a) above, we have relied solely on copies of the articles or certificate of
incorporation, bylaws, limited partnership agreement, limited liability company
agreement or limited liability company articles of organization or regulations,
as applicable, or on certificates of officers or other representatives of the
relevant Principal Parties, and we have relied without independent investigation
on certificates of officers or other representatives of the Principal Parties
and of public officials with respect to the authenticity of such articles or
certificates of incorporation, bylaws, limited partnership agreements, limited
liability company agreements or limited liability company articles of
organization or regulations.
(o) In rendering the opinions set forth above with respect to
remedies under the Security Documents, we call to your attention that (i) in
connection with a foreclosure or similar action on intrastate pipeline assets,
certain filings may have to be made with the Texas Railroad Commission, and (ii)
in connection with a foreclosure or similar action on contracts for the sale or
transportation of gas under Section 311 of the Natural Gas Policy Act of 1978,
as amended, certain filings may have to be made with the Federal Energy
Regulatory Commission.
We express no opinion as to the laws of any jurisdiction other than:
(a) with respect to our opinions in paragraphs 5(b) and 6, Applicable Laws; (b)
with respect to our opinions in paragraphs 8 through 10, the UCC; (c) with
respect to our opinions in paragraphs 2 and 5(a), the
10 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Fleet National Bank, as Administrative Agent
January 20, 2004
Page 11
General Corporation Law of the State of Delaware, the Delaware Revised Uniform
Limited Partnership Act, and the Texas Revised Limited Partnership Act, as
applicable; (d) with respect to our opinion in paragraph 12, Section 35.51 of
the Texas Business and Commerce Code; (e) with respect to our opinion in
paragraph 11, the laws of the State of Texas; (f) the laws of the State of New
York; and (g) the federal laws of the United States of America.
This opinion letter is rendered as of the date set forth above. We
expressly disclaim any obligation to update this letter after such date.
This opinion letter is given solely for your benefit and the benefit of
the Lenders in connection with the Principal Documents and may not be furnished
to, or relied upon by, any other person or for any other purpose without our
prior written consent; provided, however, that your counsel may rely upon this
opinion letter with respect to any opinions being rendered by such counsel to
any Lender in connection with the Principal Documents, and the Underwriters, as
defined in Section E of Schedule I, may rely upon this opinion letter solely for
their benefit pursuant to Section 7(c) of the Underwriting Agreement, as defined
in Section E of Schedule I.
Very truly yours,
VINSON & ELKINS L.L.P.
11 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Fleet National Bank, as Administrative Agent
January 20, 2004
Page 1
SCHEDULE I
TO OPINION LETTER OF VINSON & ELKINS L.L.P.
DOCUMENTS EXAMINED
SECTION A.
PRINCIPAL DOCUMENTS
1. Second Amended and Restated Credit Agreement dated as of January 20,
2004, among La Grange Acquisition, L.P. as Borrower, Fleet National
Bank as Administrative Agent, Fleet Securities, Inc. and Wachovia
Capital Markets, LLC as Joint Lead Arrangers and Book Runners, Wachovia
Bank, National Association as Syndication Agent, The Royal Bank of
Scotland plc and BNP Paribas as Co-Documentation Agents, Bank of
Scotland as Senior Managing Agent, U.S. Bank National Association and
Fortis Capital as Co-Agents, and certain financial institutions as
Lenders (the "Credit Agreement").
2. The Notes (as defined in the Credit Agreement), dated as of and
delivered on the date of the Opinion Letter to which this Schedule I is
attached.
3. Second Amended and Restated Guaranty dated as of January 20, 2004,
executed by ETC Gas, ETC Texas, ETC Oklahoma, ETC Marketing, ETC Oasis,
ETC Texas Processing, Whiskey Bay Gas, Whiskey Bay Gathering, Chalkley,
TX Energy Transfer, ET Co. I, Oasis Pipe Line, Oasis Finance, Oasis
Partner, Oasis Management and Oasis Pipe Line TX in favor of
Administrative Agent.
4. Second Amended and Restated Pledge Agreement dated as of January 20,
2004, executed by Borrower in favor of Administrative Agent (the
"Borrower LLC Pledge Agreement").
5. Second Amended and Restated Security Agreement dated as of January 20,
2004, executed by Borrower in favor of Administrative Agent (the
"Borrower Security Agreement").
6. Second Amended and Restated Pledge Agreement dated as of January 20,
2004, executed by Borrower in favor of Administrative Agent (the
"Borrower Partnership Pledge Agreement").
7. Second Amended and Restated Pledge Agreement dated as of January 20,
2004, executed by LA GP, LG PL, LGM, ETC Oasis GP, Oasis Partner, Oasis
Management, DAWACO, TETC and ET Co. I in favor of Administrative Agent
(the "Subsidiary Pledge Agreement").
8. Second Amended and Restated Security Agreement dated as of January 20,
2004, executed by ETC Marketing, ETC Oasis, ETC Texas Processing, TX
Energy Transfer,
1 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Fleet National Bank, as Administrative Agent
January 20, 2004
Page 2
Whiskey Bay Gas, Whiskey Bay Gathering, Chalkley, ET Co. I, Oasis Pipe
Line, Oasis Management, Oasis Finance, Oasis Partner and ETC Gas in
favor of Administrative Agent (the "Subsidiary Security Agreement").
9. Amended and Restated Stock Pledge Agreement dated as of January 20,
2004, executed by ETC Oasis and Oasis Pipe Line in favor of
Administrative Agent (the "Oasis Entities Stock Pledge Agreement").
10. First Amended and Restated Deed of Trust, Mortgage, Assignment,
Security Agreement, Fixture Filing and Financing Statement dated as of
January 20, 2004 executed by ETC Texas, Oasis Pipe Line TX, ETC
Oklahoma and ETC Texas Processing (the "Mortgage").
The Borrower LLC Pledge Agreement, the Borrower Partnership Pledge Agreement,
the Subsidiary Pledge Agreement, the Oasis Entities Stock Pledge Agreement, the
Borrower Security Agreement, the Subsidiary Security Agreement and the Mortgage
are herein collectively called the "Security Documents".
SECTION B.
CORPORATE DOCUMENTS AND PROCEEDINGS
1. Unanimous Written Consent of Mangers in Lieu of Meeting of LA GP dated
January 20, 2004.
2. Resolutions of the Board of Managers of LA GP.
3. Unanimous Written Consent of Mangers in Lieu of Meeting of LG PL dated
January 20, 2004.
4. Resolutions of the Board of Managers of LG PL.
5. Unanimous Written Consent of Mangers in Lieu of Meeting of LGM dated
January 20, 2004.
6. Resolutions of the Board of Managers of LGM.
7. Unanimous Written Consent of Mangers in Lieu of Meeting of ETC Oasis GP
dated January 20, 2004.
8. Resolutions of the Board of Managers of ETC Oasis GP.
2 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Fleet National Bank, as Administrative Agent
January 20, 2004
Page 3
9. Unanimous Written Consent of Mangers in Lieu of Meeting of DAWACO dated
January 20, 2004.
10. Resolutions of the Board of Managers of DAWACO.
11. Unanimous Written Consent of Mangers in Lieu of Meeting of TETC dated
January 20, 2004.
12. Resolutions of the Board of Managers of TETC.
13. Unanimous Written Consent of Directors in Lieu of Meeting of Oasis Pipe
Line dated January 20, 2004.
14. Resolutions of the Board of Directors of Oasis Pipe Line.
15. Unanimous Written Consent of Directors in Lieu of Meeting of Oasis
Management dated January 20, 2004.
16. Resolutions of the Board of Directors of Oasis Management.
17. Unanimous Written Consent of Directors in Lieu of Meeting of Oasis
Finance dated January 20, 2004.
18. Resolutions of the Board of Directors of Oasis Finance.
19. Unanimous Written Consent of Directors in Lieu of Meeting of Oasis
Partner dated January 20, 2004.
20. Resolutions of the Board of Directors of Oasis Partner.
21. Consent and Acknowledgment of DAWACO dated January 20, 2004.
22. Consent and Acknowledgment of Heritage ETC GP, L.L.C. dated January 20,
2004.
23. Unanimous Consent of the Board of Directors of U.S. Propane, L.L.C.
dated January 16, 2004.
SECTION C.
FINANCING STATEMENTS
1. Financing Statement 03-0004379086, naming La Grange Acquisition, L.P.,
as debtor, and Fleet National Bank, as Administrative Agent, as secured
party, and filed in the Office of the Secretary of State of the State
of Texas on October 10, 2002.
3 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Fleet National Bank, as Administrative Agent
January 20, 2004
Page 4
2. An unfiled copy of a Financing Statement naming ETC Gas Company, Ltd.,
as debtor, and Fleet National Bank, as Administrative Agent, as secured
party, to be filed in the Office of the Secretary of State of the State
of Texas.
3. Financing Statement 03-0004378732, naming ETC Marketing, Ltd., as
debtor, and Fleet National Bank, as Administrative Agent, as secured
party, and filed in the Office of the Secretary of State of the State
of Texas on October 10, 2002.
4. Financing Statement 03-0004379531, naming ETC Oasis GP, LLC, as debtor,
and Fleet National Bank, as Administrative Agent, as secured party, and
filed in the Office of the Secretary of State of the State of Texas on
October 10, 2002, as amended by UCC Financing Statement Amendment
03-00236900, filed in the Office of the Secretary of State of the State
of Texas on April 8, 2003.
5. Financing Statement 03-0004378954, naming ETC Oklahoma Pipeline, Ltd.,
as debtor, and Fleet National Bank, as Administrative Agent, as secured
party and filed in the Office of the Secretary of State of the State of
Texas on October 10, 2002.
6. Financing Statement 03-0004378843, naming ETC Texas Pipeline, Ltd., as
debtor, and Fleet National Bank, as Administrative Agent, as secured
party, and filed in the Office of the Secretary of State of the State
of Texas on October 10, 2002.
7. Financing Statement 04-0042019696, naming ETC Texas Pipeline, Ltd., as
debtor, and Fleet National Bank, as Administrative Agent, as secured
party, and filed in the Office of the Secretary of State of the State
of Texas on September 17, 2003, as a transmitting utility filing and a
fixture filing, and an unfiled copy of a UCC Financing Statement
Amendment amending such Financing Statement to restate the collateral
description, to be filed in the Office of the Secretary of State of the
State of Texas.
8. An unfiled copy of a Financing Statement naming ETC Texas Processing,
Ltd., as debtor, and Fleet National Bank, as Administrative Agent, as
secured party, and to be filed in the Office of the Secretary of State
of the State of Texas.
9. An unfiled copy of a Financing Statement naming ETC Texas Processing,
Ltd., as debtor, and Fleet National Bank, as Administrative Agent, as
secured party, and to be filed in the Office of the Secretary of State
of the State of Texas, as a transmitting utility filing and a fixture
filing.
10. Financing Statement 03-0012863720, naming FIVE-DAWACO, INC., as debtor,
and Fleet National Bank, as Administrative Agent, as secured party, and
filed in the Office of the Secretary of State of the State of Texas on
January 6, 2003, and an unfiled copy of a UCC Financing Statement
Amendment amending such Financing Statement to reflect a change of name
of such debtor to Five Dawaco, LLC and a change of its type of
4 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Fleet National Bank, as Administrative Agent
January 20, 2004
Page 5
organization to a limited liability company, to be filed in the Office
of the Secretary of State of the State of Texas.
11. Financing Statement 03-0004379208, naming LA GP, LLC, as debtor, and
Fleet National Bank, as Administrative Agent, as secured party, and
filed in the Office of the Secretary of State of the State of Texas on
October 10, 2002.
12. Financing Statement 03-0004379319, naming LG PL, LLC, as debtor, and
Fleet National Bank, as Administrative Agent, as secured party, and
filed in the Office of the Secretary of State of the State of Texas on
October 10, 2002, and an unfiled copy of a UCC Financing Statement
Amendment amending such Financing Statement to restate the collateral
description, to be filed in the Office of the Secretary of State of the
State of Texas.
13. Financing Statement 03-0004379420, naming LGM, LLC, as debtor, and
Fleet National Bank, as Administrative Agent, as secured party, and
filed in the Office of the Secretary of State of the State of Texas on
October 10, 2002.
14. Financing Statement 03-0012863053, naming ET Company I, Ltd., as
debtor, and Fleet National Bank, as Administrative Agent, as secured
party, and filed in the Office of the Secretary of State of the State
of Texas on January 6, 2003.
15. Financing Statement 03-0012862709, naming Texas Energy Transfer
Company, Ltd., as debtor, and Fleet National Bank, as Administrative
Agent, as secured party, and filed in the Office of the Secretary of
State of the State of Texas on January 6, 2003.
16. Financing Statement 03-0012862921, naming Whiskey Bay Gathering
Company, Ltd., as debtor, and Fleet National Bank, as Administrative
Agent, as secured party, and filed in the Office of the Secretary of
State of the State of Texas on January 6, 2003.
17. Financing Statement 03-0012862810, naming Whiskey Bay Gas Company,
Ltd., as debtor, and Fleet National Bank, as Administrative Agent, as
secured party, and filed in the Office of the Secretary of State of the
State of Texas on January 6, 2003.
18. Financing Statement 03-0012862698, naming Chalkley Transmission
Company, Ltd., as debtor, and Fleet National Bank, as Administrative
Agent, as secured party, and filed in the Office of the Secretary of
State of the State of Texas on January 6, 2003.
19. Financing Statement 03-0012863619, naming TETC, INC., as debtor and
Fleet National Bank, as Administrative Agent, as secured party, and
filed in the Office of the Secretary of State of the State of Texas on
January 6, 2003, and an unfiled copy of a UCC Financing Statement
Amendment amending such Financing Statement to reflect a change of name
of such debtor to TETC, LLC and a change of its type of organization to
a
5 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Fleet National Bank, as Administrative Agent
January 20, 2004
Page 6
limited liability company, to be filed in the Office of the Secretary
of State of the State of Texas.
20. Financing Statement 03-0012863497, naming Oasis Pipe Line Company Texas
L.P., as debtor, and Fleet National Bank, as Administrative Agent, as
secured party, and filed in the Office of the Secretary of State of the
State of Texas on January 6, 2003.
21. Financing Statement 04-0042039274, naming Oasis Pipe Line Company Texas
L.P., as debtor, and Fleet National Bank, as Administrative Agent, as
secured party, and filed in the Office of the Secretary of State of the
State of Texas on September 17, 2003, as a transmitting utility filing
and a fixture filing, and an unfiled copy of a UCC Financing Statement
Amendment amending such Financing Statement to restate the collateral
description, to be filed in the Office of the Secretary of State of the
State of Texas.
22. Financing Statement 3020443 1, naming Oasis Pipe Line Company, as
debtor, and Fleet National Bank, as Administrative Agent, as secured
party, and filed with the Delaware Department of State, U.C.C. Filing
Section on January 6, 2003.
23. Financing Statement 3020438 1, naming Oasis Pipe Line Finance Company,
as debtor, and Fleet National Bank, as Administrative Agent, as secured
party, and filed with the Delaware Department of State, U.C.C. Filing
Section on January 6, 2003.
24. Financing Statement 3020442 3, naming Oasis Partner Company, as debtor,
and Fleet National Bank, as Administrative Agent, as secured party, and
filed with the Delaware Department of State, U.C.C. Filing Section on
January 6, 2003.
25. Financing Statement 3020439 9, naming Oasis Pipe Line Management
Company, as debtor, and Fleet National Bank, as Administrative Agent,
as secured party, and filed with the Delaware Department of State,
U.C.C. Filing Section on January 6, 2003.
26. Financing Statement 3020680 8, naming ETC Oasis, L.P., as debtor, and
Fleet National Bank, as Administrative Agent, as secured party, and
filed with the Delaware Department of State, U.C.C. Filing Section on
January 6, 2003.
The above-described Financing Statements and UCC Financing Statement Amendments
are herein collectively called the "Financing Statements" and the places in
which they are indicated to have been filed or are indicated to be filed are
herein collectively called the "Filing Offices."
SECTION D.
GOVERNMENTAL CERTIFICATES
6 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Fleet National Bank, as Administrative Agent
January 20, 2004
Page 7
1. A certificate from the Secretary of State of Delaware, dated January
13, 2004, regarding Oasis Pipe Line Company.
2. A certificate from the Secretary of State of Delaware, dated January
12, 2004, regarding Oasis Pipe Line Management Company.
3. A certificate from the Secretary of State of Delaware, dated January
12, 2004, regarding Oasis Partner Company.
4. A certificate from the Secretary of State of Delaware, dated January
12, 2004, regarding Oasis Pipe Line Finance Company.
5. A certificate from the Secretary of State of Delaware, dated January
12, 2004, regarding ETC Oasis, L.P.
6. A certificate from the Secretary of State of Delaware, dated January
12, 2004, regarding Heritage Holdings, Inc.
7. A certificate from the Secretary of State of Louisiana, dated January
9, 2004, regarding Five-Dawaco, Inc.
8. A certificate from the Secretary of State of Louisiana, dated January
9, 2004, regarding Chalkley Transmission Company, Ltd.
9. A certificate from the Secretary of State of Louisiana, dated January
9, 2004, regarding Texas Energy Transfer Company, Ltd.
10. A certificate from the Secretary of State of Texas, dated January 9,
2004, regarding Oasis Pipe Line Management Company.
11. A certificate from the Secretary of State of Texas, dated January 9,
2004, regarding Oasis Pipe Line Finance Company.
12. A certificate from the Secretary of State of Texas, dated January 9,
2004, regarding ETC Oasis, L.P.
13. A certificate from the Secretary of State of Texas, dated January 9,
2004, regarding TETC, Inc.
14. A certificate from the Secretary of State of Texas, dated January 9,
2004, regarding Five-Dawaco, Inc.
7 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Fleet National Bank, as Administrative Agent
January 20, 2004
Page 8
15. A certificate from the Secretary of State of Texas, dated January 9,
2004, regarding ETC Oasis GP, LLC.
16. A certificate from the Secretary of State of Texas, dated January 9,
2004, regarding LGM, LLC.
17. A certificate from the Secretary of State of Texas, dated January 9,
2004, regarding LG PL, LLC.
18. A certificate from the Secretary of State of Texas, dated January 12,
2004, regarding LA GP, LLC.
19. A certificate from the Secretary of State of Texas, dated January 9,
2004, regarding ET Company I, Ltd.
20. A certificate from the Secretary of State of Texas, dated January 9,
2004, regarding Chalkley Transmission Company, Ltd.
21. A certificate from the Secretary of State of Texas, dated January 9,
2004, regarding Texas Energy Transfer Company, Ltd.
22. A certificate from the Secretary of State of Texas, dated January 9,
2004, regarding Whiskey Bay Gas Company, Ltd.
23. A certificate from the Secretary of State of Texas, dated January 12,
2004, regarding Whiskey Bay Gathering Company, Ltd.
24. A certificate from the Secretary of State of Texas, dated January 9,
2004, regarding Oasis Pipe Line Company Texas L.P.
25. A certificate from the Secretary of State of Texas, dated January 9,
2004, regarding ETC Marketing, Ltd.
26. A certificate from the Secretary of State of Texas, dated January 9,
2004, regarding ETC Oklahoma Pipeline, Ltd.
27. A certificate from the Secretary of State of Texas, dated January 12,
2004, regarding ETC Texas Pipeline, Ltd.
28. A certificate from the Secretary of State of Texas, dated January 12,
2004, regarding ETC Gas Company, Ltd.
8 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Fleet National Bank, as Administrative Agent
January 20, 2004
Page 9
29. A certificate from the Secretary of State of Texas, dated January 12,
2004, regarding La Grange Acquisition, L.P.
30. A certificate from the Secretary of State of Texas, dated January 14,
2004, regarding ETC Texas Processing, Ltd.
31. A certificate from the Texas Comptroller of Public Accounts, dated
January 12, 2004, regarding Oasis Pipe Line Management Company.
32. A certificate from the Texas Comptroller of Public Accounts, dated
January 12, 2004, regarding Oasis Pipe Line Finance Company.
33. A certificate from the Texas Comptroller of Public Accounts, dated
January 12, 2004, regarding TETC, Inc.
34. A certificate from the Texas Comptroller of Public Accounts, dated
January 12, 2004, regarding Five-Dawaco, Inc.
35. A certificate from the Texas Comptroller of Public Accounts, dated
January 12, 2004, regarding ETC Oasis GP, LLC.
36. A certificate from the Texas Comptroller of Public Accounts, dated
January 12, 2004, regarding LGM, LLC.
37. A certificate from the Texas Comptroller of Public Accounts, dated
January 12, 2004, regarding LG PL, LLC.
38. A certificate from the Texas Comptroller of Public Accounts, dated
January 12, 2004, regarding LA GP, LLC.
SECTION E.
NEW DEFINED TERMS
Underwriting Agreement means the Underwriting Agreement dated January
13, 2004 by and among Heritage L.P., U.S. Propane, L.P. (the "General Partner"),
Heritage ETC, L.P. (the "New Operating Partnership"), Heritage ETC GP, L.L.C.
(the "New OLP General Partner"), Heritage Operating, L.P. (the "Heritage
Operating Partnership"), Heritage LP, Inc. ("Heritage OLP LP"), and the
underwriters named therein.
Underwriters means Lehman Brothers Inc., Citigroup Global Markets Inc.,
UBS Securities LLC, A.G. Edwards & Sons, Inc., Wachovia Capital Markets, LLC,
Credit Suisse
9 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Fleet National Bank, as Administrative Agent
January 20, 2004
Page 10
First Boston LLC, RBC Dain Rauscher Inc., Raymond James & Associates, Inc. and
Stephens Inc.
10 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
EXHIBIT H
ENVIRONMENTAL COMPLIANCE CERTIFICATE
Reference is made to that certain Second Amended and Restated Credit
Agreement dated as of January 20, 2004 (as from time to time amended, the
"Agreement"), by and among La Grange Acquisition, L.P. ("Borrower"), Fleet
National Bank, as Administrative Agent, and certain financial institutions
("Lenders"). Terms which are defined in the Agreement are used herein with the
meanings given them in the Agreement. Borrower hereby certifies to
Administrative Agent and Lenders as follows:
1. For the Fiscal Year ending immediately prior to the
date hereof, Borrower has complied and is complying with Section [____]
of the Agreement *[except as set forth in Schedule I attached hereto];
2. To the best knowledge of the undersigned after due
inquiry, Borrower is on the date hereof in compliance with all
applicable Environmental Laws, noncompliance with which could cause a
Material Adverse Change;
3. Borrower has taken (and continues to take) steps to
minimize the generation of potentially harmful effluents;
4. Borrower has established an ongoing program of
conducting an internal audit of each operating facility of Borrower to
identify actual or potential environmental liabilities which could
reasonably be expected to have a Material Adverse Effect; and
5. Borrower has established an ongoing program of
training its employees in issues of environmental, health and safety
compliance, and Borrower presently has one or more individuals in
charge of implementing such training program.
The officer of LA GP signing this instrument hereby certifies that, to
the best of his knowledge after due inquiry and consultation with the operating
officers of Borrower, the above representations, warranties, acknowledgments,
and agreements of Borrower are true, correct and complete in all material
respects.
1 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
IN WITNESS WHEREOF, this instrument is executed as of ____________, ____.
LA GRANGE ACQUISITION, L.P.
By: LA GP, LLC, its general partner
By: _____________________________
Name:
Title:
2 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Ray C. Davis, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Energy Transfer
Partners, L.P.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
c. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize, and report financial
information; and
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: April 14, 2004
/s/ Ray C. Davis
---------------------------------
Ray C. Davis
Co-Chief Executive Officer
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Kelcy L. Warren, certify that:
6. I have reviewed this quarterly report on Form 10-Q of Energy Transfer
Partners, L.P.;
7. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
8. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this
report;
9. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
c. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
10. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize, and report financial
information; and
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: April 14, 2004
/s/ Kelcy L. Warren
-----------------------------
Kelcy L Warren
Co-Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, H. Michael Krimbill, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Energy Transfer
Partners, L.P.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
c. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize, and report financial
information; and
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: April 14, 2004
/s/ H. Michael Krimbill
----------------------------
H. Michael Krimbill
President
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Energy Transfer Partners, L.P. (the
"Partnership") on Form 10-Q for the three months ended February 29, 2004 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Ray C. Davis, Co-Chief Executive Officer, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Partnership.
Date: April 14, 2004
/s/ Ray C. Davis
---------------------------
Ray C. Davis
Co-Chief Executive Officer
*A signed original of this written statement required by 18 U.S.C. Section 1350
has been provided to and will be retained by Energy Transfer Partners, L.P.
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Energy Transfer Partners, L.P. (the
"Partnership") on Form 10-Q for the three months ended February 29, 2004 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Kelcy L. Warren, Co-Chief Executive Officer, certify, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Partnership.
Date: April 14, 2004
/s/ Kelcy L. Warren
------------------------------
Kelcy L. Warren
Co-Chief Executive Officer
*A signed original of this written statement required by 18 U.S.C. Section 1350
has been provided to and will be retained by Energy Transfer Partners, L.P.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Energy Transfer Partners, L.P. (the
"Partnership") on Form 10-Q for the three months ended February 29, 2004, as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, H. Michael Krimbill, President, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Partnership.
Date: January 14, 2004
/s/ H. Michael Krimbill
-------------------------------
H. Michael Krimbill
President
*A signed original of this written statement required by 18 U.S.C. Section 1350
has been provided to and will be retained by Energy Transfer Partners, L.P.
