-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, sOkCD3fDpGPeKYwvOBCC66nV/gvE5tgox8k2Vt/s9ko2fd4bcQIW3wMFEx8M3YAH QtvA6fijh2Aa3OXTLISciQ== 0000912057-94-002022.txt : 19940613 0000912057-94-002022.hdr.sgml : 19940613 ACCESSION NUMBER: 0000912057-94-002022 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 19 FILED AS OF DATE: 19940610 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMPIRE GAS CORP/NEW CENTRAL INDEX KEY: 0000922404 STANDARD INDUSTRIAL CLASSIFICATION: 0000 STATE OF INCORPORATION: MO FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-53343 FILM NUMBER: 94533743 BUSINESS ADDRESS: STREET 1: 1700 SO JEFFERSON ST STREET 2: P O BOX 303 CITY: LEBANON STATE: MO ZIP: 65536 MAIL ADDRESS: STREET 1: 2445 M ST N W CITY: WASHINGTON STATE: DC ZIP: 20037 S-1/A 1 S-1/A AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 10, 1994 REGISTRATION NO. 33-53343 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- AMENDMENT NO. 2 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ EMPIRE GAS CORPORATION (Exact name of Registrant as specified in its charter) MISSOURI 5984 43-1494323 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number)
P.O. BOX 303 (1700 SOUTH JEFFERSON STREET) LEBANON, MISSOURI 65536 (417) 532-3101 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) -------------------------- See table of additional registrants. -------------------------- Paul S. Lindsey, Jr. Chief Operating Officer Empire Gas Corporation P.O. Box 303 Lebanon, Missouri 65536 (417) 532-3101 (Name and address, including zip code, and telephone number, including area code, of agent for service) -------------------------- COPIES TO: Richard W. Cass, Esq. Joseph A. Coco, Esq. Wilmer, Cutler & Pickering Skadden, Arps, Slate, Meagher & Flom 2445 M Street, N.W. 919 Third Avenue Washington, D.C. 20037-1420 New York, New York 10022 (202) 663-6000 (212) 735-3000
-------------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS POSSIBLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE. -------------------------- If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: /X/ -------------------------- CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED MAXIMUM MAXIMUM AGGREGATE AMOUNT OF TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING PRICE REGISTRATION SECURITIES TO BE REGISTERED REGISTERED PER UNIT (2) FEE Units (each unit consisting of $ principal amount of % Senior Secured Notes due 2004 and Warrants to purchase Common Stock)................... (1) (1) $100,000,000 $34,483 Guarantee of the % Senior Secured Notes due 2004 by subsidiaries of the Registrant (3)........................... (1) -- -- -- Common Stock, par value $.001 per share (4)...................................... shares -- -- -- (1) The amount to be registered and proposed maximum offering price of the Senior Secured Notes will be calculated to result in a maximum aggregate offering price to the public of $100,000,000. (2) Estimated solely for purposes of determining the registration fee pursuant to Rule 457. (3) The guarantors listed on the attached table will jointly and severally issue full and unconditional guarantees of the payment of the Senior Secured Notes. No separate consideration will be received for the guarantees. (4) Issuable upon exercise of the Warrants offered hereunder. An indeterminate number of additional shares of Common Stock is registered hereunder, which may be issued pursuant to the anti-dilution provisions of the Warrants. No additional registration fee is included for such shares.
--------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A) MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF ADDITIONAL REGISTRANTS
ADDRESS, INCLUDING ZIP CODE AND PRIMARY TELEPHONE NUMBER, STANDARD INCLUDING AREA STATE OR OTHER INDUSTRIAL I.R.S. EMPLOYER CODE, OF JURISDICTION OF CLASSIFICATION IDENTIFICATION PRINCIPAL NAME INCORPORATION CODE NUMBER NUMBER EXECUTIVE OFFICES - --------------------------------------------------- ----------------- --------------- ---------------- ----------------- EMPIRE TANK LEASING CORPORATION.................... DELAWARE 5984 43-0909092 (1) EMPIREGAS EQUIPMENT CORPORATION.................... CALIFORNIA 5984 43-0966160 (1) EMPIRE UNDERGROUND STORAGE, INC.................... KANSAS 5984 43-1034230 (1) EMPIRE INDUSTRIAL SALES OKLAHOMA CORPORATION....................................... 5984 43-0898527 (1) UTILITY COLLECTION CORPORATION..................... DELAWARE 5984 43-0796108 (1) EMPIREGAS TRANSPORTS, INC. (MISSOURI).............. DELAWARE 5984 43-0794408 (1) EMPIRE AVIATION CORPORATION........................ DELAWARE 5984 43-1405593 (1) EMPIREGAS TRANSPORTS, INC. -- OR................... OREGON 5984 43-1623931 (1) EMPIREGAS INC. OF CLINTON (MISSOURI)............... DELAWARE 5984 43-1222571 (1) EMPIREGAS INC. OF KANSAS CITY...................... DELAWARE 5984 43-0815037 (1) EMPIREGAS INC. OF ALBANY........................... OREGON 5984 43-1526762 (1) EMPIREGAS INC. OF AIKEN............................ SOUTH CAROLINA 5984 43-1113382 (1) EMPIREGAS OF ARMA, INC............................. KANSAS 5984 43-0797739 (1) EMPIREGAS INC. OF ARNAULDVILLE..................... LOUISIANA 5984 43-0969880 (1) EMPIREGAS INC. OF AUBURN........................... WASHINGTON 5984 43-1547484 (1) EMPIREGAS INC. OF BIG RAPIDS....................... MICHIGAN 5984 43-0991732 (1) EMPIREGAS INC. OF BOLIVAR.......................... DELAWARE 5984 43-0794420 (1) EMPIREGAS INC. OF BOISE............................ IDAHO 5984 82-0456341 (1) EMPIREGAS INC. OF BOULDER.......................... COLORADO 5984 43-0910833 (1) EMPIREGAS INC. OF BOWLING GREEN.................... DELAWARE 5984 43-0813526 (1) EMPIREGAS INC. OF BRANDON.......................... IOWA 5984 43-0961168 (1) EMPIREGAS INC. OF BREMERTON........................ WASHINGTON 5984 43-1655742 (1) EMPIREGAS OF BRISTOW, INC.......................... OKLAHOMA 5984 43-0864361 (1) EMPIREGAS INC. OF BUFFALO.......................... DELAWARE 5984 43-0896236 (1) EMPIREGAS INC. OF ADRIAN........................... DELAWARE 5984 43-0914797 (1) EMPIREGAS INC. OF CAMDENTON........................ DELAWARE 5984 43-0897842 (1) EMPIREGAS INC. OF CANON CITY....................... COLORADO 5984 43-0911108 (1) EMPIREGAS INC. OF CANTON........................... TEXAS 5984 43-1124489 (1) EMPIREGAS INC. OF CARTHAGE......................... DELAWARE 5984 43-1024249 (1) EMPIREGAS INC. OF CASTLE ROCK...................... COLORADO 5984 43-0961711 (1) EMPIREGAS INC. OF CENTERVILLE...................... IOWA 5984 43-0831405 (1) EMPIREGAS INC. OF CHARLOTTE........................ MICHIGAN 5984 43-0991735 (1) EMPIREGAS INC. OF CHASSEL.......................... MICHIGAN 5984 43-0994501 (1) EMPIREGAS INC. OF CHEHALIS......................... WASHINGTON 5984 43-1521611 (1) EMPIREGAS INC. OF CLINTON, ILLINOIS................ DELAWARE 5984 43-0813524 (1) EMPIREGAS OF COLCORD, INC.......................... OKLAHOMA 5984 43-0893108 (1) EMPIREGAS INC. OF COLE CAMP........................ DELAWARE 5984 43-1519473 (1) EMPIREGAS INC. OF COLEMAN.......................... MICHIGAN 5984 43-0991731 (1) EMPIREGAS INC. OF COLORADO SPRINGS................. COLORADO 5984 43-0914812 (1) EMPIREGAS INC. OF COQUILLE......................... OREGON 5984 43-0961770 (1) EMPIREGAS INC. OF CUBA............................. DELAWARE 5984 43-0810587 (1) EMPIREGAS INC. OF CHETEK........................... WISCONSIN 5984 43-0957058 (1) EMPIREGAS INC. OF DENVER........................... COLORADO 5984 43-0910829 (1) EMPIREGAS INC. OF DOVER............................ DELAWARE 5984 43-0908483 (1) EMPIREGAS INC. OF DURAND........................... MICHIGAN 5984 43-0998704 (1) EMPIREGAS INC. OF EL DORADO SPRINGS................ DELAWARE 5984 43-1180992 (1) EMPIREGAS INC. OF ELSBERRY......................... DELAWARE 5984 43-0911111 (1) EMPIREGAS INC. OF ELSINORE......................... CALIFORNIA 5984 43-0962196 (1) EMPIREGAS INC. OF ESCONDIDO........................ CALIFORNIA 5984 43-0962188 (1) EMPIREGAS INC. OF EUNICE........................... DELAWARE 5984 43-1175673 (1) EMPIREGAS INC. OF EVERGREEN........................ COLORADO 5984 43-0914820 (1) SALGAS INC. OF FAIRPLAY............................ COLORADO 5984 43-0911113 (1) EMPIREGAS INC. OF EAU CLAIRE....................... WISCONSIN 5984 43-0957057 (1) EMPIREGAS INC. OF FORT COLLINS..................... COLORADO 5984 43-0910828 (1)
ADDRESS, INCLUDING ZIP CODE AND PRIMARY TELEPHONE NUMBER, STANDARD INCLUDING AREA STATE OR OTHER INDUSTRIAL I.R.S. EMPLOYER CODE, OF JURISDICTION OF CLASSIFICATION IDENTIFICATION PRINCIPAL NAME INCORPORATION CODE NUMBER NUMBER EXECUTIVE OFFICES - ------------------------------------------------ ----------------- --------------- ---------------- ----------------- EMPIREGAS INC. OF FOWLER........................ COLORADO 5984 43-0911116 (1) EMPIREGAS INC. OF MID-MISSOURI.................. DELAWARE 5984 43-0831431 (1) EMPIREGAS INC. OF GALVESTON..................... TEXAS 5984 43-0968240 (1) EMPIREGAS INC. OF GALVA......................... DELAWARE 5984 43-1078190 (1) EMPIREGAS INC. OF GAYLORD....................... MICHIGAN 5984 43-1617313 (1) EMPIREGAS INC. OF GLOBE......................... ARIZONA 5984 43-1080630 (1) EMPIREGAS INC. OF GOOSE CREEK................... SOUTH CAROLINA 5984 43-1116503 (1) EMPIREGAS INC. OF GREELEY....................... COLORADO 5984 74-1622653 (1) EMPIREGAS INC. OF GRAND JUNCTION................ COLORADO 5984 43-0961675 (1) EMPIREGAS OF GROVE, INC......................... OKLAHOMA 5984 43-0815874 (1) EMPIREGAS INC. OF HERMISTON..................... OREGON 5984 43-1559568 (1) EMPIREGAS INC. OF HERMITAGE..................... DELAWARE 5984 43-0897840 (1) EMPIREGAS INC. OF HIAWASSEE..................... DELAWARE 5984 96-3748077 (1) EMPIREGAS INC. OF HIGGINSVILLE.................. MISSOURI 5984 43-1648250 (1) EMPIREGAS OF HITICHITA, INC..................... OKLAHOMA 5984 43-0887746 (1) EMPIREGAS INC. OF HOOPESTON..................... DELAWARE 5984 43-0976128 (1) EMPIREGAS INC. OF HORNICK....................... IOWA 5984 43-0961106 (1) EMPIREGAS INC. OF HUMANSVILLE................... DELAWARE 5984 43-0797681 (1) EMPIREGAS INC. OF JACKSONVILLE.................. DELAWARE 5984 43-0976132 (1) EMPIREGAS INC. OF JACKSON, MI................... MICHIGAN 5984 36-3657583 (1) EMPIREGAS INC. OF KALAMAZOO..................... MICHIGAN 5984 43-1438800 (1) EMPIREGAS INC. OF KIRKSVILLE.................... DELAWARE 5984 43-0810527 (1) EMPIREGAS INC. OF LAFAYETTE..................... LOUISIANA 5984 43-0914806 (1) EMPIREGAS INC. OF LAKE CHARLES.................. LOUISIANA 5984 43-0914807 (1) EMPIREGAS INC. OF LAKE PROVIDENCE............... LOUISIANA 5984 43-0914808 (1) EMPIREGAS INC. OF LAURIE........................ DELAWARE 5984 43-1073506 (1) EMPIREGAS OF LE SUEUR, INC...................... MINNESOTA 5984 43-0992082 (1) EMPIREGAS INC. OF LINCOLN....................... ARKANSAS 5984 43-0820385 (1) EMPIREGAS INC. OF LONGMONT...................... COLORADO 5984 43-0910827 (1) EMPIREGAS INC. OF LOS ANGELES................... CALIFORNIA 5984 43-0962195 (1) EMPIREGAS INC. OF LOVELAND...................... COLORADO 5984 43-0914809 (1) EMPIREGAS INC. OF MARQUETTE..................... MICHIGAN 5984 43-0971920 (1) EMPIREGAS INC. OF MARSHALL...................... MISSOURI 5984 43-0813522 (1) EMPIREGAS INC. OF MEDFORD....................... OREGON 5984 43-1559569 (1) EMPIREGAS INC. OF MENOMONIE..................... WISCONSIN 5984 39-1135410 (1) EMPIREGAS INC. OF MERILLAN...................... WISCONSIN 5984 43-0957846 (1) EMPIREGAS INC. OF MILLER........................ DELAWARE 5984 43-0796054 (1) EMPIREGAS INC. OF MODESTO....................... CALIFORNIA 5984 43-0962187 (1) EMPIREGAS INC. OF MONTE VISTA................... COLORADO 5984 43-0971965 (1) EMPIREGAS INC. OF MOUNT VERNON.................. OHIO 5984 43-1078168 (1) EMPIREGAS INC. OF MUNISING...................... MICHIGAN 5984 43-0971911 (1) EMPIREGAS INC. OF MURPHY........................ NORTH CAROLINA 5984 43-1584673 (1) THRIF-T-GAS INC. OF BLACKWATER.................. DELAWARE 5984 43-0914888 (1) EMPIREGAS INC. OF NORTH BEND.................... OREGON 5984 43-0961772 (1) EMPIREGAS INC. OF NORTH MYRTLE BEACH, INC....... OKLAHOMA 5984 43-0815797 (1) EMPIREGAS INC. OF OAK GROVE..................... LOUISIANA 5984 43-0914896 (1) EMPIREGAS INC. OF ONAWA......................... IOWA 5984 43-0961040 (1) EMPIREGAS INC. OF ORANGEBURG.................... SOUTH CAROLINA 5984 43-1107825 (1) EMPIREGAS INC. OF OWENSVILLE.................... DELAWARE 5984 43-0911121 (1) EMPIREGAS INC. OF SANTA PAULA................... CALIFORNIA 5984 43-0962185 (1) EMPIREGAS INC. OF PADUCAH....................... TEXAS 5984 43-1208276 (1) EMPIREGAS INC. OF PALMYRA....................... DELAWARE 5984 43-0890013 (1) EMPIREGAS INC. OF PLACERVILLE................... CALIFORNIA 5984 43-0962190 (1) EMPIREGAS INC. OF POMONA........................ CALIFORNIA 5984 43-0962191 (1) EMPIREGAS INC. OF POTOSI........................ DELAWARE 5984 43-0898220 (1)
ADDRESS, INCLUDING ZIP CODE AND PRIMARY TELEPHONE NUMBER, STANDARD INCLUDING AREA STATE OR OTHER INDUSTRIAL I.R.S. EMPLOYER CODE, OF JURISDICTION OF CLASSIFICATION IDENTIFICATION PRINCIPAL NAME INCORPORATION CODE NUMBER NUMBER EXECUTIVE OFFICES - ------------------------------------------------ ----------------- --------------- ---------------- ----------------- EMPIREGAS INC. OF PUEBLO........................ COLORADO 5984 43-0914833 (1) EMPIREGAS INC. OF REEDSPORT..................... OREGON 5984 43-0961774 (1) EMPIREGAS INC. OF RICHLAND...................... DELAWARE 5984 43-0897850 (1) EMPIREGAS INC. OF ROLLA......................... DELAWARE 5984 43-0911115 (1) EMPIREGAS INC. OF SACRAMENTO.................... CALIFORNIA 5984 43-0962193 (1) EMPIREGAS INC. OF SANDY......................... DELAWARE 5984 43-0964734 (1) EMPIREGAS INC. OF SHELL LAKE.................... WISCONSIN 5984 43-0957054 (1) EMPIREGAS INC. OF SILOAM SPRINGS................ ARKANSAS 5984 43-0820384 (1) EMPIREGAS OF STIGLER, INC....................... OKLAHOMA 5984 43-0836428 (1) EMPIREGAS INC. OF SUSANVILLE.................... CALIFORNIA 5984 43-1618791 (1) EMPIREGAS INC. OF SUNNYSIDE..................... WASHINGTON 5984 43-0961777 (1) EMPIREGAS INC. OF ROCKY MOUNT................... NORTH CAROLINA 5984 43-0985116 (1) EMPIREGAS INC. OF THE DALLES.................... OREGON 5984 43-1559567 (1) EMPIREGAS INC. OF TIPTON (IOWA)................. IOWA 5984 43-0961124 (1) EMPIREGAS INC. OF TRAVERSE CITY................. MICHIGAN 5984 43-1616711 (1) EMPIREGAS INC. OF VANDALIA...................... DELAWARE 5984 43-1025019 (1) EMPIREGAS INC. OF VASSAR........................ MICHIGAN 5984 43-0991734 (1) EMPIREGAS INC. OF VINITA, INC................... OKLAHOMA 5984 43-0865345 (1) EMPIREGAS INC. OF WARREN........................ ARKANSAS 5984 43-1062386 (1) EMPIREGAS INC. OF WARSAW (MISSOURI)............. DELAWARE 5984 43-0897849 (1) EMPIREGAS INC. OF WASHINGTON.................... NORTH CAROLINA 5984 43-0976108 (1) EMPIREGAS INC. OF WAUKON........................ IOWA 5984 43-0961125 (1) EMPIREGAS INC. OF WAYNESVILLE................... DELAWARE 5984 43-0914835 (1) EMPIREGAS INC. OF WAYNESVILLE, NC............... NORTH CAROLINA 5984 43-1136713 (1) EMPIREGAS INC. OF WENATCHEE..................... WASHINGTON 5984 43-0961776 (1) EMPIREGAS INC. OF WENTZVILLE.................... DELAWARE 5984 43-0828895 (1) EMPIREGAS OF WESTVILLE, INC..................... OKLAHOMA 5984 43-0820386 (1) EMPIREGAS INC. OF WILLS POINT................... TEXAS 5984 43-1124487 (1) EMPIREGAS INC. OF WILMINGTON.................... NORTH CAROLINA 5984 43-0986459 (1) EMPIREGAS INC. OF WILSON........................ NORTH CAROLINA 5984 43-1009657 (1) EMPIREGAS INC. OF WOODLAND PARK................. COLORADO 5984 43-0910830 (1) EMPIREGAS INC. OF YAKIMA........................ WASHINGTON 5984 43-0961778 (1) EMPIREGAS INC. OF YUCCA VALLEY.................. CALIFORNIA 5984 43-0962194 (1) EMPIREGAS INC. OF ZEBULON....................... NORTH CAROLINA 5984 43-1009658 (1) EMPIREGAS INC. OF COLUMBIANA.................... OHIO 5984 43-1208278 (1) EMPIREGAS OF ZUMBRO FALLS, INC.................. MINNESOTA 5984 43-0989945 (1) GINCO GAS COMPANY, INC.......................... COLORADO 5984 36-3943352 (1) EMPIREGAS INC. OF ORANGE COUNTY................. TEXAS 5984 43-1118050 (1) EMPIREGAS INC. OF MORGAN COUNTY................. DELAWARE 5984 43-1183774 (1) EMPIREGAS INC. OF LAKE OZARK.................... DELAWARE 5984 43-0900202 (1) EMPIREGAS INC. OF WACO.......................... TEXAS 5984 43-1113582 (1) EMPIREGAS INC. OF PARIS, TX..................... TEXAS 5984 43-1117378 (1) EMPIREGAS INC. OF DALLAS, TX.................... TEXAS 5984 43-1050035 (1) EMPIREGAS INC. OF KEMP.......................... TEXAS 5984 43-1107542 (1) EMPIREGAS INC. OF SAN ANTONIO................... TEXAS 5984 43-1118053 (1) THRIFT-T-GAS CO., INC........................... DELAWARE 5984 43-1030760 (1) EMPIREGAS INC. OF PARIS, MO..................... DELAWARE 5984 43-0830813 (1) SALIDA GAS CO., INC............................. DELAWARE 5984 43-1078187 (1) SALGAS INC. OF GUNNISON......................... COLORADO 5984 43-0815009 (1) EMPIREGAS INC. OF TOLEDO........................ OHIO 5984 APPLIED FOR (1) EMPIREGAS INC. OF WILKESBORO.................... NORTH CAROLINA 5984 APPLIED FOR (1) EMPIREGAS INC. OF HENDERSVILLE.................. NORTH CAROLINA 5984 APPLIED FOR (1) EMPIREGAS INC. OF NORTH CAROLINA................ NORTH CAROLINA 5984 APPLIED FOR (1)
ADDRESS, INCLUDING ZIP CODE AND PRIMARY TELEPHONE NUMBER, STANDARD INCLUDING AREA STATE OR OTHER INDUSTRIAL I.R.S. EMPLOYER CODE, OF JURISDICTION OF CLASSIFICATION IDENTIFICATION PRINCIPAL NAME INCORPORATION CODE NUMBER NUMBER EXECUTIVE OFFICES - ------------------------------------------------ ----------------- --------------- ---------------- ----------------- EMPIREGAS INC. OF CARTHAGE...................... NORTH CAROLINA 5984 APPLIED FOR (1) EMPIREGAS INC. OF APEX.......................... NORTH CAROLINA 5984 APPLIED FOR (1) EMPIREGAS INC. OF DURHAM........................ NORTH CAROLINA 5984 APPLIED FOR (1) EMPIREGAS INC. OF WARRENTON..................... NORTH CAROLINA 5984 APPLIED FOR (1) - ------------ (1) P.O. BOX 303 (1700 SOUTH JEFFERSON STREET), LEBANON, MISSOURI 65536, (417) 532-3101.
EMPIRE GAS CORPORATION CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
REGISTRATION STATEMENT ITEM AND HEADING PROSPECTUS CAPTION - ------------------------------------------------------------- -------------------------------------------------------- 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus................... Outside Front Cover Page of Prospectus 2. Inside Front and Outside Back Cover Page of Prospectus....................................... Inside Front and Outside Back Cover Pages of Prospectus; Available Information 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges........................ Prospectus Summary; Risk Factors; Selected Consolidated Financial and Other Data for the Company Prior to the Transaction; Pro Forma Consolidated Financial and Other Data; Selected Consolidated Financial and Other Data 4. Use of Proceeds................................... Prospectus Summary; Use of Proceeds 5. Determination of Offering Price................... Not Applicable 6. Dilution.......................................... Not Applicable 7. Selling Security Holders.......................... Not Applicable 8. Plan of Distribution.............................. Outside Front Cover Page of Prospectus; The Underwriter 9. Description of Securities to be Registered........ Outside Front Cover Page of Prospectus; Description of the Units; Description of Senior Secured Notes; Description of the Warrants; Description of Capital Stock 10. Interests of Named Experts and Counsel............ Legal Matters; Experts 11. Information with Respect to the Registrant........ Outside and Inside Front Cover Page of Prospectus; Prospectus Summary; Risk Factors; The Transaction; Capitalization; Selected Consolidated Financial and Other Data for the Company Prior to the Transaction; Pro Forma Consolidated Financial and Other Data; Selected Consolidated Financial and Other Data; Management's Discussion and Analysis of Financial Condition and Results of Operations; Business; Management; Certain Relationships and Related Transactions; Description of the Units; Description of Senior Secured Notes; Description of the Warrants; Description of Capital Stock; Description of Other Indebtedness; Financial Statements 12. Disclosure of Commission Position on Indemnification for Securities Act Liabilities... Not Applicable
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. PROSPECTUS (SUBJECT TO COMPLETION) ISSUED JUNE 10, 1994 EMPIRE GAS CORPORATION $ REPRESENTING UNITS, EACH UNIT CONSISTING OF % SENIOR SECURED NOTES DUE 2004 AND WARRANTS TO PURCHASE COMMON STOCK ----------------- INTEREST PAYABLE AND ------------------- CASH INTEREST ON THE SENIOR SECURED NOTES WILL BE PAYABLE AT THE RATE OF % PER ANNUM OF THEIR PRINCIPAL AMOUNT AT MATURITY THROUGH AND INCLUDING , 1999, AND AFTER SUCH DATE WILL BE PAYABLE AT THE RATE OF % PER ANNUM OF THEIR PRINCIPAL AMOUNT AT MATURITY. THE SENIOR SECURED NOTES WILL BE ISSUED AT A SUBSTANTIAL DISCOUNT FROM THEIR PRINCIPAL AMOUNT AT MATURITY. SEE "CERTAIN FEDERAL INCOME TAX CONSIDERATIONS." THE PRICE TO PUBLIC OF THE SENIOR SECURED NOTES SHOWN BELOW REPRESENTS A YIELD TO MATURITY OF % PER ANNUM, COMPUTED ON THE BASIS OF SEMIANNUAL COMPOUNDING. ------------------------ THE SENIOR SECURED NOTES WILL BE REDEEMABLE AT THE OPTION OF THE COMPANY, IN WHOLE OR IN PART, AT ANY TIME ON OR AFTER , 1999, INITIALLY AT % OF THEIR ACCRETED VALUE, PLUS ACCRUED INTEREST, DECLINING TO 100% OF THEIR ACCRETED VALUE PLUS ACCRUED INTEREST, ON OR AFTER , 2001. IN ADDITION, UP TO $ MILLION AGGREGATE PRINCIPAL AMOUNT AT MATURITY (35%) OF THE SENIOR SECURED NOTES WILL BE REDEEMABLE, IN WHOLE OR IN PART, AT THE OPTION OF THE COMPANY, FROM THE PROCEEDS OF ONE OR MORE PUBLIC EQUITY OFFERINGS (AS DEFINED HEREIN) FOLLOWING WHICH THERE IS A PUBLIC MARKET (AS DEFINED HEREIN), AT THE REDEMPTION PRICES SET FORTH HEREIN, PLUS ACCRUED INTEREST. ------------------------ EACH WARRANT ENTITLES THE HOLDER THEREOF TO PURCHASE ONE SHARE OF THE COMPANY'S COMMON STOCK AT A PRICE OF $7.00 PER SHARE, SUBJECT TO ADJUSTMENT. THE WARRANTS OFFERED HEREBY ENTITLE THE HOLDERS THEREOF TO PURCHASE, IN THE AGGREGATE, APPROXIMATELY 10% OF THE COMPANY'S OUTSTANDING COMMON STOCK (AFTER GIVING EFFECT TO THE EXERCISE OF THE WARRANTS). THE WARRANTS WILL BE EXERCISABLE ON OR AFTER , 1994 AND EXPIRE ON , 2004. ------------------------ THE SENIOR SECURED NOTES WILL BE SENIOR OBLIGATIONS OF THE COMPANY SECURED BY A PLEDGE OF ALL OF THE CAPITAL STOCK OF THE COMPANY'S PRESENT AND FUTURE SUBSIDIARIES. THE SENIOR SECURED NOTES WILL RANK PARI PASSU WITH ALL EXISTING AND FUTURE SENIOR INDEBTEDNESS OF THE COMPANY. THE SENIOR SECURED NOTES WILL BE GUARANTEED BY ALL WHOLLY-OWNED SUBSIDIARIES OF THE COMPANY, WHICH CARRY ON THE RETAIL BUSINESS OF THE COMPANY (COLLECTIVELY, THE "SUBSIDIARY GUARANTORS"). ON A PRO FORMA BASIS, AS OF MARCH 31, 1994, AFTER GIVING EFFECT TO THE TRANSACTION (AS DEFINED HEREIN), THE OFFERING AND THE APPLICATION OF THE NET PROCEEDS THEREFROM, THE COMPANY WOULD HAVE HAD NO SENIOR INDEBTEDNESS OUTSTANDING, EXCLUDING THE SENIOR SECURED NOTES. THE COMPANY IS A HOLDING COMPANY, AND ACCORDINGLY, THE SENIOR SECURED NOTES WILL BE EFFECTIVELY SUBORDINATED TO ALL EXISTING AND FUTURE LIABILITIES OF THE COMPANY'S SUBSIDIARIES (EXCEPT TO THE EXTENT THAT THE GUARANTEES REPRESENT DIRECT CLAIMS AGAINST SUCH SUBSIDIARIES). ON A PRO FORMA BASIS, AS OF MARCH 31, 1994, AFTER GIVING EFFECT TO THE TRANSACTION, THE OFFERING AND THE APPLICATION OF THE NET PROCEEDS THEREFROM, THE COMPANY'S SUBSIDIARIES WOULD HAVE HAD APPROXIMATELY $530,000 OF OUTSTANDING LIABILITIES (EXCLUDING GUARANTEES), INCLUDING TRADE PAYABLES AND ACCRUED EXPENSES AND TAXES PAYABLE. ------------------- SEE "RISK FACTORS" FOR INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. ------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------- PRICE $ A UNIT AND ACCRUED INTEREST -----------------
UNDERWRITING PRICE TO DISCOUNTS AND PROCEEDS TO PUBLIC (1) COMMISSIONS (2) COMPANY (1)(3) ----------------------- ----------------------- ----------------------- PER UNIT.................................... % % % TOTAL....................................... $ $ $ - --------- (1) PLUS ACCRUED INTEREST ON THE SENIOR SECURED NOTES FROM , 1994. (2) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITER AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SEE "THE UNDERWRITER." (3) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $ .
THE UNITS ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF ACCEPTED BY THE UNDERWRITER AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS BY SKADDEN, ARPS, SLATE, MEAGHER & FLOM, COUNSEL FOR THE UNDERWRITER. IT IS EXPECTED THAT THE DELIVERY OF THE UNITS WILL BE MADE ON OR ABOUT , 1994, AT THE OFFICE OF MORGAN STANLEY & CO. INCORPORATED, NEW YORK, NEW YORK, AGAINST PAYMENT THEREFOR IN NEW YORK FUNDS. ------------------- MORGAN STANLEY & CO. INCORPORATED JUNE , 1994 [GRAPHIC] NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE UNITS OFFERED HEREBY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. UNTIL , 1994 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. ------------------- TABLE OF CONTENTS
PAGE --------- Prospectus Summary......................................................................................... 4 Risk Factors............................................................................................... 10 The Transaction............................................................................................ 16 Use of Proceeds............................................................................................ 17 Capitalization............................................................................................. 18 Selected Consolidated Financial and Other Data For the Company Prior to the Transaction.................... 19 Pro Forma Consolidated Financial and Other Data............................................................ 21 Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 29 Business................................................................................................... 37 Management................................................................................................. 44 Principal Shareholders..................................................................................... 50 Certain Relationships and Related Transactions............................................................. 51 Description of the Units................................................................................... 54 Description of the Senior Secured Notes.................................................................... 57 Description of the Warrants................................................................................ 84 Description of Capital Stock............................................................................... 87 Certain Federal Income Tax Considerations.................................................................. 88 Description of Other Indebtedness.......................................................................... 92 The Underwriter............................................................................................ 93 Legal Matters.............................................................................................. 94 Experts.................................................................................................... 94 Available Information...................................................................................... 94 Index to Financial Statements.............................................................................. F-1
------------------- IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SENIOR SECURED NOTES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. 3 PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND THE CONSOLIDATED FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS. AS USED HEREIN, UNLESS THE CONTEXT REQUIRES OTHERWISE, THE TERMS "EMPIRE GAS" AND THE "COMPANY" REFER TO EMPIRE GAS CORPORATION AND ITS SUBSIDIARIES ASSUMING CONSUMMATION OF THE TRANSACTION, WHICH WILL OCCUR SIMULTANEOUSLY WITH THIS OFFERING. ALL REFERENCES IN THE PROSPECTUS TO FISCAL YEARS ARE TO THE COMPANY'S FISCAL YEAR WHICH ENDS ON JUNE 30. THE COMPANY Empire Gas is one of the largest retail distributors of propane in the United States and, through its subsidiaries, has been engaged in the retail distribution of propane since 1963. During the fiscal year ended June 30, 1993, without giving effect to the Transaction, Empire Gas supplied propane to approximately 200,000 customers in 27 states from 284 retail service centers and sold approximately 142.1 million gallons of propane, accounting for approximately 91.4% of its operating revenue. The Company also sells related gas-burning appliances and equipment and rents customer storage tanks. The Company will implement a change in ownership and management contemporaneously with this Offering by repurchasing shares of its common stock from its controlling shareholder, Mr. Robert W. Plaster, and certain other departing officers (the "Stock Purchase") in exchange for all of the shares of common stock of a subsidiary that owns 133 retail service centers located primarily in the Southeast. Mr. Paul S. Lindsey, Jr., who has been with the Company for 26 years and currently serves as the Company's Chief Operating Officer and Vice Chairman of the Board, will become the Company's controlling shareholder, Chief Executive Officer, and President. The change in ownership and management will enable the Company to pursue a growth strategy focused on acquiring propane operating companies. Contemporaneously with the Offering, the Company will acquire the assets of PSNC Propane Corporation, a company located in North Carolina that has six retail service centers and five additional bulk storage facilities with annual volume of approximately 9.5 million gallons (the "Acquisition," and together with the Stock Purchase, the "Transaction"), for an aggregate purchase price of approximately $14.0 million (which includes payment for inventory and accounts receivable). The Company also recently completed the acquisition of a retail propane company in Colorado with annual volume of approximately 700,000 gallons, and has entered into a contract to purchase a retail propane company in Missouri with annual volume of approximately 690,000 gallons. Following the Transaction, Empire Gas' operations will consist of 158 retail service centers with 22 additional bulk storage facilities. During the fiscal year ended June 30, 1993, Empire Gas, after giving effect to the Transaction, sold approximately 84.8 million gallons of propane (approximately 40% less than prior to the Transaction) to approximately 112,000 customers in 20 states, which (based on retail gallons sold) makes it one of the 11 largest retail distributors of propane in the United States. The impact on the Company's operations of weather fluctuations in a particular region will be reduced as a result of the substantial geographic diversification of the Company after the Transaction, with operations in the west, the southwest, Colorado, the upper midwest, the Mississippi Valley and the southeast. Propane, a hydrocarbon with properties similar to natural gas, is separated from natural gas at gas processing plants and refined from crude oil at refineries. It is stored and transported in a liquid state and vaporizes into a clean-burning energy source that is used for a variety of residential, commercial, and agricultural purposes. Residential and commercial uses include heating, cooking, water heating, refrigeration, clothes drying, and incineration. Commercial uses also include metal cutting, drying, container pressurization, and charring, as well as use as a fuel for internal combustion engines. As of December 31, 1991, the propane industry had grown, as measured by the gallons of retail residential/commercial propane sold, at the rate of 3.7% per annum since 1984. The Company believes the highly fragmented retail propane market presents substantial opportunities for growth through consolidation. As of December 31, 1991, there were approximately 8,000 propane retail marketing companies in the continental United States with approximately 13,500 retail distribution points. In addition, Empire Gas believes growth can be achieved by the conversion to propane of homes that 4 currently use either electricity or fuel oil products because of the price advantage propane has over electricity and because propane is a cleaner source of energy than fuel oil products. As of December 31, 1990, there were approximately 23.7 million homes that used electricity for heating, water heating, cooking and other household purposes, approximately 11.2 million homes that used fuel oil products, and approximately 5.7 million homes that used propane for such purposes. Empire Gas focuses on propane distribution to retail customers, including residential, commercial, and agricultural users, emphasizing, in particular, sales to residential customers, a stable segment of the retail propane market that traditionally has generated higher gross margins per gallon than other retail segments. Sales to residential customers, giving effect to the Transaction, accounted for approximately 65.5% of the Company's aggregate propane sales revenue and 74.3% of its aggregate gross margin from propane sales in fiscal year 1993. Empire Gas attracts and retains its residential customers by supplying them storage tanks, by offering them superior service and by strategically locating visible and accessible retail service centers on or near major highways. Empire Gas focuses its operations on sales to customers to which it also leases tanks, as sales to this segment of the retail propane market tend to be more stable and typically provide higher gross margins than sales to customers who own tanks. After the Transaction, Empire Gas will own approximately 109,000 storage tanks that it leases to approximately 96% of its customers. Empire Gas' residential customer base is relatively stable, because (i) fire safety regulations and state container laws restrict the filling of a leased tank solely to the propane supplier that leases the tank, (ii) rental agreements for its tanks restrict the customers from using any other supplier, and (iii) the cost and inconvenience of switching tanks minimizes a customer's tendency to change suppliers. Historically, the Company has retained 90% of all its customers from year to year, with the average customer remaining with Empire Gas for approximately 10 years. The change in ownership and management of the Company will enable it to pursue a business strategy to increase its revenues and profitability through (i) expansion by acquisitions and start-ups, (ii) expansion of its existing residential customer base, and (iii) geographic rationalization and the reduction of operating expenses. Empire Gas will seek opportunities to acquire retail service centers in areas where it already has a strong presence and to develop new retail service centers in new markets. Efforts to expand the existing residential customer base will focus primarily on conversion of customers currently using electricity for heating, conversion of customers currently using fuel oil and wood due to environmental impact, and soliciting customers created by the new home construction market in growth areas. Empire Gas intends to dispose of a limited number of retail service centers that are located in markets in which it does not have, and does not desire to develop, a strong presence or that do not have the potential for long-term growth. Empire Gas believes it will be able to reduce its operating expenses through a program of consolidating a number of retail service centers where such consolidations will yield operating efficiencies. The Company's principal executive offices are located at 1700 South Jefferson Street, Lebanon, Missouri 65536. The Company's telephone number is (417) 532-3101. THE OFFERING THE UNITS Securities Offered................ Units (the "Units") consisting of % Senior Secured Notes due 2004 (the "Senior Secured Notes"), each having an initial accreted value of $ , and Warrants. Each Warrant entitles the holder thereof to purchase one share of Common Stock , par value $.001 per share, of the Company (the "Common Stock") at an exercise price of $7.00 per share. See "Description of the Units." Separability...................... The Senior Secured Notes and the Warrants will become separately transferrable on , 1994 (the "Separation Date").
5
THE SENIOR SECURED NOTES Notes Offered..................... $ estimated aggregate principal amount ($100,000,000 initial accreted value) of % Senior Secured Notes due 2004. See "Description of the Senior Secured Notes." Maturity Date..................... , 2004 Interest.......................... Cash interest on the Senior Secured Notes will be payable at the rate of % per annum of their principal amount at maturity through and including , 1999, and after such date will be payable at the rate of % per annum of their principal amount at maturity. See "Original Issue Discount" below. In- terest on the Senior Secured Notes is payable semiannually on and , commencing , 1994. The price to the public of the Senior Secured Notes represents a yield to maturity of % per annum, computed on the basis of semiannual compounding. Optional Redemption............... The Senior Secured Notes will be redeemable at the option of the Company, in whole or in part, on or after , 1999 at the redemption prices set forth herein, plus accrued interest. In addition, up to $ million aggregate principal amount at maturity (35%) of the Senior Secured Notes are redeemable, in whole or in part, at the option of the Company, from the proceeds of one or more Public Equity Offerings following which there is a Public Market, at the redemption prices set forth herein, plus accrued interest. Change of Control................. Upon a Change of Control (as defined herein), holders of the Senior Secured Notes will have the right to require the Company to purchase the Senior Secured Notes at a purchase price of 101% of the accreted value thereof, plus accrued and unpaid interest, if any, to the date of purchase. The Company may not have sufficient funds or the financing to satisfy its obligations to repurchase the Senior Secured Notes and other debt that may come due upon a Change of Control. Security.......................... The Senior Secured Notes will be secured by a pledge of all of the capital stock of the Company's present and future subsidiaries, subject to certain exceptions. Subsidiary Guarantees............. The Senior Secured Notes will be guaranteed (each a "Subsidiary Guarantee") by all of the wholly owned subsidiaries of the Company, which carry on the retail business of the Company (collectively, the "Subsidiary Guarantors"). The Subsidiary Guarantees will be senior indebtedness of the respective Subsidiary Guarantors and will rank PARI PASSU with the guarantees by the Subsidiary Guarantors of other senior indebtedness, including indebtedness under the New Credit Facility (as hereinafter defined). Ranking........................... The Senior Secured Notes will be senior obligations of the Company and will rank PARI PASSU in right of payment with the Company's existing and future senior indebtedness. On a pro forma basis as of March 31, 1994, after giving effect to the application of the net proceeds of the Offering and the Transaction, the Company would have had no senior indebtedness
6 outstanding, excluding the Senior Secured Notes. In addition, because the Company is a holding company, the Senior Secured Notes will be effectively subordinated to all existing and future liabilities of the Company's subsidiaries (except to the extent the Subsidiary Guarantees represent direct claims against such subsidiaries). On a pro forma basis as of March 31, 1994, after giving effect to the application of the net proceeds of the Offering and the Transaction, the aggregate liabilities (excluding guarantees) of the Company's subsidiaries would have been approximately $530,000, including trade payables, accrued expenses, and taxes payable. Certain Covenants................. The Indenture governing the Senior Secured Notes (the "Indenture") will contain covenants, including, but not limited to, covenants with respect to the following matters: (i) limitations on the incurrence of additional indebtedness; (ii) limitations on restricted payments; (iii) limitations on incurrence of additional indebtedness by subsidiaries; (iv) limitations on the sale and issuance of capital stock by subsidiaries; (v) limitations on dividends and other payments; (vi) limitations on transactions with affiliates; (vii) limitations on liens; (viii) limitations on mergers, consolidations, or asset sales; and (ix) limitations on subsidiary investments. Events of Default................. Events of default under the Senior Secured Notes include: (i) non-payment of interest for 30 days; (ii) non-payment of principal when due or failure to redeem when required; (iii) default in performance of other covenants or agreements for 30 days after written notice to the Company; (iv) default on other indebtedness of the Company or its subsidiaries having a principal amount of $2,000,000 singly or $5,000,000 in the aggregate; (v) a final judgment or order for the payment of money in the amount of $2,000,000 singly or $5,000,000 in the aggregate that is not discharged or appealed within 30 days; (vi) certain events of bankruptcy, insolvency and reorganization of the Company; (vii) except as permitted by the Inden- ture, the Trustee's failure to have a perfected security interest in the Collateral; and (viii) except as permitted by the Indenture and the Senior Secured Notes, the cessation of effectiveness of any Subsidiary Guarantee as against any Subsidiary Guarantor. Actions by Noteholders............ Holders of the Senior Secured Notes may not pursue any remedy with respect to the Indenture (except actions for payment of overdue principal or interest) unless: (i) the Holder has given notice to the Trustee of a continuing Event of Default: (ii) Holders of at least 25% in principal amount of the Senior Secured Notes have made a written request to the Trustee to pursue such remedy and offered the Trustee security or indem- nity reasonably satisfactory to the Trustee; (iii) the Trustee has not complied with such request within 60 days; and (iv) the Holders of a majority in principal amount of the Senior Secured Notes have not given the Trustee an inconsistent direction during such 60-day period.
7 Original Issue Discount........... The Senior Secured Notes are being issued with original issue discount. For Federal income tax purposes, holders of the Senior Secured Notes will be required to include amounts in gross income in advance of receipt of cash to which the income is attributable. See "Certain Federal Income Tax Considerations." Use of Proceeds................... The net proceeds to the Company from this Offering will be used to repay certain indebtedness of the Company, to complete the Acquisition, to repay certain amounts due in connection with the Stock Purchase, and for general corporate purposes. Governing Law..................... State of New York.
THE WARRANTS Warrants Offered.................. Warrants to purchase Common Stock. The aggregate number of shares of Common Stock issuable upon exercise of the Warrants is equal to approximately 10% of the outstanding shares of Common Stock on a fully diluted basis, subject to certain exceptions. See "Description of the Warrants." Exercise Price.................... Each Warrant entitles the holder thereof to purchase one share of Company Common Stock at the exercise price of $7.00 per share, subject to adjustment. Exercise.......................... The Warrants may be exercised at any time after , 1994 and prior to , 2004. Warrants that are not exercised by such date will expire. A Warrant does not entitle the holder thereof to receive any dividends paid on the Common Stock. Repurchase Offer.................. Following the occurrence of a Repurchase Event, the Company must offer to repurchase all of the outstanding Warrants. A Repurchase Event will occur upon the merger or consolidation of the Company with or into, or the sale by the Company of all or substantially all of its assets to, another person, if the consid- eration for such transaction does not consist solely of cash or if the transaction is entered into with certain entities. Repurchase Price.................. The repurchase of Warrants following a Repurchase Event will be: (i) at the average of the closing sales prices of the Common Stock for the 20 days prior to such Repurchase Event if the Common Stock is registered under the Securities Exchange Act of 1934, as amended; or (ii) if the Common Stock is not so registered or the value cannot be computed under clause (i), at the value, as determined by an independent financial expert, of the shares of Common Stock or other securities issuable upon exercise of the Warrants less the exercise price thereof.
RISK FACTORS An investment in the Units involves a high degree of risk. Each prospective purchaser of the Units should consider carefully the specific factors set forth under "Risk Factors," as well as the other information set forth in this Prospectus, before purchasing the Units offered by this Prospectus. 8 SUMMARY PRO FORMA FINANCIAL AND OTHER DATA The following table presents selected summary pro forma financial and other data of the subsidiaries that will be retained by the Company following the consummation of the Stock Purchase and PSNC Propane Corporation (the "PSNC Operations") for the year ended June 30, 1993, and for the nine and twelve months ended March 31, 1994. The pro forma financial operating and other data for the year ended June 30, 1993 and for the nine and twelve months ended March 31, 1994 give effect to the Offering and the Transaction, as if these transactions had occurred on July 1, 1992. Due to the seasonal nature of the Company's business, the majority of the Company's revenues are earned in its second and third fiscal quarters. Accordingly, the results of operations for the nine months ended March 31, 1994 are not indicative of the results of operations to be expected for the full year. Data for the twelve months ended March 31, 1994 have been set forth to provide recent data covering a full year's operations. The financial data set forth below should be read in conjunction with the Company's consolidated financial statements and related notes, "Selected Consolidated Financial and Other Data for the Company Prior to the Transaction," "Pro Forma Financial and Other Data," and "Management's Discussion and Analysis of Results of Operations and Financial Condition," all contained elsewhere in this Prospectus. See "Selected Consolidated and Other Financial Data for the Company Prior to the Transaction" for a presentation of the Company's historical consolidated financial data.
PRO FORMA FOR THE TRANSACTION AND OFFERING(1) ---------------------------------------------------- YEAR ENDED JUNE 30, NINE MONTHS ENDED TWELVE MONTHS ENDED 1993 MARCH 31, 1994 MARCH 31, 1994 ---------- ----------------- ------------------- (IN THOUSANDS, EXCEPT RATIOS AND GROSS PROFIT PER GALLON DATA) OPERATING DATA: Operating revenue............................... $ 76,931 $ 64,997 $ 76,463 Gross profit (2)................................ 41,243 34,931 41,951 Operating expenses.............................. 23,825 18,617 24,304 Depreciation and amortization................... 6,722 4,980 6,332 Operating income................................ 10,696 11,334 11,315 Interest expense: Cash interest................................. 10,167 7,375 9,808 Amortization of debt discount and expense..... 4,344 3,324 4,446 Total interest expense...................... 14,501 10,699 14,254 Net income (loss)............................... (2,733) 2 (2,410) OTHER OPERATING DATA AND FINANCIAL RATIOS: Capital expenditures: Existing operations........................... 1,905 1,834 2,358 Start-up of new retail service centers........ 729 453 664 Acquisitions.................................. -- 444 444 ---------- ------- ------- Total capital expenditures.................. 2,634 2,731 3,466 Cash from sale of retail service centers and other assets................................... 145 228 948 EBITDA (3)...................................... 17,418 16,314 17,647 EBITDA (3) to interest expense.................. 1.20x 1.52x 1.24x EBITDA (3) to cash interest..................... 1.71x 2.21x 1.80x Retail gallons sold............................. 84,840 72,021 83,980 Weighted average gross profit per gallon........ .429 .435 .442 - ------------ (1) For an explanation of adjustments to arrive at pro forma data, see "Capitalization," and "Pro Forma Consolidated Financial and Other Data." (2) Represents operating revenue less the cost of products sold. (3) EBITDA consists of earnings before depreciation, amortization, interest, income taxes, and other non-recurring expenses. EBITDA is presented here because it is a widely accepted financial indicator of a highly leveraged company's ability to service and/ or incur indebtedness. However, EBITDA should not be construed as an alternative either (i) to operating income (determined in accordance with generally accepted accounting principles) or (ii) to cash flows from operating activities (determined in accordance with generally accepted accounting principles).
9 RISK FACTORS IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, PROSPECTIVE PURCHASERS OF THE UNITS SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS IN EVALUATING AN INVESTMENT IN THE UNITS. HIGH LEVERAGE AND ABILITY TO SERVICE DEBT As of March 31, 1994, on a pro forma basis after giving effect to the application of the proceeds of this Offering as set forth in "Use of Proceeds," and the Transaction, the Company would have had approximately $107.2 million aggregate outstanding principal amount (in the case of the Senior Secured Notes, such amount being the accreted value) of indebtedness on a consolidated basis, and a stockholders' deficit of approximately $27.8 million. See "Capitalization." On a pro forma basis, after giving effect to the application of the proceeds of this Offering and the Transaction, earnings would have been inadequate to cover fixed charges by $4.4 million for fiscal year 1993 and by $4.4 million for the twelve months ended March 31, 1994, resulting in the reporting of losses of $2.7 million and $2.4 million, respectively, for these periods. See "Capitalization"; "Selected Consolidated Financial and Other Data for the Company Prior to the Transaction;" and "Pro Forma Consolidated Financial and Other Data." The Company expects earnings to be inadequate to cover fixed charges for fiscal year 1994, resulting in the reporting of a loss for that period. The Company's high degree of leverage will make it vulnerable to adverse changes in the weather and may limit its ability to respond to market conditions, to capitalize on business opportunities, and to meet its contractual and financial obligations. Fluctuations in interest rates will affect the Company's financial condition inasmuch as the credit facility the Company will enter into simultaneously with this Offering (the "New Credit Facility") will bear interest at a floating rate. The Company will be required to use a significant portion of its cash flow from operations to meet its debt service obligations, which through fiscal year 1997 are expected to consist primarily of interest, including interest on the Senior Secured Notes. On a pro forma basis, after giving effect to the Offering and the Transaction, debt service obligations (which consist of interest expense and mortgage principal payments) would have been $10.4 million for the fiscal year ended June 30, 1993 and $7.5 million for the nine months ended March 31, 1994, and earnings before interest, taxes, depreciation and amortization (EBITDA) would have been $17.4 million and $16.3 million, respectively. The ability of the Company to meet its debt service obligations, including the increase in the cash interest rate on the Senior Secured Notes to % in fiscal year 1999, and to reduce its total debt, will be dependent upon the future performance of the Company and its subsidiaries, which, in turn, will be subject to general economic conditions and to financial, business, weather, and other factors, including factors beyond the Company's control. The Company believes that, based on current levels of operations and assuming winter weather with heating degree days that are not substantially abnormal compared to the historical average, it will be able to fund these debt service obligations from funds generated from operations, proceeds of the sales of service centers pursuant to the Company's consolidation strategy and, if necessary, funds available under the New Credit Facility. If the Company and its subsidiaries are unable to comply with the terms of their debt agreements and fail to generate sufficient cash flow from operations in the future, they may be required to refinance all or a portion of their existing debt or to obtain additional financing. There can be no assurance that any such refinancing would be possible or that any additional financing could be obtained, particularly in view of the Company's anticipated high levels of debt, the fact that a significant portion of the Company's consolidated current assets will be given as collateral to secure indebtedness under the New Credit Facility and all of the capital stock of the Company's present and future subsidiaries will be pledged to secure the Senior Secured Notes, and the debt incurrence restrictions under existing debt agreements. If no such refinancing or additional financing were available, the Company could be forced to default on its respective debt obligations and, as an ultimate remedy, seek protection under the federal bankruptcy laws. RESTRICTIONS IN FINANCING AGREEMENTS The Indenture contains provisions that will limit, among other things, (a) the ability of the Company and its subsidiaries to incur additional indebtedness, (b) certain restricted payments and investments, (c) the 10 sale and issuance of capital stock by subsidiaries, (d) dividend and other payments, (e) transactions with affiliates, (f) the creation of liens, (g) the types of mergers, consolidations, or asset sales in which the Company may participate, and (h) subsidiary investments. The Indenture also contains provisions which require the Company, in the event of a Change in Control, to make an offer to purchase the Senior Secured Notes. A Change in Control is defined in the Indenture to include: (i) the acquisition of over 30% of the voting shares of the Company in certain circumstances; (ii) certain changes in the Board of Directors of the Company; (iii) a sale of all or substantially all of the assets of the Company; (iv) a reduction in the percentage of voting shares of the Company held by certain members of management below 50%; or (v) the failure of the Board of Directors to have at least two independent members, to have an audit committee consisting solely of independent members or to have fewer than eight members. See "Description of the Senior Secured Notes -- Certain Definitions (Change of Control)." There can be no assurance that the Company will have the financial resources necessary to purchase the Senior Secured Notes upon a Change in Control. See "Description of the Senior Secured Notes -- Covenants." The New Credit Facility will contain provisions similar to the provisions in the Indenture, as well as certain financial maintenance tests. Any failure of the Company to comply with these or other covenants contained in these agreements could result in a default thereunder, which, in turn, could cause such indebtedness (and by reason of cross-default provisions, the Senior Secured Notes) to be declared immediately due and payable. The ability of the Company to comply with these provisions may be affected by events beyond its control. See "Description of Other Indebtedness -- New Credit Facility." EFFECTIVE RANKING OF SENIOR SECURED NOTES The Senior Secured Notes will be senior secured obligations of the Company and will rank PARI PASSU with all other existing and future senior indebtedness of the Company. Pursuant to the Indenture, the Company may incur up to $15.0 million of senior secured indebtedness under the New Credit Facility and may, subject to certain limitations, incur other secured indebtedness. In the event of a bankruptcy, liquidation or similar proceeding affecting the Company, the other secured creditors of the Company would be entitled to repayment in full from the proceeds of any collateral subject to their security interests before any payment therefrom could be made to holders of the Senior Secured Notes. See "Description of Senior Secured Notes -- General" and "Description of Other Indebtedness." The Company is a holding company that conducts its operations through its subsidiaries (the vast majority of which are retail service centers) and has no material assets other than its interests in its subsidiaries. As a result of the Company's holding company structure, except to the extent that the Senior Secured Notes (and the Subsidiary Guarantees) constitute recognized creditor claims against the assets and earnings of the Company's subsidiaries, claims of creditors of the Company's subsidiaries (including lenders under the New Credit Facility which will also be guaranteed by subsidiaries of the Company) will have priority with respect to the assets and earnings of such subsidiaries over the claims of creditors of the Company, including holders of the Senior Secured Notes, even though such subsidiary obligations do not constitute senior indebtedness. On a pro forma basis as of March 31, 1994, after giving effect to the application of the proceeds of the Offering and the Transaction, the obligations of the Company's subsidiaries, other than their respective guarantees of Empire Gas' obligations under the Senior Secured Notes and the New Credit Facility, would have consisted of total payables of approximately $530,000 including trade payables, accrued expenses and taxes payable. The New Credit Facility and the Indenture will restrict the subsidiaries' ability to incur additional indebtedness other than in limited circumstances, including to fund acquisitions. See "Description of the Senior Secured Notes." SECURITY FOR THE SENIOR SECURED NOTES The Senior Secured Notes will be secured by a pledge of all of the capital stock of the Company's present and future subsidiaries. Currently there is no market for such stock. There can be no assurance that the proceeds from the sale or sales of all such collateral would be sufficient to satisfy the amounts due on the Senior Secured Notes in the event of a default. If such proceeds are not sufficient to repay all such amounts due on the Senior Secured Notes, then Holders of the Senior Secured Notes (to the extent not repaid from the proceeds of the sale of the collateral) would have only an unsecured claim against the Company's 11 remaining assets (together with a claim against the Subsidiary Guarantors pursuant to the Subsidiary Guarantees). In addition, the ability of the Holders of the Senior Secured Notes to rely upon the collateral (or upon the Subsidiary Guarantees) for fulfillment of the Company's obligations under the Indenture may be subject to certain bankruptcy law limitations in the event of a bankruptcy. PAYMENTS DUE ON INDEBTEDNESS PRIOR TO MATURITY OF SENIOR SECURED NOTES The Company intends to refinance or replace some portion of its New Credit Facility prior to its maturity on or about July 1997. There can be no assurance that any such refinancing will be possible, or that any additional financing in the future can be obtained, particularly in view of the Company's anticipated high levels of debt, and the restrictions on the Company's ability to incur additional debt under the New Credit Facility and the Indenture. If no such refinancing or additional financing is available or possible, as the case may be, the Company could be forced to default on its debt obligations and, as an ultimate remedy, seek protection under the federal bankruptcy laws. TAX CONSEQUENCES OF THE OFFERING The Senior Secured Notes will be issued at a substantial discount from their principal amount. Consequently, purchasers of Units generally will be required to include amounts in gross income for Federal income tax purposes in advance of their receipt of the cash payments to which the income is attributable. If the Senior Secured Notes are "applicable high yield discount obligations," the Company's federal income tax deductions with respect to the original issue discount on the Senior Secured Notes will be deferred until the Company makes the related payments and possibly, in part, disallowed. See "Certain Federal Income Tax Considerations -- Certain Federal Income Tax Consequences to the Company and to Corporate Holders." BANKRUPTCY CONSIDERATIONS If a bankruptcy case is commenced by or against the Company under the Bankruptcy Code after the issuance of the Senior Secured Notes, the claim of a holder of Senior Secured Notes may be limited to an amount equal to the sum of (i) the initial public offering price of the Senior Secured Notes (which may exclude amounts attributable to the value of the Warrants) and (ii) that portion of original issue discount which is not deemed to constitute "unmatured interest" for purposes of the Bankruptcy Code. Any original issue discount that was not amortized as of the date of any such bankruptcy filing would constitute "unmatured interest." WEATHER Weather conditions have a substantial impact on the demand for propane, particularly by retail customers, with peak sales typically occurring during the winter months. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Warmer than normal winter weather in fiscal years 1991 and 1992 had a material adverse effect on the Company's operating income in each of those years. Warmer than normal weather in the future could have a material adverse effect on the Company's operating income and could affect its ability to fulfill its debt service obligations. While the fiscal year 1993 winter was a nearly normal winter, there can be no assurance that average temperatures in future years will be closer to the historical average. PROPANE COST VOLATILITY The cost of propane purchased by the Company can fluctuate dramatically over a short period of time due to a variety of factors, including severe cold weather and product transportation difficulties. In general, the Company's supply contracts permit its suppliers to charge posted prices at the time of delivery, less any negotiated discount. The Company has generally been able to pass any cost increases on to its customers; however, there can be no assurance that the Company will be able to pass on such cost increases in the future. COMPETITION Empire Gas encounters competition from a number of other propane distributors in each geographic region in which it operates and competes for customers against suppliers of other energy sources. For residential and commercial customers, Empire Gas competes primarily with suppliers of electricity and 12 propane. The Company currently enjoys, and historically has enjoyed, a competitive advantage over suppliers of electricity because of the higher cost of electricity. The Company believes that fuel oil does not present a significant competitive threat in the Company's primary service areas because: (i) propane is a residue-free, cleaner energy source, (ii) environmental concerns make fuel oil relatively unattractive, and (iii) fuel oil appliances are not as efficient as propane appliances. Empire Gas generally does not attempt to sell propane in areas served by natural gas distribution systems, except sales for specialized industrial applications and for motor fuel, because the price per equivalent energy unit of propane is, and has historically been, higher than that of natural gas. To use natural gas, however, a retail customer must be connected to a distribution system provided by a local utility. Because of the costs involved in building or connecting to a natural gas distribution system, natural gas is not expected to create significant competition for the Company in areas that are not currently served by natural gas distribution systems. CONSERVATION AND IMPROVED EFFICIENCY OF GAS APPLIANCES Retail customers primarily use propane for heating, water heating, and cooking. Conservation measures or technological advances, including the development of more efficient gas appliances, could slow the growth of demand for propane by retail propane customers. The Company believes that decreases in oil and gas prices in recent years have decreased the incentive to conserve and that the gas appliances used today are already operating at high levels of efficiency. The Company cannot predict the impact of future conservation measures. Nor is the Company able to predict the effect that any technological advances might have on the Company's operations. OPERATING RISKS The Company's propane operations are subject to all operating hazards and risks normally incident to handling, storing and transporting combustible liquids, such as the risk of personal injury and property damage caused by fire. Empire Gas maintains insurance policies with insurers in such amounts and with such coverages and deductibles as management of the Company believes is reasonable and prudent. Empire Gas' current automobile liability policy provides coverage for losses of up to $101.0 million per occurrence with a $500,000 deductible per occurrence. Empire Gas' general liability policy has a $500,000 deductible per occurrence (subject to an aggregate deductible of $1.0 million per policy period) with total coverage of $101.0 million. Current workers compensation coverage also has a $500,000 deductible per incident. Current liability insurance coverage substantially exceeds any liability Empire Gas has previously incurred, though the $500,000 deductible on each of the policies means that the Company is effectively self-insured for liability up to these deductibles. The occurrence of an event not fully covered by insurance could have a material adverse effect on the Company's financial condition and results. See "Business of the Company -- Propane Operations -- Risks of Business." REORGANIZATION OF THE COMPANY Prior to the Offering, the Company consisted of 284 retail outlets operating in 27 states. As a result of the Transaction, the number of retail outlets will be reduced to 158 operating in 20 states (resulting in a decrease of approximately 40% based on gallons sold during the fiscal year ended June 30, 1993). In addition, new management of the Company after the Offering intends to pursue a strategy of acquisitions and start-ups, expansion of the Company's existing residential customer base, geographic rationalization and reduction of operating expenses, which differs in some regards from the strategy of current management. See "Business -- Business Strategy." The operations of the Company after the Offering will therefore differ from the operations prior to the Offering in terms of the size, geographical scope, management and leverage of the Company and there is no assurance that new management's business strategy will be carried out effectively. Accordingly, operations of the Company prior to the Offering are not indicative of expected operations of the Company after the Offering. POTENTIAL ACQUISITIONS AND DEVELOPMENT OF NEW RETAIL SERVICE CENTERS The Company intends to consider and evaluate opportunities for growth in its industry through acquisitions and the development of new retail propane service centers. While the Company recently completed an acquisition of one retail service center in Colorado, has signed an agreement to purchase a small retail propane company in Missouri, and will complete the Acquisition contemporaneously with this 13 Offering, there can be no assurance that the Company will continue to find attractive acquisition opportunities, or to the extent such opportunities or opportunities to develop new retail service centers are identified, that the Company will be able to consummate the acquisitions or develop such centers or will be able to obtain financing for any such acquisitions or projects. In addition, the Company's ability to undertake acquisitions will be limited in certain geographic areas by the non-competition agreement (the "Non-Competition Agreement") entered into by the Company and Empire Energy Corporation ("Energy"), whose stock will be transferred to Mr. Plaster and certain other departing officers as part of the Transaction. Subject to an exception for multi-state acquisitions, the Non-Competition Agreement restricts the Company from making acquisitions in seven states (Alabama, Florida, Georgia, Indiana, Kentucky, Mississippi and Tennessee) and certain territories in five states (southeastern Missouri, northern Arkansas, western Virginia, western West Virginia and an area within a 50-mile radius of an existing Energy operation in Illinois) (the "Energy Territories") for a period of three years from the date the Stock Purchase is consummated (the "Effective Date"). The Non-Competition Agreement also requires the Company not to disclose secret information it may have regarding Energy, not to solicit Energy customers or employees, and to grant Energy an option to purchase from the Company (on terms substantially equivalent to the terms on which the Company acquired the business) any business the Company acquires in violation of the Non-Competition Agreement. The same restrictions apply to Energy under the Non-Competition Agreement. See "The Transaction" and "Certain Relationships and Related Transactions -- The Transaction." No assurance can be given as to the extent to which acquisitions or new retail service centers will contribute to the Company's cash flows or results of operations. DEPENDENCE ON CONTROLLING SHAREHOLDER AND CONFLICT OF INTERESTS Upon consummation of the Transaction, Empire Gas will be dependent on the efforts of Paul S. Lindsey, Jr. who will serve as the Company's Chief Executive Officer, President, and Chairman of the Board. Mr. Lindsey and his wife, Kristin L. Lindsey, will hold approximately 96% of the Company's Common Stock and generally will be able to control the Company's operations. Although the Company will purchase a key man life insurance policy in the amount of $30 million, the loss of Mr. Lindsey's services could have a material adverse effect on the business of the Company. As the holder of a majority of the Company's outstanding Common Stock, Mr. Lindsey may have interests different from those of holders of the Units. In case of such a conflict of interests, there can be no assurance that the Company will take actions in the best interests of the holders of the Units. FRAUDULENT TRANSFER CONSIDERATIONS ASSOCIATED WITH THE STOCK REPURCHASE AND DEBT REFINANCING Under fraudulent transfer provisions of the Bankruptcy Code or comparable provisions of state fraudulent transfer law, a transfer of property made within a year before a bankruptcy filing (or within the applicable state law period) can be avoided if a company or a subsidiary thereof (a) made such transfer with the intent of hindering, delaying, or defrauding current or future creditors, or (b)(i) received less than reasonably equivalent value or fair consideration therefor and (ii) at the time of such transfer (A) was insolvent or was rendered insolvent by such transfer, (B) was engaged or was about to engage in a business or transaction for which its remaining assets constituted unreasonably small capital to carry on such business, or (C) intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature. If a court were to find that, in substance, the Senior Secured Notes were issued to repurchase the Common Stock of Mr. Plaster and the departing officers, the court could find that the Company did not receive fair consideration or reasonably equivalent value for the issuance of the Senior Secured Notes. In addition, to the extent the proceeds are being used to repay (i) the Company's 12% Senior Subordinated Debentures due 2002 (the "12% Senior Subordinated Debentures") which were incurred in repaying certain indebtedness incurred in the 1983 leveraged buy-out of Empire Gas Corporation (the "LBO"), and (ii) $13.7 million principal amount of the Company's 9% Subordinated Debentures due 2007 (the "2007 9% Subordinated Debentures"), which were incurred in the LBO, of which $4.7 million principal amount will be purchased from Mr. Plaster, a court could find that the Company did not receive fair consideration or reasonably equivalent value for the issuance of the Senior Secured Notes. If a court found a lack of fair consideration for the Senior Secured Notes and also concluded that one or more of the financial conditions 14 described above was satisfied at the time Empire Gas incurred the debt to the holders of the Senior Secured Notes, or if the court found that the transaction was entered into with the intent of hindering, delaying, or defrauding creditors, the court could set aside the transaction as a fraudulent transfer and void the Senior Secured Notes and order the return of any payments of principal and interest made on the Senior Secured Notes. To the extent any Senior Secured Note was avoided as a fraudulent transfer, the holder of that Senior Secured Note would cease to have any claim in respect of the Company. In addition, the avoidance of the Senior Secured Notes could result in an event of default with respect to the other indebtedness of the Company and could result in the acceleration of such indebtedness, a change in control of the Company, or otherwise adversely affect the Company. The obligations of the Company's existing subsidiaries to guarantee the Company's obligations under the Senior Secured Notes pursuant to the Subsidiary Guarantees may also be avoidable as fraudulent transfers. In the event that a court finds that (a) any such subsidiary did not receive reasonably equivalent value or fair consideration in exchange for such subsidiary's incurrence of the obligations under its respective Subsidiary Guaranty, and (b) that such subsidiary was insolvent or rendered insolvent by such Subsidiary Guaranty, had unreasonably small capital, or intended to or believed that it would incur debt beyond its ability to repay, such Subsidiary Guaranty could be avoided. The Subsidiary Guarantees could also be subject to avoidance as a fraudulent transfer if a court finds that such obligations were incurred with actual intent to delay, hinder or defraud any of the subsidiaries' creditors. The measures of insolvency for purposes of the foregoing considerations will vary depending upon the law applied in any such proceeding. Generally, however, a company will be considered insolvent if the sum of its debts, including estimated contingent liabilities, was greater than all of its assets at a fair valuation or if the present fair saleable value of its assets is less than the amount that would be required to pay its probable liability on its existing debts, including estimated contingent liabilities, as they become absolute and mature. The Company believes that the indebtedness represented by the Senior Secured Notes and the Subsidiary Guarantees is being incurred for proper purposes and in good faith, and without any actual intent to delay, hinder, or defraud the Company's creditors. Furthermore, the Company believes, based on analyses of internal cash flow, that it (i) will not be considered insolvent, at the time of or as a result of the issuance of the Senior Secured Notes, under any of the foregoing standards, (ii) will have sufficient capital to meet the needs of the business in which it is engaged, and (iii) will not have incurred debts beyond its ability to pay such debts as they mature. Furthermore, as a condition to the consummation of the Stock Purchase, the Company will receive a solvency opinion that the Stock Purchase and this Offering will not render the Company insolvent, leave the Company with inadequate or unreasonably small capital or result in the Company incurring indebtedness beyond its ability to repay such indebtedness as it matures. There can be no assurance, however, that a court passing on such questions would agree with the Company. ABSENCE OF PUBLIC MARKET There is currently no established trading market for the Units, the Senior Secured Notes, the Warrants or shares of Common Stock and the Company does not intend to have the Units, the Senior Secured Notes, the Warrants or the shares of Common Stock listed for trading on any securities exchange or on any automated dealer quotation system. The Underwriter has advised the Company that it presently intends to make a market in the Units, the Senior Secured Notes and the Warrants, but the Underwriter is not obligated to make such markets and any such market making may be discontinued at any time at the sole discretion of the Underwriter. Accordingly, no assurance can be given as to the prices or liquidity of, or trading markets for, the Units, the Senior Secured Notes, the Warrants or shares of Common Stock. The liquidity of any market for the Units, the Senior Secured Notes, the Warrants or shares of Common Stock will depend upon the number of holders of such securities, the interest of securities dealers in making a market in such securities, and other factors. The absence of an active market for the Units, the Senior Secured Notes, the Warrants or shares of Common Stock would adversely affect the liquidity of such securities. The liquidity of, and trading markets for, the Senior Secured Notes may also be adversely affected by the liquidity of, and market for high yield securities generally. Such a decline may adversely affect the liquidity of, and trading markets for, the Senior Secured Notes, independent of the financial performance of, and prospects for, the Company. 15 THE TRANSACTION The Company will implement a change in ownership and management contemporaneously with this Offering by repurchasing shares of its common stock from its controlling shareholder, Mr. Robert W. Plaster, and certain other departing officers in exchange for all of the shares of a subsidiary that owns 133 retail service centers located primarily in the Southeast. Mr. Paul S. Lindsey, Jr., who has been with the Company for 26 years and currently serves as the Company's Chief Operating Officer and Vice Chairman of the Board, will become the Company's controlling shareholder, Chief Executive Officer, and President. The change in ownership and management will enable the Company to pursue a growth strategy focusing on acquiring propane operating companies. Contemporaneously with the Offering, the Company will acquire the assets of PSNC Propane Corporation, a company located in North Carolina that has six retail service centers and five additional bulk storage facilities with annual volume of approximately 9.5 million gallons, for an aggregate purchase price of approximately $14.0 million (which includes payment for inventory and accounts receivable). The Company also recently completed the acquisition of a retail propane company in Colorado with annual volume of approximately 700,000 gallons, and has entered into a contract to purchase a retail propane company in Missouri with annual volume of approximately 690,000 gallons. Pursuant to the Stock Purchase, the Company will transfer 100% of the common stock of its subsidiary, Energy ("Energy Common Stock"), to Mr. Robert W. Plaster and certain departing directors, officers and employees in exchange for 12,004,430 of their shares of Common Stock. Certain of the departing officers and employees will receive $7.00 per share for the remaining 346,220 of shares of Common Stock that they hold. Energy owns the common stock of approximately 136 subsidiaries, 133 of which are retail service centers located in ten states, primarily in the Southeast, and certain other assets. Empire Gas will retain ownership of 158 retail service centers located in 20 states and 8 nonretail subsidiaries that provide services related to the Company's retail propane business. Following the Transaction, Mr. Lindsey and his wife Kristin Lindsey will beneficially own approximately 96% of the approximately 2,400,000 shares of the Company's Common Stock remaining outstanding and Mr. Lindsey will become the Company's Chief Executive Officer and President. In connection with the Stock Purchase, Mr. Plaster will terminate his positions with the Company as Chief Executive Officer and Chairman of the Board of Directors. Mr. Plaster's employment contract with the Company will be terminated. See "Management -- Employment Agreement." Similarly, the departing directors, officers and employees will terminate their positions with the Company and its subsidiaries. In connection with the Stock Purchase, certain lease and use agreements between the Company and Mr. Plaster, or entities controlled by Mr. Plaster, will be terminated. The Company has also entered into certain agreements that will become effective on the Effective Date, including the Non-Competition Agreement, a lease for the Company's headquarters, and a services agreement pursuant to which Empire Service Corporation ("Service Corp."), a subsidiary of Energy, will provide data processing, management information and other services to the Company (the "Service Agreement"). See "Certain Relationships and Related Transactions." The Company has requested a private letter ruling from the Internal Revenue Service concerning the federal income tax consequences of the Stock Purchase. The consummation of the Transaction is conditioned upon the receipt of rulings from the IRS that provide, among other things, that, based on certain representations contained in the rulings, neither income nor gain for federal income tax purposes will be recognized by the Company as a result of the Stock Purchase. The obligations of the parties to consummate the Stock Purchase are also subject to certain other conditions, including the receipt of a solvency opinion that the consummation of the Stock Purchase and this Offering will not render the Company insolvent, leave the Company with inadequate or unreasonably small capital or result in the Company incurring indebtedness beyond its ability to repay such indebtedness as it matures. Simultaneously with this Offering, the Company will consummate the acquisition of PSNC Propane Corporation, a company that has six retail service centers and an additional five bulk storage facilities 16 located in North Carolina, an area in which the Company desires to strengthen its presence. The Company will use approximately $12.0 million of the proceeds towards the $14.0 million aggregate purchase price. Approximately $1.5 million of the remaining purchase price will be funded by borrowings on the Company's New Credit Facility. The remaining $500,000 will be paid by the Company over five years. See "Use of Proceeds." During 1993, PSNC Propane Corporation sold approximately 9.5 million gallons, 70% of which were higher margin sales to residential customers. The Company will use a portion of the proceeds to repay certain of its existing indebtedness that have earlier maturity dates or that carry a higher effective interest rate. The Company will enter into the $15.0 million New Credit Facility. Immediately prior to the consummation of the Offering, the Company's subsidiary, Empire Gas Operating Corporation ("EGOC"), which owns the outstanding capital stock of the Company's retail service centers and certain nonretail subsidiaries, and certain other assets, will merge into the Company. USE OF PROCEEDS The net proceeds to the Company from the issuance and sale of the Units offered hereby will be approximately $95.0 million. The Company intends to use approximately $72.1 million of the net proceeds to retire existing indebtedness. Approximately $22.3 million will be used to redeem the Company's 12% Senior Subordinated Debentures due 2002, which currently have an annual sinking fund requirement of $690,000. Approximately $20.0 million will be used to redeem the Company's 9% Convertible Subordinated Debentures due 1998, which currently have an annual sinking fund requirement of $1.25 million. Approximately $16.1 million will be used to repay the term loan (currently accruing interest at 6.125% per annum) under the existing credit facility (the "Term Loan"), which matures June 30, 1998 and which currently has a quarterly sinking fund requirement of $650,000. Approximately $13.7 million will be used to repurchase $13.7 million principal amount of 2007 9% Subordinated Debentures, $4.7 principal amount of which will be purchased from Mr. Robert W. Plaster. See "Certain Relationships and Related Transactions." The purchase of the 2007 9% Subordinated Debentures will satisfy the Company's $1.37 million annual sinking fund requirement through the maturity date of the Senior Secured Notes. Approximately $12.0 million of the remaining net proceeds will be used by the Company to complete the Acquisition, which has an aggregate purchase price of $14.0 million (which includes payment for inventory and accounts receivable). See "The Transaction" and "Business -- Business Strategy -- Growth through acquisition of retail service centers." Approximately $2.6 million of the net proceeds will be used to repurchase, at $7.00 per share, approximately 346,220 shares of Common Stock held by the departing directors, officers and employees, and approximately 31,640 shares of Common Stock held by other shareholders. The Company will use approximately $4.1 million of the net proceeds to make a payment to Energy in connection with the Stock Purchase, reduced to the extent Energy may be required to make a payment to the Company based on the balance, as of the Effective Date, of certain of the Company's liabilities net of certain of its assets. See "Certain Relationships and Related Transactions -- The Transaction." Any remaining net proceeds (estimated to be $4.2 million) will be used by the Company for general corporate purposes which could include payment of accrued interest, repayment of the existing credit facility and future acquisitions. 17 CAPITALIZATION The following table sets forth, as of March 31, 1994, the historical capitalization of the Company and the pro forma capitalization of the Company as adjusted to give effect to the Transaction and the application of the proceeds of the Offering as described in "Use of Proceeds". This table should be read in conjunction with the Company's consolidated financial statements and the pro forma financial statements, including the notes thereto, included elsewhere in this Prospectus.
AS OF MARCH 31, 1994 ----------------------------- HISTORICAL AS ADJUSTED ------------- ------------- (UNAUDITED) (IN THOUSANDS) Short-term debt: Current maturities of long-term debt.............. $ 6,135 $ 329 ------------- ------------- ------------- ------------- Long-term debt (excluding current portion of long-term debt): Existing Credit Facility: Term Loan....................................... $ 13,450 $ -- $22 million revolving credit facility........... 3,500 -- New Credit Facility: $15 million revolving credit facility........... -- % Senior Secured Notes due 2004................. 99,360(2) 9% Convertible Subordinated Debentures due 1998............................................. 15,875 -- 9% Subordinated Debentures due 2007.............. 14,731 6,415(1) 12% Senior Subordinated Debentures due 2002....... 18,201 -- Purchase contract obligations..................... 939 1,101 ------------- ------------- Total long-term debt............................ 66,696 106,876 ------------- ------------- Stockholders' equity (deficit): Common stock...................................... 14 14 Common stock purchase warrants.................... -- 640(2) Additional paid-in capital........................ 27,088 27,088 Retained earnings................................. 5,899 32,393 ------------- ------------- 33,001 60,135 Less: Treasury stock.............................. (1,299) (87,975) ------------- ------------- Total stockholders' equity (deficit)............ 31,702 (27,840) ------------- ------------- Total capitalization.......................... $ 98,398 $ 79,036 ------------- ------------- ------------- ------------- - --------- (1) Face amount $12.3 million. (2) Reflects estimated $100 million of gross proceeds of the Units offered hereby, including $99.4 million of allocated value to the Senior Secured Notes and $.6 million of allocated value to the warrants.
18 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA FOR THE COMPANY PRIOR TO THE TRANSACTION The following table presents selected consolidated operating and balance sheet data of Empire Gas, prior to the consummation of the Transaction, as of and for each of the years in the five-year period ended June 30, 1993, as of and for the nine months ended March 31, 1993 and 1994, and for the twelve months ended March 31, 1994. The financial data of the Company as of and for each of the years in the five-year period ended June 30, 1993 were derived from the Company's audited consolidated financial statements. The financial data for the Company as of and for the nine months ended March 31, 1993 and 1994, were derived from the Company's unaudited consolidated financial statements which, in the opinion of the Company, reflect all adjustments, of a normal and recurring nature, necessary for a fair presentation of the results for the unaudited periods. Due to the seasonal nature of the Company's business, the majority of the Company's revenues are earned in its second and third fiscal quarters. Accordingly, the results of operations for the nine months ended March 31, 1994 are not indicative of the results of operations to be expected for the full year. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Data for the twelve months ended March 31, 1994 have been set forth to provide recent data concerning a full year's operations. The financial and other data set forth below should be read in conjunction with the Company's consolidated financial statements, including the notes thereto, included elsewhere in this Prospectus. Because these data do not take into account the effects of the Transaction on the Company's results and financial condition, management does not believe they are indicative of the results of the Company that can be expected after the Transaction and Offering.
EMPIRE GAS BEFORE THE TRANSACTION AND OFFERING ------------------------------------------------------------------------------------ NINE MONTHS ENDED TWELVE MONTHS YEAR ENDED JUNE 30, MARCH 31, ENDED ------------------------------------------------ ------------------ MARCH 31, 1989 (1) 1990 1991 1992 1993 1993 1994 1994 -------- -------- -------- -------- -------- -------- -------- -------------- (IN THOUSANDS EXCEPT RATIOS AND PER SHARE AMOUNTS) Operating data: Operating revenue..................... $108,389 $123,153 $121,758 $112,080 $128,401 $111,332 $110,108 $127,177 Gross profit (2)...................... 61,995 64,962 61,787 61,107 68,199 58,525 59,338 69,012 Operating expenses.................... 36,438 39,062 44,772 40,052 41,845 31,986 33,109 42,968 Depreciation and amortization......... 8,194 9,334 9,552 10,062 10,351 7,672 7,494 10,173 Operating income...................... 17,363 16,566 7,463 10,993 16,003 18,867 18,735 15,871 Interest expense: Cash interest....................... 12,288 11,437 12,038 10,721 9,826 7,541 6,446 8,731 Amortization of debt discount and expenses........................... 1,469 1,147 890 1,006 1,686 1,167 1,396 1,915 -------- -------- -------- -------- -------- -------- -------- -------------- Total interest expense............ 13,757 12,584 12,928 11,727 11,512 8,708 7,842 10,646 Net income (loss) (3)................. 857 1,216 (4,557) (1,474) 2,228 5,929 5,789 2,088 Other operating data: Ratio of earnings to fixed charges (4).......................... 1.16x 1.23x -- -- 1.36x 2.14x 2.27x 1.39x Deficiency in earnings available to cover fixed charges (4).............. -- -- $ (6,167) $ (1,184) -- -- -- -- Capital expenditures: Existing operations................. 4,310 3,993 4,148 4,048 2,964 1,839 3,429 4,554 Acquisitions........................ 2,863 260 1,708 225 -- -- 444 444 Start up of new retail service centers............................ 450 1,987 2,957 2,430 1,394 1,259 848 983 -------- -------- -------- -------- -------- -------- -------- -------------- Total capital expenditures.......... 7,623 6,240 8,813 6,703 4,358 3,098 4,721 5,981 Cash from sale of retail service centers and other assets............. 1,301 430 497 3,062 1,088 360 153 881 EBITDA (5)............................ 25,557 25,399 17,015 21,055 26,354 26,539 26,229 26,044 Income (loss) per share............... $ .05 $ .04 $ (.33) $ (.11) $ .16 $ .41 $ .40 $ .14
19
AS OF JUNE 30, AS OF ---------------------------------------------------------------------------------- MARCH 31, 1994 1989 1990 1991 1992 1993 -------------- -------------- -------------- -------------- -------------- -------------- (UNAUDITED) (IN THOUSANDS) Balance sheet data: Total assets................ $ 161,727 $ 157,858 $156,613 $ 150,946 $ 147,445 $152,193 Long-term debt (including current maturities)........ 77,775 79,666 84,289 78,958 79,249 72,831 Stockholders' equity........ 29,418 29,960 25,416 23,879 24,891 31,702 - ------------ (1) The operating data for 1989 include the operating results of the Company's predecessor, which was also named Empire Gas Corporation ("Old Empire"), for the period ended October 28, 1988. The Company was formed in September 1988 to acquire Old Empire. (2) Represents operating revenue less the cost of products sold. (3) Empire Gas did not declare or pay dividends on its common stock during the five-year period ending June 30, 1993 or during the nine-month period ending March 31, 1994. (4) For the purpose of calculating the ratio of earnings to fixed charges, "earnings" represents net income before income taxes, plus "fixed charges" and the amortization of capitalized interest, less interest capitalized. "Fixed charges" consist of interest (including amortization of debt issuance costs) and amortization of discount on indebtedness. (5) EBITDA consists of earnings before depreciation, amortization, interest, income taxes, and other non-recurring expenses. EBITDA is presented here because it is a widely accepted financial indicator of a highly leveraged company's ability to service and/ or incur indebtedness. However, EBITDA should not be construed as an alternative either (i) to operating income (determined in accordance with generally accepted accounting principles) or (ii) to cash flows from operating activities (determined in accordance with generally accepted accounting principles).
20 PRO FORMA CONSOLIDATED FINANCIAL AND OTHER DATA The following unaudited pro forma consolidated statements of operations have been derived from the consolidated statement of operations of the Company for the fiscal year ended June 30, 1993 and the consolidated statement of operations for the nine months and twelve months ended March 31, 1994 and adjust such information to give effect to the Offering and the Transaction as if they had been consummated on July 1, 1992. The unaudited pro forma consolidated balance sheet has been derived from the consolidated balance sheet of the Company and adjusts such information to give effect to the Offering and the Transaction as if they had been consummated on March 31, 1994. The Pro Forma Consolidated Financial and Other Data and accompanying notes should be read in conjunction with the consolidated financial statements and related notes thereto appearing elsewhere in this Prospectus. The Pro Forma Consolidated Financial and Other Data is presented for informational purposes only and does not purport to represent what the results of operations would actually have been if the Offering and the Transaction had occurred on July 1, 1992, or what the Company's financial position would actually have been if the Offering and the Transaction had occurred on March 31, 1994, or to project the Company's results of operations or financial position at any future date or for any future period. The Transaction is being accounted for as a treasury stock transaction using the fair value of the assets conveyed to repurchase the Company's stock. 21 EMPIRE GAS CORPORATION PRO FORMA STATEMENT OF OPERATIONS (IN THOUSANDS EXCEPT RATIOS AND PER SHARE AMOUNTS) (UNAUDITED)
YEAR ENDED JUNE 30, 1993 ---------------------------------------------------------------- ADJUSTMENTS EFFECTS OF EMPIRE TO EXCLUDE PSNC EFFECTS OF GAS ENERGY ACQUISITION* OFFERING PRO FORMA -------- ------------ ------------ ----------- --------- OPERATING REVENUE....................... $128,401 $(61,057)(1) $ 9,587 $ $ 76,931 COST OF PRODUCT SOLD.................... 60,202 (29,157)(1) 4,643 35,688 -------- ------------ ------------ --------- GROSS PROFIT............................ 68,199 (31,900) 4,944 41,243 -------- ------------ ------------ --------- OPERATING COSTS AND EXPENSES Provision for doubtful accounts....... 958 (442)(1) 30 546 General and administrative............ 40,437 (19,852)(2) 2,619 23,204 Rent expense to related party......... 450 (375)(2) 75 Depreciation and amortization......... 10,351 (4,687)(3) 1,058 6,722 -------- ------------ ------------ --------- 52,196 (25,356) 3,707 30,547 -------- ------------ ------------ --------- OPERATING INCOME........................ 16,003 (6,544) 1,237 10,696 -------- ------------ ------------ --------- OTHER EXPENSE Interest expense...................... (8,877) 271(4) (1,064) (497) (6) (10,167) Interest expense to related party..... (949) 94(4) 855(6) Amortization of debt discount and expense.............................. (1,686) (423) (2,235) (7) (4,344) Restructuring proposal costs.......... (223) 105(2) (118) -------- ------------ ------------ ----------- --------- (11,735) 470 (1,487) (1,877) (14,629) -------- ------------ ------------ ----------- --------- INCOME (LOSS) BEFORE INCOME TAXES....... 4,268 (6,074) (250) (1,877) (3,933) PROVISION (CREDIT) FOR INCOME TAXES 2,040 (2,433)(5) (100) (707) (8) (1,200) -------- ------------ ------------ ----------- --------- INCOME (LOSS) BEFORE EXTRAORDINARY ITEM................................... $ 2,228 $ (3,641) $ (150) $(1,170) (9) $ (2,733) -------- ------------ ------------ ----------- --------- -------- ------------ ------------ ----------- --------- INCOME (LOSS) PER SHARE BEFORE EXTRAORDINARY ITEM..................... $ .16 -- -- -- $ (1.73) -------- --------- -------- --------- OTHER OPERATING DATA AND FINANCIAL RATIOS Ratio of earnings to fixed charges.... 1.36x -- -- -- -- -------- -------- Deficiency in earnings to cover fixed charges.............................. -- -- -- -- $ (4,352) --------- --------- EBITDA**.............................. $ 26,354 -- -- -- $ 17,418 EBITDA to total interest expense...... 2.29x -- -- -- 1.20x EBITDA to cash interest............... 2.68x -- -- -- 1.71x - ------------ * For adjustments from actual PSNC results see Pro Forma Financial Statements of PSNC elsewhere in this Prospectus. ** EBITDA consists of earnings before depreciation, amortization, interest, income taxes, and other non-recurring expenses. EBITDA is presented here because it is a widely accepted financial indicator of a highly leveraged company's ability to service and/ or incur indebtedness. However, EBITDA should not be construed as an alternative either (i) to operating income (determined in accordance with generally accepted accounting principles) or (ii) to cash flows from operating activities (determined in accordance with generally accepted accounting principles).
22 EMPIRE GAS CORPORATION PRO FORMA STATEMENT OF OPERATIONS (IN THOUSANDS EXCEPT RATIOS AND PER SHARE AMOUNTS) (UNAUDITED)
NINE MONTHS ENDED MARCH 31, 1994 ---------------------------------------------------------------- ADJUSTMENTS EFFECTS OF EMPIRE TO EXCLUDE PSNC EFFECTS OF GAS ENERGY ACQUISITION* OFFERING PRO FORMA -------- ------------ ------------ ----------- --------- OPERATING REVENUE....................... $110,108 $(54,638)(1) $ 9,526 $ $ 64,996 COST OF PRODUCT SOLD.................... 50,770 (25,368)(1) 4,663 30,065 -------- ------------ ------------ ----------- --------- GROSS PROFIT............................ 59,338 (29,270) 4,863 34,931 OPERATING COSTS AND EXPENSES Provision for doubtful accounts 413 (215)(1) 34 232 General and administrative............ 32,359 (15,925)(2) 1,894 18,328 Rent expense to related party 337 (280)(2) 57 Depreciation and amortization......... 7,494 (3,292)(3) 778 4,980 -------- ------------ ------------ --------- 40,603 (19,712) 2,706 23,597 -------- ------------ ------------ --------- OPERATING INCOME........................ 18,735 (9,558) 2,157 11,334 -------- ------------ ------------ --------- OTHER EXPENSE Interest expense...................... (6,446) 105(4) (801) (233)(6) (7,375) Amortization of debt discount and expense.............................. (1,396) (353) (1,575)(7) (3,324) Restructuring proposal costs.......... (674) 321(2) (353) -------- ------------ ------------ ----------- --------- (8,516) 426 (1,154) (1,808) (11,052) -------- ------------ ------------ ----------- --------- INCOME BEFORE INCOME TAXES.............. 10,219 (9,132) 1,003 (1,808) 282 PROVISION FOR INCOME TAXES 4,430 (3,717)(5) 390 (823)(8) 280 -------- ------------ ------------ ----------- --------- NET INCOME.............................. $ 5,789 $ (5,415) $ 613 $ (985) $ 2 -------- ------------ ------------ ----------- --------- -------- ------------ ------------ ----------- --------- INCOME PER SHARE........................ $ .40 -- -- -- $ .00 -------- --------- -------- --------- OTHER OPERATING DATA AND FINANCIAL RATIOS Ratio of earnings to fixed charges.... 2.27x -- -- -- -------- -------- Deficiency in earnings to cover fixed charges.............................. -- -- -- -- (2,215) --------- --------- EBITDA**.............................. $ 26,229 -- -- -- $ 16,314 EBITDA to total interest expense...... 3.34x -- -- -- 1.52x EBITDA to cash interest............... 4.07x -- -- -- 2.21x - ------------ * For adjustments from actual PSNC results see Pro Forma Financial Statements of PSNC elsewhere in this Prospectus. ** EBITDA consists of earnings before depreciation, amortization, interest, income taxes, and other non-recurring expenses. EBITDA is presented here because it is a widely accepted financial indicator of a highly leveraged company's ability to service and/ or incur indebtedness. However, EBITDA should not be construed as an alternative either (i) to operating income (determined in accordance with generally accepted accounting principles) or (ii) to cash flows from operating activities (determined in accordance with generally accepted accounting principles).
23 EMPIRE GAS CORPORATION PRO FORMA STATEMENT OF OPERATIONS (IN THOUSANDS EXCEPT RATIOS AND PER SHARE AMOUNTS) (UNAUDITED)
TWELVE MONTHS ENDED MARCH 31, 1994 ------------------------------------------------------------------ ADJUSTMENTS EFFECTS OF EMPIRE TO EXCLUDE PSNC EFFECTS OF GAS ENERGY ACQUISITION* OFFERING PRO FORMA --------- ------------ ------------ ------------ --------- OPERATING REVENUE....................... $ 127,177 $(61,319)(1) $ 10,605 $ $ 76,463 COST OF PRODUCT SOLD.................... 58,165 (28,817)(1) 5,164 34,512 --------- ------------ ------------ --------- GROSS PROFIT............................ 69,012 (32,502) 5,441 41,951 --------- ------------ ------------ --------- OPERATING COSTS AND EXPENSES Provision for doubtful accounts....... 1,073 (512)(1) 40 601 General and administrative............ 41,445 (20,308)(2) 2,491 23,628 Rent expense to related party......... 450 (375)(2) 75 Depreciation and amortization......... 10,173 (4,880)(3) 1,039 6,332 --------- ------------ ------------ --------- 53,141 (26,075) 3,570 30,636 --------- ------------ ------------ --------- OPERATING INCOME........................ 15,871 (6,427) 1,871 11,315 --------- ------------ ------------ --------- OTHER EXPENSE Interest expense...................... (8,450) 85(4) (1,060) (383)(6) (9,808) Interest expense to related party..... (281) 94(4) 187(6) -- Amortization of debt discount and expense.............................. (1,915) (462) (2,069)(7) (4,446) Restructuring proposal costs.......... (897) 426(2) (471) --------- ------------ ------------ ------------ --------- (11,543) 605 (1,522) (2,265) (14,725) --------- ------------ ------------ ------------ --------- INCOME (LOSS) BEFORE INCOME TAXES....... 4,328 (5,822) 349 (2,265) (3,410) PROVISION (CREDIT) FOR INCOME TAXES..... 2,240 (2,500)(5) 130 (870)(8) (1,000) --------- ------------ ------------ ------------ --------- NET INCOME (LOSS)....................... $ 2,088 $ (3,322) $ 219 $ (1,395) $ (2,410) --------- ------------ ------------ ------------ --------- --------- ------------ ------------ ------------ --------- INCOME (LOSS) PER SHARE................. $ .14 $ (1.53) --------- --------- --------- --------- OTHER OPERATING DATA AND FINANCIAL RATIOS Ratio of earnings to fixed charges.... 1.39x --------- --------- Deficiency in earnings to cover fixed charges.............................. $ $ (4,407) --------- --------- EBITDA**.............................. $ 26,044 $ 17,647 EBITDA to total interest expense...... 2.45x 1.24x EBITDA to cash interest............... 2.98x 1.80x Total Long-term debt (including current portion) to EBITDA........... 2.80x 6.07x - ------------ * For adjustments from actual PSNC results see Pro Forma Financial Statements of PSNC elsewhere in this Prospectus. ** EBITDA consists of earnings before depreciation, amortization, interest, income taxes, and other non-recurring expenses. EBITDA is presented here because it is a widely accepted financial indicator of a highly leveraged company's ability to service and/ or incur indebtedness. However, EBITDA should not be construed as an alternative either (i) to operating income (determined in accordance with generally accepted accounting principles) or (ii) to cash flows from operating activities (determined in accordance with generally accepted accounting principles).
24 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENTS OF EMPIRE GAS CORPORATION (EGC) FOR THE YEAR ENDED JUNE 30, 1993, NINE MONTHS ENDED MARCH 31, 1994, AND TWELVE MONTHS ENDED MARCH 31, 1994. The pro forma consolidated income statement amounts are based on the estimated pro forma effects of the consolidated balance sheet adjustments assuming the transactions were consummated on July 1, 1992. The basis for the allocation of income and expenses between the Company and Energy is described in detail below. The amounts presented reflect actual operations of the retail subsidiaries while certain non-retail general and administrative expenses have been allocated on the bases set forth below to the extent they were not otherwise related to specific subsidiaries. The consolidated statement of operations amounts after the Transaction closes may differ from the pro forma statements because of changes in the consolidated balance sheet between July 1, 1992 and the actual consummation date. (1) The revenues and expenses of the retail subsidiaries of Energy were excluded. These subsidiaries represent substantially all the Operating Revenue, Cost of Product Sold and the Provision for Doubtful Accounts excluded on the pro forma statement of operations. (2) The general and administrative expenses of Energy retail subsidiaries were excluded. Exclusions of Energy non-retail general and administrative expenses were determined as follows: The amounts related to the salaries and related expenses of the departing officers and certain agreements between the Company and Mr. Plaster, or entities controlled by him, being terminated were estimated as follows and eliminated: Year Ended June 30, 1993.................. $2,556,100 Nine Months Ended March 31, 1994.......... $1,740,425 Twelve Months Ended March 31, 1994........ $2,320,567
Expenses related to maintenance and management of specific energy non-retail assets were identified and eliminated. All remaining non-retail expenses were assigned 52.3% to the Company and 47.7% to Energy based on the respective proportions of consolidated retail revenues. (3) Depreciation and amortization of the assets of Energy retail subsidiaries and non-retail subsidiaries were excluded. (4) Interest expense and amortization of debt acquisition costs related to (a) amounts directly related to liabilities of Energy retail subsidiaries and (b) the revolving bank debt and related party note borrowings applicable to Energy were excluded. (5) Income tax expenses were based on the proportion of Energy taxable income to the consolidated EGC taxable income. (6) To (a) recognize additional interest expense assuming interest paid at 7% on face value $107,844,000 (which represents 88% of the total $122,550,000) of Senior Secured Note borrowings (the remaining $14,706,000 of Senior Secured borrowings are included in the pro forma statements reflecting the Acquisition), (b) eliminate interest expense on the repaid term credit facility, 9% Convertible Subordinated Debentures due 1998 and the 12% Senior Subordinated Debentures due 2002, the reduced amount of the 9% Subordinated Debentures due 2007, and related party note borrowings and (c) reduce interest expense on the revolving credit facility to reflect the reduction due to the proceeds of this Offering. (7) To (a) recognize amortization of new debt acquisition costs being amortized over 10 years, (b) recognize amortization of new original issue discount on new Senior Secured Secured Notes to bring the effective rate of the new debt (excluding the amount included in the PSNC purchase accounting adjustments) to 12% using the effective interest method, (c) eliminate amortization of the discount on the 9% Convertible Subordinated Debentures due 1998 and the 12% Senior Subordinated Debentures due 2002, (d) reduce the amortization of the discount that will result from the reduction of 9% Subordinated Debentures due 2007 outstanding as a result of the Offering, and (e) eliminate amortization of debt acquisition costs related to Bank of Boston term credit facility and revolving credit facility being repaid. 25 (8) To record the increased estimated income tax credit provision, computed at an effective rate of 38%, associated with the additional deductible expense as a result of the operations after the Offering. (9) The foregoing pro forma consolidated income statement does not give effect to the gain of approximately $37.2 million resulting from the excess of the fair value of EGC Common Stock received in exchange for Energy ($84.0 million) over the book value of the assets transferred in the transaction ($46.8 million) and the extraordinary expense of $8.6 million (net of estimated income tax effect of $4.2 million) for the remaining unamortized debt discount related to the 9% Convertible Subordinated Debentures due 1998 and the 12% Senior Subordinated Debentures due 2002 and the reduction of the 9% Subordinated Debentures due 2007 that will be recognized as a result of use of proceeds of the Offering. The gain on disposition of Energy has been assumed to be non-taxable. If any portion of the gain is deemed to be taxable, such liability would be accrued and payable by the Company. 26 EMPIRE GAS CORPORATION PRO FORMA BALANCE SHEET MARCH 31, 1994 (IN THOUSANDS) (UNAUDITED)
ADJUSTMENTS EFFECTS OF EMPIRE TO EXCLUDE PSNC EFFECTS OF GAS ENERGY ACQUISITION* OFFERING PRO FORMA --------- ------------ ----------- ------------ --------- CURRENT ASSETS Cash.................................. $ 183 $ (454)(1) $ $ (239)(5) $ 1,591 (2,645)(8) 4,746(10) Trade Receivables..................... 15,072 (7,351)(1) 1,180 8,901 Inventories........................... 9,313 (4,506)(1) 700 5,507 Prepaid Expenses...................... 299 (110)(1) 189 Due from Energy....................... 3,886(2) (3,886)(5) Deferred Income taxes................. 408 (350)(1) 287(6) 345 --------- ------------ ----------- ------------ --------- Total current assets................ 25,275 (8,885) 1,880 (1,737) 16,533 --------- ------------ ----------- ------------ --------- PROPERTY AND EQUIPMENT At cost, net of accumulated depreciation......................... 107,838 (51,174)(1) 12,000 68,664 --------- ------------ ----------- --------- OTHER ASSETS Debt acquisition, costs, net of amortization......................... 446 4,554(7) 5,000 Excess of cost over fair value of net assets acquired, at amortized cost... 17,870 (3,567)(3) 14,303 Other................................. 764 (275)(1) 500 (250)(11) 739 --------- ------------ ----------- ------------ --------- 19,080 (3,842) 500 4,304 20,042 --------- ------------ ----------- ------------ --------- $ 152,193 $(63,901) $ 14,380 $ 2,567 $105,239 --------- ------------ ----------- ------------ --------- --------- ------------ ----------- ------------ --------- CURRENT LIABILITIES Due to Energy......................... $ $ 4,125(2) $ $ (4,125)(5) $ Current maturities of long-term debt................................. 6,135 (76)(1) 100 (5,830)(10) 329 Accounts payable and accrued expenses............................. 14,407 (2,463)(1) 250 (1,126)(10) 10,818 (250)(11) --------- ------------ ----------- ------------ --------- Total current liabilities........... 20,542 1,586 350 (11,331) 11,147 --------- ------------ ----------- ------------ --------- LONG-TERM DEBT.......................... 66,696 (162)(1) 12,000 87,360(9) 400 (71,298)(10) 1,630 10,250(6) 106,876 --------- ------------ ----------- ------------ --------- DEFERRED INCOME TAXES................... 31,214 (13,921)(1) (3,313)(6) 13,980 --------- ------------ ------------ --------- ACCRUED SELF INSURANCE LIABILITY........ 2,039 (963)(1) 1,076 --------- ------------ --------- STOCKHOLDERS' EQUITY (DEFICIT) Capital stock Common stock.......................... 14 14 Common stock purchase warrants........ 640(9) 640 Additional paid-in capital............ 27,088 27,088 Retained earnings..................... 5,899 33,590(4) (7,096)(6) 32,393 --------- ------------ ------------ --------- 33,001 33,590 (6,456) 60,135 Treasury Stock at cost................ (1,299) (84,031)(4) (2,645)(8) (87,975) --------- ------------ ------------ --------- 31,702 (50,441) (9,101) (27,840) --------- ------------ ----------- ------------ --------- $ 152,193 $(63,901) $ 14,380 $ 2,567 $105,239 --------- ------------ ----------- ------------ --------- --------- ------------ ----------- ------------ --------- - ------------ * For adjustments from actual PSNC results see Pro Forma Financial Statements of PSNC elsewhere in this Prospectus.
27 NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET OF EMPIRE GAS CORPORATION (EGC) AS OF MARCH 31, 1994 The pro forma consolidated balance sheet amounts assume the transactions described below were consummated on March 31, 1994. The allocation of assets and liabilities between the Company and Energy is based on the allocation in the Stock Redemption Agreement. The actual consolidated amounts may differ substantially because of changes in the financial position of the Company, Energy and PSNC Propane Corporation as of the actual consummation date. (1) The assets and liabilities of the retail distribution subsidiaries and certain non-retail assets of Energy (principally administrative office and data processing equipment, vehicles, airplanes, and home office parts inventories) were excluded. (2) The amount of $3,886,000 due from Energy was accrued under the provisions of the Stock Redemption Agreement pertaining to certain non-retail assets retained and liabilities assumed by the Company. The amount due to Energy of $4,125,000 was accrued under the provisions of the Stock Redemption Agreement. (3) The historical unamortized excess of cost over fair value of net assets acquired for Energy retail subsidiaries was excluded. (4) The fair value ($84,031,000) of 12,004,430 shares of EGC common stock received in exchange for Energy was charged to Treasury Stock and the resulting gain on the exchange of $33,590,000 was credited to retained earnings. The gain on disposition of Energy has been assumed to be non-taxable. If any portion of the gain is deemed to be taxable, such liability would be accrued and payable by the Company. The fair value is based on the valuation methods used by stockholders of the Company, including Mr. Plaster, to establish the relative values of the parts of the business being retained versus those included in Energy. The valuation method is based principally on gallons of retail sales and operating cash flows, and, in management's view, is consistent with valuation methods generally used in valuing propane distribution companies. (5) To record the net payment due to Energy at the closing date of the Transaction. (6) To (a) eliminate the unamortized discount from face value of the 9% Convertible Subordinated Debentures due 1998 and the 12% Senior Subordinated Debentures due 2002 and the unamortized discount from face value related to the paid 9% Subordinated Debentures due 2007 and (b) record the tax benefit from the deductions related to the discounts. (7) To (a) record $5,000,000 of debt acquisition costs paid in arranging the financing which will be amortized on a straight-line basis over the term of the new debt of 120 months and (b) eliminate the remaining unamortized debt issuance costs of $446,000 for Bank of Boston term credit facility and revolving credit facility. (8) To record $2,645,000 for the purchase of 346,220 shares of Common Stock from departing officers, directors and employees and 31,640 shares of Common Stock from employees who are remaining with the Company. (9) To record the estimated gross proceeds from the Units offered hereby, which include $640,000 of assumed value of Warrants with the remainder consisting of the initial accreted value of the Senior Secured Notes. For pro forma purposes, the Warrants are valued using Black-Scholes methodology with an assumed annualized volatility of the underlying Common Stock and without any liquidity discount. No assurance can be given that this valuation is indicative of the price at which the Warrants may actually trade. (10) To (a) record repayment of $55,948,000 face value of existing debentures, (b) record repayment of $16,050,000 of the term credit facility, (c) record reduction of $5,130,000 of the revolving credit facility, (d) payment of $1,126,000 of accrued interest and (e) excess proceeds of $4,746,000. (11) To eliminate in consolidation of the financial statements a $250,000 deposit made for the Acquisition. 28 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the Company's results of operations, financial condition and liquidity should be read in conjunction with the "Selected Consolidated Financial and Other Data," the "Consolidated Pro Forma Financial and Other Data" and the historical consolidated financial statements of Empire Gas and the notes thereto included in this Prospectus. Pro forma results reflect completion of the Transaction and the Offering. The Company believes that the pro forma results are most indicative of the past performance of the business of the Company as constituted after the Transaction and Offering. Historical results and percentage relationships set forth in "Selected Consolidated Financial Information," "Consolidated Pro Forma Financial and Other Data" and the financial statements of Empire Gas should not be taken as indicative of future operations of the Company. RESULTS OF OPERATIONS GENERAL Empire Gas' primary source of revenue is retail propane sales, which accounted for approximately 91.4% (90.4% on a pro forma basis taking account of the Transaction) of its revenue in fiscal year 1993. Other sources of revenue include sales of gas appliances and rental of customer tanks. The Company's operating revenue is subject to both price and volume fluctuations. Price fluctuations are generally caused by changes in the wholesale cost of propane. The Company is not materially affected by these price fluctuations, inasmuch as it can generally recover any cost increase through a corresponding increase in retail prices. Consequently, the Company's gross profit per retail gallon is relatively stable from year to year within each customer class. Volume fluctuations from year to year are generally caused by variations in the winter weather from year to year. Because a substantial amount of the propane sold by the Company to residential and commercial customers is used for heating, the severity of the weather will affect the volume sold. Volume fluctuations do materially affect the Company's operations because lower volume produces less revenue to cover the Company's fixed costs, including any debt service costs. Because a substantial amount of the propane sold to residential and commercial customers is used for heating, the Company's business is seasonal with approximately 60% (62% on a pro forma basis) of Empire Gas' sales occurring during the five months of November through March. The Company's expenses consist primarily of cost of products sold, general and administrative expenses and, to a much lesser extent, depreciation and amortization and interest expense. Purchases of propane inventory account for the vast majority of the cost of products sold. Historically, the Company has purchased approximately 75% of its propane under supply contracts with major oil companies. The Company purchases propane on the spot market to satisfy its remaining propane requirements. The typical supply contract is for a one-year term and requires the Company to purchase propane at the supplier's daily posted price or at a negotiated discount. The Company believes that it will continue to purchase inventory in this manner. While the cost of propane may fluctuate considerably from year to year, as discussed above, these fluctuations do not generally affect the Company's operating income because of corresponding changes in the Company's retail price. See "Risk Factors -- Propane Cost Volatility" and "Risk Factors -- Operating Risks." The Company has not experienced any difficulty in obtaining propane in recent years and believes that domestic sources of propane will continue to meet its needs. The Company's general and administrative expenses consist mainly of salaries and related employee benefits, vehicle expenses, and insurance. The Company's interest expense has consisted primarily of interest on its existing credit facility, 12% Senior Subordinated Debentures, 1998 9% Subordinated Debentures, and 2007 9% Subordinated Debentures. While the Company will use a portion of the proceeds of this Offering or the New Credit Facility to repay all of its existing indebtedness except a portion of its 2007 9% Subordinated Debentures (see "Use of Proceeds"), the Company's interest expense will increase substantially as a result of the issuance of the Senior Secured Notes. Through 1999 a significant portion of the increase will be non-cash interest expense. 29 PRO FORMA OPERATIONS GENERAL. Operating revenue of the Company on a pro forma basis is less than actual operating revenue for each period because of a decrease in operating revenue of approximately $61.1 million for the year ended June 30, 1993 and $54.6 million for the nine months ended March 31, 1994 from the exclusion of the sales from the 133 retail service centers that are being transferred in the Transaction. This decrease will be partially offset by an increase of approximately $9.6 million for the year ended June 30, 1993 and $9.5 million for the nine months ended March 31, 1994 from the inclusion of sales from service centers acquired in the Acquisition. On a pro forma basis, the Company reported a loss of approximately $2.7 million for the fiscal year ended June 30, 1993 and income of $2,000 for the nine months ended March 31, 1994. These compare to income of $2.2 million and $5.8 million for the respective historical periods. The changes from historical results are caused by an increase in interest expense after the Transaction and by the fact that the Company will bear all of the interest expense even though approximately 40% of the Company (based on retail gallons sold) will be divested in the Transaction. Changes between actual and pro forma results for most other operating results (cost of products sold, gross profit, provisions for doubtful accounts and depreciation and amortization) are roughly equivalent (on a percentage basis) to changes in operating revenue. Other than for general and administrative expenses and interest expense (discussed further below), the Company does not currently foresee any changes in operating results resulting from the Transaction that are not roughly proportional to changes in operating revenue resulting from the disposition of centers and the Acquisition. GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expenses on a pro forma basis are $14.5 million less for the nine months ended March 31, 1994, and $18.0 million less for the year ended June 30, 1993, than the respective historical amounts. The reduction represents the elimination of salaries and related expenses of the departing officers, the termination of certain agreements between the Company and Mr. Plaster or entities controlled by him, and the elimination of costs related to service centers that will not be part of the Company after the Transaction. This reduction will be partially offset by an increase in costs of $1.9 million and $2.6 million for the nine months ended March 31, 1994 and the year ended June 30, 1993, respectively, related to the operations acquired in the Acquisition. The expenses of the operations acquired in the Acquisition were, however, reduced by approximately $1.2 million for the fiscal year ended June 30, 1993, reflecting elimination of the costs of duplicative personnel and certain other items. The Company believes that it will realize additional reductions in operating expenses (which are not reflected in the pro forma financial information) through the consolidation of a number of existing retail service centers. INTEREST EXPENSE. Pro forma interest expense (plus amortization of debt discount and expense) was $10.7 million and $14.5 million for the nine months ended March 31, 1994 and the fiscal year ended June 30, 1993, respectively, an increase of approximately 36% and 26%, respectively, over the actual amounts. The overall increase results from a $30.3 million increase in total indebtedness of the Company offset by a small reduction in the weighted average effective interest rate from 12.8% (as of March 31, 1994) to 12.2%. The reduction in the effective interest rate results from the repayment of all of the Company's currently outstanding debt (other than approximately $12.3 million principal amount of the 2007 9% Subordinated Indentures) in connection with the Offering, and the replacement of that indebtedness with the Senior Secured Notes and the New Credit Facility, which will carry a lower effective interest rate. INCOME TAXES. The effective rate for pro forma income taxes varies from the historical rate because of the increase in the nondeductible excess of cost over fair value of net assets acquired as a result of the Transaction. NINE MONTHS ENDED MARCH 31, 1994 AND MARCH 31, 1993 OPERATING REVENUE. Operating revenue decreased by approximately $1.2 million, or 1.1%, from $111.3 million for the nine months ended March 31, 1993 to $110.1 million for the nine months ended March 31, 1994. This decrease was due to a decrease in propane sales of approximately $1.8 million offset by an increase in parts and appliances sales of approximately $.6 million. The decrease in propane sales was due to an approximate $.006 decrease in the average net sales price per gallon combined with a 1% decrease in gallons sold. The increase in parts and appliance sales was due to increased sales efforts by the Company. 30 COST OF PRODUCTS SOLD. Cost of products sold decreased by approximately $2.0 million, or 3.8%, from $52.8 million for the nine months ended March 31, 1993 to $50.8 million for the nine months ended March 31, 1994. This decrease was due to a decrease of approximately $2.5 million in the cost of propane offset by an increase of approximately $.5 million in the cost of parts and appliances. The decrease in the cost of propane was due to a $.016 decrease in the average net cost per gallon combined with a 1% decrease in gallons sold. The increase in the cost of parts and appliances was due to the increased sales activity. GROSS PROFIT. The Company's gross profit increased by approximately $800,000 (or 1.4%) from $58.5 million for the nine months ended March 31, 1993 to $59.3 million for the nine months ended March 31, 1994. The Company's gross profit per gallon increased from $.422 for the nine months ended March 31, 1993 to $.434 for the nine months ended March 31, 1994. GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expenses for the nine months ended March 31, 1994, increased approximately $1.1 million due to increases of $700,000 in insurance and liability claims expense, $500,000 in salaries and commissions, and $200,000 in payroll taxes and employee benefits. These increases were offset by decreases of $100,000 each in vehicle fuel and maintenance, rent and maintenance, and travel and entertainment. The increase in insurance and liability claims was due primarily to increased claims. The increase in salaries and commissions was due to normal pay increases combined with a slight increase in the total number of employees. The increase in payroll taxes and employee benefits was due to the increase in taxes related to the increased payroll and the increase in health insurance expenses. The decrease in vehicle fuel and maintenance was due to reduced vehicle maintenance as a result of the purchase of new vehicles to replace older vehicles. DEPRECIATION AND AMORTIZATION. Depreciation and amortization remained relatively constant, decreasing by approximately $200,000 or 3% from $7.7 million for the nine months ended March 31, 1993 to $7.5 million for the nine months ended March 31, 1994. INTEREST EXPENSE. Interest expense and amortization of debt discount and expense decreased approximately $800,000 or 9%, from $8.7 million for the nine months ended March 31, 1993 to $7.9 million for the nine months ended March 31, 1994. This decrease was the result of lower interest rates and reduced borrowing levels as compared to the comparable period for the prior year. INCOME TAXES. The effective income tax rate for the nine months ended March 31, 1994 was essentially unchanged from the effective rate for the nine months ended March 31, 1993. TRANSACTION PROPOSAL COSTS. Transaction proposal costs of $674,000 for the nine months ended March 31, 1994 consisted of legal and accounting expenses incurred in connection with a proposed restructuring of the Company's debt and equity that resulted in the Transaction described herein. FISCAL YEARS ENDED JUNE 30, 1993 AND JUNE 30, 1992 OPERATING REVENUE. Operating revenue increased $16.3 million, or 14.5%, from $112.1 million in fiscal year 1992 to $128.4 million in fiscal year 1993. This increase was the result of a $15.9 million increase in propane sales and $800,000 increase in sales of parts and gas appliances, offset by a $400,000 decrease in other revenues. The increase in propane sales was caused by a 12.1% increase in gallons sold and a 2% increase in the average gross sales price per gallon. The increased volume reflects the results of a winter heating season that was considered nearly normal based on historical standards as compared to a warmer winter heating season in fiscal year 1992. There were approximately 12.7% more weighted average heating degree days in fiscal year 1993 than in fiscal year 1992. Other revenues decreased by $400,000 primarily due to a decrease in fixed asset sales. COST OF PRODUCTS SOLD. Cost of products sold increased $9.2 million, or 18%, from $51.0 million in fiscal year 1992 to $60.2 million in fiscal year 1993. The increase resulted from the 12.1% increase in gallons sold, which reflects the increase in weighted average heating degree days, and a 4% increase in the wholesale cost of propane. 31 GROSS PROFIT. The Company's gross profit for the year increased $7.1 million, or 11.6%. The increase was caused by a 14.5% increase in operating revenue offset by an 18% increase in cost of products sold. The Company's gross profit per gallon was relatively constant at $.429 in fiscal year 1993 and $.425 in fiscal year 1992. GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expenses increased $1.0 million, or 2.5%, from $39.4 million in fiscal year 1992 to $40.4 million in fiscal year 1993. The increase was due primarily to increases of $800,000 in salaries and commissions and $600,000 in insurance and liability claims, offset by a decrease of $200,000 in professional fees. The increase in salaries and commissions reflects an increase in the commissions earned due to the increased sales activity. The increase in insurance costs is primarily due to higher worker compensation insurance premiums. The decrease in professional fees is due to reduced legal fees primarily related to federal income tax matters that have been settled. PROVISION FOR DOUBTFUL ACCOUNTS. The provision for doubtful accounts increased $760,000 from $200,000 in fiscal year 1992 to $960,000 in fiscal year 1993. This increase reflects the adjustment of the Company's annual provision to a level that the Company believes will be indicative of normal provisions for future years. The provision for fiscal year 1992 was much lower because the Company had significantly increased its provision in fiscal year 1991 due to concerns about the effect of the Persian Gulf crisis and the economy on its operations. The provision for fiscal year 1991 was more than adequate due, in part, to certain measures the Company implemented in fiscal year 1992 that improved the monitoring of its accounts receivable. Accordingly, a relatively small provision was required for fiscal year 1992. See "Fiscal Years Ended June 30, 1992 and June 30, 1991." DEPRECIATION AND AMORTIZATION. Depreciation and amortization remained relatively constant, increasing by $300,000 or 3%, from $10.1 million in 1992 to $10.4 million in 1993. INTEREST EXPENSE. Cash interest expense decreased by approximately $900,000 or 8.4%, from $10.7 million in fiscal year 1992 to $9.8 million in fiscal year 1993. This decrease was primarily attributable to lower interest rates in fiscal year 1993. Amortization of debt discount and expense increased $700,000 or 70% from $1.0 million in 1992 to $1.7 million in 1993. This increase related to increased amortization of the discounts on the Company's 1998 9% Subordinated Debentures, 2007 9% Subordinated Debentures, and 12% Senior Subordinated Debentures, as well as amortization of expenses related to the Company's Existing Credit Facility. RECAPITALIZATION COSTS. During fiscal year 1993, the Company incurred $200,000 in expenses relating to a proposed recapitalization that the Company later decided not to pursue. INCOME TAXES. The effective tax rate for the fiscal year ended June 30, 1993 was 47.8% compared to 24.5% for the fiscal year ended June 30, 1992. The increase was the result of the Company's reporting an income in the 1993 period compared to a loss in the 1992 period. The Company had a positive effective tax rate in 1992 despite its reported loss primarily because of state taxes imposed on operations that were profitable in individual states and because of the effective tax resulting from the amortization of the excess of cost over fair value of assets sold. FISCAL YEARS ENDED JUNE 30, 1992 AND JUNE 30, 1991 OPERATING REVENUE. Operating revenue decreased $9.7 million, or 8%, from $121.8 million in 1991 to $112.1 million in 1992. The decrease was the result of a $10.2 million decrease in propane sales offset by a $500,000 increase in other revenues. The decrease in retail sales was the result of a 8.8% decrease in the average gross sales price per gallon offset by a 1% increase in gallons sold. The decrease in selling price was primarily attributable to the general trend of a reduction in petroleum prices following the end of the Persian Gulf crisis. Volume did not fluctuate significantly inasmuch as the weighted average degree days decreased by less than 1% from fiscal year 1991 to 1992. Other revenues increased $500,000 primarily due to gains on the sale of surplus real estate. COST OF PRODUCTS SOLD. Cost of products sold decreased by $9.0 million, or 15%, from $60.0 million in fiscal year 1991 to $51.0 million in fiscal year 1992. The decrease in cost of products sold resulted from a 32 15.7% decrease in the wholesale cost of propane offset by the 1% increase in gallons sold. As discussed above, this cost decrease related to the general trend of a reduction in petroleum prices following the end of the Persian Gulf crisis. GROSS PROFIT. The gross profit for the year decreased by $700,000, or 1.1%. This decrease was caused by the 8% decrease in operating revenue offset by a decrease of 15% in the cost of products sold. The Company's gross profit per gallon decreased from $.441 in fiscal year 1991 to $.425 in fiscal year 1992. The gross profit per gallon in 1991 was abnormally high as a result of the Persian Gulf war. GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expenses decreased $2.1 million, or 5%, from $41.5 million in 1991 to $39.4 million in 1992. The decrease was due to decreases of $800,000 in transportation expense, $600,000 in insurance and liability claims, $400,000 in rent and maintenance, and $300,000 in employee benefits. The decrease in transportation expense primarily reflects the decrease in the cost of propane fuel used in the transportation equipment. Insurance and liability claims expense decreased due to a reduction in claims expense as the result of fewer claims. Maintenance expense decreased primarily due to lower maintenance costs for the underground storage facility and reduced purchases of paint for painting storage tanks. Employee benefits decreased due to the reduction of the Company's costs for employee health insurance claims due to an increase in the premiums charged to employees which partially offset the cost of providing this insurance. PROVISION FOR DOUBTFUL ACCOUNTS. The provision for doubtful accounts decreased $2.6 million, or 92.9%, from $2.8 million in 1991 to $200,000 in 1992. In fiscal year 1991 the Company reevaluated its reserve for doubtful accounts and significantly increased its reserve because of concerns about the collection of accounts due to the increase in retail propane prices caused by the Persian Gulf Crisis and general concerns about the economy. Historically the Company's provision had been approximately $1.2 million per year. During fiscal year 1992, the Company completed the installation of computers in all of its retail service centers, which enabled it to improve its monitoring of accounts receivable. Because the Company's collection of accounts receivable relating to fiscal year 1991 was better than anticipated and because the Company improved its collection process through the installation of the computers, a much smaller provision for doubtful accounts was required for fiscal year 1992. DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased $500,000, or 5.2%, from $9.6 million in fiscal year 1991 to $10.1 million in fiscal year 1992. This was primarily attributable to increased capital expenditures. INTEREST EXPENSE. Interest expense decreased $1.3 million, or 10.8%, from $12.0 million in 1991 to $10.7 million in 1992. This decrease was primarily attributable to decreased borrowing levels and lower interest rates in 1992 as compared to 1991. Amortization of debt discount and expense increased $110,000 or 12.3% from $890,000 in 1991 to $1.0 million in 1992. This increase relates primarily to increased amortization of the discounts on the Company's 1998 9% Subordinated Debentures, 2007 9% Subordinated Debentures, and 12% Senior Subordinated Debentures. MERGER PROPOSAL COSTS. During fiscal year 1992, the Company recorded expenses of $450,000 related to a proposed acquisition of a large competitor. The Company incurred these costs in performing due diligence related to the acquisition. The acquisition was later abandoned with the related costs being expensed. CRESTED BUTTE LITIGATION EXPENSE. During 1991, the Company incurred approximately $700,000 in litigation losses related to a matter that was concluded in fiscal year 1993. No further costs will be incurred. INCOME TAXES. The effective tax rate for the fiscal year ended June 30, 1992 was approximately 24.5% compared to a tax benefit of 26.1% in the prior year. Although the Company reported a loss for both periods, the loss was greater in the fiscal year ended June 30, 1991 and taxes on earnings in individual states where operations were profitable, plus the effect of amortization of excess of costs over fair value of net assets acquired, resulted in a net positive tax rate in the 1992 period. 33 LIQUIDITY AND CAPITAL RESOURCES The Company's liquidity requirements have arisen primarily from funding its working capital needs, capital expenditures and debt service obligations. Historically, the Company has met these requirements from cash flow generated by operations and from borrowings under its revolving credit line. OPERATING ACTIVITIES. Cash flow provided from operating activities was $6.2 million in fiscal year 1993 as compared to $10.0 million in fiscal year 1992. Cash flow from operations for fiscal year 1993 does not fully reflect the beneficial impact that the first nearly normal winter since fiscal year 1988 had on the Company's operations. As discussed above, the Company's operating revenue and gross profit increased approximately $16.3 million and $7.1 million, respectively, due primarily to increased sales of propane as a result of the increase in weighted average heating degree days for fiscal year 1993. See "Results of Operations -- Fiscal Years Ended June 30, 1993 and June 30, 1992." EBITDA also increased, from $21.1 million for fiscal year 1992 to $26.4 million for fiscal year 1993. Cash flow from operations did not experience a similar increase due to the following factors: (i) the Company used approximately $2.4 million during fiscal year 1993 for a non-recurring payment of accrued interest on federal income taxes, (ii) the Company used approximately $3.5 million during fiscal year 1993 to pay the current year's income taxes, a substantial increase from the prior year's income tax payment, (iii) the Company used approximately $1.5 million during fiscal year 1993 to reduce its accounts payables and accrued expenses, and (iv) accounts receivable at the end of fiscal year 1993 increased as a result of the increased sales activity. Cash flow provided from operating activities was $12.3 million for the nine months ended March 31, 1994, compared to $4.6 million for the same period in 1993. The increase in cash flow resulted primarily from an increase in payables and a smaller increase in receivables compared to the prior period. EBITDA of the Company on a pro forma basis for the fiscal year ended June 30, 1993 and for the nine months ended March 31, 1994 is $8.9 million and $9.9 million lower than the respective historical levels as a result of the disposition of service centers in the Stock Purchase (resulting in reductions of $11.2 million and $12.8 million for the respective periods), partially offset by an increase (of $2.3 million and $2.9 million in the respective periods) resulting from EBITDA contributed by the centers acquired in the Acquisition. The Company intends to increase its EBITDA by reducing operating expenses by consolidating a number of retail service centers, and by increasing its operating revenue through acquisitions (including the Acquisition) of retail service centers, development of new retail service centers, and expansion of the Company's existing residential customer base. There can be no assurance that the foregoing increases in cash flow can be realized. The seasonal nature of the Company's business will require it to rely on borrowings under the $15.0 million New Credit Facility as well as cash from operations particularly during the summer and fall months when the Company is building its inventory in preparation for the winter heating season. While approximately 62% of the Company's operating revenue (on a pro forma basis) is earned in the second and third quarters, certain expense items such as general and administrative expense are recognized on a more annualized basis. Interest expense also tends to be higher during the summer and fall months because the Company relies in part on increased borrowings on its revolving credit line to finance inventory purchases in preparation for the Company's winter heating season. CAPITAL EXPENDITURES. The Company's capital expenditures consist of routine expenditures for existing operations as well as non-recurring expenditures, purchases of assets for the start-up of new retail service centers, and acquisition costs (including costs of acquiring retail service centers). Routine expenditures usually consist of expenditures relating to the Company's bulk delivery trucks, customer tanks, and costs associated with the installation of new tanks. The Company believes that capital expenditures will increase as the Company more actively pursues acquisitions. See "Business -- Business Strategy." The Company's capital expenditures totalled $4.4 million in fiscal year 1993 and $6.7 million in fiscal year 1992. These capital expenditures were offset by proceeds from the sale of retail service centers and surplus real estate totalling $1.1 million in fiscal year 1993 and $3.1 million in fiscal year 1992. Of these amounts, approximately $2.5 million in fiscal year 1993 and $3.4 million in fiscal year 1992 were for routine 34 capital expenditures for existing operations. The Company incurred relocation expenditures of $225,000 in fiscal year 1992, relating to the relocation of the Company's retail service centers to locations on or near major highways. The Company incurred nonrecurring expenditures of $336,000 in fiscal year 1993 and $268,000 in fiscal year 1992. These expenditures related to the development of a new program to build dispensing stations and expenditures for the jet used by the Company, which the Company is disposing of in connection with the Transaction. The Company started 10 new retail service centers in fiscal year 1993, and 11 new retail service centers in fiscal year 1992, incurring costs of approximately $1.4 million and $2.4 million, respectively. No expenditures were made for acquisitions during fiscal year 1993, and acquisition costs of approximately $225,000 were incurred in fiscal year 1992. The Company believes that capital expenditures for routine expenditures after the Transaction will be approximately $2.0 million per year, and that capital expenditures for the start-up of new retail service centers will not exceed $1.0 million per year. The Company anticipates that capital expenditures in fiscal year 1994 will be significantly larger than 1993, primarily due to an increase in acquisition activity. The Company will use approximately $12.0 million of the proceeds of this Offering to fund the majority of the $14.0 million Acquisition purchase price, with approximately $1.5 million being funded through the Company's New Credit Facility. The remaining $500,000 will be funded with cash from operations over a five-year period. The Company acquired a service center in Colorado in March, 1994, at a cost of approximately $473,000, of which $273,000 was paid in cash, with the remaining amount financed through the issuance of two five-year notes to the seller, one for $100,000 bearing interest at 7% and the other for $100,000 bearing no interest. The Company has entered into an agreement to purchase another service center in Missouri at a cost of $325,000, of which $210,000 will be paid in cash at closing and the remaining amount will be financed through the issuance of two ten-year notes to the seller, one for $90,000 bearing interest at 7% and the other for $25,000 bearing no interest. For future acquisitions, the Company intends to fund acquisitions with seller financing, to the extent feasible, and with cash from operations or bank financing. The Company intends to fund its routine capital expenditures and the purchases of assets for new retail service centers with cash from operations, borrowings on the New Credit Facility, or other bank financing. The Company is currently in the process of opening two new service centers at an expected initial cost of $150,000 each. The Company does not currently have any material commitments for any capital expenditures other than the agreements for the pending acquisitions and the new service centers discussed above. The Company is also exploring the possibility of making modifications to its underground storage facility, which will require additional capital expenditures. The Company has not yet determined the amount that it would need to spend to make such modifications, or whether such modifications will in fact be made. See "Business -- Propane Operations (Distribution)." Any acquisitions or purchases of assets will be subject to the restrictions on investments and debt incurrence contained in the New Credit Facility and the Indenture as well as the restrictions contained in the Non-Competition Agreement. See "Financing Activities"; "Description of Senior Secured Notes"; "Description of Other Indebtedness"; "Certain Relationships and Related Transactions -- The Transaction." FINANCING ACTIVITIES. During fiscal year 1993, the Company replaced its old term loan and its Old Working Capital Facility with the Company's current existing credit facility. The Company also made non-recurring expenditures of approximately $2.1 million in connection with the termination of two employee benefit plans. Upon consummation of the Offering and application of the net proceeds therefrom, the Company will have substantial debt service obligations. While the net proceeds will be used to retire all the Company's existing indebtedness and approximately $13.7 million principal amount 2007 9% Subordinated Debentures, the Company will carry a significant amount of debt and will be required to use a substantial portion of its cash flow to make interest payments. On a pro forma basis, after giving effect to the consummation of this Offering and the application of the net proceeds therefrom, for the year ended June 30, 1993, the Company's cash interest expense would have been approximately $8.4 million. Because the New Credit Facility will bear interest at a floating rate, the Company's financial condition will be affected by fluctuations in interest rates. See "Description of Other Indebtedness -- New Credit Facility." 35 The Company's $15.0 million New Credit Facility will mature on or about July, 1997, at which time the Company will have to refinance or replace some portion of the facility and may be required to pay some portion of any outstanding balance. There can be no assurance that the Company will be able to refinance or replace the New Credit Facility, or the terms upon which any such financing may occur. Beginning in fiscal year 1999, the cash interest rate on the Senior Secured Notes will increase to %. The Company believes cash from operations will be sufficient to meet the increased interest payments. See "Risk Factors -- Payment on Indebtedness Prior to Maturity of Senior Secured Notes." The Company's New Credit Facility and the Indenture will impose restrictions on the Company's ability to incur additional indebtedness. Such restrictions, together with the highly leveraged position of the Company, could restrict corporate activities, including the Company's ability to respond to market conditions, to provide funds for capital expenditures, to refinance its debt, if desired, or to take advantage of business opportunities. After consummation of the Offering, the Company's ability to borrow will be very limited. The Company believes that based on current levels of operations and assuming normal winter weather, cash flow from operations together with borrowings under the New Credit Facility will be adequate to fund the Company's operating needs, anticipated capital expenditures, and debt service obligations until the New Credit Facility expires in 1997. The Company believes that earnings before interest, taxes, depreciation and amortization will exceed debt service requirements and that seasonal needs for cash can be met through borrowings under the New Credit Facility. The Company believes that it will have sufficient capitalization and cash flow to refinance the New Credit Facility when it expires, but there can be no assurance of this. In particular, there can be no assurance that the Company's current level of operations will continue or that the Company will experience normal winter weather (based on deviation from the 50-year average of heating degree days). The Company's revenues and operating income could decrease as a result of substantially abnormal winter weather to a level that could adversely affect the Company's ability to service its debt from EBITDA. Furthermore, a substantial increase in interest rates could result in an increase in interest expense under the New Credit Facility that could similarly endanger the Company's ability to service its debt. If the Company were unable to meet its debt service obligations or obtain refinancing or additional financing, it could be forced to default on its respective debt obligations and, as an ultimate remedy, seek protection under the federal bankruptcy laws. See "Risk Factors -- High Leverage and Ability to Service Debt." EFFECTS OF INFLATION AND CHANGING PRICES General inflation does not have a material effect upon Company operations. Prices of propane will change materially from time to time due to either the combined or individual effects of weather and available supplies of petroleum products. Such changes may have differing effects on revenues and costs of products sold depending upon the inventory levels when such changes occur. Generally, increases in the cost of propane do not substantially affect the Company's gross margin, inasmuch as these cost increases are usually recovered through a corresponding increase in the Company's retail price. FUTURE CHANGES IN ACCOUNTING PRINCIPLE Effective July 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). As a result of this change, there was no material effect upon the Company's financial statements. SFAS 109 requires recognition of deferred tax liabilities and assets for the difference between the financial statement and tax basis of assets and liabilities. Under this new standard, a valuation allowance is established to reduce deferred tax assets if it is more likely than not that a deferred tax asset will not be realized. Prior to fiscal year 1994, deferred taxes were determined using the Statement of Financial Accounting Standards No. 96. 36 BUSINESS GENERAL Empire Gas is one of the largest retail distributors of propane in the United States and, through its subsidiaries, has been engaged in the retail distribution of propane since 1963. During the fiscal year ended June 30, 1993, without giving effect to the Transaction, Empire Gas supplied propane to approximately 200,000 customers in 27 states from 284 retail service centers and sold approximately 142.1 million gallons of propane, accounting for approximately 91.4% of its operating revenue. The Company also sells related gas-burning appliances and equipment and rents customer storage tanks. The Company will implement a change in ownership and management contemporaneously with this Offering by repurchasing shares of its common stock from its controlling shareholder, Mr. Robert W. Plaster, and certain other departing officers in exchange for all of the shares of common stock of a subsidiary that owns 133 retail service centers located primarily in the Southeast. Mr. Paul S. Lindsey, Jr., who has been with the Company for 26 years and currently serves as the Company's Chief Operating Officer and Vice Chairman of the Board, will become the Company's controlling shareholder, Chief Executive Officer, and President. The change in ownership and management will enable the Company to pursue a growth strategy focussed on acquiring independent propane operating companies. Contemporaneously with the Offering, the Company will acquire the assets of PSNC Propane Corporation, a company located in North Carolina that has six retail service centers and five additional bulk storage facilities with annual volume of approximately 9.5 million gallons for an aggregate purchase price of approximately $14.0 million (which includes payment for inventory and accounts receivable). The Company also recently completed the acquisition of a retail propane company in Colorado with annual volume of approximately 700,000 gallons and has entered into a contract to purchase a retail propane company in Missouri with annual volume of approximately 690,000 gallons. Following the Transaction, Empire Gas' operations will consist of 158 retail service centers with 22 additional bulk storage facilities. During the fiscal year ended June 30, 1993, Empire Gas, after giving effect to the Transaction, sold approximately 84.8 million gallons of propane (approximately 40% less than prior to the Transaction) to approximately 112,000 customers in 20 states, which (based on retail gallons sold) makes it one of the 11 largest retail distributors of propane in the United States. The impact on the Company's operations of weather fluctuations in a particular region will be reduced as a result of the substantial geographic diversification of the Company after the Transaction, with operations in the west, the southwest, Colorado, the upper midwest, the Mississippi Valley and the southeast. Propane, a hydrocarbon with properties similar to natural gas, is separated from natural gas at gas processing plants and refined from crude oil at refineries. It is stored and transported in a liquid state and vaporizes into a clean-burning energy source that is used for a variety of residential, commercial, and agricultural purposes. Residential and commercial uses include heating, cooking, water heating, refrigeration, clothes drying, and incineration. Commercial uses also include metal cutting, drying, container pressurization, and charring, as well as use as a fuel for internal combustion engines. As of December 31, 1991, the propane industry had grown, as measured by the gallons of retail residential/commercial propane sold, at the rate of 3.7% per annum since 1984. The Company believes the highly fragmented retail propane market presents substantial opportunities for growth through consolidation. As of December 31, 1991, there were approximately 8,000 propane retail marketing companies in the continental United States with approximately 13,500 retail distribution points. In addition, Empire Gas believes growth can be achieved by the conversion to propane of homes that currently use either electricity or fuel oil products because of the price advantage propane has over electricity and because propane is a cleaner source of energy than fuel oil products. As of December 31, 1990, there were approximately 23.7 million homes that used electricity for heating, water heating, cooking and other household purposes, approximately 11.2 million homes that used fuel oil products, and approximately 5.7 million homes that used propane for such purposes. 37 Empire Gas focuses on propane distribution to retail customers, including residential, commercial, and agricultural users, emphasizing, in particular, sales to residential customers, a stable segment of the retail propane market that traditionally has generated higher gross margins per gallon than other retail segments. Sales to residential customers, giving effect to the Transaction, accounted for approximately 65.5% of the Company's aggregate propane sales revenue and 74.3% of its aggregate gross margin from propane sales in fiscal year 1993. Empire Gas attracts and retains its residential customers by supplying storage tanks, by offering superior service and by strategically locating visible and accessible retail service centers on or near major highways. Empire Gas focuses its operations on sales to customers to which it also leases tanks, as sales to this segment of the retail propane market tend to be more stable and typically provide higher gross margins than sales to customers who own tanks. After the Transaction, Empire Gas will own approximately 109,000 storage tanks that it leases to approximately 96% of its customers. Empire Gas' residential customer base is relatively stable, because (i) fire safety regulations and state container laws restrict the filling of a leased tank solely to the propane supplier that leases the tank, (ii) rental agreements for its tanks restrict the customers from using any other supplier, and (iii) the cost and inconvenience of switching tanks minimizes a customer's tendency to change suppliers. Historically, the Company has retained 90% of all its customers from year to year, with the average customer remaining with Empire Gas for approximately 10 years. BUSINESS STRATEGY The change in ownership and management of the Company will enable it to pursue a business strategy to increase its revenues and profitability through (i) expansion by acquisitions and start-ups, (ii) expansion of its existing residential customer base, and (iii) geographic rationalization and the reduction of operating expenses. Empire Gas will seek opportunities to acquire retail service centers in areas where it already has a strong presence and to develop new retail service centers in new markets. Efforts to expand the existing residential customer base will focus primarily on conversion of customers currently using electricity for heating, conversion of customers currently using fuel oil and wood due to environmental impact, and soliciting customers created by the new home construction market in growth areas. Empire Gas intends to dispose of a limited number of retail service centers that are located in markets in which it does not have, and does not desire to develop, a strong presence or that do not have the potential for long-term growth. Empire Gas believes it will be able to reduce its operating expenses through a program of consolidating a number of retail service centers where such consolidations will yield operating efficiencies. GROWTH THROUGH ACQUISITION OF RETAIL SERVICE CENTERS. Historically, the acquisition of other retail service centers has been viewed by the industry as one of the primary means of growth and much of the Company's growth over the past thirty years has been attributable to acquisitions. As of December 31, 1991, there were substantially in excess of 8,000 retail marketing companies in the continental United States with at least 13,500 distribution points. The Company intends to focus its acquisition efforts on candidates that meet certain criteria, including minimum cash flow requirements and location in areas of economic growth or areas in which the Company currently has a market position which it desires to strengthen. The Company has not engaged in significant acquisition activity over the past several years. With the change in ownership and management, the new management, under the leadership of Mr. Lindsey, will emphasize achieving growth through acquisitions. The Company has entered into an agreement which provides that, contemporaneously with this Offering, the Company will complete the acquisition of the assets of PSNC Propane Corporation, a company that has six retail service centers with five additional bulk storage facilities located in North Carolina, an area the Company has targeted because of its high economic growth. The aggregate purchase price of the Acquisition will be approximately $14.0 million (which includes payment for inventory and accounts receivable), which consists of $12.0 million for certain assets, primarily customer and storage tanks, approximately $1.5 million for accounts receivable and inventory, and $500,000 for a non-compete agreement with the seller. The Company will fund $12.0 million of the purchase price with the proceeds of this Offering and will fund the $1.5 million for the purchase of the accounts receivable and inventory through the Company's New Credit Facility. The purchase price for the non-compete agreement will be paid out over five years with cash flow from operations. 38 The Acquisition will enable the Company to expand its geographic market, to increase its high margin residential customer base and to improve its operating results and cash flow. The Company currently has only limited operations in North Carolina, and all of the operations to be acquired from PSNC in the Acquisition are out of the Company's current service territory. Based on the gallons sold by the acquired operations in 1993, the Company believes this acquisition will increase its annual propane sales by approximately 9.5 million gallons, approximately 64% of which will be for sales to residential customers with generally higher margins than sales to industrial and agricultural customers. Empire Gas believes it will be able to improve PSNC Propane Corporation's operating results and cash flow through the integration of its operations into the Company's operations and the elimination of certain administrative personnel as well as the elimination of certain other general and administrative costs. See "Pro Forma Financial and Other Data." There can be no assurance that the anticipated cash flows will be indicative of the actual cash flows realized by the Company. In March of 1994, the Company completed the acquisition of a retail service center in Colorado with annual propane volume of approximately 700,000 gallons and in April of 1994 signed a contract for the acquisition of a retail service center in Missouri with annual propane volume of approximately 690,000 gallons. The Colorado acquisition was completed at a cost of approximately $473,000, of which $273,000 was paid in cash, with the remaining amount financed through the issuance of two five-year notes to the sellers, one for $100,000 bearing interest at 7% and the other for $100,000 bearing no interest. The Missouri center will be purchased for a total cost of $325,000, of which $210,000 will be paid in cash at closing, with the remaining amount financed through the issuance of two ten-year notes to the seller, one for $90,000 bearing interest at 7% and the other for $25,000 bearing no interest. The Company does not currently have any material commitments for any acquisitions other than the agreements for the pending acquisitions discussed above. The Company will continue to seek additional opportunities to acquire retail service centers and intends to finance such acquisitions, to the extent possible, through seller financing. The Company will also rely on internally generated cash flow and bank financing, including borrowing under the New Credit Facility, to meet any remaining financing requirements. See "Risk Factors -- Potential Acquisitions and Development of New Retail Service Centers." Any acquisitions will be subject to the restrictions on investments and debt incurrence contained in the New Credit Facility and the Indenture as well as the restrictions contained in the Non-Competition Agreement. See "Description of the Senior Secured Notes"; "Description of Other Indebtedness"; "Certain Relationships and Related Transactions -- The Transaction." GROWTH THROUGH DEVELOPMENT OF NEW RETAIL SERVICE CENTERS IN NEW MARKETS. The Company believes opportunities exist to increase the size and profitability of its operations by starting new retail service centers in new markets. The Company generally looks for opportunities in areas experiencing economic growth. Indicators of this growth include the relocation of businesses to an area or an increase in the population in the area. The Company started three new retail service centers in fiscal year 1992 that will remain with the Company after the Transaction (at an aggregate cost of $502,000) and four such centers in fiscal year 1993 (at an aggregate cost of $453,000), and has started three new retail service centers to date during fiscal year 1994 (at an aggregate cost of $75,000 to date). The Company continues to look for opportunities to purchase land and assets to start new retail service centers. It is currently in the process of opening new centers in Toledo, Ohio and Wilkesboro, North Carolina. Although the Company expects to open additional centers, it has not yet begun opening any additional centers and there can be no assurance additional centers will be open. Because minimal capital expenditures (approximately $150,000 per center) are required to cover first-year start up costs of a new retail service center, the Company intends to rely primarily on internally generated cash flow to fund this activity, with any remaining financing needs being met by bank financing. In addition, the Company currently owns excess propane storage tanks that it will be able to use to supply storage tanks needed in opening new service centers and to reduce the cost of starting a new retail service center. EXPANSION OF THE COMPANY'S EXISTING RESIDENTIAL RETAIL CUSTOMER BASE. Empire Gas will also look for opportunities to expand its existing residential customer retail base other than through acquisitions or the development of new retail service centers. The Company believes there are several factors that will enable it 39 to expand its residential customer base including (i) the Company's ability to supply storage tanks to its customers, (ii) the Company's reputation for quality service, and (iii) the accessibility and visibility of the Company's retail service centers, many of which are located on or near highways. The Company's ability to expand its residential customer base other than through acquisitions or the development of new retail service centers in new markets may be limited by the relative stability of this market. In addition to the foregoing, Empire Gas will look for growth opportunities including opportunities to expand its commercial customer base and opportunities presented from developments in the industry, including the potential for the growth in the use of propane in the alternative motor fuel market or in cogeneration plants. Any acquisitions or purchases of assets will be subject to the restrictions on investments and debt incurrence contained in the New Credit Facility and the Indenture. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources - -- Financing Activities"; "Description of Senior Secured Notes"; "Description of Other Indebtedness -- New Credit Facility." Any acquisitions or start-ups of retail service centers will also be subject to the restrictions in the Non-Competition Agreement. See "The Transaction" and "Certain Relationships and Related Transactions." GEOGRAPHIC RATIONALIZATION AND REDUCTION OF OPERATING EXPENSES. The Company believes that it can increase the efficiency with which it serves its customers by consolidating a number of retail service centers, thereby reducing its operating expenses. The Company has selected 16 service centers (two in Missouri, six in Oklahoma and the remaining eight in Colorado, California, Louisiana and Oregon) that can be consolidated into 8 service centers. The Company consolidated several of these service centers in May of this year and the remainder will be consolidated in June and July. The Company will continue to evaluate opportunities to consolidate additional retail outlets. The consolidation of companies will result in reduced operating expense due to reduced general and administrative expenses and operating costs without a corresponding reduction in revenue. There can be no assurance as to the extent to which the implementation of the Company's business strategy will contribute to the Company's operating efficiencies, results of operations, or cash flow. See "Risk Factors -- Potential Acquisitions and Development of New Retail Service Centers." PROPANE OPERATIONS Propane is used for residential, commercial, and agricultural purposes. Residential and commercial uses include heating, cooking, water heating, refrigeration, clothes drying, and incineration. Commercial uses also include metal cutting, drying, container pressurization, and charring, as well as use as a fuel for internal combustion engines. Agricultural uses include brooder heating, stock tank heating, crop drying, and weed control, as well as use as a motor fuel for farm equipment and vehicles. Propane is also used for a number of other purposes. Sales of propane to residential and commercial customers, which account for the vast majority of the Company's revenue, have provided a relatively stable source of revenue for the Company. Sales to residential customers accounted for 65.5% of the Company's propane sales revenue and 74.3% of its gross margin (on a pro forma basis after giving effect to the Transaction) in fiscal year 1993. Historically, this market has provided higher margins than other retail propane sales. Based on fiscal year 1993 propane sales revenue, the remaining customer base consisted of 22.1% commercial and 12.4% agricultural and other customers. While commercial propane sales are generally less profitable than residential retail sales, the Company has traditionally relied on this customer base to provide a steady, noncyclical source of revenues. No single customer accounts for more than 2.1% of sales. On a pro forma basis, the Company's operations will have substantial geographic diversification reducing the potential impact of fluctuations of weather in a particular region. 40 The following table sets forth, for the five years ending June 30, 1993, selected aggregate operating data for the retail service centers of the Company that will be retained after the Transaction and for the retail service centers the Company is acquiring in the Acquisition.
YEAR ENDED JUNE 30, ----------------------------------------------------- 1989 1990 1991 1992 1993 --------- --------- --------- --------- --------- (IN THOUSANDS EXCEPT PERCENTAGES, DEGREE DAYS AND PER GALLON DATA) Operating revenue.......................................... $ 65,469 $ 75,342 $ 75,250 $ 69,216 $ 76,931 Gross profit (1)........................................... $ 36,838 $ 39,455 $ 37,799 $ 38,031 $ 41,243 Retail gallons sold........................................ 87,852 82,180 74,278 76,167 84,840 Weighted average gross profit per gallon................... $ .360 $ .418 $ .441 $ .426 $ .429 Actual weighted average heating degree days (2)............ 8,191 7,872 7,303 7,321 8,265 Deviation from normal weighted average heating degree days (2)....................................................... 150 (193) (749) (715) 100 Percent deviation from normal average heating degree days...................................................... 1.9% (2.4%) (9.3%) (8.9%) 1.2% - --------- (1) Represents operating revenue less the cost of product sold. (2) Actual weighted average heating degree days represents the average heating degree days in the Company's market areas for November through March of each year weighted to reflect the retail gallons sold in each area. Heating degree days represent the summation of the amount by which a 65 degree Fahrenheit base amount exceeds the mean daily temperature (average of daily maximum and minimum temperatures) at various locations in the United States and are calculated by the National Weather Service. Normal weighted average heating degree days are determined based on a 50-year moving average. The increase in actual weighted average heating degree days for fiscal year 1993 was due primarily to a change in the markets in which the Company did business.
SOURCES OF SUPPLY. Propane is derived from the refining of crude oil or is extracted in the processing of natural gas. The Company obtains its supply of propane primarily from oil refineries and natural gas plants located in the South, West and Midwest. Most of the Company's propane inventory is purchased under supply contracts with major oil companies which typically have a one-year term, at the suppliers' daily posted prices or a negotiated discount. During fiscal 1993, contract suppliers sold nearly 75% of the propane purchased by the Company (including the centers that are being transferred in the Transaction), and the two largest suppliers sold 21.2% and 18.5%, respectively, of the total volume purchased by Empire Gas. The Company has established relationships with a number of suppliers over the past few years and believes it would have ample sources of supply under comparable terms to draw upon to meet its propane requirements if it were to discontinue purchasing propane from its two largest suppliers. The Company takes advantage of the spot market as appropriate. The Company has not experienced a shortage that has prevented it from satisfying its customer's needs and does not foresee any significant shortage in the supply of propane. DISTRIBUTION. The Company purchases propane at refineries, gas processing plants, underground storage facilities and pipeline terminals and transports the propane by railroad tank cars and tank trailer trucks to the Company's retail service centers, each of which has bulk storage capacity ranging from 16,000 to 180,000 gallons. After the Transaction, the Company will have retail service centers with an aggregate storage capacity of approximately 8.7 million gallons of propane, and each service center will have equipment for transferring the gas into and from the bulk storage tanks. The Company operates 15 over-the-road tractors and 37 transport trailers to deliver propane to its retail service centers and also relies on common carriers to deliver propane to its retail service centers. The Company also maintains an underground storage capacity of approximately 120 million gallons. This facility is not currently being used and cannot be used until a new disposal well is constructed, and the system is tested and brought up to industry standards. The Company can meet its storage needs from existing capacity and third-party sources, but is considering 41 making the necessary modifications to provide storage that it may use for its own purposes or lease to third parties. The Company has not yet determined the amount that it would need to spend to make such modifications, or whether such modifications will in fact be made. Deliveries to customers are made by means of 325 bulk delivery tank trucks owned by the Company. Propane is stored by the customers on their premises in stationary steel tanks generally ranging in capacity from 25 to 1,000 gallons, with large users having tanks with a capacity of up to 30,000 gallons. Approximately 96% of the propane storage tanks used by the Company's residential and commercial customers are owned by the Company and leased, rented, or loaned to customers. PROPANE GAS FROM SOURCE TO CUSTOMER [GRAPHIC] OPERATIONS. The Company has organized its operations in a manner that the Company believes enables it to provide superior service to its customers and to achieve maximum operating efficiencies. The Company's retail propane distribution business is organized into eight regions: West Coast (North); West Coast (South); Colorado; Midwest (North); Midwest (South); Midwest (Central); North and South Carolina; and Mideast. Each region is supervised by a regional manager. The regions are grouped into three divisions and the regional managers report to their respective divisional vice president. Personnel located at the retail service centers in the various regions are primarily responsible for customer service and sales. A number of functions are centralized at the Company's corporate headquarters in order to achieve certain operating efficiencies as well as to enable the personnel located in the retail service centers to focus on customer service and sales. The Company makes centralized purchases of propane through its corporate headquarters for resale to the retail service centers enabling the Company to achieve certain advantages, including price advantages, because of its status as a large volume buyer. The functions of cash management, accounting, taxes, payroll, permits, licensing, asset control, employee benefits, human resources, and strategic planning are also performed on a centralized basis. The corporate headquarters and the retail service centers are linked via a computer system. Each of the Company's primary retail service centers is equipped with a computer that is connected to a central data processing department in the Company's corporate headquarters. Following the Transaction, this central data processing department will be owned and operated by Service Corp, which will be an affiliate of Energy. Service Corp. will provide data processing and management information services to the Company pursuant to the Services Agreement. See "Certain Relationships and Related Transactions." This computer network system provides retail company personnel with accurate and timely information on pricing, inventory, and customer accounts. In addition, this system enables management to monitor pricing, sales, delivery and the general operations of its numerous retail service centers and plan accordingly to improve the operations of the Company as a whole. 42 FACTORS INFLUENCING DEMAND. Because a substantial amount of propane is sold for heating purposes, the severity of winter weather and resulting residential and commercial heating usage have an important impact on the Company's earnings. Approximately 62% of the Company's retail propane sales (on a pro forma basis) usually occur during the five months of November through March. Sales and profits are subject to variation from month to month and from year to year, depending on temperature fluctuations. See "Risk Factors -- Weather." COMPETITION. The Company encounters competition from a number of other propane distributors in each geographic region in which it operates. The Company competes with these distributors primarily on the basis of service, stability of supply, availability of consumer storage equipment, and price. The propane distribution industry is composed of two types of participants: larger multi-state marketers, including the Company, and smaller intrastate marketers. Most of the Company's retail service centers face competition from a number of other marketers. Empire Gas also competes with suppliers of other energy sources. The Company competes with suppliers of electricity for sales to residential and commercial customers. The Company currently enjoys, and historically has enjoyed, a competitive advantage because of the higher cost of electricity. Fuel oil does not present a significant competitive threat in Empire Gas' primary service areas due to the following factors: (i) propane is a residue-free, cleaner energy source, (ii) environmental concerns make fuel oil relatively unattractive, and (iii) fuel oil appliances are not as efficient as propane appliances. Empire Gas generally does not attempt to sell propane in areas served by natural gas distribution systems, except sales for specialized industrial applications, because the price per equivalent energy unit of propane is, and has historically been, higher than that of natural gas. To use natural gas, however, a retail customer must be connected to a distribution system provided by a local utility. Because of the costs involved in building or connecting to a natural gas distribution system, natural gas does not create significant competition for the Company in areas that are not currently served by natural gas distribution systems. In each of the past five years, the Company has lost fewer than 0.5% of its customers to natural gas distributors. The Company's ability to compete through acquisitions will be limited in certain geographic areas as a result of the Non-Competition Agreement. Subject to an exception for multi-state acquisitions, the Non-Competition Agreement restricts the Company from making acquisitions in seven states (Alabama, Florida, Georgia, Indiana, Kentucky and Tennessee) and certain territories in five other states (southeastern Missouri, northern Arkansas, western Virginia, western West Virginia and an area within a 50-mile radius of an existing Energy operation in Illinois) for a period of three years from the date the Stock Purchase Agreement is consummated. The Non-Competition Agreement also requires the Company not to disclose secret information it may have regarding Energy, not to solicit Energy customers or employees, and to grant Energy an option to purchase from the Company (on terms substantially equivalent to the terms on which the Company acquired the business) any business the Company acquires in violation of the Non-Competition Agreement. The same restrictions apply to Energy under the Non-Competition Agreement. See "The Transaction" and "Certain Relationships and Related Transactions -- The Transaction." RISKS OF BUSINESS. The Company's propane operations are subject to all the operating hazards and risks normally incident to handling, storing, and transporting combustible liquids, such as the risk of personal injury and property damages caused by accident or fire. The Company's current automobile liability policy provides coverage for losses of up to $101.0 million with a $500,000 deductible per occurrence. The Company's general liability policy provides coverage for losses of up to $101.0 million per occurrence with a $500,000 deductible per occurrence subject to an aggregate deductible of $1.0 million for any policy period. Current workers compensation coverage also has a $500,000 deductible per incident. The deductibles mean that the Company is effectively self-insured for liability up to these deductibles. REGULATION The Company's operations are subject to various federal, state, and local laws governing the transportation, storage and distribution of propane, occupational health and safety, and other matters. All states in which the Company operates have adopted fire safety codes that regulate the storage and distribution of 43 propane. In some states these laws are administered by state agencies, and in others they are administered on a municipal level. Certain municipalities prohibit the below ground installation of propane furnaces and appliances, and certain states are considering the adoption of similar regulations. The Company cannot predict the extent to which any such regulations might affect the Company, but does not believe that any such effect would be material. It is not anticipated that the Company will be required to expend material amounts by reason of environmental and safety laws and regulations, but inasmuch as such laws and regulations are constantly being changed, the Company is unable to predict the ultimate cost to the Company of complying with environmental and safety laws and regulations. Empire Gas currently meets and exceeds Federal regulations requiring that all persons employed in the handling of propane gas be trained in proper handling and operating procedures. All employees have participated, or will participate within 90 days of their employment date, in the National Propane Gas Association's ("NPGA") Certified Employee Training Program. The Company has established ongoing training programs in all phases of product knowledge and safety. EMPLOYEES As of June 1, 1994, the Company had approximately 1,075 employees, none of whom was represented by unions. Upon consummation of the Transaction, the Company will have approximately 600 employees. The Company has never experienced any significant work stoppage or other significant labor problems and believes it has good relations with its employees. LEGAL PROCEEDINGS The Company and its subsidiaries are defendants in various routine litigation incident to its business, none of which is expected to have a material adverse effect on the Company's financial position or results of operations. MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS Upon consummation of the Transaction, the directors and executive officers of the Company will be as follows:
NAME AGE POSITION - ------------------------ --- --------------------------------------------- Paul S. Lindsey, Jr. 49 Chairman of the Board, Chief Executive Officer, and President Douglas A. Brown 33 Director Kristin L. Lindsey 46 Director/Vice President Bruce M. Withers, Jr. 67 Director Jim J. Shoemake 56 Director Mark W. Buettner 51 Divisional Vice President Kenneth J. DePrinzio 46 Divisional Vice President Robert C. Heagerty 46 Divisional Vice President James E. Acreman 56 Vice President/Treasurer Valeria Schall 39 Vice President/Corporate Secretary Willis D. Green 56 Controller
The directors will serve for a term ending on the date of the Company's next annual meeting in October 1994, or until their successors are elected or qualified. Officers of the Company are elected by the Board of Directors of the Company and will serve at the discretion of the Board. As required by the Indenture, immediately following this Offering, an audit committee will be formed consisting of two independent directors. See "Description of the Senior Secured Notes -- Covenants." BOARD OF DIRECTORS Upon consummation of the Offering, the Company's directors will be as follows: PAUL S. LINDSEY, JR. Mr. Lindsey will serve as Chairman of the Board, Chief Executive Officer, and President of the Company. Mr. Lindsey currently serves as Vice Chairman of the Board and Chief Operating 44 Officer of the Company, positions he has held since February 1987 and March 1988, respectively. Mr. Lindsey joined the Company in 1967 when the company by which he was employed, a subsidiary of Gulf Oil Company, was acquired by the Company. He has a total of 29 years of experience in the oil and gas industry, 26 of which are with the Company. After serving in various administrative positions with the Company, including the position of Vice President of Finance, Mr. Lindsey assumed responsibility for operation of the Company's retail service centers and, essentially, all other operational functions of the Company. Mr. Lindsey has been a Director of the NPGA, the industry's leading association, since February 1991, and has served on the Governmental Affairs Committee of the NGPA since May 1987. He was recently elected to NPGA's executive committee. DOUGLAS A. BROWN. Mr. Brown will serve as a director of the Company. Since 1989, Mr. Brown has been a member of Holding Capital Group, Inc. an equity investment group specializing in the acquisition of and investment in privately held, middle market businesses. Holding Capital Group has performed certain investment services for Empire Gas. See "Certain Relationships and Related Transactions." KRISTIN L. LINDSEY. Mrs. Lindsey will serve as a director and Vice President of the Company. Mrs. Lindsey is the wife of Paul S. Lindsey, Jr., (see above). For the past five years, Mrs. Lindsey has been pursuing charitable and other personal interests. Ms. Lindsey has 11 years of experience in the LP gas industry, all of these with the Company. Her experience is primarily in the area of LP gas supply and distribution. In her capacity as Vice President, Mrs. Lindsey will be involved in the Company's propane supply and distribution activities. BRUCE M. WITHERS, JR. Mr. Withers will serve as a director of the Company. Mr. Withers is Chairman and Chief Executive Officer of Trident NGL Holding, Inc., a major fully-integrated natural gas liquids company, a position he has held since August, 1991. For the previous 18 years, Mr. Withers was President of the Transmission & Processing Division of Mitchell Energy Corporation and, prior to that, Mr. Withers was associated with Tenneco Oil & Gas. JIM J. SHOEMAKE. Mr. Shoemake will serve as a Director of the Company. Mr. Shoemake is lead litigation partner of Guilfoil, Petzall & Shoemake, located in St. Louis, Missouri, where he has been since 1976. Mr. Shoemake was Assistant U.S. Attorney of the Eastern District of Missouri from 1967 to 1970 and was with the U.S. Dept of Justice for one year prior to that time. EXECUTIVE OFFICERS Upon consummation of the Transaction, the individuals listed below will serve as the Company's executive officers. These individuals have an average of 20 years of experience in the LP gas industry and have been with the Company an average of 12 years. PAUL S. LINDSEY, JR. Chairman of the Board, Chief Executive Officer and President. See description under "Board of Directors." MARK W. BUETTNER. Mr. Buettner will serve the Company as a Divisional Vice President, a position he has held with the Company since mid-1993. Mr. Buettner has also held the positions of Regional Vice President and Regional Manager during his five years with the Company. Mr. Buettner began his career in the LP gas industry in a family-owned business and has a total of 39 years experience in the LP gas industry. As Divisional Vice President of the Company, Mr. Buettner is responsible for the Company's retail operations on the West Coast and in Arizona, Colorado, and Idaho. KENNETH J. DEPRINZIO. Mr. DePrinzio will serve the Company as a Divisional Vice President, a position he has held with the Company since mid-1993. Mr. DePrinzio joined the Company in May 1992 as a Regional Manager. From 1990 to 1991, Mr. DePrinzio was a Vice President of Star Gas Corporation. For the prior 17 years, Mr. DePrinzio worked with Petrolane, Inc., serving as an Area Vice President during part of his tenure. From 1991 to 1992, he owned and operated a restaurant. As Divisional Vice President of the Company, Mr. DePrinzio is responsible for the Company's retail operations in Michigan, Ohio, South Carolina, and North Carolina. ROBERT C. HEAGERTY. Mr. Heagerty will serve the Company as a Divisional Vice President, a position he has held with the Company since mid-1993. Mr. Heagerty has also held the positions of Regional Manager 45 and Regional Vice President during his seven years with the Company. He has 15 years of experience in the LP gas industry and joined the Company when it acquired D&H Propane. At the time of the acquisition, Mr. Heagerty was President of D&H Propane. As Divisional Vice President of the Company, Mr. Heagerty is responsible for the Company's retail operations in Oklahoma, Kansas, Missouri, Arkansas, Texas, Louisiana, Iowa, Minnesota, Wisconsin, and Illinois. JAMES E. ACREMAN. Mr. Acreman will serve the Company as Vice President and Treasurer. Mr. Acreman has held the position of Senior Vice President of the Company since 1989. Mr. Acreman has 16 years of experience in the LP gas industry, all of those with the the Company. During that time he has held the positions of Regional Vice President, Regional Manager, and Retail Manager. As Senior Vice President of the Company, Mr. Acreman has been responsible for various areas including expense control and human resources. VALERIA SCHALL. Ms. Schall will serve the Company as Vice President, Corporate Secretary, and Assistant to the Chairman of the Board of Directors. She has held the position of Vice President of Empire Gas since December 1992, and those of Corporate Secretary and Assistant to the Vice Chairman of the Board of Directors since September 1985, and February 1987, respectively. Ms. Schall has 13 years of experience in the LP gas industry, all of those with the Company. During that time she has had various administrative and accounting responsibilities. Ms. Schall is responsible for federal compliance filings, acquisitions, divestitures, real estate closings, control of certain corporate assets, internal audit, risk management, and communications with employees through various corporate handbooks and manuals, and acting as a liaison with legal counsel. KRISTIN L. LINDSEY. Director and Vice President. See description under "Board of Directors." WILLIS D. GREEN. Mr. Green will serve as Controller of the Company, a position he has held with the Company since July 1989. Mr. Green has 22 years of experience in the LP gas industry. He joined the Company in 1979 and during his tenure has had responsibility for various administrative and accounting functions. Prior thereto, he was an internal auditor and systems analyst with Phillips Petroleum Co. for nine years. Mr. Green is a Certified Public Accountant and is responsible for the corporate financial control of the Company. The individuals currently serving as directors and executive officers of Empire Gas are as follows:
NAME AGE POSITION - --------------------- --- -------------------------------------------------- Chairman of the Board and Chief Executive Robert W. Plaster* 63 Officer (1) Vice Chairman of the Board and Chief Operating Paul S. Lindsey, Jr. 49 Officer Stephen R. Plaster* 35 Director and President (2) Robert L. Wooldridge* 63 Executive Vice President -- Marketing (3) James E. Acreman 56 Senior Vice President Valeria Schall 39 Vice President/Corporate Secretary Willis D. Green 56 Vice President/Controller - --------- * These individuals will terminate their employment with Empire Gas upon consummation of the Transaction. (1) Mr. Plaster has served as the Chairman of the Board and Chief Executive Officer of the Company since 1963. Mr. Plaster established the Company in 1963 and has been involved in the propane industry since the early 1960s. (2) Mr. Stephen Plaster has served as a director and President of the Company since 1988. Prior thereto, Mr. Plaster served the Company in various positions. Mr. Plaster is the son of Mr. Robert W. Plaster, the Chairman of the Board, Chief Executive Officer and President of the Company.
46 (3) Mr. Wooldridge has served the Company as Executive Vice President -- Marketing since April 1992. Prior thereto, he held the position of Senior Vice President -- Marketing at the Company.
EXECUTIVE COMPENSATION The following table provides compensation information for each of the years ended June 30, 1993, 1992, and 1991 for Empire Gas' Chief Executive Officer and the four other most highly compensated executive officers of Empire Gas for services rendered to the Company during each of those years. SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION ------------------------------------- ALL OTHER OTHER FISCAL ANNUAL COMPENSATION NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (1) (1) (2) - --------------------------------------------- ------ ---------- ------- ---------------- ------------ Robert W. Plaster(3) 1993 $1,000,000 -- $ 100,000(4) $ 1,648 Chief Executive Officer 1992 1,000,000 -- -- -- and Chairman of the Board 1991 947,916 -- -- -- Paul S. Lindsey, Jr. 1993 230,000 $ 5,000 -- 1,648 Chief Operating Officer and 1992 230,000 -- -- -- Vice Chairman of the Board 1991 230,000 -- -- -- Stephen R. Plaster(3) 1993 100,000 50,000 -- 927 President and Director 1992 75,000 50,000 -- -- 1991 75,000 50,000 -- -- Robert L. Wooldridge(3) 1993 90,000 69,222 -- 970 Executive Vice President -- 1992 85,000 45,663 -- -- Marketing 1991 85,000 45,000 -- -- James E. Acreman 1993 70,000 34,794 -- 464 Senior Vice President 1992 40,000 22,664 -- -- 1991 40,000 27,866 -- -- - --------- (1) In accordance with the transitional provisions applicable to the revised rules on executive officer and director compensation disclosures adopted by the Securities and Exchange Commission, amounts of Other Annual Compensation and All Other Compensation for Empire Gas' 1992 and 1991 fiscal years are excluded. (2) This amount includes the allocation of a portion of the forfeitures under the Company's profit sharing plan (the "Profit Sharing Plan") to each of the named officers in the following amounts: Mr. R. Plaster -- $1,296, Mr. Lindsey -- $1,296, Mr. S. Plaster -- $198, Mr. Wooldridge -- $207, and Mr. Acreman -- $99. This amount also includes the allocation of a portion of the forfeitures under the Company's stock bonus plan (the "Stock Bonus Plan") to each of the named officers in the following amounts: Mr. R. Plaster -- $352, Mr. Lindsey -- $352, Mr. S. Plaster -- $729, Mr. Wooldridge -- $763, and Mr. Acreman -- $365. The Company made no contributions to either plan in fiscal year 1993. In September 1992, the Company terminated both plans and filed with the Internal Revenue Service ("IRS") for determination that the plans were qualified at termination. The IRS issued favorable determination letters for both plans in December 1992. The Company liquidated the assets of both plans and paid out the plan accounts to participants on March 31, 1993. (3) Upon consummation of the Transaction, these individuals will no longer serve as executive officers of the Company. (4) Includes $75,000 to meet the requirements for a new car each year for Mr. Plaster and $25,000 for services provided by the Company, free of charge, to Empire Ranch, Inc., a corporation wholly owned by Mr. Plaster and members of his family. These perquisites were provided to Mr. Plaster in accordance
47 with the terms of his employment agreement with the Company. See "-- Employment Agreements." This amount does not include amounts paid to a corporation owned by Mr. Plaster to lease the jet aircraft used by Mr. Plaster. Nor does it include amounts paid to Empire Ranch, Inc. pursuant to an agreement between the Company and Empire Ranch, Inc. See "Certain Relationships and Related Transactions -- Past Transactions and Relationships."
EMPLOYMENT AGREEMENTS Upon consummation of the Transaction, Mr. Lindsey will enter into an employment agreement with the Company. The agreement will have a five-year term and will provide for the payment of an annual salary of $350,000 and reimbursement for reasonable travel and business expenses. The agreement will require Mr. Lindsey to devote substantially all of his time to the Company's business. The Company has an employment agreement with Mr. Robert W. Plaster that will be terminated, at no cost to the Company, in connection with the Transaction. The agreement provides for payment of an annual salary of at least $1.0 million, reimbursement of all expenses incurred pursuant to his employment and certain fringe benefits, including but not limited to, a new car each year, the provision of certain services free of charge to Empire Ranch, Inc., a corporation owned by Mr. Plaster and members of his family, and the use of the jet aircraft leased by the Company. See "Certain Relationships and Related Transactions." Under the agreement, if Mr. Plaster dies or becomes permanently incapacitated during its term, the agreement provides that the Company will make a one-time payment, in an amount equal to Mr. Plaster's annual salary, to the Robert W. Plaster Trust established December 31, 1988. INCENTIVE STOCK OPTION PLAN Pursuant to the Company's Incentive Stock Option Plan (the "Stock Option Plan"), the Company grants options to its employees for the purchase of its Common Stock. Options granted pursuant to the Stock Option Plan are exercisable at the end of the first month following the date of grant at 6.7% of the total number of shares subject to options and for each month thereafter, at the rate of 1.7% of the total number of shares subject to options. The options expire ten years from their grant. Stock issued under the Plan is subject to restrictions on transfer including a right of first refusal exercisable by the Company in the event an employee terminates his employment with the Company or wishes to transfer his shares. During fiscal year 1993 no options were granted pursuant to this Plan. Prior to the consummation of the Offering, all of the 129,250 outstanding options, all of which are exercisable, must be exercised. See "Certain Relationships and Related Transactions." The following table sets forth certain information concerning options exercised during fiscal year 1993 and unexercised options held as of that date by each of the individuals named in the Summary Compensation Table: AGGREGATED OPTION EXERCISES IN THE FISCAL YEAR ENDED JUNE 30, 1993 AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT ACQUIRED JUNE 30, 1993 JUNE 30, 1993(1) ON VALUE ----------------------------- ----------------------------- NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - --------------------------- --------- ----------- ---------- ----------------- ---------- ----------------- Robert W. Plaster.......... -- -- -- -- -- -- Paul S. Lindsey, Jr........ -- -- -- -- -- -- Stephen R. Plaster......... 19,500 $ 112,313 -- -- -- -- Robert L. Wooldridge....... 72,467 479,898 40,000 -- $ 220,000 James E. Acreman........... 13,250 87,755 8,000 -- 44,000 -- - --------- (1) Calculated based on the estimated fair market value of the Company's common stock at the exercise date or year-end, as the case may be, minus the exercise price. The Company has estimated the fair market value of the stock as of these dates to be $7.00, the price per share to be received by certain officers, directors, and employees in connection with the Transaction.
48 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Company does not have a compensation committee. Mr. Lindsey, the Vice Chairman of the Board and Chief Operating Officer of the Company, makes the initial decision concerning executive compensation for the executive officers of the Company, other than decisions concerning his own and his wife's compensation, which are then approved by the Board of Directors of the Company. Upon consummation of the Transaction, the Company will not have a compensation committee, and all decisions concerning compensation, other than decisions concerning his own and his wife's compensation, will be made by Mr. Lindsey, subject to approval by the Company's Board of Directors. The independent directors will determine the compensation of Mr. Lindsey and his wife. DIRECTOR COMPENSATION The directors of Empire Gas do not receive any compensation for their services. Directors of a subsidiary of Empire Gas, other than Mr. Lindsey and Mr. Stephen Plaster, receive an annual fee of $25,000, payable quarterly, for their services. Following the Transaction, all directors of Empire Gas will receive an annual fee of $25,000, payable quarterly. 49 PRINCIPAL SHAREHOLDERS EMPIRE GAS The table below sets forth the following information with respect to the beneficial ownership of Empire Gas as of April 1, 1994, and on a pro forma basis, upon consummation of the Transaction and this Offering and the application of net proceeds therefrom, by persons owning more than five percent of any class, by all directors of the Company, by the individuals named in the Summary Compensation Table, and by all directors and executive officers of the Company as a group.
PRO FORMA FOR THE AS OF APRIL 1, 1994 TRANSACTION ---------------------------- -------------------------- NUMBER OF SHARES NUMBER OF SHARES NAME OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED PERCENT BENEFICIALLY OWNED PERCENT - ---------------------------------------- ------------------ -------- -------------------------- Robert W. Plaster(2).................... 10,974,103 79.3% -- -- Paul S. Lindsey, Jr.(3)................. 1,507,610 10.9 1,507,610 95.5% Kristin L. Lindsey(3)................... 753,805 5.4 753,805 47.7 Stephen R. Plaster(4)................... 619,888 4.5 -- -- Robert L. Wooldridge(5)................. 260,500 1.9 -- -- James E. Acreman(6)..................... 21,550 .2 17,701 1.1 Douglas A. Brown........................ -- -- -- -- Bruce M. Withers, Jr.................... -- -- -- -- Jim J. Shoemake......................... -- -- -- -- All directors and executive officers as a group (3 persons, 8 persons on a pro forma basis)(7).............................. 13,411,554 96.6 1,554,170 98.4 - --------- (1) The address of each of the beneficial owners is c/o Empire Gas Corporation, P.O. Box 303, 1700 South Jefferson Street, Lebanon, Missouri 65536. (2) Prior to the Transaction, Mr. Plaster's shares consist of 10,515,103 shares owned by the Robert W. Plaster Trust established December 13, 1988 and 459,000 shares owned by four trusts for the benefit of three of Mr. Plaster's daughters, the Tammy Jane Plaster Trust established July 30, 1984, the Dolly Francine Plaster Trust established July 30, 1984, the Cheryl Jean Plaster Schaefer Trust dated October 30, 1988 and the Cheryl Jean Plaster Schaefer Trust dated July 30, 1984. (3) Mr. Lindsey's shares consist of 753,805 shares owned by the Paul S. Lindsey, Jr. Trust established January 24, 1992 and 753,805 shares owned by the Kristin L. Lindsey Trust established January 24, 1992. Mr. Lindsey has the power to vote and to dispose of the shares held in the Kristin L. Lindsey Trust. Mrs. Lindsey's shares consist of the shares owned by the Kristin L. Lindsey Trust. Mrs. Lindsey disclaims beneficial ownership of the shares held by her husband in the Paul S. Lindsey, Jr. Trust. (4) Mr. Stephen Plaster's shares are owned by the Stephen Robert Plaster Trust established October 30, 1988 and the Stephen Robert Plaster Trust established July 30, 1984. (5) Includes 40,000 shares Mr. Wooldridge may acquire upon exercise of options that are currently exercisable. Mr. Wooldridge will be required to exercise these options prior to the Effective Date. See "Management -- Incentive Stock Option Plan." (6) Includes 8,000 shares Mr. Acreman may acquire upon exercise of options that are currently exercisable. Mr. Acreman will be required to exercise these options prior to the Effective Date. See "Management -- Incentive Stock Option Plan." (7) The amount shown as of April 1, 1994, includes the shares beneficially owned by Messrs. R. Plaster, Lindsey, S. Plaster, Wooldridge, and Acreman as set forth above, and 236,903 shares owned by other executive officers, including 15,000 shares those officers may acquire upon exercise of options that are currently exercisable. The options must be exercised prior to the Effective Date. See "Management --
50 Incentive Stock Option Plan." The amounts shown immediately after the Transaction include the shares beneficially owned by Messrs. Lindsey and Acreman, and Mrs. Lindsey as set forth above, and 28,859 shares owned by other executive officers.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS THE TRANSACTION The following will occur in connection with the Transaction: Pursuant to the terms of the Stock Redemption Agreement, the Company will repurchase the shares of Common Stock held by Mr. Robert W. Plaster, and trusts for the benefit of Mr. Plaster, Mr. Stephen Plaster, and certain of their relatives by exchanging one share of Energy Common Stock for each share of Common Stock. The Stock Redemption Agreement also obligates the Company to repurchase the shares of Common Stock held by Mr. Robert L. Wooldridge, an executive officer of the Company, and Mr. S. A. Spencer, a director of a subsidiary of the Company. Mr. Wooldridge and Mr. Spencer will receive $7.00 per share for a portion of their shares of Common Stock and one share of Energy Common Stock for their remaining shares of Common Stock. The aggregate amount of shares of Common Stock held by these individuals and the consideration to be received for the shares is as set forth below:
NUMBER OF SHARES NUMBER OF SHARES OF ENERGY COMMON NAME OF COMMON STOCK STOCK CASH - ---------------------------------- ---------------- ---------------- -------- Mr. Robert W. Plaster............. 10,974,103(1) 10,974,103 -- Mr. Stephen R. Plaster............ 619,888(2) 619,888 -- Mr. Wooldridge.................... 260,500(3) 163,686 $677,698 Mr. S.A. Spencer.................. 125,000 100,000 175,000 - --------- (1) Includes 459,000 shares held in four trusts for Mr. Plaster's daughters. (2) These shares are held in two trusts for Mr. S. Plaster. (3) Includes 40,000 options Mr. Wooldridge is required to exercise prior to the Effective Date.
Following the Transaction, Mr. Plaster will be the controlling shareholder of Energy, which will own approximately 133 retail services centers located in ten states. See "The Transaction." Upon consummation of the Transaction, Mr. Plaster will resign from his positions as Chairman of the Board and as Chief Executive Officer of the Company and from his positions with the Company's subsidiaries. Messrs. S. Plaster, Wooldridge, and Spencer will also resign from their positions with the Company and its subsidiaries. Energy and Messrs. Plaster and S. Plaster have entered into the Non-Competition Agreement which restricts them and their affiliates from competing with the Company, Mr. Lindsey and their affiliates in the territories in which the Company is doing business immediately following the Stock Purchase. Similarly, Empire Gas, Mr. Lindsey, and their affiliates are restricted from competing with Energy, Messrs. Plaster and S. Plaster and their affiliates in seven states and certain areas within five states. The Non- Competition Agreement is for a term of three years from the Effective Date. Certain relatives of Mr. Plaster and Mr. Lindsey, and the officers of Energy and the Company must enter into a substantially similar non-competition agreement. See "The Transaction." The Stock Redemption Agreement also provides for: (i) a payment to be made by either the Company or Energy based on the balance of certain liabilities net of certain assets as of the Effective Date; (ii) a payment of approximately $4.1 million to be made by the Company to Energy; (iii) an agreement regarding use of the Empire Gas name and logo; and (iv) the allocation, between the Company and Energy, of the responsibility for litigation relating to matters or events occurring prior to the Effective Date (most of which is related to liability within the Company's deductibles under its insurance policies), and the responsibility for any costs related to any such litigation. The Company and Energy have also entered into a tax indemnity agreement allocating liability for taxes incurred prior to the Transaction. 51 Pursuant to the terms of the Stock Redemption Agreement, the Company will repurchase, at face value, $4.7 million principal amount of the Company's 2007 9% Subordinated Debentures from Robert W. Plaster and will purchase, at face value, $300,000 principal amount of the Company's 2007 9% Subordinated Debentures from certain departing officers and employees of the Company. See "Use of Proceeds." The Company is required to redeem approximately $1.37 million principal amount of the debentures in December of each year through the year 2006. As a result of this transaction and the purchase by the Company of an additional $8.7 million principal amount of the 2007 9% Subordinated Debentures from unaffiliated noteholders, the Company will not be required to purchase additional 2007 9% Subordinated Debentures to meet sinking fund requirements until after the maturity of the Senior Secured Notes. ONGOING TRANSACTIONS AND RELATIONSHIPS The following discussion describes ongoing transactions that will occur in connection with the Transaction, and existing transactions and relationships that are expected to continue following the Transaction. The Company and Empire Service Corp. ("Service Corp."), a wholly owned subsidiary of Energy that will be controlled by Mr. Robert W. Plaster following the Transaction, have entered into the Service Agreement pursuant to which Service Corp. will provide to the Company certain data processing, management information, receptionist and switchboard services. The Company will perform its own accounting and bookkeeping functions. The Company shall pay a monthly fee equal to (i) its proportionate share of the actual costs incurred by Service Corp. in providing these services to the Company and to Energy, less approximately $2,500 for services provided to two other entities controlled by Mr. Plaster, and (ii) the actual cost incurred for certain telephone and postal costs and for the maintenance contract for the computer terminals used by the Company in its operations. At any time after June 30, 1998, the Company may terminate the Service Agreement in the event of a change in its business circumstances, such as an acquisition. In the event the Service Agreement is terminated by the Company prior to its expiration date, the Company will continue to be obligated to pay, for the remainder of the original term, a monthly payment equal to the amount paid by the Company for the last full month for which services were rendered. The Service Agreement is for a term expiring June 30, 2001, subject to earlier termination if the Company's new lease for its headquarters expires or if there is a change in control of the Company. The Company leases its headquarters in Lebanon, Missouri from a corporation controlled by Mr. Robert W. Plaster, under a lease agreement effective June 30, 1991 for an initial term ending June 30, 2001. The Company made annual lease payments of $200,000 in fiscal years 1991, 1992, and 1993. The Company also paid the utilities, taxes and maintenance costs during each of those years. This lease will be terminated and a new lease will become effective upon consummation of the Transaction. The new lease provides the Company the right to use approximately 8,020 square feet of office space in the Lebanon location as well as the use of the parking facilities for a term expiring June 30, 2001. The Company will pay monthly rent of $6,250 and will be responsible for its proportionate share of utilities and taxes and for the payment of certain repairs and maintenance costs. The lease is subject to earlier termination, at the option of the lessor, in the event of a change in control of the Company. At any time after June 30, 1998, the Company may terminate the lease in the event of a change in its business circumstances, such as an acquisition. In the event the Company terminates the lease prior to its expiration date, the Company will continue to be obligated to pay, for the remainder of the original term, the monthly rent payment; provided, however, that the lessor shall use its best efforts to re-let the premises. Pursuant to the Aircraft Facility Agreement, the Company leased a jet aircraft and an airport hangar from a corporation owned by Mr. Robert W. Plaster during the last quarter of fiscal year 1992 and all of fiscal year 1993. Under the terms of this agreement, the Company was responsible for direct lease payments and operating costs, including insurance, of the aircraft and the hangar. The Company paid direct rent of $25,000 in fiscal year 1992 and $100,000 in fiscal year 1993. The Company also paid operating expenses relating to the lease of $385,000 in fiscal year 1992 and $276,000 in fiscal year 1993. This jet had been purchased by Mr. Plaster from the Company on June 30, 1991, when he exercised an option to purchase the jet at its depreciated net book value of $32,399, an amount the Company believes was substantially less than its fair market value at that date. This option had been granted to Mr. Plaster pursuant to an employment 52 agreement, negotiated in 1983 between Mr. Plaster and the then-controlling shareholders of the Company in connection with a leveraged buy-out and merger involving the Company. In connection with the Transaction, the Aircraft Facility Agreement will be terminated; however, pursuant to the Stock Redemption Agreement, the Company may use the hangar, at no cost, for storage and maintenance of the Company's two turbo prop aircraft for a term that coincides with the Company's new lease for its headquarters. Mrs. Kristin L. Lindsey, who beneficially owns approximately 5.4% of the Company's outstanding common stock and who will become a director of the Company upon consummation of the Transaction, is the majority stockholder in a company that supplies paint to the Company. The Company's purchases of paint from this company totalled $117,000 in fiscal year 1992 and $125,000 in fiscal year 1993. During fiscal year 1993, the Company received certain financial advisory services in connection with the negotiation of the existing credit facility from Mr. Douglas A. Brown and Holding Capital Group, Inc. ("HCGI"), who received $125,000 as compensation for these services. Mr. Brown, who will become a director of the Company upon consummation of the Transaction and Mr. S.A. Spencer, a director of a subsidiary of the Company, are affiliated with HCGI. Mr. Brown and HCGI have been engaged to provide certain financial advisory services in connection with the negotiation of the New Credit Facility and the structuring and execution of this Offering, and will receive $500,000 for these services. The Company has entered into an agreement with each of its current shareholders (all of whom are directors or employees of the Company) providing that the Company has a right of first refusal with respect to the sale of any shares by such shareholders. In addition, the Company has the right to purchase from such shareholders all shares they hold at the time of their termination of employment with the Company at the then current fair market value of the shares. The fair market value is determined in the first instance by the Board of Directors and by an independent appraisal (the cost of which is split between the Company and the departing shareholder) if the departing shareholder disputes the board's determination. PAST TRANSACTIONS AND RELATIONSHIPS The following discussion describes transactions that have occurred during the past three fiscal years that are not expected to continue following the Transaction. During fiscal years 1991, 1992, and 1993, pursuant to the terms of the Ranch Agreement, the Company paid $150,000 annually and provided services each year at a cost of approximately $25,000 to a wildlife preserve owned by Empire Ranch, Inc. The Company used the facilities at the preserve for meetings with Company employees and business guests. In connection with the Transaction, the Ranch Agreement is being terminated. Mr. Robert W. Plaster and trusts or entities controlled by Mr. Plaster have provided demand loans to the Company over the past three years. The maximum amount loaned to the Company during fiscal year 1991, 1992, and 1993 was $5,928,000, $5,753,000, and $3,000,000, respectively. These loans were fully repaid by June 30, 1993. The interest rate on these loans was equal to or below the average rates available to the Company through its bank lines of credit in effect during each of those years. The Company incurred total interest expense of $583,000, $315,000, and $200,000 for fiscal years 1991, 1992, and 1993, respectively. The Company provides bookkeeping, data processing, and accounting services to two corporations controlled by Mr. Robert W. Plaster for an annual fee of $84,000. The Company received an annual fee of $84,000 in fiscal year 1991, 1992, and 1993 for providing these services. Following the Transaction, the Company will no longer provide these services to the two corporations. See "-- Ongoing Transactions and Relationships" Mr. Paul W. Zeller, a director of a subsidiary of the Company during fiscal year 1991 and 1992, was an officer of Reliance Insurance Company, the Company's lender on its Old Term Loan. The maximum outstanding balance on the Old Term Loan was $20 million during fiscal year 1991 and $13.25 million during fiscal year 1992. The Company paid interest of $2.9 million, $2.4 million, and $710,000 on the Old Term Loan during fiscal years 1991, 1992, and 1993, respectively. In November 1992, the Old Term Loan (which was accruing interest at 14.5% per annum) was repaid with funds provided by a $13.25 million loan from Mr. 53 Robert W. Plaster, through the Robert W. Plaster Trust established December 13, 1988. This loan was secured by substantially all of the assets of the Company and its subsidiaries on a PARI PASSU basis with the Company's Old Working Capital Facility. The loan bore interest at 10% per annum and was repaid in June 1993 with the proceeds from the Term Loan. The Company incurred interest expense of $749,000 during fiscal year 1993 for this loan. DESCRIPTION OF THE UNITS Each Unit consists of Senior Secured Notes, each such Senior Secured Note having a principal amount at maturity of $1,000 and Warrants each to purchase one share of the Company's Common Stock at a price of $7.00 per share, subject to adjustment. The Senior Secured Notes and the Warrants will become separately transferable at the close of business on , 1994 (the "Separation Date"). See "Description of the Senior Secured Notes" and "Description of the Warrants" for further information concerning the Senior Secured Notes and Warrants, respectively. In addition, see "Description of Capital Stock" for additional information relating to the Common Stock issuable upon exercise of the Warrants. FORM, DENOMINATION AND REGISTRATION The Senior Secured Notes will be issued in the form of a fully registered Global Note (the "Global Note") and the Warrants will be issued in the form of a fully registered Global Warrant (the "Global Certificate" and together with the Global Note, the "Global Securities"), each of which will be deposited with, or on behalf of, The Depository Trust Company (the "Depositary") and registered in the name of a nominee of the Depositary. The Depositary has provided the Company and the Underwriter with the information set forth below. The Depositary will act as securities depositary for the Global Securities. The Global Securities will be issued as fully-registered securities in the name of Cede & Co. (the Depositary's partnership nominee). The Depositary is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. The Depositary holds securities that its participants (the "Participants") deposit with the Depositary. The Depositary also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. The Depositary is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the Depositary system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The rules applicable to the Depositary and its Participants are on file with the Commission. Purchases of Senior Secured Notes or Warrants under the Depositary system must be made by or through Direct Participants, which will receive a credit for the Senior Secured Notes or Warrants on the Depositary's records. The ownership interest of each actual purchaser of each Senior Secured Note or Warrant (the "Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from the Depositary of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Senior Secured Notes or Warrants are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. 54 Beneficial Owners will not receive certificates representing their ownership interests in Senior Secured Notes or Warrants, except in the event that use of the book-entry system for the Senior Secured Notes or the Warrants is discontinued. To facilitate subsequent transfers, all Senior Secured Notes and Warrants deposited by Participants with the Depositary are registered in the name of the Depositary's partnership nominee, Cede & Co. The deposit of Senior Secured Notes or Warrants with the Depositary and their registration in the name of Cede & Co. effect no change in beneficial ownership. The Depositary has no knowledge of the actual Beneficial Owners of the Senior Secured Notes or the Warrants. The Depositary's records reflect only the identity of the Direct Participants to whose accounts such Senior Secured Notes or Warrants are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by the Depositary to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to Cede & Co. if less than all of the Senior Secured Notes within an issue are being redeemed. The Depositary's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither the Depositary nor Cede & Co. will consent or vote with respect to the Senior Secured Notes. Under its usual procedures, the Depositary made an Omnibus Proxy to the Company as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Senior Secured Notes are credited on the record date identified in a listing attached to the Omnibus Proxy. Principal and interest payments on the Senior Secured Notes will be made to the Depositary. The Depositary's practice is to credit Direct Participants' accounts on the payment date in accordance with their respective holdings shown on the Depositary's records unless the Depositary has reason to believe that it will not receive payment on such date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of the Depositary, the Agent, or the Company, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to the Depositary is the responsibility of the Company or the Agent, disbursement of such payments to Direct Participants shall be the responsibility of the Depositary, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. So long as the Depositary, or its nominee, is the registered owner of the Global Securities, the Depositary or its nominee, as the case may be, will be considered the record owner (the "Holder") of the Senior Secured Notes represented by the Global Note or the Warrants represented by the Global Certificate, as the case may be, for all purposes under the Indenture governing such Senior Secured Notes and under the Warrant Agreement governing such Warrants. Except as set forth below, owners of beneficial interests in such Global Securities will not be entitled to have Senior Secured Notes represented by the Global Note or Warrants represented by the Global Certificate registered in their names, will not receive or be entitled to receive physical delivery of Senior Secured Notes or Warrants, as the case may be, in definitive form and will not be considered the owners or Holders thereof under the Indenture or the Warrant Agreement, as the case may be. Accordingly, each person owning a beneficial interest in a Global Security must rely on the procedures of the Depositary and, if such person is not a Participant, those of the Participant through which such person owns its interests, in order to exercise any rights of a Holder under the Indenture or the Senior Secured Notes, or the Warrant Agreement or the Warrant, as the case may be. The Indenture provides that the Depositary, as a Holder, may appoint agents and otherwise authorize Participants to give or take any request, demand, authorization, direction, notice, consent, waiver or other 55 action which a Holder is entitled to give or take under the Indenture or the Warrant Agreement, including the right to sue for payment of principal or interest pursuant to Section 316(b) of the Trust Indenture Act of 1939, as amended. The Company understands that under existing industry practices, when the Company requests an action of Holders or when a Beneficial Owner desires to give or take any action which a Holder is entitled to give or take under the Indenture or the Warrant Agreement, as the case may be, the Depositary generally will give or take such action, or authorize the relevant Participants to give or take such action, and such Participants would authorize Beneficial Owners through such Participants to give or take such action or would otherwise act upon the instructions of Beneficial Owners owning through them. The Company has been informed by the Depositary that the Depositary will assist its Participants and their customers (Beneficial Owners) in taking any action a Holder is entitled to take under the Indenture or the Warrant Agreement, as the case may be, or exercise any rights available to Cede & Co., as the holder of record of the Senior Secured Notes or the Warrants, as the case may be, including the right to demand acceleration upon an event of default as defined under the Indenture or to institute suit for the enforcement of payment of principal or interest pursuant to Section 316(b) of the Trust Indenture Act of 1939, as amended. The Depositary has advised the Company that it will act with respect to such matters upon written instructions from a Participant to whose account with the Depositary the relevant beneficial ownership in the Senior Secured Notes or the Warrants is credited. The Company understands that a Participant will deliver such written instructions to the Depositary upon itself receiving similar written instructions from either Indirect Participants or Beneficial Owners, as the case may be. Under Rule 6 of the rules and procedures filed by the Depositary with the Securities and Exchange Commission pursuant to Section 17 of the Securities Exchange Act of 1934, as amended, Participants are required to indemnify the Depositary against all liability the Depositary may sustain without fault on the part of the Depositary or its nominee, as a result of any action they may take pursuant to the instructions of the Participant in exercising any such rights. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and such laws may impair the ability to transfer beneficial interests in Global Securities. Payments of principal, premium, if any, and interest on Senior Secured Notes and payments made with respect to the Warrants registered in the name of or held by the Depositary or its nominee will be made to the Depositary or its nominee, as the case may be, as the registered owner or the Holder of the Global Securities representing such Senior Secured Notes or Warrants. Neither the Company nor the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. If the Depositary is at any time unwilling, unable or ineligible to continue as depositary, or if the Company determines to discontinue use of the system of book-entry transfers through the Depositary, and a successor depositary is not appointed by the Company within sixty days (and with respect to the Senior Secured Notes, if an Event of Default under the Indenture has occurred and is continuing), the Company will issue Senior Secured Notes or Warrants in definitive registered form, in exchange for the Global Security representing such Senior Secured Notes or Warrants. In addition, the Company may at any time and in its sole discretion determine not to have any Senior Secured Notes or Warrants in registered form represented by the Global Securities and, in such event, will issue Senior Secured Notes or Warrants in definitive registered form in exchange for the Global Securities representing such Senior Secured Notes or Warrants. In any such instance, an owner of a beneficial interest in Global Securities will be entitled to physical delivery in definitive form of Senior Secured Notes or Warrants represented by such Global Securities equal in principal amount to such beneficial interest and to have such Senior Secured Notes or Warrants registered in its name. The information in this section concerning the Depositary and the Depositary's book-entry system has been obtained from sources that the Company and the Underwriter believe to be reliable, but the Company and the Underwriter take no responsibility for the accuracy thereof. 56 DESCRIPTION OF THE SENIOR SECURED NOTES GENERAL The Senior Secured Notes are to be issued under an Indenture (the "Indenture") to be dated as of , 1994, among the Company, the Subsidiary Guarantors (as defined herein) and Shawmut Bank Connecticut, National Association, as trustee (the "Trustee"). A copy of the proposed form of the Indenture has been filed as an exhibit to the Registration Statement, of which this Prospectus is a part. See "Available Information." The following summary of certain provisions of the Indenture and the Subsidiary Guarantees does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Indenture, including the definitions of certain terms therein. The Senior Secured Notes will be issued in fully registered form only, without coupons, in denominations of $1,000 or integral multiples thereof. The Senior Secured Notes are transferable and exchangeable at the office of the Registrar. Principal, premium, if any, and interest are payable at the office of the Paying Agent, but at the option of the Company, interest may be paid by check mailed to the registered holders at their registered addresses. The Company has initially appointed the Trustee as the Paying Agent and the Registrar under the Indenture. The Company has no sinking fund or mandatory redemption obligations with respect to the Senior Secured Notes. The Company is subject to the informational reporting requirements of Sections 13 and 15(d) under the Exchange Act and, in accordance therewith, will file certain reports and other information with the Commission. See "Available Information." In addition, if Sections 13 and 15(d) cease to apply to the Company, the Company will covenant in the Indenture to file such reports and information with the Trustee and the Commission, and mail such reports and information to Noteholders at their registered addresses, for so long as any Senior Secured Notes remain outstanding. The Company conducts substantially all of its operations through its subsidiaries. Creditors of its subsidiaries, including trade creditors, would have a claim on the subsidiaries' assets that would (except to the extent that the Subsidiary Guarantees represent direct claims against such subsidiaries) be prior to the claims of the holders of the Senior Secured Notes. See "Risk Factors -- Effective Ranking of Senior Secured Notes." The Senior Secured Notes will be issued in the form of a fully registered Global Note and will be deposited with, or on behalf of, The Depository Trust Company and registered in the name of a nominee of the Depositary. Except as set forth in "Description of the Units -- Form, Denomination and Registration" above, owners of beneficial interests in such Global Note will not be entitled to have Senior Secured Notes registered in their names, will not receive or be entitled to receive physical delivery of Senior Secured Notes in definitive form and will not be considered the owners or Holders thereof under the Indenture. See "Description of the Units -- Form, Denomination and Registration." No service charge will be made for any registration of transfer or exchange of Senior Secured Notes, but the Company may require payment of a sum sufficient to cover any transfer tax or other similar governmental charge payable in connection therewith. SUBSIDIARY GUARANTEE The Senior Secured Notes will be unconditionally guaranteed as to the payment of principal, premium, if any, and interest by the Subsidiary Guarantors pursuant to the Subsidiary Guarantees. See "-- Certain Definitions -- Subsidiary Guarantees." Upon the redesignation by the Company of a Subsidiary Guarantor from Restricted Subsidiary to an Unrestricted Subsidiary in compliance with the provisions of the Indenture, such Subsidiary shall cease to be a Subsidiary Guarantor and shall be released from all of the obligations of a Subsidiary Guarantor under its Subsidiary Guarantee. 57 Upon the sale or disposition (by merger or otherwise) of any Subsidiary Guarantor by the Company or any Subsidiary of the Company to any entity that is not a Subsidiary of the Company and which sale or disposition is otherwise in compliance with the terms of the Indenture, each such Subsidiary Guarantor shall automatically be released from all obligations under its Subsidiary Guarantee, PROVIDED, that each such Subsidiary Guarantor is sold or disposed of for fair market value (evidenced by a board resolution and set forth in an Officers' Certificate delivered to the Trustee). TERMS OF THE SENIOR SECURED NOTES The Senior Secured Notes will be senior obligations of the Company. The Senior Secured Notes will mature on , 2004. Prior to , 1999, interest will accrue on the Senior Secured Notes from , 1994, or from the most recent Interest Payment Date to which interest has been paid or provided for, and will be payable in cash semiannually at the rate of % per annum of the principal amount at maturity of the Senior Secured Notes (to Holders of record at the close of business on the or immediately preceding the Interest Payment Date) on and of each year, commencing , 1994. In addition, prior to , 1999, original issue discount will accrete on the Senior Secured Notes such that the yield to maturity will be % per annum, compounded on the basis of semiannual compounding. From and after , 1999, interest on the Senior Secured Notes will accrue and be payable in cash semiannually at the rate of % per annum of the principal amount at maturity of the Senior Secured Notes (to Holders of record at the close of business on the or immediately preceding the Interest Payment Date) on and of each year, commencing , 1999. For federal income tax purposes, Holders of Senior Secured Notes will be required to recognize interest income in respect of the Senior Secured Notes in the form of original issue discount in advance of the receipt of the cash payments to which such income is attributable. See "Certain Federal Income Tax Considerations" for information concerning certain federal income tax considerations associated with the Senior Secured Notes. OPTIONAL REDEMPTION Except as set forth in the following paragraph, the Company may not redeem the Senior Secured Notes prior to , 1999. On and after such date, the Company may redeem the Senior Secured Notes at any time as a whole, or from time to time in part, at the following redemption prices (expressed in percentages of Accreted Value), plus accrued interest to the redemption date, if redeemed during the 12-month period beginning :
YEAR REDEMPTION PRICE - ----------------------------------- ---------------- 1999............................... % 2000............................... % 2001 and thereafter................ 100.00 %
The Company may redeem up to $ million principal amount at maturity (35%) of Senior Secured Notes with the proceeds of one or more Public Equity Offerings following which there is a Public Market, at any time as a whole or from time to time in part, at a redemption price (expressed as a percentage of Accreted Value), plus accrued interest to the redemption date, of % if redeemed at any time prior to , 1997. SELECTION FOR REDEMPTION In the case of any partial redemption, selection of the Senior Secured Notes for redemption will be made by the Trustee on a pro rata basis, by lot or by such other method that complies with applicable legal and securities exchange requirements, if any, and that the Trustee in its sole discretion shall deem to be fair and appropriate; provided that no Senior Secured Note of $1,000 in principal amount at maturity or less shall be redeemed in part. If any Senior Secured Note is to be redeemed in part only, the notice of redemption relating to such Senior Secured Note shall state the portion of the principal amount thereof to be redeemed. A Senior Secured Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Senior Secured Note. 58 RANKING The Indebtedness evidenced by the Senior Secured Notes constitutes Senior Indebtedness of the Company and will rank PARI PASSU in right of payment with all existing and future Senior Indebtedness of the Company, including, without limitation, amounts due under the New Credit Facility. The Subsidiary Guarantees constitute senior indebtedness of the respective Subsidiary Guarantors and will rank PARI PASSU with all existing and future senior indebtedness of the Subsidiary Guarantors, including, without limitation, guarantees of amounts due under the New Credit Facility. Any borrowings under the New Credit Facility, but not the Senior Secured Notes, will be secured by the inventory and accounts receivable of the Company and its subsidiaries. The Company conducts substantially all of its operations through its subsidiaries. Claims of creditors of such subsidiaries, including trade creditors and holders of indebtedness guaranteed by such subsidiaries, will have priority with respect to the assets and earnings of such subsidiaries over creditors of the Company, including holders of Senior Secured Notes (except to the extent that such creditors hold claims against such subsidiaries, such as guarantees). See "Risk Factors -- Effective Ranking of Senior Secured Notes." COLLATERAL AND SECURITY Pursuant to the Indenture and the Pledge Agreement, the Company will pledge to the Trustee all shares of Capital Stock of each of its Restricted Subsidiaries (including, without limitation, PSNC Propane Corporation) and all other Restricted Subsidiaries of the Company formed or acquired after the date of the Indenture (such Capital Stock, together with any proceeds therefrom or replacements therefor pursuant to the terms of the Indenture, being hereafter referred to as the "Collateral"). The security interest in the Collateral will be a first priority perfected security interest. However, absent any Default or Event of Default, the Company will be able to receive dividends and vote, as it sees fit in its sole discretion, the Capital Stock of the Restricted Subsidiaries, provided that no vote may be cast, and no consent, waiver or ratification given or action taken, which would be inconsistent with or violate any provision of the Indenture or the Senior Secured Notes. The Indenture will provide that the Collateral may be released from the Lien thereon (a) upon payment in full of all obligations under the Indenture and the termination thereof or (b) upon the sale or other disposition of such Collateral if (i) the Company or a Subsidiary receives consideration at the time of such sale or other disposition at least equal to the fair market value, as determined in good faith by the Board of Directors, of the Collateral subject to the sale or other disposition, (ii) at least 80% of the consideration thereof received by the Company or a Subsidiary is in the form of Additional Assets or cash or cash equivalents which cash equivalents are promptly converted into cash by the Company, and (iii) an amount equal to 100% of the Net Available Cash is applied by the Company as set forth in the following paragraph. The Net Available Cash resulting from the sale or other disposition of any Collateral shall, to the extent permitted by law, be immediately deposited in an account (the "Collateral Account") subject to a first priority perfected Lien in favor of the Trustee, and the Company shall cause any non-cash proceeds from such sale or other disposition (including securities) received by the Company or a Subsidiary to immediately become subject to a first priority perfected Lien in favor of the Trustee. Within 360 days after consummation of any sale or disposition of Collateral, the Company shall apply 100% of the Net Available Cash resulting from such sale or disposition to (i) the purchase of Additional Assets (the "Replacement Assets"), provided, however, that, when acquired, such Replacement Assets are subject to a first priority perfected Lien in favor of the Trustee, (ii) the purchase of Senior Secured Notes tendered to the Company for purchase at a price equal to at least 100% of the Accreted Value thereof, plus accrued interest, if any, to the date of purchase (which purchase shall be made pursuant to an offer substantially similar to an Asset Sale Offer to all of the holders of the Senior Secured Notes), or (iii) the acquisition or formation of a Subsidiary, provided, however, that, when acquired or formed, the Capital Stock of such Subsidiary is subject to a first priority perfected Lien in favor of the Trustee; PROVIDED, that if the Company does not apply such Net Available Cash in accordance with (i), (ii) or (iii) above, such Net Available Cash shall remain in the Collateral Account and not be released until the obligations of the Company under the Indenture and the Senior Secured Notes have been discharged. See "-- Covenants - -- Sale of Assets." Subject to the proviso in the preceding sentence, amounts in the Collateral Account shall be 59 released (i) upon the purchase of Additional Assets, (ii) upon the purchase of Senior Secured Notes pursuant to an clause (ii) above, or (iii) upon the acquisition or formation of a Subsidiary, all of whose Capital Stock has been pledged to the Trustee. Any such actions by the Trustee to release the Collateral must be taken in accordance with the Trust Indenture Act of 1939, as amended, including Section 314 thereunder. There can be no assurance that the proceeds of any sale of the Collateral pursuant to the Indenture following an Event of Default would be sufficient to satisfy payments due on the Senior Secured Notes. If such proceeds are not sufficient to repay all such amounts due on the Senior Secured Notes, then Holders of the Senior Secured Notes (to the extent not repaid from the proceeds of the sale of the Collateral) would have only an unsecured claim against the Company's remaining assets. In addition, the ability of the Holders of the Senior Secured Notes to rely upon the Collateral for fulfillment of the Company's obligations under the Indenture may be subject to certain bankruptcy law limitations in the event of a bankruptcy. CERTAIN DEFINITIONS Set forth below is a summary of certain defined terms used in the Indentures. "ACCRETED VALUE" as of any date (the "specified date") means, with respect to each $1,000 face amount of Senior Secured Notes, the following amount: (i) if the specified date is one of the following dates (each an "accrual date"), the amount set forth opposite such date below:
ACCRETED ACCRUAL DATE VALUE - ---------------------- ------------- , 1994 -- , 1994 -- , 1995 -- , 1995 -- , 1996 -- , 1996 -- , 1997 -- , 1997 -- , 1998 -- , 1998 -- , 1999 1,000.00;
(ii) if the specified date occurs between two accrual dates, the sum of (A) the accreted value for the accrual date immediately preceding the specified date and (B) an amount equal to the product of (i) the accreted value for the immediately following accrual date less the accreted value for the immediately preceding accrual date and (ii) a fraction, the numerator of which is the number of days (not to exceed 180 days) from the immediately preceding accrual date to the specified date, using a 360-day year of twelve 30-day months, and the denominator of which is 180 (or, if the immediately following accrual date is , 1999, ); and (iii) if the specified date occurs after , 1999, $1,000. "ACQUIRED INDEBTEDNESS" means Indebtedness of a Person existing at the time at which such Person became a Subsidiary and not incurred in connection with, or in contemplation of, such Person becoming a Subsidiary. Acquired Indebtedness shall be deemed to be Incurred on the date the acquired Person becomes a Subsidiary. "ACQUISITION INDEBTEDNESS" means Indebtedness of a Restricted Subsidiary incurred in connection with the acquisition of property or assets related to the Line of Business which will be owned and used by the Company or a Restricted Subsidiary, which Indebtedness is without recourse to the Company or any other Restricted Subsidiary other than the Restricted Subsidiary issuing such Acquisition Indebtedness. "ADDITIONAL ASSETS" means (i) any property or assets related to the Line of Business which will be owned and used by the Company or a Restricted Subsidiary; (ii) the Capital Stock of a Person that becomes a 60 Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary or (iii) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary. "AFFILIATE" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of the provisions described under "-- Covenants -- Transactions with Affiliates" and "-- Sales of Assets" only, "Affiliate" shall also mean any beneficial owner of 5% or more of the total Voting Shares (on a Fully Diluted Basis) of the Company or of rights or warrants to purchase such stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. For purposes of the provision described under "-- Covenants -- Limitation on Restricted Payments" only, "Affiliate" shall also mean any Person of which the Company owns 5% or more of any class of Capital Stock or rights to acquire 5% or more or any class of Capital Stock and any Person who would be an Affiliate of any such Person pursuant to the first sentence hereof. "ASSET SALE" means any sale, transfer or other disposition (including by way of merger, consolidation or sale leaseback transactions, but excluding (except as provided for in the provisions described in the last paragraph under "-- Covenants -- Sales of Assets") those permitted by the provisions described under "-- Covenants -- Merger and Consolidation") in one or a series of transactions by the Company or any Restricted Subsidiary to any Person other than the Company or any Wholly Owned Subsidiary, of (i) all or any of the Capital Stock of the Company or any Restricted Subsidiary, (ii) all or substantially all of the assets of any operating unit, division or line of business of the Company or any Restricted Subsidiary or (iii) any other property or assets or rights to acquire property or assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary. "ATTRIBUTABLE DEBT" in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the Senior Secured Notes, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended). "AVERAGE LIFE" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum of the products of (A) the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or scheduled redemption or similar payment with respect to such Indebtedness or Preferred Stock multiplied by (B) the amount of such payment by (ii) the sum of all such payments. "BASIC AGREEMENTS" means (i) the Stock Redemption Agreement, dated May 7, 1994, among the Company, Energy, Mr. Lindsey, Mr. Robert Plaster, and the other parties named therein; (ii) the Services Agreement between the Company and Empire Service Corporation entered into pursuant to the Stock Redemption Agreement; (iii) the Lease Agreement between the Company and Evergreen National Corporation entered into pursuant to the Stock Redemption Agreement; (iv) and the Non-Competition Agreement among the Company, Energy, Paul Lindsey, Robert Plaster and Stephen Plaster entered into pursuant to the Stock Redemption Agreement. "BOARD OF DIRECTORS" means the Board of Directors of the Company or any authorized committee thereof. "BUSINESS DAY" means each day which is not a Legal Holiday. "CAPITAL STOCK" means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation or any and all equivalent ownership interests in a Person (other than a corporation). "CAPITALIZED LEASE" means, as applied to any Person, any lease of any property (whether real, personal or mixed) of which the discounted present value of the rental obligations of such Person as lessee, in conformity with GAAP, is required to be capitalized on the balance sheet of such Person; the Stated Maturity 61 thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which the lease may be terminated by the lessee without payment of a penalty; and "Capitalized Lease Obligations" means the rental obligations, as aforesaid, under such lease. "CHANGE OF CONTROL" means the occurrence of any of the following events: (i) at any time after the occurrence of a Public Market, any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than the Management Group or an underwriter engaged in a firm commitment underwriting on behalf of the Company, is or becomes the beneficial owner (as such term is used in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause (i) a person shall be deemed to have "beneficial ownership" of all shares that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 30%, of the total Voting Shares of the Company; (ii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors together with any new directors whose election by Board of Directors or whose nomination for election by the stockholders was approved by a vote of 66 2/3% of the directors of the Company then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved cease for any reason to constitute a majority of the Board of Directors, as the case may be, then in office; (iii) all or substantially all of the Company's and its Restricted Subsidiaries' assets are sold, leased, exchanged or otherwise transferred to any Person or group of Persons acting in concert; (iv) the Company is liquidated or dissolved or adopts a plan of liquidation; (v) prior to the occurrence of a Public Market, the Management Group ceases in the aggregate to beneficially own, directly or indirectly, at least 50% in the aggregate of the total Voting Shares of the Company; or (vi) at any time prior to the occurrence of a Change of Control pursuant to clauses (i) to (v) of this definition as a result of which a Change of Control Offer was made, (A) the failure of the Company for a period of greater than 90 days in any 12 month period to continuously maintain (following the 6 month anniversary of the Offering) on its Board of Directors at least two Outside Directors, (B) the failure of the Company for a period of greater than 90 days in any 12 month period to continuously maintain an audit committee of its Board of Directors consisting solely of Outside Directors or (C) the Board of Directors consists of greater than seven members; and the Company has agreed that upon the occurrence of any of the events in this item (vi) the Company shall notify the Trustee of such occurrence. "CODE" means the Internal Revenue Code of 1986, as amended. "COMPANY" means the party named as such in the Indenture until a successor replaces it pursuant to the terms and conditions of the Indenture and thereafter means the successor. "CONSOLIDATED COVERAGE RATIO" as of any date of determination means the ratio of (i) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters to (ii) the Consolidated Interest Expense for such four fiscal quarters; PROVIDED, HOWEVER, that if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both, both EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to (x) such new Indebtedness as if such Indebtedness had been Incurred on the first day of such period and (y) the repayment, redemption, repurchase, defeasance or discharge of any Indebtedness repaid, redeemed, repurchased, defeased or discharged with the proceeds of such new Indebtedness as if such repayment, redemption, repurchase, defeasance or discharge had been made on the first day of such period; PROVIDED, FURTHER, that if within the period during which EBITDA or Consolidated Interest Expense is measured, the Company or any of its Restricted Subsidiaries shall have made any Asset Sales, (x) the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets or Capital Stock which are the subject of such Asset Sales for such period, or increased by an amount equal to the EBITDA (if negative), directly attributable thereto for such period and (y) the Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness for which neither Company nor any Restricted Subsidiary shall continue to be liable as a result of any such Asset Sale or repaid, redeemed, defeased, discharged or otherwise retired in connection with or with the proceeds of the assets or 62 Capital Stock which are the subject of such Asset Sales for such period; and PROVIDED, FURTHER, that if the Company or any Restricted Subsidiary shall have made any acquisition of assets or Capital Stock (occurring by merger or otherwise) since the beginning of such period (including any acquisition of assets or Capital Stock occurring in connection with a transaction causing a calculation to be made hereunder) the EBITDA and Consolidated Interest Expense for such period shall be calculated, after giving pro forma effect thereto (and without regard to clause (iv) of the definition of "Consolidated Net Income"), as if such acquisition of assets or Capital Stock took place on the first day of such period. For all purposes of this definition, if the date of determination occurs prior to the completion of the first four full fiscal quarters following the Issue Date, then "EBITDA" and "Consolidated Interest Expense" shall be calculated after giving effect on a pro forma basis to the Offering as if the Offering occurred on the first day of the four full fiscal quarters that were completed preceding such date of determination. "CONSOLIDATED CURRENT LIABILITIES," as of the date of determination, means the aggregate amount of liabilities of the Company and its Consolidated Restricted Subsidiaries which may properly be classified as current liabilities (including taxes accrued as estimated), after eliminating (i) all inter-company items between the Company and any Subsidiary and (ii) all current maturities of long-term Indebtedness, all as determined in accordance with GAAP. "CONSOLIDATED INCOME TAX EXPENSE" means, for any period, as applied to the Company, the provision for local, state, federal or foreign income taxes on a Consolidated basis for such period determined in accordance with GAAP. "CONSOLIDATED INTEREST EXPENSE" means, for any period, as applied to the Company, the sum of (a) the total interest expense of the Company and its Consolidated Restricted Subsidiaries for such period as determined in accordance with GAAP, including, without limitation, (i) amortization of original issue discount on any Indebtedness and the interest portion of any deferred payment obligation, calculated in accordance with the effective interest method of accounting, and amortization of debt issuance costs (other than issuance costs with regard to the Offering, the execution of the New Credit Facility and the related transactions occurring simultaneously therewith), (ii) accrued interest, (iii) noncash interest payments, (iv) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, (v) interest actually paid by the Company or any such Subsidiary under any guarantee of Indebtedness or other obligation of any other Person and (vi) net costs associated with Interest Rate Agreements (including amortization of discounts) and Currency Agreements, plus (b) all but the principal component of rentals in respect of Capitalized Lease Obligations paid, accrued, or scheduled to be paid or accrued by the Company or its Consolidated Restricted Subsidiaries, plus (c) one-third of all Operating Lease Obligations paid, accrued and/or scheduled to be paid by the Company and its Consolidated Restricted Subsidiaries, plus (d) amortization of capitalized interest, plus (e) dividends paid in respect of Preferred Stock of the Company or any Restricted Subsidiary held by Persons other than the Company or a Wholly Owned Subsidiary, plus (f) cash contributions to any employee stock ownership plan to the extent such contributions are used by such employee stock ownership plan to pay interest or fees to any person (other than the Company or a Restricted Subsidiary) in connection with loans incurred by such employee stock ownership plan to purchase Capital Stock of the Company. "CONSOLIDATED NET INCOME (LOSS)" means, for any period, as applied to the Company, the Consolidated net income (loss) of the Company and its Consolidated Restricted Subsidiaries for such period, determined in accordance with GAAP, adjusted by excluding (without duplication), to the extent included in such net income (loss), the following: (i) all extraordinary gains or losses; (ii) any net income of any Person if such Person is not a Restricted Subsidiary, except that (A) the Company's equity in the net income of any such Person for such period shall be included in Consolidated Net Income (Loss) up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution and (B) the equity of the Company or a Restricted Subsidiary in a net loss of any such Person for such period shall be included in determining Consolidated Net Income (Loss); (iii) the net income of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such income is not at the time thereof permitted, directly or indirectly, by operation of the terms of its charter or by-laws or any agreement, instrument, judgment, 63 decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary or its stockholders; (iv) any net income (or loss) of any Person combined with the Company or any of its Restricted Subsidiaries on a "pooling of interests" basis attributable to any period prior to the date of such combination; (v) any gain or loss realized upon the sale or other disposition of any property, plant or equipment of the Company or its Restricted Subsidiaries (including pursuant to any sale-and-leaseback arrangement) which is not sold or otherwise disposed of in the ordinary course of business and any gain (but not loss) realized upon the sale or other disposition by the Company or any Restricted Subsidiary of any Capital Stock of any Person; and (vi) the cumulative effect of a change in accounting principles; and further adjusted by subtracting from such net income the tax liability of any parent of the Company to the extent of payments made to such parent by the Company pursuant to any tax sharing agreement or other arrangement for such period. "CONSOLIDATED NET TANGIBLE ASSETS" means, as of any date of determination, as applied to the Company, the total amount of assets (less accumulated depreciation or amortization, allowances for doubtful receivables, other applicable reserves and other properly deductible items) which would appear on a Consolidated balance sheet of the Company and its Consolidated Restricted Subsidiaries, determined on a Consolidated basis in accordance with GAAP, and after giving effect to purchase accounting and after deducting therefrom, to the extent otherwise included, the amounts of: (i) Consolidated Current Liabilities; (ii) minority interests in Consolidated Subsidiaries held by Persons other than the Company or a Restricted Subsidiary; (iii) excess of cost over fair value of assets of businesses acquired, as determined in good faith by the Board of Directors; (iv) any revaluation or other write-up in value of assets subsequent to December 31, 1993 as a result of a change in the method of valuation in accordance with GAAP; (v) unamortized debt discount and expenses and other unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, licenses, organization or developmental expenses and other intangible items; (vi) treasury stock; and (vii) any cash set apart and held in a sinking or other analogous fund established for the purpose of redemption or other retirement of Capital Stock to the extent such obligation is not reflected in Consolidated Current Liabilities. "CONSOLIDATED NET WORTH" means, at any date of determination, as applied to the Company, stockholders' equity as set forth on the most recently available Consolidated balance sheet of the Company and its Consolidated Restricted Subsidiaries (which shall be as of a date no more than 60 days prior to the date of such computation), less any amounts attributable to Redeemable Stock or Exchangeable Stock, the cost of treasury stock and the principal amount of any promissory notes receivable from the sale of Capital Stock of the Company or any Subsidiary. "CONSOLIDATION" means, with respect to any Person, the consolidation of accounts of such Person and each of its subsidiaries if and to the extent the accounts of such Person and such subsidiaries are consolidated in accordance with GAAP. The term "Consolidated" shall have a correlative meaning. "CURRENCY AGREEMENT" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Company or any Restricted Subsidiary against fluctuations in currency values to or under which the Company or any Restricted Subsidiary is a party or a beneficiary on the Issue Date or becomes a party or beneficiary thereafter. "DEFAULT" means any event which is, or after notice or passage of time or both would be, an Event of Default. "DOMESTIC SUBSIDIARY" means a Restricted Subsidiary that is not a Foreign Subsidiary. "DEFAULTED INTEREST" means any interest on any Security which is payable, but is not punctually paid or duly provided for on any Interest Payment Date. "EBITDA" means, for any period, as applied to the Company, the sum of Consolidated Net Income (Loss) (but without giving effect to adjustments, accruals, deductions or entries resulting from purchase accounting, extraordinary losses or gains and any gains or losses from any Asset Sales), plus the following to the extent included in calculating Consolidated Net Income (Loss): (a) Consolidated Income Tax Expense, (b) Consolidated Interest Expense, (c) depreciation expense, and (d) amortization expense, in each case for 64 such period; PROVIDED that, if the Company has any Subsidiary that is not a Wholly Owned Subsidiary, EBITDA shall be reduced (to the extent not otherwise reduced by GAAP) by an amount equal to (A) the consolidated net income (loss) of such Subsidiary (to the extent included in Consolidated Net Income (Loss) multiplied by (B) the quotient of (1) the number of shares of outstanding common stock of such Subsidiary not owned on the last day of such period by the Company or any Wholly Owned Subsidiary of the Company divided by (2) the total number of shares of outstanding common stock of such Subsidiary on the last day of such period. "ENERGY" means Empire Energy Corporation, a Tennessee corporation. "EXCESS PAYMENTS" means any amounts paid in respect of salary, bonus, insurance or annuity premiums (other than premiums for "key man" insurance the sole beneficiary of which is the Company), or other payments or contributions to any employee benefit, severance, retirement, stock ownership or stock purchase plan or program or any similar plan or arrangement, to, or for the benefit of, a Lindsey Entity in excess of the lesser of (A) the aggregate scheduled amounts of any such payments as set forth in the Employment Agreements between each of Paul Lindsey and Kristen Lindsey, on the one hand, and the Company on the other hand, each dated as of , 1994, as they may be amended from time to time, and (B) an aggregate of $1,000,000. "EXCHANGEABLE STOCK" means any Capital Stock which by its terms is exchangeable or convertible at the option of any Person other than the Company into another security (other than Capital Stock of the Company which is neither Exchangeable Stock nor Redeemable Stock). "FOREIGN ASSET SALE" means an Asset Sale in respect of the Capital Stock or assets of a Foreign Subsidiary or a Restricted Subsidiary of the type described in Section 936 of the Code to the extent that the proceeds of such Asset Sale are received by a Person subject in respect of such proceeds to the tax laws of a jurisdiction other than the United States of America or any State thereof or the District of Columbia. "FOREIGN SUBSIDIARY" means a Restricted Subsidiary that is incorporated in a jurisdiction other than the United States of America or a State thereof or the District of Columbia. "FULLY DILUTED BASIS" means after giving effect to the exercise of any outstanding options, warrants or rights to purchase Voting Shares and the conversion or exchange of any securities convertible into or exchangeable for Voting Shares. "GAAP" means generally accepted accounting principles in the United States of America as in effect and, to the extent optional, adopted by the Company on the Issue Date, consistently applied, including, without limitation, those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board. "GUARANTEE" means, as applied to any obligation, contingent or otherwise, of any Person, (i) a guarantee, direct or indirect, in any manner, of any part or all of such obligation (other than by endorsement of negotiable instruments for collection in the ordinary course of business) and (ii) an agreement, direct or indirect, contingent or otherwise, the practical effect of which is to insure in any way the payment or performance (or payment of damages in the event of nonperformance) of any part or all of such obligation, including the payment of amounts drawn down under letters of credit. "HOLDER" or "SECURITYHOLDER" means the Person in whose name a Senior Secured Note is registered on the Registrar's books. "INCUR" means, as applied to any obligation, to create, incur, issue, assume, guarantee or in any other manner become liable with respect to, contingently or otherwise, such obligation, and "INCURRED," "INCURRENCE" and "INCURRING" shall each have a correlative meaning; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes (after the Issue Date) a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at the time it becomes a Subsidiary; and PROVIDED, FURTHER, that any amendment, modification or waiver of any provision of any document pursuant to which Indebtedness was previously Incurred shall not 65 be deemed to be an Incurrence of Indebtedness as long as (i) such amendment, modification or waiver does not (A) increase the principal or premium thereof or interest rate thereon, (B) change to an earlier date the Stated Maturity thereof or the date of any scheduled or required principal payment thereon or the time or circumstances under which such Indebtedness may or shall be redeemed, (C) if such Indebtedness is contractually subordinated in right of payment to the Senior Secured Notes, modify or affect, in any manner adverse to the Holders, such subordination, (D) if the Company is the obligor thereon, provide that a Restricted Subsidiary shall be an obligor, or (E) violate, or cause the Indebtedness to violate, the provisions described under "-- Covenants -- Limitation on Payment Restrictions Affecting Subsidiaries" and "-- Limitation on Liens" and (ii) such Indebtedness would, after giving effect to such amendment, modification or waiver as if it were an Incurrence, comply with clause (i) of the first proviso to the definition of "Refinancing Indebtedness." "INDEBTEDNESS" of any Person means, without duplication, (i) the principal of and premium (if any such premium is then due and owing) in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable; (ii) all Capitalized Lease Obligations of such Person; (iii) all obligations of such Person Incurred as the deferred purchase price of property, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement; (iv) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in (i) through (iii) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the tenth Business Day following receipt by such Person of a demand for reimbursement following payment on the letter of credit); (v) the amount of all obligations of such Person with respect to the scheduled redemption, repayment or other repurchase of any Redeemable Stock and, in the case of any Subsidiary, with respect to any other Preferred Stock (but excluding in each case any accrued dividends); (vi) all obligations of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any guarantee; (vii) all liabilities or other obligations, contingent or otherwise, purchased, assumed or with respect to which such Person shall otherwise become liable or responsible in connection with the purchase, acquisition or assumption of property, services or business operations to the extent reflected on the balance sheet of such Person in accordance with GAAP; (viii) contractual obligations to repurchase goods sold or distributed; (ix) all obligations of such Person in respect of Interest Rate Agreements and Currency Agreements; and (x) all obligations of the type referred to in clauses (i) through (ix) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so secured; PROVIDED, HOWEVER, that Indebtedness shall not include trade accounts payable arising in the ordinary course of business. The amount of Indebtedness of any Person at any date shall be, with respect to unconditional obligations, the outstanding balance at such date of all such obligations as described above and, with respect to any contingent obligations (other than pursuant to clause (vii) above, which shall be included to the extent reflected on the balance sheet of such Person in accordance with GAAP) at such date, the maximum liability determined by such Person's board of directors, in good faith, as, in light of the facts and circumstances existing at the time, reasonably likely to be Incurred upon the occurrence of the contingency giving rise to such obligation. "INTERCOMPANY NOTES" means the notes issued to the Company by its Subsidiaries pursuant to the Master Intercompany Note dated as of , 1994, among the Company and each of the Subsidiaries pursuant to which the Company shall make certain loans to finance the working capital needs of the Subsidiaries incurred pursuant to the New Credit Facility, as such Intercompany Notes may be amended or otherwise modified from time to time. "INTEREST PAYMENT DATE" means the stated maturity of an installment of interest on the Senior Secured Notes. 66 "INTEREST RATE AGREEMENT" means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement designed to protect against fluctuations in interest rates to or under which the Company or any of its Restricted Subsidiaries is a party or beneficiary on the Issue Date or becomes a party or beneficiary thereunder. "INVESTMENT" means, with respect to any Person, any direct or indirect advance, loan (other than advances to customers who are not Affiliates in the ordinary course of business that are recorded as accounts receivable on the balance sheet of such Person or its Subsidiaries) or other extension of credit or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any other investment in any other Person, or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or assets issued or owned by any other Person (whether by merger, consolidation, amalgamation, sale of assets or otherwise). For purposes of the definition of "Unrestricted Subsidiary" and the provisions set forth under "-- Covenants -- Limitation on Restricted Payments", (i) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary and shall exclude the fair market value of the net assets of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary and (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined by the Board of Directors in good faith. "ISSUE DATE" means the date on which the Senior Secured Notes are originally issued under the Indenture. "LIEN" means any mortgage, lien, pledge, charge, or other security interest or encumbrance of any kind (including any conditional sale or other title retention agreement and any lease in the nature thereof). "LINDSEY ENTITY" means Paul S. Lindsey, Jr., Kristen L. Lindsey, any member of their family and any Person of which any of the foregoing Persons are Affiliates. "LINE OF BUSINESS" means the sale and distribution of propane gas and operations related thereto. "MANAGEMENT GROUP" means, collectively, (i) those individuals who beneficially own, directly or indirectly, Voting Shares of the Company or any successor thereto immediately following the consummation of the Offering and the transactions related thereto and are members of management of the Company or any of its Subsidiaries (or the estate or any beneficiary of any such individual or any immediate family member of any such individual or any trust established for the benefit of any such individual or immediate family member). "NET AVAILABLE CASH" means, with respect to any Asset Sale or Collateral Sale, the cash or cash equivalent payments received by the Company or a Subsidiary in connection with such Asset Sale or Collateral Sale (including any cash received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as or when received and also including the proceeds of other property received when converted to cash or cash equivalents) net of the sum of, without duplication, (i) all reasonable legal, title and recording tax expenses, reasonable commissions, and other reasonable fees and expenses incurred directly relating to such Asset Sale or Collateral Sale, (ii) provision for all local, state, federal and foreign taxes expected to be paid (whether or not such taxes are actually be paid or payable) as a consequence of such Asset Sale or Collateral Sale, without regard to the consolidated results of the Company and its Subsidiaries, (iii) payments made to repay Indebtedness which is secured by any assets subject to such Asset Sale or Collateral Sale in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or by applicable law, be repaid out of the proceeds from such Asset Sale or Collateral Sale, and (iv) reasonable amounts reserved by the Company or any Subsidiary of the Company receiving proceeds of such Asset Sale or Collateral Sale against any liabilities associated with such Asset Sale or Collateral Sale, including without limitation, indemnification obligations, PROVIDED that such amounts shall not exceed 10% of the payments received by the Company 67 or a Subsidiary in connection with such Asset Sale or Collateral Sale, and PROVIDED FURTHER that such amounts will be applied as described under "-- Covenants -- Sales of Assets" or "Collateral and Security," as the case may be, no later than the fifth anniversary of such Asset Sale or Collateral Sale if not previously paid to satisfy such liabilities. "NET CASH PROCEEDS" means, with respect to any issuance or sale of Capital Stock by any Person, the cash proceeds to such Person of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultancy and other fees actually incurred by such Person in connection with such issuance or sale and net of taxes paid or payable by such Person as a result thereof. "NEW CREDIT FACILITY" means the credit facility provided pursuant to the credit agreement, dated as of , 1994, between the Company and Continental Bank, N.A. "NON-CONVERTIBLE CAPITAL STOCK" means, with respect to any corporation, any Capital Stock of such corporation which is not convertible into another security other than non-convertible common stock of such corporation; PROVIDED, HOWEVER, that Non-Convertible Capital Stock shall not include any Redeemable Stock or Exchangeable Stock. "OFFERING" means the public offering and sale of the Senior Secured Notes. "OFFICER" means the Chairman, the President, any Vice President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, the Secretary, any Assistant Treasurer, any Assistant Secretary or the Controller of the Company. "OFFICERS' CERTIFICATE" means a certificate signed by two Officers, one of whom must be the President, the Treasurer or a Vice President of the Company. Each Officers' Certificate (other than certificates provided pursuant to TIA Section 314(a)(4)) shall include the statements provided for in TIA Section 314(e). "OPERATING LEASE OBLIGATIONS" means any obligation of the Company and its Restricted Subsidiaries on a Consolidated basis incurred or assumed under or in connection with any lease of real or personal property which, in accordance with GAAP, is not required to be classified and accounted for as a capital lease. "OPINION OF COUNSEL" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel, if so acceptable, may be an employee of or counsel to the Company or the Trustee. Each such Opinion of Counsel shall include the statements provided for in TIA Section 314(e). "OUTSIDE DIRECTOR" means any Person who is a member of the Board of Directors who is not (i) an employee or Affiliate of the Company, any Subsidiary of the Company or Energy, (ii) an employee or Affiliate of Holding Capital Group, Inc., (iii) a Plaster Entity or a Lindsey Entity, or (iv) a Person who has engaged in a transaction with the Company or any Subsidiary of the Company that would be required to be disclosed under Item 13 of Form 10-K if such Person were a director of a registrant under the Securities Exchange Act of 1934, as amended. "PERSON" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "PLASTER ENTITY" means Robert W. Plaster, Stephen R. Plaster, any member of each of such individual's family, and any Person of which any of the foregoing Persons are Affiliates. "PLEDGE AGREEMENT" means that certain Pledge Agreement, dated as of the date of the Indenture, by the Company in favor of the Trustee, in the form attached to the Indenture. "PREFERRED STOCK", as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation. 68 "PUBLIC EQUITY OFFERING" means an underwritten primary public offering of equity securities of the Company pursuant to an effective registration statement under the Securities Act. "PUBLIC MARKET" shall be deemed to have occurred if (x) a Public Equity Offering has been consummated and (y) at least 25% (for purposes of the definition of "Change of Control") or 20% (for purposes of the provisions described under "-- Optional Redemption") of the total issued and outstanding common stock of the Company has been distributed by means of an effective registration statement under the Securities Act or sales pursuant to Rule 144 under the Securities Act. "REDEEMABLE STOCK" means any class or series of Capital Stock of any Person that (a) by its terms, by the terms of any security into which it is convertible or exchangeable or otherwise is, or upon the happening of an event or passage of time would be, required to be redeemed (in whole or in part) on or prior to the first anniversary of the Stated Maturity of the Senior Secured Notes, (b) is redeemable at the option of the holder thereof at any time on or prior to the first anniversary of the Stated Maturity of the Senior Secured Notes or (c) is convertible into or exchangeable for Capital Stock referred to in clause (a) or clause (b) above or debt securities at any time prior to the first anniversary of the Stated Maturity of the Senior Secured Notes. "REFINANCING INDEBTEDNESS" means Indebtedness that refunds, refinances, replaces, renews, repays or extends (including pursuant to any defeasance or discharge mechanism) (collectively, "refinances," and "refinanced" shall have a correlative meaning) any Indebtedness of the Company or a Restricted Subsidiary existing on the Issue Date or Incurred in compliance with the Indenture (including Indebtedness of the Company that refinances Indebtedness of any Restricted Subsidiary and Indebtedness of any Restricted Subsidiary that refinances Indebtedness of another Restricted Subsidiary) including Indebtedness that refinances Refinancing Indebtedness; PROVIDED, HOWEVER, that (i) the Refinancing Indebtedness shall be contractually subordinated in right of payment to the Senior Secured Notes on terms at least as favorable to the Holders of Senior Secured Notes as the terms set forth in the form of subordination provisions attached to the Indenture, (ii) the Refinancing Indebtedness is scheduled to mature either (a) no earlier than the Indebtedness being refinanced or (b) after the Stated Maturity of the Senior Secured Notes, (iii) the Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being refinanced and (iv) such Refinancing Indebtedness is in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) then outstanding (plus fees and expenses, including any premium and defeasance costs) under the Indebtedness being refinanced; and PROVIDED, FURTHER, that Refinancing Indebtedness shall not include (x) Indebtedness of a Subsidiary of the Company that refinances Indebtedness of the Company or (y) Indebtedness of the Company or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary. "RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that is not designated an Unrestricted Subsidiary by the Board of Directors. "SALE/LEASEBACK TRANSACTION" means an arrangement relating to property now owned or hereafter acquired whereby the Company or a Subsidiary transfers such property to a Person and leases it back from such Person, other than leases for a term of not more than 36 months or between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries. "SEASONAL OVERADVANCE" has the meaning ascribed to it in that certain Credit Agreement dated as of the date of the Indenture, between the Company and Continental Bank, N.A., which such Seasonal Overadvance shall not exceed $3,000,000. "SECURITIES" means all series of the Senior Secured Notes Due 2004 that are issued under and pursuant to the terms of the Indenture, as amended or supplemented from time to time. "SENIOR INDEBTEDNESS" means (i) all obligations consisting of the principal of and premium, if any, and accrued and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not post-filing interest is allowed in such proceeding), 69 whether existing on the Issue Date or thereafter Incurred, in respect of (A) Indebtedness of the Company for money borrowed and (B) Indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which the Company is responsible or liable; (ii) all Capitalized Lease Obligations of the Company; (iii) all obligations of the Company (A) for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction, (B) under Interest Rate Agreements and Currency Agreements entered into in respect of any obligations described in clauses (i) and (ii) or (C) issued or assumed as the deferred purchase price of property, and all conditional sale obligations of the Company and all obligations of the Company under any title retention agreement; (iv) all guarantees of the Company with respect to obligations of other persons of the type referred to in clauses (ii) and (iii) and with respect to the payment of dividends of other Persons; and (v) all obligations of the Company consisting of modifications, renewals, extensions, replacements and refundings of any obligations described in clauses (i), (ii), (iii) or (iv); unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are subordinated in right of payment to the Senior Secured Notes, or any other Indebtedness or obligation of the Company; PROVIDED, HOWEVER, that Senior Indebtedness shall not be deemed to include (1) any obligation of the Company to any Subsidiary, (2) any liability for Federal, state, local or other taxes or (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities). "SIGNIFICANT SUBSIDIARY" means any Subsidiary (other than an Unrestricted Subsidiary) that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulations S-X promulgated by the SEC. "STATED MATURITY" means, with respect to any security, the date specified in such security as the fixed date on which the principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency). "SUBORDINATED INDEBTEDNESS" means any Indebtedness of the Company (whether outstanding on the Issue Date or thereafter Incurred) which is contractually subordinated or junior in right of payment to the Senior Secured Notes or any other Indebtedness of the Company. "SUBSIDIARY" means, as applied to any Person, (i) a corporation at least a majority of whose Capital Stock with voting power, under ordinary circumstances, to elect a majority of the Board of Directors of such corporation is at the time, directly or indirectly, owned or controlled by such Person, by a Subsidiary or Subsidiaries of such Person, or by such Person and a Subsidiary or Subsidiaries of such Person or (ii) any other Person (other than a corporation) in which such Person, a Subsidiary or Subsidiaries of such Person, or such Person and a Subsidiary or Subsidiaries of such Person, directly or indirectly, at the date of determination, has at least a majority ownership interest. As of the date of the Indenture, the Subsidiaries of the Company will include, without limitation, PSNC Propane Corporation. "SUBSIDIARY GUARANTEES" means the unconditional guarantees by the respective Subsidiary Guarantors of the due and punctual payment of principal, premium, if any, and interest on the Senior Secured Notes when and as the same shall become due and payable and in the coin or currency in which the same are payable, whether at Stated Maturity, by declaration of acceleration, call for redemption, purchase or otherwise. "SUBSIDIARY GUARANTOR" means each of the Persons listed on Schedule I attached to the Indenture, each Person that becomes a Restricted Subsidiary of the Company after the Issue Date and each other Person that becomes a Subsidiary Guarantor under the Indenture pursuant to which such Person jointly and severally unconditionally guarantees the Securities on a senior basis. "UNRELATED BUSINESS" means any business other than the Line of Business. "UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below and (ii) any subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary (including any newly 70 acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, the Company or any other Subsidiary that is not a Subsidiary of the Subsidiary to be so designated; PROVIDED, that either (A) the Subsidiary to be so designated has total assets of $1,000 or less or (B) if such Subsidiary has assets greater than $1,000, that such designation would be permitted pursuant to the provisions under "Covenants -- Limitation on Restricted Payments". The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary of the Company; PROVIDED, HOWEVER, that immediately after giving effect to such designation (x) the Company could Incur $1.00 of additional Indebtedness pursuant to the first paragraph of "Covenants -- Limitation on Incurrence of Indebtedness" and (y) no Default or Event of Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the respective Trustee by promptly filing with the respective Trustee a copy of the board resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. GOVERNMENT OBLIGATIONS" means securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case under clauses (i) or (ii) are not callable or redeemable before the maturity thereof. "VOTING SHARES", with respect to any corporation, means the Capital Stock having the general voting power under ordinary circumstances to elect at least a majority of the board of directors of such corporation (irrespective of whether or not 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 SUBSIDIARY" means a Subsidiary (other than an Unrestricted Subsidiary) all the Capital Stock of which (other than directors' qualifying shares) is owned by the Company or another Wholly Owned Subsidiary. COVENANTS The Indentures contains covenants including, among others, the following: LIMITATION ON RESTRICTED PAYMENTS. Under the terms of the Indenture, so long as any of the Senior Secured Notes are outstanding, the Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, (i) declare or pay any dividend on or make any distribution or similar payment of any sort in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving the Company) to the direct or indirect holders of its Capital Stock (other than dividends or distributions payable solely in its Non-Convertible Capital Stock or rights to acquire its Non-Convertible Capital Stock and dividends or distributions payable solely to the Company or a Restricted Subsidiary), (ii) purchase, redeem, defease or otherwise acquire or retire for value any Capital Stock of the Company or of any direct or indirect parent of the Company, or, with respect to the Company, exercise any option to exchange any Capital Stock that by its terms is exchangeable solely at the option of the Company (other than into Capital Stock of the Company which is neither Exchangeable Stock nor Redeemable Stock), (iii) purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to scheduled maturity or scheduled repayment thereof or scheduled sinking fund payment thereon, any Subordinated Indebtedness (other than the purchase, repurchase, or other acquisition of Subordinated Indebtedness purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition) or (iv) make any Investment in any Unrestricted Subsidiary or any Affiliate of the Company other than a Restricted Subsidiary or a Person which will become a Restricted Subsidiary as a result of any such Investment (each such payment described in clauses (i)-(iv) of this paragraph, a "Restricted Payment"), unless at the time of and after giving effect to the proposed Restricted Payment: (1) no Default or Event of Default shall have occurred and be continuing (or would result therefrom); (2) the Company would be permitted to Incur an additional $1 of Indebtedness pursuant to the provisions described in the first paragraph under "-- Limitation on Incurrence of Indebtedness", and 71 (3) the aggregate amount of all such Restricted Payments subsequent to the Issue Date shall not exceed the sum of (A) 50% of aggregate Consolidated Net Income (or if such Consolidated Net Income is a deficit, minus 100% of such deficit), and minus 100% of the amount of any write-downs, write-offs, other negative reevaluations and other negative extraordinary charges not otherwise reflected in Consolidated Net Income during such period; (B) the aggregate Net Cash Proceeds received by the Company after the Issue Date from a sale by the Company of Capital Stock (other than Redeemable Stock or Exchangeable Stock) of the Company or from the issuance of any options or warrants or other rights to acquire Capital Stock (other than Redeemable Stock or Exchangeable Stock); (C) the amount by which the principal amount of Indebtedness of the Company or its Restricted Subsidiaries is reduced on the Company's Consolidated balance sheet upon the conversion or exchange (other than by a Subsidiary) subsequent to the Issue Date of any Indebtedness of the Company or any Restricted Subsidiary converted or exchanged for Capital Stock (other than Redeemable Stock or Exchangeable Stock) of the Company (less the amount of any cash, or the value of any other property, distributed by the Company or any Restricted Subsidiary upon such conversion or exchange); (D) an amount equal to the net reduction in Investments in Unrestricted Subsidiaries resulting from payments of interest on Indebtedness, dividends, repayments of loans or advances, or other transfers of assets, in each case to the Company or any Restricted Subsidiary from Unrestricted Subsidiaries, or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investments"), not to exceed in the case of any Unrestricted Subsidiary the amount of Investments previously made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary; and (E) $1,000,000 million, less the aggregate of all Excess Payments made during such period. The failure to satisfy the conditions set forth in clauses (2) and (3) of the first paragraph under "Covenants -- Limitation on Restricted Payments" shall not prohibit any of the following as long as the condition set forth in clause (1) of such paragraph is satisfied (except as set forth below): (i) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividend would have complied with the provisions described in the first paragraph under "Covenants -- Limitation on Restricted Payments"; (ii) any purchase, redemption, defeasance, or other acquisition or retirement for value of Capital Stock or Subordinated Indebtedness of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company (other than Redeemable Stock or Exchangeable Stock and other than stock issued or sold to a Subsidiary or to an employee stock ownership plan), PROVIDED, HOWEVER, that notwithstanding clause (1) of the immediately preceding paragraph, the occurrence or existence of a Default or Event of Default shall not prohibit the making of such purchase, redemption, defeasance or other acquisition or retirement, and PROVIDED, FURTHER, such purchase, redemption, defeasance or other acquisition or retirement shall not be included in the calculation of Restricted Payments made for purposes of clause (3) of the immediately preceding paragraph and PROVIDED, FURTHER, that the Net Cash Proceeds from such sale shall be excluded from sub-clause (B) of clause (3) of the immediately preceding paragraph; (iii) any purchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Indebtedness of the Company made by exchange for, or out of the proceeds of the substantially concurrent Incurrence of for cash (other than to a Subsidiary), new Indebtedness of the Company, PROVIDED, HOWEVER, that (A) such new Indebtedness shall be contractually subordinated in right of payment to the Senior Secured Notes on terms at least as favorable to the Holders of Senior Secured Notes as the terms set forth in the form of subordination provisions attached to the Indenture, (B) such new Indebtedness has a Stated Maturity either (1) no earlier than the Stated Maturity of the Indebtedness redeemed, repurchased, defeased, acquired or retired or (2) after the Stated Maturity of the Senior Secured Notes and (C) such Indebtedness has an Average Life equal to or greater than the Average Life of the Indebtedness redeemed, repurchased, defeased, acquired or retired, and PROVIDED, FURTHER, that such purchase, redemption, defeasance or other acquisition or retirement, shall not be included in the calculation of Restricted Payments made for purposes of clause (3) of the immediately preceding paragraph; (iv) any purchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Indebtedness upon a Change of Control or an Asset Sale to the extent required by the indenture or other agreement pursuant to which such Subordinated Indebtedness was issued, but only if the Company (A) in the case of a Change of Control, has made an offer to repurchase the Senior Secured Notes as described under "-- Covenants -- Change of Control" or (B) in the case of an Asset Sale, has applied the Net Available Cash from such Asset Sale in 72 accordance with the provisions described under "-- Covenants -- Sales of Assets" and certain provisions related to the release of collateral, if applicable; (v) pro rata dividends paid by a Subsidiary with respect to a series or class of its Capital Stock the majority of which is held by the Company or a Wholly Owned Subsidiary; (vi) the payment of dividends on the Capital Stock of the Company following an initial Public Equity Offering of such Capital Stock of up to an amount per annum of 6% of the Net Cash Proceeds received by the Company in such Public Equity Offering; (vii) the purchase, redemption, acquisition, cancellation, or other retirement for value of shares of Capital Stock of the Company, options on any such shares or related phantom stock, or stock appreciation rights or similar securities held by officers or employees or former officers or employees (or their estates or beneficiaries under their estates), upon the death, disability, retirement or termination of employment of such employee or former employee, pursuant to the terms of an employee benefit plan or any other agreement under which such shares of stock or related rights were issued, provided that the aggregate cash consideration paid, or distributions made, pursuant to this clause (vii) after the date of the Indenture does not exceed an aggregate amount of $1,000,000 plus the cash proceeds received by or contributed to the Company from any reissuance of Capital Stock by the Company to members of management and employees of the Company and its Subsidiaries; and (viii) Investments in Unrestricted Subsidiaries of up to $3,000,000 at any one time outstanding. LIMITATION ON INCURRENCE OF INDEBTEDNESS. Under the terms of the Indenture, the Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness, except that the Company may Incur Indebtedness if, after giving effect thereto, the Consolidated Coverage Ratio would be greater than 1.75:1, if such Incurrence takes place on or prior to , 1998, or 2.0:1, if such Incurrence takes place thereafter. The foregoing provision will not limit the ability of the Company or any Restricted Subsidiary to Incur the following Indebtedness: (i) Refinancing Indebtedness (except with respect to Indebtedness referred to in clause (ii), (iii) or (iv) below); (ii) Acquisition Indebtedness at any one time outstanding in an aggregate principal amount not to exceed $15,000,000, PROVIDED that not more than an aggregate of $6,000,000 of such Acquisition Indebtedness may be incurred in any twelve month period; (iii) Indebtedness of the Company which is owed to and held by a Wholly Owned Subsidiary and Indebtedness of a Wholly Owned Subsidiary which is owed to and held by the Company or a Wholly Owned Subsidiary, including without limitation, the Indebtedness evidenced by the Intercompany Notes; PROVIDED, HOWEVER, that any subsequent issuance or transfer of any Capital Stock which results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any transfer of such Indebtedness (other than to the Company or a Wholly Owned Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the Company or by a Wholly Owned Subsidiary, as the case may be; (iv) Indebtedness (whether under the New Credit Facility or otherwise) Incurred for the purpose of financing the working capital needs of the Company and its Restricted Subsidiaries, PROVIDED, HOWEVER, that after giving effect to the Incurrence of such Indebtedness and any substantially simultaneous use of the proceeds thereof, the aggregate principal amount of all such Indebtedness Incurred pursuant to this clause (iv) and then outstanding immediately after such Incurrence and such use of proceeds shall not exceed the sum of 60% of the book value of the inventory and 90% of the book value of the receivables of the Company and the Restricted Subsidiaries on a consolidated basis at such time plus the amount of the Seasonal Overadvance, and PROVIDED FURTHER, that the aggregate amount of Indebtedness pursuant to this clause (iv) shall not exceed $15,000,000 at any time prior to , 1997 and PROVIDED FURTHER, that the Company's Subsidiaries shall be permitted to guarantee Indebtedness incurred by the Company pursuant to the New Credit Facility; (v) Acquired Indebtedness; PROVIDED, HOWEVER, that the Company would have been able to Incur such Indebtedness at the time of the Incurrence thereof pursuant to the immediately preceding paragraph; and (vi) Indebtedness of the Company or a Restricted Subsidiary outstanding on the Issue Date (other than Indebtedness referred to in clause (iv) above and Indebtedness being repaid or retired with the proceeds of the Offering. Notwithstanding the provisions of this covenant described in the first two paragraphs above, the Indenture provides that the Company shall not Incur any Indebtedness if the proceeds thereof are used, directly or indirectly, to repay, prepay, redeem, defease, retire, refund or refinance any Subordinated 73 Indebtedness unless such repayment, prepayment, redemption, defeasance, retirement, refunding or refinancing is not prohibited under "-- Limitation on Restricted Payments" or unless such Indebtedness shall be contractually subordinated to the Senior Secured Notes at least to the same extent as such Subordinated Indebtedness. LIMITATION ON PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. Under the terms of the Indenture, the Company shall not, and shall not permit any Subsidiary, to create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (i) pay dividends to or make any other distributions on its Capital Stock, or pay any Indebtedness or other obligations owed to the Company or any other Restricted Subsidiary, (ii) make any Investments in the Company or any other Restricted Subsidiary or (iii) transfer any of its property or assets to the Company or any other Restricted Subsidiary; PROVIDED, HOWEVER, that the foregoing shall not apply to (a) any encumbrance or restriction existing pursuant to the Indenture or any other agreement or instrument as in effect or entered into on the Issue Date (including the New Credit Facility as in effect on the Issue Date); (b) any encumbrance or restriction with respect to a Subsidiary pursuant to an agreement relating to any Acquired Indebtedness of such Subsidiary; PROVIDED, HOWEVER, that such encumbrance or restriction was not Incurred in connection with or in contemplation of such Subsidiary becoming a Subsidiary; (c) any encumbrance or restriction pursuant to an agreement effecting a refinancing, renewal, extension or replacement of Indebtedness referred to in clause (a) or (b) above or contained in any amendment or modification with respect to such Indebtedness; PROVIDED, HOWEVER, that the encumbrances and restrictions contained in any such agreement, amendment or modification are no less favorable in any material respect with respect to the matters referred to in clauses (i), (ii) and (iii) above than the encumbrances and restrictions with respect to the Indebtedness being refinanced, renewed, extended, replaced, amended or modified; (d) in the case of clause (iii) above, customary non-assignment provisions of any leases governing a leasehold interest or of any supply, license or other agreement entered into in the ordinary course of business of the Company or any Subsidiary; (e) any restrictions with respect to a Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Subsidiary pending the closing of such sale or disposition or (f) any encumbrance or restriction existing by reason of applicable law. Nothing contained in the covenant described in this paragraph prevents the sale of assets that secure Indebtedness of the Company or its Subsidiaries. LIMITATION ON SALE/LEASEBACK TRANSACTIONS. Under the terms of the Indenture, the Company shall not, and shall not permit any Restricted Subsidiary to, enter into any Sale/Leaseback Transaction unless (i) the Company or such Subsidiary would be entitled to create a Lien on such property securing Indebtedness in an amount equal to the Attributable Debt with respect to such transaction without equally and ratably securing the Securities pursuant to the covenant entitled "Limitation on Liens" or (ii) the net proceeds of such sale are at least equal to the fair value (as determined by the Board of Directors) of such property and the Company or such Subsidiary shall apply or cause to be applied an amount in cash equal to the net proceeds of such sale to the retirement, within 30 days of the effective date of any such arrangement, of Senior Indebtedness or Indebtedness of a Restricted Subsidiary, PROVIDED, HOWEVER, that the Company or any Restricted Subsidiary may enter into a Sale/Leaseback Transaction as long as the sum of (x) the Attributable Debt with respect to such Sale/Leaseback Transaction and all other Sale/Leaseback Transactions entered into pursuant to this proviso, plus (y) the amount of outstanding Indebtedness secured by Liens Incurred pursuant to the proviso to the covenant described under "-- Limitation on Liens" below, does not exceed 5% of Consolidated Net Tangible Assets as determined based on the consolidated balance sheet of the Company as of the end of the most recent fiscal quarter for which financial statements are available. LIMITATION ON LIENS. Under the terms of the Indenture, except as described under "-- Security," the Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, incur or permit to exist any Lien of any nature whatsoever on any of its properties (including, without limitation, Capital Stock), whether owned at the date of such Indenture or thereafter acquired, other than (a) pledges or deposits made by such Person under workers' compensation, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for payment of Indebtedness) or leases to which such Person is a party, or deposits to secure statutory or regulatory 74 obligations of such Person or deposits of cash of United States Government bonds to secure surety, appeal or performance bonds to which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent, in each case Incurred in the ordinary course of business; (b) Liens imposed by law such as carriers', warehousemen's and mechanics' Liens, in each case, arising in the ordinary course of business and with respect to amounts not yet due or being contested in good faith by appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made; or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be diligently prosecuting appeal or other proceedings for review; (c) Liens for property taxes not yet subject to penalties for non-payment or which are being contested in good faith and by appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made; (d) Liens in favor of issuers or surety bonds or letters of credit issued pursuant to the request of and for the account of such Person in the ordinary course of its business; PROVIDED, HOWEVER, that such letters of credit may not constitute Indebtedness; (e) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties or liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not Incurred in connection with Indebtedness or other extensions of credit and which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person; (f) Liens securing Indebtedness Incurred to finance the construction of, purchase of, or repairs, improvements or additions to, property (including Acquisition Indebtedness Incurred pursuant to clause (ii) of the penultimate paragraph under "-- Limitation on the Incurrence of Indebtedness"); PROVIDED, HOWEVER, that the Lien may not extend to any other property owned by the Company or any Restricted Subsidiary at the time the Lien is incurred, and the Indebtedness secured by the Lien may not be issued more than 180 days after the later of the acquisition, completion of construction, repair, improvement, addition or commencement of full operation of the property subject to the Lien; (g) Liens existing on the Issue Date (other than Liens relating to Indebtedness or other obligations being repaid or Liens that are otherwise extinguished with the proceeds of the Offering), (h) Liens on property of a Person (excluding Capital Stock) of such Person at the time such Person becomes a Subsidiary; PROVIDED, HOWEVER, that any Lien may not extend to any other property owned by the Company or any Restricted Subsidiary; (i) Liens on property at the time the Company or a Subsidiary acquires the property, including any acquisition by means of a merger or consolidation with or into the Company or a Subsidiary; PROVIDED, HOWEVER, that such Liens are not incurred in connection with, or in contemplation of, such merger or consolidation; and PROVIDED, FURTHER, that the Lien may not extend to any other property owned by the Company or any Restricted Subsidiary; (j) Liens securing Indebtedness or other obligations of a Subsidiary owing to the Company or a Wholly Owned Subsidiary, including without limitation, the Indebtedness Incurred under the Intercompany Notes, PROVIDED that any Lien securing Indebtedness pursuant to any Intercompany Notes shall be limited to the inventory and accounts receivable of the Subsidiary of the Company issuing such Intercompany Note; (k) Liens incurred by a Person other than the Company or any Subsidiary on assets that are the subject of a Capitalized Lease Obligation to which the Company or a Subsidiary is a party; PROVIDED, HOWEVER, that any such Lien may not secure Indebtedness of the Company or any Subsidiary (except by virtue of clause (x) of the definition of "Indebtedness") and may not extend to any other property owned by the Company or any Restricted Subsidiary; (l) Liens on inventory and accounts receivable of the Company and its subsidiaries securing Indebtedness permitted to be Incurred under the provision described in clause (iv) of the penultimate paragraph under "-- Limitation on the Incurrence of Indebtedness"; (m) Liens to secure any refinancing, refunding, extension, renewal or replacement (or successive refinancings, refundings, extensions, renewals or replacements) as a whole, or in part, of any Indebtedness secured by any Lien referred to in the foregoing clauses (f), (g), (h), (i) and (m), PROVIDED, HOWEVER, that (x) such new Lien shall be limited to all or part of the same property that secured the original Lien (plus improvements on such property) and (y) the Indebtedness secured by such Lien at such time is not increased (other than by an amount necessary to pay fees and expenses, including premiums, related to the refinancing, refunding, extension, renewal or replacement of such Indebtedness); and (n) Liens by which the Senior Secured Notes are secured equally and ratably with other Indebtedness of the Company pursuant to 75 this paragraph, without effectively providing that the Senior Secured Notes shall be secured equally and ratably with (or prior to) the obligations so secured for so long as such obligations are so secured; PROVIDED, HOWEVER, that the Company may incur other Liens other than on the Collateral to secure Indebtedness as long as the sum of (x) the amount of outstanding Indebtedness secured by Liens incurred pursuant to this proviso plus (y) the Attributable Debt with respect to all outstanding leases in connection with Sale/ Leaseback Transactions entered into pursuant to the proviso under "-- Limitation on Sale/Leaseback Transactions," does not exceed 5% of Consolidated Net Tangible Assets as determined with respect to the Company as of the end of the most recent fiscal quarter for which financial statements are available. CHANGE OF CONTROL. Under the terms of the Indenture, in the event of a Change of Control, the Company shall make an offer to purchase (the "Change of Control Offer") the Senior Secured Notes then outstanding at the time at a purchase price equal to 101% of the Accreted Value thereof plus accrued interest to the Change of Control Purchase Date (as defined below) on the terms set forth in this provision. The date on which the Company shall purchase the Securities pursuant to this provision (the "Change of Control Purchase Date") shall be no earlier than 30 days, nor later than 60 days, after the notice referred to below is mailed, unless a longer period shall be required by law. The Company shall notify the Trustee in writing promptly after the occurrence of any Change of Control of the Company's obligation to purchase the Senior Secured Notes. Notice of a Change of Control Offer shall be mailed by the Company to the Holders of the Senior Secured Notes at their last registered address (with a copy to the Trustee and the Paying Agent) within thirty (30) days after a Change in Control has occurred. The Change of Control Offer shall remain open from the time of mailing until five (5) Business Days before the Change of Control Purchase Date. The notice shall contain all instructions and materials necessary to enable such Holders to tender (in whole or in part) the Senior Secured Notes pursuant to the Change of Control Offer. The notice, which shall govern the terms of the Change of Control Offer, shall state: (a) that the Change of Control Offer is being made pursuant to the Indenture; (b) the purchase price and the Change of Control Purchase Date; (c) that any Senior Secured Note not surrendered or accepted for payment will continue to accrue interest; (d) that any Senior Secured Note accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Purchase Date if payment is made; (e) that any Holder electing to have a Senior Secured Note purchased (in whole or in part) pursuant to a Change of Control Offer will be required to surrender the Senior Secured Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Senior Secured Note completed, to the Paying Agent at the address specified in the notice (or otherwise make effective delivery of the Senior Secured Note pursuant to book-entry procedures and the related rules of the applicable depositories) at least five Business Days before the Change of Control Purchase Date; and (f) that any Holder will be entitled to withdraw his or her election if the Paying Agent receives, not later than three Business Days prior to the Change of Control Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Senior Secured Note the Holder delivered for purchase and a statement that such Holder is withdrawing his or her election to have the Senior Secured Note purchased. On the Change of Control Purchase Date, the Company shall (i) accept for payment the Senior Secured Notes, or portions thereof, surrendered and properly tendered and not withdrawn, pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent money sufficient to pay the purchase price plus accrued interest of all the Senior Secured Notes or portions thereof, so accepted and (iii) deliver to the Trustee the Senior Secured Notes so accepted together with an Officers' Certificate stating that such securities have been accepted for payment by the Company. The Paying Agent shall promptly mail or deliver to Holders of securities so accepted payment in an amount equal to the purchase price. Holders whose Securities are purchased only in part will be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered. TRANSACTIONS WITH AFFILIATES. Under the terms of the Indenture, the Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, enter into, permit to exist, renew or extend any transaction or series of transactions (including, without limitation, the sale, purchase, exchange or lease of any assets or property or the rendering of any services) with any Affiliate of the Company, any Plaster Entity, 76 any Lindsey Entity or Energy unless (i) the terms of such transaction or series of transactions are (A) no less favorable to the Company or such Restricted Subsidiary, as the case may be, than would be obtainable in a comparable transaction or series of related transactions in arm's-length dealings with an unrelated third party and, in the case of a transaction or series of transactions involving payments or consideration in excess of $100,000, approved by a majority of the Outside Directors, and (B) set forth in writing, if such transaction or series of transactions involves aggregate payments or consideration in excess of $250,000, and (ii) with respect to a transaction or series of transactions involving aggregate payments or consideration in excess of $1 million, such transaction or series of transactions has been determined, in the written opinion of an independent nationally recognized investment banking firm, to be fair, from a financial point of view, to the Company or such Restricted Subsidiary. The foregoing provisions do not prohibit (i) the payment of reasonable fees to directors of the Company and its subsidiaries, (ii) scheduled payments made pursuant to the terms of any of the Basic Agreements, as the terms of each such agreement are in effect on the Issue Date, or (iii) any transaction between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries otherwise permitted by the terms of the Indenture. Any transaction which has been determined, in the written opinion of an independent nationally recognized investment banking firm, to be fair, from a financial point of view, to the Company or the applicable Restricted Subsidiary shall be deemed to be in compliance with this provision. SALES OF ASSETS. Under the terms of the Indenture, neither the Company nor any Restricted Subsidiary shall consummate any Asset Sale unless (i) the Company or such Restricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the fair market value, as determined in good faith by the Board of Directors, of the shares or assets subject to such Asset Sale, (ii) at least 80% of the consideration thereof received by the Company or such Restricted Subsidiary is in the form of Additional Assets or cash or cash equivalents which cash equivalents are promptly converted into cash by the Person receiving such payment and (iii) an amount equal to 100% of the Net Available Cash is applied by the Company (or such Subsidiary, as the case may be) as set forth herein. Under the terms of the Indenture, the Company shall not permit any Unrestricted Subsidiary to make any Asset Sale unless such Unrestricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the fair market value of the shares or assets so disposed of as determined in good faith by the Board of Directors. Under the terms of the Indenture, within 360 days (such period being the "Application Period") following the consummation of an Asset Sale, the Company or such Restricted Subsidiary shall apply the Net Available Cash from such Asset Sale as follows: (i) FIRST, to the extent the Company or such Restricted Subsidiary elects, to reinvest in Additional Assets; (ii) SECOND, to the extent of the balance of such Net Available Cash after application in accordance with clause (i), and to the extent the Company or such Restricted Subsidiary elects (or is required by the terms of any Senior Indebtedness or any Indebtedness of such Restricted Subsidiary), to prepay, repay or purchase (A) secured Senior Indebtedness or (B) Indebtedness (other than any Preferred Stock) of a Restricted Subsidiary in either case other than Indebtedness owed to the Company (except to the extent that the proceeds of any such repayment received by the Company are used to repay secured Senior Indebtedness of the Company or an Affiliate of the Company), (iii) THIRD, to the extent of the balance of such Net Available Cash after application in accordance with clause (i) and (ii), to make an offer to purchase the Senior Secured Notes at not less than 100% of their Accreted Value, plus accrued interest (if any) pursuant to and subject to the conditions set forth in the Indenture; PROVIDED, HOWEVER that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (ii) or (iii) above, the Company or Restricted Subsidiary shall retire such Indebtedness and cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. To the extent that any Net Available Cash of Asset Sales remains after the application of such Net Available Cash in accordance with this paragraph, the Company or such Restricted Subsidiary may utilize such remaining Net Available Cash in any manner set forth in clause (i) or clause (ii) above. To the extent that any or all of the Net Available Cash of any Foreign Asset Sale is prohibited or delayed by applicable local law from being repatriated to the United States, the portion of such Net Available Cash so affected shall not be required to be applied at the time provided above, but may be retained by the 77 applicable Restricted Subsidiary so long, but only so long, as the applicable local law will not permit repatriation to the United States (the Company hereby agreeing to promptly take or cause the applicable Restricted Subsidiary to promptly take all actions required by the applicable local law to permit such repatriation). Once such repatriation of any of such affected Net Available Cash is permitted under the applicable local law, such repatriation shall be immediately effected and such repatriated Net Available Cash will be applied in the manner set forth in this provision as if such Asset Sale had occurred on the date of such repatriation. To the extent that the Board of Directors determines, in good faith, that repatriation of any or all of the Net Available Cash of any Foreign Asset Sale would have a material adverse tax consequence to the Company, the Net Available Cash so affected may be retained outside of the United States by the applicable Restricted Subsidiary for so long as such material adverse tax consequence would continue. Under the Indenture, the Company shall not be required to make an offer to purchase the Senior Secured Notes if the Net Available Cash available from an Asset Sale (after application of the proceeds as provided in clauses (i) and (ii) of the second paragraph of this covenant above) is less than $1,000,000 for any particular Asset Sale (which lesser amounts shall not be carried forward for purposes of determining whether an offer is required with respect to the Net Available Cash from any subsequent Asset Sale). Notwithstanding the foregoing, this provision shall not apply to, or prevent any sale of assets, property, or Capital Stock of Subsidiaries to the extent that the fair market value (as determined in good faith by the Board of Directors) of such asset, property or Capital Stock, together with the fair market value of all other assets, property, or Capital Stock of Subsidiaries sold, transferred or otherwise disposed of in Asset Sales during the twelve month period preceding the date of such sale, does not exceed 5% of Consolidated Net Tangible Assets as determined as of the end of the most recent fiscal quarter, and no violation of this provision shall be deemed to have occurred as a consequence thereof. In the event of the transfer of substantially all (but not all) of the property and assets of the Company as an entirety to a Person in a transaction permitted under the covenant described under "-- Merger and Consolidation", the Successor Corporation shall be deemed to have sold the properties and assets of the Company not so transferred for purposes of this covenant, and shall comply with the provisions of this covenant with respect to such deemed sale as if it were an Asset Sale. LIMITATION ON THE ISSUANCE OF CAPITAL STOCK AND THE INCURRENCE OF INDEBTEDNESS OF RESTRICTED SUBSIDIARIES. Pursuant to the terms of the Indenture, the Company shall not permit any Restricted Subsidiary, directly or indirectly, to issue or sell, and shall not permit any Person other than the Company or a Wholly Owned Subsidiary to own (except to the extent that any such Person may own on the Issue Date), any shares of such Restricted Subsidiary's Capital Stock (including options, warrants or other rights to purchase shares of Capital Stock) except, to the extent otherwise permitted by the Indenture, (i) to the Company or another Restricted Subsidiary that is a Wholly Owned Subsidiary of the Company, or (ii) if, immediately after giving effect to such issuance and sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary for purposes of the Indenture. The Company shall not permit any Restricted Subsidiary, directly or indirectly, to Incur Indebtedness other than pursuant to the second paragraph under "-- Limitation on Indebtedness." LIMITATION ON CHANGES IN THE NATURE OF BUSINESS. The Indenture provides that the Company and its Subsidiaries shall not engage in any line of business other than the business of the sale and distribution of propane gas and operations related thereto for any period of time in excess of 270 consecutive days for any such unrelated line of business. MERGER AND CONSOLIDATION. Under the terms of the Indenture, the Company shall not, in a single transaction or through a series of related transactions, consolidate with or merge with or into any other corporation or sell, assign, convey, transfer or lease or otherwise dispose of all or substantially all of its properties and assets to any Person or group of affiliated Persons unless: (a) either the Company shall be the continuing Person, or the Person (if other than the Company) formed by such consolidation or into which the Company is merged or to which the properties and assets of the Company as an entirety are transferred (the 78 "Successor Corporation"), shall be a corporation organized and existing under the laws of the United States or any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental to the Indenture, executed and delivered to the Trustee, in form and substance reasonably satisfactory to the Trustee, all the obligations of the Company under the Indenture and the Senior Secured Notes; (b) immediately before and immediately after giving effect to such transaction on a pro forma basis (and treating any Indebtedness which becomes an obligation of the Company (or the Successor Corporation if the Company is not the continuing obligor under the Indenture) or any Restricted Subsidiary as a result of such transaction as having been Incurred by such Person at the time of such transaction), no Default shall have occurred and be continuing; (c) the Company shall have delivered, or caused to be delivered, to the respective Trustee an Officers' Certificate and, as to legal matters, an Opinion of Counsel, each in form and substance reasonably satisfactory to the respective Trustee, each stating that such consolidation, merger or transfer and such supplemental indenture comply with this provision and that all conditions precedent herein provided for relating to such transaction have been complied with; (d) immediately after giving effect to such transaction on a pro forma basis (and treating any Indebtedness which becomes an obligation of the Company (or the Successor Corporation if the Company is not the continuing obligor under the Indenture) or a Restricted Subsidiary in connection with or as a result of such transaction as having been Incurred by such Person at the time of such transaction, the Consolidated Coverage Ratio of the Company (or the Successor Corporation if the Company is not the continuing obligor under the Indenture) is at least 1:1, PROVIDED that, if the Consolidated Coverage Ratio before giving effect to such transaction is within the range set forth in column (A) below, then the pro forma Consolidated Coverage Ratio of the Company or the Successor Corporation shall be at least equal to the lessor of (1) the ratio determined by multiplying the percentage set forth in column (B) below by the Consolidated Coverage Ratio of the Company prior to such transaction and (2) the ratio set forth in column (C) below:
(A) (B) (C) - -------------------- ---- -------- 1.11:1 to 1.99:1 90% 1.50:1 2.00:1 to 2.99:1 80% 2.10:1 3.00:1 to 3.99:1 70% 2.40:1 4.00:1 or more 60% 2.50:1;
and (e) immediately after giving effect to such transaction on a pro forma basis (and treating any Indebtedness which becomes an obligation of the Company (or the Successor Corporation if the Company is not the continuing obligor under the Indenture) or a Restricted Subsidiary in connection with or as a result of such transaction as having been Incurred by such Person at the time of such transaction), the Company (or the Successor Corporation if the Company is not the continuing obligor under the Indenture) shall have Consolidated Net Worth in an amount which is not less than the Consolidated Net Worth immediately prior to such transaction. Notwithstanding the foregoing clauses (b), (d) and (e), any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company or any Wholly Owned Subsidiary or Wholly Owned Subsidiaries and no violation of this provision will be deemed to have occurred as a consequence thereof, as long as the requirements of clauses (a) and (c) are satisfied in connection therewith. Upon any such assumption by the Successor Corporation, except in the case of a lease, the Successor Corporation shall succeed to and be substituted for the Company under the Indenture and the Senior Secured Notes and the Company shall thereupon be released from all obligations under the Indenture and under the Senior Secured Notes and the Company as the predecessor corporation may thereupon or at any time thereafter be dissolved, wound up or liquidated. The Successor Corporation thereupon may cause to be signed, and may issue either in its own name or in the name of the Company, all or any of the Senior Secured Notes issuable under the Indenture which theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of the Successor Corporation instead of the Company and subject to all the terms, conditions and limitations prescribed in the Indenture, the Trustee shall authenticate and shall deliver any Senior Secured Notes which the Successor Corporation thereafter shall cause to be signed and delivered to the Trustee for that purpose. All the Senior Secured Notes so issued shall in all 79 respects have the same legal rank and benefit under the Indenture as the Senior Secured Notes theretofore or thereafter issued in accordance with the terms of the Indenture as though all such Senior Secured Notes had been issued at the date of the execution of the Indenture. A Subsidiary Guarantor (other than a Subsidiary Guarantor whose Subsidiary Guarantee is released pursuant to the Indenture in connection with the sale by the Company of all of the Capital Stock of such Subsidiary Guarantor as described under "-- Subsidiary Guarantee") shall not, and the Company shall not permit a Subsidiary Guarantor to, in a single transaction or through a series of related transactions, consolidate with or merge into any other Person (other than a wholly owned Subsidiary of such Subsidiary Guarantor, another Subsidiary Guarantor or the Company) or sell, assign, convey, transfer, or lease or otherwise dispose of all or substantially all of its properties and assets to any Person or group of affiliated persons (other than another Subsidiary Guarantor or the Company) unless: (a) either (A) such Subsidiary Guarantor shall be the continuing corporation or (B) the Person (if other than such Subsidiary Guarantor) formed by such consolidation or into which such Subsidiary Guarantor is merged or the Person which acquires by conveyance, transfer, lease or disposition of all or substantially all of the properties and assets of such Subsidiary Guarantor (a "Successor Subsidiary Guarantor") (1) shall be a corporation, organized and validly existing under the laws of the United States of America or any State thereof or the District of Columbia or Canada and (2) shall expressly assume by an indenture supplemental to the Indenture, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all the obligations of such Subsidiary Guarantor under the Senior Secured Notes and the Indenture; (b) immediately before and after giving effect to such transaction on a pro forma basis (and treating any Indebtedness not previously an obligation of such Subsidiary Guarantor or a Subsidiary of such Subsidiary Guarantor which becomes the obligation of such Subsidiary Guarantor or any of its Subsidiaries in connection with or as a result of such transaction as having been Incurred at the time of such transaction), the Subsidiary Guarantor or Successor Subsidiary Guarantor, as the case may be, shall have a consolidated net worth equal to or greater than the consolidated net worth of such Subsidiary Guarantor immediately prior to such transaction (in each case consolidated net worth shall be calculated in a manner consistent with the manner in which Consolidated Net Worth shall be calculated with respect to the Company); (c) immediately after giving effect to such transaction on a pro forma basis (and treating any Indebtedness not previously an obligation of such Subsidiary Guarantor or a Subsidiary of such Subsidiary Guarantor which becomes the obligation of such Subsidiary Guarantor or any of its Subsidiaries in connection with or as a result of such transaction as having been Incurred at the time of such transaction) no Default shall have occurred and be continuing; (d) immediately after giving effect to such transaction on a pro forma basis (and treating any Indebtedness not previously an obligation of such Subsidiary Guarantor or a Subsidiary of such Subsidiary Guarantor which becomes the obligation of such Subsidiary Guarantor or any of its Subsidiaries in connection with or as a result of such transaction as having been Incurred at the time of such transaction), the consolidated coverage ratio of the Successor Subsidiary Guarantor is equal to the lesser of 2:1 or the consolidated coverage ratio of the predecessor Subsidiary Guarantor immediately prior to such transaction (in each case consolidated coverage ratio shall be calculated in a manner consistent with the manner in which Consolidated Coverage Ratio shall be calculated with respect to the Company); and (e) such Subsidiary Guarantor shall have delivered, or caused to be delivered, to the Trustee an Officers' Certificate and, as to legal matters, an Opinion of Counsel, each in form and substance reasonably satisfactory to the Trustee, each stating that such consolidation, merger, conveyance or transfer or lease and such supplemental indenture comply with the Indenture, and that all conditions precedent relating to such transactions have been complied with. Upon any such consolidation or merger, or any conveyance, transfer, lease, or disposition of all or substantially all of the properties or assets of any Subsidiary Guarantor, except in the case of a lease, the Successor Subsidiary Guarantor shall succeed to and be substituted for such Subsidiary Guarantor under the Indenture, and such Subsidiary Guarantor shall thereupon be released from all obligations thereunder and such Subsidiary Guarantor, as the predecessor Subsidiary Guarantor, may thereupon or at any time thereafter be dissolved, wound up or liquidated. In the case of any such consolidation, merger or transfer, such changes in form (but not in substance) may be made in the Senior Secured Notes thereafter to be issued as may be appropriate. 80 EVENTS OF DEFAULT "EVENTS OF DEFAULT" are defined in the Indenture as (i) default for 30 days in payment of any interest installment due and payable on the Senior Secured Notes, (ii) default in payment of the principal when due on the Senior Secured Notes, or failure to redeem or purchase the Senior Secured Notes when required pursuant to the respective Indenture, (iii) default in performance of any other covenants or agreements in the Indenture, the Senior Secured Notes or the Pledge Agreement and the default continues for 30 days after written notice to the Company by the Trustee or the Collateral Agent or to the Company and the Trustee by the holders of at least 25% in principal amount of the outstanding Senior Secured Notes; PROVIDED that the failure to commence a Change of Control Offer following a Change of Control pursuant to clause (vi) of the definition of "Change of Control" shall not constitute an Event of Default if, during such 30 day period, the Company takes the necessary actions with respect to the Board of Directors to comply with the requirements of clauses (vi)(A), (vi)(B) and (vi)(C) of the definition of "Change of Control", (iv) there shall have occurred either (a) a default by the Company or any Subsidiary under any instrument under which there is or may be secured or evidenced any Indebtedness of the Company or any Subsidiary of the Company (other than the Securities) having an outstanding principal amount of $2,000,000 (or its foreign currency equivalent) or more individually or $5,000,000 (or its foreign currency equivalent) or more in the aggregate that has caused the holders thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity or (b) a default by the Company or any Subsidiary in the payment when due of any portion of the principal under any such instrument, and such unpaid portion exceeds $2,000,000 (or its foreign currency equivalent) individually or $5,000,000 (or its foreign currency equivalent) in the aggregate and is not paid, or such default is not cured or waived, within any grace period applicable thereto; (v) any final judgment or order (not covered by insurance) for the payment of money shall be rendered against the Company or any Subsidiary in an amount in excess of $2,000,000 (or its foreign currency equivalent) individually or $5,000,000 (or its foreign currency equivalent) in the aggregate for all such final judgments or orders against all such Persons (treating any deductibles, self-insurance or retention as not so covered) and shall not be discharged, and there shall be any period of 30 consecutive days following entry of the final judgment or order in excess of $2,000,000 individually or that causes the aggregate amount for all such final judgments or orders outstanding against all such Persons to exceed $5,000,000 during which a stay of enforcement of such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (vi) certain events of bankruptcy, insolvency and reorganization of the Company; (vii) except as permitted by the Indenture, the Trustee fails to have a first priority perfected security interest in the Collateral; and (viii) except as permitted by the Indenture and the Senior Secured Notes, the cessation of effectiveness of any Subsidiary Guarantee as against any Subsidiary Guarantor, or the finding by any judicial proceeding that any such Subsidiary Guarantee is, as to any Subsidiary Guarantor, unenforceable or invalid, or the written denial or disaffirmation by any Subsidiary Guarantor of its obligations under its Subsidiary Guarantee. If any Event of Default (other than an Event of Default described in clause (vi) with respect to the Company) has occurred and is continuing, the Indenture provides that the Trustee may by notice to the Company, or the Holders of not less than 25% in principal amount of the Senior Secured Notes may by notice to the Company and the Trustee, declare the principal amount of the Senior Secured Notes and any accrued and unpaid interest to be due and payable immediately. If an Event of Default described in clause (vi) with respect to the Company occurs, the principal of and interest on all the Senior Secured Notes shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holders of Senior Secured Notes. The Holders of a majority in principal amount of the Senior Secured Notes by notice to the Trustee may rescind any such declaration and its consequences (if the rescission would not conflict with' any judgment or decree) if all existing Events of Default (other than the non-payment of principal of or interest on the Senior Secured Notes which shall have become due by such declaration) shall have been cured or waived. The Company must file annually with the Trustee a certificate describing any Default by the Company in the performance of any conditions or covenants that has occurred under the Indenture and its status. The 81 Company must give the Trustee written notice within 30 days of any Default under the Indenture that could mature into an Event of Default described in clause (iii), (iv), (v), (vi), (vii) or (viii) of the second preceding paragraph. The Trustee is entitled, subject to the duty of the Trustee during a Default to act with the required standard of care, to be indemnified before proceeding to exercise any right or power under the Indenture at the direction of the Holders of the Senior Secured Notes or which requires the Trustee to expend or risk its own funds or otherwise incur any financial liability. The Indenture also provides that the Holders of a majority in principal amount of the Senior Secured Notes issued under the Indenture may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee; however, the Trustee may refuse to follow any such direction that conflicts with law or the Indenture, is unduly prejudicial to the rights of other Holders of the Senior Secured Notes, or would involve the Trustee in personal liability. The Indenture provides that while the Trustee generally must mail notice of a Default or Event of Default to the holders of the Senior Secured Notes within 90 days of occurrence, the Trustee may withhold notice to the Holders of the Senior Secured Notes of any Default or Event of Default (except in payment on the Senior Secured Notes) if the Trustee in good faith determines that the withholding of such notice is in the interest of the Holders of the Senior Secured Notes. MODIFICATION OF THE INDENTURE Under the terms of the Indenture, the Company, the Subsidiary Guarantors and the Trustee may, with the consent of the Holders of a majority in principal amount of the outstanding Senior Secured Notes amend or supplement the Indenture, the Pledge Agreement or the Senior Secured Notes except that no amendment or supplement may, without the consent of each affected Holder, (i) reduce the principal of or change the Stated Maturity of any Senior Secured Note, (ii) reduce the rate of or change the time of payment of interest on any Senior Secured Note, (iii) change the currency of payment of the Senior Secured Notes, (iv) reduce the premium payable upon the redemption of any Senior Secured Note, or change the time at which any such Senior Secured Note may or shall be redeemed, (v) reduce the amount of Senior Secured Notes, the holders of which must consent to an amendment or supplement, (vi) change the provisions of the Indenture relating to Waiver of past defaults, rights of Holders of the Senior Secured Notes to receive payments or the provisions relating to amendments of the Indenture that require the consent of Holders of each affected Senior Secured Note, (vii) directly or indirectly release the Liens on all or substantially all of the collateral securing the Senior Secured Notes or (viii) modify or affect in any manner adverse to the Holders the terms and conditions of the obligation of any Subsidiary Guarantor for the due and punctual payment of the principal of premium, if any, or interest on the Senior Secured Notes. In addition, certain amendments or supplements may be adopted without the consent of Holders. ACTIONS BY NOTEHOLDERS Under the terms of the Indenture, a Holder of Senior Secured Notes may not pursue any remedy with respect to the Indenture or the Senior Secured Notes (except actions for payment of overdue principal or interest), unless (i) the Holder has given notice to the Trustee of a continuing Event of Default, (ii) Holders of at least 25% in principal amount of the Senior Secured Notes have made a written request to the Trustee to pursue such remedy, (iii) such Holder or Holders have offered the Trustee security or indemnity reasonably satisfactory to it against any loss, liability or expense, (iv) the Trustee has not complied with such request within 60 days of such request and offer and (v) the Holders of a majority in principal amount of the Senior Secured Notes have not given the Trustee an inconsistent direction during such 60-day period. DEFEASANCE, DISCHARGE AND TERMINATION DEFEASANCE AND DISCHARGE. The Indenture provides that the Company will be discharged from any and all obligations in respect of the Senior Secured Notes, and the provisions of the Indenture will no longer be in effect with respect to such Senior Secured Notes (except for, among other matters, certain obligations to register the transfer or exchange of such Senior Secured Notes, to replace stolen, lost or mutilated Senior Secured Notes, to maintain paying agencies and to hold monies for payment in trust, and the rights of 82 holders to receive payments of principal and interest thereon), on the 123rd day after the date of the deposit with the appropriate Trustee, in trust, of money or U.S. Government Obligations that, through the payment of interest and principal in respect thereof in accordance with their terms, will provide money in an amount sufficient to pay the principal of, premium, if any, and accrued interest on such Senior Secured Notes, when due in accordance with the terms of the Indenture and such Senior Secured Notes. Such a trust may only be established if, among other things, (i) the Company has delivered to the Trustee either (a) an Opinion of Counsel (who must not be employed by the Company) to the effect that holders will not recognize income, gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred, which Opinion of Counsel must refer to and be based upon a ruling of the Internal Revenue Service or a change in applicable federal income tax law occurring after the date of the Indentures or (b) a ruling of the Internal Revenue Service to such effect and (ii) no Default under the Indenture shall have occurred and be continuing on the date of such deposit or during the period ending on the 123rd day after such date of deposit and such deposit shall not result in or constitute a Default or result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company is a party or by which the Company is bound. DEFEASANCE OF CERTAIN COVENANTS AND CERTAIN EVENTS OF DEFAULT. The Indenture further provides that the provisions of the Indenture will no longer be in effect with respect to the provisions described in clauses (d) and (e) of the first paragraph and clauses (b) and (d) of the third paragraph under "-- Merger and Consolidation," and all the covenants described herein under "-- Covenants," clause (iii) under "-- Events of Default" with respect to such covenants and clauses (d) and (e) of the first paragraph and clauses (b) and (d) of the third paragraph under "-- Merger and Consolidation," and clauses (v) and (vi) under "-- Events of Default" shall be deemed not to be Events of Default under the Indenture, and the provisions described herein under "-- Ranking" shall not apply, upon the deposit with the Trustee, in trust, of money or U.S. Government Obligations that through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of, premium, if any, and accrued interest on the Senior Secured Notes issued thereunder when due in accordance with the terms of the Indenture. Such a trust may only be established if, among other things, the provisions described in clause (ii) of the immediately preceding paragraph have been satisfied and the Company has delivered to the Trustee an Opinion of Counsel (who must not be an employee of the Company) to the effect that the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance of certain covenants and Events of Default and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred. DEFEASANCE AND CERTAIN OTHER EVENTS OF DEFAULT. In the event the Company exercises its option to omit compliance with certain covenants and provisions of the Indenture with respect to the Senior Secured Notes, as described in the immediately preceding paragraph and such Senior Secured Notes are declared due and payable because of the occurrence of an Event of Default that remains applicable, the amount of money or U.S. Government Obligations on deposit with the relevant Trustee will be sufficient to pay principal of and interest on Senior Secured Notes on the respective dates on which such amounts are due but may not be sufficient to pay amounts due on such Senior Secured Notes, at the time of the acceleration resulting from such Event of Default. However, the Company shall remain liable for such payments. TERMINATION OF COMPANY'S OBLIGATIONS IN CERTAIN CIRCUMSTANCES. The Indenture further provides that the Company will be discharged from any and all obligations in respect of the Senior Secured Notes and the provisions of such Indenture will no longer be in effect with respect to the Senior Secured Notes (except to the extent provided under "-- Defeasance and Discharge"), if such Senior Secured Notes mature within one year or all of them are to be called for redemption within one year under arrangements satisfactory to the Trustee for giving the notice of redemption, and the Company deposits with the appropriate Trustee, in trust, money or U.S. Government Obligations that, through the payment of interest and principal in respect thereof in accordance with their terms, will provide money in an amount sufficient to pay the principal of, premium if any and accrued interest on such Senior Secured Notes when due in accordance with the terms of 83 the applicable Indenture and such Senior Secured Notes. Such a trust may only be established if, among other things, (i) no Default under the Indenture shall have occurred and be continuing on the date of such deposit, (ii) such deposit will not result in or constitute a Default or result in a breach or violation of, or constitute a Default under, any other agreement or instrument to which the Company is a party or by which it is bound and (iii) the Company has delivered to the Trustee an Opinion of Counsel stating that such conditions have been complied with. Pursuant to this provision, the Company is not required to deliver an Opinion of Counsel to the effect that Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such deposit and termination, and there is no assurance that Holders would not recognize income, gain or loss for U.S. federal income tax purposes as a result thereof or that Holders would be subject to U.S. federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and termination had not occurred. UNCLAIMED MONEY Under the terms of the Indenture, subject to any applicable abandoned property law, the Trustee will pay to the Company upon request any money held by it for the payment of principal or interest that remains unclaimed for two years. After payment to the Company, Noteholders entitled to such money must look to the Company for payment as general creditors. CONCERNING THE TRUSTEES AND PAYING AGENTS Shawmut Bank Connecticut, National Association will act as Trustee under the Indenture and the Pledge Agreement and will initially be Paying Agent and Registrar for the Senior Secured Notes. The Company has had, from time to time, and may have in the future, other relationships with such bank. Notices to the Trustee, Paying Agent and Registrar under the Indenture should be directed to Shawmut Bank Connecticut, National Association, 777 Main Street -- MSN 238, Hartford, Connecticut 06115, Attention: Corporate Trust Administration. GOVERNING LAW Under the terms of the Indenture the laws of the State of New York govern the Indenture and the Senior Secured Notes. DESCRIPTION OF THE WARRANTS GENERAL The Company will issue an aggregate of Warrants to the purchasers of the Senior Secured Notes. The Warrants will be issued pursuant to a Warrant Agreement (the "Warrant Agreement") to be entered into between the Company and Shawmut Bank Connecticut, National Association, as the Warrant Agent. The following summary of certain provisions of the Warrant Agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Warrant Agreement, including the definitions of certain terms therein. Each Warrant is evidenced by a Warrant Certificate which entitles the holder thereof, at any time, to purchase one share of Common Stock from the Company at a price (the "Exercise Price") of $7.00 per share, subject to adjustment as provided in the Warrant Agreement. The Warrants will be separately transferable from the Notes and may be exercised at any time after , 1994 and prior to , 2004. Warrants that are not exercised by such date will expire. The aggregate number of shares of Common Stock issuable upon exercise of the Warrants is equal to approximately 10% of the outstanding shares of Common Stock, on a fully diluted basis, subject to certain exceptions described in the Warrant Agreement. The Company has authorized and reserved for issuance such number of shares of Common Stock as shall be issuable upon the exercise of all outstanding Warrants. Such shares of Common Stock, when issued, will be duly and validly issued and fully paid and nonassessable. The issuance of Common Stock upon the exercise of the Warrants has been registered with the Securities and Exchange Commission pursuant to the Registration Statement of which this Prospectus forms a part. The Warrants will be issued in the form of a fully registered Global Certificate and will be deposited with, or on behalf of, the Depositary and registered in the name of a nominee of the Depositary. Except as set forth in "Description of the Units -- Form, Denomination and Registration," owners of beneficial 84 interest in such Global Certificate will not be entitled to have Warrants registered in their names, will not receive or be entitled to receive physical delivery of Warrants in definitive form and will not be considered the owners or holders thereof under the Warrant Agreement. No service charge will be made for any registration of transfer or exchange of Warrants, but the Company may require payment of a sum sufficient to cover any transfer tax or other similar governmental charge payable in connection therewith. See "Description of the Units." Upon the occurrence of a merger in connection with which all of the consideration to shareholders of the Company is not cash, the Company or its successor by merger will be required, upon the expiration of the time periods discussed below, to offer to repurchase the Warrants. This feature of the Warrants may have the effect of increasing the cost of purchasing the Company to any acquiror (including an acquiror in an unsolicited merger or similar transaction). CERTAIN DEFINITIONS The Warrant Agreement contains, among others, the following definitions: A "Repurchase Event" is defined to occur if at any time prior to , 2004, the Company consolidates with, merges into or with (where holders of the Common Stock receive consideration in exchange for all or part of such shares of Common Stock), or sells all or substantially all of its assets to another person which has a class of equity securities registered under the Exchange Act or a wholly owned subsidiary of such person, if the consideration for the transaction does not consist solely of cash or if such merger or consolidation is not effected solely for the purpose of changing the Company's state of incorporation or is effected with a Plaster Entity or a Lindsey Entity. A "Financial Expert" is a nationally recognized investment banking firm. An "Independent Financial Expert" is a Financial Expert which does not (or whose directors, executive officers or 5% stockholders do not) have a direct or indirect financial interest in the Company or any of its subsidiaries, which has not been for at least five years, and, at the time that it is called upon to give independent financial advice to the Company, is not (and none of its directors, executive officers or 5% stockholders is) a promoter, director or officer of the Company or any of its subsidiaries. CERTAIN TERMS REPURCHASE Following the occurrence of a Repurchase Event, the Company must make an offer to repurchase for cash all outstanding Warrants (a "Repurchase Offer"). The holders of the Warrants may, until 5:00 p.m. (New York City time) on the date at least 30 but not more than 60 calendar days following the date on which the Company gives notice of such Repurchase Offer (the "Final Surrender Date"), surrender all or part of their Warrants for repurchase by the Company. Except as otherwise provided in the Warrant Agreement, Warrants received by the Warrant Agent in proper form for purchase during a Repurchase Offer prior to the Final Surrender Date are to be repurchased by the Company at a price in cash (the "Repurchase Price") equal to the value (the "Relevant Value"), on the date five business days prior to notice of such Repurchase Offer (the "Valuation Date") relating thereto, of the Common Stock issuable, and other securities of the Company which would have been delivered, upon exercise of the Warrants had the Warrants been exercised, less the Exercise Price therefor. The Relevant Value of the Common Stock and other securities, assuming exercise of all Warrants, on any Valuation Date shall be (i) if the Common Stock (or other securities) is registered under the Exchange Act, deemed to be the average of the closing sales prices of the Common Stock (or other securities) for the 20 consecutive trading days immediately preceding such Valuation Date or, if the Common Stock (or other securities) has been registered under the Exchange Act for less than 20 consecutive trading days before such date, then the average of the closing sales prices for all of the trading days before such date for which closing sales prices are available or (ii) if the Common Stock (or other securities) is not registered under the Exchange Act or if the value cannot be computed under clause (i) above, the value determined (without giving effect to any 85 discount for lack of liquidity, the fact that the Company has no class of equity securities registered under the Exchange Act, or the fact that the shares of Common Stock and other securities issuable upon exercise of the Warrants represent a minority interest in the Company) by an Independent Financial Expert. In the case of clause (ii) of the preceding paragraph, the Board of Directors of the Company is required to select an Independent Financial Expert not less than five business days following any Repurchase Event. Within two calendar days after its selection of the Independent Financial Expert, the Company must deliver to the Warrant Agent a notice setting forth the name of such Independent Financial Expert. The Company also must cause the Independent Financial Expert to deliver to the Company, with a copy to the Warrant Agent, a value report (the "Value Report") which states the Relevant Value of the Common Stock and other securities of the Company, if any, being valued as of the Valuation Date and contains a brief statement as to the nature and scope of the examination of investigation upon which the determination was made. The Warrant Agent will have no duty with respect to the Value Report, except to keep it on file available for inspection by the holders of the Warrants. The determination of the Independent Financial Expert as to Relevant Value in accordance with the provisions of the Warrant Agreement shall be conclusive on all persons. EXERCISE In order to exercise all or any of the Warrants represented by a Warrant Certificate, the holder thereof is required to surrender to the Warrant Agent the Warrant Certificate, a duly executed copy of the subscription form set forth as part of the Warrant Certificate, and payment in full of the Exercise Price for each share of Common Stock or other securities issuable upon exercise of the Warrants as to which a Warrant Certificate is exercised, which payment may be made in cash or by certified or official bank or bank cashier's check payable to the order of the Company. Upon the exercise of any Warrants in accordance with the Warrant Agreement, the Warrant Agent will cause the Company to transfer promptly to or upon the written order of the holder of such Warrant Certificate appropriate evidence of ownership of any shares of Common Stock or other securities or property to which it is entitled, registered or otherwise placed in such name or names as it may direct in writing, and will deliver such evidence of ownership to the person or persons entitled to receive the same and fractional shares, if any, or an amount in cash, in lieu of any fractional shares, if any. NO RIGHTS AS STOCKHOLDERS The holders of unexercised Warrants are not entitled, as such, to receive dividends or other distributions, receive notice of or vote at any meeting of the stockholders, consent to any action of the stockholders, receive notice of any other proceedings of the Company, or any other rights as stockholders of the Company. MERGERS, CONSOLIDATIONS, ETC. Except as provided below, in the event that the Company consolidates with, merges with or into, or sells all or substantially all of its property and assets to another person, each Warrant thereafter shall entitle the holder thereof to receive upon exercise thereof the number of shares of capital stock or other securities or property which the holder of a share of Common Stock is entitled to receive upon completion of such consolidation, merger or sale of assets. If the Company merges or consolidates with, or sells all or substantially all of the property and assets of the Company to, another person (other than an Affiliate of the Company) and, in connection therewith, consideration to the holders of Common Stock in exchange for their shares is payable solely in cash, or in the event of the dissolution, liquidation or winding-up of the Company, then the holders of the Warrants will be entitled to receive distributions on an equal basis with the holders of Common Stock or other securities issuable upon exercise of the Warrants, as if the Warrants had been exercised immediately prior to such event, less the Exercise Price. Upon receipt of such payment, if any, the Warrants will expire and the rights of the holders thereof will cease. If the Company has made a Repurchase Offer that has not expired at the time of such transaction, the holders of the Warrants will be entitled to receive the higher of (1) the amount payable to the holders of the Warrants described above or (2) the Repurchase Price payable to the holders of the Warrants pursuant to such Repurchase Offer. In case of any such merger, consolidation or sale of assets, the surviving or acquiring person and, in the event of any dissolution, liquidation or winding-up of the Company, the Company must deposit promptly with the Warrant Agent the funds, if any, necessary to pay the holders of the Warrants. After such funds and the 86 surrendered Warrant Certificates are received, the Warrant Agent must make payment by delivering a check in such amount as is appropriate (or, in the case of consideration other than cash, such other consideration as is appropriate) to such person or persons as it may be directed in writing by the holders surrendering such Warrants. ADJUSTMENT The number of shares of Common Stock issuable upon the exercise of each Warrant and the Exercise Price are subject to adjustment in certain events, including (a) a dividend or distribution on the Company's Common Stock in shares of its capital stock, or a subdivision, combination, or reclassification of Common Stock, (b) the issuance of rights, options, warrants or convertible or exchangeable securities to all holders of Common Stock entitling them to subscribe for or purchase Common Stock at a price which is lower than the Current Market Value (as defined in the Warrant Agreement) per share of Common Stock, (c) the sale and issuance of shares of Common Stock, or rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase shares of Common Stock at a price per share lower than the Current Market Value per share of the Common Stock in effect immediately prior to such sale or issuance, (taking into account the consideration received for the issuance of such right, warrant, or option plus any consideration to be received upon the exercise thereof) and (d) a distribution of the Common Stock of evidence of indebtedness, assets, cash dividends or distributions (excluding distributions in connection with the dissolution, liquidation or winding up of the Company). Upon the expiration of any rights, options, warrants or conversion or exchange privileges that have previously resulted in an adjustment, if any thereof shall not have been exercised, the Exercise Price and the number of shares of Common Stock issuable upon the exercise of each Warrant shall, upon such expiration, be readjusted. Notwithstanding the foregoing, no adjustment in the Exercise Price or the number of shares of Common Stock issuable upon exercise or Warrants will be required until cumulative adjustments would result in an adjustment of at least one percent in the number of shares of Common Stock purchasable on exercise of the Warrant. DESCRIPTION OF CAPITAL STOCK The authorized capital stock of the Company consists of 20,000,000 shares of Common Stock, par value $.001 per share. As of June 1, 1994, there were 13,832,270 shares of Common Stock outstanding; 129,250 shares of Common Stock subject to options issued but not exercised; and 329,500 shares of Treasury Stock. Immediately following consummation of the Transaction there will be approximately 2,400,000 shares of Common Stock outstanding. GENERAL Each outstanding share of Common Stock will entitle the holder to one vote on all matters presented to stockholders for a vote and have cumulative voting rights. In all elections for directors, each stockholder shall have the right to cast as many votes in the aggregate as shall equal the number of shares held by such stockholder multiplied by the number of directors to be elected at the election, and each shareholder may cast the whole number of votes, either in person or by proxy, for one candidate or distribute them among two or more candidates. Consequently, persons holding less than a majority of shares may by themselves be able to elect one or more directors. The holders of a majority of the Common Stock entitled to vote constitute a quorum at any meeting of stockholders. The By-Laws provide that whenever the vote of stockholders at a meeting thereof is required or permitted to be taken, the meeting and vote of shareholders may be dispensed with, if all the stockholders who would have been entitled to vote upon the action if such meeting were held shall consent in writing to such corporate action being taken. Holders of the Common Stock will have no preemptive rights. MISSOURI LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS Under the General and Business Corporation Law of Missouri, stockholders are generally not liable for the Company's debts or obligations. Pursuant to the General and Business Corporation Law of Missouri, the Company cannot merge with or sell all or substantially all of the assets of the Company, except upon the affirmative vote of the holders of at least two-thirds of the outstanding shares entitled to vote on the proposed merger or sale. 87 Under the General and Business Corporation Law of Missouri, the certain shares acquired in a control share acquisition (as defined in the statute) have the same voting rights as were accorded the shares before the control share acquisition only to the extent granted by resolution approved by the shareholders of the issuing public corporation, UNLESS the corporation's articles of incorporation or bylaws provide that this section does not apply to control share acquisitions of the shares of the corporation. The Company's Certificate of Incorporation provides that Missouri's control share acquisition statute shall not apply to control share acquisitions of shares of the Company. The Company's By-Laws provide that dividends upon the capital stock of the Company may be declared by the Board of Directors at any regular or special meeting. Before payment of any dividend, there may be set aside out of any funds of the Company available for dividends such sum or sums as the Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Company, or for such other purpose as the Directors shall think conducive to the interest of the Company, and the Directors may modify or abolish any such reserve in the manner in which it was created. CERTAIN FEDERAL INCOME TAX CONSIDERATIONS The following is a summary of certain Federal income tax consequences associated with the acquisition, ownership, and disposition of the Senior Secured Notes and the Warrants by holders who acquire the Units on original issue for cash. In the opinion of Wilmer, Cutler & Pickering, tax counsel to the Company, the discussion below fairly summarizes the principal Federal income tax consequences of the acquisition, ownership, and disposition of the Senior Secured Notes and the Warrants by such holders. The following summary does not discuss all of the aspects of Federal income taxation that may be relevant to a prospective holder of the Units in light of his or her particular circumstances or to certain types of holders (including insurance companies, tax-exempt entities, financial institutions or broker-dealers, foreign corporations and persons who are not citizens or residents of the United States) which are subject to special treatment under the Federal income tax laws. In addition, this summary does not describe any tax consequences under state, local, or foreign tax laws. The discussion is based upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, Internal Revenue Service ("IRS") rulings and pronouncements and judicial decisions now in effect, all of which are subject to change at any time by legislative, judicial or administrative action. Any such changes may be applied retroactively in a manner that could adversely affect a holder of the Units. The Company will treat the Senior Secured Notes as indebtedness for federal income tax purposes, and the balance of the discussion is based on the assumption that such treatment will be respected. The Company has not sought and will not seek any rulings from the IRS with respect to the matters discussed below. There can be no assurance that the IRS will not take positions concerning the tax consequences of the purchase, ownership or disposition of the Senior Secured Notes and the Warrants which are different from those discussed herein. PROSPECTIVE PURCHASERS OF UNITS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF ACQUIRING, OWNING AND DISPOSING OF SENIOR SECURED NOTES AND THE WARRANTS, AS WELL AS THE APPLICATION OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS. CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS ALLOCATION OF ISSUE PRICE BETWEEN THE NOTES AND THE WARRANTS. Each Unit is comprised of Senior Secured Notes and Warrants. Consequently, the issue price of a Unit must be allocated between the Senior Secured Notes and the Warrants. The "issue price" of a Senior Secured Note will equal the first price at which a substantial amount of Units is sold for money (excluding for such purposes sales to bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents, or wholesalers) less the amount allocable to the Warrants (based on the relationship of the fair market value of each of the Senior Secured Notes and the Warrants to the fair market value of the Senior Secured Notes and Warrants taken together as a Unit). Based on the foregoing, 88 the Company intends to treat each Senior Secured Note as having been issued with an issue price of $ per $1,000 principal amount, and each Warrant as having been issued with an issue price of $3.65. No assurance can be given, however, that the IRS will not challenge the Company's allocation of the issue price. The Company's allocation of the issue price of the Units will be binding on a holder, unless such holder discloses the use of a different allocation on the applicable form attached to such holder's timely filed Federal income tax return for the year of acquisition of such Unit. Holders intending to use an issue price allocation different from that used by the Company should consult their tax advisors as to the consequences to them of their particular allocation of the issue price of the Unit. AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THE SENIOR SECURED NOTES The Senior Secured Notes will be issued with original issue discount for federal income tax purposes, and holders of the Senior Secured Notes will be required to recognize such original issue discount as ordinary interest income as it accrues on the Senior Secured Notes (regardless of whether the holder is a cash or accrual basis taxpayer). As a result, in certain accrual periods the holder will be required to recognize gross income in excess of the amount of cash payments received. The amount of original issue discount with respect to each Senior Secured Note will be equal to the excess of the "stated redemption price at maturity" of such Senior Secured Note over its issue price, as defined above. The "stated redemption price at maturity" of each Senior Secured Note will include all cash payments (other than stated interest to the extent that it is unconditionally payable at least annually at a single fixed rate ("qualified stated interest")) required to be made thereunder until maturity. Qualified stated interest on the Senior Secured Notes is % per annum. To the extent that the stated interest of % that accrues beginning , 1999 exceeds qualified stated interest, such excess will be included in the Senior Secured Notes' stated redemption price at maturity. TAXATION OF ORIGINAL ISSUE DISCOUNT ON THE SENIOR SECURED NOTES Each holder of a Senior Secured Note will be required to include in gross income (as interest) an amount equal to the sum of the "daily portions" of the original issue discount on the Senior Secured Notes for each day such holder holds a Senior Secured Note. The daily portions of original issue discount required to be included in a holder's gross income will be determined on a constant yield basis by allocating to each day during the taxable year in which the holder holds the Senior Secured Notes a pro rata portion of the original issue discount thereon which is attributable to the "accrual period." The amount of the original issue discount attributable to each accrual period will be the product of the "adjusted issue price" of the Senior Secured Notes at the beginning of such accrual period multiplied by the "yield to maturity" of the Senior Secured Notes, less the amount of any qualified stated interest allocable to the accrual period. Appropriate adjustments will be made in computing the amount of original issue discount attributable to the initial accrual period. The adjusted issue price of the Senior Secured Notes at the beginning of the first accrual period is the issue price. Thereafter, the adjusted issue price of a Senior Secured Note is the issue price of the Senior Secured Note plus the aggregate amount of original issue discount that accrued in all prior accrual periods, and less any payments (other than payments of qualified stated interest) on the Senior Secured Note. The yield to maturity of a Senior Secured Note will be the discount rate that, when used to compute the present value (on a semi-annual compounded basis) of all principal and interest payments to be made under a Senior Secured Note, produces a present value equal to the issue price of the Senior Secured Note. The "accrual periods" of a Senior Secured Note (other than the initial accrual period) are each of the six-month periods during the term of the Senior Secured Note that end on and of each year. TAXATION OF QUALIFIED STATED INTEREST ON THE SENIOR SECURED NOTES Qualified stated interest paid on a Senior Secured Note will generally be taxable to a holder as ordinary interest income at the time it accrues or is received, in accordance with the holder's regular method of accounting for Federal income tax purposes. 89 The Company will furnish annually to certain record holders of the Senior Secured Notes and to the IRS information with respect to original issue discount accruing during the calendar year (as well as qualified stated interest paid during that year) as may be required under applicable regulations. EFFECT OF MANDATORY REPURCHASE AND OPTIONAL REDEMPTION ON ORIGINAL ISSUE DISCOUNT OF THE SENIOR SECURED NOTES In the event the Company is required to make a Change of Control Offer, each holder may require the Company to repurchase such holder's Senior Secured Notes in accordance with such Offer. In addition, in the event of an Asset Sale the Company may be required to make an offer (the "Asset Sale Offer") to purchase the Senior Secured Notes. Treasury Regulations contain special rules for calculating the yield to maturity and maturity on a note in the event the debt instrument provides for a contingency that could result in the acceleration or deferral of one or more payments. Further, Treasury Regulations contain special rules for determining the yield to maturity or maturity of a debt instrument if either the holder or the issuer has an option to defer or accelerate payments. Because neither of these rules apply by reason of a Change of Control Offer or an Asset Sale Offer, the Company has no present intention of treating such repurchase provisions of the Senior Secured Notes as affecting the computation of the yield to maturity or maturity date of any Senior Secured Notes. The Company may redeem the Senior Secured Notes, in whole or part, at any time on or after 1999. The Company may also redeem a limited portion of the Senior Secured Notes (up to $ million principal amount at maturity) prior to 1997, in connection with one or more Public Equity Offerings following which there is a Public Market. Treasury Regulations set forth special rules, relating to the determination of yield to maturity and maturity, for a debt instrument that may be redeemed prior to its stated maturity date at the option of the issuer. These rules should not apply to a debt instrument, and, hence, should not affect the determination of the yield to maturity or the maturity date of such debt instrument, unless the issuer's exercise of its redemption rights would reduce the yield to maturity on such instrument. The Company's exercise of either of these redemption rights would not reduce the yield to maturity on the Senior Secured Notes; therefore the special option rules will not apply to the Senior Secured Notes. SALE OR OTHER TAXABLE DISPOSITION OF THE SENIOR SECURED NOTES The sale or other taxable disposition of a Senior Secured Note will result in the recognition of gain or loss to the holder in an amount equal to the difference between (a) the amount of cash and fair market value of property received (except to the extent attributable to the payment of accrued qualified stated interest) in exchange therefor and (b) the holder's adjusted tax basis in such Senior Secured Note. A holder's initial tax basis in a Senior Secured Note purchased by such holder will be equal to the portion of the issue price of the Units allocable to the Senior Secured Notes, as discussed above. The holder's initial tax basis in a Senior Secured Note will be increased by the amount of original issue discount included in gross income with respect to such Senior Secured Note to the date of disposition and decreased by the amount of payments (other than payments of qualified stated interest) with respect to such Senior Secured Note. Any gain or loss on the sale or other taxable disposition of a Senior Secured Note will be capital gain or loss, assuming a purchaser of the Senior Secured Note holds such security as a "capital asset" (generally property held for investment) within the meaning of Section 1221 of the Code. Any capital gain or loss will be long-term capital gain or loss if the Senior Secured Note had been held for more than one year and otherwise will be short-term capital gain or loss. Payments on such disposition for accrued qualified stated interest not previously included in income will be treated as ordinary interest income. SALE OR OTHER TAXABLE DISPOSITION OF WARRANTS The sale or other taxable disposition of a Warrant (other than as a result of a Repurchase Event, as discussed below) will result in the recognition of gain or loss to the holder in an amount equal to the difference between (a) the amount of cash and fair market value of property received in exchange therefor and (b) the holder's adjusted tax basis in the Warrant, which will equal the amount of the issue price of the 90 Units that is properly allocable to the Warrants as described above. Any gain or loss from the sale or other disposition of a Warrant will be a capital gain or loss if the Warrant is held as a capital asset within the meaning of Section 1221 of the Code. Any such capital gain or loss will be long-term capital gain or loss if the Warrant had been held for more than one year and otherwise will be short-term capital gain or loss. A purchase by the Company of a Warrant pursuant to a Repurchase Event in which the Company elects to repurchase the Warrant may give rise to ordinary income, depending on the application of certain rules under the Code relating to whether stock redemptions result in dividend/ordinary income treatment. As a general rule, no gain or loss will be recognized to a holder upon the exercise of a Warrant. The tax basis of a share of Common Stock so acquired will be equal to the sum of the holder's adjusted tax basis in the exercised Warrant and the exercise price, but the holding period of such share will not include the holding period of the Warrant exercised. Under Section 305 of the Code, adjustments to the exercise price of the Warrants which occur under certain circumstances, or the failure to make such adjustments, may result in a deemed dividend to holders of Common Stock. Upon expiration of a Warrant, a holder will recognize a loss equal to such holder's adjusted tax basis in the Warrant. If the Common Stock issuable upon exercise of the Warrant would have been a capital asset of the holder if acquired by the holder, such loss will be a capital loss. PURCHASERS OF SENIOR SECURED NOTES AT OTHER THAN ORIGINAL ISSUANCE PRICE OR DATE The foregoing does not discuss special rules which may affect the treatment of purchasers that acquire Senior Secured Notes either (a) other than at the time of original issuance or (b) at the time of original issuance other than at the issue price, including those provisions of the Code relating to the treatment of "market discount", "acquisition premium" and "amortizable bond premium." Such purchasers should consult their tax advisors as to the consequences to them of the acquisition, ownership, and disposition of the Senior Secured Notes and the Warrants. BACKUP WITHHOLDING The backup withholding rules require a payor to deduct and withhold a tax if (a) the payee fails to furnish a taxpayer identification number ("TIN") to the payor, (b) the IRS notifies the payor that the TIN furnished by the payee is incorrect, (c) the payee has failed to report properly the receipt of "reportable payments" and the IRS has notified the payor that withholding is required, or (d) there has been a failure of the payee to certify under the penalty of perjury that a payee is not subject to withholding under section 3406 of the Code. As a result, if any one of the events discussed above occurs with respect to a holder of Senior Secured Notes, the Company, its paying agent or other withholding agent will be required to withhold a tax equal to 31% of any "reportable payment" made in connection with the Senior Secured Notes of such holder. A "reportable payment" includes, among other things, amounts paid in respect of interest or original issue discount and amounts paid through brokers in retirement of securities. Any amounts withheld from a payment to a holder under the backup withholding rules will be allowed as a refund or credit against such holder's federal income tax, provided that the required information is furnished to the IRS. Certain holders (including, among others, corporations and certain tax-exempt organizations) are not subject to the backup withholding and, as discussed above, information reporting requirements. CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND TO CORPORATE HOLDERS OF SENIOR SECURED NOTES The Senior Secured Notes will constitute "applicable high yield discount obligations" ("AHYDOs") if (i) the yield to maturity of such Senior Secured Notes is equal to or greater than the sum of the relevant applicable federal rate (the "AFR") plus five percentage points, and (ii) such notes have "significant original discount." The relevant AFR for debt instruments issued in June 1994 is 7.38%. If the Senior Secured Notes constitute AHYDOs, the Company will not be entitled to deduct original issue discount that accrues with respect to such Senior Secured Notes until amounts attributable to original issue discount are paid, although the tax consequences to holders will not be affected. In addition, if the yield to maturity of the Senior Secured Notes exceeds the sum of the relevant AFR plus six percentage points (the "Excess Yield"), the 91 "disqualified portion" of the original issue discount accruing on the Senior Secured Notes will be characterized as a non-deductible dividend with respect to the Company and also may be treated as a dividend distribution solely for purposes of the dividends received deduction of Sections 243, 246 and 246A of the Code with respect to holders which are corporations. In general, the "disqualified portion" of original issue discount for any accrual period will be equal to the product of (i) a percentage determined by dividing the Excess Yield by the yield to maturity, and (ii) the original issue discount for the accrual period. Assuming a corporate holder satisfies the requirements of Sections 243, 246 and 246A of the Code (which include a holding period requirement and a debt financing limitation), such a holder will be entitled to a dividends received deduction (generally at a 70% rate) with respect to the disqualified portion of the accrued original issue discount if the Company has sufficient current or accumulated "earnings and profits". To the extent that the Company's earnings and profits are insufficient, any portion of the original issue discount that otherwise would have been recharacterized as a dividend for purposes of the dividends received deduction will continue to be taxed as ordinary original issue discount income in accordance with the rules described above. DESCRIPTION OF OTHER INDEBTEDNESS NEW CREDIT FACILITY The Company expects to enter into a New Credit Facility contemporaneously with the consummation of this Offering. The following is a brief description of certain terms the Company expects the New Credit Facility will contain, based on the commitment letter it has received from its lender. This summary is qualified in its entirety by reference to the credit agreement governing the New Credit Facility (the "Credit Agreement"). Capitalized terms used in this section and not otherwise defined have the meanings ascribed thereto in the Credit Agreement. The New Credit Facility will be provided by Continental Bank, N.A. ("CBNA") as agent. The Credit Agreement will provide for maximum borrowings under a revolving credit line of $15 million, with available borrowings determined as follows: (i) up to 85% of eligible accounts receivable with eligibility determined by CBNA; (ii) up to 60% of eligible inventory; (iii) for the months of August through January, an additional seasonal overadvance of $3.0 million, but with inventory advances plus the seasonal overadvance not to exceed 80% of eligible inventory. All current assets of the Company (i.e., inventory and receivables) and a negative pledge on fixed assets will secure the Company's obligations under the New Credit Facility. INTEREST AND FEES. Amounts borrowed under the revolving credit line will bear interest at either (i) 1.0% over CBNA's Reference Rate per annum (as defined), or, at the Company's option, (ii) 2.5% over the LIBOR rate. The Company will be required to pay a commitment fee of .375% per annum on the unused portion of the New Credit Facility. The Company will be required to pay a fee of 1% of the total New Credit Facility payable at the closing. PRINCIPAL REPAYMENTS. The New Credit Facility will mature on or about July 1, 1997. FINANCIAL COVENANTS. Under the Credit Agreement, the Company will be subject to certain financial covenants, including financial covenants related to (i) interest coverage, (ii) minimum tangible net worth, (iii) the ratio of liabilities to net worth, and (iv) maximum capital expenditures. In addition, the Credit Agreement will provide a number of other affirmative and negative covenants. EVENTS OF DEFAULT. The Credit Agreement will contain usual and customary provisions specifying various events that shall be events of default and will include cross default and cross acceleration provisions to all material indebtedness of the Company, including the Senior Secured Notes. 92 2007 9% SUBORDINATED DEBENTURES The following is a brief description of certain terms contained in the Company's indenture, as such indenture has been amended, for the 2007 9% Subordinated Debentures and is qualified in its entirety by reference to the indenture, as amended. Capitalized terms used in this section and not otherwise defined have the meanings ascribed thereto in the indenture, as amended Pursuant to an indenture dated June 7, 1983, as amended by the First Supplemental Indenture dated December 13, 1989, the Company is indebted to the holders of $25.9 principal amount of debentures due in 2007. The Company will repurchase approximately $13.7 million principal amount of these debentures, $4.7 million of which will be repurchased from Mr. Plaster, with the proceeds of this Offering. See "Use of Proceeds" and "Certain Relationships and Related Transactions." The 2007 9% Subordinated Debentures represent general unsecured obligations of the Company and rank junior in right of payment to all Senior Indebtedness (as defined) of the Company, including the Senior Secured Notes. The 2007 9% Subordinated Debentures mature on December 31, 2007, unless redeemed before such date. The 2007 9% Subordinated Debentures bear interest at the rate of 9% per annum payable semi-annually on December 31 and June 30 of each year. The 2007 9% Subordinated Debentures are subject to redemption at any time, in whole or in part, at the option of the Company, at a redemption price, beginning January 1, 1993, of 100% of the principal amount thereof, plus accrued and unpaid interest. The Company is required to redeem $1.37 million principal amount 2007 9% Subordinated Debentures commencing December 31, 1993 and on each December 31 thereafter, at 100% of the principal amount thereof plus accrued and unpaid interest. The repurchase of $13.7 million principal amount of these debentures will satisfy the Company's sinking fund obligation through 2004. The 2007 9% Subordinated Debenture indenture contains a number of covenants, including affirmative covenants relating to maintenances of offices or agency, maintenance of corporate existence, and other matters. Events of default under the indenture for the 2007 9% Subordinated Debentures include: (i) failure to pay any interest on any debenture when due and the continuance of such failure for a period of 30 days; (ii) failure to pay the principal or any premium, on any debenture when due whether at maturity or upon redemption by declaration or otherwise, including any Sinking Fund (as defined) payment; (iii) failure to perform or breach of the covenants or agreements on the part of the Company contained in the debenture or in the indenture and the continuance of such failure for a period of 60 days following written notice of such failure; or (iv) certain events of bankruptcy or insolvency. THE UNDERWRITER Under the terms and subject to the conditions in an Underwriting Agreement dated the date hereof, Morgan Stanley & Co. Incorporated (the "Underwriter") has agreed to purchase, and the Company has agreed to sell to the Underwriter, the Units. The Underwriting Agreement provides that the obligation of the Underwriter to pay for and accept delivery of the Units is subject to the approval of certain legal matters by its counsel and to certain other conditions. The Underwriter is obligated to take and pay for all the Units if any are taken. The Company has agreed to indemnify the Underwriter against certain liabilities, including liabilities under the Securities Act of 1933, as amended. The Underwriter proposes to offer part of the Units directly to the public initially at the public offering price set forth on the cover page hereof and part to certain dealers at a price that represents a concession not in excess of % of the principal amount at maturity of the Units. The Underwriter may allow, and such dealers may reallow, a concession not in excess of % of the principal amount at maturity of the Units to certain other dealers. 93 The Company does not intend to apply for listing of the Units, the Senior Secured Notes, the Warrants or the Common Stock on a national securities exchange, but has been advised by the Underwriter that it presently intends to make a market in the Units, the Senior Secured Notes, and the Warrants, as permitted by applicable laws and regulations. The Underwriter is not obligated, however, to make a market in the Units, the Senior Secured Notes or the Warrants and any such market making may be discontinued at any time at the sole discretion of the Underwriter. Accordingly, no assurance can be given as to the liquidity of, or trading markets for, the Units, the Senior Secured Notes and the Warrants. See "Risk Factors -- Absence of Public Market." LEGAL MATTERS The validity of the issuance of the Units offered hereby will be passed upon for the Company by Wilmer, Cutler & Pickering, Washington, D.C. Certain legal matters with respect to the Offering will be passed upon for the Underwriter by Skadden, Arps, Slate, Meagher & Flom, New York, New York. EXPERTS The consolidated financial statements and the related schedules of Empire Gas included in this Prospectus and the Registration Statement have been examined by Baird, Kurtz, & Dobson, independent public accountants, for the periods indicated in its reports thereon which appear elsewhere herein and in the Registration Statement. The consolidated financial statements and schedules examined by Baird, Kurtz & Dobson have been included in reliance on its reports given on its authority as experts in accounting and auditing. AVAILABLE INFORMATION Empire Gas and the Guarantors have filed with the Securities and Exchange Commission (the "Commission") in Washington, D.C. a Registration Statement on Form S-1 under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Units offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement as permitted by the rules and regulations of the Commission. For further information pertaining to the Company and the Units offered hereby, reference is made to the Registration Statement and the exhibits and schedules filed as a part thereof. Statements contained in this Prospectus as to the contents of any contract or any other document referred to are not necessarily complete, and, with respect to any contract or other document filed as an exhibit to the Registration Statement, each such statement is qualified in all respects by reference to such exhibit. The Company is not currently subject to the informational requirements of the Securities Exchange Act of 1934 (the "Exchange Act"). As a result of the Offering, the Company will become subject to such requirements, and in accordance therewith will file periodic reports and other information with the Commission. Empire Gas Operating Corporation (formerly Empire Gas Corporation), a subsidiary of the Company, is currently subject to the informational requirements of the Exchange Act, and in accordance therewith, files periodic reports and other information with the Commission and with the Pacific Stock Exchange. The Registration Statement and the exhibits and schedules thereto, filed by Empire Gas Operating Corporation as well as the reports and information filed by the Company under the Exchange Act, may be inspected and copied at the public reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, or at its regional offices located at Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661-2511 and Suite 1300, 7 World Trade Center, New York, New York 10048. Copies of such material can be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such reports and other information concerning the Company can also be inspected at the Pacific Stock Exchange, 301 Pine Street, San Francisco, California. The Indenture requires the Company to file with the Commission annual reports containing consolidated financial statements and the related report of independent public accountants and quarterly reports containing unaudited consolidated financial statements for the first three quarters of each fiscal year for so long as any Senior Secured Notes are outstanding. 94 INDEX TO FINANCIAL STATEMENTS EMPIRE GAS CORPORATION HISTORICAL: Report of Independent Accountants.......................................... F-2 Consolidated Balance Sheets as of June 30, 1992 and 1993 and as of March 31, 1994 (unaudited).......................................... F-3 Consolidated Statements of Operations for the Years Ended June 30, 1991, 1992, and 1993 and for the Nine Months Ended March 31, 1993 and 1994 (unaudited)....................................... F-4 Consolidated Statements of Stockholders' Equity for the Years June 30, 1991, 1992, and 1993 and for the Nine Months Ended March 31, 1994 (unaudited).......................................... F-5 Consolidated Statements of Cash Flows for the Years Ended June 30, 1991, 1992, and 1993 and for the Nine Months Ended March 31, 1993 and 1994 (unaudited)..................... F-6 Notes to Consolidated Financial Statements................................. F-7 PSNC PROPANE CORPORATION Report of Independent Accountants.......................................... F-17 Balance Sheets as of June 30, 1993 and as of March 31, 1994 (unaudited)...................................... F-18 Statements of Income for the Year Ended June 30, 1993 and for the Nine Months Ended March 31, 1994 (unaudited).................. F-19 Statements of Stockholder's Equity for the Year Ended June 30, 1993 and for the Nine Months Ended March 31, 1994 (unaudited).................. F-20 Statements of Cash Flows for the Year Ended June 30, 1993 and for the Nine Months Ended March 31, 1994 (unaudited).................. F-21 Notes to Financial Statements.............................................. F-22 PRO FORMA: Unaudited Pro Forma Income Statements of PSNC Propane Corporation (PSNC) for the Year Ended June 30, 1993, Nine Months Ended March 31, 1994, and Twelve Months Ended March 31, 1994........................................ P-1 Unaudited Pro Forma Balance Sheet of PSNC Propane Corporation (PSNC) as of March 31, 1994................................... P-7
F-1 INDEPENDENT ACCOUNTANTS' REPORT Board of Directors and Stockholders Empire Gas Corporation Lebanon, Missouri We have audited the accompanying consolidated balance sheets of EMPIRE GAS CORPORATION (FORMERLY EMPIRE GAS ACQUISITION CORPORATION) as of June 30, 1993 and 1992, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended June 30, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of EMPIRE GAS CORPORATION as of June 30, 1993 and 1992, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 1993, in conformity with generally accepted accounting principles. BAIRD KURTZ & DOBSON Springfield, Missouri July 30, 1993 F-2 EMPIRE GAS CORPORATION (FORMERLY EMPIRE GAS ACQUISITION CORPORATION) CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
JUNE 30, -------------------- 1992 1993 --------- --------- MARCH 31, ----------- 1994 ----------- (UNAUDITED) ASSETS CURRENT ASSETS Cash..................................................... $ 216 $ 362 $ 183 Trade receivables, less allowance for doubtful accounts; June 30, 1992 - $2,720, June 30, 1993 - $2,657, March 31, 1994 - $2,953 (NOTE 3).............................. 6,508 8,199 15,072 Inventories (NOTE 3)..................................... 7,913 9,691 9,313 Prepaid expenses......................................... 629 305 299 Deferred income taxes (NOTE 4)........................... -- -- 408 --------- --------- ----------- Total Current Assets................................... 15,266 18,557 25,275 --------- --------- ----------- PROPERTY AND EQUIPMENT, At Cost (NOTE 3) Land and buildings....................................... 11,821 12,215 12,626 Storage and consumer service facilities.................. 113,450 113,821 114,973 Transportation, office and other equipment............... 24,245 25,550 27,668 --------- --------- ----------- 149,516 151,586 155,267 Less accumulated depreciation............................ 34,055 41,906 47,429 --------- --------- ----------- 115,461 109,680 107,838 --------- --------- ----------- OTHER ASSETS Debt acquisition costs, net of amortization.............. -- 475 446 Excess of cost over fair value of net assets acquired, at amortized cost.......................................... 20,212 18,834 17,870 Other.................................................... 532 474 764 --------- --------- ----------- 20,744 19,783 19,080 --------- --------- ----------- $ 151,471 $ 148,020 $ 152,193 --------- --------- ----------- --------- --------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long-term debt (NOTE 3)............ $ 16,590 $ 5,181 $ 6,135 Accounts payable......................................... 5,341 4,485 3,823 Accrued salaries......................................... 1,574 1,573 2,970 Accrued expenses......................................... 2,612 2,193 3,792 Income taxes payable (NOTE 9)............................ 3,094 165 3,822 --------- --------- ----------- Total Current Liabilities............................ 29,211 13,597 20,542 --------- --------- ----------- LONG-TERM DEBT (NOTE 3).................................... 59,372 74,068 66,696 --------- --------- ----------- DUE TO RELATED PARTY (NOTES 2 AND 3)....................... 2,996 -- -- --------- --------- ----------- DEFERRED INCOME TAXES (NOTE 4)............................. 33,428 32,568 31,214 --------- --------- ----------- ACCRUED SELF INSURANCE LIABILITY (NOTE 8).................. 1,563 1,874 2,039 --------- --------- ----------- STOCKHOLDERS' EQUITY....................................... Common; $.001 par value; authorized 20,000,000 shares; issued and outstanding June 30, 1992 - 13,921,458 shares, June 30, 1993 and March 31, 1994 - 13,832,270 shares................................................ 14 14 14 Additional paid-in capital............................. 27,133 27,088 27,088 Retained earnings (deficit)............................ (2,118) 110 5,899 --------- --------- ----------- 25,029 27,212 33,001 Treasury stock, at cost June 30, 1992 - 39,367 shares, June 30, 1993 and March 31, 1994 - 329,500 shares..... (128) (1,299) (1,299) --------- --------- ----------- 24,901 25,913 31,702 --------- --------- ----------- $ 151,471 $ 148,020 $ 152,193 --------- --------- ----------- --------- --------- -----------
See Notes to Consolidated Financial Statements F-3 EMPIRE GAS CORPORATION (FORMERLY EMPIRE GAS ACQUISITION CORPORATION) CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NINE MONTHS ENDED YEAR ENDED JUNE 30, MARCH 31, ---------------------------------- ---------------------- 1991 1992 1993 1993 1994 ---------- ---------- ---------- ---------- ---------- (UNAUDITED) OPERATING REVENUE.................................... $ 121,758 $ 112,080 $ 128,401 $ 111,332 $ 110,108 COST OF PRODUCT SOLD................................. 59,971 50,973 60,202 52,807 50,770 ---------- ---------- ---------- ---------- ---------- GROSS PROFIT......................................... 61,787 61,107 68,199 58,525 59,338 ---------- ---------- ---------- ---------- ---------- OPERATING COSTS AND EXPENSES Provision for doubtful accounts.................... 2,828 214 958 298 413 General and administrative......................... 41,594 39,463 40,437 31,351 32,359 Rent expense to related party (NOTE 2)............. 350 375 450 337 337 Depreciation and amortization...................... 9,552 10,062 10,351 7,672 7,494 ---------- ---------- ---------- ---------- ---------- 54,324 50,114 52,196 39,658 40,603 ---------- ---------- ---------- ---------- ---------- OPERATING INCOME..................................... 7,463 10,993 16,003 18,867 18,735 ---------- ---------- ---------- ---------- ---------- OTHER EXPENSE Interest expense................................... (11,455) (10,406) (8,877) (6,873) (6,446) Interest expense to related party (NOTES 2 AND 3).................................. (583) (315) (949) (668) -- Amortization of debt discount and expense.......... (890) (1,006) (1,686) (1,167) (1,396) Crested Butte litigation (NOTE 8).................. (702) -- -- -- -- Merger proposal costs (NOTE 5)..................... -- (450) -- -- -- Restructuring proposal costs (NOTE 6).............. -- -- (223) -- (674) ---------- ---------- ---------- ---------- ---------- (13,630) (12,177) (11,735) (8,708) (8,516) ---------- ---------- ---------- ---------- ---------- INCOME (LOSS) BEFORE INCOME TAXES.................... (6,167) (1,184) 4,268 10,159 10,219 PROVISION (CREDIT) FOR INCOME TAXES (NOTE 4)......... (1,610) 290 2,040 4,230 4,430 ---------- ---------- ---------- ---------- ---------- NET INCOME (LOSS).................................... $ (4,557) $ (1,474) $ 2,228 $ 5,929 $ 5,789 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- INCOME (LOSS) PER COMMON SHARE (NOTE 1).............. $ (.33) $ (.11) $ .16 $ .41 $ .40 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
See Notes to Consolidated Financial Statements F-4 EMPIRE GAS CORPORATION (FORMERLY EMPIRE GAS ACQUISITION CORPORATION) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS)
ADDITIONAL RETAINED TOTAL PAID-IN EARNINGS TREASURY STOCKHOLDERS' COMMON STOCK CAPITAL (DEFICIT) STOCK EQUITY ------------- ----------- ----------- --------- ------------ BALANCE, JUNE 30, 1990................................. $ 14 $ 27,105 $ 3,913 $ (50) $ 30,982 STOCK OPTIONS EXERCISED................................ -- 13 -- -- 13 NET LOSS............................................... -- -- (4,557) -- (4,557) --- ----------- ----------- --------- ------------ BALANCE, JUNE 30, 1991................................. 14 27,118 (644) (50) 26,438 STOCK OPTIONS EXERCISED................................ -- 15 -- -- 15 PURCHASE OF TREASURY STOCK............................. -- -- -- (78) (78) NET LOSS............................................... -- -- (1,474) -- (1,474) --- ----------- ----------- --------- ------------ BALANCE, JUNE 30, 1992................................. 14 27,133 (2,118) (128) 24,901 STOCK OPTIONS EXERCISED................................ -- 225 -- -- 225 NET INCOME............................................. -- -- 2,228 -- 2,228 SALE OF TREASURY STOCK................................. -- (270) -- 270 -- PURCHASE OF TREASURY STOCK............................. -- -- -- (1,441) (1,441) --- ----------- ----------- --------- ------------ BALANCE, JUNE 30, 1993................................. 14 27,088 110 (1,299) 25,913 NET INCOME (UNAUDITED)................................. -- -- 5,789 -- 5,789 --- ----------- ----------- --------- ------------ BALANCE, MARCH 31, 1994 (UNAUDITED).................... $ 14 $ 27,088 $ 5,899 $ (1,299) $ 31,702 --- ----------- ----------- --------- ------------ --- ----------- ----------- --------- ------------
See Notes to Consolidated Financial Statements F-5 EMPIRE GAS CORPORATION (FORMERLY EMPIRE GAS ACQUISITION CORPORATION) CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
NINE MONTHS ENDED YEAR ENDED JUNE 30, MARCH 31, --------------------------------- -------------------- 1991 1992 1993 1993 1994 --------- --------- ----------- --------- --------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss).................................... $ (4,557) $ (1,474) $ 2,228 $ 5,929 $ 5,789 Items not requiring (providing) cash: Depreciation....................................... 8,263 8,789 9,004 6,663 6,496 Amortization....................................... 2,179 2,279 3,033 2,107 2,394 (Gain) loss on sale of assets...................... 252 (758) 155 (162) 3 Deferred income taxes.............................. (2,210) (810) (860) (571) (1,762) Changes in: Bank overdraft..................................... (872) -- -- -- -- Trade receivables.................................. 1,360 32 (1,691) (9,393) (6,873) Inventories........................................ (1,074) (300) (1,886) (1,251) 378 Accounts payable................................... 1,418 246 (856) (247) (662) Accrued expenses and self insurance................ (560) 1,772 (3,158) 1,828 6,768 Prepaid expenses and other......................... 348 224 272 (350) (218) --------- --------- ----------- --------- --------- Net cash provided by operating activities........ 4,547 10,000 6,241 4,553 12,313 --------- --------- ----------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of assets......................... 497 3,062 1,088 360 153 Purchases of property and equipment.................. (8,629) (6,601) (4,358) (3,098) (4,721) --------- --------- ----------- --------- --------- Net cash used in investing activities............ (8,132) (3,539) (3,270) (2,738) (4,568) --------- --------- ----------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in working capital financing..... 3,500 3,400 (1,875) (200) (3,800) Increase in notes payable to related party........... 1,498 554 -- 45 -- Principal payments on notes payable to related party............................................... (1,116) (3,310) (2,996) -- -- Principal payments on acquisition credit facility.... -- (6,750) (13,250) -- -- Principal payments on other long-term debt........... (195) (191) (182) (134) (162) Debenture sinking fund payments...................... -- -- (528) (528) (2,012) Purchase of debentures from employee benefit plan.... -- -- (778) -- -- Proceeds from issuance of term credit facility....... -- -- 18,000 -- -- Principal payments on term credit facility........... -- -- -- -- (1,950) Stock options exercised.............................. 13 15 173 163 -- Purchase of treasury stock........................... -- (78) (1,441) (142) -- Sale of treasury stock............................... -- -- 52 52 -- --------- --------- ----------- --------- --------- Net cash provided by (used in) financing activities...................................... $ 3,700 $ (6,360) $ (2,825) $ (744) $ (7,924) --------- --------- ----------- --------- --------- INCREASE (DECREASE) IN CASH............................ $ 115 $ 101 $ 146 $ 1,071 $ (179) CASH, BEGINNING OF PERIOD.............................. -- 115 216 216 362 --------- --------- ----------- --------- --------- CASH, END OF PERIOD.................................... $ 115 $ 216 $ 362 $ 1,287 $ 183 --------- --------- ----------- --------- --------- --------- --------- ----------- --------- ---------
See Notes to Consolidated Financial Statements F-6 EMPIRE GAS CORPORATION (Formerly Empire Gas Acquisition Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Three Years Ended June 30, 1991, 1992 and 1993 and for the Nine Months Ended March 31, 1993 and 1994 (Unaudited) NOTE 1 : ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS The Company's principal operations are the sale of LP gas at retail and wholesale. Most of the Company's customers are owners of residential single or multi-family dwellings who make periodic purchases on credit. Such customers are located throughout the United States with the larger number concentrated in the central and southeastern states and along the Pacific coast. The Company was formed in September 1988 to acquire 100% of the stock of Empire Gas Operating Corporation (formerly Empire Gas Corporation) in a transaction which was accounted for by the purchase method of accounting. At acquisition date, asset and liability values were recorded at their market values with respect to the purchase price. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Empire Gas Corporation and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. UNAUDITED INTERIM FINANCIAL STATEMENTS In the opinion of Management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly Empire Gas Corporation's consolidated financial position as of December 31, 1993, and the related consolidated results of its operations and cash flows for the six-month periods ended December 31, 1992 and 1993. All such adjustments are of a normal recurring nature. The results of operations for the nine-month period ended March 31, 1994, are not necessarily indicative of the results to be expected for the full year due to the seasonal nature of the Company's business. REVENUE RECOGNITION POLICY Sales and related cost of product sold are recognized upon delivery of the product or service. INVENTORIES Inventories are valued at the lower of cost or market. Cost is determined by the first-in, first-out method for retail operations and specific identification method for wholesale operations. At June 30 the inventories were:
1992 1993 --------- --------- (IN THOUSANDS) Gas and other petroleum products................ $ 3,199 $ 4,279 Gas distribution parts, appliances and equipment...................................... 4,714 5,412 --------- --------- $ 7,913 $ 9,691 --------- --------- --------- ---------
PROPERTY AND EQUIPMENT Depreciation is provided on all property and equipment on the straight-line method over estimated useful lives of 5 to 33 years. INCOME TAXES Deferred tax liabilities and assets are recognized for the tax effects of differences between the financial statement and tax bases of assets and liabilities. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that a deferred tax asset will not be realized. F-7 EMPIRE GAS CORPORATION (FORMERLY EMPIRE GAS ACQUISITION CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE YEARS ENDED JUNE 30, 1991, 1992 AND 1993 AND FOR THE NINE MONTHS ENDED MARCH 31, 1993 AND 1994 (UNAUDITED) NOTE 1 : ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) RECLASSIFICATION Certain reclassifications have been made to the 1992 and 1991 financial statements to conform to the 1993 financial statement presentation. These reclassifications had no effect on net earnings. AMORTIZATION The debt acquisition costs related to the revolving credit facility and term credit facility (originally $525,000) are being amortized over five years. Amortization of discounts on debentures (Note 3) is on the effective interest, bonds outstanding method. The excess of cost over fair value of net assets acquired (originally $25,600,000) is being amortized on the straight-line basis over 20 years. INCOME PER COMMON SHARE Income per common share is computed by dividing net income by the weighted average number of common shares and, except where anti-dilutive, common share equivalents outstanding, if any. The weighted average number of common shares outstanding used in the computation of earnings per share was 13,881,091, 13,885,087, and 14,055,407 for each of the fiscal years ended June 30, 1991, 1992, and 1993, respectively. NOTE 2 : RELATED PARTY TRANSACTIONS During each of the last three years, the Company has periodically borrowed funds from an officer of the Company who is also a principal shareholder (the "Shareholder") of the Company and from individuals and corporations related to the Shareholder. The Company had no outstanding borrowings from this related party at June 30, 1993. The amounts of outstanding borrowings from this related party at June 30, 1991 and 1992, were $5,753,000 and $2,996,000, respectively. The maximum amounts borrowed from this related party except for the November 1992 agreement described below during the years ended June 30, 1991, 1992 and 1993, were $5,928,000, $5,753,000 and $3,000,000, respectively. The interest rate on these borrowings was equal to or below the rates available through the working capital facility. Interest expense incurred on these related party borrowings was $583,000, $315,000 and $200,000, for the years ended June 30, 1991, 1992 and 1993, respectively. During November 1992 the Shareholder loaned under a separate agreement $13.25 million to the Company to repay the acquisition credit facility (see Note 3). Interest expense incurred on this related party borrowing for the year ended June 30, 1993, was $749,000. In June 1993, all outstanding borrowings from the Shareholder were repaid using the proceeds from the new term credit facility. The Company provides data processing, office rent and other clerical services to two corporations principally owned by certain officers and shareholders of the Company and is currently being reimbursed $7,000 per month for these services. The Company leases a jet aircraft and an airport hanger from a corporation owned by the Shareholder. The lease requires annual rent payments of $100,000 beginning April 1, 1992, for a period of eight years. In addition to direct lease payments, the Company is also responsible for the operating costs of the aircraft and the hanger. During the years ended June 30, 1992 and 1993, the Company paid direct rent of $25,000 and $100,000, respectively. F-8 EMPIRE GAS CORPORATION (FORMERLY EMPIRE GAS ACQUISITION CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE YEARS ENDED JUNE 30, 1991, 1992 AND 1993 AND FOR THE NINE MONTHS ENDED MARCH 31, 1993 AND 1994 (UNAUDITED) NOTE 2 : RELATED PARTY TRANSACTIONS (CONTINUED) The Company paid $150,000 in each of the three years ended June 30, 1993, to a corporation owned by the Shareholder pursuant to an agreement providing the Company the right to use business guest facilities owned by the corporation. The Company has entered into a lease agreement with a corporation which is principally owned by the Shareholder for the corporate home office, land, buildings and equipment. The lease was extended in 1991 for a term of ten years, with two three-year renewal options. The Company paid $200,000 during each of the three years ended June 30, 1993, related to this lease. NOTE 3 : LONG-TERM DEBT Long-term debt (in thousands) consisted of:
JUNE 30, -------------------- MARCH 31, 1992 1993 1994 --------- --------- ------------ (UNAUDITED) Acquisition credit facility (A)......................... $ 13,250 $ -- $ -- Working capital facility (B)............................ 8,700 -- -- Term credit facility (C)................................ -- 18,000 16,050 Revolving credit facility (C)........................... -- 7,300 3,500 9% Convertible Subordinated Debentures, due 1998 (D)........................................... 17,539 17,767 17,125 9% Subordinated Debentures, due 2007 (E)................ 16,040 15,691 16,097 12% Senior Subordinated Debentures, due 2002 (F)........................................... 19,121 19,361 18,891 Purchase contract obligations (G)....................... 1,312 1,130 1,168 --------- --------- ------------ 75,962 79,249 72,831 Less current maturities................................. 16,590 5,181 6,135 --------- --------- ------------ $ 59,372 $ 74,068 $ 66,696 --------- --------- ------------ --------- --------- ------------ - --------- (A) The acquisition credit agreement to which substantially all the Company's assets were pledged bore interest at 14 1/2%. In November 1992 the principal shareholder of the Company, referred to in Note 2 as the Shareholder, loaned $13.25 million to the Company. The proceeds were used by the Company to repay the acquisition credit facility. The loan was secured by substantially all of the assets of the Company on an equal basis with the working capital facility. The loan had interest at 10% per annum. This loan was repaid in June 1993, with the proceeds from the new term credit facility. (B) The Company's working capital facility, under which substantially all the Company's assets were pledged, provided for borrowings up to $20 million and bore interest at 1% over prime. The agreement provided for a commitment fee of 1/2% per annum of the unadvanced portion of the commitment. This loan was repaid in June 1993 with the proceeds from the new term and revolving credit facilities.
F-9 EMPIRE GAS CORPORATION (FORMERLY EMPIRE GAS ACQUISITION CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE YEARS ENDED JUNE 30, 1991, 1992 AND 1993 AND FOR THE NINE MONTHS ENDED MARCH 31, 1993 AND 1994 (UNAUDITED) NOTE 3 : LONG-TERM DEBT (CONTINUED) At June 30, 1992, the Company was in default of the working capital ratio covenant and a covenant requiring minimum consolidated operating cash flow. The lenders waived the noncompliance with these covenants. (C) The term credit facility and revolving credit facility are provided to the Company by the same lender under one agreement. In June 1993 the proceeds from these new loans were used to repay the $13.25 million loan from Shareholder, working capital facility and other outstanding borrowings to Shareholder. Substantially all of the Company's assets are pledged to the agreement which contains working capital, debt and certain dividend restrictions. These dividend restrictions prohibit the Company from paying common stock cash dividends. The term credit facility bears interest at either 1.125% over prime or 2.625% over the Eurodollar rate. The effective interest rates at June 30, 1993 and March 31, 1994, are approximately 6.2% and 6.1% respectively. The agreement requires quarterly principal payments of $650,000. The revolving credit facility provides for borrowings up to $22 million and bears interest at either 1 % over prime or 2.5 % over the Eurodollar rate. The effective interest rates at June 30, 1993 and March 31, 1994 are approximately 6.2% and 7.0% respectively. The agreement provides for a commitment fee of .5% per annum of the unadvanced portion of the commitment. The Company's unused revolving credit line amounted to $13,448,000 at June 30, 1993, after considering $1,252,000 of letters of credit. At December 31, 1993, the Company was in default of the consolidated working capital covenant. The lender waived the noncompliance with this covenant. (D) The convertible debentures issued in January 1981 were convertible into common stock at a rate equal to $10.31 of principal amount for each share of common stock through December 1989. In December 1989 the Company executed a supplemental indenture for the convertible debentures. The supplemental indenture provides that the holder of each convertible debenture now has, in lieu of the right to convert each debenture into common stock, the right to convert each debenture into the right to receive $3.75 cash for each $10.31 face amount of debentures. The debentures mature in 1998, and at maturity an 8% premium of the outstanding principal amount will be paid. Such premium is being accrued over the term to maturity. The debentures are redeemable at the Company's option, as a whole or in part, at 100% of the principal amount plus accrued interest to the redemption date, on any date prior to maturity. A sinking fund payment sufficient to retire $1,250,000 of principal is required annually on each December 31. The original principal amount of debentures outstanding ($21,854,000) was adjusted to market value (effective interest rate of 14.5%) in October 1988, in accordance with the purchase method of accounting. The discount on these debentures is being amortized over the remaining life of the debentures using the effective interest, bonds outstanding method. The face value of debentures outstanding at June 30, 1993, is $21,230,000. (E) The debentures, issued June 1983, are redeemable at the Company's option, as a whole or in part, at par value. Annual sinking fund payments sufficient to retire $1,366,000 of principal outstanding are required on each December 31. The original principal amount of debentures issued ($27,313,000) was adjusted to market value (effective interest rate of 16.5%) in October 1988, in accordance with the purchase method of accounting.
F-10 EMPIRE GAS CORPORATION (FORMERLY EMPIRE GAS ACQUISITION CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE YEARS ENDED JUNE 30, 1991, 1992 AND 1993 AND FOR THE NINE MONTHS ENDED MARCH 31, 1993 AND 1994 (UNAUDITED) NOTE 3 : LONG-TERM DEBT (CONTINUED) The discount on these debentures is being amortized over the remaining life of the debentures using the effective interest, bonds outstanding method. The face value of debentures outstanding at June 30, 1993, is $26,037,000. (F) The debentures, issued April 1986, are redeemable at the Company's option, as a whole or in part, at 100% of the principal amount plus accrued interest to the redemption date, on any date prior to maturity. Annual sinking fund payments sufficient to retire $690,000 of principal outstanding, are required beginning March 31, 1994. The original principal amount of debentures issued ($23,000,000) was adjusted to market value (effective interest rate of 15.0%) in October 1988, in accordance with the purchase method of accounting. The discount on the debentures is being amortized over the remaining life of the debentures using the effective interest, bonds outstanding method. The face value of debentures outstanding at June 30, 1993, is $22,998,000. (G) Purchase contract obligations arise from the purchase of operating businesses and are collateralized by the equipment and real estate acquired in the respective acquisitions. At June 30, 1992 and 1993, these obligations carried interest rates from 7.5% to 10% and are due periodically through 1999.
Aggregate annual maturities and sinking fund requirements (in thousands) of the long-term debt outstanding at June 30, 1993, are: 1994............................................................ $ 5,181 1995............................................................ 6,027 1996............................................................ 6,025 1997............................................................ 5,973 1998............................................................ 18,469 Thereafter...................................................... 37,574 --------- $ 79,249 --------- ---------
F-11 EMPIRE GAS CORPORATION (FORMERLY EMPIRE GAS ACQUISITION CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE YEARS ENDED JUNE 30, 1991, 1992 AND 1993 AND FOR THE NINE MONTHS ENDED MARCH 31, 1993 AND 1994 (UNAUDITED) NOTE 4 : INCOME TAXES Components of income tax expense (benefit) are as follows:
CURRENT DEFERRED ----------- --------- (IN THOUSANDS) YEAR ENDED JUNE 30, 1991 Tax expense (benefit) before application of tax credits $ 241 $ (1,851) Alternative minimum tax 359 (359) ----------- --------- Tax expense (benefit) $ 600 $ (2,210) ----------- --------- ----------- --------- YEAR ENDED JUNE 30, 1992 Tax expense (benefit) before application of tax credits $ 954 $ (664) Alternative minimum tax 146 (146) ----------- --------- Tax expense (benefit) $ 1,100 $ (810) ----------- --------- ----------- --------- YEAR ENDED JUNE 30, 1993 Tax expense (benefit) before application of tax credits $ 3,548 $ (1,508) Alternative minimum tax credit (648) 648 ----------- --------- Tax expense (benefit) $ 2,900 $ (860) ----------- --------- ----------- ---------
Principal items making up the deferred income tax provisions are as follows:
1991 1992 1993 --------- --------- --------- (IN THOUSANDS) Depreciation and asset dispositions................................... $ (942) $ (1,332) $ (1,439) Amortization of 1981 debenture costs.................................. (130) (190) (284) Allowance for doubtful accounts....................................... (564) -- 23 Accrued expenses...................................................... (201) 936 147 Alternative minimum tax............................................... (359) (146) 648 Other................................................................. (14) (78) 45 --------- --------- --------- $ (2,210) $ (810) $ (860) --------- --------- --------- --------- --------- ---------
Reconciliation of the statutory federal income tax rate to the effective tax rate as a percent of pretax financial income is as follows:
1991 1992 1993 ----------- ----------- ----------- Statutory tax rate................................................... (34.0)% (34.0)% 34.0% State income taxes, net of federal income tax benefits............... 2.1 13.9 4.8 Amortization of excess of cost over fair value of net assets acquired............................................................ 6.3 32.5 9.0 Unamortized excess of cost over fair value of assets sold............ -- 5.7 .9 Other tax accruals................................................... (.5) 6.4 (.9) ----------- ----------- --- Effective tax rate............................................. (26.1)% 24.5 % 47.8% ----------- ----------- --- ----------- ----------- ---
F-12 EMPIRE GAS CORPORATION (FORMERLY EMPIRE GAS ACQUISITION CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE YEARS ENDED JUNE 30, 1991, 1992 AND 1993 AND FOR THE NINE MONTHS ENDED MARCH 31, 1993 AND 1994 (UNAUDITED) NOTE 4 : INCOME TAXES (CONTINUED) CHANGE IN ACCOUNTING PRINCIPLE Effective July 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). As a result of the change, there was no effect on income tax expense and the effect on current-noncurrent classification of deferred assets and liabilities was not material. SFAS 109 requires recognition of deferred tax liabilities and assets for the difference between the financial statement and tax basis of assets and liabilities. Under this new standard, a valuation allowance is established to reduce deferred tax assets if it is more likely than not that a deferred tax asset will not be realized. Prior to July 1, 1993, deferred taxes were determined using the Statement of Financial Accounting Standards No. 96. Deferred tax balances at July 1, 1993, consisted of:
(IN THOUSANDS) Deferred Tax Assets Allowance for doubtful accounts............................................................... $ 1,016 Accounts receivable advance collections....................................................... 182 Self insurance liabilities and contingencies.................................................. 1,474 1981 debenture premium........................................................................ 403 -------------- 3,075 -------------- Deferred Tax Liabilities Accumulated depreciation...................................................................... (33,975) 1981 debenture discount....................................................................... (1,668) -------------- (35,643) -------------- Net Deferred Tax Liability.................................................................... $ (32,568) -------------- --------------
NOTE 5 : MERGER PROPOSAL COSTS During the year ended June 30, 1992, the Company submitted a proposal to acquire a large competitor in the propane business after incurring due diligence costs including professional fees and out-of-pocket expenses in connection with the proposed acquisition. The Company abandoned the proposal and expensed the related $450,000 of costs in 1992. NOTE 6 : RESTRUCTURING PROPOSAL COSTS During the year ended June 30, 1993, the Company was considering proposals to restructure the debt and equity of the Company. The Company abandoned the proposal and expensed the related $223,000 of costs in 1993. NOTE 7 : EMPLOYEE BENEFIT PLANS The Company had a qualified profit-sharing plan which covered substantially all full-time employees under which annual Company contributions were determined by the Board of Directors. No contributions to the plan were made in the past six fiscal years. F-13 EMPIRE GAS CORPORATION (FORMERLY EMPIRE GAS ACQUISITION CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE YEARS ENDED JUNE 30, 1991, 1992 AND 1993 AND FOR THE NINE MONTHS ENDED MARCH 31, 1993 AND 1994 (UNAUDITED) NOTE 7 : EMPLOYEE BENEFIT PLANS (CONTINUED) The Company had an employee stock bonus plan which covered substantially all full-time employees under which no contributions to the plan were made in fiscal years ended June 30, 1992 and 1993. The annual Company contribution was $100,000 in the year ended June 30, 1991, as determined by the Board of Directors. In April 1992 the Company's Board of Directors voted to terminate both employee benefit plans effective June 30, 1992. Applications for a Determination Upon Plan Termination were filed with the Internal Revenue Service (IRS) and were approved in December 1992. The Company liquidated the plans' assets and paid out the plans' funds to participants on March 31, 1993. The Company purchased from the plans the Company's common stock for $1.3 million and Company debentures for $.8 million. NOTE 8 : SELF INSURANCE AND RELATED CONTINGENCIES Under the Company's current insurance program, coverage for comprehensive general liability and vehicle liability is obtained for catastrophic exposures as well as those risks required to be insured by law or contract. The Company retains a significant portion of certain expected losses related primarily to comprehensive general liability and vehicle liability. Under these current insurance programs, the Company self-insures the first $500,000 of coverage (per incident). The Company obtains excess coverage from carriers for these programs on claims-made basis policies. The excess coverage for comprehensive general liability provides a loss limitation that limits the Company's aggregate of self-insured losses to $1 million per policy period. The aggregate cost of obtaining this excess coverage from carriers for the years ended June 30, 1991, 1992 and 1993, was $961,000, $1,222,000 and $1,441,000, respectively. For the policy periods July 1, 1989 through December 30, 1989, and December 31, 1989 through June 30, 1991, the Company has incurred aggregate comprehensive general liability losses in excess of the policies' $1 million loss limit. Additional losses (except for punitive damages), if any, are insured by the excess carrier and should not result in additional expense to the Company. As of June 30, 1993, the Company has not exceeded the $1 million loss limit for the comprehensive general liability policy periods July 1, 1991 through June 30, 1992, and July l, 1992 through June 30, 1993. Provisions for self-insured losses are recorded based upon the Company's estimates of the aggregate self-insured liability for claims incurred. A summary of the self-insurance liability, general and vehicle liability (in thousands) for the years ended June 30, 1991, 1992 and 1993, are:
BEGINNING SELF SELF SELF INSURED ENDING SELF INSURANCE INSURANCE CLAIMS INSURANCE LIABILITY EXPENSES PAID LIABILITY ----------- ----------- --------- ----------- June 30, 1991........... $ 2,070 $ 2,701 $ 2,533 $ 2,238 June 30, 1992........... $ 2,238 $ 1,764 $ 1,336 $ 2,666 June 30, 1993........... $ 2,666 $ 1,148 $ 1,480 $ 2,334
The ending accrued liability for each period includes $500,000 for incurred but not reported claims. The current portion of the ending liability of $350,000, $1,103,000 and $460,000 at June 30, 1991, 1992 and 1993, respectively, is included in accrued expenses in the consolidated balance sheets. The noncurrent portion at the end of each period is included in accrued self-insurance liability. In November 1991 and February 1992, jury verdicts including compensatory and punitive damages were returned in favor of numerous plaintiffs in claims filed against the Company resulting from an explosion in F-14 EMPIRE GAS CORPORATION (FORMERLY EMPIRE GAS ACQUISITION CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE YEARS ENDED JUNE 30, 1991, 1992 AND 1993 AND FOR THE NINE MONTHS ENDED MARCH 31, 1993 AND 1994 (UNAUDITED) NOTE 8 : SELF INSURANCE AND RELATED CONTINGENCIES (CONTINUED) Crested Butte, Colorado, during 1990. All of the compensatory damage awards were settled by the Company's insurance carrier in 1992. The Company paid $300,000 in October 1992 to settle all the remaining punitive damage awards which were accrued at June 30, 1991. The Company and its subsidiaries are also defendants in various other lawsuits related to the self-insurance program which are not expected to have a material adverse effect on the Company's financial position or results of operations. During the years ended June 30, 1991, 1992 and 1993, the Company had obtained workers' compensation coverage from carriers and state insurance pools at annual costs of $810,000, $733,000 and $1,743,000, respectively. Effective July 1, 1993, the Company changed its policy so that it will self-insure the first $500,000 of workers' compensation coverage (per incident). The Company will purchase excess coverage from carriers for workers' compensation claims in excess of the self-insured coverage. Provisions for losses expected under this program will be recorded based upon the Company's estimates of the aggregate liability for claims incurred. The Company will provide letters of credit aggregating approximately $2.3 million in connection with this program of which $582,000 was already provided at June 30, 1993. Interim accruals for the costs of excess coverages, general liability, vehicle liability and workers' compensation are based on an estimate of the related annual costs compared to the estimated total gallons of propane to be sold during the same period. Presently, the resulting accrual rate of expense recognizing these costs is 3.5 cents per gallon sold. The Company currently self insures health benefits provided to the employees of the Company and its subsidiaries. Provisions for losses expected under this program are recorded based upon the Company's estimate of the aggregate liability for claims incurred. The aggregate cost of providing the health benefits was $1,151,000, $1,011,000 and $873,000 for the years ended June 30, 1991, 1992 and 1993, respectively. NOTE 9 : LITIGATION CONTINGENCIES The Company's federal income tax returns for the fiscal years 1979 and 1980 were audited by the Internal Revenue Service (IRS). Income tax due as a result of these audits was approximately $640,000 which was paid during the year ended June 30, 1989. The initial amount of interest due of approximately $2,050,000 as a result of the audits was accrued by the Company for fiscal year 1989 and included in income taxes payable. During settlement discussions with the IRS the Company continued to accrue interest on the unpaid interest amount until the Company paid $2.4 million during August, 1992 to settle all outstanding federal tax audits. The last federal income tax return audited by the IRS was for fiscal year 1987. The Company has no federal income tax audits in process at June 30, 1993. The Company and its subsidiaries are also defendants in various state income tax audits and other business-related lawsuits which are not expected to have a material adverse effect on the Company's financial position or results of operations. F-15 EMPIRE GAS CORPORATION (FORMERLY EMPIRE GAS ACQUISITION CORPORATION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE YEARS ENDED JUNE 30, 1991, 1992 AND 1993 AND FOR THE NINE MONTHS ENDED MARCH 31, 1993 AND 1994 (UNAUDITED) NOTE 10 : STOCK OPTIONS The table below summarizes transactions under the Company's stock option plan:
NUMBER OF SHARES OPTION PRICE ----------- ---------------- Balance June 30, 1990.................................... 495,737 $ .377 - $1.50 Exercised.............................................. (11,858) .377 - 1.50 ----------- Balance June 30, 1991.................................... 483,879 .377 - 1.50 Exercised.............................................. (15,950) .377 - 1.50 ----------- Balance June 30, 1992.................................... 467,929 .377 - 1.50 Exercised.............................................. (338,679) .377 - 1.50 ----------- Balance June 30, 1993.................................... 129,250 1.12 - 1.50 ----------- -----------
NOTE 11 : SUBSEQUENT EVENT The Company is considering an exchange of assets and liabilities of approximately 133 retail subsidiaries plus other non-retail assets for 12,004,430 shares of Company Common Stock, at a fair value of $84,031,000. The proposed shares of stock being redeemed are principally held by the Shareholder described in Note 2. In connection with this transaction, the Company will issue approximately $122 million of new debentures (with expected proceeds before expenses of approximately $100 million) which will be used to retire approximately $72 million of existing debt. The remaining net proceeds will be used to finance an acquisition, repurchase common shares for cash and for working capital. NOTE 12 : ADDITIONAL CASH FLOW INFORMATION (IN THOUSANDS)
JUNE 30, MARCH 31, ------------------------------- -------------------- 1991 1992 1993 1993 1994 --------- --------- --------- --------- --------- (UNAUDITED) NONCASH INVESTING AND FINANCING ACTIVITIES Mortgage obligations incurred on property and equipment purchases.................................. $ 184 $ 102 -- -- $ 200 Short-term note payable issued for the repurchase of debentures from the employee benefit plan............ -- -- -- $ 778 -- Short-term note payable issued for the purchase of Company stock from the employee benefit plan......... -- -- -- $ 1,299 -- ADDITIONAL CASH PAYMENT INFORMATION Interest paid......................................... $ 11,880 $ 11,213 $ 12,185 $ 9,543 $ 6,043 Income taxes paid (net of refunds).................... $ 1,328 $ (441) $ 3,434 $ 2,384 $ 2,529
F-16 INDEPENDENT ACCOUNTANTS' REPORT Board of Directors and Stockholder PSNC Propane Corporation Gastonia, North Carolina We have audited the accompanying balance sheet of PSNC PROPANE CORPORATION (A WHOLLY-OWNED SUBSIDIARY OF PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INC.) as of June 30, 1993, and the related statements of income, stockholder's equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PSNC PROPANE CORPORATION as of June 30, 1993, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. BAIRD, KURTZ & DOBSON Springfield, Missouri May 27, 1994 F-17 PSNC PROPANE CORPORATION BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) ASSETS
JUNE 30, 1993 --------- MARCH 31, 1994 ----------- (UNAUDITED) CURRENT ASSETS Cash and cash equivalents............................................................... $ 1,466 $ 1,094 Trade receivables, less allowance for doubtful accounts; June 30, 1993 -- $160, March 31, 1994 -- $184....................................................................... 512 1,180 Inventories............................................................................. 1,322 700 Prepaid expenses........................................................................ 147 119 Refundable income taxes................................................................. 100 -- Deferred income taxes (NOTE 3).......................................................... 434 434 --------- ----------- Total Current Assets.................................................................. 3,981 3,527 --------- ----------- PROPERTY AND EQUIPMENT, At Cost Land and buildings...................................................................... 1,123 1,109 Storage and consumer service facilities................................................. 9,292 9,255 Transportation, office and other equipment.............................................. 2,354 2,419 --------- ----------- 12,769 12,783 Less accumulated depreciation........................................................... 3,443 3,904 --------- ----------- 9,326 8,879 --------- ----------- OTHER ASSETS.............................................................................. 432 296 --------- ----------- $ 13,739 $ 12,702 --------- ----------- --------- ----------- LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES Accounts payable........................................................................ $ 570 $ 329 Accrued expenses........................................................................ 292 149 Income taxes payable.................................................................... -- 328 Due to related party (NOTE 2)........................................................... 375 462 Advances from related party (NOTE 2).................................................... 9,063 6,813 Cash deposit (NOTE 6)................................................................... -- 250 --------- ----------- Total Current Liabilities............................................................. 10,300 8,331 --------- ----------- DEFERRED INCOME TAXES (NOTE 3)............................................................ 2,188 2,289 --------- ----------- STOCKHOLDER'S EQUITY Common stock; $1 par value; authorized 100,000 shares; issued and outstanding 500 shares................................................................................. 1 1 Retained earnings....................................................................... 1,250 2,081 --------- ----------- 1,251 2,082 --------- ----------- $ 13,739 $ 12,702 --------- ----------- --------- -----------
See Notes to Financial Statements F-18 PSNC PROPANE CORPORATION STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED JUNE 30, 1993 --------- NINE MONTHS ENDED MARCH 31, 1994 ------------ (UNAUDITED) OPERATING REVENUE........................................................................ $ 9,587 $ 9,526 COST OF PRODUCTS SOLD.................................................................... 4,643 4,663 --------- ------------ GROSS PROFIT............................................................................. 4,944 4,863 --------- ------------ OPERATING EXPENSES Provision for doubtful accounts........................................................ 30 34 General and administrative............................................................. 3,770 2,752 Rent expense to related party (NOTE 2)................................................. 68 53 Depreciation and amortization.......................................................... 975 692 --------- ------------ 4,843 3,531 --------- ------------ OPERATING INCOME......................................................................... 101 1,332 INTEREST INCOME.......................................................................... 61 27 --------- ------------ INCOME BEFORE INCOME TAXES............................................................... 162 1,359 PROVISION FOR INCOME TAXES............................................................... 63 528 --------- ------------ NET INCOME............................................................................... $ 99 $ 831 --------- ------------ --------- ------------ INCOME PER COMMON SHARE.................................................................. $ 198 $ 1,662 --------- ------------ --------- ------------
See Notes to Financial Statements F-19 PSNC PROPANE CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (IN THOUSANDS)
TOTAL RETAINED STOCKHOLDER'S COMMON STOCK EARNINGS EQUITY --------------- ----------------- ------------- BALANCE, JUNE 30, 1992................................................. $ 1 $ 1,151 $ 1,152 NET INCOME...................................................... 99 99 ------ ------ ------ BALANCE, JUNE 30, 1993................................................. 1 1,250 1,251 NET INCOME (UNAUDITED).......................................... 831 831 ------ ------ ------ BALANCE, MARCH 31, 1994 (UNAUDITED).................................... $ 1 $ 2,081 $ 2,082 ------ ------ ------ ------ ------ ------
See Notes to Financial Statements F-20 PSNC PROPANE CORPORATION STATEMENTS OF CASH FLOWS (IN THOUSANDS)
NINE YEAR MONTHS ENDED ENDED MARCH 31, 1994 JUNE 30, --------------- 1993 ----------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES Net income............................................................................ $ 99 $ 831 Items not requiring cash: Depreciation........................................................................ 778 568 Amortization........................................................................ 197 124 Deferred income taxes............................................................... 166 101 Loss on sale of assets.............................................................. 26 20 Changes in: Trade receivables................................................................... (60) (668) Inventories......................................................................... (971) 622 Accounts payable.................................................................... 455 (241) Accrued expenses.................................................................... 174 372 Prepaid expenses and other.......................................................... (89) 290 ----------- ------ Net cash provided by operating activities......................................... 775 2,019 ----------- ------ CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of assets.......................................................... 384 145 Purchases of property and equipment................................................... (722) (286) ----------- ------ Net cash used in investing activities............................................. (338) (141) ----------- ------ CASH FLOWS FROM FINANCING ACTIVITIES Repayments of related party advances.................................................. (1,222) (2,250) ----------- ------ Net cash used in financing activities............................................. (1,222) (2,250) ----------- ------ DECREASE IN CASH AND CASH EQUIVALENTS................................................... (785) (372) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.......................................... 2,251 1,466 ----------- ------ CASH AND CASH EQUIVALENTS, END OF PERIOD................................................ $ 1,466 $ 1,094 ----------- ------ ----------- ------
See Notes to Financial Statements F-21 PSNC PROPANE CORPORATION NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 1993 AND NINE MONTHS ENDED MARCH 31, 1994 (UNAUDITED) NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS The Company's principal operations are the sale of LP gas at retail and wholesale. Most of the Company's customers are owners of residential single or multi-family dwellings who make periodic purchases on credit. Such customers are located mainly in North Carolina and South Carolina with the larger number concentrated in North Carolina. The Company is wholly-owned by Public Service Company of North Carolina, Inc. (PSC). UNAUDITED INTERIM FINANCIAL STATEMENTS In the opinion of management, the accompanying unaudited financial statements contain all adjustments necessary to present fairly PSNC Propane Corporation's financial position as of March 31, 1994, and the related results of its operations and cash flows for the nine-month period ended March 31, 1994. All such adjustments are of a normal recurring nature. The results of operations for the nine-month period ended March 31, 1994, are not necessarily indicative of the results to be expected for the full year due to the seasonal nature of the Company's business. REVENUE RECOGNITION Sales and related cost of products sold are recognized upon delivery of the product or service. INVENTORIES Inventories are valued at the lower of cost or market. Cost is determined by the first-in, first-out method. At June 30, 1993, the inventories (in thousands) were: Gas and other petroleum products............................ $ 1,074 Gas distribution parts, appliances and equipment............ 248 --------- $ 1,322 --------- ---------
PROPERTY AND EQUIPMENT Depreciation is provided on all property and equipment on the straight-line method over estimated useful lives of 4 to 30 years. INCOME TAXES Deferred tax liabilities and assets are recognized for the tax effects of differences between the financial statement and tax bases of assets and liabilities. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that deferred tax asset will not be realized. The Company files consolidated income tax returns with its parent, PSC. Income taxes resulting from the consolidated returns are allocated to PSNC Propane Corporation and subsidiaries based upon the separate-return method. EARNINGS PER COMMON SHARE Earnings per common share are computed by dividing net income by the weighted average number of common shares and, except where anti-dilutive, common share equivalents outstanding, if any. The weighted average number of common shares outstanding used in the computation of earnings per share was 500 for the fiscal year ended June 30, 1993. F-22 PSNC PROPANE CORPORATION NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED JUNE 30, 1993 AND NINE MONTHS ENDED MARCH 31, 1994 (UNAUDITED) NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) AMORTIZATION Noncompete agreements, included in other assets, are amortized on a straight-line basis over the life of the agreement, which is generally 60 months. CASH EQUIVALENTS The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. At June 30, 1993, cash equivalents consisted primarily of a repuchase account. NOTE 2: RELATED PARTY TRANSACTIONS The Company rents three of its offices under operating leases with PSC. The leases required aggregate monthly rent payments of $5,900. During the year ended June 30, 1993, the Company paid direct rents of $67,880. At June 30, 1993, the Company had outstanding amounts due to PSC of $375,000 for Company payroll and other expenses paid by the parent which are generally repaid within 60 days. The Company also had at June 30, 1993, outstanding advances of $9,063,000 which were used to finance acquisitions and working capital needs of the Company. Payment of advances are subject to a subordination agreement for the holders of certain PSC debentures. PSC provides payroll processing services to the Company and is currently being reimbursed $4 per employee per month for these services. Included in 1993 PSC payroll charges are $26,000 allocated to the Company for payroll paid to PSC administrative staff. NOTE 3: INCOME TAXES The provision for income taxes includes these components: Taxes currently refundable............................... $(103,000) Deferred income taxes.................................... 166,000 --------- $ 63,000 --------- ---------
The tax effects of temporary differences related to deferred taxes shown on the balance sheet were: Deferred tax assets: Allowance for doubtful accounts...................... $ 65,000 Inventory overhead costs capitalized for tax purposes............................................ 151,000 Pension costs paid deductible in the future.......... 218,000 ------------ 434,000 Deferred tax liabilities: Accumulated depreciation............................. (2,188,000) ------------ Net deferred tax liability......................... $ (1,754,000) ------------ ------------
The above net deferred tax liability is presented on the balance sheet as follows: Deferred tax asset -- current.......................... $ 434,000 Deferred tax liability -- long term.................... (2,188,000) ------------ Net deferred tax liability......................... $ (1,754,000) ------------ ------------
F-23 PSNC PROPANE CORPORATION NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED JUNE 30, 1993 AND NINE MONTHS ENDED MARCH 31, 1994 (UNAUDITED) NOTE 3: INCOME TAXES (CONTINUED) A reconciliation of income tax expense at the statutory rate to the Company's actual income tax expense is shown below: Computed at the statutory rate 34%......................... $ 55,000 Increase resulting from: Nondeductible travel costs............................... 1,000 State income taxes -- net of federal tax benefit......... 7,000 --------- Actual tax provision....................................... $ 63,000 --------- ---------
NOTE 4: PENSION AND 401(K) SAVINGS PLAN PENSION PLAN The Company participates in the noncontributory defined benefit pension plan provided by PSC. The plan covers all employees of the Company who meet the eligibility requirements. To be eligible, an employee must be 21 years of age and have completed one year of continuous service. The plan provides benefits based upon the career earnings of each participant, subject to certain reductions if the employee retires before reaching age 65. 401(K) SAVINGS PLAN The Company participates in the Savings Plan provided by PSC. The Plan covers all employees of the Company who meet certain eligibility requirements. To be eligible, an employee must be 21 years of age and have one year of continuous service. The Company matches a portion of employee contributions made to the Plan, subject to certain limitations. Net pension and 401(k) savings plan expense for the Company's employees participating in the plans, as allocated by PSC to the Company, was $164,000 for the year ended June 30, 1993. NOTE 5: SELF-INSURANCE AND LITIGATION CONTINGENCIES Under the Company's current insurance program, coverage for comprehensive general liability, workers' compensation and vehicle liability is obtained for catastrophic exposures as well as those risks required to be insured by law or contract. The Company retains a significant portion of certain expected losses related primarily to comprehensive general liability, workers' compensation and vehicle liability. Under these current insurance programs, the Company self-insures the first $200,000 of coverage (per incident). The Company obtains excess coverage from carriers for these programs on claims-made basis policies. The aggregate cost of obtaining this excess coverage as a subsidiary under PSC's insurance policies for the year ended June 30, 1993, was approximately $51,000. The Company is a defendant in various lawsuits related to the self-insurance program and other business-related lawsuits which are not expected to have a material adverse effect on the Company's financial position or results of operations. The last PSC consolidated federal income tax audit, which included the Company as a subsidiary, was for 1991. There are no federal income tax audits in process at June 30, 1993. NOTE 6: SUBSEQUENT EVENT SALE OF COMPANY In January 1994 the Company entered into an agreement with Empire Gas Corporation (EGC) to sell the Company's entire operations to EGC. The agreement provides for the sale of all property and equipment for $12 million plus the respective values for inventory and accounts receivable at closing. EGC paid a F-24 PSNC PROPANE CORPORATION NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED JUNE 30, 1993 AND NINE MONTHS ENDED MARCH 31, 1994 (UNAUDITED) NOTE 6: SUBSEQUENT EVENT (CONTINUED) nonrefundable cash deposit of $250,000 in February 1994 under the agreement. In May 1994, EGC obtained an extension of the closing date which can be no later than June 30, 1994. For this extension, EGC paid an additional nonrefundable cash deposit of $250,000. NOTE 7: ADDITIONAL CASH FLOW INFORMATION ADDITIONAL CASH PAYMENT INFORMATION
MARCH 31, 1994 JUNE 30, -------------- 1993 ----------- (UNAUDITED) Income taxes paid (net of refunds)..................... $ (222,000) $ --
F-25 UNAUDITED PRO FORMA INCOME STATEMENTS OF PSNC PROPANE CORPORATION (PSNC) FOR THE YEAR ENDED JUNE 30, 1993, NINE MONTHS ENDED MARCH 31, 1994, AND TWELVE MONTHS ENDED MARCH 31, 1994 The following unaudited income statements show the results of PSNC and the pro forma effects of purchase accounting adjustments in connection with the acquisition of PSNC by EGC as if the acquisition had been consummated as of July 1, 1992. The unaudited pro forma results are not necessarily indicative of the actual results that would have occurred had the acquisition been consummated as of July 1, 1992, or of the future operations of the Company. The pro forma statements of operations reflect reductions in salaries and other expenses related to the corporate headquarters of PSNC. EGC intends to eliminate all employees of the corporate headquarters because it currently is providing these services to its other subsidiaries through its existing home office. In addition to eliminating salaries and other expenses related to the corporate headquarters, EGC intends to eliminate certain guaranteed overtime policies, courier services, answering services, dedicated computer lines, vehicle expenses and advertising costs which will not be necessary to operate PSNC as a subsidiary of EGC. No adjustments were made for any increases in cost required by the addition of PSNC. P-1 PSNC PROPANE CORPORATION UNAUDITED PRO FORMA STATEMENT OF OPERATIONS (IN THOUSANDS)
YEAR ENDED JUNE 30, 1993 ------------------------------------- PURCHASE PSNC ACCOUNTING PROPANE ADJUSTMENTS PRO FORMA CORPORATION ------------- --------- ----------- (UNAUDITED) OPERATING REVENUE.......................................................... $ 9,587 $ $ 9,587 COST OF PRODUCT SOLD....................................................... 4,643 4,643 ----------- --------- GROSS PROFIT............................................................... 4,944 4,944 ----------- --------- OPERATING COSTS AND EXPENSES Provision for doubtful accounts.......................................... 30 30 General and administrative............................................... 3,838 (1,219)(1) 2,619 Depreciation and amortization............................................ 975 83(2) 1,058 ----------- ------------- --------- 4,843 (1,136) 3,707 ----------- ------------- --------- OPERATING INCOME........................................................... 101 1,136 1,237 ----------- ------------- --------- OTHER INCOME (EXPENSE) Interest income (expense)................................................ 61 (1,125)(3) (1,064) Amortization of debt discount and expense................................ -- (423)(4) (423) ----------- ------------- --------- 61 (1,548) (1,487) ----------- ------------- --------- INCOME (LOSS) BEFORE INCOME TAXES.......................................... 162 (412) (250) PROVISION (CREDIT) FOR INCOME TAXES........................................ 63 (163)(5) (100) ----------- ------------- --------- NET INCOME (LOSS).......................................................... $ 99 $ (249) $ (150) ----------- ------------- --------- ----------- ------------- ---------
P-2 PSNC PROPANE CORPORATION UNAUDITED PRO FORMA STATEMENT OF OPERATIONS (IN THOUSANDS)
NINE MONTHS ENDED MARCH 31, 1994 ------------------------------------- PURCHASE PSNC ACCOUNTING PROPANE ADJUSTMENTS PRO FORMA CORPORATION ------------- --------- ----------- (UNAUDITED) OPERATING REVENUE.......................................................... $ 9,526 $ $ 9,526 COST OF PRODUCT SOLD....................................................... 4,663 4,663 ----------- --------- GROSS PROFIT............................................................... 4,863 4,863 ----------- --------- OPERATING COSTS AND EXPENSES Provision for doubtful accounts.......................................... 34 34 General and administrative............................................... 2,805 (911) 1,894 Depreciation and amortization............................................ 692 86 778 ----------- ------------- --------- 3,531 (825) 2,706 ----------- ------------- --------- OPERATING INCOME........................................................... 1,332 825 2,157 ----------- ------------- --------- OTHER INCOME (EXPENSE) Interest income (expense)................................................ 27 (828) (801) Amortization of debt discount and expense................................ -- (353) (353) ----------- ------------- --------- 27 (1,181) (1,154) ----------- ------------- --------- INCOME BEFORE INCOME TAXES................................................. 1,359 (356) 1,003 PROVISION FOR INCOME TAXES................................................. 528 (138) 390 ----------- ------------- --------- NET INCOME................................................................. $ 831 $ (218) $ 613 ----------- ------------- --------- ----------- ------------- ---------
P-3 PSNC PROPANE CORPORATION UNAUDITED PRO FORMA STATEMENT OF OPERATIONS (IN THOUSANDS)
TWELVE MONTHS ENDED MARCH 31, 1994 ------------------------------------- PURCHASE ACCOUNTING PSNC ADJUSTMENTS PRO FORMA PROPANE ------------- --------- CORPORATION ----------- (UNAUDITED) OPERATING REVENUE........................................................ $ 10,605 $ $ 10,605 COST OF PRODUCT SOLD..................................................... 5,164 5,164 ----------- --------- GROSS PROFIT............................................................. 5,441 5,441 ----------- --------- OPERATING COSTS AND EXPENSES Provision for doubtful accounts........................................ 40 40 General and administrative............................................. 3,685 (1,194) 2,491 Depreciation and amortization.......................................... 933 106 1,039 ----------- ------------- --------- 4,658 (1,088) 3,570 ----------- ------------- --------- OPERATING INCOME......................................................... 783 1,088 1,871 ----------- ------------- --------- OTHER INCOME (EXPENSE) Interest income (expense).............................................. 42 (1,102) (1,060) Amortization of debt discount and expense.............................. -- (462) (462) ----------- ------------- --------- 42 (1,564) (1,522) ----------- ------------- --------- INCOME BEFORE INCOME TAXES............................................... 825 (476) 349 PROVISION FOR INCOME TAXES............................................... 291 (161) 130 ----------- ------------- --------- NET INCOME............................................................... $ 534 $ (315) $ 219 ----------- ------------- --------- ----------- ------------- ---------
P-4 PSNC PROPANE CORPORATION NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1993, THE NINE MONTHS ENDED MARCH 31, 1994 AND THE TWELVE MONTHS ENDED MARCH 31, 1994 (1) To record the effect of (a) elimination of salaries of executive and administrative personnel and related costs, (b) elimination of auto and travel expenses related to executive and administrative personnel being terminated, (c) elimination of newspaper, radio, and magazine advertising, (d) elimination of dedicated computer telephone lines and cellular telephones, (e) elimination of temporary service personnel and overtime wages, (f) elimination of payroll taxes related to salaries eliminated and (g) elimination of courier service, credit bureau fees, answering service expense and office supplies.
NINE MONTHS TWELVE MONTHS YEAR ENDED ENDED ENDED JUNE 30, 1993 MARCH 31, 1994 MARCH 31, 1994 ------------- ----------------- ----------------- Executive and administrative salaries............. $ 695,000 $ 521,000 $ 694,000 Auto and travel expenses.......................... 29,000 18,000 25,000 Advertising expenses.............................. 18,000 7,000 12,000 Telephone expenses................................ 56,000 39,000 52,000 Temporary personnel and overtime wages............ 241,000 213,000 254,000 Payroll taxes..................................... 67,000 51,000 67,000 Other expenses.................................... 113,000 62,000 90,000 ------------- -------- ----------------- Total General and Administrative Expense Reduction...................................... $ 1,219,000 $ 911,000 $ 1,194,000 ------------- -------- ----------------- ------------- -------- -----------------
(2) To (a) record additional depreciation based upon the purchase price of PSNC's property and equipment, (b) record amortization on the new non-compete agreement being amortized over five years and (c) eliminate amortization on pre-acquisition non-compete agreements.
NINE MONTHS TWELVE MONTHS YEAR ENDED ENDED ENDED JUNE 30, 1993 MARCH 31, 1994 MARCH 31, 1994 ------------- ----------------- ----------------- Depreciation...................................... $ 180,000 $ 135,000 $ 180,000 New non-compete amortization...................... 100,000 75,000 100,000 Old non-compete amortization...................... (197,000) (124,000) (174,000) ------------- ----------------- ----------------- $ 83,000 $ 86,000 $ 106,000 ------------- ----------------- ----------------- ------------- ----------------- -----------------
(3) To (a) record additional interest expense assuming interest paid at 7% on face value $14,706,000 of new Senior Secured Note borrowings, (b) recognize additional interest expense on the revolving credit facility to reflect the purchase of PSNC's working capital assets and the effect of operational changes and (c) eliminate interest income earned on excess PSNC cash.
NINE MONTHS TWELVE MONTHS YEAR ENDED ENDED ENDED JUNE 30, 1993 MARCH 31, 1994 MARCH 31, 1994 ------------- ----------------- ----------------- Senior Notes, due 2004............................ $ 1,030,000 $ 773,000 $ 1,030,000 Revolving Credit Facility......................... 34,000 27,000 29,000 Interest Income eliminated........................ 61,000 28,000 43,000 ------------- -------- ----------------- $ 1,125,000 $ 828,000 $ 1,102,000 ------------- -------- ----------------- ------------- -------- -----------------
P-5 PSNC PROPANE CORPORATION NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1993, THE NINE MONTHS ENDED MARCH 31, 1994 AND THE TWELVE MONTHS ENDED MARCH 31, 1994 (4) To recognize amortization of the original discount on face value $14,706,000 of new Senior Secured Notes to bring the effective rate of the new debt to 12% using the effective interest method. Year Ended June 30, 1993.......................................... $ 423,000 Nine Months Ended March 31, 1994.................................. $ 353,000 Twelve Months Ended March 31, 1994................................ $ 462,000
(5) To record the estimated income tax reduction, computed at an effective rate of 39%, associated with the additional deductible expense as a result of the acquired operations. P-6 UNAUDITED PRO FORMA BALANCE SHEET OF PSNC PROPANE CORPORATION (PSNC) AS OF MARCH 31, 1994 The following unaudited balance sheet shows the balance sheet of PSNC and the pro forma effects of purchase accounting adjustments in connection with the acquisition of PSNC by EGC as if the acquisition had been completed on March 31, 1994. PSNC PROPANE CORPORATION UNAUDITED PRO FORMA BALANCE SHEET (IN THOUSANDS)
MARCH 31, 1994 ----------------------------------------- EFFECTS OF PSNC PSNC PSNC PROPANE ADJUSTMENTS ACQUISITION CORPORATION --------------- ----------- ----------- (UNAUDITED) CURRENT ASSETS Cash and cash equivalents............................................ $ 1,094 $ (1,094)(1) $ Trade receivables.................................................... 1,180 1,180 Inventories.......................................................... 700 700 Prepaid expenses..................................................... 119 (119)(1) Deferred Income taxes................................................ 434 (434)(5) ----------- ------- ----------- Total current assets............................................... 3,527 (1,647) 1,880 ----------- ------- ----------- PROPERTY AND EQUIPMENT, At Cost, net of accumulated depreciation............................. 8,879 3,121(2) 12,000 ----------- ------- ----------- OTHER ASSETS........................................................... 296 204(3) 500 ----------- ------- ----------- TOTAL ASSETS......................................................... $ 12,702 $ 1,678 $ 14,380 ----------- ------- ----------- ----------- ------- ----------- CURRENT LIABILITIES Current maturities of long-term debt................................. $ $ 100(4) $ 100 Accounts payable and accrued expenses................................ 1,056 (806)(1) 250 Advances from and due to related party............................... 7,275 (7,275)(4) ----------- ------- ----------- 8,331 (7,981) 350 ----------- ------- ----------- LONG-TERM DEBT......................................................... 14,030(4) 14,030 ------- ----------- DEFERRED INCOME TAXES.................................................. 2,289 (2,289)(5) ----------- ------- STOCKHOLDER'S EQUITY Common stock......................................................... 1 (1)(5) Retained earnings.................................................... 2,081 (2,081)(5) ----------- ------- 2,082 (2,082) ----------- ------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......................... $ 12,702 $ 1,678 $ 14,380 ----------- ------- ----------- ----------- ------- ----------- - --------- (1) To eliminate working capital assets and liabilities not acquired under the acquisition agreement. (2) To adjust the property and equipment to the acquisition price which is the fair value. (3) To (a) eliminate pre-acquisition deferred charges, intangibles and non-compete agreements and (b) record a $500,000 non-compete agreement issued as part of the PSNC acquisition by EGC. (4) To (a) eliminate advances from and amounts due to PSNC's parent of $7,275,000 not assumed under the acquisition agreement, (b) record the estimated net proceeds ($12,000,000) of Senior Secured Notes issued to acquire the fixed assets, (c) record a revolver advance of $1,630,000 to purchase the accounts receivable and inventory under the acquisition agreement (net of the $250,000 deposit made under the agreement) and (d) record a liability to PSNC's parent of $500,000 for the non-compete agreement issued. (5) To eliminate pre-acquisition equity and deferred income taxes.
P-7 EMPIRE GAS CORPORATION PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the expenses expected to be incurred in connection with the Offering described in this Registration Statement. All of such amounts (except the Commission Registration Fee and the NASD Filing Fee) are estimates. Commission Registration Fee................................................ $ 34,483 NASD Filing Fee............................................................ 10,500 Blue Sky Fees and Expenses (excluding legal fees).......................... * Printing and Engraving Costs............................................... * Legal Fees and Expenses.................................................... * Accounting Fees and Expenses............................................... * Trustee's Fees and Expenses................................................ * Miscellaneous.............................................................. * --------- Total...................................................................... $ * --------- --------- - --------- * To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS. Article 9 of the Company's Articles of Incorporation, included as Exhibit 3.1 to this Registration Statement to this Registration Statement, provide for the indemnification of the directors, officers and employees of the Company. The effect of these provisions is to indemnify the directors, officers and employees for all expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by them in connection with any threatened, pending or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, in which they are involved by reason of their affiliation with the Company if they acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action, with no reasonable cause to believe their actions unlawful, to the full extent allowed by The General and Business Corporation Law of Missouri; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person's conduct shall have been adjudged to be knowingly fraudulent or deliberately dishonest or willful misconduct. Article VII, Section 7, of the Company's By-Laws, included as Exhibit 3.2 to this Registration Statement, provides that the Company may purchase liability insurance that indemnifies directors, officers, employees and agents against any liability and any expense asserted against or incurred by them in their capacity as such and also may establish a separate fund alone or with other companies to provide and maintain such insurance. At the present time, the Company has not purchased any such insurance, or established or contributed to any such fund. Section 351.355 of The General and Business Corporation Law of Missouri requires a corporation to indemnify a director, officer, employee, or agent of the corporation who has been successful on the merits or otherwise in defense of any action for all expenses, including attorneys' fees, actually and reasonably incurred in connection with the action. The Section also permits indemnification for expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred in connection with actions, suits or proceedings in which a corporate director, officer, employee, or agent, if he is a party by reason of the fact that he is or was such a director, officer, employee, or agent, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Indemnification in connection with actions by or in the right of the corporation is permitted only for expenses, including attorneys' fees, and amounts paid in settlement actually and reasonably incurred by him in connection with the defense or settlement of the action or suit and only if the officer, director, or II-1 employee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and is not adjudged liable for negligence or misconduct in the performance of his duty to the corporation, unless the court otherwise provides. The employment agreement between the Company and Robert W. Plaster provides that Mr. Plaster, his heirs, executors and administrators shall be indemnified by the Company against fines, judgments, amounts paid in settlement and reasonable expenses, including attorneys' fees, incurred by him in connection with any pending, threatened or completed action, suit or proceeding against him arising by reason of his being or having been a director or officer of the Company, any parent company, or any subsidiary, except in relation to any matter in which his conduct has been finally adjudged to have been knowingly fraudulent, deliberately dishonest or willful misconduct. The obligation of the Company to provide indemnification to Mr. Plaster shall continue after termination of the employment agreement with respect to any matter against Mr. Plaster arising by reason of his having been a director or officer of the Company or of any parent or subsidiary of the Company prior to such termination, or by reason of any action taken by him as such director or officer prior to the date of such termination. The Company has entered into agreements with directors, persons named as becoming directors, and certain of its officers whereby the Company shall indemnify such persons for all damages, judgments, settlements and costs, cost of investigation, and cost of defense of legal actions (other than fines or other obligations which it is prohibited by applicable law from paying for any reason), because of any claim or claims made against such persons of any act or omission or neglect or breach of duty including any actual or alleged error or misstatement committed or suffered while acting in the capacity and solely because of such capacity as officer and director. Reference is made to Section 7 of the form of Underwriting Agreement filed as Exhibit 1.1 to the Registration Statement for additional indemnification provisions. See Item 17 for the Registrants' undertakings with respect to indemnification. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. The following information relates to securities of the Company issued or sold within the past three years that were not registered under the Securities Act. The purchases described below were made upon exercise of options issued pursuant to the Company's Incentive Stock Option Plan. On July 16, 1991, Mr. Alan Simer, an employee of the Company, purchased 2,010 shares of the Company's common stock, $.001 par value, at $.377 per share and 8,000 shares at $1.50 per share for an aggregate purchase price of $12,758. On August 20, 1991, Mr. Larry Bisig, an employee of the Company, purchased 8,000 shares of the Company's common stock at $1.50 per share and 7,950 shares at $.377 per share, for an aggregate purchase price of $14,997. On October 29, 1992, Joseph L. Schaefer, an executive officer of the Company, purchased 39,750 shares of the Company's common stock at $.377 per share, 20,250 shares at $1.125 per share, and 20,000 shares at $1.50 per share, for an aggregate purchase price of $67,767. On October 30, 1992, Mr. Stephen R. Plaster, a director and executive officer of the Company, purchased 13,500 shares of the Company's common stock, $.001 par value, at $1.125 per share and 6,000 shares at $1.50 per share, for an aggregate purchase price of $24,188. On November 27, 1992, Mr. Dwight Gilpin, an officer of the Company, purchased 26,500 shares of the Company's common stock at $.377 per share, 20,000 shares at $1.50 per share, and 3,500 shares at $1.125 per share, for an aggregate purchase price of $43,929. II-2 On December 10, 1992, Ms. Gwendolyn B. VanDerhoef, an officer of the Company, purchased 26,500 shares of the Company's common stock at $.377 per share, 8,000 shares at $1.50 per share, and 5,500 shares at $1.125 per share, for an aggregate purchase price of $28,178. On December 21, 1992, Mr. Robert L. Wooldridge, an executive officer of the Company, purchased 72,467 shares of the Company's common stock at $.377 per share, for an aggregate purchase price of $27,320. On December 31, 1992, Floyd Waterman, an officer of the Company, purchased 5,000 shares of the Company's common stock at $1.125 per share, for an aggregate purchase price of $5,625, and Earl L. Noe, an executive officer of the Company, purchased 26,500 shares of the Company's common stock at $.377 per share for an aggregate purchase price of $9,991. On February 17, 1993, Mr. Paul Stahlman, an officer of the Company, purchased 18,712 shares of the Company's common stock at $.377 per share, for an aggregate purchase price of $7,054. On April 15, 1993, Mr. Charles Jones, an officer of the Company, purchased 13,250 shares of the Company's common stock at $.377 per share, for an aggregate purchase price of $4,995. On June 18, 1993, Mr. James E. Acreman, an executive officer of the Company, purchased 13,250 shares of the Company's common stock at $.377 per share, for an aggregate purchase price of $4,995. These transactions were completed without registration under the Securities Act in reliance on Section 4(2) of the Act. In relying on this exemption, the Company relied on representations from these purchasers that each purchaser was an accredited investor, that each was acquiring the shares for investment purposes, and that each had received adequate opportunity to obtain information regarding the Company. The shares issued contained a legend restricting transfer of the shares absent registration under the Securities Act or the availability of an exemption therefrom. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits
EXHIBIT NO. DESCRIPTION - ----------- ------------------------------------------------------------------------------- 1.1* Form of Underwriting Agreement 2.1 Stock Redemption Agreement, dated May 7, 1994, between the Company, EGOC, Energy, Robert W. Plaster, Paul S. Lindsey, Jr., Stephen R. Plaster, Joseph L. Schaefer, the Robert W. Plaster Trust dated December 13, 1988, the Stephen Robert Plaster Trust dated October 30, 1988, the Stephen Robert Plaster Trust dated July 30, 1984, Empire Ranch, Inc., Empire Airlines, Inc., and Evergreen National Corporation (incorporated herein by reference to Exhibit 10.1 to the Empire Gas Operating Corporation (Commission File No. 1-6537-3) Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1994) 2.2+ Stock Redemption Agreement, dated May 7, 1994, between the Company, the Dolly Francine Plaster Trust dated July 30, 1984, the Tammy Jane Plaster Trust dated July 30, 1984, the Cheryl Jean Plaster Schaefer Trust dated October 30, 1988, and the Cheryl Jean Plaster Schaefer Trust dated July 30, 1984 2.3+ Form of Merger Agreement by and between the Company and EGOC 3.1+ Articles of Incorporation of the Company 3.2 Certificate of Amendment of the Certificate of Incorporation of the Company, dated April 26, 1994, relating to the change of name 3.3+ By-laws of the Company
II-3
EXHIBIT NO. DESCRIPTION - ----------- ------------------------------------------------------------------------------- 4.1 Indenture between Empire Gas Corporation and J. Henry Schroder Bank & Trust Company, Trustee, relating to the 9% Subordinated Debentures due December 31, 2007 and the form of 9% Subordinated Debentures due December 31, 2007 (incorporated herein by reference to Exhibit 4(a) to the Empire Incorporated and Exco Acquisition Corp. (Commission File No. 2-83683) Registration Statement on Form S-14 filed with the Commission on May 11, 1983; and First Supplemental Indenture thereto between Empire Gas Corporation (now known as EGOC) and IBJ Schroder Bank & Trust Co., dated as of December 13, 1989 (incorporated herein by reference to Exhibit 4(c) to Empire Gas Corporation (now known as EGOC) Registration Statement on Form 8-B filed with the Commission on February 1, 1990) 4.2 Form of Proposed Indenture between the Company and Shawmut Bank Connecticut, National Association, Trustee, relating to the % Senior Secured Notes due 2004, including the form of % Senior Secured Notes due 2004, the form of the Guarantee and the form of the Pledge Agreement 4.3 Form of Proposed Warrant Agreement 5.1* Opinion of Wilmer, Cutler & Pickering as to the validity of the issuance of the Senior Secured Notes 8.1* Form of opinion of Wilmer, Cutler & Pickering with respect to certain tax matters 10.1+ Shareholder Agreement, dated as of October 28, 1988, by and among Empire Gas Acquistion Corporation and Robert W. Plaster Trust, Robert W. Plaster, Trustee; Paul S. Lindsey, Jr.; Stephen R. Plaster Trust, Lynn C. Hoover, Trustee; Cheryl Plaster Schaefer Trust, Lynn C. Hoover, Trustee; Robert L. Wooldridge; Gwendolyn B. VanDerhoef; Dwight Gilpin; Luther Henry Gill; Valeria Schall; Floyd J. Waterman; Larry W. Bisig; Larry Weis; Robert Heagerty; Murl J. Waterman; Earl L. Noe; Thomas Flak; Michael Kent St. John; James E. Acreman; Carolyn S. Rein; Dan Weatherly; Nina Irene Craighead; Joyce Sue Kinnett; Edwin H. McMahon; Paul Stahlman; Ralph Wilson; Alan Simer; Ferrell Stamper; and Empire Gas Corporation Employee Stock Ownership Plan, Robert W. Plaster, Trustee 10.2+ 1989 Incentive Stock Option Plan 10.3* Form of Credit Agreement between the Company and Continental Bank, as agent 10.4 Lease Agreement, dated May 7, 1994, between the Company and Evergreen National Corporation (incorporated herein by reference to Exhibit F of Exhibit 10.1 to the Empire Gas Operating Corporation (Commission File No. 1-6537-3) Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1994) 10.5 Form of Services Agreement, dated May 7, 1994, between the Company and Empire Service Corporation (incorporated herein by reference to Exhibit G of Exhibit 10.1 to the Empire Gas Operating Corporation (Commission File No. 1-6537-3) Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1994) 10.6 Non-Competition Agreement, dated May 7, 1994, by and among the Company, Energy, Robert W. Plaster, Stephen R. Plaster, Joseph L. Schaefer, Paul S. Lindsey, Jr. (incorporated herein by reference to Exhibit E of Exhibit 10.1 to the Empire Gas Operating Corporation (Commission File No. 1-6537-3) Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1994) 10.7* Form of Employment Agreement between the Company and Paul S. Lindsey, Jr. 10.8* Form of Asset Purchase Agreement by and among the Company, Empiregas, Inc. of North Carolina, PSNC Propane Corporation, and Public Service Company of North Carolina, Incorporated 10.9 Form of Indemnification Agreement between the Company and Douglas A. Brown
II-4
EXHIBIT NO. DESCRIPTION - ----------- ------------------------------------------------------------------------------- 10.10* Form of Tax Indemnification Agreement between the Company and Energy 10.11 Supply Contract No. 1, dated September 13, 1991, between EGOC and Phillips 66 Company 10.12 Supply Contract No. 2, dated September 13, 1991, between EGOC and Phillips 66 Company; and Amendment thereto between EGOC and Phillips 66 Company, dated October 15, 1992 10.13 Supply Contract, dated as of November 4, 1991, between EGOC and Conoco, Inc. 10.14 Supply Contract, dated as of January 21, 1992, between EGOC and Conoco Inc. 10.15 Supply Contract, dated as of January 24, 1992, between EGOC and Conoco, Inc. 10.16 Supply Contract No. 1, dated November 20, 1986, between EGOC and Warren Petroleum Company 10.17 Supply Contract No. 2, dated November 20, 1986, between EGOC and Warren Petroleum Company 10.18 Supply Contract, dated November 22, 1986, between EGOC and Warren Petroleum Company 10.19 Supply Contract, dated November 24, 1986, between EGOC and Warren Petroleum Company 10.20 Supply Contract No. 1, dated June 1, 1993, between EGOC and Warren Petroleum Company 10.21 Supply Contract No. 2, dated June 1, 1993, between EGOC and Warren Petroleum Company 12.1+ Statement regarding computation of ratio of earnings to fixed charges 21.1 Subsidiaries of the Company 23.1+ Consent of Baird, Kurtz & Dobson, dated April 29, 1994 23.2* Consent of Wilmer, Cutler & Pickering, included in the opinion filed as Exhibit 5.1 23.3+ Consent of Douglas A. Brown to being named as a director 23.4+ Second Consent of Baird, Kurtz & Dobson, dated June 3, 1994 23.5* Consent of Valuation Research Corporation 23.6+ Consent of Bruce M. Withers, Jr. to being named as a director 23.7+ Consent of Jim J. Shoemake to being named as a director 23.8 Third Consent of Baird, Kurtz & Dobson, dated June 9, 1994 24.1+ Power of Attorney, located on signature page 25.1+ Statement of Eligibility and Qualification of Trustee on Form T-1 25.2 Report of Condition and Income of Shawmut Bank Connecticut, N.A., for the period ending March 31, 1994 99.1* Opinion of Valuation Research Corporation re solvency - --------- + Previously filed. * To be supplied by amendment.
II-5 (b) Financial Statement Schedules
SCHEDULE DESCRIPTION - ---------- ----------------------------------------------------------------- V. Property and Equipment VI. Accumulated Depreciation VIII. Valuation and Qualifying Accounts X. Supplementary Income Statement Information
ITEM 17. UNDERTAKINGS. The undersigned Registrants hereby undertake as follows: (1) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the provisions described under Item 14 hereof, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by the director, officer, or controlling person thereof in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (2) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (3) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (4) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1993; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (5) For the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (6) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Company has duly caused this Amendment No. 1 to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the District of Columbia on the 9th day of June, 1994. EMPIRE GAS CORPORATION By: _______/s/_Robert W. Plaster______ CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD THE SUBSIDIARY GUARANTORS LISTED BELOW By: _____/s/_Paul S. Lindsey, Jr._____ PRESIDENT OF EACH GUARANTOR Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE CAPACITY IN WHICH SIGNED DATE - ------------------------------------------------------ --------------------------------------- ---------------- Chief Executive Officer and Chairman of /s/Robert W. Plaster* the Board of Empire Gas Corporation June 9, 1994 Robert W. Plaster (principal executive officer) Vice President/Controller of Empire Gas /s/Willis D. Green* Corporation (principal financial and June 9, 1994 Willis D. Green accounting officer) /s/Paul S. Lindsey, Jr. Paul S. Lindsey, Jr. Director of Empire Gas Corporation June 9, 1994 /s/Stephen R. Plaster* Stephen R. Plaster Director of Empire Gas Corporation June 9, 1994 /s/Paul S. Lindsey, Jr. Principal Executive Officer of each of Paul S. Lindsey, Jr. the Subsidiary Guarantors June 9, 1994
II-7
SIGNATURE CAPACITY IN WHICH SIGNED DATE - ------------------------------------------------------ --------------------------------------- ---------------- /s/Valeria Schall* Director of each of the Subsidiary Valeria Schall Guarantors June 9, 1994 /s/Earl L. Noe* Director of each of the Subsidiary Earl L. Noe Guarantors June 9, 1994 *By: /s/Paul S. Lindsey, Jr. Paul S. Lindsey, Jr. ATTORNEY-IN-FACT
II-8 GUARANTORS EMPIRE TANK LEASING CORPORATION EMPIREGAS EQUIPMENT CORPORATION EMPIRE UNDERGROUND STORAGE, INC. EMPIRE INDUSTRIAL SALES CORPORATION UTILITY COLLECTION CORPORATION EMPIREGAS TRANSPORTS, INC. (MISSOURI) EMPIRE AVIATION CORPORATION EMPIREGAS TRANSPORTS, INC. - OR EMPIREGAS INC. OF CLINTON (MISSOURI) EMPIREGAS INC. OF KANSAS CITY EMPIREGAS INC. OF ALBANY EMPIREGAS INC. OF AIKEN EMPIREGAS OF ARMA, INC. EMPIREGAS INC. OF ARNAULDVILLE EMPIREGAS INC. OF AUBURN EMPIREGAS INC. OF BIG RAPIDS EMPIREGAS INC. OF BOLIVAR EMPIREGAS INC. OF BOISE EMPIREGAS INC. OF BOULDER EMPIREGAS INC. OF BOWLING GREEN EMPIREGAS INC. OF BRANDON EMPIREGAS INC. OF BREMERTON EMPIREGAS OF BRISTOW, INC. EMPIREGAS INC. OF BUFFALO EMPIREGAS INC. OF ADRIAN EMPIREGAS INC. OF CAMDENTON EMPIREGAS INC. OF CANON CITY EMPIREGAS INC. OF CANTON EMPIREGAS INC. OF CARTHAGE EMPIREGAS INC. OF CASTLE ROCK EMPIREGAS INC. OF CENTERVILLE EMPIREGAS INC. OF CHARLOTTE EMPIREGAS INC. OF CHASSEL EMPIREGAS INC. OF CHEHALIS EMPIREGAS INC. OF CLINTON, ILLINOIS EMPIREGAS OF COLCORD, INC. EMPIREGAS INC. OF COLE CAMP EMPIREGAS INC. OF COLEMAN EMPIREGAS INC. OF COLORADO SPRINGS EMPIREGAS INC. OF COQUILLE EMPIREGAS INC. OF CUBA EMPIREGAS INC. OF CHETEK EMPIREGAS INC. OF DENVER EMPIREGAS INC. OF DOVER EMPIREGAS INC. OF DURAND EMPIREGAS INC. OF EL DORADO SPRINGS EMPIREGAS INC. OF ELSBERRY EMPIREGAS INC. OF ELSINORE EMPIREGAS INC. OF ESCONDIDO EMPIREGAS INC. OF EUNICE EMPIREGAS INC. OF EVERGREEN SALGAS INC. OF FAIRPLAY EMPIREGAS INC. OF EAU CLAIRE EMPIREGAS INC. OF FORT COLLINS EMPIREGAS INC. OF FOWLER EMPIREGAS INC. OF MID-MISSOURI II-9 EMPIREGAS INC. OF GALVESTON EMPIREGAS INC. OF GALVA EMPIREGAS INC. OF GAYLORD EMPIREGAS INC. OF GLOBE EMPIREGAS INC. OF GOOSE CREEK EMPIREGAS INC. OF GREELEY EMPIREGAS INC. OF GRAND JUNCTION EMPIREGAS OF GROVE, INC. EMPIREGAS INC. OF HERMISTON EMPIREGAS INC. OF HERMITAGE EMPIREGAS INC. OF HIAWASSEE EMPIREGAS INC. OF HIGGINSVILLE EMPIREGAS OF HITICHITA, INC. EMPIREGAS INC. OF HOOPESTON EMPIREGAS INC. OF HORNICK EMPIREGAS INC. OF HUMANSVILLE EMPIREGAS INC. OF JACKSONVILLE EMPIREGAS INC. OF JACKSON, MI EMPIREGAS INC. OF KALAMAZOO EMPIREGAS INC. OF KIRKSVILLE EMPIREGAS INC. OF LAFAYETTE EMPIREGAS INC. OF LAKE CHARLES EMPIREGAS INC. OF LAKE PROVIDENCE EMPIREGAS INC. OF LAURIE EMPIREGAS OF LE SUEUR, INC. EMPIREGAS INC. OF LINCOLN EMPIREGAS INC. OF LONGMONT EMPIREGAS INC. OF LOS ANGELES EMPIREGAS INC. OF LOVELAND EMPIREGAS INC. OF MARQUETTE EMPIREGAS INC. OF MARSHALL EMPIREGAS INC. OF MEDFORD EMPIREGAS INC. OF MENOMONIE EMPIREGAS INC. OF MERILLAN EMPIREGAS INC. OF MILLER EMPIREGAS INC. OF MODESTO EMPIREGAS INC. OF MONTE VISTA EMPIREGAS INC. OF MOUNT VERNON EMPIREGAS INC. OF MUNISING EMPIREGAS INC. OF MURPHY THRIF-T-GAS INC. OF BLACKWATER EMPIREGAS INC. OF NORTH BEND EMPIREGAS INC. OF NORTH MYRTLE BEACH, INC. EMPIREGAS INC. OF OAK GROVE EMPIREGAS INC. OF ONAWA EMPIREGAS INC. OF ORANGEBURG EMPIREGAS INC. OF OWENSVILLE EMPIREGAS INC. OF SANTA PAULA EMPIREGAS INC. OF PADUCAH EMPIREGAS INC. OF PALMYRA EMPIREGAS INC. OF PLACERVILLE EMPIREGAS INC. OF POMONA EMPIREGAS INC. OF POTOSI EMPIREGAS INC. OF PUEBLO EMPIREGAS INC. OF REEDSPORT EMPIREGAS INC. OF RICHLAND EMPIREGAS INC. OF ROLLA II-10 EMPIREGAS INC. OF SACRAMENTO EMPIREGAS INC. OF SANDY EMPIREGAS INC. OF SHELL LAKE EMPIREGAS INC. OF SILOAM SPRINGS EMPIREGAS OF STIGLER, INC. EMPIREGAS INC. OF SUSANVILLE EMPIREGAS INC. OF SUNNYSIDE EMPIREGAS INC. OF ROCKY MOUNT EMPIREGAS INC. OF THE DALLES EMPIREGAS INC. OF TIPTON (IOWA) EMPIREGAS INC. OF TRAVERSE CITY EMPIREGAS INC. OF VANDALIA EMPIREGAS INC. OF VASSAR EMPIREGAS INC. OF VINITA, INC. EMPIREGAS INC. OF WARREN EMPIREGAS INC. OF WARSAW (MISSOURI) EMPIREGAS INC. OF WASHINGTON EMPIREGAS INC. OF WAUKON EMPIREGAS INC. OF WAYNESVILLE EMPIREGAS INC. OF WAYNESVILLE, NC EMPIREGAS INC. OF WENATCHEE EMPIREGAS INC. OF WENTZVILLE EMPIREGAS OF WESTVILLE, INC. EMPIREGAS INC. OF WILLS POINT EMPIREGAS INC. OF WILMINGTON EMPIREGAS INC. OF WILSON EMPIREGAS INC. OF WOODLAND PARK EMPIREGAS INC. OF YAKIMA EMPIREGAS INC. OF YUCCA VALLEY EMPIREGAS INC. OF ZEBULON EMPIREGAS INC. OF COLUMBIANA EMPIREGAS OF ZUMBRO FALLS, INC. GINCO GAS COMPANY, INC. EMPIREGAS INC. OF ORANGE COUNTY EMPIREGAS INC. OF MORGAN COUNTY EMPIREGAS INC. OF LAKE OZARK EMPIREGAS INC. OF WACO EMPIREGAS INC. OF PARIS, TX EMPIREGAS INC. OF DALLAS, TX EMPIREGAS INC. OF KEMP EMPIREGAS INC. OF SAN ANTONIO THRIFT-T-GAS CO., INC. EMPIREGAS INC. OF PARIS, MO SALIDA GAS CO., INC. SALGAS INC. OF GUNNISON EMPIREGAS INC. OF TOLEDO EMPIREGAS INC. OF WILKESBORO EMPIREGAS INC. OF HENDERSVILLE EMPIREGAS INC. OF NORTH CAROLINA EMPIREGAS INC. OF CARTHAGE EMPIREGAS INC. OF APEX EMPIREGAS INC. OF DURHAM EMPIREGAS INC. OF WARRENTON II-11 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES Board of Directors and Stockholders Empire Gas Corporation Lebanon, Missouri In connection with our audit of the financial statements of EMPIRE GAS CORPORATION (FORMERLY EMPIRE GAS ACQUISITION CORPORATION) for each of the three years in the period ended June 30, 1993, we have also audited the following financial statement schedules. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion of these financial statement schedules based on our audits of the basic financial statements. The schedules are presented for purposes of complying with the Securities and Exchange Commission's rules and regulations and are not a required part of the consolidated financial statements. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. BAIRD, KURTZ & DOBSON Springfield, Missouri July 30, 1993 S-1 EMPIRE GAS CORPORATION AND SUBSIDIARIES SCHEDULE V -- PROPERTY AND EQUIPMENT YEARS ENDED JUNE 30, 1993, 1992 AND 1991 (IN THOUSANDS)
COL. B COL. F ---------- COL. C ---------- COL. A BALANCE AT ----------- COL. D COL. E BALANCE AT - ------------------------------------------------------- BEGINNING ADDITIONS ----------- --------- END OF CLASSIFICATION OF YEAR AT COST RETIREMENTS OTHER YEAR - ------------------------------------------------------- ---------- ----------- ----------- --------- ---------- Year Ended June 30, 1993: Land and buildings................................... $ 11,821 $ 884 $ 490 $ 12,215 Storage and consumer service facilities.............. 113,450 1,520 1,149 113,821 Transportation, office and other equipment........... 24,245 1,954 649 25,550 ---------- ----------- ----------- ---------- $ 149,516 $ 4,358 $ 2,288 $ 151,586 ---------- ----------- ----------- ---------- ---------- ----------- ----------- ---------- Year Ended June 30, 1992: Land and buildings................................... $ 10,781 $ 1,381 $ 341 $ 11,821 Storage and consumer service facilities.............. 113,343 2,058 1,951 113,450 Transportation, office and other equipment........... 22,765 3,264 1,784 24,245 ---------- ----------- ----------- ---------- $ 146,889 $ 6,703 $ 4,076 $ 149,516 ---------- ----------- ----------- ---------- ---------- ----------- ----------- ---------- Year Ended June 30, 1991: Land and buildings................................... $ 9,457 $ 1,439 $ 115 $ 10,781 Storage and consumer service facilities.............. 111,646 2,651 954 113,343 Transportation, office and other equipment........... 20,150 4,723 2,108 22,765 ---------- ----------- ----------- ---------- $ 141,253 $ 8,813 $ 3,177 $ 146,889 ---------- ----------- ----------- ---------- ---------- ----------- ----------- ----------
S-2 EMPIRE GAS CORPORATION AND SUBSIDIARIES SCHEDULE VI -- ACCUMULATED DEPRECIATION YEARS ENDED JUNE 30, 1993, 1992 AND 1991 (IN THOUSANDS)
COL. C COL. B ----------- COL. F ----------- ADDITIONS ----------- COL. A BALANCE AT CHARGED TO COL. D COL. E BALANCE AT - ------------------------------------------------------ BEGINNING COSTS AND ----------- --------- END OF CLASSIFICATION OF YEAR EXPENSES RETIREMENTS OTHER YEAR - ------------------------------------------------------ ----------- ----------- ----------- --------- ----------- Year Ended June 30, 1993: Buildings........................................... $ 1,444 $ 332 $ 73 $ 1,703 Storage and consumer service facilities............. 19,536 5,529 631 24,434 Transportation, office and other equipment.......... 13,075 3,143 449 15,769 ----------- ----------- ----------- ----------- $ 34,055 $ 9,004 $ 1,153 $ 41,906 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Year Ended June 30, 1992: Buildings........................................... $ 1,172 $ 302 $ 30 $ 1,444 Storage and consumer service facilities............. 14,751 5,473 688 19,536 Transportation, office and other equipment.......... 11,378 3,014 1,317 13,075 ----------- ----------- ----------- ----------- $ 27,301 $ 8,789 $ 2,035 $ 34,055 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Year Ended June 30, 1991: Buildings........................................... $ 928 $ 260 $ 16 $ 1,172 Storage and consumer service facilities............. 9,710 5,316 275 14,751 Transportation, office and other equipment.......... 10,828 2,687 2,137 11,378 ----------- ----------- ----------- ----------- $ 21,466 $ 8,263 $ 2,428 $ 27,301 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
S-3 EMPIRE GAS CORPORATION AND SUBSIDIARIES SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED JUNE 30, 1993, 1992 AND 1991 (IN THOUSANDS)
BALANCE AT CHARGED TO AMOUNT BALANCE AT BEGINNING COSTS AND WRITTEN END OF DESCRIPTION OF YEAR EXPENSES OFF YEAR - ------------------------------------------------------------------- ----------- ----------- --------- ----------- Valuation accounts deducted from assets to which they apply -- for doubtful accounts receivable: June 30, 1993.................................................... $ 2,720 $ 958 $ 1,021 $ 2,657 June 30, 1992.................................................... 2,719 214 213 2,720 June 30, 1991.................................................... 1,648 2,828 1,757 2,719
S-4 EMPIRE GAS CORPORATION AND SUBSIDIARIES SCHEDULE X -- SUPPLEMENTARY INFORMATION YEARS ENDED JUNE 30, 1993, 1992 AND 1991 (IN THOUSANDS)
COL. B ----------- COL. A CHARGED TO - ------------------------------------------------------------------------------------------------------ COSTS AND ITEM EXPENSES - ------------------------------------------------------------------------------------------------------ ----------- June 30, 1993: Maintenance and repairs............................................................................. $ 2,963 June 30, 1992: Maintenance and repairs............................................................................. $ 3,070 June 30, 1991: Maintenance and repairs............................................................................. $ 3,806
S-5 EXHIBIT INDEX
EXHIBITS PAGE - ----------- --------- 1.1* Form of Underwriting Agreement 2.1 Stock Redemption Agreement, dated May 7, 1994, between the Company, EGOC, Energy, Robert W. Plaster, Paul S. Lindsey, Jr., Stephen R. Plaster, Joseph L. Schaefer, the Robert W. Plaster Trust dated December 13, 1988, the Stephen Robert Plaster Trust dated October 30, 1988, the Stephen Robert Plaster Trust dated July 30, 1984, Empire Ranch, Inc., Empire Airlines, Inc., and Evergreen National Corporation (incorporated herein by reference to Exhibit 10.1 to the Empire Gas Operating Corporation (Commission File No. 1-6537-3) Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1994) 2.2+ Stock Redemption Agreement, dated May 7, 1994, between the Company, the Dolly Francine Plaster Trust dated July 30, 1984, the Tammy Jane Plaster Trust dated July 30, 1984, the Cheryl Jean Plaster Schaefer Trust dated October 30, 1988, and the Cheryl Jean Plaster Schaefer Trust dated July 30, 1984 2.3+ Form of Merger Agreement by and between the Company and EGOC 3.1+ Articles of Incorporation of the Company 3.2 Certificate of Amendment of the Certificate of Incorporation of the Company, dated April 26, 1994, relating to the change of name 3.3+ By-laws of the Company 4.1 Indenture between Empire Gas Corporation and J. Henry Schroder Bank & Trust Company, Trustee, relating to the 9% Subordinated Debentures due December 31, 2007 and the form of 9% Subordinated Debentures due December 31, 2007 (incorporated herein by reference to Exhibit 4(a) to the Empire Incorporated and Exco Acquisition Corp. (Commission File No. 2-83683) Registration Statement on Form S-14 filed with the Commission on May 11, 1983; and First Supplemental Indenture thereto between Empire Gas Corporation (now known as EGOC) and IBJ Schroder Bank & Trust Co., dated as of December 13, 1989 (incorporated herein by reference to Exhibit 4(c) to Empire Gas Corporation (now known as EGOC) Registration Statement on Form 8-B filed with the Commission on February 1, 1990) 4.2 Form of Proposed Indenture between the Company and Shawmut Bank Connecticut, National Association, Trustee, relating to the % Senior Secured Notes due 2004, including the form of % Senior Secured Notes due 2004, the form of the Guarantee and the form of the Pledge Agreement 4.3 Form of Proposed Warrant Agreement 5.1* Opinion of Wilmer, Cutler & Pickering as to the validity of the issuance of the Senior Secured Notes 8.1* Form of opinion of Wilmer, Cutler & Pickering with respect to certain tax matters 10.1+ Shareholder Agreement, dated as of October 28, 1988, by and among Empire Gas Acquistion Corporation and Robert W. Plaster Trust, Robert W. Plaster, Trustee; Paul S. Lindsey, Jr.; Stephen R. Plaster Trust, Lynn C. Hoover, Trustee; Cheryl Plaster Schaefer Trust, Lynn C. Hoover, Trustee; Robert L. Wooldridge; Gwendolyn B. VanDerhoef; Dwight Gilpin; Luther Henry Gill; Valeria Schall; Floyd J. Waterman; Larry W. Bisig; Larry Weis; Robert Heagerty; Murl J. Waterman; Earl L. Noe; Thomas Flak; Michael Kent St. John; James E. Acreman; Carolyn S. Rein; Dan Weatherly; Nina Irene Craighead; Joyce Sue Kinnett; Edwin H. McMahon; Paul Stahlman; Ralph Wilson; Alan Simer; Ferrell Stamper; and Empire Gas Corporation Employee Stock Ownership Plan, Robert W. Plaster, Trustee 10.2+ 1989 Incentive Stock Option Plan 10.3* Form of Credit Agreement between the Company and Continental Bank, as agent
EXHIBITS PAGE - ----------- --------- 10.4 Lease Agreement, dated May 7, 1994, between the Company and Evergreen National Corporation (incorporated herein by reference to Exhibit F of Exhibit 10.1 to the Empire Gas Operating Corporation (Commission File No. 1-6537-3) Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1994) 10.5 Form of Services Agreement, dated May 7, 1994, between the Company and Empire Service Corporation (incorporated herein by reference to Exhibit G of Exhibit 10.1 to the Empire Gas Operating Corporation (Commission File No. 1-6537-3) Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1994) 10.6 Non-Competition Agreement, dated May 7, 1994, by and among the Company, Energy, Robert W. Plaster, Stephen R. Plaster, Joseph L. Schaefer, Paul S. Lindsey, Jr. (incorporated herein by reference to Exhibit E of Exhibit 10.1 to the Empire Gas Operating Corporation (Commission File No. 1-6537-3) Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1994) 10.7* Form of Employment Agreement between the Company and Paul S. Lindsey, Jr. 10.8* Form of Asset Purchase Agreement by and among the Company, Empiregas, Inc. of North Carolina, PSNC Propane Corporation, and Public Service Company of North Carolina, Incorporated 10.9 Form of Indemnification Agreement between the Company and Douglas A. Brown 10.10* Form of Tax Indemnification Agreement between the Company and Energy 10.11 Supply Contract No. 1, dated September 13, 1991, between EGOC and Phillips 66 Company 10.12 Supply Contract No. 2, dated September 13, 1991, between EGOC and Phillips 66 Company; and Amendment thereto between EGOC and Phillips 66 Company, dated October 15, 1992 10.13 Supply Contract, dated as of November 4, 1991, between EGOC and Conoco Inc. 10.14 Supply Contract, dated as of January 21, 1992, between EGOC and Conoco Inc. 10.15 Supply Contract, dated as of January 24, 1992, between EGOC and Conoco, Inc. 10.16 Supply Contract No. 1, dated November 20, 1986, between EGOC and Warren Petroleum Company 10.17 Supply Contract No. 2, dated November 20, 1986, between EGOC and Warren Petroleum Company 10.18 Supply Contract, dated November 22, 1986, between EGOC and Warren Petroleum Company 10.19 Supply Contract, dated November 24, 1986, between EGOC and Warren Petroleum Company 10.20 Supply Contract No. 1, dated June 1, 1993, between EGOC and Warren Petroleum Company 10.21 Supply Contract No. 2, dated June 1, 1993, between EGOC and Warren Petroleum Company 12.1+ Statement regarding computation of ratio of earnings to fixed charges 21.1 Subsidiaries of the Company 23.1+ Consent of Baird, Kurtz & Dobson, dated April 29, 1994 23.2* Consent of Wilmer, Cutler & Pickering, included in the opinion filed as Exhibit 5.1 23.3+ Consent of Douglas A. Brown to being named as a director 23.4+ Second Consent of Baird, Kurtz & Dobson, dated June 3, 1994 23.5* Consent of Valuation Research Corporation 23.6+ Consent of Bruce M. Withers, Jr. to be named as a director
EXHIBITS PAGE - ----------- --------- 23.7+ Consent of Jim J. Shoemake to be named as a director 23.8 Third Consent of Baird, Kurtz & Dobson, dated June 9, 1994 24.1+ Power of Attorney, located on signature page 25.1+ Statement of Eligibility and Qualification of Trustee on Form T-1 25.2 Report of Condition and Income of Shawmut Bank Connecticut, N.A., for the period ending March 31, 1994 99.1* Opinion of Valuation Research Corporation re solvency - --------- + Previously filed. * To be supplied by amendment.
DESCRIPTION OF GRAPHIC: Inside front cover Map of the United States showing the locations of retail service centers, transport terminals, rail terminals, underground storage, pipeline terminals and home office (on a pro form basis for the Transaction). Page 39 Illustration showing movement of propane from refinery or gas processing plant to retail distriubtion center by rail, pipeline or truck, and then on to residential, commercial and agricultural users. EX-3.2 2 EXHIBIT 3.2 Exhibit 3.2 STATE OF MISSOURI [STATE SEAL] JUDITH K. MORIARTY, SECRETARY OF STATE P.O. BOX 778, JEFFERSON CITY, MO. 65102 CORPORATION DIVISION AMENDMENT OF ARTICLES OF INCORPORATION (To be submitted in duplicate) Pursuant to the provisions of The General and Business Corporation Law of Missouri, the undersigned Corporation certifies the following: 1. The present name of the Corporation is Empire Gas Acquisition Corporation. The name under which it was originally organized was Empire Gas Acquisition Corporation. 2. An amendment to the Corporation's Articles of Incorporation was adopted by the shareholders on April 25, 1994. 3. Article Number 1. is amended to read as follows: The name of the corporation (hereinafter the "Corporation") is: Empire Gas Corporation. (IF MORE THAN ONE ARTICLE IS TO BE AMENDED OR MORE SPACE IS NEEDED ATTACH FLY SHEET.) 4. Of the 13,832,270 shares outstanding, 13,832,270 of such shares were entitled to vote on such amendment. The number of outstanding shares of any class ENTITLED TO VOTE THEREON AS A CLASS were as follows: CLASS NUMBER OF OUTSTANDING SHARES Common Stock 13,832,270 5. The number of shares voted for and against the amendment was as follows: CLASS NO. VOTED FOR NO. VOTED AGAINST Common Stock 13,832,270 0 6. If the amendment changed the number or par value of authorized shares having a par value, the amount in dollars of authorized shares having a par value as changed is: N/A If the amendment changed the number of authorized shares without par value, the authorized number of shares without par value as changed and the consideration proposed to be received for such increased authorized shares without par value as are to be presently issued are: 7. If the amendment provides for an exchange, reclassification, or cancellation of issued shares, or a reduction of the number of authorized shares of any class below the number of issued shares of that class, the following is a statement of the manner in which such reduction shall be effected: N/A IN WITNESS WHEREOF, the undersigned, Stephen R. Plaster has executed this --------------------- President instrument and its Valeria Schall has affixed its corporate seal -------------------------------- Secretary or Assistant Secretary hereto and attested said seal on the 25th day of April, 1994. PLACE CORPORATE SEAL HERE (If no seal, state "None.") NONE Empire Gas Acquisition Corporation -------------------------------------- Name of Corporation ATTEST: /s/ Valeria Schall By /s/ Stephen R. Plaster - -------------------------------- -------------------------------------- Secretary of Assistant Secretary President or Vice President State of Missouri ) ) ss. County of Laclede ) I, Jackie Day, a Notary Public, do hereby certify that on this 25th day of April, 1994, personally appeared before me Stephen R. Plaster who, being by me first duly sworn, declared that he is the President of Empire Gas Acquisition Corporation that he signed the foregoing documents as Vice President of the corporation, and that the statements therein contained are true. (Notarial Seal) /s/ Jackie Day ---------------------------------------- Notary Public My commission expires 9/30/97 The Secretary of State's Office makes every effort to provide program accessibility to all citizens without regard to disability. If you desire this publication in alternate form because of a disability, please contact the Director of Publications, P.O. Box 778, Jefferson City, Mo. 65102; phone (314) 751-1814. Hearing-impaired citizens may contact the Director by phone through Missouri Relay (800-735-2966). The Corporations Division also maintains a Telecommunications Device for the Deaf (TDD) at (314) 526-5599. EX-4.2 3 EXHIBIT 4.2 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EMPIRE GAS CORPORATION and CERTAIN SUBSIDIARY GUARANTORS HERETO and SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, Trustee - -------------------------------------------------------------------------------- Indenture Dated as of __________, 1994 - -------------------------------------------------------------------------------- $___,000,000 Principal Amount at Maturity Senior Secured Notes Due 2004 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.2 Other Definitions. . . . . . . . . . . . . . . . . . . . . . 26 SECTION 1.3 Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . . 27 SECTION 1.4 Rules of Construction . . . . . . . . . . . . . . . . . . . 28 ARTICLE II THE SECURITIES SECTION 2.1 Form and Dating . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 2.2 Execution and Authentication . . . . . . . . . . . . . . . . 30 SECTION 2.3 Registrar and Paying Agent . . . . . . . . . . . . . . . . . 31 SECTION 2.4 Paying Agent To Hold Money in Trust . . . . . . . . . . . . 31 SECTION 2.5 Securityholder Lists . . . . . . . . . . . . . . . . . . . . 32 SECTION 2.6 Transfer and Exchange . . . . . . . . . . . . . . . . . . . 32 SECTION 2.7 Replacement Securities . . . . . . . . . . . . . . . . . . . 35 SECTION 2.8 Outstanding Securities . . . . . . . . . . . . . . . . . . . 35 SECTION 2.9 Determination of Holders' Action . . . . . . . . . . . . . . 36 SECTION 2.10 Temporary Securities . . . . . . . . . . . . . . . . . . . . 36 SECTION 2.11 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . 37 SECTION 2.12 Defaulted Interest . . . . . . . . . . . . . . . . . . . . . 37 ARTICLE III COVENANTS SECTION 3.1 Payment of Securities . . . . . . . . . . . . . . . . . . . 38 SECTION 3.2 Maintenance of Office or Agency . . . . . . . . . . . . . . 38 SECTION 3.3 Limitation on Restricted Payments. . . . . . . . . . . . . . 39 SECTION 3.4 Limitation on Incurrence of Indebtedness . . . . . . . . . . 43 SECTION 3.5 Limitation on Payment Restrictions Affecting Subsidiaries . . . . . . . . . . . . . . . . . . 45 SECTION 3.6 Limitation on Sale/Leaseback Transactions . . . . . . . . . 46 SECTION 3.7 Limitation on Liens . . . . . . . . . . . . . . . . . . . . 47 SECTION 3.8 Change of Control . . . . . . . . . . . . . . . . . . . . . 50 SECTION 3.9 Compliance Certificate . . . . . . . . . . . . . . . . . . . 52 SECTION 3.10 SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . 53 SECTION 3.11 Transactions with Affiliates . . . . . . . . . . . . . . . . 53 SECTION 3.12 Sales of Assets . . . . . . . . . . . . . . . . . . . . . . 54 SECTION 3.13 Corporate Existence . . . . . . . . . . . . . . . . . . . . 59 SECTION 3.14 Payment of Taxes and Other Claims . . . . . . . . . . . . . 60 SECTION 3.15 Notice of Defaults and Other Events . . . . . . . . . . . . 60 SECTION 3.16 Maintenance of Properties and Insurance . . . . . . . . . . 60 SECTION 3.17 Limitation on Issuance of Capital Stock and Incurrence of Indebtedness of Restricted Subsidiaries . . . . . . . . . . . . . . . . . 61 SECTION 3.18 Limitation on Changes in the Nature of the Business . . . . . . . . . . . . . . . . . . . . . . . 61 ARTICLE IV CONSOLIDATION, MERGER AND SALE SECTION 4.1 Merger and Consolidation of Company . . . . . . . . . . . . 62 SECTION 4.2 Successor Substituted . . . . . . . . . . . . . . . . . . . 66 ARTICLE V DEFAULTS AND REMEDIES SECTION 5.1 Events of Default . . . . . . . . . . . . . . . . . . . . . 67 SECTION 5.2 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . 70 SECTION 5.3 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . 70 SECTION 5.4 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . 71 SECTION 5.5 Control by Majority . . . . . . . . . . . . . . . . . . . . 72 SECTION 5.6 Limitation on Suits . . . . . . . . . . . . . . . . . . . . 72 SECTION 5.7 Rights of Holders To Receive Payment . . . . . . . . . . . . 72 SECTION 5.8 Collection Suit by Trustee . . . . . . . . . . . . . . . . . 73 SECTION 5.9 Trustee May File Proofs of Claim . . . . . . . . . . . . . . 73 SECTION 5.10 Priorities . . . . . . . . . . . . . . . . . . . . . . . . . 74 SECTION 5.11 Undertaking for Costs . . . . . . . . . . . . . . . . . . . 74 SECTION 5.12 Waiver of Stay or Extension Laws . . . . . . . . . . . . . . 74 ARTICLE VI TRUSTEE SECTION 6.1 Duties of Trustee . . . . . . . . . . . . . . . . . . . . . 75 SECTION 6.2 Rights of Trustee . . . . . . . . . . . . . . . . . . . . . 76 SECTION 6.3 Individual Rights of Trustee . . . . . . . . . . . . . . . . 77 SECTION 6.4 Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . 77 SECTION 6.5 Notice of Defaults . . . . . . . . . . . . . . . . . . . . . 78 SECTION 6.6 Reports by Trustee to Holders . . . . . . . . . . . . . . . 78 SECTION 6.7 Compensation and Indemnity . . . . . . . . . . . . . . . . . 78 SECTION 6.8 Replacement of Trustee . . . . . . . . . . . . . . . . . . . 80 SECTION 6.9 Successor Trustee by Merger, etc. . . . . . . . . . . . . . 81 SECTION 6.10 Eligibility; Disqualification . . . . . . . . . . . . . . . 81 SECTION 6.11 Preferential Collection of Claims Against Company . . . . . . . . . . . . . . . . . . . . . . . . . 81 SECTION 6.12 Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . 82 ARTICLE VII SATISFACTION AND DISCHARGE OF INDENTURE SECTION 7.1 Discharge of Liability on Securities; Defeasance . . . . . . . . . . . . . . . . . . . . . . . . 83 SECTION 7.2 Termination of Company's Obligations . . . . . . . . . . . . 83 SECTION 7.3 Defeasance and Discharge of Indenture . . . . . . . . . . . 84 SECTION 7.4 Defeasance of Certain Obligations . . . . . . . . . . . . . 87 SECTION 7.5 Application of Trust Money . . . . . . . . . . . . . . . . . 90 SECTION 7.6 Repayment to Company . . . . . . . . . . . . . . . . . . . . 90 SECTION 7.7 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . 91 ARTICLE VIII AMENDMENTS AND SUPPLEMENTS SECTION 8.1 Without Consent of Holders . . . . . . . . . . . . . . . . . 91 SECTION 8.2 With Consent of Holders . . . . . . . . . . . . . . . . . . 92 SECTION 8.3 Compliance with Trust Indenture Act . . . . . . . . . . . . 94 SECTION 8.4 Revocation and Effect of Consents . . . . . . . . . . . . . 94 SECTION 8.5 Notation on or Exchange of Securities . . . . . . . . . . . 94 SECTION 8.6 Trustee To Sign Amendments . . . . . . . . . . . . . . . . . 94 SECTION 8.7 Fixing of Record Dates . . . . . . . . . . . . . . . . . . . 95 ARTICLE IX REDEMPTION SECTION 9.1 Notices to Trustee . . . . . . . . . . . . . . . . . . . . . 95 SECTION 9.2 Selection of Securities To Be Redeemed . . . . . . . . . . . 96 SECTION 9.3 Notice of Redemption . . . . . . . . . . . . . . . . . . . . 96 SECTION 9.4 Effect of Notice of Redemption . . . . . . . . . . . . . . . 97 SECTION 9.5 Deposit of Redemption Price . . . . . . . . . . . . . . . . 97 SECTION 9.6 Securities Redeemed in Part . . . . . . . . . . . . . . . . 97 ARTICLE X SECURITY AND PLEDGE OF COLLATERAL SECTION 10.1 Collateral Documents . . . . . . . . . . . . . . . . . . . . 98 SECTION 10.2 Recording and Opinions . . . . . . . . . . . . . . . . . . . 99 SECTION 10.3 Remedies Upon an Event of Default . . . . . . . . . . . . . 99 SECTION 10.4 Release of the Collateral . . . . . . . . . . . . . . . . . 100 SECTION 10.5 Purchase of Securities with Net Available Cash . . . . . . . . . . . . . . . . . . . . . . 102 SECTION 10.6 Certificates of Company . . . . . . . . . . . . . . . . . . 104 SECTION 10.7 Authorization of Actions to be Taken by the Trustee Under the Pledge Agreement . . . . . . . . . . . . . . . . . . . . . . . . 104 ARTICLE XI MISCELLANEOUS SECTION 11.1 Trust Indenture Act Controls . . . . . . . . . . . . . . . . 105 SECTION 11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 105 SECTION 11.3 Communication by Holders with Other Holders . . . . . . . . . . . . . . . . . . . . . . . . . 106 SECTION 11.4 Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . 106 SECTION 11.5 Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . . . . . . . 107 SECTION 11.6 Rules by Trustee and Agents . . . . . . . . . . . . . . . . 108 SECTION 11.7 Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . 108 SECTION 11.8 Successors; No Recourse Against Others . . . . . . . . . . . 108 SECTION 11.9 Duplicate Originals . . . . . . . . . . . . . . . . . . . . 108 SECTION 11.10 Other Provisions . . . . . . . . . . . . . . . . . . . . . . 108 SECTION 11.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 108 ARTICLE XII SUBSIDIARY GUARANTEES SECTION 12.1 Subsidiary Guarantees . . . . . . . . . . . . . . . . . . . 109 SECTION 12.2 Execution and Delivery of Subsidiary Guarantees . . . . . . . . . . . . . . . . . . . . . . . . 111 SECTION 12.3 Subsidiary Guarantors May Consolidate, Etc. on Certain Terms . . . . . . . . . . . . . . . . . . . . . 112 SECTION 12.4 Release of Subsidiary Guarantors . . . . . . . . . . . . . . 112 SECTION 12.5 Additional Subsidiary Guarantors . . . . . . . . . . . . . . 114 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 EXHIBIT A--FORM OF SECURITY . . . . . . . . . . . . . . . . . . . . . . . . A-1 EXHIBIT B--FORM OF GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . B-1 EXHIBIT C--FORM OF SUBORDINATION PROVISIONS . . . . . . . . . . . . . . . . C-1 EXHIBIT D--PLEDGE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . D-1 INDENTURE dated as of ___________, 1994, between Empire Gas Corporation, a Missouri corporation (the "Company"), each of the Subsidiary Guarantors (as hereinafter defined) and Shawmut Bank Connecticut, National Association, a National Banking Association (the "Trustee"). Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the holders of the Company's Senior Secured Notes Due 2004: ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1 DEFINITIONS. "ACCRETED VALUE" means as of any date (the "specified date") with respect to each $1,000 face amount of Securities, the following amount: (i) if the specified date is one of the following dates (each an "accrual date"), the amount set forth opposite such date below:
ACCRUAL DATE ACCRETED VALUE ______, 1994 . . . . . . . . . . . . ______ ______, 1994 . . . . . . . . . . . . ______ ______, 1995 . . . . . . . . . . . . ______ ______, 1995 . . . . . . . . . . . . ______ ______, 1996 . . . . . . . . . . . . ______ ______, 1996 . . . . . . . . . . . . ______ ______, 1997 . . . . . . . . . . . . ______ ______, 1997 . . . . . . . . . . . . ______ ______, 1998 . . . . . . . . . . . . ______ ______, 1998 . . . . . . . . . . . . ______ ______, 1999 . . . . . . . . . . . . $1,000;
(ii) if the specified date occurs between two accrual dates, the sum of (A) the accreted value for the accrual date immediately preceding the specified date and (B) an amount equal to the product of (i) the accreted value for the immediately following accrual date less the accreted value for the immediately preceding accrual date and (ii) a fraction, the numerator of which is the number of days (not to exceed 180 days) from the immediately preceding accrual date to the specified date, using a 360-day year of twelve 30-day months, and the denominator of which is 180 (or, if the immediately following accrual date is _________, 1999, ___); and (iii) if the specified date occurs after ______, 1999, $1,000. "ACQUIRED INDEBTEDNESS" means Indebtedness of a Person existing at the time at which such Person became a Subsidiary and not incurred in connection with, or in contemplation of, such Person becoming a Subsidiary. Acquired Indebtedness shall be deemed to be Incurred on the date the acquired Person becomes a Subsidiary. "ACQUISITION INDEBTEDNESS" means Indebtedness of a Restricted Subsidiary incurred in connection with the acquisition of property or assets related to the Line of Business which will be owned and used by the Company or a Restricted Subsidiary, which Indebtedness is without recourse to the Company or any Restricted Subsidiary other than the Restricted Subsidiary issuing such Acquisition Indebtedness. "ADDITIONAL ASSETS" means (i) any property or assets related to the Line of Business which will be owned and used by the Company or a Restricted Subsidiary, (ii) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary or (iii) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary. "AFFILIATE" of any specified Person means any other Person, directly or indirectly, controlling or controlled by, or under direct or indirect common control with, such specified Person. For the purposes of this definition, "control," when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract 2 or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of Sections 3.11 and 3.12 only, "Affiliate" shall also mean any beneficial owner of 5% or more of the total Voting Shares (on a Fully Diluted Basis) of the Company or of rights or warrants to purchase such stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. For purposes of Section 3.3, "Affiliate" shall also mean any Person of which the Company owns 5% or more of any class of Capital Stock or rights to acquire 5% or more of any class of Capital Stock and any Person who would be an Affiliate of any such Person pursuant to the first sentence hereof. "AGENT" means any Registrar, Paying Agent or co-registrar. "ASSET SALE" means any sale, transfer or other disposition (including by way of merger, consolidation or sale/leaseback transactions, but excluding (except as provided for in the last paragraph of Section 3.12(b)) those permitted by Article IV hereof) in one or a series of transactions by the Company or any Restricted Subsidiary to any Person other than the Company or any Wholly Owned Subsidiary, of (i) all or any of the Capital Stock of the Company or any Restricted Subsidiary, (ii) all or substantially all of the assets of any operating unit, or line of business of the Company or any Restricted Subsidiary or (iii) any other property or assets or rights to acquire property or assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary. "ATTRIBUTABLE DEBT" in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the Securities, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended). "AVERAGE LIFE" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum of the products of (A) the numbers of years from the date of 3 determination to the dates of each successive scheduled principal payment of such Indebtedness or scheduled redemption or similar payment with respect to such Indebtedness or Preferred Stock multiplied by (B) the amount of such payment by (ii) the sum of all such payments. "BASIC AGREEMENTS" means (i) the Stock Redemption Agreement, dated May 7, 1994, among the Company, Energy, Mr. Lindsey, Mr. Robert Plaster and the other parties named therein; (ii) the Services Agreement, between the Company and Empire Service Corp., entered into pursuant to the Stock Redemption Agreement; (iii) the Lease Agreement, among the Company and Evergreen National Corporation, entered into pursuant to the Stock Redemption Agreement and (iv) the Non-Competition Agreement, among the Company, Energy, Paul Lindsey, Robert Plaster and Stephen Plaster, entered into pursuant to the Stock Redemption Agreement. "BOARD OF DIRECTORS" means the Board of Directors of the Company or any authorized committee thereof. "BOARD RESOLUTION" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "BUSINESS DAY" means each day which is not a Legal Holiday. "CAPITAL STOCK" means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation or any and all equivalent ownership interests in a Person (other than a corporation). "CAPITALIZED LEASE" means, as applied to any Person, any lease of any property (whether real, personal or mixed) of which the discounted present value of the rental obligations of such Person as lessee, in conformity with GAAP, is required to be capitalized on the balance sheet of such Person; the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which the lease may be terminated by the lessee 4 without payment of a penalty; and "Capitalized Lease Obligations" means the rental obligations, as aforesaid, under such lease. "CHANGE OF CONTROL" means the occurrence of any of the following events: (i) at any time after the occurrence of a Public Market, any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than the Management Group or an underwriter engaged in a firm commitment underwriting on behalf of the Company, is or becomes the "beneficial owner" (as such term is used in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause (i) a person shall be deemed to have beneficial ownership of all shares that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 30% of the total Voting Shares of the Company; (ii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors together with any new directors whose election by the Board of Directors or whose nomination for election by the stockholders was approved by a vote of 66-2/3% of the directors of such person then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved cease for any reason to constitute a majority of the Board of Directors then in office; (iii) all or substantially all of the Company's and its Restricted Subsidiaries' assets are sold, leased, exchanged or otherwise transferred to any Person or group of Persons acting in concert; (iv) the Company is liquidated or dissolved or adopts a plan of liquidation; (v) prior to the occurrence of a Public Market, the Management Group ceases in the aggregate to beneficially own, directly or indirectly, at least 50% in the aggregate of the total voting power of the Voting Shares of the Company; or (vi) at any time prior to the occurrence of a Change of Control pursuant to clauses (i) to (v) of this definition as a result of which a Change of Control Offer was made, (A) the failure of the Company for a period of greater than 90 days in any 12 month period to continuously maintain (following the 6 month anniversary of the Offering) on its Board of Directors at least two Outside Directors, (B) the failure of the Company for a period of greater than 90 days in any 12 month period to continuously maintain an audit committee of its Board of Direc- 5 tors consisting solely of Outside Directors or (C) the Board of Directors consists of greater than seven members; PROVIDED, HOWEVER, that upon the occurrence of any of the events in this item (vi) the Company shall notify the Trustee of such occurrence. "CODE" means the Internal Revenue Code of 1986, as amended. "COLLATERAL" means the collateral securing the Obligations of the Company hereunder as defined in the Pledge Agreement. "COLLATERAL ACCOUNT" means an account subject to a first priority perfected Lien in favor of the Trustee, the funds of which shall be invested in Temporary Cash Investments. "COLLATERAL AGENT" means Shawmut Bank Connecticut, National Association, as provided for in the Pledge Agreement until a successor replaces it and thereafter means the successor. "COMPANY" means the party named as such in the Indenture until a successor replaces it pursuant to the terms and conditions of the Indenture and thereafter means the successor. "CONSOLIDATED COVERAGE RATIO" as of any date of determination means the ratio of (i) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters to (ii) the Consolidated Interest Expense for such four fiscal quarters; PROVIDED, HOWEVER, that if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both, both EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to (x) such new Indebtedness as if such Indebtedness had been Incurred on the first day of such period and (y) the repayment, redemption, repurchase, defeasance or discharge of any Indebtedness repaid, redeemed, repurchased, defeased or discharged with the proceeds of such new Indebtedness as if such repayment, redemption, repurchase, defeasance or discharge had been 6 made on the first day of such period; PROVIDED, FURTHER, that if within the period during which EBITDA or Consolidated Interest Expense is measured, the Company or any of its Consolidated Restricted Subsidiaries shall have made any Asset Sales, (x) the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets or Capital Stock which are the subject of such Asset Sales for such period, or increased by an amount equal to the EBITDA (if negative), directly attributable thereto for such period and (y) the Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness for which neither the Company nor any Consolidated Restricted Subsidiary shall continue to be liable as a result of any such Asset Sale or which is repaid, redeemed, defeased, discharged or otherwise retired in connection with or with the proceeds of the assets or Capital Stock which are the subject of such Asset Sales for such period; and PROVIDED, FURTHER, that if the Company or any Consolidated Restricted Subsidiary shall have made any acquisition of assets or Capital Stock (occurring by merger or otherwise) since the beginning of such period (including any acquisition of assets or Capital Stock occurring in connection with a transaction causing a calculation to be made hereunder) the EBITDA and Consolidated Interest Expense for such period shall be calculated, after giving pro forma effect thereto (and without regard to clause (iv) of the proviso to the definition of "Consolidated Net Income"), as if such acquisition of assets or Capital Stock took place on the first day of such period. For all purposes of this definition, if the date of determination occurs prior to the completion of the first four full fiscal quarters following the Issue Date, then "EBITDA" and "Consolidated Interest Expense" shall be calculated after giving effect on a pro forma basis to the Offering as if the Offering occurred on the first day of the four full fiscal quarters that were completed preceding such date of determination. "CONSOLIDATED CURRENT LIABILITIES," as of the date of determination, means the aggregate amount of liabilities of the Company and its Consolidated Restricted Subsidiaries which may properly be classified as current liabilities (including taxes accrued as estimated), after eliminating (i) all inter-company items be- 7 tween the Company and any Subsidiary and (ii) all current maturities of long- term Indebtedness, all as determined in accordance with GAAP. "CONSOLIDATED INCOME TAX EXPENSE" means, for any period, as applied to the Company, the provision for local, state, federal or foreign income taxes on a Consolidated basis for such period determined in accordance with GAAP. "CONSOLIDATED INTEREST EXPENSE" means, for any period, as applied to the Company, the sum of (a) the total interest expense of the Company and its Consolidated Restricted Subsidiaries for such period as determined in accordance with GAAP, including, without limitation, (i) amortization of original issue discount on any Indebtedness and the interest portion of any deferred payment obligation, calculated in accordance with the effective interest method of accounting, and amortization of debt issuance costs (other than issuance costs with regard to the Offering, the execution of the New Credit Facility and the related transactions occurring simultaneously therewith), (ii) accrued interest, (iii) noncash interest payments, (iv) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, (v) interest actually paid by the Company or any such Subsidiary under any guarantee of Indebtedness or other obligation of any other Person and (vi) net costs associated with Interest Rate Agreements (including amortization of discounts) and Currency Agreements, plus (b) all but the principal component of rentals in respect of Capitalized Lease Obligations paid, accrued, or scheduled to be paid or accrued by the Company or its Consolidated Restricted Subsidiaries, plus (c) one-third of all Operating Lease Obligations paid, accrued and/or scheduled to be paid by the Company and its Consolidated Restricted Subsidiaries, plus (d) amortization of capitalized interest, plus (e) dividends paid in respect of Preferred Stock of the Company or any Consolidated Restricted Subsidiary held by Persons other than the Company or a Wholly Owned Subsidiary, plus (f) cash contributions to any employee stock ownership plan to the extent such contributions are used by such employee stock ownership plan to pay interest or fees to any person (other than the Company or a Restricted Subsidiary) in connection with loans incurred by such employee stock ownership plan to purchase Capital Stock 8 of the Company. "CONSOLIDATED NET INCOME (LOSS)" means, for any period, as applied to the Company, the Consolidated net income (loss) of the Company and its Consolidated Restricted Subsidiaries for such period, determined in accordance with GAAP, adjusted by excluding (without duplication), to the extent included in such net income (loss), the following: (i) all extraordinary gains or losses; (ii) any net income of any Person if such Person is not a Restricted Subsidiary, except that (A) the Company's equity in the net income of any such Person for such period shall be included in Consolidated Net Income (Loss) up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution and (B) the equity of the Company or a Restricted Subsidiary in a net loss of any such Person for such period shall be included in determining Consolidated Net Income (Loss); (iii) the net income of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such income is not at the time thereof permitted, directly or indirectly, by operation of the terms of its charter or by-laws or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary or its stockholders; (iv) any net income (or loss) of any Person combined with the Company or any of its Restricted Subsidiaries on a "pooling of interests" basis attributable to any period prior to the date of such combination; (v) any gain or loss realized upon the sale or other disposition of any property, plant or equipment of the Company or its Restricted Subsidiaries (including pursuant to any sale/leaseback arrangement) which is not sold or otherwise disposed of in the ordinary course of business and any gain (but not loss) realized upon the sale or other disposition by the Company or any Restricted Subsidiary of any Capital Stock of any Person; and (vi) the cumulative effect of a change in accounting principles; and further adjusted by subtracting from such net income the tax liability of any parent of the Company to the extent of payments made to such parent by the Company pursuant to any tax sharing agreement or other arrangement for such period. 9 "CONSOLIDATED NET TANGIBLE ASSETS" means, as of any date of determination, as applied to the Company, the total amount of assets (less accumulated depreciation or amortization, allowances for doubtful receivables, other applicable reserves and other properly deductible items) which would appear on a Consolidated balance sheet of the Company and its Consolidated Restricted Subsidiaries, determined on a Consolidated basis in accordance with GAAP, and after giving effect to purchase accounting and after deducting therefrom, to the extent otherwise included, the amounts of: (i) Consolidated Current Liabilities; (ii) minority interests in Consolidated Subsidiaries held by Persons other than the Company or a Restricted Subsidiary; (iii) excess of cost over fair value of assets of businesses acquired, as determined in good faith by the Board of Directors; (iv) any revaluation or other write-up in value of assets subsequent to December 31, 1993 as a result of a change in the method of valuation in accordance with GAAP; (v) unamortized debt discount and expenses and other unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, licenses, organization or developmental expenses and other intangible items; (vi) treasury stock; and (vii) any cash set apart and held in a sinking or other analogous fund established for the purpose of redemption or other retirement of Capital Stock to the extent such obligation is not reflected in Consolidated Current Liabilities. "CONSOLIDATED NET WORTH" means, at any date of determination, as applied to the Company, stockholders' equity as set forth on the most recently available Consolidated balance sheet of the Company and its Consolidated Restricted Subsidiaries (which shall be as of a date no more than 60 days prior to the date of such computation), less any amounts attributable to Redeemable Stock or Exchangeable Stock, the cost of treasury stock and the principal amount of any promissory notes receivable from the sale of Capital Stock of the Company or any Subsidiary. "CONSOLIDATION" means, with respect to any Person, the consolidation of accounts of such Person and each of its subsidiaries if and to the extent the accounts of such Person and such subsidiaries are consolidated in accordance with GAAP. The term "Consolidated" shall have a correlative meaning. 10 "CURRENCY AGREEMENT" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Company or any Restricted Subsidiary against fluctuations in currency values to or under which the Company or any Restricted Subsidiary is a party or a beneficiary on the Issue Date or becomes a party or beneficiary thereafter. "DEFAULT" means any event which is, or after notice or passage of time or both would be, an Event of Default. "DEPOSITARY" means The Depositary Trust Company, its nominees, and their respective successors until a successor Depositary shall have become such pursuant to the applicable provisions of this Indenture and thereafter "Depositary" shall mean or include each Person who is then a Depositary hereunder. "DEFAULTED INTEREST" means any interest on any Security which is payable, but is not punctually paid or duly provided for on any Interest Payment Date. "EBITDA" means, for any period, as applied to the Company, the sum of Consolidated Net Income (Loss) (but without giving effect to adjustments, accruals, deductions or entries resulting from purchase accounting, extraordinary losses or gains and any gains or losses from any Asset Sales), plus the following to the extent included in calculating Consolidated Net Income (Loss): (a) Consolidated Income Tax Expense, (b) Consolidated Interest Expense, (c) depreciation expense and (d) amortization expense, in each case for such period; PROVIDED that, if the Company has any Subsidiary that is not a Wholly Owned Subsidiary, EBITDA shall be reduced (to the extent not otherwise reduced by GAAP) by an amount equal to (A) the consolidated net income (loss) of such Subsidiary (to the extent included in Consolidated Net Income (Loss)) multiplied by (B) the quotient of (1) the number of shares of outstanding common stock of such Subsidiary not owned on the last day of such period by the Company or any Wholly Owned Subsidiary of the Company divided by (2) the total number of shares of outstanding common stock of such Subsidiary on the last day of such period. 11 "ENERGY" means Empire Energy Corporation, a Missouri corporation. "EXCESS PAYMENTS" means any amounts paid in respect of salary, bonus, insurance or annuity premiums (other than premiums for "key man" insurance the sole beneficiary of which is the Company), or other payments or contributions to any employee benefit, severance, retirement, stock ownership or stock purchase plan or program or any similar plan or arrangement, to, or for the benefit of, a Lindsey Entity in excess of the lesser of (A) the aggregate scheduled amounts of any such payments as set forth in the Employment Agreements between each of Paul Lindsey and Kristen Lindsey, on the one hand, and the Company on the other hand, each dated as of _______, 1994, as they may be amended from time to time and (B) an aggregate of $1,000,000. "EXCHANGEABLE STOCK" means any Capital Stock which by its terms is exchangeable or convertible at the option of any Person other than the Company into another security (other than Capital Stock of the Company which is neither Exchangeable Stock nor Redeemable Stock). "FAIR VALUE" of any property shall mean its fair value as of a date not more than 90 days prior to the date of the certificate relating thereto, such Fair Value to be determined in any case as if such property were free of Liens securing Indebtedness, if any. "FOREIGN ASSET SALE" means an Asset Sale in respect of the Capital Stock or assets of a Foreign Subsidiary or a Restricted Subsidiary of the type described in Section 936 of the Code to the extent that the proceeds of such Asset Sale are received by a Person subject in respect of such proceeds to the tax laws of a jurisdiction other than the United States of America or any State thereof or the District of Columbia. "FOREIGN SUBSIDIARY" means a Restricted Subsidiary that is incorporated in a jurisdiction other than the United States of America or a State thereof or the District of Columbia. "FULLY DILUTED BASIS" means after giving effect to the exercise of any outstanding options, warrants or rights to purchase Voting Shares and the conversion or 12 exchange of any securities convertible into or exchangeable for Voting Shares. "GAAP" means generally accepted accounting principles in the United States of America as in effect and, to the extent optional, adopted by the Company on the Issue Date, consistently applied, including, without limitation, those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board. "GUARANTEE" means, as applied to any obligation, contingent or otherwise, of any Person, (i) a guarantee, direct or indirect, in any manner, of any part or all of such obligation (other than by endorsement of negotiable instruments for collection in the ordinary course of business) and (ii) an agreement, direct or indirect, contingent or otherwise, the practical effect of which is to insure in any way the payment or performance (or payment of damages in the event of nonperformance) of any part or all of such obligation, including the payment of amounts drawn down under letters of credit. "HOLDER" or "SECURITYHOLDER" means the Person in whose name a Security is registered on the Registrar's books. "INCUR" means, as applied to any obligation, to create, incur, issue, assume, guarantee or in any other manner become liable with respect to, contingently or otherwise, such obligation, and "INCURRED," "INCURRENCE" and "INCURRING" shall each have a correlative meaning; PROVIDED, HOWEVER, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes (after the Issue Date) a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at the time it becomes a Subsidiary; and PROVIDED, FURTHER, that any amendment, modification or waiver of any provision of any document pursuant to which Indebtedness was previously Incurred shall not be deemed to be an Incurrence of Indebtedness as long as (i) such amendment, modification or waiver does not (A) increase the principal or premium thereof or interest rate thereon, (B) change to an earlier date the 13 Stated Maturity thereof or the date of any scheduled or required principal payment thereon or the time or circumstances under which such Indebtedness may or shall be redeemed, (C) if such Indebtedness is contractually subordinated in right of payment to the Securities, modify or affect, in any manner adverse to the Holders, such subordination, (D) if the Company is the obligor thereon, provide that a Restricted Subsidiary shall be an obligor, or (E) violate, or cause the Indebtedness to violate, the provisions of Sections 3.5 or 3.7 and (ii) such Indebtedness would, after giving effect to such amendment, modification or waiver as if it were an Incurrence, comply with clause (i) of the first proviso to the definition of "Refinancing Indebtedness." "INDEBTEDNESS" of any Person means, without duplication, (i) the principal of and premium (if any such premium is then due and owing) in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable; (ii) all Capitalized Lease Obligations of such Person; (iii) all obligations of such Person Incurred as the deferred purchase price of property, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement; (iv) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction (other- than obligations with respect to letters of credit securing obligations (other than obligations described in (i) through (iii) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the tenth Business Day following receipt by such Person of a demand for reimbursement following payment on the letter of credit); (v) the amount of all obligations of such Person with respect to the scheduled redemption, repayment or other repurchase of any Redeemable Stock and, in the case of any Subsidiary, with respect to any Preferred Stock (but excluding in each case any accrued dividends); (vi) all obligations of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any guarantee; (vii) all liabilities or other 14 obligations, contingent or otherwise, purchased, assumed or with respect to which such Person shall otherwise become liable or responsible in connection with the purchase, acquisition or assumption of property, services or business operations to the extent reflected on the balance sheet of such Person in accordance with GAAP; (viii) contractual obligations to repurchase goods sold or distributed; (ix) all obligations of such Person in respect of Interest Rate Agreements and Currency Agreements; and (x) all obligations of the type referred to in clauses (i) through (ix) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so secured; PROVIDED, HOWEVER, that Indebtedness shall not include trade accounts payable arising in the ordinary course of business. The amount of Indebtedness of any Person at any date shall be, with respect to unconditional obligations, the outstanding balance at such date of all such obligations as described above and, with respect to any contingent obligations (other than pursuant to clause (vii) above, which shall be included to the extent reflected on the balance sheet of such Person in accordance with GAAP) at such date, the maximum liability determined by such Person's board of directors, in good faith, as, in light of the facts and circumstances existing at the time, reasonably likely to be Incurred upon the occurrence of the contingency giving rise to such obligation. "INTERCOMPANY NOTES" means the notes issued to the Company by its Subsidiaries pursuant to the Master Intercompany Note, dated as of ___________, 1994, among the Company and each of the Subsidiaries pursuant to which the Company shall make certain loans to finance the working capital needs of the Subsidiaries with the proceeds of the Indebtedness incurred pursuant to the New Credit Facility, as such Intercompany Notes may be amended or otherwise modified from time to time. "INTEREST PAYMENT DATE" means the stated maturity of an installment of interest on the Securities. "INTEREST RATE AGREEMENT" means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap 15 agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement designed to protect against fluctuations in interest rates to or under which the Company or any of its Restricted Subsidiaries is a party or beneficiary on the Issue Date or becomes a party or beneficiary thereafter. "INVESTMENT" means, with respect to any Person, any direct or indirect advance, loan (other than advances to customers who are not Affiliates in the ordinary course of business that are recorded as accounts receivable on the balance sheet of such Person or its Subsidiaries) or other extension of credit or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any other investment in any other Person, or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or assets issued or owned by any other Person (whether by merger, consolidation, amalgamation, sale of assets or otherwise). For purposes of the definition of "Unrestricted Subsidiary" and the provisions set forth in Section 3.3, (i) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary and shall exclude the fair market value of the net assets of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary and (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined by the Board of Directors in good faith. "ISSUE DATE" means the date on which the Securities are originally issued under the Indenture. "LIEN" means any mortgage, lien, pledge, charge, hypothecation, assignment, claim, option, priority, preferential arrangement of any kind or nature or other security interest or encumbrance of any kind or nature (including any conditional sale or other title retention agreement and any lease in the nature thereof). 16 "LINDSEY ENTITY" means Paul S. Lindsey, Jr., Kristen L. Lindsey, any member of their family and any Person of which any of the foregoing Persons are Affiliates. "LINE OF BUSINESS" means the sale and distribution of propane gas and operations related thereto. "MANAGEMENT GROUP" means, collectively, those individuals who beneficially own, directly or indirectly, Voting Shares of the Company or any successor thereto immediately following the consummation of the Offering and the transactions related thereto and are members of management of the Company or any Subsidiaries of the Company (or the estate or any beneficiary of any such individual or any immediate family member of any such individual or any trust established for the benefit of any such individual or immediate family member). "NET AVAILABLE CASH" means, with respect to any Asset Sale or Collateral Sale, the cash or cash equivalent payments received by the Company or a Subsidiary in connection with such Asset Sale or Collateral Sale (including any cash received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as or when received and also including the proceeds of other property received when converted to cash or cash equivalents) net of the sum of, without duplication, (i) all reasonable legal, title and recording tax expenses, reasonable commissions, and other reasonable fees and expenses incurred directly relating to such Asset Sale or Collateral Sale, (ii) provision for all local, state, federal and foreign taxes expected to be paid (whether or not such taxes are actually paid or payable) as a consequence of such Asset Sale or Collateral Sale, without regard to the consolidated results of the Company and its Subsidiaries, (iii) payments made to repay Indebtedness which is secured by any assets subject to such Asset Sale or Collateral Sale in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or by applicable law, be repaid out of the proceeds from such Asset Sale or Collateral Sale, and (iv) reasonable amounts reserved by the Company or any Subsidiary of the Company receiving proceeds of such Asset Sale or Collateral Sale against any liabilities associated with such Asset Sale or Collateral Sale, 17 including without limitation, indemnification obligations PROVIDED that, such amounts shall be applied as described in Section 3.12 or Section 10.4, as the case may be, no later than the fifth anniversary of such Asset Sale or Collateral Sale if not previously paid to satisfy such liabilities and PROVIDED FURTHER that such amounts shall not exceed 10% of the payments received by the Company or a Subsidiary in connection with such Asset Sale or Collateral Sale. "NET CASH PROCEEDS" means, with respect to any issuance or sale of Capital Stock by any Person, the cash proceeds to such Person of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultancy and other fees actually incurred by such Person in connection with such issuance or sale and net of taxes paid or payable by such Person as a result thereof. "NEW CREDIT FACILITY" means the credit facility provided pursuant to the credit agreement, dated as of _________ __, 1994, as it may be amended or otherwise modified from time to time, between the Company and Continental Bank, N.A. and its successors and assigns. "NON-CONVERTIBLE CAPITAL STOCK" means, with respect to any corporation, any Capital Stock of such corporation which is not convertible into another security other than non-convertible common stock of such corporation; PROVIDED, HOWEVER, that Non-Convertible Capital Stock shall not include any Redeemable Stock or Exchangeable Stock. "OBLIGATIONS" means for any Person all principal, premium, interest, penalties, expenses, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness of such Person. "OFFERING" means the public offering and sale of the Securities. "OFFICER" means the Chairman, the President, any Vice President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, the Secretary, 18 any Assistant Treasurer, any Assistant Secretary or the Controller of the Company. "OFFICERS' CERTIFICATE" means a certificate signed by two Officers, one of whom must be the President, the Treasurer or a Vice President of the Company. Each Officers' Certificate (other than certificates provided pursuant to TIA Section 314(a)(4)) shall include the statements provided for in TIA Section 314(e). "OPERATING LEASE OBLIGATIONS" means any obligation of the Company and its Restricted Subsidiaries on a Consolidated basis incurred or assumed under or in connection with any lease of real or personal property which, in accordance with GAAP, is not required to be classified and accounted for as a capital lease. "OPINION OF COUNSEL" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel, if so acceptable, may be an employee of or counsel to the Company or the Trustee. Each such Opinion of Counsel shall include the statements provided for in TIA Section 314(e). "OUTSIDE DIRECTOR" means any Person who is a member of the Board of Directors who is not (i) an employee or Affiliate of the Company, any Subsidiary of the Company or Energy, (ii) an employee or Affiliate of Holding Capital Group, Inc. (iii) a Plaster Entity or a Lindsey Entity, or (iv) a Person who has engaged in a transaction with the Company or any Subsidiary of the Company that would be required to be disclosed under Item 13 of Form 10-K if such Person were a director of a registrant under the Securities Exchange Act of 1934, as amended. "PERSON" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "PLASTER ENTITY" means Robert W. Plaster, Stephen R. Plaster, any member of each such individual's 19 family, and any Person of which any of the foregoing Persons are Affiliates. "PLEDGE AGREEMENT" means that certain Pledge Agreement, dated as of the date hereof, by the Company in favor of the Trustee, in the form attached hereto as EXHIBIT D, as amended, supplemented and/or restated. "PREFERRED STOCK", as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation. "PRINCIPAL" means, with respect to the Securities, the Accreted Value of the Securities. "PUBLIC EQUITY OFFERING" means an underwritten primary public offering of equity securities of the Company pursuant to an effective registration statement under the Securities Act. "PUBLIC MARKET" shall be deemed to have occurred if (x) a Public Equity Offering has been consummated and (y) at least 25% (for purposes of the definition of "Change of Control") or 20% (for purposes of paragraph 5 of the Securities attached hereto) of the total issued and outstanding common stock of the Company has been distributed by means of an effective registration statement under the Securities Act or sales pursuant to Rule 144 under the Securities Act. "REDEEMABLE STOCK" means any class or series of Capital Stock of any Person that (a) by its terms, by the terms of any security into which it is convertible or exchangeable or otherwise is, or upon the happening of an event or passage of time would be, required to be redeemed (in whole or in part) on or prior to the first anniversary of the Stated Maturity of the Securities, (b) is redeemable at the option of the holder thereof at any time on or prior to the first anniversary of the Stated Maturity of the Securities or (c) is convertible into or exchangeable for Capital Stock referred to in clause (a) or clause (b) above or debt securities at any time prior 20 to the first anniversary of the Stated Maturity of the Securities. "REFINANCING INDEBTEDNESS" means Indebtedness that refunds, refinances, replaces, renews, repays or extends (including pursuant to any defeasance or discharge mechanism) (collectively, "refinances," and "refinanced" shall have a correlative meaning) any Indebtedness of the Company or a Restricted Subsidiary existing on the Issue Date or Incurred in compliance with the Indenture (including Indebtedness of the Company that refinances Indebtedness of any Restricted Subsidiary and Indebtedness of any Restricted Subsidiary that refinances Indebtedness of another Restricted Subsidiary) including Indebtedness that refinances Refinancing Indebtedness; PROVIDED, HOWEVER, that (i) the Refinancing Indebtedness shall be contractually subordinated in right of payment to the Securities on terms at least as favorable to the Holders of the Securities as the terms set forth in the form of subordinated provisions attached hereto as Exhibit C, (ii) the Refinancing Indebtedness shall be scheduled to mature either (a) no earlier than the Indebtedness being refinanced or (b) after the Stated Maturity of the Securities, (iii) the Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being refinanced and (iv) such Refinancing Indebtedness shall have an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) then outstanding (plus fees and expenses, including any premium and defeasance costs) under the Indebtedness being refinanced; and PROVIDED, FURTHER, that Refinancing Indebtedness shall not include (x) Indebtedness of a Subsidiary of the Company that refinances Indebtedness of the Company or (y) Indebtedness of the Company or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary. "RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that is not designated an Unrestricted Subsidiary by the Board of Directors. "SALE/LEASEBACK TRANSACTION" means an arrangement relating to property now owned or hereafter acquired 21 whereby the Company or a Subsidiary transfers such property to a Person and leases it back from such Person, other than leases for a term of not more than 36 months or between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries. "SEASONAL OVERADVANCE" has the meaning ascribed to it in that certain Credit Agreement, dated as of the date hereof, between the Company and Continental Bank, N.A., which such Seasonal Overadvance shall not exceed $3,000,000. "SEC" means the Securities and Exchange Commission. "SECURITIES" means all series of the Senior Secured Notes Due 2004 that are issued under and pursuant to the terms of this Indenture, as amended or supplemented from time to time. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time. "SENIOR INDEBTEDNESS" means (i) all obligations consisting of the principal of and premium, if any, and accrued and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not post-filing interest is allowed in such proceeding), whether existing on the Issue Date or thereafter Incurred, in respect of (A) Indebtedness of the Company for money borrowed and (B) Indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which the Company is responsible or liable; (ii) all Capitalized Lease Obligations of the Company; (iii) all obligations of the Company (A) for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction, (B) under Interest Rate Agreements and Currency Agreements entered into in respect of any obligations described in clauses (i) and (ii) or (C) issued or assumed as the deferred purchase price of property, and all conditional sale obligations of the Company and all obligations of the Company under any title retention agreement; (iv) all guarantees of the Company with respect to obligations of other persons of the type referred to in clauses (ii) and (iii) and with respect to the payment of dividends of 22 other Persons; and (v) all obligations of the Company consisting of modifications, renewals, extensions, replacements and refundings of any obligations described in clauses (i), (ii), (iii) or (iv); unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are subordinated in right of payment to the Securities, or any other Indebtedness or obligation of the Company; PROVIDED, HOWEVER, that Senior Indebtedness shall not be deemed to include (1) any obligation of the Company to any Subsidiary, (2) any liability for Federal, state, local or other taxes or (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities). "SIGNIFICANT SUBSIDIARY" means any Subsidiary (other than an Unrestricted Subsidiary) that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulations S-X promulgated by the SEC. "STATED MATURITY" means, with respect to any security, the date specified in such security as the fixed date on which the principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency). "SUBORDINATED INDEBTEDNESS" means any Indebtedness of the Company (whether outstanding on the Issue Date or thereafter Incurred) which is contractually subordinated or junior in right of payment to the Securities or any other Indebtedness of the Company. "SUBSIDIARY" means, as applied to any Person, (i) a corporation, at least a majority of whose Capital Stock with voting power, under ordinary circumstances, to elect a majority of the board of directors of such corporation is at the time, directly or indirectly, owned or controlled by such Person, by a Subsidiary or Subsidiaries of such Person, or by such Person and a Subsidiary or Subsidiaries of such Person or (ii) any other Person (other than a corporation) in which such Person, a Subsidiary or Subsidiaries of such Person, or such Person and a Subsidiary or Subsidiaries of such Person, directly 23 or indirectly, at the date of determination, has at least a majority ownership interest. As of the date of this Indenture, the Subsidiaries of the Company include, without limitation, PSNC Propane Corporation. "SUBSIDIARY GUARANTEES" means the unconditional guarantees by the respective Subsidiary Guarantors of the due and punctual payment of principal, premium, if any, and interest on the Securities when and as the same shall become due and payable and in the coin or currency in which the same are payable, whether at Stated Maturity, by declaration of acceleration, call for redemption, purchase or otherwise. "SUBSIDIARY GUARANTOR" means each of the Persons listed on Schedule I attached hereto, each Person that becomes a Restricted Subsidiary of the Company after the Issue Date and each other Person that becomes a Subsidiary Guarantor under this Indenture by executing a supplement to this Indenture pursuant to which such Person jointly and severally unconditionally guarantees the Securities on a senior basis. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. 77aaa- 77bbbb) as in effect on the date first above written. "TEMPORARY CASH INVESTMENTS" means any of the following: (i) any investment in direct obligations of the United States of America or any agency thereof or obligations Guaranteed by the United States of America or any agency thereof, in each case, maturing within 360 days of the date of acquisition thereof, (ii) investments in time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company (including the Trustee) which is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States having capital, surplus and undivided profits aggregating in excess of $250,000,000 and whose debt is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by an registered broker dealer or mutual fund distributor,(iii) repurchase obligations with a term of not more than 30 days for 24 underlying securities of the types described in clause (i) above entered into with a bank meeting the qualifications described in clause (ii) above, (iv) investments in commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate or Subsidiary of the Company) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of "P-2" (or higher) according to Moody's Investors Service, Inc. or "A-2" (or higher) according to Standard and Poor's Corporation, (v) securities with maturities or six months or less from the date of acquisition backed by standby or direct pay letters of credit issued by any bank satisfying the requirements of clause (ii) above and (vi) securities with maturities of six months or less from the date of acquisition issued or fully Guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by Standard and Poor's Corporation or "A" by Moody's Investors Service, Inc. "TRUSTEE" means the party named as such above until a successor replaces it and thereafter means the successor. "TRUST OFFICER" means any officer of the Trustee assigned by the Trustee to administer its corporate trust matters or to whom any corporate trust matter is referred because of that officer's knowledge of and familiarity with the particular subject. "UNIFORM COMMERCIAL CODE" means the New York Uniform Commercial Code as in effect from time to time. "UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below and (ii) any subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, the Company or any 25 other Subsidiary that is not a Subsidiary of the Subsidiary to be so designated; PROVIDED, that either (A) the Subsidiary to be so designated has total assets of $1,000 or less or (B) if such Subsidiary has assets greater than $1,000, that such designation would be permitted pursuant to Section 3.3. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary of the Company; PROVIDED, HOWEVER, that immediately after giving effect to such designation (x) the Company could Incur $1.00 of additional Indebtedness pursuant to Section 3.4(a) and (y) no Default or Event of Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the respective Trustee by promptly filing with the respective Trustee a copy of the board resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. GOVERNMENT OBLIGATIONS" means securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case under clauses (i) or (ii) are not callable or redeemable before the maturity thereof. "VOTING SHARES," with respect to any corporation, means the Capital Stock having the general voting power under ordinary circumstances to elect at least a majority of the board of directors of such corporation (irrespective of whether or not 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 SUBSIDIARY" means a Subsidiary (other than an Unrestricted Subsidiary) all the Capital Stock of which (other than directors' qualifying shares) is owned by the Company or another Wholly Owned Subsidiary. 26 SECTION 1.2 OTHER DEFINITIONS. TERM DEFINED IN SECTION "Application Period" . . . . . . . . . . . . . . . . . . . . . . . 3.12 "Asset Sale Offer" . . . . . . . . . . . . . . . . . . . . . . . . 3.12 "Asset Sale Offer Amount" . . . . . . . . . . . . . . . . . . . . . 3.12 "Asset Sale Purchase Date" . . . . . . . . . . . . . . . . . . . . 3.12 "Bankruptcy Law" . . . . . . . . . . . . . . . . . . . . . . . . . 5.1 "Change of Control Offer" . . . . . . . . . . . . . . . . . . . . . 3.8 "Change of Control Purchase Date" . . . . . . . . . . . . . . . . . 3.8 "Collateral Application Period" . . . . . . . . . . . . . . . . . . 10.4 "Collateral Offer Period" . . . . . . . . . . . . . . . . . . . . . 10.5 "Collateral Sale" . . . . . . . . . . . . . . . . . . . . . . . . . 10.4 "Collateral Sale Offer" . . . . . . . . . . . . . . . . . . . . . . 10.5 "Collateral Sale Offer Amount" . . . . . . . . . . . . . . . . . . 10.5 "Collateral Sale Purchase Date" . . . . . . . . . . . . . . . . . . 10.5 "Custodian" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1 "Event of Default" . . . . . . . . . . . . . . . . . . . . . . . . 5.1 "Global Securities" . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 "Legal Holiday" . . . . . . . . . . . . . . . . . . . . . . . . . . 11.7 "Offer Period" . . . . . . . . . . . . . . . . . . . . . . . . . . 3.12 "Paying Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 "Registrar" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 "Restricted Payment" . . . . . . . . . . . . . . . . . . . . . . 3.3 "Successor Corporation" . . . . . . . . . . . . . . . . . . . . . . 4.1 "Successor Subsidiary Guarantor" . . . . . . . . . . . . . . . . . . 4.1 SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "COMMISSION" means the SEC; "INDENTURE SECURITIES" means the Securities; "INDENTURE SECURITY HOLDER" means a Holder or Securityholder; "INDENTURE TO BE QUALIFIED" means this Indenture; 27 "INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; and "OBLIGOR" on the indenture securities means the Company. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings assigned to them. SECTION 1.4 RULES OF CONSTRUCTION. Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) "generally accepted accounting principles" means, and any accounting term not otherwise defined has the meaning assigned to it and shall be construed in accordance with, GAAP; (c) "OR" is not exclusive; (d) words in the singular include the plural, and in the plural include the singular; (e) provisions apply to successive events and transactions; (f) "including" means including, without limitation; (g) unsecured debt shall not be deemed to be subordinate or junior to secured debt merely by virtue of its nature as unsecured debt; (h) the principal amount of any non-interest bearing or other discount security (other than the Securities) at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with generally accepted accounting principles and accretion of principal on such security shall be deemed to be the Incurrence of Indebtedness; and 28 (i) the principal amount (if any) of any Preferred Stock shall be the greatest of (i) the stated value, (ii) the redemption price or (iii) the liquidation preference of such Preferred Stock. 29 ARTICLE II THE SECURITIES SECTION 2.1 FORM AND DATING. The Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A annexed hereto, which is part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage and shall have endorsed thereon the Subsidiary Guarantee executed by the Subsidiary Guarantors as provided in Article XII. Each Security shall be dated the date of its authentication. The terms and provisions contained in the form of Security annexed hereto as Exhibit A shall constitute, and are expressly made, a part of this Indenture. To the extent applicable, the Company, each Subsidiary Guarantor and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. The Securities shall be issued initially in the form of one or more permanent global Securities in registered form (the "Global Securities"), deposited with, or on behalf of, the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. Each Global Security shall bear such legend as may be required or reasonably requested by the Depositary. Each Global Security shall have endorsed thereon the Subsidiary Guarantee executed by the Subsidiary Guarantors. The definitive Securities shall be typed, printed, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. 30 SECTION 2.2 EXECUTION AND AUTHENTICATION. Two Officers shall sign the Securities for the Company by manual or facsimile signature. The Company's seal shall be reproduced on the Securities and the Subsidiary Guarantee of the Subsidiary Guarantors shall be endorsed thereon. If an Officer whose signature is on a Security no longer holds that office at the time the Security is authenticated, the Security shall nevertheless be valid. A Security shall not be valid until authenticated by the manual signature of an authorized signatory of the Trustee. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate Securities for original issue up to the aggregate principal amount stated in paragraph 4 of Exhibit A upon a written order of the Company signed by two Officers. Such order shall specify the amount of the Securities to be authenticated and the date on which the original issue of Securities is to be authenticated. The aggregate principal amount of Securities outstanding at any time may not exceed that amount except as provided in Section 2.7. The Trustee shall initially act as authenticating agent and may subsequently appoint another Person acceptable to the Company as authenticating agent to authenticate Securities. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company or an Affiliate of the Company. Provided that the authentication agent has entered into an agreement with the Company concerning the authentication agent's duties, the Trustee shall not be liable for any act or any failure of the authenticating agent to perform any duty either required herein or authorized herein to be performed by such person in accordance with this Indenture. 31 The Securities shall be issued only in registered form without coupons and only in denominations of $1,000 and integral multiples thereof. SECTION 2.3 REGISTRAR AND PAYING AGENT. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Securities may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall promptly notify the Trustee of the name and address of any such Agent and any change in the address of such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 6.7. The Company or any Subsidiary or Affiliate of the Company may act as Paying Agent, Registrar, co-registrar or transfer agent; provided, however, that the Company shall not act as Paying Agent during such time as an Event of Default shall have occurred and be continuing. The Company initially appoints the Trustee as Registrar and Paying Agent in connection with the Securities. SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST. On or prior to 1:00 p.m. on each due date of the principal and interest on any Security (including any redemption date fixed under the terms of such Security or this Indenture) the Company shall deposit with the Paying Agent a sum of money sufficient to pay such principal and interest in funds available when such becomes due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall 32 hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Securities (whether such money has been paid to it by the Company or any other obligor on the Securities, including any Subsidiary Guarantor) and shall notify the Trustee of any default by the Company (or any other obligor on the Securities, including any Subsidiary Guarantor) in making any such payment. If the Company or a Subsidiary or an affiliate of the Company acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund for the benefit of the Securityholders. If the Company defaults in its obligation to deposit funds for the payment of principal and interest the Trustee may, during the continuation of such default, require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by it. Upon doing so, the Paying Agent (other than the Company or a Subsidiary or Affiliate of the Company) shall have no further liability for the money delivered to the Trustee. SECTION 2.5 SECURITYHOLDER LISTS. The Trustee shall preserve in as current a form as reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Securityholders, and the Company shall otherwise comply with TIA Section 312(a). SECTION 2.6 TRANSFER AND EXCHANGE. The Securities shall be transferable only upon the surrender of a Security for registration of transfer. When a Security is presented to the Registrar or a co-registrar with a request to register a transfer, the Registrar shall register the transfer as requested if the requirements of Section 8-401(1) of the Uniform Commercial Code are met and, if so required by the Trustee, the Company or any Subsidiary Guarantor, if the Security presented is accompanied by a written instrument of 33 transfer in form satisfactory to the Trustee, the Company and each of the Subsidiary Guarantors, duly executed by the registered owner or by his or her attorney duly authorized in writing. When Securities are presented to the Registrar or a co-registrar with a request to exchange them for an equal principal amount of Securities of other denominations, the Registrar shall make the exchange as requested if the same requirements are met. To permit registration of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities endorsed thereon with the Subsidiary Guarantee of the Subsidiary Guarantors at the Registrar's or co-registrar's request. No service charge shall be made for any registration of transfer or exchange of the Securities, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange pursuant to Section 2.10 or 8.5 of this Indenture). The Company shall not be required to make and the Registrar need not register transfers or exchanges of Securities selected for redemption (except, in the case of Securities to be redeemed in part, the portion thereof not to be redeemed) or for a period of 15 days before a selection of Securities to be redeemed or 15 days before an interest payment date. Prior to the due presentation for registration of transfer of any Security, the Company, each of the Subsidiary Guarantors, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar or any co- registrar shall be affected by notice to the contrary. Notwithstanding any other provisions of this Section 2.6, unless and until it is exchanged in whole or in part for Securities in definitive registered form, a Global Security representing all or a portion of the Securities may not be transferred except as a whole by the Depositary to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another 34 nominee of such Depositary or by such Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. If the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for the Global Securities or if at any time the Depositary shall no longer be eligible under the next sentence of this paragraph, the Company shall appoint a successor Depositary with respect to the Securities. Each Depositary appointed pursuant to this Section 2.6 must, at the time of its appointment and at all times while it serves as Depositary, be a clearing agency registered under the Exchange Act and any other applicable statute or regulation. The Company will execute, and the Trustee will authenticate and deliver upon a written order of the Company signed by two Officers, Securities in definitive registered form with the Subsidiary Guarantee of the Subsidiary Guarantors endorsed thereon in any authorized denominations representing such Securities in exchange for such Global Security or Securities if (i) the Depositary notifies the Company that it is unwilling or unable to continue or unable to continue as Depositary for the Global Securities or if at any time the Depositary shall no longer be eligible to serve as Depositary and a successor Depositary for the Securities is not appointed by the Company within 60 days after the Company receives such notice or becomes aware of such ineligibility or (ii) an Event of Default has occurred and is continuing. The Company may at any time and in its sole discretion determine that the Securities shall no longer be represented by a Global Security or Securities. In such event the Company will execute, and the Trustee will authenticate and deliver upon a written order of the Company signed by two Officers, Securities with the Subsidiary Guarantee of the Subsidiary Guarantors endorsed thereon in exchange for such Global Security or Securities. Upon the exchange of a Global Security for Securities in definitive registered form without coupons, in authorized denominations, such Global Security shall be cancelled by the Trustee. Securities in definitive registered form issued in exchange for a Global Security pursuant to this Section 2.6 shall be registered in such names and in such authorized denominations as the Deposi- 35 tary for such Global Security, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Securities to or as directed by the Persons in whose names such Securities are so registered. All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture will evidence the same debt and will be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. SECTION 2.7 REPLACEMENT SECURITIES. If a mutilated security is surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken and the Holder furnishes to the Company, each Subsidiary Guarantor and the Trustee evidence to their satisfaction of such loss, destruction or wrongful taking, the Company shall issue and the Trustee shall, in the absence of notice to the Company or the Trustee that such Security has been acquired by a BONA FIDE purchaser, authenticate a replacement Security with the Subsidiary Guarantee of the Subsidiary Guarantors endorsed thereon if the requirements of Section 8-405 of the Uniform Commercial Code are met and if there is delivered to the Company, each Subsidiary Guarantor and the Trustee such security or indemnity as may be required to save each of them harmless, satisfactory to the Company or the Trustee, as the case may be. The Company, each Subsidiary Guarantor and the Trustee may charge the Holder for their expenses in replacing a Security. Every replacement Security is an additional obligation of the Company and shall be entitled to the benefits of this Indenture. SECTION 2.8 OUTSTANDING SECURITIES. The Securities outstanding at any time are all the Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, and those described in this Section as not outstanding. 36 If a Security is replaced pursuant to Section 2.7, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a BONA FIDE purchaser. If all the principal and interest on any Securities are considered paid under Section 3.1, such Securities cease to be outstanding under this Indenture and interest on such Securities shall cease to accrue. If the Paying Agent (other than the Company or a Subsidiary or an Affiliate of the Company) holds in accordance with this Indenture on a redemption date or maturity date money sufficient to pay all principal and interest due on that date then on and after that date such Securities cease to be outstanding and interest on them ceases to accrue (unless there shall be a default in such payment). If a Security is called for redemption, the Company and the Trustee need not treat the Security as outstanding in determining whether Holders of the required principal amount of Securities have concurred in any direction, waiver or consent. Subject to Section 2.9, a Security does not cease to be outstanding because the Company or an Affiliate thereof holds the Security. SECTION 2.9 DETERMINATION OF HOLDERS' ACTION. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, amendment, waiver or consent, Securities owned by or pledged to the Company, any Subsidiary Guarantor, any other obligor upon the Securities or any Affiliate of the Company, any Subsidiary Guarantor or such other obligor shall be disregarded and deemed not to be outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so owned or pledged shall be so disregarded. SECTION 2.10 TEMPORARY SECURITIES. 37 Until definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities having endorsed thereon temporary Subsidiary Guarantees executed by the Subsidiary Guarantors. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities and having duly endorsed thereon the Subsidiary Guarantees which shall be substantially in the form of definitive Subsidiary Guarantees but which may have variations that the Company believes appropriate for temporary securities. Without unreasonable delay, the Company shall prepare and the Trustee, upon the written order of the Company signed by two Officers, shall authenticate definitive Securities in exchange for temporary Securities. Until such exchange, temporary Securities shall be entitled to the same rights, benefits and privileges as definitive Securities. SECTION 2.11 CANCELLATION. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee shall cancel all Securities surrendered for registration of transfer, exchange, payment or cancellation and shall destroy the same or otherwise dispose of canceled Securities as the Company directs by written order signed by two Officers. The Company may not issue new Securities to replace Securities that it has paid or delivered to the Trustee for cancellation. SECTION 2.12 DEFAULTED INTEREST. If the Company defaults in a payment of interest on the Securities, it shall pay defaulted interest, plus any interest payable on the defaulted interest to the extent permitted by law, in any lawful manner. It may pay the defaulted interest to the Persons who are Securityholders on a subsequent special record date which date shall be at least five Business Days prior to the payment date. The Company shall fix the special record date and payment date. At least 15 days before the special record date, the Company (or the Trustee, in the name of and at the expense of the Company) shall mail to 38 Securityholders a notice that states the special record date, payment date and amount of interest to be paid. ARTICLE III COVENANTS SECTION 3.1 PAYMENT OF SECURITIES. The Company shall pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities. The Company shall pay interest on overdue principal at the rate borne by the Securities; it shall pay interest on overdue installments of interest at the rate borne by the Securities to the extent lawful. Principal and interest shall be considered paid on the date due (including a redemption date) if the Trustee or the Paying Agent (other than the Company or a Subsidiary or an Affiliate of the Company) has received from or on behalf of the Company on or prior to 1:00 p.m. on that date money sufficient to pay all principal and interest then due. SECTION 3.2 MAINTENANCE OF OFFICE OR AGENCY. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency where Securities may be surrendered for registration of transfer or exchange or for presentation for payment and where notices and demands to or upon the Company or any Subsidiary Guarantor in respect of the Securities any Subsidiary Guarantee endorsed thereon and this Indenture may be served. The Company and the Subsidiary Guarantors will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company or any Subsidiary Guarantor shall fail to maintain any such required office or agency or to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 11.2 of this Indenture. The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; PROVIDED, HOWEVER, that no such designation 39 or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York, for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby initially designates the office of Shawmut Trust Company in the Borough of Manhattan, the City of New York, as such office of the Company in accordance with Section 2.3. SECTION 3.3 LIMITATION ON RESTRICTED PAYMENTS. (a) So long as any of the Securities are outstanding, the Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, (i) declare or pay any dividend on or make any distribution or similar payment of any sort in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving the Company) to the direct or indirect holders of its Capital Stock (other than dividends or distributions payable solely in its Non-Convertible Capital Stock or rights to acquire its Non-Convertible Capital Stock and dividends or distributions payable solely to the Company or a Restricted Subsidiary), (ii) purchase, redeem, defease or otherwise acquire or retire for value any Capital Stock of the Company or of any direct or indirect parent of the Company or, with respect to the Company, exercise any option to exchange any Capital Stock that by its terms is exchangeable solely at the option of the Company (other than into Capital Stock of the Company which is neither Exchangeable Stock nor Redeemable Stock), (iii) purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to scheduled maturity or scheduled repayment thereof or scheduled sinking fund payment thereon, any Subordinated Indebtedness (other than the purchase, repurchase, or other acquisition of Subordinated Indebtedness purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition) or (iv) make any Investment in any Unrestricted Subsidiary or any Affiliate of the Company other than a Restricted Subsidiary or a Person which will become a Restricted Subsidiary as a result of any such 40 Investment (each such payment described in clauses (i)-(iv) of this paragraph, a "Restricted Payment"), unless at the time of and after giving effect to the proposed Restricted Payment: (1) no Default or Event of Default shall have occurred and be continuing (or would result therefrom); (2) the Company would be permitted to Incur an additional $1 of Indebtedness pursuant to the provisions of Section 3.4(a); and (3) the aggregate amount of all such Restricted Payments subsequent to the Issue Date shall not exceed the sum of: (A) 50% of aggregate Consolidated Net Income (or if such Consolidated Net Income is a deficit, minus 100% of such deficit), and minus 100% of the amount of any write-downs, write-offs, other negative reevaluations and other negative extraordinary charges not otherwise reflected in Consolidated Net Income during such period; (B) the aggregate Net Cash Proceeds received by the Company after the Issue Date from a sale by the Company of Capital Stock (other than Redeemable Stock or Exchangeable Stock) of the Company or from the issuance of any options or warrants or other rights to acquire Capital Stock (other than Redeemable Stock or Exchangeable Stock); (C) the amount by which the principal amount of Indebtedness of the Company or its Restricted Subsidiaries is reduced on the Company's Consolidated balance sheet upon the conversion or exchange (other than by a Subsidiary) subsequent to the Issue Date of any Indebtedness of the Company or any Restricted Subsidiary converted or exchanged for Capital Stock (other than Redeemable Stock or Exchangeable Stock) of the Company (less the amount of any cash, or the value of any other property, 41 distributed by the Company or any Restricted Subsidiary upon such conversion or exchange); (D) an amount equal to the net reduction in Investments in Unrestricted Subsidiaries resulting from payments of interest on Indebtedness, dividends, repayments of loans or advances, or other transfers of assets, in each case to the Company or any Restricted Subsidiary from Unrestricted Subsidiaries, or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investments"), not to exceed in the case of any Unrestricted Subsidiary the amount of Investments previously made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary; and (E) $1,000,000, less the aggregate of all Excess Payments made during such period. (b) The failure to satisfy the conditions set forth in clauses (2) and (3) of Section 3.3(a) shall not prohibit any of the following as long as the condition set forth in Section 3.3(a)(1) is satisfied (except as set forth below): (i) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividend would have complied with Section 3.3(a); (ii) any purchase, redemption, defeasance, or other acquisition or retirement for value of Capital Stock or Subordinated Indebtedness of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company (other than Redeemable Stock or Exchangeable Stock and other than stock issued or sold to a Subsidiary or to an employee stock ownership plan), PROVIDED, HOWEVER, that notwithstanding Section 3.3(a)(1), the occurrence or existence of a Default or Event of Default shall not prohibit the making of such purchase, redemption, defeasance or other acquisition or retirement, and PROVIDED, FURTHER, such purchase, redemption, defeasance or other acquisition or retirement shall not be included in 42 the calculation of Restricted Payments made for purposes of Section 3.3(a)(3) and PROVIDED, FURTHER, that the Net Cash Proceeds from such sale shall be excluded from Section 3.3(a)(3)(B); (iii) any purchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Indebtedness of the Company made by exchange for, or out of the proceeds of the substantially concurrent Incurrence of for cash (other than to a Subsidiary), new Indebtedness of the Company, PROVIDED, HOWEVER, that (A) such new Indebtedness shall be contractually subordinated in right of payment to the Securities on terms at least as favorable to the Security holders as the terms set forth in the form of subordination provisions attached hereto as Exhibit B, (B) such new Indebtedness has a Stated Maturity either (1) no earlier than the Stated Maturity of the Indebtedness redeemed, repurchased, defeased, acquired or retired or (2) after the Stated Maturity of the Securities and (C) such Indebtedness has an Average Life equal to or greater than the Average Life of the Indebtedness redeemed, repurchased, defeased, acquired or retired, and PROVIDED, FURTHER, that such purchase, redemption, defeasance or other acquisition or retirement shall not be included in the calculation of Restricted Payments made for purposes of Section 3.3(a)(3); (iv) any purchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Indebtedness upon a Change of Control or an Asset Sale to the extent required by the indenture or other agreement pursuant to which such Subordinated Indebtedness was issued, but only if the Company (A) in the case of a Change of Control, has made an offer to repurchase the Securities as described under Section 3.8 or (B) in the case of an Asset Sale, has applied the Net Available Cash from such Asset Sale in accordance with Section 3.12 and Section 10.4 (if applicable); (v) pro rata dividends paid by a Subsidiary with respect to a series or class of its Capital Stock the majority of which is held by the Company or a Wholly Owned Subsidiary; 43 (vi) the payment of dividends on the Capital Stock of the Company following an initial Public Equity Offering of such Capital Stock of up to an amount per annum of 6% of the Net Cash Proceeds received by the Company in such Public Equity Offering; (vii) the purchase, redemption, acquisition, cancellation, or other retirement for value of shares of Capital Stock of the Company, options on any such shares or related phantom stock, or stock appreciation rights or similar securities held by officers or employees or former officers or employees (or their estates or beneficiaries under their estates), upon the death, disability, retirement or termination of employment of such employee or former employee, pursuant to the terms of an employee benefit plan or any other agreement under which such shares of stock or related rights were issued, provided that the aggregate cash consideration paid, or distributions made, pursuant to this clause (vii) after the date of this Indenture does not exceed an aggregate amount of $1,000,000 plus the cash proceeds received by or contributed to the Company from any reissuance of Capital Stock by the Company to members of management and employees of the Company and its Subsidiaries; and (viii) Investments in Unrestricted Subsidiaries of up to $3,000,000 at any one time outstanding. SECTION 3.4 LIMITATION ON INCURRENCE OF INDEBTEDNESS. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness, except that the Company may Incur Indebtedness if, after giving effect thereto, the Consolidated Coverage Ratio would be greater than 1.75:1 if such Incurrence takes place on or prior to __________, 1998, or 2.0:1, if such Incurrence takes place thereafter. (b) Notwithstanding the foregoing, this Section shall not limit the ability of the Company or any Restricted Subsidiary to Incur the following Indebtedness: 44 (i) Refinancing Indebtedness (except with respect to Indebtedness referred to in clauses (ii), (iii) or (iv) below); (ii) Acquisition Indebtedness at any one time outstanding in an aggregate principal amount not to exceed $15,000,000, PROVIDED that not more than an aggregate of $6,000,000 of such Acquisition Indebtedness may be incurred in any twelve month period; (iii) Indebtedness of the Company which is owed to and held by a Wholly Owned Subsidiary and Indebtedness of a Wholly Owned Subsidiary which is owed to and held by the Company or a Wholly Owned Subsidiary, including, without limitation, the Indebtedness evidenced by the Intercompany Notes; PROVIDED, HOWEVER, that any subsequent issuance or transfer of any Capital Stock which results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any transfer of such Indebtedness (other than to the Company or a Wholly Owned Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the Company or by a Wholly Owned Subsidiary, as the case may be; (iv) Indebtedness of the Company (whether under the New Credit Facility or otherwise) Incurred for the purpose of financing the working capital needs of the Company and its Restricted Subsidiaries, PROVIDED, HOWEVER, that after giving effect to the Incurrence of such Indebtedness and any substantially simultaneous use of the proceeds thereof, the aggregate principal amount of all such Indebtedness Incurred pursuant to this clause (iv) and then outstanding immediately after such Incurrence and such use of proceeds shall not exceed the sum of 60% of the book value of the inventory and 90% of the book value of the receivables of the Company and the Restricted Subsidiaries on a consolidated basis at such time plus the amount of the Seasonal Overadvance and, PROVIDED, FURTHER, that such aggregate principal amount outstanding shall not exceed $15,000,000 at any time prior to __________, 1997 and PROVIDED FURTHER, that the Company's Subsidiaries shall be permitted to guaran- 45 tee Indebtedness Incurred by the Company pursuant to the New Credit Facility; (v) Acquired Indebtedness; PROVIDED, HOWEVER, that the Company would have been able to Incur such Indebtedness at the time of the Incurrence thereof pursuant to Section 3.4(a); and (vi) Indebtedness of the Company or a Restricted Subsidiary outstanding on the Issue Date (other than Indebtedness referred to in clause (iv) above and Indebtedness being repaid or retired with the proceeds of the Offering). (c) Notwithstanding Sections 3.4(a) and (b), the Company shall not Incur any Indebtedness if the proceeds thereof are used, directly or indirectly, to repay, prepay, redeem, defease, retire, refund or refinance any Subordinated Indebtedness unless such repayment, prepayment, redemption, defeasance, retirement, refunding or refinancing is not prohibited by Section 3.3 or unless such Indebtedness shall be contractually subordinated to the Securities at least to the same extent as such Subordinated Indebtedness. SECTION 3.5 LIMITATION ON PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The Company shall not, and shall not permit any Subsidiary, to create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (i) pay dividends to or make any other distributions on its Capital Stock, or pay any Indebtedness or other obligations owed to the Company or any other Restricted Subsidiary, (ii) make any Investments in the Company or any other Restricted Subsidiary or (iii) transfer any of its property or assets to the Company or any other Restricted Subsidiary; PROVIDED, HOWEVER, that the foregoing shall not apply to: (a) any encumbrance or restriction existing pursuant to this Indenture or any other agreement or instrument as in effect or entered into on the Issue Date (including the New Credit Facility as in effect on the Issue Date); 46 (b) any encumbrance or restriction with respect to a Subsidiary pursuant to an agreement relating to any Acquired Indebtedness; PROVIDED, HOWEVER, that such encumbrance or restriction was not Incurred in connection with or in contemplation of such Subsidiary becoming a Subsidiary; (c) any encumbrance or restriction pursuant to an agreement effecting a refinancing, renewal, extension or replacement of Indebtedness referred to in clause (a) or (b) above or contained in any amendment or modification with respect to such Indebtedness; PROVIDED, HOWEVER, that the encumbrances and restrictions contained in any such agreement, amendment or modification are no less favorable in any material respect with respect to the matters referred to in clauses (i), (ii) and (iii) above than the encumbrances and restrictions with respect to the Indebtedness being refinanced, renewed, extended, replaced, amended or modified; (d) in the case of clause (c)(iii) above, customary non-assignment provisions of any leases governing a leasehold interest or of any supply, license or other agreement entered into in the ordinary course of business of the Company or any Subsidiary; (e) any restrictions with respect to a Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Subsidiary pending the closing of such sale or disposition; or (f) any encumbrance or restriction existing by reason of applicable law. Nothing contained in this Section 3.5 shall prohibit the sale of assets that secure Indebtedness of the Company or its Subsidiaries. SECTION 3.6 LIMITATION ON SALE/LEASEBACK TRANSACTIONS. The Company shall not, and shall not permit any Restricted Subsidiary to, enter into any Sale/Leaseback Transaction unless (i) the Company or such Subsidiary would be entitled to create a Lien on such property securing Indebtedness in an amount equal to the Attributable Debt with respect to such transaction without equal- 47 ly and ratably securing the Securities pursuant to Section 3.7 or (ii) the net proceeds of such sale are at least equal to the fair value (as determined by the Board of Directors) of such property and the Company or such Subsidiary shall apply or cause to be applied an amount in cash equal to the net proceeds of such sale to the retirement, within 30 days of the effective date of any such arrangement, of Senior Indebtedness or Indebtedness of a Restricted Subsidiary, PROVIDED, HOWEVER, that the Company or any Restricted Subsidiary may enter into a Sale/Leaseback Transaction as long as the sum of (x) the Attributable Debt with respect to such Sale/Leaseback Transaction and all other Sale/Leaseback Transactions entered into pursuant to this proviso, plus (y) the amount of outstanding Indebtedness secured by Liens Incurred pursuant to the final proviso of Section 3.7, does not exceed 5% of Consolidated Net Tangible Assets as determined based on the consolidated balance sheet of the Company as of the end of the most recent fiscal quarter for which financial statements are available. SECTION 3.7 LIMITATION ON LIENS. Except as provided for under Article X, the Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, incur or permit to exist any Lien of any nature whatsoever on any of its properties (including, without limitation, Capital Stock), whether owned at the date of such Indenture or thereafter acquired, other than: (a) pledges or deposits made by such Person under workers' compensation, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for payment of Indebtedness) or leases to which such Person is a party, or deposits to secure statutory or regulatory obligations of such Person or deposits of cash of United States Government bonds to secure surety, appeal or performance bonds to which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent, in each case Incurred in the ordinary course of business; (b) Liens imposed by law such as carriers', warehousemen's and mechanics' Liens, in each case, arising in the ordinary course of business and with respect 48 to amounts not yet due or being contested in good faith by appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made; or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be diligently prosecuting appeal or other proceedings for review; (c) Liens for property taxes not yet subject to penalties for non- payment or which are being contested in good faith and by appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made; (d) Liens in favor of issuers or surety bonds or letters of credit issued pursuant to the request of and for the account of such Person in the ordinary course of its business; PROVIDED, HOWEVER, that such letters of credit may not constitute Indebtedness; (e) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties or liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not Incurred in connection with Indebtedness or other extensions of credit and which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person; (f) Liens securing Indebtedness Incurred to finance the construction of, purchase of, or repairs, improvements or additions to, property (including Acquisition Indebtedness Incurred pursuant to Section 3.4(b)(ii)); PROVIDED, HOWEVER, that the Lien may not extend to any other property owned by the Company or any Restricted Subsidiary at the time the Lien is incurred, and the Indebtedness secured by the Lien may not be issued more than 180 days after the later of the acquisition, completion of construction, repair, improvement, addition or commencement of full operation of the property subject to the Lien; 49 (g) Liens existing on the Issue Date (other than Liens relating to Indebtedness or other obligations being repaid or Liens that are otherwise extinguished with the proceeds of the Offering); (h) Liens on property (excluding Capital Stock) of a Person at the time such Person becomes a Subsidiary; PROVIDED, HOWEVER, that any such Lien may not extend to any other property owned by the Company or any Restricted Subsidiary; (i) Liens on property at the time the Company or a Subsidiary acquires the property, including any acquisition by means of a merger or consolidation with or into the Company or a Subsidiary; PROVIDED, HOWEVER, that such Liens are not incurred in connection with, or in contemplation of, such merger or consolidation; and PROVIDED, FURTHER, that the Lien may not extend to any other property owned by the Company or any Restricted Subsidiary; (j) Liens securing Indebtedness or other obligations of a Subsidiary owing to the Company or a Wholly Owned Subsidiary, including, without limitation, the Indebtedness Incurred under Intercompany Notes; PROVIDED, that any such Lien securing Indebtedness pursuant to any Intercompany Note shall be limited to the inventory and accounts receivable of the Subsidiary of the Company issuing such Intercompany Note; (k) Liens incurred by a Person other than the Company or any Subsidiary on assets that are the subject of a Capitalized Lease Obligation to which the Company or a Subsidiary is a party; PROVIDED, HOWEVER, that any such Lien may not secure Indebtedness of the Company or any Subsidiary (except by virtue of clause (x) of the definition of "Indebtedness") and may not extend to any other property owned by the Company or any Restricted Subsidiary; (l) Liens on inventory and accounts receivable of the Company and its Subsidiaries securing Indebtedness permitted to be incurred pursuant to Section 3.4(b)(iv); (m) Liens to secure any refinancing, refunding, extension, renewal or replacement (or successive 50 refinancings, refundings, extensions, renewals or replacements) as a whole, or in part, of any Indebtedness secured by any Lien referred to in the foregoing clauses (f), (g), (h) and (i), PROVIDED, HOWEVER, that (x) such new Lien shall be limited to all or part of the same property that secured the original Lien (plus improvements on such property) and (y) the Indebtedness secured by such Lien at such time is not increased (other than by an amount necessary to pay fees and expenses, including premiums, related to the refinancing, refunding, extension, renewal or replacement of such Indebtedness); and (n) Liens by which the Securities are secured equally and ratably with other Indebtedness of the Company pursuant to this Section 3.7; without effectively providing that the Securities shall be secured equally and ratably with (or prior to) the obligations so secured for so long as such obligations are so secured; PROVIDED, HOWEVER, that the Company may incur other Liens other than on the Collateral to secure Indebtedness as long as the sum of (x) the amount of outstanding Indebtedness secured by Liens incurred pursuant to this proviso plus (y) the Attributable Debt with respect to all outstanding leases in connection with Sale/Leaseback Transactions entered into pursuant to the proviso to Section 3.6 does not exceed 5% of Consolidated Net Tangible Assets as determined with respect to the Company as of the end of the most recent fiscal quarter for which financial statements are available. SECTION 3.8 CHANGE OF CONTROL. In the event of a Change of Control, the Company shall make an offer to purchase (the "Change of Control Offer") the Securities then outstanding at a purchase price equal to 101 percent (101%) of the Accreted Value thereof plus accrued interest to the Change of Control Purchase Date (as defined below) on the terms set forth in this Section. The date on which the Company shall purchase the Securities pursuant to this Section (the "Change of Control Purchase Date") shall be no earlier than 30 days, nor later than 60 days, after the notice referred to below is mailed, unless a longer period shall be required by law. The Company shall notify the Trustee in writing promptly after the occurrence of any Change of Control of the Company's obliga- 51 tion to offer to purchase the Securities. Notice of a Change of Control Offer shall be mailed by the Company to the Holders of the Securities at their last registered address (with a copy to the Trustee and the Paying Agent) within thirty (30) days after a Change in Control has occurred. The Change of Control Offer shall remain open from the time of mailing until five (5) Business Days before the Change of Control Purchase Date. The notice shall contain all instructions and materials necessary to enable such Holders to tender (in whole or in part) the Securities pursuant to the Change of Control Offer. The notice, which shall govern the terms of the Change of Control Offer, shall state: (a) that the Change of Control Offer is being made pursuant to this Section; (b) the purchase price and the Change of Control Purchase Date; (c) that any Security not surrendered or accepted for payment will continue to accrue interest; (d) that any Security accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Purchase Date if payment is made; (e) that any Holder electing to have a Security purchased (in whole or in part) pursuant to a Change of Control Offer will be required to surrender the Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security completed, to the Paying Agent at the address specified in the notice (or otherwise make effective delivery of the Security pursuant to book-entry procedures and the related rules of the applicable depositories) at least five Business Days before the Change of Control Purchase Date; and (f) that any Holder will be entitled to withdraw his or her election if the Paying Agent receives, not later than three Business Days prior to the Change of Control Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security the Holder delivered for purchase and a statement that such Holder 52 is withdrawing his or her election to have the Security purchased. On the Change of Control Purchase Date, the Company shall (i) accept for payment the Securities, or portions thereof, surrendered and properly tendered and not withdrawn, pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent money sufficient to pay the purchase price plus accrued interest of all the Securities or portions thereof, so accepted and (iii) deliver to the Trustee the Securities so accepted together with an Officers' Certificate stating that such Securities have been accepted for payment by the Company. The Paying Agent shall promptly mail or deliver to Holders of Securities so accepted payment in an amount equal to the purchase price. Holders whose Securities are purchased only in part will be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered. The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section by virtue thereof. SECTION 3.9 COMPLIANCE CERTIFICATE. The Company shall, within 120 days after the close of each fiscal year following the issuance of the Securities, file with the Trustee an Officer's Certificate, with one of the Officers executing the same being the principal executive officer, the principal financial officer or the principal accounting officer of the Company, covering the period from the date of issuance of the Securities to the end of the fiscal year in which the Securities were issued, in the case of the first such certificate, and covering the preceding fiscal year in the case of each subsequent certificate, and stating whether or not, to the knowledge of each such executing Officer, the Company and each Subsidiary Guarantor has complied with and performed and fulfilled all 53 conditions and covenants on its part contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions contained in this Indenture, and, if any such signer has obtained knowledge of any default by the Company in the performance, observance or fulfillment of any such condition, covenant, term or provision specifying each such default and the nature thereof. For the purpose of this Section 3.9, compliance shall be determined without regard to any grace period or requirement of notice provided pursuant to the terms of this Indenture. SECTION 3.10 SEC REPORTS. The Company shall, to the extent required by TIA 314(a), file with the Trustee, within 15 days after the filing with the SEC, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. In the event the Company is at any time no longer subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, it shall, for so long as the Securities remain outstanding, file with the Trustee and the SEC and mail to each Securityholder at such Securityholder's registered address, within 15 days after the Company would have been required to file such documents with the SEC, copies of the annual reports and of the information, documents and other reports which the Company would have been required to file with the SEC if the Company had continued to be subject to such Sections 13 or 15(d). The Company also shall comply with the other provisions of TIA 314(a). SECTION 3.11 TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, enter into, permit to exist, renew or extend any transaction or series of transactions (including, without limitation, the sale, purchase, exchange or lease of any assets or property or the rendering of any services) with any Affiliate of the Company, any Plaster Entity, any Lindsey Entity or Energy unless (i) the terms of such transaction or series of transactions are (A) no less favorable to 54 the Company or such Restricted Subsidiary, as the case may be, than would be obtainable in a comparable transaction or series of related transactions in arm's-length dealings with an unrelated third party and, in the case of a transaction or series of transactions involving payments or consideration in excess of $100,000 approved by a majority of the Outside Directors, and (B) set forth in writing if such transaction or series of transactions involves aggregate payments or consideration in excess of $250,000, and (ii) with respect to a transaction or series of transactions involving aggregate payments or consideration in excess of $1,000,000, such transaction or series of transactions has been determined, in the written opinion of an independent nationally recognized investment banking firm, to be fair, from a financial point of view, to the Company or such Restricted Subsidiary. The foregoing provisions do not prohibit (i) the payment of reasonable fees to directors of the Company and its subsidiaries, (ii) scheduled payments made pursuant to the terms of any of the Basic Agreements, as the terms of each such agreement are in effect on the Issue Date, or (iii) any transaction between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries otherwise permitted by the terms of the Indenture. Any transaction which has been determined, in the written opinion of an independent nationally recognized investment banking firm, to be fair, from a financial point of view, to the Company or the applicable Restricted Subsidiary shall be deemed to be in compliance with this Section 3.11. SECTION 3.12 SALES OF ASSETS. (a) Neither the Company nor any Restricted Subsidiary shall consummate any Asset Sale unless (i) the Company or such Restricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the fair market value, as determined in good faith by the Board of Directors, of the shares or assets subject to such Asset Sale, (ii) at least 80% of the consideration thereof received by the Company or such Restricted Subsidiary is in the form of Additional Assets or cash or cash equivalents which cash equivalents are promptly converted into cash by the Person receiving such payment and (iii) an amount equal to 100% of the Net Available Cash is applied by the Company (or such Subsidiary, as the case may be) as set forth herein. The Company shall not 55 permit any Unrestricted Subsidiary to make any Asset Sale unless such Unrestricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the fair market value of the shares or assets so disposed of as determined in good faith by the Board of Directors. (b) Within three hundred and sixty (360) days (such 360 days being the "Application Period") following the consummation of an Asset Sale, the Company or such Restricted Subsidiary shall apply the Net Available Cash from such Asset Sale as follows: (i) FIRST, to the extent the Company or such Restricted Subsidiary elects, to reinvest in Additional Assets; (ii) SECOND, to the extent of the balance of such Net Available Cash after application in accordance with clause (i), and to the extent the Company or such Restricted Subsidiary elects (or is required by the terms of any Senior Indebtedness or any Indebtedness of such Restricted Subsidiary), to prepay, repay or purchase (A) secured Senior Indebtedness or (B) Indebtedness (other than any Preferred Stock) of a Restricted Subsidiary, in either case other than Indebtedness owed to the Company (except to the extent that the proceeds of any such repayment received by the Company are used to repay secured Senior Indebtedness of the Company or an Affiliate of the Company); and (iii) THIRD, to the extent of the balance of such Net Available Cash after application in accordance with clause (i) and (ii), to make an offer to purchase the Securities at not less than 100% of their Accreted Value, plus accrued interest (if any) pursuant to and subject to the conditions of Section 3.12(c); PROVIDED, HOWEVER, that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (ii) or (iii) above, the Company or such restricted Subsidiary shall retire such Indebtedness and cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. To the extent that any Net Available Cash remains after the application of such Net Available Cash in accordance with this paragraph, the Company or such Restricted Subsidiary shall utilize such remaining Net Available Cash in any manner set forth in clause (i) or clause (ii) above. To the extent that any or all of the Net Available Cash of any Foreign Asset Sale is prohibited or delayed by applicable local law from being repatriated to the United States, the portion of such Net Available Cash 56 so affected shall not be required to be applied at the time provided above, but may be retained by the applicable Restricted Subsidiary so long, but only so long, as the applicable local law will not permit repatriation to the United States (the Company hereby agreeing to promptly take or cause the applicable Restricted Subsidiary to promptly take all actions required by the applicable local law to permit such repatriation). Once such repatriation of any of such affected Net Available Cash is permitted under the applicable local law, such repatriation shall be immediately effected and such repatriated Net Available Cash will be applied in the manner set forth in this Section as if such Asset Sale had occurred on the date of such repatriation. To the extent that the Board of Directors determines, in good faith, that repatriation of any or all of the Net Available Cash of any Foreign Asset Sale would have a material adverse tax consequence to the Company, the Net Available Cash so affected may be retained outside of the United States by the applicable Restricted Subsidiary for so long as such material adverse tax consequence would continue. Notwithstanding the foregoing, this Section shall not apply to, or prevent any sale of assets, property, or Capital Stock of Subsidiaries to the extent that the fair market value (as determined in good faith by the Board of Directors) of such asset, property or Capital Stock, together with the fair market value of all other assets, property, or Capital Stock of Subsidiaries sold, transferred or otherwise disposed of in Asset Sales during the twelve month period preceding the date of such sale, does not exceed 5% of Consolidated Net Tangible Assets as determined as of the end of the most recent fiscal quarter, and no violation of this Section shall be deemed to have occurred as a consequence thereof. In the event of the transfer of substantially all (but not all) of the property and assets of the Company as an entirety to a Person in a transaction permitted under Article IV, the Successor Corporation shall be deemed to have sold the properties and assets of the Company not so transferred for purposes of Section 3.12, and shall comply with the Section 3.12 with respect to such deemed sale as if it were an Asset Sale. 57 (c) Subject to the last sentence of this paragraph, in the event of an Asset Sale that requires the purchase of Securities pursuant to clause (iii) of the first paragraph of Section 3.12(b), the Company will be required to purchase Securities tendered pursuant to an offer by the Company for the Securities (the "Asset Sale Offer") at a purchase price of not less than 100% of their Accreted Value plus accrued interest to the Asset Sale Purchase Date in accordance with the procedures (including prorationing in the event of oversubscription) set forth in Section 3.12(d). If the aggregate purchase price of Securities tendered pursuant to the Asset Sale Offer is less than the Net Available Cash allotted to the purchase of the Securities, the Company shall apply the remaining Net Available Cash in accordance with the last sentence of the first paragraph of Section 3.12(b). The Company shall not be required to make an Asset Sale Offer for Securities pursuant to this Section if the Net Available Cash available therefor (after application of the proceeds as provided in Section 3.12(b)(i) and (ii)) is less than $1,000,000 for any particular Asset Sale (which lesser amounts shall not be carried forward for purposes of determining whether an Asset Sale Offer is required with respect to the Net Available Cash from any subsequent Asset Sale). (d) (1) Promptly, and in any event prior to the 360th day after the later of the date of each Asset Sale as to which the Company must make an Asset Sale Offer or the receipt of Net Available Cash therefrom, the Company shall be obligated to deliver to the Trustee and send, by first-class mail to each Holder, a written notice stating that the Holder may elect to have his Securities purchased by the Company either in whole or in part (subject to prorationing as hereinafter described in the event the Asset Sale Offer is oversubscribed) in integral multiples of $1,000 of principal amount, at the applicable purchase price. The notice shall specify a purchase date not less than 30 days, nor more than 60 days, after the date of such notice (the "Asset Sale Purchase Date") and shall contain the information required in a notice for a Change of Control Offer, to the extent applicable. (2) Not later than the date upon which written notice of an Asset Sale Offer is delivered to the Trustee as provided in Section 3.12(d)(1), the Company 58 shall deliver to the Trustee an Officers' Certificate as to (i) the amount of the Asset Sale Offer (the "Asset Sale Offer Amount"), (ii) the allocation of the Net Available Cash from the Asset Sales pursuant to which such Asset Sale Offer is being made and (iii) the compliance of such allocation with Section 3.12(a). On such date, the Company shall also deposit with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust) funds in an amount equal to the Asset Sale Offer Amount to be held for payment in accordance with the provisions of this Section. Upon the expiration of the period for which the Asset Sale Offer remains open (the "Offer Period"), the Company shall deliver, or cause to be delivered, to the Trustee the Securities or portions thereof which have been properly tendered to and are to be accepted by the Company. The Paying Agent shall, on the Asset Sale Purchase Date, mail or deliver payment to each tendering Holder in the amount of the purchase price. In the event that the aggregate purchase price of the Securities delivered, or caused to be delivered, by the Company to the Trustee is less than the Asset Sale Offer Amount, the Paying Agent shall deliver the excess to the Company immediately after the expiration of the Offer Period. (3) Holders electing to have a Security purchased will be required to surrender the Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security duly completed, to the Company or the Paying Agent, as specified in, and at the address specified in, the notice at least ten Business Days prior to the Asset Sale Purchase Date. Holders will be entitled to withdraw their election if the Trustee or the Paying Agent receives, not later than three Business Days prior to the Asset Sale Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. If at the expiration of the Offer Period the aggregate principal amount of Securities surrendered by Holders exceeds the Asset Sale Offer Amount, the Company shall select the Securities to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Securities in denominations of $1,000, or integral multiples thereof, shall be purchased). Holders 59 whose Securities are purchased only in part will be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered. (4) At the time the Company delivers Securities to the Trustee which are to be accepted for purchase, the Company will also deliver an Officers' Certificate stating that such Securities are to be accepted by the Company pursuant to and in accordance with the terms of this Section. A Security shall be deemed to have been accepted for purchase at the time the Paying Agent, directly or through an agent, mails or delivers payment therefor to the surrendering Holder. (e) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section by virtue thereof. SECTION 3.13 CORPORATE EXISTENCE. Except as permitted under Article IV, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate existence of each Restricted Subsidiary in accordance with the respective organizational documents of the Company and of each Restricted Subsidiary and the rights (charter and statutory), licenses and franchises of the Company and the Restricted Subsidiaries necessary or appropriate to carry out their businesses; PROVIDED, HOWEVER, that the Company shall not be required to preserve any such right, license or franchise, or the corporate existence of any Restricted Subsidiary if the preservation thereof is no longer desirable in the conduct of the business of the Company and the Restricted Subsidiaries taken as a whole; and PROVIDED, FURTHER, that any Restricted Subsidiary may consolidate with, merge into, or sell, convey, transfer, lease or otherwise dispose of all or part of its property and assets to the Company or any Wholly Owned Subsidiary to the extent otherwise permitted under this Indenture. 60 SECTION 3.14 PAYMENT OF TAXES AND OTHER CLAIMS. The Company shall pay or discharge, or cause to be paid or discharged, before any material penalty accrues thereon all material taxes, assessments and governmental charges levied or imposed upon the Company or any Restricted Subsidiary or upon the income, profits or property of the Company or any Restricted Subsidiary; PROVIDED, HOWEVER, that the Company shall not be required to pay or discharge, or cause to be paid or discharged, any such tax, assessment, charge or claim the amount, applicability or validity of which is being contested in good faith by appropriate proceedings and for which adequate reserves, if the same shall be required in accordance with generally accepted accounting principles, have been made. SECTION 3.15 NOTICE OF DEFAULTS AND OTHER EVENTS. In the event that any Indebtedness of the Company or any Significant Subsidiary having an outstanding principal amount of $1,000,000 or more individually or $2,000,000 or more in the aggregate has been or could be declared due and payable before its maturity because of the occurrence of any event of default under such Indebtedness (including any Default under this Indenture), the Company, promptly after it becomes aware thereof, will give written notice thereof to the Trustee. SECTION 3.16 MAINTENANCE OF PROPERTIES AND INSURANCE. The Company shall cause all properties used or useful in the conduct of its business or the business of each Restricted Subsidiary and material to the Company and the Restricted Subsidiaries taken as a whole to be maintained and kept in normal condition, repair and working order and supplied with all necessary equipment; PROVIDED, HOWEVER, that nothing in this Section 3.16 shall prevent the Company or any Restricted Subsidiary from discontinuing the use, operation or maintenance of any of such properties or disposing of any of them, if such discontinuance or disposal is, in the judgment of an Officer (or other employee of the Company or any Restricted Subsidiary) of the Company or such Restricted Subsidiary having managerial responsibility for any such property, appropriate. 61 The Company shall provide or cause to be provided, for itself and the Restricted Subsidiaries, insurance (including appropriate self-insurance) against loss or damage of the kinds customarily insured against by corporations similarly situated and owning like properties, including, but not limited to, product liability insurance and public liability insurance with reputable insurers or with the government of the United States of America, or an agency or instrumentality thereof, of such kinds, and in such amounts, with such deductibles and by such methods as the Company in good faith shall determine to be reasonable and appropriate in the circumstances. SECTION 3.17 LIMITATION ON ISSUANCE OF CAPITAL STOCK AND INCURRENCE OF INDEBTEDNESS OF RESTRICTED SUBSIDIARIES. The Company shall not permit any Restricted Subsidiary, directly or indirectly, to issue or sell, and shall not permit any Person other than the Company or a Wholly Owned Subsidiary to own (except to the extent that any such Person may own on the Issue Date), any shares of such Restricted Subsidiary's Capital Stock (including options, warrants or other rights to purchase shares of Capital Stock) except, to the extent otherwise permitted by this Indenture, (i) to the Company or another Restricted Subsidiary that is a Wholly Owned Subsidiary of the Company, or (ii) if, immediately after giving effect to such issuance and sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary for purposes of this Indenture. The Company shall not permit any Restricted Subsidiary, directly or indirectly, to Incur Indebtedness other than pursuant to Section 3.4(b). SECTION 3.18 LIMITATION ON CHANGES IN THE NATURE OF THE BUSINESS. The Company and its Subsidiaries shall not engage in any line of business other than the business of the sale and distribution of propane gas and operations related thereto for any period of time in excess of 270 consecutive days for any such unrelated line of business. 62 ARTICLE IV CONSOLIDATION, MERGER AND SALE SECTION 4.1 MERGER AND CONSOLIDATION OF COMPANY. (a) The Company shall not, in a single transaction or through a series of related transactions, consolidate with or merge with or into any other corporation or sell, assign, convey, transfer or lease or otherwise dispose of all or substantially all of its properties and assets to any Person or group of affiliated Persons unless: (i) either the Company shall be the continuing Person, or the Person (if other than the Company) formed by such consolidation or into which the Company is merged or to which the properties and assets of the Company as an entirety are transferred (the "Successor Corporation"), shall be a corporation organized and existing under the laws of the United States or any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto executed and delivered to the Trustee, in form and substance satisfactory to the Trustee, all the obligations of the Company under this Indenture and the Securities; (ii) immediately before and immediately after giving effect to such transaction on a pro forma basis (and treating any Indebtedness which becomes an obligation of the Company (or the Successor Corporation if the Company is not the continuing obligor under the Indenture) or any Restricted Subsidiary as a result of such transaction as having been Incurred by such Person at the time of such transaction), no Default shall have occurred and be continuing; (iii) the Company shall have delivered, or caused to be delivered, to the Trustee an Officers' Certificate and, as to legal matters, an Opinion of Counsel, each in form and substance satisfactory to the Trustee, each stating that such consolidation, merger or transfer and such supplemental indenture comply with this Section and that 63 all conditions precedent herein provided for relating to such transaction have been complied with; (iv) immediately after giving effect to such transaction on a pro forma basis (and treating any Indebtedness which becomes an obligation of the Company (or the Successor Corporation if the Company is not the continuing obligor under this Indenture) or a Restricted Subsidiary in connection with or as a result of such transaction as having been Incurred by such Person at the time of such transaction, the Consolidated Coverage Ratio of the Company (or the Successor Corporation if the Company is not the continuing obligor under this Indenture) is at least 1:1, PROVIDED that, if the Consolidated Coverage Ratio before giving effect to such transaction is within the range set forth in column (A) below, then the pro forma Consolidated Coverage Ratio of the Company or the Successor Corporation shall be at least equal to the lesser of (1) the ratio determined by multiplying the percentage set forth in column (B) below by the Consolidated Coverage Ratio of the Company prior to such transaction and (2) the ratio set forth in column (C) below: (A) (B) (C) 1.11:1 to 1.99:1 90% 1.50:1 2.00:1 to 2.99:1 80% 2.10:1 3.00:1 to 3.99:1 70% 2.40:1 4.00:1 or more 60% 2.50:1; and (v) immediately after giving effect to such transaction on a pro forma basis (and treating any Indebtedness which becomes an obligation of the Company (or the Successor Corporation if the Company is not the continuing obligor under this Indenture) or a Restricted Subsidiary in connection with or as a result of such transaction as having been Incurred by such Person at the time of such transaction), the Company (or the Successor Corporation if the Company is not the continuing obligor under this Indenture) shall have Consolidated Net Worth in an amount which is not less than the Consolidated Net Worth immediately prior to such transaction. 64 Notwithstanding the foregoing paragraphs (ii), (iv) and (v), any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company or any Wholly Owned Subsidiary or Wholly Owned Subsidiaries and no violation of this Section shall be deemed to have occurred as a consequence thereof, as long as the requirements of paragraphs (i) and (iii) are satisfied in connection therewith. (b) A Subsidiary Guarantor (other than a Subsidiary Guarantor whose Subsidiary Guarantee is being released pursuant to Section 12.4 as a result of such transaction) shall not, and the Company shall not permit a Subsidiary Guarantor to, in a single transaction or through a series of related transactions, consolidate with or merge into any other Person (other than a wholly owned Subsidiary of such Subsidiary Guarantor, another Subsidiary Guarantor or the Company) or sell, assign, convey, transfer, or lease or otherwise dispose of all or substantially all of its properties and assets to any Person or group of affiliated persons (other than another Subsidiary Guarantor or the Company) unless: (i) either (A) such Subsidiary Guarantor shall be the continuing corporation or (B) the Person (if other than such Subsidiary Guarantor) formed by such consolidation or into which such Guarantor is merged or the Person which acquires by conveyance, transfer, lease or disposition of all or substantially all of the properties and assets of such Subsidiary Guarantor (a "Successor Subsidiary Guarantor") (1) shall be a corporation, organized and validly existing under the laws of the United States of America or any State thereof or the District of Columbia or Canada and (2) shall expressly assume by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all the obligations of such Subsidiary Guarantor under the Securities and this Indenture; (ii) immediately before and after giving effect to such transaction on a pro forma basis (and treating any Indebtedness not previously an obligation of such Subsidiary Guarantor or a subsidiary of such Subsidiary Guarantor which becomes the obligation of such Subsidiary Guarantor or any of its 65 subsidiaries in connection with or as a result of such transaction as having been Incurred at the time of such transaction), the Subsidiary Guarantor or Subsidiary Successor Guarantor, as the case may be, shall have a consolidated net worth equal to or greater than the consolidated net worth of such Subsidiary Guarantor immediately prior to such transaction (in each case consolidated net worth shall be calculated in a manner consistent with the manner in which Consolidated Net Worth shall be calculated hereunder with respect to the Company); (iii) immediately after giving effect to such transaction on a pro forma basis (and treating any Indebtedness not previously an obligation of such Subsidiary Guarantor or a Subsidiary of such Subsidiary Guarantor which becomes the obligation of such Guarantor or any of its Subsidiaries in connection with or as a result of such transaction as having been Incurred at the time of such transaction) no Default shall have occurred and be continuing; (iv) immediately after giving effect to such transaction on a pro forma basis (and treating any Indebtedness not previously an obligation of such Subsidiary Guarantor or a Subsidiary of such Subsidiary Guarantor which becomes the obligation of such Subsidiary Guarantor or any of its Subsidiaries in connection with or as a result of such transaction as having been Incurred at the time of such transaction), the consolidated coverage ratio of the Successor Subsidiary Guarantor is equal to at least the lesser of 2:1 or the consolidated coverage ratio of the predecessor Subsidiary Guarantor immediately prior to such transaction (in each case consolidated Coverage Ratio shall be calculated in a manner consistent with the manner in which Consolidated coverage ratio shall be calculated hereunder with respect to the Company); and (v) such Subsidiary Guarantor shall have delivered or caused to be delivered to the Trustee an Officers' Certificate and, as to legal matters, an Opinion of Counsel, each in form and substance reasonably satisfactory to the Trustee, each stating that such consolidation, merger, conveyance or 66 transfer or lease and such supplemental indenture comply with this Indenture, and that all conditions precedent herein provided for relating to such transactions have been complied with. SECTION 4.2 SUCCESSOR SUBSTITUTED. (a) Upon any such consolidation or merger, or any conveyance, transfer, or disposition of all or substantially all of the properties or assets of the Company in accordance with Section 4.1(a), but not in the case of a lease, the Successor Corporation shall succeed to and be substituted for the Company under this Indenture and the Securities, and the Company shall thereupon be released from all obligations hereunder and under the Securities and the Company, as the predecessor corporation, may thereupon or at any time thereafter be dissolved, wound up or liquidated. The Successor Corporation thereupon may cause to be signed, and may issue either in its own name or in the name of the Company, all or any of the Securities issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of the Successor Corporation instead of the Company and subject to all the terms, conditions and limitations prescribed in this Indenture, the Trustee shall authenticate and shall deliver any Securities which the Successor Corporation thereafter shall cause to be signed and delivered to the Trustee for that purpose. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all such Securities had been issued at the date of the execution hereof. (b) Upon any such consolidation or merger, or any conveyance, transfer, or disposition of all or substantially all of the properties or assets of any Subsidiary Guarantor in accordance with Section 4.1(b), but not in the case of a lease, the Successor Subsidiary Guarantor shall succeed to and be substituted for such Subsidiary Guarantor under this Indenture and the Securities, and such Subsidiary Guarantor shall thereupon be released from all obligations hereunder and under the Securities and such guarantor, as the predecessor guarantor, may thereupon or at any time thereafter be dissolved, wound up or liquidated. 67 (c) In the case of any consolidation, merger or transfer described in Section 4.2(a) or 4.2(b) above, such changes in form (but not in substance) may be made in the Securities thereafter to be issued as may be appropriate. ARTICLE V DEFAULTS AND REMEDIES SECTION 5.1 EVENTS OF DEFAULT. An "Event of Default" means any of the following events: (a) default in the payment of interest on any Security when the same becomes due and payable, and such default continues for a period of 30 days; (b) default in the payment of the principal of any Security when the same becomes due and payable at maturity or otherwise or a failure to redeem or purchase Securities when required pursuant to this Indenture or the Securities; (c) default in performance of any other covenants or agreements in the Securities, this Indenture or the Pledge Agreement and the default continues for 30 days after the date on which written notice of such default is given to the Company by the Trustee or the Collateral Agent or to the Company and the Trustee by Holders of at least 25% in principal amount of the Securities then outstanding hereunder; PROVIDED that the failure to commence a Change of Control Offer following a Change of Control pursuant to clause (vi) of the definition of "Change of Control" shall not constitute an Event of Default if, during such 30 day period, the Company takes the necessary actions with respect to the Board of Directors to comply with the requirements of clauses (vi)(A), (vi)(B) and (vi)(C) of the definition of "Change of Control"; (d) there shall have occurred either (a) a default by the Company or any Subsidiary under any instrument under which there is or may be secured or evidenced any Indebtedness of the Company or any Subsidiary of the Company (other than the Securities) having an 68 outstanding principal amount of $2,000,000 (or its foreign currency equivalent) or more individually or $5,000,000 (or its foreign currency equivalent) or more in the aggregate that has caused the holders thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity or (b) a default by the Company or any Subsidiary in the payment when due of any portion of the principal under any such instrument, and such unpaid portion exceeds $2,000,000 (or its foreign currency equivalent) individually or $5,000,000 (or its foreign currency equivalent) in the aggregate and is not paid, or such default is not cured or waived, within any grace period applicable thereto; (e) any final judgment or order (not covered by insurance) for the payment of money shall be rendered against the Company or any Significant Subsidiary in an amount in excess of $2,000,000 (or its foreign currency equivalent) individually or $5,000,000 (or its foreign currency equivalent) in the aggregate for all such final judgments or orders against all such Persons (treating any deductibles, self-insurance or retention as not so covered) and shall not be discharged, and there shall be any period of 30 consecutive days following entry of the final judgment or order in excess of $2,000,000 (or its foreign currency equivalent) individually or that causes the aggregate amount for all such final judgments or orders outstanding against all such Persons to exceed $5,000,000 (or its foreign currency equivalent) during which a stay of enforcement of such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (f) the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or 69 (v) admits in writing its inability to generally pay its debts as such debts become due, or takes any comparable action under any foreign laws relating to insolvency; (g) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any Significant Subsidiary in an involuntary case, (ii) appoints a Custodian of the Company or any Significant Subsidiary or for all or substantially all of its property, or (iii) orders the winding up or liquidation of the Company or any Significant Subsidiary, or any similar relief is granted under any foreign laws; and the order or decree remains unstayed and in effect for 60 days; and (h) except as permitted by this Indenture, the Trustee fails to have a first priority perfected security interest in the Collateral; and (i) except as permitted by the terms hereof and the Securities, the cessation of effectiveness of any Subsidiary Guarantee as against any Subsidiary Guarantor, or the finding by any judicial proceeding that any such Subsidiary Guarantee is, as to any Subsidiary Guarantor, unenforceable or invalid, or the written denial or disaffirmation by any Subsidiary Guarantor of its obligations under its Subsidiary Guarantee. The term "Bankruptcy Law" means Title 11 of the U.S. Code or any similar Federal or State law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. Any notice of Default given by the Trustee or Securityholders under this Section must specify the Default, demand that it be remedied and state that the notice is a "Notice of Default." 70 The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any event which with the giving of notice or the lapse of time or both would become an Event of Default under clause (c), (d), (e), (g), (h) or (i) hereof. Subject to the provisions of Section 6.1 and 6.2, the Trustee shall not be charged with knowledge of any Event of Default unless written notice thereof shall have been given to the Trustee as specified in Section 11.2 by the Company, the Paying Agent, the Collateral Agent, any Holder or an agent of any Holder. SECTION 5.2 ACCELERATION. If an Event of Default (other than an Event of Default specified in clause (f) and (g) of Section 5.1 with respect to the Company) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount of the Securities by notice to the Company and the Trustee, may declare the principal of and accrued interest on all the Securities to be due and payable. Upon such declaration the principal amount at maturity and interest shall be due and payable immediately. If an Event of Default specified in clause (f) or (g) of Section 5.1 with respect to the Company occurs, the principal amount at maturity of and interest on all the Securities shall IPSO FACTO become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholders. The Holders of a majority in principal amount of the Securities by notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration. No such rescission shall affect any subsequent or other Default or Event of Default or impair any consequent right. SECTION 5.3 OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal amount at maturity or 71 interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. SECTION 5.4 WAIVER OF PAST DEFAULTS. The Holders of a majority in principal amount of the Securities by notice to the Trustee may waive an existing Default and its consequences except (a) a Default in the payment of the principal of or interest on any Security or (b) a Default in respect of a provision that under Section 8.2 cannot be amended without the consent of each Securityholder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any consequent right. SECTION 5.5 CONTROL BY MAJORITY. The Holders of a majority in principal amount of the Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, or, subject to Section 6.1, that the Trustee determines is unduly prejudicial to the rights of other Securityholders, or would involve the Trustee in personal liability; PROVIDED, HOWEVER, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to indemnification reasonably satisfactory to it against all risk, losses and expenses caused by taking or not taking such action. Subject to Section 6.1, the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of the Securityholders pursuant to this Indenture, unless such Securityholders shall have provided to 72 the Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities which might be incurred in compliance with such request or direction. SECTION 5.6 LIMITATION ON SUITS. A Securityholder may pursue a remedy with respect to this Indenture or the Securities only if: (a) the Holder gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 25% in principal amount of the Securities make a written request to the Trustee to pursue the remedy; (c) such Holder or Holders offer to the Trustee security reasonably satisfactory to it or indemnity against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security or indemnity; and (e) the Holders of a majority in principal amount of the Securities do not give the Trustee a direction inconsistent with the request during such 60-day period. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder. SECTION 5.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder of a Security to receive payment of principal and interest on the Security, on or after the respective due dates expressed in the Security, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder. 73 SECTION 5.8 COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in Section 5.1(a) or (b) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal and interest remaining unpaid (together with interest on such unpaid interest to the extent lawful) and the amounts provided for in Section 6.7. SECTION 5.9 TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file such proofs of claim and other papers or documents and take such other actions including participating as a member or otherwise in any committees of creditors appointed in the matter as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the amounts provided in Section 6.7) and the Securityholders allowed in any judicial proceedings relative to the Company, its creditors or its property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 6.7. To the extent that the payment of any such amount due to the Trustee under Section 6.7 out of the estate in any such proceeding shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties which the Holders of the Securities may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. 74 SECTION 5.10 PRIORITIES. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee for amounts due under Section 6.7; Second: to Securityholders for amounts due and unpaid on the Securities for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and Third: to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section. At least 15 days before such record date, the Company shall give written notice to each Securityholder and the Trustee of the record date, the payment date and amount to be paid. SECTION 5.11 UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 5.7, or a suit by Holders of more than 10% in principal amount of the Securities. SECTION 5.12 WAIVER OF STAY OR EXTENSION LAWS. The Company and each Subsidiary Guarantor (to the extent that each of them may lawfully do so) shall not at any time insist upon, or plead, or in any manner whatsoever, claim or take the benefit or advantage of, 75 any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company and each Subsidiary Guarantor (to the extent that each of them may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE VI TRUSTEE SECTION 6.1 DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and the Pledge Agreement, and use the same degree of care and skill in their exercise, as a prudent Person would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) The Trustee need perform only those duties that are specifically set forth in this Indenture and no others and no implied covenants or obligations shall be read into this Indenture or the Pledge Agreement against the Trustee. (ii) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture or the Pledge Agreement. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture or the Pledge Agreement. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent 76 failure to act, or its own willful misconduct, except that: (i) This paragraph does not limit the effect of paragraph (b) of this Section. (ii) The Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (iii) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 5.2, 5.4 or 5.5. (iv) No provision of this Indenture and the Pledge Agreement shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, unless it receives indemnity satisfactory to it against any risk, loss, liability or expense. (d) Every provision of this Indenture and the Pledge Agreement that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) The Trustee, in its capacity as Trustee and Registrar and Paying Agent, shall not be liable to the Company, the Securityholders or any other Person for interest on any money received by it, including, but not limited to, money with respect to principal of or interest on the Securities, except as the Trustee may agree with the Company. (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 6.2 RIGHTS OF TRUSTEE. (a) The Trustee may rely on any document reasonably believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee 77 need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on any such Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers PROVIDED, HOWEVER, that the Trustee's conduct does not constitute wilful misconduct, negligence or bad faith. (e) The Trustee may consult with counsel, and the advice or opinion of such counsel as to matters of law shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice of such counsel. (f) The Trustee shall not be obligated to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or any other paper or document. SECTION 6.3 INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or an Affiliate with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Sections 6.10 and 6.11. SECTION 6.4 TRUSTEE'S DISCLAIMER. The Trustee makes no representation as to the validity or adequacy of this Indenture, the Pledge Agreement, the Subsidiary Guarantees or the Securities, it 78 shall not be accountable for the Company's use of the proceeds from the Securities, it shall not be responsible for the use or application of any money received by the Paying Agent (other than the Trustee) and it shall not be responsible for any statement in the Securities other than its authentication. SECTION 6.5 NOTICE OF DEFAULTS. If a Default or an Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Securityholders a notice of the Default or Event of Default within 90 days of notification of such occurrence. Except in the case of a Default in any payment on any Security, the Trustee may withhold the notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Securityholders. SECTION 6.6 REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after the reporting date stated in Section 11.10, the Trustee shall mail to Securityholders a brief report dated as of such reporting date that complies with TIA Section 313(a) if required by that Section. The Trustee also shall comply with TIA Section 313(b). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange on which the Securities are listed. The Company shall promptly notify the Trustee when the Securities are listed on any stock exchange and of any delisting thereof. SECTION 6.7 COMPENSATION AND INDEMNITY. The Company shall pay to the Trustee from time to time reasonable compensation for its services. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket disbursements, expenses and advances incurred by it. Such expenses shall include the 79 reasonable compensation and out-of-pocket disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee for, and hold it harmless against, any loss, liability and expenses including reasonable attorneys' fees, disbursements and expenses, incurred by it in connection with the administration of this trust and the performance of its duties hereunder and under the Pledge Agreement including the costs and expenses of defending itself against or investigating any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder and thereunder. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent; provided however, that the consent of the Company shall not be required if the Company has instituted proceedings to be adjudicated a bankrupt or insolvent, or is otherwise subject to proceedings under Title 11 of the United States Bankruptcy Code, or has consented to the appointment of a receiver, liquidator, assignee, trustee or similar official for the Company or of any substantial part of its property, or has made an assignment for the benefit of creditors, or has admitted in writing its inability to pay its debts generally as they become due, or has taken corporate action in furtherance of any such action. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through negligence or bad faith. To secure the Company's payment obligations in this Section, the Trustee shall have a Lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Securities. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 5.1(f) or (g) occurs, the expenses and the compensation 80 for the services are intended to constitute expenses of administration under any Bankruptcy Law. The Company's obligations under this Section 6.7 and any Lien arising hereunder shall survive the resignation or removal of the Trustee, the satisfaction and discharge of the Company's obligations pursuant to Article VII of this Indenture or the termination of this Indenture or the Pledge Agreement. SECTION 6.8 REPLACEMENT OF TRUSTEE. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign at any time by so notifying the Company. The Holders of a majority in principal amount of the Securities may, by written notice to the Trustee, remove the Trustee by so notifying the Trustee and the Company. The Company, by notice to the Trustee, shall remove the Trustee if: (a) the Trustee fails to comply with Section 6.10; (b) the Trustee is adjudged a bankrupt or an insolvent; (c) a receiver or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the Securities may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in principal amount of the Securities may 81 petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 6.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture and the Pledge Agreement. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the Lien provided for in Section 6.7. SECTION 6.9 SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. SECTION 6.10 ELIGIBILITY; DISQUALIFICATION. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1). The Trustee shall always have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA Section 310(b). Nothing herein shall prevent the Trustee from filing with the SEC the application referred to in the second-to-last paragraph of TIA Section 310(b). SECTION 6.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee shall comply with TIA Section 311(a), except with respect to any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been 82 removed is subject to TIA Section 311(a) to the extent indicated. SECTION 6.12 PAYING AGENTS. The Company shall cause each Paying Agent other than the Trustee to execute and deliver to it and the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section 6.12: (a) that it will hold all sums held by it as agent for the payment of principal of, or interest on, the Securities (whether such sums have been paid to it by the Company or by any obligor on the Securities) in trust for the benefit of Holders of the Securities; (b) that it will at any time during the continuance of any Event of Default specified in Section 5.1, upon written request from the Trustee, deliver to the Trustee all sums so held in trust by it; (c) that it will give the Trustee written notice within one (1) Business Day of any failure of the Company (or by any obligor on the Securities) in the payment of any installment of the principal of, or interest on, the Securities when the same shall be due and payable; and (d) that it will comply with the provisions of the TIA applicable to it. ARTICLE VII SATISFACTION AND DISCHARGE OF INDENTURE SECTION 7.1 DISCHARGE OF LIABILITY ON SECURITIES; DEFEASANCE. If (i) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.7) for cancellation or (ii) all outstanding Securities have become due and payable and the Company or a Subsidiary Guarantor irrevocably deposits with the Trustee as trust funds solely for the benefit of the Holders for that purpose funds sufficient to pay at maturity the principal of and all accrued interest 83 on all outstanding Securities (other than Securities replaced pursuant to Section 2.7), and if in either case the Company or a Subsidiary Guarantor pays all other sums payable hereunder by the Company, then, subject to Sections 7.2 and 7.7, this Indenture shall cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on written demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Company. SECTION 7.2 TERMINATION OF COMPANY'S OBLIGATIONS. Except as otherwise provided in this Section 7.2, the Company may terminate its obligations under the Securities and this Indenture if: (i) the Securities mature within one year or all of them are to be called for redemption within one year under arrangements satisfactory to the Trustee for giving the notice of redemption, (ii) the Company irrevocably deposits in trust with the Trustee or Paying Agent (other than the Company or a Subsidiary or Affiliate of the Company) during such one-year period, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee, as trust funds solely for the benefit of the Holders for that purpose, money or U.S. Government Obligations sufficient (in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee), without consideration of any reinvestment of such interest, to pay principal and interest on the Securities to maturity or redemption, as the case may be, and to pay all other sums payable by it hereunder, (iii) no Default shall have occurred and be continuing on the date of such deposit, (iv) such deposit will not result in or constitute a Default or result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company is a party or by which it is bound and (v) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the satisfaction and discharge of this Indenture have been complied with; PROVIDED that the Trustee or Paying Agent shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations 84 to the payment of such principal and interest with respect to the Securities. With respect to the foregoing, the Company's obligations in Sections 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.12, 3.1, 3.2, 6.7, 6.8, 7.5 and 7.6 shall survive until the Securities are no longer outstanding. Thereafter, only the Company's obligations in Sections 6.7, 6.8 and 7.6 shall survive. After any such irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under the Securities and this Indenture except for those surviving obligations specified above. SECTION 7.3 DEFEASANCE AND DISCHARGE OF INDENTURE. The Company will be deemed to have paid and will be discharged from any and all obligations in respect of the Securities on the 123rd day after the date of the deposit referred to in clause (i) hereof, and the provisions of this Indenture will no longer be in effect with respect to the Securities, and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same, except as to (a) rights of registration of transfer and exchange, (b) substitution of mutilated, defaced, destroyed, lost or stolen Securities pursuant to Section 2.7, (c) rights of Holders to receive payments of principal thereof and interest thereon, (d) the Company's obligations under Sections 3.2 and 6.7, (e) the rights, obligations and immunities of the Trustee hereunder and (f) the rights of the Holders as beneficiaries of this Indenture with respect to the property so deposited with the Trustee payable to all or any of them; PROVIDED that the following conditions shall have been satisfied: (i) with reference to this Section 7.3, the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee (or another trustee satisfying the requirement of Section 6.10) or Paying Agent (other than the Company or a Subsidiary or Affiliate of the Company) and conveyed all right, title and interest for the benefit of the Holders, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee as trust funds in trust, specifically pledged as security for, and dedicated solely to, 85 the benefit of the Holders, in and to, (A) money in an amount, (B) U.S. Government Obligations that, through the payment of interest and principal in respect thereof in accordance with their terms, will provide, not later than one day before the due date of any payment referred to in this clause (i), money in an amount or (C) a combination thereof in an amount sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, without consideration of the reinvestment of such interest and after payment of all federal, state and local taxes or other fees, charges and assessments in respect thereof payable by the Trustee or Paying Agent, the principal of and interest on the outstanding Securities when due; PROVIDED that the Trustee or Paying Agent shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to the payment of such principal and interest with respect to the Securities; (ii) such deposit will not result in or constitute a Default or result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company is a party or by which it is bound; (iii) no Default shall have occurred and be continuing on the date of such deposit or during the period ending on the 123rd day after such date of deposit; (iv) the Company shall have delivered to the Trustee (A) either (1) a ruling directed to the Trustee received from the Internal Revenue Service to the effect that the Holders will not recognize income, gains or loss for federal income tax purposes as a result of the Company's exercise of its option under this Section 7.3 and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such option had not been exercised or (2) an Opinion of Counsel (who must not be an employee of the Company) to the same effect as the ruling described in clause (1) accompanied by a 86 ruling to that effect published by the Internal Revenue Service, unless there has been a change in the applicable federal income tax law since the date of this Indenture such that a ruling from the Internal Revenue Service is no longer required and (B) an Opinion of Counsel to the effect that (1) the creation of the defeasance trust does not violate the Investment Company Act of 1940, (2) after the passage of 123 days following the deposit (except, with respect to any trust funds for the account of any Holder who may be deemed to be an "insider" for purposes of Title 11 of the United States Bankruptcy Code, after one year following the deposit), the trust funds will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law in a case commenced by or against the Company under either such statute, and either (x) the trust funds will no longer remain the property of the Company (and therefore, will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally) or (y) if a court were to rule under any such law in any case or proceeding that the trust funds remained property of the Company, (I) assuming such trust funds remained in the possession of the Trustee prior to such court ruling to the extent not paid to Holders, the Trustee will hold, for the benefit of the Holders, a valid and perfected security interest in such trust funds that is not avoidable in bankruptcy or otherwise except for the effect of Section 552(b) of the United States Bankruptcy Code on interest on the trust funds accruing after the commencement of a case under such statute and (II) the Holders will be entitled to receive adequate protection of their interests in such trust funds if such trust funds are used in such case or proceeding; and (v) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the defeasance contemplated by this Section 7.3 have been complied with. 87 Notwithstanding the foregoing, prior to the end of the 123-day period referred to in clause (iv)(B)(2) above, none of the Company's obligations under this Indenture shall be discharged. Subsequent to the end of such 123-day period with respect to this Section 7.3, the Company's obligations in Sections 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.12, 3.1, 3.2, 6.7, 6.8, 7.6 and 7.7 shall survive until the securities are no longer outstanding. Thereafter, only the Company's obligations in Sections 6.7, 7.6 and 7.7 shall survive. If and when a ruling from the Internal Revenue Service or Opinion of Counsel referred to in clause (iv)(A) above is able to be provided specifically without regard to, and not in reliance upon, the continuance of the Company's obligations under Section 3.1, then the Company's obligations under such Section 3.1 shall cease upon delivery to the Trustee of such ruling or Opinion of Counsel and compliance with the other conditions precedent provided for herein relating to the defeasance contemplated by this Section 7.3. After any such irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under the Securities and this Indenture except for those surviving obligations in the immediately preceding paragraph. SECTION 7.4 DEFEASANCE OF CERTAIN OBLIGATIONS. The Company may omit to comply with any term, provision or condition set forth in clauses (iv) and (v) of Section 4.1(a), clauses (ii) and (iv) of Section 4.1(b) and Sections 3.3 through 3.18, and clause (c) of Section 5.1 with respect to clauses (iv) and (v) of Section 4.1(a), clauses (ii) and (iv) of Section 4.1(b) and Sections 3.3 through 3.18, and clauses (d) and (e) of Section 5.1 shall be deemed not to be Events of Default, in each case with respect to the outstanding Securities if: (i) with reference to this Section 7.4, the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee (or another trustee satisfying the requirements of Section 6.10) or Paying Agent (other than the Company or a Subsidiary or Affiliate of the Company) and conveyed all right, title and interest for the benefit of the 88 Holders, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders, in and to, (A) money in an amount, (B) U.S. Government obligations that, through the payment of interest and principal in respect thereof in accordance with their terms, will provide, not later than one day before the due date of any payment referred to in this clause (i), money in an amount or (C) a combination thereof in an amount, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, without consideration of the reinvestment of interest and after payment of all federal, state and local taxes or other fees, charges and assessments in respect thereof payable by the Trustee or Paying Agent, the principal of and interest on the outstanding Securities when due; PROVIDED that the Trustee or Paying Agent shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to the payment of such principal and interest with respect to the Securities; (ii) such deposit will not result in or constitute a Default or result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company is a party or by which it is bound; (iii) no Default shall have occurred and be continuing on the date of such deposit; (iv) the Company has delivered to the Trustee an Opinion of Counsel who is not employed by the Company to the effect that (A) the creation of the defeasance trust does not violate the Investment Company Act of 1940, (B) the Holders have a valid first-priority security interest in the trust funds, (C) the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance of certain obligations and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit 89 and defeasance had not occurred and (D) after the passage of 123 days following the deposit (except, with respect to any trust funds for the account of any Holder who may be deemed to be an "insider" for purposes of the United States Bankruptcy Code, after one year following the deposit), the trust funds will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law in a case commenced by or against the Company under either such statute, and either (1) the trust funds will no longer remain the property of the Company (and therefore, will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally) or (2) if a court were to rule under any such law in any case or proceeding that the trust funds remained property of the Company, (x) assuming such trust funds remained in the possession of the Trustee prior to such court ruling to the extent not paid to Holders, the Trustee will hold, for the benefit of the Holders, a valid and perfected first priority security interest in such trust funds that is not avoidable in bankruptcy or otherwise except for the effect of Section 552(b) of the United States Bankruptcy Code on interest on the trust funds accruing after the commencement of a case under such statute and (y) the Holders will be entitled to receive adequate protection of their interests in such trust funds if such trust funds are used in such case or proceeding; and (v) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the defeasance contemplated by this Section 7.4 have been complied with. SECTION 7.5 APPLICATION OF TRUST MONEY. Subject to Section 7.7 of this Indenture, the Trustee or Paying Agent shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Section 7.2, 7.3 or 7.4 of this Indenture, as the case may be, and shall apply the deposited money and the money from U.S. Government Obligations in accordance with this 90 Indenture to the payment of principal of and interest on the Securities. The Trustee shall be under no obligation to invest such money or U.S. Government Obligations except as it may agree with the Company. SECTION 7.6 REPAYMENT TO COMPANY. Subject to Sections 6.7, 7.2, 7.3 and 7.4 of this Indenture, the Trustee and the Paying Agent shall promptly pay to the Company upon written request any excess money held by them at any time and thereupon shall be relieved from all liability with respect to such money. The Trustee and the Paying Agent shall pay to the Company upon written request any money held by them for the payment of principal or interest that remains unclaimed for two years; PROVIDED, HOWEVER, that the Company shall, if requested by the Trustee or the Paying Agent, give the Trustee or such Paying Agent indemnification reasonably satisfactory to it against any and all liability which may be incurred by it by reason of such payment; and PROVIDED, FURTHER, that the Trustee or such Paying Agent before being required to make any payment may cause to be published at the expense of the Company once in a newspaper of general circulation in the City of New York or mail to each Holder entitled to such money at such Holder's address as set forth in the Security Register notice that such money remains unclaimed and that after a date specified therein (which shall be at least 30 days from the date of such publication or mailing) any unclaimed balance of such money then remaining will be repaid to the Company. After payment to the Company, Holders entitled to such money must look to the Company for payment as general creditors unless an applicable law designates another person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. SECTION 7.7 REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 7.2, 7.3 or 7.4 of this Indenture, as the case may be, by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived 91 and reinstated as though no deposit had occurred pursuant to Section 7.2, 7.3 or 7.4 of this Indenture, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with Section 7.2, 7.3 or 7.4 of this Indenture, as the case may be; PROVIDED that, if the Company has made any payment of principal of or interest on any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE VIII AMENDMENTS AND SUPPLEMENTS SECTION 8.1 WITHOUT CONSENT OF HOLDERS. The Company, the Subsidiary Guarantors and the Trustee may amend or supplement this Indenture, the Pledge Agreement or the Securities without notice to or the consent of any Securityholder: (a) to cure any ambiguity, omission, defect or inconsistency; (b) to comply with Article IV; (c) to provide for uncertificated Securities in addition to certificated Securities; PROVIDED, HOWEVER, that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Internal Revenue Code of 1986, as amended, or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Code; (d) to add additional guarantees with respect to the Securities or to secure the Securities; (e) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; 92 (f) to comply with the requirements of the SEC in connection with qualification of the Indenture under the TIA; (g) to make any change that does not adversely affect the rights of any Securityholder; (h) to provide for certain amendments to the Pledge Agreement expressly called for therein and to add Collateral thereto; or (i) to increase the aggregate principal amount at maturity of Securities that may be issued by the Company pursuant to this Indenture; PROVIDED, HOWEVER, that any such additional Indebtedness Incurred is otherwise permitted to be Incurred by the Company pursuant to the terms of this Indenture. After an amendment or supplement under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment or supplement. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment or supplement under this Section. SECTION 8.2 WITH CONSENT OF HOLDERS. The Company, the Subsidiary Guarantors and the Trustee may amend or supplement this Indenture, the Pledge Agreement or the Securities with the written consent of the Holders of a majority in principal amount of the Securities. However, without the consent of each Securityholder affected, an amendment or supplement under this Section may not: (a) reduce the amount of Securities the Holders of which must consent to an amendment or supplement; (b) reduce the rate of or change the time for payment of interest on any Security; (c) reduce the principal of or change the Stated Maturity of any Security; (d) reduce the premium payable upon the redemption of any Security or change the time at which any 93 Security may or shall be redeemed in accordance with Article IX; (e) make any Security payable in currency or consideration other than that stated in the Security; (f) make any change in Section 5.4, 5.7 or 8.2 (second sentence); (g) directly or indirectly release Liens on all or substantially all of the Collateral; or (h) modify or affect in any manner adverse to the Holders the terms and conditions of the obligation of any Guarantor for the due and punctual payment of the principal of, premium, if any, or interest on the Securities. It shall not be necessary for the consent of the Holders under this Section 8.2 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment or supplement under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment or supplement. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment or supplement under this Section. SECTION 8.3 COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment or supplement to this Indenture or the Securities shall be set forth in a supplemental indenture that complies with the TIA as then in effect. SECTION 8.4 REVOCATION AND EFFECT OF CONSENTS. Until an amendment or supplement under this Article or a waiver under Article V becomes effective, a consent to it by a Holder of a Security is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. Howev- 94 er, any such Holder or subsequent Holder may revoke the consent as to his Security or portion of a Security if the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective. After an amendment or supplement becomes effective, it shall bind every Securityholder. SECTION 8.5 NOTATION ON OR EXCHANGE OF SECURITIES. If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment. SECTION 8.6 TRUSTEE TO SIGN AMENDMENTS. The Trustee shall sign any supplemental indenture which sets forth an amendment or supplement authorized pursuant to this Article if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such supplemental indenture the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such supplemental indenture is authorized or permitted by this Indenture. SECTION 8.7 FIXING OF RECORD DATES. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to take any action under this Indenture by vote or consent. Except as provided herein, such record date shall be the later of 30 days prior to the first solicitation of such consent or vote or the date of the most recent list of Securityholders furnished to the Trustee pursuant to Section 2.5 prior to such solicita- 95 tion. If a record date is fixed, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to take such action by vote or consent or to revoke any vote or consent previously given, whether or not such Persons continue to be Holders after such record date; PROVIDED, HOWEVER, that unless such vote or consent is obtained from the Holders (or their duly designated proxies) of the requisite principal amount of outstanding Securities prior to the date which is the 120th day after such record date, any such vote or consent previously given shall automatically and without further action by any Holder be canceled and of no further effect. ARTICLE IX REDEMPTION SECTION 9.1 NOTICES TO TRUSTEE. If the Company elects to redeem Securities pursuant to paragraph 5 of the Securities it shall notify the Trustee in writing of the redemption date and the principal amount (not including any premium in respect thereof) of Securities to be redeemed and the paragraph of the Securities pursuant to which the redemption will occur. The Company shall give the notices provided for in this Section at least 40 days before the redemption date (unless a shorter period shall be satisfactory to the Trustee). Such notice shall be accompanied by an Officers' Certificate to the effect that such redemption will comply with the conditions herein. If fewer than all the Securities are to be redeemed, the record date relating to such redemption shall be selected by the Company and given to the Trustee, which record date shall be not less than 15 days after the date of notice to the Trustee. SECTION 9.2 SELECTION OF SECURITIES TO BE REDEEMED. If fewer than all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed pro rata or by lot or by any other method that complies with applicable legal and securities exchange 96 requirements, if any, and that the Trustee considers, in its sole discretion, fair and appropriate and in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances. The Trustee shall make the selection not more than 75 days before the redemption date from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000 in original principal amount at maturity. Securities and portions of them selected by the Trustee shall be in amounts of $1,000 or whole multiples of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. SECTION 9.3 NOTICE OF REDEMPTION. At least 30 days but not more than 60 days before a redemption date, the Company shall mail a notice of redemption to each Holder whose Securities are to be redeemed at the address set forth for such Holder on the register referred to in Section 2.3. The notice shall identify the Securities to be redeemed and shall state: (a) the redemption date; (b) the redemption price; (c) the name and address of the Paying Agent; (d) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (e) if fewer than all the outstanding Securities are to be redeemed, the identification and principal amounts of the particular Securities to be redeemed; (f) that, unless the Company defaults in making the redemption payment, interest on Securities called for redemption ceases to accrue on and after the redemption date; and 97 (g) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Securities. At the Company's written request, made at least 45 days before a redemption date, unless a shorter period shall be satisfactory to the Trustee, the Trustee shall give the notice of redemption provided for in this Section in the Company's name and at its expense. SECTION 9.4 EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed, Securities called for redemption become due and payable on the redemption date at the redemption price. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price stated in the notice, plus accrued and unpaid interest to the redemption date. SECTION 9.5 DEPOSIT OF REDEMPTION PRICE. Prior to the redemption date, the Company shall deposit with the Paying Agent (or, if the Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued and unpaid interest on all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption which have been delivered by the Company to the Trustee for cancellation. SECTION 9.6 SECURITIES REDEEMED IN PART. Upon surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder (at the Company's expense) a new Security equal in principal amount to the unredeemed portion of the Security surrendered. ARTICLE X SECURITY AND PLEDGE OF COLLATERAL SECTION 10.1 COLLATERAL DOCUMENTS. The due and punctual payment of the principal of, premium, if any, and interest on the Securities when 98 and as the same shall be due and payable, whether on an interest payment date, at maturity, by acceleration, repurchase, redemption or otherwise, and interest on the overdue principal of, premium and interest (to the extent permitted by law), if any, on the Securities and performance of all other Obligations of the Company to the Holders or the Trustee under this Indenture and the Securities, according to the terms hereunder and thereunder, shall be secured as provided in the Pledge Agreement. Each Holder, by its acceptance of a Security, consents and agrees to the terms of the Pledge Agreement (including, without limitation, the provisions providing for foreclosure and release of Collateral) as the same may be in effect or may be amended from time to time in accordance with the terms thereof and hereof and authorizes and directs the Trustee to enter into the Pledge Agreement and to perform its Obligations and exercise its rights thereunder in accordance therewith. The Company will do or cause to be done all such acts and things as may be necessary or proper, or as may be required by the provisions of the Pledge Agreement, to assure and confirm to the Trustee the security interest in the Collateral contemplated hereby and by the Pledge Agreement, as from time to time constituted, so as to render the same available for the security and benefit of this Indenture and of the Securities secured hereby, according to the intent and purposes herein expressed. The Company shall take, upon request of the Trustee, any and all actions required to cause the Pledge Agreement to create and maintain, as security for the Obligations of the Company under this Indenture and the Securities, valid and enforceable, perfected (except as expressly provided therein), Liens in and on all the Collateral, in favor of the Trustee, superior to and prior to the rights of all third Persons, and subject to no other Liens, other than as provided herein and therein. SECTION 10.2 RECORDING AND OPINIONS. The Company shall furnish to the Trustee within 5 days after the execution and delivery of this Indenture an Opinion of Counsel either (i) stating that in the opinion of such counsel all action has been taken with respect to the recording, registering and filing of this Indenture, the Pledge Agreement, financing statements or other instruments necessary to make effective the Lien intended to be created by the Pledge Agreement, and 99 reciting the details of such action, or (ii) stating that, in the opinion of such counsel, no such action is necessary to make such Lien effective. SECTION 10.3 REMEDIES UPON AN EVENT OF DEFAULT. (a) Upon the occurrence of an Event of Default, then or at any time during the continuance of such occurrence, the Trustee is hereby authorized and empowered, at its election, in accordance with its rights hereunder and under the Pledge Agreement (i) to transfer and register in its or its nominee's name the whole or any part of the Collateral, (ii) to exercise all voting rights with respect thereto, (iii) to demand, sue for, collect, receive and give acquittance for any and all cash dividends or other distributions or monies due or to become due upon or by virtue thereof, and to settle, prosecute or defend any action or proceeding with respect thereto, (iv) to transfer to or to register in the name of the Trustee or any of its nominees any or all of the Collateral, (v) to exchange certificates or instruments representing or evidencing the Collateral for certificates or instruments of different denominations, (vi) to sell in one or more sales the whole or any part of the Collateral or otherwise to transfer or assign the same, applying the proceeds therefrom to the payment of the Securities in accordance with Section 5.10, and (vii) otherwise to act with respect to the Collateral or the proceeds thereof as though the Trustee were the outright owner thereof. SECTION 10.4. RELEASE OF THE COLLATERAL. (a) As long as no Event of Default shall have occurred and be continuing, at the sole cost and expense of the Company, the Company shall be entitled at any time and from time to time to request the Trustee to release a portion of the Collateral and the Trustee shall release such portion of the Collateral upon: (i) payment in full of all obligations under this Indenture and the termination thereof; or (ii) the sale or other disposition of the Collateral (the "Collateral Sale") if (A) the Company or a Subsidiary receives consideration at the time of the Collateral Sale at least equal to the 100 fair market value, as determined in good faith by the Board of Directors, of the Collateral subject to the sale or disposition, (B) at least 80% of the consideration thereof received by the Company or a Subsidiary is in the form of Additional Assets or cash or cash equivalents which cash equivalents are promptly converted into cash by the Company (or a Subsidiary, as the case may be), (C) an amount equal to 100% of the Net Available Cash is immediately deposited in the Collateral Account to be used in accordance with Section 10.4(b), (D) the non-cash proceeds from such Collateral Sale (including securities or other Additional Assets) received by the Company or a Subsidiary immediately become subject to a first priority perfected Lien in favor of the Trustee, and (E) the Company (or a Subsidiary, as the case may be) complies with all the requirements of Section 10.6, PROVIDED, that the Trustee shall not release any Lien on any Collateral pursuant to this Section 10.4 unless and until it shall have received from the Company an Officers' Certificate certifying that all conditions precedent hereunder have been met and such other documents required by Section 10.6 hereof. Upon compliance with the above provisions, the Trustee shall execute, deliver or acknowledge any necessary or proper instruments of termination, satisfaction or release to evidence the release of any Collateral permitted to be released pursuant to this Indenture. (b) Within three hundred and sixty (360) days (such 360 days being the "Collateral Application Period") following the sale or disposition of the Collateral, the Company or such Subsidiary shall apply the Net Available Cash from such Collateral Sale as follows: (i) FIRST, if the Collateral Sale results in the Person sold no longer being a Subsidiary, then to the extent required by the agreement governing the New Credit Facility and not otherwise satisfied in connection with such Collateral Sale, to outstanding Indebtedness Incurred under the New Credit Facility in an amount equal to (A) the outstanding principal amount of Indebtedness to the Company of the Subsidiary subject to such Collateral Sale as evidenced by the applicable Intercompany Note, plus (B) an additional amount, if any, necessary to prevent the aggregate outstanding Indebtedness Incurred pursuant to the New Credit Facility to exceed the amount of Indebtedness then 101 permitted to be outstanding pursuant to the borrowing formulae contained in the agreement evidencing such Indebtedness plus the Seasonal Overadvance; (ii) SECOND, to the extent that the balance of such Net Available Cash after application in accordance with clause (i), and to the extent the Company or the Subsidiary elects, to reinvest in Additional Assets, provided, however, that, when acquired, (A) if such Additional Assets are stock of a Subsidiary, then such Additional Assets shall be subject to a first priority perfected Lien in favor of the Trustee, and (B) if such Additional Assets are other than stock of a Subsidiary, accounts receivable or inventory, then such Additional Assets shall be unencumbered by any Lien; (iii) THIRD, to the extent of the balance of such Net Available Cash after application in accordance with clauses (i) and (ii), and to the extent the Company or such Subsidiary elects, to make an offer to purchase the Securities at not less than 100% of their Accreted Value, plus accrued interest (if any) pursuant to and subject to the conditions of Section 10.5(a); and (iv) FOURTH, to the extent of the balance of such Net Available Cash after application in accordance with clauses (i), (ii) and (iii), and to the extent the Company or such Subsidiary elects, to acquire or form a Subsidiary which, when acquired or formed, the Capital Stock of such Subsidiary shall be subject to a first priority perfected Lien in favor of the Trustee. To the extent that any Net Available Cash remains after the application of the Net Available Cash in accordance with the previous sentence, such Net Available Cash will remain in the Collateral Account and will not be released until the obligations of the Company under this Indenture and the Securities have been discharged. SECTION 10.5. PURCHASE OF SECURITIES WITH NET AVAILABLE CASH. (a) In the event of a purchase of Securities pursuant to clause (ii) of Section 10.4(b), the Company will purchase Securities tendered pursuant to an offer by the Company for the Securities (the "Collateral Sale Offer") at a purchase price of not less than 100% of their Accreted Value plus accrued interest to the Collateral Sale Purchase Date in accordance with the procedures (including prorationing in the event of oversubscription) set forth below. If the aggregate purchase price of Securities tendered pursuant to the Collateral Sale Offer is less than the Net Available Cash allotted 102 to the purchase of the Securities, the Company shall apply the remaining Net Available Cash in accordance with Section 10.4(b). (b) Promptly, and in any event prior to the 360th day after the later of the date of each Collateral Sale as to which the Company makes a Collateral Sale Offer or the receipt of Net Available Cash therefrom, the Company shall be obligated to deliver to the Trustee and send, by first-class mail to each Holder, a written notice stating that the Holder may elect to have his Securities purchased by the Company either in whole or in part (subject to prorationing as hereinafter described in the event the Collateral Sale Offer is oversubscribed) in integral multiples of $1,000 of principal amount at maturity, at the applicable purchase price. The notice shall specify a purchase date not less than 30 days, nor more than 60 days, after the date of such notice (the "Collateral Sale Purchase Date") and shall contain the information required in a notice for a Change of Control Offer as described in Section 3.8, to the extent applicable. (c) Not later than the date upon which written notice of a Collateral Sale Offer is delivered to the Trustee as provided below, the Company shall deliver to the Trustee an Officers' Certificate as to (i) the amount of the Collateral Sale Offer (the "Collateral Sale Offer Amount"), (ii) the allocation of the Net Available Cash from the Collateral Sale pursuant to which such Collateral Sale Offer is being made and (iii) the compliance of such allocation with Section 10.4(a). On such date, the Trustee shall also deposit with a Paying Agent other than the Company or a Subsidiary or an Affiliate of the Company funds in an amount equal to the Collateral Sale Offer Amount to be held for payment in accordance with the provisions of Section 10.4. Upon the expiration of the period for which the Collateral Sale Offer remains open (the "Collateral Offer Period"), the Company shall deliver, or cause to be delivered, to the Trustee the Securities or portions thereof which have been properly tendered to and are to be accepted by the Company. The Paying Agent shall, on the Collateral Sale Purchase Date, mail or deliver payment to each tendering Holder in the amount of the purchase price. In the event that the aggregate purchase price of the Securities delivered, or caused to be delivered, by the Company to the Trustee is 103 less than the Collateral Sale Offer Amount, the Paying Agent shall deliver the excess to the Trustee immediately after the expiration of the Collateral Offer Period and the Trustee shall place such funds in the Collateral Account. (d) Holders electing to have a Security purchased will be required to surrender the Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security duly completed, to the Company or the Paying Agent, as specified in, and at the address specified in, the notice at least ten Business Days prior to the Collateral Sale Purchase Date. Holders will be entitled to withdraw their election if the Trustee or the Paying Agent receives, not later than three Business Days prior to the Collateral Sale Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. If at the expiration of the Collateral Offer Period the aggregate principal amount of Securities surrendered by Holders exceeds the Collateral Sale Offer Amount, the Company shall select the Securities to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Securities in denominations of $1,000, or integral multiples thereof, shall be purchased). Holders whose Securities are purchased only in part will be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered. (e) At the time the Company delivers Securities to the Trustee which are to be accepted for purchase, the Company will also deliver an Officers' Certificate stating that such Securities are to be accepted by the Company pursuant to and in accordance with the terms of this Section. A Security shall be deemed to have been accepted for purchase at the time the Paying Agent, directly or through an agent, mails or delivers payment therefor to the surrendering Holder. (f) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant 104 to clause (ii) of Section 10.4(b). To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section by virtue thereof. SECTION 10.6. CERTIFICATES OF COMPANY. (a) The Company will furnish to the Trustee prior to each proposed release of Collateral pursuant to Section 10.4 all documents required by Sections 314(c) and 314(d) of the TIA. The Trustee may, to the extent permitted by Sections 6.1 and 6.2 hereof, accept as conclusive evidence of compliance with the foregoing provisions the appropriate statements contained in such instruments. Any certificate or opinion required by Sections 314(c) and 314(d) of the TIA may be made by an Officer of the Company, except in cases where TIA Sections 314(c) and 314(d) require that such certificate or opinion be made by an independent engineer, appraiser or other expert within the meaning of Sections 314(c) and 314(d) of the TIA. SECTION 10.7 AUTHORIZATION OF ACTIONS TO BE TAKEN UNDER THE PLEDGE AGREEMENT. The Trustee may, in its sole discretion and without the consent of the Holders, on behalf of the Holders, take all actions its deems necessary or appropriate in order to (a) enforce any of the terms of the Pledge Agreement and (b) collect and receive any and all amounts payable in respect of the Obligations of the Company hereunder. The Trustee shall have the power to institute and to maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Collateral by any acts that may be unlawful or in violation of the Pledge Agreement or this Indenture, and such suits and proceedings as the Trustee may deem expedient to preserve or protect its interests and interests of the Holders in the Collateral (including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, 105 or compliance with, such enactment, rule or order would impair the security interest hereunder or be prejudicial to the interests of the Holders or of the Trustee). ARTICLE XI MISCELLANEOUS SECTION 11.1 TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by any of TIA Sections 310 to 317, inclusive, through operation of TIA Section 318(c), such imposed duties shall control. SECTION 11.2 NOTICES. Any notice or communication shall be in writing and delivered in person, or mailed by first-class mail (certified, return receipt requested), addressed as follows: if to the Company or the Subsidiary Guarantors: Empire Gas Corporation 1700 South Jefferson Street P.O. Box 303 Lebanon, Missouri 65536 Attention: Secretary if to the Trustee: Shawmut Bank Connecticut, National Association 777 Main Street - MSN 238 Hartford, Connecticut 06115 Attention: Corporate Trust Administration The Company, any Subsidiary Guarantor or the Trustee by notice to the others may designate additional or different addresses for subsequent notices or communications. 106 Any notice or communication to a Securityholder shall be mailed by first-class mail to the Securityholder's address shown on the register kept by the Registrar. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company or any Subsidiary Guarantor mails a notice or communication to Securityholders, it shall mail a copy to the Trustee and each Agent at the same time. SECTION 11.3 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS. Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Subsidiary Guarantors, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 11.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company or any Subsidiary Guarantor to the Trustee to take any action under this Indenture, the Company shall, if requested by the Trustee, furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent (including any covenants compliance with which constitutes a condition precedent), if any, provided for in this Indenture relating to the proposed action have been complied with; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel (which may rely upon an Officers' Certificate as to factual matters), all such conditions precedent have been complied with. 107 SECTION 11.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture other than certificates provided pursuant to Section 3.9 shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with. SECTION 11.6 RULES BY TRUSTEE AND AGENTS. The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 11.7 LEGAL HOLIDAYS. A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York, the State of Connecticut or the State in which the principal office of the Paying Agent is located. If a payment date is a Legal Holiday, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the regular record date shall not be affected. 108 SECTION 11.8 SUCCESSORS; NO RECOURSE AGAINST OTHERS. (a) All agreements of the Company in this Indenture and the Securities shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor. (b) All liability of the Company or any Subsidiary Guarantor described in the Securities insofar as it relates to any director, officer, employee or stockholder, as such, of the Company is waived and released by each Securityholder. SECTION 11.9 DUPLICATE ORIGINALS. The parties may sign any number of copies of this Indenture. One signed copy is enough to prove this Indenture. SECTION 11.10 OTHER PROVISIONS. The first certificate pursuant to Section 3.9 shall be for the fiscal year ending on June 30, 1994. The reporting date for Section 6.6 is May 15th of each year. The first reporting date is May 15, 1995. SECTION 11.11 GOVERNING LAW. The laws of the State of New York govern this Indenture and the Securities, without regard to the conflicts of laws rules thereof. ARTICLE XII SUBSIDIARY GUARANTEES SECTION 12.1 SUBSIDIARY GUARANTEES. Each of the Subsidiary Guarantors hereby jointly and severally unconditionally guarantees to each Holder of a Senior Secured Note authenticated and delivered by the Trustee, and to the Trustee on behalf of such Holder, the due and punctual payment of the principal of (and premium, if any) and interest on such Senior Secured Note when and as the same shall become due and payable, 109 whether at the Stated Maturity, by acceleration, call for redemption, purchase or otherwise, in accordance with the terms of such Senior Secured Note and of this Indenture. In case of the failure of the Company punctually to make any such payment, each of the Subsidiary Guarantors hereby jointly and severally agrees to cause such payment to be made punctually when and as the same shall become due and payable, whether at the Stated Maturity or by acceleration, call for redemption, purchase or otherwise, and as if such payment were made by the Company. Each of the Subsidiary Guarantors hereby jointly and severally agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of such Senior Secured Note or this Indenture, the absence of any action to enforce the same, any exchange, release or non-perfection of any Lien on any collateral for, or any release or amendment or waiver of any term of any other guarantee of, or any consent to departure from any requirement of any other guarantee of all or any of the Securities, the election by the Trustee or any of the Holders in any proceeding under Chapter 11 of the Bankruptcy Law of the application of Section 1111(b)(2) of the Bankruptcy Law, any borrowing or grant of a security interest by the Company, as debtor-in- possession, under Section 364 of the Bankruptcy Law, the disallowance, under Section 502 of the Bankruptcy Law, of all or any portion of the claims of the Trustee or any of the Holders for payment of any of the Senior Secured Note, any waiver or consent by the Holder of such Senior Secured Note or by the Trustee with respect to any provisions thereof or of this Indenture, the obtaining of any judgment against the Company or any action to enforce the same or any other circumstances which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each of the Subsidiary Guarantors hereby waives the benefits of diligence, presentment, demand of payment, any requirement that the Trustee or any of the Holders protect, secure, perfect or insure any security interest in or other Lien on any property subject thereto or exhaust any right or take any action against the Company or any other Person or any Collateral, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest or notice with respect to such Security or the Indebtedness evidenced thereby and all demands whatsoever, and covenants, that this 110 Subsidiary Guarantee will not be discharged in respect of such Senior Secured Note except by complete performance of the obligations contained in such Senior Secured Note and in this Subsidiary Guarantee. Each of the Subsidiary Guarantors hereby agrees that, in the event of a default in payment of principal (or premium, if any) or interest on such Senior Secured Note, whether at their Stated Maturity, by acceleration, call for redemption, purchase or otherwise, legal proceedings may be instituted by the Trustee on behalf of, or by, the Holder of such Senior Secured Note, subject to the terms and conditions set forth in this Indenture, directly against each of the Subsidiary Guarantors to enforce this Subsidiary Guarantee without first proceeding against the Company. Each Subsidiary Guarantor agrees that if, after the occurrence and during the continuance of an Event of Default, the Trustee or any of the Holders are prevented by applicable law from exercising their respective rights to accelerate the maturity of the Senior Secured Notes, to collect interest on the Senior Secured Notes, or to enforce or exercise any other right or remedy with respect to the Senior Secured Notes, or the Trustee or the Holders are prevented from taking any action to realize on the Collateral, such Subsidiary Guarantor agrees to pay to the Trustee for the account of the Holders, upon demand therefor, the amount that would otherwise have been due and payable had such rights and remedies been permitted to be exercised by the Trustee or any of the Holders. Each Subsidiary Guarantor shall be subrogated to all rights of the Holders of the Senior Secured Notes upon which its guarantee is endorsed against the Company in respect of any amounts paid by such Subsidiary Guarantor on account of such Senior Secured Note pursuant to the provisions of its Subsidiary Guarantee or this Indenture; PROVIDED, HOWEVER, that no Subsidiary Guarantor shall be entitled to enforce or to receive any payments arising out of, or based upon, such right of subrogation until the principal of (and premium, if any) and interest on all Senior Secured Notes issued hereunder shall have been paid in full. Each Subsidiary Guarantee shall remain in full force and effect and continue to be effective should any petition be filed by or against the Company for liquidation or reorganization, should the Company become insolvent or make an assignment for the benefit of creditors 111 or should a receiver or trustee be appointed for all or any significant part of the Company's assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Senior Secured Notes, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Senior Secured Notes, whether as a "voidable preference," "fraudulent transfer," or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Senior Secured Notes shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. SECTION 12.2 EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES. The Subsidiary Guarantees to be endorsed on the Senior Secured Notes shall include the terms of the Subsidiary Guarantee set forth in Section 12.1 and any other terms that may be set forth in the form established pursuant to Exhibit B annexed hereto, which is part of this Indenture. Each of the Subsidiary Guarantors hereby agrees to execute its Subsidiary Guarantee, in a form established pursuant to Exhibit B, to be endorsed on each Security authenticated and delivered by the Trustee. The Subsidiary Guarantee shall be executed on behalf of each respective Subsidiary Guarantor by any one of such Subsidiary Guarantor's Chairman of the Board, Vice Chairman of the Board, President or Vice Presidents, attested by its Secretary or Assistant Secretary. The signature of any or all of these officers on the Subsidiary Guarantee may be manual or facsimile. A Subsidiary Guarantee bearing the manual or facsimile signatures of individuals who were at any time the proper officers of a Subsidiary Guarantor shall bind such Subsidiary Guarantor, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of the Security on which such Subsidiary Guarantee is endorsed or did not hold such offices at the date of such Subsidiary Guarantee. 112 The delivery of any Senior Secured Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee endorsed thereon on behalf of the Subsidiary Guarantors. Each of the Subsidiary Guarantors hereby jointly and severally agrees that its Subsidiary Guarantee set forth in Section 12.1 shall remain in full force and effect notwithstanding any failure to endorse a Subsidiary Guarantee on any Senior Secured Note. SECTION 12.3 SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. Except as set forth in Section 12.4 and in Articles III and IV hereof, nothing contained in this Indenture or in any of the Senior Secured Notes shall prevent any consolidation or merger of a Subsidiary Guarantor with or into the Company or a Subsidiary Guarantor or shall prevent any sale or conveyance of the property of a Subsidiary Guarantor as an entirety of substantially as an entirety to the Company or a Subsidiary Guarantor. SECTION 12.4 RELEASE OF SUBSIDIARY GUARANTORS. (a) Concurrently with any consolidation or merger of a Subsidiary Guarantor or any sale or conveyance of the property of a Subsidiary Guarantor as an entirety or substantially as an entirety, in each case as permitted by Section 12.3 hereof, and upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such consolidation, merger, sale or conveyance was made in accordance with Section 12.3 hereof, the Trustee shall execute any documents reasonably required in order to evidence the release of such Subsidiary Guarantor from its obligations under its Subsidiary Guarantees endorsed on the Senior Secured Notes and under this Article XII. Any Subsidiary Guarantor not released from its obligations under its Subsidiary Guarantees endorsed on the Senior Secured Notes and under this Article XII shall remain liable for the full amount of principal of and interest on the Senior Secured Notes and for the other obligations of a Subsidiary Guarantor under its Subsidiary Guarantees endorsed on the Senior Secured Notes and under this Article XII. 113 (b) Concurrently with the defeasance of the Senior Secured Notes under Section 7.2 hereof, the Subsidiary Guarantors shall be released from all of their obligations under their Subsidiary Guarantees endorsed on the Senior Secured Notes and under this Article XII subject to reinstatement if the obligations under the Securities are reinstated pursuant to Section 7.7. (c) Upon the sale or disposition (by merger or otherwise) of any Subsidiary Guarantor by the Company or any Restricted Subsidiary of the Company to any entity that is not the Company or a Subsidiary or Affiliate thereof and which sale or disposition is otherwise in compliance with the terms of this Indenture, such Subsidiary Guarantor shall automatically be released from all obligations under its Subsidiary Guarantees endorsed on the Senior Secured Notes and under this Article XII, PROVIDED THAT such Subsidiary Guarantor is sold or disposed of for fair market value (evidenced by a Board Resolution and set forth in an Officers' Certificate delivered to the Trustee). (d) Upon the redesignation by the Company of a Subsidiary Guarantor from Restricted Subsidiary to an Unrestricted Subsidiary in compliance with the provisions of this Indenture, such Subsidiary shall cease to be a Subsidiary Guarantor and shall be released from all of the obligations of a Subsidiary Guarantor under its Subsidiary Guarantees endorsed on the Senior Secured Notes and under this Article XII. SECTION 12.5 ADDITIONAL SUBSIDIARY GUARANTORS. (a) The Company shall cause any Person that becomes a Restricted Subsidiary after the date of this Indenture to become a Subsidiary Guarantor with respect to the Senior Secured Notes. Any such Person shall become a Subsidiary Guarantor by executing and delivering to the Trustee (a) a supplemental indenture, in form and substance satisfactory to the Trustee, which subjects such Person to the provisions (including the representations and warranties) of this Indenture as a Subsidiary Guarantor and (b) an Opinion of Counsel to the effect that such supplemental indenture has been duly authorized and executed by such Person and constitutes the legal, valid, binding and enforceable obligation of such Person (subject to such customary exceptions concerning credi- 114 tors' rights and equitable principles as may be reasonably acceptable to the Trustee in its discretion). (b) The Company will cause any Subsidiary of the Company that is or becomes a borrower under or guarantor of the Company's obligations under the New Credit Facility to become a Subsidiary Guarantor with respect to the Senior Secured Notes. 115 SIGNATURES Dated: , 199_ EMPIRE GAS CORPORATION By_______________________ Name: Title: Attest: By_______________________ Name: Title: _________________________ Each of the SUBSIDIARY GUARANTORS listed on Schedule I attached hereto By_______________________ Name: Title: Attest: _________________________ SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, as Trustee By_______________________ Name: Title: [SEAL] Attest: _________________________ 116 SCHEDULE I Empire Tank Leasing Corporation Empiregas Equipment Corporation Empire Underground Storage, Inc. Empire Industrial Sales Corporation Utility Collection Corporation Empiregas Transports, Inc. (Missouri) Empiregas Aviation Corporation Empiregas Transports, Inc. - OR Empiregas Inc. of Clinton (Missouri) Empiregas Inc. of Kansas City Empiregas Inc. of Albany Empiregas Inc. of Aiken Empiregas of Arma, Inc. Empiregas Inc. of Arnauldville Empiregas Inc. of Auburn Empiregas Inc. of Big Rapids Empiregas Inc. of Bolivar Empiregas Inc. of Boise Empiregas Inc. of Boulder Empiregas Inc. of Bowling Green Empiregas Inc. of Brandon Empiregas Inc. of Bremerton Empiregas of Bristow, Inc. Empiregas Inc. of Buffalo Empiregas Inc. of Adrian Empiregas Inc. of Camdenton Empiregas Inc. of Canon City Empiregas Inc. of Canton Empiregas Inc. of Carthage Empiregas Inc. of Castle Rock Empiregas Inc. of Centerville Empiregas Inc. of Charlotte Empiregas Inc. of Chassel Empiregas Inc. of Chehalis Empiregas Inc. of Clinton, Illinois Empiregas of Colcord, Inc. Empiregas Inc. of Cole Camp Empiregas Inc. of Coleman Empiregas Inc. of Colorado Springs Empiregas Inc. of Coquille Empiregas Inc. of Cuba 1 Empiregas Inc. of Chetek Empiregas Inc. of Denver Empiregas Inc. of Dover Empiregas Inc. of Durand Empiregas Inc. of El Dorado Springs Empiregas Inc. of Elsberry Empiregas Inc. of Elsinore Empiregas Inc. of Escondido Empiregas Inc. of Eunice Empiregas Inc. of Evergreen Salgas Inc. of Fairplay Empiregas Inc. of Eau Claire Empiregas Inc. of Fort Collins Empiregas Inc. of Fowler Empiregas Inc. of Mid-Missouri Empiregas Inc. of Galveston Empiregas Inc. of Galva Empiregas Inc. of Gaylord Empiregas Inc. of Globe Empiregas Inc. of Goose Creek Empiregas Inc. of Greeley Empiregas Inc. of Grand Junction Empiregas of Grove, Inc. Empiregas Inc. of Hermiston Empiregas Inc. of Hermitage Empiregas Inc. of Hiawassee Empiregas Inc. of Higginsville Empiregas of Hitichita, Inc. Empiregas Inc. of Hoopeston Empiregas Inc. of Hornick Empiregas Inc. of Humansville Empiregas Inc. of Jacksonville Empiregas Inc. of Jackson, MI Empiregas Inc. of Kalamazoo Empiregas Inc. of Kirksville Empiregas Inc. of Lafayette Empiregas Inc. of Lake Charles Empiregas Inc. of Lake Providence Empiregas Inc. of Laurie Empiregas of Le Sueur, Inc. Empiregas Inc. of Lincoln Empiregas Inc. of Longmont Empiregas Inc. of Los Angeles Empiregas Inc. of Loveland Empiregas Inc. of Marquette Empiregas Inc. of Marshall Empiregas Inc. of Medford 2 Empiregas Inc. of Menomonie Empiregas Inc. of Merillan Empiregas Inc. of Miller Empiregas Inc. of Modesto Empiregas Inc. of Monte Vista Empiregas Inc. of Mount Vernon Empiregas Inc. of Munising Empiregas Inc. of Murphy Thrif-T-Gas Inc. of Blackwater Empiregas Inc. of North Bend Empiregas Inc. of North Myrtle Beach, Inc. Empiregas Inc. of Oak Grove Empiregas Inc. of Onawa Empiregas Inc. of Orangeburg Empiregas Inc. of Owensville Empiregas Inc. of Santa Paula Empiregas Inc. of Paducah Empiregas Inc. of Palmyra Empiregas Inc. of Placerville Empiregas Inc. of Pomona Empiregas Inc. of Potosi Empiregas Inc. of Pueblo Empiregas Inc. of Reedsport Empiregas Inc. of Richland Empiregas Inc. of Rolla Empiregas Inc. of Sacramento Empiregas Inc. of Sandy Empiregas Inc. of Shell Lake Empiregas Inc. of Siloam Springs Empiregas of Stigler, Inc. Empiregas Inc. of Susanville Empiregas Inc. of Sunnyside Empiregas Inc. of Rocky Mount Empiregas Inc. of the Dalles Empiregas Inc. of Tipton (Iowa) Empiregas Inc. of Traverse City Empiregas Inc. of Vandalia Empiregas Inc. of Vassar Empiregas Inc. of Vinita, Inc. Empiregas Inc. of Warren Empiregas Inc. of Warsaw (Missouri) Empiregas Inc. of Washington Empiregas Inc. of Waukon Empiregas Inc. of Waynesville Empiregas Inc. of Waynesville, NC Empiregas Inc. of Wenatchee Empiregas Inc. of Wentzville 3 Empiregas of Westville, Inc. Empiregas Inc. of Wills Point Empiregas Inc. of Wilmington Empiregas Inc. of Wilson Empiregas Inc. of Woodland Park Empiregas Inc. of Yakima Empiregas Inc. of Yucca Valley Empiregas Inc. of Zebulon Empiregas Inc. of Columbiana Empiregas of Zumbro Falls, Inc. Ginco Gas Company, Inc. Empiregas Inc. of Orange County Empiregas Inc. of Morgan County Empiregas Inc. of Lake Ozark Empiregas Inc. of Waco Empiregas Inc. of Paris, TX Empiregas Inc. of Dallas, TX Empiregas Inc. of Kemp Empiregas Inc. of San Antonio Thrift-T-Gas Co., Inc. Empiregas Inc. of Paris, MO Salida Gas Co., Inc. Salgas Inc. of Gunnison Empiregas Inc. of Toledo Empiregas Inc. of Wilkesboro Empiregas Inc. of Hendersville Empiregas Inc. of North Carolina Empiregas Inc. of Carthage Empiregas Inc. of Apex Empiregas Inc. of Durham Empiregas Inc. of Warrenton 4 EXHIBIT A - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Form of Face of Security) Unless this certificate is presented by an authorized representative of The Depositary Trust Company, a New York corporation ("DTC"), to the Company (as defined below) or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co., or such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co., or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. Unless and until it is exchanged in whole or in part for Securities in definitive registered form, this certificate may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any such nominee to a successor Depositary or a nominee of such successor Depositary. EMPIRE GAS CORPORATION % SENIOR SECURED NOTE DUE 2004 No. $ Empire Gas Corporation, a Missouri corporation, promises to pay to , or registered assigns, the principal sum of Dollars on , 2004. Interest Payment Dates: Record Dates: Additional provisions of this Security are set forth on the reverse hereof. IN WITNESS WHEREOF, the Company has caused this Security to be signed manually or by facsimile by its duly authorized officers. Date: EMPIRE GAS CORPORATION By_______________________ Name: Title: By_______________________ Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION: , as Trustee, certifies that this is one of the Securities referred to in the Indenture. (SEAL) By: _________________________ Authorized Signature - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- A-2 (Form of Back of Security) EMPIRE GAS CORPORATION % SENIOR SECURED NOTE DUE 2004 (1) INTEREST. Empire Gas Corporation, a Missouri corporation (such corporation, and its successors and assigns under the Indenture referred to below, being herein called the "Company"), promises to pay interest on the principal amount at maturity of this Security at the rate of [____]% per annum until [______], 1999 and at the rate of [__]% per annum from and including [________], 1999 until maturity. Interest will be payable semiannually (to the holders of record of the Securities at the close of business on the [_____] or [_____] immediately preceding the Interest Payment Date) on each Interest Payment Date, commencing [___________], 1994. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from [_____], 1994; PROVIDED that, if there is no existing default in the payment of interest and if this Security is authenticated between a Regular Record Date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such Interest Payment Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal and premium, if any, and interest on overdue installments of interest, to the extent lawful, at a rate per annum that is 2% in excess of the rate otherwise payable. (2) METHOD OF PAYMENT. The Company will pay interest on the Securities (except defaulted interest) to the persons who are registered Holders of Securities at the close of business on the record date next preceding the interest payment date even though Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal and A-3 interest by check payable in such money. It may mail an interest check to a Holder's registered address. (3) PAYING AGENT, REGISTRAR. Initially, Shawmut Bank Connecticut, National Association, a National Banking Association (the "Trustee"), will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-registrar without notice. The Company may act as Paying Agent, Registrar or co-registrar. (4) INDENTURE. The Company issued the Securities under an Indenture dated as of , 1994 (the "Indenture") between the Company, the Subsidiary Guarantors (as defined therein) and the Trustee. The Securities are general obligations of the Company limited to $ aggregate principal amount at maturity, subject to increase pursuant to the terms of the Indenture. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"). Capitalized terms used herein but not defined herein are used as defined in the Indenture, and references to the principal amount of any Security refer to the Accreted Value of such Security as determined pursuant to the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the TIA for a statement of such terms. (5) OPTIONAL REDEMPTION. Except as set forth in the following paragraph, the Company may not redeem the Securities prior to _____, 1999. On and after such date, the Company may redeem the Securities at any time as a whole, or from time to time in part, at the following redemption prices (expressed in percentages of Accreted Value), plus accrued interest to the redemption date, if redeemed during the 12-month period beginning _____, YEAR % 1999 . . . . . . . . . . 2000 . . . . . . . . . . 2001, and thereafter . . The Company may redeem up to $ principal amount at maturity of Securities with the proceeds of one or more Public Equity Offerings following which there is a Public Market, at any time in whole or from time to time in part, at a price (expressed as a percentage of Accreted A-4 Value), plus accrued interest to the redemption date, of % if redeemed at any time prior to , 1997. (6) NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at the address set forth for such Holder on the register referred to in Section 2.3 of the Indenture. Unless the Company shall default in payment of the redemption price plus accrued interest, on and after the redemption date interest ceases to accrue on such Securities or portions of them called for redemption. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. (7) "ACCRETED VALUE" means as of any date (the "specified date") with respect to each $1,000 face amount of Securities, the following amount: (i) if the specified date is one of the following dates (each an "accrual date"), the amount set forth opposite such date below: ACCRUAL DATE ACCRETED VALUE ______, 1994 . . . . . . . . . . . . ______ ______, 1994 . . . . . . . . . . . . ______ ______, 1995 . . . . . . . . . . . . ______ ______, 1995 . . . . . . . . . . . . ______ ______, 1996 . . . . . . . . . . . . ______ ______, 1996 . . . . . . . . . . . . ______ ______, 1997 . . . . . . . . . . . . ______ ______, 1997 . . . . . . . . . . . . ______ ______, 1998 . . . . . . . . . . . . ______ ______, 1998 . . . . . . . . . . . . ______ ______, 1999 . . . . . . . . . . . . $1,000; (ii) if the specified date occurs between two accrual dates, the sum of (A) the accreted value for the accrual date immediately preceding the specified date and (B) an amount equal to the product of (i) the accreted value for the immediately following accrual date less the accreted value for the immediately preceding accrual date and (ii) a fraction, the numerator of which is the number of days (not to exceed 180 days) from the immediately preceding accrual date to the specified date, using a 360-day year of twelve 30- A-5 day months, and the denominator of which is 180 (or, if the immediately following accrual date is _________, 1999, ___); and (iii) if the specified date occurs after _____ __, 1999, $1,000. (8) DENOMINATIONS; TRANSFER; EXCHANGE. The Securities are in registered form without coupons in denominations of $1,000 in face amount and whole multiples of $1,000. The transfer of Securities may be registered and Securities may be exchanged as provided in the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not exchange or register the transfer of any Security or portion of a Security selected for redemption (except, in the case of a Security to be redeemed in part, the portion thereof not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed, or 15 days before an interest payment date. (9) PUT PROVISIONS. Upon a Change of Control, any Holder of Securities will have the right to cause the Company to repurchase all or any part of the Securities of such Holder at a repurchase price equal to 10 % of the principal amount of the Securities to be repurchased plus accrued interest to the date of repurchase as provided in, and subject to the terms of, the Indenture. (10) DEFEASANCE. Subject to certain conditions, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. (11) SECURITY. As provided in the Indenture and the Pledge Agreement, and subject to certain limitations set forth therein, the Obligations of the Company under the Indenture and the Pledge Agreement are secured by the Collateral as provided in the Indenture and the Pledge Agreement. Each Holder, by accepting a Security, agrees to be bound by all terms and provisions of the Pledge Agreement, as the same may be amended form time to time. The Liens created under the Indenture and the Pledge Agreement shall A-6 be released upon the terms and subject to the conditions set forth in the Indenture and Pledge Agreement. (12) PERSONS DEEMED OWNERS. The registered Holder of a Security may be treated as its owner for all purposes, except that interest (other than defaulted interest) will be paid to the person that was the registered Holder on the relevant record date for such payment of interest. (13) AMENDMENTS AND WAIVERS. Subject to certain exceptions, (i) the Indenture or the Securities may be amended or supplemented with the consent of the Holders of a majority in principal amount of the Securities; and (ii) any existing default may be waived with the consent of the Holders of a majority in principal amount of the Securities. Without the consent of any Securityholder, the Indenture or the Securities may be amended or supplemented to cure any ambiguity, omission, defect or inconsistency, to provide for assumption of Company obligations to Securityholders or to provide for uncertificated Securities in addition to or in place of certificated Securities, to provide for guarantees with respect to, or security for, the Securities, or to comply with the TIA or to add additional covenants or surrender Company rights, to make certain amendments to the Pledge Agreement called for therein to add Collateral or to make any change that does not adversely affect the Rights of any Securityholder. (14) REMEDIES. If an Event of Default occurs and is continuing, the Trustee or Holders of at least 25% in principal amount of the Securities may declare all the Securities to be due and payable immediately. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may require an indemnity before it enforces the Indenture or the Securities. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing default (except a Default in payment of principal or interest) if it determines that withholding notice is in their interests. The Company must furnish an annual compliance certificate to the Trustee. (15) TRUSTEE DEALINGS WITH COMPANY. Subject to the provisions of the TIA, the Trustee under the Indenture, A-7 in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not Trustee. The Trustee will initially be Shawmut Bank Connecticut, National Association. (16) NO RECOURSE AGAINST OTHERS. A director, officer, employee or stockholder, as such, of the Company or a Subsidiary Guarantor shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. (17) AUTHENTICATION. This Security shall not be valid until authenticated by the manual signature of an authorized signatory of the Trustee or an authenticating agent. (18) ABBREVIATIONS. Customary abbreviations may be used in the name of a Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). (19) SUBSIDIARY GUARANTEE. The payment of principal of, premium, if any and interest on the Securities is guaranteed on a senior basis by the Guarantors pursuant to Article XII of the Indenture. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST AND WITHOUT CHARGE A COPY OF THE INDENTURE AND THE PLEDGE AGREEMENT, WHICH INDENTURE HAS IN IT THE A-8 TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO: SECRETARY, EMPIRE GAS CORPORATION, 1700 SOUTH JEFFERSON STREET, P.O. BOX 303, LEBANON, MISSOURI, 65536 ATTENTION: SECRETARY. A-9 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Insert assignee's soc. sec or tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. ____________________________________________________________ Dated: ________________ Signed: ____________________ ____________________ (Sign exactly as your name appears on the other side of this Security) Signature Guarantee: _______________________________________ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- OPTION OF HOLDER TO ELECT PURCHASE FORM If you wish to elect to have this Security purchased by the Company pursuant to Section 3.8, 3.12 or 10.5 of the Indenture, check this box: / / If you wish to elect to have only part of this Security purchased by the Company pursuant to Section 3.8, 3.12 or 10.5 of the Indenture, state the amount: $ *As set forth in the Indenture, any purchase pursuant to Section 3.12 is subject to proration in the event the offer is oversubscribed. Dated: ________________ Signed: ____________________ ____________________ (Sign exactly as your name appears on the other side of this Security) Signature Guarantee: _______________________________________ A-10 EXHIBIT B FORM OF GUARANTEE GUARANTEE For value received, each of the Subsidiary Guarantors listed below hereby jointly and severally unconditionally guarantees to the Holder of the Senior Secured Note on which this guarantee is endorsed, and to the Trustee on behalf of such Holder, the due and punctual payment of the principal of (and premium, if any) and interest on such Senior Secured Note when and as the same shall become due and payable, whether at the Stated Maturity, by acceleration, call for redemption, purchase or otherwise, according to the terms thereof and of the Indenture referred to therein. In case of the failure of the Company punctually to make any such payment, each of the Subsidiary Guarantors hereby jointly and severally agrees to cause such payment to be made punctually when and as the same shall become due and payable, whether at the Stated Maturity or by acceleration, call for redemption, purchase or otherwise, and as if such payment were made by the Company. Each of the Subsidiary Guarantors hereby jointly and severally agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of such Senior Secured Note or the Indenture, the absence of any action to enforce the same, or any release or amendment or waiver of any term of any other guarantee of, or any consent to departure from any requirement of any other guarantee of all or of any of the Securities, the election by the Trustee or any of the Holders in any proceeding under Chapter 11 of the Bankruptcy Code, 11 U.S.C. Sections 101-13330, as amended (the "Bankruptcy Law") of the application of Section 1111(b)(2) of the Bankruptcy Law, any borrowing or grant of a security interest by the Company, as debtor-in-possession, under Section 364 of the Bankruptcy Law, the disallowance, under Section 502 of the Bankruptcy Law, of all or any portion of the claims of the Trustee or any of the Holders for payment of any of the Securities, any waiver or consent by the Holder of such Security or by the Trustee or either of them with respect to any provisions thereof or of the Indenture, the obtaining of any judgment against the Company or any action to enforce B-1 the same or any other circumstances which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each of the Subsidiary Guarantors hereby waives the benefits of diligence, presentment, demand of payment, any requirement that the Trustee or any of the Holders protect, secure, perfect or insure any security interest in or other Lien on any property subject thereto or exhaust any right or take any action against the Company or any other Person, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest or notice with respect to such Security or the Debt evidenced thereby and all demands whatsoever, and covenants that this Subsidiary Guarantee will not be discharged except by complete performance of the obligations contained in such Senior Secured Note and in this Subsidiary Guarantee. Each of the Subsidiary Guarantors hereby agrees that, in the event of a default in payment of principal (or premium, if any) or interest on such Senior Secured Note, whether at its Stated Maturity, by acceleration, call for redemption purchase or otherwise, legal proceedings may be instituted by the Trustee on behalf of, or by, the Holder of such Senior Secured Note, subject to the terms and conditions set forth in the Indenture, directly against each of the Subsidiary Guarantors to enforce this Subsidiary Guarantee without first proceeding against the Company. Each Subsidiary Guarantor agrees that if, after the occurrence and during the continuance of an Event of Default, the Trustee or any of the Holders are prevented by applicable law from exercising their respective rights to accelerate the maturity of the Senior Secured Notes, to collect interest on the [BSenior Secured Notes, or to enforce or exercise any other right or remedy with respect to the Senior Secured Notes, such Subsidiary Guarantor agrees to pay to the Trustee for the account of the Holders, upon demand therefor, the amount that would otherwise have been due and payable had such rights and remedies been permitted to be exercised by the Trustee or any of the Holders. No reference herein to the Indenture and no provision of this Subsidiary Guarantee or of the Indenture shall alter or impair the Subsidiary Guarantee of any Subsidiary Guarantor, which is absolute and unconditional, of the due and punctual payment of the principal (and premium, if any) and interest on the Security upon which this Subsidiary Guarantee is endorsed. B-2 Each Subsidiary Guarantor shall be subrogated to all rights of the Holder of this Senior Secured Note against the Company in respect of any amounts paid by such Subsidiary Guarantor on account of this Security pursuant to the provisions of this Subsidiary Guarantee or the Indenture; PROVIDED, HOWEVER, that such Subsidiary Guarantor shall not be entitled to enforce or to receive any payments arising out of, or based upon, such right of subrogation until the principal of (and premium, if any) and interest on this Security and all other Securities issued under the Indenture shall have been paid in full. This Subsidiary Guarantee shall remain in full force and effect and continue to be effective should any petition be filed by or against the Company for liquidation or reorganization, should the Company become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the Company's assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Senior Secured Notes, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Senior Secured Notes whether as a "voidable preference," "fraudulent transfer," or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Senior Secured Notes shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. The Subsidiary Guarantors shall have the right to seek contribution from any non-paying Subsidiary Guarantor so long as the exercise of such right does not impair the rights of the Holders under this Subsidiary Guarantee. The Subsidiary Guarantors or any particular Subsidiary Guarantor shall be released from this Subsidiary Guarantee upon the terms and subject to certain conditions provided in the Indenture. By delivery of a Supplemental Indenture to the Trustee in accordance with the terms of the Indenture, each Person that become a Subsidiary Guarantor after the date of the Indenture will be deemed to have executed and delivered B-3 this Subsidiary Guarantee for the benefit of the Holder of this Senior Secured Note with the same effect as if such Subsidiary Guarantor was named below. All terms used in this Subsidiary Guarantee which are defined in the Indenture referred to in the Security upon which this Subsidiary Guarantee is endorsed shall have the meanings assigned to them in such Indenture. This Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Senior Secured Note upon which this Subsidiary Guarantee is endorsed shall have been executed by the Trustee under the Indenture by manual signature. Reference is made to Article Twelve of the Indenture for further provisions with respect to this Subsidiary Guarantee. THIS SUBSIDIARY GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, each of the Subsidiary Guarantors has caused this Subsidiary Guarantee to be duly executed. Each of the SUBSIDIARY GUARANTORS listed on Schedule I attached hereto Each as Subsidiary Guarantor By Title: Attest: ___________________________ Title: B-4 EXHIBIT C FORM OF SUBORDINATION PROVISIONS [THE TERM "SECURITIES" IN THIS FORM REFERS TO THE SUBORDINATED SECURITIES REFERRED TO IN THE DEFINITION OF "REFINANCING INDEBTEDNESS" AND SECTION 3.4(B) TO WHICH THESE PROVISIONS WOULD APPLY.] ARTICLE __ SUBORDINATION SECTION ____ AGREEMENT TO SUBORDINATE. The Company agrees, and each Securityholder by accepting a Security agrees, that the indebtedness evidenced by the Securities is subordinated in right of payment, to the extent and in the matter provided herein, to the prior payment in full of all Senior Debt, and that the subordination is for the benefit of the holders of Senior Debt. SECTION ____ CERTAIN DEFINITIONS. "REPRESENTATIVE" means the indenture trustee or other trustee, agent or representative for an issue of Senior Debt. "SENIOR DEBT" means (a) the principal of and accrued and unpaid interest (including interest accruing on or after filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post- filing interest is allowed in such proceeding) in respect of (1) indebtedness (other than the Securities) of the Company for money borrowed, including, without limitation, the Senior Secured Notes Due 2004 of the Company, and for the reimbursement of amounts paid under letters of credit, (2) express written guarantees by the Company of indebtedness for money borrowed by any other Person, (3) indebtedness evidenced by notes, debentures, bonds or other instruments of indebtedness for the payment of which the Company is responsible or liable, by guarantees or otherwise, (4) obligations of the Company under any agreement in respect of any interest rate or currency swap, interest rate cap, floor or collar, interest rate future, currency exchange or for- C-1 ward currency transaction, or any similar interest rate or currency hedging transaction, but only to the extent such obligations relate to other Senior Debt (exclusive of Senior Debt consisting of obligations referred to in this clause (4)) and (5) obligations of the Company under any agreement to lease, or any lease of, any real or personal property which, in accordance with generally accepted accounting principles, is classified upon the Company's balance sheet as a liability, irrespective of whether in any case referred to in the foregoing (1) through (5) such indebtedness, guarantee or obligation is outstanding on the date of execution of this Indenture or thereafter created, incurred or assumed, and (b) modifications, renewals, extensions and refundings of any such indebtedness, guarantee or obligation; unless, in any case referred to in the foregoing clauses (a) and (b), in the instrument creating or evidencing the indebtedness, guarantee or obligation or pursuant to which the same is outstanding, it is provide that such indebtedness, guarantee or obligation, or such modification, renewal, extension or refunding thereof, is not superior in right of payment to the Securities; PROVIDED, HOWEVER, that Senior Debt shall not be deemed to include (i) any obligation of the Company to any Subsidiary and (ii) any other indebtedness, guarantee or obligation of the Company of the type set forth in clauses (a) or (b) above which is subordinate or junior in ranking in any respect to any other indebtedness, guarantee or obligation of the Company. SECTION ____ LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any payment or distribution of assets of the Company to creditors upon a liquidation or total or partial dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property: (1) holders of Senior Debt shall be entitled to receive payment in full of the Senior Debt before Securityholders shall be entitled to received any payment of principal of, or interest on, the Securities; and (2) until Senior Debt shall received payment in full, any distribution to which Securityholders would be entitled but for this Article shall be made to holders of Senior Debt as their interests may appear, except that Securityholders may receive securities that C-2 are subordinated to Senior Debt to at least the same extent as the Securities. For purposes of this Section "payment in full", as used with respect to Senior Debt, means the receipt of cash or securities (taken at their fair value at the time of receipt, determined as hereinafter provided) equal to the principal of and interest on the Senior Debt to the date of payment. "Fair value" means (i) if the securities are quoted on a nationally recognized securities exchange, the closing price on the day such securities are received or, if there are no sales reported on that day, the reported closing bid price on that day, and (ii) if the securities are not so quoted, a price determined by a nationally recognized investment banking house selected by the Trustee or the Holders of a majority in principal amount of the Securities and the Representative or the holders of Senior Debt receiving such securities, such price to be determined as of the date of receipt of such securities by the holders of Senior Debt. SECTION ____ DEFAULT ON SENIOR DEBT. (a) The Company may not pay principal of or interest on the Securities and may not (and may not permit any Subsidiary to) acquire any Securities for cash or property, other than capital stock of the Company, if: (i) a default in the payment of any principal of or interest on any Senior Debt occurs and is continuing, whether at maturity or at a date fixed for redemption or by declaration or otherwise; or (ii) a default on Senior Debt (other than as described in clause (a)(i) of this Section) occurs and is continuing that permits holders of such Senior Debt to accelerate its maturity, and the default is the subject of judicial proceedings or the Company receives a notice of the default from a Person who may give it pursuant to Section .12 (if the Company receives any such notice, a similar notice received within nine months thereafter relating to the same default on the same issue of Senior Debt shall not be effective for purposes of this Section). (b) The Company may resume payment on the Securities and the Company or a Subsidiary may acquire them when: C-3 (i) the default is cured or waived, or (ii) in the case of clause (a)(ii) of this Section, 180 days pass after the notice is given if the default is not the subject of judicial proceedings, if this Article otherwise permits the payment or acquisition at that time. SECTION ____ ACCELERATION OF SECURITIES. If payment of the Securities is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify holders of Senior Debt and their Representative of the acceleration. The Company may not pay principal of or interest on the Securities until after 180 days following the acceleration and only if this Article permits the payment at that time. SECTION ____ WHEN PAYMENT OR DISTRIBUTION MUST BE PAID OVER. If a payment or distribution is made to Securityholders that because of this Article should not have been made to them, the Securityholders who receive the payment or distribution shall hold it in trust for holders of Senior Debt and pay it over to them or their Representative, if any, as their interests may appear promptly after receipt thereof. SECTION ____ NOTICE BY COMPANY. The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of principal of or interest on the Securities to violate this Article. SECTION ____ SUBROGATION. After all Senior Debt is paid in full and until the Securities are paid in full, Securityholders shall be subrogated to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to the Securityholders have been applied to the payment of Senior Debt. A distribution made under this Article to holders of Senior Debt which otherwise would have been made to Securityholders is not, as C-4 between the Company and Securityholders, a payment by the Company on Senior Debt. SECTION ____ RELATIVE RIGHTS. This Article defines the relative rights of Securityholders and holders of Senior Debt. Nothing in this Indenture shall: (a) impair, as between the Company and Securityholders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Securities in accordance with their terms; (b) affect the relative rights of Securityholders and creditors of the Company other than holders of Senior Debt; or (c) prevent the Trustee or any Securityholder from exercising its available remedies upon a Default, subject to the rights of holders of Senior Debt to receive distribution otherwise payable to Securityholders. SECTION ____ SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY. No right of any holder of Senior Debt to enforce the subordination of the indebtedness evidenced by the Securities shall be impaired by any act or failure to act by the Company or by its failure to comply with this Indenture. SECTION ____ DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a distribution is to be made or a notice given to holders of Senior Debt, the distribution may be made and the notice given to their Representative. SECTION ____ RIGHTS OF TRUSTEE AND PAYING AGENT. The Trustee or Paying Agent may continue to make payments on the Securities until it receives notice of facts that would cause a payment of principal of or interest on the Securities to violate this Article. The Company, the Registrar, the Paying Agent, a Representative or a holder of an issue of Senior Debt that has no Representative may give the notice. C-5 The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with the like rights. SECTION ____ TRUSTEE AND SECURITYHOLDERS ENTITLED TO RELY. In connection with any payment or distribution pursuant to this Article, the Trustee and the Securityholders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section .03 are pending, (ii) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Securityholders or (iii) upon the Representative, if any, of the holders of Senior Debt for the purpose of ascertaining the persons entitled to participate in such payment or distribution, the holders of the Senior Debt and other indebtedness of the Company, the amount thereof or payment thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Debt to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION ____ ARTICLE [ ] NOT TO PREVENT EVENTS OF DEFAULT OR LIMIT RIGHT TO ACCELERATE. The failure to make a payment pursuant to the Securities by reason of any provision in this Article shall not be construed as preventing the occurrence of a Default or an Event of Default. Nothing in this Article shall have any effect on the right of the Securityholders to accelerate the maturity of the Securities. C-6 SECTION ____ TRUSTEE TO EFFECTUATE SUBORDINATION. Each Securityholder by accepting a Security authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Securityholders and the holders of Senior Debt as provided in this Article and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION ____ TRUSTEE NOT CHARGED WITH KNOWLEDGE OF PROHIBITION. Notwithstanding the provisions of this Article or any other provision of this Indenture, but subject to the provisions under "Duties of Trustee" and "Rights of Trustee", the Trustee and any Paying Agent shall not be charged with knowledge of the existence of any Senior Debt, or of any default in the payment of the principal of, or interest on, any Senior Debt, or of any facts which would prohibit the making of any payment of money to or by the Trustee or any such Paying Agent, unless and until the Trustee or such Paying Agent shall have received at least three business days prior to the date set for payment under the terms of this Indenture written notice thereof from the Company or a holder of any kind or category of any Senior Debt or the Representative or such holder; nor shall the Trustee or any such Paying Agent be charged with knowledge of the curing of any such default or of the elimination of the fact or condition preventing any such payment, unless and until the Trustee or such Paying Agent shall have received an Officers' Certificate to such effect. Nothing contained in this Section shall limit the rights of holders of Senior Debt to recover payments pursuant to Section .06. SECTION ____ TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR DEBT. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Securityholders or the Company or any other Person, money or assets to which any holders of Senior Debt shall be entitled by virtue of this Article or otherwise. C-7 SECTION ____ ARTICLE APPLYING TO PAYING AGENTS. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context shall otherwise require) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee. SECTION ____ RELIANCE BY HOLDERS OF SENIOR DEBT ON SUBORDINATION PROVISIONS. Each Securityholder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Debt, whether such Senior Debt was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Debt and such holder of Senior Debt shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Debt. SECTION ____ ENFORCEMENT BY HOLDERS OF SENIOR DEBT. Each Securityholder by accepting a Security appoints each holder of Senior Debt and each such holder's Representative as such Securityholder's agent and attorney-in-fact to make and enforce any matured claim of such Securityholder against the Company for payment on the Securities in the event that the Trustee or such Securityholder does not make and enforce such a claim within 60 days after receipt by the Trustee of a written demand for such enforcement made by a holder of Senior Debt or such holder's Representative. Each Securityholder authorizes such holder or Representative to take all action and to execute all documents on behalf of such Securityholder or the Trustee to make and enforce such a claim in such event. C-8 EXHIBIT D PLEDGE AGREEMENT THIS PLEDGE AGREEMENT (as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms hereof, this "PLEDGE AGREEMENT") is made and entered into as of _________, 1994 by EMPIRE GAS CORPORATION, a Missouri corporation, (the "PLEDGOR"), in favor of SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, not individually but in its capacity as trustee (the "TRUSTEE") for the holders (the "HOLDERS") of the Senior Secured Notes (as defined herein). WITNESSETH: WHEREAS, the Pledgor and the Trustee have entered into an indenture, dated as of _________, 1994 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "SENIOR SECURED NOTE INDENTURE"), pursuant to which the Pledgor is issuing on the date hereof $___________ in aggregate principal amount ($100,000,000 initial accreted value) of its __% Senior Secured Notes due 2004 (the "SENIOR SECURED NOTES"); WHEREAS, the Pledgor is the legal and beneficial owner of the out- standing shares of common stock set forth on SCHEDULE I hereto (the "PLEDGED SHARES") of the subsidiaries listed on SCHEDULE I hereto (the "Restricted Subsidiaries" and, together with any future Restricted Subsidiaries of the Pledgor, the "ISSUERS"); and WHEREAS, to secure its payment and performance obligations under the Senior Secured Note Indenture and the Senior Secured Notes (the "OBLIGATIONS"), the Pledgor has agreed to (i) pledge to the Trustee, for the Trustee's benefit and the equal and ratable benefit of the Holders, and grant to the Trustee for the Trustee's benefit and the equal and ratable benefit of the Holders, a security interest in the Collateral (as defined herein) and (ii) execute and deliver this Pledge Agreement in order to secure the payment and performance when due by the Pledgor of all such Obligations. AGREEMENT: NOW, THEREFORE, in consideration of the premises and in order to induce the Holders to purchase the Senior Secured Notes, the Pledgor hereby agrees with the Trustee, for the Trustee's benefit and the equal and ratable benefit of the Holders, as follows: SECTION 1. DEFINITIONS. (a) Capitalized terms used and not otherwise defined herein, includ- ing, without limitation, the term "Event of Default," shall have the meanings given to such terms in the Senior Secured Note Indenture, and terms defined in the Uniform Commercial Code as in effect from time to time in the State of New York (the "UCC") and not otherwise defined herein shall have the meanings ascribed thereto in the UCC. (b) The following terms shall have the following meanings: "COLLATERAL" means, collectively. (i) the Pledged Shares and the certificates representing the Pledged Shares, the Relevant Records and all Proceeds, wherever located, whether now owned or existing or hereafter acquired or arising; and (ii) all additional shares of, all securities convertible into, and all warrants, options or other rights to purchase, stock of or other equity interests in, any of the Issuers from time to time acquired by the Pledgor in any manner, and the certificates representing any such additional shares (any such additional shares shall constitute part of the Pledged Shares under and as defined in this Pledge Agreement), and all Proceeds of the forego- ing. "LIEN NOTICE" means any financing statement, notice of lien, assign- ment or collateral assignment, security agreement, equipment mortgage, mortgage, deed of trust or similar notice or instrument filed or recorded in the public records which covers the Collateral or any portion thereof. 2 "PLEDGE DOCUMENTS" means, collectively, this Pledge Agreement and each of the stock powers and other instruments and documents pertaining to the Collateral required to be delivered by the Pledgor pursuant to the terms hereof, as the same may be amended, restated or otherwise modified from time to time in accordance with the terms hereof and of the Senior Secured Note Indenture. "PROCEEDS" shall have the meaning ascribed thereto in the UCC and shall include, without limitation, the following: (a) whatever is now or hereafter received by the Pledgor upon the sale, exchange, collection or other disposition of any Pledged Shares or any Relevant Records or any proceeds thereof, including, without limitation, (i) all dividends, cash, options, warrants, rights, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all Pledged Shares and (ii) all funds deposited in the Collateral Account pursuant to the terms of the Senior Secured Note Indenture; (b) any property now or hereafter acquired by the Pledgor with any Proceeds; and (c) any payments under insurance or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing. "RELEVANT RECORDS" means, collectively, all certificates, instruments, account statements, books and other records of the Pledgor relating to the Pledged Shares or any Proceeds thereof. "UCC COLLATERAL" means all Collateral in which a security interest or Lien can be perfected under the UCC. SECTION 2. PLEDGE. To secure the full and prompt payment and perfor- mance when due of the Obligations, the Pledgor hereby pledges to the Trustee for the Trustee's benefit and for the equal and ratable benefit of the Holders, and grants to the Trustee for the Trustee's benefit and the equal and ratable benefit of the Holders, a continuing first priority security interest in and Lien upon all of the Pledgor's right, title and interest in the Collateral. 3 SECTION 3. DELIVERY OF COLLATERAL. All certificates or instruments representing or evidencing any of the Collateral shall be delivered to and held by or on behalf of the Trustee pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed, undated stock powers or other instruments of transfer or assignment in blank, all in form and substance satisfactory to the Trustee. SECTION 4. REPRESENTATIONS AND WARRANTIES. The Pledgor hereby repre- sents and warrants that: (a) DUE AUTHORIZATION. The execution, delivery and performance by the Pledgor of the Pledge Documents have been duly authorized by all necessary corporate action of the Pledgor, and each of the Pledge Documents has been duly executed and delivered by the Pledgor. (b) ENFORCEABILITY. Each of the Pledge Documents constitutes a legal, valid and binding obligation of the Pledgor, enforceable against the Pledgor in accordance with its terms, except as enforceability may be limited by the effect of applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally. (c) NO VIOLATION; NO CONSENTS. The execution, delivery and perfor- mance of the Pledge Documents by the Pledgor will not violate, conflict with or constitute a breach of any of the terms or provisions of, or a default under (or an event that, with notice or the lapse of time, or both, would constitute a default), or require consent under, or result in the imposition of a Lien on any properties of the Pledgor or any of its subsidiaries (except for the security interest created by this Pledge Agreement) or an acceleration of indebtedness pursuant to: (i) the Pledgor's or any of its subsidiaries' charter or by-laws, (ii) any bond, debenture, note, indenture, mortgage, deed of trust or other agreement or instrument to which the Pledgor or any of its subsidiaries is party or by which any of them or their property is or may be bound, (iii) any statute, rule or regulation applicable to the Pledgor, any of its subsidiaries or any of their assets or properties, or (iv) any judgment, order or decree of any court or governmental 4 agency or authority having jurisdiction over the Pledgor, any of its subsidiaries, or any of its or their respective assets or properties, which, in the case of clauses (ii) and (iii) only, could not reasonably be expected to have a material adverse effect on the business, condition (financial or other), results of operations or properties of the Pledgor and its subsidiaries, taken as a whole. No consent, approval, authoriza- tion or other action by, or order of, or filing, registration, qualifica- tion, license or permit of or with, any court or governmental agency, body or administrative agency is required either (i) for the pledge by the Pledgor of the Collateral pursuant to this Pledge Agreement or for the execution, delivery and performance of the Pledge Documents by the Pledgor or (ii) for the exercise by the Trustee of the voting and other rights provided for in this Pledge Agreement or the remedies in respect of the Collateral pursuant to this Pledge Agreement (except as may be required in connection with such disposition by laws affecting the offering and sale of securities). No consents or waivers from any other person or entity are required for the execution, delivery and performance by the Pledgor of the Pledge Documents other than such consents and waivers as have been ob- tained. (d) PLEDGED SHARES. The Pledged Shares have been (or to the extent that Pledged Shares are acquired after the date hereof, shall be), duly authorized, validly issued, fully paid and non assessable. (e) SECURITY INTEREST. The Pledgor is (or, to the extent Collateral is acquired after the date hereof, will be) the sole legal, record and beneficial owner of the Collateral. Upon delivery to the Trustee of the Collateral and (as to certain of the Relevant Records and Proceeds that are UCC Collateral) the filing of UCC financing statements, the pledge of the Collateral pursuant to this Pledge Agreement creates a valid and perfected first priority security interest in the Collateral, securing the payment of the Obligations for the benefit of the Trustee and the Holders, and enforceable as such against all creditors of the Pledgor and any persons or entities purporting to purchase any of the Collateral from the Pledgor other than as permitted by the Senior Secured Note 5 Indenture. As of the date hereof, the Trustee's security interest in the Collateral is free and clear of any Lien or claims of any person or entity except for Liens permitted in the Senior Secured Note Indenture. (f) LITIGATION. No litigation, investigation or proceeding of or before any arbitrator or governmental authority is pending or, to the knowledge of the Pledgor, threatened by or against the Pledgor or against any of its properties or revenues with respect to any of the Pledge Documents or any of the transactions contemplated thereby. (g) CAPITAL STOCK. Pledged Shares constitute all of the authorized, issued and outstanding capital stock of the respective Issuer and Schedule I reflects all of the subsidiaries of Pledgor as of the date hereof. (h) NO PROHIBITION. The pledge of the Collateral pursuant to the Pledge Documents is not prohibited by any applicable law or governmental regulation, release, interpretation or opinion of the Board of Governors of the Federal Reserve System or other regulatory agency (including, without limitation, Regulations G, T, U and X of the Board of Governors of the Federal Reserve System). (i) ACCURACY OF INFORMATION. All information set forth herein relating to the Collateral is accurate and complete in all respects. SECTION 5. VOTING RIGHTS; DIVIDENDS; ETC. (a) So long as no Event of Default shall have occurred and be continuing, the Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Shares or any part thereof for any purpose not inconsistent with the terms of this Pledge Agreement or the Senior Secured Note Indenture; PROVIDED, HOWEVER, that the Pledgor shall not exercise or shall refrain from exercising any such right if such action would be inconsistent with or violate any provisions of any of the Pledge Documents or the Senior Secured Note Indenture. 6 (b) So long as no Event of Default shall have occurred and be continuing, and subject to the other terms and conditions hereof, the Pledgor shall be entitled to receive, and to utilize free and clear of the Lien of this Pledge Agreement, all dividends and distributions paid from time to time in respect of the Pledged Shares as permitted by the Senior Secured Note Indenture other than dividends and distributions in the form of additional shares of capital stock of the respective Issuers which shall be Collateral pursuant to Section 6(h) hereof. (c) The Trustee shall execute and deliver (or cause to be executed and delivered) to the Pledgor all such proxies and other instruments as the Pledgor may reasonably request for the purpose of enabling the Pledgor to exercise the voting and other rights that it is entitled to exercise pursuant to Sections 5(a) and (b) above. (d) Upon the occurrence and during the continuance of an Event of Default, all rights of the Pledgor to exercise the voting and other consensual rights that it would otherwise be entitled to exercise pursuant to Section 5(a) shall cease, and all such rights shall thereupon become vested in the Trustee, which shall thereupon have the sole right to exercise such voting and other consensual rights. (e) Upon the occurrence and during the continuance of an Event of Default, the Pledgor shall execute and deliver (or cause to be executed and delivered) to the Trustee all such proxies and other instruments as the Trustee may request for the purposes of enabling the Trustee to exercise the voting and other rights that it is entitled to exercise pursuant to Section 5(d) above. (f) All dividends or other distributions that are received by the Pledgor contrary to the provisions of this Section 5 shall be received in trust for the benefit of the Trustee and the Holders, be segregated from the other property or funds of the Pledgor and be forthwith delivered to the Trustee as Collateral in the same form as so received (with any necessary endorsements). 7 SECTION 6. COVENANTS. The Pledgor covenants and agrees with the Trustee and the Holders from and after the date of this Pledge Agreement until the Obligations have been paid in full: (a) LIEN NOTICES. The Pledgor will defend the Collateral against all Liens, claims and demands of all persons and entities at any time claiming any interest therein, and the Pledgor will not permit any Lien Notices with respect to the Collateral or any portion thereof to exist or be on file in any public office, except with respect to Permitted Liens and the Lien created hereby. (b) FURTHER ASSURANCES. Promptly upon request by the Trustee, the Pledgor will execute and deliver or cause to be executed and delivered, or use its best efforts to procure, all stock powers, proxies, assignments, instruments and other documents, all in form and substance satisfactory to the Trustee, deliver any instruments to the Trustee and take any other actions (including filing any Lien Notice covering Collateral or any portion thereof) that are necessary or, in the opinion of the Trustee, desirable to perfect, continue the perfection and priority of the Trustee's security interest in the Collateral, to protect the Collateral against the rights, claims, or interests of their persons or entities (other than holders of Permitted Liens) or to effect the purposes of the Pledge Documents. The Pledgor also hereby authorizes the Trustee to file any financing or continuation statements with respect to the Collateral without the signature of the Pledgor to the extent permitted by applicable law. The Pledgor will pay all costs incurred in connection with any of the foregoing. (c) NO LIENS. Without the prior written consent of the Trustee, the Pledgor will not in any way hypothecate, create or permit to exist any Lien upon or with respect to any of the Collateral or any portion thereof. (d) DISPOSITION OF COLLATERAL. The Pledgor will not sell, transfer, assign, pledge, collaterally assign, exchange or otherwise dispose of, or grant any option or warrant with respect to, any of the Collat- 8 eral, except as permitted by the Senior Secured Note Indenture. If the Collateral, or any part thereof, is sold, transferred, assigned, exchanged, or otherwise disposed of in violation of these provisions, the security interest of the Trustee shall continue in such Collateral or part thereof notwithstanding such sale, transfer, assignment, exchange or other disposi- tion. In addition to its rights under Section 6(i) below, following such a sale, transfer, assignment, exchange or other disposition, the Trustee may elect to have the Pledgor transfer such proceeds to the Trustee in kind. (e) NO RESTRICTION ON SALES. Except as permitted by the Senior Secured Note Indenture, the Pledgor will not enter into any agreement or understanding that purports to or may restrict or inhibit the Trustee's rights or remedies hereunder, including, without limitation, the Trustee's right or ability to sell or otherwise dispose of the Collateral or any part thereof after the occurrence of an Event of Default. (f) RIGHTS OF TRUSTEE. Upon the occurrence and during the continu- ance of an Event of Default, the Trustee shall have the right at any time to make any payments and do any other acts the Trustee may deem necessary to protect its security interests in the Collateral, including, without limitation, the rights to pay, purchase, contest or compromise any Lien which, in the judgment of the Trustee, appears to be prior to or superior to the security interests granted hereunder, and challenge any action or proceeding purporting to affect its security interests in, and/or the value of, the Collateral. The Pledgor hereby agrees to reimburse the Trustee for all payments made and expenses incurred under the Pledge Documents including fees, expenses and disbursements of attorneys and paralegals (including, the allocated costs of inside counsel) acting for the Trustee, including any of the foregoing payments under or acts taken to perfect or protect its security interest in the Collater- al, which amount shall be secured under the Pledge Documents, and agrees that it shall be bound by any payment made or act taken by the Trustee hereunder. The Trustee shall have no obligation to make any 9 of the foregoing payments or perform any of the foregoing acts. (g) NO MERGER. Except as permitted by the Senior Secured Note Indenture, the Pledgor agrees that it will not permit any Issuer to merge or consolidate, unless all outstanding capital stock of the surviving corporation is, upon such merger or consolidation, pledged hereunder to the Trustee. (h) ADDITIONAL SHARES. The Pledgor agrees that immediately upon becoming the beneficial owner of any additional shares of capital stock of any of the Issuers, it will pledge and deliver to the Trustee for its benefit and the ratable benefit of the Holders and grant to the Trustee for its benefit and the ratable benefit of the Holders, a continuing first priority security interest in such shares (as well as duly executed stock powers or other instru- ments of transfer or assignment in blank, all form and substance satisfactory to the Trustee). The Pledgor further agrees that it will promptly (and in any event within five Business Days after such acquisition) deliver to the Trustee a pledge amendment, duly executed by the Pledgor, in substantially the form of EXHIBIT A hereto (a "PLEDGE AMENDMENT"), with respect to the additional Collat- eral that is to be pledged pursuant to this Pledge Agreement. The Pledgor hereby authorizes the Trustee to attach each Pledge Amendment to this Pledge Agreement and agrees that any stock listed on any Pledge Amendment delivered to the Trustee shall for all purposes hereunder be considered Collateral. (i) TURNOVER OF CERTAIN PROCEEDS. In the event any letters of credit, chattel paper or negotiable documents, instruments or securities included in the Collateral come into the Pledgor's possession, whether upon consummation of an Asset Sale or otherwise, the Pledgor shall segregate such items from its other cash and assets, hold such items in trust for the Trustee, and shall promptly deliver the same to the Trustee with any necessary endorse- ments in favor of the Trustee. No sale of Collateral may be made in contraven- tion of the terms of the Senior Secured Note Indenture and the cash proceeds of the sale of any Collateral shall be immediately remitted to the Trustee for deposit in the Collateral Account. 10 (j) RECORDS. The Pledgor will keep and maintain at its own cost and expense complete Relevant Records in such form as is satisfactory to the Trustee. (k) ACCESS. The Trustee shall at all times have full and free access during normal business hours to all the books, correspondence and records of the Pledgor relating to the Collateral, and the Trustee and its representatives may examine the same, take extracts therefrom and make photocopies thereof, and the Pledgor agrees to render to the Trustee, at the Pledgor's cost and expense, such clerical and other assistance, at all times and in such manner as may be requested with regard thereto. The Trustee and its representatives shall at all times also have the right to enter, during normal business hours, into and upon any premises where any of the Collateral is located for the purpose of inspect- ing the same, observing its use or otherwise protecting its interests therein. (l) NOTICES OF LIENS. The Pledgor will advise the Trustee promptly, in reasonable detail, at the address set forth in SECTION 11.02 of the Senior Secured Note Indenture, of any Lien (other than Liens permitted in the Senior Secured Note Indenture) on, or claim asserted against, any of the Collateral. (m) TAXES. The Pledgor shall pay all taxes, assessments and levies as and to the extent required by SECTION 3.14 of the Senior Secured Note Indenture; PROVIDED that the Pledgor shall in any event pay such taxes, assess- ments or levies not later than five days prior to the date of any proposed sale under any judgment, writ or warrant of attachment with regard to any Collateral entered or filed against the Pledgor as a result of the failure to make such payment. SECTION 7. SUBSEQUENT CHANGES AFFECTING COLLATERAL. The Pledgor represents to the Trustee and the Holders that the Pledgor has made its own arrangements for keeping informed of changes or potential changes affecting the Collateral (including, but not limited to, rights to convert, rights to sub- scribe, payment of dividends, payments of interest and/or principal, reorganiza- tion or other exchanges, tender offers and voting rights), and the 11 Pledgor agrees that the Trustee and the Holders shall have no responsibility or liability for informing the Pledgor of any such changes or potential changes or for taking any action or omitting to take any action with respect thereto. Except as permitted by the Senior Secured Note Indenture, the Pledgor covenants that it will not, without the prior written consent of the Trustee, vote to enable, or take any other action to permit, any Issuer to issue any capital stock or other securities or to sell or otherwise dispose of, or grant any option with respect to, any of the Collateral or create or permit to exist any Lien upon or with respect to any of the Collateral, except for the security interests granted under the Pledge Documents. SECTION 8. REMEDIES UPON DEFAULT. (a) If any Event of Default shall have occurred and be continuing, the Trustee and the Holders shall have, in addition to all other rights given by law or by the Pledge Documents or the Senior Secured Note Indenture, all of the rights and remedies with respect to the Collateral of a secured party under the applicable UCC in effect at that time. The Trustee may, without notice and at its option, transfer or register, and the Pledgor shall register or cause to be registered upon request therefor by the Trustee, the Collateral or any part thereof on the books of the Issuers or Obligors thereof into the name of the Trustee or the Trustee's nominee(s). In addition, with respect to any Collater- al that shall then be in or shall thereafter come into the possession or custody of the Trustee, the Trustee may sell or cause the same to be sold at any broker's board or at public or private sale, in one or more sales or lots, at such price or prices as the Trustee may deem best, for cash or on credit or for future delivery, without assumption of any credit risk. The purchaser of any or all Collateral so sold shall thereafter hold the same absolutely, free from any claim, encumbrance or right of any kind whatsoever. Unless any of the Collater- al threatens to decline speedily in value or is or becomes of a type sold on a recognized market, the Trustee will give the Pledgor reasonable notice of the time and place of any public sale thereof, or of the time after which any private sale or other intended disposition is to be made. Any sale of the Collateral conducted in conformity with reasonable commercial 12 practices of banks, insurance companies, commercial finance companies, or other financial institutions disposing of property similar to the Collateral shall be deemed to be commercially reasonable. Any requirements of reasonable notice shall be met if such notice is mailed to the Pledgor as provided in Section 10(a) herein, at least ten (10) days before the time of the sale or disposition. The Trustee or any Holder may, in its own name or in the name of a designee or nominee, buy any of the Collateral at any public sale and, if permitted by applicable law, at any private sale. All expenses (including court costs and reasonable attorneys' fees, expenses and disbursements) of, or incident to, the enforcement of any of the provisions hereof shall be recoverable from the proceeds of the sale or other disposition of the Collateral. (b) If the Trustee shall determine to exercise its right to sell any or all of the Pledged Shares pursuant to Section 8(a) above, and if in the opinion of counsel for the Trustee it is necessary, or if in the opinion of the Trustee it is advisable, to have the Pledged Shares or that portion thereof to be sold, registered under the provisions of the Securities Act of 1933, as amended (the "SECURITIES ACT"), the Pledgor will cause the Issuer to (i) execute and deliver, and cause its directors and officers to execute and deliver, all at the Pledgor's own expense, all such instruments and documents, and to do or cause to be done all such other acts and things, as may be necessary or, in the opinion of the Trustee, advisable to register such Pledged Shares under the provisions of the Securities Act, (ii) use its best efforts to cause the registration statement relating thereto to become effective and to remain effective for period of 180 days from the date of the first public offering of such Pledged Shares or that portion thereof to be sold and (iii) make all amendments thereto and/or to the related prospectus that, in the opinion of the Trustee, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. The Pledgor agrees to use its best efforts to cause the applicable Issuer to comply with the provisions of the securities or "Blue Sky" laws of any jurisdiction that the Trustee shall 13 designate for the sale of the Pledged Shares and to make available to the Issuer's security holders, as soon as practicable, an earnings statement (which need not be audited) that will satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder. The Pledgor will cause the Issuer to furnish to the Trustee such number of copies as the Trustee may reasonably request of each preliminary prospectus and prospectus, to notify promptly the Trustee of the happening of any event as a result of which any prospectus includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances when such prospectus is delivered to any purchaser, misleading, and cause the Trustee to be furnished with such number of copies as the Trustee may request of such supplement to or amendment of such prospectus as is necessary to eliminate such untrue statement or supply such omission. The Pledgor will use its best efforts to cause each Issuer, to the extent permitted by law, to indemnify, defend and hold harmless the Trustee and the Holders from and against all losses, liabilities, expenses or claims (including reasonable legal expenses and the reasonable costs of investigation) that the Trustee or the Holders may incur under the Securities Act or otherwise, insofar as such losses, liabilities, expenses or claims arise out of or are based upon any alleged untrue statement of a material fact contained in such registration statement (or any amendment thereto) or in any preliminary prospec- tus or prospectus (or any amendment or supplement thereto), or arise out of or are based upon any alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Pledgor will cause the Issuer to bear all costs and expenses of carrying out is obligation hereunder. (c) In view of the fact that federal and state securities laws may impose certain restrictions on the method by which a sale of certain of the Collateral may be effected after an Event of Default, the Pledgor agrees that upon the occurrence and during the continuance of an Event of Default, the Trustee may, from time to time, attempt to sell all or any part of the Collater- al by means of a private place- 14 ment, restricting the prospective purchasers to those who will represent and agree that they are purchasing for investment only and not for distribution. In so doing, the Trustee may solicit offers to buy the Collateral, or any part of it, for cash, from a limited number of investors who might be interested in purchasing the Collateral. The Pledgor acknowledges and agrees that any such private sale may result in prices and terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. The Trustee shall be under no obligation to delay a sale of any of the Collateral for the period of time necessary to permit the Pledgor to cause the Issuer to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if the Pledgor could cause the Issuer to do so. (d) The Pledgor further agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of all or any portion of the Collateral pursuant to this Section 8 valid and binding and in compliance with any and all other applicable requirements of law. The Pledgor further agrees that a breach of any of the covenants contained in this Section 8 will cause irreparable injury to the Trustee and the Holders, that the Trustee and the Holders have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 8 shall be specifically enforceable against the Pledgor, and the Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred. SECTION 9. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO THE ISSUER. The Pledgor hereby authorizes and instructs each Issuer to comply with any instruc- tion received by such Issuer from the Trustee that (i) states that an Event of Default has occurred and (ii) is otherwise in accordance with the terms of this Pledge Agreement, without any other or further instructions from the Pledgor, and the Pledgor agrees that each Issuer shall be fully protected in so comply- ing. 15 SECTION 10. MISCELLANEOUS PROVISIONS. (a) NOTICES. All notices, approvals, consents or other communica- tions required or desired to be given hereunder shall be in the form and manner, and delivered to each of the parties hereto at their respective addresses, as set forth in Section 11.2 of the Senior Secured Note Indenture. (b) NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Pledge Agreement may not be used to interpret another pledge, security or debt agree- ment of the Pledgor, any Issuer or obligor or any subsidiary thereof. No such pledge, security or debt agreement may be used to interpret any Pledge Document. (c) SEVERABILITY. The provisions of the Pledge Documents are severable, and, if any clause or provision shall be held invalid, illegal or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect in that jurisdiction only such clause or provi- sion, or part thereof, and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of any Pledge document in any jurisdiction. (d) HEADINGS. The headings in this Pledge Agreement have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms or provisions hereof. (e) COUNTERPART ORIGINALS. This Pledge Agreement may be signed in two or more counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same agreement. (f) BENEFITS OF PLEDGE AGREEMENT. Nothing in this Pledge Agreement, express or implied, shall give to any person or entity, other than the parties hereto, the Holders and their respective successors and permitted assigns, any benefit or any legal or equitable right, remedy or claim under the Pledge Documents. 16 (g) AMENDMENTS, WAIVERS AND CONSENTS. Any amendment or waiver of any provision of this Pledge Agreement and any consent to any departure by the Pledgor from any provision of any Pledge Document shall be effective only if made or given in compliance with all of the terms and provisions of the Senior Secured Note Indenture, and neither the Trustee nor any Holder shall be deemed, by any act, delay, indulgence, omission or otherwise, to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof. Failure of the Trustee or any Holder to exercise, or delay in exercising, any right, power or privilege hereunder shall not operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Trustee or any Holder of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy that the Trustee or such Holder would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. (h) INTERPRETATION OF PLEDGE DOCUMENTS. Time is of the essence in each provision of the Pledge Documents of which time is an element. All terms not defined therein or in the Senior Secured Note Indenture shall have the respective meanings set forth in the applicable UCC, except where the context otherwise requires. To the extent a term or provision of this Pledge Agreement conflicts with the Senior Secured Note Indenture and is not dealt with herein with more specificity, the Senior Secured Note Indenture shall control with respect to the subject matter of such term or provision. Acceptance of or acquiescence in a course of performance rendered under the Pledge Document shall not be relevant to determine the meaning of any Pledge Document even though the accepting or acquiescing party had knowledge of the nature of the performance and opportunity for objection. (i) CONTINUING SECURITY INTEREST; TRANSFER OF SECURITIES. The Pledge Documents shall create a 17 continuing security interest in the Collateral and shall (i) unless otherwise provided in the Senior Secured Note Indenture or in the Pledge Documents, remain in full force and effect until the payment in full and performance of all Obligations and payment in full of all fees and expenses owing to the Trustee, (ii) be binding upon the Pledgor, its successors and assigns, and (iii) inure, together with the rights and remedies of the Trustee hereunder, to the benefit of the Trustee, the Holders and their respective successors and permitted transferees and assigns. (j) SECURITY INTEREST ABSOLUTE. All rights of the Trustee and the Holders and security interests hereunder, and all obligations of the Pledgor hereunder, shall be absolute and unconditional irrespective of: (i) any lack of validity or enforceability of the Senior Secured Note Indenture or any other agreement or instrument relating thereto; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Senior Secured Note Indenture; (iii) any exchange, surrender, release or non-perfection of any Liens on any other collateral, or any release or amendment or waiver of or consent to departure from any guarantee, for all or any of the Obliga- tions; or (iv) any other circumstances which might otherwise consti- tute a defense available to, or a discharge of, the Pledgor in respect of the Obligations or of the Pledge Documents. (k) REINSTATEMENT. The Pledge documents shall continue to be effective or be reinstated, as the case may be, if at any time any amount received by the Trustee or any Holder in respect of the Obligations is rescinded or must otherwise be restored or returned by the Trustee or any Holder upon the 18 insolvency, bankruptcy, dissolution, liquidation or reorganization of the Pledgor or upon the appointment of any receiver, intervenor, conservator, trustee or similar official for the Pledgor or any substantial part of its assets, or otherwise, all as though such had not been made. (l) SURVIVAL OF PROVISIONS. All representations, warranties and covenants of the Pledgor contained herein shall survive the execution and delivery of the Pledge Documents, and shall terminate only upon the full and final payment and performance by the Pledgor of the Obligations. (m) POWER OF ATTORNEY. In addition to all of the powers granted to the Trustee pursuant to Article VI of the Senior Secured Note Indenture, the Pledgor hereby appoints and constitutes the Trustee as the Pledgor's attorney- in-fact to exercise all of the following powers upon and at any time after the occurrence and during the continuance of an Event of Default: (i) collection of Proceeds; (ii) conveyance of any item of Collateral to any purchaser thereof; (iii) giving of any notice or recording of any Liens under Section 6(b) hereof; (iv) making of any payments or taking any acts under Section 6(f) hereof and (v) paying or discharging taxes or Liens levied or placed upon or threatened against the Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by the Trustee in its sole discretion, and such payments made by the Trustee to become the Obligations of the Pledgor to the Trustee, due and payable immediately without demand. The Trustee's authori- ty hereunder shall include, without limitation, the authority to endorse and negotiate any checks or instruments in the name of the Pledgor, execute and give receipt for any certificate of ownership or any document, transfer title to any item of Collateral, prepare, file and sign the Pledgor's name on all financing statements or any other documents deemed necessary or appropriate by the Trustee to preserve, protect or perfect the security interest in the Collateral and to file the same, and prepare, file and sign the Pledgor's name on a proof of claim in bankruptcy or similar document against any customer of the Pledgor, and to take any other actions arising from or incident to the powers granted to the 19 Trustee in this Pledge Agreement. This power of attorney is coupled with an interest and is irrevocable by the Pledgor. (n) WAIVERS. The Pledgors waives presentment and demand for payment of any of the Obligations, protest and notice of dishonor or default with respect to any of the Obligations, and all other notices to which the Pledgor might otherwise be entitled, except as otherwise expressly provided herein or in the Senior Secured Not Indenture. (o) AUTHORITY OF THE TRUSTEE. (i) The Trustee shall have and be entitled to exercise all powers hereunder that are specifically granted to the Trustee by the terms hereof, together with such powers as are reasonably incident thereto. The Trustee may perform any of its duties hereunder or in connection with the Collateral by or through agents or employees and shall be entitled to retain counsel and to act in reliance upon the advice of counsel concerning all such matters. Neither the Trustee, any director, officer, employee, attorney or agent of the Trustee nor the Holders shall be liable to the Pledgor for any action taken or omitted to be taken by it or them hereun- der, except for its or their own negligence or bad faith, nor shall the Trustee be responsible for the validity, effectiveness or sufficiency hereof or of any document or security furnished pursuant hereto. The Trustee and its directors, officers, employees, attorneys and agents shall be entitled to rely on any communication, instrument or document believed by it or then to be genuine and correct and to have been signed or sent by the proper person or persons. (ii) The Pledgor acknowledges that the rights and responsi- bilities of the Trustee under this Pledge Agreement with respect to any action taken by the Trustee or the exercise or non-exercise by the Trustee of any option, right, request, judgment or other right or remedy provided for herein or resulting or 20 arising out of this Pledge Agreement shall, as between the Trustee and the Holders, be governed by the Senior Secured Note Indenture and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Trustee and the Pledgor, the Trustee shall be conclu- sively presumed to be acting as agent for the Holder with full and valid authority so to act or refrain from acting, and the Pledgor shall not be obliged or entitled to make any inquiry respecting such authority. (p) RELEASE; TERMINATION OF PLEDGE AGREEMENT. (i) Subject to the provisions of Section 10(k) hereof, this Pledge Agreement shall terminate upon (A) full and final payment and performance of all Obligations, (B) receipt by the Trustee of an Officers' Certificate to the effect that all such Obligations have been satisfied, and (C) payment in full of all fees and expenses owing by the Pledgor to the Trustee. (ii) The Pledgor agrees that it will not, except as permit- ted by the Senior Secured Note Indenture, sell, transfer or otherwise dispose of any of the Collateral, PROVIDED, HOWEVER, that if the Pledgor shall sell any of the Collateral in accordance with the terms of the Senior Secured Note Indenture, the Trustee shall, at the request of the Pledgor, release the Collateral subject to such sale free and clear of the Lien and security interest under the Pledge Documents in the manner specified in the Senior Secured Note Indenture. (iii) Upon any termination of the Pledge Documents or release of Collateral as permitted by the Senior Secured Note Indenture, the Trustee will, at the expense of the Pledgor, execute and deliver to the Pledgor such documents and take such other actions as the Pledgor shall reasonably request to evidence the termination of the Pledge Documents or the release of such Collateral, as the case may be. Any such 21 action taken by the Trustee shall be without warranty by or recourse to the Trustee, except as to the absence of any prior assignments by the Trustee of its interests in the Collateral, and shall be at the expense of the Pledgor. The Trustee may conclusively rely on any certificate delivered to it by the Pledgor stating that the execution of such documents and release of the Collateral is in accordance with and permitted by the terms of the Pledge Documents and the Senior Secured Note Indenture. (q) NO DUTY. The powers conferred on the Trustee hereunder are solely to protect the interest of the Trustee and the Holders in the Collateral and shall not impose any duties on the Trustee or any Holder to exercise such powers. Except for the exercise of reasonable care in the custody of any Collateral in its possession and the accounting for any monies actually received by it hereunder or under the Senior Secured Note Indenture, the Trustee shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to the Collateral. The Trustee shall be deemed to exercise reasonable care in the custody and preservation of the Collateral if the Collateral is accorded treatment substantially equal to that which the Trustee accords its own proper- ty, it being understood that the Trustee shall have no responsibility for (i) ascertaining or taking action with respect to calls, conversations, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not the Trustee has or is deemed to have knowledge of such matters, or (ii) collec- tion of any proceeds of any Collateral or by reason of any invalidity, lack of value or uncollectibility of any of the payments received by it from obligors or otherwise. (r) PAYMENT OF FEES AND EXPENSES. The Pledgor will upon demand pay to the Trustee, without duplication, the amount of all expenses, including without limitation, the reasonable fees, expenses and disbursements of its counsel, of any investment banking firm, business broker or other selling agent and of any other experts and agents retained by the Trustee that the Trustee may incur in connection with 22 (i) administration of the Pledge Documents, (ii) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of the Trustee and the Holders hereunder or (iv) the failure by the Pledgor to perform to observe any of the provisions hereof. (s) FINAL EXPRESSION. The Pledge Documents are intended by the parties as a final expression of the Pledge Documents and are intended as a complete and exclusive statement of the terms and conditions thereof. (t) PLEDGOR TO REMAIN LIABLE. Anything herein to the contrary notwithstanding: (i) the Pledgor shall remain liable under any contracts and agreements included in the Collateral, to the extent set forth therein, to perform all of its duties and obligations thereunder to the same extent as if this Pledge Agreement had not been executed, (ii) the exercise by the Trustee of any of the rights hereunder shall not release the Pledgor from any of its duties or obligations under the contracts and agreements included in the Collateral, and (iii) the Trustee shall not have any obligation or liability under any contracts and agreements included in the Collateral by reason of this Pledge Agreement, nor shall the Trustee be obligated to perform any of the obligations or duties of the Pledgor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. (u) LIMITATION BY LAW. All rights, remedies and powers provided herein may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions hereof are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited by the extent necessary so that they will not render any of the Pledge documents invalid, unenforceable in whole or in part or not entitled to be recorded, registered or filed under provisions of any applicable law. (v) INCORPORATION BY REFERENCE. THE PROVISIONS OF ARTICLE X OF THE SENIOR SECURED NOTE INDEN- 23 TURE ARE INCORPORATED BY REFERENCE HEREIN WITH THE SAME FORCE AND EFFECT AS IF FULLY SET FORTH HEREIN. [SIGNATURE PAGE FOLLOWS] 24 IN WITNESS WHEREOF, the Pledgor and the Trustee have each caused this Pledge Agreement to be duly executed and delivered as of the date first above written. PLEDGOR: EMPIRE GAS CORPORATION By: -------------------------------- Name: Title: TRUSTEE: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, as Trustee By: -------------------------------- Name: Title: 25 SCHEDULE I Number of Pledged Share Certificate Percentage of Issuer Shares Number Outstanding Shares - ------ ----------------- ------------------ ------------------ 100% 26 EXHIBIT A Pledge Amendment This Pledge Amendment, dated __________, 19__, is delivered pursuant to Section 6(h) of the Pledge Agreement referred to below. The undersigned hereby pledges to the Trustee for its benefit and the ratable benefit of the Holders, and grants to the Trustee for its benefit and the ratable benefit of the Holders, a continuing first priority security interest in all of its right, title and interest in the shares of stock listed below: Number of Pledged Share Certificate Percentage of Issuer Shares Number Outstanding Shares - ------ ----------------- ----------------- ------------------ The undersigned hereby agrees that this Pledge Agreement may be attached to the Pledge Agreement, dated __________, 1993, between the under- signed and Shawmut Bank Connecticut, National Association as Trustee (the "PLEDGE AGREEMENT"); capitalized terms used herein and not otherwise defined herein shall have the meanings given to such terms in the Pledge Agreement; and the Collateral listed on this Pledge Amendment shall be deemed to be part of the Collateral, and shall become part of the Collateral and shall secure all Obligations. EMPIRE GAS CORPORATION By: --------------------------------- Name: Title: 27 EX-4.3 4 EXHIBIT 4.3 WARRANT AGREEMENT between EMPIRE GAS CORPORATION and SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, Warrant Agent _________________________ Dated as of June __, 1994 WARRANT AGREEMENT WARRANT AGREEMENT dated as of June ___, 1994 (this "AGREEMENT") between Empire Gas Corporation, a Missouri corporation (the "Company"), and Shawmut Bank Connecticut, National Association, a National Banking Association, as warrant agent (the "WARRANT AGENT"). Pursuant to the terms of an Underwriting Agreement dated as of June ___, 1994 between the Company and Morgan Stanley & Co. Incorporated, as Purchaser (the "UNDERWRITING AGREEMENT"), the Company has agreed to issue and sell ______ units (the "UNITS"). Each Unit will consist of (i) __ Senior Secured Notes, each Senior Secured Note having a principal amount at maturity of $1,000 (the "SENIOR SECURED NOTES"), to be issued pursuant to the provisions of an Indenture dated as of June ___, 1994 between the Company, each of the Subsidiary Guarantors (as defined therein) and Shawmut Bank Connecticut, National Association, as trustee, and (ii) _____ warrants (each, a "WARRANT") of the Company, each Warrant entitling the registered owner thereof, subject to the terms and conditions set forth herein, to purchase one share of Common Stock, $.001 par value per share, of the Company (the "COMMON STOCK") at an initial purchase price of $7.00 per share. The Senior Secured Note and the Warrants included in each Unit will become separately transferable at the close of business on December __, 1994. In consideration of the foregoing and of the agreements contained in the Underwriting Agreement and for the purpose of defining the terms and provisions of the Warrants and the respective rights and obligations thereunder of the Company and the record holders thereof (the "HOLDERS"), the Company and the Warrant Agent hereby agree as follows: ARTICLE I CERTAIN DEFINITIONS "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by, or under direct or indirect common control with such specified Person. For purposes of this defini- tion, "control," when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent Members" has the meaning specified in Section 8.2. "Business Day" means any day which is not a Saturday, a Sunday, or a day on which banking institutions are not required to be open in the State of New York or the State in which the principal corporate trust office of the Warrant Agent is located. "Commission" means the Securities and Exchange Commission. "Common Stock" means the Common Stock of the Company and any other capital stock of the Company into which such common stock may be converted or reclassified or that may be issued in respect of, in exchange for, or in substitution of, such common stock by reason of any stock splits, stock dividends, distributions, mergers, consolidations or other like events. "Company" has the meaning specified in the preamble to this Agreement. "Depositary" means The Depository Trust Company, its nominees and their respective successors. "Default" has the meaning specified in Article X. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exercise Price" has the meaning specified in Section 3.1. "Expiration Date" means June __, 2004. "Final Surrender Date" has the meaning specified in Section 3.4(b). 2 "Financial Expert" means a nationally recognized investment banking firm. "Global Warrant" has the meaning specified in Section 2.1. "Holders" has the meaning specified in the recitals to this Agreement. "Independent Financial Expert" means a Financial Expert which does not (or whose directors, executive officers or 5% stockholders do not) have a direct or indirect financial interest in the Company or any of its subsidiaries, which has not been for at least five years, and, at the time it is called upon to give independent financial advice to the Company, is not (and none of its directors, executive officers or 5% stockholders is) a promoter, director, or officer of the Company or any of its subsidiaries. The Independent Financial Expert may be compensated and indemnified by the Company for opinions or services it provides as an Independent Financial Expert. "Lindsey Entity" means Paul S. Lindsey, Jr., Kristen L. Lindsey, any member of their family and any Person or which any or the foregoing Persons are Affiliates. "Notice Date" has the meaning specified in Section 3.4(b). "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof or any other entity. "Physical Security" has the meaning specified in Section 2.1. "Plaster Entity" means Robert W. Plaster, Stephen R. Plaster, any member of such individual's family, and any Person of which any of the foregoing Persons are Affiliates. "Relevant Value" means the value of the Warrants as set forth in the Value Report in accordance with Section 3.4(d). 3 "Repurchase Event" means, and shall be deemed to occur if at any time prior to June __, 2004 the Company consolidates with, merges into or with (where holders of the Common Stock receive consideration in exchange for all or part of such shares of Common Stock), or sells all or substantially all of its assets to, another Person which has a class of equity securities registered under the Exchange Act, or a wholly owned subsidiary of such Person, if (i) the consideration for such transaction does not consist solely of cash, (ii) such merger or consolidation is not effected solely for the purpose of changing the Company's state of incorporation or (iii) such transaction is effected with a Plaster Entity or a Lindsey Entity. "Repurchase Obligation" has the meaning specified in Section 10.2. "Repurchase Offer" means the Company's offer to repurchase Warrants in accordance with Section 3.4. "Repurchase Price" means the amount of cash payable in respect of Warrants surrendered pursuant to a Repurchase Offer determined in accordance with Section 3.4(d). "Securities Act" means the Securities Act of 1933, as amended. "Senior Secured Notes" has the meaning specified in the recitals to this Agreement. "Separation Date" means the close of business on December __, 1994. "Underwriter" has the meaning specified in the recitals to this Agreement. "Units" has the meaning specified in the recitals to this Agreement. "Valuation Date" means the date five Business Days prior to the Notice Date. "Value Report" means the value report prepared by an Independent Financial Expert in accordance with Section 3.4(d). 4 "Warrant" has the meaning specified in the recitals to this Agreement. "Warrant Agent" has the meaning specified in the preamble to this Agreement. "Warrant Certificate" has the meaning specified in Section 2.1. ARTICLE II ORIGINAL ISSUE OF WARRANTS SECTION 2.1 FORM OF WARRANT CERTIFICATES. Certificates representing the Warrants (the "WARRANT CERTIFICATES") shall be substantially in the form attached hereto as Exhibit A, shall be dated the date on which countersigned by the Warrant Agent and shall have such insertions as are appropriate or required or permitted by this Agreement and may have such letters, numbers or other marks of identification and such legends and endorsements stamped, printed, lithographed or engraved thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any law or with any rule or regulation pursuant thereto or with any rule or regulation of any securities exchange on which the Warrants may be listed, or to conform to usage. The Warrants shall be issued initially in the form of a single permanent global Warrant in registered form, substantially in the form set forth in Exhibit A (the "GLOBAL WARRANT"), deposited with the Warrant Agent, as custodian for the Depositary, duly executed by the Company and countersigned by the Warrant Agent as hereinafter provided. The aggregate number of Warrants represented by the Global Warrant may from time to time be increased or decreased by adjustments made on the records of the Warrant Agent, as custodian for the Depositary or its nominee, as hereinafter provided. Warrants issued pursuant to Section 8.2 in exchange for an interest in the Global Warrant shall be issued in the form of permanent Warrant Certificates in registered form in substantially the form set forth in Exhibit A (the "PHYSICAL SECURITY"). 5 The definitive Warrant Certificates shall be typed, printed, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any securities exchange on which the Warrants may be listed, all as determined by the officers executing such Warrant Certificates, as evidenced by their execution of such Warrant Certificates. SECTION 2.2 RESTRICTIVE LEGENDS. (A) Each Global Warrant shall bear the following legend on the face thereof: UNLESS THIS WARRANT CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, TO THE COMPANY OR THE WARRANT AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR REPURCHASE, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHER- WISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL WARRANT SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL WARRANT SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE VIII OF THE WARRANT AGREEMENT. (b) Prior to the Separation Date, each Warrant Certificate shall bear the following legend on the face thereof: 6 THE WARRANTS ARE INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF(I) [ ] ___% SENIOR SECURED NOTES DUE 2004 OF EMPIRE GAS CORPORATION AND (II) _____ WARRANTS. PRIOR TO THE CLOSE OF BUSINESS ON DECEMBER __, 1994, THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE SENIOR SECURED NOTES ISSUED BY EMPIRE GAS CORPORATION IN CONNECTION HEREWITH. SECTION 2.3 EXECUTION AND DELIVERY OF WARRANT CERTIFICATES. Warrant Certificates evidencing Warrants to purchase initially an aggregate of up to _______ shares of Common Stock may be executed, on or after the date of this Agreement, by the Company and delivered to the Warrant Agent for countersignature, and the Warrant Agent shall thereupon countersign and deliver such Warrant Certificates upon the order and at the direction of the Company to the purchasers thereof on the date of issuance. The Warrant Agent is hereby authorized to countersign and deliver Warrant Certificates as required by this Section 2.3 or by Section 3.3, Section 3.4, Article VI or Article VIII hereof. The Warrant Certificates shall be executed on behalf of the Company by its Chairman of the Board, Chief Executive Officer, President or a Vice President, either manually or by facsimile signature printed thereon. The Warrant Certificates shall be manually countersigned by the Warrant Agent and shall not be valid for any purpose unless so countersigned. In case any officer of the Company whose signature shall have been placed upon any of the Warrant Certificates shall cease to be such officer of the Company before countersignature by the Warrant Agent and issue and delivery thereof, such Warrant Certificates may, nevertheless, be countersigned by the Warrant Agent and issued and delivered with the same force and effect as though such person had not ceased to be such officer of the Company. 7 ARTICLE III EXERCISE PRICE; EXERCISE AND REPURCHASE OF WARRANTS SECTION 3.1 EXERCISE PRICE. Each Warrant Certificate shall, when countersigned by the Warrant Agent, entitle the Holder thereof, subject to the provisions of this Agreement, to purchase one share of Common Stock for each Warrant represented thereby at a purchase price (the "EXERCISE PRICE") of $7.00 per share, subject to adjustment as provided in Section 4.1 and Article V. SECTION 3.2 EXERCISE; RESTRICTIONS ON EXERCISE. At any time after the Separation Date and on or before the Expiration Date, all outstanding Warrants may be exercised on any Business Day. Any Warrants not exercised by 5:00 pm., New York City time, on the Expiration Date shall expire and all rights of the Holders of such Warrants shall terminate; PROVIDED, HOWEVER, that the Warrants may expire and all rights of the Holders of such Warrants may terminate pursuant to Section 4.1(i)(ii) in the event the Company merges or consolidates with or sells all or substantially all of its property and assets to a Person (other than an Affiliate of the Company) if the consideration payable to holders of Common Stock in exchange for their Common Stock in connection with such merger, consolidation or sale consists solely of cash or in the event of the dissolution, liquidation or winding up of the Company. SECTION 3.3 METHOD OF EXERCISE; PAYMENT OF EXERCISE PRICE. In order to exercise all or any of the Warrants represented by a Warrant Certificate, the Holder thereof must surrender for exercise the Warrant Certificate to the Warrant Agent at its corporate trust office set forth in Section 12.5 herein, with the Subscription Form set forth in the Warrant Certificate duly executed, together with payment in full of the Exercise Price then in effect for each share of Common Stock or other securities or property issuable upon exercise of the Warrants as to which a Warrant is exercised; such payment may be made in cash or by certified or official bank or bank cashier's check payable to the order of the Company. All payments received upon exercise of Warrants shall be delivered to the Company by the Warrant Agent as instructed in writing by the Company. If less than all the Warrants represented by a Warrant Certificate are exer- 8 cised, such Warrant Certificate shall be surrendered and a new Warrant Certifi- cate of the same tenor and for the number of Warrants which were not exercised shall be executed by the Company and delivered to the Warrant Agent and the Warrant Agent shall countersign the new Warrant Certificate, registered in such name or names as may be directed in writing by the Holder, and shall deliver the new Warrant Certificate to the Person or Persons entitled to receive the same. Upon exercise of any Warrants following surrender of a Warrant Certificate in conformity with the foregoing provisions, the Warrant Agent shall cause the Company to transfer promptly to or upon the written order of the Holder of such Warrant Certificate appropriate evidence of ownership of any shares of Common Stock or other securities or property (including money) to which it is entitled, registered or otherwise placed in such name or names as may be directed in writing by the Holder, and to deliver such evidence of ownership and any other securities or property (including money) to the Person or Persons entitled to receive the same, together with an amount in cash in lieu of any fraction of a share as provided in Section 4.5; PROVIDED that the Holder of such Warrant shall be responsible for the payment of any transfer taxes required as the result of any change in ownership of such Warrants. Upon exercise of a Warrant or Warrants the Warrant Agent is hereby authorized and directed to requisition from any transfer agent of the Common Stock (and all such transfer agents are hereby irrevocably authorized to comply with all such requests) certificates for the necessary number of shares to which the Holder of the Warrant or Warrants may be entitled. A Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of the surrender for exercise, as provided above, of the Warrant Certificate representing such Warrant and, for all purposes of this Agreement, the Person entitled to receive any shares of Common Stock or other securities or property deliverable upon such exercise shall, as between such Person and the Company, be deemed to be the Holder of such shares of Common Stock or other securities or property of record as of the close of business on such date and shall be entitled to receive, and the Warrant Agent shall deliver to such Person, any money, shares of Common Stock or other securities or property to which he would have been entitled had he been the record holder on such date. Without limiting the foregoing, if, at the date referred to above, the transfer books for the shares 9 of Common Stock or other securities purchasable upon the exercise of the Warrants shall be closed, the certificates for the shares of Common Stock or securities in respect of which such Warrants are then exercised shall be issuable as of the date on which such books shall next be opened, and until such date the Company shall be under no duty to deliver any certificate for such shares of Common Stock or other securities; PROVIDED FURTHER that the transfer books or records, unless required by law, shall not be closed at any one time for a period longer than 20 days. SECTION 3.4 REPURCHASE OFFERS. (a) NOTICE OF REPURCHASE EVENT. Within five Business Days following the occurrence of a Repurchase Event, the Company shall give notice to the Holders of the Warrants that such event has occurred and will result in the Company making a Repurchase Offer. (b) REPURCHASE OFFERS GENERALLY. Following the occurrence of a Repurchase Event, the Company shall offer to purchase for cash all outstanding Warrants pursuant to the provisions of this Section 3.4 (each a "REPURCHASE OFFER"). The Company shall give notice of a Repurchase Offer in accordance with Section 3.4(f). The date on which the Company gives any such notice is referred to as a "NOTICE DATE". Each Repurchase Offer shall commence on the Notice Date for such offer and shall expire at 5:00 p.m., New York City time on a date (the "FINAL SURRENDER DATE") as specified in the notice provided for in Section 3.4(f) which date shall be at least 30 but not more than 60 calendar days after such Notice Date. Once a Repurchase Event has occurred, there is no limit on the number of Repurchase Offers the Company may make. (c) REPURCHASE OFFERS. (i) In any Repurchase Offer, the Company shall offer to purchase for cash at the Repurchase Price for such Repurchase Offer all Warrants outstanding on the Notice Date for such offer that are properly tendered to the Warrant Agent on or prior to the Final Surrender Date for such Repurchase Offer. (ii) Each Holder may, but shall not be obligated to, accept such Repurchase Offer, by tendering to the Warrant Agent, on or prior to the 10 Final Surrender Date for such Repurchase Offer, the Warrant Certificates evidencing the Warrants such Holder desires to have repurchased in such offer, together with a completed Certificate for Surrender for Repurchase Offer referred to in Section 3.4(f). A Holder may withdraw all or a portion of the Warrants tendered to the Warrant Agent at any time prior to the Final Surrender Date for such Repurchase Offer. If less than all the Warrants represented by a Warrant Certificate shall be tendered, such Warrant Certificate shall be surrendered and a new Warrant Certificate of the same tenor and for the number of Warrants which were not tendered shall be executed by the Company and delivered to the Warrant Agent and the Warrant Agent shall countersign the new Warrant Certificate, registered in such name or names as may be directed in writing by the Holder, and shall deliver the new Warrant Certificate to the Person or Persons entitled to receive the same; PROVIDED that the Holder of such Warrants shall be responsible for the payment of any transfer taxes required as the result of any change in ownership of such Warrants. (d) REPURCHASE PRICE. (i) The purchase price (the "REPURCHASE PRICE") for each Warrant properly tendered to the Warrant Agent pursuant to a Repurchase Offer shall be equal to the value (the "RELEVANT VALUE") on the Valuation Date of the Common Stock and other securities or property of the Company which would have been delivered upon exercise of Warrants had the Warrants been exercised, less the Exercise Price then in effect. (ii) The Relevant Value of the Common Stock and other securities or property issuable upon exercise of all the Warrants, will be: (I) If the Common Stock (or other securities) is registered under the Exchange Act, deemed to be the average of the closing sales prices of the Common Stock (or other securities) for the 20 consecu- tive trading days immediately preceding such Valuation Date or, if the Common Stock (or other securities) has been registered under the Exchange Act for less than 20 consecutive trading days before such 11 date, then the average of the closing sales prices for all of the trading days before such date for which closing sales prices are available. (II) If the Common Stock (or other securities) is not regis- tered under the Exchange Act or if the value cannot be computed under clause (I) above, equal to the value set forth in the Value Report (as defined below) as determined by an Independent Financial Expert, which shall be selected by the Board of Directors in accordance with Section 3.4(e), and retained on customary terms and conditions, using one or more valuation methods that the Independent Financial expert, in its best professional judgment, determines to be most appropriate but without giving effect to any discount for lack of liquidity, the fact that the Company has no class of equity registered under the Exchange Act, or the fact that the shares of Common Stock and other securities or property issuable upon exercise of the Warrants represent a minori- ty interest in the Company. The Company shall cause the Independent Financial Expert to deliver to the Company, with a copy to the Warrant Agent, within 45 days of the appointment of the Independent Financial Expert in accordance with Section 3.4(e), a value report (the "VALUE REPORT") stating the Relevant Value of the Common Stock and other securities or property of the Company, if any, being valued as of the Valuation Date and containing a brief statement as to the nature and scope of the examination or investigation upon which the determination of Relevant Value was made. The Warrant Agent shall have no duty with respect to the Value Report of any Independent Financial Expert, except to keep it on file and available for inspection by the Holders. The determination as to Relevant Value in accordance with the provi- sions of this Section 3.4(d) shall be conclusive on all Persons. The Independent Financial Expert shall consult with management of the Company in order to allow management to comment on the proposed Relevant Value prior to delivery to the Company of any 12 Value Report of the Independent Financial Expert. (e) SELECTION OF INDEPENDENT FINANCIAL EXPERT. If a Value Report is required pursuant to Section 3.4(d)(ii)(II), the Board of Directors of the Company shall select an Independent Financial Expert not more than five Business Days following a Repurchase Event. Within two days after such selection of the Independent Financial Expert, the Company shall deliver to the Warrant Agent a notice setting forth the name of such Independent Financial Expert. (f) NOTICE OF REPURCHASE OFFER. Each notice of a Repurchase Offer given by the Company pursuant to Section 3.4(b) shall be given (i) if the Relevant Value is determined pursuant to Section 3.4(d)(ii)(I), within ten Business Days following the occurrence of the Repurchase Event or (ii) if the Relevant Value is determined pursuant to Section 3.4(d)(ii)(II) within five Business Days after the Company receives the Value Report with respect to such offer. Such notice shall specify (i) the Final Surrender Date for such Repur- chase Offer, (ii) the manner in which Warrants may be surrendered to the Warrant Agent for repurchase by the Company, (iii) the Repurchase Price at which the Warrants will be repurchased by the Company, (iv) if applicable, the name of the Independent Financial Expert whose valuation of the Common Stock and other securities or property was utilized in connection with determining such Repur- chase Price and (v) that payment of the Repurchase Price will be made by the Warrant Agent. Each such notice shall be accompanied by a Certificate for Surrender for Repurchase Offer in substantially the form attached to the Warrant Certificate and a copy of the Valuation Report. (g) PAYMENT FOR WARRANTS. Upon surrender for repurchase of any Warrants in conformity with the provisions of this Section 3.4, the Warrant Agent shall thereupon promptly notify the Company of such surrender. On or before the Final Surrender Date for any Repurchase Offer, the Company shall deposit with the Warrant Agent funds sufficient to make payment for the Warrants tendered to the Warrant Agent and not withdrawn. After receipt of such deposit from the Company, the Warrant Agent shall make payment, by delivering a check in such amount as is appropriate, to such Person or Persons as it 13 may be directed in writing by the Holder surrendering such Warrants, net of any transfer taxes required to be paid in the event that the check is to be deliv- ered to a Person other than the Holder. (h) COMPLIANCE WITH LAWS. Notwithstanding anything contained in this Section 3.4, if the Company is required to comply with laws or regulations in connection with making any Repurchase Offer, such laws or regulations shall also govern the making of such Repurchase Offer. ARTICLE IV ADJUSTMENTS SECTION 4.1 ADJUSTMENTS. The Exercise Price and the number of shares of Common Stock issuable upon exercise of each Warrant shall be subject to adjustment from time to time as follows: (a) STOCK DIVIDENDS; STOCK SPLITS; REVERSE STOCK SPLITS; RECLASSIFICATIONS. In case the Company shall (i) pay a dividend or make any other distribution with respect to its Common Stock in shares of any class or series of its capital stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine its outstanding Common Stock into a smaller number of shares or (iv) issue any shares of its capital stock in a reclassification of the Common Stock (other than a reclassification in connection with a merger, consolidation or other business combination which will be governed by Section 4.1(i)), the number of shares of Common Stock purchasable upon exercise of each Warrant immediately prior to the record date for such dividend or distribution or the effective date of such subdivision, or combination or reclassification shall be adjusted so that the Holder of each Warrant shall thereafter be entitled to receive the kind and number of shares of Common Stock or other secu- rities of the Company which such Holder would have been entitled to receive after the happening of any of the events described above had such Warrant been exercised immediately prior to the happening of such event or any record date with respect thereto. An adjustment made pursuant to this Section 4.1(a) shall become effective immediately after the effective date of 14 such event retroactive to the record date, if any, for such event. (b) RIGHTS; OPTIONS; WARRANTS. In case the Company shall issue rights, options, warrants or convertible or exchangeable securities (other than a convertible or exchangeable security subject to Section 4.1(a)) to all holders of its Common Stock, entitling them to subscribe for or purchase Common Stock at a price per share which is lower (at the record date for such issuance) than the greater of (i) the then Current Market Value per share of Common Stock and (ii) the Exercise Price, the number of shares of Common Stock thereafter purchasable upon the exercise of each Warrant shall be determined by multiplying the number of shares of Common Stock theretofore purchasable upon exercise of each Warrant by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to the issuance of such rights, options, warrants or convertible or exchangeable securities plus the number of additional shares of Common Stock offered for subscription or purchase, and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to the issuance of such rights, options, warrants or convertible or exchangeable securities plus the number of shares which the aggregate offering price of the total number of shares of Common Stock so offered would purchase at the greater of (i) the then Current Market Value per share of Common Stock and (ii) the Exercise Price. Such adjustment shall be made whenever such rights, options, warrants or convertible or exchangeable securities are issued, and shall become effective retroactively immediately after the record date for the determination of shareholders entitled to receive such rights, options, warrants or convertible or exchangeable securities. (c) ISSUANCE OF COMMON STOCK AT LOWER VALUES. In case the Company shall sell and issue shares of Common Stock, or rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase shares of Common Stock (excluding shares, rights, options, warrants or convertible or exchangeable securities issued in any of the transactions described in Section 4.1(a) or (b)) at a price per share of Common Stock (determined in the case of such rights, options, warrants or convertible or exchangeable securi- 15 ties, by dividing (x) the total amount receivable by the Company in consid- eration of the sale and issuance of such rights, options, warrants or convert- ible or exchangeable securities, plus the total consideration payable to the Company upon exercise, conversion or exchange thereof, by (y) the total number of shares of Common Stock covered by such rights, options, warrants or convert- ible or exchangeable securities) that is lower than the greater of (i) the Cur- rent Market Value per share of the Common Stock in effect immediately prior to such sale or issuance and (ii) the Exercise Price, then the number of shares of Common Stock thereafter purchasable upon the exercise of each Warrant shall be determined by multiplying the number of shares of Common Stock theretofore purchasable upon exercise of each Warrant by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on the date of such sale or issuance and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such sale or issuance plus the number of shares of Common Stock which the aggregate consideration received (determined as provided below) for such sale or issuance would purchase at the greater of (i) such Current Market Value per share of Common Stock and (ii) the Exercise Price. For purposes of this Section 4.1(c), the shares of Common Stock which the holder of any such rights, options, warrants or convertible or ex- changeable securities shall be entitled to subscribe for or purchase shall be deemed to be issued and outstanding as of the date of such sale and issuance and the consideration received by the Company therefor shall be deemed to be the consideration received by the Company for such rights, options, warrants or convertible or exchangeable securities, plus the consideration or premiums stated in such rights, options, warrants or convertible or exchangeable securi- ties to be paid for the shares of Common Stock covered thereby. In case the Company shall sell and issue shares of Common Stock or rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase shares of Common Stock, for a consideration consisting, in whole or in part, of property other than cash or its equivalent, then in determining the "price per share of Common Stock" and the "consideration received by the Company" for purposes of the first sentence of this Section 4.1(c), the Board of Directors of the Company shall determine, in good faith, the fair value of said property, which determination shall be evi- 16 denced by a resolution of the Board of Directors of the Company. In case the Company shall sell and issue rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase shares of Common Stock together with one or more other securities as part of a unit at a price per unit, then in determining the "price per share of Common Stock" and the "consideration received by the Company" for purposes of the first sentence of this Section 4.1(c), the Board of Directors of the Company shall determine, in good faith, the fair value of the rights, options, warrants or convertible or exchangeable securities then being sold as part of such unit. (d) DISTRIBUTIONS OF DEBT, ASSETS, SUBSCRIPTION RIGHTS OR CONVERTIBLE SECURITIES. In case the Company shall fix a record date for the making of a distribution to all holders of shares of its Common Stock of evidences of its indebtedness, assets, cash dividends or distributions (excluding dividends or distributions referred to in Section 4.1(a) above and excluding distributions in connection with the dissolution, liquidation or winding up of the Company which will be governed by Section 4.1(i)(ii) below) or securities (excluding those referred to in Section 4.1(a), Section 4.1(b) or Section 4.1(c) above), then in each case the number of shares of Common Stock purchasable after such record date upon the exercise of each Warrant shall be determined by multiplying the number of shares of Common Stock purchasable upon the exercise of such Warrant immediately prior to such record date by a fraction, the numerator of which shall be the Current Market Value per share of Common Stock immediately prior to the record date for such distribution and the denominator of which shall be the Current Market Value per share of Common Stock immediately prior to the record date for such distribution less the then fair value (as determined in good faith by the Board of Directors of the Company) of the portion of the assets, evidence of indebtedness, cash dividends or distributions or securities so distributed applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made, and shall become effective on the date of distribution retroactive to the record date for the determination of share- holders entitled to receive such distribution. 17 (e) EXPIRATION OF RIGHTS, OPTIONS AND CONVERSION PRIVILEGES. Upon the expiration of any rights, options, warrants or conversion or exchange privileges that have previously resulted in an adjustment hereunder, if any thereof shall not have been exercised, the Exercise Price and the number of shares of Common Stock issuable upon the exercise of each Warrant shall, upon such expiration, be readjusted and shall thereafter, upon any future exercise, be such as they would have been had they been originally adjusted (or had the original adjustment not been required, as the case may be) as if (i) the only shares of Common Stock so issued were the shares of Common Stock, if any, actually issued or sold upon the exercise of such rights, options, warrants or conversion or exchange rights and (ii) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise plus the consideration, if any, actually received by the Company for issuance, sale or grant of all such rights, options, warrants or conversion or exchange rights whether or not exercised; PROVIDED FURTHER that no such read- justment shall have the effect of increasing the Exercise Price by an amount, or decreasing the number of shares issuable upon exercise of each Warrant by a num- ber, in excess of the amount or number of the adjustment initially made in respect to the issuance, sale or grant of such rights, options, warrants or conversion or exchange rights. (f) CURRENT MARKET VALUE. For the purposes of any computation under this Article IV, the Current Market Value per share of Common Stock or of any other security (herein collectively referred to as a "security") at any date herein specified shall be: (i) if the security is not registered under the Exchange Act, the value of the security (1) most recently determined as of a date within the six months preceding such date by an Independent Financial Expert selected by the Company in accordance with the criteria for such valuation set out in Section 3.4(d)(ii)(II), or (2) if no such determination shall have been made within such six-month period or if the Company so chooses, determined as of such date by an Independent Financial Expert selected by the Company in accordance with the criteria for such valuation set out in Section 18 3.4(d)(ii)(II); PROVIDED, HOWEVER, that in determining the value of the Common Stock under Section 4.5, if the foregoing clause (1) shall not be applicable, the Current Market Value per share of Common Stock shall be determined in good faith by the Board of Directors of the Company, or (ii) if the security is registered under the Exchange Act, deemed to be the average of the daily market prices of the security for the 20 consecutive trading days immediately preceding such date or, if the security has been registered under the Exchange Act for less than 20 consecutive trading days before such date, then the average of the daily market prices for all of the trading days before such date for which daily market prices are available. The market price for each such trading day shall be: (A) in the case of a security listed or admitted to trading on any national securities exchange, the closing sales price, regular way, on such day, or if no sale takes place on such day, the average of the closing bid and asked prices on such day, (B) in the case of a security not then listed or admitted to trading on any national securities exchange, the last reported sale price on such day, or if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reputable quotation source designated by the Company, (C) in the case of a security not then listed or admitted to trading on any national securities exchange and as to which no such reported sale price or bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reputable quotation service, or a newspaper of general circulation in the Borough of Manhattan, City and State of New York customarily published on each Business Day, designated by the Company, or, if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than 30 days prior to the date in question) for which prices have been so reported and (D) if there are no bid and asked prices reported during the 30 days prior to the date in question, the Current Market Value of the security shall be deter- mined as if the security were not registered under the Exchange Act. 19 (g) DE MINIMIS ADJUSTMENTS. No adjustment in the number of shares of Common Stock purchasable hereunder shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the number of shares of Common Stock purchasable upon the exercise of each Warrant; PROVIDED, HOWEVER, that any adjustments which by reason of this Section 4.1(g) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations shall be made to the nearest one- thousandth of a share. (h) ADJUSTMENT OF EXERCISE PRICE. Whenever the number of shares of Common Stock purchasable upon the exercise of each Warrant is adjusted, as herein provided, the Exercise Price per share of Common Stock payable upon exercise of such Warrant shall be adjusted (calculated to the nearest $.0001) so that it shall equal the price determined by multiplying such Exercise Price immediately prior to such adjustment by a fraction the numerator of which shall be the number of shares purchasable upon the exercise of each Warrant immediate- ly prior to such adjustment and the denominator of which shall be the number of shares so purchasable immediately thereafter. (i) CONSOLIDATION, MERGER, ETC. Subject to the provisions of Subsection (ii) below of this Section 4.1(i), in case of the consolidation of the Company with, or merger of the Company with or into, or of the sale of all or substantially all of the properties and assets of the Company to, any Person, and in connection therewith consideration is payable to holders of Common Stock (or other securities or property purchasable upon exercise of Warrants) in exchange therefor, the Warrants shall remain subject to the terms and conditions set forth in this Agreement and each Warrant shall, after such consolidation, merger or sale, entitle the Holder to receive upon exercise the number of shares of capital stock or other securities or property (including cash) of the Company, or of such Person resulting from such consolidation or surviving such merger or to which such sale shall be made or of the parent of such Person, as the case may be, that would have been distributable or payable on account of the Common Stock (or other securities or property pur- 20 chasable upon exercise of Warrants) if such Holder's Warrants had been exercised immediately prior to such merger, consolidation or sale (or, if applicable, the record date therefor); and in any such case the provisions of this Agreement with respect to the rights and interests thereafter of the Holders of Warrants shall be appropriately adjusted by the Board of Directors in good faith so as to be applicable, as nearly as may reasonably be, to any shares of stock or other securities or any property thereafter deliverable on the exercise of the Warrants. (ii) Notwithstanding the foregoing, (x) if the Company merges or consolidates with, or sells all or substantially all of its property and assets to, another Person (other than an Affiliate of the Company) and, in connection therewith, consideration is payable to holders of Common Stock in exchange for their Common Stock in connection with such merger, consolidation or sale which consists solely of cash, or (y) in the event of the dissolution, liquidation or winding up of the Company, then the Holders of Warrants shall be entitled to receive distributions on the date of such event on an equal basis with holders of Common Stock (or other securities issuable upon exercise of the Warrants) as if the Warrants had been exercised immediately Prior to such event, less the Exercise Price. Upon receipt of such payment, if any, the rights of a Holder shall terminate and cease and his or her Warrants shall expire. Notwithstanding the foregoing, if the Company has made a Repurchase Offer, which has not expired at the time of such transaction, the Holders of the Warrants shall be entitled to receive on the date of such transaction the higher of (1) the amount payable to Holders of Warrants pursuant to this paragraph and (2) the Repurchase Price payable to Holders of Warrants pursuant to such Repurchase Offer. In case of any such merger, consolidation or sale of assets, the surviving or acquiring Person and, in the event of any dissolution, liquidation or winding up of the Company, the Company shall deposit promptly with the Warrant Agent the funds, if any, necessary to pay the Holders of the Warrants. After receipt of such deposit from such Person or the Company and after receipt of surrendered Warrant Certificates, the Warrant Agent shall make payment 21 by delivering a check in such amount as is appropriate (or, in the case of consideration other than cash, such other consideration as is appropriate) to such Person or Persons as it may be directed in writing by the Holder surrender- ing such Warrants. SECTION 4.2 NOTICE OF ADJUSTMENT. Whenever the number of shares of Common Stock or other stock or property purchasable upon the exercise of each Warrant or the Exercise Price is adjusted, as herein provided, the Company shall cause the Warrant Agent promptly to mail, at the expense of the Company, to each Holder notice of such adjustment or adjustments and shall deliver to the Warrant Agent a certificate of a firm of independent public accountants selected by the Board of Directors of the Company (who may be the regular accountants employed by the Company) setting forth the number of shares of Common Stock or other stock or property purchasable upon the exercise of each Warrant and the Exercise Price after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such certificate shall be conclusive evidence of the correctness of such adjustment. The Warrant Agent shall be entitled to rely on such certificate and shall be under no duty or responsibility with respect to any such certificate, except to exhibit the same, from time to time, to any Holder desiring an inspection thereof during reasonable business hours. The Warrant Agent shall not at any time be under any duty or responsibility to any Holders to determine whether any facts exist which may require any adjustment of the Exercise Price or the number of shares of Common Stock or other stock or property purchasable on exercise of the Warrants, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed in making such adjustment, or the validity or value (or the kind or amount) of any shares of Common Stock or other stock or property which may be purchasable on exercise of the Warrants. The Warrant Agent shall not be responsible for any failure of the Company to make any cash payment or to issue, transfer or deliver any shares of Common Stock or stock certificates or other common stock or properties upon the exercise of any Warrant. 22 SECTION 4.2 STATEMENT ON WARRANTS. Irrespective of any adjustment in the Exercise Price or the number or kind of shares purchasable upon the exercise of the Warrants, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the Warrants initially issuable pursuant to this Agreement. SECTION 4.4 NOTICE OF CONSOLIDATION, MERGER, ETC. In case at any time after the date hereof and prior to 5:00 p.m., New York City time, on the Expiration Date, there shall be any (i) consolidation or merger involving the Company or sale, transfer or other disposition of all or substantially all of the Company's property, assets or business (except a merger or other reorgani- zation in which the Company shall be the surviving corporation and holders of Common Stock (or other securities or property purchasable upon exercise of the Warrants) receive no consideration in respect of their shares) or (ii) any other transaction contemplated by Section 4.1(i)(ii) above; then in any one or more of said cases, the Company shall cause to be mailed to the Warrant Agent and each Holder of a Warrant, at the earliest practicable time (and, in any event, not less than 20 calendar days before any date set for definitive action), notice of the date on which such reorganization, sale, consolidation, merger, dissolution, liquidation or winding up shall take place, as the case may be. Such notice shall also set forth such facts as shall indicate the effect of such action (to the extent such effect may be known at the date of such notice) on the Exercise Price and the kind and amount of the shares of Common Stock and other securi- ties, money and other property deliverable upon exercise of the Warrants. Such notice shall also specify the date as of which the holders of record of the shares of Common Stock or other securities or property issuable upon exercise of the Warrants shall be entitled to exchange their shares for securities, money or other property deliverable upon such reorganization, sale, consolidation, merger, dissolution, liquidation or winding up, as the case may be. SECTION 4.5 FRACTIONAL INTERESTS. The Company may but shall not be required to issue fractional shares of Common Stock on the exercise of Warrants. If more than one Warrant shall be presented for exercise in full at the same time by the same Holder, the number of full 23 shares of Common Stock which shall be issuable upon such exercise thereof shall be computed on the basis of the aggregate number of shares of Common Stock purchasable on exercise of the Warrants so presented. If any fraction of a share of Common Stock would, except for the provisions of this Section 4.5, be issuable on the exercise of any Warrant (or specified portion thereof), the Company shall pay an amount in cash calculated by it to be equal to the then Current Market Value per share of Common Stock multiplied by such fraction computed to the nearest whole cent. ARTICLE V DECREASE IN EXERCISE PRICE The Board of Directors of the Company, in its sole discretion, shall have the right at any time, or from time to time, to decrease the Exercise Price of the Warrants, such reduction of the Exercise Price to be effective for a period or periods to be determined by it, but in no event for a period of less than 30 calendar days. Any exercise by the Board of Directors of any rights granted in this Article V must be preceded by a written notice from the Company to each Holder of the Warrants setting forth the reduction in the Exercise Price and to the Warrant Agent, which notice shall be mailed at least 30 calendar days prior to the effective date of such decrease in the Exercise Price of the War- rants. Any reduction of the Exercise Price pursuant to provisions of this Article V shall not alter or adjust the number of shares of Common Stock or other securities issuable upon the exercise of the Warrants. ARTICLE VI LOSS OR MUTILATION Upon receipt by the Company and the Warrant Agent of evidence satis- factory to them of the ownership and the loss, theft, destruction or mutilation of any Warrant Certificate and of indemnity satisfactory to them and (in the case of mutilation) upon surrender and cancellation thereof, then, in the absence of notice to the Company or the Warrant Agent that the Warrants repre- sent- 24 ed thereby have been acquired by a bona fide purchaser, the Company shall execute and the Warrant Agent shall countersign and deliver to the registered Holder of the lost, stolen, destroyed or mutilated Warrant Certificate, in exchange for or in lieu thereof, a new Warrant Certificate of the same tenor and for a like aggregate number of Warrants. Upon the issuance of any new Warrant Certificate under this Article VI, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and other expenses (including the fees and expenses of the Warrant Agent) in connection therewith. Every new Warrant Certificate executed and delivered pursuant to this Article VI in lieu of any lost, stolen or destroyed Warrant Certificate shall constitute a contractual obligation of the Company, whether or not the allegedly lost, stolen or destroyed Warrant Certifi- cates shall be at any time enforceable by anyone, and shall be entitled to the benefits of this Agreement equally and proportionately with any and all other Warrant Certificates duly executed and delivered hereunder. The provisions of this Article VI are exclusive and shall preclude (to the extent lawful) all other rights or remedies with respect to the replacement of mutilated, lost, stolen, or destroyed Warrant Certificates. ARTICLE VII RESERVATION, AUTHORIZATION AND REGISTRATION OF COMMON STOCK SECTION 7.1 RESERVATION AND AUTHORIZATION. The Company shall at all times reserve and keep available for issue upon the exercise of Warrants such number of its authorized but unissued shares of Common Stock or other securities of the Company deliverable upon exercise of Warrants as will be sufficient to permit the exercise in full of all outstanding Warrants and will cause appro- priate evidence of ownership of such Common Stock or other securities of the Company to be delivered to the Warrant Agent upon its request for delivery upon the exercise of Warrants, and all such shares of Common Stock will, at all times, be duly approved for listing subject to official notice of issuance on each securities exchange, if any, on which such Common Stock is then listed. 25 SECTION 7.2 REGISTRATION. Subject to Section 3.2, if the issuance or sale of any shares of Common Stock or other securities issuable upon the exercise of the Warrants require registration or approval of any governmental authority, or the taking of any other action under the laws of the United States of America or any political subdivision thereof, before such securities may be validly offered or sold in compliance with such laws, then the Company covenants that it will, in good faith and as expeditiously as reasonably practicable, endeavor to secure and maintain such registration or approval or to take such other action, as the case may be, and the Company will furnish the Warrant Agent with current Prospectuses meeting the requirements of the Securities Act and the rules and regulations of the Commission thereunder in sufficient quantity to permit the Warrant Agent to deliver a Prospectus to each Holder of a Warrant upon the exercise thereof. In connection with the foregoing, the Company agrees to maintain the effectiveness of the Registration Statement (Registration No. 33-53343) pursuant to which the Units were originally issued, or a successor thereto, until the earlier of the Expiration Date or the exercise of all of the Warrants. The Company further agrees to pay all fees, costs and expenses in connection with the preparation and delivery to the Warrant Agent of the Prospectuses and the delivery thereof by the Warrant Agent to the Holders of the Warrants. The Company shall also advise the Warrant Agent of the political subdivisions of the United States and the persons in such subdivision in and to whom such shares may be issued. ARTICLE VII WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER SECTION 8.1 TRANSFER AND EXCHANGE. The Warrant Certificates shall be issued in registered form only. The Company shall cause to be kept at the office of the Warrant Agent a register in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Warrant Certificates and transfers or exchanges of Warrant Certificates as herein provided. All Warrant Certificates issued upon any registration of transfer or exchange of Warrant Certificates shall be the valid obligations of the Compa- 26 ny, evidencing the same obligations, and entitled to the same benefit under this Agreement, as the Warrant Certificate surrendered for such registration of transfer or exchange. The Warrants shall initially be issued as part of an issuance of Units, each of which consists of ___ Senior Secured Notes and __ Warrants. Prior to the Separation Date, the Warrants may not be transferred or exchanged separately from, but may be transferred or exchanged only together with, the Senior Secured Notes issued in connection with such Warrants. A Holder may transfer its Warrants only by written application to the Warrant Agent stating the name of the proposed transferee and otherwise comply- ing with the terms of this Agreement. No such transfer shall be effected until, and such transferee shall succeed to the rights of a Holder only upon, final acceptance and registration of the transfer by the Warrant Agent in the regis- ter. Prior to the registration of any transfer of Warrants by a Holder as provided herein, the Company, the Warrant Agent, and any agent of the Company may treat the person in whose name the Warrants are registered as the owner thereof for all purposes and as the person entitled to exercise the rights represented thereby, any notice to the contrary notwithstanding. Furthermore, any Holder of a Global Warrant shall, by acceptance of such Global Warrant, agree that transfers of beneficial interests in such Global Warrant may be effected only through a book entry system maintained by the Holder of such Global Warrant (or its agent), and that ownership of a beneficial interest in the Warrants represented thereby shall be required to be reflected in a book entry. When Warrant Certificates are presented to the Warrant Agent with a request to register the transfer or to exchange them for an equal amount of War- rants of other authorized denominations, the Warrant Agent shall register the transfer or make the exchange as requested if its requirements for such trans- actions are met. To permit registrations of transfers and exchanges, the Company shall execute Warrant Certificates at the Warrant Agent's request. No service charge shall be made for any registration of transfer or exchange of Warrants, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed 27 in connection with any registration of transfer of Warrants. SECTION 8.2 BOOK-ENTRY PROVISIONS FOR GLOBAL WARRANT. (a) The Global Warrant initially shall (i) be registered in the name of the Depositary for such Global Warrant or the nominee of such Depositary, (ii) be delivered to the Warrant Agent as custodian for such Depositary and (iii) bear legends as set forth in Section 2.2. Members of, or participants in, the Depositary ("AGENT MEMBERS") shall have no rights under this Agreement with respect to the Global Warrant held on their behalf by the Depositary, or the Warrant Agent as its custodian, or under the Global Warrant, and the Depositary may be treated by the Company, the Warrant Agent and any agent of the Company or the Warrant Agent as the absolute owner of such Global Warrant for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Warrant Agent or any agent of the Company or the Warrant Agent, from giving effect to any written certification, proxy or other authorization furnished by the Depositary or im- pair, as between the Depositary and its Agent Members, the operation of cus- tomary practices governing the exercise of the rights of a holder of any Warrants. (b) Transfers of the Global Warrant shall be limited to trans- fers of such Global Warrant in whole, but not in part, to the Depositary, its successors or their respective nominees. Interests of beneficial owners in the Global Warrant may be transferred in accordance with the rules and procedures of the Depositary. Beneficial owners may obtain Physical Securities in exchange for their beneficial interests in the Global Warrant upon request in accordance with the Depositary's and the Warrant Agent's procedures. In addition, Physical Securities shall be transferred to all beneficial owners in exchange for their beneficial interests in the Global Warrant if the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for the Global Warrant, and a successor depositary is not appointed by the Company within 90 days of such notice. (c) In connection with any transfer of a portion of the benefi- cial interests in the Global Warrant to beneficial owners pursuant to paragraph (b) of this Section, the Warrant Agent shall reflect on its books and 28 records the date and a decrease in the amount of Warrants represented by the Global Warrant in an amount equal to the amount of the beneficial interest in the Global Warrant to be transferred, and the Company shall execute, and the Warrant Agent shall countersign and deliver, one or more Physical Securities of like tenor and amount. (d) In connection with the transfer of the entire Global Warrant to beneficial owners pursuant to paragraph (b) of this Section, the Global Warrant shall be deemed to be surrendered to the Warrant Agent for cancellation, and the Company shall execute, and the Warrant Agent shall countersign and deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial interest in the Global Warrant an equal aggregate principal amount of Physical Securities of authorized denominations. (e) Any Physical Security delivered in exchange for an interest in the Global Warrant pursuant to paragraphs (b) or (d) of this Section shall bear the legend regarding transfer restrictions applicable to the Physical Security set forth in Section 2.2. (f) The registered holder of the Global Warrant may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Agreement or the Warrants. The Warrant Agent shall retain copies of all letters, notices and other written communications received pursuant to this Section 8.2. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reason- able written notice to the Warrant Agent. SECTION 8.3 SURRENDER OF WARRANT CERTIFICATES. Any Warrant Certifi- cate surrendered for registration of transfer, exchange, exercise or repurchase of the Warrants represented thereby shall, if surrendered to the Company, be delivered to the Warrant Agent, and all Warrant Certificates surrendered or so delivered to the Warrant Agent shall be promptly cancelled by the Warrant Agent and shall not be reissued by the Company and, 29 except as provided in this Article VIII in case of an exchange, Article III in case of the exercise or repurchase of less than all the Warrants represented thereby or Article VI in case of a mutilated Warrant Certificate, no Warrant Certificate shall be issued hereunder in lieu thereof. The Warrant Agent shall deliver to the Company from time to time or otherwise dispose of such cancelled Warrant Certificates as the company may direct. ARTICLE IX WARRANT HOLDERS SECTION 9.1 WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Prior to the exercise of the Warrants, no Holder of a Warrant Certificate, as such, shall be entitled to any rights of a stockholder of the Company, including, without limitation, the right to vote or to consent to any action of the stockholders, to receive dividends or other distributions, to exercise any preemptive right or to receive any notice of meetings of stockholders and, except as otherwise provided in this Agreement, shall not be entitled to receive any notice of any proceedings of the Company. SECTION 9.2 RIGHT OF ACTION. All rights of action with respect to this Agreement are vested in the Holders of the Warrants, and any Holder of any Warrant, without the consent of the Warrant Agent or the Holders of any other Warrant, may, in his own behalf and for his own benefit, enforce, and may insti- tute and maintain any suit, action or proceeding against the Company suitable to enforce, or otherwise in respect of, his right to exercise his Warrants in the manner provided in the Warrant Certificate representing his Warrants and in this Agreement. ARTICLE X REMEDIES SECTION 10.1 DEFAULTS. It shall be deemed to be a Default with respect to the Company's (or its successor's) obligations under this Agreement if: (i) the Company (or its successor) shall fail to make a 30 Repurchase Offer pursuant to Section 3.4 hereof or (ii) the Company (or its successor) shall fail to purchase the Warrants pursuant to any Repurchase Offer in accordance with the provisions of Section 3.4. SECTION 10.2 PAYMENT OBLIGATIONS. Upon the happening of a Default under this Agreement the Company shall be obligated to increase the amount otherwise payable pursuant to Section 3.4(d) in respect of the Repurchase Offer to which such Default relates by an amount equal to interest thereon at a rate per annum equal to ___% from the date of the Default to the date of payment, which interest shall compound quarterly (all such payment obligations in respect of any such Repurchase Offer, together with all such increased amounts, being the "REPURCHASE OBLIGATION"). SECTION 10.3 REMEDIES; NO WAIVER. Notwithstanding any other provi- sion of this Warrant Agreement, if a Default occurs and is continuing, the Holders of the Warrants may pursue any available remedy to collect the Repur- chase Obligation or to enforce the performance of any provision of this Warrant Agreement. A delay or omission by any Holder of a Warrant in exercising, or a failure to exercise, any right or remedy arising out of a Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Default. All remedies are cumulative to the extent permitted by law. ARTICLE XI THE WARRANT AGENT SECTION 11.1 DUTIES AND LIABILITIES. The Warrant Agent hereby accepts the agency established by this Agreement and agrees to perform the same upon the terms and conditions herein set forth, by all of which the Company and the Holders of Warrants, by their acceptance thereof, shall be bound. The Warrant Agent shall not, by countersigning Warrant Certificates or by any other act hereunder, be deemed to make any representations as to the validity or authorization of the Warrants or the Warrant Certificates (except as to its countersignature thereon) or of any securities or other property delivered upon exercise or repurchase of any Warrant, or as to the accuracy of the computation of the Exercise Price or the 31 number or kind or amount of stock or other securities or other property deliver- able upon exercise or repurchase of any Warrant, or as to the independence of any Independent Financial Expert or the correctness of the representations of the Company made in the certificates that the Warrant Agent receives. The Warrant Agent shall not be accountable for the use or application by the Company of the proceeds of the exercise of any Warrant. The Warrant Agent shall not have any duty to calculate or determine any adjustments with respect to either the Exercise Price or the kind and amount of shares or other securities or any property receivable by Holders upon the exercise or repurchase of Warrants required from time to time and the Warrant Agent shall have no duty or responsi- bility in determining the accuracy or correctness of such calculation. The Warrant Agent shall not be (a) liable for any recital or statement of fact contained herein or in the Warrant Certificates or for any action taken, suffered or omitted by it in good faith in the belief that any Warrant Cer- tificate or any other documents or any signatures are genuine or properly autho- rized, (b) responsible for any failure on the part of the Company to comply with any of its covenants and obligations contained in this Agreement or in the Warrant Certificates or (c) liable for any act or omission in connection with this Agreement except for its own gross negligence or willful misconduct. The Warrant Agent is hereby authorized to accept instructions with respect to the performance of its duties hereunder from the President, any Vice President or the Secretary of the Company and to apply to any such officer for instructions (which instructions will be promptly given in writing when requested) and the Warrant Agent shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with the instructions of any such officer; however, in its discretion the Warrant Agent may in lieu thereof accept other evidence of such or may require such further or additional evidence as it may deem reasonable. The Warrant Agent shall not be liable for any action taken in the event it requests instructions from the Company and does not receive such instructions within a reasonable period of time after the request therefor. The Warrant Agent may execute and exercise any of the rights and powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys, agents or employees, and the Warrant Agent 32 shall not be answerable or accountable for any act, default, neglect or miscon- duct of any such attorneys, agents or employees, provided reasonable care has been exercised in the selection and in the continued employment of any such attorney, agent or employee. The Warrant Agent shall not be under any obliga- tion or duty to institute, appear in or defend any action, suit or legal proceeding in respect hereof, unless first indemnified to its satisfaction, but this provision shall not affect the power of the Warrant Agent to take such action as the Warrant Agent may consider proper, whether with or without such indemnity. The Warrant Agent shall promptly notify the company in writing of any claim made or action, suit or proceeding instituted against it arising out of or in connection with this Agreement. The Company will perform, execute, acknowledge and deliver or cause to be delivered all such further acts, instruments and assurances as may reasonably be required by the Warrant Agent in order to enable it to carry out or perform its duties under this Agreement. The Warrant Agent shall act solely as agent of the Company hereunder. The Warrant Agent shall not be liable except for the failure to perform such duties as are specifically set forth herein, and no implied covenants or obligations shall be read into this Agreement against the Warrant Agent, whose duties and obligations shall be determined solely by the express provisions hereof. SECTION 11.2 RIGHT TO CONSULT COUNSEL. The Warrant Agent may at any time consult with legal counsel (who may be legal counsel for the Company), and the opinion or advice of such counsel shall be full and complete authorization and protection to the Warrant Agent and the Warrant Agent shall incur no liability or responsibility to the Company or to any Holder for any action taken, suffered or omitted by it in good faith in accordance with the opinion or advice of such counsel. SECTION 11.3 COMPENSATION; INDEMNIFICATION. The Company agrees promptly to pay the Warrant Agent from time to time, on demand of the Warrant Agent, compensation for its services hereunder as the Company and the Warrant Agent may agree from time to time, and to reimburse it for reasonable expenses and counsel fees in- 33 curred in connection with the execution and administration of this Agreement, and further agrees to indemnify the Warrant Agent and save it harmless against any losses, liabilities or expenses arising out of or in connection with the acceptance and administration of this Agreement, including the costs and expenses of investigating or defending any claim of such liability, except that the Company shall have no liability hereunder to the extent that any such loss, liability or expense results from the Warrant Agent's own gross negligence or willful misconduct. The obligations of the Company under this Section shall survive the exercise and the expiration of the Warrants and the resignation or removal of the Warrant Agent. SECTION 11.4 NO RESTRICTIONS ON ACTIONS. The Warrant Agent and any stockholder, director, officer or employee of the Warrant Agent may buy, sell or deal in any of the Warrants or other securities of the Company or become pecuniarily interested in transactions in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not the Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity. SECTION 11.5 DISCHARGE OR REMOVAL; REPLACEMENT WARRANT AGENT. The Warrant Agent may resign from its position as such and be discharged from all further duties and liabilities hereunder (except liability arising as a result of the Warrant Agent's own gross negligence or willful misconduct), after giving one month's prior written notice to the Company. The Company may remove the Warrant Agent upon one month's written notice specifying the date when such discharge shall take effect, and the Warrant Agent shall thereupon in like manner be discharged from all further duties and liabilities hereunder, except as aforesaid. The Warrant Agent or the Company shall cause to be mailed to each Holder of a Warrant a copy of said notice of resignation or notice of removal, as the case may be. Upon such resignation or removal the Company shall appoint in writing a new warrant agent. If the Company shall fail to make such appoint- ment within a period of 30 calendar days after it has been notified in writing of such resignation by the resigning Warrant Agent or after such removal, then the 34 resigning Warrant Agent or the Holder of any Warrant may apply to any court of competent jurisdiction for the appointment of a new warrant agent. Any new warrant agent, whether appointed by the Company or by such a court, shall be a bank or trust company doing business under the laws of the United States or any state thereof, in good standing and having a combined capital and surplus of not less than $25,000,000. The combined capital and surplus of any such new warrant agent shall be deemed to be the combined capital and surplus as set forth in the most recent annual report of its condition published by such warrant agent prior to its appointment, provided that such reports are published at least annually pursuant to law or to the requirements of a federal or state supervising or examining authority. After acceptance in writing of such appointment by the new warrant agent, it shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named herein as the Warrant Agent, without any further assurance, conveyance, act or deed; however, if for any reason it shall be necessary or expedient to execute and deliver any further assurance, conveyance, act or deed, the same shall be done at the expense of the Company and shall be legally and validly executed and delivered by the resigning or removed Warrant Agent. Not later than the effective date of any such appointment the Company shall file notice thereof with the resigning or removed Warrant Agent and shall forthwith cause a copy of such notice to be mailed to each Holder of a Warrant. Failure to give any notice provided for in this Section 11.5, however, or any defect therein, shall not affect the legality or validity of the resignation of the Warrant Agent or the appointment of a new warrant agent, as the case may be. SECTION 11.6 SUCCESSOR WARRANT AGENT. Any corporation into which the Warrant Agent or any new warrant agent may be merged, or any corporation resulting from any consolidation to which the Warrant Agent or any new warrant agent shall be a party, shall be a successor Warrant Agent under this Agreement without any further act, provided that such corporation would be eligible for appointment as successor to the Warrant Agent under the provisions of Section 11.5. Any such successor Warrant Agent shall promptly cause notice of its succession as Warrant Agent to be mailed to each Holder of a Warrant. 35 ARTICLE XII MISCELLANEOUS SECTION 12.1 MONEY DEPOSITED WITH THE WARRANT AGENT. The Warrant Agent shall not be required to pay interest on any moneys deposited pursuant to the provisions of this Agreement except such as it shall agree in writing with the Company to pay thereon. Any moneys, securities or other property which at any time shall be deposited by the Company or on its behalf with the Warrant Agent pursuant to this Agreement shall be and are hereby assigned, transferred and set over to the Warrant Agent in trust for the purpose for which such moneys, securities or other property shall have been deposited; but such moneys, securities or other property need not be segregated from other funds, securities or other property except to the extent required by law. Any money, securities or other property deposited with the Warrant Agent for payment or distribution to the Holders that remains unclaimed for two years after the date the money, securities or other property was deposited with the Warrant Agent shall be delivered to the Company upon its request therefor. SECTION 12.2 PAYMENT OF TAXES. All shares of Common Stock or other securities issuable upon the exercise of Warrants shall be validly issued, fully paid and nonassessable, and the Company shall pay any taxes and other governmen- tal charges that may be imposed under the laws of the United States of America or any political subdivision or taxing authority thereof or therein in respect of the issue or delivery thereof or of other securities deliverable upon exercise of Warrants or in respect of any Repurchase Offer (other than income taxes imposed on the Holders). The Company shall not be required, however, to pay any tax or other charge imposed in connection with any transfer involved in the issue of any certificate for shares of Common Stock or other securities or property issuable upon the exercise of the Warrants or in respect of any Repurchase Offer or payment of cash to any Person other than the Holder of a Warrant Certificate surrendered upon the exercise or repurchase of a Warrant and in case of such transfer or payment, the Warrant Agent and the Company shall not be required to issue any stock certificate or pay any cash until such tax or charge has been paid or it has been established to 36 the Warrant Agent's and the Company's satisfaction that no such tax or charge is due. SECTION 12.3 NO MERGER, CONSOLIDATION OR SALE OF ASSETS OF THE COMPANY. Except as otherwise provided herein, the Company will not merge into or consolidate with any other Person, or sell or otherwise transfer its proper- ty, assets and business substantially as an entirety to a successor of the Company, unless the Person resulting from such merger or consolidation, or such successor of the Company, shall expressly assume, by supplemental agreement satisfactory in form to the Warrant Agent and executed and delivered to the Warrant Agent, the due and punctual performance and observance of each and every covenant and condition of this Agreement to be performed and observed by the Company. SECTION 12.4 REPORTS TO HOLDERS. Until the Company has a class of equity securities registered under the Exchange Act, the Company will prepare, for the first three quarters of each fiscal year, full quarterly financial reports (including combined or consolidated quarterly financial statements and a management discussion and analysis of financial condition and results of opera- tions). The Company will also prepare, on an annual basis, complete audited combined or consolidated financial statements including, but not limited to, a balance sheet, a statement of income and stockholders' equity, a statement of changes in financial position and all appropriate notes. Such annual report will also include a management discussion and analysis of financial condition and results of operations. All financial statements will be prepared in accordance with generally accepted accounting principles consistently applied, except for changes with which the Company's independent public accountants concur and except that quarterly statements may be subject to year-end adjust- ments. The Company will cause a copy of the respective reports to be mailed to the Warrant Agent and to each of the Holders of the Warrants within 60 calendar days after the close of each of the first three quarters of each fiscal year and within 120 calendar days after the close of each fiscal year, at such Holder's address appearing on the register of the Company maintained by the Warrant Agent. If the Company shall have a class of equity securities registered under the Exchange Act, the Company 37 will cause a copy of the annual reports and of the information, documents and other reports which the Company shall be required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act to be mailed to the Warrant Agent and to each Holder of the Warrants within 15 days after such information, documents and other reports have been so filed, at such Holder's address appearing on the register of the Company maintained by the Warrant Agent. SECTION 12.5 NOTICES. Except as otherwise provided in Section 12.5(b), any notice, demand or delivery authorized by this Agreement shall be sufficiently given or made when mailed, if sent by first class mail, postage prepaid, addressed to any Holder of a Warrant at such Holder's last known address appearing on the register of the Company maintained by the Warrant Agent and to the Company or the Warrant Agent as follows: To the Company: Empire Gas Corporation 1700 South Jefferson Street P.O. Box 303 Lebanon, Missouri 66536 Attention: Secretary To the Warrant Agent: Shawmut Bank Connecticut National Association 777 Main Street MSN 238 Hartford, Connecticut 06115 Attention: Corporate Trust Administration or such other address as shall have been furnished to the party giving or making such notice, demand or delivery. Any notice that is mailed in the manner herein provided shall be conclusively presumed to have been duly given when mailed, whether or not the Holder receives the notice. (b) Any notice required to be given by the Company to the Holders pursuant to Section 3.4(b), shall be made by mailing by registered mail, return receipt requested, to the Holders at their last known addresses appearing on the register of the Company maintained by the Warrant Agent. The Company hereby irrevocably authorizes the Warrant Agent, in the name and at the expense of the Company, to mail any such notice upon 38 receipt thereof from the Company. Any notice that is mailed in the manner herein provided shall be conclusively presumed to have been duly given when mailed, whether or not the Holder receives the notice. SECTION 12.6 APPLICABLE LAW. This Agreement, each Warrant Certifi- cate issued hereunder and all rights arising hereunder shall be construed and determined in accordance with the laws of the State of New York, and the performance thereof shall be governed and enforced in accordance with such laws. SECTION 12.7 BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the Company and the Warrant Agent and their respec- tive successors and assigns, and the Holders from time to time of the Warrants. Nothing in this Agreement is intended or shall be construed to confer upon any Person, other than the Company, the Warrant Agent and the Holders of the Warrants, any right, remedy or claim under or by reason of this Agreement or any part hereof. SECTION 12.8 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together constitute one and the same instrument. SECTION 12.9 AMENDMENTS. The Warrant Agent may, without the consent or concurrence of the Holders of the Warrants, by supplemental agreement or otherwise, join with the Company in making any changes or corrections in this Agreement that they shall have been advised by counsel (a) are required to cure any ambiguity or to correct any defective or inconsistent provision or clerical omission or mistake or manifest error herein contained or (b) add to the covenants and agreements of the Company in this Agreement further covenants and agreements of the Company thereafter to be observed, or surrender any rights or power reserved to or conferred upon the Company in this Agreement; PROVIDED that in either case such changes or corrections do not and will not adversely affect, alter or change the rights, privileges or immunities of the Holders of Warrants. SECTION 12.10 HEADINGS. The descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. 39 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed, as of the day and year first above written. EMPIRE GAS CORPORATION By_____________________________________ Name: Title: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, as Warrant Agent By_____________________________________ Name: Title: 40 EXHIBIT A FORM OF WARRANT CERTIFICATE [UNLESS THIS WARRANT CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTA- TIVE OF THE DEPOSITORY TRUST COMPANY, TO THE COMPANY OR THE WARRANT AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR REPURCHASE, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER REPRESENTATIVE OF THE DEPOSITARY TRUST COMPANY OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL WARRANT SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL WARRANT SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE VIII OF THE WARRANT AGREEMENT. ]1 THE WARRANTS ARE INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS. EACH UNIT CONSISTS OF (i) ___ SENIOR SECURED NOTES AND (ii) ___ WARRANTS OF THE COMPANY. PRIOR TO THE CLOSE OF BUSINESS DECEMBER __, 1994, THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPA- RATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE SENIOR SECURED NOTES ISSUED BY EMPIRE GAS CORPORATION, IN CONNECTION HERE- WITH. [CUSIP] [SINS] No. ________ - ----------------------------- 1. Include only for Global Warrant A-1 No. _____ Certificate for _______ Warrants WARRANTS TO PURCHASE COMMON STOCK This certifies that _____________, or its registered assigns, is the owner of the number of Warrants set forth above, each of which represents the right to purchase, after the Separation Date (as defined below), from EMPIRE GAS CORPORATION, a Missouri corporation (the "Company"), one share of Common Stock, par value $.001 per share, of the Company ("Common Stock") at the purchase price (the "Exercise Price") of $7.00 per share (subject to adjustment as provided in the Warrant Agreement hereinafter referred to), upon surrender hereof at the office of Shawmut Bank Connecticut, National Association or to its successor as the warrant agent under the Warrant Agreement hereinafter referred to (any such warrant agent being herein called the "Warrant Agent"), with the Subscription Form on the reverse hereof duly executed, with signature guaranteed as therein specified and simultaneous payment in full (in cash or by certified or official bank or bank cashier's check payable to the order of the Company) of the pur- chase price for the share(s) as to which the Warrant(s) represented by this Warrant Certificate are exercised, all subject to the terms and conditions hereof and of the Warrant Agreement. "Separation Date" means the close of business upon December __, 1994. This Warrant Certificate is issued under and in accordance with a Warrant Agreement dated as of June __, 1994 (the "Warrant Agreement"), between the Company and Shawmut Bank Connecticut, National Association, as Warrant Agent, and is subject to the terms and provisions contained therein; to all of which terms and provisions the Holder of this Warrant Certificate consents by acceptance hereof. The Warrant Agreement is hereby incorporated herein by reference and made a part hereof. Reference is hereby made to the Warrant Agreement for a full description of the rights, limitations of rights, obliga- tions, duties and immunities thereunder of the Company and the Holders of the Warrants. The summary of the terms of the Warrant Agreement contained in this Warrant Certificate is qualified in its entirety by express reference to the Warrant Agreement. All terms used in this Warrant Certificate that are defined in the Warrant Agreement shall have the meanings assigned to them in the Warrant Agreement. A-2 Copies of the Warrant Agreement are on file at the office of the Warrant Agent and may be obtained by writing to the Warrant Agent at the following address: Shawmut Bank Connecticut, National Association 777 Main Street MSN 238 Hartford, Connecticut 06115 Attention: Corporate Trust Administration A "Repurchase Event", as defined in the Warrant Agreement, shall be deemed to occur if at any time prior to June __, 2004 the Company consolidates with, merges into or with (where holders of the Common Stock receive consid- eration in exchange for all or part of such shares of Common Stock), or sells all or substantially all of its assets to, another Person which has a class of equity Securities registered under the Exchange Act, or a wholly owned subsid- iary of such Person, if the consideration for such transaction does not consist solely of cash or such merger or consolidation is not effected solely for the purpose of changing the Company's state of incorporation or is effected with a Plaster Entity or a Lindsey Entity. Following a Repurchase Event, the Company must make an offer to repurchase all Warrants surrendered for repurchase (a "Repurchase Offer"). If the Company makes a Repurchase Offer, Holders may, until the Final Surrender Date of such offer, surrender all or part of their Warrants for repurchase by the Company. Warrants received by the Warrant Agent in proper form during a Repurchase Offer will, except as otherwise provided in the Warrant Agreement, be repurchased by the Company at a price (the "Repurchase Price") equal to the value on the Valuation Date relating thereto of the Common Stock and other securities or property of the Company which would have been delivered upon exercise of the Warrants, less the Exercise Price. The value of such Common Stock and other securities will be (i) if the Common Stock (or other securities) is registered under the Exchange Act, determined based upon the closing sales prices of the Common Stock (or other securities) for the 20 trading days immediately preceding such Valuation Date or (ii) if the Common Stock (or other securities) is not registered under the Exchange Act or if the value cannot be computed under clause (i) above, determined by the Independent Financial Expert (as defined in A-3 the Warrant Agreement), in each case as set forth in the Warrant Agreement. The "Valuation Date" as defined in the Warrant Agreement shall be deemed to occur on the date five business days prior to the date notice of the Repurchase Offer is first given. If the Company fails to make or complete any Repurchase Offer (a "Default") as required by the Warrant Agreement, it shall be obligated to increase the amount otherwise payable pursuant to the Warrant Agreement in respect of the Repurchase Offer to which such Default relates by an amount equal to interest thereon at a rate of ___% per annum from the date of the Default to the date of payment, which interest shall compound quarterly. If the Company merges or consolidates with, or sells all or substan- tially all of its property and assets to, another Person (other than an Affili- ate of the Company) solely for cash, the Holders of Warrants shall be entitled to receive upon exercise cash on an equal basis with holders of Common Stock, as if the Warrants had been exercised immediately prior to such transaction or the amount payable pursuant to an outstanding Repurchase Offer, if higher. The number of shares of Common Stock purchasable upon the exercise of each Warrant and the price per share are subject to adjustment as provided in the Warrant Agreement. Except as stated in the immediately preceding paragraph, in the event the Company merges or consolidates with, or sells all or substan- tially all of its assets to, another Person, each Warrant will, upon exercise, entitle the Holder thereof to receive the number of shares of stock or other securities or the amount of money and other property which the holder of a share of Common Stock (or other securities or property issuable upon exercise of a Warrant) is entitled to receive upon completion of such merger, consolidation or sale. As to any final fraction of a share which the same Holder of one or more Warrant Certificates would otherwise be entitled to purchase upon exercise thereof in the same transaction, the Company may pay the cash value thereof determined as provided in the Warrant Agreement. All shares of Common Stock or other securities issuable by the Company upon the exercise of Warrants shall be validly issued, fully paid and nonassess- able, and the Company A-4 shall pay all taxes and other governmental charges that may be imposed under the laws of the United States of America or any political subdivision or taxing authority thereof or therein in respect of the issue or delivery of such shares or of other securities deliverable upon exercise of Warrants. The Company shall not be required, however, to pay any tax or other charge imposed in connection with any transfer involved in the issue of any certificate for shares of Common Stock, and in such case the Company shall not be required to issue or deliver any stock certificate until such tax or other charge has been paid or it has been established to the Warrant Agent's and the Company's satisfaction that no tax or other charge is due. Subject to the restrictions on transfer set forth in Article VIII of the Warrant Agreement, this Warrant Certificate and all rights hereunder are transferable by the registered Holder hereof, in whole or in part, on the register of the Company maintained by the Warrant Agent for such purpose at its office in Hartford, Connecticut, upon surrender of this Warrant Certificate duly endorsed, or accompanied by a written instrument of transfer in form satisfacto- ry to the Company and the Warrant Agent duly executed, with signatures guaran- teed as specified in the attached Form of Assignment, by the registered Holder hereof or his attorney duly authorized in writing and upon payment of any necessary transfer tax or other governmental charge imposed upon such transfer. Upon any partial transfer the Company will issue and deliver to such Holder a new Warrant Certificate or Certificates with respect to any portion not so transferred. Each taker and Holder of this Warrant Certificate, by taking and holding the same, consents and agrees that prior to the registration of transfer as provided in the Warrant Agreement, the Company and the Warrant Agent may treat the person in whose name the Warrants are registered as the absolute owner hereof for any purpose and as the Person entitled to exercise the rights repre- sented hereby, any notice to the contrary notwithstanding. This Warrant Certificate may be exchanged at the office of the Warrant Agent maintained for such purpose in Hartford, Connecticut for Warrant Certifi- cates representing the same aggregate number of Warrants, each new Warrant Certificate to represent such number of Warrants as the Holder hereof shall designate at the time of such exchange. Prior to the exercise of the Warrants represented hereby, the Holder of this Warrant Certificate, as such, shall not be entitled to any right of a stockholder of the Company, A-5 including, without limitation, the right to vote or to consent to any action of the stockholders, to receive dividends or other distributions, to exercise any preemptive right or to receive any notice of meetings of stockholders, and shall not be entitled to receive any notice of any proceedings of the Company except as provided in the Warrant Agreement. This Warrant Certificate shall be void and all rights evidenced hereby shall cease on June __, 2004 unless sooner terminated by the liquidation, disso- lution or winding-up of the Company or as otherwise provided in the Warrant Agreement upon the consolidation or merger of the Company with or sale of the Company to, another Person (other than an Affiliate of the Company), or unless such date is extended as provided in the Warrant Agreement. A-6 This Warrant Certificate shall not be valid for any purpose until it shall have been countersigned by the Warrant Agent. Dated: June __, 1994 EMPIRE GAS CORPORATION By:____________________________________ Name: Title: Countersigned: Shawmut Bank Connecticut, National Association, as Warrant Agent By:______________________ A-7 FORM OF REVERSE OF WARRANT CERTIFICATE SUBSCRIPTION FORM (To be executed only upon exercise of Warrant) To: The undersigned irrevocably exercises _________ of the Warrants for the purchase of one share (subject to adjustment) of Common Stock, par value $.001 per share, of EMPIRE GAS CORPORATION for each Warrant represented by the Warrant Certificate and herewith makes payment of $__________ (such payment being in cash or by certified or official bank or bank cashier's check payable to the order of ____________________________________), all at the exercise price and on the terms and conditions specified in the within Warrant Certificate and the Warrant Agreement therein referred to, surrenders this Warrant Certificate and all right, title and interest therein to __________________________________- _______ and directs that the shares of Common Stock deliverable upon the exercise of said Warrants be registered or placed in the name and at the address specified below and delivered thereto. Dated: (1) ------------------------------------------------ (Signature of Owner) ------------------------------------------------ (Street Address) ------------------------------------------------ (City) (State) (Zip Code) Signature Guaranteed By: Securities and/or check to be issued to: Please insert social security or identifying number: Name: Street Address: City, State and Zip Code: - --------------------------- (1) The signature must correspond with the name as written upon the face of the within Warrant Certificate in every particular, without alteration or enlargement or any change whatever, and must be guaranteed by a national bank or trust company or by a member firm of any national securities exchange. FORM OF CERTIFICATE FOR SURRENDER FOR REPURCHASE OFFER (To be executed only upon repurchase of Warrant by the Company) To: The undersigned, having received prior notice of the consideration for which EMPIRE GAS CORPORATION will repurchase the Warrants represented by the within Warrant Certificate, hereby surrenders this Warrant Certificate for repurchase by EMPIRE GAS CORPORATION for the consideration set forth in said notice. Dated: (1) ------------------------------------------------ (Signature of Owner) ------------------------------------------------ (Street Address) ------------------------------------------------ (City) (State) (Zip Code) Signature Guaranteed By: Check to be issued to: Please insert social security or identifying number: Name: Street Address: City, State and Zip Code: - ----------------------------------------------- (l) The signature must correspond with the name as written upon the face of the within Warrant Certificate in every particular, without alteration or enlargement or any change whatever, and must be guaranteed by a national bank or trust company or by a member firm of any national securities exchange. FORM OF ASSIGNMENT FOR VALUE RECEIVED the undersigned registered holder of the within Warrant Certificate hereby sells, assigns, and transfers unto the Assignee(s) named below (including the undersigned with respect to any Warrants constituting a part of the Warrants evidenced by the within Warrant Certificate not being as- signed hereby) all of the right of the undersigned under the within Warrant Certificate, with respect to the number of Warrants set forth below: Name(s) of ASSIGNEE(S) ADDRESS NO. OF WARRANTS - ----------- ------- --------------- Please insert social security or other identifying number of assignee(s). and does hereby irrevocably constitute and appoint _____________ __________ the undersigned's attorney to make such transfer on the books of _____________________ maintained for the purposes, with full power of substitu- tion in the premises. Dated: (1) -------------------------------------------------- (Signature of Owner) -------------------------------------------------- (Street Address) -------------------------------------------------- (City) (State) (Zip Code) Signature Guaranteed By: - ---------------------------------------------- (1) The signature must correspond with the name as written upon the face of the within Warrant Certificate in every particular, without alteration or enlargement or any change whatever, and must be guaranteed by a national bank or trust company or by a member firm of EX-10.9 5 EXHIBIT 10.9 INDEMNIFICATION AGREEMENT This Indemnification Agreement (the "Agreement") is entered into this __ day of _____, 1994, between Douglas A. Brown ("Brown") and Empire Gas Corporation, formerly Empire Gas Acquisition Corporation (the "Company"). RECITALS WHEREAS, as part of a series of transactions that will effect a change in its ownership and management, the Company filed on April 29, 1994 a registration statement on Form S-1 (the "Registration Statement") relating to the registration of Senior Secured Notes due 2004 in an aggregate principal amount expected to result in gross proceeds of $100,000,000 in a public offering (the "Offering"); and WHEREAS, Brown will become a director of the Company upon the consummation of the Offering; and WHEREAS, included as an exhibit to the Registration Statement is a written consent by Brown to be named in the Registration Statement as a prospective director of the Company; and WHEREAS, Article 9 of the Company's Articles of Incorporation provides for the indemnification of all directors, officers, employees and agents of the Company; and WHEREAS, the Company agrees to indemnify Brown with respect to liability incurred by him as a result of his being named as a director and consenting thereto, as an inducement to become a director; In consideration of the foregoing and the respective covenants and agreements set forth in this Agreement, Brown and the Company agree as follows: Section 1 INDEMNIFICATION. Notwithstanding the fact that Brown was not a director of the Company at the time the Registration Statement was filed, the Company agrees to indemnify Brown, to the full extent provided for indemnification of directors set forth in Article 9 of the Company's Articles of Incorporation as in effect on the date of this Agreement, against any and all loss, liability, claim, damage and expense whatsoever (a "Loss"), as incurred, arising out of or resulting from his being named as a director in the Registration Statement and consenting thereto, including without limitation any Loss arising out of any untrue statement or alleged untrue statement of material fact contained in the Registration Statement (or any amendment thereto), including the information deemed to be part of the Registration Statement pursuant to Rule 430A(b) of the regulations pursuant to the Securities Act of 1933, as amended, if applicable, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in any preliminary or final prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Section 2 PROCEDURE. (a) Indemnification under this Agreement shall be provided in accordance with the procedures set forth in Article 9 of the Articles of Incorporation of the Company and as set forth in this Section 3. (b) Brown shall give notice as promptly as reasonably practicable to the Company of any action commenced against him in respect of which an indemnity may be sought hereunder, but failure to do so notify the Company shall not relieve the Company from any liability which it may have otherwise than on account of this Agreement. The Company may participate at its own expense in the defense of such action. If it so elects within a reasonable time after receipt of such notice, the Company may assume the defense of such action with counsel chosen by it and approved by Brown, unless Brown reasonably objects to such assumption on the ground that the named parties to any such action (including any impleaded parties) include both Brown and the Company, and Brown reasonably believes that there may be legal defenses available to him which are different from or in addition to those available to the Company. If the Company assumes the defense of such action, the Company shall not be liable for any fees and expenses of counsel for Brown incurred thereafter in connection with such action. In no event shall the Company be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from its own counsel for Brown in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. Section 3 NOTICES. All notices called for under this Agreement must be in writing and will be deemed given for all purposes (i) upon -2- personal delivery, (ii) two days after being sent, when sent by professional overnight courier service, (iii) five days after posting when sent by registered or certified mail, or (iv) on the date of transmission when sent by telegram, telegraph, telex, or facsimile transmission, addressed to Brown and the Company at the following addresses (or at such other address for a party as is specified by like notice; provided that notices of a change of address will be effective only upon receipt of the notice): To Douglas A. Brown: Holding Capital Group 685 Fifth Avenue New York, New York 10022 Attention: Douglas A. Brown To Empire Gas Corporation: Empire Gas Corporation 1700 South Jefferson Street Lebanon, Missouri 65536 Attention: Paul S. Lindsey, Jr. Section 4 SEVERABILITY. If any provision of this Agreement is held invalid, such invalidity will not affect any other provision of the Agreement that can be given effect without the invalid provision, and to this end, the provisions of this Agreement are separable. Section 5 ASSIGNMENT. This Agreement will bind and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests and obligations hereunder, may be assigned by any party without the written consent of the other party. Section 6 AMENDMENT. This Agreement may be modified only by a written instrument duly executed by the Company and Brown and compliance with any provision or condition contained in this Agreement, or the obtaining of any consent provided for in this Agreement, may be waived only by written instrument duly executed by the party to be bound by such waiver. -3- Section 7 GOVERNING LAW. The rights of the parties arising under this Agreement shall be construed and enforced under the laws of the State of Missouri without giving effect to any choice of law or conflict of law rules. Section 8 ENTIRE AGREEMENT. This Agreement contains the entire understanding of the parties to this Agreement respecting the subject matter hereof and supersedes all prior agreements, discussions, and understandings. Section 9 CAPTIONS. The captions in this Agreement are for convenience only, do not form a part of it, and do not in any way modify, interpret or construe the intentions of the parties to it. Section 10 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which will be deemed an original but all of which will constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date set forth in the first paragraph of this Agreement. Empire Gas Corporation By: __________________________ __________________________ Douglas A. Brown -4- EX-10.11 6 EXHIBIT 10.11 EXHIBIT 10.11 PHILLIPS 66 COMPANY NGL DIVISION SALES CONFIRMATION 764 ADAMS BUILDING BARTLESVILLE, OK 74004 ________________________________________________________________________________ EMPIRE GAS CORP. DATE AUGUST 29, 1991 P.O. BOX 303 PHILLIPS' SALES CONFIRMATION NO. _______________ LEBANON, MO 65536 CUSTOMER'S PURCHASE CONFIRMATION NO. _______________ ATTENTION MR. EARL NOE THIS CONSTITUTES A CONTRACT BETWEEN OUR RESPECTIVE COMPANIES WHEREBY BOTH PARTIES HAVE AGREED TO THE FOLLOWING TERMS AND CONDITIONS OF THIS SALE. ________________________________________________________________________________ 1. PERIOD: July 1, 1991 - June 30, 1992, subject to 30 day written notice of cancellation during any summer month (April-September) 2. PRODUCTS: HD-5 Propane 3. QUANTITY: Phillips National Accounts posting on date of lifting at Paola, KS; Jeff City, MO; St. Louis, MO; E. St. Louis, IL; Decatur & Kankakee, IL 4. PRICE: Per Attachment A 5. F.O.B.: Wire transfer, .5% (one-half percent) 5 days 6. TERMS: Net 10 days 7. SHIPPING INSTRUCTIONS: / / TANK CAR /X/ TANK TRUCK / / OTHER: 8. MATERIAL: /X/ STENCHED / / UNSTENCHED 9. SPECIAL INSTRUCTIONS: During periods of terminal allocation at Phillips Pipe Line Co. terminals, allocation earnings shall be the lesser of: (a) monthly contract volume, (b) total summer deliveries multiplied by three (3) and divided by six (6), (c) a proportionate share of the terminal capacity calculated as a percent (%) of your forecast volume to the total forecast volume for all customers at the terminal. PHILLIPS INVOICES SHOULD BE MAILED TO THE FOLLOWING CUSTOMER INVOICES SHOULD PLEASE FORWARD ADDRESS: BE MAILED TO: BILLS OF LADING TO: - -------------------------- ------------------------ ------------------- - -------------------------- ------------------------ ------------------- - -------------------------- ------------------------ ------------------- ________________________________________________________________________________ THE GENERAL PROVISIONS AND WARNINGS APPEARING ON THE REVERSE SIDE HEREOF ARE A PART OF THIS CONTRACT. PLEASE INDICATE YOUR ACCEPTANCE OF THIS AGREEMENT IN THE SPACE PROVIDED BELOW AND RETURN ONE COPY FOR OUR FILES. ACCEPTED AND AGREED TO THIS 13TH PHILLIPS 66 COMPANY ----------- DAY OF Sept, 1991 -------------------------------- BY /s/ Earl Noe BY /s/ J.R. Fouts ------------------------------------ -------------------------------- TITLE Sr. V.P. J.R. Fouts -------------------------------- TITLE Director, National Accounts ----------------------------- EMPIRE GAS CORP. PPCo. Pipe Line East Leg 1991 - 1992 ATTACHMENT A (Thousands of Gallon) Forecast: OCT NOV DEC JAN FEB MAR Paola L 388 100 190 240 260 180 100 ---- ---- ---- ---- ---- ---- ---- Jeff City L 350 1000 1200 1900 1950 1500 1000 ---- ---- ---- ---- ---- ---- ---- St. Louis L 325 310 310 490 490 440 340 ---- ---- ---- ---- ---- ---- ---- E. St. Louis L 330 40 90 110 120 90 30 ---- ---- ---- ---- ---- ---- ---- Decatur L 240 250 250 320 340 300 250 ---- ---- ---- ---- ---- ---- ---- Kankakee L 354 230 190 180 190 200 140 ---- ---- ---- ---- ---- ---- ---- Forecast: APR MAY JUN JUL AUG SEP Paola L 388 60 40 40 30 60 120 ---- ---- ---- ---- ---- ---- ---- Jeff City L 350 560 370 340 240 540 800 ---- ---- ---- ---- ---- ---- ---- St. Louis L 325 110 100 110 110 230 330 ---- ---- ---- ---- ---- ---- ---- E. St. Louis L 330 20 20 20 20 20 60 ---- ---- ---- ---- ---- ---- ---- Decatur L 240 90 80 60 60 80 200 ---- ---- ---- ---- ---- ---- ---- Kankakee L 354 80 80 80 40 60 140 ---- ---- ---- ---- ---- ---- ---- 12 Month Total: 20,720 -------- PAGE 2 10. TITLE AND RISK OF LOSS Title to and risk of loss for propane purchased by BUYER at a Phillips Pipe Line Company terminal shall pass from SELLER to BUYER when such propane passes through the flange connection between such PPLC terminals' delivery hose and a transport truck or tank car furnished or arranged for by BUYER. 11. RECORDS AND AUDIT Each party shall maintain a true and correct set of records pertaining to its performance of this Contract and all transactions related hereto. Each party further agrees to retain all such records for a period of time not less than two (2) years after completion of this Contract. Any representative or representatives authorized by either party may audit any and all such records of the other party at any time or times during such performance of this Contract and during the two (2) year period after completion of performance. 12. SEVERABILITY If any provision hereof is found by any court of competent jurisdiction to be illegal, invalid or unenforceable, for any reason whatsoever, such finding shall not affect the other provisions hereof, which shall remain in full force and effect. 13. NONWAIVER No waiver of any breach by either party of the terms, conditions or obligations in this Contract shall be deemed a waiver of the same or similar terms in the future nor a waiver of subsequent breaches of the same or similar nature. 14. ENTIRE AGREEMENT This Contract contains the entire and only agreement between SELLER and BUYER respecting the sale/purchase of propane, and there are no promises, terms, conditions or obligations except those which are expressly incorporated herein. In order to be binding upon SELLER or BUYER, any modification or amendment of this Contract, or of any of the provisions hereof, must be in writing and signed by both parties. 15. TERMINATION OF PRIOR CONTRACT The Contract, as of its effective date, terminates and supersedes all prior sales contracts by and between SELLER and BUYER covering propane, subject, however, to all rights accruing under said prior sales contract before the said date of termination thereof. 16. ASSIGNMENT The terms, conditions and provisions of this Contract shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that neither party shall assign this Contract, or any interest therein, without the other party's prior written consent. PAGE 3 17. APPLICABLE LAW REGARDLESS OF THE PLACE OF CONTRACTING, PLACE(S) OF PERFORMANCE, OR OTHERWISE, THIS CONTRACT, AND ALL AMENDMENTS, MODIFICATIONS, ALTERNATIONS OR SUPPLEMENTS THERETO, IF ANY, SHALL BE GOVERNED EXCLUSIVELY BY THE LAWS OF THE STATE OF OKLAHOMA, AS TO THE NATURE, VALIDITY AND INTERPRETATION THEREOF. 18. WARRANTY: TAXES SELLER hereby warrants that it has good and marketable title, free of liens, taxes and encumbrances, to the propane delivered to BUYER hereunder. Any tax (other than an income or franchise tax based on or measured by net income, or a franchise tax or fee based on capital employed), license fee, inspection fee, or other charge imposed by any governmental authority or other agency or measured by gross receipts from propane herein sold, or on the production, transportation, sale, use, delivery or other handling of propane, or on any other feature of this Contract, existing at the time of delivery hereunder, shall be added to the price then in effect hereunder and shall be paid by BUYER to SELLER, if such tax, fee or charge is required to be or is paid by SELLER. The failure of SELLER to add any such tax, fee or charge to an invoice hereunder shall not relieve BUYER of future liability therefor. BUYER shall reimburse SELLER for any interest and/or penalty assessed by any governmental authority or other agency when such penalty and/or interest is accrued as the result of false, incorrect or delinquent certification made to SELLER by BUYER. [LOGO] PHILLIPS 66 COMPANY BARTLESVILLE, OKLAHOMA 74004 918 661-6600 NGL DIVISION August 29, 1991 Empire Gas Co. P.O. Box 303 Lebanon, Missouri 65536 Gentlemen: Your attention is directed to that certain "NGL Division Sales Confirmation" dated August 29, 1991, by and between yourself as Buyer and Phillips 66 Company as Seller. 1) Paragraph 1 shall be amended by adding the following sentence at the end thereof, to wit: "The indemnity provision in paragraph 2 shall not apply to any damage or injury caused by a failure of Seller to deliver propane that meets the aforesaid specifications except as to a failure to odorize as is more fully set forth in paragraph 2." 2) Paragraph 2 shall be amended by inserting the word "reasonable" before the word "attorney's" in the second line of the text. 3) Paragraph 3 hereof shall be amended by adding the following language at the end thereof, to wit: "Anything herein to the contrary notwithstanding, it is agreed that deliveries hereunder shall be made only at pipeline terminals into trucks designated by Buyer. The risk of loss passes to Buyer upon actual delivery into such trucks." In every other respect, the terms and conditions of the aforementioned NGL Division Sales Confirmation dated August 29, 1991, by and between yourself and Phillips is hereby ratified and confirmed. Please signify your agreement by signing the enclosed copy and returning it to the undersigned. Yours truly, /s/ J.R. Fouts J.R. Fouts Director, National Accounts ACCEPTED AND AGREED TO THIS 13th DAY OF Sept , 1991 - ---- ---------- EMPIRE GAS CORP. BY /s/ Earl Noe -------------------------------- EX-10.12 7 EXHIBIT 10.12 EXHIBIT 10.12 [logo] PHILLIPS 66 COMPANY NGL DIVISION SALES CONFIRMATION 764 Adams Building ----------------------- Bartlesville, OK 74004 ----------------------- - -------------------------------------------------------------------------------- Empire Gas Corp. Date August 29, 1991 - ------------------------- --------------- P.O. Box 303 PHILLIPS' SALES CONFIRMATION NO. - ------------------------- --------------- Lebanan, MO 65536 CUSTOMER'S PURCHASE CONFIRMATION NO. - ------------------------- --------------- ATTENTION Mr. Earl Noe ---------------- THIS CONSTITUTES A CONTRACT BETWEEN OUR RESPECTIVE COMPANIES WHEREBY BOTH PARTIES HAVE AGREED TO THE FOLLOWING TERMS AND CONDITIONS OF THIS SALE. - -------------------------------------------------------------------------------- 1. PERIOD: July 1, 1991 - June 30, 1992, subject to 30 day written notice of cancellation during any summer month (April-September) 2. PRODUCTS: HD-5 Propane 3. QUANTITY: Per Attachment A 4. PRICE: Phillips posted price on date of lifting 5. F.O.B.: Memphis, TN; W. Memphis, AR; Denver, CO; LaJunta, CO; Sweeny, TX 6. TERMS: 1% 10 Days 7. SHIPPING INSTRUCTIONS: / / TANK CAR / / TANK TRUCK / / OTHER 8. MATERIAL: / / STENCHED / / UNSTENCHED Customer #'s: Memphis, TN 223541 Denver, CO 223826 W.Memphis, AR 223687 LaJunta, CO 223827 9. SPECIAL INSTRUCTIONS: Sweeny, TX 223775 Subject to Phillips allocation procedure as applicable to all other customers at locations specified above. PHILLIPS INVOICES SHOULD BE MAILED TO THE CUSTOMER INVOICES PLEASE FORWARD BILLS FOLLOWING ADDRESS: SHOULD BE MAILED TO: OF LADING TO: __________________________ __________________________ __________________________ __________________________ __________________________ __________________________ __________________________ __________________________ __________________________ ________________________________________________________________________________ THE GENERAL PROVISIONS AND WARNINGS APPEARING ON THE REVERSE SIDE HEREOF ARE A PART OF THIS CONTRACT. PLEASE INDICATE YOUR ACCEPTANCE OF THIS AGREEMENT IN THE SPACE PROVIDED BELOW AND RETURN ONE COPY FOR OUR FILES. ACCEPTED AND AGREED TO THIS 13th PHILLIPS 66 COMPANY --------------- DAY OF Sept. , 1991 ------------------------------------ BY /s/ Earl Noe BY /s/ J.R. Fouts ---------------------------------------- ------------------------------- J. R. Fouts TITLE Sr. V.P. TITLE Director, National Accounts ------------------------------------- ---------------------------- PAGE 2 10. TITLE AND RISK OF LOSS Title to and risk of loss for propane purchased by BUYER at a Phillips Pipe Line Company terminal shall pass from SELLER to BUYER when such propane passes through the flange connection between such PPLC terminals' delivery hose and a transport truck or tank car furnished or arranged for by BUYER. 11. RECORDS AND AUDIT Each party shall maintain a true and correct set of records pertaining to its performance of this Contract and all transactions related hereto. Each party further agrees to retain all such records for a period of time not less than two (2) years after completion of this Contract. Any representative or representatives authorized by either party may audit any and all such records of the other party at any time or times during such performance of this Contract and during the two (2) year period after completion of performance. 12. SEVERABILITY If any provision hereof is found by any court of competent jurisdiction to be illegal, invalid or unenforceable, for any reason whatsoever, such finding shall not affect the other provisions hereof, which shall remain in full force and effect. 13. NONWAIVER No waiver of any breach by either party of the terms, conditions or obligations in this Contract shall be deemed a waiver of the same or similar terms in the future nor a waiver of subsequent breaches of the same or similar nature. 14. ENTIRE AGREEMENT This Contract contains the entire and only agreement between SELLER and BUYER respecting the sale/purchase of propane, and there are no promises, terms, conditions or obligations except those which are expressly incorporated herein. In order to be binding upon SELLER or BUYER, any modification or amendment of this Contract, or of any of the provisions hereof, must be in writing signed by both parties. 15. TERMINATION OF PRIOR CONTRACT The Contract, as of its effective date, terminates and supersedes all prior sales contracts by and between SELLER and BUYER covering propane, subject, however, to all rights accruing under said prior sales contract before the said date of termination thereof. 16. ASSIGNMENT The terms, conditions and provisions of this Contract shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that neither party shall assign this Contract, or any interest therein, without the other party's prior written consent. PAGE 3 17. APPLICABLE LAW REGARDLESS OF THE PLACE OF CONTRACTING, PLACE(S) OF PERFORMANCE, OR OTHERWISE, THIS CONTRACT, AND ALL AMENDMENTS, MODIFICATIONS, ALTERNATIONS OR SUPPLEMENTS THERETO, IF ANY, SHALL BE GOVERNED EXCLUSIVELY BY THE LAWS OF THE STATE OF OKLAHOMA, AS TO THE NATURE, VALIDITY AND INTERPRETATION THEREOF. 18. WARRANTY: TAXES SELLER hereby warrants that it has good and marketable title, free of liens, taxes and encumbrances, to the propane delivered to BUYER hereunder. Any tax (other than an income or franchise tax based on or measured by net income, or a franchise tax or fee based on capital employed), license fee, inspection fee, or other charge imposed by any governmental authority or other agency or measured by gross receipts from propane herein sold, or on the production, transportation, sale, use, delivery or other handling of propane, or on any other feature of this Contract, existing at the time of delivery hereunder, shall be added to the price then in effect hereunder and shall be paid by BUYER to SELLER, if such tax, fee or charge is required to be or is paid by SELLER. The failure of SELLER to add any such tax, fee or charge to an invoice hereunder shall not relieve BUYER of future liability therefor. BUYER shall reimburse SELLER for any interest and/or penalty assessed by any governmental authority or other agency when such penalty and/or interest is accrued as the result of false, incorrect or delinquent certification made to SELLER by BUYER. ATTACHMENT A (Thousands of Gallon)
Forecast: OCT NOV DEC JAN FEB MAR LaJunta L 362 200 260 400 400 300 30 --- --- --- --- --- --- --- Denver L 322 180 260 620 620 450 220 --- --- --- --- --- --- --- Memphis L 813 170 190 260 260 270 200 --- --- --- --- --- --- --- Forecast: APR MAY JUN JUL AUG SEPT LaJunta L 362 50 50 50 50 90 240 --- --- --- --- --- --- --- Denver L 322 100 120 120 100 150 200 --- --- --- --- --- --- --- Memphis L 813 90 90 40 40 80 130 --- --- --- --- --- --- --- 12 Month Total: 7,080 -----
[logo] PHILLIPS 66 COMPANY BARTLESVILLE, OKLAHOMA 74004 918 661-6600 NGL DIVISION August 29, 1991 Empire Gas Co. P. O. Box 303 Lebanon, Missouri 65536 Gentlemen: Your attention is directed to that certain "NGL Division Sales Confirmation" dated August 29, 1991, by and between yourself as Buyer and Phillips 66 Company as Seller. 1) Paragraph 1 shall be amended by adding the following sentence at the end thereof, to wit: "The indemnity provision in paragraph 2 shall not apply to any damage or injury caused by a failure of Seller to deliver propane that meets the aforesaid specifications except as to a failure to odorize as is more fully set forth in paragraph 2." 2) Paragraph 2 shall be amended by inserting the word "reasonable" before the word "attorney's" in the second line of the text. 3) Paragraph 3 hereof shall be amended by adding the following language at the end thereof, to wit: "Anything herein to the contrary notwithstanding, it is agreed that deliveries hereunder shall be made only at pipeline terminals into trucks designated by Buyer. The risk of loss passes to Buyer upon actual delivery into such trucks." In every other respect, the terms and conditions of the aforementioned NGL Division Sales Confirmation dated August 29, 1991, by and between yourself and Phillips is hereby ratified and confirmed. Please signify your agreement by signing the enclosed copy and returning it to the undersigned. Yours truly, /s/ J. R. Fouts J. R. Fouts Director, National Accounts ACCEPTED AND AGREED TO THIS 13TH day of Sept, 1991 EMPIRE GAS CORP. BY /s/ Earl Noe -------------------------- [logo] PHILLIPS 66 COMPANY A DIVISION OF PHILLIPS PETROLEUM COMPANY BARTLESVILLE, OKLAHOMA 74004 918 661-6600 NATURAL GAS LIQUIDS October 13, 1992 Earl Noe Empire Gas Corp. P.O. Box 303 Lebanon, MO 65536 Dear Earl: This letter shall serve to amend our letter agreement dated July 2, 1992, and include Borger and Sweeny as sales locations with all of the terms and conditions applicable to the letter agreement dated July 2, 1992. Please indicate your acceptance of this amendment and return one copy for our files. Accepted and agreed to This 15th day of October 1992 By /s/ Earl Noe By /s/ J. R. Fouts --------------------------------- -------------------------------- Title Sr. V.P. Title Wholesale Sales Director ------------------------------ ------------------------------- JRF:sks ATTACHMENT A 1992 - 1993 EMPIRE GAS CORP.
Sales Forecast: OCT NOV DEC JAN FEB MAR Borger L 310 18 27 45 54 36 18 --- --- --- --- --- --- --- Sweeny L 234 27 18 45 60 36 27 --- --- --- --- --- --- --- L____ ____ ____ ____ ____ ____ ____ L____ ____ ____ ____ ____ ____ ____ L____ ____ ____ ____ ____ ____ ____ L____ ____ ____ ____ ____ ____ ____ Subtotal: ____ ____ ____ ____ ____ ____ Sales Forecast: APR MAY JUN JUL AUG SEP Borger L 310 18 9 9 9 9 9 --- --- --- --- --- --- --- Sweeny L 234 18 9 9 18 18 27 --- --- --- --- --- --- --- L____ ____ ____ ____ ____ ____ ____ L____ ____ ____ ____ ____ ____ ____ L____ ____ ____ ____ ____ ____ ____ L____ ____ ____ ____ ____ ____ ____ Subtotal: ____ ____ ____ ____ ____ ____ 12 Month Total: _______
EX-10.13 8 EXHIBIT 10.13 EXHIBIT 10.13 CONOCO DEALER SALE CONTRACT Conoco Inc. Gas Products Division Humber Building - 1021 P.O. Box 2197 Houston, TX 77252 LP-GAS (713) 293-3815 We hereby confirm SALE to: Empire Gas Corporation DATE: November 4, 1991 P.O. Box 303 CONOCO No.: 30-9028517-0000 Lebanon, MO 65536 SYSTEM CODE: 50 Attention: Earl Noe ACCOUNT CODE: 509 Per conversations between Earl Noe and our Richard Fitzgerald PRODUCT: Propane (Stenched) meeting GPA specifications PRICE: Conoco Established Price On Date Of Delivery TERMS OF PAYMENT: 1% 10 Days/Net 11 Days From Date of Invoice F.O.B. ORIGIN POINT DESTINATION - ----------------------------------------- ----------------------------------- Conoco/Denver Refinery - Commerce City, c 30-9028517-0000 Various, Denver FREIGHT: Origin Collect METHOD OF TRANSPORTATION: Customer Truck and/or Common Carrier TERM OF AGREEMENT: The primary term of this agreement shall be for a period of one year commencing November 4, 1991, and shall be automatically renewed from year to year thereafter unless either buyer or seller otherwise notifies the other party in writing not less than 90 days before the expiration of the primary term or the anniversary date of any renewal. REMARKS: QUANTITY: Product will be sold on an as-available basis. Conoco Inc. invoices should be Customer invoices, contracts, and mailed to the following address: correspondence to be mailed to: Conoco Inc. Empire Gas Corporation Gas Products Division P.O. Box 303 Humber Building - 1021 Lebanon, MO 65536 P.O. Box 2197 Houston, TX 77252 ("Buyer") ("Seller") Subject to terms and conditions on reverse side Accepted June 9 , 1992 By /s/ J. H. Thomas - ------------------------------------ ------------------------------------- Empire Gas Corporation Ben Boldt - ------------------------------------ Manager - Marketing By /s/ Earl Noe - ------------------------------------ Please sign and return one copy and retain one copy for your files. EX-10.14 9 EXHIBIT 10.14 EXHIBIT 10.14 DEALER SALE CONTRACT Conoco Inc. CONOCO Gas Products Division Humber Building - 1021 P.O. Box 2197 LP-gas Houston, TX 77252 (713) 293-3815 We hereby confirm SALE to: Empire Gas Corporation DATE: January 21, 1992 P.O. Box 303 CONOCO NO.: 30-9026859-0000-A01 Lebanon, MO 65536 SYSTEM CODE: 35 Attention: Earl Noe ACCOUNT CODE: 586 Per conversations between Earl Noe and our Lewis Bradshaw PRODUCT: Propane (Stenched) meeting GPA specifications PRICE: Conoco Established Price On Date Of Delivery TERMS OF PAYMENT: 1% 10 Days/Net 11 Days From Date of Invoice F.O.B. ORIGIN POINT DESTINATION - --------------------------------------- -------------------------------------- Texas Eastern Pipeline - Coshocton, OH 30-9013694-0000 Various, Illinois Texas Eastern Pipeline - Greensburg, PA 30-9026840-0000 Various, Indiana Texas Eastern Pipeline - Todhunter, OH 30-9026859-0000 Various, Ohio Texas Eastern Pipeline - Princeton, IN 30-9027260-0000 Various, Pennsylvania FREIGHT: Origin Collect METHOD OF TRANSPORTATION: Common Carrier and/or Customer Truck TERM OF AGREEMENT: January 21, 1992 through June 30, 1993 and year to year thereafter. QUANTITY: Subject to the terms and conditions on the reverse hereof, seller agrees to sell and deliver, and buyer agrees to purchase and receive the following volumes of product: (000) Gallons MIN MAX MIN MAX MIN MAX MIN MAX ---- ---- ---- ---- ---- ---- ---- ---- JAN 1016 1524 APR 248 372 JUL 112 168 OCT 856 1284 FEB 776 1164 MAY 192 288 AUG 240 360 NOV 832 1248 MAR 512 768 JUN 152 228 SEP 504 756 DEC 960 1440 ---- ---- ---- ---- ---- ---- ---- ---- Q1 2304 3456 Q2 592 888 Q3 856 1284 Q4 2648 3972 Year Total 6400 9600 REMARKS: CONVERSION OPTION: Empire Gas reserves the right to convert up to 5 million gallons of the above stated volumes to "5 cents down - forward contract volumes". No more than 25,000 barrels per day will be converted without Conoco's prior approval. Upon an Empire conversion request, Conoco will (Continued on attached page) Conoco Inc. invoices should be Customer invoices, contracts, and mailed to the following address: correspondence to be mailed to: Conoco Inc. Empire Gas Corporation Gas Products Division P.O. Box 303 Humber Building - 1021 Lebanon, MO 65536 P.O. Box 2197 Houston, TX 77252 ("Buyer") ("Seller") Subject to terms and conditions on reverse side Accepted June 9, 1992 By /s/ Ben Boldt ----------------------------- ------------------------------------ Empire Gas Corporation Ben Boldt - -------------------------------------- Manager - Marketing By /s/ Earl Noe ------------------------------------ Please sign and return one copy and retain one copy for your files. TERMS AND CONDITIONS DEALER SALE CONTRACT 1. SPECIFICATIONS. All Products delivered hereunder will conform to applicable NGPA and individual pipeline specifications in effect at time of delivery unless mutually agreed otherwise and specified elsewhere in this Agreement. Seller guarantees specifications at delivery point. 2. MEASUREMENT. Quantities of Products delivered will be determined in tank cars or trucks at delivery point by means of slip tube, rotary gauge, or other mutually acceptable gauging method or device. Volumes of LP-gas Products will be corrected for temperature to 80DEG.F using "Standard Factors for Volume Correction and Specific Gravity Conversion of Liquified Petroleum Gases and Volatile Gasolines," NGPA Publication No. 2142-57 or latest revision thereof. Volumes of Natural Gasoline will be corrected for temperatures to 60DEG.F, using ASTM-IP Petroleum Measurement Tables, American Addition, ASTM designation D 1250, abridged Table No. 7. A barrel will consist of 42 U.S. gallons, and a gallon will contain 231 cubic inches. 3. DELIVERIES. Seller's tank cars must be unloaded and returned to railroad within the 48-hour period beginning at 7 a.m. on the day following notice of arrival at destination. Demurrage charges at destination will be borne by Buyer. Seller's tank cars and transport trucks will not be diverted except with written consent from Seller. If delivery is made by Seller, in Seller-owned equipment, there will be added to the invoice a separate freight charge equal to the lowest published applicable transportation charge, as determined by Seller, from Supplier's terminal to Buyer's destination(s). 4. TITLE. Seller represents that it has title to the Products delivered and has the right to deliver same. Title to Products delivered will pass to Buyer upon completion of loading the same into tank trucks and/or tank cars furnished by Buyer, upon delivery of Products in a tank car to carrier, upon delivery thereof in a tank truck or tank car furnished by Seller alongside Buyer's storage facilities at destination, or as stipulated on the face hereof, as the case may be. Thereafter, Buyer will bear all risk of and be solely liable for any loss or damage caused by or attributable to said Products, or to their transportation, care, handling, resale, or use. Title to Products delivered via pipeline will pass to Buyer at the FOB point. 5. TAXES. In addition to the delivered price, Buyer will pay all applicable federal, state, and local sales or other excise taxes required to be paid or collected by Seller by reason of the manufacture, sale, or delivery of Products. Buyer agrees to furnish Seller with satisfactory tax exemption certificate where exemption from applicable taxes is claimed. 6. PAYMENT REQUIREMENTS. Payment for all Product delivered under this Agreement will be paid to Seller at the place of payment designated on the invoice. Invoices not paid pursuant to the "Terms of Payment section on the face of this Agreement will be considered delinquent. Seller may charge interest at the lesser of the maximum legal interest or 18 percent per annum on all unpaid amounts on any delinquent accounts. Cash discounts, if any, will not apply to freight charges prepaid by Seller. 7. CREDIT. If Buyer's credit becomes impaired or unsatisfactory to Seller or if Buyer fails to make any payment due to Seller or if Buyer defaults in performance of any of Buyer's obligations hereunder, Seller may, at its discretion and without prejudice to its other legal remedies, suspend deliveries to Buyer, or cancel this Agreement or ship hereunder only on a COD or other basis satisfactory to Seller. In event of suspension of deliveries, Seller reserves the right to adjust scheduled volumes. 8. MALODORANT. Unless otherwise expressly directed in writing or on the face hereof, LPG Products delivered will contain malodorant at the rate of 1 1/2 pounds of ethyl mercaptan, or its equivalent, per 10,000 gallons; the kind and quantity of malodorant added will be indicated on the bill of lading or the invoice relating to each delivery. 9. CLAIMS. Seller will have no liability to Buyer for any defect in quality or shortage in quantity of Products sold and delivered hereunder, unless Buyer gives Seller notice of Buyer's claim by telegraph and Seller is given an opportunity to inspect the Products in question prior to unloading or, in case of any latent defect in quality, Buyer gives Seller notice thereof within 48 hours after Buyer's discovery of such defect. Seller will have no liability for any defect in any Product which has been commingled in any way with a similar Product obtained elsewhere or with a different Product, regardless of where obtained. Every notice of claim will set forth fully the facts upon which the claim is based. It is agreed that any claim of any kind by Buyer based upon or arising out of this Agreement or otherwise will be barred unless asserted by Buyer by the commencement of an action within 12 months after the delivery of the Product or other event, action, or inaction to which such claim relates, provided, however, Seller will not be liable for prospective profits or special, indirect, or consequential damages. This provision will survive any termination of this Agreement, however arising. 10. PURCHASE REQUIREMENT. If maximum, minimum volumes are specified on the face of this Agreement, then Buyer will use its best effort to purchase and accept delivery of the scheduled volumes indicated on the face of the Agreement each month as scheduled. Buyer will not exceed the specified maximum volumes during any month without prior consent of Seller. Buyer may order and take delivery of volumes less than the scheduled minimum volumes during any month, provided, however, that Buyer must purchase and accept delivery of the minimum cumulative volumes for each calendar quarter. Should Buyer fail to purchase and accept delivery of the minimum cumulative volumes for any calendar quarter, Seller may at its option cancel this Agreement, except as provided for in paragraph 13. 11. TRADEMARK AND TRADE NAME. If Conoco is the Seller hereunder, Conoco hereby grants Buyer, during the term of this Agreement, the right and license to use and display, in a manner specified by Conoco, and at Buyer's expense, Conoco's trademarks, trade name, advertising, and other indicia of Conoco in the advertisement, sale, or distribution of the Product, provided, however, that the right and license hereby granted will terminate when this Agreement ceases to be in force and effect or may be cancelled at any time upon 30 days' prior written notice from Conoco to Buyer. Upon the effective date of such notice or upon the termination of such right and license, Buyer will forthwith remove such trademark, trade name, advertising, and the indicia from Buyer's Delivery Points, other places of business, and equipment. At no time will Buyer apply Conoco's trademark, trade name, advertising, or other indicia to any Product other than Products sold and purchased under this Agreement. 12. SET-OFF. In the event Buyer fails to make timely payment of any monies due and owing to Seller, Seller may offset any deliveries or payments due under this or any other agreement between the parties. 13. FORCE MAJEURE. Neither party will be liable to the other for any delay or failure in performance under this Agreement other than the obligation to make payments in the event and to the extent that such delay or failure in performance is caused or prevent by any cause reasonably beyond its control, including, but not limited to, acts of God, perils of navigation, public enemies, war, riots, insurrection, acts or orders of governmental authorities, fire, flood, explosion, accident, strike, or other difference with workmen, embargo, inability to obtain fuel, power, labor, transportation facilities, or raw materials upon which their performance of this Agreement is dependent, accident, breakage of machinery or apparatus, or national defense requirements, provided; however, that performance will be resumed with a reasonable time after such cause has been removed and provided, further, that neither party will be required to settle any labor dispute against its will. Any deliveries suspended as a result of this paragraph 13 will be cancelled without prejudice or penalty, but this Agreement will otherwise remain unaffected. If, because of any of the foregoing circumstances, Seller is unable to supply its requirements for and its contractual obligations for one or more of the Products, then Seller will allocate the available supply of such Product among its contract customers and itself on an equitable pro rata basis. In the event Seller, during a period of allocation pursuant to the provisions of this paragraph 13, delivers to Buyer a quantity of product less than the minimum quantity Buyer is required to purchase during such period as provided on the face of this Agreement, then neither Seller nor Buyer will have any obligation to sell or purchase the difference between the amount so delivered and such minimum quantity during such period. 14. MISCELLANEOUS. (a) Except as provided for in paragraph 13, should either party fail to comply with any of the terms and conditions of this Agreement, the other party, by notice in writing, may request the noncomplying party to correct such noncompliance within 10 days from the date of such notice. If such noncompliance is not corrected before the expiration of said 10-day period, the other party, at its option, may terminate this Agreement forthwith, but failure of either party to notify the other party of such noncompliance will not be regarded, in the event of any future similar noncompliance, as a waiver of the right to terminate this Agreement in accordance with the foregoing provision. (b) This Agreement sets forth the entire agreement between parties respecting the sale and purchase of the Products, but neither it nor any amendment will be binding upon either party until it is executed by both parties. (c) This Agreement will inure to the benefit of and be binding upon the parties, their heirs, personal representatives, successors, and assigns, but no assignment of all or any portion of this Agreement by Buyer will be valid without the written consent of Seller. (d) This Agreement is subject to and may be overridden by all applicable federal, state, and local laws, rules, regulations, and orders. Invoices must bear a certification that these Products were produced and handled in compliance with applicable requirements of the Fair Labor Standards Act, as amended, and the regulations and orders of the U.S. Labor Department issued pursuant thereto. (e) Unless otherwise provided for herein, all notices will be in writing and considered given when deposited in the United States mail, postage prepaid, addressed to the appropriate party at the address shown above. (f) Seller will indemnify, defend, and hold Buyer harmless from the acts or omissions of Seller, and Buyer will indemnify, defend, and hold Seller harmless from the acts or omissions of Buyer. 15. AUDIT. No commissions or fees will be paid nor any payments or rebates be made to any employee or officer of Conoco, nor will anyone favor any employee or officer of Conoco with gifts or entertainment of significant cost or value, or enter into any business arrangements with any employees or officers of Conoco other than as representatives of Conoco. The parties hereto will maintain a true and correct set of records pertaining to this Agreement and all transactions related thereto and will retain such records for a period of 2 years after termination of this Agreement. Prior to the expiration of such 2-year period, either party will have access to all of such records and information, including all books, papers, documents, agreements, and any other information that may have any bearing on or pertain to this Agreement or any business conducted between the parties, and either party will have the right to audit all such records and information at reasonable times and places during normal working hours. The parties hereto will also have the right to obtain statements from any personnel of the other party in order to conduct or complete such audit. The other party will cooperate fully in any such audit. All audits will be conducted in accordance with generally accepted auditing standards. 16. WARNING. The Material Safety Data Sheets and labels for Products delivered hereunder contain formation regarding health risks and recommendations for the safe use and handling of such Products. Buyer acknowledges and represents that it has read and understands the Material Safety Data Sheets, the labels, or warnings regarding such Products. Buyer will exercise the degree of care necessary to protect all persons and property from all hazards disclosed in such Material Safety Data Sheets, labels, or warnings. Buyers obligations in this regard will include but not be limited to (1) warning the employees of Buyer and its affiliates who may become exposed to such Products or their hazards; (2) taking measures to assure that such employees have appropriate safety equipment which is adequately maintained and properly used and that all precautions contained in Material Safety Data Sheets, labels, and other warnings are followed; and (3) warning third parties, including but not limited to Buyer's customers, who may use or be exposed to such Products of their hazards, and requiring that the precautions contained in such Material Safety Data Sheets, labels, and other warnings are followed. If Buyer does not so protect all persons and property from all hazards disclosed in such Material Safety Data Sheets, labels, or warnings, Buyer will indemnify and hold Seller harmless from any claims, causes of action, liabilities, losses, or expenses on account of injury or death of persons and/or damage to property arising directly or indirectly out of Buyer's failure to fulfill its obligations under this paragraph 16. CONTRACT ATTACHMENT 30-9026859-0000-A01 Page 2 January 21, 1992 offer a quote based on current market conditions and the following formulae: Conversion Dates Mt. Belvieu Current spot plus Princeton's Winter T&T plus 1.85 CPG plus January 21 - April 30, 1992 1.25 CPG May 1 - July 31, 1992 1.00 CPG August 1 - October 31, 1992 0.75 CPG Additionally, deliveries to Todhunter, Coshocton and Greensburg will also be billed the incremental winter tariff for delivery beyond Princeton. Empire reserves the right to determine which terminals the converted volumes will be pulled. No vintaging of conversion volumes will occur. Instead, a new weighted average conversion price will be calculated as additional volumes are converted. The down payment of 5.00 CPG will be due within ten days from date of invoice. The balance will be invoiced in accordance with the above schedule as the product is delivered to Empire, but in no event later than March 31, 1993. Balances will be due net, upon receipt of invoice. This section shall be updated in 1993, prior to converting volumes for the 1993/1994 heating season. EX-10.15 10 EXHIBIT 10.15 EXHIBIT 10.15 Dealer Sale Contract Conoco Inc. CONOCO Gas Products Division Humber Building - 1021 P.O. Box 2197 LP-gas Houston, TX 77252 (713) 293-3815 We hereby confirm SALE to: Empire Gas Corporation DATE: January 24, 1992 P.O. Box 303 CONOCO NO.: 30-9009636-0000-A09 Lebanon, MO 65536 SYSTEM CODE: 15 Attention: Earl Noe ACCOUNT CODE: 407 Per conversations between Earl Noe and our Lewis Bradshaw PRODUCT: Propane (Stenched) meeting GPA specifications PRICE: See Remarks TERMS OF PAYMENT: 1% 10 Days/Net 11 Days From Date of Invoice F.O.B. ORIGIN POINT DESTINATION - ---------------------------------------- ---------------------------------- Cherokee Pipeline - Wood River, IL 30-9009636-0000 Missouri, Various Cherokee Pipeline - Belle, MO 30-9013694-0000 Illinois, Various Cherokee Pipeline - Mt. Vernon, MO Conoco/Medford Plant - Medford, OK Conoco/Ponca City Refinery - Ponca City, FREIGHT: Origin Collect METHOD OF TRANSPORTATION: Common Carrier and/or Customer Truck TERM OF AGREEMENT: January 21, 1992 through June 30, 1993 and year to year thereafter. QUANTITY: Subject to the terms and conditions on the reverse hereof, seller agrees to sell and deliver, and buyer agrees to purchase and receive the following volumes of product: (000) Gallons MIN MAX MIN MAX MIN MAX MIN MAX ---- ---- ---- ---- ---- ---- ---- ---- JAN 2800 4200 APR 576 864 JUL 280 420 OCT 1480 2220 FEB 2224 3336 MAY 456 684 AUG 872 1308 NOV 1960 2940 MAR 1720 2580 JUN 352 528 SEP 1440 2160 DEC 2640 3960 ---- ---- ---- ---- ---- ---- ---- ---- Q1 6744 10116 Q2 1384 2076 Q3 2592 3888 Q4 6080 9120 Year Total 16800 25200 REMARKS: CONVERSION OPTION: Empire Gas reserves the right to convert up to 50% of the above stated volumes to "5 cents down - forward contract volumes". No more than 25,000 barrels per day will be converted without Conoco's prior (Continued on attached page) Conoco Inc. invoices should be Customer invoices, contracts, and mailed to the following address: correspondence to be mailed to: Conoco Inc. Empire Gas Corporation Gas Products Division P.O. Box 303 Humber Building - 1021 Lebanon, MO 65536 P.O. Box 2197 Houston, TX 77252 ("Buyer") ("Seller") Subject to terms and conditions on reverse side Accepted June 9, 1992 By /s/ Ben Bolt ------------------------ -------------------------------- Empire Gas Corporation Ben Boldt - --------------------------------- Manager - Marketing By /s/ Earl Noe ------------------------------ Please sign and return one copy and retain one copy for your files. CONTRACT ATTACHMENT 30-9009636-0000-A09 Page 2 January 24, 1992 approval. Upon an Empire conversion request, Conoco will offer a quote based on current market conditions and the following formulae: Mt. Vernon Conversion Dates Conway current spot plus January 21 - April 30, 1992 6.00 CPG May 1 - July 31, 1992 5.75 CPG August 1 - October 31, 1992 5.50 CPG Belle and Wood River will be billed on the above schedule plus 0.50 CPG. Empire reserves the right to pull up to 45% of the converted volumes at the Belle terminal. Empire may pull greater than 45% of the converted volumes at the Belle terminal upon written authorization from Conoco Propane Marketing. No limitations apply to the proportion of converted volumes which Empire may pull at Mt. Vernon and Wood River. No vintaging of conversion volumes will occur. Instead, a new weighted average conversion price will be calculated as additional volumes are converted. The down payment of 5.00 CPG will be due net within ten days from date of invoice. The balance will be invoiced in accordance with the above schedule as the product is delivered to Empire, but in no event later than March 31, 1993. The balance due invoices will be subject to 1.00% 10 days/Net 11 days from date of invoice. This section shall be updated in 1993, prior to converting volumes for the 1993/1994 heating season. PRICE: Contract amended effective 4/1/91 until the end of the contract term -- price shall be Conoco's established price on the date of delivery less 0.700 cents per gallon. This reduction shall only apply to purchases on Conoco's established posting. EX-10.16 11 EXHIBIT 10.16 EXHIBIT 10.16 [LOGO] WARREN PETROLEUM COMPANY PRODUCT SALES AGREEMENT A Division of Chevron U.S.A. Inc. PREPARE IN ORIGINAL AND FOUR COPIES - -------------------------------------------------------------------------------- Purchaser | Confirming Arrangements Made With EMPIRE GAS CORPORATION | JOYCE KINNET/EARL NOE - -------------------------------------------------------------------------------- Address | Arrangements Made By | Date P. O. BOX 303 | D. W. CAMPION | Nov. 20, 1986 - -------------------------------------------------------------------------------- Lebanon, MO 65536 | Warren No. | Purchaser No. | No. S40844 | - -------------------------------------------------------------------------------- 1. Warren will sell the following during period of: DECEMBER 1, 1986 AND THEREAFTER (SEE ATTACHMENT NO. 1) - -------------------------------------------------------------------------------- Product | Quantity | Delivery Point | Product Sale | | | Price - -------------------------------------------------------------------------------- Description | Approx. Bbls.|Measrmnt.| Location | Methods | Cents/Gallon |(net at 60 |(see 2) | | (see 3) | | degree F) | | | | - -------------------------------------------------------------------------------- HD-5 PROPANE| (SEE AT- | A | Origin | A |(SEE ATTACH- | TACHMENT | | MT. VERNON, IN | | MENT NO. 1) | NO. 1 | | | | - -----------------------------------------------------------------| | | | Destination | | | | | | | - -------------------------------------------------------------------------------- 2. Measurement (See General Provisions, Item 2) Basis: V - Volumetric per API /X/ A. Trucks Tables 23 and 24 or / / B. Tank Cars 23A or 24A or 5A / / C. Pipeline and 6A / / D. Ship or Barge M - Mass per GPA 8182 / / E. Other 1 - Origin ----------------------------------------- 2 - Destination ----------------------------------------- - -------------------------------------------------------------------------------- 3. Methods /X/ A. To Truck / / B. To Pipeline / / C. To Tank Car / / D. To Barge / / E. To Ship / / F. Other ----------------------------------------- ----------------------------------------- - -------------------------------------------------------------------------------- 4. Specifications HD-5 PROPANE - -------------------------------------------------------------------------------- 5. Product: /X/ Stenched / / Unstenched - -------------------------------------------------------------------------------- 6. Terms (SEE ATTACHMENT NO. 1) / / Expires on __________________________ /s/ - -------------------------------------------------------------------------------- 7. Warren sends statements, invoices and shipping documentation to (SAME AS ABOVE) - -------------------------------------------------------------------------------- 8. Terms of Payment NET 10 DAYS FROM DATE OF INVOICE. - -------------------------------------------------------------------------------- 9. Special Provisions THE TERMS AND CONDITIONS SET FORTH IN ATTACHMENT A AND ATTACHMENT NO. 1 ARE INCORPORATED HEREIN AND MADE A PART OF THIS AGREEMENT. - -------------------------------------------------------------------------------- 10. In addition to the above terms and conditions, the General Provisions of this Product Sales Agreement as set forth on the reverse side hereof are incorporated herein by reference and made a part of this Agreement. - -------------------------------------------------------------------------------- If you are in agreement with the foregoing terms and conditions, please so indicate by signing below and returning one copy of the Agreement to Warren. - -------------------------------------------------------------------------------- Accepted and Agreed to | Warren Petroleum Company EMPIRE GAS CORPORATION | A Division of Chevron U.S.A. Inc. - -----------------------------------|-------------------------------------------- By /s/ Earl Noe | By /s/ - -----------------------------------|-------------------------------------------- | Mgr., Domestic & Industrial Sales - -------------------------------------------------------------------------------- Distribution: Original - Buyer for file WP 82021 (CD 9 85) Pink - Buyer for acceptance and Printed in U.S.A. return to Warren's Tulsa Office Yellow - Distribution Section, Tulsa Green - Marketing Department, Tulsa White - Retained by Originator PRODUCT SALES AGREEMENT GENERAL PROVISIONS 1. DELIVERIES A. When delivery is point of origin, delivery shall be deemed to have been completed: 1. To ships or barges when the product has passed the vessel's loading flange; 2. To tank trucks when the product has actually been delivered into the truck; 3. To tank cars when the carrier accepts the same for shipment; 4. To pipelines upon metering of the product. B. When delivery is point of destination, delivery shall be deemed to have been completed: 1. From ships or barges when the product has passed the vessel's discharge flange; 2. From tank trucks when truck has been placed at buyer's facilities for unloading; 3. From tank cars when carrier delivers same at the destination; 4. From pipeline upon metering of the product. C. When by an in-line product transfer, delivery shall be deemed to have been completed upon execution of the order by the pipeline carrier. D. If any common or contract carrier trucks are used, Warren shall not be liable to Buyer for quantity or quality of product. After completion of loading at the point of origin, Buyer agrees that the handling, care or use of product delivered as herein provided shall thereafter be at Buyer's sole risk and expense. 2. MEASUREMENT--Measurement shall be done in the manner customarily utilized at the point of delivery so long as it is in accordance with one of the following alternatives: A. On all deliveries into/out of tank cars, the quantity shall be determined by official tank car capacity tables, meters with no vapor return, or by weighing, in accordance with GPA Publication 8162 and all revisions thereof. B. On all deliveries into/out of transport and tank truck equipment, quantities shall be determined by meter with no vapor return, slip tube, rotary gauging device or weighing, in accordance with GPA Publication 8162 and all revisions thereof. C. On all deliveries into/out of pipeline, quantity shall be determined by turbine or positive displacement pipeline meter in accordance with API Manual of Petroleum Measurement Standards and all revisions thereof. D. On all deliveries to/from ships or barges, shore tank or turbine or positive displacement meter measurements shall determine quantity, unless otherwise agreed upon. Use of meters shall not allow vapor return. E. All quantities shall be corrected to 60 degrees Fahrenheit and equilibrium vapor pressure at 60 degrees Fahrenheit. F. Volume and compressibility correction factors shall be determined from referenced API tables or computer programs used to generate these tables. 3. PASSAGE OF TITLE AND WARRANTY OF TITLE--Title to the product and risk of loss shall pass to Buyer upon delivery. Warren warrants to Buyer that it has title to the product(s) delivered by it hereunder and the right to deliver same, and agrees to indemnify, defend and hold the Buyer harmless from and against any loss, claim or demand by reason of any failure of such title or breach of this warranty. Except as set forth in this paragraph 3 and elsewhere herein, WARREN MAKES NO OTHER WARRANTY WITH RESPECT TO THE PRODUCT OR OTHERWISE, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE. 4. TAXES--Any tax, duty, toll, fee, impost, charge or other exaction, or the amount equivalent thereto, now or hereafter imposed, levied or assessed by any governmental authority upon, measured by, incident to or as a result of the transaction herein provided for, or the transportation, importation, production, manufacture, use or ownership of the goods or source materials thereof which are the subject matter of this Agreement, shall, if collectible or payable by Warren, be paid by Buyer on demand by Warren. Notwithstanding the foregoing, it is understood and agreed that any personal property taxes levied or assessed by any governmental authority upon the value of the products covered by this Agreement shall be paid by the party having title thereto at the time of such assessment. Buyer shall furnish Warren proper exemption certificate where tax exemption is claimed on any or all product(s) delivered hereunder, or shall pay such taxes. 5. FUTURE OBLIGATIONS--SUPPLIER/PURCHASER RELATIONSHIP--This Agreement is freely entered into between the parties hereto. It does not reflect or grow out of any previously existing legal obligation which either party may have to the other to supply any petroleum product. Part of the consideration for this Agreement is each party's express agreement that neither party expects or desires that this Agreement form the basis of any additional future obligation of either party to supply any petroleum product to the other. To the extent that under present or future laws or regulations this Agreement may give rise to such obligations, each party hereby waives in advance its right to enforce any such obligation and upon submittal of written notice of termination by one party to the other under this Agreement, it is agreed that both parties intend to terminate any such additional future supplier/buyer relationship which may be created by this Agreement under such laws or regulations. Additionally, at any time hereafter, the parties agree to submit and/or execute documentation in compliance with the then applicable laws and regulations as may be necessary to evidence such termination insofar as the parties are concerned. The parties further agree to obtain any other consents or authorization required under the then applicable laws and regulations insofar as reasonably possible to give effect to the intent hereof. 6. GOVERNMENT REGULATIONS & LAW--Warren warrants that the product it delivers hereunder will be produced and delivered in full compliance with all applicable federal and state laws and regulations and all Presidential Proclamations which may be applicable. This agreement shall be construed in accordance with the laws of the State of Oklahoma including the Uniform Commercial Code. Buyer agrees to comply with the provisions contained in Exhibit "B" attached hereto, to the extent that such provisions are legally applicable to Buyer. 7. FORCE MAJEURE--If either party is rendered unable, wholly or in part, to perform its obligations under this Agreement (other than to make payments due hereunder) due to force majeure, defined herein as acts of God, flood, fire, explosion or storm; transportation difficulty; strike, lockout or other industrial disturbance; war or any law, rule, order or action of any court or instrumentality of the federal or any state government; exhaustion, reduction or unavailability of products from one or more of the sources of supply from which deliveries are normally made hereunder, or exhaustion or unavailability or delay in delivery of any material or product necessary in the manufacture of the product(s) deliverable hereunder; or any other cause or causes beyond its control whether similar or dissimilar to those stated above, then in any such event, it is agreed that the affected party shall give promptly after the occurrence of force majeure notice and full particulars of such force majeure to the other party, the obligations of the affected party shall be suspended for the duration of such inability to perform but for no longer period, and such cause shall, so far as possible, be remedied with all reasonable dispatch. Force majeure shall also include the failure of any third party pipeline, through no fault of the parties hereto, to accept the referenced products for transportation to or from Warren's facilities. 8. ASSIGNMENT--This Agreement shall extend to and be binding upon the parties hereto, their heirs, executors, administrators, successors and assigns; but it is expressly agreed that neither party shall voluntarily assign this Agreement without the prior written consent of the other. 9. NOTICE--Any notice hereunder shall be in writing and shall be delivered personally, by mail, by telex, or by telegram to the address first hereinabove set forth, unless changed by notice. Such notice shall be deemed to have been given on the date of the delivery thereof. 10. WAIVER--The waiver by either party of the breach of any provision hereof by the other party shall not be deemed to be a waiver of the breach of any other provision or provisions hereof or of any subsequent or continuing breach of such provision or provisions. 11. ALTERATIONS--No oral promises, agreements or warranties shall be deemed a part hereof, nor shall any alteration or amendment of this Agreement, or waiver of any of its provisions, be binding upon either party hereto unless the same be in writing, signed by the party charged. 12. INSPECTION--Unless otherwise specified, Buyer will provide gauging, sampling, and testing at no charge to Warren. Either party may secure outside inspectors to perform this work and if this is done, the payments for these services will be shared equally among the parties unless some other arrangement for payment is mutually agreed upon. 13. MARINE PROVISIONS--If delivery of any products hereunder is to be accomplished by waterborne transportation, the provisions set out in the "Marine Provisions" attached hereto and made a part hereof shall apply to such deliveries. 14. INVOICES AND TERMS OF PAYMENT--Invoices will be prepared by Warren and transmitted to the Buyer from time to time during the month. Unless otherwise specified, payment is due within ten (10) days after receipt of invoice. 15. FINANCIAL RESPONSIBILITY--If in the judgment of Warren the financial responsibility of Buyer becomes impaired or unsatisfactory, advance cash payments or acceptable security including, but not limited to a letter of credit from a financial institution acceptable to Warren shall be given by Buyer upon demand of Warren, and Buyer's failure to abide by the provisions of this Paragraph shall be considered a breach hereof and in such event payment for all products delivered hereunder shall be due and owing and shall be paid immediately, and Warren may without waiving any rights or remedies it may have, withhold further deliveries until such payment or security is received. Buyer's duty to provide the hereinabove credit assurance shall be a condition precedent to Warren's obligation to perform under this agreement. 16. CONFLICTS OF INTEREST--No director, employee or agent of either party shall give or receive any commission, fee, rebate, gift or entertainment of significant cost or value in connection with this Agreement. Any representative(s) authorized by either party may audit the applicable records of the other party solely for the purpose of determining whether there has been compliance with this paragraph. 17. AUDIT--Each party and its duly authorized representatives shall have access to the accounting records and other documents maintained by the other party which relate to the product being delivered to the other party under this Agreement and shall have the right to audit such records once a year at any reasonable time or times during the terms of this Agreement and for two years after the year in which this Agreement terminates. Neither party shall make claim on the other for any adjustment after said two-year period. 18. QUALITY--Any requirements of customer pertaining to potential contaminants and/or specific hydrocarbon composition not listed in Warren's product specification must be identified by customer and allowable concentrations agreed to in writing by both parties prior to delivery of product to be effective under this Agreement. 19. WARREN'S TANK CARS--Unless Warren's tank cars are unloaded and returned to railroad, Buyer shall be liable to Warren for rental at the rate of ________________ for each day or fraction thereof in excess of ________________ days (LPG cars). Tank cars shall not be diverted without Warren's written consent. 20. PRICES--Prices at destination include allowance for transportation charges at lowest applicable common carrier rate between shipping point and actual destination. Warren reserves the right to add other shipping points and to change the shipping points on which destination prices are based. Notice of any such additions or changes in shipping points shall be given to Buyer in writing and unless objected to within ten days after receipt, said shipping points shall be deemed accepted by Buyer. Deletions of shipping points shall be made in like manner with like effect. Destination prices are subject to adjustment with changes in common carrier freight rates and any changes in applicable freight rates shall be for Buyer's account. Unless otherwise provided, if common carrier is employed, transportation charges shall be paid by consignee directly to carrier. If prices are based on quotations in industry publications, quotations published on dates of shipment shall apply. If no quotations for date of shipment are published in designated industry publication, the last previous quotations in such publication shall govern. PRODUCT SALES AGREEMENT ATTACHMENT A (PSA #S-40844) 1. SHORTAGE OF PRODUCTS. Due to uncertainties in the supply/demand situation, Warren may not have sufficient supplies of said product to be delivered hereunder from its then contemplated sources of supply to meet the full requirements of all of its customers, contract or otherwise. Whenever that situation exists and regardless of whether Warren's performance hereunder is otherwise excused, Warren shall have, in addition to any other rights Warren may have under this Agreement, the right to reduce deliveries of such product on any basis which in Warren's opinion is equitable, allowing for such priorities to such classes of customers as Warren deems appropriate. No such priorities to such classes of customers as Warren deems appropriate. No such reduction need be made up. If any such reduction occurs, Buyer shall have the option to accept such reduction occurs, Buyer shall have the option to accept such reduction or to terminate this Agreement as to any or all products by fifteen (15) day's notice to Warren given at any time within thirty (30) days after the notice of reduction. 2. BRAND NAMES. Buyer agrees not represent, or authorize or permit any other person to represent, that the product delivered hereunder is the product of Warren. All products delivered to Buyer hereunder shall be used for sold under Buyer's own brand names or under brand names approved by Warren, and Buyer shall not authorize or permit said product to be used or sold under any other brand names. 3. CONDUCT OF BUYER'S BUSINESS. Buyer agrees to conduct all operations in strict compliance with all applicable law, ordinances, and regulations of governmental authorities. Buyer in the performance of this Agreement is engaged in an independent business and nothing therein contained shall be construed as giving to Warren any right to control Buyer in any way in its performance of this Agreement. Warren has no right to exercise control over any of the Buyer's employees. All employees of Buyer shall be entirely under the control and direction of Buyer who shall be responsible for their actions and omissions. ATTACHMENT ACCEPTED AND AGREED TO: EMPIRE GAS CORPORATION Warren Petroleum Company - --------------------------------- A Division of CHEVRON U.S.A. Inc. By: /s/ Earl Noe By: /s/ ------------------------------ ------------------------------------ Mgr., Domestic & Industrial Sales WARREN PETROLEUM COMPANY A Division of Chevron U.S.A. Inc. P. O. Box 1589 Tulsa, Oklahoma 74102 ATTACHMENT NO. 1 (LP-GAS SALES) Product Sales Agreement No. S-40844 1. TERM: This agreement shall remain in effect for a primary term of one (1) year beginning December 1, 1986, and shall continue thereafter from year-to-year unless terminated at the end of the primary term or on any subsequent anniversary thereof by either party giving the other the not less than sixty (60) days' prior written notice of termination. 2. QUANTITY: During the term hereof, Buyer agrees to buy the product herein specified in monthly quantities of not less than the minimum nor more than the maximum set forth below and Warren agrees to sell said quantities to Buyer. Buyer agrees to purchase such quantities from Warren as evenly as possible over each month. Unless otherwise provided, the monthly quantities set forth below shall be the quantities applicable for the entire term of this agreement. Notwithstanding the foregoing, if during any period of this agreement the quantity of product Warren is obligated to deliver to Buyer is prescribed by government rules, regulations or orders, then the quantity of product covered by this agreement shall be the quantity so prescribed for such period and Buyer agrees to buy and Warren agrees to sell such quantity. Volume (In Thousands of Gallons) Minimum Maximum Minimum Maximum April 100 200 October 100 200 -------- -------- --------- -------- May 100 200 November 100 200 -------- -------- --------- -------- June 100 200 December 100 200 -------- -------- --------- -------- July 100 200 January 100 200 -------- -------- --------- -------- August 100 200 February 100 200 -------- -------- --------- -------- September 100 200 March 100 200 -------- -------- --------- -------- For the purposes of determining compliance with the above quantity schedule, purchase of product shall be allocated to the month in which shipment is made. Should either party fail to comply in any amount with the above schedule, the other party may elect to terminate this agreement by mailing notice of such termination on or before the 20th day of the succeeding month. If the Buyer fails to purchase 100% of the above specified minimum monthly quantities during any month or months of the period beginning April 1 and ending September 30 and Warren does not elect to terminate this agreement, Warren shall not be obligated hereunder to sell to Buyer in any of the succeeding six months (October through March) more than one and one half times the average monthly quantity which Buyer actually purchased during the preceding six-month period (April through September), but in no event more than the maximum monthly quantities shown for each of the months October through March. When delivery is into tank trucks furnished by Buyer, the delivery ticket showing the quantity delivered and measured in tank trucks shall be signed by the loader at the point of origin as the agent of Warren and by the truck driver as the agent of the Buyer; thereafter, such quantities shall be conclusively presumed to have been delivered to Buyer. Buyer agrees that on or before the 1st day of each month Warren will be furnished with requisitions showing quantities required during such month, delivery dates, and, when applicable, destinations of each shipment to be made by Warren. Warren shall not be obligated to ship less than a tank car load or less than a tank truck load. Page 1 of 2 3. METHOD OF DELIVERY: __X__ By tank trucks furnished by Buyer. _____ By tank trucks owned or controlled by Buyer. _____ By tank cars furnished by ____________ with a capacity of ________ gallons each. 4. PRICES: Subject to General Provision No. 20 (Prices) of this agreement, Buyer shall pay the applicable prices per gallon listed under "Price Information" set forth hereinbelow for the product specified, unless and until such prices are changed by written notice given in accordance with the provisions hereof. Said prices may be changed at any time and from time to time by Warren upon written notice effective when deposited in the United States Mail, postage prepaid and addressed to Buyer. However, if any such notice shall increase Warren's price per gallon for the designated product to Buyer at any shipping point or destination listed herein above Warren's highest price for such product in effect thereat during the elapsed portion of the calendar year in which Warren's notice is effective, Buyer may by written notice to Warren given and effective within 15 days from the date of Warren's said notice, terminate this contract with respect to such shipping point or destination. If the sale is on the basis of a destination price and if delivery is into tank trucks furnished by Buyer, the Buyer shall receive an allowance calculated at the lowest applicable common carrier truck rate between shipping point and actual destination. PRICE INFORMATION (Prices in effect as of November 20, 1986) (Check if sale on /X/ shipping point basis or / / destination price basis) Price in Shipping Points Destinations Product cents/gallons MT. VERNON, INDIANA VARIOUS HD-5 PROPANE 25.50 5. ODORIZATION: All product sold and delivered hereunder shall be odorized unless delivery of unodorized product is permitted by law and there is in effect a separate written agreement between Warren and Buyer providing for the delivery of unodorized product. 6. SALE OF BUSINESS: The Buyer agrees that in the event of a sale of its LP- gas business or substantially all of its assets used in its LP-gas business, Buyer will require the purchaser of such business or such assets as a condition of the sale to assume the obligation of Buyer under this agreement. 7. TRADEMARKS: Buyer acknowledges that the CHEVRON and WARRENGAS trademarks are valuable property rights belonging to Chevron Corporation and its subsidiaries, including Chevron U.S.A. Inc., and that any use thereof by Buyer in connection with this agreement is solely for the purposes of advertising products obtained from such subsidiaries. Upon termination of this agreement, Buyer agrees that it will make no further use of such trademarks or any other mark, name or designs confusingly similar therewith. 8. APPORTIONMENT: Notwithstanding the obligations of this agreement, Warren may apportion its available supply at a given location or in a stated area among its customers in such manner as it may determine. Page 2 of 2 EX-10.17 12 EXHIBIT 10.17 EXHIBIT 10.17 WARREN PETROLEUM COMPANY PRODUCT SALES AGREEMENT A Division of Chevron U.S.A. Inc. PREPARE IN ORIGINAL AND FOUR COPIES. - -------------------------------------------------------------------------------------------------------------------------------- Purchaser Confirming Arrangements Made With EMPIRE GAS CORPORATION JOYCE KINNET/EARL NOE - -------------------------------------------------------------------------------------------------------------------------------- Address Arrangements Made by Date P. O. BOX 303 D. W. CAMPION NOV. 20, 1986 - -------------------------------------------------------------------------------------------------------------------------------- Warren No. Purchaser No. LEBANON, MO 65536 No. S 4 0 8 4 5 - -------------------------------------------------------------------------------------------------------------------------------- 1. Warren will sell the following during period of: DECEMBER 1, 1986 AND THEREAFTER (SEE ATTACHMENT NO. 1) - -------------------------------------------------------------------------------------------------------------------------------- Product Quantity Delivery Point Product Sale Price - -------------------------------------------------------------------------------------------------------------------------------- Approx. Bbls. Measrmnt. Methods Description (net @ 60 DEG. F) (see 2) Location (see 3) Cents/Gallon - -------------------------------------------------------------------------------------------------------------------------------- HD-5 PROPANE (SEE AT- A LEBANON, IN A (SEE ATTACH- - ------------------------------------------------ ---------------------------------------------------------------------- TACHMENT Origin MENT NO. 1) - ------------------------------------------------ ---------------------------------------------------------------------- NO. 1) - -------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------- Destination - ------------------------------------------------ ---------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- 2. Measurement (See General Provisions, Item 2) Basis: V -- Volumetric per API Tables 23 and 24 or 23A and 24A or 5A and 6A M -- Mass per GPA 8182 /x/ A. Trucks / / D. Ship or Barge 1 -- Origin 2 -- Destination / / B. Tank Cars / / E. Other ---------------------------------------- / / C. Pipeline ---------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- 3. Methods /x/ A. To Truck / / E. To Ship / / B. To Pipeline / / F. Other ------------------------------------------------- / / C. To Tank Car ------------------------------------------------- / / D. To Barge - --------------------------------------------------------------------------------------------------------------------------------- 4. Specifications HD-5 PROPANE - --------------------------------------------------------------------------------------------------------------------------------- 5. Product: /x/ Stenched / / Unstenched - --------------------------------------------------------------------------------------------------------------------------------- 6. Terms (SEE ATTACHMENT NO. 1) /x/ Expires on ------------------------ - --------------------------------------------------------------------------------------------------------------------------------- 7. Warren sends statements, invoices and shipping documentation to (SAME AS ABOVE) - --------------------------------------------------------------------------------------------------------------------------------- 8. Terms of Payment NET 10 DAYS FROM DATE OF INVOICE. - --------------------------------------------------------------------------------------------------------------------------------- 9. Special Provisions THE TERMS AND CONDITIONS SET FORTH IN ATTACHMENT A AND ATTACHMENT NO. 1 ARE INCORPORATED HEREIN AND MADE A PART OF THIS AGREEMENT. 10. In addition to the above terms and conditions, the General Provisions of this Product Sales Agreement as set forth on the reverse side hereof are incorporated herein by reference and made a part of this Agreement. - --------------------------------------------------------------------------------------------------------------------------------- If you are in agreement with the foregoing terms and conditions, please so indicate by signing below and returning one copy of the Agreement to Warren. - --------------------------------------------------------------------------------------------------------------------------------- Accepted and Agreed to EMPIRE GAS CORPORATION Warren Petroleum Company A Division of Chevron U.S.A. Inc. - --------------------------------------------------------------------------------------------------------------------------------- By By /s/ Earl Noe /s/ - --------------------------------------------------------------------------------------------------------------------------------- MGR., DOMESTIC & INDUSTRIAL SALES - --------------------------------------------------------------------------------------------------------------------------------- Distribution: Original -- Buyer for file Yellow -- Distribution Section, Tulsa WP 82021 (CD 9 85) Pink -- Buyer for acceptance and Green -- Marketing Department, Tulsa Printed in U.S.A. return to Warren's Tulsa Office White -- Retained by Originator
PRODUCT SALES AGREEMENT GENERAL PROVISIONS 1. DELIVERIES A. When delivery is point of origin, delivery shall be deemed to have been completed: 1. To ships or barges when the product has passed the vessel's loading flange; 2. To tank trucks when the product has actually been delivered into the truck; 3. To tank cars when the carrier accepts the same for shipment; 4. To pipelines upon metering of the product. B. When delivery is point of destination, delivery shall be deemed to have been completed: 1. From ships or barges when the product has passed the vessel's discharge flange; 2. From tank trucks when truck has been placed at buyer's facilities for unloading; 3. From tank cars when carrier delivers same at the destination; 4. From pipeline upon metering of the product. C. When by an in-line product transfer, delivery shall be deemed to have been completed upon execution of the order by the pipeline carrier. D. If any common or contract carrier trucks are used, Warren shall not be liable to Buyer for quantity or quality of product. After completion of loading at the point of origin, Buyer agrees that the handling, care or use of product delivered as herein provided shall thereafter be at Buyer's sole risk and expense. 2. MEASUREMENT -- Measurement shall be done in the manner customarily utilized at the point of delivery so long as it is in accordance with one of the following alternatives: A. On all deliveries into/out of tank cars, the quantity shall be determined by official tank car capacity tables, meters with no vapor return, or by weighing, in accordance with GPA Publication 8162 and all revisions thereof. B. On all deliveries into/out of transport and tank truck equipment, quantities shall be determined by meter with no vapor return, slip tube, rotary gauging device or weighing, in accordance with GPA Publication 8162 and all revisions thereof. C. On all deliveries into/out of pipeline, quantity shall be determined by turbine or positive displacement pipeline meter in accordance with API Manual of Petroleum Measurement Standards and all revisions thereof. D. On all deliveries to/from ships or barges, shore tank or turbine or positive displacement meter measurements shall determine quantity, unless otherwise agreed upon. Use of meters shall not allow vapor return. E. All quantities shall be corrected to 60 degrees Fahrenheit and equilibrium vapor pressure at 60 degrees Fahrenheit. F. Volume and compressibility correction factors shall be determined from referenced API tables or computer programs used to generate these tables. 3. PASSAGE OF TITLE AND WARRANTY OF TITLE -- Title to the product and risk of loss shall pass to Buyer upon delivery. Warren warrants to Buyer that it has title to the product(s) delivered by it hereunder and the right to deliver same, and agrees to indemnify, defend and hold the Buyer harmless from and against any loss, claim or demand by reason of any failure of such title or breach of this warranty. Except as set forth in this paragraph 3 and elsewhere herein, WARREN MAKES NO OTHER WARRANTY WITH RESPECT TO THE PRODUCT OR OTHERWISE, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE. 4. TAXES -- Any tax, duty, toll, fee, impost, charge or other exaction, or the amount equivalent thereto, now or hereafter imposed, levied or assessed by any governmental authority upon, measured by, incident to or as a result of the transaction herein provided for, or the transportation, importation, production, manufacture, use or ownership of the goods or source materials thereof which are the subject matter of this Agreement, shall, if collectible or payable by Warren, be paid by Buyer on demand by Warren. Notwithstanding the foregoing, it is understood and agreed that any personal property taxes levied or assessed by any governmental authority upon the value of the products covered by this Agreement shall be paid by the party having title thereto at the time of such assessment. Buyer shall furnish Warren proper exemption certificate where tax exemption is claimed on any or all product(s) delivered hereunder, or shall pay such taxes. 5. FUTURE OBLIGATIONS -- SUPPLIER/PURCHASER RELATIONSHIP -- This Agreement is freely entered into between the parties hereto. It does not reflect or grow out of any previously existing legal obligation which either party may have to the other to supply any petroleum product. Part of the consideration for this Agreement is each party's express agreement that neither party expects or desires that this Agreement form the basis of any additional future obligation of either party to supply any petroleum product to the other. To the extent that under present or future laws or regulations this Agreement may give rise to such obligations, each party hereby waives in advance its right to enforce any such obligation and upon submittal of written notice of termination by one party to the other under this Agreement, it is agreed that both parties intend to terminate any such additional future supplier/buyer relationship which may be created by this Agreement under such laws or regulations. Additionally, at any time hereafter, the parties agree to submit and/or execute documentation in compliance with the then applicable laws and regulations as may be necessary to evidence such termination insofar as the parties are concerned. The parties further agree to obtain any other consents or authorization required under the then applicable laws and regulations insofar as reasonably possible to give effect to the intent hereof. 6. GOVERNMENT REGULATIONS & LAW -- Warren warrants that the product it delivers hereunder will be produced and delivered in full compliance with all applicable federal and state laws and regulations and all Presidential Proclamations which may be applicable. This agreement shall be construed in accordance with the laws of the State of Oklahoma including the Uniform Commercial Code. Buyer agrees to comply with the provisions contained in Exhibit "B" attached hereto, to the extent that such provisions are legally applicable to Buyer. 7. FORCE MAJEURE -- If either party is rendered unable, wholly or in part, to perform its obligations under this Agreement (other than to make payments due hereunder) due to force majeure, defined herein as acts of God, flood, fire, explosion or storm; transportation difficulty; strike, lockout or other industrial disturbance; war or any law, rule, order or action of any court or instrumentality of the federal or any state government; exhaustion, reduction or unavailability of products from one or more of the sources of supply from which deliveries are normally made hereunder, or exhaustion or unavailability or delay in delivery of any material or product necessary in the manufacture of the product(s) deliverable hereunder, or any other cause or causes beyond its control whether similar or dissimilar to those stated above, then in any such event, it is agreed that the affected party shall give promptly after the occurrence of force majeure notice and full particulars of such force majeure to the other party, the obligations of the affected party shall be suspended for the duration of such inability to perform but for no longer period, and such cause shall, so far as possible, be remedied with all reasonable dispatch. Force majeure shall also include the failure of any third party pipeline, through no fault of the parties hereto, to accept the referenced products for transportation to or from Warren's facilities. 8. ASSIGNMENT -- This Agreement shall extend to and be binding upon the parties hereto, their heirs, executors, administrators, successors and assigns; but it is expressly agreed that neither party shall voluntarily assign this Agreement without the prior written consent of the other. 9. NOTICE -- Any notice hereunder shall be in writing and shall be delivered personally, by mail, by telex, or by telegram to the address first hereinabove set forth, unless changed by notice. Such notice shall be deemed to have been given on the date of the delivery thereof. 10. WAIVER -- The waiver by either party of the breach of any provision hereof by the other party shall not be deemed to be a waiver of the breach of any other provision or provisions hereof or of any subsequent or continuing breach of such provision or provisions. 11. ALTERATIONS -- No oral promises, agreements or warranties shall be deemed a part hereof, nor shall any alteration or amendment of this Agreement, or waiver of any of its provisions, be binding upon either party hereto unless the same be in writing, signed by the party charged. 12. INSPECTION -- Unless otherwise specified, Buyer will provide gauging, sampling, and testing at no charge to Warren. Either party may secure outside inspectors to perform this work and if this is done, the payments for these services will be shared equally among the parties unless some other arrangement for payment is mutually agreed upon. 13. MARINE PROVISIONS -- If delivery of any products hereunder is to be accomplished by waterborne transportation, the provisions set out in the "Marine Provisions" attached hereto and made a part hereof shall apply to such deliveries. 14. INVOICES AND TERMS OF PAYMENT -- Invoices will be prepared by Warren and transmitted to the Buyer from time to time during the month. Unless otherwise specified, payment is due within ten (10) days after receipt of invoice. 15. FINANCIAL RESPONSIBILITY -- If in the judgment of Warren the financial responsibility of Buyer becomes impaired or unsatisfactory, advance cash payments or acceptable security including, but not limited to a letter of credit from a financial institution acceptable to Warren shall be given by Buyer upon demand of Warren, and Buyer's failure to abide by the provisions of this Paragraph shall be considered a breach hereof and in such event payment for all products delivered hereunder shall be due and owing and shall be paid immediately, and Warren may without waiving any rights or remedies it may have, withhold further deliveries until such payment or security is received. Buyer's duty to provide the hereinabove credit assurance shall be a condition precedent to Warren's obligation to perform under this agreement. 16. CONFLICTS OF INTEREST -- No director, employee or agent of either party shall give or receive any commission, fee, rebate, gift or entertainment of significant cost or value in connection with this Agreement. Any representative(s) authorized by either party may audit the applicable records of the other party solely for the purpose of determining whether there has been compliance with this paragraph. 17. AUDIT -- Each party and its duly authorized representatives shall have access to the accounting records and other documents maintained by the other party which relate to product being delivered to the other party under this Agreement and shall have the right to audit such records once a year at any reasonable time or times during the terms of this Agreement and for two years after the year in which this Agreement terminates. Neither party shall make claim on the other for any adjustment after said two year period. 18. QUALITY -- Any requirements of customer pertaining to potential contaminants and/or specific hydrocarbon composition not listed in Warren's product specification must be identified by customer and allowable concentrations agreed to in writing by both parties prior to delivery of product to be effective under this Agreement. 19. WARREN'S TANK CARS -- Unless Warren's tank cars are unloaded and returned to railroad, Buyer shall be liable to Warren for rental at the rate of ________________ for each day or fraction thereof in excess of ________________ days (LPG cars). Tank cars shall not be diverted without Warren's written consent. 20. PRICES -- Prices at destination include allowance for transportation charges at lowest applicable common carrier rate between shipping point and actual destination. Warren reserves the right to add other shipping points and to change the shipping points on which destination prices are based. Notice of any such additions or changes in shipping points shall be given to Buyer in writing and unless objected to within ten days after receipt, said shipping points shall be deemed accepted by Buyer. Deletions of shipping points shall be made in like manner with like effect. Destination prices are subject to adjustment with changes in common carrier freight rates and any changes in applicable freight rates shall be for Buyer's account. Unless otherwise provided, if common carrier is employed, transportation charges shall be paid by consignee directly to carrier. If prices are based on quotations in industry publications, quotations published on dates of shipment shall apply. If no quotations for date of shipment are published in designated industry publication, the last previous quotations in such publication shall govern. PRODUCT SALES AGREEMENT ATTACHMENT A (PSA #s-40845) 1. SHORTAGE OF PRODUCTS. Due to uncertainties in the supply/demand situation, Warren may not have sufficient supplies of said product to be delivered hereunder from its then contemplated sources of supply to meet the full requirements of all of its customers, contract or otherwise. Whenever that situation exists and regardless of whether Warren's performance hereunder is otherwise excused, Warren shall have, in addition to any other rights Warren may have under this Agreement, the right to reduce deliveries of such product on any basis which in Warren's opinion is equitable, allowing for such priorities to such classes of customers as Warren deems appropriate. No such priorities to such classes of customers as Warren deems appropriate. No such reduction need be made up. If any such reduction occurs, Buyer shall have the option to accept such reduction occurs, Buyer shall have the option to accept such reduction or to terminate this Agreement as to any or all products by fifteen (15) day's notice to Warren given at any time within thirty (30) days after the notice of reduction. 2. BRAND NAMES. Buyer agrees not represent, or authorize or permit any other person to represent, that the product delivered hereunder is the product of Warren. All products delivered to Buyer hereunder shall be used for sold under Buyer's own brand names or under brand names approved by Warren, and Buyer shall not authorize or permit said product to be used or sold under any other brand names. 3. CONDUCT OF BUYER'S BUSINESS. Buyer agrees to conduct all operations in strict compliance with all applicable law, ordinances, and regulations of governmental authorities. Buyer in the performance of this Agreement is engaged in an independent business and nothing therein contained shall be construed as giving to Warren any right to control Buyer in any way in its performance of this Agreement. Warren has no right to exercise control over any of the Buyer's employees. All employees of Buyer shall be entirely under the control and direction of Buyer who shall be responsible for their actions and omissions. ATTACHMENT ACCEPTED AND AGREED TO: Warren Petroleum Company EMPIRE GAS CORPORATION A Division of CHEVRON U.S.A. Inc. - ---------------------------------------- By: /s/ Earl Noe By: /s/ - ---------------------------------------- ------------------------------ MGR., DOMESTIC & INDUSTRIAL SALES WARREN PETROLEUM COMPANY A Division of Chevron U.S.A. Inc. P. O. Box 1589 Tulsa, Oklahoma 74102 ATTACHMENT NO. 1 (LP-GAS SALES) Product Sales Agreement No. S-40845 1. TERM: This agreement shall remain in effect for a primary term of one (1) year beginning December 1, 1986, and shall continue thereafter from year-to-year unless terminated at the end of the primary term or on any subsequent anniversary thereof by either party giving the other the not less than sixty (60) days' prior written notice of termination. 2. QUANTITY: During the term hereof, Buyer agrees to buy the product herein specified in monthly quantities of not less than the minimum not more than the maximum set forth below and Warren agrees to sell said quantities to Buyer. Buyer agrees to purchase such quantities from Warren as evenly as possible over each month. Unless otherwise provided, the monthly quantities set forth below shall be the quantities applicable for the entire term of this agreement. Notwithstanding the foregoing, if during any period of this agreement the quantity of product Warren is obligated to deliver to Buyer is prescribed by government rules, regulations or orders, then the quantity of product covered by this agreement shall be the quantity so prescribed for such period and Buyer agrees to buy and Warren agrees to sell such quantity.
Volume (In Thousands of Gallons) Minimum Maximum Minimum Maximum April 250 650 October 250 650 ------- ------- ------- ------- May 250 650 November 250 650 ------- ------- ------- ------- June 250 650 December 250 650 ------- ------- ------- ------- July 250 650 January 250 650 ------- ------- ------- ------- August 250 650 February 250 650 ------- ------- ------- ------- September 250 650 March 250 650 ------- ------- ------- -------
For the purposes of determining compliance with the above quantity schedule, purchase of product shall be allocated to the month in which shipment is made. Should either party fail to comply in any amount with the above schedule, the other party may elect to terminate this agreement by mailing notice of such termination on or before the 20th of the succeeding month. If the Buyer fails to purchase 100% of the above specified minimum monthly quantities during any month or months of the period beginning April 1 and ending September 30 and Warren does not elect to terminate this agreement, Warren shall not be obligated hereunder to sell to Buyer in any of the succeeding six months (October through March) more than one and one half times the average monthly quantity which Buyer actually purchased during the preceding six-month period (April through September), but in no event more than the maximum monthly quantities shown for each of the months October through March. When delivery is into tank trucks furnished by Buyer, the delivery ticket showing the quantity delivered and measures in tank trucks shall be signed by the loader at the point of origin as the agent of Warren and by the truck driver as the agent of the Buyer; thereafter, such quantities shall be conclusively presumed to have been delivered to Buyer. Buyer agrees that on or before the 1st day of each month Warren will be furnished with requisitions showing quantities required during such month, delivery dates, and, when applicable, destinations of each shipment to be made by Warren. Warren shall not be obligated to ship less than a tank car load or less than a tank truck load. Page 1 of 2 3. METHOD OF DELIVERY: __x__ By tank trucks furnished by Buyer. _____ By tank trucks owned or controlled by Buyer. _____ By tank cars furnished by ____________ with a capacity of ________ gallons each. 4. PRICES: Subject to General Provision No. 20 (Prices) of this agreement, Buyer shall pay the applicable prices per gallon listed under "Price Information" set forth hereinbelow for the product specified, unless and until such prices are changed by written notice given in accordance with the provisions hereof. Said prices may be changed at any time and from time to time by Warren upon written notice effective when deposited in the United States Mail, postage prepaid and addressed to Buyer. However, if any such notice shall increase Warren's price per gallon for the designated product to Buyer at any shipping point or destination listed herein above Warren's highest price for such product in effect thereat during the elapsed portion of the calendar year in which Warren's notice is effective, Buyer may by written notice to Warren given and effective within 15 days from the date of Warren's said notice, terminate this contract with respect to such shipping point or destination. If the sale is on the basis of a destination price and if delivery is into tank trucks furnished by Buyer, the Buyer shall receive an allowance calculated at the lowest applicable common carrier truck rate between shipping point and actual destination. PRICE INFORMATION (Prices in effect as of November 20, 1986) (Check if sale on /x/ shipping point basis or / / destination price basis) Price in Shipping Points Destinations Product cents/gallons LEBANON, INDIANA Various HD-5 Propane 26.00 5. ODORIZATION: All product sold and delivered hereunder shall be ordorized unless delivery of unordorized product is permitted by law and there is in effect a separate written agreement between Warren and Buyer providing for the delivery of unodorized product. 6. SALE OF BUSINESS: The Buyer agrees that in the event of a sale of its LP- gas business or substantially all of its assets used in its assets used in its LP-gas business, Buyer will require the purchaser of such business or such assets as a condition of the ale to assume the obligation of Buyer under this agreement. 7. TRADEMARKS: Buyer acknowledges that the CHEVRON and WARRENGAS trademarks are valuable rights belonging to Chevron Corporation and its subsidiaries, including Chevron U.S.A. Inc., and that any use thereof by Buyer in connection with this agreement is solely for the purposes of advertising products obtained from such subsidiaries. Upon termination of this agreement, Buyer agrees that it will make no further use of such trademarks or any other mark, name or designs confusingly similar therewith. 8. APPORTIONMENT: Notwithstanding the obligations of this agreement, Warren may apportion its available supply at a given location or in a stated area among its customers in such manner as it may determine. Page 2 of 2 EX-10.18 13 EXHIBIT 10.18 EXHIBIT 10.18 [LOGO] WARREN PETROLEUM COMPANY PRODUCT SALES AGREEMENT A Division of Chevron U.S.A. Inc. PREPARE IN ORIGINAL AND FOUR COPIES - -------------------------------------------------------------------------------- Purchaser | Confirming Arrangements Made With EMPIRE GAS CORPORATION | JOYCE KINNET/EARL NOE - -------------------------------------------------------------------------------- Address | Arrangements Made By | Date P. O. BOX 303 | D. W. CAMPION | Nov. 22, 1986 - -------------------------------------------------------------------------------- Lebanon, MO 65536 | Warren No. | Purchaser No. | No. S40849 | - -------------------------------------------------------------------------------- 1. Warren will sell the following during period of: DECEMBER 1, 1986 AND THEREAFTER (SEE ATTACHMENT A) - -------------------------------------------------------------------------------- Product | Quantity | Delivery Point | Product Sale | | | Price - -------------------------------------------------------------------------------- Description | Approx. |Measrmnt.| Location | Methods | Cents/Gallon* |(net at 60 |(see 2) | | (see 3) | | degree F) | | | | - -------------------------------------------------------------------------------- COMMERCIAL |200,000 | A | Origin | A | 35.50 PROPANE |GALLONS PER | | F.O.B. RICHMOND,| |*PRICE SUBJECT |MONTH | | CA | |TO CHANGE-- - -----------------------------------------------------------------|SEE ATTACH- | | | Destination | |MENT A) | | | | | - -------------------------------------------------------------------------------- 2. Measurement (See General Provisions, Item 2) Basis: V - Volumetric per API /X/ A. Trucks Tables 23 and 24 or / / B. Tank Cars 23A and 24A or 5A / / C. Pipeline and 6A / / D. Ship or Barge M - Mass per GPA 8182 / / E. Other____________________________________ 1 - Origin _________________________________________ 2 - Destination - -------------------------------------------------------------------------------- 3. Methods /X/ A. To Truck / / B. To Pipeline / / C. To Tank Car / / D. To Barge / / E. To Ship / / F. Other___________________________________ ________________________________________ - -------------------------------------------------------------------------------- 4. Specifications COMMERCIAL PROPANE - GPA SPECIFICATIONS. - -------------------------------------------------------------------------------- 5. Product: /X/ Stenched / / Unstenched - -------------------------------------------------------------------------------- 6. Terms (SEE ATTACHMENT A) / / Expires on __________________________ / / Until _____________ and continuing thereafter unless terminated by either party's giving at least ___________ days prior written notice - -------------------------------------------------------------------------------- 7. Warren sends statements, invoices and shipping documentation to (SAME AS ABOVE) - -------------------------------------------------------------------------------- 8. Terms of Payment NET 10 DAYS FROM DATE OF INVOICE. - -------------------------------------------------------------------------------- 9. Special Provisions THE TERMS AND CONDITIONS SET FORTH IN ATTACHMENT A ARE INCORPORATED HEREIN AND MADE A PART OF THIS AGREEMENT. - -------------------------------------------------------------------------------- 10. In addition to the above terms and conditions, the General Provisions of this Product Sales Agreement as set forth on the reverse side hereof are incorporated herein by reference and made a part of this Agreement. - -------------------------------------------------------------------------------- If you are in agreement with the foregoing terms and conditions, please so indicate by signing below and returning one copy of the Agreement to Warren. - -------------------------------------------------------------------------------- Accepted and Agreed to | Warren Petroleum Company EMPIRE GAS CORPORATION | A Division of Chevron U.S.A. Inc. - -----------------------------------|-------------------------------------------- By /s/ Earl Noe | By /s/ - -----------------------------------|-------------------------------------------- | MGR., DOMESTIC & INDUSTRIAL SALES - -------------------------------------------------------------------------------- Distribution: Original - Buyer for file WP 82021 (CD 9 85) Pink - Buyer for acceptance and Printed in U.S.A. return to Warren's Tulsa Office Yellow - Distribution Section, Tulsa Green - Marketing Department, Tulsa White - Retained by Originator PRODUCT SALES AGREEMENT GENERAL PROVISIONS 1. DELIVERIES A. When delivery is point of origin, delivery shall be deemed to have been completed: 1. To ships or barges when the product has passed the vessel's loading flange; 2. To tank trucks when the product has actually been delivered into the truck; 3. To tank cars when the carrier accepts the same for shipment; 4. To pipelines upon metering of the product. B. When delivery is point of destination, delivery shall be deemed to have been completed: 1. From ships or barges when the product has passed the vessel's discharge flange; 2. From tank trucks when truck has been placed at buyer's facilities for unloading; 3. From tank cars when carrier delivers same at the destination; 4. From pipeline upon metering of the product. C. When by an in-line product transfer, delivery shall be deemed to have been completed upon execution of the order by the pipeline carrier. D. If any common or contract carrier trucks are used, Warren shall not be liable to Buyer for quantity or quality of product. After completion of loading at the point of origin, Buyer agrees that the handling, care or use of product delivered as herein provided shall thereafter be at Buyer's sole risk and expense. 2. MEASUREMENT--Measurement shall be done in the manner customarily utilized at the point of delivery so long as it is in accordance with one of the following alternatives: A. On all deliveries into/out of tank cars, the quantity shall be determined by official tank car capacity tables, meters with no vapor return, or by weighing, in accordance with GPA Publication 8162 and all revisions thereof. B. On all deliveries into/out of transport and tank truck equipment, quantities shall be determined by meter with no vapor return, slip tube, rotary gauging device or weighing, in accordance with GPA Publication 8162 and all revisions thereof. C. On all deliveries into/out of pipeline, quantity shall be determined by turbine or positive displacement pipeline meter in accordance with API Manual of Petroleum Measurement Standards and all revisions thereof. D. On all deliveries to/from ships or barges, shore tank or turbine or positive displacement meter measurements shall determine quantity, unless otherwise agreed upon. Use of meters shall not allow vapor return. E. All quantities shall be corrected to 60 degrees Fahrenheit and equilibrium vapor pressure at 60 degrees Fahrenheit. F. Volume and compressibility correction factors shall be determined from referenced API tables or computer programs used to generate these tables. 3. PASSAGE OF TITLE AND WARRANTY OF TITLE--Title to the product and risk of loss shall pass to Buyer upon delivery. Warren warrants to Buyer that it has title to the product(s) delivered by it hereunder and the right to deliver same, and agrees to indemnify, defend and hold the Buyer harmless from and against any loss, claim or demand by reason of any failure of such title or breach of this warranty. Except as set forth in this paragraph 3 and elsewhere herein, WARREN MAKES NO OTHER WARRANTY WITH RESPECT TO THE PRODUCT OR OTHERWISE, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE. 4. TAXES--Any tax, duty, toll, fee, impost, charge or other exaction, or the amount equivalent thereto, now or hereafter imposed, levied or assessed by any governmental authority upon, measured by, incident to or as a result of the transaction herein provided for, or the transportation, importation, production, manufacture, use or ownership of the goods or source materials thereof which are the subject matter of this Agreement, shall, if collectible or payable by Warren, be paid by Buyer on demand by Warren. Notwithstanding the foregoing, it is understood and agreed that any personal property taxes levied or assessed by any governmental authority upon the value of the products covered by this Agreement shall be paid by the party having title thereto at the time of such assessment. Buyer shall furnish Warren proper exemption certificate where tax exemption is claimed on any or all product(s) delivered hereunder, or shall pay such taxes. 5. FUTURE OBLIGATIONS--SUPPLIER/PURCHASER RELATIONSHIP--This Agreement is freely entered into between the parties hereto. It does not reflect or grow out of any previously existing legal obligation which either party may have to the other to supply any petroleum product. Part of the consideration for this Agreement is each party's express agreement that neither party expects or desires that this Agreement form the basis of any additional future obligation of either party to supply any petroleum product to the other. To the extent that under present or future laws or regulations this Agreement may give rise to such obligations, each party hereby waives in advance its right to enforce any such obligation and upon submittal of written notice of termination by one party to the other under this Agreement, it is agreed that both parties intend to terminate any such additional future supplier/buyer relationship which may be created by this Agreement under such laws or regulations. Additionally, at any time hereafter, the parties agree to submit and/or execute documentation in compliance with the then applicable laws and regulations as may be necessary to evidence such termination insofar as the parties are concerned. The parties further agree to obtain any other consents or authorization required under the then applicable laws and regulations insofar as reasonably possible to give effect to the intent hereof. 6. GOVERNMENT REGULATIONS & LAW--Warren warrants that the product it delivers hereunder will be produced and delivered in full compliance with all applicable federal and state laws and regulations and all Presidential Proclamations which may be applicable. This agreement shall be construed in accordance with the laws of the State of Oklahoma including the Uniform Commercial Code. Buyer agrees to comply with the provisions contained in Exhibit "B" attached hereto, to the extent that such provisions are legally applicable to Buyer. 7. FORCE MAJEURE--If either party is rendered unable, wholly or in part, to perform its obligations under this Agreement (other than to make payments due hereunder) due to force majeure, defined herein as acts of God, flood, fire, explosion or storm; transportation difficulty; strike, lockout or other industrial disturbance; war or any law, rule, order or action of any court or instrumentality of the federal or any state government; exhaustion, reduction or unavailability of products from one or more of the sources of supply from which deliveries are normally made hereunder, or exhaustion or unavailability or delay in delivery of any material or product necessary in the manufacture of the product(s) deliverable hereunder, or any other cause or causes beyond its control whether similar or dissimilar to those stated above, then in any such event, it is agreed that the affected party shall give promptly after the occurrence of force majeure notice and full particulars of such force majeure to the other party, the obligations of the affected party shall be suspended for the duration of such inability to perform but for no longer period, and such cause shall, so far as possible, be remedied with all reasonable dispatch. Force majeure shall also include the failure of any third party pipeline, through no fault of the parties hereto, to accept the referenced products for transportation to or from Warren's facilities. 8. ASSIGNMENT--This Agreement shall extend to and be binding upon the parties hereto, their heirs, executors, administrators, successors and assigns; but it is expressly agreed that neither party shall voluntarily assign this Agreement without the prior written consent of the other. 9. NOTICE--Any notice hereunder shall be in writing and shall be delivered personally, by mail, by telex, or by telegram to the address first hereinabove set forth, unless changed by notice. Such notice shall be deemed to have been given on the date of the delivery thereof. 10. WAIVER--The waiver by either party of the breach of any provision hereof by the other party shall not be deemed to be a waiver of the breach of any other provision or provisions hereof or of any subsequent or continuing breach of such provision or provisions. 11. ALTERATIONS--No oral promises, agreements or warranties shall be deemed a part hereof, nor shall any alteration or amendment of this Agreement, or waiver of any of its provisions, be binding upon either party hereto unless the same be in writing, signed by the party charged. 12. INSPECTION--Unless otherwise specified, Buyer will provide gauging, sampling, and testing at no charge to Warren. Either party may secure outside inspectors to perform this work and if this is done, the payments for these services will be shared equally among the parties unless some other arrangement for payment is mutually agreed upon. 13. MARINE PROVISIONS--If delivery of any products hereunder is to be accomplished by waterborne transportation, the provisions set out in the "Marine Provisions" attached hereto and made a part hereof shall apply to such deliveries. 14. INVOICES AND TERMS OF PAYMENT--Invoices will be prepared by Warren and transmitted to the Buyer from time to time during the month. Unless otherwise specified, payment is due within ten (10) days after receipt of invoice. 15. FINANCIAL RESPONSIBILITY--If in the judgment of Warren the financial responsibility of Buyer becomes impaired or unsatisfactory, advance cash payments or acceptable security including, but not limited to a letter of credit from a financial institution acceptable to Warren shall be given by Buyer upon demand of Warren, and Buyer's failure to abide by the provisions of this Paragraph shall be considered a breach hereof and in such event payment for all products delivered hereunder shall be due and owing and shall be paid immediately, and Warren may without waiving any rights or remedies it may have, withhold further deliveries until such payment or security is received. Buyer's duty to provide the hereinabove credit assurance shall be a condition precedent to Warren's obligation to perform under this agreement. 16. CONFLICTS OF INTEREST--No director, employee or agent of either party shall give or receive any commission, fee, rebate, gift or entertainment of significant cost or value in connection with this Agreement. Any representative(s) authorized by either party may audit the applicable records of the other party solely for the purpose of determining whether there has been compliance with this paragraph. 17. AUDIT--Each party and its duly authorized representatives shall have access to the accounting records and other documents maintained by the other party which relate to product being delivered to the other party under this Agreement and shall have the right to audit such records once a year at any reasonable time or times during the terms of this Agreement and for two years after the year in which this Agreement terminates. Neither party shall make claim on the other for any adjustment after said two year period. 18. QUALITY--Any requirements of customer pertaining to potential contaminants and/or specific hydrocarbon composition not listed in Warren's product specification must be identified by customer and allowable concentrations agreed to in writing by both parties prior to delivery of product to be effective under this Agreement. 19. WARREN'S TANK CARS--Unless Warren's tank cars are unloaded and returned to railroad, Buyer shall be liable to Warren for rental at the rate of ________________ for each day or fraction thereof in excess of ________________ days (LPG cars). Tank cars shall not be diverted without Warren's written consent. 20. PRICES--Prices at destination include allowance for transportation charges at lowest applicable common carrier rate between shipping point and actual destination. Warren reserves the right to add other shipping points and to change the shipping points on which destination prices are based. Notice of any such additions or changes in shipping points shall be given to Buyer in writing and unless objected to within ten days after receipt, said shipping points shall be deemed accepted by Buyer. Deletions of shipping points shall be made in like manner with like effect. Destination prices are subject to adjustment with changes in common carrier freight rates and any changes in applicable freight rates shall be for Buyer's account. Unless otherwise provided, if common carrier is employed, transportation charges shall be paid by consignee directly to carrier. If prices are based on quotations in industry publications, quotations published on dates of shipment shall apply. If no quotations for date of shipment are published in designated industry publication, the last previous quotations in such publication shall govern. PRODUCT SALES AGREEMENT ATTACHMENT A (Product Sales Agreement No. S-40849) 1. SHORTAGE OF PRODUCTS. Due to uncertainties in the supply/demand situation, Warren may not have sufficient supplies of said product to be delivered hereunder from its then contemplated sources of supply to meet the full requirements of all of its customers, contract or otherwise. Whenever that situation exists and regardless of whether Warren's performance hereunder is otherwise excused, Warren shall have, in addition to any other rights Warren may have under this Agreement, the right to reduce deliveries of such product on any basis which in Warren's opinion is equitable, allowing for such priorities to such classes of customers as Warren deems appropriate. No such reduction need be made up. If any such reduction occurs, Buyer shall have the option to accept such reduction occurs, Buyer shall have the option to accept such reduction or to terminate this Agreement as to any or all products by fifteen (15) day's notice to Warren given at any time within thirty (30) days after the notice of reduction. 2. BRAND NAMES. Buyer agrees not represent, or authorize or permit any other person to represent, that the product delivered hereunder is the product of Warren. All products delivered to Buyer hereunder shall be used or sold under Buyer's own brand names or under brand names approved by Warren, and Buyer shall not authorize or permit said product to be used or sold under any other brand names. 3. CONDUCT OF BUYER'S BUSINESS. Buyer agrees to conduct all operations in strict compliance with all applicable law, ordinances, and regulations of governmental authorities. Buyer in the performance of this Agreement is engaged in an independent business and nothing therein contained shall be construed as giving to Warren any right to control Buyer in any way in its performance of this Agreement. Warren has no right to exercise control over any of the Buyer's employees. All employees of Buyer shall be entirely under the control and direction of Buyer who shall be responsible for their actions and omissions. 4. TERM. This agreement shall remain in effect for a primary term of one (1) year beginning Dec. 1, 1986 and shall continue thereafter from year-to-year unless terminated at the end of the primary term or any subsequent anniversary thereof by either party giving the other not less than sixty (60) days' prior written notice of termination. 5. QUANTITY. Buyer agrees to purchase such quantities from Warren as evenly as possible over each month. Unless otherwise excused, should either party fail to comply with the stated quantity, the other party may elect to terminate this agreement by written notice of such termination on or before the 20th day of the succeeding month. 6. PRICE. Said prices may be changed at any time and from time-to-time by Warren upon written notice to Buyer. Notwithstanding other notice provisions contained herein, such written price change notifications shall be effective on the date such notice is deposited in the United States mail posted prepaid, transmitted by telex, or transmitted by telegram. However, if any such notice shall increase Warren's price per gallon for the designated product to Buyer at any shipping point or destination listed herein above Warren's highest price for such product in effect therat during the elapsed portion of the calendar year in which Warren's notice is effective, Buyer may by written notice to Warren given and effective within 15 days from the date of Warren's said notice, terminate this contract with respect to such shipping point or destination. 7. DUTY DRAWBACK ALLOWANCE. Warren reserves the right to claim and receive any duty drawback allowance in connection with product that is purchased by Buyer and exported from the United States. The Buyer shall notify and assist Warren in securing any duty drawback allowance that may be available, including providing all necessary certificates and documentation. 8. TERMINATION OF PRIOR AGREEMENTS. This agreement shall, as of the commencement date hereof, terminate and supersede all prior agreements for the purchase and sale of the products(s) named, provided that any accrued obligations of either party under any such prior agreement shall be performed by such party. EX-10.19 14 EXHIBIT 10.19 EXHIBIT 10.19 [LOGO] WARREN PETROLEUM COMPANY PRODUCT SALES AGREEMENT A Division of Chevron U.S.A. Inc. PREPARE IN ORIGINAL AND FOUR COPIES - -------------------------------------------------------------------------------- Purchaser | Confirming Arrangements Made With EMPIRE GAS CORPORATION | JOYCE KINNET/EARL NOE - -------------------------------------------------------------------------------- Address | Arrangements Made By | Date P. O. BOX 303 | D. W. CAMPION | Nov. 24, 1986 - -------------------------------------------------------------------------------- Lebanon, MO 65536 | Warren No. | Purchaser No. | No. S 4 0 8 4 7 | - -------------------------------------------------------------------------------- 1. Warren will sell the following during period of: DECEMBER 1, 1986 AND THEREAFTER (SEE ATTACHMENT NO. 1) - -------------------------------------------------------------------------------- Product | Quantity | Delivery Point | | Product Sale | | | | Price - -------------------------------------------------------------------------------- Description | Approx. Bbls.|Measrmnt.| Location | Methods | Cents/Gallon |(net at |(see 2) | | (see 3) | | 60DEG. F) | | | | - -------------------------------------------------------------------------------- HD-5 PROPANE| (SEE AT- | A | Origin | A | 20.00 | TACHMENT | | MT. BELVIEU, TX | | | NO. 1 | | | |(PRICE SUBJECT - -----------------------------------------------------------------|TO CHANGE -- | | | Destination | |SEE ATTACHMENT | | | | |NO. 1) - -------------------------------------------------------------------------------- 2. Measurement (See General Provisions, Item 2) Basis: V - Volumetric per API /X/ A. Trucks Tables 23 and 24 or / / B. Tank Cars 23A or 24A or 5A / / C. Pipeline and 6A / / D. Ship or Barge M - Mass per GPA 8182 / / E. Other 1 - Origin ----------------------------------------- 2 - Destination ----------------------------------------- - -------------------------------------------------------------------------------- 3. Methods /X/ A. To Truck / / B. To Pipeline / / C. To Tank Car / / D. To Barge / / E. To Ship / / F. Other ----------------------------------------- ----------------------------------------- - -------------------------------------------------------------------------------- 4. Specifications HD-5 PROPANE - -------------------------------------------------------------------------------- 5. Product: /X/ Stenched / / Unstenched - -------------------------------------------------------------------------------- 6. Terms (SEE ATTACHMENT NO. 1) / / Expires on __________________________ - -------------------------------------------------------------------------------- 7. Warren sends statements, invoices and shipping documentation to (SAME AS ABOVE) - -------------------------------------------------------------------------------- 8. Terms of Payment NET 10 DAYS FROM DATE OF INVOICE. - -------------------------------------------------------------------------------- 9. Special Provisions THE TERMS AND CONDITIONS SET FORTH IN ATTACHMENT A AND ATTACHMENT NO. 1 ARE INCORPORATED HEREIN AND MADE A PART OF THIS AGREEMENT. - -------------------------------------------------------------------------------- 10. In addition to the above terms and conditions, the General Provisions of this Product Sales Agreement as set forth on the reverse side hereof are incorporated herein by reference and made a part of this Agreement. - -------------------------------------------------------------------------------- If you are in agreement with the foregoing terms and conditions, please so indicate by signing below and returning one copy of the Agreement to Warren. - -------------------------------------------------------------------------------- Accepted and Agreed to EMPIRE GAS CORPORATION | Warren Petroleum Company | A Division of Chevron U.S.A. | Inc. - -------------------------------------------------------------------------------- By /s/ Earl Noe | By /s/ - -------------------------------------------------------------------------------- | Mgr., Domestic & Industrial | Sales - -------------------------------------------------------------------------------- Distribution: Original - Buyer for file WP 82021 (CD 9 85) Pink - Buyer for acceptance and Printed in U.S.A. return to Warren's Tulsa Office Yellow - Distribution Section, Tulsa Green - Marketing Department, Tulsa White - Retained by Originator PRODUCT SALES AGREEMENT GENERAL PROVISIONS 1. DELIVERIES A. When delivery is point of origin, delivery shall be deemed to have been completed: 1. To ships or barges when the product has passed the vessel's loading flange; 2. To tank trucks when the product has actually been delivered into the truck; 3. To tank cars when the carrier accepts the same for shipment; 4. To pipelines upon metering of the product. B. When delivery is point of destination, delivery shall be deemed to have been completed: 1. From ships or barges when the product has passed the vessel's discharge flange; 2. From tank trucks when truck has been placed at buyer's facilities for unloading; 3. From tank cars when carrier delivers same at the destination; 4. From pipeline upon metering of the product. C. When by an in-line product transfer, delivery shall be deemed to have been completed upon execution of the order by the pipeline carrier. D. If any common or contract carrier trucks are used, Warren shall not be liable to Buyer for quantity or quality of product. After completion of loading at the point of origin, Buyer agrees that the handling, care or use of product delivered as herein provided shall thereafter be at Buyer's sole risk and expense. 2. MEASUREMENT--Measurement shall be done in the manner customarily utilized at the point of delivery so long as it is in accordance with one of the following alternatives: A. On all deliveries into/out of tank cars, the quantity shall be determined by official tank car capacity tables, meters with no vapor return, or by weighing, in accordance with GPA Publication 8162 and all revisions thereof. B. On all deliveries into/out of transport and tank truck equipment, quantities shall be determined by meter with no vapor return, slip tube, rotary gauging device or weighing, in accordance with GPA Publication 8162 and all revisions thereof. C. On all deliveries into/out of pipeline, quantity shall be determined by turbine or positive displacement pipeline meter in accordance with API Manual of Petroleum Measurement Standards and all revisions thereof. D. On all deliveries to/from ships or barges, shore tank or turbine or positive displacement meter measurements shall determine quantity, unless otherwise agreed upon. Use of meters shall not allow vapor return. E. All quantities shall be corrected to 60 degrees Fahrenheit and equilibrium vapor pressure at 60 degrees Fahrenheit. F. Volume and compressibility correction factors shall be determined from referenced API tables or computer programs used to generate these tables. 3. PASSAGE OF TITLE AND WARRANTY OF TITLE--Title to the product and risk of loss shall pass to Buyer upon delivery. Warren warrants to Buyer that it has title to the product(s) delivered by it hereunder and the right to deliver same, and agrees to indemnify, defend and hold the Buyer harmless from and against any loss, claim or demand by reason of any failure of such title or breach of this warranty. Except as set forth in this paragraph 3 and elsewhere herein, WARREN MAKES NO OTHER WARRANTY WITH RESPECT TO THE PRODUCT OR OTHERWISE, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE. 4. TAXES--Any tax, duty, toll, fee, impost, charge or other exaction, or the amount equivalent thereto, now or hereafter imposed, levied or assessed by any governmental authority upon, measured by, incident to or as a result of the transaction herein provided for, or the transportation, importation, production, manufacture, use or ownership of the goods or source materials thereof which are the subject matter of this Agreement, shall, if collectible or payable by Warren, be paid by Buyer on demand by Warren. Notwithstanding the foregoing, it is understood and agreed that any personal property taxes levied or assessed by any governmental authority upon the value of the products covered by this Agreement shall be paid by the party having title thereto at the time of such assessment. Buyer shall furnish Warren proper exemption certificate where tax exemption is claimed on any or all product(s) delivered hereunder, or shall pay such taxes. 5. FUTURE OBLIGATIONS--SUPPLIER/PURCHASER RELATIONSHIP--This Agreement is freely entered into between the parties hereto. It does not reflect or grow out of any previously existing legal obligation which either party may have to the other to supply any petroleum product. Part of the consideration for this Agreement is each party's express agreement that neither party expects or desires that this Agreement form the basis of any additional future obligation of either party to supply any petroleum product to the other. To the extent that under present or future laws or regulations this Agreement may give rise to such obligations, each party hereby waives in advance its right to enforce any such obligation and upon submittal of written notice of termination by one party to the other under this Agreement, it is agreed that both parties intend to terminate any such additional future supplier/buyer relationship which may be created by this Agreement under such laws or regulations. Additionally, at any time hereafter, the parties agree to submit and/or execute documentation in compliance with the then applicable laws and regulations as may be necessary to evidence such termination insofar as the parties are concerned. The parties further agree to obtain any other consents or authorization required under the then applicable laws and regulations insofar as reasonably possible to give effect to the intent hereof. 6. GOVERNMENT REGULATIONS & LAW--Warren warrants that the product it delivers hereunder will be produced and delivered in full compliance with all applicable federal and state laws and regulations and all Presidential Proclamations which may be applicable. This agreement shall be construed in accordance with the laws of the State of Oklahoma including the Uniform Commercial Code. Buyer agrees to comply with the provisions contained in Exhibit "B" attached hereto, to the extent that such provisions are legally applicable to Buyer. 7. FORCE MAJEURE--If either party is rendered unable, wholly or in part, to perform its obligations under this Agreement (other than to make payments due hereunder) due to force majeure, defined herein as acts of God, flood, fire, explosion or storm; transportation difficulty; strike, lockout or other industrial disturbance; war or any law, rule, order or action of any court or instrumentality of the federal or any state government; exhaustion, reduction or unavailability of products from one or more of the sources of supply from which deliveries are normally made hereunder, or exhaustion or unavailability or delay in delivery of any material or product necessary in the manufacture of the product(s) deliverable hereunder, or any other cause or causes beyond its control whether similar or dissimilar to those stated above, then in any such event, it is agreed that the affected party shall give promptly after the occurrence of force majeure notice and full particulars of such force majeure to the other party, the obligations of the affected party shall be suspended for the duration of such inability to perform but for no longer period, and such cause shall, so far as possible, be remedied with all reasonable dispatch. Force majeure shall also include the failure of any third party pipeline, through no fault of the parties hereto, to accept the referenced products for transportation to or from Warren's facilities. 8. ASSIGNMENT--This Agreement shall extend to and be binding upon the parties hereto, their heirs, executors, administrators, successors and assigns; but it is expressly agreed that neither party shall voluntarily assign this Agreement without the prior written consent of the other. 9. NOTICE--Any notice hereunder shall be in writing and shall be delivered personally, by mail, by telex, or by telegram to the address first hereinabove set forth, unless changed by notice. Such notice shall be deemed to have been given on the date of the delivery thereof. 10. WAIVER--The waiver by either party of the breach of any provision hereof by the other party shall not be deemed to be a waiver of the breach of any other provision or provisions hereof or of any subsequent or continuing breach of such provision or provisions. 11. ALTERATIONS--No oral promises, agreements or warranties shall be deemed a part hereof, nor shall any alteration or amendment of this Agreement, or waiver of any of its provisions, be binding upon either party hereto unless the same be in writing, signed by the party charged. 12. INSPECTION--Unless otherwise specified, Buyer will provide gauging, sampling, and testing at no charge to Warren. Either party may secure outside inspectors to perform this work and if this is done, the payments for these services will be shared equally among the parties unless some other arrangement for payment is mutually agreed upon. 13. MARINE PROVISIONS--If delivery of any products hereunder is to be accomplished by waterborne transportation, the provisions set out in the "Marine Provisions" attached hereto and made a part hereof shall apply to such deliveries. 14. INVOICES AND TERMS OF PAYMENT--Invoices will be prepared by Warren and transmitted to the Buyer from time to time during the month. Unless otherwise specified, payment is due within ten (10) days after receipt of invoice. 15. FINANCIAL RESPONSIBILITY--If in the judgment of Warren the financial responsibility of Buyer becomes impaired or unsatisfactory, advance cash payments or acceptable security including, but not limited to a letter of credit from a financial institution acceptable to Warren shall be given by Buyer upon demand of Warren, and Buyer's failure to abide by the provisions of this Paragraph shall be considered a breach hereof and in such event payment for all products delivered hereunder shall be due and owing and shall be paid immediately, and Warren may without waiving any rights or remedies it may have, withhold further deliveries until such payment or security is received. Buyer's duty to provide the hereinabove credit assurance shall be a condition precedent to Warren's obligation to perform under this agreement. 16. CONFLICTS OF INTEREST--No director, employee or agent of either party shall give or receive any commission, fee, rebate, gift or entertainment of significant cost or value in connection with this Agreement. Any representative(s) authorized by either party may audit the applicable records of the other party solely for the purpose of determining whether there has been compliance with this paragraph. 17. AUDIT--Each party and its duly authorized representatives shall have access to the accounting records and other documents maintained by the other party which relate to product being delivered to the other party under this Agreement and shall have the right to audit such records once a year at any reasonable time or times during the terms of this Agreement and for two years after the year in which this Agreement terminates. Neither party shall make claim on the other for any adjustment after said two year period. 18. QUALITY--Any requirements of customer pertaining to potential contaminants and/or specific hydrocarbon composition not listed in Warren's product specification must be identified by customer and allowable concentrations agreed to in writing by both parties prior to delivery of product to be effective under this Agreement. 19. WARREN'S TANK CARS--Unless Warren's tank cars are unloaded and returned to railroad, Buyer shall be liable to Warren for rental at the rate of ________________ for each day or fraction thereof in excess of ________________ days (LPG cars). Tank cars shall not be diverted without Warren's written consent. 20. PRICES--Prices at destination include allowance for transportation charges at lowest applicable common carrier rate between shipping point and actual destination. Warren reserves the right to add other shipping points and to change the shipping points on which destination prices are based. Notice of any such additions or changes in shipping points shall be given to Buyer in writing and unless objected to within ten days after receipt, said shipping points shall be deemed accepted by Buyer. Deletions of shipping points shall be made in like manner with like effect. Destination prices are subject to adjustment with changes in common carrier freight rates and any changes in applicable freight rates shall be for Buyer's account. Unless otherwise provided, if common carrier is employed, transportation charges shall be paid by consignee directly to carrier. If prices are based on quotations in industry publications, quotations published on dates of shipment shall apply. If no quotations for date of shipment are published in designated industry publication, the last previous quotations in such publication shall govern. PRODUCT SALES AGREEMENT ATTACHMENT A (PSA #S-40847) 1. SHORTAGE OF PRODUCTS. Due to uncertainties in the supply/demand situation, Warren may not have sufficient supplies of said product to be delivered hereunder from its then contemplated sources of supply to meet the full requirements of all of its customers, contract or otherwise. Whenever that situation exists and regardless of whether Warren's performance hereunder is otherwise excused, Warren shall have, in addition to any other rights Warren may have under this Agreement, the right to reduce deliveries of such product on any basis which in Warren's opinion is equitable, allowing for such priorities to such classes of customers as Warren deems appropriate. No such priorities to such classes of customers as Warren deems appropriate. No such reduction need be made up. If any such reduction occurs, Buyer shall have the option to accept such reduction occurs, Buyer shall have the option to accept such reduction or to terminate this Agreement as to any or all products by fifteen (15) day's notice to Warren given at any time within thirty (30) days after the notice of reduction. 2. BRAND NAMES. Buyer agrees not represent, or authorize or permit any other person to represent, that the product delivered hereunder is the product of Warren. All products delivered to Buyer hereunder shall be used for sold under Buyer's own brand names or under brand names approved by Warren, and Buyer shall not authorize or permit said product to be used or sold under any other brand names. 3. CONDUCT OF BUYER'S BUSINESS. Buyer agrees to conduct all operations in strict compliance with all applicable law, ordinances, and regulations of governmental authorities. Buyer in the performance of this Agreement is engaged in an independent business and nothing therein contained shall be construed as giving to Warren any right to control Buyer in any way in its performance of this Agreement. Warren has no right to exercise control over any of the Buyer's employees. All employees of Buyer shall be entirely under the control and direction of Buyer who shall be responsible for their actions and omissions. ATTACHMENT ACCEPTED AND AGREED TO: EMPIRE GAS CORPORATION Warren Petroleum Company - --------------------------------- A Division of CHEVRON U.S.A. Inc. By: /s/ Earl Noe By /s/ ------------------------------ ------------------------------------ Mgr., Domestic & Industrial Sales WARREN PETROLEUM COMPANY A Division of Chevron U.S.A. Inc. P. O. Box 1589 Tulsa, Oklahoma 74102 ATTACHMENT NO. 1 (LP-GAS SALES) Product Sales Agreement No. S-40847 1. TERM: This agreement shall remain in effect for a primary term of one (1) year beginning December 1, 1986, and shall continue thereafter from year-to-year unless terminated at the end of the primary term or on any subsequent anniversary thereof by either party giving the other the not less than sixty (60) days' prior written notice of termination. 2. QUANTITY: During the term hereof, Buyer agrees to buy the product herein specified in monthly quantities of not less than the minimum not more than the maximum set forth below and Warren agrees to sell said quantities to Buyer. Buyer agrees to purchase such quantities from Warren as evenly as possible over each month. Unless otherwise provided, the monthly quantities set forth below shall be the quantities applicable for the entire term of this agreement. Notwithstanding the foregoing, if during any period of this agreement the quantity of product Warren is obligated to deliver to Buyer is prescribed by government rules, regulations or orders, then the quantity of product covered by this agreement shall be the quantity so prescribed for such period and Buyer agrees to buy and Warren agrees to sell such quantity. Volume (In Thousands of Gallons) Minimum Maximum Minimum Maximum April 50 100 October 50 100 -------- -------- --------- -------- May 50 100 November 50 100 -------- -------- --------- -------- June 50 100 December 50 100 -------- -------- --------- -------- July 50 100 January 50 100 -------- -------- --------- -------- August 50 100 February 50 100 -------- -------- --------- -------- September 50 100 March 50 100 -------- -------- --------- -------- For the purposes of determining compliance with the above quantity schedule, purchase of product shall be allocated to the month in which shipment is made. Should either party fail to comply in any amount with the above schedule, the other party may elect to terminate this agreement by mailing notice of such termination on or before the 20th of the succeeding month. If the Buyer fails to purchase 100% of the above specified minimum monthly quantities during any month or months of the period beginning April 1 and ending September 30 and Warren does not elect to terminate this agreement, Warren shall not be obligated hereunder to sell to Buyer in any of the succeeding six months (October through March) more than one and one half times the average monthly quantity which Buyer actually purchased during the preceding six-month period (April through September), but in no event more than the maximum monthly quantities shown for each of the months October through March. When delivery is into tank trucks furnished by Buyer, the delivery ticket showing the quantity delivered and measures in tank trucks shall be signed by the loader at the point of origin as the agent of Warren and by the truck driver as the agent of the Buyer; thereafter, such quantities shall be conclusively presumed to have been delivered to Buyer. Buyer agrees that on or before the 1st day of each month Warren will be furnished with requisitions showing quantities required during such month, delivery dates, and, when applicable, destinations of each shipment to be made by Warren. Warren shall not be obligated to ship less than a tank car load or less than a tank truck load. Page 1 of 2 3. METHOD OF DELIVERY: __X__ By tank trucks furnished by Buyer. _____ By tank trucks owned or controlled by Buyer. _____ By tank cars furnished by ____________ with a capacity of ________ gallons each. 4. PRICES: Subject to General Provision No. 20 (Prices) of this agreement, Buyer shall pay the applicable prices per gallon listed under "Price Information" set forth hereinbelow for the product specified, unless and until such prices are changed by written notice given in accordance with the provisions hereof. Said prices may be changed at any time and from time to time by Warren upon written notice effective when deposited in the United States Mail, postage prepaid and addressed to Buyer. However, if any such notice shall increase Warren's price per gallon for the designated product to Buyer at any shipping point or destination listed herein above Warren's highest price for such product in effect thereat during the elapsed portion of the calendar year in which Warren's notice is effective, Buyer may by written notice to Warren given and effective within 15 days from the date of Warren's said notice, terminate this contract with respect to such shipping point or destination. If the sale is on the basis of a destination price and if delivery is into tank trucks furnished by Buyer, the Buyer shall receive an allowance calculated at the lowest applicable common carrier truck rate between shipping point and actual destination. PRICE INFORMATION (Prices in effect as of November 24, 1986) (Check if sale on /X/ shipping point basis or / / destination price basis) Price in Shipping Points Destinations Product cents/gallons MT. BELVIEU, TX VARIOUS HD-5 PROPANE 21.00 5. ODORIZATION: All product sold and delivered hereunder shall be ordorized unless delivery of unordorized product is permitted by law and there is in effect a separate written agreement between Warren and Buyer providing for the delivery of unodorized product. 6. SALE OF BUSINESS: The Buyer agrees that in the event of a sale of its LP- gas business or substantially all of its assets used in its assets used in its LP-gas business, Buyer will require the purchaser of such business or such assets as a condition of the ale to assume the obligation of Buyer under this agreement. 7. TRADEMARKS: Buyer acknowledges that the CHEVRON and WARRENGAS trademarks are valuable rights belonging to Chevron Corporation and its subsidiaries, including Chevron U.S.A. Inc., and that any use thereof by Buyer in connection with this agreement is solely for the purposes of advertising products obtained from such subsidiaries. Upon termination of this agreement, Buyer agrees that it will make no further use of such trademarks or any other mark, name or designs confusingly similar therewith. 8. APPORTIONMENT: Notwithstanding the obligations of this agreement, Warren may apportion its available supply at a given location or in a stated area among its customers in such manner as it may determine. Page 2 of 2 EX-10.20 15 EXHIBIT 10.20 Chevron Exhibit 10.20 WARREN PETROLEUM COMPANY PRODUCT SALES AGREEMENT A Division of Chevron U.S.A. Inc. Prepare in original and four copies. - ------------------------------------------------------------------------------------------------------------------- Purchaser Confirming Arrangements Made With Empire Gas Corporation Paul Lindsay - ------------------------------------------------------------------------------------------------------------------- Address Arrangements Made by Date P.O. Box 303 L.C. Shull 6/1/93 - ------------------------------------------------------------------------------------------------------------------- Lebanon, MO 65536 Warren No. Purchaser No. No. S 58558 - ------------------------------------------------------------------------------------------------------------------- 1. Warren will sell the following during period of: 6/1/93 and thereafter (See Item No. 6 below) - ------------------------------------------------------------------------------------------------------------------- Product Quantity Delivery Point Product Sale Price - ------------------------------------------------------------------------------------------------------------------- Description Approx. Bbls. Measurement. Location Methods Cents/Gallon (net @ 60 Degrees F) (see 2) (see 3) - ------------------------------------------------------------------------------------------------------------------- Commercial Propane See AV1 Millis, WY - -------------------------------------------------------------- ---------------------------------------- Attachment Origin - -------------------------------------------------------------- ---------------------------------------- A - ------------------------------------------------------------------------------------------------------------------- Nampa, ID AV1 See - ------------------------------------------------------------------------------------------------------------------- Destination Attachment - -------------------------------------------------------------- ---------------------------------------- A - ------------------------------------------------------------------------------------------------------------------- 2. Measurement (See General Provisions, Item 2) Basis: V -- Volumetric per API Tables 23 and 24 or 23A and A. Trucks D. Ship or Barge 24A or 5A and 6A --------- E. Inventory Transfer M -- Mass per GPA 8182 B. Tank Cars F. Other _________________ 1 -- Origin 2 - Destination C. Pipeline - ------------------------------------------------------------------------------------------------------------------- 3. Methods A. Trucks D. To Ship or Barge F. Other ___________________ --------- E. Inventory Transfer B. To Tank Car C. To Pipeline - ------------------------------------------------------------------------------------------------------------------- 4. Specifications Commercial Propane, as per GPA specifications - ------------------------------------------------------------------------------------------------------------------- 5. Product: /X/ Stenched / / Unstenched - ------------------------------------------------------------------------------------------------------------------- 6. Terms / / Expires on ________________ /X/ Until 5/31/94 and continuing year to year thereafter unless and until cancelled at the end of any year by either party giving the other at least 60 days written notice prior to the proposed termination date. - ------------------------------------------------------------------------------------------------------------------- 7. Warren sends statements, invoices and shipping documentation to Same as above - ------------------------------------------------------------------------------------------------------------------- 8. Terms of Payment Net 10 days from date of invoice. - ------------------------------------------------------------------------------------------------------------------- 9. Special Provisions The terms and conditions set forth in Attachment A to this Agreement are incorporated herein by reference and made a part of this Agreement. - ------------------------------------------------------------------------------------------------------------------- 10. In addition to the above terms and conditions, the General Provisions of this Product Sales Agreement as set forth on the reverse side hereof are incorporated herein by reference and made a part of this Agreement. - ------------------------------------------------------------------------------------------------------------------- If you are in agreement with the foregoing terms and conditions, please so indicate by signing below and returning one copy of the Agreement to Warren. - ------------------------------------------------------------------------------------------------------------------- Accepted and Agreed to Warren Petroleum Company A Division of Chevron U.S.A. Inc. - ------------------------------------------------------------------------------------------------------------------- By /s/ Earl Noe By /s/ J.L. Gawronski - ------------------------------------------------------------------------------------------------------------------- Title Date Title J.L. Gawronski, Manager, Western District - -------------------------------------------------------------------------------------------------------------------
PRODUCT SALES AGREEMENT GENERAL PROVISIONS 1. DELIVERIES A. When delivery is point of origin, delivery shall be deemed to have been completed: 1. To ships or barges when the product has passed the vessel's loading flange; 2. To tank trucks when the product has actually been delivered into the truck; 3. To tank cars when the carrier accepts the same for shipment; 4. To pipelines upon metering of the product. B. When delivery is point of destination, delivery shall be deemed to have been completed; 1. From ships or barges when the product has passed the vessel's discharge flange; 2. From tank trucks when truck has been placed at buyer's facilities for unloading; 3. From tank cars when carrier delivers same at the destination; 4. From pipeline upon metering of the product. C. When by an in-line product transfer, delivery shall be deemed to have been completed upon execution of the order by the pipeline carrier. D. If any common or contract carrier trucks are used, Warren shall not be liable to Buyer for quantity or quality of product. After completion of loading at the point of origin, Buyer agrees that the handling, care or use of product delivered as herein provided shall thereafter be at Buyer's sole risk and expense. 2. MEASUREMENT -- Measurement shall be done in the manner customarily utilized at the point of delivery so long as it is in accordance with one of the following alternatives. A. On all deliveries into/out of tank cars, the quantity shall be determined by official tank car capacity tables, meters with no vapor return, or by weighing, in accordance with GPA Publication 8162 and all revisions thereof. B. On all deliveries into/out of transport and tank truck equipment, quantities shall be determined by meter with no vapor return, slip tube, rotary gauging device or weighing, in accordance with GPA Publication 8162 and all revisions thereof. C. On all deliveries into/out of pipeline, quantity shall be determined by turbine or positive displacement pipeline meter in accordance with API Manual of Petroleum Measurement Standards and all revisions thereof. D. On all deliveries to/from ships or barges, shore tank or turbine or positive displacement meter measurements shall determine quantity, unless otherwise agreed upon. Use of meters shall not allow vapor return. E. All quantities shall be corrected to 60 degrees Fahrenheit and equilibrium vapor pressure at 60 degrees Fahrenheit. F. Volume and compressibility correction factors shall be determined from referenced API tables or computer programs used to generate these tables. 3. PASSAGE OF TITLE AND WARRANTY OF TITLE -- Title to the product and risk of loss shall pass to Buyer upon delivery. Warren warrants to Buyer that it has title to the product(s) delivered by it hereunder and the right to deliver same, and agrees to indemnify, defend and hold the Buyer harmless from and against any loss, claim or demand by reason of any failure of such title or breach of this warranty. Except as set forth in this paragraph 3 and elsewhere herein, WARREN MAKES NO OTHER WARRANTY WITH RESPECT TO THE PRODUCT OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE. 4. TAXES -- Any tax, duty, toll, fee, impost, charge or other exaction, or the amount equivalent thereto, nor or hereafter imposed, levied or assessed by any governmental authority upon, measured by, incident to or as a result of the transaction herein provided for, or the transportation, importation, production, manufacture, use or ownership of the goods or source materials thereof which are the subject matter of this Agreement, shall, if collectible or payable by Warren, be paid by Buyer on demand by Warren. Notwithstanding the foregoing, it is understood and agreed that any personal property taxes levied or assessed by any governmental authority upon the value of the products covered by this Agreement shall be paid by the party having title thereto at the time of such assessment. Buyer shall furnish Warren proper exemption certificate where tax exemption is claimed on any or all product(s) delivered hereunder, or shall pay such taxes. 5. FUTURE OBLIGATIONS -- Supplier/Purchaser Relationship -- This Agreement is freely entered into between the parties hereto. It does not reflect or grow out of any previously existing legal obligation which either party may have to the other to supply any petroleum product. Part of the consideration for this Agreement is each party's express agreement that neither party expects or desires that this Agreement form the basis of any additional future obligation of either party to supply any petroleum product to the other. To the extent that under present or future laws or regulations this Agreement may give rise to such obligations, each party hereby waives in advance its right to enforce any such obligation and upon submittal of written notice of termination by one party to the other under this Agreement, it is agreed that both parties intend to terminate any such additional future supplier/buyer relationship which may be created by this Agreement under such laws or regulations. Additionally, at any time hereafter, the parties agree to submit and/or execute documentation in compliance with the then applicable laws and regulations as may be necessary to evidence said termination insofar as the parties are concerned. The parties further agree to obtain any other consents or authorization required under the then applicable laws and regulations insofar as reasonably possible to give effect to the intent hereof. 6. GOVERNMENT REGULATIONS & LAW -- Warren warrants that the product it delivers hereunder will be produced and delivered in full compliance with all applicable federal and state laws and regulations and all Presidential Proclamations which may be applicable. This agreement shall be construed in accordance with the laws of the State of Oklahoma including the Uniform Commercial Code. Buyer agrees to comply with the provisions contained in Exhibit "A" attached hereto, to the extent that such provisions are legally applicable to Buyer. 7. FORCE MAJEURE -- If either party is rendered unable, wholly or in part, to perform its obligations under this Agreement (other than to make payments due hereunder) due to force majeure, defined herein as acts of God, flood, fire, explosion or storm; transportation difficulty, strike, lockout or other industrial disturbance; war or any law, rule, order or action of any court or instrumentality of the federal or any state government; exhaustion, reduction or unavailability of products from one or more of the sources of supply from which deliveries are normally made hereunder, or exhaustion or unavailability or delay in delivery of any material or product necessary in the manufacture of the product(s) deliverable hereunder; or any other cause or causes beyond its control whether similar or dissimilar to those stated above, then in any such event, it is agreed that the affected party shall give promptly after the occurrence of force majeure notice and full particulars of such force majeure to the other party, the obligations of the affected party shall be suspended for the duration of such inability to perform but for no longer period, and such cause shall, so far as possible, be remedied with all reasonable dispatch. Force majeure shall also include the failure of any third party pipeline, through no fault of the parties hereto, to accept the referenced products for transportation to or from Warren's facilities. 8. ASSIGNMENT -- This Agreement shall extend to and be binding upon the parties hereto, their heirs, executors, administrators, successors and assigns; but it is expressly agreed that neither party shall voluntarily assign this Agreement without the prior written consent of the other. 9. NOTICE -- Any notice hereunder shall be in writing and shall be delivered personally, by mail, by telex, or by telegram to the address first hereinabove set forth, unless changed by notice. Such notice shall be deemed to have been given on the date of the delivery thereof. 10. WAIVER -- The waiver by either party of the breach of any provisions hereof by the other party shall not be deemed to be a waiver of the breach of any other provision or provisions hereof or of any subsequent or continuing breach of such provisions or provisions. 11. ALTERATIONS -- No oral promises, agreements or warranties shall be deemed a part hereof, nor shall any alteration or amendment of this Agreement, or waiver of any of its provisions, be binding upon either party hereto unless the same be in writing, signed by the party charged. 12. INSPECTION -- Unless otherwise specified, Buyer will provide gauging, sampling, and testing at no charge to Warren. Either party may secure outside inspectors to perform this work and if this is done, the payments for these services will be shared equally among the parties unless some other arrangement for payment is mutually agreed upon. 13. MARINE PROVISIONS -- If delivery of any products hereunder is to be accomplished by waterborne transportation, the provisions set out in the "Marine Provisions" attached hereto and made a part hereof shall apply to such deliveries. 14. INVOICES AND TERMS OF PAYMENT -- Invoices will be prepared by Warren and transmitted to the Buyer from time to time during the month. Unless otherwise specified, payment is due within ten (10) days after receipt of invoice. 15. FINANCIAL RESPONSIBILITY -- If in the judgment of Warren the financial responsibility of Buyer becomes impaired or unsatisfactory, advance cash payments or acceptable security (including, but not limited to a letter of credit from a financial institution acceptable to Warren) shall be given by Buyer upon demand of Warren, and Buyer's failure to abide by the provisions of this Paragraph shall be considered a breach hereof and in such event payment for all products delivered hereunder shall be due and owing and shall be paid immediately, and Warren may without waiving any rights or remedies it may have, without further deliveries until such payment or security is received. Buyer's duty to provide the hereinabove credit assurance shall be a condition precedent to Warren's obligation to perform under this agreement. 16. CONFLICTS OF INTEREST -- No director, employee or agent of either party shall give or receive any commission, fee, rebate, gift or entertainment of significant cost or value in connection with this Agreement. Any representative(s) authorized by either party may audit the applicable records of the other party solely for the purpose of determining whether there has been compliance with this paragraph. 17. AUDIT -- Each party and its duly authorized representatives shall have access to the accounting records and other documents maintained by the other party which related to the product being delivered to the other party under this Agreement and shall have the right to audit such records once a year at any reasonable time or times during the term of this Agreement and for two years after the year in which this Agreement terminates. Neither party shall make claim on the other for any adjustment after said two-year period. 18. QUALITY -- Any requirements of customer pertaining to potential contaminants and/or specific hydrocarbon composition not listed in Warren's product specification must be identified by customer and allowable concentrations agreed to in writing by both parties prior to delivery of product to be effective under this Agreement. 19. WARREN'S TANK CARS -- Unless Warren's tank care are unloaded and returned to railroad, Buyer shall be liable to Warren for rental at the rate of _______________ for each day or fraction thereof in excess of _________ days (LPG cars). Tank cars shall not be diverted without Warren's written consent. 20. PRICES -- Prices at destination include allowance for transportation charges at lowest applicable common carrier rate between shipping point and actual destination. Warren reserves the right to add other shipping points and to change the shipping points on which destination prices are based. Notice of any such additions or changes in shipping points shall be given to Buyer in writing and unless objected to within ten days after receipt, said shipping points shall be deemed accepted by Buyer. Deletions of shipping points shall be made in like manner with like effect. Destination prices are subject to adjustment with changes in common carrier freight rates and any changes in applicable freight rates shall be for Buyer's account. Unless otherwise provided, if common carrier is employed, transportation charges shall be paid by consignee directly to carrier. If prices are based on quotations in industry publications, quotations published on dates of shipment shall apply. If no quotations of shipment are published in designated industry publication, the last previous quotations in such publication shall govern. ATTACHMENT A TO PRODUCT SALES AGREEMENT No. 58558 1. SHORTAGE OF PRODUCTS. Due to uncertainties in the supply/demand situation, Warren may not have sufficient supplies of product to be delivered hereunder to meet the full requirements of all of its customers, contract or otherwise. Whenever that situation exists, Warren shall have, in addition to any other rights Warren may have under this Agreement, the right to reduce deliveries of such product on any basis which in Warren's opinion is equitable, allowing for such priorities to such classes of customers as Warren deems appropriate. If any such reduction occurs, Buyer shall have the option to terminate this Agreement as to any or all products by fifteen (15) day's notice, given within thirty (30) days of the notice of reduction. 2. PRODUCT HAZARDS. Buyer acknowledges receipt of Warren's Safety Bulletin for odorized propane and is knowledgeable of the hazards or risks in handling or using the product. Buyer warrants that Buyer shall inform its employees, contractors and customers of any hazards or risks associated with the product. 3. CONDUCT OF BUYER'S BUSINESS. Buyer in the performance of this Agreement is engaged in an independent business and nothing herein contained shall be construed as giving Warren any right to control Buyer in any way in its performance of its business. Warren has no right to exercise control over any of Buyer's employees. All employees of Buyer shall be entirely under the control and direction of Buyer who shall be responsible for their actions and omissions. 4. PAYMENT. If payment is not made within the time allowed under this Agreement, then Warren may charge interest on the unpaid balance at the lesser of 1 1/2% per month or the highest rate permitted by Oklahoma law and Warren shall be entitled to recover in any court in Oklahoma its reasonable costs of collection, including attorney's fees. 5. U.S. GOVERNMENT SUBCONTRACT REQUIREMENTS. If this contract is a subcontract under contract(s) with the United States Government, it incorporated by this reference, and each party shall always comply with, all provisions required by United States laws, regulations, and orders applicable to a covered subcontract, including (without limitation) those relating to equal employment opportunity, utilization of minority business enterprises, listing of employment openings, employment of the handicapped and maintenance of nonsegregated facilities. 6. PRICES. Product and freight prices hereunder may be changed at any time by Warren upon written notice effective when deposited in the United States mail, faxed or otherwise transmitted to customer. If any such notice shall increase Warren's price to Buyer at any shipping point or destination above Warren's highest price for such product or freight in effect during the elapsed portion of the calendar year in which Warren's notice is effective, Buyer may be written notice to Warren given and effective within fifteen (15) days from the date of Warren's notice, terminate this contract with respect to such shipping point or destination. 7. ODORIZATION. Unless otherwise specifically agreed in writing, Buyer hereby requests that the propane sold hereunder be odorized with 1.5lbs. of ethyl mercaptan per 10,000 gallons. Buyer warrants that compliance with its request will satisfy all applicable legal requirements, and agrees to monitor and maintain the stench at or above the legally required levels. 8. SALE OF BUSINESS. The Buyer agrees that in the event of a sale of its LP- gas business or substantially all of the assets used in its LP-business, Buyer will require the purchaser of such assets as a condition of the sale to assume the obligation of Buyer under this agreement. 9. TRADEMARK. Buyer acknowledges that the CHEVRON and WARRENGAS Trademarks are valuable property rights belonging to Chevron Corporation and its subsidiaries, including Chevron U.S.A. Inc. and that any use thereof by Buyer in connection with this agreement is solely for the purposes of advertising products obtained from such subsidiaries. Upon termination of this agreement, Buyer agrees that it will make no further use of such trademarks or any other mark name or designs confusingly similar herewith. 10. QUANTITY. During the term hereof, Buyer agrees to buy the product herein specified in monthly quantities of not less than the minimum set forth below and Warren agrees to sell said quantities to Buyer. Buyer shall purchase such quantities as evenly as possible during each month. If during any period of this agreement the quantity of product Warren is obligated to deliver to Buyer is prescribed by government rules, regulations or orders, then the quantity of product covered by this agreement shall be the quantity so prescribed for such period and Buyer agrees to buy and Warren agrees to sell such quantity. Volume (In Thousands of Gallons) Minimum Maximum Minimum Maximum April 20 30 October 20 30 ------- ------- ------- ------- May 20 30 November 20 30 ------- ------- ------- ------- June 20 30 December 20 30 ------- ------- ------- ------- July 20 30 January 20 30 ------- ------- ------- ------- August 20 30 February 20 30 ------- ------- ------- ------- September 20 30 March 20 30 ------- ------- ------- ------- For the purpose of determining compliance with the above quantity schedule, purchase of product shall be allocated to the month in which shipment is made. Should either party fail to comply in any amount with the above schedule, the other party may elect to terminate this agreement by mailing notice of such termination on or before the 20th day of the succeeding month. If the Buyer fails to purchase 100% of the above specified minimum monthly quantities during any month or months and Warren does not elect to terminate this agreement, Warren shall not be obligated hereunder to sell to Buyer in any of the succeeding six months more than one and one half times the average monthly quantity which Buyer actually purchased during the preceding six-month period. When delivery is into tank trucks furnished by Buyer, the delivery ticket showing the quantity delivered shall be signed by the loader as the agent of Warren and by the truck driver as the agent of the Buyer; such quantities shall be conclusively presumed to have been delivered to Buyer. On or before the 1st day of each month Buyer shall inform Warren of quantities required during such month, delivery dates, and when applicable, destinations of each shipment, Warren shall not be obligated to ship less than a tank car or tank truck load. 11. METHOD OF DELIVERY: By tank trucks furnished by Buyer. ----------- X By tank trucks furnished by Warren. ----------- By tank trucks furnished by _________ ----------- with a capacity of ____ gallons each. PRICE INFORMATION Prices in effect as of 6/1 , 1993 ------- Sale based on / / shipping point price or X destination price
Shipping or Price in Pricing Points Destinations Product cents/ gallons Freight Charges Millis, Wy Nampa, ID Comm. Propane *31.00 CENTS *10.65 CENTS *Price subject to change
Chevron Warren Petroleum Company 112 J. Street, Suite 300 Sacramento, CA 95814 916-557-1088 FAX 916-557-1093 Marketing Department July 22, 1993 Mr. Paul Lindsay Empire Gas Corporation P.O. Box 303 Lebanon, MO 65536 Dear Paul: Enclosed please find four (4) copies of an Indemnity Agreement which should be attached to our Product Sales Agreements 58558 and 58559. After executing the agreements, please return the pink copies to our office. Thank you for your prompt attention to this matter. Sincerely, /s/ Leslie C. Shull L.C. Shull Sales Representative Western District D&I Sales LCS:ec Enclosures INDEMNITY AGREEMENT Warren Petroleum Company and Empire Gas Corporation shall each indemnify, and hold harmless the other, its agents and employees, from and against each and every claim, demand, or cause of action and any and all liability, costs, expense (including, but not limited to, reasonable attorney's fees), damage, or loss in connection therewith which may be made or asserted by that party or any third parties on account of personal injury, death, or property damage caused by, arising out of, or in any way incidental to or in connection with that party's performance under the Contract (whether such performance was complete, partial, or nonexistent), but only if such injury, death or property damage is the result of that party's fault or negligence. Any party hereto having a claim for indemnification against the other party shall give written notice specifying the nature and amount of such claim as soon as possible after the claim is asserted, and no such claim shall be waived or forfeited by either party's failure to give such notice within a certain period of time unless notice is not given prior to trial or settlement of the claim or as required by law. 7-15-93 Sales Agreement 58558 /s/ J.L. Gawronski /s/ Earl Noe - ------------------ ------------- Warren Empire Gas Petroleum Company EX-10.21 16 EXHIBIT 10.21 Chevron Exhibit 10.21 WARREN PETROLEUM COMPANY PRODUCT SALES AGREEMENT A Division of Chevron U.S.A. Inc. Prepare in original and four copies. - ------------------------------------------------------------------------------------------------------------------- Purchaser Confirming Arrangements Made With Empire Gas Corporation Paul Lindsay - ------------------------------------------------------------------------------------------------------------------- Address Arrangements Made by Date P.O. Box 303 L.C. Shull 6/1/93 - ------------------------------------------------------------------------------------------------------------------- Lebanon, MO 65536 Warren No. Purchaser No. No. S 58559 - ------------------------------------------------------------------------------------------------------------------- 1. Warren will sell the following during period of: 6/1/93 and thereafter (See Item No. 6 below) - ------------------------------------------------------------------------------------------------------------------- Product Quantity Delivery Point Product Sale Price - ------------------------------------------------------------------------------------------------------------------- Description Approx. Bbls. Measurement. Location Methods Cents/Gallon (net @ 60 Degrees F) (see 2) (see 3) - ------------------------------------------------------------------------------------------------------------------- Commercial Propane See AV1 Wingate, AZ - -------------------------------------------------------------- ---------------------------------------- Attachment Origin - -------------------------------------------------------------- ---------------------------------------- A - ------------------------------------------------------------------------------------------------------------------- Globe, AZ AV1 See - ------------------------------------------------------------------------------------------------------------------- Destination Attachment - -------------------------------------------------------------- ---------------------------------------- A - ------------------------------------------------------------------------------------------------------------------- 2. Measurement (See General Provisions, Item 2) Basis: V -- Volumetric per API Tables 23 and 24 or 23A and A. Trucks D. Ship or Barge 24A or 5A and 6A --------- E. Inventory Transfer M -- Mass per GPA 8182 B. Tank Cars F. Other _________________ 1 -- Origin 2 - Destination C. Pipeline - ------------------------------------------------------------------------------------------------------------------- 3. Methods A. Trucks D. To Ship or Barge F. Other ___________________ --------- E. Inventory Transfer B. To Tank Car C. To Pipeline - ------------------------------------------------------------------------------------------------------------------- 4. Specifications Commercial Propane, as per GPA specifications - ------------------------------------------------------------------------------------------------------------------- 5. Product: /X/ Stenched / / Unstenched - ------------------------------------------------------------------------------------------------------------------- 6. Terms / / Expires on ________________ /X/ Until 5/31/94 and continuing year to year thereafter unless and until cancelled at the end of any year by either party giving the other at least 60 days written notice prior to the proposed termination date. - ------------------------------------------------------------------------------------------------------------------- 7. Warren sends statements, invoices and shipping documentation to Same as above - ------------------------------------------------------------------------------------------------------------------- 8. Terms of Payment Net 10 days from date of invoice. - ------------------------------------------------------------------------------------------------------------------- 9. Special Provisions The terms and conditions set forth in Attachment A to this Agreement are incorporated herein by reference and made a part of this Agreement. - ------------------------------------------------------------------------------------------------------------------- 10. In addition to the above terms and conditions, the General Provisions of this Product Sales Agreement as set forth on the reverse side hereof are incorporated herein by reference and made a part of this Agreement. - ------------------------------------------------------------------------------------------------------------------- If you are in agreement with the foregoing terms and conditions, please so indicate by signing below and returning one copy of the Agreement to Warren. - ------------------------------------------------------------------------------------------------------------------- Accepted and Agreed to Warren Petroleum Company A Division of Chevron U.S.A. Inc. - ------------------------------------------------------------------------------------------------------------------- By /s/ Earl Noe By /s/ J.L. Gawronski - ------------------------------------------------------------------------------------------------------------------- Title Date Title J.L. Gawronski, Manager, Western District - -------------------------------------------------------------------------------------------------------------------
PRODUCT SALES AGREEMENT GENERAL PROVISIONS 1. DELIVERIES A. When delivery is point of origin, delivery shall be deemed to have been completed: 1. To ships or barges when the product has passed the vessel's loading flange; 2. To tank trucks when the product has actually been delivered into the truck; 3. To tank cars when the carrier accepts the same for shipment; 4. To pipelines upon metering of the product. B. When delivery is point of destination, delivery shall be deemed to have been completed; 1. From ships or barges when the product has passed the vessel's discharge flange; 2. From tank trucks when truck has been placed at buyer's facilities for unloading; 3. From tank cars when carrier delivers same at the destination; 4. From pipeline upon metering of the product. C. When by an in-line product transfer, delivery shall be deemed to have been completed upon execution of the order by the pipeline carrier. D. If any common or contract carrier trucks are used, Warren shall not be liable to Buyer for quantity or quality of product. After completion of loading at the point of origin, Buyer agrees that the handling, care or use of product delivered as herein provided shall thereafter be at Buyer's sole risk and expense. 2. MEASUREMENT -- Measurement shall be done in the manner customarily utilized at the point of delivery so long as it is in accordance with one of the following alternatives. A. On all deliveries into/out of tank cars, the quantity shall be determined by official tank car capacity tables, meters with no vapor return, or by weighing, in accordance with GPA Publication 8162 and all revisions thereof. B. On all deliveries into/out of transport and tank truck equipment, quantities shall be determined by meter with no vapor return, slip tube, rotary gauging device or weighing, in accordance with GPA Publication 8162 and all revisions thereof. C. On all deliveries into/out of pipeline, quantity shall be determined by turbine or positive displacement pipeline meter in accordance with API Manual of Petroleum Measurement Standards and all revisions thereof. D. On all deliveries to/from ships or barges, shore tank or turbine or positive displacement meter measurements shall determine quantity, unless otherwise agreed upon. Use of meters shall not allow vapor return. E. All quantities shall be corrected to 60 degrees Fahrenheit and equilibrium vapor pressure at 60 degrees Fahrenheit. F. Volume and compressibility correction factors shall be determined from referenced API tables or computer programs used to generate these tables. 3. PASSAGE OF TITLE AND WARRANTY OF TITLE -- Title to the product and risk of loss shall pass to Buyer upon delivery. Warren warrants to Buyer that it has title to the product(s) delivered by it hereunder and the right to deliver same, and agrees to indemnify, defend and hold the Buyer harmless from and against any loss, claim or demand by reason of any failure of such title or breach of this warranty. Except as set forth in this paragraph 3 and elsewhere herein, WARREN MAKES NO OTHER WARRANTY WITH RESPECT TO THE PRODUCT OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE. 4. TAXES -- Any tax, duty, toll, fee, impost, charge or other exaction, or the amount equivalent thereto, nor or hereafter imposed, levied or assessed by any governmental authority upon, measured by, incident to or as a result of the transaction herein provided for, or the transportation, importation, production, manufacture, use or ownership of the goods or source materials thereof which are the subject matter of this Agreement, shall, if collectible or payable by Warren, be paid by Buyer on demand by Warren. Notwithstanding the foregoing, it is understood and agreed that any personal property taxes levied or assessed by any governmental authority upon the value of the products covered by this Agreement shall be paid by the party having title thereto at the time of such assessment. Buyer shall furnish Warren proper exemption certificate where tax exemption is claimed on any or all product(s) delivered hereunder, or shall pay such taxes. 5. FUTURE OBLIGATIONS -- Supplier/Purchaser Relationship -- This Agreement is freely entered into between the parties hereto. It does not reflect or grow out of any previously existing legal obligation which either party may have to the other to supply any petroleum product. Part of the consideration for this Agreement is each party's express agreement that neither party expects or desires that this Agreement form the basis of any additional future obligation of either party to supply any petroleum product to the other. To the extent that under present or future laws or regulations this Agreement may give rise to such obligations, each party hereby waives in advance its right to enforce any such obligation and upon submittal of written notice of termination by one party to the other under this Agreement, it is agreed that both parties intend to terminate any such additional future supplier/buyer relationship which may be created by this Agreement under such laws or regulations. Additionally, at any time hereafter, the parties agree to submit and/or execute documentation in compliance with the then applicable laws and regulations as may be necessary to evidence said termination insofar as the parties are concerned. The parties further agree to obtain any other consents or authorization required under the then applicable laws and regulations insofar as reasonably possible to give effect to the intent hereof. 6. GOVERNMENT REGULATIONS & LAW -- Warren warrants that the product it delivers hereunder will be produced and delivered in full compliance with all applicable federal and state laws and regulations and all Presidential Proclamations which may be applicable. This agreement shall be construed in accordance with the laws of the State of Oklahoma including the Uniform Commercial Code. Buyer agrees to comply with the provisions contained in Exhibit "A" attached hereto, to the extent that such provisions are legally applicable to Buyer. 7. FORCE MAJEURE -- If either party is rendered unable, wholly or in part, to perform its obligations under this Agreement (other than to make payments due hereunder) due to force majeure, defined herein as acts of God, flood, fire, explosion or storm; transportation difficulty, strike, lockout or other industrial disturbance; war or any law, rule, order or action of any court or instrumentality of the federal or any state government; exhaustion, reduction or unavailability of products from one or more of the sources of supply from which deliveries are normally made hereunder, or exhaustion or unavailability or delay in delivery of any material or product necessary in the manufacture of the product(s) deliverable hereunder; or any other cause or causes beyond its control whether similar or dissimilar to those stated above, then in any such event, it is agreed that the affected party shall give promptly after the occurrence of force majeure notice and full particulars of such force majeure to the other party, the obligations of the affected party shall be suspended for the duration of such inability to perform but for no longer period, and such cause shall, so far as possible, be remedied with all reasonable dispatch. Force majeure shall also include the failure of any third party pipeline, through no fault of the parties hereto, to accept the referenced products for transportation to or from Warren's facilities. 8. ASSIGNMENT -- This Agreement shall extend to and be binding upon the parties hereto, their heirs, executors, administrators, successors and assigns; but it is expressly agreed that neither party shall voluntarily assign this Agreement without the prior written consent of the other. 9. NOTICE -- Any notice hereunder shall be in writing and shall be delivered personally, by mail, by telex, or by telegram to the address first hereinabove set forth, unless changed by notice. Such notice shall be deemed to have been given on the date of the delivery thereof. 10. WAIVER -- The waiver by either party of the breach of any provisions hereof by the other party shall not be deemed to be a waiver of the breach of any other provision or provisions hereof or of any subsequent or continuing breach of such provisions or provisions. 11. ALTERATIONS -- No oral promises, agreements or warranties shall be deemed a part hereof, nor shall any alteration or amendment of this Agreement, or waiver of any of its provisions, be binding upon either party hereto unless the same be in writing, signed by the party charged. 12. INSPECTION -- Unless otherwise specified, Buyer will provide gauging, sampling, and testing at no charge to Warren. Either party may secure outside inspectors to perform this work and if this is done, the payments for these services will be shared equally among the parties unless some other arrangement for payment is mutually agreed upon. 13. MARINE PROVISIONS -- If delivery of any products hereunder is to be accomplished by waterborne transportation, the provisions set out in the "Marine Provisions" attached hereto and made a part hereof shall apply to such deliveries. 14. INVOICES AND TERMS OF PAYMENT -- Invoices will be prepared by Warren and transmitted to the Buyer from time to time during the month. Unless otherwise specified, payment is due within ten (10) days after receipt of invoice. 15. FINANCIAL RESPONSIBILITY -- If in the judgment of Warren the financial responsibility of Buyer becomes impaired or unsatisfactory, advance cash payments or acceptable security (including, but not limited to a letter of credit from a financial institution acceptable to Warren) shall be given by Buyer upon demand of Warren, and Buyer's failure to abide by the provisions of this Paragraph shall be considered a breach hereof and in such event payment for all products delivered hereunder shall be due and owing and shall be paid immediately, and Warren may without waiving any rights or remedies it may have, without further deliveries until such payment or security is received. Buyer's duty to provide the hereinabove credit assurance shall be a condition precedent to Warren's obligation to perform under this agreement. 16. CONFLICTS OF INTEREST -- No director, employee or agent of either party shall give or receive any commission, fee, rebate, gift or entertainment of significant cost or value in connection with this Agreement. Any representative(s) authorized by either party may audit the applicable records of the other party solely for the purpose of determining whether there has been compliance with this paragraph. 17. AUDIT -- Each party and its duly authorized representatives shall have access to the accounting records and other documents maintained by the other party which related to the product being delivered to the other party under this Agreement and shall have the right to audit such records once a year at any reasonable time or times during the term of this Agreement and for two years after the year in which this Agreement terminates. Neither party shall make claim on the other for any adjustment after said two-year period. 18. QUALITY -- Any requirements of customer pertaining to potential contaminants and/or specific hydrocarbon composition not listed in Warren's product specification must be identified by customer and allowable concentrations agreed to in writing by both parties prior to delivery of product to be effective under this Agreement. 19. WARREN'S TANK CARS -- Unless Warren's tank care are unloaded and returned to railroad, Buyer shall be liable to Warren for rental at the rate of _______________ for each day or fraction thereof in excess of ________ days (LPG cars). Tank cars shall not be diverted without Warren's written consent. 20. PRICES -- Prices at destination include allowance for transportation charges at lowest applicable common carrier rate between shipping point and actual destination. Warren reserves the right to add other shipping points and to change the shipping points on which destination prices are based. Notice of any such additions or changes in shipping points shall be given to Buyer in writing and unless objected to within ten days after receipt, said shipping points shall be deemed accepted by Buyer. Deletions of shipping points shall be made in like manner with like effect. Destination prices are subject to adjustment with changes in common carrier freight rates and any changes in applicable freight rates shall be for Buyer's account. Unless otherwise provided, if common carrier is employed, transportation charges shall be paid by consignee directly to carrier. If prices are based on quotations in industry publications, quotations published on dates of shipment shall apply. If no quotations of shipment are published in designated industry publication, the last previous quotations in such publication shall govern. ATTACHMENT A TO PRODUCT SALES AGREEMENT No. 58559 1. SHORTAGE OF PRODUCTS. Due to uncertainties in the supply/demand situation, Warren may not have sufficient supplies of product to be delivered hereunder to meet the full requirements of all of its customers, contract or otherwise. Whenever that situation exists, Warren shall have, in addition to any other rights Warren may have under this Agreement, the right to reduce deliveries of such product on any basis which in Warren's opinion is equitable, allowing for such priorities to such classes of customers as Warren deems appropriate. If any such reduction occurs, Buyer shall have the option to terminate this Agreement as to any or all products by fifteen (15) day's notice, given within thirty (30) days of the notice of reduction. 2. PRODUCT HAZARDS. Buyer acknowledges receipt of Warren's Safety Bulletin for odorized propane and is knowledgeable of the hazards or risks in handling or using the product. Buyer warrants that Buyer shall inform its employees, contractors and customers of any hazards or risks associated with the product. 3. CONDUCT OF BUYER'S BUSINESS. Buyer in the performance of this Agreement is engaged in an independent business and nothing herein contained shall be construed as giving Warren any right to control Buyer in any way in its performance of its business. Warren has no right to exercise control over any of Buyer's employees. All employees of Buyer shall be entirely under the control and direction of Buyer who shall be responsible for their actions and omissions. 4. PAYMENT. If payment is not made within the time allowed under this Agreement, then Warren may charge interest on the unpaid balance at the lesser of 1 1/2% per month or the highest rate permitted by Oklahoma law and Warren shall be entitled to recover in any court in Oklahoma its reasonable costs of collection, including attorney's fees. 5. U.S. GOVERNMENT SUBCONTRACT REQUIREMENTS. If this contract is a subcontract under contract(s) with the United States Government, it incorporated by this reference, and each party shall always comply with, all provisions required by United States laws, regulations, and orders applicable to a covered subcontract, including (without limitation) those relating to equal employment opportunity, utilization of minority business enterprises, listing of employment openings, employment of the handicapped and maintenance of nonsegregated facilities. 6. PRICES. Product and freight prices hereunder may be changed at any time by Warren upon written notice effective when deposited in the United States mail, faxed or otherwise transmitted to customer. If any such notice shall increase Warren's price to Buyer at any shipping point or destination above Warren's highest price for such product or freight in effect during the elapsed portion of the calendar year in which Warren's notice is effective, Buyer may be written notice to Warren given and effective within fifteen (15) days from the date of Warren's notice, terminate this contract with respect to such shipping point or destination. 7. ODORIZATION. Unless otherwise specifically agreed in writing, Buyer hereby requests that the propane sold hereunder be odorized with 1.5lbs. of ethyl mercaptan per 10,000 gallons. Buyer warrants that compliance with its request will satisfy all applicable legal requirements, and agrees to monitor and maintain the stench at or above the legally required levels. 8. SALE OF BUSINESS. The Buyer agrees that in the event of a sale of its LP- gas business or substantially all of the assets used in its LP-business, Buyer will require the purchaser of such assets as a condition of the sale to assume the obligation of Buyer under this agreement. 9. TRADEMARK. Buyer acknowledges that the CHEVRON and WARRENGAS Trademarks are valuable property rights belonging to Chevron Corporation and its subsidiaries, including Chevron U.S.A. Inc. and that any use thereof by Buyer in connection with this agreement is solely for the purposes of advertising products obtained from such subsidiaries. Upon termination of this agreement, Buyer agrees that it will make no further use of such trademarks or any other mark name or designs confusingly similar herewith. 10. QUANTITY. During the term hereof, Buyer agrees to buy the product herein specified in monthly quantities of not less than the minimum set forth below and Warren agrees to sell said quantities to Buyer. Buyer shall purchase such quantities as evenly as possible during each month. If during any period of this agreement the quantity of product Warren is obligated to deliver to Buyer is prescribed by government rules, regulations or orders, then the quantity of product covered by this agreement shall be the quantity so prescribed for such period and Buyer agrees to buy and Warren agrees to sell such quantity. Volume (In Thousands of Gallons) Minimum Maximum Minimum Maximum April 20 40 October 20 40 ------- ------- ------- ------- May 20 40 November 20 40 ------- ------- ------- ------- June 20 40 December 20 40 ------- ------- ------- ------- July 20 40 January 20 40 ------- ------- ------- ------- August 20 40 February 20 40 ------- ------- ------- ------- September 20 40 March 20 40 ------- ------- ------- ------- For the purpose of determining compliance with the above quantity schedule, purchase of product shall be allocated to the month in which shipment is made. Should either party fail to comply in any amount with the above schedule, the other party may elect to terminate this agreement by mailing notice of such termination on or before the 20th day of the succeeding month. If the Buyer fails to purchase 100% of the above specified minimum monthly quantities during any month or months and Warren does not elect to terminate this agreement, Warren shall not be obligated hereunder to sell to Buyer in any of the succeeding six months more than one and one half times the average monthly quantity which Buyer actually purchased during the preceding six-month period. When delivery is into tank trucks furnished by Buyer, the delivery ticket showing the quantity delivered shall be signed by the loader as the agent of Warren and by the truck driver as the agent of the Buyer; such quantities shall be conclusively presumed to have been delivered to Buyer. On or before the 1st day of each month Buyer shall inform Warren of quantities required during such month, delivery dates, and when applicable, destinations of each shipment, Warren shall not be obligated to ship less than a tank car or tank truck load. 11. METHOD OF DELIVERY: By tank trucks furnished by Buyer. ----------- X By tank trucks furnished by Warren. ----------- By tank trucks furnished by _________ ----------- with a capacity of ____ gallons each. PRICE INFORMATION Prices in effect as of 6/1 , 1993 Sale based on / / shipping point price or X destination price
Shipping or Price in Pricing Points Destinations Product cents/ gallons Freight Charges Wingate, Az Globe, AZ Comm. Propane *35.00 CENTS *7.44 CENTS *Price subject to change
Chevron Warren Petroleum Company 112 J. Street, Suite 300 Sacramento, CA 95814 916-557-1088 FAX 916-557-1093 Marketing Department July 22, 1993 Mr. Paul Lindsay Empire Gas Corporation P.O. Box 303 Lebanon, MO 65536 Dear Paul: Enclosed please find four (4) copies of an Indemnity Agreement which should be attached to our Product Sales Agreements 58558 and 58559. After executing the agreements, please return the pink copies to our office. Thank you for your prompt attention to this matter. Sincerely, /s/ Leslie C. Shull L.C. Shull Sales Representative Western District D&I Sales LCS:ec Enclosures INDEMNITY AGREEMENT Warren Petroleum Company and Empire Gas Corporation shall each indemnify, and hold harmless the other, its agents and employees, from and against each and every claim, demand, or cause of action and any and all liability, costs, expense (including, but not limited to, reasonable attorney's fees), damage, or loss in connection therewith which may be made or asserted by that party or any third parties on account of personal injury, death, or property damage caused by, arising out of, or in any way incidental to or in connection with that party's performance under the Contract (whether such performance was complete, partial, or nonexistent), but only if such injury, death or property damage is the result of that party's fault or negligence. Any party hereto having a claim for indemnification against the other party shall give written notice specifying the nature and amount of such claim as soon as possible after the claim is asserted, and no such claim shall be waived or forfeited by either party's failure to give such notice within a certain period of time unless notice is not given prior to trial or settlement of the claim or as required by law. 7-15-93 Sales Agreement 58559 /s/ J.L. Gawronski /s/ Earl Noe - ------------------ ------------- Warren Empire Gas Petroleum Company EX-21.1 17 EXHIBIT 21.1 SUBSIDIARIES OF THE COMPANY EMPIRE GAS CORPORATION MO EMPIRE GAS OPERATING CORPORATION# MO EMPIREGAS INC. OF LINCOLN AR EMPIREGAS INC. OF SILOAM SPRINGS AR EMPIREGAS INC. OF WARREN AR EMPIREGAS INC. OF GLOBE AZ EMPIREGAS INC. OF ELSINORE CA EMPIREGAS INC. OF ESCONDIDO CA EMPIREGAS INC. OF LOS ANGELES CA EMPIREGAS INC. OF MODESTO CA EMPIREGAS INC. OF SANTA PAULA CA EMPIREGAS INC. OF PLACERVILLE CA EMPIREGAS INC. OF POMONA CA EMPIREGAS INC. OF SACRAMENTO CA EMPIREGAS INC. OF SUSANVILLE CA EMPIREGAS INC. OF YUCCA VALLEY CA EMPIREGAS INC. OF BOULDER CO EMPIREGAS INC. OF CANON CITY CO EMPIREGAS INC. OF CASTLE ROCK CO EMPIREGAS INC. OF COLORADO SPRINGS CO EMPIREGAS INC. OF DENVER CO EMPIREGAS INC. OF EVERGREEN CO SALGAS INC. OF FAIRPLAY CO EMPIREGAS INC. OF FORT COLLINS CO EMPIREGAS INC. OF FOWLER CO EMPIREGAS INC. OF GREELEY CO EMPIREGAS INC. OF GRAND JUNCTION CO EMPIREGAS INC. OF LONGMONT CO EMPIREGAS INC. OF LOVELAND CO EMPIREGAS INC. OF MONTE VISTA CO EMPIREGAS INC. OF PUEBLO CO EMPIREGAS INC. OF WOODLAND PARK CO SALGAS INC. OF GUNNISON CO SALIDA GAS CO., INC. DE GINCO GAS COMPANY INC. CO EMPIREGAS INC. OF BOISE ID EMPIREGAS INC. OF BREMERTON WA EMPIREGAS INC. OF CLINTON, ILL DE EMPIREGAS INC. OF GALVA DE EMPIREGAS INC. OF HOOPESTON DE EMPIREGAS INC. OF JACKSONVILLE DE EMPIREGAS INC. OF VANDALIA DE EMPIREGAS INC. OF BRANDON IA EMPIREGAS INC. OF CENTERVILLE IA 1 EMPIREGAS INC. OF HORNICK IA EMPIREGAS INC. OF ONAWA IA EMPIREGAS INC. OF TIPTON IA EMPIREGAS INC. OF WAUKON IA EMPIREGAS INC. OF ARMA KS EMPIREGAS INC. OF ARNAUDVILLE LA EMPIREGAS INC. OF EUNICE DE EMPIREGAS INC. OF LAFAYETTE LA EMPIREGAS INC. OF LAKE CHARLES LA EMPIREGAS INC. OF LAKE PROVIDENCE LA EMPIREGAS INC. OF OAK GROVE LA EMPIREGAS INC. OF BIG RAPIDS MI EMPIREGAS INC. OF CHARLOTTE MI EMPIREGAS INC. OF CHASSEL MI EMPIREGAS INC. OF COLEMAN MI EMPIREGAS INC. OF DURAND MI EMPIREGAS INC. OF GAYLORD MI EMPIREGAS INC. OF JACKSON MI EMPIREGAS INC. OF KALAMAZOO MI EMPIREGAS INC. OF MARQUETTE MI EMPIREGAS INC. OF MUNISING MI EMPIREGAS INC. OF TRAVERSE CITY MI EMPIREGAS INC. OF VASSAR MI EMPIREGAS OF LE SUER INC. MN EMPIREGAS OF ZUMBRO FALLS, INC. MN EMPIRE TANK LEASING CORPORATION DE EMPIREGAS EQUIPMENT CORPORATION CA EMPIRE UNDERGROUND STORAGE, INC. KS EMPIRE INDUSTRIAL SALES CORPORATION OK UTILITY COLLECTION CORPORATION DE EMPIREGAS TRANSPORTS, INC. (MO) DE EMPIRE AVIATION CORPORATION DE EMPIREGAS TRANSPORTS, INC.-OREGON OR EMPIREGAS INC. OF CLINTON, MO DE EMPIREGAS INC. OF KANSAS CITY DE EMPIREGAS INC. OF BOLIVAR DE EMPIREGAS INC. OF BOWLING GREEN DE EMPIREGAS INC. OF BUFFALO DE EMPIREGAS INC. OF ADRIAN DE EMPIREGAS INC. OF CAMDENTON DE EMPIREGAS INC. OF CARTHAGE DE EMPIREGAS INC. OF COLE CAMP DE 2 EMPIREGAS INC. OF CUBA DE EMPIREGAS OF EL DORADO SPRINGS, INC. DE EMPIREGAS INC. OF ELSBERRY DE EMPIREGAS INC. OF MID-MISSOURI DE EMPIREGAS INC. OF HERMITAGE DE EMPIREGAS INC. OF HIGGINSVILLE MO EMPIREGAS INC. OF HUMANSVILLE DE EMPIREGAS INC. OF KIRKSVILLE DE EMPIREGAS INC. OF LAURIE DE EMPIREGAS INC. OF MARSHALL MO EMPIREGAS INC. OF MILLER DE THRIF-T-GAS INC. OF BLACKWATER DE EMPIREGAS INC. OF OWENSVILLE DE EMPIREGAS INC. OF PALMYRA DE EMPIREGAS INC. OF POTOSI DE EMPIREGAS INC. OF RICHLAND DE EMPIREGAS INC. OF ROLLA DE EMPIREGAS INC. OF WARSAW, MO DE EMPIREGAS INC. OF WAYNESVILLE, MO DE EMPIREGAS INC. OF WENTZVILLE DE EMPIREGAS INC. OF MORGAN COUNTY DE EMPIREGAS INC. OF LAKE OZARK DE THRIFT-T-GAS CO., INC. DE EMPIREGAS INC. OF PARIS, MO DE EMPIREGAS INC. OF HIAWASSEE DE EMPIREGAS INC. OF MURPHY NC EMPIREGAS INC. OF NORTH CAROLINA NC EMPIREGAS INC. OF ROCKY MOUNT NC EMPIREGAS INC. OF WASHINGTON NC EMPIREGAS INC. OF WAYNESVILLE, NC NC EMPIREGAS INC. OF WILMINGTON NC EMPIREGAS INC. OF WILSON NC EMPIREGAS INC. OF ZEBULON NC EMPIREGAS INC. OF DOVER DE EMPIREGAS INC. OF MOUNT VERNON OH EMPIREGAS INC. OF COLUMBIANA OH EMPIREGAS INC. OF TOLEDO OH EMPIREGAS INC. OF BRISTOW, INC. OK EMPIREGAS INC. OF COLCORD, INC. OK EMPIREGAS INC. OF GROVE, INC. OK EMPIREGAS INC. OF HITICHITA, INC. OK EMPIREGAS INC. OF STIGLER, INC. OK 3 EMPIREGAS INC. OF VINITA, INC. OK EMPIREGAS INC. OF WESTVILLE, INC. OK EMPIREGAS INC. OF ALBANY OR EMPIREGAS INC. OF COQUILLE OR EMPIREGAS INC. OF HERMISTON OR EMPIREGAS INC. OF MEDFORD OR EMPIREGAS INC. OF NORTH BEND OR EMPIREGAS INC. OF REEDSPORT OR EMPIREGAS INC. OF SANDY DE EMPIREGAS INC. OF THE DALLES OR EMPIREGAS INC. OF AIKEN SC EMPIREGAS INC. OF GOOSE CREEK SC EMPIREGAS OF NORTH MYRTLE BEACH, INC. OK EMPIREGAS INC. OF ORANGEBURG SC EMPIREGAS INC. OF CANTON TX EMPIREGAS INC. OF GALVESTON TX EMPIREGAS INC. OF PADUCAH TX EMPIREGAS INC. OF WILLS POINT TX EMPIREGAS INC. OF ORANGE COUNTY TX EMPIREGAS INC. OF WACO TX EMPIREGAS INC. OF PARIS, TX TX EMPIREGAS INC. OF DALLAS, TX TX EMPIREGAS INC. OF KEMP TX EMPIREGAS INC. OF SAN ANTONIO TX EMPIREGAS INC. OF AUBURN WA EMPIREGAS INC. OF CHEHALIS WA EMPIREGAS INC. OF SUNNYSIDE WA EMPIREGAS INC. OF WENATCHEE WA EMPIREGAS INC. OF YAKIMA WA EMPIREGAS INC. OF CHETEK WI EMPIREGAS INC. OF EAU CLAIRE WI EMPIREGAS INC. OF MENOMONIE WI EMPIREGAS INC. OF MERILLAN WI EMPIREGAS INC. OF SHELL LAKE WI EMPIREGAS INC. OF WILKESBORO NC EMPIREGAS INC. OF HENDERSVILLE NC EMPIREGAS INC. OF CARTHAGE NC EMPIREGAS INC. OF APEX NC EMPIREGAS INC. OF DURHAM NC EMPIREGAS INC. OF WARRENTON NC EMPIRE ENERGY CORPORATION* TN EMPIREGAS INC. OF ARAB* DE EMPIREGAS INC. OF ATHENS, AL* DE EMPIREGAS INC. OF BELLE MINA* DE EMPIREGAS INC. OF CULLMAN* DE EMPIREGAS INC. OF DALEVILLE* DE 4 EMPIREGAS INC. OF DOTHAN* DE EMPIREGAS INC. OF DOUBLE SPRINGS* DE EMPIREGAS INC. OF FAYETTE* DE EMPIREGAS INC. OF FORT PAYNE* DE JEFFERSON COUNTY GAS CO.* DE EMPIREGAS INC. OF GERALDINE* DE EMPIREGAS INC. OF HENAGAR* DE EMPIREGAS INC. OF HUNTSVILLE* DE EMPIREGAS INC. OF ONEONTA* DE EMPIREGAS INC. OF SKYLINE* DE EMPIREGAS INC. OF ALBERTVILLE* DE EMPIREGAS INC. OF NEW HOPE* DE EMPIREGAS INC. OF BATESVILLE* AR EMPIREGAS INC. OF BELLA VISTA* AR EMPIREGAS INC. OF BLYTHEVILLE* AR EMPIREGAS INC. OF HARDY* AR EMPIREGAS INC. OF HARRISON* AR EMPIREGAS INC. OF HORSESHOE BEND* AR EMPIREGAS INC. OF MELBOURNE* AR EMPIREGAS INC. OF MOUNTAIN HOME* AR EMPIREGAS INC. OF ROGERS* AR EMPIRE BUILDING CORPORATION* DE EMPIRE EQUIPMENT CORPORATION* DE EMPIREGAS TRUCKING CORPORATION (JASPER)* DE EMPIREGAS INC. OF CROSS CITY* DE EMPIREGAS INC. OF CRYSTAL RIVER* DE EMPIREGAS INC. OF DADE CITY* FL EMPIREGAS INC. OF GROVELAND* FL EMPIREGAS INC. OF LEESBURG* FL EMPIREGAS INC. OF PANAMA CITY* FL EMPIREGAS INC. OF PENSACOLA* FL EMPIREGAS INC. OF PORT RICHEY* FL EMPIREGAS INC. OF RIVERVIEW* FL EMPIREGAS INC. OF BAINBRIDGE* DE EMPIREGAS INC. OF BLAIRSVILLE* DE EMPIREGAS INC. OF BLAKELY* DE EMPIREGAS INC. OF BLUE RIDGE* DE EMPIREGAS INC. OF CARTERSVILLE* DE EMPIREGAS INC. OF CLERMONT* DE EMPIREGAS INC. OF DALTON* DE EMPIREGAS INC. OF DAWSON* DE EMPIREGAS INC. OF DONALSONVILLE* DE 5 EMPIREGAS INC. OF JASPER* DE EMPIREGAS INC. OF MOULTRIE* DE EMPIREGAS INC. OF ROME* DE EMPIREGAS INC. OF TRENTON* DE EMPIREGAS INC. OF WARNER ROBINS* DE NAILS CREEK GAS CO.* DE EMPIREGAS INC. OF SANDERSVILLE* DE EMPIREGAS INC. OF MOUND CITY* DE EMPIREGAS INC. OF BRYANT* IN EMPIREGAS INC. OF COLUMBUS* IN EMPIREGAS INC. OF EVANSVILLE* IN EMPIREGAS INC. OF GREENSBURG* IN EMPIREGAS INC. OF HARTFORD CITY* IN EMPIREGAS INC. OF MARION* IN EMPIREGAS INC. OF INDIANAPOLIS* IN EMPIREGAS INC. OF OSGOOD* IN EMPIREGAS INC. OF PENDLETON* IN EMPIREGAS INC. OF ROCHESTER* IN EMPIREGAS INC. OF SCOTTSBURG* IN EMPIREGAS INC. OF VINCENNES* IN EMPIREGAS INC. OF WARSAW* IN EMPIREGAS INC. OF BARDSTOWN* KY EMPIREGAS INC. OF CORBIN* KY EMPIREGAS INC. OF CORINTH* KY EMPIREGAS INC. OF CROFTON* KY EMPIREGAS INC. OF FALMOUTH* KY EMPIREGAS INC. OF HAZARD* KY EMPIREGAS INC. OF WALTON* KY EMPIREGAS INC. OF HODGENVILLE* KY EMPIREGAS INC. OF JACKSON* KY EMPIREGAS INC. OF LA GRANGE* KY EMPIREGAS INC. OF LEBANON JUNCTION* KY EMPIREGAS INC. OF LOUISVILLE* KY EMPIREGAS INC. OF MOREHEAD* KY EMPIREGAS INC. OF NICHOLASVILLE* KY EMPIREGAS INC. OF OWENSBORO* KY EMPIREGAS INC. OF AMORY* MS EMPIREGAS INC. OF BAY SPRINGS* MS EMPIREGAS INC. OF BLUE MOUNTAIN* MS EMPIREGAS INC. OF BRUCE* MS EMPIREGAS INC. OF COLUMBUS, MS* MS EMPIREGAS INC. OF JACKSON, MS* MS 6 EMPIREGAS INC. OF KOSCIUSKO* MS EMPIREGAS INC. OF PONTOTOC* MS EMPIREGAS INC. OF WAYNESBORO* MS EMPIREGAS INC. OF ALTON* DE EMPIREGAS INC. OF AVA* DE EMPIREGAS INC. OF BIRCH TREE* DE EMPIREGAS INC. OF BLUE EYE* DE EMPIREGAS INC. OF BRANSON* DE EMPIREGAS INC. OF CAPE GIRARDEAU* DE EMPIREGAS INC. OF CASSVILLE* DE EMPIREGAS INC. OF ELLINGTON* DE EMPIREGAS INC. OF FAIR GROVE* DE EMPIREGAS INC. OF GALENA* DE EMPIREGAS INC. OF HOUSTON, MO* DE EMPIREGAS INC. OF KIMBERLING CITY* DE EMPIREGAS INC. OF MALDEN* DE EMPIREGAS INC. OF MONETT* DE EMPIREGAS INC. OF MOUNTAIN GROVE* DE EMPIREGAS INC. OF NEOSHO* DE EMPIREGAS INC. OF NOEL* DE EMPIREGAS INC. OF PERRYVILLE* DE EMPIREGAS INC. OF PIEDMONT* DE EMPIREGAS INC. OF POPLAR BLUFF* DE EMPIREGAS INC. OF SPRINGFIELD* DE EMPIREGAS INC. OF SALEM* DE EMPIREGAS INC. OF SELIGMAN* DE EMPIREGAS INC. OF SIKESTON* DE EMPIREGAS INC. OF WEST PLAINS* DE EMPIREGAS INC. OF WHEATON* DE GENERAL GAS CO., INC.* DE S. P. GAS CO. OF LEBANON* DE EMPIREGAS INC. OF MARSHFIELD* DE EMPIREGAS INC. OF GREENE COUNTY* DE TRI LAKES GAS CO. INC.* DE TRI LAKES GAS, INC. OF HIGHLANDVILLE* DE EMPIREGAS INC. OF ARDMORE* TN EMPIREGAS INC. OF ATHENS, TN* TN EMPIREGAS INC. OF CHATTANOOGA* TN EMPIREGAS INC. OF CLEVELAND* TN EMPIREGAS INC. OF CLINTON, TN* TN EMPIREGAS INC. OF COOKEVILLE* TN EMPIREGAS INC. OF DUNLAP* TN 7 EMPIREGAS INC. OF FAYETTEVILLE* TN EMPIREGAS INC. OF KINGSTON* TN EMPIREGAS INC. OF LEBANON* TN EMPIREGAS INC. OF LEWISBURG* TN EMPIREGAS INC. OF LORETTO* TN EMPIREGAS INC. OF MARYVILLE* TN EMPIREGAS INC. OF MURFREESBORO* TN EMPIREGAS INC. OF NEW TAZEWELL* TN EMPIREGAS INC. OF SEVIERVILLE* TN EMPIREGAS INC. OF SHELBYVILLE* TN EMPIREGAS INC. OF SNEEDVILLE* TN EMPIREGAS INC. OF TULLAHOMA* TN * Pursuant to the Stock Redemption Agreement, dated May 7, 1994, the Company will transfer 100% of the common stock of Empire Energy Corporation to Mr. Robert W. Plaster and certain departing directors, officers, and employees in exchange for 12,004,430 of their shares of the Company's common stock. # Immediately prior to the consummation of the Offering, Empire Gas Operating Corporation, the Company's subsidiary, will merge into the Company. 8 EX-23.8 18 EXHIBIT 23.8 EXHIBIT 23.8 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Registration Statement on Form S-1 of our reports dated July 30, 1993, relating to the financial statements and financial statement schedules of EMPIRE GAS CORPORATION (FORMERLY EMPIRE GAS ACQUISITION CORPORATION) and our report dated May 27, 1994, relating to the financial statements of PSNC PROPANE CORPORATION, all of which appear in such Registration Statement. We also consent to the reference to us under the heading "Experts" in such Registration Statement. BAIRD, KURTZ & DOBSON Springfield, Missouri June 9, 1994 EX-25.2 19 EXHIBIT 25.2 EXHIBIT 6 Board of Governors of the Federal Reserve System OMB Number: 7100-0036 Federal Deposit Insurance Corporation OMB Number 3064-0052 Office of the Comptroller of the Currency OMB Number: 1557-0081 Expires February 28, 1995 Federal Financial Institutions Examination Council - -------------------------------------------------------------------------------- / 1 / Please refer to page i, Table of Contents, for the required disclosure of estimated burden. - -------------------------------------------------------------------------------- CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR A BANK WITH DOMESTIC AND FOREIGN OFFICES--FFIEC 031 REPORT AT THE CLOSE OF BUSINESS MARCH 31, 1994 (940331) -------- This report is required by law: 12 U.S.C. Section 324 (State member banks); 12 U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161 (National banks). This report form is to be filed by banks with branches and consolidated subsidiaries in U.S. territories and possessions, Edge or Agreement subsidiaries, foreign branches, consolidated foreign subsidiaries, or International Banking Facilities. - -------------------------------------------------------------------------------- NOTE: The Reports of Condition and Income must be signed by an authorized officer and the Report of Condition must be attested to by not less than two directors (trustees) for State nonmember banks and three directors for State member and National banks. I, Romolo C. Santarosa, SVP and Controller of the named bank do hereby declare --------------------------------------- Name and Title of Officer Authorized to Sign Report that these Reports of Condition and Income (including the supporting schedules) have been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and are true to the best of my knowledge and belief. /s/ Romolo C. Santarosa - ------------------------------------------------- Signature of Officer Authorized to Sign Report April 29, 1994 - ------------------------------------------------- Date of Signature The Reports of Condition and Income are to be prepared in accordance with Federal regulatory authority instructions. NOTE: These instructions may in some cases differ from generally accepted accounting principles. We, the undersigned directors (trustees), attest to the correctness of this Report of Condition (including the supporting schedules) and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true and correct. /s/ - ------------------------------------------------- Director (Trustee) /s/ - ------------------------------------------------- Director (Trustee) /s/ - ------------------------------------------------- Director (Trustee) - -------------------------------------------------------------------------------- For Banks Submitting Hard Copy Report Forms: State Member Banks: Return the original and one copy to the appropriate Federal Reserve District Bank. State Nonmember Banks: Return the original only in the SPECIAL RETURN ADDRESS ENVELOPE PROVIDED. If express mail is used in lieu of the special return address envelope, return the original only to the FDIC, c/o Quality Data Systems, 2139 Espey Court, Crofton, MD 21114. National Banks: Return the original only in the SPECIAL RETURN ADDRESS ENVELOPE PROVIDED. If express mail is used in lieu of the special return address envelope, return the original only to the FDIC, c/o Quality Data Systems, 2139 Espey Court, Crofton, MD 21114. - -------------------------------------------------------------------------------- FDIC Certificate Number Call No. 187 31 03-31-94 --------------- CERT: 02499 10582 STBK 09-0590 SHAWMUT BANK CONNECTICUT, NATIONAL A 777 MAIN STREET HARTFORD, CT 06115 /2/ CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR A BANK WITH DOMESTIC AND FOREIGN OFFICES - -------------------------------------------------------------------------------- TABLE OF CONTENTS Signature Page Cover Report of Income Schedule RI--Income Statement. . . . . . . . . . . . . . . . . . . . RI-1, 2, 3 Schedule RI-A--Changes in Equity Capital . . . . . . . . . . . . . . . . . RI-3 Schedule RI-B--Charge-offs and Recoveries and Changes in Allowance for Loan and Lease Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .RI-4, 5 Schedule RI-C--Applicable Income Taxes by Taxing Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . RI-5 Schedule RI-D--Income from International Operations . . . . . . . . . . . . . . . . . . . . . . . . RI-6 Schedule RI-E--Explanations. . . . . . . . . . . . . . . . . . . . . . .RI-7, 8 REPORT OF CONDITION Schedule RC--Balance Sheet . . . . . . . . . . . . . . . . . . . . . . .RC-1, 2 Schedule RC-A--Cash and Balances Due From Depository Institutions . . . . . . . . . . . . . . . . . . . . . . RC-3 Schedule RC-B--Securities. . . . . . . . . . . . . . . . . . . . . . . .RC-4, 5 Schedule RC-C--Loans and Lease Financing Receivables: Part I. Loans and Leases . . . . . . . . . . . . . . . . . . . . . .RC-6, 7 Part II. Loans to Small Businesses and Small Farms (included in the forms for June 30 only). . . . . . . . . . . . . . . . . . . . . . . . . .RC-7a, 7b Schedule RC-D--Assets Held in Trading Accounts in Domestic Offices Only (to be completed only by banks with $1 billion or more in total assets). . . . . . . . . . . . RC-8 Schedule RC-E--Deposit Liabilities . . . . . . . . . . . . . . . . . . RC-9, 10 Schedule RC-F--Other Assets. . . . . . . . . . . . . . . . . . . . . . . .RC-11 Schedule RC-G--Other Liabilities . . . . . . . . . . . . . . . . . . . . .RC-11 Schedule RC-H--Selected Balance Sheet Items for Domestic Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . .RC-12 Schedule RC-I--Selected Assets and Liabilities of IBFs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .RC-13 Schedule RC-K--Quarterly Averages. . . . . . . . . . . . . . . . . . . . .RC-13 Schedule RC-L--Off-Balance Sheet Items . . . . . . . . . . . . . . . .RC-14, 15 Schedule RC-M--Memoranda . . . . . . . . . . . . . . . . . . . . . . .RC-16, 17 Schedule RC-N--Past Due and Nonaccrual Loans, Leases, and Other Assets . . . . . . . . . . . . . . . . . . . . . .RC-18, 19 Schedule RC-O--Other Data for Deposit Insurance Assessments. . . . . . . . . . . . . . . . . . . . . . . .RC-20, 21 Schedule RC-R--Risk-Based Capital. . . . . . . . . . . . . . . . . . .RC-22, 23 Optional Narrative Statement Concerning the Amounts Reported in the Reports of Condition and Income . . . . . . . . . . . . . . . . . . . . . . . . . .RC-24 Special Report (to be completed by all banks) Schedule RC-J--Repricing Opportunities (sent only to and to be completed only by savings banks) Disclosure of Estimated Burden The estimated average burden associated with this information collection is 30.7 hours per respondent and is estimated to vary from 15 to 200 hours per response, depending on individual circumstances. Burden estimates include the time for reviewing instructions, gathering and maintaining data in the required form, and completing the information collection, but exclude the time for compiling and maintaining business records in the normal course of a respondent's activities. Comments concerning the accuracy of this burden estimate and suggestions for reducing this burden should be directed to the Office of Information and Regulatory Affairs, Office of Management and Budget, Washington D.C. 20503, and to one of the following: Secretary Board of Governors of the Federal Reserve System Washington, D.C. 20551 Legislative and Regulatory Analysis Division Office of the Comptroller of the Currency Washington, D.C. 20219 Assistant Executive Secretary Federal Deposit Insurance Corporation Washington, D.C. 20429 For information or assistance, national and state nonmember banks should contact the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington, D.C. 20429, toll free on (800) 688-FDIC (3342), Monday through Friday between 8:00 a.m. and 5:00 p.m., Eastern time. State member banks should contact their Federal Reserve District Bank. Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RI-1 Consolidated Report of Income For the period January 1, 1994-March 31, 1994 Report of income schedules are to be reported on a calendar year-to-date basis in thousands of dollars. Schedule RI--Income Statement
------- | 1480 | --------------------| Dollar Amounts in Thousands | RIAD Bil Mil Thou | - -----------------------------------------------------------------------------------------------|-------------------| Interest income: | ///////////////// | a. Interest and fee income on Loans: | ///////////////// | (1) In domestic offices: | ///////////////// | (a) Loans secured by real estate. . . . . . . . . . . . . . . . . . . . . . . . . . | 4011 82,308 | 1.a.(1)(a) (b) Loans to depository institutions. . . . . . . . . . . . . . . . . . . . . . . . | 4019 75 | 1.a.(1)(b) (c) Loans to finance agricultural production and other loans to farmers . . . . . . | 4024 23 | 1.a.(1)(c) (d) Commercial and industrial loans . . . . . . . . . . . . . . . . . . . . . . . . | 4012 36,347 | 1.a.(1)(d) (e) Acceptances of other banks. . . . . . . . . . . . . . . . . . . . . . . . . . . | 4026 2 | 1.a.(1)(e) (f) Loans to individuals for household, family, and other personal expenditures: | ///////////////// | (1) Credit cards and related plans . . . . . . . . . . . . . . . . . . . . . . | 4054 859 | 1.a.(1)(f)(1) (2) Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4055 7,181 | 1.a.(1)(f)(2) (g) Loans to foreign governments and official institutions. . . . . . . . . . . . . | 4056 0 | 1.a.(1)(g) (h) Obligations (other than securities and leases) of states and political | ///////////////// | subdivisions in the U.S.: | ///////////////// | (1) Taxable obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4503 8 | 1.a.(1)(h)(1) (2) Tax-exempt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . | 4504 670 | 1.a.(1)(h)(2) (i) All other loans in domestic offices . . . . . . . . . . . . . . . . . . . . . . | 4058 8,572 | 1.a.(1)(i) (2) In foreign offices, Edge and Agreement subsidiaries, and IBFs. . . . . . . . . . . . | 4059 0 | 1.a.(2) b. Income from lease financing receivables: | ///////////////// | (1) Taxable leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4505 41 | 1.b.(1) (2) Tax-exempt leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4307 0 | 1.b.(2) c. Interest income on balances due from depository institutions:(1) | ///////////////// | (1) In domestic offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4105 0 | 1.c.(1) (2) In foreign offices, Edge and Agreement subsidiaries, and IBFs. . . . . . . . . . . . | 4106 793 | 1.c.(2) d. Interest and dividend income on securities: | ///////////////// | (1) U.S. Treasury securities and U.S. Government agency and corporation obligations. . . | 4027 51,410 | 1.d.(1) (2) Securities issued by states and political subdivisions in the U.S.: | ///////////////// | (a) Taxable securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4506 0 | 1.d.(2)(a) (b) Tax-exempt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4507 0 | 1.d.(2)(b) (3) Other domestic debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3657 13,170 | 1.d.(3) (4) Foreign debt securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3658 46 | 1.d.(4) (5) Equity securities (including investments in mutual funds). . . . . . . . . . . . . . | 3659 373 | 1.d.(5) e. Interest income from assets held in trading accounts. . . . . . . . . . . . . . . . . . . | 4069 0 | 1.e. --------------------- - ------------------------ (1) Includes interest income on time certificates of deposit not held in trading accounts.
3 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RI-2 Schedule RI--Continued
--------------------| Dollar Amounts in Thousands | Year-to-date | - ------------------------------------------------------------------------------------|-------------------| | RIAD Bil Mil Thou | 1. Interest income (continued) f. Interest income on federal funds sold and securities purchased | ///////////////// | under agreements to resell in domestic offices of the bank and of | ///////////////// | its Edge and Agreement subsidiaries, and in IBFs . . . . . . . . . . . . | 4020 145 | 1.f. g. Total interest income (sum of items 1.a through 1.f) . . . . . . . . . . | 4107 202,023 | 1.g. 2. Interest expense: | ///////////////// | a. Interest on deposits: | ///////////////// | (1) Interest on deposits in domestic offices: | ///////////////// | (a) Transaction accounts (NOW accounts, ATS accounts, and | ///////////////// | telephone and preauthorized transfer accounts) . . . . . . . . | 4508 2,508 | 2.a.(1)(a) (b) Nontransaction accounts: | ///////////////// | (1) Money market deposit accounts (MMDAs) . . . . . . . . . . | 4509 2,449 | 2.a.(1)(b)(1) (2) Other savings deposits. . . . . . . . . . . . . . . . . . | 4511 8,765 | 2.a.(1)(b)(2) (3) Time certificates of deposit of $100,000 or more. . . . . | 4174 4,234 | 2.a.(1)(b)(3) (4) All other time deposits . . . . . . . . . . . . . . . . . | 4512 13,673 | 2.a.(1)(b)(4) (2) Interest on deposits in foreign offices, Edge and Agreement | ///////////////// | subsidiaries, and IBFs. . . . . . . . . . . . . . . . . . . . . . . | 4172 1,199 | 2.a.(2) b. Expense of federal funds purchased and securities sold under | ///////////////// | agreements to repurchase in domestic offices of the bank and of | ///////////////// | its Edge and Agreement subsidiaries, and in IBFs . . . . . . . . . . . . | 4180 36,607 | 2.b. c. Interest on demand notes issued to the U.S. Treasury and on | ///////////////// | other borrowed money . . . . . . . . . . . . . . . . . . . . . . . . . . | 4185 2,565 | 2.c. d. Interest on mortgage indebtedness and obligations under | ///////////////// | capitalized leases . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4072 220 | 2.d. e. Interest on subordinated notes and debentures. . . . . . . . . . . . . . | 4200 0 | 2.e. f. Total interest expense (sum of items 2.a through 2.e). . . . . . . . . . | 4073 72,220 | 2.f. | |--------------------- 3. Net interest income (items 1.g minus 2.f) . . . . . . . . . . . . . . . . . . | ///////////////// | RIAD 4074 | 129,803 | 3. 4. Provisions: | ///////////////// |--------------------- a. Provision for loan and lease losses. . . . . . . . . . . . . . . . . . . | ///////////////// | RIAD 4230 | (1,258)| 4.a. b. Provision for allocated transfer risk. . . . . . . . . . . . . . . . . . | ///////////////// | RIAD 4243 | 0 | 4.b. 5. Noninterest income: | ///////////////// |---------------------| a. Income from fiduciary activities . . . . . . . . . . . . . . . . . . . . | 4070 17,690 | 5.a. b. Service charges on deposit accounts in domestic offices. . . . . . . . . | 4080 16,395 | 5.b. c. Trading gains (losses) and fees from foreign exchange transactions . . . | 4075 (186)| 5.c. d. Other foreign transaction gains (losses) . . . . . . . . . . . . . . . . | 4076 0 | 5.d. e. Gains (losses) and fees from assets held in trading accounts . . . . . . | 4077 498 | 5.e. f. Other noninterest income: | ///////////////// | (1) Other fee income. . . . . . . . . . . . . . . . . . . . . . . . . . | 5407 11,415 | 5.f.(1) (2) All other noninterest income* . . . . . . . . . . . . . . . . . . . | 5408 14,673 | 5.f.(2) | |--------------------- g. Total noninterest income (sum of items 5.a through 5.f). . . . . . . . . | ///////////////// | RIAD 4079 | 60,485 | 5.g. 6. a. Realized gains (losses) on held-to-maturity securities . . . . . . . . . | ///////////////// | RIAD 3521 | 290 | 6.a. b. Realized gains (losses) on available-for-sale securities . . . . . . . . | ///////////////// | RIAD 3196 | (1,010)| 6.b. 7. Noninterest expense: | ///////////////// |--------------------- a. Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . | 4135 67,849 | 7.a. b. Expenses of premises and fixed assets (net of rental income) | ///////////////// | (excluding salaries and employee benefits and mortgage interest) . . . . | 4217 20,811 | 7.b. c. Other noninterest expense* . . . . . . . . . . . . . . . . . . . . . . . | 4092 40,091 | 7.c. d. Total noninterest expense (sum of items 7.a through 7.c) . . . . . . . . | ///////////////// |--------------------- 8. Income (loss) before income taxes and extraordinary items and other | ///////////////// | RIAD 4093 | 128,751 | 7.d. adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d) . . | ///////////////// |--------------------- | | RIAD 4301 | 62,075 | 8. 9. Applicable income taxes (on item 8) . . . . . . . . . . . . . . . . . . . . . | ///////////////// | RIAD 4302 | 21,131 | 9. | |--------------------- 10. Income (loss) before extraordinary items and other adjustments | ///////////////// |--------------------- (item 8 minus 9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | ///////////////// | RIAD 4300 | 40,944 | 10. ------------------------------------------ - ------------------------- *Describe on Schedule RI-E--Explanations.
4 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RI 3 Schedule RI--Continued
-------------- | Year-to-date | -------------------- Dollar Amounts in Thousands | RIAD Bil Mil Thou | - ------------------------------------------------------------------------------------------------ | 11. Extraordinary items and other adjustments: ///////////////// | a. Extraordinary items and other adjustments, gross of income taxes* . | 4310 0 | 11.a. b. Applicable income taxes (on item 11.a)* . . . . . . . . . . . . . . | 4515 0 | 11.b. c. Extraordinary items and other adjustments, net of income taxes | ///////////////// |___________________________ (item 11.a minus 11.b). . . . . . . . . . . . . . . . . . . . . . . | ///////////////// | RIAD 4320 | 0 | 11.c. 12. Net income (loss) (sum of items 10 and 11.c) . . . . . . . . . . . . . | ///////////////// | RIAD 4340 | 40,944 | 12. ------------------------------------------------
----------------- | Year-to-date | ----------------------- Memoranda Dollar Amounts in Thousands | RIAD Bil Mil Thou | - ------------------------------------------------------------------------------------------------------------------------------ 1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after | ////////////////// | August 7, 1986, that is not deductible for federal income tax purposes . . . . . . . . . . . . . | 4513 2 |M.1. 2. Fee income from the sale and servicing of mutual funds and annuities in domestic offices | ////////////////// | (included in Schedule RI, item 5.g). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 8431 388 |M.2. 3. Estimated foreign tax credit included in applicable income taxes, items 9 and 11.b above . . . . | 4309 0 |M.3. 4. To be completed only by banks with $1 billion or more in total assets: | ////////////////// | Taxable equivalent adjustment to "income (loss) before income taxes and extraordinary | ////////////////// | items and other adjustments" (item 8 above). . . . . . . . . . . . . . . . . . . . . . . . . . . | 1244 466 |M.4. 5. Number of full-time equivalent employees on payroll at end of current period (round to | //// Number | nearest whole number). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4150 5,705 |M.5. -----------------------
Schedule RI-A-- Changes in Equity Capital Indicate decreases and losses in parentheses.
-------- | 1483 | ----------------------- Dollar Amounts in Thousands | RIAD Bil Mil Thou | - ------------------------------------------------------------------------------------------------------------------------------ 1. Total equity capital originally reported in the December 31, 1993, Reports of Condition | /////////////////// | and Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3215 1,131,626 | 1. 2. Equity capital adjustments from amended Reports of Income, net*. . . . . . . . . . . . . . . . . | 3216 0 | 2. 3. Amended balance end of previous calendar year (sum of items 1 and 2) . . . . . . . . . . . . . . | 3217 1,131.626 | 3. 4. Net income (loss) (must equal Schedule R1, item 12). . . . . . . . . . . . . . . . . . . . . . . | 4340 40,944 | 4. 5. Sale, conversion, acquisition, or retirement of capital stock, net . . . . . . . . . . . . . . . | 4346 0 | 5. 6. Changes incident to business combinations, net . . . . . . . . . . . . . . . . . . . . . . . . . | 4356 0 | 6. 7. LESS: Cash dividends declared on preferred stock . . . . . . . . . . . . . . . . . . . . . . . . | 4470 0 | 7. 8. LESS: Cash dividends declared on common stock. . . . . . . . . . . . . . . . . . . . . . . . . . | 4460 21,500 | 8. 9. Cumulative effect of changes in accounting principles from prior years* (see instructions | /////////////////// | for this schedule) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4411 0 | 9. 10. Corrections of material accounting errors from prior years* (see instructions for this schedule) | 4412 0 | 10. 11. Change in net unrealized holding gains (losses) on available-for-sale securities . . . . . . . . | 8433 (14,105)| 11. 12. Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4414 0 | 12. 13. Other transactions with parent holding company* (not included in items 5, 7, or 8 above) . . . . | 4415 0 | 13. 14. Total equity capital end of current period (sum of items 3 through 13) (must equal Schedule RC, | /////////////////// | item 28) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3210 1,136,965 | 14. |---------------------| - ------------------------ * Describe on Schedule RI-E-Explanations
5 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RI 4 Schedule RI-B--Charge-offs and Recoveries and Changes in Allowance for Loan and Lease Losses Part I. Charge-offs and Recoveries on Loans and Leases Part I excludes charge-offs and recoveries through the allocated transfer risk reserve.
-------------- | 1486 | ----------------------------------------------- | (Column A) | (Column B) | | Charge-offs | Recoveries | |---------------------------------------------| | calendar year-to-date | |---------------------------------------------| Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou | - --------------------------------------------------------------------------------|---------------------------------------------| 1. Loans secured by real estate: | /////////////////////////////////////////// | a. To U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . . . | 4651 13,681 | 4661 1,899 | 1.a. b. To non-U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . | 4652 0 | 4662 0 | 1.b. 2. Loans to depository institutions and acceptances of other banks: . . . . . | /////////////////////////////////////////// | a. To U.S. Banks and other U.S. depository institutions. . . . . . . . . . | 4653 0 | 4663 0 | 2.a. b. To foreign Banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4654 0 | 4664 0 | 2.b. 3. Loans to finance agricultural production and other loans to farmers. . . . | 4655 0 | 4665 1 | 3. 4. Commercial and industrial loans: | /////////////////////////////////////////// | a. To U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . . . | 4645 4,567 | 4617 1,539 | 4.a. b. To non-U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . | 4646 0 | 4618 0 | 4.b. 5. Loans to individuals for household, family, and other personal | /////////////////////////////////////////// | expenditures: | /////////////////////////////////////////// | a. Credit cards and related plans. . . . . . . . . . . . . . . . . . . . . | 4656 354 | 4666 86 | 5.a. b. Other (includes single payment, installment, and all student loans) . . | 4657 600 | 4667 1,225 | 5.b. 6. Loans to foreign governments and official institutions . . . . . . . . . . | 4643 0 | 4627 0 | 6. 7. All other loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4644 852 | 4628 45 | 7. 8. Lease financing receivables: | /////////////////////////////////////////// | a. Of U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . . . | 4658 0 | 4668 0 | 8.a. b. Of non-U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . | 4659 0 | 4669 0 | 8.b. 9. Total (sum of items 1 through 8) . . . . . . . . . . . . . . . . . . . . . | 4635 20,054 | 4605 4,795 | 9. ----------------------------------------------- ------------------------------------------- | Cumulative | Cumulative | | Charge-offs | Recoveries | | Jan. 1, 1986 | Jan. 1, 1986 | | through | through | Memoranda Dollar Amounts in Thousands | Dec. 31, 1989 | Report Date | - --------------------------------------------------------------------------------|-----------------------------------------| To be completed by national banks only. | RIAD Bil Mil Thou | RIAD Bil Mil Thou | ------------------------------------------- 1. Charge-offs and recoveries of Special-Category Loans, as defined for this | ///////////////// | /////////////////// | Call Report by the Comptroller of the Currency . . . . . . . . . . . . . . | ///////////////// | 4784 644 | M.1. |-----------------------------------------| | (Column A) | (Column B) | Memorandum items 2 and 3 are to be completed by all banks | Charge-offs | Recoveries | |-------------------|---------------------| | calendar year-to-date | |-----------------------------------------| 2. Loans to finance commercial real estate, construction, and land | RIAD Bil Mil Thou | RIAD Bil Mil Thou | development activities (not secured by real estate) included in |-----------------------------------------| Schedule RI-8, part I, items 4 and 7, above. . . . . . . . . . . . . . . . | 5409 515 | 5410 138 |M.2. 3. Loans secured by real estate in domestic offices (included in | ///////////////// | /////////////////// | Schedule RI-8, part I, item 1, above). . . . . . . . . . . . . . . . . . . | ///////////////// | /////////////////// | a. Construction and land development . . . . . . . . . . . . . . . . . . . | 3582 570 | 3583 23 |M.3.a. b. Secured by farmland . . . . . . . . . . . . . . . . . . . . . . . . . . | 3584 0 | 3585 13 |M.3.b. c. Secured by 1-4 family residential properties: | ///////////////// | /////////////////// | (1) Revolving, open-end loans secured by 1-4 family residential | ///////////////// | /////////////////// | properties and extended under lines of credit . . . . . . . . . . . | 5411 319 | 5412 11 |M.3.c.(1) (2) All other loans secured by 1-4 family residential properties. . . . | 5413 4,638 | 5414 534 |M.3.c.(2) d. Secured by multifamily (5 or more) residential properties . . . . . . . | 3588 2,252 | 3589 6 |M.3.d. 3. Secured by nonfarm nonresidential properties. . . . . . . . . . . . . . | 3590 5,902 | 3591 1,311 |M.3.e. -------------------------------------------
6 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 Main Street City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RI-5 Schedule RI-B--Continued Part II. Changes in Allowance for Loan and Lease Losses and in Allocated Transfer Risk Reserve
------------------------------------------- | (Column A) | (Column B) | | Allowance for | Allocated | | Loan and Lease | Transfer Risk | | Losses | Reserve | |--------------------|--------------------| Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou | - ---------------------------------------------------------------------------|--------------------|--------------------| 1. Balance originally reported in the December 31, 1993, Reports of | ////////////////// | ////////////////// | Condition and Income. . . . . . . . . . . . . . . . . . . . . . . . . . | 3124 350,900 | 3131 0 | 1. 2. Recoveries (column A must equal part I, item 9, column B above) . . . . | 4605 4,795 | 3132 0 | 2. 3. LESS: Charge-offs (column A must equal part I, item 9, column A above). | 4635 20,054 | 3133 0 | 3. 4. Provision (column A must equal Schedule RI, item 4.a; column B must | ////////////////// | ///////////////////| equal Schedule RI, item 4.b). . . . . . . . . . . . . . . . . . . . . . | 4230 (1,258)| 4243 0 | 4. 5. Adjustments* (see instructions for this schedule) . . . . . . . . . . . | 4815 0 | 3134 0 | 5. 6. Balance end of current period (sum of items 1 through 5) (column A must | ////////////////// | ////////////////// | equal Schedule RC, item 4.b; column B must equal Schedule RC, | ////////////////// | ////////////////// | item 4.c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3123 334,383 | 3128 0 | 6. ------------------------------------------- - ------------ *Describe on Schedule RI-E--Explanations.
Schedule RI-C--Applicable Income Taxes by Taxing Authority Schedule RI-C is to be reported with the December Report of Income.
-------- | 1489 | (- ---------------------- Dollar Amounts in Thousands | RIAD Bil Mil Thou | - ----------------------------------------------------------------------------------------------------------------------- 1. Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4780 N/A | 1. 2. State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4790 N/A | 2. 3. Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4795 N/A | 3. 4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and 11.b). . . . . . | 4770 N/A | 4. ------------------------------| | 5. Deferred portion of item 4 . . . . . . . . . . . . . . . . . . | RIAD 4772 | N/A | ////////////////// | 5. ----------------------------------------------------
7 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-GK: 09-0590 FFIEC 031 Page RI-6 Schedule RI-D--Income from International Operations For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs where international operations account for more than 10 percent of total revenues, total assets, or net income. Part I. Estimated Income from International Operations
----------- | 1492 | (- ---------------- | Year-to-date | ---------------------- Dollar Amounts in Thousands | RIAD Bil Mil Thou | - ----------------------------------------------------------------------------------------------------------------------- 1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, | ////////////////// | and IBFs: | ////////////////// | a. Interest income booked . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4837 N/A | 1.a. b. Interest expense booked. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4838 N/A | 1.b. c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and IBFs | ////////////////// | (item 1.a minus 1.b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4839 N/A | 1.c. 2. Adjustments for booking location of international operations: | ////////////////// | a. Net interest income attributable to international operations booked at domestic offices. . | 4840 N/A | 2.a. b. Net interest income attributable to domestic business booked at foreign offices. . . . . . | 4841 N/A | 2.b. c. Net booking location adjustment (item 2.a minus 2.b) . . . . . . . . . . . . . . . . . . . | 4842 N/A | 2.c. 3. Noninterest income and expense attributable to international operations: | ////////////////// | a. Noninterest income attributable to international operations. . . . . . . . . . . . . . . . | 4097 N/A | 3.a. b. Provision for loan and lease losses attributable to international operations . . . . . . . | 4235 N/A | 3.b. c. Other noninterest expense attributable to international operations . . . . . . . . . . . . | 4239 N/A | 3.c. d. Net noninterest income (expense) attributable to international operations (item 3.a | ////////////////// | minus 3.b and 3.c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4843 N/A | 3.d. 4. Estimated pretax income attributable to international operations before capital allocation | ////////////////// | adjustment (sum of items 1.c, 2.c, and 3.d) . . . . . . . . . . . . . . . . . . . . . . . . . | 4844 N/A | 4. 5. Adjustment to pretax income for internal allocations to international operations to reflect | ////////////////// | the effects of equity capital on overall bank funding costs . . . . . . . . . . . . . . . . . | 4845 N/A | 5. 6. Estimated pretax income attributable to international operations after capital allocation | ////////////////// | adjustment (sum of items 4 and 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4846 N/A | 6. 7. Income taxes attributable to income from international operations as estimated in item 6. . . | 4797 N/A | 7. 8. Estimated net income attributable to international operations (item 6 minus 7). . . . . . . . | 4341 N/A | 8. ---------------------- Memoranda ---------------------- Dollar Amounts in Thousands | RIAD Bil Mil Thou | - ----------------------------------------------------------------------------------------------------------------------- 1. Intracompany interest income included in item 1.a above . . . . . . . . . . . . . . . . . . . | 4847 N/A | M.1. 2. Intracompany interest income included in item 1.b above . . . . . . . . . . . . . . . . . . . | 4848 N/A | M.2. ----------------------
Part II. Supplementary Details on Income from International Operations Required by the Departments of Commerce and Treasury for Purposes of the U.S. International Accounts and the U.S. National Income and Product Accounts
---------------- | Year-to-date | ---------------------- Dollar Amounts in Thousands | RIAD Bil Mil Thou | - ----------------------------------------------------------------------------------------------------------------------- 1. Interest income booked at IBFs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4849 N/A | 1. 2. Interest expense booked at IBFs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4850 N/A | 2. 3. Noninterest income attributable to international operations booked at domestic offices | ////////////////// | (excluding IBFs): | ////////////////// | a. Gains (losses) and extraordinary items . . . . . . . . . . . . . . . . . . . . . . . . . . | 5491 N/A | 3.a. b. Fees and other noninterest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5492 N/A | 3.b. 4. Provision for loan and lease losses attributable to international operations booked at | ////////////////// | domestic offices (excluding IBFs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4852 N/A | 4. 5. Other noninterest expense attributable to international operations booked at domestic offices | ////////////////// | (excluding IBFs). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4853 N/A | 5. ----------------------
8 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 03: Page RI-7 SCHEDULE RI-E--EXPLANATIONS Schedule RI-E is to be completed each quarter on a calendar year-to-date basis. Detail all adjustments in Schedules RI-A and RI-B, all extraordinary items and other adjustments in Schedule RI, and all significant items of other noninterest income and other noninterest expense in Schedule RI. (See instructions for details.)
---------- | I495 | (- ---------------- | Year-to-date | ---------------- Dollar Amounts in Thousands | RIAD Bil Mil Thou | - --------------------------------------------------------------------------------------------------------------------------| 1. All other noninterest income (from Schedule RI, item 5.f.(2)) | ////////////////// | Report amounts that exceed 10% of Schedule RI, item 5.f.(2): | ////////////////// | a. Net gains on other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5415 0 | 1.a. b. Net gains on sales of loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5416 0 | 1.b. c. Net gains on sales of premises and fixed assets. . . . . . . . . . . . . . . . . . . . . . . | 5417 0 | 1.c. Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// | Schedule RI, item 5.f.(2): | ////////////////// | ------------- | | d. | TEXT 4461 | Chargeback to affiliates | 4461 8,494 | 1.d. -----------------------------------------------------------------------------------------------| | e. | TEXT 4462 | | 4462 | 1.e. -----------------------------------------------------------------------------------------------| | f. | TEXT 4463 | | 4463 | 1.f. -----------------------------------------------------------------------------------------------| | 2. Other noninterest expense (from Schedule RI, item 7.c): | ////////////////// | a. Amortization expense of intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . | 4531 2,450 | 2.a. Report amounts that exceed 10% of Schedule RI, item 7.c: | ////////////////// | b. Net losses on other real estate owned. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5418 0 | 2.b. c. Net losses on sales of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5419 0 | 2.c. d. Net losses on sales of premises and fixed assets . . . . . . . . . . . . . . . . . . . . . . | 5420 0 | 2.d. Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// | Schedule RI, item 7.c: | ////////////////// | ------------- | | e. | TEXT 4464 | | 4464 | 2.e. -----------------------------------------------------------------------------------------------| | f. | TEXT 4467 | | 4467 | 2.f. -----------------------------------------------------------------------------------------------| | g. | TEXT 4468 | | 4468 | 2.g. -----------------------------------------------------------------------------------------------| | 3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and | ////////////////// | applicable income tax effect (from Schedule RI, item 11.b) (itemize and describe | ////////////////// | all extraordinary items and other adjustments): | ////////////////// | ------------- | | a. (1) | TEXT 4469 | | 4469 | 3.a.(1) -------------------------------------------------------------------------------------------| | (2) Applicable income tax effect | RIAD 4486 | | ////////////////// | 3.a.(2) ------------- ------------------------------------| | b. (1) | TEXT 4487 | | 4487 | 3.b.(1) -------------------------------------------------------------------------------------------| | (2) Applicable income tax effect | RIAD 4488 | | ////////////////// | 3.b.(2) ------------- ------------------------------------| | c. (1) | TEXT 4489 | | 4489 | 3.c.(1) -------------------------------------------------------------------------------------------| | (2) Applicable income tax effect | RIAD 4491 | | ////////////////// | 3.c.(2) ------------------------------------| | 4. Equity capital adjustments from amended Reports of Income (from Schedule RI+A, | ////////////////// | item 2) (itemize and describe all adjustments): | ////////////////// | ------------- | | a. | TEXT 4492 | | 4492 | 4.a. -----------------------------------------------------------------------------------------------| | b. | TEXT 4493 | | 4493 | 4.b. -----------------------------------------------------------------------------------------------| | 5. Cumulative effect of changes in accounting principles from prior years (from | ////////////////// | Schedule RI-A, item 9) (itemize and describe all changes in accounting principles): | ////////////////// | ------------- | | a. | TEXT 4494 | | 4494 | 5.a. -----------------------------------------------------------------------------------------------| | b. | TEXT 4495 | | 4495 | 5.b. -----------------------------------------------------------------------------------------------| | 6. Corrections of material accounting errors from prior years (from Schedule RI-A, | ////////////////// | item 10) (itemize and describe all corrections): | ////////////////// | ------------- | | a. | TEXT 4496 | | 4496 | 6.a. b. | TEXT 4497 | | 4497 | 6.b. ---------------------------------------------------------------------------------------------------------------------
9 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RI-8 SCHEDULE RI-E--Continued
---------------- | Year-to-date | --------------------- Dollar Amounts in Thousands | RIAD Bil Mil Thou | - -----------------------------------------------------------------------------------------------------|--------------------| 7. Other transactions with parent holding company (from Schedule RI-A, item 13) | ////////////////// | (itemize and describe all such transactions): | ////////////////// | ------------ | | a. | TEXT 4498 | | 4498 | 7.a. -----------------------------------------------------------------------------------------------| | b. | TEXT 4499 | | 4499 | 7.b -----------------------------------------------------------------------------------------------| | 8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, | ////////////////// | item 5) (itemize and describe all adjustments): | ////////////////// | ------------ a. | TEXT 4521 | | 4521 | 8.a. -----------------------------------------------------------------------------------------------| | b. | TEXT 4522 | | 4522 | 8.b. -----------------------------------------------------------------------------------------------|--------------------| 9. Other explanations (the space below is provided for the bank to briefly describe, | I498 | I499 | (- at its option, any other significant items affecting the Report of Income): --- No comment | | (RIAD 4769) Other explanations (please type or print clearly): (TEXT 4769)
10 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RC-1 Consolidated Report of Condition for Insured Commercial and State-Chartered Savings Banks for March 31, 1994 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding as of the last business day of the quarter. Schedule RC--Balance Sheet
------- | C400 | --------------------| Dollar Amounts in Thousands | RCFD Bil Mil Thou | - -----------------------------------------------------------------------------------------------|-------------------| ASSETS | ///////////////// | 1. Cash and balances due from depository institutions (from Schedule RC-A): | ///////////////// | (a) Noninterest-bearing balances and currency and coin(1). . . . . . . . . . . . . . . . | 0081 904,815 | 1.a. (b) Interest-bearing balances(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 0071 200,000 | 1.b. 2. Securities: | ///////////////// | (a) Held-to maturity securities (from Schedule RC-B, column A) . . . . . . . . . . . . . | 1754 3,503,554 | 2.a. (b) Available-for-sale securities (from Schedule RC-B, column D) . . . . . . . . . . . . | 1773 1,011,545 | 2.b. 3. Federal funds sold and securities purchased under agreements to resell in domestic offices| ///////////////// | of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | ///////////////// | (a) Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 0276 0 | 3.a. (b) Securities purchased under agreements to resell. . . . . . . . . . . . . . . . . . . | 0277 0 | 3.b. 4. Loans and Lease financing receivables: ------------------------| ///////////////// | (a) Loans and Leases, net of unearned income (from Schedule RC-C)| RCFD 2122 | 8,266,522 | ///////////////// | 4.a. (b) LESS: Allowance for Loan and Lease Losses . . . . . . . . . | RCFD 3123 | 334,383 | ///////////////// | 4.b. (c) LESS: Allocated transfer risk reserve . . . . . . . . . . . | RCFD 3128 | 0 | ///////////////// | 4.c. (d) Loans and leases, net of unearned income, ------------------------| ///////////////// | allowance, and reserve (item 4.a minus 4.b and 4.c) . . . . . . . . . . . . . . . | 2125 7,932,139 | 4.d. 5. Assets held in trading accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3545 0 | 5. 6. Premises and fixed assets (including capitalized Leases). . . . . . . . . . . . . . . . . | 2145 168,167 | 6. 7. Other real estate owned (rom Schedule RC-H) . . . . . . . . . . . . . . . . . . . . . . . | 2150 20,657 | 7. 8. Investment in unconsolidated subsidiaries and associated companies (from Schedule RC-H) . | 2130 0 | 8. 9. Customers' liability to this bank on acceptances outstanding. . . . . . . . . . . . . . . | 2155 31,157 | 9. 10. Intangible assets (from Schedule RC-H). . . . . . . . . . . . . . . . . . . . . . . . . . | 2143 72,849 |10. 11. Other assets (from Schedule RC-F) . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2160 648,388 |11. 12. Total assets (sum of items 1 through 11). . . . . . . . . . . . . . . . . . . . . . . . . | 2170 14,493,271 |12. -------------------- - ------------------------ (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held in trading accounts.
11 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RC-2 Schedule RC--Continued
--------------------------- Dollar Amounts in Thousands | //////// Bil Mil Thou | - ------------------------------------------------------------------------------------------------------------------------ LIABILITIES | /////////////////////// | 13. Deposits: | /////////////////////// | a. In domestic offices (sum of totals of columns A and C from Schedule RC-E part 1) . . | RCON 2200 7,548,857 | 13.a. ------------------------ (1) Noninterest-bearing (1) . . . . . . . . . . . . . . . . | RCON 6631 2,344,664 | /////////////////////// | 13.a.(1) (2) Interest-bearing . . . . . . . . . . . . . . . . . . . | RCON 6636 5,204,193 | /////////////////////// | 13.a.(2) ------------------------ b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, | /////////////////////// | part 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFN 2200 243,933 | 13.b. ------------------------ (1) Noninterest-bearing . . . . . . . . . . . . . . . . . . | RCFN 6631 0 | /////////////////////// | 13.b.(1) (2) Interest-bearing . . . . . . . . . . . . . . . . . . . | RCFN 6636 243,933 | /////////////////////// | 13.b.(2) ------------------------ 14. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// | offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | /////////////////////// | a. Federal funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 0278 1,824,426 | 14.a. b. Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . | RCFD 0279 3,162,509 | 14.b. 15. a. Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . . . . . . | RCON 2840 168,554 | 15.a. b. Trading liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 3548 7,085 | 15.b. 16. Other borrowed money: | /////////////////////// | a. With original maturity of one year or less . . . . . . . . . . . . . . . . . . . . | RCFD 2332 279,380 | 16.a. b. With original maturity of more than one year . . . . . . . . . . . . . . . . . . . | RCFD 2333 0 | 16.b. 17. Mortgage indebtedness and obligations under capitalized Leases . . . . . . . . . . . . | RCFD 2910 9,880 | 17. 18. Bank's Liability on acceptances executed and outstanding . . . . . . . . . . . . . . . | RCFD 2920 31,157 | 18. 19. Subordinated notes and debentures . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 3200 0 | 19. 20. Other Liabilities (from Schedule RC-G) . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 2930 80,525 | 20. 21. Total Liabilities (sum of items 13 through 20) . . . . . . . . . . . . . . . . . . . . | RCFD 2948 13,356,306 | 21. | /////////////////////// | 22. Limited-Life preferred stock and related surplus . . . . . . . . . . . . . . . . . . . | RCFD 3282 0 | 22. EQUITY CAPITAL | /////////////////////// | 23. Perpetual preferred stock and related surplus . . . . . . . . . . . . . . . . . . . . | RCFD 3838 0 | 23. 24. Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 3230 19,489 | 24. 25. Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . . . . . | RCFD 3839 849,190 | 25. 26. a. Undivided profits and capital reserves . . . . . . . . . . . . . . . . . . . . . . | RCFD 3632 281,158 | 26.a. b. Net unrealized holdings gains (Losses) on available-for-sale securities . . . . . . | RCFD 8438 (12,872)| 26.b. 27. Cumulative foreign currency translation adjustments . . . . . . . . . . . . . . . . . | RCFD 3284 0 | 27. 28. Total equity capital (sum of items 23 through 27) . . . . . . . . . . . . . . . . . . | RCFD 3210 1,136,965 | 28. 29. Total liabilities, Limited-Life preferred stock, and equity capital(sum of items 21, 22,| /////////////////////// | and 28). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 3300 14,493,271 | 29. ---------------------------
MEMORANDUM To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent external auditors as of any date during 1993. . . . . . Number -------------------- | RCFD 6724 2 | M.1. --------------------- 1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the bank 2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately) 3 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority) 4 = Directors' examination of the bank performed by other external auditors (may be required by state chartering authority) 5 = Review of the bank's financial statements by external auditors 6 = Compilation of the bank's financial statements by external auditors 7 = Other audit procedures (excluding tax preparation work) 8 = No external audit work - ------------------------ (1) Includes total demand deposits and noninterest-bearing time and savings deposits. 12 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RC-3 Schedule RC-A--Cash and Balances Due From Depository Institutions Exclude assets held in trading accounts.
---------- | C4DS | ------------------------------------------- | (Column A) | (Column B) | | Consolidated | Domestic | | Bank | Offices | |--------------------|--------------------| Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou | - ---------------------------------------------------------------------------|--------------------|--------------------| 1. Cash items in process of collection, unposted debits, and currency and | ////////////////// | ////////////////// | coin ................................................................. | 0022 596,851 | ////////////////// | 1. a. Cash items in process of collection and unposted debits............. | ////////////////// | 0020 483,959 | 1.a. b. Currency and coin................................................... | ////////////////// | 0080 112,892 | 1.b. 2. Balances due from depository institutions in the U.S. ................. | ////////////////// | 0082 86,207 | 2. a. U.S. branches and agencies of foreign banks (including their 18Fs).. | 0083 0 | ////////////////// | 2.a. b. Other commercial banks in the U.S. and other depository institutions | ////////////////// | ////////////////// | in the U.S. (including their 18Fs).................................. | 0085 86,207 | ////////////////// | 2.b. 3. Balances due from banks in foreign countries and foreign central banks. | ////////////////// | 0070 204,415 | 3. a. Foreign branches of other U.S. banks................................ | 0073 0 | ////////////////// | 3.a. b. Other banks in foreign countries and foreign central banks.......... | 0074 204,415 | ////////////////// | 3.b. 4. Balances due from Federal Reserve Banks................................ | 0090 217,342 | 0090 217,342 | 4. 5. Total (sum of items 1 through 4) (total of column A must equal | ////////////////// | ////////////////// | Schedule RC, sum of items 1.a and 1.b)................................. | 0010 1,104,815 | 0010 1,104,815 | 5. -------------------------------------------
---------------------- Memorandum Dollar Amounts in Thousands | RCON Bil Mil Thou | - ---------------------------------------------------------------------------------------------------------------------- 1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2, | ////////////////// | column 8 above)................................................................................ | 0050 86,207 | ---------------------- M.1.
13 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RC-4 Schedule RC-B--Securities Exclude assets held in trading accounts.
-------- | C410 | ------------------------------------------------------------------------------------- | Held-to-maturity | Available-for-sale | ------------------------------------------------------------------------------------- | (Column A) | (Column B) | (Column C) | (Column D) | | Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) | ------------------------------------------------------------------------------------| Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | - ----------------------------------------------------------------------------------------------------------------------| 1. U.S. Treasury securities...... | 0211 1,048,235 | 0213 1,011,643 | 1286 758,370 | 1287 741,321 | 1. 2. U.S. Government agency | ////////////////// | ////////////////// | ////////////////// | ////////////////// | and corporation obligations | ////////////////// | ////////////////// | ////////////////// | ////////////////// | (exclude mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// | securities): | ////////////////// | ////////////////// | ////////////////// | ////////////////// | a. Issued by U.S. Govern- | ////////////////// | ////////////////// | ////////////////// | ////////////////// | ment agencies(2)........... | 1289 0 | 1290 0 | 1291 0 | 1293 0 | 2.a. b. Issued by U.S. | ////////////////// | ////////////////// | ////////////////// | ////////////////// | Government-sponsored | ////////////////// | ////////////////// | ////////////////// | ////////////////// | agencies(3)................ | 1294 0 | 1295 0 | 1297 0 | 1298 0 | 2.b. 3. Securities issued by states | ////////////////// | ////////////////// | ////////////////// | ////////////////// | and political subdivisions | ////////////////// | ////////////////// | ////////////////// | ////////////////// | in the U.S.: | ////////////////// | ////////////////// | ////////////////// | ////////////////// | a. General obligations........ | 1676 0 | 1677 0 | 1678 138 | 1679 142 | 3.a. b. Revenue obligations........ | 1681 0 | 1686 0 | 1690 0 | 1691 0 | 3.b. c. Industrial development | ////////////////// | ////////////////// | ////////////////// | ////////////////// | and similar obligations.... | 1694 0 | 1695 0 | 1696 0 | 1697 0 | 3.c. 4. Mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// | securities (MBS): | ////////////////// | ////////////////// | ////////////////// | ////////////////// | a. Pass-through securities | ////////////////// | ////////////////// | ////////////////// | ////////////////// | (1) Guaranteed by | ////////////////// | ////////////////// | ////////////////// | ////////////////// | GNMA................... | 1698 0 | 1699 0 | 1701 91,023 | 1702 94,713 | 4.a.(1) (2) Issued by FNMA | ////////////////// | ////////////////// | ////////////////// | ////////////////// | and FHLMC.............. | 1703 1,669,092 | 1705 1,656,370 | 1706 0 | 1707 0 | 4.a.(2) (3) Privately-issued....... | 1709 20,194 | 1710 19,468 | 1711 0 | 1713 0 | 4.a.(3) b. CMOs and REMICs: | ////////////////// | ////////////////// | ////////////////// | ////////////////// | (1) Issued by FNMA | ////////////////// | ////////////////// | ////////////////// | ////////////////// | and FHLMC.............. | 1714 0 | 1715 0 | 1716 0 | 1717 0 | 4.b.(1) (2) Privately-issued | ////////////////// | ////////////////// | ////////////////// | ////////////////// | and collateralized | ////////////////// | ////////////////// | ////////////////// | ////////////////// | by MBS issued or | ////////////////// | ////////////////// | ////////////////// | ////////////////// | guaranteed by | ////////////////// | ////////////////// | ////////////////// | ////////////////// | FNMA, FHLMC, or | ////////////////// | ////////////////// | ////////////////// | ////////////////// | GNMA................... | 1718 0 | 1719 0 | 1731 0 | 1732 0 | 4.b.(2) (3) All other privately- | ////////////////// | ////////////////// | ////////////////// | ////////////////// | issued................. | 1733 37,690 | 1734 37,382 | 1735 155,019 | 1736 148,784 | 4.b.(3) 5. Other debt securities: | ////////////////// | ////////////////// | ////////////////// | ////////////////// | a. Other domestic debt | ////////////////// | ////////////////// | ////////////////// | ////////////////// | securities................. | 1737 725,093 | 1738 726,925 | 1739 0 | 1741 0 | 5.a b. Foreign debt | ////////////////// | ////////////////// | ////////////////// | ////////////////// | securities................. | 1742 3,250 | 1743 3,264 | 1744 0 | 1746 0 | 5.b |-----------------------------------------------------------------------------------| - ----------------- (1) Includes equity securities without readily determinable fair values at historical cost in item 6.c, column D. (2) Includes Small Business Administration "Guaranteed Loan Pool Certificates," U.S. Maritime Administration obligations, and Export-Import Bank participation certificates. (3) Includes obligations (other than pass-through securities, CMOs, and REMICs) issued by the Farm Credit System, the Federal Home Loan Bank System, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Financing Corporation, Resolution Funding Corporation, the Student Loan Marketing Association, and the Tennessee Valley Authority.
14 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RC-5 Schedule RC-B--Continued
------------------------------------------------------------------------------------- | Held-to-maturity | Available-for-sale | ------------------------------------------------------------------------------------- | (Column A) | (Column B) | (Column C) | (Column D) | | Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) | ------------------------------------------------------------------------------------- Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | - ----------------------------------------------------------------------------------------------------------------------------- 6. Equity securities: | ////////////////// | ////////////////// | ////////////////// | ////////////////// | a. Investments in mutual | ////////////////// | ////////////////// | ////////////////// | ////////////////// | funds............................ | ////////////////// | ////////////////// | 1747 0 | 1748 0 | 6.a. b. Other equity securities | ////////////////// | ////////////////// | ////////////////// | ////////////////// | with readily determin- | ////////////////// | ////////////////// | ////////////////// | ////////////////// | able fair values................. | ////////////////// | ////////////////// | 1749 0 | 1751 0 | 6.b. c. All other equity | ////////////////// | ////////////////// | ////////////////// | ////////////////// | securities(1).................... | ////////////////// | ////////////////// | 1752 26,585 | 1753 26,585 | 6.c. 7. Total (sum of items 1 | ////////////////// | ////////////////// | ////////////////// | ////////////////// | through 6) (total of | ////////////////// | ////////////////// | ////////////////// | ////////////////// | column A must equal | ////////////////// | ////////////////// | ////////////////// | ////////////////// | Schedule RC, item 2.a) | ////////////////// | ////////////////// | ////////////////// | ////////////////// | (total of column D must | ////////////////// | ////////////////// | ////////////////// | ////////////////// | equal Schedule RC, | ////////////////// | ////////////////// | ////////////////// | ////////////////// | item 2.b)........................... | 1754 3,503,554 | 1771 3,455,052 | 1772 1,031,135 | 1773 1,011,545 | 7. -------------------------------------------------------------------------------------
----------- | C412 | (- MEMORANDA ---------------------- Dollar Amounts in Thousands| RCFD Bil Mil Thou | - -------------------------------------------------------------------------------------------------------------------------- 1. Pledged securities(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | D416 3,719,885 | M.1. 2. Maturity and repricing data for debt securities(2)(3)(4) (excluding those in nonaccrual status):| ////////////////// | a. Fixed rate debt securities with a remaining maturity of: | ////////////////// | (1) Three months or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 0343 16,585 | M.2.a.(1) (2) Over three months through 12 months . . . . . . . . . . . . . . . . . . . . . . . . . . | 0344 0 | M.2.a.(2) (3) Over one year through five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 0345 2,062,474 | M.2.a.(3) (4) Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 0346 2,236,321 | M.2.a.(4) (5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through 2.a.(4)) . . . | 0347 4,315,380 | M.2.a.(5) b. Floating rate debt securities with a repricing frequency of: | ////////////////// | (1) Quarterly or more frequently . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4544 20,194 | M.2.b.(1) (2) Annually or more frequently, but less frequently than quarterly . . . . . . . . . . . . | 4545 152,940 | M.2.b.(2) (3) Every five years or more frequently, but less frequently than annually . . . . . . . . . | 4551 0 | M.2.b.(3) (4) Less frequently than every five years . . . . . . . . . . . . . . . . . . . . . . . . . | 4552 0 | M.2.b.(4) (5) Total floating rate debt securities (sum of Memorandum items 2.b.(1) through 2.b.(4)). . | 4553 173,134 | M.2.b.(5) c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal total debt | ////////////////// | securities from Schedule RC-B, sum of items 1 through 5, columns A and D, minus nonaccrual | ////////////////// | debt securities included in Schedule RC-B, item 9, column C) . . . . . . . . . . . . . . . . | 0393 4,488,514 | M.2.c. 3. Not applicable | ////////////////// | 4. Held-to-maturity debt securities restructured and in compliance with modified terms (included | ////////////////// | in Schedule RC-B, items 3 through 5, column A, above). . . . . . . . . . . . . . . . . . . . . | 5365 0 | M.4. 5. Not applicable | ////////////////// | 6. Floating rate debt securities with a remaining maturity of one year or less(2) (included in | ////////////////// | Memorandum item 2.b.(5) above) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5519 2,000 | M.6. 7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or | ////////////////// | trading securities during the calendar year-to-date . . . . . . . . . . . . . . . . . . . . . | 1778 0 | M.7. ---------------------- - ------------------------- (1) Includes equity securities without readily determinable fair values at historical cost in item 6.c. column D. (2) Includes held-to-maturity securities at amortized cost and available-for- sale securities at fair value. (3) Exclude equity securities, e.g., investments in mutual funds, Federal Reserve stock, common stock, and preferred stock. (4) Memorandum item 2 is not applicable to savings banks that must complete supplemental Schedule RC-J.
15 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RC-6 SCHEDULE RC-C--LOANS AND LEASE FINANCING RECEIVABLES Part I. Loans and Leases
Do not deduct the allowance for Loan and Lease Losses from amounts -------- reported in this schedule. Report total Loans and Leases, net of unearned | C415 | (- income. Exclude assets held in trading accounts. ------------------------------------------- | (Column A) | (Column B) | | Consolidated | Domestic | | Bank | Offices | ------------------------------------------- Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou | - ------------------------------------------------------------------------------------------------------------------------- 1. Loans secured by real estate . . . . . . . . . . . . . . . . . . . . . . .| 1410 4,370,884 | ////////////////// | 1. a. Construction and land development . . . . . . . . . . . . . . . . . . .| ////////////////// | 1415 89,497 | 1.a. b. Secured by farmland (including farm residential and other | ////////////////// | ////////////////// | improvements) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .| ////////////////// | 1420 1,482 | 1.b. c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// | (1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// | properties and extended under lines of credit . . . . . . . . . . .| ////////////////// | 1797 394,116 | 1.c.(1) (2) All other loans secured by 1-4 family residential properties: | ////////////////// | ////////////////// | (a) Secured by first liens. . . . . . . . . . . . . . . . . . . . .| ////////////////// | 5367 2,536,461 | 1.c.(2)(a) (b) Secured by junior liens . . . . . . . . . . . . . . . . . . . .| ////////////////// | 5368 179,781 | 1.c.(2)(b) d. Secured by multifamily (5 or more) residential properties . . . . . . .| ////////////////// | 1460 84,769 | 1.d. e. Secured by nonfarm nonresidential properties. . . . . . . . . . . . . .| ////////////////// | 1480 1,084,778 | 1.e. 2. Loans to depository institutions: | ////////////////// | ////////////////// | a. To commercial banks in the U.S. . . . . . . . . . . . . . . . . . . . .| ////////////////// | 1505 6,581 | 2.a. (1) To U.S. branches and agencies of foreign banks. . . . . . . . . . .| 1506 0 | ////////////////// | 2.a.(1) (2) To other commercial banks in the U.S. . . . . . . . . . . . . . . .| 1507 6,581 | ////////////////// | 2.a.(2) b. To other depository institutions in the U.S.. . . . . . . . . . . . . .| 1517 0 | 1517 0 | 2.b. c. To banks in foreign countries . . . . . . . . . . . . . . . . . . . . .| ////////////////// | 1510 0 | 2.c. (1) To foreign branches of other U.S. banks . . . . . . . . . . . . . .| 1513 0 | ////////////////// | 2.c.(1) (2) To other banks in foreign countries . . . . . . . . . . . . . . . .| 1516 0 | ////////////////// | 2.c.(2) 3. Loans to finance agricultural production and other loans to farmers. . . .| 1590 1,259 | 1590 1,259 | 3. 4. Commercial and industrial loans: | ////////////////// | ////////////////// | a. To U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . . .| 1763 2,625,120 | 1763 2,625,120 | 4.a. b. To non-U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . .| 1764 0 | 1764 0 | 4.b. 5. Acceptances of other banks: | ////////////////// | ////////////////// | a. Of U.S. banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . .| 1756 154 | 1756 154 | 5.a. b. Of foreign banks. . . . . . . . . . . . . . . . . . . . . . . . . . . .| 1757 0 | 1757 0 | 5.b. 6. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// | expenditures (i.e., consumer loans) (includes purchased paper) . . . . . .| ////////////////// | 1975 389,666 | 6. a. Credit cards and related plans (includes check credit and other | ////////////////// | ////////////////// | revolving credit plans) . . . . . . . . . . . . . . . . . . . . . . . .| 2008 27,099 | ////////////////// | 6.a. b. Other (includes single payment, installment, and all student loans) . .| 2011 362,567 | ////////////////// | 6.b. 7. Loans to foreign governments and official institutions (including | ////////////////// | ////////////////// | foreign central banks) . . . . . . . . . . . . . . . . . . . . . . . . . .| 2081 0 | 2081 0 | 7. 8. Obligations (other than securities and leases) of states and political | ////////////////// | ////////////////// | subdivisions in the U.S. (includes nonrated industrial development | ////////////////// | ////////////////// | obligations) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .| 2107 53,771 | 2107 53,771 | 8. 9. Other loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .| 1563 820,827 | ////////////////// | 9. a. Loans for purchasing or carrying securities (secured and unsecured) . .| ////////////////// | 1545 268,502 | 9.a. b. All other loans (exclude consumer loans). . . . . . . . . . . . . . . .| ////////////////// | 1564 552,325 | 9.b. 10. Lease financing receivables (net of unearned income) . . . . . . . . . . .| ////////////////// | 2165 2,653 |10. a. Of U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . . .| 2182 2,653 | ////////////////// |10.a. b. Of non-U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . .| 2183 0 | ////////////////// |10.b. 11. LESS: Any unearned income on loans reflected in items 1-9 above. . . . . .| 2123 4,393 | 2123 4,393 |11. 12. Total Loans and Leases, net of unearned income (sum of items 1 through | ////////////////// | ////////////////// | 10 minus item 11) (total of column A must equal Schedule RC, item 4.a) . .| 2122 8,266,522 | 2122 8,266,522 |12. -------------------------------------------
16 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RI-7 Schedule RC-C--Continued Part I. Continued
------------------------------------------------ | (Column A) | (Column B) | | Consolidated | Domestic | | Bank | Offices | Memoranda ------------------------------------------------ Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou | - ------------------------------------------------------------------------------------------------------------------------------- 1. Commercial paper included in Schedule RC-C, part I, above . . . . . . . . . | 1496 0 | 1496 0 | M.1. 2. Loans and leases restructured and in compliance with modified terms | ////////////////// | /////////////////////// | (included in Schedule RC-C, part I, above): | ////////////////// | /////////////////////// | a. Loans secured by real estate: | ////////////////// | /////////////////////// | --------------------------- (1) To U.S. addressees (domicile). . . . . . . . . . . . . . . . . . . . | 1687 29,848 | M.2.a(1) (2) To non-U.S. addresses (domicile) . . . . . . . . . . . . . . . . . . | 1689 0 | M.2.a(2) b. Loans to finance agricultural production and other loans to farmers . . | 1613 0 | M.2.b. c. Commericial and industrial loans: | ////////////////// | (1) To U.S. addressees (domicile). . . . . . . . . . . . . . . . . . . . | 1758 1,579 | M.2.c.(1) (2) To non-U.S. addresses (domicile) . . . . . . . . . . . . . . . . . . | 1759 0 | M.2.c.(2) d. All other loans (exclude loans to individuals for household, | ////////////////// | family, and other personal expenditures) . . . . . . . . . . . . . . . . | 1615 0 | M.2.d. e. Lease financing receivables: | ////////////////// | (1) Of U.S. addressees (domicile). . . . . . . . . . . . . . . . . . . . | 1789 0 | M.2.e.(1) (2) Of non-U.S. addresses (domicile) . . . . . . . . . . . . . . . . . . | 1790 0 | M.2.e.(2) f. Total (sum of Memorandum items 2.a through 2.e). . . . . . . . . . . . . | 1616 31,427 | M.2.f. 3. Maturity and repricing data for loans and leases (1) (excluding those | ////////////////// | in nonaccrual status): | ////////////////// | a. Fixed rate loans and leases with a remaining maturity of: | ////////////////// | (1) Three months or less . . . . . . . . . . . . . . . . . . . . . . . . | 0348 411,426 | M.3.a.(1) (2) Over three months through 12 months. . . . . . . . . . . . . . . . . | 0349 57,005 | M.3.a.(2) (3) Over one year through five years . . . . . . . . . . . . . . . . . . | 0356 721,559 | M.3.a.(3) (4) Over five years. . . . . . . . . . . . . . . . . . . . . . . . . . . | 0357 1,994,884 | M.3.a.(4) (5) Total fixed rate loans and leases (sum of | ////////////////// | Memorandum items 3.a.(1) through 3.a.(4)). . . . . . . . . . . . . . | 0358 3,184,874 | M.3.a.(5) b. Floating rate loans with a repricing frequency of: | ////////////////// | (1) Quarterly or more frequently . . . . . . . . . . . . . . . . . . . . | 4554 4,434,366 | M.3.b.(1) (2) Annually or more frequently, but less frequently than quarterly. . . | 4555 310,256 | M.3.b.(2) (3) Every five years or more frequently, but less frequently than | ////////////////// | annually . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4561 182,904 | M.3.b.(3) (4) Less frequently than every five years. . . . . . . . . . . . . . . . | 4564 0 | M.3.b.(4) (5) Total floating rate loans (sum of Memorandum items 3.b.(1) | ////////////////// | through 3.b.(4). . . . . . . . . . . . . . . . . . . . . . . . . . . | 4567 4,927,526 | M.3.b.(5) c. Total loans and leases (sum of Memorandum items 3.a.(5) and 3.b.(5)) | ////////////////// | (must equal the sum of total loans and leases, net, from | ////////////////// | Schedule RC-C, part I, item 12, plus unearned income from | ////////////////// | Schedule RC-C, part I, item 11, minus total nonaccrual loans and | ////////////////// | leases from Schedule RC-W, sum of items 1 through 8, column C) . . . . . | 1479 8,112,400 | M.3.c. 4. Loans to finance commercial real estate, construction, and land | ////////////////// | development activities (not secured by real estate) included in | ////////////////// | Schedule RC-C, part I, items 4 and 9, column A, page RC-6(2) . . . . . . . | 2746 40,590 | M.4. 5. Loans and leases held for sale (included in Schedule RC-C, part I, above) . | 5369 233,342 | M.5. 6. Adjustable rate closed-end loans secured by first liens on 1-4 family | ////////////////// --------------------------- residential properties (included in Schedule RC-C, part I, item | ////////////////// | RCON Bil Mil Thou | --------------------------- 1.c.(2)(a), column B, page RC-6). . . . . . . . . . . . . . . . . . . . . . | ////////////////// | 5370 981,320 | M.6. ------------------------------------------------ - ------------------------ (1) Memorandum item 3 is not applicable to savings banks that must complete supplemental Schedule RC-J. (2) Exclude loans secured by real estate that are included in Schedule RC-C, part I, item 1, column A.
17 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RC-8 Schedule RC-D--Trading Assets and Liabilities Schedule RC-D is to be completed only by banks with $1 billion or more in total assets or with $2 billion or more in par/notional amount of interest rate, foreign exchange rate, and other commodity and equity contracts (as reported in Schedule RC-L, items 11, 12, and 13).
----------------- | C420 | ------------------------------ Dollar Amounts in Thousands | /////////// Bil Mil Thou | - ------------------------------------------------------------------------------------------------------------------------ ASSETS | ////////////////////////// | 1. U.S. Treasury securities in domestic offices . . . . . . . . . . . . . . . . . . . | RCON 3531 0 | 1. 2. U.S. Government agency and corporation obligations in domestic offices | ////////////////////////// | (exclude mortgage-backed securites) . . . . . . . . . . . . . . . . . . . . . . . . | RCON 3532 0 | 2. 3. Securities issued by states and political subdivisions in the U.S. in | ////////////////////////// | domestic offices: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCON 3533 0 | 3. 4. Mortgage-backed securities in domestic offices: | ////////////////////////// | a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA. . . . . . | RCON 3534 0 | 4.a. b. CMOs and REMICs issued by FNMA or FHLMC . . . . . . . . . . . . . . . . . . . . | RCON 3535 0 | 4.b. c. All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCON 3536 0 | 4.c. 5. Other debt securities in domestic offices. . . . . . . . . . . . . . . . . . . . . | RCON 3537 0 | 5. 6. Certificates of deposit in domestic offices. . . . . . . . . . . . . . . . . . . . | RCON 3538 0 | 6. 7. Commercial paper in domestic offices . . . . . . . . . . . . . . . . . . . . . . . | RCON 3539 0 | 7. 8. Bankers acceptances in domestic offices. . . . . . . . . . . . . . . . . . . . . . | RCON 3540 0 | 8. 9. Other trading assets in domestic offices . . . . . . . . . . . . . . . . . . . . . | RCON 3541 0 | 9. 10. Trading assets in foreign offices. . . . . . . . . . . . . . . . . . . . . . . . . | RCON 3542 0 | 10. 11. Revaluation gains on interest rate, foreign exchange rate, and other commodity | ////////////////////////// | and equity contracts: | ////////////////////////// | a. In domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCON 3543 0 | 11.a. b. In foreign offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFN 3544 0 | 11.b. 12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5). | RCFD 3545 0 | 12. ------------------------------ ------------------------------ | /////////// Bil Mil Thou | LIABILITIES ------------------------------ 13. Liability for short positions. . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 3546 0 | 13. 14. Revaluation losses on interest rate, foreign exchange rate, and other commodity | ////////////////////////// | and equity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 3547 7,085 | 14. 15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, | ////////////////////////// | item 15.b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 3548 7,085 | 15. ------------------------------
18 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RC-9 Schedule RC-E--Deposit Liabilities Part I. Deposits in Domestic Offices
-------- | C425 | --------------------------------------------------------------| | | Nontransaction | | Transaction Accounts | Accounts | --------------------------------------------------------------| | (Column A) | (Column B) | (Column C) | | Total transaction | Memo: Total | Total | | accounts (including| demand deposits | nontransaction | | total demand | (included in | accounts | | deposits) | column A) | (including MMDAs)| --------------------------------------------------------------| Dollar Amounts in Thousands | RCON Bil Mil Thou | RCON Bil Mil Thou | RCON Bil Mil Thou | - ------------------------------------------------------------------------------------------------------------------------ Deposits of: | ////////////////// | ////////////////// | ///////////////// | 1. Individuals, partnerships, and corporations ......... | 2201 2,834,904 | 2240 1,894,010 | 2346 4,012,928 | 1. 2. U.S. Government ..................................... | 2202 6,768 | 2280 6,768 | 2520 0 | 2. 3. States and political subdivisions in the U.S. ....... | 2203 175,226 | 2290 150,389 | 2530 224,034 | 3. 4. Commercial banks in the U.S. ........................ | 2206 144,590 | 2310 144,590 | ///////////////// | 4. a. U.S. branches and agencies of foreign banks ...... | ////////////////// | ////////////////// | 2347 0 | 4.a. b. Other commercial banks in the U.S. ............... | ////////////////// | ////////////////// | 2348 1,500 | 4.b. 5. Other depository institutions in the U.S. ........... | 2207 102,800 | 2312 102,800 | 2349 0 | 5. 6. Banks in foreign countries .......................... | 2213 1,633 | 2320 1,633 | ///////////////// | 6. a. Foreign branches of other U.S. banks ............. | ////////////////// | ////////////////// | 2367 0 | 6.a. b. Other banks in foreign countries ................. | ////////////////// | ////////////////// | 2373 0 | 6.b. 7. Foreign governments and official institutions | ////////////////// | ////////////////// | ///////////////// | (including foreign central banks) ................... | 2216 298 | 2300 298 | 2377 0 | 7. 8. Certified and official checks ....................... | 2330 44,176 | 2330 44,176 | ///////////////// | 8. 9. Total (sum of items 1 through 8) (sum of | ////////////////// | ////////////////// | ///////////////// | columns A and C must equal Schedule RC, | ////////////////// | ////////////////// | ///////////////// | item 13.a) .......................................... | 2215 3,310,395 | 2210 2,344,664 | 2385 4,238,462 | 9. --------------------------------------------------------------- --------------------- Memoranda Dollar Amounts in Thousands | RCON Bil Mil Thou | - ------------------------------------------------------------------------------------------------------------------------ 1. Selected components of total deposits (i.e. sum of item 9, columns A and C): | ///////////////// | a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts ........................ | 6835 785,416 | M.1.a. b. Total brokered deposits .................................................................... | 2365 19,857 | M.1.b. c. Fully insured brokered deposits (included in Memorandum item 1.b above): | ///////////////// | (1) issued in denominations of less than $100,000 .......................................... | 2343 48 | M.1.c.(1) (2) issued either in denominations of $100,000 or in denominations greater than $100,000 | ///////////////// | and participated out by the broker in shares of $100,000 or less ....................... | 2344 13,357 | M.1.c.(2) d. Total deposits denominated in foreign currencies ........................................... | 3776 0 | M.1.d. e. Preferred deposits (uninsured deposits or states and political subdivisions in the U.S. | ///////////////// | reported in item 3 above which are secured or collateralized as required under state law)... | 5590 399,259 | M.1.e. 2. Components of total nontransaction accounts (sum of Memoranda items 2.a through 2.d must | ///////////////// | equal item 9, column C above): | ///////////////// | a. Savings deposits: | ///////////////// | (1) Money market deposit accounts (NHDAs) ................................................... | 6810 533,488 | M.2.a.(1) (2) Other savings deposits (excludes NHDAs) ................................................. | 0352 2,040,291 | M.2.a.(2) b. Total time deposits of less than $100,000 .................................................. | 6648 1,332,962 | M.2.b. c. Time certificates of deposit of $100,000 or more ........................................... | 6645 331,721 | M.2.c. d. Open-account time deposits of $100,000 or more ............................................. | 6646 0 | M.2.d. 3. All NOW accounts (included in column A above) ................................................. | 2398 965,731 | M.3. ---------------------
19 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RC-10 Schedule RC-E--Continued Part I. Continued Memoranda (continued)
- ------------------------------------------------------------------------------------------------------------------------------- | Deposit Totals of FDIC Insurance Assessments(1) | | --------------------- | | Dollar Amounts in Thousands | RCON Bil Mil Thou | | |----------------------------------------------------------------------------------------------------------------------- | | 4. Total deposits in domestic offices (sum of item 9, column A and item 9, column C) | ///////////////// | | | (must equal Schedule RC, item 13.a) ......................................................... | 2200 7,548,857 | M.4. | | | ///////////////// | | | a. Total demand deposits (must equal item 9, column 8) ...................................... | 2210 2,344,664 | M.4.a.| | b. Total time and savings deposits(2) (must equal item 9, column A plus item 9, column C | ///////////////// | | | minus item 9, column B) .................................................................. | 2350 5,204,193 | M.4.b.| | --------------------- | | ------------- | | (1) An amended Certified Statement should be submitted to the FDIC if the deposit totals reported in this item are amended | | after the semiannual Certified Statement originally covering this report date has been filed with the FDIC. | | (2) For FDIC insurance assessment purposes, "total time and savings deposits" consists of nontransaction accounts and all | | transaction accounts other than demand deposits. | | | - --------------------------------------------------------------------------------------------------------------------------------
--------------------- Dollar Amounts in Thousands | RCON Bil Mil Thou | - ------------------------------------------------------------------------------------------------------------------------ 5. Time deposits of less than $100,000 and open-account time deposits of $100,000 or more | ///////////////// | (included in Memorandum items 2.b and 2.d above) with a remaining maturity or repricing | ///////////////// | frequency of:(1) | ///////////////// | a. Three months or less ....................................................................... | 0359 565,968 | M.5.a. b. Over three months through 12 months (but not over 12 months) ............................... | 3644 322,670 | M.5.b. 6. Maturity and repricing data for time certificates of deposit of $100,000 or more:(1) | ///////////////// | a. Fixed rate time certificates of deposit of $100,000 or more with a remaining maturity of: | ///////////////// | (1) Three months or less ................................................................... | 2761 226,799 | M.6.a.(1) (2) Over three months through 12 months .................................................... | 2762 52,027 | M.6.a.(2) (3) Over one year through five years ....................................................... | 2763 48,528 | M.6.a.(3) (4) Over five years ........................................................................ | 2765 4,367 | M.6.a.(4) (5) Total fixed rate time certificates of deposit of $100,000 or more (sum of | ///////////////// | Memorandum items 6.a.(1) through 6.a.(4)) .............................................. | 2767 331,721 | M.6.a.(5) b. Floating rate time certificates of deposit of $100,000 or more with a repricing frequency of:| ///////////////// | (1) Quarterly or more frequently ........................................................... | 4568 0 | M.6.b.(1) (2) Annually or more frequently, but less frequently than quarterly ........................ | 4569 0 | M.6.b.(2) (3) Every five years or more frequently, but less frequently than annually ................. | 4571 0 | M.6.b.(3) (4) Less frequently than every five years .................................................. | 4572 0 | M.6.b.(4) (5) Total floating rate time certificates of deposit of $100,000 or more (sum of | ///////////////// | Memorandum items 6.b.(1) through 6.b.(4)) .............................................. | 4573 0 | M.6.b.(5) c. Total time certificates of deposit of $100,000 or more (sum of Memorandum items 6.a.(5) | ///////////////// | and 6.b.(5)) (must equal Memorandum item 2.c. above) ....................................... | 6645 331,721 | M.6.c. -------------------- - -------------- (1) Memorandum items 5 and 6 are not applicable to savings banks that must complete supplemental Schedule RC-J.
20 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RC-11 Schedule RC - E -- Continued Part II. Deposits in Foreign Offices (including Edge and Agreement subsidiaries and IBFs)
---------------------- Dollar Amounts in Thousands | RCFN Bil Mil Thou | - ---------------------------------------------------------------------------------------------|--------------------- Deposits of: | ////////////////// | 1. Individuals, partnerships, and corporations . . . . . . . . . . . . . . . . . . . . . . | 2621 243,933 | 1. 2. U.S. banks (including IBFs and foreign branches of U.S. banks). . . . . . . . . . . . . | 2623 0 | 2. 3. Foreign banks (including U.S. branches and . . . . . . . . . . . . . . . . . . . . . . | ///////////////// | agencies of foreign banks, including their IBFs). . . . . . . . . . . . . . . . . . . . | 2625 0 | 3. 4. Foreign government and official institutions (including foreign central banks). . . . . | 2650 0 | 4. 5. Certified and official checks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2330 0 | 5. 6. All other deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2668 0 | 6. 7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b). . . . . . . . . . | 2200 243,933 | 7. ----------------------
Schedule RC - F -- Other Assets
--------- | C430 | ----------------------------- Dollar Amounts in Thousands | ////////// Bil Mil Thou | - -------------------------------------------------------------------------------------------------------------------------- 1. Income earned, not collected on loans . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 2164 37,243 | 1. 2. Net deferred tax assets(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 2148 120,018 | 2. 3. Excess residential mortgage servicing fees receivable . . . . . . . . . . . . . . . . . | RCFD 5371 39,725 | 3. 4. Other (itemize amounts that exceed 25% of this item). . . . . . . . . . . . . . . . . . | RCFD 2168 451,402 | 4. ------------ ----------------------------------- a. | TEXT 3549 |---------------------------------------| RCFD 3549 | | /////////////////////// | 4.a. b. | TEXT 3550 |---------------------------------------| RCFD 3550 | | /////////////////////// | 4.b. c. | TEXT 3551 |---------------------------------------| RCFD 3551 | | /////////////////////// | 4.c. --------------------------------------------------------------------------------------- 5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11). . . . . . . . . . . | RCFD 2160 648,388 | 5. ----------------------------- Memorandum ----------------------------- Dollar Amounts in Thousands | ////////// Bil Mil Thou | - -------------------------------------------------------------------------------------------------------------------------- 1. Deferred tax assets disallowed for regulatory capital purposes. . . . . . . . . . . . . | RCFD 5610 8,491 | M.1. -----------------------------
Schedule RC - G -- Other Liabilities
--------- | C435 | ----------------------------- Dollar Amounts in Thousands | ////////// Bil Mil Thou | - -------------------------------------------------------------------------------------------------------------------------- 1. a. Interest accrued and unpaid on deposits in domestic offices(2) . . . . . . . . . . . | RCDN 3645 6,556 | 1.a. b. Other expenses accrued and unpaid (includes accrued income taxes payable). . . . . . | RCFD 3646 58,026 | 1.b. 2. Net deferred tax liabilities(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 3049 0 | 2. 3. Minority interest in consolidated subsidiaries. . . . . . . . . . . . . . . . . . . . . | RCFD 3000 0 | 3. 4. Other (itemize amounts that exceed 25% of this item). . . . . . . . . . . . . . . . . . | RCFD 2938 15,943 | 4. ------------- -----------------------------------| | a. | TEXT 3552 |---------------------------------------| RCFD 3552 | | /////////////////////// | 4.a. b. | TEXT 3553 |---------------------------------------| RCFD 3553 | | /////////////////////// | 4.b. c. | TEXT 3554 |---------------------------------------| RCFD 3554 | | /////////////////////// | 4.c. ---------------------------------------------------------------------------------------| | 5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20). . . . . . . . . . . | RCFD 2930 80,525 | 5. ----------------------------- - ------------------------ (1) See discussion of deferred income taxes in Glossary entry on "income taxes." (2) For savings banks, include "dividends" accrued and unpaid on deposits.
21 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RC-12 Schedule RC-H--Selected Balance Sheet Items for Domestic Offices
--------- | C440 | (- ------------------------ | Domestic Offices | ------------------------ Dollar Amounts in Thousands | RCON Bil Mil Thou | - --------------------------------------------------------------------------------------------------------------------- 1. Customers' liability to this bank on acceptances outstanding. . . . . . . . . . . . . . | 2155 31,157 | 1. 2. Rank's liability on acceptances executed and outstanding. . . . . . . . . . . . . . . . | 2920 31,157 | 2. 3. Federal funds sold and securities purchased under agreements to resell. . . . . . . . . | 1350 0 | 3. 4. Federal funds purchased and securities sold under agreements to repurchase. . . . . . . | 2800 4,986,935 | 4. 5. Other borrowed money. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2850 279,380 | 5. EITHER | ////////////////// | 6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs . . . . . . | 2163 N/A | 6. OR | ////////////////// | 7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs . . . . . . . | 2941 43,933 | 7. 8. Total assets (excludes net due from foreign offices, Edge and Agreement | | subsidiaries, and IBFs).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2192 14,293,271 | 8. 9. Total liabilities (excludes net due to foreign offices, Edge and Agreement | | subsidiaries, and IBFs) | 3129 13,112,371 | 9. ------------------------- Items 10-17 include held-to-maturity and available-for-sale securities in domestic offices. ------------------------- RCON Bil Mil Thou | ------------------------- 10. U.S. Treasury securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1779 1,789,556 | 10. 11. U.S. Government agency and corporation obligations (exclude mortgage-backed | ////////////////// | securities). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1785 0 | 11. 12. Securities issued by states and political subdivisions in the U.S. . . . . . . . . . . | 1786 142 | 12. 13. Mortgage-backed securities: | ////////////////// | a. Pass-through securities: | ///////////////// | (1) Issued or guaranteed by FHMA, FHLMC , or GNMA . . . . . . . . . . . . . . . . . | 1787 1,763,805 | 13.a.(1) (2) Privately-issued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1869 20,194 | 13.a.(2) b. CMOs and REMICs: | ////////////////// | (1) Issued by FHMA and FHLMC. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1877 0 | 13.b.(1) (2) Privately-issued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2253 186,474 | 13.b.(2) 14. Other domestic debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3159 725,093 | 14. 15. Foreign debt securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3160 3,250 | 15. 16. Equity securities: | ////////////////// | a. Investments in mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3161 0 | 16.a. b. Other equity securities with readily determinable fair values . . . . . . . . . . . | 3162 0 | 16.b. c. All other equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3169 26,585 | 16.c. 17. Total held-to maturity and available-for-sale securities (sum of items 10 through 16). | 3170 4,515,099 | 17. ------------------------- Memorandum (to be completed only by banks with IBFs and other "foreign" offices) ------------------------- Dollar Amounds in Thousands | RCON Bil Mil Thou - ---------------------------------------------------------------------------------------------------------------------- EITHER | ////////////////// | 1. Net due from the IBF of the domestic offices of the reporting bank. . . . . . . . . . . | 3051 N/A | N.1. OR | ////////////////// 2. Net due to the IBF of the domestic offices of the reporting bank. . . . . . . . . . . . | 3059 N/A | N.2. -------------------------
22 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RC-13 Schedule RC-I--Selected Assets and Liabilities of IBFs To be completed only by banks with IBFs and other "foreign" offices.
-------- | C445 | (- --------------------- Dollar Amounts in Thousands | RCFN Bil Mil Thou | - ------------------------------------------------------------------------------------------------------------------------- 1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12) ................ | 2133 N/A | 1. 2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, item 12, | ////////////////// | column A) .................................................................................... | 2076 N/A | 2. 3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4, column A) ... | 2077 N/A | 3. 4. Total IBF liabilities (component of Schedule RC, item 21) .................................... | 2898 N/A | 4. 5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E, | ////////////////// | part II, items 2 and 3) ...................................................................... | 2379 N/A | 5. 6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5, and 6) .... | 2381 N/A | 6. ---------------------- Schedule RC-K--Quarterly Averages (1) -------- | C455 | (- --------------------------- Dollar Amounts in Thousands | ///////// Bil Mil Thou | - ------------------------------------------------------------------------------------------------------------------------- ASSETS | /////////////////////// | 1. Interest-bearing balances due from depository institutions .............................. | RCFD 3381 88,889 | 1. 2. U.S. Treasury securities and U.S. Government agency and corporation obligations(2) ...... | RCFD 3382 3,684,324 | 2. 3. Securities issued by states and political subdivisions in the U.S.(2) ................... | RCFD 3383 145 | 3. 4. a. Other debt securities(2) ............................................................. | RCFD 3647 897,639 | 4.a. b. Equity securities(3) (includes investments in mutual funds and Federal Reserve stock). | RCFD 3648 25,573 | 4.b. 5. Federal funds sold and securities purchased under agreements to resell in domestic offices| /////////////////////// | of the bank and of its Edge and Agreement subsidiaries, and in IBFs ..................... | RCFD 3365 18,750 | 5. 6. Loans: | /////////////////////// | a. Loans in domestic offices: | /////////////////////// | (1) Total loans ...................................................................... | RCON 3360 8,044,221 | 6.a.(1) (2) Loans secured by real estate ..................................................... | RCON 3385 4,291,796 | 6.a.(2) (3) Loans to finance agricultural production and other loans to farmers .............. | RCON 3386 1,446 | 6.a.(3) (4) Commercial and industrial loans .................................................. | RCON 3387 2,468,743 | 6.a.(4) (5) Loans to individuals for household, family, and other personal expenditures ...... | RCON 3388 377,364 | 6.a.(5) (6) Obligations (other than securities and leases) of states and political | /////////////////////// | subdivisions in the U.S. ......................................................... | RCON 3389 54,847 | 6.a.(b) b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs ............ | RCFN 3360 0 | 6.b. 7. Assets held in trading accounts ......................................................... | RCFD 3401 0 | 7. 8. Lease financing receivables (net of unearned income) .................................... | RCFD 3484 2,425 | 8. 9. Total assets ............................................................................ | RCFD 3368 14,016,825 | 9. LIABILITIES | /////////////////////// | 10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts, | /////////////////////// | and telephone and preauthorized transfer accounts) (exclude demand deposits) ............ | RCON 3485 950,655 | 10. 11. Nontransaction accounts in domestic offices: | /////////////////////// | a. Money market deposit accounts (MMDAs) ................................................ | RCON 3486 525,558 | 11.a. b. Other savings deposits ............................................................... | RCON 3487 2,008,424 | 11.b. c. Time certificates of deposit of $100,000 or more ..................................... | RCON 3345 431,476 | 11.c. d. All other time deposits .............................................................. | RCON 3469 1,354,641 | 11.d. 12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs . | RCFN 3404 152,789 | 12. 13. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// | offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs ............. | RCFD 3353 4,537,597 | 13. 14. Other borrowed money .................................................................... | RCFD 3355 124,995 | 14. -------------------------- - -------------------------- (1) For all items, banks have the option of reporting either (1) an average of daily figures for the quarter, or (2) an average of weekly figures (i.e., the Wednesday of each week of the quarter). (2) Quarterly averages for all debt securities should be based on amortized cost. (3) Quarterly averages for all equity securities should be based on historical cost.
23 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RC-14 Schedule RC-L--Off-Balance Sheet Items
Please read carefully the instructions for the preparation of Schedule RC-L. Some of the amounts reported in Schedule RC-L are regarded as volume indicators and not necessarily as measures of risk. -------- | C460 | (- --------------------- Dollar Amounts in Thousands | RCFD Bil Mil Thou | - ------------------------------------------------------------------------------------------------------------------------- 1. Unused commitments: | ////////////////// | a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home | ////////////////// | equity lines .............................................................................. | 3814 402,918 | 1.a. b. Credit card lines ......................................................................... | 3815 0 | 1.b. c. Commercial real estate, construction, and land development: | ////////////////// | (1) Commitments to fund loans secured by real estate ...................................... | 3816 51,143 | 1.c.(1) (2) Commitments to fund loans not secured by real estate .................................. | 6550 24,282 | 1.c.(2) d. Securities underwriting ................................................................... | 3817 0 | 1.d. e. Other unused commitments .................................................................. | 3818 4,258,577 | 1.e. 2. Financial standby letters of credit and foreign office guarantees ......-----------------------| 3819 663,706 | 2. a. Amount of financial standby letters of credit conveyed to others | RCFD 3820 | 1,877 | ////////////////// | 2.a. 3. Performance standby letters of credit and foreign office guarantees ....-----------------------| 3821 43,317 | 3. a. Amount of performance standby letters of credit conveyed to -----------------------| ////////////////// | others ..............................................................| RCFD 3822 | 0 | ////////////////// | 3.a. 4. Commercial and similar letters of credit ...............................-----------------------| 3411 7,243 | 4. 5. Participations in acceptances (as described in the instructions) conveyed to others by | ////////////////// | the reportings bank ...........................................................................| 3428 0 | 5. 6. Participations in acceptances (as described in the instructions) acquired by the reporting | ////////////////// | (nonaccepting) bank .......................................................................... | 3429 0 | 6. 7. Securities borrowed .......................................................................... | 3432 0 | 7. 8. Securities lent (including customers' securities lent where the customer is indemnified | ////////////////// | against loss by the reporting bank) .......................................................... | 3433 0 | 8. 9. Mortgages transferred (i.e., sold or swapped) with recourse that have been treated as sold | ////////////////// | for Call Report purposes: | ////////////////// | a. FNMA and FHLMC residential mortgage loan pools: | ////////////////// | (1) Outstanding principal balance of mortgages transferred as of the report date .......... | 3650 146,238 | 9.a.(1) (2) Amount of recourse exposure on these mortgages as of the report date .................. | 3651 146,238 | 9.a.(2) b. Private (nongovernment-issued or -guaranteed) residential mortgage loan pools: | ////////////////// | (1) Outstanding principal balance of mortgages transferred as of the report date .......... | 3652 0 | 9.b.(1) (2) Amount of recourse exposure on these mortgages as of the report date .................. | 3653 0 | 9.b.(2) c. Farmer Mac agricultural mortgage loan pools: | ////////////////// | (1) Outstanding principal balance of mortgages transferred as of the report date .......... | 3654 0 | 9.c.(1) (2) Amount of recourse exposure on these mortgages as of the report date .................. | 3655 0 | 9.c.(2) 10. When-issued securities: | ////////////////// | a. Gross commitments to purchase ............................................................. | 3434 0 | 10.a. b. Gross commitments to sell ................................................................. | 3435 0 | 10.b. 11. Interest rate contracts (exclude when-issued securities): | ////////////////// | a. Notional value of interest rate swaps ..................................................... | 3450 2,206,000 | 11.a. b. Futures and forward contracts ............................................................. | 3823 4,144,000 | 11.b. c. Option contracts (e.g., options on Treasuries): | ////////////////// | (1) Written option contracts .............................................................. | 3824 1,293,000 | 11.c.(1) (2) Purchased option contracts ............................................................ | 3825 2,108,000 | 11.c.(2) 12. Foreign exchange rate contracts: | ////////////////// | a. Notional value of exchange swaps (e.g., cross-currency swaps) ............................. | 3826 0 | 12.a. b. Commitments to purchase foreign currencies and U.S. dollar exchange (spot, forward, | ////////////////// | and futures) .............................................................................. | 3415 6,711,984 | 12.b. c. Option contracts (e.g., options on foreign currency): | ////////////////// | (1) Written option contracts .............................................................. | 3827 0 | 12.c.(1) (2) Purchased option contracts ............................................................ | 3828 0 | 12.c.(2) ----------------------
24 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RC-15
Schedule RC-L--Continued -------------- | C461 | ---------------------- Dollar Amounts in Thousands | RCFD Bil Mil Thou | - ----------------------------------------------------------------------------------------------------------------------- 13. Contracts on other commodities and equities: | ////////////////// | a. Notional value of other swaps (e.g., oil swaps) . . . . . . . . . . . . . . . . . . . . | 3829 0 | 13.a. b. Futures and forward contracts (e.g., stock index and commodity--precious metals, | ////////////////// | wheat, cotton, livestock--contracts) | 3830 0 | 13.b. c. Option contracts (e.g., options on commodities, individual stocks and stock indexes): | ////////////////// | (1) Written option contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3831 0 | 13.c.(1) (2) Purchased option contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3832 0 | 13.c.(2) 14. All other off-balance sheet liabilities (itemize and describe each component of this item | ////////////////// | over 25% of Schedule RC, item 28, "Total equity capital"). . . . . . . . . . . . . . . . . | 3430 0 | 14. ------------- ------------- | ////////////////// | a. | TEXT 3555 | | RCFD 3555 | | ////////////////// | 14.a. |-----------|---------------------------------------------------| | | | b. | TEXT 3556 | | RCFD 3556 | | ////////////////// | 14.b. |-----------|---------------------------------------------------| | | | c. | TEXT 3557 | | RCFD 3557 | | ////////////////// | 14.c. |-----------|---------------------------------------------------| | | | d. | TEXT 3558 | | RCFD 3558 | | ////////////////// | 14.d. |-----------|-----------------------------------------------------------------------------| | 15. All other off-balance sheet assets (itemize and describe each component of this item | ////////////////// | over 25% of Schedule RC, item 28, "Total equity capital"). . . . . . . . . . . . . . . . . | 5591 0 | 15. ------------- ------------- | ////////////////// | a. | TEXT 5592 | | RCFD 5592 | | ////////////////// | 15.a. |-----------|---------------------------------------------------| | | | b. | TEXT 5593 | | RCFD 5593 | | ////////////////// | 15.b. |-----------|---------------------------------------------------| | | | c. | TEXT 5594 | | RCFD 5594 | | ////////////////// | 15.c. |-----------|---------------------------------------------------| | | | d. | TEXT 5595 | | RCFD 5595 | | ////////////////// | 15.d. |-----------|--------------------------------------------------------------------------------------------------- Memoranda -------------------- Dollar Amounts in Thousands | RCFD Bil Mil Thou | - ----------------------------------------------------------------------------------------------------------------------- 1. Not applicable | ////////////////// | 2. Not applicable | ////////////////// | 3. Unused commitments with an original maturity exceeding one year that are reported in | ////////////////// | Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of | ////////////////// | commitments that are fee paid or otherwise legally binding). . . . . . . . . . . . . . . . | 3833 2,544,660 | M.3. a. Participations in commitments with an original maturity ----------------------| ////////////////// | exceeding one year conveyed to others . . . . . . . . . . . . . . . | RCFD 3834 | 20,453 | ////////////////// | M.3.a. 4. To be completed only by banks with $1 billion or more in total assets: ----------------------| ////////////////// | Standby letters of credit and foreign office guarantees (both financial and performance) | ////////////////// | issued to non-U.S. addressees (domicile) included in Schedule RC-L, items 2 and 3, above . | 3377 213,815 | M.4. 5. To be completed for the September report only: | ////////////////// | Installment Loans to individuals for household, family, and other personal expenditures | ////////////////// | that have been securitized and sold without recourse (with servicing retained), amounts | ////////////////// | outstanding by type of loan: | ////////////////// | a. Loans to purchase private passenger automobiles . . . . . . . . . . . . . . . . . . . . | 2741 N/A | M.5.a. b. Credit cards and related plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2742 N/A | M.5.b. c. All other consumer installment credit (including mobile home loans) . . . . . . . . . . | 2743 N/A | M.5.c. ---------------------
25 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RC-16
Schedule RC-M--Memoranda |---------| | C465 | |----------|---------| Dollar Amounts in Thousands | RCFD Bil Mil Thou | - -------------------------------------------------------------------------------------------------------------------------- 1. Extensions of credit by the reporting bank to its executive officers, directors, principal | ////////////////// | shareholders, and their related interests as of the report date: | ////////////////// | a. Aggregate amount of all extensions of credit to all executive officers, directors, principal | ////////////////// | shareholders, and their related interests ................................................... | 6164 2,987 | 1.a b. Number of executive officers, directors, and principal shareholders to whom the amount of all | ////////////////// | extensions of credit by the reporting bank (including extensions of credit to | ////////////////// | related interests) equals or exceeds the lesser of $500,000 or 5 percent Number | ////////////////// | of total capital as defined for this purpose in agency regulations. |-------------------------| | | RCFD 6165 | 7 | ////////////////// | 1.b. |-------------------------| | 2. Federal funds sold and securities purchased under agreements to resell with U.S. branches | ////////////////// | and agencies of foreign banks(1) (included in Schedule RC, items 3.a. and 3.b) .................| 3405 0 | 2. 3. Not applicable. | ////////////////// | 4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others | ////////////////// | (include both retained servicing and purchased servicing): | ////////////////// | a. Mortgages serviced under a GNMA contract . . . . . . . . . . . . . . . . . . . . . . . . . . | 5500 28,003 | 4.a. b. Mortgages serviced under a FHLMC contract: | ////////////////// | (1) Serviced with recourse to servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5501 87,828 | 4.b.(1) (2) Serviced without recourse to servicer. . . . . . . . . . . . . . . . . . . . . . . . . . | 5502 730,620 | 4.b.(2) c. Mortgages serviced under a FNMA contract: | ////////////////// | (1) Serviced under a regular option contract . . . . . . . . . . . . . . . . . . . . . . . . | 5503 61,256 | 4.c.(1) (2) Serviced under a special option contract . . . . . . . . . . . . . . . . . . . . . . . . | 5504 2,231,506 | 4.c.(2) d. Mortgages serviced under other servicing contracts . . . . . . . . . . . . . . . . . . . . . | 5505 4,324,582 | 4.d. 5. To be completed only by banks with $1 billion or more in total assets: | ////////////////// | Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must | ////////////////// | equal Schedule RC, item 9): | ////////////////// | a. U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2103 31,157 | 5.a. b. Non-U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2104 0 | 5.b. 6. Intangible assets: | ////////////////// | a. Mortgage servicing rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3164 18,622 | 6.a. b. Other identifiable intangible assets: | ////////////////// | (1) Purchased credit card relationships. . . . . . . . . . . . . . . . . . . . . . . . . . . | 5506 0 | 6.b.(1) (2) All other identifiable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . | 5507 0 | 6.b.(2) c. Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3163 54,227 | 6.c. d. Total (sum of items 6.a through 6.e) (must equal Schedule RC, item 10) . . . . . . . . . . . | 2143 72,849 | 6.d e. Intangible assets that have been grandfathered for regulatory capital purposes . . . . . . . | 6442 0 | 6.e |--------------------| YES NO |--------------------| 7. Does your bank have any mandatory convertible debt that is part of your Tier 2 capital? . . . . | 6167 |///| X | 7. |--------------------| If yes, complete items 7.a through 7.e: | RCFD Bil Mil Thou | |--------------------| a. Total equity contract notes, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3290 N/A | 7.a. b. Common or perpetual preferred stock dedicated to redeem the above notes. . . . . . . . . . . | 3291 N/A | 7.b. c. Total equity commitment notes, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3293 N/A | 7.c. d. Common or perpetual preferred stock dedicated to redeem the above notes. . . . . . . . . . . | 3294 N/A | 7.d. e. Total (item 7.a minus 7.b plus 7.c minus 7.d). . . . . . . . . . . . . . . . . . . . . . . . | 3295 N/A | 7.e. |--------------------| - ---------------------- (1) Do NOT report federal funds sold and securities purchased under agreements to resell with other commercial banks in the U.S. in this item.
26 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RC-17 Schedule RC - M -- Continued
------------------------------ Dollar Amounts in thousands | ///////// Bil Mil Thou | - ----------------------------------------------------------------------------------------------------------------------- 8. a. Other real estate owned: | /////////////////////// | (1) Direct and indirect investments in real estate ventures . . . . . . . . . . | RCFD 5372 0 | 8.a.(1) (2) All other real estate owned: | /////////////////////// | (a) Construction and land development in domestic offices . . . . . . . . . | RCON 5508 6,855 | 8.a.(2)(a) (b) Farmland in domestic offices. . . . . . . . . . . . . . . . . . . . . . | RCON 5509 0 | 8.a.(2)(b) (c) 1-4 family residential properties in domestic offices . . . . . . . . . | RCON 5510 4,044 | 8.a.(2)(c) (d) Multifamily (5 or more) residential properties in domestic offices. . . | RCON 5511 83 | 8.a.(2)(d) (e) Nonfarm nonresidential properties in domestic offices . . . . . . . . . | RCON 5512 9,675 | 8.a.(2)(e) (f) In foreign offices. . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFN 5513 0 | 8.a.(2)(f) (3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) . | RCFD 2150 20,657 | 8.a.(3) b. Investments in unconsolidated subsidiaries and associated companies: | /////////////////////// | (1) Direct and indirect investments in real estate ventures . . . . . . . . . . | RCFD 5374 0 | 8.b.(1) (2) All other investments in unconsolidated subsidiaries and | /////////////////////// | associated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 5375 0 | 8.b.(2) (3) Total (sum of items 8.b.(1) and 8.b.(2) (must equal Schedule RC, item 8). . | RCFD 2130 0 | 8.b.(3) c. Total assets of unconsolidated subsidiaries and associated companies. . . . . . | RCFD 5376 0 | 8.c. 9. Noncumulative perpetual preferred stock and related surplus included in | /////////////////////// | Schedule RC, item 23, "Perpetual preferred stock and related surplus". . . . . . . | RCFD 3778 0 | 9. 10. Mutual fund and annuity sales in domestic offices during the quarter (include | /////////////////////// | proprietary, private label, and third party mutual funds): | /////////////////////// | a. Money market funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCON 6441 41,284 | 10.a. b. Equity securities funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCON 8427 8,380 | 10.b. c. Debt securities funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCON 8428 3,841 | 10.c. d. Other mutual funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCON 8429 0 | 10.d. e. Annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCON 8430 0 | 10.e. ------------------------------ - ----------------------------------------------------------------------------------------------------------------------------------- | ------------------------------ | | Memorandum Dollar Amounts in Thousands | RCFD Bil Mil Thou | | - ----------------------------------------------------------------------------------------------------------------------------------- |1. Interbank holdings of capital instruments (to be completed for the December | /////////////////////// | | report only): | /////////////////////// | | | a. Reciprocal holdings of banking organizations' capital instruments . . . . . . . | 3836 N/A | M.1.a. | | b. Nonreciprocal holdings of banking organizations' capital instruments. . . . . . | 3837 N/A | M.1.b. | | ------------------------------- | - ------------------------------------------------------------------------------------------------------------------------------------
27 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RC-18 Schedule RC - N -- Past Due and Nonaccrual Loans, Leases and Other Assets The FFIEC regards the information reported in all of Memorandum item 1, in items 1 through 10, Column A, and in Memorandum items 2 through 4, Column A, as confidential.
---------- | C470 | ------------------------------------------------------------------- | (Column A) | (Column B) | (Column C) | | Past due | Past due 90 | Nonaccrual | | 30 through 89 | days or more | | | days and still | and still | | | accruing | accruing | | ------------------------------------------------------------------- Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | - -------------------------------------------------------------------------------------------------------------------------- 1. Loans secured by real estate: | /////////////////// | ////////////////// | ////////////////// | a. To U.S. addressees (domicile). . . . . . . . . | | 1246 12,517 | 1247 127,407 | 1.a. b. To non-U.S. addressees (domicile). . . . . . . | C | 1249 0 | 1250 0 | 1.b. 2. Loans to depository institutions and | O | ////////////////// | ////////////////// | acceptances of other banks: | N | ////////////////// | ////////////////// | a. To U.S. banks and other U.S. depository | F | ////////////////// | ////////////////// | institutions . . . . . . . . . . . . . . . . . | I | 5378 0 | 5379 0 | 2.a. b. To foreign banks . . . . . . . . . . . . . . . | D | 5381 0 | 5382 0 | 2.b. 3. Loans to finance agricultural production and | E | ////////////////// | ////////////////// | other loans to farmers. . . . . . . . . . . . . . | N | 1597 0 | 1583 114 | 3. 4. Commercial and industrial loans: | T | ////////////////// | ////////////////// | a. To U.S. addressees (domicile). . . . . . . . . | I | 1252 2,064 | 1253 26,122 | 4.a. b. To non-U.S. addressees (domicile). . . . . . . | A | 1255 0 | 1256 0 | 4.b. 5. Loans to individuals for household, family and | L | ////////////////// | ////////////////// | other personal expenditures: | | ////////////////// | ////////////////// | a. Credit cards and related plans . . . . . . . . | | 5384 97 | 5385 588 | 5.a. b. Other (includes single payment, installment, | | ////////////////// | ////////////////// | and all student loans) . . . . . . . . . . . . | | 5387 303 | 5388 2,546 | 5.b. 6. Loans to foreign governments and official | | ////////////////// | ////////////////// | institutions. . . . . . . . . . . . . . . . . . . | | 5390 0 | 5391 0 | 6. 7. All other loans . . . . . . . . . . . . . . . . . | | 5460 1,252 | 5461 1,738 | 7. 8. Lease financing receivables: | | ////////////////// | ////////////////// | a. Of U.S. addressees (domicile). . . . . . . . . | | 1258 0 | 1259 0 | 8.a. b. Of non-U.S. addressees (domicile). . . . . . . | | 1272 0 | 1791 0 | 8.b. 9. Debt securities and other assets (exclude other | | ////////////////// | ////////////////// | real estate owned and other repossessed assets) . | | 3506 0 | 3507 0 | 9. ------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Amounts reported in items 1 through 8 above include guaranteed and unguaranteed portions of past due and nonaccrual loans and leases. Report in item 10 below certain guaranteed loans and leases that have already been included in the amounts reported in items 1 through 8. ------------------------------------------------------------------- | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | 10. Loans and leases reported in items 1 ------------------------------------------------------------------- through 8 above which are wholly or partially | ////////////////// | ////////////////// | ////////////////// | guaranteed by the U.S. Government. . . . . . . . | CONFIDENTIAL | 5613 85 | 5614 268 | 10. a. Guaranteed portion of loans and leases | ////////////////// | ////////////////// | ////////////////// | included in item 10 above . . . . . . . . . . | | 5616 69 | 5617 253 | 10.a. -------------------------------------------------------------------
28 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RC-19 Schedule RC - N -- Continued
---------- | C473 | (- ------------------------------------------------------------------- | (Column A) | (Column B) | (Column C) | | past due | Past due 90 | Nonaccrual | | 30 through 89 | days or more | | | days and still | and still | | | accruing | accruing | | ------------------------------------------------------------------- Memoranda Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | - -------------------------------------------------------------------------------------------------------------------------- 1. Restructured loans and leases included in | ////////////////// | ////////////////// | ////////////////// | Schedule RC-N, items 1 through 8, above . . . . . | | | M.1. 2. Loans to finance commercial real estate, | | CONFIDENTIAL | construction, and land development activities | C | | (not secured by real estate) included in | O | | | Schedule RC-N, items 4 and 7, above . . . . . . . | N |---------------------| ------------------- | M.2. 3. Loans secured by real estate in domestic offices | F | RCON Bil Mil Thou | RCON Bil Mil Thou | (included in Schedule RC-N, item 1, above): | I |---------------------| --------------------- a. Construction and land development. . . . . . . | D | 2769 200 | 3492 21,589 | M.3.a. b. Secured by farmland. . . . . . . . . . . . . . | E | 3494 0 | 3495 391 | M.3.b. c. Secured by 1-4 family residential properties: | N | ////////////////// | ////////////////// | (1) Revolving, open-end loans secured by | T | ////////////////// | ////////////////// | 1-4 family residential properties and | I | ////////////////// | ////////////////// | extended under lines of credit . . . . . . | A | 5399 91 | 5400 1,102 |M.3.c.(1) (2) All other loans secured by 1-4 family | L | ////////////////// | ////////////////// | residential properties and extended under | | ////////////////// | ////////////////// | lines of credit. . . . . . . . . . . . . . | | 5402 4,550 | 5403 23,130 |M.3.c.(2) d. Secured by multifamily (5 or more) | | ////////////////// | ////////////////// | residential properties | | 3500 715 | 3501 8,630 | M.3.d. e. Secured by nonfarm nonresidential properties . | | 3503 6,961 | 3504 72,565 | M.3.e. ------------------------------------------------------------------- --------------------------------------------- | (Column A) | (Column B) | | past due 30 | Past due 90 | | through 89 days | days or more | --------------------------------------------- | RCFD Bil Mil Thou | RCFD Bil Mil Thou | --------------------------------------------- 4. Interest rate, foreign exchange rate, and other | ////////////////// | ////////////////// | commodity and equity contracts: | ////////////////// | ////////////////// | a. Book value of amounts carried as assets. . . . | 3522 0 | 3528 0 | M.4.a. b. Replacement cost of contracts with a | ////////////////// | ////////////////// | positive replacement cost. . . . . . . . . . . | 3529 0 | 3530 0 | M.4.b. ---------------------------------------------
29 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RC-20 Schedule RC - O -- Other Data for Deposit Insurance Assessments An amended Certified Statement should be submitted to the FDIC if the amounts reported in items 1 through 10 of this schedule are amended after the semiannual Certified Statement originally covering this report date has been filed with the FDIC.
-------- | C475 | (- ----------------------- Dollar Amounts in Thousands | RCON Bil Mil Thou | - ------------------------------------------------------------------------------------------------------------------------- 1. Unposted debits (see instructions): | ////////////////// | a. Actual amount of all unposted debits. . . . . . . . . . . . . . . . . . . . . . . . . . | 0030 N/A | 1.a. OR | ////////////////// | b. Separate amount of unposted debits: | ////////////////// | (1) Actual amount of unposted debits to demand deposits . . . . . . . . . . . . . . . . | 0031 0 | 1.b.(1) (2) Actual amount of unposted debits to time and savings deposits(1). . . . . . . . . . | 0032 0 | 1.b.(2) 2. Unposted credits (see instructions): | ////////////////// | a. Actual amount of all unposted credits . . . . . . . . . . . . . . . . . . . . . . . . . | 3510 N/A | 2.a. OR | ////////////////// | b. Separate amount of unposted credits: | ////////////////// | (1) Actual amount of unposted credits to demand deposits. . . . . . . . . . . . . . . . | 3512 160,725 | 2.b.(1) (2) Actual amount of unposted credits to time and savings deposits(1) . . . . . . . . . | 3514 0 | 2.b.(2) 3. Uninvested trust funds (cash) held in bank's own trust department (not included in total | ////////////////// | deposits in domestic offices). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3520 0 | 3. 4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in | ////////////////// | Puerto Rico and U.S. territories and possessions (not included in total deposits): | ////////////////// | a. Demand deposits of consolidated subsidiaries. . . . . . . . . . . . . . . . . . . . . . | 2211 7,943 | 4.a. b. Time and savings deposits(1) of consolidated subsidiaries . . . . . . . . . . . . . . . | 2351 0 | 4.b. c. Interest accrued and unpaid on deposits of consolidated subsidiaries. . . . . . . . . . | 5514 0 | 4.c. 5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions: | ////////////////// | a. Demand deposits in insured branches (included in Schedule RC-E, Part II). . . . . . . . | 2229 0 | 5.a. b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, Part II) . | 2383 0 | 5.b. c. Interest accrued and unpaid on deposits in insured branches | ////////////////// | (included in Schedule RC-G, item 1.b) . . . . . . . . . . . . . . . . . . . . . . . . . | 5515 0 | 5.c. ----------------------- ----------------------- Item 6 is not applicable to state nonmember banks that have not been authorized by the | ////////////////// | Federal Reserve to act as pass-through correspondents. | ////////////////// | 6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on | ////////////////// | behalf of its respondent depository institutions that are also reflected as deposit | ////////////////// | liabilities of the reporting bank: | ////////////////// | a. Amount reflected in demand deposits (included in Schedule RC-E, Part I, | ////////////////// | Memorandum item 4.a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2314 0 | 6.a. b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I, | ////////////////// | Memorandum item 4.b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2315 0 | 6.b. 7. Unamortized premiums and discounts on time and savings deposits:(1) | ////////////////// | a. Unamortized premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5516 0 | 7.a. b. Unamortized discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5517 0 | 7.b. ----------------------- - ----------------------------------------------------------------------------------------------------------------------------------- |8. To be completed by banks with "Oakar deposits." ----------------------- | | Total "Adjusted Attributable Deposits" of all institutions acquired under Section 5(d)(3) of | ////////////////// | | | the Federal Deposit Insurance Act (from most recent FDIC Oaker Transaction Worksheet(s)) . | 5518 N/A | 8. | | ----------------------- | - ------------------------------------------------------------------------------------------------------------------------------------ ----------------------- 9. Deposits in lifeline accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5596 ///////////// | 9. 10. Benefit-responsive "Depository Institution Investment Contracts" (included in total | ////////////////// | deposits in domestic offices). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 8432 0 | 10. ----------------------- - ------------- (1) For FDIC insurance assessment purposes, "time and savings deposits" consists of nontransaction and all transaction accounts other than demand deposits.
30 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RC-21 Schedule RC - O -- Continued
Memoranda (to be completed each quarter except as noted) |----------------------| Dollar Amounts in Thousands | RCON Bil Mil Thou | - -------------------------------------------------------------------------------------------------|----------------------| | 1. Total deposits in domestic offices of the bank (sum of Memorandum items 1.a.(1) and 1.b.(1) | //////////////////// | must equal Schedule RC, item 13.a): | //////////////////// | a. Deposit accounts of $100,000 or less: | //////////////////// | M.1.a.(1) (1) Amount of deposit accounts of $100,000 or less . . . . . . . . . . . . . . . . . . . . | 2702 4,413,942 | Number | | (2) Number of deposit accounts of $100,000 or less (to be --------------------------------| //////////////////// | M.1.a.(2) completed for the June report only). . . . . . . . . . | RCON 3779 | N/A | //////////////////// | b. Deposit accounts of more than $100,000: --------------------------------| | (1) Amount of deposit accounts of more than $100,000 Number | 2710 3,134,915 | M.1.b.(1) --------------------------------| | (2) Number of deposit accounts of more than $100,000 . . . | RCON 2722 | 7,096 | //////////////////// | M.1.b.(2) --------------------------------|----------------------| 2. Estimated amount of uninsured deposits in domestic offices of the bank: a. An estimate of your bank's uninsured deposits can be determined by multiplying the number of deposit accounts of more than $100,000 reported in Memorandum item 1.b (2) above by $100,000 and subtracting the result from the amount of deposit accounts of more than $100,000 reported in Memorandum item 1.b. (1) above. YES NO Indicate in the appropriate box at the right whether your bank has a method or procedure |---------------------| for determining a better estimate of uninsured deposits than the estimate described above. .| 6861 | | /// | X | M.2.a. |---------------------| | RCON Bil Mil Thou | b. If the box marked YES has been checked, report the estimate of uninsured deposits |---------------------| determined by using your bank's method or procedure. . . . . . . . . . . . . . . . . . . . .| 5597 N/A | M.2.b. --------------------- - -------------------------------------------------------------------------------------------------------------------------- Person to whom questions about the Reports of Condition and Income should be directed: | C477 | (- |-------| ROBERT DUFF, ASSISTANT VICE PRESIDENT (203) 986-2474 - ------------------------------------------------------------------------------------ ---------------------------------- Name and Title (TEXT 8901) Area code and phone number (TEXT 8902)
31 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RC-22 SCHEDULE RC - R -- RISK BASED CAPITAL
This schedule must be completed by all banks as follows: Banks that reported total assets of $1 billion or more in Schedule RC, item 12, for June 30, 1993, must complete items 2 through 9 and Memorandum item 1. Banks with assets of less than $1 billion must complete items 1 through 3 below or Schedule RC-R in its entirety, depending on their response to item 1 below. |-------------------| | C480 | (- 1. Test for determining the extent to which Schedule RC-R must be completed. To be completed |-------------------| only by banks with total assets of less than $1 billion. Indicate in the appropriate | YES NO | box at the right whether the bank has total capital greater than or equal to eight |-----------|-----|-------------| percent of adjusted total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | RCFD 6056 | | //// | | 1. |-------------------------------|
For purposes of this test, adjusted total assets equals total assets less cash, U.S. Treasuries, U.S. Government agency obligations, and 80 percent of U.S. Government-sponsored agency obligations plus the allowance for loan and lease losses and selected off-balance sheet items as reported on Schedule RC-L (see instructions). If the box marked YES has been checked, then the bank only has to complete items 2 and 3 below. If the box marked NO has been checked, the bank must complete the remainder of this schedule. A NO response to item 1 does not necessarily mean that the bank's actual risk-based capital ratio is less than eight percent or that the bank is not in compliance with the risk-based capital guidelines.
------------------------------------------ | (Column A) | (Column B) | |Subordinated Debt(1)| Other | | and Intermediate | Limited- | | Term Preferred | Life Capital | Items 2 and 3 are to be completed by all banks. | Stock | Instruments | |--------------------|-------------------| Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | - --------------------------------------------------------------------------------|------------------- |-------------------| | 2. Subordinated debt(1) and other limited-life capital instruments (original | ////////////////// | ///////////////// | weighted average maturity of at least five years) with a remaining | ////////////////// | ///////////////// | maturity of: | ////////////////// | ///////////////// | a. One year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3780 0 | 3786 0 | 2.a. b. Over one year through two years. . . . . . . . . . . . . . . . . . . . . | 3781 0 | 3787 0 | 2.b. c. Over two years through three years . . . . . . . . . . . . . . . . . . . | 3782 0 | 3788 0 | 2.c. d. Over three years through four years. . . . . . . . . . . . . . . . . . . | 3783 0 | 3789 0 | 2.d. e. Over four years through five years . . . . . . . . . . . . . . . . . . . | 3784 0 | 3790 0 | 2.e. f. Over five years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3785 0 | 3791 0 | 2.f. -------------------- ------------------- |-------------------| | RCFD Bil Mil Thou | 3. Total qualifying capital (i.e., Tier 1 and Tier 2 capital) allowable under the risk-based |-------------------| capital guidelines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3792 1,235,505 | 3. |-------------------| ------------------------------------------ | (Column A) | (Column B) | | Assets | Credit Equiv- | Items 4-9 and Memorandum item 1 are to be completed | Recorded | alent Amount | by banks that answered NO to item 1 above and | on the | of Off-Balance | by banks with total assets of $1 billion or more. | Balance Sheet | Sheet Items(2) | |--------------------|-------------------| | RCFD Bil Mil Thou | RCFD Bil Mil Thou | 4. Assets and credit equivalent amounts of off-balance sheet items assigned |--------------------|-------------------| to the Zero percent risk category: | ////////////////// | ///////////////// | a. Assets recorded on the balance sheet: | ////////////////// | ///////////////// | (1) Securities issued by, other claims on, and claims unconditionally | ////////////////// | ///////////////// | guaranteed by, the U.S. Government and its agencies and other | ////////////////// | ///////////////// | OECD central governments. . . . . . . . . . . . . . . . . . . . . . | 3794 1,997,407 | ///////////////// | 4.a.(1) (2) All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 3795 356,343 | ///////////////// | 4.a.(2) b. Credit equivalent amount of off-balance sheet items . . . . . . . . . . | ////////////////// | 3796 0 | 4.b. |--------------------|-------------------| - ------------------ (1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.e, "Total." (2) Do not report in column B the risk-weighted amount of assets reported in column A.
32 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-8K: 09-0590 FFIEC 031 Page RC-23 Schedule RC-R--Continued
------------------------------------------- | (Column A) | (Column B) | | Assets | Credit Equiv- | | Recorded | alent Amount | | on the | of Off-Balance | | Balance Sheet | Sheet Items(1) | ------------------------------------------- Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | - ------------------------------------------------------------------------------------------------------------------------- 5. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// | assigned to the 20 percent risk category: | ////////////////// | ////////////////// | a. Assets recorded on the balance sheet: | ////////////////// | ////////////////// | (1) Claims conditionally guaranteed by the U.S. Government and its | ////////////////// | ////////////////// | agencies and other OECD central governments ....................... | 3798 19,894 | ////////////////// | 5.a.(1) (2) Claims collateralized by the U.S. Government | ////////////////// | ////////////////// | and its agencies and other OECD central governments; by | ////////////////// | ////////////////// | securities issued by U.S. Government-sponsored agencies; and | ////////////////// | ////////////////// | by cash on deposit ................................................ | 3799 0 | ////////////////// | 5.a.(2) (3) All other ......................................................... | 3800 2,450,545 | ////////////////// | 5.a.(3) b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3801 124,572 | 5.b. 6. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// | assigned to the 50 percent risk category: | ////////////////// | ////////////////// | a. Assets recorded on the balance sheet .................................. | 3802 2,701,931 | ////////////////// | 6.a. b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3803 215,248 | 6.b. 7. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// | assigned to the 100 percent risk category: | ////////////////// | ////////////////// | a. Assets recorded on the balance sheet .................................. | 3804 7,321,123 | ////////////////// | 7.a. b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3805 1,947,040 | 7.b. 8. On-balance sheet asset values excluded from the calculation of the | ////////////////// | ////////////////// | risk-based capital ratio(2) .............................................. | 3806 (19,589)| ////////////////// | 8. 9. Total assets recorded on the balance sheet (sum of | ////////////////// | ////////////////// | items 4.a, 5.a, 6.a, 7.a, and 8, column A)(must equal Schedule RC, | ////////////////// | ////////////////// | item 12 plus items 4.b and 4.c) .......................................... | 3807 14,827,654 | ////////////////// | 9. ------------------------------------------- ------------------------------------------- | (Column A) | (Column B) | | Notional | Replacement | | Principal | Cost | | Value | (Market Value) | Memorandum ------------------------------------------- Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | - ------------------------------------------------------------------------------------------------------------------------- 1. Notional principal value and replacement cost of interest rate and | ////////////////// | ////////////////// | foreign exchange rate contracts (in column B, report only those | ////////////////// | ////////////////// | contracts with a positive replacement cost): | ////////////////// | ////////////////// | a. Interest rate contracts (exclude futures contracts) ................... | ////////////////// | 3808 20,463 | M.1.a. (1) With a remaining maturity of one year or less ..................... | 3809 1,903,000 | ////////////////// | M.1.a.(1) (2) With a remaining maturity of over one year ........................ | 3810 2,396,000 | ////////////////// | M.1.a.(2) b. Foreign exchange rate contracts (exclude contracts with an original | ////////////////// | ////////////////// | maturity of 14 days or less and futures contracts) .................... | ////////////////// | 3811 87,721 | M.1.b. (1) With a remaining maturity of one year or less ..................... | 3812 6,131,499 | ////////////////// | M.1.b.(1) (2) With a remaining maturity of over one year ........................ | 3813 0 | ////////////////// | M.1.b.(2) ------------------------------------------- - -------------- (1) Do not report in column B the risk-weighted amount of assets reported in column A. (2) Until a final rule on the regulatory capital treatment of net unrealized holding gains (losses) an available-for-sale securities that is applicable to the reporting bank has taken effect, a bank that has adopted FASB Statement No. 115 should include the difference between the fair value and the amortized cost of its available-for-sale securities in item 8 and report the amortized cost of these securities in items 4 through 7 above. Item 8 also includes on-balance sheet asset values (or portions thereof) of off-balance sheet interest rate, foreign exchange rate, and commodity contracts and those contracts (e.g., futures contracts) not subject to risk-based capital. Exclude from item 8 margin accounts and accrued receivables as well as any portion of the allowance for loan and lease losses in excess of the amount that may be included in Tier 2 capital.
33 Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION Address: 777 MAIN STREET City, State Zip: HARTFORD, CT 06115 FDIC Certificate No.: |0|2|4|9|9| ----------- Call Date: 3/31/94 ST-BK: 09-0590 FFIEC 031 Page RC-24 OPTIONAL NARRATIVE STATEMENT CONCERNING THE AMOUNTS REPORTED IN THE REPORTS OF CONDITION AND INCOME at close of business on March 31, 1994 SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION HARTFORD , CONNECTICUT - ------------------------------------------------- -------------- ----------- Legal Title of Bank City State The management of the reporting bank may, if it wishes, submit a brief narrative statement on the amounts reported in the Reports of Condition and Income. This optional statement will be made available to the public, along with the publicly available data in the Reports of Condition and Income, in response to any request for individual bank report data. However, the information reported in column A and in all of Memorandum item 1 of Schedule RC-N is regarded as confidential and will not be released to the public. BANKS CHOOSING TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE STATEMENT DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL BANK CUSTOMERS, REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS IN SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE NOT WILLING TO HAVE MADE PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks choosing not to make a statement may check the "No comment" box below and should make no entries of any kind in the space provided for the narrative statement; i.e., DO NOT enter in this space such phrases as "No statement," "Not applicable," "N/A," "No comment," and "None." The optional statement must be entered on this sheet. The statement should not exceed 100 words. Further, regardless of the number of words, the statement must not exceed 750 characters, including punctuation, indentation, and standard spacing between words and sentences. If any submission should exceed 750 characters, as defined, it will be truncated at 750 characters with no notice to the submitting bank and the truncated statement will appear as the bank's statement both on agency computerized records and in computer- file releases to the public. All information furnished by the bank in the narrative statement must be accurate and not misleading. Appropriate efforts shall be taken by the submitting bank to ensure the statement's accuracy. The statement must be signed, in the space provided below, by a senior officer of the bank who thereby attests to its accuracy. If, subsequent to the original submission, material changes are submitted for the data reported in the Reports of Condition and Income, the existing narrative statement will be deleted from the files, and from disclosure; the bank, at its option, may replace it with a statement, under signature, appropriate to the amended data. The optional narrative statement will appear in agency records and in release to the public exactly as submitted (or amended as described in the preceding paragraph) by the management of the bank (except for the truncation of statements exceeding the 750-character limit described above). THE STATEMENT WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE REPORTING BANK. - ----------------------------------------------------------------------------- No comment |X| (RCON 6979) | C471 | C472| (- --- -------------- BANK MANAGEMENT STATEMENT (please type or print clearly): (TEXT 6980) -------------------------------------- --------------------- Signature of Executive Officer of Bank Date of Signature 34 -----END PRIVACY-ENHANCED MESSAGE-----