-----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, S6U2uzbSPw1li51OrL8pjVN40oABJ+qdokXgfZj1nWkIKIP/mT6enZCSE7iMJCZi utLSBlXfNi7NnTQZHMZoJw== 0000912057-94-003260.txt : 19941004 0000912057-94-003260.hdr.sgml : 19941004 ACCESSION NUMBER: 0000912057-94-003260 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940928 DATE AS OF CHANGE: 19941003 SROS: NONE 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: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-20435 FILM NUMBER: 94550785 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 10-K 1 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year ended June 30, 1994 Commission file Number 1-6537 EMPIRE GAS CORPORATION (Exact Name of Registrant as Specified in Its Charter) MISSOURI 43-1494323 (State or other jurisdiction of (IRS Employer Identification No.) Incorporation or Organization) P.O. Box 303 1700 SOUTH JEFFERSON STREET, LEBANON, MISSOURI 65536 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (417) 532-3101 Securities registered pursuant to Section 12(b) of the Act: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED 9% Subordinated Debentures due 2007 PACIFIC STOCK EXCHANGE Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part II of this Form 10-K or any amendment to this Form 10-K. (X) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No The aggregate market value of the voting stock held by non-affiliates of the Registrant as of close of business on September 15, 1994 is: $116,480 Shares of Common Stock, $0.001 par value, outstanding as of close of business on September 15, 1994: 1,579,225. Upon request, Empire Gas Corporation will furnish a copy of any exhibit listed but not contained herein. A fee of $.05 per page, to cover the Company's costs in furnishing exhibits requested will be charged. Please direct all requests to: Corporate Secretary, 1700 South Jefferson, Lebanon, Missouri 65536; Telephone (417)532-3101. PART I ITEMS 1 AND 2. BUSINESS AND PROPERTIES. Prior to June 29, 1994, Empire Gas Corporation ("Empire Gas" or the "Company") was the owner of 100% of the outstanding common stock of Empire Gas Operating Corporation ("EGOC") and had no other assets or operations. Prior to a name change on April 26, 1994, EGOC had been known as Empire Gas Corporation, and filed reports under the Securities Exchange Act of 1934 under that name. On June 29, 1994, EGOC merged with and into the Company, with the Company as the surviving corporation. All references to the Company in this report refer to Empire Gas Corporation and its consolidated subsidiaries, which prior to June 29, 1994 included EGOC. On June 30, 1994, the Company engaged in a series of transactions (the "Transaction") including the transfer of all of the shares of common stock of Empire Energy Corporation ("Energy") to the Company's former chairman, Robert W. Plaster, and certain departing directors, officers and employees. See "The Transaction," below. Energy held the common stock of 136 subsidiaries of the Company that carried on the business of the Company in ten states, primarily in the Southeast. As part of the Transaction, the Company also acquired the assets of PSNC Propane Corporation ("PSNC"). Except where noted otherwise, all financial information in this report and the financial statements included with this report include the results of operations of Energy through June 30, 1994 and exclude the results of operations of PSNC, but balance sheet data exclude the assets of Energy and include the assets of PSNC. Other than financial information, except where noted otherwise, the information presented in this report excludes the operations and assets of Energy, includes the operations and assets of PSNC, and otherwise reflects the effect of the Transaction. PROPANE OPERATIONS The Company is engaged in the business of the retail distribution of propane and has been in operation since 1963. In addition, the Company sells related gas-burning appliances and equipment and rents customer storage tanks. The Company's operations consist of 162 retail service centers with 18 additional bulk storage facilities. During the fiscal year ended June 30, 1994, the Company, after giving effect to the Transaction, sold approximately 82.8 million gallons of propane 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 Company's operations are geographically diversified with retail service centers located in the west, the southwest, Colorado, the upper midwest, the Mississippi Valley and the southeast. This diversification reduces the potential impact of fluctuations of weather in a particular region. 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 -2- 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. 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. 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. 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, giving effect to the Transaction, accounted for approximately 69.5% of the Company's aggregate propane sales revenue and 32.4% of its aggregate gross margin from propane sales in fiscal year 1994. Historically, this market has provided higher margins than other retail propane sales. Based on fiscal year 1994 propane sales revenue after giving effect to the Transaction, the customer base consisted of 16.7% commercial and 13.8% 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 2.5% of sales. 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 1994, contract suppliers sold nearly 76% of the propane purchased by the Company (including the centers that were transferred in the Transaction), and the two largest suppliers sold 23% and 16%, 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. The Company has retail service centers with an aggregate storage capacity of approximately 8.7 million gallons -3- of propane, and each service center has equipment for transferring the gas into and from the bulk storage tanks. The Company operates 15 over-the-road tractors and 18 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 1 million barrels. 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 making the necessary modifications to provide storage that it may use for its own purposes or lease to third parties. The Company is exploring the possibility of making modifications to its underground storage facility, and management believes that required modifications can be made for a cost of approximately $2.0 million. The Company is currently exploring options for financing these modifications, and there is no assurance that such financing will be available. Deliveries to customers are made by means of 370 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. 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 nine regions: West Coast (North); West Coast (South); Colorado; Midwest (North); Midwest (South); Midwest (Central); North and South Carolina; Mideast; and New York. 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. Empire Service Corporation ("Service Corp."), a wholly owned -4- subsidiary of Energy, provides data processing and management information services to the Company pursuant to a services agreement. See "Item 13 -- 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 to plan accordingly to improve the operations of the Company as a whole. FACTORS INFLUENCING DEMAND. Because a substantial amount of propane is sold for heating purposes, the severity of winter weather and resulting residential and commercial heating usage have an important impact on the Company's earnings. Approximately two-thirds of the Company's retail propane sales usually occur during the five months of November through March. Sales and profits are subject to variation from month to month and from year to year, depending on temperature fluctuations. COMPETITION. The Company encounters competition from a number of other propane distributors in each geographic region in which it operates. The Company competes with these distributors primarily on the basis of service, stability of supply, availability of consumer storage equipment, and price. 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, including suppliers of electricity for sales to residential and commercial customers. Empire Gas believes growth can be achieved by the conversion to propane of homes that currently use either electricity or fuel oil products. Propane has advantages over electricity and fuel oil. 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's primary service areas due to the following factors: (i) propane is a residue-free, cleaner energy source, (ii) environmental concerns make fuel oil relatively unattractive, and (iii) fuel oil appliances are not as efficient as propane appliances. 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 can predict neither the impact of future conservation measures nor the effect that any technological advances might have on the Company's operations. 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 -5- 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. The Company believes the highly fragmented retail propane market presents substantial opportunities for growth through acquisitions. The Company's ability to compete through acquisitions will be limited in certain geographic areas as a result of a non-competition agreement signed in connection with 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 and Tennessee) and certain territories in three other states (southeastern Missouri, northern Arkansas and an area within a 50-mile radius of an existing Energy operation in Illinois) until June 30, 1997. The agreement also restricts the Company from starting service centers (other than through acquisitions) in western Virginia and western West Virginia. The same restrictions apply to Energy under the agreement. See "The Transaction," below and "Item 13 -- 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. Prior to July 1994, workers compensation coverage had a $500,000 deductible per incident. The deductibles mean that the Company is effectively self-insured for liability up to these deductibles. THE TRANSACTION On June 30, 1994, the Company effected a change in ownership and management by repurchasing shares of its common stock from its controlling shareholder, Mr. Robert W. Plaster, and certain other officers in exchange for all of the shares of common stock of Energy, a subsidiary of the Company, and cash consideration aggregating approximately $2.5 million. Energy owns the stock of 136 subsidiaries, 133 of which are retail service centers located primarily in the southeast. Upon the consummation of this stock purchase, Mr. Robert Plaster and the other officers from whom stock was repurchased terminated their employment with the Company, and Mr. Paul S. Lindsey, Jr., an employee of the Company for 26 years who, prior to the Transaction, served as the Company's Chief Operating Officer and Vice Chairman of the Board, became the Company's controlling -6- shareholder, Chief Executive Officer, and President. Also upon consummation of the Transaction, certain lease and use agreements between the Company and Mr. Plaster or entities controlled by Mr. Plaster were terminated and a new lease, a non-competition agreement (the "Non-Competition Agreement"), and a support services agreement (the "Service Agreement") were entered into. See "Item 13 -- Certain Relations and Related Transactions." Contemporaneously with the repurchase of shares, the Company acquired the assets of PSNC, 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 aggregate purchase price was approximately $13.6 million (which includes payment for inventory and accounts receivable), consisting of $12.0 million for certain assets, primarily customer and storage tanks, approximately $1.1 million for accounts receivable and inventory, and $500,000 for a non-compete agreement with the seller. Based on the gallons sold by the acquired operations in 1994, the Company believes the acquisition of PSNC will increase its annual propane sales by approximately 9.5 million gallons, approximately 64% of which will be for sales to residential customers, which generally have higher margins than sales to industrial and agricultural customers. Contemporaneously with the repurchase of shares and the acquisition Name of Each Exchange of PSNC, the Company issued $127,200,000 principal amount Notes due 2004 and warrants to purchase 175,536 shares of Common Stock at $.01 per share. The Company received proceeds from the issuance of the notes and warrants (net of underwriting discounts and commissions) of $96,573,216. At the same time, the Company retired its existing credit facility and replaced it with a revolving credit line of up to $15 million from Continental Bank, N.A. See "Item 7 -- Management's Discussion and Analysis of Financial Condition and Results of Operations (Liquidity and Capital Resources)." The following table sets forth, for the five years ending June 30, 1994, selected aggregate operating data for the retail service centers of the Company that were retained after the Transaction and for the retail service centers the Company acquired from PSNC.
Year Ended June 30, ---------------------------------------------- 1990 1991 1992 1993 1994 ---- ---- ---- ---- ---- (in thousands except percentages, degree days and per gallon data) Operating revenue.............. $75,342 $75,250 $69,216 $76,931 $74,837 Gross profit (1)............... $39,455 $37,799 $38,031 $41,243 $39,731 Retail gallons sold............ 82,180 74,278 76,167 84,840 82,754 Average gross profit per gallon $.418 $.441 $.426 $.429 $.430 __________ (1) Represents operating revenue less the cost of product sold.
-7- The operations of the Company after the Transaction differ from the operations prior to the Transaction in terms of the size, geographical scope, management and leverage of the Company. Accordingly, operations of the Company prior to the Transaction are not indicative of expected operations of the Company after the Transaction. REGULATION The Company's operations are subject to various federal, state, and local laws governing the transportation, storage and distribution of propane, occupational health and safety, and other matters. All states in which the Company operates have adopted fire safety codes that regulate the storage and distribution of propane. In some states these laws are administered by state agencies, and in others they are administered on a municipal level. Certain municipalities prohibit the below ground installation of propane furnaces and appliances, and certain states are considering the adoption of similar regulations. The Company cannot predict the extent to which any such regulations might affect the Company, but does not believe that any such effect would be material. It is not anticipated that the Company will be required to expend material amounts by reason of environmental and safety laws and regulations, but inasmuch as such laws and regulations are constantly being changed, the Company is unable to predict the ultimate cost to the Company of complying with environmental and safety laws and regulations. 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 hazardous materials training. The Company has established ongoing training programs in all phases of product knowledge and safety including participation in the National Propane Gas Association's ("NPGA") Certified Employee Training Program. EMPLOYEES As of September 15, 1994, the Company had approximately 635 employees, none of whom was represented by unions. The Company has never experienced any significant work stoppage or other significant labor problems and believes it has good relations with its employees. ITEM 3. LEGAL PROCEEDINGS. The Company and its subsidiaries are defendants in various routine litigation incident to its business, none of which is expected to have a material adverse effect on the Company's financial position or results of operations. -8- ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. On April 22, 1994, the Company, as the sole shareholder of EGOC and acting by unanimous consent in lieu of a meeting, approved an amendment to the Articles of Incorporation of the subsidiary changing its name from Empire Gas Corporation to Empire Gas Operating Corporation. On April 22, 1994, the shareholders of the Company, acting by unanimous consent in lieu of a meeting, approved an amendment to the Articles of Incorporation of the Company changing its name from Empire Gas Acquisition Corporation to Empire Gas Corporation. On June 20, 1994, the Company, as the sole shareholder of EGOC and acting by unanimous consent in lieu of a meeting, approved the Transaction, pursuant to which the shares of certain shareholders of the Company were redeemed in exchange for cash and the shares of Energy. See "Item 1 -- Business (The Transaction)" and "Item 13 -- Certain Relationships and Related Transactions (The Transaction)." On June 20, 1994, the shareholders of the Company, acting by unanimous consent in lieu of a meeting, approved the Transaction, pursuant to which the shares of certain shareholders of the Company were redeemed in exchange for cash and the shares of Energy. See "Item 1 -- Business (The Transaction)" and "Item 13 -- Certain Relationships and Related Transactions (The Transaction)." PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. As of September 15, 1994, the Company's Common Stock was held of record by 8 shareholders. There is currently no active trading market in the Company's Common Stock. As of September 15, 1994, there are outstanding Warrants to purchase 175,536 shares of the Company's Common Stock. No dividends on the Common Stock of the Company were paid during the Company's 1993 or 1994 fiscal years. The indenture relating to the 12 7/8 % Senior Secured Notes due 2004 and the terms of the Company's revolving credit facility each contain dividend restrictions that prohibit the Company from paying common stock cash dividends. As a result, the Company has no current intention of paying cash dividends on the Common Stock. -9- ITEM 6. SELECTED FINANCIAL DATA. The following table presents selected consolidated operating and balance sheet data of Empire Gas as of and for each of the years in the five-year period ended June 30, 1994. The financial data of the Company as of and for each of the years in the five-year period ended June 30, 1994 were derived from the Company's audited consolidated financial statements. The financial and other data set forth below should be read in conjunction with the Company's consolidated financial statements, including the notes thereto, included with this report. Because the operating data do not take into account the effects of the Transaction on the Company, management does not believe they are indicative of the results of the Company that can be expected after the Transaction. -10-
YEAR ENDED JUNE 30, -------------------------------------------------- 1990 1991 1992 1993 1994 ---- ---- ---- ---- ---- (in thousands except ratios and per share amounts) Operating data: Operating revenue............... $123,153 $121,758 $112,080 $128,401 $124,522 Gross profit (1)................ 64,962 61,787 61,107 68,199 66,632 Operating expenses.............. 39,062 44,772 40,052 41,845 44,966 Depreciation and amortization... 9,334 9,552 10,062 10,351 10,150 Operating income................ 16,566 7,463 10,993 16,003 11,516 Interest expense: Cash interest.............. 11,437 12,038 10,721 9,826 8,542 Amortization of debt discount and expenses 1,147 890 1,006 1,686 2,016 Total interest expense. 12,584 12,928 11,727 11,512 10,558 Net income (loss) before extraordinary items (2) 1,216 (4,557) (1,474) 2,228 (1,190) Other operating data: Capital expenditures............ 6,240 8,813 6,703 4,358 20,015 Cash from sale of retail service centers and other assets...... 430 497 3,062 1,088 366 EBITDA (3)...................... 25,900 17,015 21,055 26,354 21,666 Income (loss) per share before extraordinary items $.04 $(.33) $(.11) $.16 $(0.08) AS OF JUNE 30, ------------------------------------------------ 1990 1991 1992 1993 1994 ---- ---- ---- ---- ---- Balance sheet data: Total assets.................... $158,383 $158,383 $151,471 $148,020 $104,644 Long-term debt (including current maturities)............ 79,666 84,289 78,958 79,249 105,612 Stockholders' equity (deficit).. 30,982 26,438 24,901 25,913 (28,220) ___________ (1) Represents operating revenue less the cost of products sold. (2) Empire Gas did not declare or pay dividends on its common stock during the five-year period ending June 30, 1994. (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).
-11- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis of the Company's results of operations, financial condition and liquidity should be read in conjunction with the and the historical consolidated financial statements of Empire Gas and the notes thereto included in this Report. RESULTS OF OPERATIONS GENERAL Empire Gas' primary source of revenue is retail propane sales, which accounted for approximately 91% of its revenue (without taking account of the Transaction) in fiscal year 1994. 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. 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. 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% Convertible Subordinated Debentures, and 2007 9% Subordinated Debentures. The Company retired the 12% Senior Subordinated Debentures and the 1998 9% Convertible Subordinated Debentures in connection with the Transaction, but the Company's interest expense will increase substantially as a result of the issuance of the 12 7/8% Senior Secured Notes due 2004. Through 1999 a significant portion of the increase will be non-cash interest expense. The following discussion does not reflect either the transfer of Energy or the acquisition of the assets of PSNC in the Transaction and therefore is not indicative of results -12- that can be expected in the future. In general, these transactions will result in a net reduction in the number of gallons sold, and thus in results (including operating revenue, cost of products sold, gross profit, and provisions for doubtful accounts) that are related to the number of gallons sold. General and administrative expenses are also expected to decline as a result of the elimination of salaries and related expenses of 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 are no longer part of the Company. FISCAL YEARS ENDED JUNE 30, 1994 AND JUNE 30, 1993 OPERATING REVENUE. Operating revenue decreased $3.8 million or 3.0%, from $128.4 million in fiscal year 1993 to $124.6 million in fiscal year 1994. This decrease was the result of a $4.0 million decrease in propane sales and a $300,000 decrease in other revenue, offset by a $500,000 increase in sales of parts and gas appliances. The decrease in propane sales was caused by a 1.9% decrease in gallons sold and a 1.1% decrease in the average gross sales price per gallon. The decreased volume reflects the results of slightly warmer winter weather. COST OF PRODUCTS SOLD. Cost of products sold decreased $2.3 million, or 3.8%, from $60.2 million in fiscal year 1993 to $57.9 million in fiscal year 1994. The decrease resulted from the 1.9% decrease in gallons sold, which reflects the slightly warmer winter weather, and a 3.7% decrease in the wholesale cost of propane. GROSS PROFIT. The Company's gross profit for the year decreased $1.6 million, or 2.3%. The decrease was caused by the 3.0% decrease in operating revenue partially offset by the 3.8% decrease in cost of products sold. The Company's gross profit per gallon was relatively constant at $.430 in fiscal year 1994 and $.429 in fiscal year 1993. GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expenses increased $3.0 million, or 7.5% from $40.4 million in fiscal year 1993 to $43.5 million in fiscal year 1994. The increase was due primarily to increases of $1.0 million in insurance and liability claims, $800,000 in salaries and commissions, and $400,000 in professional fees. The increase in insurance and liability claims was due primarily to increased claims. The increase in salaries and commissions was due to annual pay increases combined with a slight decrease in the total number of employees. The increase in professional fees was due to increased litigation fees relating to liability claims and increased accounting and other fees related to the Transaction that were not capitalized. Other smaller increases were incurred in transportation, office expenses, taxes and licenses, rent and maintenance, payroll taxes and employee benefits, travel and entertainment, and advertising. PROVISION FOR DOUBTFUL ACCOUNTS. The provision for doubtful accounts increased $100,000 from $960,000 in fiscal year 1993 to $1.1 million in fiscal year 1994. This -13- increase was the result of a slightly older aging of accounts receivable at June 30, 1994, compared to June 30, 1993. DEPRECIATION AND AMORTIZATION. Depreciation and amortization remained relatively constant, decreasing by $200,000, or 1.9%, from $10.4 million in fiscal year 1993 to $10.2 million in fiscal year 1994. INTEREST EXPENSE. Cash interest expense decreased by approximately $1.3 million, or 13.1%, from $9.8 million in fiscal year 1993 to $8.5 million in fiscal year 1994. This decrease was the result of lower interest rates and reduced borrowing levels as compared to the prior year. Amortization of debt discount and expense increased $300,000, or 19.6%, from $1.7 million in 1993 to $2.0 million in 1994. 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 credit facility. RECAPITALIZATION COSTS. During fiscal years 1994 and 1993, the Company incurred $398,000 and $223,000, respectively, in expenses relating to proposed recapitalizations that the Company later decided not to pursue. INCOME TAXES. The effective tax rate for the fiscal year ended June 30, 1994, was approximately 41.7% compared to 47.8% for the fiscal year ended June 30, 1993. The Company had a positive effective tax rate in 1994 despite its reported loss primarily because of the amortization of the excess of cost over fair value of assets sold and state income taxes imposed on operations that were profitable in individual states. 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. 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. -14- 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. 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 Convertible Debentures, 2007 9% Subordinated Debentures, and 12% Senior Subordinated Debentures, as well as amortization of expenses related to the Company's 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. -15- 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. 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. Cash flow provided from operating activities was $12.9 million in fiscal year 1994 as compared to $6.2 million in fiscal year 1993. Working capital provided from operating activities was $9.1 million in fiscal year 1994 as compared to $13.6 million in fiscal year 1993. This reduction in working capital resulted from the $4.5 million decrease in operating income in fiscal 1994 compared to 1993. This reduction in net income and working capital did not reduce cash flow provided by operations due to the following factors: (i) checks in the process of collection increased $3.3 million in 1994 and (ii) inventories and accounts receivable decreased $1.0 million and accounts payable and accrued expenses related to self insurance claims increased by $1.1 million offset by an increase in prepaid expenses principally related to refundable income taxes of $1.6 million. The working capital items noted above that increased cash flow by $3.8 million in 1994 contributed a decrease in cash flow of $7.4 million in 1993. The Company will be required to use a significant portion of its cash flow from operations to meet its debt service obligations. In addition to normal operating cash needs, the Company anticipates debenture interest payments of approximately $9.8 million in fiscal 1995. The Company's high degree of leverage makes 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 Company's credit facility bears interest at a floating rate. The Company believes that, based on current levels of operations and assuming winter weather that is not substantially warmer in the various regions in which it operates than the historical average of winter temperatures for those regions, it will be able to fund its debt service obligations from funds generated from operations, proceeds of potential sales of service centers and funds available under its credit facility. The seasonal nature of the Company's business will require it to rely on borrowings under its $15.0 million credit facility as well as cash from operations, -16- particularly during the summer and fall months when the Company is building its inventory in preparation for the winter heating season. While approximately two-thirds of the Company's operating revenue is earned in the second and third quarters of its fiscal year, 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. 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's capital expenditures in fiscal year 1994 were $20.0 million which increased approximately $15.6 million from the preceding year. The increase was due primarily to the acquisition of PSNC Propane Corporation, an acquisition of a service center in Colorado (requiring a cash payment of $273,000 and the issuance of two five-year notes) and increased purchases of new transportation equipment. The Company's proceeds from sales of fixed assets decreased approximately $700,000 which was due to the lack of any sales of existing companies and the reduction of other sales of property compared to the previous year. The Company intends to fund its routine capital expenditures and the purchase of assets for new retail service centers with cash from operations, borrowings under its credit facility, or other bank financing. The Company intends to fund acquisitions with seller financing, to the extent feasible, and with cash from operations or bank financing. The Company is exploring the possibility of making modifications to its underground storage facility, and management believes that the required modifications can be made for a cost of approximately $2.0 million. The Company is currently exploring options for financing these modifications, and there is no assurance that such financing will be available. The Company's credit facility and the indenture for the Senior Secured Notes impose restrictions on the Company's ability to incur additional indebtedness. Such restrictions, together with the highly leveraged position of the Company, could restrict the ability of the Company to acquire financing for capital expenditures and other corporate activities. These restrictions permit additional indebtedness of $6 million for the current fiscal year for the purpose of financing acquisitions, but allow additional indebtness to be incurred by subsidiaries formed for the purpose of making acquisitions as long as the Company does not transfer over $3,000,000 (in the aggregate) of assets to such subsidiaries. The Company's $15.0 million 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 credit facility, or the -17- 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 12 7/8%. The Company believes cash from operations will be sufficient to meet the increased interest payments. 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 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. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. See the Consolidated Financial Statements included elsewhere herein. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The directors and executive officers of the Company are as follows: NAME AGE POSITION HELD WITH THE COMPANY AND PRINCIPAL OCCUPATION Paul S. Lindsey, Jr. 49 Chairman of the Board, Chief Executive Officer, and President since June 1994; previously Vice Chairman of the Board (since February 1987) and Chief Operating Officer (since March 1988); term as director expires 1997 Douglas A. Brown 34 Director since July 1994; member Holding Capital Group, Inc. (since 1989); term as director expires 1997 -18- Kristin L. Lindsey 46 Director/Vice President since June 1994; previously pursued charitable and other personal interests; term as director expires 1996 Bruce M. Withers, Jr.67 Director since July 1994; Chairman and Chief Executive Officer of Trident NGL Holding, Inc. (since August 1991) and President of the Transmission and Processing Division of Mitchell Energy Corporation (1979 to 1991); term as director expires 1996 Jim J. Shoemake 56 Director since July 1994; partner of Guilfoil, Petzall & Shoemake (since 1970); term as director expires 1995 Mark W. Buettner 52 Divisional Vice President since mid-1993; and Regional Vice President and Regional Manager from 1989 to 1993 Kenneth J. DePrinzio 47 Divisional Vice President since mid-1993; previously Regional Manager of the Company (1992 to 1993), restaurant owner 1991 to 1992, Vice President of Star Gas Corporation (1990 to 1991) and Area Vice President at Petrolane, Inc. (from prior to 1989 through 1990) Robert C. Heagerty 47 Divisional Vice President since mid-1993; previously Regional Manager and Regional Vice President since 1987 James E. Acreman 57 Vice President/Treasurer since June 1994; previously Senior Vice President since 1989 Valeria Schall 40 Vice President since 1992; Corporate Secretary since 1985 and Assistant to the Chairman (Assistant to the Vice Chairman prior to June 1994) since 1987 Willis D. Green 57 Controller since 1989 After expiration of the initial terms of directors as set forth above, each director will serve for a term of three years. Officers of the Company are elected by the Board of Directors of the Company and will serve at the discretion of the Board, except for Mr. Lindsey who is employed pursuant to an employment agreement that expires June 24, 1999 (subject to extension). -19- ITEM 11. EXECUTIVE COMPENSATION. EXECUTIVE COMPENSATION The following table provides compensation information for each of the years ended June 30, 1994, 1993, and 1992 for (i) the Chief Executive Officer of the Company, (ii) the four other executive officers of the Company who are most highly compensated and whose total compensation exceeded $100,000 for the most recent fiscal year and (iii) those persons who are no longer executive officers of the Company but were among the four most highly compensated and whose total compensation exceeded $100,000 for the most recent year.
SUMMARY COMPENSATION TABLE ANNUAL COMPENSATION All Name and Principal Position Other Other Fiscal Annual Compensation At End of Fiscal Year 1994 Year Salary Bonus Compensation(1) (1) (2) - - --------------------------- ------- ------ ----- --------------- ------------- Paul S. Lindsey, Jr. 1994 $300,000 $5,000 - - Chief Executive Officer, 1993 230,000 5,000 - $1,648 Chairman of the Board, 1992 230,000 - - - and President 1994 1,000,000 - $100,000(6) - 1993 1,000,000 - 100,000(6) 1,648 Robert W. Plaster 1992 1,000,000 - None(3) 1994 100,000 50,000 - - 1993 100,000 50,000 - 927 Stephen R. Plaster 1992 75,000 50,000 - - None(4) Robert L. Wooldridge 1994 100,000 57,308 - - None(5) 1993 90,000 69,222 - 970 1992 85,000 45,663 - - _________ (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 fiscal year 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 -20- 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) Prior to the consummation of the Transaction on June 30, 1994, Mr. Plaster served as Chief Executive Officer and Chairman of the Board of the Company. (4) Prior to the consummation of the Transaction on June 30, 1994, Mr. S. Plaster served as the President and a Director of the Company. (5) Prior to the Transaction on June 30, 1994, Mr. Wooldridge was Executive Vice President - Marketing of the Company. (6) 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 with the terms of his employment agreement with the Company. 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 "Item 13 -- Certain Relationships and Related Transactions (Past Transactions and Relationships)."
EMPLOYMENT AGREEMENTS On June 24, 1994, the Company entered into an employment agreement with Mr. Lindsey. The agreement has a five-year term and provides for the payment of an annual salary of $350,000 and reimbursement for reasonable travel and business expenses. The agreement requires Mr. Lindsey to devote substantially all of his time to the Company's business. The agreement is for a term of five years, but is automatically renewed for one year unless either party elects to terminate the agreement at least four months prior to the end of the term or any extension. The agreement may be terminated by Mr. Lindsey or the Company, but if the agreement is terminated by the Company and without cause, the Company must pay one year's salary as severance pay. INCENTIVE STOCK OPTION PLAN The following table sets forth certain information concerning options exercised during fiscal year 1994. There were no unexercised options held as of the end of the 1994 fiscal year. -21- AGGREGATED OPTION EXERCISES IN THE FISCAL YEAR ENDED JUNE 30, 1994 AND FISCAL YEAR-END OPTION VALUES
SHARES ACQUIRED ON VALUE NAME EXERCISE REALIZED (1) ---- ----------- ------------ Paul S. Lindsey Jr. James E. Acreman 8,000 $ 44,000 Robert W. Plaster Stephen R. Plaster Robert L. Wooldridge 40,000 220,000 ___________ (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 received by certain officers, directors, and employees in connection with the Transaction.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Company did not during its last completed fiscal year have a compensation committee. A compensation committee was formed in July 1994, consisting of Messrs. Withers, Shoemake and Brown. An entity affiliated with Mr. Brown received $500,000 in the year ended June 30, 1994 with respect to certain financial and advisory services. See "Item 13 - Certain Relationships and Related Transactions (Other Transactions and Relationships)." Mr. Lindsey 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 compensation committee. The compensation committee will determine the compensation of Mr. Lindsey and his wife. DIRECTOR COMPENSATION During the last completed fiscal year, the directors of Empire Gas did not receive any compensation for their services. Directors of a subsidiary of Empire Gas, other than Mr. Lindsey and Mr. Stephen Plaster, received an annual fee of $25,000, payable quarterly, for their services. Beginning with the 1995 fiscal year, all directors of Empire Gas will receive an annual fee of $25,000, payable quarterly. -22- ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The table below sets forth information with respect to the beneficial ownership of shares of Common Stock of the Company as of September 15, 1994, by persons owning more than five percent of any class, by all directors of the Company, by the individuals named in the Summary Compensation Table owning shares, and by all directors and executive officers of the Company as a group.
NUMBER OF SHARES NAME OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED PERCENT - - --------------------------- ------------------ ------- Paul S. Lindsey, Jr.(2) 1,507,610 95.5% Kristin L. Lindsey(2) 753,805 47.7 James E. Acreman(3) 16,675 1.1 Douglas A. Brown --- -- Bruce M. Withers, Jr. --- -- Jim J. Shoemake --- -- All directors and executive officers as a group (8 persons)(3) 1,554,417 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) Mr. Lindsey's shares consist of 753,805 shares owned by the Paul S. Lindsey, Jr. Trust established January 24, 1992 and 753,805 shares owned by the Kristin L. Lindsey Trust established January 24, 1992. Mr. Lindsey has the power to vote and to dispose of the shares held in the Kristin L. Lindsey Trust. Mrs. Lindsey's shares consist of the shares owned by the Kristin L. Lindsey Trust. Mrs. Lindsey disclaims ownership of the shares held by her husband in the Paul S. Lindsey, Jr. Trust. (3) The amounts shown include the shares beneficially owned by Messrs. Lindsey and Acreman, and Mrs. Lindsey as set forth above, and 30,132 shares owned by other executive officers.
-23- ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. THE TRANSACTION The following occurred in connection with the Transaction: Pursuant to the terms of a stock redemption agreement entered into between the Company, Robert W. Plaster and certain other shareholders (the "Stock Redemption Agreement"), the Company repurchased the shares of Common Stock held by Mr. Robert W. Plaster, and trusts for the benefit of Mr. Plaster, Mr. Stephen R. Plaster, and certain of their relatives by exchanging one share of common stock ("Energy Common Stock") of Energy for each share of Common Stock of the Company held by such shareholders. The Stock Redemption Agreement also obligated 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 received $7.00 per share for a portion of their shares of Common Stock and one share of Energy Common Stock for each of their remaining shares of Common Stock of the Company. The aggregate amount of shares of Common Stock held by these individuals and the consideration received for the shares are as set forth below:
Number of Shares of Number of Shares of Name Common Stock Energy Common Stock Cash ---- ------------------- -------------------- --------- Mr. Robert W. Plaster......... 10,974,103(1) 10,974,103(4) - 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 were held in two trusts for Mr. S. Plaster. (3) Includes 40,000 options Mr. Wooldridge was required to exercise prior to the date of the Transaction. (4) Upon the consummation of the Transaction, Mr. Plaster became the controlling shareholder of Energy, which owns approximately 133 retail services centers located in ten states.
Upon consummation of the Transaction, Mr. Plaster resigned 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 also resigned from their positions with the Company and its subsidiaries. Energy and Messrs. Plaster and S. Plaster have entered into a non-competition agreement which restricts them and their respective affiliates from competing with the Company, Mr. Lindsey and their respective affiliates in the territories in which the Company is doing business immediately -24- following the Stock Purchase. Similarly, Empire Gas, Mr. Lindsey, and their respective affiliates are restricted from competing with Energy, Messrs. Plaster and S. Plaster and their respective affiliates in seven states and certain areas within five states. The non-competition agreement is for a term of three years from the date on which the Transaction is consummated. Certain relatives of Mr. Plaster and Mr. Lindsey, and the officers of Energy and the Company entered into a substantially similar non-competition agreement. Pursuant to the Stock Redemption Agreement: (i) Empire Gas made a payment of $1,497,031 to Energy based on the balance of certain liabilities net of certain assets as of the date on which the Transaction is consummated; (ii) the Company paid Energy approximately $4.1 million; (iii) the Company and Energy entered into an agreement regarding use of the Empire Gas name and logo; and (iv) the responsibility for litigation relating to matters or events occurring prior to the Transaction (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 were allocated 52.3% to the Company and 47.7% to Energy. The Company and Energy also entered into a tax indemnity agreement allocating liability for taxes incurred prior to the Transaction. Pursuant to the terms of the Stock Redemption Agreement, the Company repurchased, at face value, $4.7 million principal amount of the Company's 2007 9% Subordinated Debentures from Robert W. Plaster and purchased, at face value, $285,000 principal amount of the Company's 2007 9% Subordinated Debentures from certain departing officers and employees of the Company. OTHER TRANSACTIONS AND RELATIONSHIPS The Company and Service Corp., a wholly owned subsidiary of Energy controlled by Mr. Robert W. Plaster as a result of the Transaction, entered into an agreement (the "Service Agreement") pursuant to which Service Corp. provides to the Company certain data processing and management information services. The Company pays 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 that the Company terminates the Service Agreement 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. -25- Prior to the Transaction, the Company leased 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 year 1994. The Company also paid the utilities, taxes and maintenance costs during that year. That lease was terminated and a new lease became 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 pays monthly rent of $6,250 and is 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 an agreement ("the Aircraft Facility Agreement"), the Company leased a jet aircraft and an airport hangar from a corporation owned by Mr. Robert W. Plaster during fiscal year 1994. 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 $75,000 in fiscal year 1994. In connection with the Transaction, the Aircraft Facility Agreement was 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 47.7% of the Company's outstanding Common Stock and became 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 $210,400 in fiscal year 1994. During fiscal year 1994, the Company received certain financial advisory services in connection with the negotiation of the Company's revolving credit facility and with the structuring and execution of the offering of the Senior Secured Notes from Mr. Douglas A. Brown and Holding Capital Group, Inc. ("HCGI"). HCGI received $500,000 in aggregate with respect to those services. The Company has entered into an agreement with each person who was a shareholder prior to the Transaction (all of whom were directors or employees of the Company) providing the Company with a right of first refusal with respect to the sale of any shares by such shareholders. In addition, the Company has the right to purchase from such shareholders all shares they hold at the time of their termination of employment with the -26- 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. During fiscal year 1994, pursuant to an agreement (the "Ranch Agreement"), the Company paid $150,000 and provided services at a cost of approximately $25,000 to a wildlife preserve owned by Empire Ranch, Inc., a corporation wholly owned by Mr. Robert W. Plaster and members of his family. The Company used the facilities at the preserve for meetings with Company employees and business guests. The Ranch Agreement was terminated in connection with the Transaction. Prior to the Transaction, the Company provided bookkeeping, data processing, and accounting services to two corporations controlled by Mr. Robert W. Plaster. The Company received an annual fee of $84,000 in fiscal year 1994 for providing these services. Since the Transaction, the Company no longer provides these services to the two corporations. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) Exhibits EXHIBIT NO. DESCRIPTION - - -- ----------- 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 (incorporated herein by reference to Exhibit 2.2 to the Company's Registration Statement on Form S-1 (No. 33-53343)) -27- 2.3 Merger Agreement by and between the Company and EGOC 3.1 Articles of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-1 (No. 33-53343)) 3.2 Certificate of Amendment of the Certificate of Incorporation of the Company, dated April 26, 1994, relating to the change of name (incorporated herein by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-1 (No. 33-53343)) 3.3 By-laws of the Company (incorporated herein by reference to Exhibit 3.3 to the Company's Registration Statement on Form S-1 (No. 33-53343)) 4.1 Indenture between 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 Indenture between the Company and Shawmut Bank Connecticut, National Association, Trustee, relating to the 12 7/8% Senior Secured Notes due 2004, including the 12 7/8% Senior Secured Notes due 2004, the Guarantee and the Pledge Agreement 4.3 Warrant Agreement 10.1 Shareholder Agreement, dated as of October 28, 1988, by and among Empire Gas Acquisition 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 (incorporated herein by -28- reference to Exhibit 10.1 to the Company's Registration Statement on Form S-1 (No. 33-53343)) 10.2 1989 Incentive Stock Option Plan (incorporated herein by reference to Exhibit 10.2 to the Company's Registration Statement on Form S-1 (No. 33-53343)) 10.3 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 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 Employment Agreement between the Company and Paul S. Lindsey, Jr. (incorporated herein by reference to Exhibit 10.7 to the Company's Registration Statement on Form S-1 (No. 33-53343)) 10.8 Asset Purchase Agreement by and among the Company, Empire Gas, Inc. of North Carolina, PSNC Propane Corporation, and Public Service Company of North Carolina, Incorporated (incorporated herein by reference to Exhibit 10.8 to the Company's Registration Statement on Form S-1 (No. 33-53343)) 10.9 Indemnification Agreement between the Company and Douglas A. Brown (incorporated herein by reference to Exhibit 10.9 to the Company's Registration Statement on Form S-1 (No. 33-53343)) 10.10 Tax Indemnification Agreement between the Company and Energy (incorporated herein by reference to Exhibit 10.10 to the Company's Registration Statement on Form S-1 (No. 33-53343)) -29- 10.11 Supply Contract No. 1, dated September 13, 1991, between EGOC and Phillips 66 Company (incorporated herein by reference to Exhibit 10.11 to the Company's Registration Statement on Form S-1 (No. 33-53343)) 10.12 Supply Contract No. 2, dated September 13, 1991, between EGOC and Phillips 66 Company; and Amendment thereto between EGOC and Phillips 66 Company, dated October 15, 1992 (incorporated herein by reference to Exhibit 10.12 to the Company's Registration Statement on Form S-1 (No. 33-53343)) 10.13 Supply Contract, dated as of November 4, 1991, between EGOC and Conoco, Inc. (incorporated herein by reference to Exhibit 10.13 to the Company's Registration Statement on Form S-1 (No. 33-53343)) 10.14 Supply Contract, dated as of January 21, 1992, between EGOC and Conoco Inc. (incorporated herein by reference to Exhibit 10.14 to the Company's Registration Statement on Form S-1 (No. 33-53343)) 10.15 Supply Contract, dated as of January 24, 1992, between EGOC and Conoco, Inc. (incorporated herein by reference to Exhibit 10.15 to the Company's Registration Statement on Form S-1 (No. 33-53343)) 10.16 Supply Contract No. 1, dated November 20, 1986, between EGOC and Warren Petroleum Company (incorporated herein by reference to Exhibit 10.16 to the Company's Registration Statement on Form S-1 (No. 33-53343)) 10.17 Supply Contract No. 2, dated November 20, 1986, between EGOC and Warren Petroleum Company (incorporated herein by reference to Exhibit 10.17 to the Company's Registration Statement on Form S-1 (No. 33-53343)) 10.18 Supply Contract, dated November 22, 1986, between EGOC and Warren Petroleum Company (incorporated herein by reference to Exhibit 10.18 to the Company's Registration Statement on Form S-1 (No. 33-53343)) 10.19 Supply Contract, dated November 24, 1986, between EGOC and Warren Petroleum Company (incorporated herein by reference to Exhibit 10.19 to the Company's Registration Statement on Form S-1 (No. 33-53343)) 10.20 Supply Contract No. 1, dated June 1, 1993, between EGOC and Warren Petroleum Company (incorporated herein by reference to Exhibit 10.20 to the Company's Registration Statement on Form S-1 (No. 33-53343)) 10.21 Supply Contract No. 2, dated June 1, 1993, between EGOC and Warren Petroleum Company (incorporated herein by reference to Exhibit 10.21 to the Company's Registration Statement on Form S-1 (No. 33-53343)) -30- 21.1 Subsidiaries of the Company (incorporated herein by reference to Exhibit 21.1 to the Company's Registration Statement on Form S-1 (No. 33-53343)) 27.1 Financial Data Schedules (b) Financial Statement Schedules SCHEDULE DESCRIPTION V. Property and Equipment VI. Accumulated Depreciation VIII. Valuation and Qualifying Accounts X. Supplementary Income Statement Information (c) Reports on Form 8-K The predecessor of the Company filed a report on Form 8-K on April 29, 1994 reporting under Item 5 of Form 8-K the agreement to enter into the Transaction and the filing of the registration statement with respect to the Senior Secured Notes. -31- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Empire Gas Corporation By: /S/ PAUL S. LINDSEY, JR. ------------------------- Paul S. Lindsey, Jr. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. SIGNATURE CAPACITY IN WHICH SIGNED DATE /s/ Paul S. Lindsey, Jr. Chief Executive Officer and September 27, 1994 - - ------------------------ Chairman of the Board of Paul S. Lindsey, Jr. Empire Gas Corporation (principal financial and executive officer) /s/ Willis D. Green Vice President/Controller September 27, 1994 - - ------------------- of Empire Gas Corporation Willis D. Green (principal accounting officer) /s/ Douglas A. Brown Director of Empire Gas September 27, 1994 - - -------------------- Corporation Douglas A. Brown /s/ Kristin L. Lindsey Director of Empire Gas September 27, 1994 - - ---------------------- Corporation Kristin L. Lindsey /s/ Bruce M. Withers, Jr. Director of Empire Gas September 27, 1994 - - ------------------------- Corporation Bruce M. Withers, Jr. /s/ Jim J. Shoemake Director of Empire Gas September 27, 1994 - - ------------------- Corporation Jim J. Shoemake -32- FINANCIAL STATEMENT INDEX Empire Gas Corporation - Consolidated Financial Statements for June 30, 1994 Independent Accountants' Report........................................... 34 Consolidated Balance Sheets as of June 30, 1994 and 1993.................. 35 Consolidated Statements of Operations - Years Ended June 30, 1994, 1993, and 1992............................................................ 37 Consolidated Statements of Stockholder's Equity - Years Ended June 20, 1994, 1993, and 1992............................................. 39 Consolidated Statements of Cash Flows - Years Ended June 30, 1994, 1993, and 1992...................................................... 40 FINANCIAL STATEMENT SCHEDULE INDEX Empire Gas Corporation - Consolidated Financial Statements for June 30, 1994 Independent Accountants' Report.................................61 Schedule V - Property and Equipment.............................62 Schedule VI - Accumulated Depreciation and Depletion............63 Schedule VIII - Valuation and Qualifying Accounts...............64 Schedule X - Supplementary Information..........................65 -33- 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, 1994 and 1993, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for each of the three years in the period ended June 30, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of EMPIRE GAS CORPORATION as of June 30, 1994 and 1993, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 1994, in conformity with generally accepted accounting principles. As discussed in Note 4, the Company changed its method of accounting for income taxes in 1994. Springfield, Missouri August 26, 1994 -34-
CONSOLIDATED BALANCE SHEETS JUNE 30, 1994 AND 1993 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) ASSETS 1994 1993 ---- ---- CURRENT ASSETS Cash $ 2,927 $ 362 Trade receivables, less allowance for doubtful accounts; 1994 - $1,620, 1993 - $2,657 (NOTE 4) 5,454 8,199 Inventories (NOTE 4) 5,179 9,691 Prepaid expenses 619 305 Refundable income taxes 2,254 -- Deferred income taxes (NOTE 5) 631 -- ------ ------ Total Current Assets 17,064 18,557 ------ ------ PROPERTY AND EQUIPMENT, AT COST (NOTES 4 AND 13) Land and buildings 8,732 12,215 Storage and consumer service facilities 68,223 113,821 Transportation, office and other equipment 16,165 25,550 ------ ------- 93,120 151,586 Less accumulated depreciation 25,847 41,906 ------ ------- 67,273 109,680 ------ ------- OTHER ASSETS Debt acquisition costs, net of amortization 5,406 475 Excess of cost over fair value of net assets acquired, at amortized cost 14,027 18,834 Other 874 474 ------ ------ 20,307 19,783 ------ ------ $ 104,644 $148,020 ------- ------- ------- ------- See Notes to Consolidated Financial Statements
-35-
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) 1994 1993 ---- ---- CURRENT LIABILITIES Checks in process of collection $ 3,262 $ -- Current maturities of long-term debt (NOTE 4) 292 5,181 Accounts payable 4,039 4,485 Accrued salaries 1,249 1,573 Accrued expenses 1,412 2,193 Due to Empire Energy Corporation (NOTE 2) 497 -- Income taxes payable -- 165 ------- ------- Total Current Liabilities 10,751 13,597 ------- ------- LONG-TERM DEBT (NOTE 4) 105,320 74,068 ------- ------- DEFERRED INCOME TAXES (NOTE 5) 15,421 32,568 ------ ------ ACCRUED SELF-INSURANCE LIABILITY (NOTE 9) 1,372 1,874 ----- ----- STOCKHOLDERS' EQUITY (DEFICIT) (NOTE 2) Common; $.001 par value; authorized 20,000,000 shares; issued June 30, 1994 - 14,291,020 shares, June 30, 1993 - 14,161,770 shares 14 14 Common stock purchase warrants (NOTE 11) 1,227 -- Additional paid-in capital 27,279 27,088 Retained earnings 31,235 110 ------ ------ 60,655 27,212 Treasury stock, at cost June 30, 1994 - 12,711,795 shares, June 30, 1993 - 329,500 shares (87,975) (1,299) -------- ------- (28,220) 25,913 -------- ------- $ 104,644 $148,020 -------- ------- -------- -------
See Notes to Consolidated Financial Statements -36- EMPIRE GAS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED JUNE 30, 1994, 1993 AND 1992 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1994 1993 1992 ---- ---- ---- OPERATING REVENUE $ 124,552 $ 128,401 $ 112,080 COST OF PRODUCT SOLD 57,920 60,202 50,973 ------ ------ ------ GROSS PROFIT 66,632 68,199 61,107 ------ ------ ------ OPERATING COSTS AND EXPENSES Provision for doubtful accounts 1,056 958 214 General and administrative 43,485 40,437 39,463 Rent expense to related party (NOTE 3) 425 450 375 Depreciation and amortization 10,150 10,351 10,062 ------ ------ ------ 55,116 52,196 50,114 ------ ------ ------ OPERATING INCOME 11,516 16,003 10,993 ------ ------ ------ OTHER EXPENSE Interest expense (8,542) (8,877) (10,406) Interest expense to related party (NOTES 3 AND 4) -- (949) (315) Amortization of debt discount and expense (2,016) (1,686) (1,006) Merger proposal costs (NOTE 6) -- -- (450) Restructuring proposal costs (NOTE 7) (398) (223) -- Reduction in carrying value of Underground Storage facility (NOTE 13) (1,400) -- -- ------- ------- ------- (12,356) (11,735) (12,177) -------- -------- -------- INCOME (LOSS) BEFORE INCOME TAXES (840) 4,268 (1,184) PROVISION FOR INCOME TAXES (NOTE 5) 350 2,040 290 --- ----- --- INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS (1,190) 2,228 (1,474) EXTRAORDINARY ITEMS (NOTE 2) Loss on extinguishment of debt, net of income taxes (5,555) -- -- Excess of fair value over book value of Energy net assets, net of income taxes 37,870 -- -- ------ -- -- NET INCOME (LOSS) $ 31,125 $ 2,228 $ (1,474) ------ ----- ------- ------ ----- -------
See Notes to Consolidated Financial Statements -37- EMPIRE GAS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED JUNE 30, 1994, 1993 AND 1992 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1994 1993 1992 ---- ---- ---- INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS PER COMMON SHARE $ (.08) $ .16 $ (.11) EXTRAORDINARY ITEMS PER COMMON SHARE Loss on extinguishment of debt, net of income taxes (.40) -- -- Excess of fair value over book value of Energy net assets, net of income taxes 2.71 -- -- ----------- ----------- --------- NET INCOME (LOSS) PER COMMON SHARE (NOTE 1) $ 2.23 $ .16 $ (.11) ----------- ----------- --------- ----------- ----------- ---------
See Notes to Consolidated Financial Statements -38- EMPIRE GAS CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) YEARS ENDED JUNE 30, 1994, 1993 AND 1992 (IN THOUSANDS)
Common Total Stock Additional Stockholders' Common Purchase Paid-in Retained Treasury Equity Stock Warrants Stock Earnings Stock (Deficit) ------ -------- ----------- ---------- ------- ----------- 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 STOCK OPTIONS EXERCISED -- -- 191 -- -- 191 COMMON STOCK PURCHASE WARRANTS -- 1,227 -- -- -- 1,227 PURCHASE OF TREASURY STOCK -- -- -- -- (2,645) (2,645) EXCHANGE OF SUBSIDIARY STOCK FOR COMPANY COMMON STOCK -- -- -- -- (84,031) (84,031) NET INCOME -- -- -- 31,125 -- 31,125 ------ ------- -------- --------- --------- --------- BALANCE, JUNE 30, 1994 $ 14 $ 1,227 $27,279 $ 31,235 $ (87,975) $ (28,220) ------ ------- -------- --------- --------- --------- ------ ------- -------- --------- --------- ---------
See Notes to Consolidated Financial Statements -39- EMPIRE GAS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 1994, 1993 AND 1992 (IN THOUSANDS)
1994 1993 1992 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 31,125 $ 2,228 $ (1,474) Items not requiring (providing) cash: Depreciation 8,973 9,004 8,789 Amortization 3,193 3,033 2,279 (Gain) loss on sale of assets 1,300 155 (758) Extraordinary loss 5,555 -- -- Extraordinary gain (37,870) -- -- Deferred income taxes (3,166) (860) (810) Changes in: Checks in process of collection 3,262 -- -- Trade receivables (130) (1,691) 32 Inventories 1,170 (1,886) (300) Accounts payable (254) (856) 246 Accrued expenses and self insurance 1,377 (3,158) 1,772 Prepaid expenses and other (1,617) 272 224 Net cash provided by operating ---------- ---------- -------- activities 12,918 6,241 10,000 ---------- ---------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of assets 366 1,088 3,062 Acquisition of retail service centers (12,923) -- -- Purchases of property and equipment (7,665) (4,358) (6,601) ---------- ---------- -------- Net cash used in investing activities (20,222) (3,270) (3,539) ---------- ---------- --------
See Notes to Consolidated Financial Statements -40- EMPIRE GAS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 1994, 1993 AND 1992 (IN THOUSANDS)
1994 1993 1992 ---- ---- ---- CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in working capital financing $ (3,200) $ (1,875) $ 3,400 Increase in notes payable to related party -- -- 554 Principal payments on notes payable to related party -- (2,996) (3,310) Principal payments on acquisition credit facility -- (13,250) (6,750) Principal payments on other long-term debt (203) (182) (191) Debenture sinking fund payments (2,023) (528) -- Purchase of debentures from employee benefit plan -- (778) -- Proceeds from issuance of term credit facility -- 18,000 -- Stock options exercised -- 173 15 Purchase of treasury stock (2,274) (1,441) (78) Sale of treasury stock -- 52 -- Proceeds from new debt offering 96,573 -- -- Retirement of debt with proceeds of new debt offering (77,897) -- -- Cash distributed with Empire Energy Corporation (1,107) -- -- ------------ ------------ ------------ Net cash provided by (used in) financing activities 9,869 (2,825) (6,360) ------------ ------------ ------------ INCREASE IN CASH 2,565 146 101 CASH, BEGINNING OF PERIOD 362 216 115 ------------ ------------ ------------ CASH, END OF PERIOD $ 2,927 $ 362 $ 216 ------------ ------------ ------------ ------------ ------------ ------------
See Notes to Consolidated Financial Statements -41- EMPIRE GAS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1994 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 western 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. At June 30, 1994, the Company's ownership and management was changed. See Note 2 for a description of this restructuring transaction. 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. 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:
1994 1993 ---- ---- (In Thousands) Gas and other petroleum products $ 2,385 $4,279 Gas distribution parts, appliances and equipment 2,792 5,412 ------- ------ $5,177 $9,691 ------- ------ ------- ------
-42- NOTE 1:ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. AMORTIZATION Debt acquisition costs are being amortized on a straight-line basis over the terms of the debt to which the costs are related as follows: the revolving credit facility and term credit facility costs (originally $525,000) were amortized over an original five-year period ending in fiscal 1994; the 1994 senior secured note costs (originally $5,105,000) are amortized over ten years; and the new revolving credit facility costs (originally $301,000) are amortized over three years. Amortization of discounts on debentures and notes (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 in 1993, $20,750,000 in 1994 after giving effect to the restructuring transaction) 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 13,961,520, 14,055,407 and 13,885,087 for each of the fiscal years ended June 30, 1994, 1993 and 1992, respectively. -43- NOTE 2: RESTRUCTURING TRANSACTION On June 30, 1994, the Company implemented a change in ownership and management by repurchasing 12,004,430 shares of Company common stock from its former principal shareholder (Former Shareholder) and certain other departing officers in exchange for all of the shares of a subsidiary Empire Energy Corporation (Energy) that owns 133 retail service centers located principally in the Southeast plus certain home office assets and liabilities. Certain departing officers and employees received $7.00 per share net of the stock option exercise price for the remaining 377,865 shares of common stock that they held. The Company will retain ownership of 158 retail service centers located in 20 states plus certain home office assets and liabilities. In connection with the stock purchase, the Former Shareholder terminated his employment with the Company as well as terminated certain lease and use agreements with the Company (see Note 3). Following the stock repurchase, the Company's previous chief operating officer became the Company's president, chairman of the board and principal shareholder (Principal Shareholder). The Company has received a private letter ruling from the Internal Revenue Service which provides that, based on certain representations contained in the ruling, neither income nor gain for federal income tax purposes will be recognized by the Company as a result of the stock purchase. In connection with the stock purchase, the Company issued $127.2 million of new debentures (with proceeds of $100.1 million before expenses of $3.5 million) which was used to retire $77.9 million of existing debt. The remaining net proceeds were used to finance a $12.9 million acquisition of six retail service centers in North Carolina, $2.5 million to repurchase treasury stock and $3.3 million for working capital. The following table sets forth selected aggregate operating data for the retail service centers of the Company that will be retained after the restructuring transaction and for the six retail service centers the Company acquired in North Carolina. This acquisition was consummated June 30, 1994, and was accounted for as a purchase of assets; accordingly, no revenues or expenses related to the acquisition are included in the statement of operations. -44- NOTE 2: RESTRUCTURING TRANSACTION (CONTINUED)
Empire Gas Corporation (after giving effect North to the Restructuring Carolina Transaction) Acquisition Pro Forma ------------ ----------- --------- (Unaudited) (In thousands) June 30, 1994 Operating revenue $ 64,336 $ 10,501 $ 74,837 Cost of product sold 29,891 5,215 35,106 --------- --------- --------- Gross profit $34,445 $ 5,286 $ 39,731 --------- --------- --------- --------- --------- --------- June 30, 1993 Operating revenue $67,344 $ 9,587 $ 76,931 Cost of product sold 31,045 4,643 35,688 --------- --------- --------- Gross profit $36,299 $ 4,944 $ 41,243 --------- --------- --------- --------- --------- ---------
The Company and Energy have agreed to share certain liabilities at June 30, 1994, based on an agreed-upon percentage which is intended to estimate the relative historical revenue of the retail subsidiaries of the Company (52.3%) and Energy (47.7%). In addition, certain home office assets and liabilities have been retained by the Company and a payable to Energy of $497,031 has been recorded at June 30, 1994, reflecting the settlement of these assets and liabilities in accordance with the stock redemption agreement. The retirement of existing debt (described in Note 4) resulted in an extraordinary loss of $8,655,000, including net unamortized debt acquisition costs of $420,000 related to the debt retired. These amounts were expensed in June 1994 net of $3,100,000 of tax benefit. The excess of fair value of net assets of Energy ($84,031,000) over book value ($46,111,000) was an extraordinary credit to income ($37,870,000) in June 1994, net of $50,000 of income tax expense. -45- NOTE 3: RELATED-PARTY TRANSACTIONS The Company has periodically borrowed funds from its Former Shareholder and from individuals and corporations related to the Former Shareholder. The Company had no outstanding borrowings from this related party at June 30, 1994 and 1993. The amount of outstanding borrowings from this Former Shareholder at June 30, 1992, was $2,996,000. The maximum amounts borrowed from this Former Shareholder during the years ended June 30, 1994, 1993 and 1992, were $-0-, $3,000,000 and $5,753,000, 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 $200,000 and $315,000 for the years ended June 30, 1993 and 1992, respectively. During November 1992 the Former Shareholder loaned under a separate agreement $13.25 million to the Company to repay the acquisition credit facility (see Note 4). 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 Former Shareholder were repaid using the proceeds from the term credit facility. In connection with the stock purchase, the Company repurchased, at face value, $4.7 million principal amount of the Company's 2007 9% Subordinated Debentures from the Former Shareholder and purchased, at face value, $285,000 principal amount of the Company's 2007 9% Subordinated Debentures from certain departing officers and employees of the Company. The Company provided data processing, office rent and other clerical services to two corporations owned principally by the Former Shareholder and was being reimbursed $7,000 per month for these services. The Company has discontinued providing these services as of June 30, 1994. The Company leased a jet aircraft and an airport hanger from a corporation owned by the Former Shareholder. The lease required annual rent payments of $100,000 beginning April 1, 1992. In addition to direct lease payments, the Company was also responsible for the operating costs of the aircraft and the hanger. During the years ended June 30, 1994, 1993 and 1992, the Company paid direct rent of $75,000, $100,000 and $25,000, respectively. This lease was terminated effective June 30, 1994, at no additional expense to the Company. The Company paid $150,000 in each of the three years ended June 30, 1994, to a corporation owned by the Former Shareholder pursuant to an agreement providing the -46- Company the right to use business guest facilities owned by the corporation. This agreement was terminated effective June 30, 1994, at no additional expense to the Company. The Company leased the corporate home office, land, buildings and equipment from a corporation principally owned by the Former Shareholder. The Company paid $200,000 during each of the three years ended June 30, 1994, related to this lease. This lease was terminated effective June 30, 1994, at no additional expense to the Company. The Company has entered into a new lease agreement with a corporation owned principally by the Former Shareholder principally to lease its corporate office space. The new lease requires annual rent payments of $75,000 beginning July 1, 1994, for a period of seven years, with two three-year renewal options. The Company has entered into a seven-year services agreement with a subsidiary of Energy to provide data processing and management information services beginning July 1, 1994. The services agreement provides for payments by the Company to be based on an allocation of the subsidiary's actual costs based on the gallons of LP gas sold by the Company as a percentage of the gallons of LP gas sold by the Company and Energy. During 1994, 1993 and 1992, the Company has purchased $210,400, $68,900 and $116,300, respectively, of paint from a corporation owned by the spouse of the Principal Shareholder of the Company. During fiscal year 1994, the Company paid an investment banking firm affiliated with a director of the Company $500,000 in return for services rendered in connection with the negotiation of the Company's revolving credit facility and with the Restructuring Transaction. NOTE 4: LONG-TERM DEBT
Long-term debt at June 30 consisted of: 1994 1993 ---- ---- (In Thousands) Acquisition credit facility (A) $ -- $ -- Working capital facility (B) -- -- Term credit facility (C) -- 18,000 Revolving credit facility (C) -- 7,300 12 7/8% Senior Secured Notes, due 2004 (D) 99,220 -- New revolving credit facility (E) -- -- 9% Convertible Subordinated Debentures, due 1998 (F) -- 17,767 9% Subordinated Debentures, due 2007 (G) 5,003 15,691
-47- NOTE 4: LONG-TERM DEBT (CONTINUED)
12% Senior Subordinated Debentures, due 2002 (H) -- 19,361 Purchase contract obligations (I) 1,389 1,130 ---------- --------- 105,612 79,249 Less current maturities 292 5,181 ---------- --------- $ 105,320 $ 74,068 ---------- --------- ---------- --------- (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 Former 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 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 .5% per annum of the unadvanced portion of the commitment. This loan was repaid in June 1993 with the proceeds from the term and revolving credit facilities. (C) The term and revolving credit facilities were provided to the Company by the same lender under one agreement. In June 1993 the proceeds from these loans were used to repay the acquisition credit facility, working capital facility and notes payable to Former Shareholder. Substantially all of the Company's assets were pledged to the agreement which contained working capital, debt and certain dividend restrictions. These dividend restrictions prohibited the Company from paying common stock cash dividends. The term credit facility bore interest at either 1.125% over prime or 2.625% over the Eurodollar rate. The agreement required quarterly principal payments of $650,000. This loan was repaid in June 1994 with the proceeds from the issuance of the 12 7/8% Senior Secured Notes, due 2004. The revolving credit facility provided for borrowings up to $22 million and bore interest at either 1% over prime or 2.5% over the Eurodollar rate. The agreement provided for a commitment fee of .5% per annum of the unadvanced portion of the commitment. This loan was repaid in June 1994 with the proceeds from the issuance of the 12 7/8% Senior Secured Notes, due 2004.
-48- NOTE 4: LONG-TERM DEBT (CONTINUED) (D) The notes, issued June 1994, were issued at a discount and bear interest at 7% through July 15, 1999, and at 12 7/8 % thereafter. The notes are redeemable at the Company's option. Prior to July 15, 1999, only 35% of the original principal issued may be redeemed, as a whole or in part, at 110% of the principal amount through July 15, 1997, and at declining percentages thereafter. The notes are guaranteed by the subsidiaries of the Company and secured by the common stock of the subsidiaries of the Company. The original principal amount of the notes issued ($127,200,000) was adjusted ($27,980,000) to give effect for the original issue discount and the common stock purchase warrants (effective interest rate of 13.0%). The discount on these notes is being amortized over the remaining life of the notes using the effective interest, bonds outstanding method. The face value of notes outstanding at June 30, 1994, is $127,200,000. The proceeds from this new offering were used to repay the term credit facility, revolving credit facility, 9% Convertible Subordinated Debentures, due 1998; 12% Senior Subordinated Debentures, due 2007; repurchase a portion of the 9% Subordinated Debentures, due 2007; fund an acquisition; repurchase Company stock; and for working capital (Note 2). Separate financial statements of the guarantor subsidiaries are not included because such subsidiaries have jointly and severally guaranteed the notes on a full and unconditional basis, the aggregate assets and liabilities of the guarantor subsidiaries are substantially equivalent to the assets and liabilities of the parent on a consolidated basis and the separate financial statements and other disclosures concerning the subsidiary guarantors are not deemed to be material. The guarantor subsidiaries are restricted from paying dividends to the Company during any periods of default under the respective debt agreements or in periods where the Company has borrowed under the overadvance option described below. (E) The new revolving credit facility was provided to the Company in June 1994 in conjunction with the offering of the 12 7/8% Senior Secured Notes, due 2004. All of the Company's receivables and inventories are pledged to the agreement which contains working capital, capital expenditure, debt and certain dividend restrictions. These dividend restrictions prohibit the Company from paying common stock cash dividends. -49- NOTE 4: LONG-TERM DEBT (CONTINUED) The facility provides for borrowings up to $15 million, subject to a sufficient borrowing base. The borrowing base generally limits the Company's total borrowings to 85% of eligible accounts receivable and 60% of eligible inventory. In addition, the Company can borrow an additional $3 million during the period August 1, 1994, to January 31, 1995, and $1.5 million during the period August 1, 1995, to January 31, 1996 (overadvance option). The facility bears interest at either 1% over prime or 2.5% over the LIBOR rate. The agreement provides for a commitment fee of .375% per annum of the unadvanced portion of the commitment. The Company's available revolving credit line amounted to $3,441,000 at June 30, 1994, after considering $1,858,000 of outstanding letters of credit. (F) 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 provided that the holder of each convertible debenture had, 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 were to mature in 1998; and at maturity, an 8% premium of the outstanding principal amount would have been paid. Such premium was being accrued over the term to maturity. The debentures were 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 was required annually on each December 31. In June 1994, the Company used proceeds from the Issuance of the 12 7/8% Senior Secured Notes, due 2004, to repurchase $19,980,000 face value of these debentures which resulted in an extraordinary charge (Note 2). The original principal amount of debentures outstanding ($21,854,000) was adjusted to market value (effective interest rate of 14.5%) at June 9, 1983, in accordance with the purchase method of accounting. The discount on these debentures was being amortized over the remaining life of the debentures using the effective interest, bonds outstanding method. There are no debentures outstanding at June 30, 1994. (G) The debentures, issued June 1983, are redeemable at the Company's option, as a whole or in part, at par value. A sinking fund payment sufficient to retire $191,000 of principal outstanding is required on December 31, 2005. Notes, due 2004. In June 1994, the Company used proceeds from the issuance of the 12 7/8% Senior Secured Notes, due 2004, to -50- NOTE 4: LONG-TERM DEBT (CONTINUED) repurchase $16,201,200 face value of these debentures at a discount which resulted in an extraordinary charge (Note 2). The original principal amount of debentures issued ($27,313,000) was adjusted to market at issuance (effective interest rate of 16.5%). The remaining discount on these debentures is being amortized over the remaining life of the debentures using the effective interest, bonds outstanding method. The face value of debentures outstanding at June 30, 1994, is $9,745,800. (H) The debentures, issued April 1986, were 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 was required each March 31. In June 1994, the Company used proceeds from the issuance of the 12 7/8% Senior Secured Notes, due 2004, to repurchase $22,308,000 face value of these debentures which resulted in an extraordinary charge (Note 2). The original principal amount of debentures issued ($23,000,000) was adjusted to market at issuance (effective interest rate of 15.0%). The discount on the debentures was being amortized over the remaining life of the debentures using the effective interest, bonds outstanding method. There are no debentures outstanding at June 30, 1994. (I) 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, 1994 and 1993, these obligations carried interest rates from 7% 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, 1994, are:
1995 $ 292 1996 232 1997 228 1998 444 1999 193 Thereafter 104,223 -------- $105,612 -------- --------
-51- NOTE 5: INCOME TAXES 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. The provision for income taxes includes these components:
1994 1993 1992 ---- ---- ---- (In Thousands) Taxes currently payable $ 2,887 $ 2,900 $ 1,100 Deferred income taxes (2,537) (860) (810) --------- ---------- --------- $ 350 $ 2,040 $ 290 --------- ---------- --------- --------- ---------- ---------
The tax effects of temporary differences related to deferred taxes were:
June 30, July 1, 1994 1993 -------- ------- Deferred Tax Assets Allowance for doubtful accounts $ 566 $ 1,016 Accounts receivable advance collections 201 182 Self-insurance liabilities and contingencies 638 1,474 Alternative minimum tax credit 100 1981 debenture premium 403 --------- --------- 1,505 3,075 --------- ---------
-52- NOTE 5: INCOME TAXES (CONTINUED) CHANGE IN ACCOUNTING PRINCIPLE (Continued) June 30, July 1, 1994 1993 -------- ------- Deferred Tax Liability Accumulated depreciation $ (16,295) $ (33,975) 1981 debenture discount (1,668) ---------- --------- (16,295) (35,643) ---------- --------- Net deferred tax liability $ (14,790) $(32,568) ---------- --------- ---------- ---------
The above net deferred tax asset (liability) is presented on the June 30, 1994, balance sheet as follows (in thousands):
Deferred tax asset - current $ 631 Deferred tax liability - long-term (15,421) ---------- Net deferred tax liability $ (14,790) ---------- ----------
A reconciliation of income tax expense at the statutory rate to the Company's actual income tax expense is shown below:
1994 1993 1992 ---- ---- ---- (In Thousands) Computed at the statutory rate (34%) $ (285) $ 1,451 $ (403) Increase (decrease) resulting from: Amortization of excess of cost over fair value of assets acquired 393 422 452 State income taxes - net of federal tax benefit 150 158 230 Nondeductible travel costs and other expenses 56 11 24 Other 36 (2) (13) ------ ------- ------ Actual tax provision $ 350 $ 2,040 $ 290 ------ ------- ------ ------ ------- ------
-53- NOTE 6: 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 7: RESTRUCTURING PROPOSAL COSTS During the years ended June 30, 1994 and 1993, the Company was considering proposals to restructure the debt and equity of the Company. The Company abandoned the proposals and expensed the related costs of $398,000 and $223,000 in 1994 and 1993, respectively. NOTE 8: 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 three fiscal years. 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 year ended June 30, 1992. 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. -54- NOTE 9: 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 and vehicle liability. Under these current insurance programs, the Company self-insures the first $500,000 of coverage (per incident). Effective July 1994, the Company reduced its self insured retention for vehicle liability to $250,000 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, 1994, 1993 and 1992, was $1,634,000, $1,441,000 and $1,222,000, respectively. For the policy periods July 1, 1989, through December 30, 1989, December 31, 1989, through June 30, 1991, and July 1, 1993, through June 30, 1994, the Company has provided for aggregate comprehensive general liability losses through 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, 1994, the Company has not provided for losses which exceed 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. During the years ended June 30, 1993 and 1992, the Company had obtained workers' compensation coverage from carriers and state insurance pools at annual costs of $1,743,000 and $733,000, respectively. Effective July 1, 1993, the Company changed its policy to self-insure the first $500,000 of workers' compensation coverage (per incident). The Company purchased excess coverage from carriers for workers' compensation claims in excess of the self-insured coverage. Provisions for losses expected under this program were recorded based upon the Company's estimates of the aggregate liability for claims incurred. The Company provided letters of credit aggregating approximately $2.3 million in connection with this program of which $1,218,000 is outstanding at June 30, 1994. Effective July 1994, the Company changed its policy so that it will obtain workers' compensation coverage from carriers and state insurance pools. 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, vehicle and workers' compensation liabilities (in thousands) for the years ended June 30, 1994, 1993 and 1992, are: -55- NOTE 9: SELF INSURANCE AND RELATED CONTINGENCIES (CONTINUED)
Beginning Self Ending Self Self Insured Restructuring Self Insurance Insurance Claims Transaction Insurance Liability Expenses Paid (Note 2) Liability --------- --------- ------- ------------- --------- June 30, 1992 $2,238 $1,764 $1,336 $2,666 June 30, 1993 $2,666 $1,148 $1,480 $2,334 June 30, 1994 $2,334 $3,709 $2,464 $1,707 $1,872
The ending accrued liability includes $125,000 for incurred but not reported claims at June 30, 1994, and $500,000 at both June 30, 1993 and 1992. The current portion of the ending liability of $500,000, $460,000 and $1,103,000 at June 30, 1994, 1993 and 1992, 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. The Company and its subsidiaries are also defendants in various 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. 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 $979,000, $873,000 and $1,011,000 for the years ended June 30, 1994, 1993 and 1992, respectively. In conjunction with the restructuring transaction (Note 2) the Company and Energy have agreed to share on a percentage basis the self-insured liabilities incurred prior to June 30, 1994, including both reported and unreported claims. The self-insured liabilities included under this agreement include general, vehicle, workers' compensation and health insurance liabilities. Under the agreement, the Company will assume 52.3% of the liability with Energy assuming the remaining 47.7%. The self-insured liability included in the Company's financial statements at June 30, 1994, represents its 52.3% portion of the total liability as of that date. -56- NOTE 10: LITIGATION CONTINGENCIES The Company's federal income tax returns for the fiscal years 1979 and 1980 were audited by the IRS. During August 1992, the Company paid $2.4 million which represented interest on previously paid income taxes. This payment settled all outstanding federal tax audits. The Company has no federal income tax audits in process at June 30, 1994. The Company and its subsidiaries are presently involved in two state income tax audits and are also defendants in other business-related lawsuits which are not expected to have a material adverse effect on the Company's financial position or results of operations. In conjunction with the restructuring transaction (Note 2) the Company and Energy have agreed to share on a percentage basis amounts incurred related to federal and state audits and other business related lawsuits incurred prior to June 30, 1994. The liability recorded at June 30, 1994, in the Company's financial statements related to these contingencies represents its 52.3% portion of the total liability as of that date. NOTE 11: STOCK OPTIONS AND WARRANTS STOCK OPTIONS The table below summarizes transactions under the Company's stock option plan:
Number OF Shares Option Price --------- ------------ 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 Exercised (129,250) 1.12 - 1.50 -------- Balance June 30, 1994 -0- --------
All outstanding stock options were exercised on June 30, 1994, in connection with the restructuring transaction (see Note 2). -57- NOTE 11: STOCK OPTIONS AND WARRANTS (CONTINUED) COMMON STOCK PURCHASE WARRANTS In connection with the Company's restructuring, the Company attached warrants to purchase common stock to the new issuance of 12 7/8% Senior Secured Notes, due 2004. Each warrant represents the right to purchase one share of the Company's common stock for $.01 per warrant. The warrants are exercisable after January 15, 1995, and will expire on July 15, 2004. The table below summarizes warrant activity of the Company:
Number Of Shares Exercise Price --------- -------------- Issued 175,536 $.01 ------- Balance at June 30, 1994 175,536 $.01 ------- -------
NOTE 12: ADDITIONAL CASH FLOW INFORMATION (IN THOUSANDS)
1994 1993 1992 ---- ---- ---- NONCASH INVESTING AND FINANCING ACTIVITIES Mortgage obligations incurred on the acquisition of retail service centers $1,015 -- $102 Debt acquisition costs in accounts payable $746 -- -- Purchase of treasury stock, net of option exercise price, in accounts payable $180 -- --
-58- NOTE 12: ADDITIONAL CASH FLOW INFORMATION (IN THOUSANDS) (CONTINUED) Distribution of operating assets other than cash with Empire Energy Corporation: Current assets $ 8,185 Fixed assets, net 51,620 Other assets 3,822 Current liabilities (2,697) Long-term liabilities (15,926) ------- $45,004 ------- -------
1994 1993 1992 ---- ---- ---- ADDITIONAL CASH PAYMENT INFORMATION Interest paid $9,191 $12,185 $11,213 Income taxes paid (net of refunds) $2,620 $3,434 $(441)
NOTE 13: UNDERGROUND STORAGE FACILITY The Company owns salt cavern LPG underground storage facilities which are not in use and are subject to a consent agreement with the State of Kansas. Under the agreement, the Company was to submit a plan to the state for resuming use of the facilities or permanently closing them. The due date of the plan was initially January 1, 1994. The state has verbally extended the due date until October 1, 1994. The Company has obtained from an engineering and construction company a study of the costs of rehabilitating and opening the facilities. The Company has received various reports which estimate the cost of rehabilitating and opening the facility to be from $500,000 to $3.0 million. Management believes that the needed work can be accomplished for $2.0 million. Based on the approximately one million barrel capacity of the facilities, management believes the fair value of the facilities after rehabilitation would be approximately $4.0 million. Accordingly, the Company has reduced the current carrying value of the facilities to $1.0 million by charging $1.4 million against 1994 earnings. Management is presently evaluating several options after rehabilitation of the facility, including use as expanded storage for company inventories, use as leased storage to customers and other distributors, and sale. If the rehabilitation work is not performed and the facilities cannot be sold, then -59- EMPIRE GAS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1994 NOTE 13: UNDERGROUND STORAGE FACILITY (CONTINUED) the Company would be required to close the facilities at a cost not yet estimated and write off any remaining book value. -60- INDEPENDENT ACCOUNTANTS' REPORT 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 for each of the three years in the period ended June 30, 1994, we have also audited the following financial statement schedules. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits of the basic financial statements. The schedules are presented for purposes of complying with the Securities and Exchange Commission's rules and regulations and are not a required part of the consolidated financial statements. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. Springfield, Missouri August 26, 1994 -61- SCHEDULE V - PROPERTY AND EQUIPMENT YEARS ENDED JUNE 30, 1994, 1993 AND 1992 (IN THOUSANDS)
Col. A Col. B Col. C Col. D Col. E Col. F ------ ---------- ---------- -------- ------ ---------- Balance at Balance at Beginning Additions Retire- End of Classification of Year At Cost ments Other Year - - -------------- ---------- ---------- ------- ----- --------- (A) Year Ended June 30, 1994 Land and buildings $ 12,215 $ 2,165 $ 128 $ 5,520 $ 8,732 Storage and consumer service facilities 113,821 10,817 1,973 54,442 68,223 Transportation, office and other equipment 25,550 7,033 1,912 14,506 16,165 ---------- --------- -------- --------- --------- $ 151,586 $ 20,015 $ 4,013 $ 74,468 $ 93,120 ---------- --------- -------- --------- --------- ---------- --------- -------- --------- --------- 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 ---------- --------- -------- --------- ---------- --------- -------- --------- (A) These assets were distributed in the Restructuring Transaction described in Note 2 of the consolidated financial statements.
-62- SCHEDULE VI - ACCUMULATED DEPRECIATION YEARS ENDED JUNE 30, 1994, 1993 AND 1992 (IN THOUSANDS)
Col. A Col. B Col. C Col. D Col. E Col. F Balance at Balance at Beginning Additions Retire- End of Classification of Year At Cost ments Other Year - - -------------- --------- --------- -------- -------- ---------- (A) Year Ended June 30, 1994: Buildings $ 1,703 $ 350 $ 24 $ 858 $ 1,171 Storage and consumer service facilities 24,434 5,519 596 13,602 15,755 Transportation, office and other equipment 15,769 3,104 1,564 8,388 8,921 --------- -------- -------- -------- --------- $ 41,906 $ 8,973 $ 2,184 $ 22,848 $ 25,847 --------- -------- -------- -------- --------- --------- -------- -------- -------- --------- 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 --------- -------- -------- --------- --------- -------- -------- --------- (A) These assets were distributed in the Restructuring Transaction described in Note 2 of the consolidated financial statements.
-63- SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED JUNE 30, 1994, 1993 AND 1992 (IN THOUSANDS)
Balance at Charged to Amount Balance at Beginning Costs and Written End of Description of Year Expenses Off Other Year ----------- ---------- --------- -------- ----- ---------- Valuation accounts deducted from assets to which they apply - for doubtful accounts receivable: June 30, 1994 $2,657 $1,056 $520 $(1,684)(A) $1,620 $111(B) June 30, 1993 $2,720 $958 $1,021 $2,657 June 30, 1992 $2,719 $214 $213 $2,720 (A) Related to assets which were distributed in the Restructuring Transaction described in Note 2 of the consolidated financial statements. (B) Allowance for doubtful accounts receivable established with respect to the acquisition described in Note 2 of the consolidated financial statements.
-64- SCHEDULE X - SUPPLEMENTARY INFORMATION YEARS ENDED JUNE 30, 1994, 1993 AND 1992 (IN THOUSANDS)
Col. A Col. B ------ ------ Charged to Costs and Item Expenses ---- ---------- June 30, 1994: Maintenance and repairs............................................... $3,223 June 30, 1993: Maintenance and repairs............................................... $2,963 June 30, 1992: Maintenance and repairs............................................... $3,070
- 65 - EX-2.3 2 ARTICLES OF MERGER OF EMPIRE GAS OPERATING CORPORATION WITH AND INTO EMPIRE GAS CORPORATION ______________________ Pursuant to the provisions of Section 351.447 of the General and Business Corporation Law of Missouri, Empire Gas Corporation, a Missouri corporation ("Parent") hereby certifies that: 1. Parent is the owner of all of the 10,448,162 issued and outstanding shares of common stock, par value $.001 per share ("Empire Common Stock") of Empire Gas Operating Corporation, a Missouri corporation (the "Subsidiary"), and Parent is the owner of all of the 100,000 shares of the Class A Preferred Stock, without par value, of Subsidiary and all of the 100,000 shares of the Class B Preferred Stock, without par value, of Subsidiary. Parent is therefore in compliance with the 90 percent ownership requirement of Section 351.447 of the General and Business Corporation Law of Missouri and it will maintain at least 90 percent ownership of all classes of stock of the Subsidiary until the issuance by the Secretary of State of a certificate of merger with respect to the merger of Subsidiary with and into Parent. 2. Parent, by the following resolutions of its Board of Directors, duly adopted by the unanimous written consent of the members thereof dated June 20, 1994 and acting pursuant to Section 351.447 of the General and Business Corporation Law of the State of Missouri, approved a plan of merger of Subsidiary with and into Parent: WHEREAS, Empire Gas Corporation (the "Parent") is a corporation duly organized and validly existing under the laws of the State of Missouri having authorized capital stock consisting of 20,000,000 shares of common stock, $.001 par value per share ("Parent Common Stock"), of which 13,832,270 shares are outstanding; and WHEREAS, Empire Gas Operating Corporation (the "Subsidiary") is a corporation duly organized and validly existing under the laws of the State of Missouri having authorized capital stock consisting of 25,000,000 shares of common stock, $.001 par value per share ("Subsidiary Common Stock"), of which 10,448,162 shares are outstanding, 100,000 shares of Class A Preferred Stock, without par value, all of which are outstanding, and 100,000 shares of Class B Preferred Stock, without par value, all of which are outstanding; and WHEREAS, Parent owns 10,448,162 shares of the Subsidiary Common Stock and all shares of the Class A and Class B Preferred Stock, which is in excess of 90% of the issued and outstanding shares of such stock; and WHEREAS, the Board of Directors of Parent deems it advisable that the Subsidiary merge with and into Parent, upon the terms and subject to the conditions set forth herein and in accordance with the laws of the State of Missouri (such merger hereinafter referred to as the "Merger"), and that the shares of Subsidiary Common Stock, be cancelled upon consummation of the Merger as set forth herein; and 2 of 7 WHEREAS, Parent intends that the Merger qualify as a tax- free transaction under Section 332 of the Internal Revenue Code of 1986 for federal income tax purposes; NOW, THEREFORE, IT IS RESOLVED, that the Subsidiary be merged into Parent pursuant to Section 351.447 of the General and Business Corporation Law of the State of Missouri on the following terms and conditions: SECTION l Effect of the Merger; Manner and Basis of Converting and Cancelling Shares 1.1 At the Effective Time (as hereinafter defined), Subsidiary shall be merged with and into Parent, the separate corporate existence of Subsidiary (except as may be continued by operation of law) shall cease, and Parent shall continue as the surviving corporation, all with the effects provided by applicable law. Parent, in its capacity as the surviving corporation of the Merger, is hereinafter sometimes referred to as the "Surviving Corporation." 1.2 At the Effective Time, each share of common stock, $.01 par value per share of Subsidiary ("Subsidiary Common Stock") issued and outstanding immediately prior to the Effective Time (all of which are owned by Parent and which consist of 10,448,162 shares of common stock) shall by virtue of the Merger and without any action by Subsidiary, Parent, the stockholders of Subsidiary or Parent or any other person, be cancelled. 1.3 At the Effective Time, each share of the Class A Preferred Stock, without par value, of Subsidiary ("Subsidiary Class A Preferred Stock") and each share of the Class B Preferred Stock, without par value, of Subsidiary ("Subsidiary Class B Preferred Stock") issued and outstanding immediately prior to the Effective Time (all of which are owned by Parent and which consist of 100,000 shares of Subsidiary Class A Preferred Stock and 100,000 shares of Subsidiary Class B Preferred Stock) shall by virtue of the Merger and without any action by Subsidiary, Parent, the stockholders of Subsidiary or Parent or any other person, be cancelled. 1.4 Shares of stock of Parent issued and outstanding immediately prior to the Effective Time shall not be affected at all by virtue of the Merger and shall continue to be outstanding immediately after the Effective Time. 1.5 At and after the Effective Time, the Surviving Corporation shall possess all the rights, privileges, powers and franchises, of both a public and private nature, and be subject to all the restrictions, disabilities and duties of Subsidiary, and all rights, privileges, powers and franchises of Subsidiary, and all property, real, personal and mixed, and all debts due on whatever account, including subscriptions for shares and including the obligations under the Credit Agreement dated as of May 20, 1993 between Subsidiary and First National Bank of Boston, as agent (the "Credit Agreement"), the obligations under an Indenture dated as of January 15, 1981 between Subsidiary and Continental Illinois National Bank and Trust Company of Chicago with respect to 9% Convertible Subordinated Debentures 3 of 7 due December 31, 1998, as amended by the Supplemental Indenture No. 1 thereto dated as of December 3, 1985 and the Second Supplement to the Indenture dated December 13, 1989 (the "9% Convertible Subordinated Debenture Indenture"), the obligations under an Indenture dated as of June 7, 1983 between Subsidiary and J. Henry Schroder Bank and Trust Company with respect to 9% Subordinated Debentures due December 31, 2007 and the First Supplement thereto dated December 13, 1989 (the "9% Subordinated Debenture Indenture"), the obligations under an Indenture dated as of March 31, 1986 between Subsidiary and First Trust Company, Inc. with respect to 12% Senior Secured Debentures due 2002, as amended by the First Supplement to the Indenture dated as of December 13, 1989 (the "12% Senior Secured Debenture Indenture"), and all other choses in action, and all and every other interest, of or belonging to Subsidiary, shall be taken and deemed to be transferred to and vested in the Surviving Corporation without further act or deed; and title to any real estate, or any interest therein, vested in Subsidiary shall not revert or be in any way impaired by reason of the Merger; and the Surviving Corporation shall thenceforth be responsible and liable for all liabilities and obligations of Subsidiary; and any claim existing or action or proceeding pending by or against Subsidiary may be prosecuted to judgment as if the Merger had not taken place and the Surviving Corporation may be substituted in its place; all with the effect set forth in Section 351.450 of the General and Business Law of Missouri (the "Missouri Law"). 1.6 At the Effective Time, the Surviving Corporation shall execute supplemental indentures assuming the obligations of Subsidiary under the 9% Convertible Subordinated Debenture Indenture, the 9% Subordinated Debenture Indenture, and the 12% Senior Secured Debenture Indenture, pursuant to Sections 13.01, 12.01, and 13.01 thereof, respectively, and shall execute or provide such additional documents as are required pursuant to those provisions. 1.7 At the Effective Time, the Surviving Corporation shall execute assumption agreements assuming the obligations of Subsidiary under the Credit Agreement and shall execute or provide such additional documents as are required pursuant to those agreements. SECTION 2 Effective Time 2.1 Upon satisfaction of the conditions set forth in Section 4 of this Merger Agreement, Parent shall cause Articles of Merger to be executed, verified, attested to, and filed with the Secretary of State of the State of Missouri as provided in Section 351.430 and 351.435 of the Missouri Law. 2.2 The Merger shall become effective (the "Effective Time") upon the issuance of a certificate of merger by the Secretary of State of the State of Missouri. SECTION 3 Articles of Incorporation and By-Laws; Board of Directors 4 of 7 3.1 The Articles of Incorporation of Parent as in effect at the Effective Time shall govern the Surviving Corporation, until they shall be amended as provided by law. 3.2 The By-Laws of Parent as in effect at the Effective Time, subject to alteration, amendment or repeal from time to time by the Board of Directors or the stockholders of the Surviving Corporation, shall govern the Surviving Corporation. 3.3 The members of the Board of Directors of Subsidiary holding office immediately prior to the Effective Time shall be the members of the Board of Directors of the Surviving Corporation and the officers of Subsidiary holding office immediately prior to the Effective Time shall be the officers (holding the same positions as they held with Subsidiary immediately prior to the Effective Time) of the Surviving Corporation and shall hold such offices until the expiration of their current terms, or their prior resignation, removal or death. Exhibit A. SECTION 4 Conditions 4.1 Consummation of the Merger shall be conditioned upon (i) the receipt by Subsidiary of a waiver of Sections 8.12, 10.1.2 (solely with respect to violations of Section 8.12), and 10.1.6(c) of the Credit Agreement, and (ii) the effectiveness of the registration statement on Form S-1 filed by the Parent with respect to the offering of senior secured notes by the Parent in aggregate principal amount expected to result in aggregate offering proceeds of $100,000,000. 5 of 7 IT IS FURTHER RESOLVED, that the President or any Vice President of the Parent is hereby authorized to execute and verify, and the Secretary of the Parent is authorized to attest Articles of Merger effecting the Merger and to file such Articles with the Secretary of State of the State of Missouri, and to take such further action as is deemed necessary and advisable by such officers to effect the Merger. IN WITNESS WHEREOF, Empire Gas Corporation has caused these Articles to be executed in duplicate and verified by Stephen R. Plaster, its President, and attested by Valeria Schall, its Secretary, this 27th day of June, 1994. Empire Gas Corporation By: /s/ Stephen R. Plaster ______________________ Stephen R. Plaster President Attest By: /s/ Valeria Schall ____________________ Valeria Schall Secretary STATE OF MISSOURI ) COUNTY OF LACLEDE ) ss I, Valeria Schall, a notary public, do hereby certify that on the 27th day of June, 1994, personally appeared before me, Stephen R. Plaster, who, being by me first duly sworn, declared that he is the person who signed the foregoing document as President of Empire Gas Corporation and that the statements therein contained are true. /s/ Valeria Schall __________________ Notary Public 6 of 7 IN WITNESS WHEREOF, Empire Gas Operating Corporation has caused these Articles to be executed in duplicate and verified by Larry Weis, its Vice President, and attested by Earl L. Noe, its Secretary, this 27th day of June, 1994. Empire Gas Operating Corporation By: /s/ Larry Weis _______________ Larry Weis Vice President Attest By: /s/ Earl L. Noe _______________ Earl L. Noe Secretary STATE OF MISSOURI ) COUNTY OF LACLEDE ) ss I, Jackie Day, a notary public, do hereby certify that on the 27th day of June, 1994, personally appeared before me, Earl L. Noe, who, being by me first duly sworn, declared that he is the person who signed the foregoing document as Vice President of Empire Gas Operating Corporation and that the statements therein contained are true. /s/ Jackie Day _______________ Notary Public My commission expires 11-30-97 7 of 7 Exhibit A OFFICERS AND DIRECTORS - EMPIRE GAS OPERATING CORPORATION 4/1/94 Officers Robert W. Plaster Chairman of the Board of Chief Executive Office Paul S. Lindsey Vice Chairman of the Board & Chief Operating Officer Stephen R. Plaster President Robert L. Wooldrigde Chief Operating Officer - Eastern James E. Acreman Senior Vice President - Operations Earl L. Noe Senior Vice President - Administration Larry A. Weis Vice President - Treasurer Dwight R. Gilpin Vice President Floyd J. Waterman Vice President Gwen R. VanDerhoef Vice President Thomas Flak Vice President - Data Processing Willis D. Green Vice President - Controller Kevin B. Moran Vice President - Property and Tax Valeria Schall Vice President Mark Buettner Divisional Vice President Robert C. Heagerty Divisional Vice President Kenneth DePrinzio Divisional Vice President Luther Gill Divisional Vice President Paul Stahlman Divisional Vice President Charles Jones Regional Vice President Business address of all of the above is: 1700 S. Jefferson Lebanon, Missouri 65536 Directors Robert W. Plaster Stephen R. Plaster 1700 S. Jefferson 1700 S. Jefferson Lebanon, Missouri 65536 Lebanon, Missouri 65536 Paul S. Lindsey S.A. Spencer 1700 S. Jefferson 685 Fifth Avenue, 14th Floor Lebanon, Missouri 65536 New York, NY 10022 EX-4.2 3 ____________________________________________________________________________ EMPIRE GAS CORPORATION and CERTAIN SUBSIDIARY GUARANTORS HERETO and SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, Trustee ____________________________________________________________________________ Indenture Dated as of June 29, 1994 ____________________________________________________________________________ $127,200,000 Principal Amount at Maturity Senior Secured Notes Due 2004 ____________________________________________________________________________ 2 of 81 CROSS-REFERENCE TABLE Indenture TIA Section Section ___________ _________ 310 (a)(1) 6.10 (a)(2) 6.10 (a)(3) N.A. (a)(4) N.A. (a)(5) 6.10 (b) 6.8; 6.10; 11.2 (c) N.A. 311 (a) 6.11 (b) 6.11 (c) N.A. 312 (a) 2.5 (b) 11.3 (c) 11.3 313 (a) 6.6 (b)(1) N.A. (b)(2) 6.6 (c) 6.6 (d) 6.6 314 (a)(1) 3.10; 11.2 (a)(2) 3.10; 11.2 (a)(3) 3.10; 11.2 (a)(4) 3.9 (b) 10.2 (c)(1) 10.6; 11.4 (c)(2) 10.6; 11.4 (c)(3) N.A. (d) 10.6 (e) 11.5 (f) N.A. 315 (a) 6.1(b) (b) 6.5; 11.2 (c) 6.1(a) (d) 6.1(c) (e) 5.11 316 (a) (last sentence) 2.9 (a)(1)(A) 5.5 (a)(1)(B) 5.4 (a)(2) N.A. (b) 5.7 (c) 8.7 317 (a)(1) 5.8 (a)(2) 5.9 (b) 2.4 318 (a) 11.1 ________________ N.A. means not applicable. 3 of 81 ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 1.2 Other Definitions . . . . . . . . . . . . . . . . . . . . 23 SECTION 1.3 Incorporation by Reference of Trust Indenture Act. . . . . . . . . . 24 SECTION 1.4 Rules of Construction . . . . . . . . . . . . . . . . . . 24 ARTICLE II THE SECURITIES SECTION 2.1 Form and Dating . . . . . . . . . . . . . . . . . . . . . 25 SECTION 2.2 Execution and Authentication. . . . . . . . . . . . . . . 25 SECTION 2.3 Registrar and Paying Agent. . . . . . . . . . . . . . . . 26 SECTION 2.4 Paying Agent To Hold Money in Trust . . . . . . . . . . . 27 SECTION 2.5 Securityholder Lists. . . . . . . . . . . . . . . . . . . 27 SECTION 2.6 Transfer and Exchange . . . . . . . . . . . . . . . . . . 27 SECTION 2.7 Replacement Securities. . . . . . . . . . . . . . . . . . 29 SECTION 2.8 Outstanding Securities. . . . . . . . . . . . . . . . . . 29 SECTION 2.9 Determination of Holders' Action. . . . . . . . . . . . . 30 SECTION 2.10 Temporary Securities. . . . . . . . . . . . . . . . . . . 30 SECTION 2.11 Cancellation. . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 2.12 Defaulted Interest. . . . . . . . . . . . . . . . . . . . 30 ARTICLE III COVENANTS SECTION 3.1 Payment of Securities . . . . . . . . . . . . . . . . . . 31 SECTION 3.2 Maintenance of Office or Agency . . . . . . . . . . . . . 31 SECTION 3.3 Limitation on Restricted Payments.. . . . . . . . . . . . 31 SECTION 3.4 Limitation on Incurrence of Indebtedness. . . . . . . . . 34 SECTION 3.5 Limitation on Payment Restrictions Affecting Subsidiaries . . . . . . . . 35 SECTION 3.6 Limitation on Sale/Leaseback Transactions . . . . . . . . 36 SECTION 3.7 Limitation on Liens . . . . . . . . . . . . . . . . . . . 37 SECTION 3.8 Change of Control . . . . . . . . . . . . . . . . . . . . 39 SECTION 3.9 Compliance Certificate. . . . . . . . . . . . . . . . . . 40 SECTION 3.10 SEC Reports . . . . . . . . . . . . . . . . . . . . . . . 41 SECTION 3.11 Transactions with Affiliates. . . . . . . . . . . . . . . 41 SECTION 3.12 Sales of Assets . . . . . . . . . . . . . . . . . . . . . 42 SECTION 3.13 Corporate Existence . . . . . . . . . . . . . . . . . . . 45 SECTION 3.14 Payment of Taxes and Other Claims . . . . . . . . . . . . 45 SECTION 3.15 Notice of Defaults and Other Events . . . . . . . . . . . 45 SECTION 3.16 Maintenance of Properties and Insurance . . . . . . . . . 45 SECTION 3.17 Limitation on Issuance of Capital Stock and Incurrence of Indebtedness of Restricted Subsidiaries. . . . . . . . 46 SECTION 3.18 Limitation on Changes in the Nature of the Business . . . . . . . . . . . . . 46 ARTICLE IV CONSOLIDATION, MERGER AND SALE SECTION 4.1 Merger and Consolidation of Company . . . . . . . . . . . 46 4 of 81 SECTION 4.2 Successor Substituted . . . . . . . . . . . . . . . . . . 48 ARTICLE V DEFAULTS AND REMEDIES SECTION 5.1 Events of Default . . . . . . . . . . . . . . . . . . . . 48 SECTION 5.2 Acceleration. . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 5.3 Other Remedies. . . . . . . . . . . . . . . . . . . . . . 51 SECTION 5.4 Waiver of Past Defaults . . . . . . . . . . . . . . . . . 51 SECTION 5.5 Control by Majority . . . . . . . . . . . . . . . . . . . 51 SECTION 5.6 Limitation on Suits . . . . . . . . . . . . . . . . . . . 51 SECTION 5.7 Rights of Holders To Receive Payment. . . . . . . . . . . 52 SECTION 5.8 Collection Suit by Trustee. . . . . . . . . . . . . . . . 52 SECTION 5.9 Trustee May File Proofs of Claim. . . . . . . . . . . . . 52 SECTION 5.10 Priorities. . . . . . . . . . . . . . . . . . . . . . . . 53 SECTION 5.11 Undertaking for Costs . . . . . . . . . . . . . . . . . . 53 SECTION 5.12 Waiver of Stay or Extension Laws. . . . . . . . . . . . . 53 ARTICLE VI TRUSTEE SECTION 6.1 Duties of Trustee . . . . . . . . . . . . . . . . . . . . 54 SECTION 6.2 Rights of Trustee . . . . . . . . . . . . . . . . . . . . 55 SECTION 6.3 Individual Rights of Trustee. . . . . . . . . . . . . . . 55 SECTION 6.4 Trustee's Disclaimer. . . . . . . . . . . . . . . . . . . 55 SECTION 6.5 Notice of Defaults. . . . . . . . . . . . . . . . . . . . 56 SECTION 6.6 Reports by Trustee to Holders . . . . . . . . . . . . . . 56 SECTION 6.7 Compensation and Indemnity. . . . . . . . . . . . . . . . 56 SECTION 6.8 Replacement of Trustee. . . . . . . . . . . . . . . . . . 57 SECTION 6.9 Successor Trustee by Merger, etc. . . . . . . . . . . . . 58 SECTION 6.10 Eligibility; Disqualification . . . . . . . . . . . . . . 58 SECTION 6.11 Preferential Collection of Claims Against Company. . . . . . . . . . . . . . . . 58 SECTION 6.12 Paying Agent. . . . . . . . . . . . . . . . . . . . . . . 58 ARTICLE VII SATISFACTION AND DISCHARGE OF INDENTURE SECTION 7.1 Discharge of Liability on Securities; Defeasance . . . . . . . . . . . . . . 59 SECTION 7.2 Termination of Company's Obligations. . . . . . . . . . . 59 SECTION 7.3 Defeasance and Discharge of Indenture . . . . . . . . . . 60 SECTION 7.4 Defeasance of Certain Obligations . . . . . . . . . . . . 62 SECTION 7.5 Application of Trust Money. . . . . . . . . . . . . . . . 63 SECTION 7.6 Repayment to Company. . . . . . . . . . . . . . . . . . . 63 SECTION 7.7 Reinstatement . . . . . . . . . . . . . . . . . . . . . . 64 ARTICLE VIII AMENDMENTS AND SUPPLEMENTS SECTION 8.1 Without Consent of Holders. . . . . . . . . . . . . . . . 64 SECTION 8.2 With Consent of Holders . . . . . . . . . . . . . . . . . 65 5 of 81 SECTION 8.3 Compliance with Trust Indenture Act . . . . . . . . . . . 66 SECTION 8.4 Revocation and Effect of Consents . . . . . . . . . . . . 66 SECTION 8.5 Notation on or Exchange of Securities . . . . . . . . . . 66 SECTION 8.6 Trustee To Sign Amendments. . . . . . . . . . . . . . . . 66 SECTION 8.7 Fixing of Record Dates. . . . . . . . . . . . . . . . . . 67 ARTICLE IX REDEMPTION SECTION 9.1 Notices to Trustee. . . . . . . . . . . . . . . . . . . . 67 SECTION 9.2 Selection of Securities To Be Redeemed. . . . . . . . . . 67 SECTION 9.3 Notice of Redemption. . . . . . . . . . . . . . . . . . . 68 SECTION 9.4 Effect of Notice of Redemption. . . . . . . . . . . . . . 68 SECTION 9.5 Deposit of Redemption Price . . . . . . . . . . . . . . . 68 SECTION 9.6 Securities Redeemed in Part . . . . . . . . . . . . . . . 69 ARTICLE X SECURITY AND PLEDGE OF COLLATERAL SECTION 10.1 Collateral Documents. . . . . . . . . . . . . . . . . . . 69 SECTION 10.2 Recording and Opinions. . . . . . . . . . . . . . . . . . 69 SECTION 10.3 Remedies Upon an Event of Default . . . . . . . . . . . . 70 SECTION 10.4 Release of the Collateral . . . . . . . . . . . . . . . . 70 SECTION 10.5 Purchase of Securities with Net Available Cash . . . . . . . . . . . . 71 SECTION 10.6 Certificates of Company . . . . . . . . . . . . . . . . . 73 SECTION 10.7 Authorization of Actions to be Taken by the Trustee Under the Pledge Agreement. . . . . . . . . . . . . . . 73 ARTICLE XI MISCELLANEOUS SECTION 11.1 Trust Indenture Act Controls. . . . . . . . . . . . . . . 74 SECTION 11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 74 SECTION 11.3 Communication by Holders with Other Holders. . . . . . . . . . . . . . . . 74 SECTION 11.4 Certificate and Opinion as to Conditions Precedent. . . . . . . . . . . . . . . 75 SECTION 11.5 Statements Required in Certificate or Opinion. . . . . . . . . . . . . . . . 75 SECTION 11.6 Rules by Trustee and Agents . . . . . . . . . . . . . . . 75 SECTION 11.7 Legal Holidays. . . . . . . . . . . . . . . . . . . . . . 75 SECTION 11.8 Successors; No Recourse Against Others. . . . . . . . . . 76 SECTION 11.9 Duplicate Originals . . . . . . . . . . . . . . . . . . . 76 SECTION 11.10 Other Provisions. . . . . . . . . . . . . . . . . . . . . 76 SECTION 11.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . 76 ARTICLE XII SUBSIDIARY GUARANTEES SECTION 12.1 Subsidiary Guarantees . . . . . . . . . . . . . . . . . . 76 6 of 81 SECTION 12.2 Execution and Delivery of Subsidiary Guarantees . . . . . . . . . . . . . . 78 SECTION 12.3 Subsidiary Guarantors May Consolidate, Etc. on Certain Terms . . . . . . . . . . . 78 SECTION 12.4 Release of Subsidiary Guarantors. . . . . . . . . . . . . 79 SECTION 12.5 Additional Subsidiary Guarantors. . . . . . . . . . . . . 79 SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 SCHEDULE I--LIST OF SUBSIDIARY GUARANTORS . . . . . . . . . . . . . . . . I1 EXHIBIT A--FORM OF SECURITY . . . . . . . . . . . . . . . . . . . . . . . A1 EXHIBIT B--FORM OF GUARANTEE. . . . . . . . . . . . . . . . . . . . . . . B1 EXHIBIT C--FORM OF SUBORDINATION PROVISIONS . . . . . . . . . . . . . . . C1 EXHIBIT D--PLEDGE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . D1 7 of 81 INDENTURE dated as of June 29, 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 "speci- fied date") with respect to each $1,000 face amount of Securities, the following amount: (i) if the specified date is one of the following dates (each an "accrual date"), the amount set forth opposite such date below: Accrual Date Accreted Value _____________ ______________ July 15, 1994 . . . . . . . . . . . . . .$ 788.20 January 15, 1995. . . . . . . . . . . . . . . . 803.95 July 15, 1995 . . . . . . . . . . . . . . . 820.70 January 15, 1996. . . . . . . . . . . . . . . . 838.53 July 15, 1996 . . . . . . . . . . . . . . . 857.51 January 15, 1997. . . . . . . . . . . . . . . . 877.72 July 15, 1997 . . . . . . . . . . . . . . . 899.22 January 15, 1998. . . . . . . . . . . . . . . . 922.11 July 15, 1998 . . . . . . . . . . . . . . . 946.47 January 15, 1999. . . . . . . . . . . . . . . . 972.40 July 15, 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; and (iii) if the specified date occurs after July 15, 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. 8 of 81 "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 Re- stricted 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 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 trans- actions 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 annu ally) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (in- cluding 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 9 of 81 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 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 Redemp- tion 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 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 consecu- tive 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 10 of 81 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) a majority 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 Directors 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 determi- nation 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 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 11 of 81 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 elimi- nating (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 12 of 81 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 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 extraor- dinary 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 attribut- able 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 Sub- sidiary 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 receiv- ables, 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 Re- stricted 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 13 of 81 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 determina- tion, 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 consoli- dated 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. "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 14 of 81 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 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 pay- ments or contributions to any employee benefit, severance, retirement, stock ownership or stock purchase plan or program or any similar plan or arrange- ment, 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 June 29, 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 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 15 of 81 (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 princi- pal 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 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 obligations, contingent or otherwise, purchased, assumed or with respect to which such 16 of 81 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 Revolving Credit Note, dated as of June 29, 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, or any substantially similar master intercompany note pursuant to any credit facility Incurred pursuant to Section 3.4(b)(iv) refinancing 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 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 17 of 81 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 and evidenced by a Board Resolution, provided that if such fair market value, as determined by the Board of Directors, exceeds $2,500,000 then the Company shall also receive the written opinion of an independent nationally recognized investment banking firm that such valuation of the Board of Directors is fair from a financial point of view. "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). "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 indi- vidual 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 18 of 81 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 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 June 29, 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 corpo- ration; 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, 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 19 of 81 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 Sub- sidiary 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 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 out- standing 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 Matu- rity 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 to the first anniversary of the Stated Maturity of the Securities. 20 of 81 "Refinancing Indebtedness" means Indebtedness that refunds, refinances, replaces, renews, repays or extends (including pursuant to any defeasance or discharge mechanism) (collectively, "refinances," and "refi- nanced" 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 Refi- nancing 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 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 Subsid- iaries. "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 bank- ruptcy or for reorganization relating to the Company whether or not post- filing interest is allowed in such proceeding), whether existing on the 21 of 81 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 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 Securi- ties 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 con- trolled 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 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 22 of 81 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. Sections 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 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. 23 of 81 "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 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 designa- tion by the Board of Directors shall be evidenced to the respective Trustee by promptly filing with the respective Trustee a copy of the board resolu- tion 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 con- trolled 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. 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 24 of 81 "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 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 Security- holder; "indenture to be qualified" means this Indenture; "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; 25 of 81 (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 (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. ARTICLE II THE SECURITIES SECTION 2.1 Form and Dating. The Securities and the Trustee's certificate of authenti- cation 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 Inden- ture, 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. 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. 26 of 81 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. 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. 27 of 81 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 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 con- tinuation 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 rea- sonably 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 transfer in form satis- factory to the Trustee, the Company and each of the Subsidiary Guarantors, duly executed by the registered owner or by his or her attorney duly autho- rized 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 28 of 81 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 Trust- ee, 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 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. 29 of 81 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 Depositary 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 surren- dered 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 re- placement Security with the Subsidiary Guarantee of the Subsidiary Guarantors endorsed thereon if the requirements of Section 8-405 of the Uni- form 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 Secu- rities 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. 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). 30 of 81 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 Guar- antor, 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 deter- mining whether the Trustee shall be protected in relying on any such direc- tion, waiver or consent, only Securities which the Trustee knows are so owned or pledged shall be so disregarded. SECTION 2.10 Temporary Securities. 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 Sub- sidiary 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 Securi- ties 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 31 of 81 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 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 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 32 of 81 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 Re- stricted 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 oc- curred 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 re- ceived 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 Sub- sidiaries 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 ex- changed 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 33 of 81 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 pay- ments 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 Unre- stricted Subsidiaries, or from redesignations of Unre- stricted 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 notwith- standing 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 pro- vided, further, 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) 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 Indebted- ness 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, repur- chased, defeased, acquired or retired, and provided, further, that such purchase, redemption, defeasance or other acquisition or 34 of 81 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 accor- dance 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; (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 contrib- uted 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 July 15, 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: (i) Refinancing Indebtedness (except with respect to Indebtedness referred to in clauses (ii), (iii) or (iv) below); 35 of 81 (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 July 15, 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 or pursuant to a credit facility Incurred pursuant to this Section 3.4(b)(iv) refinancing 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 refi- nance any Subordinated Indebtedness unless such repayment, prepayment, redemption, defeasance, retirement, refunding or refinancing is not pro- hibited by Section 3.3 or unless such Indebtedness shall be contractually subordinated to the Securities at least to the same extent as such Subor- dinated Indebtedness. SECTION WP\ Limitation on Payment Restrictions Affecting Subsidiaries. 36 of 81 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 Sub- sidiary 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; pro- vided, 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); (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 Subsid- iary; (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 equally 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 37 of 81 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 indi- rectly, 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 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 38 of 81 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; (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 Sub- sidiary 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 contem- plation of, such merger or consolidation; and provided, further, that the Lien may not extend to any other property owned by the Company or any Re- stricted 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; pro- vided, 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 and Liens on Intercompany Notes, in any case 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 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 39 of 81 expenses, including premiums, related to the refinancing, refunding, exten- sion, 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 Trans- actions 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 one hundred-one 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 obligation 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; DAT 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 40 of 81 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 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 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 condi- tion, 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. 41 of 81 SECTION 3.10 SEC Reports. The Company shall, to the extent required by TIA Section 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 Section 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 limi- tation, the sale, purchase, exchange or lease of any assets or property or the rendering of any services) with any Affiliate of the Company, any Plas- ter Entity, 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 re- spect 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 transac- tion 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 42 of 81 Directors, of the shares or assets subject to such Asset Sale, (ii) at least 85% 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 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 Avail- able 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) Indebt- edness (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 clauses (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; provided further that in the case of any prepayment or repayment of Indebtedness under the New Credit Facility or Indebtedness Incurred pursuant to Section 3.4(b)(iv) refinancing the New Credit Facility, such related loan commitment shall not be required to be permanently reduced. 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 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 repa- triation 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 43 of 81 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. (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 44 of 81 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 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 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 ac- cepted 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 45 of 81 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 Re- stricted Subsidiary in accordance with the respective organizational docu- ments 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. 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, appli- cability 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 occur- rence 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 46 of 81 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. 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. ARTICLE IV CONSOLIDATION, MERGER AND SALE SECTION 4.1 Merger and Consolidation of Company. 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 a majority 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 47 of 81 (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; (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 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 all conditions precedent herein provided for relat- ing 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 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 (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 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 48 of 81 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 paragraphs (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 Sub- sidiary or Wholly Owned Subsidiaries and no violation of this Section shall be deemed to have occurred as a consequence thereof, as long as the require- ments of paragraphs (a) and (c) are satisfied in connection therewith. SECTION 4.2 Successor Substituted. Upon any such consolidation or merger, or any conveyance, transfer, or disposition of a majority of the properties or assets of the Company in accordance with Section 4.1, 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. In the case of any consolidation, merger or transfer described 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 agree- ments 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 49 of 81 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 neces- sary 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 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 de- fault by the Company or any Subsidiary in the payment when due of any por- tion 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 appli- cable 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 out- standing against all such Persons to exceed $5,000,000 (or its foreign cur- rency 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 (v) admits in writing its inability to generally pay its debts as such debts become due, 50 of 81 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 Sig- nificant 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 Collat- eral; 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 Security- holders under this Section must specify the Default, demand that it be remedied and state that the notice is a "Notice of Default." 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 De- fault 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 51 of 81 the principal amount at maturity and interest shall be due and payable imme- diately. 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 immedi- ately 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 accel- eration 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 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 indemnifica- tion 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 the Trustee security or indemnity reasonably 52 of 81 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 Security-holder. 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. 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 53 of 81 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. SECTION \A\7 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, any stay or extension law wherever enacted, now or at any time hereafter 54 of 81 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 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. 55 of 81 (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 segre- gated 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 be- lieved by it to be genuine and to have been signed or presented by the proper Person. The Trustee 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 investi- gation 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 shall not be accountable for the Company's use of the 56 of 81 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 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 con- nection 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 57 of 81 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 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 petition any court of competent jurisdiction for the appointment of a successor Trustee. 58 of 81 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 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 inter- est on, the Securities when the same shall be due and payable; and 59 of 81 (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 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, sub- ject 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 to the payment of such principal and interest with respect to the Securities. 60 of 81 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, 7.6 and 7.7 shall survive until the Securities are no longer outstanding. Thereafter, only the Company's obligations in Sections 6.7, 6.8, 7.6 and 7.7 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 obli- gations 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 Compa- ny 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 Subsid- iary 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 secu- rity 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 con- sideration 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; 61 of 81 (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 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 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 (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 DAT 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. 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 out- standing. 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 62 of 81 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 (d) and (e) of Section 4.1 and Sections 3.3 through 3.18, and clause (c) of Section 5.1 with respect to clauses (d) and (e) of Section 4.1 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 Compa- ny 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 Subsid- iary 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 secu- rity 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; 63 of 81 (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 and defeasance had not occurred and (D) after the pas- sage 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 bank- ruptcy 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 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 64 of 81 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 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 65 of 81 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; (f) to comply with the requirements of the SEC in con- nection 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 other- wise 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 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); 66 of 81 DAT 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. However, 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 67 of 81 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 solicitation. 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 Secu- rities 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 requirements, if any, and that the Trustee considers, in its sole discre- tion, 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 68 of 81 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 por- tions 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 surren- dered 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 redemp- tion payment, interest on Securities called for redemption ceases to accrue on and after the redemption date; and DAT 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 69 of 81 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 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 limita- tion, 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 first priority Lien intended to be created by the Pledge Agreement, and 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. To the extent required by the TIA, the Company shall also fur- 70 of 81 nish to the Trustee at least annually an Opinion of Counsel either (i) stat- ing that in the opinion of such counsel such action has been taken with respect to the recording, filing, re-recording and refiling 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 reciting the details of such action or (ii) stating that, in the opinion of such counsel, no such action is necessary to maintain such Lien. SECTION 10.3 Remedies Upon an Event of Default. 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 name or in the names of any of its nominees 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 proceed- ing with respect thereto, (iv) to exchange certificates or instruments representing or evidencing the Collateral for certificates or instruments of different denominations, (v) 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 (vi) 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 Collater- al (the "Collateral Sale") if (A) the Company or a Subsidiary receives consideration at the time of the Collateral Sale at least equal to the fair market value, as determined in good faith by the Board of Directors and by an independent engineer, appraiser or other expert, to the extent required by the TIA, of the Collateral subject to the sale or disposition, (B) at least 80% of the consid- eration 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, 71 of 81 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 and an Opinion of Counsel certifying that all conditions precedent hereunder have been met, to the extent required by the TIA, an Opinion of Counsel that the release of such Lien complies with the TIA and such other documents required by Section 10.6 hereof. Upon compliance with the above provisions, the Trustee shall exe- cute, deliver or acknowledge any necessary or proper instruments of termina- tion, 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 (or the agreement governing Indebtedness Incurred pursuant to Section 3.4(b)(iv) refinancing the New Credit Facility) and not otherwise satisfied in connection with such Collateral Sale, to outstanding Indebted- edness Incurred under the New Credit Facility in an amount equal to (A) the outstanding principal amount of Indebtedness to the Company of the Sub- sidiary 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 permitted to be outstanding pursuant to the borrowing formulae contained in the agreement evidencing such Indebtedness plus the Seasonal Overadvance to the extent applicable; (ii) second, to the extent that the balance of such Net Avail- able Cash after application in accordance with clause (i), and to the extent the Company or the Subsidiary elects, to reinvest in Additional Assets, pro- vided, 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 Secu- rities 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 Subsid- iary 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 ten- dered pursuant to an offer by the Company for the Securities (the "Col- 72 of 81 lateral 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 over- subscription) set forth below. If the aggregate purchase price of Securi- ties tendered pursuant to the Collateral 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 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. \DA 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 Securi- ties 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 less than the Collateral Sale Offer Amount, the Paying Agent shall deliver the excess to the Trustee immediately after the expira- tion 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 aggre- gate principal amount of Securities surrendered by Holders exceeds the 73 of 81 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 appro- priate 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 Securi- ties pursuant 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 evi- dence 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, 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). 74 of 81 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. Any notice or communication to a Securityholder shall be mailed by first-class mail to the Security-holder'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. 75 of 81 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 reason- ably 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. 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 76 of 81 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. 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 re- leased 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 Security 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 Security when and as the same shall become due and payable, whether at the Stated Maturity, by acceleration, call for redemption, purchase or otherwise, in accordance with the terms of such Security and of this Indenture; provided, however, that the liability of a Subsidiary Guarantor hereunder shall not exceed at any time the maximum amount of Indebtedness permitted at the time of the grant of such Subsidiary Guarantee or, if greater, at the time payment is required under such Subsidiary Guarantee, to be incurred in compliance with any applicable fraudulent conveyance or similar law. 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 punctu- ally when and as the same shall become due and payable, whether at the Stated Maturity or by acceleration, call for redemption, purchase or other- wise, and as if such payment were made by the Company. 77 of 81 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 Security 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 Securities, any waiver or consent by the Holder of such Security 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 Subsidiary Guarantee will not be discharged in respect of such Security except by complete performance of the obligations contained in such Security and in this Subsidiary Guarantee. Each of the Subsidiary Guar- antors hereby agrees that, in the event of a default in payment of principal (or premium, if any) or interest on such Security, 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 Security, 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 Securities, to collect interest on the Securities, or to enforce or exercise any other right or remedy with respect to the Securities, 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 Securities upon which its guarantee is endorsed against the Company in respect of any amounts paid by such Subsidiary Guarantor on account of such Securities 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 Securities issued hereunder shall have been paid in full. 78 of 81 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 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 Securities, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Securities, whether as a "voidable pref- erence," "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 Securities 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 Securities 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. The delivery of any Security 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 Security. 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 Securities 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 79 of 81 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 Securities and under this Article XII. Any Subsidiary Guarantor not released from its obligations under its Subsidiary Guarantees endorsed on the Securities and under this Article XII shall remain liable for the full amount of principal of and interest on the Securities and for the other obligations of a Subsidiary Guarantor under its Subsidiary Guarantees en- dorsed on the Securities and under this Article XII. (b) Concurrently with the defeasance of the Securities under Section 7.2 hereof, the Subsidiary Guarantors shall be released from all of their obligations under their Subsidiary Guarantees endorsed on the Securities 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 and by an independent engineer, appraiser or other expert, to the extent required by the TIA). (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 Securities 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 Securities. 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 80 of 81 customary exceptions concerning creditors' 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 Securities. 81 of 81 SIGNATURES Dated: June 29, 1994 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: _________________________ I1 of 3 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 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 I2 of 3 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 Empiregas Inc. of Sacramento I3 of 3 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 Hendersonville Empiregas Inc. of North Carolina Empiregas Inc. of Creedmoor Empiregas Inc. of Apex Empiregas Inc. of Durham Empiregas Inc. of Warrenton A1 of 8 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 12 7/8% Senior Secured Note Due 2004 No. 1 $127,200,000 Empire Gas Corporation, a Missouri corporation, promises to pay to Cede & Co., or registered assigns, the principal sum of $127,200,000 Dollars on July 15, 2004. Interest Payment Dates: January 15 and July 15 Record Dates: January 1 and July 1 Additional provisions of this Security are set forth on the reverse hereof. A2 of 8 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: Shawmut Bank Connecticut, National Association, as Trustee, certifies that this is one of the Securities referred to in the Indenture. (SEAL) By: _________________________ Authorized Signature ____________________________________________________________________________ A3 of 8 (Form of Back of Security) Empire Gas Corporation 12 7/8% Senior Secured Note Due 2004 (1) Interest. Empire Gas Corporation, a Missouri corpora- tion (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 7% per annum until July 15, 1999 and at the rate of 12 7/8% per annum from and including July 15, 1999 until maturity. Interest will be payable semiannually (to the holders of record of the Securities at the close of business on the January 1 or July 1 immediately preceding the Interest Payment Date) on each Interest Payment Date, commencing January 15, 1995. 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 June 29, 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 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 June 29, 1994 (the "Indenture") between the Company, the Subsidiary Guarantors (as defined therein) and the Trustee. The Secu- rities are general obligations of the Company limited to $127,200,000 aggre- gate 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 A4 of 8 the Indenture, and references to the principal amount of any Security refer to the Accreted Value of such Security as determined pursuant to the Inden- ture. 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 fol- lowing paragraph, the Company may not redeem the Securities prior to July 15, 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 re- demption prices (expressed in percentages of Accreted Value), plus accrued interest to the redemption date, if redeemed during the 12-month period beginning July 15, Year % ____ _______ 1999 . . . . . . . . . . 106.438 2000 . . . . . . . . . . 103.219 2001, and thereafter . . 100.000 The Company may redeem up to $44.52 million 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 Value), plus accrued interest to the redemption date, of 110% if redeemed at any time prior to July 15, 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 "speci- fied 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 ____________ ______________ July 15, 1994 $ 788.20 January 15, 1995 803.95 July 15, 1995 820.70 January 15, 1996 838.53 July 15, 1996 857.51 January 15, 1997 877.72 July 15, 1997 899.22 January 15, 1998 922.11 July 15, 1998 946.47 January 15, 1999 972.40 July 15, 1999 $1,000.00; A5 of 8 (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; and (iii) if the specified date occurs after July 15, 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 endorse- ments 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 101% of the principal amount of the Securities to be repurchased plus ac- crued interest to the date of repurchase as provided in, and subject to the terms of, the Indenture. (10) Defeasance. Subject to certain conditions, the Compa- ny 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 Agree- ment. 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 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 excep- tions, (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 A6 of 8 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 incon- sistency, 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 con- tinuing, 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 provi- sions of the TIA, the Trustee under the Indenture, 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 A7 of 8 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 text of this Security in larger type. Re- quests may be made to: Secretary, Empire Gas Corporation, 1700 South Jefferson Street, P.O. Box 303, Lebanon, Missouri, 65536 Attention: Secretary. A8 of 8 ____________________________________________________________________________ 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: _____________________________________________________ B1 of 3 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 Security 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 Security 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; provided, however, that the liability of a Subsidiary Guarantor hereunder shall not exceed at any time the maximum amount of Indebtedness permitted at the time of the grant of each Subsidiary Guarantee or, if greater, at the time payment is required under such Subsidiary Guarantee, to be incurred in compliance with any applicable fraudulent conveyance or similar law. 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 Security or the Indenture, the absence of any action to enforce the same, or any re- lease 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 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 Security 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 B2 of 3 on such Security, 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 Security, 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 exercis- ing their respective rights to accelerate the maturity of the Securities, to collect interest on the Securities, or to enforce or exercise any other right or remedy with respect to the Securities, 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. Each Subsidiary Guarantor shall be subrogated to all rights of the Holder of this Security 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 Securities, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Securities 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 Securities 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. B3 of 3 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 this Subsidiary Guarantee for the benefit of the Holder of this Security 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 Security 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________________________________________ Name: Paul S. Lindsey, Jr. Title: President of each of the SUBSIDIARY GUARANTORS Attest: ___________________________ Name: Title: C1 of 5 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 forward 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 execu- tion 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 C2 of 5 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 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 C3 of 5 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: (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 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 C4 of 5 (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. 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 rea- sonable 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 C5 of 5 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. 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. 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 Repre- sentative. 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. EX-4.3 4 WARRANT AGREEMENT between EMPIRE GAS CORPORATION and SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, Warrant Agent _________________________ Dated as of June 29, 1994 2 of 29 WARRANT AGREEMENT AGREEMENT dated as of June 29, 1994 (this "Agreement") be- tween Empire Gas Corporation, a Missouri corporation (the "Company"), and Shawmut Bank Connecticut, National Association, a National Banking Associa- tion, as warrant agent (the "Warrant Agent"). Pursuant to the terms of an Underwriting Agreement dated as of June 23, 1994 between the Company and Morgan Stanley & Co. Incorporated, as Underwriter (the "Underwriting Agreement"), the Company has agreed to issue and sell 12,720 units (the "Units"). Each Unit will consist of (i) ten 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 29, 1994 between the Compa- ny, each of the Subsidiary Guarantors (as defined therein) and Shawmut Bank Connecticut, National Association, as trustee, and (ii) 13.8 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 $.01 per share. The Senior Secured Notes and the Warrants included in each Unit will become separately transferable on January 15, 1995. 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 1. 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 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. "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 3 of 29 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. "Current Market Value" has the meaning specified in Section 4.1(f). "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 July 15, 2004. "Final Surrender Date" has the meaning specified in Section 3.4(b). "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. 4 of 29 "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). "Repurchase Event" means, and shall be deemed to occur if at any time prior to July 15, 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 substan- tially 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 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. "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 January 15, 1995. "Underwriter" has the meaning specified in the recitals to this Agreement. "Underwriting Agreement" 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). 5 of 29 "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 2. 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 War- rant 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 interests 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"). 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. 1. 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 6 of 29 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 REPRESEN- TATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRE- SENTATIVE 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 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. 2. Prior to the Separation Date, each Warrant Certificate shall bear the following legend on the face thereof: THE WARRANTS ARE INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF(I) TEN 12 7/8% SENIOR SECURED NOTES DUE 2004 OF EMPIRE GAS CORPORATION AND (II) 13.8 WARRANTS. PRIOR TO JANUARY 15, 1995, THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EX- CHANGED ONLY TOGETHER WITH, THE SENIOR SECURED NOTES ISSUED BY EMPIRE GAS CORPORATION IN CON- NECTION HEREWITH. Section 2.3 Execution and Delivery of Warrant Certificates. Warrant Certificates evidencing Warrants to purchase initially an aggregate of up to 175,536 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 7 of 29 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. ARTICLE 3. 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 $.01 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 4:00 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 shall be exercised, such Warrant Certificate shall be surrendered and a new Warrant Certificate 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 8 of 29 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 of Common Stock or other securities purchasable upon the exercise of the Warrants shall be closed, the certifi- cates 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 re- quired by law, shall not be closed at any one time for a period longer than 20 days. Section 3.4 Repurchase Offers. 1. 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. 2. 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 4:00 p.m., New York City time on the date (the "Final Surrender Date") 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. 3. Repurchase Offers. a. In any Repurchase Offer, the Company shall offer to purchase for cash at the Repurchase Price 9 of 29 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. b. Each Holder may, but shall not be obligated to, accept such Repurchase Offer, by tendering to the Warrant Agent, on or prior to the 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 re- sponsible for the payment of any transfer taxes required as the result of any change in ownership of such Warrants. 4. Repurchase Price. a. 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. b. The Relevant Value of the Common Stock and other securities or property issuable upon exercise of all the Warrants, will be: (1) If the Common Stock (or other securi- ties) 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 avail- able. (2) If the Common Stock (or other securi- ties) is not registered under the Exchange Act or if the value cannot be computed under clause (I) 10 of 29 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 minority 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 con- taining 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 provisions 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 Value Report of the Independent Financial Ex- pert. 5. Selection of Independent Financial Expert. 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. 6. 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 Repurchase Offer, (ii) the manner in which Warrants may be surrendered to the Warrant Agent for repurchase by the 11 of 29 Company, (iii) the Repurchase Price at which the Warrants will be repur- chased 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 Repurchase 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. 7. 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 the Final surrender Date and 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 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 delivered to a Person other than the Holder. 8. 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 4. 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: 1. 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 securities 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 12 of 29 become effective immediately after the effective date of such event retro- active to the record date, if any, for such event. 2. 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 sub- scribe for or purchase Common Stock at a price per share which is lower (at the record date for such issuance) than the then Current Market Value per share of Common Stock, 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 then Current Market Value per share of Common Stock. 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. 3. 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 securities, by dividing (x) the total amount receivable by the Company in consideration of the sale and issuance of such rights, options, warrants or convertible 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 convertible or exchangeable securities) that is lower than the Current Market Value per share of the Common Stock in effect immediately prior to such sale or issu- ance, 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 (deter- mined as provided below) for such sale or issuance would purchase at such Current Market Value per share of Common Stock. 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 exchangeable securities shall be 13 of 29 entitled to subscribe for or purchase shall be deemed to be issued and out- standing 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 securities 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- 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. 4. 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 shareholders entitled to receive such distribution. 5. 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 14 of 29 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 readjustment 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 number, 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. 6. 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: a. if the security is not registered under the Exchange Act, the value of the security (l) 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 deter- mination 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 3.4(d)(ii)(II); provided, however, that in determin- ing the value of the Common Stock under Section 4.5, if the foregoing clause (l) 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 b. if the security is registered under the Ex- change Act, 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 15 of 29 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 determined as if the security were not registered under the Exchange Act. 7. 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. 8. 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 immediately prior to such adjustment and the denominator of which shall be the number of shares so purchasable immediately thereafter. 9. Consolidation, Merger, Etc. a. 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 Agree- ment 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 purchasable upon exercise of 16 of 29 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. b. 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 con- nection therewith, consideration is payable to holders of Common Stock in exchange for their Common Stock in connec- tion 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 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 surrendering 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 17 of 29 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. Section 4.3 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 4:00 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 reorganization 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 securities, 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 18 of 29 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 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 5. 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 Warrants. 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 6. LOSS OR MUTILATION Upon receipt by the Company and the Warrant Agent of evidence satisfactory 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 can- cellation thereof, then, in the absence of notice to the Company or the Warrant Agent that the Warrants represented 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 Cer- tificate 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 Certificates shall be at any time enforceable by anyone, 19 of 29 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 7. 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 appropriate 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. 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. 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 8. 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 20 of 29 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 Company, 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 10 Senior Secured Notes and 13.8 Warrants. Prior to the Separation Date, the Warrants may not be trans- ferred 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 complying 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 register. 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 Security, 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 Certifi- cates are presented to the Warrant Agent with a request to register the transfer or to exchange them for an equal amount of Warrants of other authorized denominations, the Warrant Agent shall register the transfer or make the exchange as requested if its requirements for such transactions 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 in connection with any registration of transfer of Warrants. Section 8.2 Book-Entry Provisions for Global Warrant. 1. 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 Mem- bers") 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 whatso- ever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Warrant Agent or any agent of the Company or the Warrant Agent, 21 of 29 from giving effect to any written certification, proxy or other authoriza- tion furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exer- cise of the rights of a holder of any Warrants. 2. Transfers of the Global Warrant shall be limited to transfers 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 and the provisions of Sec- tion 8.3. 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 ap- pointed by the Company within 90 days of such notice. 3. In connection with any transfer of a portion of the beneficial interests in the Global Warrant to beneficial owners pursuant to paragraph (b) of this Section, the Warrant Agent shall reflect on its books and 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. 4. 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. 5. Any Physical Security delivered in exchange for an interest in the Global Warrant pursuant to paragraphs (b) or (d) of this Section shall, except as otherwise provided by paragraph (f) of Section 8.3, bear the legend regarding transfer restrictions applicable to the Physical Security set forth in Section 2.2. 6. 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 reasonable written notice to the Warrant Agent. 22 of 29 Section 8.3 Surrender of Warrant Certificates. Any Warrant Certificate 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, 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 9. 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 stock- holders 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 institute 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 10. 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 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 12 7/8% from the date of the Default to the date of payment, which interest shall compound quarterly (all 23 of 29 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 provision of this Warrant Agreement, if a Default occurs and is continuing, the Holders of the Warrants may pursue any available remedy to collect the Repurchase 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 11. 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 represen- tations 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 number or kind or amount of stock or other securities or other property deliverable 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 responsibility 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 Certificate or any other documents or any signatures are genuine or properly authorized, (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 re- quested) 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 24 of 29 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 shall not be answerable or accountable for any act, default, neglect or misconduct 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 obligation 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 incurred 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 25 of 29 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 war- rant agent. If the Company shall fail to make such appointment 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 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 26 of 29 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. ARTICLE 12. 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 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 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 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 property, 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 27 of 29 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 operations). 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 adjustments. 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 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. 1. 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 28 of 29 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. 2. 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 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 Certificate 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 respective 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. 29 of 29 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: 1 of 9 EXHIBIT A FORM OF WARRANT CERTIFICATE [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 REPUR- CHASE, 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 (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.] THE WARRANTS ARE INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS. EACH UNIT CONSISTS OF (i) 10 SENIOR SECURED NOTES AND (ii) 13.8 WAR- RANTS OF THE COMPANY. PRIOR TO JANUARY 15, 1995, THE WARRANTS EVI- DENCED 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 CON- NECTION HEREWITH. CUSIP No. 291714129 No. Certificate for Warrants _____ _______ _______________________ [FN] Include only for Global Security. 2 of 9 WARRANTS TO PURCHASE COMMON STOCK This certifies that _____________, or its registered as- signs, 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 be- low), 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 $.01 per share (subject to adjustment as provided in the Warrant Agreement hereinaf- ter 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 purchase 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 January 15, 1995. This Warrant Certificate is issued under and in accordance with a Warrant Agreement dated as of June 29, 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, obligations, 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. 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 July 15, 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 such 3 of 9 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 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 12 7/8% 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 substantially all of its property and assets to, another Person (other than an Affiliate 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 substantially 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. 4 of 9 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 shall 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 nonassessable, and the Company 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 satisfactory to the Company and the Warrant Agent duly executed, with signatures guaranteed 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 represented 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 Certificates 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, 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 enti- tled to receive any notice of any proceedings of the Company except as pro- vided in the Warrant Agreement. 5 of 9 This Warrant Certificate shall be void and all rights evi- denced hereby shall cease on July 15, 2004 unless sooner terminated by the liquidation, dissolution 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. 6 of 9 This Warrant Certificate shall not be valid for any purpose until it shall have been countersigned by the Warrant Agent. Dated: EMPIRE GAS CORPORATION By: ______________________ Name: Title: Countersigned: Shawmut Bank Connecticut, National Association, as Warrant Agent By: _________________________ Authorized Signature 7 of 9 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 ___ share[s] (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: _____________________________ (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: ________________________________ [FN] 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. 8 of 9 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 War- rant Certificate for repurchase by EMPIRE GAS CORPORATION for the consider- ation set forth in said notice. Dated: _____________________________ (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: _________________________________ [FN] 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. 9 of 9 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 assigned 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 substitution in the premises. Dated: _____________________________ (Signature of Owner) _____________________________ (Street Address) _____________________________ (City) (State) (Zip Code) Signature Guaranteed By: ___________________________________ [FN] 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. EX-10.3 5 ____________________________________________________________________________ ____________________________________________________________________________ LOAN AND SECURITY AGREEMENT DATED AS OF JUNE 29, 1994 AMONG EMPIRE GAS CORPORATION, AS BORROWER, CONTINENTAL BANK N.A., AS AGENT AND A LENDER, AND THE OTHER LENDERS PARTY HERETO ____________________________________________________________________________ ____________________________________________________________________________ 2 of 78 TABLE OF CONTENTS Page 1. DEFINITIONS AND OTHER TERMS. . . . . . . . . . . . . . . . . . . . . . 5 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . 5 1.2 Other Definitional Provisions . . . . . . . . . . . . 20 1.3 Interpretation of Agreement . . . . . . . . . . . . . 20 1.4 Compliance with Financial Restrictions. . . . . . . . 20 2. LOANS; LETTERS OF CREDIT; OTHER MATTERS. . . . . . . . . . . . . . . . 20 2.1 Loans . . . . . . . . . . . . . . . . . . . . . . . . 20 2.2 Letters of Credit . . . . . . . . . . . . . . . . . . 22 2.3 Loan Account; Demand Deposit Account. . . . . . . . . 24 2.4 Interest and Fees . . . . . . . . . . . . . . . . . . 25 2.5 Requests for Loans; Borrowing Base Certificates; Other Information . . . . . . . . . . . . . . . . . . 25 2.6 Statements. . . . . . . . . . . . . . . . . . . . . . 26 2.7 Overdraft Loans . . . . . . . . . . . . . . . . . . . 26 2.8 Over Advances . . . . . . . . . . . . . . . . . . . . 27 2.9 All Loans One Obligation. . . . . . . . . . . . . . . 27 2.10 Making of Payments; Application of Collections; Charging of Accounts. . . . . . . . . . . . . . . . . 27 2.11 Agent's Election Not to Enforce . . . . . . . . . . . 29 2.12 Reaffirmation . . . . . . . . . . . . . . . . . . . . 29 2.13 Setoff. . . . . . . . . . . . . . . . . . . . . . . . 29 2.14 Closing Fee . . . . . . . . . . . . . . . . . . . . . 29 2.15 Settlements, Distributions and Apportionment of Payments. . . . . . . . . . . . . . . . . . . . . . . 29 3. COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 3.1 Grant of Security Interest. . . . . . . . . . . . . . 30 3.2 Accounts Receivable . . . . . . . . . . . . . . . . . 31 3.3 Inventory . . . . . . . . . . . . . . . . . . . . . . 34 3.4 Supplemental Documentation. . . . . . . . . . . . . . 35 3.5 Collateral for the Benefit of Agent and Lenders . . . 35 4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 36 4.1 Organization. . . . . . . . . . . . . . . . . . . . . 36 4.2 Authorization . . . . . . . . . . . . . . . . . . . . 36 4.3 No Conflicts. . . . . . . . . . . . . . . . . . . . . 36 4.4 Validity and Binding Effect . . . . . . . . . . . . . 37 4.5 No Default. . . . . . . . . . . . . . . . . . . . . . 37 4.6 Financial Statements. . . . . . . . . . . . . . . . . 37 4.7 Insurance . . . . . . . . . . . . . . . . . . . . . . 37 4.8 Litigation; Contingent Liabilities. . . . . . . . . . 37 4.9 Liens . . . . . . . . . . . . . . . . . . . . . . . . 38 4.10 Subsidiaries. . . . . . . . . . . . . . . . . . . . . 38 4.11 Partnerships; Joint Ventures. . . . . . . . . . . . . 38 4.12 Business and Collateral Locations . . . . . . . . . . 38 4.13 Senior Notes. . . . . . . . . . . . . . . . . . . . . 39 4.14 Eligibility of Collateral . . . . . . . . . . . . . . 39 4.15 Intentionally Omitted . . . . . . . . . . . . . . . . 39 3 of 78 4.16 Patents, Trademarks, etc. . . . . . . . . . . . . . . 39 4.17 Solvency. . . . . . . . . . . . . . . . . . . . . . . 39 4.18 Contracts; Labor Matters. . . . . . . . . . . . . . . 39 4.19 Pension and Welfare Plans . . . . . . . . . . . . . . 40 4.20 Regulations G and U . . . . . . . . . . . . . . . . . 40 4.21 Compliance. . . . . . . . . . . . . . . . . . . . . . 40 4.22 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 40 4.23 Investment Company Act Representation . . . . . . . . 41 4.24 Public Utility Holding Company Act Representation . . 41 4.25 Environmental and Safety and Health Matters . . . . . 41 4.26 Related Agreements. . . . . . . . . . . . . . . . . . 42 4.27 Capitalized Lease Obligations . . . . . . . . . . . . 42 5. BORROWER COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 42 5.1 Financial Statements and Other Reports. . . . . . . . 42 5.2 Notices . . . . . . . . . . . . . . . . . . . . . . . 44 5.3 Existence . . . . . . . . . . . . . . . . . . . . . . 47 5.4 Nature of Business. . . . . . . . . . . . . . . . . . 47 5.5 Books, Records and Access . . . . . . . . . . . . . . 47 5.6 Insurance . . . . . . . . . . . . . . . . . . . . . . 48 5.7 Intentionally Omitted . . . . . . . . . . . . . . . . 48 5.8 Repair. . . . . . . . . . . . . . . . . . . . . . . . 48 5.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 48 5.10 Compliance. . . . . . . . . . . . . . . . . . . . . . 49 5.11 Pension Plans . . . . . . . . . . . . . . . . . . . . 49 5.12 Merger, Purchase and Sale . . . . . . . . . . . . . . 49 5.13 Restricted Payments . . . . . . . . . . . . . . . . . 49 5.14 Borrower's and Subsidiaries' Stock. . . . . . . . . . 50 5.15 Indebtedness. . . . . . . . . . . . . . . . . . . . . 50 5.16 Liens . . . . . . . . . . . . . . . . . . . . . . . . 50 5.17 Guaranties. . . . . . . . . . . . . . . . . . . . . . 51 5.18 Investments . . . . . . . . . . . . . . . . . . . . . 51 5.19 Subsidiaries. . . . . . . . . . . . . . . . . . . . . 51 5.20 Intentionally Omitted . . . . . . . . . . . . . . . . 52 5.21 Change in Accounts Receivable . . . . . . . . . . . . 52 5.22 Environmental Issues. . . . . . . . . . . . . . . . . 52 5.23 Related Agreements. . . . . . . . . . . . . . . . . . 52 5.24 Unconditional Purchase Options. . . . . . . . . . . . 52 5.25 Use of Proceeds . . . . . . . . . . . . . . . . . . . 53 5.26 Transactions with Related Parties . . . . . . . . . . 53 5.27 Amendment of Documents. . . . . . . . . . . . . . . . 53 6. DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 6.1 Event of Default. . . . . . . . . . . . . . . . . . . 53 6.2 Effect of Event of Default; Remedies. . . . . . . . . 56 7. ADDITIONAL PROVISIONS REGARDING COLLATERAL AND AGENT'S RIGHTS. . . . . 57 7.1 Notice of Disposition of Collateral . . . . . . . . . 57 7.2 Application of Proceeds of Collateral . . . . . . . . 57 7.3 Care of Collateral. . . . . . . . . . . . . . . . . . 57 7.4 Performance of Borrower's Obligations . . . . . . . . 57 7.5 Agent's Rights. . . . . . . . . . . . . . . . . . . . 57 8. CONDITIONS PRECEDENT; DELIVERY OF DOCUMENTS AND OTHER MATTERS. . . . . 58 8.1 Conditions Precedent to Initial Loans . . . . . . . . 58 8.2 Continuing Conditions Precedent to all Loans; Certification . . . . . . . . . . . . . . . . . . . . 62 4 of 78 9. INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 9.1 Environmental and Safety and Health Indemnity . . . . 63 9.2 General Indemnity . . . . . . . . . . . . . . . . . . 63 9.3 Capital Adequacy. . . . . . . . . . . . . . . . . . . 64 10. AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 10.1 Appointment of Agent. . . . . . . . . . . . . . . . . 64 10.2 Nature of Duties of Agent . . . . . . . . . . . . . . 64 10.3 Agent in its Capacity as Lender . . . . . . . . . . . 65 10.4 Independent Credit Analysis . . . . . . . . . . . . . 65 10.5 General Immunity. . . . . . . . . . . . . . . . . . . 65 10.6 Action by Agent.. . . . . . . . . . . . . . . . . . . 66 10.7 Right to Indemnity. . . . . . . . . . . . . . . . . . 67 10.8 Rights and Remedies to be Exercised by Agent Only.. . 67 10.9 Agent's Resignation.. . . . . . . . . . . . . . . . . 67 10.10 Disbursement of Proceeds of Loans and Other Advances. 68 10.11 Release of Collateral.. . . . . . . . . . . . . . . . 68 10.12 Agreement to Cooperate. . . . . . . . . . . . . . . . 68 10.13 Sharing of Collateral.. . . . . . . . . . . . . . . . 68 10.14 Lenders to Act as Agents. . . . . . . . . . . . . . . 69 11. ADDITIONAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . 69 12. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 12.1 Borrower Waiver . . . . . . . . . . . . . . . . . . . 69 12.2 Power of Attorney . . . . . . . . . . . . . . . . . . 69 12.3 Expenses; Attorneys' Fees . . . . . . . . . . . . . . 70 12.4 Continental's Fees and Charges. . . . . . . . . . . . 71 12.5 Lawful Interest . . . . . . . . . . . . . . . . . . . 71 12.6 No Waiver by Agent or any Lender; Amendments. . . . . 71 12.7 Termination of Revolving Credit . . . . . . . . . . . 72 12.8 Notices . . . . . . . . . . . . . . . . . . . . . . . 72 12.9 Assignments and Participations; Information . . . . . 73 12.10 Severability. . . . . . . . . . . . . . . . . . . . . 75 12.11 Successors. . . . . . . . . . . . . . . . . . . . . . 75 12.12 Construction. . . . . . . . . . . . . . . . . . . . . 75 12.13 Consent to Jurisdiction . . . . . . . . . . . . . . . 75 12.14 Subsidiary Reference. . . . . . . . . . . . . . . . . 75 12.15 Waiver of Jury Trial. . . . . . . . . . . . . . . . . 75 5 of 78 LOAN AND SECURITY AGREEMENT THIS AGREEMENT ("Agreement") is made as of this 29th day of June, 1994 by and among CONTINENTAL BANK N.A. (in its individual capacity, "Continental"), a national banking association having its principal office at 231 South LaSalle Street, Chicago, Illinois 60697, as Agent and a Lender hereunder, the other Lenders from time to time party hereto, and EMPIRE GAS CORPORATION ("Borrower"), a Missouri corporation having its principal office at 1700 South Jefferson Street, Lebanon, Missouri 65536. W I T N E S S E T H: _ _ _ _ _ _ _ _ _ _ WHEREAS, Borrower may, from time to time, request loans or other financial accommodations from Lenders, and the parties wish to provide for the terms and conditions upon which such loans or other financial accommodations shall be made; NOW, THEREFORE, in consideration of any loan or advance or grant of credit (including any loan or advance or grant of credit by renewal or extension) hereafter made to Borrower by, or on behalf of, Lenders, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. DEFINITIONS AND OTHER TERMS. 1.1 Definitions. In addition to terms defined elsewhere in this Agreement or any Supplement, Schedule or Exhibit hereto, when used herein, the following terms shall have the following meanings (such meanings shall be equally applicable to the singular and plural forms of the terms used, as the context requires): "Account Debtor" means any Person who is or who may become obligated to Borrower or any Subsidiary under, with respect to, or on account of an Account Receivable, Contract Right or other Collateral. "Account Receivable" means any account of Borrower or any Subsidiary and any other right of Borrower or any Subsidiary to payment for goods sold or leased or for services rendered, whether or not evidenced by an instrument or chattel paper and whether or not yet earned by performance. "Acquisitions" means, collectively, the acquisitions from time to time by Borrower of other businesses engaged in businesses comparable to those conducted by Borrower and the Subsidiaries, including without limitation the acquisition of PSNC Propane Corporation consummated on the date hereof. "Adjusted Reference Rate" has the meaning ascribed to such term in Supplement A. "Agent" means Continental in its capacity as agent for Lenders hereunder and under the Related Agreements, or any successor agent pursuant to Section 10. "Agreement" means this Loan and Security Agreement, as the same may be amended, modified or supplemented from time to time. 6 of 78 "Application" means an application by Borrower, in a form and containing terms and provisions acceptable to Agent and Issuing Bank, for the issuance by Issuing Bank of a Letter of Credit. "Assignee Deposit Account" has the meaning ascribed to such term in Section 3.2(d). "Assignment and Acceptance Agreement" means an agreement in the form of Exhibit D pursuant to which a Lender assigns all or a portion of its rights, and delegates all or such portion of its obligations, under this Agreement and the Related Agreements, to another Person. "Attorneys' Fees" has the meaning ascribed to such term in Section 12.3. "Banking Day" means any day other than a Saturday, Sunday or legal holiday on which banks are authorized or required to be closed for the conduct of commercial banking business in Chicago, Illinois; provided, with respect to LIBOR Rate Loans, Banking Days shall not include a day on which dealings in U.S. Dollars may not be carried on by Continental in the London interbank LIBOR market. "Borrower" has the meaning ascribed to such term in the Preamble. "Borrower Collateral" has the meaning ascribed to such term in Section 3.1. "Borrowing Base" has the meaning ascribed to such term in Supplement A. "Borrowing Base Certificate" means a certificate in the form of Exhibit A attached hereto, executed and certified as accurate by an officer of Borrower designated in writing by Borrower to Lender pursuant to resolutions of the Board of Directors of Borrower. "Borrowing Subsidiary" means any Subsidiary identified in writing to Agent by Borrower from time to time as a Borrowing Subsidiary and that has satisfied, in form and substance satisfactory to Agent in its sole discretion, each of the following requirements: (i) such Subsidiary has executed a guaranty in favor of Agent, for the benefit of itself and Lenders, pursuant to which such Subsidiary has unconditionally guarantied the Liabilities; (ii) such Subsidiary has entered into a security agreement with Agent, for the benefit of itself and Lenders, pursuant to which such Subsidiary has granted a security interest in its accounts receivable, inventory, and certain related assets to Agent, for the benefit of itself and Lenders, as collateral for the guaranty described in clause (i) above, and Agent, for the benefit of itself and Lenders has a validly perfected first priority security interest in such assets; (iii) such Subsidiary has entered into a security agreement with Borrower pursuant to which such Subsidiary has granted a security interest in its accounts receivable, inventory, and certain related assets to Borrower as security for the Intercompany Loans, and Borrower has a validly perfected second priority security interest in such assets; (iv) such Subsidiary has executed the Intercompany Agreement and such other agreements, instruments and documents as Agent shall require in order to evidence such Subsidiary's Intercompany Loans and (v) Borrower has assigned the proceeds of such Subsidiary's Intercompany Loan, all of the agreements, instruments and documents described in clause (iv), and the second priority security 7 of 78 interest related thereto, to Agent, for the benefit of itself and Lenders. The Borrowing Subsidiaries as of the date hereof are designated as such on Schedule 4.10 hereto. Any Subsidiary which is a Restricted Subsidiary shall be required to be a Borrowing Subsidiary. "Capitalized Lease" means any lease which is or should be capitalized on the balance sheet of the lessee in accordance with GAAP. "Closing Date" means the first date on which Loans are made, or Letters of Credit are issued, under this Agreement. "Code" means the Internal Revenue Code of 1986, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of the Code shall be construed to also refer to any successor sections. "Collateral" means, collectively, (a) Borrower Collateral and (b) the Obligor Collateral. "Continental" has the meaning ascribed to such term in the Preamble. "Contract Right" means any right of Borrower or any Subsidiary to payment under a contract for the sale or lease of goods or the rendering of services, which right is not yet earned by performance. "Credit" means the facility established under this Agreement pursuant to which Lenders will make Revolving Loans (the "Revolving Credit") to Borrower, and/or cause Issuing Bank to issue Letters of Credit for the account of Borrower. "Default Rate" means, with respect to a Loan, the rate of interest which is applicable to such Loan after the occurrence of an Event of Default, as determined pursuant to Supplement A. "Demand Deposit Account" has the meaning ascribed to such term in Section 2.3. "Depository Accounts" has the meaning ascribed to such term in Section 3.2(d). "Disproportionate Advance" has the meaning ascribed to such term in Section 2.1.1(a). "Eligible Account Receivable" means an Account Receivable owing to a Borrowing Subsidiary which meets the following requirements: (a) it is genuine and in all respects what it purports to be; (b) it arises from either (i) the performance of services by such Borrowing Subsidiary, which services have been fully performed and, if applicable, acknowledged and/or accepted by the Account Debtor with respect thereto or (ii) the sale or lease of goods by such Borrowing Subsidiary; and if it arises from the sale or lease of goods, (A) such goods comply with such Account Debtor's specifications (if any) and have been shipped to, or Page> 8 of 78 delivered to and accepted by, such Account Debtor and neither Borrower nor such Borrowing Subsidiary has knowledge that the Account Debtor has failed to accept delivery of all or a portion of such goods, and (B) such Borrowing Subsidiary has possession of shipping and delivery receipts evidencing such shipment, delivery and acceptance; (c) it (i) is evidenced by an invoice rendered to the Account Debtor with respect thereto which (A) is dated not earlier than the date of shipment or performance and (B) has payment terms not unacceptable to Agent in its reasonable judgment and (ii) meets the additional Eligible Account Receivable requirements set forth in Supplement A; (d) it is not subject to any assignment, claim or Lien, other than (i) a Lien in favor of Agent, for the benefit of itself and Lenders, (ii) a Lien in favor of Borrower to secure the Intercompany Loans, so long as Borrower has assigned such Lien to Agent, for the benefit of itself and Lenders, (iii) a Lien for current Taxes not delinquent, (iv) a carrier's, warehouseman's, materialman's or other like statutory Lien arising in the ordinary course of business and securing obligations which are not overdue, or (v) a Lien consented to by Agent in writing; (e) to Borrower's knowledge, it is a valid, legally enforceable and unconditional obligation of the Account Debtor with respect thereto, and is not subject to setoff, counterclaim, credit or allowance (except any credit or allowance which has been deducted in computing the net amount of the applicable invoice as shown in the original schedule or Borrowing Base Certificate furnished to Agent identifying or including such Account Receivable) or adjustment by the Account Debtor with respect thereto, or to any claim by such Account Debtor denying liability thereunder in whole or in part, and such Account Debtor has not refused to accept any of the goods or services which are the subject of such Account Receivable or offered or attempted to return any of such goods; (f) to Borrower's knowledge, there are no proceedings or actions which are then threatened or pending against the Account Debtor with respect thereto or to which such Account Debtor is a party which might result in any material adverse change in such Account Debtor's financial condition or in its ability to pay any Account Receivable in full when due; (g) it does not arise out of a contract which, by its terms, forbids, restricts or makes void or unenforceable the assignment by such Borrowing Subsidiary to Agent, for the benefit of itself and Lenders, of the Account Receivable arising with respect thereto; (h) the Account Debtor with respect thereto is not a Subsidiary, Related Party or Obligor, or a director, officer, employee or agent of Borrower, a Subsidiary, Related Party or Obligor; (i) the Account Debtor with respect thereto is a resident or citizen of, and is located within, the United States of America; (j) it is not an Account Receivable arising from a "sale on approval," "sale or return" or "consignment," or subject to any other repurchase or return agreement; (k) it is not an Account Receivable with respect to which possession and/or control of the goods sold giving rise thereto is held, 9 of 78 maintained or retained by such Borrowing Subsidiary or any Subsidiary, Related Party or other Obligor (or by any agent or custodian of such Borrowing Subsidiary, any Subsidiary, Related Party or Obligor) for the account of or subject to further and/or future direction from the Account Debtor thereof; (l) it is not an Account Receivable which in any way fails to meet or violates any warranty, representation or covenant contained in this Agreement or any Related Agreement relating directly or indirectly to Accounts Receivable; (m) the Account Debtor thereunder is not located in the States of Indiana, New Jersey or Minnesota; provided, however, that such restriction shall not apply to an Account Receivable if at the time the Account Receivable was created and at all times thereafter (i) such Borrow- ing Subsidiary has filed and has maintained effective a current Notice of Business Activities Report with the appropriate office or agency of the State of Indiana, New Jersey or Minnesota, as applicable or (ii) such Borrowing Subsidiary was and has continued to be exempt from the filing of such Report and has provided Agent with satisfactory evidence thereof; (n) it arises in the ordinary course of such Borrowing Subsidiary's business; (o) if the Account Debtor is the United States of America or any department, agency or instrumentality thereof, and the face amount of such Account Receivable is in excess of $10,000, such Borrowing Subsidiary has assigned its rights to payment of such Account Receivable to Agent, for the benefit of itself and Lenders, pursuant to the Assignment of Claims Act of 1940, as amended; (p) if Agent in its reasonable business judgment has established a credit limit for an Account Debtor, the aggregate dollar amount of Accounts Receivable due from such Account Debtor, including such Account Receivable, does not exceed such credit limit; (q) if the Account Receivable is evidenced by chattel paper or an instrument, (i) Agent shall have specifically agreed in writing to include such Account Receivable as an Eligible Account Receivable, (ii) only payments then due and payable under such chattel paper or instrument shall be included as an Eligible Account Receivable and (iii) the originals of such chattel paper or instruments have been endorsed and/or assigned and delivered to Agent, for the benefit of itself and Lenders, in a manner satisfactory to Agent; and (r) it is an Account Receivable with respect to which Agent, for itself and Lenders, has a valid, first priority and fully perfected Lien. Agent further reserves the right, from time to time hereafter, to designate as ineligible specific Accounts Receivable that meet the aforementioned criteria for Eligible Accounts Receivable if either (i) such Accounts Receivable are deemed by Agent, in its reasonable business judgment, to be unacceptable or (ii) Agent determines, in its reasonable business judgment, that the prospect of payment or performance by the Account Debtor with respect thereto is or will be impaired for any reason whatsoever. An Account Receivable which is at any time an Eligible Account Receivable, but 10 of 78 which subsequently fails to meet any of the foregoing requirements, shall forthwith cease to be an Eligible Account Receivable. "Eligible Inventory" means Inventory of propane gas and other hard good inventory (exclusive of propane gas tanks held for sale, other than twenty pound propane gas grill tanks held for resale) of Borrower or any Borrowing Subsidiary, which meets the following requirements: (a) it is owned by Borrower or a Borrowing Subsidiary and is not subject to any prior assignment, claim or Lien, other than (i) a Lien in favor of Agent, for the benefit of itself and Lenders, (ii) a Lien in favor of Borrower to secure the Intercompany Loans, so long as Borrower has assigned such Lien to Agent, for the benefit of itself and Lenders, and (iii) Liens consented to by Agent in writing; (b) if it is a hard good held for sale or lease or furnishing under contracts of service, it is (except as Agent may otherwise consent in writing) new and unused; (c) except as Agent may otherwise consent, it is in the possession and control of Borrower, a Borrowing Subsidiary or their respective agents; (d) if it is in the possession or control of a bailee, warehouseman, processor or other Person other than Borrower or a Borrowing Subsidiary, Agent is in possession of such agreements, instruments and documents as Agent may require (each in form and content acceptable to Agent and duly executed, as appropriate, by the bailee, warehouseman, processor or other Person in possession or control of such Inventory, as applicable), including but not limited to warehouse receipts in Agent's name, for the benefit of itself and Lenders, covering such Inventory; (e) it is not Inventory which is dedicated to, identifiable with, or is otherwise specifically to be used in the manufacture of, goods which are to be sold or leased to the United States of America or any department, agency or instrumentality thereof and in respect of which Inventory Borrower or a Borrowing Subsidiary shall have received any progress or other advance payment which is or may be against any Account Receivable generated upon the sale or lease of any such goods; (f) it is not Inventory produced in violation of the Fair Labor Standards Act and subject to the "hot goods" provisions contained in Title 29 U.S.C. Section 215 or any successor statute or section; (g) it is not (i) packaging or shipping materials, (ii) goods used in connection with maintenance or repair of Borrower's or a Borrowing Subsidiary's business, properties or assets, (iii) work-in-process or (iv) general supplies; (h) it is not Inventory which in any way fails to meet or violates any warranty, representation or covenant contained in this Agreement or any Related Agreement relating directly or indirectly to Inventory; (i) Agent has not determined in its reasonable business judgment that it is unacceptable due to age, type, category, quality and/or quantity; 11 of 78 (j) it is Inventory with respect to which (i) Agent, for itself and Lenders, has a valid, first priority and fully perfected Lien and (ii) if it is Inventory of a Borrowing Subsidiary, Borrower has a valid, second priority and fully perfected Lien, and such Lien has been assigned to Agent, for itself and Lenders; and (k) it is not Inventory the use of which by Borrower or a Borrowing Subsidiary or the manufacture or sale thereof by Borrower or a Borrowing Subsidiary, is subject to any licensing, patent, royalty, trademark, tradename or copyright agreement of any other Person. Inventory which is at any time Eligible Inventory but which subsequently fails to meet any of the foregoing requirements shall forthwith cease to be Eligible Inventory. "Environmental Laws" means the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, any so-called "Superfund" or "Superlien" law, the Toxic Substances Control Act, and any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree or other requirement regulating, relating to, or imposing liability or standards of conduct (including but not limited to permit requirements, and emission or effluent restrictions) concerning any Hazardous Materials or any hazardous, toxic or dangerous waste, substance or constituent, or any pollutant or contaminant or other substance, whether solid, liquid or gas, as now or at any time hereafter in effect. "Environmental Lien" means a Lien in favor of any governmental entity for (a) any liability under any Environmental Law or (b) damages arising from or costs incurred by such governmental entity in response to a Release of any Hazardous Material or the spillage, disposal or release into the environment of any other hazardous, toxic or dangerous waste, substance or constituent, or other substance. "Equipment" means all equipment of Borrower or any Subsidiary of every description, including without limitation fixtures, furniture, vehicles and trade fixtures, together with any and all accessions, parts and equipment attached thereto or used in connection therewith, and any substitutions therefor and replacements thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA shall be construed to also refer to any successor sections. "ERISA Affiliate" means any corporation, partnership, or other trade or business (whether or not incorporated) that is, along with Borrower, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in Sections 414(b) and 414(c), respectively, of the Code or Section 4001 of ERISA, or a member of the same affiliated service group within the meaning of Section 414(m) of the Code. "Eurocurrency Reserve Requirement" means, with respect to any LIBOR Rate Loan for any Interest Rate Period, a percentage equal to the daily average during such Interest Rate Period of the percentages in effect on each day of such Interest Rate Period, as prescribed by the Federal 12 of 78 Reserve Board, for determining the aggregate maximum reserve requirements (including all basic, supplemental, marginal and other reserves) applicable to "Eurocurrency liabilities" pursuant to Regulation D or any other then applicable regulation of the Federal Reserve Board which prescribes reserve requirements applicable to "Eurocurrency liabilities," as presently defined in Regulation D. Without limiting the effect of the foregoing, the Eurocurrency Reserve Requirement shall reflect any other reserves required to be maintained by Continental against (i) any category of liabilities that includes deposits by reference to which the LIBOR Rate is to be determined, or (ii) any category of extensions of credit or other assets that includes LIBOR Rate Loans. For purposes of this Agreement, any LIBOR Rate Loan hereunder shall be deemed to be "Eurocurrency liabilities," as defined in Regulation D, and, as such, shall be deemed to be subject to such reserve requirements without the benefit of, or credit for, proration, exceptions or offsets which may be available to Continental from time to time under Regulation D. "Event of Default" has the meaning ascribed to such term in Section 6.1. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal, for each day during such period, to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Banking Day, for the next preceding Banking Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Banking Day, the average of the quotations for such day on such transactions received by Agent from three federal funds brokers of recognized standing selected by it. "Federal Reserve Board" means the Board of Governors of the Federal Reserve System or any successor thereto. "Fiscal Year" means any period of twelve (12) consecutive calendar months ending on the thirtieth (30th) day of June. References to a Fiscal Year with a number corresponding to any calendar year (e.g. "Fiscal Year 1994") refer to the Fiscal Year ending on the thirtieth (30th) day of June occurring during such calendar year. "GAAP" means generally accepted accounting principles as in effect from time to time (except as otherwise provided in Section 1.4), as applied in the preparation of the audited financial statement of Borrower referred to in Section 4.6. "Hazardous Materials" means any toxic substance, hazardous substance, hazardous material, hazardous chemical or hazardous waste defined or qualifying as such in (or for the purposes of) any Environmental Law, or any pollutant or contaminant, and shall include, but not be limited to, petroleum, including crude oil, any radioactive material, including but not limited to any source, special nuclear or by-product material as defined at 42 U.S.C. Section 2011 et seq., as amended or hereafter amended, polychlorinated biphenyls and asbestos in any form or condition. "Indebtedness" of any Person means, without duplication, (a) the principal portion of any obligation of such Person for borrowed money, including without limitation (i) any obligation of such Person evidenced by bonds, debentures, notes or other similar debt instruments and (ii) any 13 of 78 obligation for borrowed money which is non-recourse to the credit of such Person but which is secured by a Lien on any asset of such Person, (b) any obligation of such Person on account of deposits or advances, (c) any obligation of such Person for the deferred purchase price of any property or services, except Trade Accounts Payable, (d) any obligation of such Person as lessee under a Capitalized Lease, (e) any obligation of such Person with respect to interest rate swaps, interest rate caps, interest rate collars or other interest hedging agreements, (f) any obligation of such Person in respect of foreign exchange contracts, (g) any obligation of such Person with respect to Letters of Credit, acceptances, guarantees or similar obligations of another Person issued for the account of such Person and (h) any Indebtedness of another Person secured by a Lien on any asset of such first Person, whether or not such Indebtedness is assumed by such first Person. For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or joint venturer. "Intercompany Agreement" means that certain Intercompany Agreement of even date herewith among Borrower and each of the Borrowing Subsidiaries. "Intercompany Loans" means revolving loans made by Borrower to the Borrowing Subsidiaries with the proceeds of the Loans pursuant to the terms of this Agreement and the Intercompany Agreement. All funds downstreamed by Borrower to the Borrowing Subsidiaries with the proceeds of the Loans will be deemed to be Intercompany Loans. "Interest Rate Period" means with respect to any portion of the Revolving Loans, the period commencing on the date on which the LIBOR Rate is deemed applicable to such portion of the Revolving Loans, and ending on the numerically corresponding day one (1), two (2) or three (3) months thereafter, as selected by Borrower pursuant to Section 3.1.1(c) of Supplement A; provided, however, that: (a) any Interest Rate Period which would otherwise end on a day which is not a Banking Day shall end on the next succeeding Banking Day unless such next succeeding Banking Day falls in another calendar month, in which case such Interest Rate Period shall end on the next preceding Banking Day; (b) any Interest Rate Period which begins on the last Banking Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Rate Period) shall end on the last Banking Day of the calendar month at the end of such Interest Rate Period; and (c) no Interest Rate Period shall extend beyond the Termination Date. "Inventory" means any and all of Borrower's and each Subsidiary's goods (including without limitation goods in transit) which are held for sale, furnished under any contract of service, or held as raw materials, work in process, or supplies or materials used or consumed in Borrower's or such Subsidiary's business, or which are held for use in connection with the manufacture, packing, shipping, advertising, selling or finishing of such goods, and any and all goods the sale or other disposition of which has 14 of 78 given rise to an Account Receivable, Contract Right or any other property described in Section 3.1(a), which are returned to and/or repossessed and/or stopped in transit by, or at any time hereafter are in the possession or under the control of, Borrower, any Subsidiary, Agent or any Lender or any agent or bailee of any of them, and all documents of title or other documents representing the same; provided, that the foregoing does not include tanks leased to, or held for lease to, customers, storage tanks and other Equipment. "Investment" of any Person means any investment, made in cash or by delivery of any kind of property or asset, in any other Person, whether by acquisition of shares of stock or similar interest, Indebtedness or other obligation or security, or by loan, advance or capital contribution, or otherwise. "Issuing Bank" means Continental or any other Lender selected by Agent with Borrower's consent (which will not be unreasonably withheld) to issue Letters of Credit under this Agreement. "L/C Draft" means a draft drawn on Issuing Bank pursuant to a Letter of Credit. "Lenders" means, collectively, Continental and any other Person that becomes a Lender under this Agreement and each of their respective successors and assigns as provided in this Agreement; and "Lender" means any one of Lenders. "Letter of Credit" means a standby or documentary letter of credit issued by the Issuing Bank on the Application of Borrower. "Letter of Credit Obligations" means at any time an amount equal to the sum of (a) the aggregate outstanding face amount of all Letters of Credit plus (b) the aggregate outstanding face amount of all accepted but unpaid L/C Drafts. "Liabilities" means all of the liabilities, obligations (including obligations of performance) and indebtedness of Borrower to Agent or any Lender of any kind or nature, however created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing or due or to become due, and arising under, or in connection with, this Agreement, any Note, any Related Agreement, any Letter of Credit or any Application therefor, including without limitation all interest, charges, expenses, Attorneys' Fees and other sums chargeable to Borrower by Agent or any Lender hereunder or thereunder. "Liabilities" shall also include any and all amendments, extensions, renewals, refundings or refinancings of any of the foregoing. "LIBOR Base Rate" means, with respect to each Interest Rate Period for a LIBOR Rate Loan, the sum of two and one-half percent (2.50%) plus the rate per annum at which U.S. Dollar deposits in immediately available funds are offered to Continental two (2) Banking Days prior to the beginning of such Interest Rate Period by major banks in the London inter- bank eurodollar market at or about 11:00 a.m., London time, for delivery on the first day of such Interest Rate Period, for the number of days comprised therein and in an amount equal to the amount of the LIBOR Rate Loan to be outstanding during such Interest Rate Period. 15 of 78 "LIBOR Rate" means, with respect to each Interest Rate Period for a LIBOR Rate Loan, a rate per annum (rounded upward, if necessary, to the nearest one hundredth of one percent (1/100th of 1%)) determined pursuant to the following formula: LIBOR Rate = LIBOR Base Rate __________________________________ 1-Eurocurrency Reserve Requirement "LIBOR Rate Loan" means any portion of the Revolving Loan which bears interest at a rate determined with reference to the LIBOR Rate. "Lien" means any security interest, mortgage, pledge, hypothecation, judgment lien or similar legal process, title retention lien, or other lien or encumbrance, including without limitation the interest of a vendor under any conditional sale or other title retention agreement and the interest of a lessor under any Capitalized Lease. "Loan" means (a) any Revolving Loan made pursuant to Section 2.1.1 and (b) any other loan or advance made to Borrower by Agent or any Lender under or pursuant to this Agreement. "Loan Account" has the meaning ascribed to such term in Section 2.3. "Margin Stock" has the meaning ascribed to such term in Regulation U of the Federal Reserve Board or any regulation substituted therefor, as in effect from time to time. "Master Revolving Credit Note" means the Master Revolving Credit Note dated on or about June 30, 1994 (as it may be amended from time to time) executed by each Borrowing Subsidiary in favor of Borrower and evidencing the Intercompany Loans made to each Borrowing Subsidiary under the Intercompany Agreement. "Material Adverse Change" means (a) a material adverse change in the condition (financial or otherwise), operations, performance, prospects, properties or affairs, taken as a whole, of Borrower or in the ability of Borrower to perform its obligations under any material agreement to which Borrower is a party, (b) a material adverse change in the condition (financial or otherwise), operations, performance, prospects, properties or affairs of Borrower and the Subsidiaries taken as a whole or in the ability of Borrower and the Subsidiaries taken as a whole to perform their obligations under any material agreements to which they are parties or (c) an impairment of Agent's interest, for the benefit of itself and Lenders, in any material portion of the Collateral or the material diminution in value of the Collateral. "Material Adverse Effect" means (a) a material adverse effect upon the condition (financial or otherwise), operations, performance, prospects, properties or affairs, taken as a whole, of Borrower or upon the ability of Borrower to perform its obligations under any material agreement to which Borrower is a party, (b) a material adverse effect upon the condition (financial or otherwise), operations, performance, prospects, properties or affairs of Borrower and the Subsidiaries taken as a whole or upon the ability of Borrower and the Subsidiaries taken as a whole to perform their obligations under any material agreements to which they are 16 of 78 parties or (c) an impairment of Agent's interest, for the benefit of itself and Lenders, in any material portion of the Collateral or the material diminution in value of the Collateral. "Maximum Facility" means $15,000,000. "Maximum Loan Amount" means, with respect to any Lender, the maximum amount of Loans which such Lender has agreed, pursuant to the terms and conditions of this Agreement, to make available to Borrower, as set forth on the signature page hereto or in an Assignment and Acceptance Agreement executed by such Lender. "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA that is maintained for employees of Borrower or any ERISA Affiliate. "Note" means any promissory note of Borrower evidencing any loan or advance made by any Lender to Borrower pursuant to this Agreement, as the same may be amended, modified or supplemented from time to time. "Obligor" means Borrower and each other Person who is or shall become primarily or secondarily liable on any of the Liabilities, or who grants to Agent, for the benefit of itself and Lenders, a Lien on any property of such Person as security for any of the Liabilities. "Obligor Collateral" means any real or personal property of any Obligor on which a Lien has been granted to Agent, for the benefit of itself and Lenders, in order to secure the Liabilities and/or such Obligor's guaranty of the Liabilities. "Occupational Safety and Health Law" means the Occupational Safety and Health Act of 1970 and any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to or imposing liability or standards of conduct concerning employee health and/or safety. "Over Advance" has the meaning ascribed to such term in Section 2.8. "Overdraft Loan" has the meaning ascribed to such term in Section 2.7. "Participant" means any Person, now or at any time or times hereafter, participating with any Lender, pursuant to the provisions of Section 12.9, in the Loans made or Letters of Credit issued, pursuant to this Agreement or any Related Agreement. "Payment Liabilities" means all Liabilities other than contingent obligations of Borrower with respect to which neither Agent nor any Lender has asserted a claim against Borrower or against which Borrower has provided reserves or Collateral satisfactory to Agent or such Lender; provided, that Payment Liabilities shall include the Letter of Credit Obligations. "PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. 17 of 78 "Pension Plan" means a "pension plan," as such term is defined in Section 3(2) of ERISA, that is subject to the provisions of Title IV of ERISA (other than a Multiemployer Plan) and to which Borrower or any ERISA Affiliate may have any liability, including any liability by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA. "Person" means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, institution, entity, or government (whether national, federal, state, county, city, municipal or otherwise, including without limitation any instrumentality, division, agency, body or department thereof). "Pre-Settlement Determination Date" has the meaning ascribed to such term in Section 2.15. "Pro Rata Share" means, with respect to any Lender, a fraction (expressed as a percentage in nine (9) decimal places), the numerator of which shall be the Maximum Loan Amount of such Lender and the denominator of which shall be the aggregate amount of the Maximum Loan Amounts of all Lenders. "Real Property" means, collectively, all real property presently owned or hereafter acquired, or presently or hereafter leased, by Borrower or any Subsidiary. "Reference Rate" means, at any time, the rate of interest then most recently announced by Continental at Chicago, Illinois as its reference rate. Each change in the interest rate on any Loan shall take effect on the effective date of the change in the Reference Rate. "Register" has the meaning ascribed to such term in Section 12.9(d). "Related Agreement" means any agreement, instrument or document (including without limitation notes, guarantees, chattel mortgages, pledges, powers of attorney, consents, assignments, contracts, notices, security agreements, leases, financing statements, subordination agreements, intercreditor agreements, trust account agreements and all other written matter) heretofore, now, or hereafter delivered to Agent or any Lender with respect to or in connection with or pursuant to this Agreement or any of the Liabilities, and executed by or on behalf of Borrower, any Subsidiary or any other Obligor, as each of the same may be amended, modified or supplemented from time to time and shall specifically include any Notes. "Related Party" means, with respect to any Person, any other Person (a) that directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such first Person or a subsidiary of such first Person, (b) that beneficially owns or holds ten percent (10%) or more of the equity interest of such first Person or a subsidiary of such first Person or (c) ten percent (10%) or more of the equity interest of which is beneficially owned or held by such first Person or a subsidiary of such first Person. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. 18 of 78 "Release" means any actual or threatened spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing of Hazardous Materials into the environment. "Reportable Event" has the meaning given to such term in ERISA. "Requisite Lenders" means Lenders having, in the aggregate, Pro Rata Shares of (a) one hundred percent (100%) at such times as there are one or two Lenders, or (b) at least fifty-one percent (51%) at such times as there are three or more Lenders. "Restricted Subsidiaries" has the meaning given to such term in the Senior Loan Documents. "Revolving Credit" has the meaning ascribed to such term in the definition of "Credit." "Revolving Credit Amount" has the meaning ascribed to such term in Supplement A. "Revolving Loan" has the meaning ascribed to such term in Section 2.1.1. "Revolving Loan Availability" means the lesser of (a) the Revolving Credit Amount minus the Letter of Credit Obligations and (b) the Borrowing Base minus the Letter of Credit Obligations. "Seasonal Overadvance" means the advances to Borrower under Sections 2.2(iii) and (iv) of Supplement A. "Senior Loan Documents" means, collectively, the agreements, instruments and documents evidencing, governing and securing the Senior Notes, including the Senior Note Indenture as each of the same may be amended, modified or supplemented from time to time pursuant to Section 5.27 hereof. "Senior Loans" means, collectively, all indebtedness of Borrower represented by the Senior Notes. "Senior Note Indenture" means the Indenture dated June 29, 1994 between Borrower, certain Subsidiaries and Shawmut Bank Connecticut, National Association, Trustee. "Senior Notes" means, collectively, Borrower's 12 7/8% Senior Secured Notes due 2004 in the aggregate principal amount due upon maturity of not more than $127,200,000, issued pursuant to the Senior Loan Documents. "Settlement Date" has the meaning ascribed to such term in Section 2.15. "Stock Repurchase" means the repurchase by Borrower of all shares of its common stock held by Mr. Robert W. Plaster and certain other departing officers of Borrower, which is being consummated on the date hereof. "Subordinated Debt" means, collectively, (a) Indebtedness of Borrower under the certain Indenture dated June 7, 1983 relating to Borrower's 9% Subordinated Debentures due December 31, 2007, as supplemented 19 of 78 by a certain First Supplemental Indenture dated December 13, 1989 (collectively, the "2007 Indenture"), in the current aggregate approximate principal amount of $9,500,000, and (b) that portion of any other liabilities, obligations or Indebtedness of Borrower which contains terms satisfactory to Agent and is subordinated, in a manner satisfactory to Agent (as evidenced by Agent's written agreement of satisfaction), as to right and time of payment of principal and interest thereon, to all of the Liabilities. "Subordinated Debt Documents" means, collectively, the agreements, instruments and documents evidencing or otherwise pertaining to any Subordinated Debt, including without limitation the 2007 Indenture, as each of the same may be amended, modified or supplemented from time to time pursuant to Section 5.27. "Subsidiary" means any Person of which or in which Borrower and its other Subsidiaries own directly or indirectly more than fifty percent (50%) of (a) the combined voting power of all classes of stock having general voting power under ordinary circumstances to elect a majority of the board of directors of such Person, if it is a corporation, (b) the capital interest or profits interest of such Person, if it is a partnership, joint venture or similar entity or (c) the beneficial interest of such Person, if it is a trust, association or other unincorporated organization. "Supplemental Documentation" has the meaning ascribed to such term in Section 3.4. "Tangible Net Worth" means at any time, the total of shareholders' equity (including capital stock, additional paid-in capital and retained earnings and after deducting treasury stock), less the sum of the total amount of all intangible assets, in each case determined on a consolidated basis for Borrower and the Subsidiaries and in accordance with GAAP. Intangible assets shall include, without limitation, unamortized debt discount and expense, unamortized deferred charges and goodwill. "Taxes" with respect to any Person means taxes, assessments or other governmental charges or levies imposed upon such Person, its income or any of its properties, franchises or assets. "Termination Date" means June 29, 1997 or such later date to which it may be extended pursuant to Section 12.7. "Trade Accounts Payable" of any Person means trade accounts payable of such Person with a maturity of not greater than ninety (90) days incurred in the ordinary course of such Person's business. "Transactions" has the meaning ascribed to such term in Section 8.1.3. "UCC" means the Uniform Commercial Code as in effect in the State of Illinois, and any successor statute, together with any regulations thereunder, in each case as in effect from time to time. References to sections of the UCC shall be construed to also refer to any successor sections. "Units" means the investment unit consisting of ten Senior Notes and 13.8 Warrants. 20 of 78 "Unmatured Event of Default" means any event or condition which, with the lapse of time or giving of notice to Borrower or both, would constitute an Event of Default. "Warrant Agreement" means the Warrant Agreement dated on or about June 29, 1994 executed by Empire and Shawmut Bank Connecticut, National Association, as Warrant Agent. "Warrants" means warrants issued to holders of the Senior Notes entitling such holders to purchase up to 175,536 shares of the common stock, $.001 par value per share, of Borrower, in accordance with the Warrant Agreement. 1.2 Other Definitional Provisions. Unless otherwise defined or the context otherwise requires, all financial and accounting terms used herein or in any certificate or other document made or delivered pursuant hereto shall be defined in accordance with GAAP. Unless otherwise defined therein, all terms defined in this Agreement shall have the defined meanings when used in any Related Agreement or Supplemental Documentation. Terms used in this Agreement which are defined in any Supplement or Exhibit hereto shall, unless the context otherwise indicates, have the meanings given them in such Supplement or Exhibit. Other terms used in this Agreement shall, unless the context indicates otherwise, have the meanings provided for by the UCC to the extent the same are used or defined therein. 1.3 Interpretation of Agreement. A Section, an Exhibit or a Schedule is, unless otherwise stated, a reference to a section hereof, an exhibit hereto or a schedule hereto, as the case may be. Section captions used in this Agreement are for convenience only and shall not affect the construction of this Agreement. The words "hereof," "herein," "hereto" and "hereunder" and words of similar import when used in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Reference to "this Agreement" shall include the provisions of Supplement A. 1.4 Compliance with Financial Restrictions. Compliance with each of the financial ratios and restrictions contained in Section 5 or Supplement A shall, except as otherwise provided herein, be determined in accordance with GAAP consistently followed. 2. LOANS; LETTERS OF CREDIT; OTHER MATTERS. 2.1 Loans. 2.1.1 Revolving Loans. (a) Subject to the terms and conditions of this Agreement and the Related Agreements, and in reliance upon the warranties and representations of Borrower set forth herein and the warranties and representations of Borrower and each other Obligor set forth in the Related Agreements, each Lender, severally and not jointly, agrees to make its Pro Rata Share of such loans or advances (individually each a "Revolving Loan" and collectively the "Revolving Loans") from time to time before the Termination Date to Borrower as Borrower may from time to time request; provided, that Agent may, but shall not be obligated to, make such Revolving Loans to Borrower on behalf of Lenders as a "Disproportionate Advance" (as defined below); provided further, that, except as provided in Section 2.8, 21 of 78 the aggregate outstanding principal amount of the Revolving Loans made by or on behalf of Lenders shall not at any time exceed the Revolving Loan Availability. Revolving Loans made by or on behalf of Lenders may be repaid and, subject to the terms and conditions hereof, reborrowed to but not including the Termination Date unless the Credit extended under this Agreement is otherwise terminated as provided in this Agreement. No Lender shall be obligated at any time to make available to Borrower its Pro Rata Share of any requested Revolving Loan if such amount, plus its Pro Rata Share of all Revolving Loans then outstanding, would exceed such Lender's Maximum Loan Amount at such time. No Lender shall be obligated to make available its Pro Rata Share of any Revolving Loans during the occurrence of any Event of Default or Unmatured Event of Default; provided that notwithstanding the foregoing or anything contained herein to the contrary, regardless of whether an Event of Default or an Unmatured Event of Default exists, each Lender shall, at the request of Agent, continue to be obligated to make its Pro Rata Share of the Revolving Loans available to Borrower for a period of up to five (5) Banking Days, but in any event, no Lender shall be obligated at any time to make available to Borrower its Pro Rata Share of any such requested Revolving Loan if such amount, plus its Pro Rata Share of all Revolving Loans then outstanding, would exceed such Lender's Maximum Loan Amount at such time. Neither Agent nor any Lender shall be responsible for any failure by any other Lender to perform its obligations to make advances hereunder, and the failure of any Lender to make its Pro Rata Share of any advance hereunder shall not relieve any other Lender of its obligation, if any, to make its Pro Rata Share of Loans hereunder, nor require such other Lender to make more than its Pro Rata Share of any Loans hereunder. If Borrower makes a request for a Revolving Loan as provided herein, or if Agent desires to make a Revolving Loan pursuant to Sections 2.2(b), 2.2(c), 2.2(d), 2.4.4, 2.10(c), 3.2(c), 5.5, 5.6, 5.22, 7.4, 12.3, 12.4 or any other provision of this Agreement or any Related Agreement that permits Agent to advance Revolving Loans to Borrower, Agent, at its option and in its sole and absolute discretion, shall do either of the following: (i) Advance the amount of the proposed Revolving Loan to Borrower disproportionately (a "Disproportionate Advance") out of Agent's own funds on behalf of Lenders, and request settlement in accordance with Section 2.15, such that upon such settlement, each Lender's share of the outstanding Revolving Loans (including, without limitation, the amount of any Disproportionate Advance) equals its Pro Rata Share and such Disproportionate Advance shall be deemed to be repaid; or (ii) Notify each Lender and Borrower by telecopy or other similar form of teletransmission of the proposed advance on the same day Agent is notified by Borrower of Borrower's request for an advance hereunder or the same day Agent desires to make a Revolving Loan for the benefit of Borrower (to the extent permitted hereunder or under any Related Agreement). Each Lender shall remit, to the Demand Deposit Account, on or prior to twelve o'clock noon, Chicago time, on the business day immediately succeeding the date of such notification, immediately available funds in an amount equal to such Lender's Pro Rata Share of such proposed advance. If and to the extent that a Lender does not settle with Agent as required under clause (i), Borrower agrees to repay to Agent forthwith on demand such amount required to be paid by such Lender to Agent, together with interest 22 of 78 thereon, for each day from the date such amount is made available to Borrower until the date such amount is repaid to Agent, at the interest rate applicable at such time for such Revolving Loans; provided, that Borrower's obligation to repay such advance to Agent shall not relieve each Lender of its liability to Agent or Borrower for failure to settle as provided in clause (i). (b) In the event the aggregate outstanding principal balance of the Revolving Loans exceeds the Revolving Loan Availability, Borrower shall, unless Agent permits such Over Advance as provided in Section 2.8 or Requisite Lenders shall otherwise consent, without notice or demand of any kind, immediately make such repayments of the Revolving Loans or take such other actions as shall be necessary to eliminate such excess. (c) All Revolving Loans hereunder shall be paid by Borrower on the Termination Date, unless payable sooner pursuant to the provisions of this Agreement, but may, at Borrower's election, be repaid in whole or in part at any time prior to such date without premium or penalty (other than as expressly provided in Section 3.4 of Supplement A with respect to LIBOR Rate Loans repaid prior to the end of the applicable Interest Rate Period). 2.1.2 Prepayment of all Liabilities; Reduction of Revolving Credit Amount. Borrower may prepay all of the Liabilities in full at any time, without premium or penalty (other than as expressly provided in Section 3.4 of Supplement A with respect to LIBOR Rate Loans repaid prior to the end of the applicable Interest Rate Period), by prepaying the outstanding principal balance of the Revolving Loans, together with (a) all accrued and unpaid interest on the Liabilities, (b) all other outstanding Liabilities and (c) cash in the amount of, or adequate (in Agent's determination) cash collateral for, the Letter of Credit Obligations. Borrower may not permanently reduce the Revolving Credit Amount except in connection with the prepayment in full of all of the Liabilities. 2.1.3 Maximum Outstanding Liabilities. Notwithstanding any other provision of this Agreement, the aggregate outstanding principal balance of the Loans plus Letter of Credit Obligations shall not exceed the Maximum Facility; provided, however, that the foregoing shall not limit the right of Agent to advance Revolving Loans to Borrower pursuant to the provisions of Section 2.2(b), 2.2(c), 2.2(d), 2.4.4, 2.10(c), 3.2(c), 5.5, 5.6, 5.22, 7.4, 12.3 or 12.4 or any other provision of this Agreement or any Related Agreement that permits Agent to advance Revolving Loans to Borrower. Any Revolving Loan advanced by Agent to Borrower under any of the foregoing provisions shall be deemed to be a Revolving Loan made by Agent on behalf of Lenders. 2.2 Letters of Credit. (a) In addition to Loans made pursuant to Section 2.1, Agent will, upon receipt of duly executed Applications and such other documents, instruments and/or agreements as Agent may require, request, on Borrower's behalf, that Issuing Bank issue Letters of Credit on such terms as are satisfactory to Agent and Issuing Bank, provided, however that no Letter of Credit will be issued if, before or after taking such Letter of Credit into account, (i) the Letter of Credit Obligations exceed $4,000,000 or (ii) the Letter of Credit Obligations exceeds the lesser of (A) the Revolving Credit Amount minus the outstanding principal balance of the Revolving Loans and 23 of 78 (B) the Borrowing Base minus the outstanding principal balance of the Revolving Loans. If such excess shall at any time exist, Borrower shall, unless Requisite Lenders shall otherwise consent, promptly make such payments as are necessary to eliminate such excess or shall promptly post cash collateral in the amount of such excess. No Letter of Credit shall have an expiry date after the date that is thirty (30) days prior to the initial Termination Date or, if the Termination Date is extended pursuant to Section 12.7, the applicable extended Termination Date. (b) Borrower agrees to pay to Issuing Bank, on demand, Issuing Bank's standard issuance, negotiation and administrative operating fees and charges in effect from time to time for issuing and administering any Letters of Credit and if not so paid, each Lender shall, without regard to any other provision of this Agreement or any other Related Agreement, any defense that Borrower may have to its obligation to pay Issuing Bank in connection with such fees and charges or any defense that any Lender may have in connection with the participation described in Section 2.2(e) in connection with any Letter of Credit or L/C Draft, pay Issuing Bank for such Lender's Pro Rata Share of such fees and charges, and any payments so made by Lenders to Issuing Bank shall be deemed to be Revolving Loans. Each Lender (other than a Lender that is Issuing Bank) acknowledges and agrees that it shall not be entitled to any of the fees and charges of Issuing Bank. Borrower further agrees to pay Agent, for the benefit of itself and Lenders, a commission equal to one percent (1%) per annum (calculated on the basis of a year consisting of three hundred sixty (360) days and paid for actual days elapsed) of the daily average of the undrawn amount of each Letter of Credit and on each L/C Draft accepted in connection therewith. Such Letter of Credit commissions shall be paid in arrears on the last day of each month thereafter. Agent may provide for the payment of any fees, charges or commissions due hereunder by advancing the amount thereof to Borrower as a Revolving Loan. At all times that any Default Rate is being charged under this Agreement, the Letter of Credit commission shall be equal to the otherwise applicable commission plus two percent (2%) per annum. (c) Subject to the remaining sentences of this clause (c), Borrower agrees to reimburse Issuing Bank, on demand, for each payment made by Issuing Bank under or pursuant to any Letter of Credit or L/C Draft and if not so reimbursed, each Lender shall, without regard to any other provision of this Agreement or any other Related Agreement, any defense that Borrower may have to its obligation to reimburse Issuing Bank in connection with such payment or any defense that any Lender may have in connection with the participation described in Section 2.2(e) in connection with any Letter of Credit or L/C Draft, reimburse Issuing Bank for such Lender's Pro Rata Share of such payment, and any payments so made by Lenders to Issuing Bank shall be deemed to be Revolving Loans. Agent and Lenders agree that so long as there is sufficient Revolving Loan Availability and provided that no Event of Default is then in existence or would be caused thereby, Agent will provide for the payment of any reimbursement obligations and any interest accrued thereon by advancing the amount thereof to Borrower as a Revolving Loan as soon as reasonably practicable. Prior to such advance, the amount of such reimbursement obligations shall bear interest at the then applicable Adjusted Reference Rate. Agent shall have the option, pursuant to Section 2.8, to so provide for such payments even if there is not sufficient Revolving Loan Availability or if an Event of Default is then in existence or would be caused thereby and such amounts will bear interest at the rate set forth in Section 2.8. In the event a Letter of Credit or 24 of 78 L/C Draft is not reimbursed from a Revolving Loan as provided herein, Borrower agrees to pay Agent, for the benefit of itself and Lenders, on demand, interest at the Default Rate on any amounts paid by Issuing Bank in respect of a Letter of Credit or an L/C Draft until the reimbursement of Issuing Bank by Borrower of such payment. (d) Notwithstanding anything to the contrary herein or in any Application, upon the occurrence of an Event of Default, an amount equal to the aggregate amount of the outstanding Letter of Credit Obligations shall, at Agent's option and without demand upon or further notice to Borrower, be deemed (as between Lenders and Borrower) to have been paid or disbursed by Agent under the Letters of Credit and accepted L/C Drafts (notwithstanding that such amounts may not in fact have been so paid or disbursed), and a Revolving Loan to Borrower in the amount of such Letter of Credit Obligations to have been made and accepted, which Loan shall be immediately due and payable. In lieu of the foregoing, at the election of Agent at any time after an Event of Default, Borrower shall, upon Agent's demand, deliver to Agent cash collateral equal to the aggregate Letter of Credit Obligations. Any such cash collateral and/or any amounts received by Agent in payment of the Loan made pursuant to this paragraph (d) shall be held by Agent, for the benefit of itself and Lenders, in the Assignee Deposit Account or a separate account appropriately designated as a cash collateral account in relation to this Agreement and the Letters of Credit and shall be retained by Agent, for the benefit of itself and Lenders, as collateral security in respect of, first, the Liabilities under or in connection with the Letters of Credit and L/C Drafts and then, all other Liabilities. Such amounts shall not be used by Agent to pay any amounts drawn or paid under or pursuant to any Letter of Credit or L/C Draft, but may be applied to reimburse Issuing Bank for drawings or payments under or pursuant to Letters of Credit or L/C Drafts which Issuing Bank has paid, or if no such reimbursement is required, to payment of such other Liabilities as Agent shall determine. Any amounts remaining in any cash collateral account established pursuant to this paragraph (d) following payment in full of all Liabilities shall be returned to Borrower. (e) Immediately upon the issuance of a Letter of Credit in accordance with this Agreement, each Lender shall be deemed to have irrevocably and unconditionally purchased and received from Issuing Bank, without recourse or warranty, an undivided interest and participation therein to the extent of such Lender's Pro Rata Share (including without limitation, all obligations of Borrower with respect thereto). Borrower hereby indemnifies each of Agent and each Lender against any and all liability and expense it may incur in connection with any Letter of Credit or L/C Draft and agrees to reimburse each of Agent and each Lender for any payment made by Agent or any Lender to Issuing Bank, except for any liability incurred or payment made as a result of Agent's or such Lender's gross negligence or willful misconduct. 2.3 Loan Account; Demand Deposit Account. Agent shall establish or cause to be established on its books in Borrower's name one or more accounts (each a "Loan Account") to evidence Loans made to Borrower. Agent or Lenders, as appropriate, will credit or cause to be credited to a commercial account ("Demand Deposit Account") maintained by Borrower at Continental's 231 South LaSalle Street, Chicago, Illinois office the amount of any sums advanced as Loans hereunder, which shall be disbursed at Borrower's direction. Any amounts advanced as Loans hereunder which are credited to Borrower's Demand Deposit Account, together with any other 25 of 78 amounts advanced to Borrower as a Loan pursuant to this Agreement, will be debited to the applicable Loan Account and result in an increase in the principal balance outstanding in such Loan Account in the amount thereof. 2.4 Interest and Fees. 2.4.1 Interest. The unpaid principal amount of each Revolving Loan hereunder shall bear interest until maturity at the rate or rates applicable to Revolving Loans indicated in Supplement A hereto. If any Revolving Loan or portion thereof is not paid when due, whether by acceleration or otherwise, the entire unpaid principal amount of the Revolving Loans shall bear interest thereafter until such amount is paid in full at the Default Rate applicable to Revolving Loans indicated in Supplement A hereto. Until maturity, interest on the Revolving Loans shall be paid by Borrower on the date(s) indicated in Supplement A, and at such maturity. After maturity, whether by acceleration or otherwise, accrued interest shall be payable on demand. 2.4.2 Nonuse Fee. Borrower agrees to pay to Agent, for the benefit of itself and Lenders, a fee equal to three-eighths of one percent (0.375%) per annum on the daily average amount by which the Revolving Credit Amount exceeds the outstanding principal balance of the Revolving Loans plus the Letter of Credit Obligations. The fee provided for in this Section 2.4.2 shall be payable monthly in arrears on the twenty-eighth day of each month commencing July 28, 1994, and on the date the Revolving Credit terminates for the period then ended. 2.4.3 Method of Calculating Interest and Fees. Interest on the unpaid principal amount of each Loan shall accrue from and including the date such Loan is made to, but not including, the date such Loan is paid. Interest and any fees shall be calculated on the basis of a year consisting of three hundred sixty (360) days and paid for actual days elapsed. 2.4.4 Payment of Interest and Fees. Agent may provide for the payment of any unpaid accrued interest and any fees by charging the Demand Deposit Account or any bank account maintained by Borrower with Agent or by advancing the amount thereof to Borrower as a Revolving Loan. 2.5 Requests for Loans; Borrowing Base Certificates; Other Information. (a) Loans shall be requested in writing or by telephone, except for Overdraft Loans and Revolving Loans made pursuant to the provisions of Section 2.2(b), 2.2(c), 2.2(d), 2.4.4, 2.10(c), 3.2(c), 5.5, 5.6, 5.22, 7.4, 12.3, or 12.4 or any other provision of this Agreement or any Related Agreement that permits Agent to advance Revolving Loans to Borrower. (b) In the event that Borrower shall at any time, or from time to time, (i) make a request for a Loan hereunder or (ii) be deemed to have requested an Overdraft Loan, Borrower agrees to forthwith provide Agent and Lenders with such information, at such frequency and in such format, as is reasonably required by Agent, such information to be current as of the time of such request. As of the date hereof, it is not Agent's intent to require that Borrower provide information to Agent and Lenders in excess of, or at times other than, that specifically required to be provided by the terms of this Agreement or the Related Agreements; however, Agent reserves the right, from time to time, in its reasonable judgment, to require 26 of 78 Borrower to provide information at different times than currently required and/or to provide additional types of information. (c) Borrower further agrees to provide to Agent and Lenders a current Borrowing Base Certificate on the first Banking Day of each month for the preceding month and, after the occurrence of an Event of Default or an Unmatured Event of Default, at such other times as Agent may request. Such Borrowing Base Certificate shall be in substantially the same form as that attached hereto as Exhibit A, executed and certified as accurate by such officers or employees of Borrower as Borrower designates in writing to Agent pursuant to duly adopted resolutions of Borrower's Board of Directors authorizing such action. (d) Borrower may request, telephonically or by written authorization, the disbursement of Revolving Loans by Agent or Lenders, as appropriate. Borrower shall provide Agent with documentation satisfactory to Agent indicating the names of those employees of Borrower authorized by Borrower to sign Borrowing Base Certificates and/or to make telephonic requests for Loans and Letters of Credit, and/or to authorize disbursement of the proceeds of Loans by wire transfer or otherwise, and Agent and Lenders shall be entitled to rely upon such documentation until notified in writing by Borrower of any change(s) in the names of the employees so authorized. Agent and Lenders shall be entitled to act on the instructions of anyone identifying himself as one of the persons authorized to request Loans and Letters of Credit, or disbursements of Loan proceeds by telephone and Borrower shall be bound thereby in the same manner as if the person were actually so authorized. Borrower agrees to indemnify and hold each of Agent and each Lender harmless from any and all claims, damages, liabilities, losses, costs and expenses (including Attorneys' Fees) which may arise or be created by the acceptance of instructions for making or paying Loans in writing or by telephone. Each such request must be received by Agent no later than 11:00 a.m. (Chicago time) on the date on which such Revolving Loan is requested to be made. 2.6 Statements. All Loans and payments hereunder shall be recorded on Agent's books, which shall be rebuttably presumptive evidence of the amount of such Loans outstanding at any time hereunder. Agent will account monthly as to all Loans and payments hereunder and, absent demonstrable error, each monthly accounting will be fully binding on Borrower unless, within fifteen (15) days of Borrower's receipt thereof, Borrower shall provide Agent with a specific listing of exceptions. Notwithstanding any term or condition of this Agreement to the contrary, however, the failure of Agent to record the date and amount of any Loan hereunder shall not limit or otherwise affect the obligation of Borrower to repay any such Loan. 2.7 Overdraft Loans. Agent, in its sole and absolute discretion, and subject to the terms hereof, may make a Revolving Loan to Borrower in an amount equal to the amount of any overdraft which may from time to time exist with respect to the Demand Deposit Account or any bank account which Borrower may now or hereafter have with Agent. The existence of any such overdraft shall be deemed to be a request by Borrower for such Loan. Borrower acknowledges that Agent is under no duty or obligation to make any Loan to Borrower to cover any overdraft. Borrower further agrees that if the making of a Loan to cover any Overdraft would result in an Over Advance, such overdraft shall constitute a separate Loan under this Agreement (an "Overdraft Loan"), which shall bear, from the date on which 27 of 78 the overdraft occurred until paid, interest in an amount equal to the greater of one hundred thirty percent (130%) of the highest rate of interest then actually being charged for Revolving Loans (other than Overdraft Loans) made hereunder, and $50 per day. If Agent, in its sole and absolute discretion, decides not to make a Loan to cover part or all of any overdraft, Agent may return any check(s) which created such overdraft. 2.8 Over Advances. If the aggregate outstanding Revolving Loans and Letter of Credit Obligations exceed the lesser of (i) the Borrowing Base and (ii) the Revolving Credit Amount (such excess Liabilities are herein referred to as "Over Advances"), Agent, in its sole and absolute discretion, may, for a period of five (5) Banking Days, to the extent such Over Advance arises as a result of a reduction in the Borrowing Base, permit such Over Advance to exist without the consent of any Lender (but subject to Section 2.1.1(a)) and continue to make Revolving Loans on behalf of Lenders, and after the expiration of such five (5) Banking Day period, no such event or occurrence shall cause or constitute a waiver by any Lender of its right to refuse to make any further Revolving Loans at any time that an Over Advance exists or would result therefrom; provided, that Agent may not (i) make Revolving Loans on behalf of Lenders under this Section 2.8 to the extent such Revolving Loans would cause a Lender's Pro Rata Share of the Revolving Loans to exceed such Lender's Maximum Loan Amount or (ii) make Revolving Loans on behalf of Lenders under this Section 2.8 to the extent such Revolving Loans would cause the then outstanding Revolving Loans and Letter of Credit Obligations to exceed the sum of $1,000,000 and the amount of the outstanding Revolving Loans and Letter of Credit Obligations as of the date Agent became aware of the Over Advance. During any period in which an Over Advance exists, the amount of Over Advances shall bear interest at a rate equal to one hundred thirty percent (130%) of the highest rate of interest then actually being charged for Revolving Loans made hereunder. 2.9 All Loans One Obligation. The Revolving Loans and all other Loans under this Agreement shall constitute one Loan, and all Indebtedness and other Liabilities of Borrower under this Agreement and any of the Related Agreements shall constitute one general obligation secured by Agent's Lien, for the benefit of itself and Lenders, on all of the Collateral and by all other Liens heretofore, now, or at any time or times hereafter granted by Borrower or any other Obligor to Agent, for the benefit of itself and Lenders. Borrower agrees that all of the rights of Agent and Lenders set forth in this Agreement shall apply to any modification of or supplement to this Agreement, any Supplements or Exhibits hereto, and the Related Agreements, unless otherwise agreed in writing. 2.10 Making of Payments; Application of Collections; Charging of Accounts. (a) All payments hereunder (including payment of Letter of Credit Obligations and payments with respect to any Notes) shall be made without set-off or counterclaim and shall be made to Agent in immediately available funds (except for payments to be made to Issuing Bank as provided in Section 2.2 and except as Agent may otherwise consent) prior to 12:30 p.m., Chicago time, on the date due at Continental's office at 231 South LaSalle Street, Chicago, Illinois 60697, or at such other place as may be designated by Agent to Borrower in writing. Any payments received after such time shall be deemed received on the next Banking Day. Whenever any payment to be made hereunder or under any Note shall be stated to be due on a date other than a Banking Day, such payment may be made on the next 28 of 78 succeeding Banking Day, and such extension of time shall be included in the calculation of interest and any fees. (b) (i) Borrower authorizes Agent, and Agent will, subject to the provisions of this paragraph (b), apply the whole or any part of any amounts received by Agent (whether deposited in the Assignee Deposit Account or otherwise received by Agent) from the collection of items of payment and proceeds of any Collateral (including without limitation proceeds of insurance), against the principal and/or interest of any Loans made hereunder and/or any other Liabilities, whether or not then due, in such order of application as Agent may determine; provided, however, that prior to the occurrence of an Event of Default, any such amounts received by Agent shall be applied in the manner, if any, specifically set forth in this Agreement with respect to such payment and if no such manner is specifically set out, then as follows: first, to payment of amounts then due with respect to fees (including Attorneys' Fees), charges and expenses for which Borrower is liable pursuant to this Agreement and the Related Agreements; second, to payment of amounts then due with respect to interest on the Loans; third, to payment of the principal of the Loans. (ii) Notwithstanding subparagraph (i) above, if prior to an Event of Default, at any time (x) the funds received by Agent in the Assignee Deposit Account, or otherwise, exceed (A) the sum of the outstanding principal balance of the Loans bearing interest at the Adjusted Reference Rate, and the amounts described in clauses first and second of the proviso set forth above in subparagraph (i) or (B) the sum of the amounts described in clauses first, second and third of the proviso set forth above in subparagraph (i), or (y) there are no Payment Liabilities, then in any such case, Borrower may direct that such excess proceeds be held in a cash collateral account maintained by Agent. The funds held in any cash collateral account referred to in the preceding sentence may be disbursed, at Borrower's direction, so long as after giving effect to such disbursements, the Payment Liabilities do not exceed Revolving Loan Availability. (iii) Notwithstanding anything to the contrary herein, (i) all cash, checks, instruments and other items of payment, solely for purposes of determining the occurrence of an Event of Default, shall be deemed received upon actual receipt by Agent, unless the same is subsequently dishonored for any reason whatsoever, (ii) for purposes of determining whether, under Sections 2.1 and 2.2, there is availability for Loans or Letters of Credit, all cash, checks, instruments and other items of payment shall be applied against the Liabilities on the first Banking Day after receipt thereof by Agent and (iii) solely for purposes of interest calculation hereunder, all cash, checks, instruments and other items of payment shall be deemed to have been applied against the Liabilities on the first Banking Day after receipt by Agent of collected funds with respect thereto; further provided, that any amounts earned on such funds during the period after receipt thereof by Agent and prior to application thereof against the Liabilities as provided herein, shall be retained by Agent for Agent's own account. Notwithstanding the foregoing, no checks, drafts or other instruments received by Agent shall constitute final payment with respect to any Liabilities unless and until such item of payment has actually been collected. (c) Borrower hereby authorizes Agent, and Agent may, in its sole and absolute discretion, charge to Borrower at any time when due all or any portion of any of the Liabilities including but not limited to any 29 of 78 Attorneys' Fees and other costs and expenses of Agent and Lenders for which Borrower is liable pursuant to the terms of this Agreement or any Related Agreement, or for which any other Obligor is liable pursuant to the terms of any Related Agreement, by charging Borrower's Demand Deposit Account or any bank account of Borrower with Agent or by advancing the amount thereof to Borrower as a Revolving Loan; provided, however that the provisions of this Section 2.10(c) shall not affect Borrower's obligation to pay when due all amounts payable by Borrower under this Agreement, any Note or any Related Agreement, whether or not there are sufficient funds therefor in the Demand Deposit Account or any such other bank account of Borrower. 2.11 Agent's Election Not to Enforce. Notwithstanding any term or condition of this Agreement to the contrary, Agent, in the sole and absolute discretion of Requisite Lenders, at any time and from time to time, may suspend or refrain from enforcing any or all of the restrictions imposed in this Section 2, but no such suspension or failure to enforce shall impair any right or power of Agent or any Lender under this Agreement, including without limitation any right of each Lender to refrain from making a Loan or Issuing Bank to refrain from issuing a Letter of Credit if all conditions precedent to such Lender's obligation to make such Loan or Issuing Bank's obligation to issue such Letter of Credit have not been satisfied. 2.12 Reaffirmation. Each Loan or Letter of Credit, or designation or continuation of a LIBOR Rate Loan, in each case requested by Borrower pursuant to this Agreement, shall constitute an automatic certification by Borrower to Agent and Lenders that (a) all of the representations and warranties of Borrower in this Agreement and each of the Related Agreements are true and correct on the date of such request to the same extent as if made on such date, except for such changes as are specifically permitted hereunder (or under such Related Agreement) and except for those representations and warranties made solely as of the date hereof or the Closing Date and (b) immediately before and after making the requested Loan or issuing the requested Letter of Credit, no Event of Default, or Unmatured Event of Default, then exists or would result therefrom. 2.13 Setoff. In addition to and not in limitation of all other rights and remedies (including other rights of offset or banker's lien) that Agent and Lenders may have under applicable law, each of Agent and each Lender shall, upon the occurrence of any Event of Default described in Section 6.1, or any Unmatured Event of Default described in Section 6.1(e), have the right to appropriate and apply to the payment of the Liabilities (whether or not then due), in such order of application as Agent may elect, any and all balances, credits, deposits (general or special, time or demand, provisional or final), accounts or moneys of Borrower then or thereafter with Agent or any Lender. Agent and each Lender shall promptly advise Borrower of any such setoff and application but failure to do so shall not affect the validity of such setoff and application. 2.14 Closing Fee. Borrower agrees to pay to Continental, for its own account, in connection with the closing of this Agreement, a closing fee of $150,000, which amount shall be deemed fully earned and shall be payable in full on the Closing Date. With Agent's consent, the amount of the closing fee may be advanced to Borrower as a Revolving Loan. 2.15 Settlements, Distributions and Apportionment of Payments. On a weekly basis (or more frequently if required by Agent) (a 30 of 78 "Settlement Date"), Agent shall provide each Lender with a statement of the outstanding balance of the Liabilities as of the end of the Banking Day preceding the Settlement Date (the "Pre-Settlement Determination Date") and the current balance of the Revolving Loans funded by each Lender (whether made directly by such Lender to Borrower or constituting a settlement by such Lender of a previous Disproportionate Advance made by Agent on behalf of such Lender to Borrower). If such statement discloses that such Lender's current balance of the Revolving Loans as of the Pre-Settlement Determination Date exceeds such Lender's Pro Rata Share of the Revolving Loans outstanding as of the Pre-Settlement Determination Date, then Agent shall, one (1) Banking Day after the Settlement Date, transfer to such Lender, by wire transfer, the net amount due to such Lender in accordance with such Lender's instructions, and if such statement discloses that such Lender's current balance of the Revolving Loans as of the Pre-Settlement Determination Date is less than such Lender's Pro Rata Share of the Revolving Loans outstanding as of the Pre-Settlement Determination Date, then such Lender shall, one (1) Banking Day after the Settlement Date, transfer to Agent, by wire transfer the net amount due to Agent in accordance with Agent's instructions. In addition, payments actually received by Agent with respect to the following items shall be distributed by Agent to Lenders as follows: (a) Within one (1) Banking Day of receipt thereof by Agent, payments to be applied to interest on the Loans shall be paid to each Lender in proportion to its Pro Rata Share, subject to any adjustments for any Disproportionate Advances so that Agent shall receive interest on the Disproportionate Advances and each Lender shall only receive interest on the amount of funds actually advanced by such Lender; and (b) Within one (1) Banking Day of receipt thereof by Agent, payments to be applied to the unused line fee set forth in Section 2.4.2 and the Letter of Credit commission set forth in Section 2.2(b), shall each be paid to each Lender in proportion to its Pro Rata Share. Notwithstanding the foregoing, if a Lender has failed to remit its Pro Rata Share of any Loans required to be made pursuant to Section 2.1.1 or has failed to make a settlement payment to Agent pursuant to this Section 2.15, no payment shall be made to such Lender by Agent at any time such Lender's share of the outstanding Loans is less than such Lender's Pro Rata Share. If Agent or any Lender fails to pay the other any payment due under this Agreement on its due date, the party to whom such payment is due shall be entitled to recover interest from the party obligated to make such payment at a rate per annum equal to the overnight Federal Funds Rate. 3. COLLATERAL. 3.1 Grant of Security Interest. As security for the payment of all Loans now or hereafter made by, or on behalf of, Lenders to Borrower hereunder or under any Note, and as security for the payment or other satisfaction of all other Liabilities (including without limitation all reimbursement obligations under any Letters of Credit), Borrower hereby grants to Agent, for the benefit of itself and Lenders, a security interest in and to the following property of Borrower, whether now owned or existing, or hereafter acquired or coming into existence, wherever now or hereafter located (all such property is hereinafter referred to collectively as the 31 of 78 "Borrower Collateral"): (a) Accounts Receivable; Contract Rights; any and all security deposits and other security held by or granted to Borrower to secure payments from any and all persons who are or may become obligated to Borrower under, with respect to, or on account of any Account Receivable or Contract Right; and all chattel paper and instruments evidencing, arising out of or relating to any obligations to Borrower for goods sold or leased or services rendered, or otherwise arising out of or relating to any property described in this Section 3.1; (b) any and all amounts from time to time owing by Subsidiaries to Borrower pursuant to the Master Revolving Credit Note; all agreements, instruments and documents evidencing or otherwise pertaining to the loans made pursuant to such Master Revolving Credit Note; and any or all security held by or granted to Borrower by any or all Subsidiaries to secure amounts owing by any or all Subsidiaries to Borrower pursuant to such Master Re- volving Credit Note; (c) Inventory (whether or not Eligible Inventory); (d) Any and all balances, credits, deposits (general or special, time or demand, provisional or final), accounts or monies of or in the name of Borrower now or hereafter with Agent and any and all property of every kind or description of or in the name of Borrower now or hereafter, for any reason or purpose whatsoever, in the possession or control of, or in transit to, or standing to Borrower's credit on the books of, Agent, any agent or bailee for Agent, or any Participant; (e) To the extent related to the property described in clauses (a) through (d) above, all books, correspondence, credit files, records, invoices and other papers and documents, including without limitation, to the extent so related, all tapes, cards, computer runs, computer programs and other papers and documents in the possession or control of Borrower or any computer bureau from time to time acting for Borrower, and, to the extent so related, all rights in, to and under all policies of insurance, including claims of rights to payments thereunder and proceeds therefrom, including any credit insurance; and (f) All products and proceeds (including but not limited to any Accounts Receivable or other proceeds arising from the sale or other disposition of any property described above, any returns of Inventory sold by Borrower, and the proceeds of any insurance covering any of the property described above) of any of the foregoing. 3.2 Accounts Receivable. (a) If requested by Agent, Borrower shall notify Agent immediately of each dispute or claim by any Account Debtor of an amount in excess of $30,000 and settle or adjust them, or cause them to be settled or adjusted, at no expense to Agent or Lenders. If Agent directs after the occurrence of an Event of Default, no discount or credit allowance shall be 32 of 78 granted thereafter by Borrower or any Subsidiary to any Account Debtor, other than discounts and trade allowances offered in the ordinary course of Borrower's or a Subsidiary's business, on terms no more advantageous to customers than those being granted by Borrower or such Subsidiary to customers on the Closing Date. If requested by Agent, Borrower will, and will cause each Subsidiary to, make proper entries in its books and records, disclosing the assignment of Accounts Receivable to Agent, for the benefit of itself and Lenders. (b) Borrower warrants and covenants that: (i) all of the Accounts Receivable are and will continue to be bona fide existing obligations created by the sale of goods, the rendering of services, or the furnishing of other good and sufficient consideration to Account Debtors in the regular course of business; (ii) all shipping or delivery receipts and other documents furnished or to be furnished to Agent upon Agent's request in connection therewith are and will be genuine; and (iii) none of the Accounts Receivable identified or included on any schedule, Borrowing Base Certificate or report as Eligible Accounts Receivable fail at the time so identified or included to satisfy any of the requirements for eligibility set forth in the definition of Eligible Accounts Receivable. (c) Agent is authorized and empowered (which authorization and power, being coupled with an interest, is irrevocable until the last to occur of termination of this Agreement and payment and performance in full of all of the Payment Liabilities under this Agreement) at any time in its sole and absolute discretion: (i) After the occurrence of an Event of Default, to request, in the name of Agent, in Borrower's or a Subsidiary's name or the name of a third party, confirmation from any Account Debtor or party obligated under or with respect to any Collateral of the amount shown by the Accounts Receivable or other Collateral to be payable, or any other matter stated therein; (ii) To endorse in Borrower's or a Subsidiary's name and to collect any chattel paper, checks, notes, drafts, instruments or other items of payment tendered to or received by Agent in payment of any Account Receivable or other obligation owing to Borrower or such Subsidiary; (iii) After the occurrence of an Event of Default, to notify, either in Agent's name or Borrower's or a Subsidiary's name, and/or to require Borrower or such Subsidiary to notify, any Account Debtor or other Person obligated under or in respect of any Collateral, of the fact of Agent's Lien thereon, for the benefit of itself and Lenders, and of the collateral assignment thereof to Agent, for the benefit of itself and Lenders; (iv) After the occurrence of an Event of Default, to direct, either in Borrower's or a Subsidiary's name or Agent's name, and/or to require Borrower or such Subsidiary to direct,any Account Debtor or other Person obligated under or in respect of any Collateral to make payment directly to Agent of any amounts due or to become due thereunder or with respect thereto; and (v) After the occurrence of an Event of Default, to demand, collect, surrender, release or exchange all or any part 33 of 78 of any Collateral or any amounts due thereunder or with respect thereto, or compromise or extend or renew for any period (whether or not longer than the initial period) any and all sums which are now or may hereafter become due or owing upon or with respect to any of the Collateral, or enforce, by suit or otherwise, payment or performance of any of the Collateral either in Agent's own name or in the name of Borrower or a Subsidiary. Under no circumstances shall Agent be under any duty to act in regard to any of the foregoing matters. The costs relating to any of the foregoing matters, including Attorneys' Fees and out-of-pocket expenses, and the cost of any Depository Account, Assignee Deposit Account, or other bank account or accounts which may be required hereunder, shall be borne solely by Borrower whether the same are incurred by Agent or Borrower, and Agent may advance same to Borrower as a Revolving Loan. (d) Unless otherwise consented to by Agent, Borrower will, forthwith upon receipt by Borrower of all checks, drafts, cash and other remittances in payment or as proceeds of, or on account of, any of the Accounts Receivable or other Collateral, deposit the same in special bank accounts (the "Depository Accounts") at such banks or financial institutions as Agent shall consent. Said proceeds shall be deposited in precisely the form received except for Borrower's endorsement where necessary to permit collection of items, which endorsement Borrower agrees to make. Pending such deposit, Borrower agrees not to commingle any such checks, drafts, cash and other remittances with any of its funds or property, but will hold them separate and apart therefrom and upon an express trust for Agent, for the benefit of itself and Lenders, until deposit thereof is made in the Depository Accounts. All funds in the Depository Accounts at the end of each Banking Day will be wire transferred or transferred by other means acceptable to Agent to a special bank account (the "Assignee Deposit Account") at Continental, over which Agent alone has power of withdrawal. Borrower acknowledges that the maintenance of the Assignee Deposit Account is solely for the convenience of Agent in facilitating its own operations, and Borrower does not and shall not have any right, title or interest in the Assignee Deposit Account or in the amounts at any time appearing to the credit thereof, except to the extent that such amounts are transferred to a cash collateral account in accordance with Section 2.10(b)(ii). Borrower agrees not to maintain any depository accounts other than Depository Accounts and the Assignee Deposit Account established pursuant to this Section 3.2(d) and other than depository accounts established solely for the proceeds of property of Borrower and the Subsidiaries other than the Collateral, pursuant to the terms of the Senior Loan Documents. The foregoing shall not limit Borrower's ability to maintain such separate disbursement accounts as Borrower determines to be appropriate from time to time. Upon Agent's request after the occurrence of an Event of Default, Borrower agrees to notify its Account Debtors to make all payments in respect of Borrower's Accounts Receivable directly to one or more lockbox accounts under the control of Agent and evidenced by agreements in form and substance satisfactory to Agent. Upon the liquidation of all Payment Liabilities, Agent will pay over to Borrower any excess amounts received by Agent as payment or proceeds of Collateral, whether received by Agent as a deposit in the Assignee Deposit Account, contained in a lockbox account or any Depository Account or received by Agent as a direct payment on any of the sums due hereunder. Borrower will cause each of its Subsidiaries to establish accounts comparable to those set forth above for the collection of the proceeds of their Accounts Receivable, and Borrower shall cause each 34 of 78 Subsidiary to take all other actions to implement the collection mechanism set forth in this Section 3.2(d). (e) Borrower appoints Agent, or any Person whom Agent may from time to time designate, as Borrower's attorney and agent-in-fact with power: (i) after the occurrence of an Event of Default, to notify the post office authorities to change the address for delivery of Borrower's mail to an address designated by Agent; (ii) to receive, open and dispose of all mail addressed to Borrower, but received by Agent; (iii) after the occurrence of an Event of Default, to send requests for verification of Accounts Receivable or other Collateral to Account Debtors; (iv) to open under Agent's sole control (subject, where applicable, to the provisions of Section 2.10(b)), an Assignee Deposit Account, Depository Accounts, lockbox accounts or other accounts required under this Agreement for the collection of Accounts Receivable or other Collateral, if not required contem- poraneously with the execution hereof and if not previously opened by Borrower; and (v) to do all other things which Agent is permitted to do under this Agreement or any Related Agreement or which are necessary to carry out this Agreement and the Related Agreements. Neither Agent nor any of its directors, officers, employees or agents will be liable for any acts of commission or omission nor for any error in judgment or mistake of fact or law, unless the same shall have resulted from gross negligence or willful misconduct. The foregoing appointment and power, being coupled with an interest, is irrevocable until all Payment Liabilities under this Agreement are paid and performed in full and this Agreement is terminated. Borrower expressly waives presentment, demand, notice of dishonor and protest of all instruments and any other notice to which it might otherwise be entitled. (f) If any Account Receivable or Contract Right in an amount in excess of $10,000 arises out of a contract with the United States or any department, agency, or instrumentality thereof, Borrower will, upon Agent's request, immediately notify Agent in writing and execute any instruments and take any steps required by Agent in order that all monies due and to become due under such contract shall be assigned to Agent, for the benefit of itself and Lenders, and notice thereof given to the government under the Federal Assignment of Claims Act of 1940, as amended, or other applicable laws or regulations. (g) If any Account Receivable or Contract Right is evidenced by chattel paper or promissory notes, trade acceptances, or other instruments for the payment of money, Borrower will, unless Agent shall otherwise agree, deliver the originals of same to Agent, appropriately endorsed to Agent's order and, regardless of the form of such endorsement, Borrower hereby expressly waives presentment, demand, notice of dishonor, protest and notice of protest and all other notices with respect thereto. 3.3 Inventory. (a) Borrower warrants and covenants that: (i) all of the Inventory is, and at all times shall be, owned by Borrower or a Subsidiary free of all claims and Liens (except as set forth in Section 5.16); and (ii) neither Borrower nor any Subsidiary will make any further assignment of any thereof or create or permit to exist any further Lien thereon, unless approved in writing by Requisite Lenders, nor permit any of Agent's rights therein to be affected by any attachment, levy, garnishment or other judicial process. 35 of 78 (b) Neither Agent nor any Lender shall be liable or responsible in any way for the safekeeping of any Inventory delivered to it, to any bailee appointed by or for it, to any warehouseman, or under any other circumstances. Neither Agent nor any Lender shall be responsible for collection of any proceeds or for losses in collected proceeds held by Borrower or any Subsidiary in trust for Agent. Any and all risk of loss for any or all of the foregoing shall be upon Borrower and the Subsidiaries, except for such loss as shall result from Agent's or any Lenders' gross negligence or willful misconduct. (c) Any material change in the value (other than changes resulting from market price changes), or condition of any Inventory, and any errors discovered in any monthly inventory certificate under Section 5.1.3 or any other inventory schedule delivered to Agent and Lenders, shall be reported to Agent promptly. Borrower represents and warrants that, as to each schedule of Inventory delivered to Agent or any Lender: (i) The descriptions, origins, sizes, qualities, quantities, weights, and markings of all goods stated thereon, or on any attachment thereto, are true and correct in all material respects; (ii) None of the goods are defective, of second quality, used, or goods returned after shipment, except where described as such; and (iii) All Inventory not included on such schedule has been previously scheduled. 3.4 Supplemental Documentation. At Agent's request, Borrower shall execute and deliver, or cause to be executed and delivered, to Agent, at any time or times hereafter, such agreements, documents, financing statements, warehouse receipts, bills of lading, notices of assignment of Accounts Receivable, schedules of Accounts Receivable assigned, and other written matter necessary or reasonably requested by Agent to perfect and maintain perfected Agent's security interest in the Collateral, for the benefit of itself and Lenders (all the above hereinafter referred to as "Supplemental Documentation"), in form and substance acceptable to Agent, and pay all taxes, fees and other costs and expenses associated with any recording or filing of the Supplemental Documentation. Borrower hereby irrevocably makes, constitutes and appoints Agent (and all Persons designated by Agent for that purpose) as Borrower's true and lawful attorney (and agent-in-fact) (which appointment and power, being coupled with an interest, is irrevocable until the last to occur of termination of this Agreement and payment and performance in full of all of the Payment Liabilities under this Agreement) to sign the name of Borrower on any of the Supplemental Documentation and to deliver any of the Supplemental Documentation to such Persons as Agent in its sole and absolute discretion, may elect. Borrower agrees that a carbon, photographic, photostatic, or other reproduction of this Agreement or of a financing statement is sufficient as a financing statement. 3.5 Collateral for the Benefit of Agent and Lenders. All Liens granted to Agent hereunder and under the Related Agreements and all Collateral delivered to Agent hereunder and under the Related Agreements shall be deemed to have been granted and delivered to Agent, for the benefit of itself and Lenders, to secure the Liabilities. 36 of 78 4. REPRESENTATIONS AND WARRANTIES. To induce Agent and Lenders to make Loans to, and issue Letters of Credit for the account of, Borrower under this Agreement, Borrower makes the following representations and warranties to Agent and Lenders, all of which shall be true and correct as of the date the initial Loan is made or the initial Letter of Credit is issued and shall survive the execution of this Agreement and the making of the initial Loan and the issuance of the initial Letter of Credit: 4.1 Organization. Borrower and all of its corporate Borrowing Subsidiaries are corporations duly organized, validly existing and in good standing under the laws of the jurisdictions of their respective incorporation. All of Borrower's other Borrowing Subsidiaries, if any, are entities duly organized, validly existing and in good standing under the laws of the jurisdictions of their respective organization. Borrower and all of the Borrowing Subsidiaries are in good standing and are duly qualified to do business in each jurisdiction where, because of the nature of their respective activities or properties, such qualification is required, except for those states in which its failure to qualify to do business would not be likely to have a Material Adverse Effect. Except as set forth on Schedule 4.1, on the date hereof, Borrower and each Borrowing Subsidiary conducts business in its own name exclusively. Schedule 4.1 sets forth a complete and accurate list, as of the date of this Agreement, of (a) the state of formation of Borrower, (b) each state in which Borrower is qualified to do business and (c) all of Borrower's tradenames, trade styles or doing business forms. 4.2 Authorization. Borrower is duly authorized to execute and deliver this Agreement, any Notes, and any Related Agreements or Supplemental Documentation contemplated by this Agreement, and is and will continue to be duly authorized to borrow monies hereunder and to perform its obligations under this Agreement, any Notes and any such Related Agreements and Supplemental Documentation. Each Borrowing Subsidiary is duly authorized to execute and deliver any Related Agreements or Supplemental Documentation contemplated to be delivered by such Borrowing Subsidiary, and is and will continue to be duly authorized to perform its obligations thereunder. The execution, delivery and performance by (a) Borrower of this Agreement, any Notes, and any Related Agreements or Supplemental Documentation contemplated by this Agreement, and the borrowings hereunder and (b) each Borrowing Subsidiary of any Related Agreements or Supplemental Documentation to which it is a party, do not and will not require any consent or approval of any governmental agency or authority. 4.3 No Conflicts. The execution, delivery and performance by (a) Borrower of this Agreement, any Notes, and any Related Agreements or Supplemental Documentation contemplated by this Agreement and (b) each Borrowing Subsidiary of any Related Agreements or Supplemental Documentation to which it is a party, do not and will not conflict with (i) any provision of law, (ii) the Certificate or Articles of Incorporation, as applicable, or by-laws, of Borrower or such Borrowing Subsidiary, (iii) any agreement binding upon Borrower or such Borrowing Subsidiary or (iv) any court or administrative order or decree applicable to Borrower or such Borrowing Subsidiary, and do not and will not require, or result in, the creation or imposition of any Lien on any asset of Borrower or any Borrowing Subsidiary, except as provided herein. 37 of 78 4.4 Validity and Binding Effect. This Agreement, any Notes, and any Related Agreements or Supplemental Documentation contemplated by this Agreement, when duly executed and delivered will be legal, valid and binding obligations of Borrower and each Subsidiary party thereto, as applicable, enforceable against Borrower and each such Subsidiary in accordance with their respective terms. 4.5 No Default. Neither Borrower nor any Subsidiary is in default under any agreement or instrument to which Borrower or any Subsidiary is a party or by which any of their respective properties or assets is bound or affected, which default is reasonably likely to have a Material Adverse Effect. No Event of Default or Unmatured Event of Default has occurred and is continuing. 4.6 Financial Statements. Borrower's consolidated audited financial statements as at June 30, 1993 and Borrower's consolidated unaudited financial statements as at March 31, 1994, copies of which have been furnished to Agent, have been prepared in conformity with GAAP applied on a basis consistent with that of the preceding Fiscal Year and period and present fairly the financial condition of Borrower and the Subsidiaries as at such dates and the results of their operations for the periods then ended, subject (in the case of the interim financial statement) to year-end audit adjustments. Since March 31, 1994, there has been no Material Adverse Change. Borrower's consolidated unaudited pro forma balance sheets as of the Closing Date reflect pro forma changes in Borrower's financial condition since March 31, 1994, including the pro forma effects of the Transactions and the application of proceeds in respect thereof, and have been prepared in conformity with GAAP and, to the best knowledge of Borrower, present fairly the expected financial condition of Borrower and the Subsidiaries as of such date. 4.7 Insurance. Schedule 4.7 hereto is a complete and accurate summary, as of the date hereof, of the property and casualty insurance program carried by Borrower and the Subsidiaries on the date hereof. Schedule 4.7 includes the insurer's(s') name(s), policy number(s), expiration date(s), amount(s) of coverage, type(s) of coverage, the annual premium(s), deductibles and self-insured retention and describes any retro- spective rating plan, fronting arrangement or any other self-insurance or risk assumption agreed to by Borrower or any Subsidiary or imposed upon Borrower or any Subsidiary by any such insurer. This summary also includes any self-insurance program that is in effect. 4.8 Litigation; Contingent Liabilities. (a) As of the date hereof, except for those referred to in Schedule 4.8, there are no claims, litigation, arbitration proceedings or governmental proceedings pending or threatened against or affecting Borrower or any Subsidiary which involve an amount in controversy in excess of $100,000 or which request injunctive or other equitable relief. Neither Borrower nor any Subsidiary is subject to any claims, litigation, arbitration proceeding or governmental proceeding, either pending or threat- ened, the result of which is reasonably likely to have a Material Adverse Effect. (b) Other than any liability incident to the claims, litigation or proceedings disclosed in Schedule 4.8 or Schedule 4.19, or provided for or disclosed in the financial statements referred to in Section 4.6, as of the date hereof, neither Borrower nor any of the Subsidiaries has 38 of 78 any contingent liabilities which are reasonably likely to have a Material Adverse Effect. 4.9 Liens. None of the Collateral or other property, revenues or assets of Borrower or any Subsidiary is subject to any Lien (including but not limited to Liens pursuant to Capitalized Leases under which Borrower or any Subsidiary is a lessee) except: (a) Liens in favor of Agent, for the benefit of itself and Lenders; (b) Liens for current Taxes not delinquent or Taxes being contested in good faith and by appropriate proceedings and as to which such reserves or other appropriate provisions as may be required by GAAP are being maintained; (c) carriers', warehousemen's, mechanics', materialmen's and other like statutory Liens arising in the ordinary course of business securing obligations which are not overdue or which are being contested in good faith and by appropriate proceedings and as to which such reserves or other appropriate provisions as may be required by GAAP are being maintained; (d) Liens listed on Schedule 4.9 and Liens permitted by Section 5.16; (e) Liens granted to the holders of the Senior Notes or their representatives pursuant to the Senior Loan Documents; (f) Liens on Obligor Collateral of the Borrowing Subsidiaries in favor of Borrower, securing the Intercompany Loans and assigned to Agent, for the benefit of itself and Lenders; (g) other Liens securing Indebtedness not in excess of $100,000 in the aggregate; and (h) Liens consented to in writing by Requisite Lenders. 4.10 Subsidiaries. As of the date hereof, all of Borrower's Subsidiaries are listed on Schedule 4.10. Schedule 4.10 sets forth, for each such Subsidiary, a complete and accurate statement of (a) Borrower's and each Subsidiary's percentage ownership of each of their respective Subsidiaries, (b) the state or other jurisdiction of formation or incorporation of each Subsidiary, (c) each state in which each Subsidiary is qualified to do business and (d) all of each Subsidiary's trade names, trade styles or doing business forms. Except as otherwise noted on Schedule 4.10, all of the Subsidiaries listed on Schedule 4.10 are Restricted Subsidiaries. 4.11 Partnerships; Joint Ventures. As of the date hereof, neither Borrower nor any of the Subsidiaries is a partner or joint venturer in any partnership or joint venture other than the partnerships and joint ventures listed on Schedule 4.11. Schedule 4.11 sets forth, for each such partnership or joint venture, a complete and accurate statement of (a) Borrower's and each Subsidiary's percentage ownership of each such partnership or joint venture, (b) the state or other jurisdiction of formation or incorporation, as appropriate, of each such partnership or joint venture, (c) each state in which each such partnership or joint venture is qualified to do business and (d) all of each such partnership's or joint venture's trade names, trade styles or doing business forms on the date of this Agreement. 4.12 Business and Collateral Locations. (a) On the date hereof, the office where Borrower and each Borrowing Subsidiary keeps its books and records concerning its Accounts Receivable and other Collateral, and Borrower's chief place of business and chief executive office, is located at the address of Borrower set forth on the signature pages of this Agreement. Schedule 4.12 contains a complete and accurate list, as of the date of this Agreement, of all of Borrower's and each Subsidiary's places of business other than that referred to in the first sentence of this paragraph (a). 39 of 78 (b) Schedule 4.12 contains a complete and accurate list, as of the date of this Agreement, of the locations of all Inventory and other tangible Collateral and if any Inventory or other Collateral is not in the possession or control of Borrower or the owner of such Collateral, the name and mailing address of each bailee, processor, warehouseman or other Person in possession or control thereof. 4.13 Senior Notes. The Units have been issued in accordance with and pursuant to the terms of the Prospectus dated as of June 23, 1994 and in compliance with all applicable federal and state securities laws. The issuance of the Units has been duly authorized by all necessary corporate action on the part of Borrower and will not require any consent or approval of any governmental agency or authority that has not been obtained prior to the date hereof. The issuance of the Units and the execution of the Senior Loan Documents does not conflict with (i) any provision of law, (ii) the Certificate of Incorporation or by-laws of Borrower, (iii) any agreement binding upon Borrower or (iv) any court or administrative order or decree applicable to Borrower, and do not and will not require, or result in, the creation or imposition of any Lien on any asset of Borrower or any Subsidiary, except as expressly provided therein. 4.14 Eligibility of Collateral. Each Account Receivable or item of Inventory which Borrower shall, expressly or by implication (by inclusion on a Borrowing Base Certificate or otherwise), request Agent to classify as an Eligible Account Receivable or as Eligible Inventory, respectively, will, as of the time when such request is made, conform in all respects to the requirements of such classification set forth in the respective definitions of "Eligible Account Receivable" and "Eligible Inventory" set forth herein. 4.15 Intentionally Omitted. 4.16 Patents, Trademarks, etc. Borrower and each of the Borrowing Subsidiaries possesses adequate licenses, patents, patent applications, copyrights, trademarks, trademark applications, trade styles, and tradenames to continue to conduct its respective business as heretofore conducted by it, and all such licenses, patents, patent applications, copyrights, trademarks, trademark applications, trade styles, and tradenames existing on the date hereof and that are material to the business of Borrower or any Borrowing Subsidiary, and, in the case of patents, trademarks and copyrights, the date of issuance thereof, are listed on Schedule 4.16. 4.17 Solvency. Borrower and its Subsidiaries, taken as a whole, now have capital sufficient to carry on their businesses and transactions and all businesses and transactions in which any of them is about to engage, and they are able to pay their debts as they mature. Borrower and its Subsidiaries, taken as a whole, are now solvent and now own property having a value, both at fair valuation and at present fair salable value, greater than the amount required to pay the debts of Borrower and its Subsidiaries. 4.18 Contracts; Labor Matters. Except as disclosed on Schedule 4.18: (a) neither Borrower nor any Borrowing Subsidiary is a party to any contract or agreement, or is subject to any charge, corporate restriction, judgment, decree or order, which is reasonably likely to have a Material Adverse Effect; (b) as of the date hereof, no labor contract to 40 of 78 which Borrower or any Borrowing Subsidiary is a party or is otherwise subject is scheduled to expire prior to the initial Termination Date; (c) neither Borrower nor any Borrowing Subsidiary has, within the two (2)-year period preceding the date of this Agreement, taken any action which would have constituted or resulted in a "plant closing" or "mass layoff" within the meaning of the Federal Worker Adjustment and Retraining Notification Act of 1988 or any similar applicable federal, state or local law, and Borrower has no reasonable expectation that any such action is or will be required at any time prior to the initial Termination Date and (d) on the date of this Agreement (i) neither Borrower nor any Borrowing Subsidiary is a party to any labor dispute and (ii) there are no strikes or walkouts relating to any labor contracts to which Borrower or any Borrowing Subsidiary is a party or is otherwise subject. 4.19 Pension and Welfare Plans. Each Pension Plan complies, and has been administered in compliance, in all material respects, with all applicable statutes and governmental rules and regulations; no Reportable Event has occurred and is continuing with respect to any Pension Plan; neither Borrower nor any ERISA Affiliate has withdrawn from any Multiemployer Plan in a "complete withdrawal" or a "partial withdrawal" as defined in Section 4203 or 4205 of ERISA, respectively; no steps have been instituted to terminate any Pension Plan; no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA; no condition exists or event or transaction has occurred in connection with any Pension Plan or Multiemployer Plan that is reasonably likely to have a Material Adverse Effect; and neither Borrower nor any ERISA Affiliate is a "contributing sponsor" as defined in Section 4001(a)(13) of ERISA of a "single-employer plan" as defined in Section 4001(a)(15) of ERISA that has two or more contributing sponsors at least two of whom are not under common control. Except as listed in Schedule 4.19, neither Borrower nor any ERISA Affiliate, to the extent there is joint and several liability with Borrower to pay such benefits, has any liability to pay any welfare benefits under any employee welfare benefit plan within the meaning of Section 3(l) of ERISA to former employees thereof or to current employees with respect to claims incurred after the termination of their employment other than as required by Section 4980B of the Code or Part 6 of Subtitle B of Title 1 of ERISA. 4.20 Regulations G and U. Borrower is not engaged in the business of purchasing or selling Margin Stock or extending credit to others for the purpose of purchasing or carrying Margin Stock, and no part of the proceeds of any borrowing hereunder will be used to purchase or carry any Margin Stock or for any other purpose which would violate any of the margin regulations of the Federal Reserve Board. 4.21 Compliance. Except as described on Schedule 4.21 or Schedule 4.25, Borrower and the Subsidiaries are in compliance with all statutes and governmental rules and regulations applicable to them, the noncompliance with which is reasonably likely to have a Material Adverse Effect. 4.22 Taxes. Each of Borrower and the Subsidiaries has filed all tax returns which are required to have been filed and has paid, or made adequate provisions for the payment of, all of its Taxes which are due and payable, except such Taxes, if any, as are being contested in good faith and by appropriate proceedings and as to which such reserves or other appropriate provisions as may be required by GAAP have been maintained. The 41 of 78 federal income tax liability of Borrower and the Subsidiaries has been audited by the Internal Revenue Service and has been finally determined and satisfied (or the time for audit has expired) for all tax years up to and including the tax year ended June 30, 1990. Except as described on Schedule 4.22, Borrower is not aware of any proposed assessment against Borrower or any of the Subsidiaries for additional Taxes (or any basis for any such assessment) which is reasonably likely to have a Material Adverse Effect. 4.23 Investment Company Act Representation. Borrower is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 4.24 Public Utility Holding Company Act Representation. Borrower is not a "holding company" or a "subsidiary company" of a "holding company" or an "affiliate" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. 4.25 Environmental and Safety and Health Matters. Except as disclosed on Schedule 4.25, Borrower and each of the Subsidiaries and/or each property, operations and facility that Borrower or any Subsidiary may own, operate or control (a) complies in all respects with (i) all applicable Environmental Laws the failure with which to comply would be reasonably likely to have a Material Adverse Effect and (ii) all applicable Occupational Safety and Health Laws the failure with which to comply would be reasonably likely to have a Material Adverse Effect; (b) is not subject to any judicial or administrative proceeding alleging the violation of any Environmental Law or Occupational Safety and Health Law which violation, if proven, would be reasonably likely to have a Material Adverse Effect; (c) has not received any notice (i) that it may be in violation of any Environmental Law or Occupational Safety and Health Law which violation, if proven, would be reasonably likely to have a Material Adverse Effect, (ii) threatening the commencement of any proceeding relating to allegedly unlawful, unsafe or unhealthy conditions, which, if adversely determined, would be reasonably likely to have a Material Adverse Effect, or (iii) alleging that it is or may be responsible for any response, cleanup, or corrective action, including but not limited to any remedial investigation/feasibility studies, under any Environmental Law or Occupational Safety and Health Law, which, if adversely determined, would be reasonably likely to have a Material Adverse Effect; (d) to Borrower's knowledge, is not the subject of federal or state investigation evaluating whether any investigation, remedial action or other response is needed to respond to (i) a Release or threatened Release into the environment of any Hazardous Material or the spillage, disposal or release or threatened release into the environment of any other hazardous, toxic or dangerous waste, substance or constituent, or other substance which, if adversely determined, would be reasonably likely to have a Material Adverse Effect or (ii) any allegedly unsafe or unhealthful condition, which, if adversely determined, would be reasonably likely to have a Material Adverse Effect; (e) has not filed any notice under or relating to any Environmental Law or Occupational Safety and Health Law indicating or reporting (i) any past or present Release into the environment of, or treatment, storage or disposal of, any Hazardous Material or spillage, disposal or release into the environment of any other hazardous, toxic or dangerous waste, substance or constituent, or other substance or (ii) any potentially unsafe or unhealthful condition, in either case, which, if adversely determined, would be reasonably likely to have a Material Adverse Effect, and to Borrower's knowledge, there exists no basis for such notice irrespective of whether 42 of 78 such notice was actually filed; and (f) has no contingent liability in connection with (i) any actual or potential Release into the environment of, or otherwise with respect to, any Hazardous Material or spillage, disposal or release into the environment of any other hazardous, toxic or dangerous waste, substance or constituent, or other substance, whether on any premises owned or occupied by Borrower or any Subsidiary or on any other premises, which would be reasonably likely to have a Material Adverse Effect or (ii) any unsafe or unhealthful condition, which would be reasonably likely to have a Material Adverse Effect. Except as disclosed on Schedule 4.25, there are no Hazardous Materials on, in or under any property or facilities owned, operated or controlled by Borrower or any Subsidiary the presence of which would be reasonably likely to have a Material Adverse Effect, including but not limited to such Hazardous Materials that may be contained in underground storage tanks, but excepting such Hazardous Materials used in accordance with all applicable laws and in the same manner as an ordinary consumer (e.g., gasoline in tanks of motor vehicles, small amounts of cosmetic cleaners, etc.). 4.26 Related Agreements. As of the date hereof, all representations and warranties of Borrower and each Subsidiary contained in any Related Agreements and any agreement evidencing any of the other Trans- actions (whether such representations and warranties were made to Agent or any Lender or to another Person), other than the Senior Loan Documents, are true and correct as if made on the date hereof (except for those representations and warranties which are expressly made as of another specified date) and Borrower hereby adopts and affirms all such representations and warranties which Borrower agrees shall be incorporated by reference herein and made a part hereof. 4.27 Capitalized Lease Obligations. As of the date hereof, the Indebtedness of Borrower and its Subsidiaries under Capitalized Leases is as set forth on Schedule 4.27. 5. BORROWER COVENANTS. From the date of this Agreement and thereafter until the Credit is terminated and all Payment Liabilities of Borrower hereunder are paid in full, Borrower agrees that unless Agent, at the written direction of Requisite Lenders, shall otherwise consent in writing, it will: 5.1 Financial Statements and Other Reports. Furnish to Agent and each Lender, in form satisfactory to Agent: 5.1.1 Financial Reports: (a) Annual Audited Financial Statements. Within ninety (90) days after each Fiscal Year, a copy of the annual audited financial statements of Borrower and the Subsidiaries prepared on a consolidated basis and in conformity with GAAP and certified by an independent certified public accountant who shall be satisfactory to Agent, together with (i) a certificate from such accountant, (x) in the form attached hereto as Exhibit B, acknowledging to Agent and Lenders such accountant's understanding that Agent, Lenders and any Participant are relying on such annual audit report, (y) containing a computation of, and showing compliance with, each of the financial ratios and restrictions contained in this Section 5 or in Supplement A, and (z) to the effect that, in making the examination necessary for the signing of such annual audit report, such accountant has 43 of 78 not become aware of any Event of Default or Unmatured Event of Default that has occurred and is continuing and that relates to financial or other accounting matters or the financial ratios and restrictions contained in this Section 5 or in Supplement A, or, if such accountant has become aware of any such event, describing it and the steps, if any, being taken to cure it and (ii) the annual operating statements of Borrower and the Subsidiaries prepared on a consolidating basis and in conformity with GAAP applied in a manner consistent with the audit report referred to in preceding clauses (a)(i), signed by Borrower's chief financial officer. (b) Monthly Financial Statement. Within thirty (30) days after the end of each month of each Fiscal Year of Borrower, a copy of the unaudited financial statement of Borrower and the Subsidiaries prepared on a consolidated basis and in conformity with GAAP applied in a manner consistent with the audit report referred to in preceding clause (a)(i), signed by Borrower's chief financial officer and consisting of at least a balance sheet as at the close of such month and an income statement and cash flow statement for such month and for the period from the beginning of such Fiscal Year to the close of such month, compared, in each case, to the actual results for the same period during the prior Fiscal Year and to Borrower's budget (delivered pursuant to Section 5.1.1(c), for the current Fiscal Year. (c) Annual Budgets. Within thirty (30) days after the end of each Fiscal Year of Borrower, a copy of an annual budget for the current Fiscal Year, prepared on a consolidated basis and in conformity with GAAP applied in a manner consistent with the prior Fiscal Year's budget, signed by Borrower's chief financial officer and consisting of at least a balance sheet, an income statement and a cash flow statement, each calculated on a quarter by quarter basis. (d) Officer's Certificate. Together with the financial statements furnished by Borrower under the preceding clauses (a), and (b), a certificate of Borrower's chief financial officer in the form of Exhibit C, dated the date of such annual audit report or such monthly financial statement, as the case may be, containing a statement that no Event of Default or Unmatured Event of Default has occurred and is continuing, or, if there is any such event, describing it and the steps, if any, being taken to cure it, and containing a computation of, and showing compliance with, each of the financial ratios and restrictions contained in this Section 5 or in Supplement A. 5.1.2 Agings. Within fifteen (15) days after the end of each month, an aging of all Accounts Receivable and an aging of all accounts payable of Borrower and the Borrowing Subsidiaries as of the end of such month, in each case in form and content acceptable to Agent. 5.1.3 Inventory Certification. Within fifteen (15) days after the end of each month, an Inventory certification report as of the end of the month for all Inventory locations of Borrower and the Borrowing Subsidiaries as of the end of such month, in form and content acceptable to Agent. 5.1.4 Other Reports and Information: (a) SEC and Other Reports. Copies of each filing and report made by Borrower or any Subsidiary with or to any securities exchange or the 44 of 78 Securities and Exchange Commission promptly upon the filing or making thereof; (b) Report of Change Relating to Borrower or Subsidiaries. Promptly from time to time, a written report of any change in the information set forth in Schedule 4.10 concerning Borrower or any Subsidiary; (c) Intercompany Loans. Within fifteen (15) days after the end of each month, a list of all outstanding balances of each Borrowing Subsidiary's Intercompany Loan as of the end of such month, together with a list of all debits and credits with respect thereto, in form and content acceptable to Agent; and (d) Other Reports. Any information required to be provided pursuant to other provisions of this Agreement, and such other reports or information from time to time reasonably requested by Agent on behalf of itself or any Lender. As of the date hereof, it is not Agent's intent to require that Borrower provide information to Agent and Lenders in excess of, or at times other than, that specifically required to be provided by the terms of this Agreement; however, Agent reserves the right, from time to time, in its reasonable judgment, to require Borrower to provide information at different times than currently required and/or to provide additional types of information. 5.2 Notices. Notify Agent in writing of any of the following, within the periods indicated, describing the same and, if applic- able, the steps being taken by the Person(s) affected with respect thereto: (a) Concurrent Reporting. Concurrently with the occurrence thereof: (i) the consummation of any Acquisition; and (ii) any change in the location of Borrower's or any Subsidiary's chief executive office or chief place of business. (b) Prompt Reporting. Within ten (10) Banking Days after Borrower learns of the occurrence thereof (or, in the case of clause (viii), after the delivery or receipt thereof): (i) Default. The occurrence of (i) an Event of Default or Unmatured Event of Default and (ii) the default by Borrower, any other Obligor or any Subsidiary under any note, indenture, loan agreement, mortgage, lease, deed or other similar agreement to which Borrower, any other Obligor or any Subsidiary, as appropriate, is a party or by which it is bound (including without limitation any Senior Loan Document or Subordinated Debt Document) that evidences or secures Indebtedness in a principal amount in excess of $500,000, or where such default would be reasonably likely to have a Material Adverse Effect; (ii) Litigation. The institution of any litigation, arbitration proceeding or governmental proceeding affecting Borrower, any other Obligor, any Subsidiary or any Collateral, involving an amount in controversy in excess of $2,000,000, 45 of 78 whether or not considered to be covered by insurance, or request- ing injunctive relief; (iii) Judgment. The entry of any uninsured judgment or decree against Borrower, any other Obligor or any Subsidiary, if the amount of such judgment exceeds $500,000; (iv) Material Adverse Change or Effect. The occurrence of a Material Adverse Change or the occurrence of any event that would be reasonably likely to have a Material Adverse Effect; (v) Change in Chief Executive Officer or Lines of Business. If any change occurs in the Person holding the position of chief executive officer of Borrower, or any change occurs in Borrower's or any Subsidiary's line(s) of business; (vi) Insurance Cancellation. Any cancellation of any insurance by Borrower or any Subsidiary or any receipt by Borrower or any Subsidiary of any notice of any cancellation by any of its insurers; (vii) Other Indebtedness Notices. Copies of any amendments, waivers or consents, notices of breach or default, notices relating to the exercise or nonexercise of any remedy available to any Person, notices of indemnity or other claims, written materials relating to any dispute, written materials relating to the exercise of any rights derived from or arising in connection with any Indebtedness and other written communications of a material nature, including any communications by Borrower in connection with the Senior Loans or the Subordinated Debt other than any such notice or other written materials already sent to Agent pursuant to any other Section of this Agreement; and (viii) Stock Purchase/Acquisitions. Copies of any agreements, instruments and documents and any amendments, waivers or consents, notices of breach or default, notices relating to the exercise or nonexercise of any remedy available to any Person, notices of indemnity or other claims, written materials relating to any dispute, written materials relating to the exercise of any rights derived from or arising in connection with the Stock Repurchase or any Acquisition and other written communications of a material nature, pertaining thereto. (c) Monthly Reporting - Name Changes. Within ten (10) Banking Days after the end of the month during which such a change occurs, any change in the name of Borrower, any Subsidiary or any other Obligor. (d) Quarterly Reporting. Within ten (10) Banking Days after the end of the fiscal quarter during which Borrower learns of the occurrence thereof: (i) Pension Plans and Welfare Plans. The occurrence of a Reportable Event with respect to any Pension Plan; the filing of a notice of intent to terminate a Pension Plan by Borrower or any ERISA Affiliate; the institution of proceedings to terminate a Pension Plan by the PBGC or any other Person; the withdrawal in a "complete withdrawal" or a "partial withdrawal" 46 of 78 as defined in Sections 4203 and 4205, respectively, of ERISA by Borrower or any ERISA Affiliate from any Multiemployer Plan; the failure of Borrower or any ERISA Affiliate to make a required contribution to any Pension Plan, including but not limited to any failure to pay an amount sufficient to give rise to a Lien under Section 302(f) of ERISA; the taking of any action with respect to a Pension Plan that could result in the requirement that Borrower or any ERISA Affiliate furnish a bond or other security to the PBGC or such Pension Plan; the occurrence of any other event with respect to any Pension Plan that is reasonably likely to have a Material Adverse Effect; or, with respect to any "employee welfare benefit plan" as defined in Section 3(l) of ERISA which covers former employees thereof or current employees and their beneficiaries with respect to claims incurred after the termination of their employment, the establishment of a new plan subject to ERISA or an amendment to any existing plan which will result in a material increase in contributions or benefits under such plan or the incurrence of any material increase in the liability of Borrower or an ERISA Affiliate to the extent there is joint and several liability with Borrower or any other Obligor or any Subsidiary; (ii) Business and Collateral Information. Any change or proposed change in any of the information set forth on Schedule 4.10 or Schedule 4.12, including but not limited to (i) the formation of any new Subsidiary, (ii) any change in the location of any Inventory or any Collateral to a location not included on such Schedule, (iii) the identity of any new bailee, processor, warehouseman or other Person in possession or control of any Inventory or other Collateral, (iv) any opening, closing or other change in the list of offices and other places of business of Borrower and each Subsidiary and (v) any opening, closing or other change in the offices and other places of business of each other Obligor; (iii) Insurance Information. Any material change in the information set forth in Schedule 4.7; (iv) Environmental and Safety and Health Matters. The occurrence of any event, or the acquisition of any information which, if it had occurred or was true on or before the Closing Date, would have been required to have been disclosed and included on Schedule 4.25, including but not limited to existence of any Environmental Lien and receipt of any notice from any federal, state or local government or agency with respect to any actual or alleged violation of any Environmental Law or any Occupational Safety and Health Law; (v) Change in Other Operating Management. If any change occurs in any of the Persons holding the positions of chief financial officer or divisional vice president of Borrower; or any change occurs in Borrower's or any Subsidiary's line(s) of business; (vi) Patents, Etc. Any change to the list of patents, trademarks, copyrights and other information set forth in Schedule 4.16; 47 of 78 (vii) Litigation. An update of any changes to Schedule 4.8 since the last quarterly update, disclosing all newly instituted claims, litigation, arbitration proceedings or governmental proceedings against or affecting Borrower or any Subsidiary which involves an amount in controversy in excess of $100,000 or which requests injunctive or other equitable relief, and which discloses any significant events or occurrences in any of the matters set forth on Schedule 4.8 or any updates previously provided thereto; (viii) Certain Changes. Any change in the information set forth in Schedule 4.1 or Schedule 4.11 concerning Borrower, any Subsidiary or any partnership or joint venture; and (ix) Other Notices. Notice of the occurrence of such other event as Agent may reasonably from time to time specify. (e) Other Notices. On a timely basis, any notices required to be provided pursuant to any Related Agreement or the other provisions of this Agreement. 5.3 Existence. Maintain and preserve, and cause each Subsidiary to maintain and preserve, its respective existence as a corporation or other form of business organization, as the case may be, and all rights, privileges, licenses, patents, patent rights, copyrights, trademarks, trade names, trade styles, franchises and other authority to the extent material and necessary for the conduct of its respective business in the ordinary course as conducted from time to time. 5.4 Nature of Business. Engage in, and cause each Subsidiary to engage in, substantially the same fields of business as it is engaged in on the date hereof. 5.5 Books, Records and Access. Maintain, and cause each Subsidiary to maintain, complete and accurate books and records (including but not limited to records relating to Accounts Receivable, Inventory, and other Collateral and property), in which full and correct entries in conformity with GAAP shall be made of all dealings and transactions in relation to its respective business and activities, including without limitation complete and accurate records of all debits and credits in respect of all Intercompany Loans. Cause its books and records as at the end of any calendar month to be posted and closed not more than thirty (30) days after the last business day of such month. Permit, and cause each Subsidiary to permit, access by Agent and its agents and employees to the books and records of Borrower and such Subsidiary at Borrower's or such Subsidiary's place or places of business at intervals to be determined by Agent (but in the absence of an Event of Default no more than four (4) times each in any twelve (12) month period) upon reasonable prior notice and during normal business hours and without hindrance or delay, and permit and cause each Subsidiary to permit Agent and its agents and employees to inspect the books and records and location of such Subsidiary and to inspect, audit, check and make copies and/or extracts from the books, records, computer data and records, computer programs, journals, orders, receipts, correspondence and other data relating to Inventory, Accounts Receivable, and, any other Collateral and property, or relating to any other transactions between the parties hereto; provided, that Borrower shall permit each Lender and its respective agents and employees to accompany 48 of 78 Agent on each such visit; and provided further, that after the occurrence of an Event of Default, Agent and Lenders may have access to such premises at such times as they desire, without having given prior notice. Any and all such inspections, appraisals and/or audits by Agent and its agents and employees relating to Borrower's books and records and location shall be at Borrower's expense, no matter when the same shall occur; and any and all such inspections, appraisals and/or audits by Agent and its agents and employees relating to a Subsidiary's books and records and location shall be at Borrower's expense only after the occurrence of an Event of Default. Agent may advance such costs for which Borrower is responsible to Borrower as a Revolving Loan. 5.6 Insurance. Maintain, and cause each Subsidiary to maintain, insurance to such extent and against such hazards and liabilities as is commonly maintained by companies similarly situated. Keep the Collateral properly housed and insured for its full insurable value (subject to customary deductibles) against loss or damage by fire, theft, explosion, sprinklers and such other risks as are customarily insured against by persons engaged in business similar to that of Borrower or such Subsidiary, as applicable, with such companies, in such amounts and under policies in such form as shall be satisfactory to Agent. Certificates of such policies of insurance (other than workman's compensation insurance) have been delivered to Agent prior to the date hereof together with evidence of payment of all premiums therefor then due; certificates with respect to worker's compensation insurance and evidence of premium payment shall be delivered to Agent within thirty (30) days after the Closing Date. Borrower shall cause each issuer of an insurance policy for Borrower or any Subsidiary to provide Agent within thirty (30) days after the Closing Date, with an endorsement or an independent instrument naming Agent as an additional insured, for the benefit of itself and Lenders. In the event Borrower at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance required herein or to pay any premium in whole or in part relating thereto when due, then Agent, without waiving or releasing any obligation of or default by Borrower hereunder, may at any time or times thereafter (but shall be under no obligation to do so) obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto which Agent deems advisable. All sums so disbursed by Agent, including reasonable Attorneys' Fees, court costs, expenses and other charges relating thereto, shall be payable on demand by Borrower to Agent, and Agent may, in its sole and absolute discretion, advance such sums to Borrower as a Revolving Loan. Borrower shall cause each Subsidiary to grant to Agent rights identical to those granted by Borrower to Agent in respect of its insurance. 5.7 Intentionally Omitted. 5.8 Repair. Maintain, preserve and keep, and cause each Subsidiary to maintain, preserve and keep, its Equipment and other properties in good operating condition and repair, ordinary wear and tear excepted, and from time to time make, and cause each Subsidiary to make, all necessary and proper repairs, renewals, replacements, additions, betterments and improvements thereto so that at all times the efficiency thereof shall be fully preserved and maintained. 5.9 Taxes. Pay, and cause each Subsidiary to pay, when due, all of its Taxes, unless and only to the extent that Borrower or such Subsidiary is contesting such Taxes in good faith and by appropriate 49 of 78 proceedings and Borrower or such Subsidiary has set aside on its books such reserves or other appropriate provisions therefor as may be required by GAAP; not file a consolidated tax return together with any other Person, unless consented to in writing by Agent, except that Borrower and the Subsidiaries may file consolidated returns; and not change its Fiscal Year or tax year without Agent's prior written consent. 5.10 Compliance. Comply, and cause each Subsidiary to comply, with all statutes and governmental rules and regulations applicable to it, except where the failure to so comply would not be reasonably likely to have a Material Adverse Effect. 5.11 Pension Plans. Not permit, and not permit any Subsidiary to permit, any condition to exist in connection with any Pension Plan that might constitute grounds for the PBGC to institute proceedings to have such Pension Plan terminated or a trustee appointed to administer such Pension Plan; not fail, and not permit any Subsidiary to fail, to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a Lien under Section 302(f) of ERISA; and not engage in, or permit to exist or occur, or permit any of the Subsidiaries to engage in, or permit to exist or occur, any other condition, event or transaction with respect to any Pension Plan that is reasonably likely to result in a Material Adverse Effect. 5.12 Merger, Purchase and Sale. Not, and not permit any Subsidiary to: (a) be a party to any merger, liquidation or consolidation, including without limitation a merger constituting a "Repurchase Event" under the terms of the Warrant Agreement; (b) except for sales of Inventory and Equipment in the normal course of its business, sell, transfer, convey, lease or otherwise dispose of its assets; or (c) sell or assign, with or without recourse, any Accounts Receivable, Contract Rights, notes receivable or chattel paper, except as provided in this Agreement; provided, that nothing herein shall prohibit the (i) merger of any Borrowing Subsidiary with another Borrowing Subsidiary, and (ii) sale, transfer, conveyance, lease or other disposition of all of the capital stock of any Subsidiary or all or substantially all of the assets of any Subsidiary if: (A) no Event of Default or Unmatured Event of Default then exists or would exist after giving effect to such transaction and the application of proceeds thereof, and (B) Borrower delivers to Agent from the proceeds thereof for application to the Loans in accordance with Section 2.10 an amount not less than the outstanding principal amount of the Intercompany Loan of such Subsidiary, along with all accrued interest thereon, as of the date of such transaction, plus the amount, if any, of any Over Advance that would result from such transaction after giving effect to the repayment of such Intercompany Loan but before any other application of proceeds thereof. Nothing in this Agreement shall be deemed to in any way limit the right of the holders of the Senior Notes or their representative to exercise any rights under the Senior Loan Documents, although such exercise may constitute a breach of this Section 5.12 or other Sections of this Agreement. 5.13 Restricted Payments. Not, and not permit any Subsidiary to, (a) purchase or redeem any shares of its stock or any options or warrants therefor, other than a repurchase of the Warrants upon the occurrence of a merger constituting a Repurchase Event to which Agent has consented; (b) declare or pay any dividends on any of its stock (other than dividends payable in non-redeemable capital stock) or make any distribution to stockholders as such or set aside any funds for any such purpose; (c) 50 of 78 make any voluntary prepayment, purchase or redemption of any Senior Loans other than as expressly required by the terms of the Senior Loan Documents; (d) except as permitted in any applicable subordination or intercreditor agreements, or any subordination terms contained within the applicable Subordinated Debt Documents, pay, prepay, purchase or redeem any Subordinated Debt; or (e) repay any amounts owing from time to time by any Subsidiary to Borrower, exclusive of the Intercompany Loans; provided, that if no Event of Default or Unmatured Event of Default then exists and if the outstanding amount of the Revolving Loans does not exceed the sum of the amounts described in Sections 2.2(i) and (ii) of Supplement A, or if there are then no Payment Liabilities, (i) any Subsidiary may pay dividends to Borrower from time to time, and (ii) any Borrowing Subsidiary may repay any amounts owing from time to time by such Borrowing Subsidiary to Borrower. 5.14 Borrower's and Subsidiaries' Stock. Not permit any Subsidiary to purchase or otherwise acquire any shares of the stock of Borrower, and not take any action, or permit any Subsidiary to take any action, which will result in a decrease in Borrower's or any Subsidiary's ownership interest in any Subsidiary. 5.15 Indebtedness. Not, and not permit any Subsidiary to, incur or permit to exist any Indebtedness (including but not limited to Indebtedness as lessee under Capitalized Leases), except: (a) Indebtedness under the terms of this Agreement; (b) Subordinated Debt; (c) other Indebtedness outstanding on the date hereof and listed on Schedule 5.15; (d) Indebtedness hereafter incurred in connection with Liens permitted under Section 5.16(d); (e) Indebtedness in respect of the Senior Loans, with an aggregate principal amount due upon maturity of not more than $127,200,000; (f) Indebtedness in respect of loans from Borrower to a Borrowing Subsidiary, including without limitation any Intercompany Loans the right to receive payment of which has been assigned by Borrower to Agent, for the benefit of itself and Lenders; (g) other Indebtedness not in excess of $100,000 for Borrower and the Subsidiaries at any time outstanding; (h) "Acquisition Indebtedness" as that term is defined in the Senior Loan Documents in an aggregate principal amount at any one time outstanding not to exceed $15,000,000 and no more than $6,000,000 of which may be incurred in any twelve month period, (i) other Indebtedness, if after giving effect thereto, the "Consolidated Coverage Ratio" (as defined in the Senior Note Indenture) would be greater than 1.75:1.00; and (j) other Indebtedness approved in writing by Requisite Lenders. 5.16 Liens. Not, and not permit any Subsidiary to, create or permit to exist any Lien with respect to any property, revenue or assets now owned or hereafter acquired, except: (a) Liens for current Taxes not delinquent or Taxes being contested in good faith and by appropriate proceedings and as to which such reserves or other appropriate provisions as may be required by GAAP are being maintained; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's, and other like statutory Liens arising in the ordinary course of business securing obligations which are not overdue or which are being contested in good faith and by appropriate proceedings and as to which such reserves or other appropriate provisions as may be required by GAAP are being maintained; (c) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation; (d) Liens in connection with the acquisition of Equipment after the date hereof, by way of purchase money mortgage, conditional sale or other title retention agreement, Capitalized Lease or other deferred payment contract, and attaching only to the property being 51 of 78 acquired, if (i) the Indebtedness secured thereby does not exceed eighty percent (80%) of the fair market value of such property at the time of the acquisition thereof, (ii) the Indebtedness secured by any single piece of property does not exceed $100,000 and (iii) the aggregate outstanding amount of such Indebtedness of Borrower and the Subsidiaries does not exceed $3,000,000; (e) Liens in favor of Agent, for the benefit of itself and Lenders; (f) Liens on property of Borrowing Subsidiaries in favor of Borrower securing the Intercompany Loans and assigned to Agent, for the benefit of itself and Lenders; (g) Liens granted to the holders of Senior Notes or their representative pursuant to the Senior Loan Documents; (h)Liens referred to in Section 4.9; (i) Liens granted to the holders of Indebtedness incurred pursuant to clause (h) of Section 5.15 to the extent such Liens do not encumber any property other than the property acquired with such Indebtedness and to the extent such Liens do not encumber any assets described in Section 3.1 and (j) Liens consented to in writing by Requisite Lenders. 5.17 Guaranties. Not, and not permit any Subsidiary to, become or be a guarantor or surety of, or otherwise become or be responsible in any manner (whether by agreement to purchase any obligations, stock, assets, goods or services, or to supply or advance any funds, assets, goods or services, or otherwise) with respect to, any undertaking of any other Person, except for the endorsement, in the ordinary course of collection, of instruments payable to it or its order, except any guaranty in favor of Agent, for the benefit of itself and Lenders, except for any guaranty of the Senior Notes (in the form attached to the Senior Loan Documents) executed by any Restricted Subsidiary and except for guaranties by Borrower or any Subsidiary of utility bills and charges of newly organized Subsidiaries in an aggregate amount not in excess of $50,000. 5.18 Investments. Not, and not permit any Subsidiary to, make or permit to exist any Investment in any Person, except for: (a) advances to employees of Borrower or any of the Subsidiaries for travel or other ordinary business expenses provided that the aggregate amount outstanding at any one time shall not exceed $25,000 for any single employee and $75,000 in the aggregate for all employees; (b) extensions of credit in the nature of Accounts Receivable or notes receivable arising from the sale of goods and services in the ordinary course of business; (c) shares of stock, obligations or other securities received in settlement of claims arising in the ordinary course of business; (d) other Investments outstanding on the date hereof and listed on Schedule 5.18; (e) other Investments not in excess of $50,000 in the aggregate for Borrower and the Subsidiaries; (f) Investments made in the form of loans by Borrower to the Borrowing Subsidiary, including without limitation the Intercompany Loans; (g) Investments in the form of capital contributions by Borrower in new and existing Subsidiaries with funds not constituting proceeds of the Revolving Loans or the Collateral (other than proceeds of the Collateral located in a cash collateral account and available to Borrower under the terms of Section 2.10(b)(ii); (h) Investments resulting from Acquisitions complying with the provisions of clause (d) of Section 5.12; (i) Investments in Unrestricted Subsidiaries to the extent permitted in the Senior Note Indenture; (j) Investments consisting of bank accounts permitted under this Agreement; and (k) other Investments consented to by Requisite Lenders in writing. 5.19 Subsidiaries. Except as provided in Section 5.12, not, and not permit any Subsidiary to, acquire any stock or similar interest in any Person, and not create, establish or acquire any Subsidiaries; not 52 of 78 designate any Restricted Subsidiary to be an "Unrestricted Subsidiary" (as defined in the Senior Loan Documents) or designate any Unrestricted Subsidiary to be a Restricted Subsidiary; and not designate any new Subsidiary as an Unrestricted Subsidiary unless such designation complies with the applicable terms of the Senior Note Indenture and unless Agent receives concurrent notice of such designation. 5.20 Intentionally Omitted. 5.21 Change in Accounts Receivable. After the occurrence of an Event of Default, not permit or agree to, or permit any Subsidiary to permit or agree to, any extension, compromise or settlement or make any change or modification of any kind or nature with respect to any Account Receivable, including any of the terms relating thereto. 5.22 Environmental Issues. Provide such information and certifications which Agent may reasonably request from time to time pertaining to the environmental aspects of Borrower and the Subsidiaries and any property owned, operated or controlled by Borrower or any Subsidiary. In order to investigate environmental aspects of Borrower and the Subsidiaries and their properties, facilities and operations, Agent and its agents shall have the right at any time that Agent shall have determined that an environmental condition affecting any Real Property would be reasonably likely to have a monetary impact of $2,000,000 or more upon Borrower or a Subsidiary, upon reasonable notice to enter upon the property of Borrower or any Subsidiary, take samples, review the books, records or other documents of Borrower and the Subsidiaries, interview officers and employees of Borrower or the Subsidiaries, and conduct such other activities as Agent, in its sole discretion, deems appropriate. Borrower shall, and shall cause the Subsidiaries to, cooperate fully in the conduct of any such audit. Borrower shall pay upon demand all costs and expenses (including Attorney's Fees) connected with such audit. Agent, may, in its discretion, provide for the payment of any amount due from Borrower under this Section 5.22 by making Borrower a Revolving Loan. Nothing in this Section 5.22, and no actions taken by Agent or any Lender pursuant thereto, shall give, or be construed as controlling, or giving to Agent or any Lender the right or obligation to direct or control, the conduct or action or inaction of Borrower or any Subsidiary with respect to any environmental matters, including but not limited to those pertaining to compliance with any Environmental Laws. Agent agrees to share with Borrower the results of any such audit conducted by a third party. 5.23 Related Agreements. Not enter into, or permit any Subsidiary to enter into, any agreement containing any provision which would be violated or breached by the performance by Borrower or such Subsidiary of its obligations hereunder or under any Related Agreement or any instrument or document delivered or to be delivered by Borrower or such Subsidiary in connection herewith. 5.24 Unconditional Purchase Options. Not enter into or be a party to, or permit any Subsidiary to enter into or be a party to any contract for the purchase of materials, supplies or other property or services, if such contract requires that payment be made by it regardless of whether or not delivery is ever made of such materials, supplies or other property or services. 53 of 78 5.25 Use of Proceeds. Not use or permit any proceeds of the Loans or Letters of Credit to be used, either directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of "purchasing or carrying" any Margin Stock, and furnish to Agent upon request, a statement in conformity with the requirements of Federal Reserve Form U-l referred to in Regulation U of the Board of Governors of the Federal Reserve System. 5.26 Transactions with Related Parties. Not, and not permit any Subsidiary to, (a) pay any management, consulting or similar fees to any Related Party, whether for services rendered to Borrower or any Subsidiary, or otherwise or (b) enter into or be a party to any other transaction or arrangement, including without limitation the purchase, sale, lease or exchange of property or the rendering of any service, with any Related Party, except in the ordinary course of and pursuant to the reasonable requirements of Borrower's or such Subsidiary's business and upon fair and reasonable terms no less favorable to Borrower or such Subsidiary than would obtain in a comparable arm's-length transaction with a Person not a Related Party. 5.27 Amendment of Documents. Not amend, modify or alter, or permit to be amended, modified or altered, (a) any Senior Loan Document (other than an amendment permitted by section 8.1(a), (b), (c) or (f) of the Senior Note Indenture), or (b) any Subordinated Debt Document (other than an amendment permitted by section 11.01(a) or (d) of the 2007 Indenture or that has the purpose of curing any ambiguity or correcting or supplementing any provision contained in the 2007 Indenture which may be defective or inconsistent with any other provision contained in the 2007 Indenture), or (c) any agreement, instrument or document evidencing any of the Indebtedness listed on Schedule 5.15. 6. DEFAULT. 6.1 Event of Default. Each of the following shall constitute an Event of Default under this Agreement: (a) Non-Payment. Default in the payment, when due or declared due, of any of the Liabilities. (b) Non-Payment of Other Indebtedness. Default in the payment when due, whether by acceleration or otherwise (subject to any applicable grace period), of any Indebtedness of, or guaranteed by, Borrower, any other Obligor or any Subsidiary with a principal balance in excess of $1,000,000 (other than (i) any Indebtedness under this Agreement and any Notes or (ii) any Indebtedness of any Subsidiary to Borrower or to any other Subsidiary), including without limitation the Senior Loans and the Subordinated Debt. (c) Acceleration of Other Indebtedness. Any event or condition shall occur which results in the acceleration of the maturity of any Indebtedness of, or guaranteed by, Borrower, any other Obligor or any Subsidiary with a principal balance in excess of $1,000,000 (other than (i) any Indebtedness of any Subsidiary to Borrower or to any other Subsidiary and (ii) the Indebtedness under this Agreement and any Notes), including without limitation the Senior Loans and the Subordinated Debt, or enables the holder or holders of such other Indebtedness or any trustee or agent for such holders to accelerate the maturity of such other Indebtedness. 54 of 78 (d) Other Obligations. Default in the performance or observance (subject to any applicable grace period or waiver of such default) of (i) any obligation or agreement of Borrower, any other Obligor or any Subsidiary to or with Agent or any Lender (other than any obligation or agreement of Borrower hereunder and under any Notes) or (ii) any obligation or agreement of Borrower, any other Obligor or any Subsidiary to or with any other Person (other than (x) any such obligation or agreement constituting or related to Indebtedness, (y) Trade Accounts Payable or (z) any obligation or agreement of any Subsidiary to Borrower or to any other Subsidiary), in any case, if such default would be reasonably likely to have a Material Adverse Effect, except only to the extent that the existence of any such default is being contested by Borrower, such other Obligor or such Subsidiary, as the case may be, in good faith and by appropriate proceedings and Borrower, such other Obligor or such Subsidiary, as applicable, shall have set aside on its books such reserves or other appropriate provisions therefor as may be required by GAAP. (e) Bankruptcy. Borrower, any other Obligor or any Subsidiary applies for, consents to, or acquiesces in the appointment of a trustee, receiver or other custodian for Borrower, such other Obligor or such Subsidiary, or for a substantial part of the property of Borrower, such other Obligor or such Subsidiary, or makes a general assignment for the benefit of creditors; or, in the absence of such application, consent or acquiescence, a trustee, receiver or other custodian is appointed for Borrower, any other Obligor or any Subsidiary, or for a substantial part of the property of Borrower, any other Obligor or any Subsidiary and is not discharged or dismissed within sixty (60) days; or any bankruptcy, reorganization, debt arrangement or other proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding, is instituted by or against Borrower, any other Obligor or any Subsidiary; or any warrant of attachment or similar legal process is issued against any substantial part of the property of Borrower, any other Obligor or any Subsidiary. Notwithstanding the foregoing, none of the foregoing events that occurs with respect to a Subsidiary shall constitute an Event of Default, unless such event would be reasonably likely to have a Material Adverse Effect. (f) Insolvency. Borrower, any other Obligor or any Subsidiary becomes insolvent, or generally fails to pay, or admits in writing its inability to pay, its debts as they mature. Notwithstanding the foregoing, none of the foregoing events that occurs with respect to a Subsidiary shall constitute an Event of Default, unless such event would be reasonably likely to have a Material Adverse Effect. (g) ERISA Liabilities. Any of the following events shall have occurred, if such event is reasonably likely to have a Material Adverse Effect: (i) the existence of a Reportable Event, (ii) the withdrawal of Borrower or any ERISA Affiliate from a Pension Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, (iii) the occurrence of an obligation to provide affected parties with a written notice of intent to terminate a Pension Plan in a distress termination under Section 4041 of ERISA, (iv) the institution by PBGC of proceedings to terminate any Pension Plan, (v) any event or condition that would require the appointment of a trustee to administer a Pension Plan, (vi) the withdrawal of Borrower or any ERISA Affiliate from a Multiemployer Plan, and (vii) any event that would give rise to a Lien under Section 302(f) of ERISA. 55 of 78 (h) Non-Compliance With This Agreement. Default in the performance of any of Borrower's agreements set forth in Section 3.2, 3.3, 5.5, 5.6, 5.12 through 5.19, 5.22 through 5.27 or in Section 6 of Supplement A hereto (and not constituting an Event of Default under any of the other subsections of this Section 6.1) and continuance of such default for ten (10) days after the occurrence thereof; or default in the performance of any of Borrower's agreements set forth in Section 5.1.1, 5.1.2, 5.1.3, 5.1.4 or 5.2 (and not constituting an Event of Default under any of the other subsections of this Section 6.1), and continuance of such default for five (5) days after the occurrence thereof; or default in the performance of any of Borrower's other agreements herein set forth (and not constituting an Event of Default under any of the other subsections of this Section 6.1), and continuance of such default for thirty (30) days after notice thereof to Borrower by Agent. (i) Non-Compliance With Related Agreements. Default in the performance by Borrower, any other Obligor or any Subsidiary of any of its agreements set forth in any Related Agreement (and not constituting an Event of Default under any of the other subsections of this Section 6.1), and continuance of such default after notice from Agent and the expiration of the grace or cure period (if any) set forth therein. (j) Representations and Warranties. Any representation or warranty made by Borrower or any other Obligor herein (including without limitation any representation or warranty contained in Section 3.2 or 3.3) or in any Related Agreement is untrue or misleading in any material respect when made or deemed made; or any schedule, statement, report, notice, certificate or other writing furnished by Borrower or any other Obligor to Agent or any Lender is untrue or misleading in any material respect on the date as of which the facts set forth therein are stated or certified; or any certification made or deemed made by Borrower or any other Obligor to Agent or any Lender is untrue or misleading in any material respect on or as of the date made or deemed made. (k) Litigation. There shall be entered against any one of Borrower, any other Obligor or any Subsidiary one or more judgments or decrees in excess of $2,000,000 in the aggregate at any one time outstanding, excluding those judgments or decrees (i) that shall have been outstanding less than thirty (30) calendar days from the entry thereof, (ii) for and to the extent which Borrower, such Obligor or such Subsidiary, as applicable, is insured and with respect to which the insurer has assumed responsibility in writing or for and to the extent which Borrower, such Obligor or such Subsidiary, as applicable, is otherwise indemnified if the terms of such indemnification are satisfactory to Agent or (iii) which have been stayed pending appeal and with respect to which Borrower, such Obligor or such Subsidiary has posted any required bond or letter of credit. (l) Termination of Obligations. If any Obligor shall terminate any of its obligations to Agent or any Lender in respect of the Liabilities. (m) Validity. If the validity or enforceability of this Agreement or any Related Agreement shall be challenged by Borrower or any other Obligor, or if this Agreement or any Related Agreement shall fail to remain in full force and effect. (n) Conduct of Business. If Borrower, any other Obligor or any Subsidiary is enjoined, restrained or in any way prevented by court 56 of 78 order, which has not been dissolved or stayed within five (5) Banking Days, from conducting all or any material part of its business affairs and such event might have a Material Adverse Effect. (o) Change of Control. If Paul S. Lindsey, Jr., members of his immediate family, and the other Persons who are officers of Borrower on the Closing Date, cease to retain among them record and beneficial ownership of not less than a majority of the outstanding voting stock of Borrower on a fully diluted basis; or if any "Change of Control" (as defined in the Senior Loan Documents) occurs which results in an obligation of Borrower to commence a "Change of Control Offer" pursuant to the terms of the Senior Loan Documents. (p) Material Adverse Change. Agent shall have determined in good faith that a Material Adverse Change has occurred. 6.2 Effect of Event of Default; Remedies. (a) In the event that one or more Events of Default described in Section 6.1(e) shall occur, then each Lender's commitment and the Credit extended under this Agreement shall terminate and all Liabilities hereunder and under any Notes shall be immediately due and payable without demand, notice or declaration of any kind whatsoever. (b) In the event an Event of Default other than one described in Section 6.1(e) shall occur, at the option of Agent or Requisite Lenders, each Lender's commitment shall terminate and all Liabilities hereunder and under any Notes shall immediately be due and payable without demand or notice of any kind whatsoever, whereupon the Credit extended under this Agreement shall terminate. Agent shall promptly advise Borrower of any such declaration. (c) In the event of the occurrence of any Event of Default, Agent may exercise any one or more or all of the following remedies, all of which are cumulative and non-exclusive: (i) Any remedy contained in this Agreement or in any of the Related Agreements or any Supplemental Documentation; (ii) Any rights and remedies available to Agent or any Lender under the UCC, and any other applicable law; (iii) To the extent permitted by applicable law, Agent may, without notice, demand or legal process of any kind, take possession of any or all of the Collateral (in addition to Collateral which it may already have in its possession), wherever it may be found, and for that purpose may pursue the same wherever it may be found, and may enter into any premises where any of the Collateral may be or is supposed to be, and search for, take possession of, remove, keep and store any of the Colla- teral until the same shall be sold or otherwise disposed of, and Agent shall have the right to store the same in any of Borrower's premises without cost to Agent; (iv) At Agent's request, Borrower will, at Borrower's expense, assemble the Collateral and make it available to Agent 57 of 78 at a place or places to be designated by Agent which is reasonably convenient to Agent and Borrower; and (v) Agent at its option, and pursuant to notification given to Borrower as provided for below, may sell any Collateral actually or constructively in its possession at public or private sale and apply the proceeds thereof as provided below. 7. ADDITIONAL PROVISIONS REGARDING COLLATERAL AND AGENT'S RIGHTS. 7.1 Notice of Disposition of Collateral. Any notification of intended disposition of any of the Collateral required by law shall be deemed reasonably and properly given if given at least five (5) calendar days before such disposition. 7.2 Application of Proceeds of Collateral. Any proceeds of any disposition by Agent of any of the Collateral may be applied by Agent to the payment of expenses in connection with the taking possession of, storing, preparing for sale, and disposition of Collateral, including Attorneys' Fees and legal expenses, and any balance of such proceeds may be applied by Agent toward the payment of such of the Liabilities, and in such order of application, as Agent may from time to time elect. 7.3 Care of Collateral. Agent shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if it takes such action for that purpose as Borrower requests in writing, but failure of Agent to comply with such request shall not, of itself, be deemed a failure to exercise reasonable care, and no failure of Agent to preserve or protect any rights with respect to such Collateral against prior parties, or to do any act with respect to the preservation of such Collateral not so requested by Borrower, shall be deemed a failure to exercise reasonable care in the custody or preservation of such Collateral. 7.4 Performance of Borrower's Obligations. Agent shall have the right, but shall not be obligated, to discharge any claims or Liens against, and any Taxes at any time levied or placed upon any or all Collateral, including without limitation those arising under statute or in favor of landlords, taxing authorities, government, public and/or private warehousemen, common and/or private carriers, processors, finishers, draymen, coopers, dryers, mechanics, artisans, laborers, attorneys, courts, or others. Agent may also pay for maintenance and preservation of Collateral. Agent may, but is not obligated to, perform or fulfill any of Borrower's responsibilities under this Agreement which Borrower has failed to perform or fulfill. Agent may advance to Borrower as a Revolving Loan any payment made or expense incurred under this Section 7.4. 7.5 Agent's Rights. None of the following shall affect the obligations of Borrower or any Subsidiary to Agent or any Lender under this Agreement or Agent's right with respect to the remaining Collateral (any or all of which actions may be taken by Agent at any time, whether before or after an Event of Default, at its sole and absolute discretion and without notice to Borrower): (a) acceptance or retention by Agent or any Lender of other property or interests in property as security for the Liabilities, or acceptance or retention of any Obligor(s), in addition to Borrower, with respect to any of the Liabilities; 58 of 78 (b) release of its Lien on, or surrender or release of, or the substitution or exchange of or for, all or any part of the Collateral or any other property securing any of the Liabilities (including but not limited to any property of any Obligor other than Borrower), or any extension or renewal for one or more periods (whether or not longer than the original period), or release, compromise, alteration or exchange, of any obligations of any guarantor or other Obligor with respect to any Collateral or any such property; (c) extension or renewal for one or more periods (whether or not longer than the original period), or release, compromise, alteration or exchange of any of the Liabilities, or release or compromise of any obligation of any Obligor with respect to any of the liabilities; or (d) failure by Agent or any Lender to resort to other security or pursue any Person liable for any of the Liabilities before resorting to the Collateral. 8. CONDITIONS PRECEDENT; DELIVERY OF DOCUMENTS AND OTHER MATTERS. 8.1 Conditions Precedent to Initial Loans and Letters of Credit. The obligation of each Lender that is a party to this Agreement on the date hereof to make the initial Loans and for Issuing Bank to issue the initial Letters of Credit is subject to satisfaction of the following conditions precedent (in addition to those provided in Section 8.2): 8.1.1 Legal Audit. Each Lender's counsel shall have completed its legal due diligence relating to Borrower, each Subsidiary, and each other Obligor, the results of which shall provide such Lender with results and information which, in such Lender's sole determination, are satisfactory to permit such Lender to enter into the secured financing transaction described in this Agreement and the Related Agreements. Such due diligence examination may include but need not be limited to an analysis of all of Borrower's, each Subsidiary's, and each other Obligor's business operations, affairs, conditions, assets, liabilities and commitments (including without limitation analysis of contingent liabilities, environmental and health and safety matters, material contracts, labor matters, union contracts, employee benefit plans, pending or threatened litigation and tax matters). 8.1.2 Liens. The Liens on the Collateral granted under this Agreement and the Related Agreements and all other Liens granted to Agent, for the benefit of itself and Lenders, to secure the Liabilities, shall be senior, perfected Liens, except for the Liens disclosed on Schedule 4.9 which are designated as senior to the Liens of Agent, and except as otherwise agreed by Agent and Lenders, and all financing statements and other documents relating to Collateral shall have been filed or recorded, as appropriate. 8.1.3 Transactions. (i) Borrower shall have issued the Units, such Units and the Senior Loan Documents shall in all respects be satisfactory to each Lender, the net proceeds of such Units, in an amount not less than $95,000,000, shall have been received by Borrower and the proceeds thereof shall have been used by Borrower in substantially the manner described in the "Use of Proceeds" section of the effective Registration Statement for the Units (the "Prospectus"), (ii) the Stock of 59 of 78 Repurchase shall have been consummated in accordance with the terms of the applicable agreements and all applicable laws, (iii) Borrower shall have acquired the assets of PSNC Propane Corporation, and (iv) the merger of Empire Gas Operating Corporation and Borrower shall have been consummated, all as described in the Prospectus and all pursuant to agreements, instruments and documents in form and substance satisfactory to each Lender (the transactions referred to in clauses (i), (ii), (iii) and (iv) are hereinafter referred to as the "Transactions"). 8.1.4 Solvency. Each Lender shall be satisfied that, after giving effect to the Transactions, and the initial Loans and Letters of Credit, Borrower, each Borrowing Subsidiary and each other Obligor shall have assets (excluding goodwill and other intangible assets not capable of valuation) having a value, both at present fair salable value and at fair valuation, greater than the amount of such Person's liabilities (including trade debt and Indebtedness to Agent and Lenders). Each Lender shall be satisfied that all of the assets supporting the Loans and Letters of Credit under this Agreement shall be sufficient in value to provide Borrower and each Subsidiary with sufficient cash flow and working capital to enable it to thereafter profitably operate its business and to meet its obligations as they become due. Each Lender shall be satisfied that Borrower and each Borrowing Subsidiary has adequate capital for the business in which it is about to engage. Notwithstanding the foregoing, the failure of any individual Borrowing Subsidiaries to meet the foregoing requirements shall not constitute a failure to satisfy this Section 8.1.4 unless such failure would be reasonably likely to have Material Adverse Effect. In connection with the foregoing, each Lender shall have received such written appraisals, balance sheets, solvency certificates or other materials as Agent shall reasonably request. 8.1.5 Maximum Initial Loans. There shall be no Loans made on the Closing Date in excess of $2,000,000. 8.1.6 Organization. Each Lender shall be satisfied with the corporate, capital and legal structures of Borrower and the Subsidiaries, and the terms of any agreements, documents or instruments relating thereto. 8.1.7 Effect of Law. No law or regulation affecting Agent's or any Lender's entering into the secured financing transaction contemplated by this Agreement shall impose upon Agent or such Lender any material obligation, fee, liability, loss, penalty, cost, expense or damage. 8.1.8 Exhibits; Schedules. All Exhibits and Schedules to this Agreement shall have been completed and submitted to each Lender, shall be in form and substance satisfactory to such Lender and shall contain no facts or information which such Lender, in its sole judgment, determines to be unacceptable. 8.1.9 Licenses, Permits and Consents. All licenses, permits, consents, judicial and regulatory approvals and corporate action necessary to consummate the Transactions and the making of the initial Loans and the issuance of the initial Letters of Credit shall have been obtained on terms acceptable to each Lender. 8.1.10 Fees. If not funded with the proceeds of the initial Loans, Agent shall have received the closing fee referred to in Section 2.14 and any other fees due and payable by Borrower or any other Person on the 60 of 78 funding of the initial Loans and the issuance of the initial Letters of Credit. 8.1.11 Title to Assets. Borrower and its Subsidiaries shall have good, indefeasible and merchantable title to the Collateral, free and clear of all Liens, except as otherwise permitted in Section 5.16 hereof. 8.1.12 Material Adverse Change; Litigation. No Material Adverse Change, as reasonably determined by each Lender, shall have occurred from March 31, 1994 through the Closing Date and the issuance of the initial Letters of Credit and no Material Adverse Change, as reasonably determined by such Lender, shall have occurred in the facts and information disclosed to such Lender or otherwise relied upon by such Lender in making its decision to enter into this Agreement. In addition, there shall not have been instituted or threatened any litigation or proceedings in any court or administrative forum affecting or threatening to affect the consummation of the Transactions or which would have a Material Adverse Effect, in each case as reasonably determined by each Lender. 8.1.13 Documents. In addition to this Agreement, each Lender shall have received all of the following, each duly executed where appropriate and dated as of the Closing Date (or such other date as shall be satisfactory to Agent), in form, and containing terms and provisions, acceptable to such Lender: (a) Resolutions. A copy, duly certified by the secretary or an assistant secretary of Borrower of (i) resolutions of the Board of Directors of Borrower authorizing (A) the borrowings by Borrower hereunder, (B) the execution, delivery and performance by Borrower of this Agreement and each Related Agreement to which Borrower is a party or by which it is bound, and (C) certain officers or employees of Borrower to request borrowings by telephone and to execute Borrowing Base Certificates, and the consent of the shareholders of Borrower thereto, (ii) all documents evidencing any other necessary corporate action with respect to this Agreement and the Related Agreements, (iii) all approvals or consents, if any, with respect to this Agreement and the Related Agreements, (iv) a list of the names of all officers and directors of Borrower, together with the true signatures of such officers, and specifying those authorized to sign this Agreement and the Related Agreements, (v) the by-laws of Borrower, (vi) the Certificate of Incorporation of Borrower and (vii) a list of all shareholders of Borrower and the number of shares of Borrower's stock owned by each; and similar certifi- cates executed by the secretary or assistant secretary of each Borrowing Subsidiary or other Obligor; (b) Borrower's Closing Certificate. The certificate of the President or Chairman of the Board of Borrower certifying to the fulfillment of all conditions precedent to closing and funding the secured financing transaction contemplated by this Agreement (other than those conditions solely under the control of Agent and Lenders), to the truth and accuracy, as of such date, of the representations and warranties of Borrower contained in this Agreement and each Related Agreement to which Borrower is a party or by which it is bound and to the absence of any defaults under any such agreements; 61 of 78 (c) Certificates and Articles of Incorporation. A copy, duly certified by the Secretary of State of Missouri, of Borrower's Certificate of Incorporation; and a copy, duly certified by the Secretary of State of the applicable state, of each Borrowing Subsidiary's and other Obligor's Articles or Certificates of Incorporation, as applicable; (d) Good Standing. A copy, duly certified by the applicable Secretary of State of (i) a certificate of good standing issued by the Secretary of the State of each state where Borrower, any Borrowing Subsidiary or any other Obligor is incorporated or organized and (ii) in any state in which Borrower, any Borrowing Subsidiary or any other Obligor is doing business under an assumed name, a certificate or other document issued by the Secretary of State of each such state evidencing Borrower's, any Borrowing Subsidiary's or any other Obligor's authority to use such name; (e) Legal Opinion. Legal opinion from Wilmer, Cutler & Pickering, counsel for Borrower and the Subsidiaries; (f) Insurance. Evidence satisfactory to Agent of the existence of insurance on the Collateral and business of Borrower and each Subsidiary, in amounts and with insurers acceptable to Agent, together with evidence establishing that Agent, for the benefit of itself and Lenders, is named as the sole loss payee with respect to property and casualty insurance covering the Collateral, and additional insured with respect to liability insurance; (g) Authorization to Pay Proceeds. Written authorization and instructions from Borrower, in form satisfactory to Agent, for disbursement of the proceeds of the initial Loans and issuance and delivery of the initial Letters of Credit; (h) Intercompany Loans. The agreements, instruments and documents governing the Intercompany Loans shall have been executed and delivered by Borrower and the Subsidiaries, such agreements, instruments and documents shall be in form and substance satisfactory to each Lender, and the liens and security interests granted to secure such indebtedness shall have been properly perfected; (i) Other Related Agreements. Notes in the aggregate amount of $15,000,000 with respect to the Revolving Loans executed by Borrower; and a Solvency Certificate executed by Borrower; (j) Borrowing Subsidiary Guaranty. Each Borrowing Subsidiary shall have entered into a guaranty in favor of Agent, for the benefit of itself and Lenders, pursuant to which such Borrowing Subsidiary shall have unconditionally guaranteed the Liabilities; (k) Borrowing Subsidiary Security Agreement. Each Borrowing Subsidiary shall have entered into a security agreement with Agent, for the benefit of itself and Lenders, pursuant to which such Borrowing Subsidiary shall have granted to Agent, for the 62 of 78 benefit of itself and Lenders, a security interest in the accounts receivable, inventory, and certain other assets of such Borrowing Subsidiary as collateral for the guaranty described in clause (j) above; and (l) Other Documents. Such other documents as Lenders shall determine, in their sole discretion, to be necessary or desirable. 8.1.14 Default. No Event of Default or Unmatured Event of Default shall have occurred and be continuing or would be caused thereby. 8.2 Continuing Conditions Precedent to all Loans; Certification. The obligation of each Lender to make the initial Loans and each subsequent Loan and to establish any LIBOR Rate Loans, and for Issuing Bank to issue the initial Letters of Credit and each subsequent Letter of Credit, is subject to satisfaction of the following conditions precedent in addition to those provided in Section 8.1: (a) No Change in Condition. No change in the condition or operations, financial or otherwise, of Borrower, any Subsidiary or any other Obligor, shall have occurred which change, in the reasonable credit judgment of Requisite Lenders, is reasonably likely to have a Material Adverse Effect; (b) Default. Before and after giving effect to such Loan and/or Letter of Credit, no Event of Default or Unmatured Event of Default shall have occurred and be continuing; (c) Insurance. There shall have been no material change, or notice of prospective material change (whether such notice is formal or informal), in the nature, extent, scope or cost of the insurance policies of Borrower or any Subsidiary listed on Schedule 4.7 which change would have a Material Adverse Effect, or would significantly adversely affect Borrower's or any Subsidiary's ability to perform its obligations under this Agreement, any Note(s), or any Related Agreement to which it is a party or by which it is bound; (d) Representations and Warranties. Before and after giving effect to such Loan and/or Letter of Credit, the representations and warranties in Section 4 shall be true and correct as though made on the date of such Loan and/or Letter of Credit, except for those representations and warranties which are expressly made as of the date hereof, except for such changes as are specifically permitted hereunder, and except for the representation and warranty contained in Section 4.26 with regard to the truthfulness and correctness of all representations and warranties contained in any agreement evidencing any of the Transactions (which representations and warranties are only being made as of the date specified in the relevant agreement) other than those, if any, contained in the Senior Loan Documents; and (e) Accounting Methods. Borrower shall not have made any material (as determined by Agent) change in its accounting methods or principles except as required by GAAP. 63 of 78 Each request for a Loan or a Letter of Credit hereunder made or deemed to have been made by Borrower shall be deemed to be a certificate of Borrower as to the matters set out in the foregoing provisions of this Section 8.2. 9. INDEMNITY. 9.1 Environmental and Safety and Health Indemnity. Borrower hereby indemnifies Agent and each Lender and agrees to hold Agent and each Lender harmless from and against any and all losses, liabilities, damages, injuries, costs, expenses and claims of any and every kind whatsoever (including without limitation court costs and Attorneys' Fees) which at any time or from time to time may be paid, incurred or suffered by, or asserted against, Agent or any Lender for, with respect to, or as a direct or indirect result of the violation by Borrower or any of the Subsidiaries of any Environmental Law or Occupational Safety and Health Law, or with respect to, or as a direct or indirect result of (a) the presence on or under, or the Release from, properties utilized by Borrower and/or any Subsidiary in the conduct of its business into or upon any land, the atmosphere, or any watercourse, body of water or wetland, of any Hazardous Material or the escape, seepage, leakage, spillage, disposal, discharge, emission or release of any other hazardous or toxic waste, substance or constituent, or other substance (including without limitation any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Environ- mental Law) or (b) the existence of any unsafe or unhealthful condition on or at any premises utilized by Borrower and/or any Subsidiary in the conduct of its business, in either case, except for any such amounts owing as a direct result of the gross negligence or willful misconduct of Agent or any Lender. The provisions of and undertakings and indemnification set out in this Section 9.1 shall survive satisfaction and payment of the Liabilities and termination of this Agreement. 9.2 General Indemnity. In addition to the payment of expenses pursuant to Section 12.3, whether or not the transactions contemplated hereby shall be consummated, Borrower agrees to indemnify, pay and hold Agent and each Lender, and the officers, directors, employees, agents, and affiliates of each of Agent and each Lender (collectively, the "Indemnitees") harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including without limitation the reasonable fees and disbursements of counsel for any of such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not any of such Indemnitees shall be designated a party thereto) that may be imposed on, incurred by, or asserted against any Indemnitee, in any manner relating to or arising out of this Agreement or any Related Agreement, the statements contained in any commitment letter delivered by Agent or any Lender, Agent's or any Lender's agreement to make the Loans or to issue Letters of Credit hereunder, the use or intended use of any Letters of Credit, or the use or intended use of the proceeds of any of the Loans hereunder (the "indemnified liabilities"); provided that Borrower shall have no obligation to an Indemnitee hereunder with respect to indemnified liabilities arising from the gross negligence or willful misconduct of such Indemnitee. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it violates any law or public policy, Borrower shall contribute the maximum portion that it is permitted to pay under applicable law to the payment and satisfaction of all indemnified liabilities incurred by the Indemnitees or any of them. The provisions of the undertakings and indemnification set out 64 of 78 in this Section 9.2 shall survive satisfaction and payment of the Liabilities and termination of this Agreement. 9.3 Capital Adequacy. If Agent or any Lender shall reasonably determine that the application or adoption of any law, rule, regulation, directive, interpretation, treaty or guideline regarding capital adequacy, or any change therein or in the interpretation or administration thereof, whether or not having the force or law (including without limitation application of changes to Regulation H and Regulation Y of the Federal Reserve Board issued by the Federal Reserve Board on January 19, 1989 and regulations of the Comptroller of the Currency, Department of the Treasury, 12 CFR Part 3, Appendix A, issued by the Comptroller of the Currency on January 27, 1989) increases the amount of capital required or expected to be maintained by Agent or such Lender or any Person controlling Agent or such Lender in excess of any such increases affecting Agent or such Lender as of the date hereof, and such increase is based upon the existence of Agent's or such Lender's obligations hereunder and other commitments of this type, then from time to time, within ten (10) days after demand from Agent or such Lender, Borrower shall pay to Agent or such Lender, as applicable, such amount or amounts as will compensate Agent or such Lender or such controlling Person, as the case may be, for such increased capital requirement. The determination of any amount to be paid by Borrower under this Section 9.3 shall take into consideration the policies of Agent or such Lender or any Person controlling Agent or such Lender with respect to capital adequacy and shall be based upon any reasonable averaging, attribution and allocation methods. A certificate of Agent or such Lender, as applicable, setting forth the amount or amounts as shall be necessary to compensate Agent or such Lender as specified in this Section 9.3 shall be delivered to Borrower and shall be conclusive in the absence of manifest error. 10. AGENT. 10.1 Appointment of Agent. Each Lender hereby irrevocably appoints and authorizes Continental to act as its Agent under this Agreement and the Related Agreements. Each Lender hereby irrevocably appoints and authorizes Agent to take such action on such Lender's behalf under the provisions of this Agreement and the Related Agreements and to exercise such powers and perform such duties under this Agreement and the Related Agreements as are specifically delegated to Agent by the terms hereof and thereof, together with such other powers as are reasonably incidental hereto and thereto. Agent may perform any of its duties hereunder or under the Related Agreements by or through its agents or employees. The provisions of this Section 10 are solely for the benefit of Agent and Lenders, and neither Borrower nor any Obligor shall have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement and the Related Agreements, Agent shall act solely as agent of Lenders and does not assume and shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for Borrower or any Obligor. 10.2 Nature of Duties of Agent. Agent shall have no duties, obligations or responsibilities except those expressly set forth in this Agreement and the Related Agreements. Neither Agent nor any of its officers, directors, employees or agents shall be liable for any action taken or omitted by it as such hereunder or under the Related Agreements or in connection herewith or therewith, unless caused by its or their gross 65 of 78 negligence or willful misconduct. The duties of Agent shall be mechanical and administrative in nature; Agent shall not have by reason of this Agreement or the Related Agreements a fiduciary relationship in respect of any Lender; and nothing in this Agreement or the Related Agreements, expressed or implied, is intended to or shall be so construed as to impose upon Agent any obligations in respect of this Agreement or the Related Agreements except as expressly set forth herein or therein. No duty to act, or refrain from acting, and no other obligation whatsoever, shall be implied on the basis of or imputed in respect of any right, power or authority granted to Agent or shall become effective in the event of any temporary or partial exercise of such rights, power or authority. 10.3 Agent in its Capacity as Lender. With respect to its obligation to lend under this Agreement and the Related Agreements, the Loans made by it and its participation in Letters of Credit, Agent shall have the same rights and powers under this Agreement and the Related Agreements as any Lender and may exercise the same as though it were not Agent, and the terms "Lender" or "Lenders" shall, unless the context otherwise indicates, include Agent in its capacity as a Lender hereunder. Agent, any Lender and their respective affiliates may accept deposits from, lend money to, and generally engage in any kind of banking or trust business with Borrower, or Related Parties of Borrower, as if it were not Agent or as if it or they were not a Lender hereunder and without any duty to account therefor to the other parties to this Agreement; provided, that the obligations of Borrower under such transactions shall not be deemed to be Liabilities or secured by any Collateral without the prior written agreement of the Requisite Lenders; provided, further that Lenders acknowledge and agree that the obligations of Borrower to Continental or any other Lender as Issuing Bank and with respect to any lockbox or bank account maintained by or for the benefit of Borrower, including the Demand Deposit Account, the Depository Accounts, and the Assignee Deposit Account, shall be deemed to be Liabilities secured by the Collateral. 10.4 Independent Credit Analysis. Each Lender agrees that it has, independently and without reliance upon Agent, any other Lender, or the directors, officers, agents, attorneys or employees of Agent or of any other Lender, and instead in reliance upon information supplied to it by or on behalf of Borrower, made its own independent credit analysis and decision to enter into this Agreement and the Related Agreements to which it is a party, and that it shall independently and without reliance upon Agent, any other Lender, or the directors, officers, agents, attorneys or employees of Agent or of any other Lender, continue to make its own independent credit analysis and decisions in acting or not acting under this Agreement and the Related Agreements. Except as otherwise expressly provided herein, Agent shall not have any duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information concerning the affairs, financial condition, litigation, liabilities, or business of Borrower or any other Obligor which may at any time come into the possession of Agent (or any of its affiliates). In the event such information is furnished to any Lender by Agent, Agent shall have no duty to confirm or verify its accuracy or completeness and shall have no liability whatsoever with respect thereto. 10.5 General Immunity. Neither Agent nor any of its directors, officers, agents, attorneys or employees shall be liable to any Lender for any action taken or omitted to be taken by it or them under this Agreement or the Related Agreements or in connection herewith or therewith 66 of 78 except for its or their own willful misconduct or gross negligence. Without limiting the generality of the foregoing, Agent: (i) shall not be responsible to Lenders for any recitals, statements, warranties or representations under this Agreement or the Related Agreements or any agreement or document relative hereto or thereto or for the financial or other condition of any Obligor, (ii) shall not be responsible for the authenticity, accuracy, completeness, value, validity, effectiveness, due execution, legality, genuineness, enforceability, collectibility or sufficiency of this Agreement or the Related Agreements or any other agreements or any assignments, certificates, requests, financial statements, projections, notices, schedules or opinions of counsel executed and delivered pursuant hereto or thereto, (iii) shall not be bound to ascertain or inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or the Related Agreements on the part of Obligors or of any of the terms of any such agreement by any party hereto or thereto and shall have no duty to inspect the property (including the books and records) of any Obligor, (iv) shall have no obligation whatsoever to Lenders or to any other Person to assure that the Collateral exists or is owned by Borrower or another Obligor or is cared for, protected or insured or that the Liens granted to Agent herein or in Related Agreements or pursuant hereto or thereto have been properly or sufficiently or lawfully created, perfected, protected, enforced, realized upon or are entitled to any particular priority, and (v) shall incur no liability under or in respect of this Agreement or the Related Agreements or any other document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, cable, telex, telecopier or similar form of facsimile transmission) believed by Agent to be genuine and signed or sent by the proper party. Agent may consult with legal counsel (including counsel for Borrower), independent public accountants and other experts selected by Agent and shall not be liable for any action taken or omitted to be taken in good faith in accordance with the advice of such counsel, accountants or experts. 10.6 Action by Agent. (a) Actual Knowledge. Agent may assume that no Event of Default has occurred and is continuing, unless Agent has actual knowledge of the Event of Default, has received notice from Borrower or Borrower's independent certified public accountants stating the nature of the Event of Default, or has received notice from a Lender stating the nature of the Event of Default and that such Lender considers the Event of Default to have occurred and to be continuing. (b) Discretion to Act. Agent shall have the right to request instructions from Requisite Lenders by notice to each Lender. If Agent shall request instructions from Requisite Lenders with respect to any act or action (including the failure to act) in connection with this Agreement or any Related Agreement, Agent shall be entitled to refrain from such act or taking such action unless and until Agent shall have received instructions from Requisite Lenders, and Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Lender shall have any right of action whatsoever against Agent as a result of Agent acting or refraining from acting hereunder or under any Related Agreement in accordance with the instructions of Requisite Lenders. Agent may give any notice required under Section 6 hereof without the consent of any of Lenders unless otherwise directed by Requisite Lenders in writing and will, at the direction of Requisite Lenders, give any such notice required 67 of 78 under Section 6. Except for any obligation expressly set forth in this Agreement or the Related Agreements, Agent may, but shall not be required to, exercise its discretion to act or not act, except that Agent shall be required to act or not act upon the instructions of Requisite Lenders (unless all of Lenders are required to provide such instructions as provided in Section 12.6) and those instructions shall be binding upon Agent and all Lenders; provided that Agent shall not be required to act or not act if to do so would expose Agent to liability or would be contrary to this Agreement or any Related Agreements or to applicable law. 10.7 Right to Indemnity. Agent shall be fully justified in failing or refusing to take any action under this Agreement or the Related Agreements or in relation hereto or thereto unless it shall first be indemnified (upon requesting such indemnification) to its satisfaction by Lenders against any and all liability and expense which it may incur by reason of taking or continuing to take any such action. Lenders further agree to indemnify Agent ratably in accordance with their Pro Rata Shares for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against Agent in any way relating to or arising out of this Agreement or the other Related Agreements or the transactions contemplated hereby or thereby, or the enforcement of any of the terms hereof or thereof or of any other documents; provided no such liability, obligation, loss, damage, penalty, action, judgment, suit, cost, expense or disbursement results from Agent's gross negligence or willful misconduct. Each Lender agrees to reimburse Agent in the amount of its Pro Rata Share of any out-of-pocket expenses for which Agent is entitled to receive, but has not received, reimbursement pursuant to this Agreement. The agreements in this Section 10.7 shall survive the payment and fulfillment of the Liabilities and termination of this Agreement. 10.8 Rights and Remedies to be Exercised by Agent Only. In the event any remedy may be exercised with respect to this Agreement or the Related Agreements or the Collateral, Agent shall pursue remedies designated by Requisite Lenders subject to the proviso set forth in Section 10.6(b). Each Lender agrees that no Lender shall have any right individually (a) to realize upon the security created by this Agreement or the Related Agreements, (b) enforce any provision of this Agreement or the Related Agreements, or (c) make demand under this Agreement or the Related Agreements; provided, that any Lender that is an Issuing Bank may make demand upon Borrower as the Issuing Bank pursuant to Sections 2.2(b) and 2.2(c) and Continental may make demand upon Borrower pursuant to Section 12.4. Without limiting the foregoing, no Lender shall have any right individually to take any action or provide any notice in connection with any Subordinated Debt. 10.9 Agent's Resignation. Agent may resign at any time after giving at least thirty (30) days' prior written notice of its intention to do so to each Lender and to Borrower. Upon satisfaction of the foregoing condition, Requisite Lenders shall have the right to appoint a successor Agent (such appointment to be subject to the consent of Borrower (which consent of Borrower shall not be unreasonably withheld or delayed); provided, that Borrower's consent shall not be required if a Lender is appointed Agent). If no successor Agent shall have been so appointed and shall have accepted such appointment within twenty (20) days after Agent's giving of such notice of resignation, then the resigning Agent may appoint a 68 of 78 successor Agent. After any resigning Agent's resignation hereunder as Agent, it shall be discharged from its duties and obligations under this Agreement but the provisions of this Section 10 shall continue to bind Agent and inure to Agent's benefit as to any actions taken or omitted to be taken by it while it was Agent hereunder. Upon appointment of a successor Agent, the term "Agent" shall for all purposes of this Agreement thereafter mean such successor. 10.10 Disbursement of Proceeds of Loans and Other Advances. Agent may (and is hereby irrevocably authorized by Lenders), but shall have no duty to make such other disbursements and advances as Revolving Loans on behalf of Lenders, including without limitation the making of advances for the expenditures described in Section 7.4 of this Agreement, which Agent, in its sole discretion, deems necessary or desirable to preserve or protect the Collateral, or any portion thereof. Agent's use of its own checks upon its funds or Agent's transfer of its own funds, by wire or otherwise, to an account of Borrower or any other Obligor shall be deemed to be disbursements made by each Lender under this Agreement and pursuant to the Related Agreements. 10.11 Release of Collateral. Each Lender hereby irrevocably authorizes Agent, at its option and in its discretion, to release any and all guaranties of the Liabilities and any Lien granted to or held by Agent upon any Collateral (i) upon termination of Lenders' obligations to make Loans and payment and satisfaction of all Loans, Letter of Credit reimbursement obligations and all other Payment Liabilities and which Agent has been notified in writing are then due and payable; (ii)constituting Collateral being sold or disposed of if Borrower certifies to Agent that the sale or disposition is made in compliance with the terms of this Agreement (and, absent any actual knowledge of Agent to the contrary, Agent may rely conclusively on any such certificate, without further inquiry); (iii) constituting property in which Borrower or any other Obligor owned no interest at the time the Lien was granted and at all times thereafter; or (iv) if approved, authorized or ratified in writing by Agent at the direction of all Lenders. Upon request by Agent at any time, each Lender will confirm in writing Agent's authority to release particular types or items of Collateral pursuant to this Section 10.11. 10.12 Agreement to Cooperate. Each Lender agrees to cooperate to the end that the terms and provisions of this Agreement may be promptly and fully carried out. Lenders also agree, from time to time, at the request of Agent, to execute and deliver any and all other agreements, documents or instruments and to take such other actions, all as may be reasonably necessary or desirable to effectuate the terms, provisions and intent of this Agreement and the Related Agreements. 10.13 Sharing of Collateral. If any Lender shall obtain any payment (whether voluntary, involuntary, through exercise of any right of set off, or otherwise) on account of the Liabilities in excess of the amount to which it is entitled pursuant to this Agreement, such Lender shall forthwith purchase from the other Lenders such participations in such other Lenders' claims against Borrower as shall be necessary to cause such purchasing Lender to share the excess payment with the other Lenders in accordance with the provisions of this Agreement; provided, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from such other Lender shall be rescinded and such other Lenders shall repay to the purchasing Lender the purchase 69 of 78 price to the extent of their portion of such recovery together with an amount equal to the share (according to the proportion of (i) the amount of such other Lenders' required repayment, to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by purchasing Lender in respect of the total amount recovered. 10.14 Lenders to Act as Agents. If any Collateral or proceeds thereof at any time comes into the possession or under the control of any Lender, such Lender shall hold such Collateral or proceeds thereof as agent for the joint benefit of Lenders, and will, upon receipt therefor, deliver such Collateral or proceeds thereof to Agent. 11. ADDITIONAL PROVISIONS. Additional provisions are set forth in Supplement A. 12. GENERAL. 12.1 Borrower Waiver. Except as otherwise provided for in this Agreement, Borrower waives (a) presentment, demand and protest and notice of presentment, protest, default, non-payment, maturity, release, compromise, settlement, one or more extensions or renewals of any or all commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties at any time held by Agent or any Lender on which Borrower may in any way be liable and hereby ratifies and confirms whatever Agent or any Lender may do in this regard; (b) all rights to notice and a hearing prior to Agent's or any Lender's taking possession or control of, or Agent's or any Lender's replevy, attachment or levy on or of, the Collateral or any bond or security which might be required by any court prior to allowing Agent or any Lender to exercise any of Agent's or any Lender's remedies; and (c) the benefit of all valuation, appraisement and exemption laws. Borrower acknowledges that it has been advised by counsel of its choice with respect to this Agreement and the transactions evidenced by this Agreement. 12.2 Power of Attorney. Borrower appoints Agent, or any Person whom Agent may from time to time designate, as Borrower's attorney and agent-in-fact with power (which appointment and power, being coupled with an interest, is irrevocable until all Payment Liabilities under this Agreement are paid and performed in full and this Agreement is terminated), without notice to Borrower, to: (a) At such time or times hereafter as Agent or said agent, in its sole and absolute discretion, may determine in Borrower's or Agent's name (i) endorse Borrower's name on any checks, notes, drafts or any other items of payment relating to and/or proceeds of the Collateral which come into the possession of Agent or under Agent's control and apply such payment or proceeds to the Liabilities; (ii) endorse Borrower's name on any chattel paper, document, instrument, invoice, freight bill, bill of lading or similar document or agreement in Agent's possession relating to Accounts Receivable, Inventory or any other Collateral; (iii) after the occurrence of an Event of Default, use the information recorded on or contained in any data processing equipment and computer hardware and software to which Borrower has access relating to Accounts Receivable, Inventory and/or other Collateral; (iv) after the occurrence of an Event of Default, use 70 of 78 Borrower's stationery and sign the name of Borrower to verification of Accounts Receivable and notices thereof to Account Debtors; and (v) if not done by Borrower, do all acts and things determined by Agent to be necessary, to fulfill Borrower's obligations under this Agreement; and (b) At such time or times after the occurrence of an Event of Default, as Agent or said agent, in its sole and absolute discretion, may determine, in Borrower's or Agent's name: (i) demand payment of the Accounts Receivable; (ii) enforce payment of the Accounts Receivable, by legal proceedings or otherwise; (iii) exercise all of Borrower's rights and remedies with respect to the collection of the Accounts Receivable and other Colla- teral; (iv) settle, adjust, compromise, extend or renew the Accounts Receivable; (v) settle, adjust or compromise any legal proceedings brought to collect the Accounts Receivable; (vi) if permitted by applicable law, sell or assign the Accounts Receivable and/or other Collateral upon such terms for such amounts and at such time or times as Agent may deem advisable; (vii) discharge and release the Accounts Receivable and/or other Collateral; (viii) prepare, file and sign Borrower's name on any proof of claim in bankruptcy or similar document against any Account Debtor; (ix) prepare, file and sign Borrower's name on any notice of lien, assignment or satisfaction of lien or similar document in connection with the Accounts Receivable and/or other Collateral; and (x) do all acts and things necessary, in Agent's sole and absolute discretion, to obtain repayment of the Liabili- ties and to fulfill Borrower's other obligations under this Agreement. 12.3 Expenses; Attorneys' Fees. Borrower agrees, whether or not any Loan is made or Letter of Credit is issued hereunder, to pay upon demand all Attorneys' Fees and all other reasonable expenses incurred by Agent at any time, including fees, costs and expenses incurred in connection with Collateral field audits or other due diligence investigations by Agent and all Attorneys' Fees and other reasonable expenses incurred by any Lender after the occurrence of an Event of Default. For purposes of this Agreement, "Attorneys' Fees" means the reasonable value of the services (and costs, charges and expenses related thereto) of the attorneys (and all paralegals and any outside consultants employed by such attorneys) employed by Agent or any Lender (including but not limited to attorneys and paralegals who are employees of Agent or any Lender) from time to time (a) in connection with the negotiation, preparation, execution, delivery, administration and enforcement of this Agreement, any Related Agreement, any Supplemental Documentation and all other documents or instruments provided for herein or in any thereof or delivered or to be delivered hereunder or under any thereof or in connection herewith or with any thereof, (b) to prepare documentation related to the Loans made and other Liabilities incurred hereunder, (c) to prepare any amendment to or waiver under this Agreement or any Related Agreement and any documents or instruments related thereto, (d) to represent Agent or any Lender in any litigation, contest, dispute, suit or proceeding or to commence, defend or intervene in any litigation, contest, dispute, suit or proceeding or to file a petition, complaint, answer, motion or other pleading, or to take any other action in or with respect to, any litigation, contest, dispute, suit or proceeding (whether instituted by Agent or any Lender, Borrower or any other Person and whether in bankruptcy or otherwise) in any way or respect relating to the 71 of 78 Collateral, this Agreement or any Related Agreement (other than any litigation, contest, dispute, suit or proceedings involving a dispute between Agent and any Lender or between any Lender and any other Lender), or Borrower's or any other Obligor's or any Subsidiary's affairs, (e) to protect, collect, lease, sell, take possession of, or liquidate any of the Collateral, (f) to perfect or attempt to enforce any security interest in any of the Collateral or to give any advice with respect to such enforcement and (g) to enforce any of Agent's or any Lender's rights to collect any of the Liabilities. Agent may advance all such amounts to Borrower as a Revolving Loan. Borrower also agrees (y) to indemnify and hold Agent and each Lender harmless from any loss or expense which may arise or be created by the acceptance of telephonic or other instructions for making Loans or issuing Letters of Credit and (z) to pay, and save Agent and each Lender harmless from all liability for, any stamp or other taxes which may be payable with respect to the execution or delivery of this Agreement, or any Related Agreement or Supplemental Documentation, or the issuance of any Note or of any other instruments or documents provided for herein or to be delivered hereunder or in connection herewith. In addition to the foregoing, "Attorneys' Fees" shall include Agent's fees and expenses of the types described in the preceding sentence incurred in connection with the syndication, participation and assignment of this Agreement, any Related Agreement and any Supplemental Documentation. Borrower's foregoing obligations shall survive any termination of this Agreement. 12.4 Continental's Fees and Charges. To the extent not already covered by Section 12.3, Borrower agrees to pay Continental on demand by Continental the customary fees and charges of Continental for maintenance of accounts with Continental or for providing other services to Borrower (including fees, costs, and expenses incurred in connection with Collateral field audits or other due diligence investigations) and if not so paid, each Lender shall, without regard to any other provision of this Agreement or any other Related Agreement or any defense that Borrower may have to its obligation to pay Continental in connection with such fees and charges, pay Continental for such Lender's Pro Rata Share of such fees and charges, and any payments so made by Lenders to Continental shall be deemed to be Revolving Loans. Each Lender (other than Continental) acknowledges and agrees that it shall not be entitled to any of the fees and charges of Continental as provided in the immediately preceding sentence. Agent may, in its sole and absolute discretion, provide for such payment by advancing the amount thereof to Borrower as a Revolving Loan. 12.5 Lawful Interest. In no contingency or event whatsoever shall the interest rate charged pursuant to the terms of this Agreement exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a court determines that any Lender has received interest hereunder in excess of the highest applicable rate, such Lender shall promptly refund its Pro Rata Share of such excess interest to Borrower. 12.6 No Waiver by Agent or any Lender; Amendments. No failure or delay on the part of Agent or any Lender in the exercise of any power or right, and no course of dealing between Borrower and Agent or any Lender shall operate as a waiver of such power or right, nor shall any single or partial exercise of any power or right preclude other or further exercise thereof or the exercise of any other power or right. The remedies provided for herein are cumulative and not exclusive of any remedies which may be available to Agent or any Lender at law or in equity. No notice to 72 of 78 or demand on Borrower not required hereunder shall in any event entitle Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the right of Agent or any Lender to any other or further action in any circumstances without notice or demand. No amendment, modification or waiver of, or consent with respect to, any provision of this Agreement or any Related Agreement shall in any event be effective unless the same shall be in writing and signed and delivered by Requisite Lenders. Notwithstanding the foregoing, any amendment, modifica- tion, termination, waiver or consent with respect to any of the following provisions of this Agreement shall be effective only by a written agreement, signed by each Lender affected thereby: (a) increase in the amount of the Maximum Loan Amount of such Lender, (b) reduction of the principal of, rate or amount of interest on the Revolving Loans or any fees or charges (including, without limitation, any Letter of Credit fees or charges) payable to such Lender (other than by the payment or prepayment thereof), (c) postponement of the date fixed for any payment of principal of, or interest on, the Loans or any fees or charges) (including, without limitation, any Letter of Credit fees or charges) or other amounts payable to such Lender, (d) change in the aggregate Pro Rata Share of Lenders which shall be required for Lenders or any of them to take action hereunder or amend the definition of "Requisite Lenders," or (e) amendment of this Section 12.6. Agent may, but shall have no obligation to, with the written concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of that Lender. Any waiver of any provision of this Agreement, and any consent to any departure by Borrower from the terms of any provision of this Agreement, shall be effective only in the specific instance and for the specific purpose for which given. 12.7 Termination of Revolving Credit. The Termination Date and each Lender's commitment to make Loans hereunder may be extended for successive one (1)-year periods by written agreement among Borrower and each Lender executed at least ninety (90) days prior to a scheduled Termination Date. Borrower may terminate the Revolving Credit at any time upon notice to Agent and payment in full of the outstanding principal balance of the Loans and all other Payment Liabilities under this Agreement and the Related Agreements, as provided in Section 2.1.2. All of Agent's and each Lender's rights and remedies, the Liens of Agent on the Collateral, for the benefit of itself and Lenders, and all of Borrower's duties and obligations under this Agreement shall survive termination of the Credit extended to Borrower hereunder until all of the Payment Liabilities hereunder have been finally paid and performed in full. The termination or cancellation of the Credit shall not affect or impair the liabilities and obligations of Borrower or any one or more of the Obligors to Agent and Lenders or Agent's and each Lender's rights with respect to any Loans and advances made and other Liabilities incurred prior to such termination or with respect to the Collateral. Upon termination of the Revolving Credit and repayment of the Payment Liabilities, Agent will promptly release all of its Liens on the Collateral and all guaranties of the Liabilities. 12.8 Notices. Except as otherwise expressly provided herein, any notice hereunder to Borrower, Agent or any Lender shall be in writing (including facsimile communication) and shall be given to Borrower, Agent or such Lender at its address or facsimile number set forth on the signature pages hereof or at such other address or facsimile number as Borrower, Agent or such Lender may, by written notice, designate as its address or facsimile number for purposes of notices hereunder. All such notices shall be deemed to be given when transmitted by facsimile, delivered by courier, personally 73 of 78 delivered or, in the case of notice by mail, three (3) Banking Days following deposit in the United States mails, properly addressed as herein provided, with proper postage prepaid; provided, however, that notice to Agent of Borrower's intent to terminate the Credit shall not be effective until actually received by Agent. 12.9 Assignments and Participations; Information. (a) This Agreement may not be assigned by Borrower without the prior written consent of Agent and Lenders. Whenever in this Agreement reference is made to any of the parties hereto, such reference shall be deemed to include, wherever applicable, a reference to the successors and permitted assigns of Borrower and the successors and assigns of Agent and each Lender. (b) Borrower and each Lender hereby agree that on or after the date hereof, Continental may, in its discretion, without Borrower's or any other Lender's consent, sell one or more assignments of portions of its interest in the Credit. Each sale described in the preceding sentence shall be to a Person or Persons satisfactory to Continental, in its discretion, and on such terms and conditions as Continental may determine. No other Lender may sell any portion of its interest in the Credit without the consent of Borrower and Agent, which consent will not be unreasonably withheld. (c) Each assignment of an interest hereunder shall be subject to the following conditions: (i) each assignment shall be of a constant, and not a varying, ratable percentage of all of the assigning Lender's rights and obligations under this Agreement, and the Maximum Loan Amount assigned shall be in a minimum amount of $5,000,000 and after giving effect to such assignment no Lender's Maximum Loan Amount shall be less than $5,000,000 (unless such Lender sells all of its interest in the Credit), and (ii) the parties to each such assignment shall execute and deliver to Agent, for its acceptance and recording in the Register, an Assignment and Acceptance Agreement, with a copy to Borrower. Upon such execution, delivery, acceptance and recording in the Register, from and after the effective date specified in each Assignment and Acceptance Agreement and agreed to by Agent, (x) the assignee thereunder shall, in addition to any rights and obligations hereunder held by it immediately prior to such effective date, if any, have the rights and obligations hereunder that have been assigned to it pursuant to such Assignment and Acceptance Agreement and shall, to the fullest extent permitted by law, have the same rights and benefits hereunder as if it were an original Lender hereunder and (y) the assigning Lender shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance Agreement, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance Agreement covering all or the remaining portion of such assigning Lender's rights and obligations under this Agreement, the assigning Lender shall cease to be a party hereto). (d) Agent shall maintain a copy of each Assignment and Acceptance Agreement delivered to and accepted by it and a register (the "Register") for the recordation of the names and addresses of Lenders and the Maximum Loan Amount and principal amount of the Loans owing to each Lender from time to time. The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and Borrower, Agent and 74 of 78 Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment and Acceptance Agreement executed by the assigning Lender and the assignee and a processing and recordation fee of $2,500 (payable by the assigning Lender or the assignee, as shall be agreed between them), Agent shall, if such Assignment and Acceptance Agreement has been completed and is in compliance with this Agreement and in substantially the form of Exhibit D and Agent has consented to the assignment evidenced thereby, (i) accept such Assignment and Acceptance Agreement, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to Borrower. (f) Each Lender may sell participations to one or more other financial institutions in or to all or a portion of its rights and obligations under and in respect of any and all facilities under this Agreement; provided, however, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) Borrower, Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and (iv) such participant's rights to agree or to restrict such Lender's ability to agree to the modification, waiver or release of any of the terms of this Agreement or the Related Agreements or to the release of any Collateral covered by this Agreement or the Related Agreements, to consent to any action or failure to act by any party to this Agreement or any of the Related Agreements, or to exercise or refrain from exercising any powers or rights which any Lender may have under or in respect of this Agreement or the Related Agreements or any Collateral, shall be limited to the right to consent to (A) an increase in the Maximum Loan Amount of Lender from whom such participant purchased a participation, (B) reduction of the principal of, or rate or amount of interest on the Loans subject to such participation (other than by the payment or prepayment thereof) or (C) postponement of any date fixed for any payment of principal of, or interest on, the Loans subject to such partici- pation. (g) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 12.9, disclose to the assignee or participant or proposed assignee or participant, any information relating to Borrower or its Subsidiaries furnished to such Lender by or on behalf of Borrower; provided that, prior to any such disclosure, such assignee or participant, or proposed assignee or participant, shall agree to preserve the confidentiality of any confidential information described therein and such Lender shall notify Borrower of the assignee or participant, or proposed assignee or partici- pant. (h) Anything in this Agreement to the contrary notwith- standing, in the case of any participation, all amounts payable by Borrower under this Agreement or the Related Agreements shall be calculated and made in the manner and to the parties required hereby as if no such participation had been sold. 75 of 78 (i) Agent agrees to promptly notify Borrower of each sale of a participation or permitted assignment hereunder. Borrower agrees to use its best efforts to assist Lenders in their efforts to sell assignments and participations hereunder. In addition, Borrower agrees to execute new Notes in favor of each of the selling and purchasing Lender, upon each sale of an assignment hereunder, provided that the existing Notes in favor of the selling Lender are simultaneously therewith returned to Borrower. 12.10 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. 12.11 Successors. This Agreement shall be binding upon each of Borrower, Agent and each Lender and their respective successors and permitted assigns, and shall inure to the benefit of each of Borrower, Agent and each Lender and their respective successors and permitted assigns. 12.12 Construction. Borrower acknowledges that this Agreement shall not be binding upon Agent or any Lender or become effective until and unless accepted by Agent or such Lender, as applicable, in writing. If so accepted by Agent or any Lender, this Agreement and the Related Agreements and Supplemental Documents shall, unless otherwise expressly provided therein, be deemed to have been negotiated and entered into in, and shall be governed and controlled by the laws of, the State of Illinois as to interpretation, enforcement, validity, construction, effect, choice of law, and in all other respects, including but not limited to the legality of the interest rate and other charges, but excluding perfection of security interests and liens which shall be governed and controlled by the laws of the relevant jurisdiction. 12.13 Consent to Jurisdiction. To induce Agent and each Lender to accept this Agreement, Borrower irrevocably agrees that, subject to Agent's sole and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE RELATED AGREEMENTS, OR THE SUPPLEMENTAL DOCUMENTATION OR THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON BORROWER, AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL DIRECTED TO BORROWER AT THE ADDRESS STATED ON THE SIGNATURE PAGE HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. 12.14 Subsidiary Reference. Any reference herein to a Subsidiary or Subsidiaries of Borrower, and any financial definition, ratio, restriction or other provision of this Agreement which is stated to be applicable to "Borrower and the Subsidiaries" or which is to be determined on a "consolidated" or "consolidating" basis, shall apply only to the extent Borrower has any Subsidiaries and, where applicable, to the extent any such Subsidiaries are consolidated with Borrower for financial reporting purposes. 12.15 Waiver of Jury Trial. BORROWER, AGENT AND EACH LENDER EACH WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (a) UNDER THIS AGREEMENT OR ANY RELATED 76 of 78 AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR (b) ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. 77 of 78 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first written above. EMPIRE GAS CORPORATION By: _______________________________ Title:____________________________ Address: 1700 South Jefferson Street Lebanon, Missouri 65536 Telecopier Number: (417) 532-3101 Attention: Chief Executive Officer CONTINENTAL BANK N.A. By: ________________________________ Title: ___________________________ Address: 231 South LaSalle Street Chicago, Illinois 60697 Telecopier Number: (312) 828-6647 Attention: Business Credit Group Maximum Loan Amount: $15,000,000 78 of 78 LIST OF EXHIBITS AND SCHEDULES ______________________________ Exhibits: ________ Exhibit A Form of Borrowing Base Certificate Exhibit B Form of Accountant's Letter Exhibit C Form of Compliance Certificate Exhibit D Form of Assignment and Acceptance Agreement Schedules: Schedule 4.1 Schedule of Tradenames, State of Incorporation & Qualification Schedule 4.7 Insurance Summary Schedule 4.8 Schedule of Litigation and Contingent Liabilities Schedule 4.9 Schedule of Liens Schedule 4.10 Schedule of Subsidiaries Schedule 4.11 Schedule of Partnerships and Joint Ventures Schedule 4.12 Schedule of Business and Collateral Locations Schedule 4.16 Schedule of Patents, Trademarks and Copyrights Schedule 4.18 Schedule of Labor Matters Schedule 4.19 Schedule of Contingent Employee Benefit Plan Liabilities Schedule 4.21 Schedule of Noncompliance Schedule 4.22 Schedule of Proposed Tax Assessments Schedule 4.25 Schedule of Environmental Matters Schedule 4.27 Schedule of Capitalized Lease Obligations Schedule 5.15 Schedule of Indebtedness Schedule 5.18 Schedule of Investments SUPPLEMENT A to LOAN AND SECURITY AGREEMENT Dated as of June 29, 1994 among Empire Gas Corporation, Continental Bank N.A., as Agent and a Lender, and the other Lenders Party Thereto 1. Loan Agreement Reference. This Supplement A, as it may be amended or modified from time to time, is a part of the Loan and Security Agreement dated as of June 29, 1994 among Borrower, Agent and Lenders (together with all amendments, modifications and supplements thereto, the "Loan Agreement"). Terms used herein and not otherwise defined shall have the meanings ascribed to them in the Loan Agreement. 2. Revolving Credit Amount; Borrowing Base. 2.1 Revolving Credit Amount. The maximum amount of Revolving Loans which Lenders will make available to Borrower (such amount is herein called the "Revolving Credit Amount") is $15,000,000. 2.2 Borrowing Base. The term "Borrowing Base," as used herein, shall mean: (i) an amount equal to up to 85% of the net amount (after deduction of such reserves and allowances as Agent deems proper and necessary in its reasonable judgment) of Eligible Accounts Receivable ("Accounts Receivable Availability"); plus (ii) an amount equal to the least of (a) $8,000,000, (b) 150% of Accounts Receivable Availability and (c) up to 60% (after deduction of such reserves and allowances as Agent deems proper and necessary in its reasonable judgment) of Eligible Inventory; plus (iii) during the period commencing on August 1, 1994 and ending on January 31, 1995, $3,000,000; plus (iv) during the period commencing on August 1, 1995 and ending on January 31, 1996, $1,500,000. 2.3 Agent's and Lenders' Rights. Borrower agrees that nothing contained in Supplement A (i) shall be construed as Agent's or any Lender's agreement to resort or look to a particular type or item of Collateral as security for any specific Loan or portion of the Liabilities or advance or in any way limit Agent's or any Lender's right to resort to any or all of the Collateral as security for any of the Liabilities, (ii) shall be deemed to limit or reduce any Lien upon any portion of the Collateral or other security for the Liabilities or (iii) shall supersede Section 2.9 of the Loan Agreement. 3. Interest. 3.1 Loans. 2 of 5 3.1.1 Revolving Loans. (a) Interest to Maturity. The unpaid principal balance of the Revolving Loans (other than Overdraft Loans and Over Advances) shall bear interest to maturity at a per annum rate equal to the Reference Rate in effect from time to time plus 1.00% (the "Adjusted Reference Rate"); provided, that pursuant to the provisions of Section 3.1.1(c), below, from time to time Borrower may elect to have all or any portion of the Revolving Loans bear interest at the LIBOR Base Rate. (b) Default Rate. After the occurrence of any Event of Default, at the option of Requisite Lenders, the entire unpaid principal balance of the Revolving Loans shall bear interest until paid at a rate per annum equal to the greater of (i) the applicable interest rate from time to time in effect plus 2.00% and (ii) 2.00% above the applicable interest rate in effect at the time of such Event of Default. (c) LIBOR Rate Option. Borrower shall have the right, from time to time, to designate all or any portion of the Revolving Loans as bearing interest at the then applicable LIBOR Base Rate, by means of a written notice to Agent specifying (i) the amount of such Revolving Loans that will bear interest at a LIBOR Base Rate (provided, that such LIBOR Rate Loans shall be in a minimum amount of Five Hundred Thousand Dollars ($500,000)); (ii) the date on which the applicable Interest Rate Period shall begin; and (iii) the Interest Rate Period applicable thereto. All designations of Revolving Loans as LIBOR Rate Loans must be received by Agent not later than 10:00 a.m., Chicago time, three (3) Banking Days prior to the date the applicable Interest Rate Period is to begin (or is to be continued). Notwithstanding the foregoing, (x) all undesignated portions of the Revolving Loans shall bear interest at the Adjusted Reference Rate, (y) no Interest Rate Period may commence or be continued at any time that an Event of Default or an Unmatured Event of Default is in existence, notwith- standing a contrary designation by Borrower, and (z) in no event may more than four (4) LIBOR Rate Loans having different Interest Rate Periods be outstanding at any one time. Each designation by Borrower of a LIBOR Rate Loan shall be irrevocable. 3.1.2 Overdraft Loans; Over Advances. Overdraft Loans and Over Advances shall bear interest at the rate(s) determined pursuant to Section 2.7 or Section 2.8 of the Loan Agreement, as applicable. 3.2 Computation. Interest shall be calculated on the basis of a year consisting of 360 days and paid for actual days elapsed; provided, that the computation of interest on LIBOR Rate Loans shall include the date on which the applicable Interest Rate Period began, but shall exclude the last day of the applicable Interest Rate Period. LIBOR Rate Loans not repaid on the last day of the Interest Rate Period applicable thereto shall be continued or converted into Revolving Loans bearing interest at the Adjusted Reference Rate, as applicable, and bear interest as provided herein, from and including the last day of such Interest Rate Period. Changes in any interest rate provided for herein which are due to changes in the Reference Rate shall take effect on the date of the change in the Reference Rate. 3.3 Payment. Until maturity, interest on the Loans shall be payable on the 28th day of each month, commencing on July 28, 1994, and at maturity; provided, that interest on LIBOR Rate Loans shall be payable in arrears on the last day of the Interest Rate Period applicable 3 of 5 thereto and at maturity. After maturity, whether by acceleration or otherwise, accrued interest shall be payable on demand. 3.4 Funding Indemnification. If any payment of a LIBOR Rate Loan occurs on a date which is not the last day of the applicable Interest Rate Period, whether because of acceleration, prepayment or otherwise, Borrower will indemnify each Lender and Agent for any loss or cost incurred by it resulting therefrom, including without limitation any loss or cost in liquidating or employing deposits acquired to fund or maintain such Loan. Agent shall deliver a written statement as to the amount due, if any, under this Section, after consultation with each Lender so affected. Such written statement shall set forth in reasonable detail the calculations upon which Agent and each Lender determined such amount and shall be final, conclusive and binding on Borrower in the absence of manifest error. Determination of amounts payable under this Section shall be calculated as though each Lender funded its LIBOR Rate Loans through the purchase of a deposit of the type and maturity corresponding to the LIBOR Rate Loan and applicable Interest Rate Period bearing interest at the LIBOR Base Rate less two and fifty hundredths percent (2.50%), as applicable, whether or not the Lender actually funded the Loan in that manner. The amount specified in the written statement shall be payable on demand after receipt by Borrower of the written statement. 3.5 Availability of Interest Rate Options. If any Lender determines that maintenance of any of its LIBOR Rate Loans would violate any applicable law, rule, regulation or directive, whether or not having the force of law, the Lender shall immediately notify Agent thereof and Agent shall suspend the availability of such LIBOR Rate Loans and require any LIBOR Rate Loans outstanding and so affected to be repaid; or if any Lender determines that (i) deposits of a type or maturity appropriate to match fund LIBOR Rate Loans are not available, (ii) the LIBOR Rate does not accurately reflect the cost of making such Loans, or (iii) the Lender's ability to make or maintain LIBOR Rate Loans has been materially adversely affected by the occurrence of any event after the date hereof, then Lender shall immediately notify Agent thereof and Agent shall suspend the availability of the LIBOR Rate Loans, as applicable, after the date of any such determination. 3.6 Lenders' Obligation to Mitigate. Agent and each Lender agrees that if it becomes aware of either (i) the occurrence of an event or the existence of a condition described in Section 9.3 of the Loan Agreement or Section 3.5 hereof that would cause Agent or such Lender to make a determination of the nature described therein, or (ii) the imposition, assessment or collection of any taxes on or in respect of any Loan or Letter of Credit, Agent or such Lender will, to the extent consistent with its internal policies, use reasonable efforts to issue, make, fund or maintain the affected Letters of Credit or Loans through another lending office of such Agent or Lender, if any, if, as a result thereof, the additional amounts that would otherwise be required to be paid to Agent or such Lender in respect thereof, would be reduced, or LIBOR Rate Loans could be maintained, as the case may be, and if, as determined by Agent or such Lender in its reasonable discretion, the issuing, making, funding or maintaining of such Letters of Credit or Loans through such other lending office would not adversely affect Agent or such Lender or such Letters of Credit or Loans. Borrower hereby agrees to pay all reasonable expenses incurred by Agent or any Lender in using another lending office pursuant to this Section 3.6. 4 of 5 4. Additional Eligible Account Receivable Requirements. Each Account Receivable identified by Borrower as an Eligible Account Receivable must not be unpaid on the date that is 120 days after the applicable invoice dates. If invoices representing 25% or more of the unpaid net amount of all Accounts Receivable from any one Account Debtor are unpaid more than 120 days after the applicable invoice dates, then all Accounts Receivable relating to such Account Debtor shall cease to be Eligible Accounts Receivable. 5. Intentionally Omitted. 6. Additional Covenants. From the Closing Date and thereafter until all of Borrower's Liabilities under the Loan Agreement are paid in full, Borrower agrees that, unless Requisite Lenders otherwise consent in writing: 6.1 Tangible Net Worth. Borrower will not permit Tangible Net Worth to be less than the following amounts on any date set forth below: Date Tangible Net Worth ____ __________________ Closing Date $(53,000,000) June 30, 1995 (57,000,000) June 30, 1996 (61,000,000) 6.2 Capital Expenditures. Borrower will not purchase or otherwise acquire (including, without limitation, acquisition by way of Capitalized Lease), or commit to purchase or otherwise acquire, or permit its Subsidiaries to purchase or otherwise acquire or commit to purchase or otherwise acquire, any fixed asset if, after giving effect to such purchase or other acquisition, the aggregate cost of all fixed assets purchased or otherwise acquired by Borrower or its Subsidiaries in any Fiscal Year period set forth below, other than in connection with an Acquisition or startup, would exceed the following amounts during the corresponding periods: Period Capital Expenditures ______ ____________________ 1995 Fiscal Year $3,750,000 1996 Fiscal Year 3,000,000 1997 Fiscal Year 3,000,000 6.3 Interest Coverage Ratio. Borrower will not permit the ratio ("Interest Coverage Ratio") of (a) net earnings before interest expense, income tax expense, depreciation and amortization for any period set forth below, to (b) cash interest expense in respect of Indebtedness under the Agreement, in respect of the Senior Notes, in respect of Subordinated Debt and in respect of Acquisition Indebtedness, in each case for such period, each determined for Borrower and its Subsidiaries on a 5 of 5 consolidated basis, and in accordance with GAAP, to be less than 1.2:1.0 for any fiscal quarter. For purposes of Section 6.3, (i) net earnings shall not include any gains or losses on the sale or other disposition of Investments or fixed assets or any other extraordinary items of income, and (ii) interest expense shall include, without limitation, implicit interest expense on Capitalized Leases. Borrower's Initials_______ Agent's Initials_________ Date: June 29, 1994 EX-27 6 EXHIBIT 27
5 1,000 12-MOS JUN-30-1994 JUL-01-1993 JUN-30-1994 2,927 0 5,454 1,620 5,179 17,064 93,120 25,847 107,644 10,751 105,320 14 0 0 (28,220) 104,644 119,338 124,522 57,920 54,060 1,798 1,056 10,558 (840) 350 (1,190) 0 32,315 0 31,125 2.23 0
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