-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WrsYsbtxu27Re8Wap1jjj7aeRC3lE374sYZaGi3D6fPr7DRNx4r8sRf1DZRp3K+4 Y3MdG4mbK9jEU4FMe/5kmg== 0000950172-96-000589.txt : 19961001 0000950172-96-000589.hdr.sgml : 19961001 ACCESSION NUMBER: 0000950172-96-000589 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960930 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMPIRE GAS CORP/NEW CENTRAL INDEX KEY: 0000922404 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MO FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11393 FILM NUMBER: 96636504 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 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, 1996 Commission file Number 1-6537 ALL STAR GAS CORPORATION (formerly known as Empire Gas Corporation) (Exact Name of Registrant as Specified in Its Charter) Missouri 43-1494323 (State or other jurisdiction (IRS Employer of Incorporation or Organization) Identification No.) 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) 532-3103 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class 9% Subordinated Debentures due 2007 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 19, 1996 is: $116,480 Shares of Common Stock, $0.001 par value, outstanding as of close of business on September 19, 1996: 1,579,225. Upon request, All Star Gas Corporation will furnish a copy of an 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) 532-3103. PART 1 Items 1 and 2. Business and Properties Introduction All Star Gas Corporation (formerly known as Empire Gas Corporation) ("All Star Gas" or the "Company") was founded in 1963 and through its subsidiaries has been in operation for over 33 years. The Company is engaged primarily in (a) the retail marketing of propane to residential, agricultural, and commercial customers, (b) the retail marketing of propane-related appliances, supplies, and equipment, and (c) the rent of consumer propane storage tanks to residential and commercial customers under various brand names, including All Star, Empiregas, and the names of numerous predecessors. During the fiscal year which ended 6/30/96, All Star Gas supplied propane to approximately 112,000 customers in 20 states from 127 retail service centers and sold approximately 88.9 million gallons. On August 15, 1995, the Company entered into a joint venture with Northwestern Growth Corporation, a subsidiary of Northwestern Public Service Corporation, to acquire the assets of Synergy Group Incorporated, the nation's fifth largest LP gas distributor. The Company has acquired, for $30,000, 30% of the common stock of SYN, Inc. ("Synergy"), the acquisition entity. The Company has entered into a Management Agreement pursuant to which the Company provides all management of the retail facilities and accounting services at the central office. In exchange for those services, the Company receives a $500,000 annual base management fee, an incentive management fee, and $3.25 million annual overhead cost reimbursement (adjusted annually for inflation). Unless specifically referenced, all information contained herein excludes information pertaining to the Synergy operations. On December 7, 1995, the Company entered into a joint venture with Northwestern Growth Corporation, a subsidiary of Northwestern Public Service Company to acquire the stock of Myers Propane Gas Company, a large Ohio LP gas distributor. The Company has acquired 49% of the common stock of Acquisition Company (Myers), the acquisition entity. The Company entered into a Management Agreement pursuant to which the Company provides all management and administrative services. In exchange for these services, the Company is entitled a management fee upon the attainment of certain performance goals. Propane, a hydrocarbon with properties similar to natural gas, is separated from natural gas at gas processing plants and refined from crude oil at refineries. It is stored and transported in a liquid state and vaporizes into a clean-burning energy source that is recognized for it's transportability and ease of use relative to other forms of stand alone energy. 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, such as over-the-road vehicles, forklifts, and stationary engines. Agricultural uses include brooder heating, stock tank heating, crop drying, tobacco curing, and weed control, as well as use as a motor fuel for farm equipment and vehicles. Propane is recognized as a clean alternative transportation fuel "ATF" by the Federal and state governments and is the most widely used ATF in the United States. The Federal government has enacted certain mandates for use of ATF's by government and private fleets under the Clean Air Act of 1990 and Energy Act of 1992. Federal and state governments have also provided various economic incentives for use of ATF's which will positively impact propane demand. The retail propane business is a "margin-based" business in which gross profits depend on the excess of sales price over propane supply costs. Sales of propane to residential and commercial customers, which account for the vast majority of the Company's revenue, have provided a relatively stable source of revenue for the Company. Sales to residential customers accounted for approximately 65.5% of the Company's aggregate propane sales revenue and 72.2% of its aggregate gross margin from propane sales in fiscal year 1996. Historically, this market has provided higher margins than other retail propane sales. Based on fiscal year 1996 propane sales revenue, the customer base consisted of 22.6% commercial and 11.9% 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 1.2% of revenue from sales. 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. 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 for June 30, 1994, and all financial information from periods beginning thereafter exclude the assets of Energy and include the assets of PSNC. Sources of Supply. During 1996, approximately 80% of the Company's propane purchases of its propane supply were on a contractual basis (generally, one year agreements subject to annual renewal). The Company's two largest suppliers provide 20.0% and 11.0% of the total supply purchased by the Company. Supply contracts do not, generally, lock in prices, but rather provide for pricing in accordance with posted prices at the time of delivery or established by current major storage points, such as Mont Belvieu, TX, and Conway, KS. The Company has established relationships with a number of suppliers 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 from its two major 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 is a shipper on all major interstate LPG pipeline systems. The retail service centers have an aggregate storage capacity of approximately 16.1 million gallons of propane, and each service center has equipment for transferring the gas into and from the bulk storage tanks. The Company operates 11 over-the-road tractors and 7 transport trailers to deliver propane and consumer tanks to its retail service centers and also relies on common carriers to deliver propane to its retail service centers. Deliveries to customers are made by means of 346 propane delivery 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. Most 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 excellent service to its customers and to achieve maximum operating efficiencies. The Company's retail propane distribution business is organized into 15 regions which include the 122 service centers managed, pursuant to the Management Agreements relating to Synergy and Myers. Each region is supervised by a Regional Manager. The regions are grouped into four divisions, which are supervised by Divisional Vice Presidents, or Managers. 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 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 connected to the central management information system in the Company's corporate headquarters. 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. 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. 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. Propane competes primarily with natural gas, electricity and fuel oil principally on the basis of price, availability and portability. The Company also competes with suppliers of electricity. Generally speaking, the cost of propane compares favorably to electricity allowing the Company to enjoy a competitive advantage due to the higher costs of elec- tricity. Fuel oil does not present a significant competitive threat in the Company'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. Although propane is generally more expensive than natural gas on an equivalent BTU basis comparison, propane serves as an alternative to natural gas in rural areas where natural gas is not available. Propane is also utilized by natural gas customers on a stand-by basis during peak demand periods. The costs involved in building or connecting to a natural gas distribution system have tempered natural gas growth in most of the Company's trade territory. 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 and amended in April 1995. Subject to an exception for multi-state acquisition, the non-competition agreement as amended restricts the Company from making acquisitions in certain territories in two states (southeastern Missouri and northern Arkansas) and an area within a 50-mile radius of an Energy operation in any state east of the Mississippi River until June 30, 1997. Reciprocal restrictions apply to Energy under the agreement. 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. Effective June 30, 1996, the Company's comprehensive general and excess liability policy provides for losses of up to $101.0 million with a $250,000 self insured retention. Above the SIR is a corridor deductible of $750,000 per occurrence and $1,250,000 in the aggregate. The aggregate is shared between All Star and Synergy. From July 1994 until July 1996 the Company had obtained workers' compensation coverage from carriers and state insurance pools. Beginning with July 1996 the company's combined auto and workers' compensation coverage has a $250,000 deductible per occurrence. There is a $2 million stop loss aggregate on the combined auto and workers' compensation losses for Synergy and All Star Gas jointly. The deductibles on the comprehensive general, auto and worker's compensation mean that the Company is effectively self insured up to these deductibles. Regulation The Company's operations are subject to various federal, state, and local laws governing the transportation, storage and distribution of propane, occupational health and safety, and other matters. All states in which the Company operates have adopted fire safety codes that regulate the storage and distribution of 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. All Star 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, 1996, the Company had approximately 617 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. Item 4. Submission of Matters to a Vote of Security Holders. The Company held its annual shareholder meeting on July 16, 1996. The only matter presented for a vote was the re-election of Kristin L. Lindsey and Bruce M. Withers, Jr. as directors. Mrs. Lindsey and Mr. Withers were re-elected with 1,579,225 votes cast in favor and no votes cast against, withheld or abstaining. The term of office of the following directors continued after the meeting: Paul S. Lindsey, Jr., Douglas A. Brown, Kristin L. Lindsey, Jim J. Shoemake, and Bruce M. Withers, Jr. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. As of September 19, 1996, the Company's Common Stock was held of record by 9 shareholders. There is currently no active trading market in the Company's Common Stock. As of September 19, 1996, 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 1995 or 1996 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. Item 6. Selected Financial Data. The following table presents selected consolidated operating and balance sheet data of All Star Gas as of and for each of the years in the five-year period ended June 30, 1996. The financial data of the Company as of and for each of the years in the five-year period ended June 30, 1996 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 for the period ending June 30, 1994 do not take into account the effects of the Transaction on the Company, the data for that period are not comparable to the data for the year ended June 30, 1996.
Year Ended June 30, ------------------------------------------------------------------- 1992 1993 1994 1995 1996 ----- ----- ---- ---- ---- (In thousands except ratios and per share amounts) Operating data: Operating revenue $111,322 $128,556 $124,452 $74,090 $82,702 Gross profit (1) 61,107 68,199 66,632 39,028 39,384 Operating expenses 40,052 41,845 44,966 29,694 28,382 Depreciation & amortization. 10,062 10,351 10,150 6,166 6,770 Operating income 10,993 16,003 11,516 3,168 4,232 Interest expense: Cash interest 10,721 9,826 8,542 10,681 10,657 Amortization of debt discount & expenses 1,006 1,686 2,016 4,889 5,476 Total interest expense 11,727 11,512 10,558 15,570 16,133 Net income (loss) before extraordinary items (2) (1,474) 2,228 (1,190) (8,726) (7,897) Other operating data: Capital expenditures 6,703 4,358 20,015 11,874 8,838 Cash from sale of retail service centers and other assets 3,062 1,088 366 2,956 6,177 EBITDA (3) 20,297 26,509 21,566 8,784 11,302 Income (loss) per share before extraordinary items $(.11) $.16 $(0.08) $(5.53) $(5.00) Year Ended June 30, ------------------------------------------------------------------- 1992 1993 1994 1995 1996 ----- ----- ---- ---- ---- Balance sheet data: Total assets $151,471 $148,020 $104,644 $105,128 $102,002 Long-term debt (including current maturities) 78,958 79,249 105,612 115,647 122,858 Stockholders' equity (deficit) 24,901 25,913 (28,220) (36,946) (44,843)
(1) Represents operating revenue less the cost of products sold. (2) All Star Gas did not declare or pay dividends on its common stock during the five-year period ending June 30, 1996. (3) EBITDA consists of earning 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). 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 historical consolidated financial statements of All Star Gas and the notes thereto included in this Report. Historical financial data for years ended prior to June 30, 1994, do not reflect either the transfer of Energy or the acquisition of the assets of PSNC in the Transaction and therefore historical data for those periods are not comparable to results for the periods subsequent to June 30, 1994. In general, these transactions have resulted in a net reduction in the number of gallons sold, and thus in results (including operating revenue, cost of the products sold, and provisions for doubtful accounts) that are related to the number of gallons sold. General and administrative expenses have also declined as a result of the elimination of salaries and related expenses of departing officers, the termination of certain agreements between the Company and its former principal shareholder or entities controlled by him, and the elimination of costs related to service centers that are no longer part of the Company. Results of Operations General All Star Gas' primary source of revenue is retail propane sales, which accounted for approximately 91% of its revenue in fiscal year 1996. Other sources of revenue include sales of service labor, 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. Therefore, 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. The severity of the weather will affect the volume sold because a substan- tial amount of the propane sold by the Company to residential and commercial customers is used for heating. 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 expense and, to a much lesser extent, depreciation, amortization and interest expense. Purchases of propane inventory account for the 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 consists primarily of interest on its existing credit facility and the 12-7/8% Senior Secured Notes due 2004 (the "Senior Secured Notes"). Interest expense increased significantly between 1994 and 1995 as a result of issuance of the Senior Secured Notes at the end of June, 1994. Through 1999, a significant portion of the increase will be non-cash amortization of original issue discount. Fiscal Years Ended June 30, 1996 and June 30, 1995 Operating Revenue. Operating revenue increased $8.6 million, or 11.6%, to $82.7 million in fiscal year 1996 as compared to $74.1 million in fiscal year 1995. The increase was due to a $9.2 million increase in gas sales and the addition of the SYN, Inc. management fee of $400,000 (prorated for a 10 month period), offset by decreases of $500,000 in gas systems and appliance sales, $200,000 in service labor, and $300,000 in service charges. The increase in gas sales was due to an approximate $.06 per gallon increase in the average net sales price of propane and a net increase of approximately 2.0 million gallons, or 2.3%. Taking into account the acquisitions and dis- posals of stores in fiscal year 1996, gallonage increased 6.5 million gallons, or 8.1% on a same store basis, as a result of increased demand due to a colder winter than in fiscal year 1995 and new customer growth. Decreases in gas systems and appliance sales and the related service labor were due primarily to divestures of retail outlets. The decrease in service charges results from improved collection efforts and more stringent credit policies and procedures. Cost of products sold. Cost of products sold increased $7.7 million, or 21.7%, to $43.3 million in fiscal year 1996 as compared to $35.6 million in fiscal year 1995. This increase was due to an increase of approximately $8.0 million in cost of gas sales due to the net 2.0 million gallon volume increase and an approximate $.05 per gallon rise in the wholesale cost of propane offset by a decrease of approximately $300,000 in the cost of gas systems and appliance sales due to the decrease in sales volume. Gross profit. The Company's gross profit for the year increased $900,000, or 2.3%, to $39.4 million in fiscal year 1996 as compared to $38.5 million in fiscal year 1995. The Company's gross project per gallon increased approximately $.01 to approximately $.39 per gallon in fiscal year 1996, as a result of the increase in sales price of approximately $.06 per gallon offset by the $.05 increase in the cost of propane. The resulting increase in gross profit of $1.2 million from gas sales was offset by a decrease in gross profit of approximately $200,000 from gas systems and appliances due to the decrease in sales volume and the decrease in other revenues of approximately $100,000. General and administrative expense. General and administrative expenses decreased $1.1 million, or 3.8%, to $27.5 million in fiscal year 1996 compared to $28.6 million in fiscal year 1995. This decrease is due primarily to a decrease in insurance and liability claims of $300,000, an increase of $400,000 in rent and maintenance and the net effect of the Management Agreement with SYN, Inc. The decrease in insurance and liability claims was due to improved claim history. The increase in rent and maintenance was due primarily to the addition of new rental agreements entered into as a part of retail service centers acquired during fiscal years 1995 and 1996 and increased tank painting and building maintenance related both to the conversion to a new identity for acquired retail service centers and as part of the Company's Modernization program. The decrease that occurred because of the SYN, Inc. Management Agreement is due to the impact of increased costs in the other general and administrative cost centers offset by the annual overhead reimbursement made, which was $2.8 million in fiscal year 1996, and an additional one time $1.1 million payment related to the SYN, Inc. acquisition. These reimbursements were made to offset the increased costs required for the management of SYN, Inc. including additional home office employee salaries and related other costs. Provision for doubtful accounts. The provision for doubtful accounts decreased approximately $250,000, or 22.0%, from approximately $1.1 million in fiscal year 1995 to approximately $900,000 in fiscal year 1996. The decrease is due to the final determination of management regarding an appropriate estimate for the allowance based on historical trends, the aging of accounts receivable, and the enhanced credit and collection efforts in place. Depreciation and amortization. Depreciation and amortization increased by $600,000, or 9.7%, to $6.8 million in fiscal year 1996 from $6.2 million in fiscal year 1995. The increase is due to an increase in amortization of approximately $100,000 due to newly acquired goodwill and intangibles related to the acquisition of certain retail service centers. The remaining increase of $500,000 is due to the effect of increasing depreciable fixed assets through capital expenditures and acquisitions while disposing of partially or fully depreciated assets through disposals of retail service centers and other sales. Interest expense. Interest expense was relatively unchanged from fiscal year 1995 to 1996. Fiscal Years Ended June 30, 1995 and June 30, 1994 Operating revenue. Operating revenue decreased $50.3 million to $74.1 million in fiscal year 1995 as compared to $124.4 million in fiscal year 1994. The decrease was primarily due to the disposition of service centers in the Transaction, offset by increases due to the acquisition of service centers from PSNC in the Transaction. Operating revenue from service centers retained in the Transaction and acquired from PSNC was $74.8 million in fiscal year 1994. The decrease of $600,000, or .5%, in fiscal year 1995 was due to a $1.9 million decrease in gas sales offset by increases of $1.0 million in gas systems and appliances, and $300,000 in service labor. The decrease in gas sales was due to an approximately $.06 per gallon decrease in the average net sales price of propane created by competitive pressures resulting from decreased demand due to warm weather. The decrease was partially offset by a 3.9 million gallon volume increase due to the addition of retail service centers through five acquisitions and ten new startups during the fiscal year 1995. The increase in service labor is due to the increased installations from greater appliance sales and the increased service market created by the acquisitions discussed above. Cost of products sold. Cost of products sold decreased $22.3 million to $35.6 million in fiscal year 1995 as compared to $57.9 million in fiscal year 1994, primarily as a result of the Transaction. Cost of product sold from service centers retained in the Transaction and acquired from PSNC was $35.1 million in fiscal year 1994. The increase of $500,000, or 1.4%, is the result of the 3.9 million gallon volume increase, partially offset by a $.01 reduction in the cost of propane and an increase in gas systems and appliances cost due to the volume of sales. Gross profit. The Company's gross profit for the year decreased $28.0 million to $38.5 million in fiscal year 1995 as compared to $66.5 million in fiscal year 1994, primarily as a result of the Transaction. Gross profit from service centers retained in the Transaction and acquired from PSNC was $39.7 million in fiscal year 1994. The decrease of $1.1 million, or 1.7%, was caused by the .5% decrease in operating revenue and the 1.4% increase in cost of products sold. The Company's gross profit per gallon decreased from $.43 in 1994 for service centers retained in the Transaction and acquired from PSNC to $.38 in fiscal year 1995, as a result of the decrease in sales price of $.06 per gallon offset by the $.01 reduction in the cost of propane. General and administrative expense. General and administrative expenses decreased $15.4 million to $28.6 million in fiscal year 1995 from $43.9 million in fiscal year 1994, primarily as a result of saving resulting from the reduction of personnel in connection with the Transaction. As a percentage of total revenues, general and administrative expenses increased to 38.3% in fiscal year 1995 from 35.3% in fiscal year 1994. The increase is due primarily to increases as a percent of total revenues of 2.2% in salaries and commissions, .6% in professional fees, .3% in both rent and maintenance and taxes and licenses, and .4% in office expenses. These increases were partially offset by a decrease of .5% in vehicle fuel and maintenance and .4% in insurance and liability claims. Other smaller increases were incurred in miscellaneous expenses and travel and entertainment and advertising. The increase in salaries and commissions was due to several factors including 1) increased retail salary expense due primarily to additional employees as a result of acquisitions and startups and increased commissions as a result of increased emphasis on new customers and tank sets, and 2) increased home office salary expense as a result primarily of additional operational employees due to acquisitions and additional marketing employees to support the Company's emphasis on enhanced sales efforts. The increase in professional fees is due to fees related to the formation of a 401(k) Plan, a state income tax audit, and a supply purchase consulting agreement. The increase in rent and maintenance of buildings is primarily due to increased tank painting, building and maintenance in converting certain retail facilities to a new identity in connection with the restructuring and an increase in the rental of facilities primarily related to the six retail service centers acquired in June, 1994. The increase in taxes and licenses relates primarily to property taxes paid for six retail service centers acquired in June, 1994. The increase in office expenses is primarily due to additional spending required for the change of identity for several retail sites and additional mailings to customers. The decrease in insurance and liability claims is due to a reduction in liability claims expense as a result of reduced claims. The decrease in vehicle expense is due to the replacement of older vehicles occurring at the end of fiscal year 1994, and in early fiscal year 1995, resulting in lower maintenance expenses. Provision for doubtful accounts. The provision for doubtful accounts increased approximately $80,000 to a little over $1.1 million in fiscal year 1995, from a little under $1.1 million in 1994. The increase is due to the final determination of management regarding the aged balances of accounts after substantial collection efforts during fiscal year 1995, offset in part by reduction in the level of accounts receivable as a result of the Transaction. Depreciation and amortization. Depreciation and amortization costs decreased by $4.0 million to $6.2 million from $10.2 million, primarily as a result of the reduction in assets as a result of the Transaction. Depreciation and amortization on assets retained in the Transaction or acquired from PSNC increased by $700,000, or 12.7%, from $5.5 million for the year ended June 30, 1994, due to amortization of non-compete agreements acquired with new service centers and depreciation of the related assets purchased in June, 1994, and fiscal 1995. Interest expense. Interest expense increased by approximately $2.4 million, or 25.9%, to $10.7 million in fiscal year 1995 as compared to $8.5 million in 1994, due to the approximately $45 million face value of additional long-term debt outstanding as compared to the same period of the prior year, partially offset by an overall lower rate of interest, principally on the new senior secured notes issued in June 1994, as compared to the higher rates on debt repaid with the June, 1994, offering. 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 flows generated by operations and from borrowings under its working capital facility. Cash flow provided from operating activities was $300,000 in fiscal year 1996 as compared to $3.1 million in fiscal year 1995, related primarily to an increase in interest paid over the prior year amounting to $3.0 million. Cash flow used in investing activities declined to a net $1.9 million in 1996 from $8.2 million in 1995. The Company's capital additions in fiscal year 1996 was $8.1 million as compared to $11.2 million in the preceding year. The Company expended $1.1 million in fiscal year 1996 in acquisitions of retail service centers whereas in 1995 the purchase of four service centers and the addition of several new start-ups amount to $7.0 million. This decrease was offset by an increase of $2.9 million due primarily to increased asset purchases in conjunction with the Company's modernization plan for providing better equipment and transportation for its retail service centers. The Company raised $6.2 million and $2.9 million from the sale of marginally profitable service centers in 1996 and 1995 respectively, the proceeds of which were used to partially fund the acquisitions noted above. Pursuant to the indenture for the 12 7/8% Senior Secured Notes, the Company is required to make a $4.5 million, semi-annual interest payment on each July 15 and January 15. Beginning in fiscal year 2000, the semi-annual cash interest payment on the Senior Secured Notes will increase to $8.2 million. The Company met the July, 1996, interest payment through the use of operating cash flows and available borrowings on its working capital facility. Cash flow was further increased by the proceeds from planned sales of retail service centers geographically remote from its primary market areas. The Company's high degree of leverage makes it vulnerable to adverse changes in the weather and could 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 working capital facility bears interest at a floating rate. The Company believes that, based on current levels of operations and assuming winter weather comparable to fiscal year 1996, it will be able to fund its debt service obligations from funds generated from operations and funds available under its working capital facility. The Company's credit facility will mature on June 29, 1997, at which time the Company will have to refinance or replace the facility, and may be required to pay some portion of any outstanding balance. The credit facility will be necessary to fund the Company's seasonal operations and debt service requirements. There can be no assurance that the Company will be able to refinance or replace the credit facility, or the terms upon which any such financing may occur. 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, 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 this 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 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 subject to borrowing availability covenants. The Company intends to fund acquisitions from sales of marginally profitable and geographically remote existing service centers, seller financing, to the extent feasible and allowable under the Senior Secured Note agreement, and with cash from operations or bank financing. 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, as amended, restrict the acquisition activity of the Company based on the availability of working capital borrowing, earnings and certain proceeds less required debt service and capital and certain other expenditures or approval from the lenders. Acquisitions are further restricted to use no more than $3.0 million in cash in a twelve month period without prior approval. At June 30, 1996, the Company was not in compliance with the capital expenditures, interest coverage ratio and tangible net worth covenants. These covenants have been waived or amended, and the Company is in compliance with the covenants as amended. 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: Position Held with the Company Name Age and Principal Occupation -------------------------------------- ----------- ------------------------------------------------ Paul S. Lindsey, Jr. 51 Chairman of the Board, Chief Executive Officer, and President since June 1994; previously Vice Chairman of the Board (since February 1987) and Chief Operating Office (since March 1988); term as director expires 1997 Douglas A. Brown 36 Director since July 1994; member Holding Capital Group, Inc. (since 1989); term as director expires 1997 Kristin L. Lindsey 48 Director/Vice President since June 1994; previously pursued charitable and other personal interest; term as director expires 1999 Bruce M. Withers, Jr. 69 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 1999 Jim J. Shoemake 58 Director since July 1994; partner of Guilfoil, Petzall & Shoemake (since 1970); term as director expires 1998 Valeria Schall 42 Vice President since 1992; Corporate Secretary since 1985 and Assistant to the Chairman (Assistant to the Vice Chairman prior to June 1994) since 1987 Mark Castaneda 32 Vice President Finance and Administration since August 1995; previously Controller of Skelgas Propane since 1991 and an accountant at Deloitte & Touche since 1986 Kenneth J. DePrinzio 49 Vice President-Corporate Development since June 1996; previously Divisional Vice President since June 1993 and Regional Manager since May 1992. From 1990 to 1991 Area Vice President for Petrolane. Mark W. Buettner 54 Divisional Vice President since June 1993; previously Regional Manager since April 1989. J. Greg House, Sr. 40 Vice President - Management Information Systems since June 1996; previously Director-MIS since September 1994 and Manager-MIS, Paul Mueller Co. since 1987. Robert C. Heagerty 49 Divisional Vice President since June 1993; previously Regional Manager since December 1986. Daniel P. Binning 39 Divisional Vice President since June 1996; previously Divisional Manager since August 1995 and Regional Manager since August 1996 and Marketing Representative with Ferrell Gas Corporation since December 1990. James M. Trickett 46 Divisional Manager since June 1996 and Regional Manager since August 1995. Divisional Manager with Synergy Gas Corporation since 1990.
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). Item 11. Executive Compensation Executive Compensation The following table provides compensation information for each of the years ended June 30, 1996, 1995, and 1994 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 (of which there were none) 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 (of which there were none)
Summary Compensation Table Annual Compensation Name and Principal Position at End of Fiscal Fiscal Other Annual All Other Year 1996 Year Salary Bonus Compensation Compensation --------- ---- ------ ----- ------------ ------------ Paul S. Lindsey, Jr. 1996 $350,000 --- --- --- Chief Executive Officer, 1995 350,000 --- --- --- Chairman of the Board 1994 300,000 $5,000 --- --- and President
Employment Agreement 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 There were no options granted to the named officer nor exercised by him during fiscal year 1996 and no unexercised options held by him as of the end of the 1996 fiscal year. Compensation Committee Interlocks and Insider Participation A compensation committee was formed in July 1994, consisting of Messrs. Withers, Shoemake, and Brown. Mr. Lindsey makes the initial recommendation concerning executive compensation for the executive officers of the Company, other than recommendations concerning his own and his wife's compensation, which are then approved by the compensation committee. The compensation committee determines the compensation of Mr. Lindsey's wife and, subject to the employment agreement described above, Mr. Lindsey. Director Compensation During the last completed fiscal year, the directors of All Star Gas received an annual fee of $25,000, payable quarterly, for their services. 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 19, 1996, 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 74.7 Kristin L. Lindsey (2) 753,805 37.3 Douglas A. Brown 122,830 6.1 Bruce M. Withers, Jr. 17,548 0.9 Jim J. Shoemake 17,548 0.9 All directors and executive officers as a group (8 persons)(3) 1,905,843 94.4 - ----------------- (1) The address of each of the beneficial owners is c/o All Star 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 Mr. Lindsey and Mrs. Lindsey as set forth above, and 240,307 shares owned by other executive officers. Item 13. Certain Relationships and Related Transactions. 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 and labels to the Company. The Company's purchases of paint and labels from this company totaled $202,598 in fiscal year 1996 and $157,842 in fiscal year 1995. The Company has entered into an agreement with each shareholder (all of whom are 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 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. In addition to purchased product at refineries, gas processing plants, underground storage facilities, and pipeline terminals for use by the Company, the Company also purchases product for use at the Synergy retail locations and Myers. From time to time, the Company has also purchased product which has been sold to Red Top Gas, a retail propane distributor owned by a party related to the Chief Executive Officer of the Company. At June 30, 1996, the Company had a receivable balance due from Red Top Gas in the amount of $176,000. During 1996, the Company sold its Cheyenne III aircraft. At the time, the Company entered into an operating lease with its Chief Executive Officer to lease a jet aircraft for use in Company travel. The lease requires $282,981 in annual payments for a term of 3 years beginning in June, 1996, and had a requirement for a $200,000 deposit. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a)(1) Financial Statements Report of Independent Accountants Consolidated Balance Sheets as of June 30, 1996 and 1995 Consolidated Statement of Operations for the Years Ended June 30, 1996, 1995, and 1994 Consolidated Statements of the Stockholders' Equity (Deficit) for the Years Ended June 30, 1996, 1995, and 1994 Consolidated Statements of Cash Flows for the Years Ended June 30, 1996, 1995, and 1994 (a)(2) Financial Statement Schedules Schedule II Valuation and qualifying accounts (a)(3) Exhibits Exhibit No. Description 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 All Star 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 All Star Incorporated and Exco Acquisition Corp. (Commission File No. 2-83683) Registration Statement on Form S-14 with the Commission on May 11, 1983); and First Supplemental Indenture thereto between All Star 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 All Star 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 (incorporated herein by reference to Exhibit 4.2 to the Registrant's Annual Report on Form 10-K for the year ended June 30, 1994) 4.3 Warrant Agreement (incorporated herein by reference to Exhibit 4.3 to the Registrant's Annual Report on Form 10-K for the year ended June 30, 1994) 10.1 Shareholder Agreement, dated as of October 28, 1988, by and among All Star 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 Rein; Dan Weatherly; Nina Irene Craighead; Joyce Sue Kinnett; Edwin H. McMahon; Paul Stahlman; Ralph Wilson; Alan Simer; Ferrell Stamper; and All Star Gas Corporation Employee Stock Ownership Plan, Robert W. Plaster, Trustee (incorporated herein by reference to Exhibit 10.1 to the Company's Registration Statement on Form S-1 (No. 33-53343)) 10.2 1995 Stock Option Plan of All Star Gas Company (incorporated herein by reference to Exhibit 10.2 to the Registrant's Annual Report on Form 10-K for the year ended June 30, 1995) 10.3 Credit Agreement between the Company and Continental Bank, as agent (incorporated herein by reference to Exhibit 10.3 to the Registrant's Annual Report on Form 10-K for the year ended June 30, 1994) 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 All Star 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 All Star Service Corporation (incorporated herein by reference to Exhibit G of Exhibit 10.1 to the All Star 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 All Star 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, All Star 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. 33-533343)) 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)) 10.11 Supply Contract No. 1, dated June 1, 1993, between EGOC and Warren Petroleum 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 June 1, 1993, between EGOC and Warren Petroleum Company (incorporated herein by reference to Exhibit 10.12 to the Company's Registration Statement on Form S-1 (No. 33-53343)) 10.13 Management Agreement between All Star Gas Corporation, Northwestern Growth Corporation and SYN Inc. dated May 17, 1995 10.14 Agreement Among Initial Stockholders and SYN Inc. dated May 17, 1995 10.15 Waiver Agreement dated April 29, 1995 by and among All Star Gas Corporation, SYN Inc., Paul S. Lindsey, Jr. Northwestern Growth Corporation, All Star Energy Corporation, Robert W. Plaster, and Stephen R. Plaster (incorporated herein by reference to Exhibit 10.15 to the Registrant's Annual Report on Form 10-K for the year ended June 30, 1995) 10.16+ Propane Sales Agreement dated August 24, 1995, between All Star Gas Corporation and Warren Petroleum Company (incorporated herein by reference to Exhibit 10.16 to the Registrant's Annual Report on Form 10-K for the year ended June 30, 1995) 10.17+ Supply Contract dated April 27, 1995, between All Star Gas Corporation and Phillips 66 Company (incorporated herein by reference to Exhibit 10.17 to the Registrant's Annual Report on Form 10-K for the year ended June 30, 1995) 10.18+ Dealer Sale Contract dated January 20, 1995, between All Star Gas Corporation and Conoco Inc. (incorporated herein by reference to Exhibit 10.18 to the Registrant's Annual Report on Form 10-K for the year ended June 30, 1995) 10.19+ Supply Contract dated April 24, 1995 between All Star Gas Corporation and Enron Gas Liquids, Inc. (incorporated herein by reference to Exhibit 10.19 to the Registrant's Annual Report on Form 10-K for the year ended June 30, 1995) 10.20+ Amendment No. 1 to Supplement A to Loan and Securities Agreement dated June 29, 1995 between All Star Gas Corporation and Bank of America Illinois (incorporated herein by reference to Exhibit 10.20 to the Registrant's Annual Report on Form 10-K for the year ended June 30, 1995) 10.21 9/9/96 Waiver, Amendment No. 2 to Loan and Security Agreement and Amendment No. 4 to Supplement A to Loan and Security Agreement with Bank of America Illinois 10.22 7/1/96 Agreement Amending Amended and Restated Agreement Among Initial Stockholders and Syn Inc. 10.23 5/15/96 Waiver between Bank of America Illinois and All Star Gas Corporation 10.24 2/13/96 Amendment No. 3 to Supplement A to Loan and Security Agreement with Bank of America Illinois 10.25 11/3/95 Agreement Among Initial Stockholders and Mac Inc. 10.26 11/3/95 Management Agreement among NWPS, Myers Acquisition Company and Empire 10.27 9/28/95 Amendment No. 1 to Loan and Security Agreement and Amendment No. 2 to Supplement A to Loan and Security Agreement with Bank of America Illinois 10.28 7/31/95 Agreement Amending Management Agreement 10.29 7/31/95 Agreement Amending and Restating Agreement Among Initial Stockholders and Syn Inc. 10.30+ Propane Sales Agreement dated April 9, 1996, between All Star Gas Corporation and Warren Petroleum Company 10.31+ Amendment to Supply Contract dated August 15, 1994, between All Star Gas Corporation and Phillips 66 Company 10.32+ Supply Contract dated April 1, 1996, between All Star Gas Corporation and Conoco Inc. 10.33 June 1, 1996 Lease of Aircraft between Paul S. Lindsey Limited Liability Company and All Star Gas Corporation 21.1 Subsidiaries of the Company 27.1 Financial Data Schedules + Confidential treatment has been requested. The copy filed as an exhibit omits the information subject to the confidentiality request. (b) Reports on Form 8-K None (c) Exhibits See (a)(3) above. (d) Financial Statements See (a)(1) above. 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. All Star 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, 1996 - ----------------------------- Chairman of the Board of Paul S. Lindsey, Jr. All Star Gas Corporation (principal executive officer) /s/ Mark Castaneda Vice President Finance and September 27, 1996 - --------------------------- Administration Mark Castaneda (principal financial/ accounting officer) /s/ Douglas A. Brown Director of All Star Gas September 27, 1996 - -------------------------- Corporation Douglas A. Brown /s/ Kristin L. Lindsey Director of All Star Gas September 27, 1996 - -------------------------- Corporation Kristin L. Lindsey /s/ Bruce M. Withers, Jr. Director of All Star Gas September 27, 1996 - -------------------------- Corporation Bruce M. Withers, Jr. /s/ Jim J. Shoemake Director of All Star Gas September 27, 1996 - --------------------------- Corporation Jim J. Shoemake ALL STAR GAS CORPORATION (FORMERLY EMPIRE GAS CORPORATION) Accountants' Report and Consolidated Financial Statements June 30, 1996 Independent Accountants' Report Board of Directors and Stockholders All Star Gas Corporation Lebanon, Missouri We have audited the accompanying consolidated balance sheets of ALL STAR GAS CORPORATION (FORMERLY EMPIRE GAS CORPORATION) as of June 30, 1996 and 1995, 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, 1996. 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 ALL STAR GAS CORPORATION as of June 30, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 1996, in conformity with generally accepted accounting principles. BAIRD KURTZ DOBSON Springfield, Missouri August 30, 1996 ALL STAR GAS CORPORATION (FORMERLY EMPIRE GAS CORPORATION) CONSOLIDATED BALANCE SHEETS JUNE 30, 1996 AND 1995 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) ASSETS 1996 1995 ---- ---- CURRENT ASSETS Cash $ 898 $ 821 Trade receivables, less allowance for doubtful accounts; 1996 - $722, 1995 - $800 4,308 4,571 Receivable from sale of retail locations 2,390 -- Inventories 6,039 5,686 Prepaid expenses 276 521 Due from related parties 1,261 -- Refundable income taxes -- 1,567 Deferred income taxes 995 1,350 ---------- --------- Total Current Assets 16,167 14,516 ---------- --------- PROPERTY AND EQUIPMENT, AT COST Land and buildings 8,868 9,496 Storage and consumer service facilities 66,336 68,706 Transportation, office and other equipment 22,203 20,015 ---------- --------- 97,407 98,217 Less accumulated depreciation 29,497 27,111 ---------- --------- 67,910 71,106 ---------- --------- OTHER ASSETS Debt acquisition costs, net of amortization 4,228 4,856 Excess of cost over fair value of net assets acquired, at amortized cost 11,536 12,992 Other 2,161 1,658 ---------- --------- 17,925 19,506 ---------- --------- $ 102,002 $ 105,128 ========== ========= See Notes to Consolidated Financial Statements LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) 1996 1995 ---- ---- CURRENT LIABILITIES Checks in process of collection $ 2,794 $ 1,585 Current maturities of long-term debt 7,358 504 Accounts payable 5,036 4,328 Accrued salaries 1,051 1,233 Accrued interest 4,553 4,100 Accrued expenses 897 1,130 Income taxes payable 181 -- --------- --------- Total Current Liabilities 21,870 12,880 --------- --------- LONG-TERM DEBT 115,500 115,143 --------- --------- DEFERRED INCOME TAXES 8,935 13,140 --------- --------- ACCRUED SELF-INSURANCE LIABILITY 540 911 --------- --------- STOCKHOLDERS' EQUITY (DEFICIT) Common; $.001 par value; authorized 20,000,000 shares; issued June 30, 1996 and 1995 - 14,291,020 shares 14 14 Common stock purchase warrants 1,227 1,227 Additional paid-in capital 27,279 27,279 Retained earnings 14,612 22,509 ---------- --------- 43,132 51,029 Treasury stock, at cost June 30, 1996 and 1995 - 12,711,795 shares (87,975) (87,975) ---------- --------- (44,843) (36,946) ---------- --------- $ 102,002 $ 105,128 ========== ========= See Notes to Consolidated Financial Statements
ALL STAR GAS CORPORATION (FORMERLY EMPIRE GAS CORPORATION) CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1996 1995 1994 ---- ---- ---- OPERATING REVENUE $82,702 $74,090 $124,452 COST OF PRODUCT SOLD 43,318 35,612 57,920 ------------ ------------ ------------ GROSS PROFIT 39,384 38,478 66,532 ------------ ------------ ------------ OPERATING COSTS AND EXPENSES Provision for doubtful accounts 889 1,136 1,056 General and administrative 27,493 28,558 43,910 Depreciation and amortization 6,770 6,166 10,150 ------------ ------------ ------------ 35,152 35,860 55,116 ------------ ------------ ------------ OPERATING INCOME 4,232 2,618 11,416 ------------ ------------ ------------ OTHER INCOME (EXPENSE) Interest expense (10,657) (10,681) (8,542) Amortization of debt discount and expense (5,476) (4,889) (2,016) Restructuring proposal costs -- -- (398) Gain on sale of assets 395 550 100 Write off of carrying value of underground storage facility and closing costs (200) (924) (1,400) ------------ ------------ ------------ (15,938) (15,944) (12,256) ------------ ------------ ------------ LOSS BEFORE EQUITY IN NET INCOME OF AFFILIATES (11,706) (13,326) (840) EQUITY IN NET INCOME OF AFFILIATES 59 -- -- ------------ ------------ ------------ LOSS BEFORE INCOME TAXES (11,647) (13,326) (840) PROVISION (CREDIT) FOR INCOME TAXES (3,750) (4,600) 350 ------------ ------------ ------------ LOSS BEFORE EXTRAORDINARY ITEMS (7,897) (8,726) (1,190) EXTRAORDINARY ITEMS 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) $ (7,897) $ (8,726) $ 31,125 ============ ============ ============ See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1996 1995 1994 ---- ---- ---- LOSS BEFORE EXTRAORDINARY ITEMS PER COMMON SHARE $ (5.00) $ (5.53) $ (.08) 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 $ (5.00) $ (5.53) $ 2.23 ======== ========= ==========
ALL STAR GAS CORPORATION (FORMERLY EMPIRE GAS CORPORATION) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (IN THOUSANDS) Common Total Stock Additional Stockholders' Common Purchase Paid-in Retained Treasury Equity Stock Warrants Stock Earnings Stock (Deficit) BALANCE, JUNE 30, 1994 $ 14 $ 1,227 $ 27,279 $31,235 $(87,975) $(28,220) NET LOSS -- -- -- (8,726) -- (8,726) ------ ------- ------- ------ ------ ------ BALANCE, JUNE 30, 1995 14 1,227 27,279 22,509 (87,975) (36,946) NET LOSS -- -- -- (7,897) -- (7,897) ------ ------- ------- ------ ------ ------ BALANCE, JUNE 30, 1996 $ 14 $ 1,227 $ 27,279 $14,612 $(87,975) $(44,843) ===== ======= ======= ====== ======= =======
ALL STAR GAS CORPORATION (FORMERLY EMPIRE GAS CORPORATION) CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (IN THOUSANDS) 1996 1995 1994 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (7,897) $ (8,726) $ 31,125 Items not requiring (providing) cash: Depreciation 5,427 4,971 8,973 Amortization 6,819 6,084 3,193 Gain on sale of assets (395) (550) (100) Loss on underground storage facility 200 924 1,400 Undistributed earnings of affiliate (59) -- -- Extraordinary loss -- -- 5,555 Extraordinary gain -- -- (37,870) Deferred income taxes (3,850) (3,000) (3,166) Changes in: Trade receivables 191 1,075 (130) Inventories (896) (383) 1,170 Due from related parties (599) -- -- Accounts payable 508 289 (254) Accrued expenses and self insurance 1,243 4,682 1,377 Prepaid expenses and other (375) (2,262) (1,617) -------- -------- -------- Net cash provided by operating activities 317 3,104 9,656 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales of retail service centers and other assets 6,177 2,956 366 Acquisition of retail service centers (1,087) (7,047) (12,923) Purchases of property and equipment (7,033) (4,154) (7,665) -------- -------- -------- Net cash used in investing activities (1,943) (8,245) 20,222) -------- -------- --------
ALL STAR GAS CORPORATION (FORMERLY EMPIRE GAS CORPORATION) CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (IN THOUSANDS) 1996 1995 1994 ---- ---- ---- CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in working capital facility $ 1,331 $ 5,058 $ (3,200) Principal payments on purchase obligations (837) (346) (203) Checks in process of collection 1,209 (1,677) 3,262 Debenture sinking fund payments -- -- (2,023) Purchase of treasury stock -- -- (2,274) 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 financing activities 1,703 3,035 13,131 -------- -------- -------- INCREASE (DECREASE) IN CASH 77 (2,106) 2,565 CASH, BEGINNING OF YEAR 821 2,927 362 -------- -------- -------- CASH, END OF YEAR $ 898 $ 821 $ 2,927 ======== ======== ========
ALL STAR GAS CORPORATION (FORMERLY EMPIRE GAS CORPORATION) ALL STAR GAS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1996 NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS The Company's principal operation is the sale of wholesale and retail LP gas. 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. At June 30, 1994, the Company's ownership and management was changed. See Note 2 for a description of this restructuring transaction. ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of All Star Gas Corporation (Formerly 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: 1996 1995 (In Thousands) Gas and other petroleum products $ 2,835 $ 2,116 Gas distribution parts, appliances and equipment 3,204 3,570 --------- --------- $ 6,039 $ 5,686 ========= ========= PROPERTY AND EQUIPMENT Depreciation is provided on all property and equipment on the straight-line method over estimated useful lives of 3 to 33 years. FAIR VALUE OF FINANCIAL INSTRUMENTS At June 30, 1996, the Company's only financial instruments are cash, long-term debt and related accrued interest. It was not practicable to estimate the fair value of long-term debt. 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 1994 senior secured note costs (originally $5,143,000) are amortized over ten years; and the revolving credit facility costs (originally $341,000) are amortized over three years. Amortization of discounts on debentures and notes (Note 4) is on the effective interest, bonds outstanding method. The excess of cost over fair value of net assets acquired ($20,750,000) is being amortized on the straight-line basis over 25 years. INCOME (LOSS) PER COMMON SHARE Income (loss) per common share is computed by dividing net income (loss) 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 1,579,225, 1,579,225 and 13,961,520 for each of the fiscal years ended June 30, 1996, 1995 and 1994, respectively. RECLASSIFICATION Certain reclassifications have been made to the 1995 and 1994 financial statements to conform to the 1996 financial statement presentation. These reclassifications had no effect on net earnings. 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 owned 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 retained 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 purchase, 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 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. The following table sets forth selected aggregate operating data for the retail service centers of the Company which were 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 have been included in the statement of operations for the year ended June 30, 1994. North Empire Gas Carolina Corporation Acquisition Pro Forma (After Giving (Unaudited) Effect to (In Thousands) Restructuring Transaction) 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 =========== ========== ========== NOTE 3: RELATED-PARTY TRANSACTIONS During 1996, 1995 and 1994, the Company has purchased $202,598, $157,842 and $210,400, respectively, of paint from a corporation owned by the spouse of the Principal Shareholder of the Company. During the year the Company also advanced $251,000 to this related party which is outstanding at June 30, 1996. During fiscal year 1994, the Company paid an investment banking firm affiliated with a director of the Company $400,000 in return for services rendered in connection with the negotiation of the Company's revolving credit facility and with the restructuring transaction. Beginning July 1, 1994, the Company entered into a seven-year services agreement for a subsidiary of Energy to provide data processing and management information services to the Company. 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. For the years ended June 30, 1996 and 1995, total expenses related to this services agreement were $622,060 and $1.1 million, respectively. Beginning July 1, 1994, the Company entered into a new lease agreement with a corporation owned principally by the Former Shareholder to lease its corporate office space. The new lease requires annual rent payments of $75,000 for a period of seven years, with two three-year renewal options. In 1996 the Company entered into an operating lease with the Principal Shareholder for a jet aircraft. The lease requires $282,981 in annual payments for a term of 3 years beginning in June 1996. The lease also requires a deposit of $200,000 which was paid in June 1996. On August 15, 1995, the Company entered into a joint venture with Northwestern Growth Corporation, a subsidiary of Northwestern Public Service Corporation, to acquire the assets of Synergy Group Incorporated, the nation's fifth largest LP gas distributor. The Company acquired 30% of the common stock of SYN Inc., the acquisition entity, for $30,000 and entered into a Management Agreement pursuant to which the Company provides management services for SYN Inc. Under the terms of the Management Agreement, the Company provides all management of the retail facilities and accounting services at the central office. In exchange for those services, the Company receives a $500,000 annual management fee and $3.25 million annual overhead cost reimbursement. During 1996 the Company received total payments of $3,281,000 related to management fees and overhead reimbursement. In addition, $1,103,000 was reimbursed to the Company for initial costs incurred related to the Synergy acquisition. The net loss of SYN Inc. was $2.0 million after considering preferred dividends for 1996. The Company's 1996 equity share of the SYN Inc. loss was limited to its basis of $30,000. During 1996, the Company purchased on behalf of SYN, Inc. $42.0 million of LP gas which was then transferred to them. A receivable of $116,000 has been recorded primarily related to amounts owed the Company for purchases of inventory and service provided on behalf of SYN Inc. During 1996, the Company exchanged real and personal property of four of its locations for three of SYN Inc.'s retail locations. The value of the Company's locations exchanged was approximately $1,713,000 with the value of SYN Inc.'s locations received of approximately $1,615,000 resulting in a difference of $98,000 which was paid to the Company. In June 1996 the Company sold to SYN Inc. one retail service center for $662,000 which is recorded as a receivable at June 30, 1996. During 1996 the Company acquired 49% of the common stock of Myers Acquisition Company (Myers) through a joint venture with Northwestern Growth Corporation. Myers acquired the stock of a retail LP distributor in Ohio. At June 30, 1996, the Company has a receivable balance due from this related party in the amount of $49,000. The Company's equity share in the net income of Myers was $89,000 for the year ended June 30, 1996. During 1996 the Company entered into lease agreements, under operating leases, for the lease of transportation equipment to Propane Resources Transportation, Inc. (PRT) of which SYN Inc. is a 15% shareholder. PRT transports LP gas to the Company's and SYN Inc.'s retail locations. The Company received $23,000 in lease income during 1996 from these leases. At June 30, 1996, the Company has a receivable balance due from this related party in the amount of $7,000. The Company sells LP gas to Red Top Gas, a retail LP distributor owned by a party related to the Principal Shareholder. At June 30, 1996, the Company has a receivable balance due from this related party in the amount of $176,000. Prior to the Restructuring Transaction described in Note 2, the Company had various related party transactions with its Former Shareholder as described below. The Company leased its corporate home office, land, buildings and equipment from a corporation principally owned by the Former Shareholder. The Company paid $200,000 during the year ended June 30, 1994, related to this lease. This lease was terminated effective June 30, 1994, at no additional expense to the Company. In connection with the stock purchase described in Note 2, 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. During 1994, 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. In 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 year ended June 30, 1994, the Company paid direct rent of $75,000. This lease was terminated effective June 30, 1994, at no additional expense to the Company. The Company paid $150,000 in the year ended June 30, 1994, to a corporation owned by the Former Shareholder pursuant to an agreement providing the 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. NOTE 4: LONG-TERM DEBT Long-term debt at June 30 consisted of (In Thousands): 1996 1995 ---- ---- Working capital facility (A) $ 6,389 $ 5,058 12_% Senior Secured Notes, due 2004 (B) 107,758 103,019 9% Subordinated Debentures, due 2007 (C) 5,203 5,094 Purchase contract obligations and capital leases (D) 3,508 2,476 ---------- ----------- 122,858 115,647 Less current maturities 7,358 504 ----------- ----------- $ 115,500 $ 115,143 =========== =========== (A) The working capital 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 tangible net worth, capital expenditures, interest coverage ratio, debt and certain dividend restrictions. These dividend restrictions prohibit the Company from paying common stock cash dividends. At June 30, 1996, the Company was not in compliance with the original capital expenditures, tangible net worth and interest coverage ratio covenants. At June 30, 1995, the Company was not in compliance with the capital expenditures and interest coverage covenants. The bank has waived and amended the covenants, and the Company is in compliance with the amended covenants. 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 52% of eligible inventory. In addition, the Company can borrow an additional $1.5 million during the period September 9, 1996, to December 31, 1996. The facility bears interest at either 1.5% over prime or 3.0% 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 $1,793,000 at June 30, 1996, after considering $1,603,000 of outstanding letters of credit. The letters of credit are principally related to the Company's self-insurance program (Note 6). The working capital facility is due on June 29, 1997 (see Note 14). (B) The notes were issued June 1994 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, 1996 and 1995, is $127,200,000. The proceeds from this new offering were used to repay existing debt; 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 above. (C) 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. In June 1994, the Company used proceeds from the issuance of the 12 7/8% Senior Secured Notes, due 2004, to 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, 1996 and 1995, is $23,215,000 of which $13,469,200 are registered in the name of the Company. (D) Purchase contract obligations arise from the purchase of operating businesses and are collateralized by the equipment and real estate acquired in the respective acquisitions. Capital leases include leases covering data processing equipment for years expiring 1998. At June 30, 1996 and 1995, these obligations carried interest rates from 7% to 10% and are due periodically through 2005. Aggregate annual debt service requirements (in thousands) of the long-term debt outstanding at June 30, 1996, are: Total Principal Interest Debt Service 1997 $ 7,358 * $ 10,023 $ 17,381 1998 980 9,945 10,925 1999 511 9,885 10,396 2000 244 17,328 17,572 2001 231 17,309 17,540 Thereafter 137,518 54,394 191,912 ------------ ---------- ----------- $ 146,842 $ 118,884 $ 265,726 ============ ========== =========== * Includes the working capital facility which the Company intends to refinance See Note 14). NOTE 5: INCOME TAXES The provision for income taxes includes these components. 1996 1995 1994 ---- ---- ---- (In Thousands) Taxes currently payable (refundable) $ 100 $ (1,600) $ 2,887 Deferred income taxes (3,850) (3,000) (2,537) -------- --------- --------- $ (3,750) $ (4,600) $ 350 ======== ========= ========= The tax effects of temporary differences at June 30 related to deferred taxes were:
1996 1995 ---- ---- (In Thousands) Deferred Tax Assets Allowance for doubtful accounts $ 271 $ 300 Accounts receivable advance collections 380 347 Self-insurance liabilities and contingencies 534 604 Original issue discount 3,341 1,564 Net operating loss carryforwards 1,769 -- Alternative minimum tax credit 1,200 1,300 ------------ ------------ 7,495 4,115 Deferred Tax Liability Accumulated depreciation and tax cost differences (15,435) (15,905) ------- ------- Net deferred tax liability $ (7,940) $ (11,790) ============ ============ The above net deferred tax asset (liability) is presented on the June 30 balance sheets as follows: 1996 1995 ---- ---- (In Thousands) Deferred Tax Assets Deferred tax asset - current $ 995 $ 1,350 Deferred tax liability - long-term (8,935) (13,140) ------------ ------------ Net deferred tax liability $ (7,940) $ (11,790) ============ ============
A reconciliation of income tax expense at the statutory rate to the Company's actual income tax expense is shown below: 1996 1995 1994 ---- ---- ---- (In Thousands) Computed at the statutory rate (34%) $ (3,960) $ (4,531) $ (285) Increase (decrease) resulting from: Amortization of excess of cost over fair value of assets acquired 279 303 393 State income taxes - net of federal tax benefit (347) (411) 150 Nondeductible travel costs and other expenses 112 39 56 Other (84) 36 Additional accruals 250 Actual tax provision $ (3,750) $ (4,600) $ 350 ============ ========= ======= At June 30, 1996, the Company had approximately $1.2 million of alternative minimum tax credits available to offset future federal income taxes which expire in the year 2010. The Company also has operating loss carryforwards of $4.7 million which expire in the year 2011. NOTE 6: SELF-INSURANCE AND RELATED CONTINGENCIES Under the Company's current insurance program, coverage for comprehensive general liability, workers' compensation and vehicle liability is obtained for catastrophic exposures as well as those risks required to be insured by law or contract. The Company retains a significant portion of certain expected losses related primarily to comprehensive general and vehicle liability. The Company has a $500,000 deductible for each and every general liability incident. In addition, the Company self-insures the first $500,000 of coverage above the deductibles up to $1 million in aggregate losses. For the vehicle liability program, the Company self-insures the first $500,000 of coverage (per incident). The Company obtains excess coverage from carriers for these programs on claims-made basis policies. Prior to July 1, 1995, the Company's excess coverage for comprehensive general liability provided a loss limitation that limits the Company's aggregate of self-insured losses to $1 million per policy period. For the policy periods prior to July 1, 1991, July 1, 1992, through June 30, 1993, 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, if any, are insured by the excess carrier and should not result in additional expense to the Company. As of June 30, 1995, the Company estimates losses for the comprehensive general liability policy periods July 1, 1991, through June 30, 1992, and July l, 1994, through June 30, 1995, and July 1, 1995, through June 30, 1996, will not reach the $1 million loss limits and has provided accordingly. Effective July 1, 1993, the Company self-insured 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 $856,000 is outstanding at June 30, 1996. Effective July 16, 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, 1996, 1995 and 1994, are:
Beginning Self- Ending Self- Self- Insured Restructuring Self- Insurance Insurance Claims Transaction Insurance Liability Expenses Paid (Note 2) Liability --------- -------- -------- ------------ --------- June 30, 1994 $2,334 $3,709 $2,464 $1,707 $1,872 June 30, 1995 $1,872 $668 $1,129 $1,411 June 30, 1996 $1,411 $252 $623 $1,040
The ending accrued liability includes $175,000 for incurred but not reported claims at June 30, 1996, $350,000 at June 30, 1995, and $125,000 at June 30, 1994. The current portion of the ending liability of $500,000 at June 30, 1996, 1995 and 1994, 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 and other business related lawsuits which are not expected to have a material adverse effect on the Company's financial position or results of operations. The 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 $547,000, $240,000 and $979,000 for the years ended June 30, 1996, 1995 and 1994, 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 and other business related lawsuits 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 assumed 52.3% of the liability with Energy assuming the remaining 47.7%. NOTE 7: CONTINGENCIES The State of Missouri has assessed the Company approximately $1,400,000 for additional state income tax for the years ended June 30, 1992 and 1993. An amount approximating one-half of the above assessment could be at issue for the year ended June 30, 1994. The Company has protested these assessments and is currently waiting for a response from the Missouri Department of Revenue. It is likely that this matter will have to be settled in litigation. The Company believes that it has a strong position on this matter and intends to vigorously contest the assessment. The Internal Revenue Service (IRS) has begun a federal income tax audit of the Company for the year ended June 30, 1994. While the audit is still in process, the audit has principally focused on the deductibility of certain professional fees and travel and entertainment expenses as well as in the tax-free treatment of the restructuring transaction (See Note 2). In conjunction with the restructuring transaction, the Company and Energy agreed to share on a percentage basis amounts incurred related to federal and state tax audits for fiscal years June 30, 1994, and prior. The restructuring transaction was structured with the intent of qualifying for tax-free treatment under Section 355 of the Internal Revenue Code and the Company obtained a private letter ruling (the "Letter Ruling") from the IRS confirming such treatment, subject to certain representations and conditions specified in the Letter Ruling. The IRS is currently conducting an audit of the Company for the year in which the restructuring transaction occurred. If the IRS were to reverse the position it took in the Letter Ruling and prevail on a challenge to the tax-free treatment of the restructuring transaction, the Company would be liable along with Energy for a portion of any taxes, interest and penalties due. The Company's liability could exceed the percentage under the tax indemnity agreement with Energy if Energy were unable to fund its percentage share under that agreement. If the Company were held liable for any taxes, interest or penalties in connection with the above restructuring transaction, the amount of this liability could be substantial and could adversely effect the Company's financial position. The Company and its subsidiaries are presently involved in other various state tax audits which are not expected to have a material adverse effect on the Company's financial position or results of operations. NOTE 8: 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, 1993 129,250 $1.12 - $1.50 Exercised (129,250) 1.12 - 1.50 ---------- Balance June 30, 1994 -0- Issued 377,926 $7.00 ----------- Balance June 30, 1995 377,926 $7.00 Issued 66,000 $7.00 ----------- Balance June 30, 1996 443,926 =========== In June 1994 all outstanding stock options were exercised in connection with the restructuring transaction (see Note 2). During the year ended June 30, 1995, a new stock option plan was approved resulting in the issuance of additional options. 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, 1996 and 1995 175,536 $.01 ======== NOTE 9: ADDITIONAL CASH FLOW INFORMATION (IN THOUSANDS) 1996 1995 1994 ---- ---- ---- NONCASH INVESTING AND FINANCING ACTIVITIES Related party receivable from sale of retail service center $662 -- -- Note receivable from sale of retail service center $148 -- -- Receivable from sale of retail service centers $2,390 -- -- Purchase contract obligations incurred $(1,111) $(1,433) $(1,015) Capitalization of leases $(757) -- -- Debt acquisition costs in accounts payable -- -- $(746) Purchase of treasury stock, net of option exercise price, in accounts payable -- -- $(180) Distribution of operating assets other than cash with Empire Energy Corporation: 1994 Current assets $ 8,185 Fixed assets, net 51,620 Other assets 3,822 Current liabilities (2,697) Long-term liabilities (15,926) --------- $ 45,004 1996 1995 1994 ---- ---- ---- ADDITIONAL CASH PAYMENT INFORMATION Interest paid $10,216 $7,196 $9,191 Income taxes paid (net of refunds) $(1,647) $(2,321) $2,620
NOTE 10: EMPLOYEE BENEFIT PLAN The Company formed in fiscal year 1995 a defined contribution retirement plan eligible to substantially all employees. Employees who elect to participate may contribute a percentage of their salaries to the plan. The Company may make contributions to the plan at the discretion of its Board of Directors. No contributions to the plan were made by the Company during the years ended June 30, 1995 or 1996. NOTE 11: OPERATING LEASES Noncancellable operating leases for the Company expire in various years through 2004. These leases generally contain renewal options for periods ranging from 1 to 5 years and require the Company to pay all executory costs (property taxes, maintenance and insurance). Future minimum lease payments (in thousands) at June 30, 1996, were: 1997 $ 547 1998 514 1999 420 2000 209 2001 200 Thereafter 135 -------------- Future minimum lease payments $ 2,025 ============== NOTE 12: RESTRUCTURING PROPOSAL COSTS During the year ended June 30, 1994, the Company was considering a proposal to restructure the debt and equity of the Company. The Company abandoned the proposal and expensed the related costs of $398,000. 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. During 1995 and 1994, charges of $924,000 and $1.4 million, respectively, were taken against earnings to reduce the carrying value of the facilities to zero. As of June 30, 1996, the Company has pursued the abandonment of the facilities at an estimated cost of $200,000 which has been charged against the current year's earnings. NOTE 14: SIGNIFICANT ESTIMATES AND CONCENTRATIONS Generally accepted accounting principles require disclosure of certain significant estimates and current vulnerabilities due to certain concentrations. Those matters include the following: DEPENDENCE ON PRINCIPAL SUPPLIERS One supplier, Warren Petroleum, accounts for approximately 20% of the Company's volume of propane purchases. ESTIMATES Significant estimates related to self-insurance, goodwill amortization, litigation, collectibility of receivables and income tax assessments are discussed in Notes 3, 6 and 7. Actual losses related to these items could vary materially from amounts reflected in the financial statements. WORKING CAPITAL FACILITY The Company's working capital facility is due on June 29, 1997. Although the Company believes that the facility can be refinanced or replaced, in the event that the Company is unable to refinance or replace this facility, the failure to obtain alternate sources of financing for the Company's seasonal working capital and debt service requirements would have a material adverse effect on the Company. NOTE 15: FUTURE ACCOUNTING PRONOUNCEMENTS IMPACT OF SFAS NO. 121 In 1995 the Financial Accounting Standards Board adopted Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for the Impairment of Long-Lived Assets to be Disposed of." The Company must adopt this standard effective July 1, 1996. The Company does not expect that the adoption of this standard will have a material impact on its financial position or results of operations. IMPACT OF SFAS NO. 123 The Financial Accounting Standards Board recently adopted Financial Accounting Standards Statement No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). This statement establishes a fair value based method of accounting for stock-based compensation plans. It encourages entities to adopt that method in place of the provisions of APB Opinion No. 25, "Accounting for Stock Issued to Employees", for all arrangements under which employees receive shares of stock or other equity instruments of the employer or the employer incurs liabilities to employees in amounts based on the price of its stock. This statement applies to financial statements for fiscal 1997. Management expects to continue to account for stock-based compensation in accordance with the provisions of APB No. 25. Therefore, SFAS 123 is not expected to have a significant impact on the Company's consolidated financial statements. NOTE 16: SUBSEQUENT SALES OF SUBSIDIARIES Subsequent to year end, the Company sold five retail service centers for sales prices totaling approximately $1.5 million in cash. Fiscal year 1996 summary data of the facilities sold were as follows: In Thousands Operating revenue $ 1,532 Cost of sales 959 ----------- Gross profit $ 573 =========== Working capital $ 214 =========== Net property, plant and equipment $ 1,197 =========== Independent Accountants' Report on Financial Statement Schedules Board of Directors and Stockholders All Star Gas Corporation Lebanon, Missouri In connection with our audit of the financial statements of ALL STAR GAS CORPORATION (FORMERLY EMPIRE GAS CORPORATION) for each of the three years in the period ended June 30, 1996, 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. BAIRD KURTZ DOBSON Springfield, Missouri August 30, 1996 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (In Thousands) Balance at Charges 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, 1996 $800 $889 $820 $(147)(D) $722 June 30, 1995 $1,620 $1,136 $1,973 $17(C) $800 June 30, 1994 $2,657 $1,056 $520 $(1,684)(A) $1,620 $111(B) (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. (C) Allowance for doubtful accounts receivable established with respect to the acquisition of retail service centers. (D) Related to accounts receivable which were sold in conjunction with the disposition of retail service centers. EX-10 2 EXHIBIT 10.13 MANAGEMENT AGREEMENT THIS AGREEMENT, dated May 17, 1995, is made and entered into among Empire Gas Corporation, a Missouri corporation ("Empire"), Northwestern Growth Corporation, a South Dakota corporation ("NGC"), and SYN Inc., a Delaware corporation ("SYN"), with respect to the following facts: A. Empire, NGC and Syn have entered into that certain Agreement Among Initial Stockholders and SYN Inc., dated May 17, 1995 (the "Stock Agreement"), which, among other things, requires this Agreement to be made for the reasons recited in the Stock Agreement (such recitals being incorporated herein by this reference). B. SYN and NGC, immediately following the execution of this Agreement, will be entering into that certain Purchase and Sale Agreement, dated as of May 17, 1995, with Sherman C. Vogel, Stephen A. Vogel, Jeffrey K. Vogel, Jon M. Vogel, Jeanette Vogel, Synergy Group Incorporated (with its subsidiaries, "Synergy"), and S&J Investments (the "Synergy Acquisition Agreement"), providing for the acquisition by SYN of Synergy (the "Synergy Acquisition"). C. This Agreement is essential to the ability of SYN to finance and consummate the Synergy Acquisition, and to manage the assets and business to be acquired by the Synergy Acquisition. NOW, THEREFORE, in consideration of the premises and the agreements exchanged herein, the parties hereto agree as follows: ARTICLE 1: ENGAGEMENT TO PLAN AND MANAGE SYN, on behalf of itself and its subsidiaries, and for the benefit of its stockholders (of which NGC is a principal one), hereby engages Empire to perform the planning and management of the assets and business operations of SYN and its subsidiaries (the "Management Services"), and Empire hereby accepts such engagement and agrees to perform the Management Services, subject to the direction of the Board of Directors of SYN (the "Board") and in accordance with the terms of this Agreement. ARTICLE 2: BUSINESS PLAN; BUDGET Section 2.01 INITIAL BUSINESS PLAN. The parties hereto have developed a business plan, a copy of which is attached as Exhibit A to this Agreement ("Initial Plan"), for the conduct of business operations of SYN and its subsidiaries after the completion of the Synergy Acquisition (the "SYN Operations"), showing: (a) The general longer-term objectives (to be accomplished in a three to five year period of time); (b) The preliminary detailed plans for conducting the SYN Operations through the end of SYN's fiscal year ending June 30, 1996 ("fiscal 1996"), including the plant, facilities and equipment (at various locations), and the personnel staffing at the locations, needed to carry on the SYN Operations for the balance of fiscal 1996 following the Synergy Acquisition and during the longer term of the plan; and (c) Capitalized reserves for (i) transition costs including such items as costs of meetings with personnel at the outlets and branches acquired in the Synergy Acquisition, retail mailings and other items, not to exceed $500,000 in the aggregate, and (ii) costs of shutting down Synergy's facility at Farmingdale, New York, offering severance to Synergy employees and incorporating Synergy's operations into Empire's facilities in Lebanon, Missouri. Section 2.02 INITIAL BUDGET. The parties hereto have developed a budget ("Initial Budget") for the conduct of the SYN Operations for the balance of fiscal 1996 following the Synergy Acquisition in accordance with the Initial Plan. A copy of the Initial Budget is attached as Exhibit B to this Agreement. Section 2.03 UPDATED AND AMENDED BUSINESS PLANS AND BUDGETS. At least 30 days prior to June 30, 1996 and at least 30 days prior to each June 30 thereafter until the term of this Agreement expires or is terminated (hereinafter sometimes referred to as the "end of the term of this Agreement"), Empire will develop, in consultation with NGC, and obtain the approval of the Board of: (d) An updated version of the Initial Plan (or of the most recent previously updated version thereof) to provide a detailed business plan for the SYN Operations for the 18 months following such June 30 and a longer-term business plan for the three- to five-year period following such June 30 (the Initial Plan or updated version thereof in effect at a given time, including all amendments thereto up to such time, is hereinafter referred to as the "Applicable Plan"); and (e) An updated version of the Initial Budge (or of the most recent previously updated version thereof) to provide a budget for the conduct of the SYN Operations for the 18 months following such June 30, (the Initial Budget or updated version thereof in effect at a given time for a particular period, including all amendments thereto up to such time, is hereinafter referred to as the "Applicable Budget"). Empire may amend an Applicable Plan or an Applicable Budget, or both, at any time and from time to time by preparing such amendment, submitting the same to the Board with such supporting information as the Board may require, and obtaining the Board's approval thereof, but no such amendment shall be effective unless and until approved by the Board. SECTION 2.04 ACTING WITHIN APPLICABLE PLAN AND BUDGET. Empire shall mange the SYN Operations, commencing with the Synergy Acquisition and continuing thereafter until the end of the term of this Agreement, in accordance with the Applicable plan and within the applicable Budget, without obtaining approval of the Board of the details of such management, but subject to approvals by the Board required by law and to the requirements for approval by the Board specified in Article 9 herein. Notwithstanding the foregoing: (f) Empire may take such management action with respect to the SYN Operations as it may deem advisable to respond to, and attempt to curtail or avoid material adverse consequences resulting from material unplanned adverse developments when (reasonably) there is inadequate time in which to secure advance approval of such action by the Board, but in such event the situation and action taken shall be submitted with reasonable promptness to the Board for such further action as the Board may then deem advisable; (g) In addition to action taken pursuant to preceding paragraph (a), Empire may cause SYN to make maintenance capital expenditures which individually exceed the Applicable Budget for such expenditures or category of expenditures by not more than $10,000, but only if the Board is notified prior to, or at, the time of such expenditures, while such expenditures in excess of such $10,000 limit may not be made or committed to unless authorized in advance by the Board; and (h) If Empire becomes aware that aggregate operating or administrative expenses likely will be 1% or more in excess of what is provided for in the then Applicable Budget, Empire shall promptly notify the Board of such expected excess. SECTION 2.05 OTHER ACTION. Any action that needs to be taken in the performance of the Management Services that is not provided for in an Applicable Plan or Applicable Budget or otherwise provided for in this Agreement shall be taken in accordance with Empire's good faith judgment as to what is in the best interests of SYN and its subsidiaries. ARTICLE 3: EMPIRE'S SERVICES; KEY MAN INSURANCE SECTION 3.01 EFFORT REQUIRED. Empire under the management of Paul S. Lindsey, jr. ("Lindsey") as the chief executive officer of Empire, shall devote sufficient time and resources to reasonably assure successful performance by Empire for SYN of the Management Services in accordance with this Agreement. SECTION 3.02 KEY MAN INSURANCE. To compensate SYN for the loss of services that would occur in the event of Lindsey's death, at all times while this Agreement is in effect SYN may maintain in effect (at SYN's expense) insurance on the life of Lindsey in an amount not less than $10,000,000, payable to SYN, and Lindsey will cooperate by providing personal information and taking physical examinations as required by the insurance carrier for issuing and maintaining such insurance coverage. The cost of such insurance shall not be charged, directly or indirectly, in any way to Empire or to any of the compensation due Empire under this Agreement. At the end of the term of this agreement, or at such earlier time as the Board determines that SYN no longer needs the insurance coverage provided for in this Section, Lindsey will have the option to purchase ownership of such insurance policies from SYN for a price equal to any cash surrender value of the insurance. ARTICLE 4: COMPENSATION OF EMPIRE SECTION 4.01 COMPENSATION ENTITLEMENT. As compensation in full for Empire's services under this Agreement, SYN shall pay Empire a Fixed Fee (as defined in Section 4.02 hereof) per annum and a Management Fee (as defined in Section 4.03 hereof). SECTION 4.02 FIXED FEE. The Fixed Fee (the amount of which for each fiscal year of SYN, or part thereof, will be included in the Applicable Budget for such period), is intended to cover Empire's operating overhead in performing its services under this Agreement. The Fixed Fee shall be paid by SYN to Empire in equal monthly installments in advance, upon commencement of Empire's services and thereafter on the first day of each month, and shall be at the initial annual rate of $3,250,000 for the period commencing with the commencement of Empire's services under this Agreement and ending June 30, 1996, and for each 12-month period or portion thereof thereafter until the end of the term of this agreement the annual rate of the Fixed Fee shall increase by the percentage increase in the Consumer Price Index. All Items For all Urban Consumers, U.S. City Average (1982-84 = 100), as of the start of such period as determined by the index number for the month most recently published by the U.S. Department of Labor or any successor governmental agency handling such publication, as of the start of the period, compared to 151.4 (which is such index figure for the month of March, 1995), but no reduction in the annual rates of the Fixed Fee shall be made if a decrease in such Consumer Price Index figure shall occur. In addition to the foregoing adjustments in the Fixed Fee related to changes in such Consumer Price Index, the Fixed Fee shall be adjusted in an amount approved by the Board to reflect Empire's increased fixed operating overhead reasonably attributable to increases in SYN's business resulting from acquisitions and start- ups of business locations after the Synergy Acquisition is completed. In the event of changes in the basis for such Consumer Price index, or such index is discontinued, the parties shall amend this Section 4.02 to provide as closely as possible for the same adjustment mechanism, using the changed basis or a different published index, as appropriate. SECTION 4.03 MANAGEMENT FEE. The Management Fee, an estimate of which for each fiscal year shall be included in the applicable Budget for such period, shall be at the annual rate of $500,000 per annum payable by SYN to Empire in equal monthly installments in advance upon commencement of Empire's services and thereafter on the first day of each month, plus a sum (the "Additional Amount") equal to 10% of the amount by which the EBITDA for SYN and its subsidiaries, on a consolidated basis, exceeds the amount shown below for each period indicated, with the Additional Amount for each such period to be paid by SYN to Empire within 90 days after the end of such period or at such earlier time as the final calculation of the Additional Amount for such period is completed: $17,500,000 for the period ending June 30, 1996; $18,000,000 for the 12 months ending June 30, 1997; $18,300,000 for the 12 months ending June 30, 1998; $18,600,000 for the 12 months ending June 30, 1999; and $18,900,000 for the 12 months ending June 30, 2000; For purposes of this Agreement, "EBITDA" means earnings before interest, taxes, depreciation and amortization for a specified period for the specified corporation, or the specified group of corporations on a consolidated basis, or the specified business locations, determined from financial statements for such corporation or corporations or business locations prepared on the basis of generally accepted accounting principles, consistently applied. ARTICLE 5: COMPETITION BETWEEN EMPIRE AND SYN SECTION 5.01 OVERLAPPING MARKET AREAS. As promptly as is reasonably possible, Empire and SYN shall use their best efforts to exchange those outlets of Empire and SYN that are designated in Exhibit C attached to this agreement as having overlapping, competing market areas, by having some of the SYN outlets listed on such Exhibit C transferred to Empire and some of the Empire outlets listed on such Exhibit C transferred to SYN, such that upon completion of these transfers, the SYN outlets transferred to Empire will have EBITDA (as defined in Section 4.03 herein) and assets equivalent (with immaterial exceptions) in value to the Empire outlets transferred to SYN, and the overlapping, competing nature of the market areas shown on Exhibit C will be eliminated by such transfers. Any shortfall of EBITDA or asset value to either party from such transfers shall be compensated by either a transfer of assets or a cash payment, the amount of which is to be negotiated between NGC and SYN, as one party, and Empire, as the other party. SECTION 5.02 NON-COMPETITION; ACQUISITIONS. (a) While this Agreement is in effect and for a period of one year thereafter, Empire and SYN will not solicit customers and employees from each other. (b) Until the end of the term of this Agreement and for a period of two years thereafter, Empire and SYN shall not compete in each others area of interest for new customers within such area. Regarding individual acquisitions of retail propane businesses greater than $7,500,000 which any party hereto desires to make before the end of the term of this Agreement, such acquisitions shall be owned jointly by Empire and SYN in relation to the capital provided for such acquisition or such other arrangements as can be negotiated by such parties on a case by case basis, but acquisitions less than $7,500,000 shall be pursued first by the individual entity with operations closest to the acquired property, or if not successfully pursued by such party, then jointly by Empire and SYN together, based on capital provided, and if not successfully pursued by those two parties, then by whichever (Empire of SYN) was not such first party. ARTICLE 6: ACCOUNTING SYSTEM; ACCOUNTANTS SECTION 6.01 ACCOUNTING SYSTEM. At all times until the end of term of this Agreement, Empire will: (a) Cause SYN and its subsidiaries to implement and maintain a system of accounting for the assets, liabilities, operations and cash flows of SYN and its subsidiaries, and internal controls over accounting and financial matters for SYN and its subsidiaries, similar to the system and controls maintained by Empire for itself, or, if requested by the Board, as the Board shall reasonably require; and in connection with the foregoing, Empire shall cause SYN to provide NGC with such financial statement and reports with respect to assets, liabilities, operations and developments affecting the business or assets of SYN and its subsidiaries, as NGC may require (taking into account the accounting and reporting requirements of NGC's parent corporation. Northwestern Public Service Company); and (b) Cause SYN to engage a so-called "Big six" firm of independent public accountants (or whatever, at the time is the equivalent of the present Big six) approved by the Board to make quarterly reviews and annual audits of SYN and its subsidiaries; but to the most efficient extent possible, Empire shall cause SYN to engage Baird, Kurtz & Dobson ("BK&D") to perform detailed compliance work to assist the designated firm of independent accountants in completing the quarterly reviews and annual audits. SECTION 6.02 AUDIT OR REVIEW. At all times until the end of the term of this Agreement, Empire will allow the Board and its authorized representatives, upon at least seven-days' prior notice to, and in coordination with, the President and Chief Executive Officer of SYN, to audit or review the books of account and records of all kinds kept for SYN, inspect SYN's properties, consult with SYN's personnel and with Empire's personnel involved in Empire's performance of services under this Agreement, and generally to observe and monitor the operation, management and accounting for SYN's business and assets; provided, however, that such review and/or audit shall not last longer than five business days unless Empire is in default under this Agreement. Such reviews shall be restricted to no more than once a month at the home office of SYN, as maintained by Empire, through June 30, 1996 and quarterly thereafter, and unrestricted at all of SYN's retail locations. All reports resulting from these audits or reviews shall be promptly furnished to the Board. ARTICLE 7: INSURANCE FOR SYN In addition to the key man insurance which SYN may maintain pursuant to Section 3.02 herein, at all times while this Agreement is in effect insurance covering liability exposures of SYN and its Board, with types and amounts of coverage as shall be approved by the Board, shall be obtained and maintained for SYN and its subsidiaries (at SYN's expense, and at no cost to Empire) by Empire as part of the Management Services. Empire shall be named as a co-insured under such coverages. The cost of such insurance shall be included in each Applicable Budget. ARTICLE 8: ATTENDANCE OF EMPIRE'S BOARD MEETINGS At all times while this Agreement is in effect, NGC will designate a representative who may, as invited, be allowed to attend quarterly meetings of Empire's Board of Directors and to receive copies of all information supplied by Empire to the members of its Board of Directors for such meetings. ARTICLE 9: SYN BOARD APPROVAL REQUIRED The assets and business of SYN and its subsidiaries shall be managed as provided herein by Empire while this Agreement remains in effect, subject to the overall direction and supervision by the Board. However, Empire shall not take for SYN (such term at all times in this Article 9 includes SYN's subsidiaries), or cause SYN to take, any of the following actions without having obtained the prior approval of the Board: (a) Sell, lease, transfer or otherwise dispose of, or enter into any agreement or arrangement for any sale, lease, transfer or other disposition of assets of SYN, except for (i) a sale, lease, transfer or other disposition specifically provided for in the Applicable Budget, or (ii) the sale of services to customers and the sale or lease of products in the ordinary course of business of SYN; (b) Purchase any goods or services from, or sell any goods or services to, or enter into or amend any agreement or other transaction with, Empire or any affiliate of Empire that is not on an arm's-length basis; (c) Cause SYN to incur any indebtedness for borrowed money (including without limitation, any capitalized lease obligations) or to enter into an agreement for such borrowing (or leasing) with the exception of seller financing of the purchase of particular assets; (d) Mortgage or otherwise grant a lien upon or security interest in any assets of SYN except liens upon acquired assets to secure seller financing for the acquisition of such assets; (e) Cause SYN to become a surety or guarantor of, or an accommodation party to, or otherwise become or be contingently liable for any indebtedness or obligations of any other party, other than as a result of endorsing to negotiate payment of instruments received from customers in payment for goods and services in the ordinary course of business in amounts less than $50,000; (f) Cause SYN to enter into any joint venture or similar relationship or acquire any stock, debt obligations or other securities of, or loan to or make any investment in or capital contribution to any other party which is not a wholly-owned subsidiary of SYN; (g) Institute, defend, or settle any legal proceeding on behalf of SYN, except legal proceedings against SYN shall be defended and if the matter is partially or wholly covered by insurance, it may be settled if the settlement payment to be made by SYN is an amount not exceeding the deductible under such insurance coverage for such matter and all other matters not partially or wholly covered by insurance may be settled if the settlement payment to be made by SYN is an amount not exceeding $50,000 per matter; (h) Enter into any new contract for the leasing, as lessee, of any real or personal property, other than operating leases entered into in the ordinary course of business involving a term of not more than one year total or rental of not more than $0,000, and other than retail location operating leases; (i) File or consent to any petition in bankruptcy, reorganization, liquidation or similar proceeding with respect to SYN, or seek, consent to or acquiesce in the appointment of a trustee, receiver or liquidator of SYN, or of all or any part of the assets of SYN, or make an assignment for the benefit of SYN's creditors; (j) Confess a judgment against SYN greater than $50,000; (k) Amend, modify, supplement or waive any provision of any contract, the making of which was approved or required to be approved by the Board; (l) Make any employment, severance, consulting or similar agreement, including any agreement with a labor union, or amend the same, for SYN with any other party involving payments by SYN greater than $50,000, or adopt any employee benefit plan for employees of SYN; (m) Open or close a primary office, plant or other business location for SYN, or make an agreement or commitment of any kind to do so unless it results from the merger or consolidation with another SYN plant, office or other business location; or (n) Take any action in contravention of this Agreement. ARTICLE 10: DIRECTORS AND OFFICERS SECTION 10.01 DIRECTORS AND OFFICERS OF SYN. During the term of this Agreement, the provisions of Section 5.02 of the Stock Agreement (which are hereby incorporated herein by this reference) shall be carried out by Empire and NGC even if the Stock Agreement ceases to be in effect for any reason. SECTION 10.02 DIRECTORS AND OFFICERS OF SUBSIDIARIES. The directors and officers of subsidiaries of SYN shall be designated by Empire to enable Empire to achieve an efficient management and administration of the business and affairs of the subsidiaries. ARTICLE 11: TERM; TERMINATION SECTION 11.01 TERM OF THIS AGREEMENT; TERMINATION. The term of this Agreement shall be in effect until it expires on June 30, 2000, or at the end of any fiscal year thereafter if preceded by at least six-months' written notice by SYN or one-year's written notice by Empire of its desire to terminate as of such date, unless sooner terminated at the election of the Board, and upon giving notice to Empire of such election, on any earlier date in the event of any of the following: (a) Upon default by Empire under this Agreement which remains uncured after 30 days written notice of such default has been given to Empire by SYN or NGC; (b) Upon any change in ownership of Empire which results in Lindsey having less than voting control (as a stockholder) of Empire; (c) Upon the filing or consent to any petition in bankruptcy, reorganization, liquidation or similar proceeding with respect to Empire, or the appointment of a trustee, receiver or liquidator for Empire for all or a substantial part of its assets, or the making of an assignment by Empire for the benefit of its creditors; (d) Upon the failure of SYN and its subsidiaries to achieve the following cumulative (consolidated) EBITDA results for the periods beginning with the Synergy Acquisition and ending on the dates indicated below, as follows: (i) for the period ended June 30, 1996, cumulative EBITDA of at least $14 million; (ii) for the period ended June 30, 1997, cumulative EBITDA of at least $29 million; (iii) for the period ended June 30, 1998, cumulative EBITDA of at least $45 million; (iv) for the period ended June 30, 1999, cumulative EBITDA of at least $62 million; (v) for the period ended June 30, 2000, cumulative EBITDA of at least $80 million; and (vi) for periods (if any) subsequent to June 30, 2000, cumulative EBITDA at the end of each fiscal year of SYN shall be at least $20,000,000 higher than at the end of the previous fiscal year; (e) If SYN at any time is in default with respect to more than $1,000,000 of its borrowings; (f) If Empire at any time is in default with respect to its outstanding publicly-held bonds; (g) By mutual agreement of the parties or when required by final court order or final award of arbitrators; or (h) If the stock of SYN, or stock entitling the holder or holders thereof to cast a majority of the votes in the general election of directors of SYN, or substantially all of the assets of SYN, is sold, directly or by merger or consolidation. The term of this Agreement also may be terminated at the election of Empire and upon giving notice to NGC and SYN of such election in the event of any of the following: (i) Upon default by SYN resulting from non- payment of the Fixed Fee or the Management Fee to Empire which remains uncured after 30 days written notice of such default has been given by Empire to SYN or NGC; or (ii) If the stock of SYN, or stock entitling the holder or holders thereof to cast a majority of the votes in the general election of directors of SYN, or substantially all of the assets of SYN is sold, directly or by merger or consolidation; or (iii) If any of the terms of this Agreement are changed without the consent of Empire. SECTION 11.02 TRANSITION UPON TERMINATION. (i) Upon expiration or earlier termination of this Agreement, the parties hereto will cooperate to the fullest extent possible to facilitate the creation of a staff of management personnel, and the establishment of facilities owned or leased by SYN or otherwise available for use by SYN on terms acceptable to SYN, to enable SYN to plan and manage its business operations and assets without the services that would have been provided by Empire under this agreement had this agreement remained in effect; and until that is accomplished (and the parties hereto shall make a good faith effort to accomplish it promptly), SYN shall have the use of the personnel and facilities of Empire that had been devoted in whole or in part to such planning and management at a cost not to exceed the amount most recently budgeted therefor in the last applicable Budget, or at Empire's cost in the absence of such budgeted amount. (j) Notwithstanding the foregoing, in the event this Agreement is terminated by Empire, SYN shall have up to 18 months (including the 12-months' notice period) to plan and execute an operational and transition plan for achieving what is provided for in preceding subsection (a). SECTION 11.03 PUTS AND CALLS. (k) In the event this Agreement is terminated by Empire, SYN shall have a call right to purchase Empire's shares of common stock of SYN at a price equal to 100% of fair market value, determined by appraisal, and Empire shall have a put right to sell to SYN Empire's shares of common stock of SYN at a price equal to 90% of fair market value, determined by appraisal, provided that, in case of a put by Empire, SYN has adequate liquidity, as reasonably determined by its Board, to make such purchase. (l) In the event this Agreement is terminated by SYN, SYN shall have a call right to purchase Empire's shares of common stock of SYN at a price equal to 110% of fair market value, determined by appraisal, and Empire shall have a put right to sell to SYN Empire's shares of common stock of SYN at a price equal to 100% of fair market value, determined by appraisal, provided that in the case of a put by Empire, SYN has adequate liquidity, as reasonably determined by its Board, to ,make such purchase. (m) For these purposes, fair market value of the shares of common stock of SYN to be sold and purchased shall be determined by an appraiser or investment bunker selected as provided in Section 1.04(a)(ii) of the Stock Agreement, with the appraisal made in accordance with such Section. ARTICLE 12: RIGHT OF FIRST REFUSAL So long as this Agreement is in effect, Empire will require Lindsey not to sell or otherwise dispose of the shares of stock of Empire which he owns (other than to an affiliated entity or related party or to Empire management personnel, provided that Lindsey retains voting control of Empire), and Empire will not sell or otherwise dispose of all or substantially all of its business and assets, whether such transactions are to be done directly or indirectly by means of a merger or consolidation of Empire with the acquiring entity, without first offering the same for sale to NGC, on the same terms as are offered by the other party (with full disclosure of such terms to NGC), and allowing not less than 30 days after its receipt of the offer for NGC to accept the offer, and if such offer is accepted by NGC, NGC shall have 90 days in which to complete the purchase on such terms. ARTICLE 13: MISCELLANEOUS SECTION 13.01 NOTES. All notices and other communications hereunder shall be in writing and shall be deemed to have been give (a) when delivered in person, (b) one business day after deposit with a nationally recognized overnight courier service, (c) two business days after being deposited in the United States mail, postage prepaid, first class, registered or certified mail, or (d) the business day on which it is sent and received by facsimile, as follows: If to SYN, to: SYN Inc. c/o Northwestern Growth Corporation 33 Third Street , S.E. Huron, SD 57350 Fax No. (605) 353-8286 Attn: Richard R. Hyland, President and Chief Operating Officer and to SYN Inc. c/o Empire Gas Corporation 1700 South Jefferson Street Lebanon, MO 65536 Fax No. (417) 532-8529 Attn: Paul S. Lindsey, Jr., Chief Executive Officer If to NGC: Northwestern Growth Corporation 33 Third Street, S.E. Huron, SD 57350 Fax No. (605) 353-8286 Attn: Richard R. Hylland, President If to Empire: Empire Gas Corporation PO Box 303 1700 South Jefferson Lebanon, MO 65536 Fax No. (417) 532-8529 Attn: Paul S. Lindsey, Jr., President or to such other person or address as any party hereto shall specify in notice in writing given to the other parties hereto. SECTION 13.02 ASSIGNMENT RESTRICTED; SUCCESSORS AND ASSIGNS. No party hereto may assign its interest in this Agreement without first obtaining the written consent of the other parties hereto, except that this Agreement may be assigned by SYN, without obtaining such consents, to (and in connection with the closing of the acquisition by) an acquirer of substantially all of the business and assets of SYN and its subsidiaries, provided that written notice of such assignment is given to the other parties hereto, and except further that this Agreement may be assigned by NGC (in connection with the assignment of NGC's shares of common stock of SYN) to NWPS, or any wholly-owned subsidiary of NWPS, without obtaining such consents, provided written notice of such assignment is given to the other parties hereto. SECTION 13.03 SEVERABILITY. Should any provision of this Agreement for any reason be declared invalid or unenforceable, such decision shall not affect the validity or enforceability of any of the other provisions of this Agreement, which remaining provisions shall remain in full force and effect and the application of such invalid or unenforceable provision to persons or circumstances other than those as to which it is held invalid or unenforceable shall be valid and be enforced to the fullest extent permitted by law. SECTION 13.04 INTERPRETATION. The article and section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. SECTION 13.05 ARBITRATION. Any dispute arising under this Agreement shall be resolved by arbitration. Each of the parties hereto agrees (a) that each such arbitration shall be initiated and conducted in accordance with the rules and procedures of the American Arbitration Association ("AAA"), (b) to submit all such disputes to the office of the AAA in charge of arbitrations conducted in the metropolitan area of the City of Minneapolis, Minnesota, and (c) to have each such arbitration proceeding conducted in the metropolitan area of the City of Minneapolis, Minnesota, and (d) to be subject to the jurisdiction of the arbitrators in the City of Minneapolis, Minnesota upon notice given in accordance with the provisions of this Agreement that a dispute has been submitted to such office of the AAA. SECTION 13.06 GOVERNING LAW. This Agreement shall be governed by the laws of the State of Delaware (regardless of the laws, that might otherwise govern under applicable principles of conflicts of law) as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies. SECTION 13.07 COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which collectively shall constitute one and the same agreement. IN WITNESS HEREOF, the parties hereto have executed this Agreement as of the date first above written. Empire Gas Corporation SYN Inc. By: /s/ Paul S. Lindsey, Jr. By:/s/ Paul S. Lindsey, Jr. _______________________ _______________________ Its President Title: Northwestern Growth Corporation By: /s/ Richard R. Hylland ________________________ Its President EX-10 3 EXHIBIT 10.14 AGREEMENT AMONG INITIAL STOCKHOLDERS AND SYN INC. THIS AGREEMENT, dated May 17, 1995, is made and entered into among Empire Gas Corporation, a Missouri corporation ("Empire"), Northwestern Growth Corporation, a South Dakota corporation ("NGC"), and SYN Inc., a Delaware corporation ("SYN"), with respect to the following facts: A. Empire currently is engaged in the business of distributing and selling at retail liquefied petroleum ("LP") gas and appliances, and has a management experienced in the operation of such business. B. NGC is a wholly-owned subsidiary of Northwestern Public Service Company ("NWPS") and has as one of its objectives the making of investments that could benefit NWPS and its stockholders. C. Empire and NGC, acting together, have made a successful bid to acquire the LP gas distribution and appliance business of Synergy Group Incorporated ("Synergy"; such acquisition being hereinafter called the "Synergy Acquisition"), in what is planned to be the first step in the proposed development by Empire and NGC, on a team basis, of a significant position in the LP gas distribution industry. Empire and NGC have contemplated, in their bidding for the Synergy Acquisition, that they will rely principally on Empire for management expertise and on NGC to provide or arrange the financing for the Synergy Acquisition, and that the success of the Synergy Acquisition will depend in large measure upon the cost savings and operating improvements expected to be achieved by having Empire do the planning and management of the business of Synergy and its subsidiaries, under the direction of the Board of Directors of SYN. D. Empire and NGC have caused SYN to be incorporated to serve as the vehicle (directly or through subsidiaries to be created) for making the Synergy Acquisition. E. Empire and NGC, on behalf of SYN, are concluding the negotiation of the definitive agreement (the "Synergy Acquisition Agreement") for the Synergy Acquisition, and need to provide for (i) the initial capitalization of SYN, (ii) certain loan financing for SYN, (iii) the management of SYN and (iv) for certain matters pertaining to the ownership of shares of stock of SYN. NOW THEREFORE, in consideration of the premises and the agreements exchanged herein, the parties hereto agree as follows: ARTICLE I: INITIAL CAPITALIZATION OF SYN; STOCK SUBSCRIPTIONS AND RESERVATIONS OF STOCK SECTION 1.01 INITIAL AUTHORIZED STOCK OF SYN. SYN has been incorporated by Empire and NGC with an initial authorized capitalization (as set forth in Article FOURTH of SYN's Certificate of Incorporation, a true and complete copy of which is attached hereto as Exhibit A), consisting of 100,000 shares of common stock, par value 1 CENT per share (the "Common Stock"); and the 100,000 shares of Common Stock referred to herein shall only be increased with the prior written agreement of Empire and NGC unless such increased number of shares is to be issued in an arm's length transaction to a party who is not affiliated with any of the parties to this Agreement), and 100,000 shares of preferred stock, par value 1 CENT per share, issuable in one or more series (the "Preferred Stock"). Prior to the consummation of the Synergy Acquisition, SYN shall, and Empire and NGC shall cause SYN to, take all action necessary to create and authorize the issuance of a series of the Preferred Stock, namely, the Series A Cumulative Preferred Stock, consisting of 70,500 shares, the terms of which shall be as set forth in Exhibit B attached hereto, with such changes therein as the parties hereto may approve before such series is created (the "Series A Preferred Stock"). SECTION 1.02 SUBSCRIPTIONS AND OPTION FOR STOCK. NGC has previously purchased, and hereby subscribes for, stock of SYN, and NGC has granted Empire an option to purchase certain shares of stock from NGC, as follows: (a) SYN and NGC acknowledge that NGC has purchased from SYN, and SYN has sold and issued to NGC, 1,000 shares of Common Stock for a cash purchase price of $1,000.00 which has been paid by NGC to SYN, and that these shares are the only shares of stock of SYN that are currently outstanding. (b) NGC hereby subscribes for, and agrees to purchase from SYN, and SYN hereby agrees to sell and issue to NGC, an additional 71,500 shares of Common Stock for a cash purchase price of $71,500.00 to be paid at the time of such issuance, with this transaction to be consummated (the "Subscription Closing") at the First Closing, as defined in the Synergy Acquisition Agreement, unless an earlier time for the Subscription Closing is agreed to by the parties hereto. The obligation of NGC under its subscription in this paragraph (b) is subject to the condition (unless waived by NGC) that NGC shall have been able to obtain the funds from the Permanent Financing or the Temporary Financing, as those terms are defined in the Synergy Acquisition Agreement, at or prior to the time of the Subscription Closing. (c) NGC hereby subscribes for, and agrees to purchase from SYN, and SYN hereby agrees to sell and issue to NGC, 68,000 shares of Series A Preferred Stock for a cash purchase price of $1,000 per share ($68,000,000.00 total), with this transaction to be consummated at the Subscription Closing. The obligation of NGC under its subscription in this paragraph (c) is subject to the condition (unless waived by NGC) that NGC shall have been able to obtain the funds from the Permanent Financing or the Temporary Financing, as those terms are defined in the Synergy Acquisition Agreement, at or prior to the time of the Subscription Closing and that, at the time of the Subscription Closing, the First Closing (as defined in the Synergy Acquisition Agreement) is currently occurring or is reasonably assured of being consummated immediately thereafter. (d) Empire hereby subscribes for, and agrees to purchase from SYN, and SYN hereby agrees to issue and sell to Empire, 10,000 shares of Common Stock (which shall represent 10% of the issued and outstanding Common Stock) for a cash purchase price of $10,000 to be paid at the time of such issuance, with this transaction to be consummated at the Subscription Closing. The obligation of Empire under its subscription in this paragraph (d) is subject to the condition (unless waived by Empire) that NGC consummates its purchase of shares of Common Stock under paragraph (b) above in this Section 1.02 at the Subscription Closing. (e) NGC hereby grants to Empire an option to purchase from NGC, at a price of $1.00 per share, up to 20,000 of the shares of Common Stock which shall represent 20% of the issued and outstanding Common Stock, subject to NGC acquiring such shares pursuant to paragraph (b) above in this Section 1.02. Such option may be exercised at any time after September 30, 1995 and prior to September 30, 1997, or the Determination Date (as defined in Section 1.04 herein), whichever is earlier, by Empire's giving written notice of such exercise to NGC. After the giving of such notice, NGC shall assign and deliver to Empire the shares of Common Stock for which the stock option was exercised, as promptly as possible, but in any event within seven days, in exchange for Empire's payment to NGC of the purchase price for such shares; and the shares so assigned and delivered shall then be shares owned by Empire and shall be held by Empire subject to the terms of this Agreement. SECTION 1.03 RESERVATIONS OF STOCK FOR ISSUANCE. SYN shall, and Empire and NGC shall cause SYN to, take all action necessary to reserve for initial issuance, 17,500 shares of Common Stock and 2,500 shares of Series A Preferred Stock to be issued to the Stockholders (as defined in the Synergy Acquisition Agreement) at the Second Closing (also as defined in the Synergy Acquisition Agreement), pursuant to the Synergy Acquisition Agreement. SECTION 1.04 COMMON STOCK RETURN. The following provisions of this Section 1.04 apply in the event Empire exercises the stock option granted to it in Section 1.02(d) herein: (f) The "Common Stock Return," as the term is used herein, shall be the number of shares of Common Stock of SYN which Empire hereby agrees to assign and deliver to NGC, without cost to NGC, in the event that the common equity value at a Determination Date (as defined below) is below levels specified for such date in subparagraph (iii) in this paragraph (a). The Common Stock Return shall be set in accordance with the following formula: (i) The Determination Date shall be the date on which SYN is sold (meaning a sale of substantially all of the assets of SYN and its subsidiaries, the acquisition of SYN by another, non-affiliated entity by merger or consolidation, or the sale of partnership units or shares of stock or SYN which entitle the holder thereof to cast at least a majority of the votes entitled to be cast in the general election of directors of SYN or the date on which the sale of partnership units or shares of SYN's Common Stock is closed in an underwritten public offering, for which the partnership units or shares are registered under the Securities Act of 1933, or the date on which this Agreement expires or is terminated in accordance with Section 7.02 herein, whichever of the foregoing first occurs). (ii) The value of the total outstanding Common Stock of SYN on the Determination Date (the "Value"), shall be determined by the parties hereto on the basis of the sale price for SYN if the sale of SYN is involved, or based upon the price to SYN (or the selling stockholders if SYN is not the seller) in the event an underwritten public offering of partnership units or Common Stock of SYN is involved, or on the basis of the fair market value of the outstanding Common Stock of SYN in every other event, as determined by an appraisal firm or an investment banking firm selected by the parties hereto, with such fair market value to be determined on the basis of the value of SYN and its subsidiaries as a whole, if sold as a going concern. In the event there is a combination of one or more entities with SYN, the value of SYN will be determined by either (x) a fair market value appraisal or (y) in the event there is a public offering within nine months after such combination, the value shall be the initial price to the public of the SYN shares of Common Stock or partnership units in such public offering. (iii) For these purposes, "deemed outstanding shares of Common Stock" shall be the total of the number of shares of Common Stock issued and outstanding, plus the number that would be issued and outstanding if all outstanding stock options, warrants, conversion rights and other rights to acquire shares of Common Stock were exercised, whether or not exercisable at the time. The number of shares of Common Stock of SYN constituting the Common Stock Return shall be the percentage of the deemed outstanding shares of Common Stock of SYN as of the Determination Date, determined on the basis of the following table and paragraph (b) below, if applicable: Column A Column B Column C Percentage of deemed Percentage of deemed outstanding outstanding shares of Common Stock shares of Common Stock of SYN of SYN shall be 0% if the shall be 7.5% if the Fiscal Year of Value as of Value as of SYN in which the Determination Date the Determination Date Determination is at least the is less than the Date occurs: following amount: following amount: 1996 $24,500,000 $22,250,000 1997 $30,000,000 $24,750,000 1998 $36,750,000 $27,500,000 1999 $45,000,000 $30,600,000 2000 $55,200,000 $34,000,000 After 2000 1.225 times the 1.1125 times the previous year's amount previous year's amount (g) If the Value as of the Determination Date is more than the amount in Column C in Section 1.04(a)(iii) above, but less than the amount in Column B therein, the percentage used to determine the Common Stock Return shall be a figure between 7.5% and 0% which is in proportion to what the Value is to the amounts in the two columns for the particular Determination Date. SECTION 1.06 ACQUISITION FOR INVESTMENT. Empire and NGC each represent and warrant to the other, and to SYN, as follows: It has (through its management personnel) such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of purchase of securities of SYN as provided for in this Agreement; it is acquiring such securities, and will acquire them, for investment and not with a view toward, or with any intention of, distributing or selling any of the securities and it will not sell or offer to sell or otherwise transfer any of the securities in violation of the Securities Act of 1933, as amended. ARTICLE II: LOAN FINANCING FOR SYN NGC shall make a commercially reasonable effort to arrange for SYN, or provide SYN with, loan financing for SYN, on a fully secured basis, of up to $70,000,000 principal amount needed by SYN for the Synergy Acquisition. ARTICLE III: LIMIT TO FINANCING OBLIGATIONS Neither Empire nor NGC, nor any of their affiliates, shall have any obligation to provide, or arrange, financing for SYN other than as expressly provided for in Articles I and II herein. ARTICLE IV: SYNERGY ACQUISITION Each of the parties hereto will make a commercially reasonable effort in cooperation with the other parties hereto, to do those things within its control to consummate the Synergy Acquisition in accordance with the terms of, and subject to the conditions in, the Synergy Acquisition Agreement. Nothing in this Agreement or otherwise shall be construed to give anyone who is not a party to this Agreement, whether under a third party beneficiary legal doctrine or otherwise, a right to enforce the provisions of this Article or to obtain relief for any failure to perform in accordance with the requirements of this Article. ARTICLE V: MANAGEMENT OF SYN SECTION 5.01 At or before the first Closing (as defined in the Synergy Acquisition Agreement), the parties hereto will enter into a management agreement in substantially the form attached hereto as Exhibit C, or with such changes therein as the parties hereto hereafter agree upon (the "Management Agreement"), pursuant to which the planning and management of the business of SYN subsequent to the Second Closing (as defined in the Synergy Acquisition Agreement) will be conducted by Empire under the direction of the Board of Directors of SYN, as provided therein. SECTION 5.02 DIRECTORS AND OFFICERS OF SYN (a) For purposes of this Agreement, "Control Period" means the period of time commencing on the date of this Agreement and continuing either (i) until this Agreement is terminated pursuant to Section 7.02 herein because of the termination of the Synergy Acquisition Agreement without the Synergy Acquisition having been completed or (ii) until a time after the First Closing, as defined in the Synergy Acquisition Agreement, when (A) the Control Period is terminated by agreement of the parties hereto, (B) NGC no longer owns a majority of the shares of Common Stock of SYN deemed to be outstanding (determined as provided in Section 1.04 herein), (C) Empire no longer owns at least 20% of the shares of Common Stock of SYN deemed to be outstanding or has an option to acquire at least that amount of shares, or (D) when SYN consummates an underwritten public offering of partnership units or shares of its Common Stock, registered under the Securities Act of 1933, whichever of (A), (B), (C) or (D) first occurs. (b) Throughout the Control Period, NGC and Empire shall vote their voting shares of stock of SYN that are capable of being voted, and will otherwise use their respective commercially reasonable efforts, to carry out the following: (i) the Board of Directors of SYN shall consist of five members, three of whom shall be nominees of NGC (the "NGC Positions") and two of whom shall be nominees of Empire (the "Empire Positions"); and any vacancies occurring in the NGC Positions will be promptly filled with nominees of NGC and any vacancies occurring in the Empire Positions will be promptly filled with nominees of Empire. (ii) The officers of SYN shall include at all times a Chairman of the Board and a Vice Chairman of the Board, who will be persons nominated by NGC, and a President and Chief Executive Officer, who will be Paul S. Lindsey, Jr., and a Secretary, who will be a person nominated by Empire. The authority and duties of such officers shall be set forth in the by-laws of SYN, a true and complete copy of which as in effect on the date hereof is attached hereto as Exhibit D. (c) To initiate compliance with preceding paragraph (b), Empire and NGC have caused the following person to be elected to the positions with SYN indicated by their names, to serve for the period provided in the by-laws of SYN: * Chairman of the Board and director -- Merle D. Lewis (an NGC nominee for such positions); * Vice Chairman of the Board and director -- Richard R. Hylland (an NGC nominee for such positions); * President and Chief Executive officer and director -- Paul S. Lindsey, Jr. (an Empire nominee as to the position of director); * Secretary and director -- Douglas A. Brown (an Empire nominee for such positions); with the fifth member of the Board of Directors of SYN (one of the NGC Positions) to be nominated by NGC, and elected, at a future time when NGC has selected the nominee for such position. ARTICLE VI: DISPOSITION OF SYN STOCK BY EMPIRE OR NGC SECTION 6.01 PERMITTED DISPOSITIONS. (a) NGC may at any time or from time to time transfer any of the securities issued by SYN which NGC may own at any time to NWPS or any wholly-owned subsidiary of NWPS, provided that notice of such transfer is given to the other parties to this Agreement and that the Transferee becomes a party to this Agreement with respect to the securities so transferred, by all of such transferees and NGC shall collectively act, and be treated, as a single entity with NGC acting as their representative for purposes of this Agreement. (b) Empire may at any time and from time to time transfer any of the securities issued by SYN which Empire may own at any time to any affiliated party, provided that notice of such transfer is given to the other parties to this Agreement and the transferee becomes a party to this Agreement with respect to the securities so transferred, but all such transferees and Empire shall collectively act, and be treated, as a single entity with Empire acting as their representative for purposes of this Agreement. SECTION 6.02 RIGHTS OF FIRST REFUSAL. (c) Except as permitted by Section 1.04 and Section 6.01(b) herein, so long as the Management Agreement is in effect, Empire will not sell or otherwise dispose of any shares of Common Stock of SYN, or any other securities convertible into such shares, to any party without first offering the same for sale to NGC in writing on the same terms as are offered to or by the other party (with full disclosure of such terms to NGC) and allowing not less than 30 days after its receipt of the offer for NGC to accept the offer, and if such offer is accepted by NGC, NGC shall have 90 days in which to complete the purchase on such terms. (d) Except as permitted by Section 1.02(e) and Section 6.01(a) herein, so long as the Management Agreement is in effect, NGC will not sell or otherwise dispose of any shares of Common Stock of SYN, or any other securities convertible into such shares, to any party without first offering the same for sale to Empire in writing on the same terms as are offered to or by the other party (with full disclosure of such terms to Empire) and allowing Empire not less than 30 days after its receipt of the offer for Empire to accept the offer, and if such offer is accepted by Empire, Empire shall have 90 days in which to complete the purchase on such terms, but if Empire declines such offer, then Empire shall have the right to participate on a pro rata basis in the sale of such shares by NGC. ARTICLE VII: MISCELLANEOUS SECTION 7.01 RESTRICTIVE LEGEND. Each certificate issued by SYN to evidence shares of Common Stock, or securities convertible into such shares, owned by either Empire or NGC shall be endorsed with the following legend: "The shares represented by this certificate are subject to the Agreement among the Corporation and its Initial Stockholders, dated as of May 17, 1995, as the same may be amended, on file with the issuing Corporation at its principal business office and may be transferred or otherwise disposed of only in accordance therewith." SECTION 7.02 TERM OF THIS AGREEMENT. This Agreement, if not sooner terminated by agreement of the parties hereto or pursuant to the next sentence, shall terminate when the Control Period terminates. In the event the Synergy Acquisition Agreement is terminated without the Synergy Acquisition having been completed, the parties hereto will liquidate and dissolve SYN as promptly as possible when all obligations of SYN under, or with respect to, the Synergy Acquisition Agreement have been discharged or provided for, and this Agreement shall then automatically terminate. SECTION 7.03 NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered in person, (b) one business day after deposit with a nationally recognized overnight courier service (c) two business days after being deposited in the United States mail, postage prepaid, first class, registered or certified mail, or (d) the business day on which it is sent and received by facsimile, as follows: (i) If to SYN, to: SYN Inc. c/o Northwestern Growth Corporation 33 Third Street, S.E. Huron, South Dakota 57350 Fax No. (605) 353-8286 Attention: Richard R. Hylland, President with a copy to Empire, addressed and sent to it at the place required under this Agreement for giving notice to Empire (ii) If to Empire, to: Empire Gas Corporation P.O. Box 303 1700 South Jefferson Lebanon, Missouri 65536 Fax No. (417) 532-8529 Attention: Paul S. Lindsey, Jr., President (iii) If to NGC, to: Northwestern Growth Corporation 33 Third Street, S.E. Huron, South Dakota 57350 Fax No. (605) 353-8286 Attention: Richard R. Hylland, President SECTION 7.04 SECTION 351 OF THE CODE. Each of the parties hereto agrees to comply with the requirements of Section 6.28 of the Synergy Acquisition Agreement, both with respect to the transaction referred to therein and with respect to any transaction under this Agreement to the extent necessary to assure the result under Section 351 of the Internal Revenue Code of 1986, as amended, for the transaction referred to in such Section 6.28. SECTION 7.05 CAPTIONS. The captions in this Agreement are included for convenience of reference only and shall be ignored in the construction and interpretation of this Agreement. SECTION 7.06 GOVERNING LAW. This Agreement shall be construed in accordance with and governed by the internal laws of the State of Delaware without regard to the choice of law principles thereof. SECTION 7.07 COUNTERPARTS. Execution of separate copies of this Agreement by each or some of the several parties hereto shall have the same force and effect as though all such parties had executed the original of this Agreement. Further, the parties hereto may execute several counterparts of this Agreement, all of which shall constitute but one and the same agreement. IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement to be executed in its name as of the date first above written. EMPIRE GAS CORPORATION By /s/ Paul S. Lindsey, Jr. __________________________ President NORTHWESTERN GROWTH CORPORATION By /s/ Richard R. Hylland _____________________________ President SYN INC. By /s/ Paul S. Lindsey, Jr. ______________________________ Title: EX-10 4 EXHIBIT 10.21 WAIVER, AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT AND AMENDMENT NO. 4 TO SUPPLEMENT A TO LOAN AND SECURITY AGREEMENT September 9, 1996 Empire Gas Corporation 1700 South Jefferson Street Lebanon, Missouri 65536 Attention: Ms. Valeria Schall Ladies and Gentlemen: Reference is made to the Loan and Security Agreement dated as of June 29, 1994 among Empire Gas Corporation ("Borrower"), the Lenders party thereto ("Lenders") and Bank of America Illinois, f/k/a Continental Bank, f/k/a Continental Bank N.A., as a Lender and as Agent for the Lenders, as amended through the date hereof (the "Loan Agreement"). Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to such terms in the Loan Agreement. Reference is further made to the certain conditional waiver letter dated May 15, 1996 executed by Agent and addressed to Borrower (the "Waiver Letter"). Pursuant to the Waiver Letter, Borrower informed Agent that Borrower had breached Section 6.2 of Supplement A to the Loan Agreement by failing to comply with the limitation on the acquisition of fixed assets set forth herein for the 1996 Fiscal Year. The occurrence of such breach and continuance thereof for a period exceeding ten (10) days after the occurrence thereof constituted an Event of Default under Section 6.1(h) of the Loan Agreement (the "Existing Default"). Pursuant to the Waiver Letter, Requisite Lenders agreed to waive the Existing Default, subject to the satisfaction of certain conditions on or prior to June 30, 1996. Such conditions were not satisfied on or prior to June 30, 1996; consequently, pursuant to the terms of the Waiver Letter, on July 1, 1996, the waiver of the Existing Default immediately ceased to be effective and the Existing Default was immediately reinstated. Borrower has informed Agent that the Existing Default remains in existence as of the date hereof. Consequently, Borrower has requested that Requisite Lenders agree to waive the Existing Default. Requisite Lenders have agreed to do so, on the terms and conditions contained herein. Borrower has also requested that Requisite Lenders agree to amend various provisions contained in the Loan Agreement and Supplement A. Requisite Lenders have agreed to do so, on the terms and conditions contained herein. Therefore, the parties hereto agree as follows: 1. Waiver. Requisite Lenders hereby waive the Existing Default and any and all rights and remedies that Agent and Lenders may have under the Loan Agreement, the Related Agreements and applicable law in respect thereof. Other than as expressly set forth herein, the foregoing waiver shall not constitute a waiver of any Events of Default or Unmatured Events of Default that are now in existence or that may hereafter occur or any rights or remedies that Agent or any Lender may have under the Loan Agreement, the Related Agreements or applicable law with respect thereto, all of which rights and remedies Agent and Lenders hereby specifically reserve. 2. Amendments to Loan Agreement. The Loan Agreement is hereby amended as follows: (a) Section 1.1. (i) Section 1.1 of the Loan Agreement is hereby amended by inserting therein, in appropriate alphabetical order, the following new definitions: "'Acquisition Availability' means, for any period, the sum of (a) net earnings before interest expense, income tax expense, depreciation and amortization for such period, plus (b) proceeds from asset dispositions consummated during such period and permitted under Section 5.12 (or otherwise consented to by Requisite Lenders), net of all related taxes and disposition expenses, minus (c) cash interest expense during such period in respect of Indebtedness for borrowed money, including, without limitation, Indebtedness under the Agreement, in respect of the Senior Notes, in respect of Subordinated Debt and in respect of Acquisition Indebtedness, minus (d) taxes paid during such period plus (e) tax refunds received during such period, minus (f) required principal payments during such period in respect of Indebtedness for borrowed money, including, without limitation, Indebtedness in respect of the Senior Notes, in respect of Subordinated Debt and in respect of Acquisition Indebtedness and minus (g) capital expenditures during such period and permitted under Section 6.2 of Supplement A (or otherwise consented to by Requisite Lenders), each determined for Borrower and its Subsidiaries on a consolidated basis, and in accordance with GAAP." "'Permitted Acquisition' means any Acquisition that either is consented to in writing by Requisite Lenders or satisfies the following conditions: (a) no Event of Default or Unmatured Event of Default is in existence at the time of such Acquisition or, after giving pro forma effect to such Acquisition, would be caused thereby; (b) total cash consideration paid for such Acquisition, together with the cash consideration paid for all other Permitted Acquisitions consummated in the immediately preceding twelve month period, does not exceed $3,000,000 in the aggregate; (c) the Revolving Credit Amount exceeds the outstanding principal balance of the Revolving Loans plus the Letter of Credit Obligations by at least $500,000 immediately prior to, and immediately after, consummation of such Acquisition; (d) Agent has received, as soon as available, copies of all agreements delivered in connection therewith; and (e) Agent has received a certificate of Borrower's chief financial officer certifying that all of the applicable conditions contained herein to treating such Acquisition as a Permitted Acquisition have been satisfied and showing all appropriate calculations." (ii) Section 1.1 of the Loan Agreement is hereby further amended by amending and restating in their entirety the definitions of the terms "LIBOR Base Rate" and "LIBOR Rate" contained therein, as follows: "'LIBOR Base Rate' means, with respect to each Interest Rate Period for a LIBOR Rate- Loan, the rate per annum at which U.S. Dollar deposits in immediately available funds are offered to Bank of America Illinois two (2) Banking Days prior to the beginning of such Interest Rate Period by major banks in the London interbank 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. '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 = 3.00% + LIBOR Base Rate ___________________________________ 1 -Eurocurrency Reserve Requirement" (b) Section 2.2. The third sentence of subsection (b) of Section 2.2 of the Loan Agreement is hereby amended by deleting therefrom the words "one percent (1%)" and inserting in their place the words "one and one-half percent (1.5%)". (c) Section 5.12. Subsection (d) of Section 5.12 of the Loan Agreement is hereby amended and restated in its entirety, as follows: "(d) purchase or otherwise acquire, or agree to purchase or otherwise acquire, any of the stock, assets or business of any Person (including, without limitation, by means of an Acquisition), other than pursuant to a Permitted Acquisition." (d) Section 5.15. Subsection (h) of Section 5.12 of the Loan Agreement is hereby amended and restated in its entirety, as follows: "(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 $10,000,000 and no more than $3,000,000 of which may be incurred in any twelve month period," 3. Amendments to Supplement A. Supplement A is hereby amended as follows: (a) Section 2.2. Clauses (iii) and (iv) of Section 2.2 of Supplement A are hereby amended and restated in their entirety, as follows: "(iii) during the period commencing on September 9, 1996 and ending on December 31, 1996, $1,500,000." (b) Section 3.1.1. (i) Subsection (a) of Section 3.1.1 of Supplement A is hereby amended by deleting the percentage "1.00%" contained therein and inserting in its place the percentage "1.50%." (ii) Subsection (c) of Section 3.1.1 of Supplement A is hereby amended by deleting the words "LIBOR Base Rate" each time that it appears and inserting in their place the words "LIBOR Rate." (c) Section 6.2. Section 6.2 of Supplement A is hereby amended by deleting the words "Acquisition permitted under the Agreement" contained therein and inserting in their place the words "Permitted Acquisition." (d) Section 6.3. Section 6.3 of Supplement A is hereby amended and restated in its entirety, as follows: "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 to (b) cash interest expense in respect of Indebtedness for borrowed money, including, without limitation, Indebtedness under the Agreement, in respect of the Senior Notes, in respect of Subordinated Debt and in respect of Acquisition Indebtedness, in each case measured on the last day of any calendar quarter set forth below, calculated for the twelve months ending on such date, and determined for Borrower and its Subsidiaries on a consolidated basis, and in accordance with GAAP, to be less than the ratio set forth below opposite such period: Interest Coverage Date Ratio The quarter ending March 31, 1996 1.00:1.0 The quarter ending June 30, 1996 1.00:1.0 The quarter ending September 30, 1996 1.00:1.0 The quarter ending December 31, 1996 1.05:1.0 The quarter ending March 31, 1997 1.10:1.0 The quarter ending June 30, 1997 and 1.20:1.0" each September 30, December 31, March 31 and June 30 thereafter (e) Section 6.4. A new Section 6.4 is hereby added to Supplement A, as follows: "6.4 Acquisition Availability. Borrower will not permit Acquisition Availability, measured on the last day of each calendar quarter commencing September 30, 1996, and calculated for the twelve months ending on such date, to be less than zero." 4. Scope. This Waiver, Amendment No. 2 to Loan and Security Agreement and Amendment No. 4 to Supplement A to Loan and Security Agreement (the "Amendment") shall have the effect of amending the Loan Agreement, Supplement A and the Related Agreements as appropriate to express the agreements contained herein. In all other respects, the Loan Agreement, Supplement A and the Related Agreements shall remain in full force and effect in accordance with their respective terms. 5. Acknowledgment of Effect of Amendments. Borrower hereby acknowledges that the effectiveness of the amendments to the Loan Agreement and Supplement A contained in this Amendment shall have the effect of immediately increasing the LIBOR Rate, the Adjusted Reference Rate and the Letter of Credit commissions payable under Section 2.2(b) of the Loan Agreement. Borrower further hereby acknowledges that such increases shall effect interest accruing on and after the effective date of this Amendment with respect to Loans outstanding on such effective date (including, without limitation, LIBOR Rate Loans) or advanced thereafter, and Letter of Credit commissions accruing on and after such effective date with respect to Letters of Credit and L/C Drafts outstanding on such effective date or issued thereafter. 6. Conditions to Effectiveness. This Amendment shall be effective immediately upon the execution of this Amendment by BAI, on behalf of the Requisite Lenders, acceptance hereof by Borrower and each other Obligor, and delivery hereof to BAI at 231 South LaSalle Street, Chicago, Illinois 60697, Attention: Mr. Mark Cordes, on or prior to September 9, 1996, together with a $20,000 work fee payable to the Agent for its own account. Very truly yours, BANK OF AMERICA ILLINOIS, f/k/a CONTINENTAL BANK, f/k/a CONTINENTAL BANK N.A., AS AGENT ON BEHALF OF REQUISITE LENDERS By /s/ __________________________ Its_______________________ Acknowledged and agreed to this 9th day of September, 1996. EMPIRE GAS CORPORATION By /s/ Mark Castaneda _____________________ Its V.P., Finance Acknowledgment and Acceptance of Guarantors Each of the undersigned is a party to the Master Corporate Guaranty dated June 29, 1994 in favor of BAI, as Agent for itself and Lenders (the "Guaranty"), pursuant to which each of the undersigned has guaranteed the Obligations of Borrower under the Loan Agreement. Each of the undersigned hereby acknowledges receipt of the foregoing Amendment, accepts and agrees to be bound by the terms thereof, ratifies and confirms all of its obligations under the Guaranty, and agrees that the Guaranty shall continue in full force and effect as to it, notwithstanding such Amendment. Acknowledged and Agreed to this 9th day of September, 1996. EACH OF THE SUBSIDIARIES OF EMPIRE GAS CORPORATION LISTED ON EXHIBIT A ATTACHED HERETO By /s/ Robert L. Mathews ___________________________ Vice President of each Subsidiary EX-10 5 EXHIBIT 10.22 AGREEMENT AMENDING AMENDED AND RESTATED AGREEMENT AMONG INITIAL STOCKHOLDERS AND SYN INC. THIS AGREEMENT, dated July 1, 1996, is made and entered into among Empire Gas Corporation, a Missouri corporation ("Empire"), Northwestern Growth Corporation, a South Dakota corporation ("NGC"), and SYN Inc., a Delaware corporation ("SYN"), with respect to the following facts: A. The parties hereto previously entered into that certain agreement, effective as of May 17, 1995, titled "Amended and Restated Agreement Among Initial Stockholders and SYN Inc." B. Such parties now desire to amend said Amended and Restated Agreement Among Initial Stockholders and SYN Inc. NOW THEREFORE, the parties hereto agree that Section 5.02(b)(i) of said Amended and Restated Agreement Among Initial Stockholders and SYN is hereby amended to read as follows: (i) the Board of Directors of SYN shall consist of six members, five of whom shall be nominees of NGC (the "NGC Positions"); and one of whom shall be the nominee of Empire (the "Empire Positions"); and any vacancies occurring in the NGC Positions will be promptly filled with nominees of NGC and any vacancies occurring in the Empire Positions will be promptly filled with nominees of Empire. FURTHER, the parties hereto agree that Section 5.02(c) of said Amended and Restated Agreement Among Initial Stockholders and SYN is hereby amended to read as follows: (c) To initiate compliance with preceding paragraph (b), Empire and NGC have caused the following persons to be elected to the positions with SYN indicated by their names, to serve for the period provided in the by-laws of SYN: * Chairman of the Board and director -- Merle D. Lewis (an NGC nominee for such positions); * Vice Chairman of the Board and director -- Richard R. Hylland (an NGC nominee for such positions); * Director -- Douglas A. Brown (an NGC nominee for such position); [and] * Director -- Daniel K. Newell (an NGC nominee for such position); * President and Chief Executive Officer and director -- Paul S. Lindsey, Jr. (an Empire nominee as to the position of director); with the sixth member of the Board of Directors of SYN (one of the NGC Positions) to be nominated by NGC, and elected, at a future time when NGC has selected the nominee for such position. FURTHER, the parties hereto agree that said Amended and Restated Agreement Among Initial Stockholders and SYN is hereby amended to add the following: Empire hereby grants to SYN the right to use of the name Allstar and all similar related names, marks and logos, for so long as the Management Agreement (as the same may be amended) is in effect, and for a transition period of twelve (12) months thereafter, for the conduct of business at all locations where Empire has caused SYN to use such name and/or all similar related names, marks and logos. IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement to be executed in its name as of the date first above written. EMPIRE GAS CORPORATION By: /s/ Paul S. Lindsey, Jr. __________________________ President NORTHWESTERN GROWTH CORPORATION By: /s/ ___________________________ President SYN INC. By: /s/ Paul S. Lindsey, Jr. ___________________________ Title:______________________ EX-10 6 EXHIBIT 10.23 [BANK OF AMERICA LETTERHEAD] May 15, 1996 VIA FACSIMILE AND CERTIFIED MAIL RETURN RECEIPT REQUESTED Empire Gas Corporation 1700 South Jefferson Street Lebanon, Missouri 65536 Attention: Valeria Schall RE: LOANS BY BANK OF AMERICA ILLINOIS TO EMPIRE GAS CORPORATION Ladies and Gentlemen: Reference is made hereby to the certain Loan and Security Agreement dated as of June 29, 1994 between Empire Gas Corporation ("Borrower") and Bank of America Illinois (f/k/a Continental Bank N.A.), as agent ("Agent") and as lender ("Lender"), as amended to date (the "Loan Agreement"). Unless defined herein, capitalized terms used herein shall have the meanings provided to such terms in the Loan Agreement. Borrower has informed Agent that Borrower has failed to comply with the limitation on the acquisition of fixed assets for the 1996 Fiscal Year set forth in Section 6.2 of Supplement A to the Loan Agreement. Such breach has continued for a period exceeding ten (10) days after the occurrence thereof. The occurrence and continuance of such breach constitutes an Event of Default under Section 6.1(h) of the Loan Agreement. Borrower has further informed Agent that the foregoing Event of Default (the "Existing Default") remains in existence as of the date hereof. Consequently, Borrower has requested that Requisite Lenders agree to waive the Existing Default. Requisite Lenders have agreed to do so, on the terms and conditions contained herein. Requisite Lenders hereby agree to waive the Existing Default and any and all rights and remedies that Agent and Lenders have under the Loan Agreement and applicable law in respect thereof, conditional upon the occurrence of the following events on or before June 30, 1996: a. Borrower shall have delivered to Agent, in form and substance satisfactory to Agent, revised projections for the period from April 1, 1996 through June 30, 1997, which shall consist of a detailed statement of cash flow projections and a borrowing base analysis; b. Borrower shall have delivered to Agent, in form and substance satisfactory to Agent, such other information regarding Borrower's and any Subsidiary's financial condition and business as Agent shall request; c. Borrower shall have promptly notified Agent in writing of the sale by Borrower or any Subsidiary during the period from the date hereof through June 30, 1996 of the capital stock or assets of any Subsidiary permitted under the Loan Agreement, specifying in each case the capital stock or assets sold and the amount of the proceeds received therefor; d. No Events of Default (other than the Existing Default) or Unmatured Events of Default shall have occurred; and e. Borrower and Requisite Lenders shall have agreed on an amendment to the financial covenant contained in Section 6.2 of Supplement A to the Loan Agreement, which amendment shall be based on the projections described in paragraph (a) above, and shall be satisfactory to Requisite Lenders. If any of the above conditions has not been completed to Agent's and Requisite Lenders' satisfaction on or before June 30, 1996, the above waiver shall immediately cease to be effective, the Existing Default shall be immediately reinstated and the financial covenant contained in Section 6.2 of Supplement A to the Loan Agreement, as it presently exists, shall remain in effect for all testing dates. In such case, Agent and Lenders shall have the immediate right, without further notice to any Person, to take any and all actions available to Agent or Lenders under the Loan Agreement and applicable law with respect to the Existing Default. Except as specifically set forth herein, this letter shall not constitute a waiver by Agent or Lenders of any Events of Default or Unmatured Events of Default that are now in existence or may hereafter occur or any rights or remedies that Agent or any Lender may have under the Loan Agreement or applicable law with respect thereto, all of which rights and remedies Agent and Lenders hereby specifically reserve. Very truly yours, BANK OF AMERICA ILLINOIS, as Agent for the Lenders By /s/ Steve Standbridge _________________________ Its Vice President EX-10 7 EXHIBIT 10.24 AMENDMENT NO. 3 TO SUPPLEMENT A TO LOAN AND SECURITY AGREEMENT February 13, 1996 Empire Gas Corporation 1700 South Jefferson Street Lebanon, Missouri 65536 Attention: Ms. Valeria Schall Ladies and Gentlemen: Reference is made to the Loan and Security Agreement dated as of June 29, 1994 among Empire Gas Corporation ("Borrower"), the Lenders party thereto (the "Lenders") and Bank of America Illinois, f/k/a Continental Bank, f/k/a Continental Bank N.A., as a Lender and as Agent for the Lenders, as amended through the date hereof (the "Loan Agreement"). Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to such terms in the Loan Agreement. Borrower has requested that Lenders agree to amend the Interest Coverage Ratio contained in Section 6.3 of Supplement A to the Loan Agreement, retroactive to December 31, 1995. Lenders have agreed to the foregoing request on the following terms and conditions: 1. Amendment to Supplement A. The first paragraph of Section 6.3 of Supplement A is hereby amended and restated in its entirety, retroactively effective as of December 31, 1995, as follows: "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 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 measured on the last day of any calendar month in any period set forth below, calculated for the 12 months ending on such date, and determined for Borrower and its Subsidiaries on a consolidated basis, and in accordance with GAAP, to be less than the ratio set forth below opposite such period: Interest Coverage Period Ratio December 31, 1995 through and 0.82:1.0 including March 30, 1996 March 31, 1996 through and 1.00:1.0 including June 29, 1996 June 30, 1996 and thereafter 1.35:1.0" 2. Scope. This Amendment No. 3 to Supplement A to Loan and Security Agreement ("Amendment") shall have the effect of amending the Loan Agreement, Supplement A and the Related Agreements as appropriate to express the agreements contained herein. In all other respects, the Loan Agreement, Supplement A and the Related Agreements shall remain in full force and effect in accordance with their respective terms. 3. Condition to Effectiveness. This Amendment No. 3 to Supplement A to Loan and Security Agreement shall be effective immediately upon the execution of this Amendment No. 3 to Supplement A to Loan and Security Agreement by BAI, on behalf of the Lenders, acceptance hereof by Borrower and each other Obligor, and delivery hereof to BAI at 231 South LaSalle Street, Chicago, Illinois 60697, Attention: Mark Cordes, on or prior to February 14, 1996. Very truly yours, BANK OF AMERICA ILLINOIS, f/k/a CONTINENTAL BANK, f/k/a CONTINENTAL BANK N.A., ON BEHALF OF LENDERS By /s/ John P. Hesselmann __________________________ Its Sr. Vice President Acknowledged and agreed to this 15th day of February, 1996. EMPIRE GAS CORPORATION By /s/ Valeria Schall _______________________ Its Vice President Acknowledgment and Acceptance of Guarantors Each of the undersigned is a party to the Master Corporate Guaranty dated June 29, 1994 in favor of BAI, as Agent for itself and Lenders (the "Guaranty"), pursuant to which each of the undersigned has guaranteed the Obligations of Borrower under the Loan Agreement. Each of the undersigned hereby acknowledges receipt of the foregoing and Amendment No. 3 to Supplement A to Loan and Security Agreement ("Amendment"), accepts and agrees to be bound by the terms thereof, ratifies and confirms all of its obligations under the Guaranty, and agrees that the Guaranty shall continue in full force and effect as to it, notwithstanding such Amendment. Acknowledged and Agreed to this 15th day of February, 1996. EACH OF THE SUBSIDIARIES OF EMPIRE GAS CORPORATION LISTED ON EXHIBIT ATTACHED HERETO By /s/ Valeria Schall _________________________________ Vice President of each Subsidiary EX-10 8 EXHIBIT 10.25 AGREEMENT AMONG INITIAL STOCKHOLDERS AND MAC INC. THIS AGREEMENT, dated November 3, 1995, is made and entered into among Empire Gas Corporation, a Missouri corporation ("Empire"), Northwestern Public Service Corporation, a Delaware ("NWPS"), and Myers Acquisition Company, a Delaware corporation ("MAC"), with respect to the following facts: A. Empire currently is engaged in the business of distributing and selling at retail liquefied petroleum ("LP") gas and appliances, and has a management experienced in the operation of such business. B. Northwestern Public Service Company ("NWPS") has as one of its objectives the making of investments that could benefit NWPS and its stockholders. C. Empire and NWPS, acting together, have made a successful bid to acquire the LP gas distribution and appliance business of Myers Propane Gas Company ("Myers"- such acquisition being hereinafter called the "Myers Acquisition"). Empire and NWPS have contemplated, in their bidding for the Myers Acquisition, that they will rely principally on Empire for management expertise and on NWPS to provide or arrange the financing for the Myers Acquisition, and that the success of the Myers Acquisition will depend in part upon the cost savings and operating improvements expected to be achieved by having Empire do the planning and management of the business of Myers and its subsidiaries, under the direction of the Board of Directors of MAC. D. Empire and NWPS have caused MAC to be incorporated to serve as the vehicle for making the Myers Acquisition. E. Empire and NWPS, on behalf of MAC, are concluding the negotiation of the definitive agreement (the "Myers Agreement of Merger") for the Myers Acquisition, and need to provide for (i) the initial capitalization of MAC, (ii) the management of MAC and (iii) for certain matters pertaining to the ownership of shares of stock of MAC. NOW THEREFORE, in consideration of the premises and the agreements exchanged herein. the parties hereto agree as follows: ARTICLE 1: INITIAL CAPITALIZATION OF MAC; STOCK SUBSCRIPTIONS AND RESERVATIONS OF STOCK SECTION 1.01 INITIAL AUTHORIZED STOCK OF MAC. MAC has been incorporated by Empire and NWPS with an initial authorized capitalization (as set forth in Article IV of MAC's Certificate of Incorporation, a true and complete copy of which is attached hereto as Exhibit A), consisting of 1,000 shares of common stock, par value $1 per share (the "Common Stock"; and 4,000 shares of preferred stock, par value $ 1,000 per share, issuable in one or more series (the "Preferred Stock"). The 1,000 shares of common stock and 4,000 shares of Preferred Stock referred to herein shall only be increased with their prior written agreement of Empire and NWPS. SECTION 1.02 SUBSCRIPTIONS AND OPTION FOR STOCK. NWPS has previously purchased, and hereby subscribes for. stock of MAC, and Empire hereby subscribes for stock of MAC, as follows: (a) MAC and NWPS acknowledge that NWPS has purchased from MAC, and MAC has sold and issued to NWPS, 51 shares of Common Stock for a cash purchase price of $51 which has been paid by NWPS to MAC, and that these shares are the only shares of stock of MAC that are currently outstanding. (b) NWPS hereby subscribes for, and agrees to purchase from MAC, and MAC hereby agrees to sell and issue to NWPS, 2,300 shares of Series A Voting Preferred Stock for purchase price of $ 1,000 per share ($2,300,000 total), with this transaction to be consummated at the Closing of the Myers Acquisition. NWPS will deliver to MAC $1,150,000 of its own common stock and 11,500 shares of 6 1/2% series of NWPS preferred stock, $100 par value with a combined value of $2,300,000 in fulfillment of its purchase obligation. (c) Empire hereby subscribes for, and agrees to purchase from MAC, and MAC hereby agrees to issue and sell to Empire, 49 shares of Common Stock (which shall represent 49% of the issued and outstanding Common Stock) for a cash purchase price of $49 to be paid at the time of such issuance, with this transaction to be consummated at the closing of the Myers Acquisition. SECTION 1.03 ACQUISITION FOR INVESTMENT. Empire and NWPS each represent and warrant to the other, and to MAC, as follows: It has (through its management personnel) such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its purchase of securities of MAC as provided for in this Agreement; it is acquiring such securities, and will acquire them, for investment and not with a view toward, or with any intention of, distributing or selling any of the securities and it will not sell or offer to sell or otherwise transfer any of the securities in violation of the Securities Act of 1933, as amended. ARTICLE 2: MYERS ACQUISITION Each of the parties hereto will make a commercially reasonable effort in cooperation with the other parties hereto, to do those things within its control to consummate the Myers Acquisition in accordance with the terms of and subject to the conditions in, the Myers Agreement of Merger. Nothing in this Agreement or otherwise shall be construed to give anyone who is not a party to this Agreement, whether under a third party beneficiary legal doctrine or otherwise, a right to enforce the provisions of this Article or to obtain relief for any failure to perform in accordance with the requirements of this Article. ARTICLE 3: MANAGEMENT OF MAC SECTION 3.01 At or before the Closing (as defined in the Myers Agreement of Merger), the parties hereto will enter into a management agreement in substantially the form attached hereto as Exhibit B, or with such changes therein as the parties hereto hereafter agree upon (the "Management Agreement"), pursuant to which the planning and management of the business of MAC subsequent to the Closing (as defined in the Myers Agreement of Merger) will be conducted by Empire under the direction of the Board of Directors of MAC, as provided therein. SECTION 3.02 DIRECTORS AND OFFICERS OF MAC. (a) For purposes of this Agreement, "Control Period" means the period of time commencing on the date of this Agreement and continuing either (i) until this Agreement is terminated pursuant to Section 5.02 herein because of the termination of the Myers Agreement of Merger without the Myers Acquisition having been completed or (ii) until (A) NWPS no longer owns a majority of the shares of both the Common Stock and Preferred Stock of MAC deemed to be outstanding, (B) Empire no longer owns at least 49% of the shares of Common Stock of MAC deemed to be outstanding or (C) when MAC consummates an underwritten public offering of partnership units or shares of its Common Stock, registered under the Securities Act of 1933, whichever of (A), (B), or (C) first occurs. (b) Throughout the Control Period, NWPS and Empire shall vote their voting shares of stock of MAC that are capable of being voted, and will otherwise use their respective commercially reasonable efforts, to carry out the following: (i) the Board of Directors of MAC shall consist of six members, five of whom shall be nominees of NWPS (the "NWPS Positions") and one of whom shall be a nominee of Empire (the "Empire Position"); and any vacancies occurring in the NWPS Positions will be promptly filled with nominees of NWPS and any vacancy occurring in the Empire Position will be promptly filled with a nominee of Empire. (ii) The officers of MAC shall include at all times a Chairman of the Board, who will be a person nominated by NWPS, and a President and Chief Executive Officer, who will be a person nominated by Empire. The authority and duties of such officers shall be as set forth in the bylaws of MAC, a true and complete copy of which as in effect on the date hereof is attached hereto as Exhibit C. (c) To initiate compliance with preceding paragraph (b), Empire and NWPS have caused the following persons to be elected to the positions with MAC indicated by their names, to serve for the period provided in the bylaws of MAC: * Chairman of the Board -- Paul S. Lindsey, Jr. (an NWPS nominee for such positions); * President and Chief Executive Officer -- Dan P. Binning (an Empire nominee for such positions); * Vice Chairman -- Daniel K. Newell (NWPS nominee for such position); * Secretary and Director -- Valeria Schall (NWPS nominee for such position); * Director -- Rogene A. Thaden (NWPS nominee for such position); with the fifth and sixth member of the Board of Directors of MAC (two NWPS Positions) to be nominated by NWPS, and elected, at a future time when NWPS has selected the nominee for such position. ARTICLE 4: DISPOSITION OF MAC STOCK BY EMPIRE OR NWPS SECTION 4.01 PERMITTED DISPOSITIONS. (a) NWPS may at any time or from time to time transfer any of the securities issued by MAC which NWPS may own at any time to any wholly-owned subsidiary of NWPS, provided that notice of such transfer is given to the other parties to this Agreement and that the transferee becomes a party to this Agreement with respect to the securities so transferred, but all of such transferees and NWPS shall collectively act, and be treated, as a single entity with NWPS acting as their representative for purposes of this Agreement. (b) Empire may at any time and from time to time transfer any of the securities issued by MAC which Empire may own at any time to any affiliated party, provided that notice of such transfer is given to the other parties to this Agreement and the transferee becomes a party to this Agreement with respect to the securities so transferred, but all such transferees and Empire shall collectively act, and be treated, as a single entity with Empire acting as their representative for purposes of this Agreement. SECTION 4.02 RIGHTS OF FIRST REFUSAL. (a) Except as permitted by Section 4.01(b) herein, so long as the Management Agreement is in effect, Empire will not sell or otherwise dispose of any shares of Common Stock of MAC, or any other securities convertible into such shares, to any party without first offering the same for sale to NWPS in writing on the same terms as are offered to or by the other party (with full disclosure of such terms to NWPS) and allowing not less than 30 days after its receipt of the offer for NWPS to accept the offer; and if such offer is accepted by NWPS, NWPS shall have 90 days in which to complete the purchase on such terms. (b) Except as permitted by Section 4.01(a) herein, so long as the Management Agreement is in effect, NWPS will not sell or otherwise dispose of any shares of Common Stock of MAC, or any other securities convertible into such shares to any party without first offering the same for sale to Empire in writing on the same terms as are offered to or by the other party (with full disclosure of such terms to Empire) and allowing Empire not less than 30 days after its receipt of the offer for Empire to accept the offer, and if such offer is accepted by Empire, Empire shall have 90 days in which to complete the purchase on such terms. ARTICLE 5: MISCELLANEOUS SECTION 5.01 RESTRICTIVE LEGEND. Each certificate issued by MAC to evidence shares of Common Stock, or securities convertible into such shares, owned by either Empire or MAC shall be endorsed with the following legend: "The shares represented by this certificate are subject to the Agreement among the Corporation and its Initial Stockholders, dated as of November 1995, as the same may be amended, on file with the issuing Corporation at its principal business office and may be transferred or otherwise disposed of only in accordance therewith." SECTION 5.02 TERM OF THIS AGREEMENT. This Agreement, if not sooner terminated by agreement of the parties hereto or pursuant to the next sentence, shall terminate when the Control Period terminates. In the event the Myers Agreement of Merger is terminated without the Myers Acquisition haying been completed, the parties hereto will liquidate and dissolve MAC as promptly as possible when all obligations of MAC under, or with respect to, the Myers Agreement of Merger have been discharged or provided for, and this Agreement shall then automatically terminate. SECTION 5.03 NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered in person, (b) one business day after deposit with a nationally recognized overnight courier service or (c) the business day on which it is sent and received by facsimile, as follows: (i) If to MAC, to: Myers Acquisition Company c/o Northwestern Public Service Company 33 Third Street, S.E. Huron, South Dakota 57350 Fax No. (605) 353-8286 Attention: Rogene Thaden, Treasurer and to Myers Acquisition Company c/o Empire Gas Corporation 1700 Jefferson Street Lebanon, Missouri 65536 Attention: Valeria Schall, Vice President (ii) If to Empire, to: Empire Gas Corporation P.O. Box 303 1700 South Jefferson Lebanon, Missouri 65536 Fax No. (417) 532-8529 Attention: Paul S. Lindsey, Jr., President (iii) If to NWPS, to: Northwestern Public Service Company 33 Third Street, S.E. Huron, South Dakota 57350 Fax No. (605) 353-8286 Attention: Daniel K. Newell, Vice President-Finance SECTION 5.04 CAPTIONS. The captions in this Agreement are included for convenience of reference only and shall be ignored in the construction and interpretation of this Agreement. SECTION 5.05 GOVERNING LAW. This Agreement shall be construed in accordance with and governed by the internal laws of the State of Delaware without regard to the choice of law principles thereof SECTION 5.06 COUNTERPARTS. Execution of separate copies of this Agreement by each or some of the several parties hereto shall have the same force and effect as though all such parties had executed the original of this Agreement. Further, the parties hereto may execute several counterparts of this Agreement, all of which shall constitute but one and the same agreement. IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement to be executed in its name as of the date first above written. EMPIRE GAS CORPORATION By /s/ Paul S. Lindsey, Jr. __________________________ President NORTHWESTERN PUBLIC SERVICE COMPANY By /s/ Daniel K. Newell ___________________________ Title: MYERS ACQUISITION COMPANY By /s/ Valeria Schall ____________________________ Title: EX-10 9 EXHIBIT 10.26 MANAGEMENT AGREEMENT THIS AGREEMENT, dated November 3, 1995, is made and entered into among Empire Gas Corporation, a Missouri corporation ("Empire"), Northwestern Public Service Company, a Delaware corporation ("NWPS"), and Myers Acquisition Company, a Delaware corporation ("MAC"), with respect to the following facts: A. Empire, NWPS and MAC have entered into that certain Agreement Among Initial Stockholders and MAC Inc., dated November 3, 1995 (the "Stock Agreement"), which, among other things, requires this Agreement to be made for the reasons recited in the Stock Agreement (such recitals being incorporated herein by this reference). B. MAC, NWPS and Empire immediately following the execution of this Agreement, will be entering into that certain Agreement of Merger by and among Empire, NWPS, MAC, Myers Propane Gas Company, James T. Myers, and William J. Myers dated November 3, 1995 providing for the acquisition by MAC of Myers Propane Gas Company ("the Myers Acquisition"). NOW, THEREFORE, in consideration of the premises and the agreements exchanged herein, the parties hereto agree as follows: ARTICLE 1: ENGAGEMENT TO PLAN AND MANAGE MAC, on behalf of itself, and for the benefit of its stockholders (of which NWPS is a principal one), hereby engages Empire to perform the planning and management of the assets and business operations of MAC (the "Management Services"), and Empire hereby accepts such engagement and agrees to perform the Management Services, subject to the direction of the Board of Directors of MAC (the "Board") and in accordance with the terms of this Agreement. Empire hereby acknowledges and agrees that its opportunity to profit shall be derived from its ability to manage MAC. ARTICLE 2: BUSINESS PLAN; BUDGET SECTION 2.01 INITIAL BUSINESS PLAN. The parties hereto have developed a business plan, a copy of which is attached as Exhibit A to this Agreement ("Initial Plan"), for the conduct of business operations of MAC after the completion of the Myers Acquisition (the "MAC Operations"), showing: (a) The general longer-term objectives (to be accomplished in a three to five year period of time). (b) The preliminary plans for conducting the MAC Operations through the balance of MAC's fiscal year ending June 30, 1996 ("fiscal 1995"), and fiscal 1996 including the plant, facilities and equipment (at various locations), and the personnel staffing at the locations, needed to carry on the MAC Operations following the Myers Acquisition and during the longer term of the plan SECTION 2.02 INITIAL BUDGET. The parties hereto have developed a budget ("Initial Budget") for the conduct of the MAC Operations for the balance of fiscal 1995 and fiscal 1996 following the Myers Acquisition in accordance with the Initial Plan. A copy of the Initial Budget is attached as Exhibit B to this Agreement. SECTION 2.03 UPDATED AND AMENDED BUSINESS PLANS AND BUDGETS. At least 30 days prior to January 31, 1996 and at least 30 days prior to each June 30 thereafter until the term of this Agreement expires or is terminated (hereinafter sometimes referred to as the "end of the term of this Agreement"), Empire will develop, in consultation with NWPS, and obtain the approval of the Board of: (a) An updated version of the Initial Plan (or of the most recent previously updated version thereof) to provide a detailed business plan for the MAC Operations for the 18 months following such June 30 and a longer-term business plan for the three- to five-year period following such June 30 (the Initial Plan or updated version thereof in effect at a given time, including all amendments thereto up to such time, is hereinafter referred to as the "Applicable Plan"); and (b) An updated version of the Initial Budget (or of the most recent previously updated version thereof) to provide a budget for the conduct of the MAC Operations for the 18 months following such June 30, (the Initial Budget or updated version thereof in effect at a given time for a particular period, including all amendments thereto up to such time, is hereinafter referred to as the "Applicable Budget"). Empire may amend an Applicable Plan or an Applicable Budget, or both, at any time and from time to time by preparing such amendment, submitting the same to the Board with such supporting information as the Board may require, and obtaining the Board's approval thereof, but no such amendment shall be effective unless and until approved by the Board. SECTION 2.04 ACTING WITHIN APPLICABLE PLAN AND BUDGET. Empire shall manage the MAC Operations, commencing with the Myers Acquisition and continuing thereafter until the end of the term of this Agreement, in accordance with the Applicable Plan and within the Applicable Budget, without obtaining approval of the Board of the details of such management, but subject to approvals by the Board required by law and to the requirements for approval by the Board specified in Article 7 herein. Notwithstanding the foregoing: (a) Empire may take such management action with respect to the MAC Operations as it may deem advisable to respond to, and attempt to curtail or avoid material adverse consequences resulting from material unplanned adverse developments when (reasonably) there is inadequate time in which to secure advance approval of such action by the Board, but in such event the situation and action taken shall be submitted with reasonable promptness to the Board for such further action as the Board may then deem advisable; (b) In addition to action taken pursuant to preceding paragraph (a), Empire may cause MAC to make maintenance capital expenditures which individually exceed the Applicable Budget for such expenditures or category of expenditures by not more than $5,000, but only if the Board is notified prior to, or at the time of such expenditures, while such expenditures in excess of such $5,000 limit may not be made or committed to unless authorized in advance by the Board; and (c) If Empire becomes aware that aggregate operating or administrative expenses likely will be 10% or more in excess of what is provided for in the then Applicable Budget, Empire shall promptly notify the Board of such expected excess. SECTION 2.05 OTHER ACTION. Any action that needs to be taken in the performance of the Management Services that is not provided for in an Applicable Plan or Applicable Budget or otherwise in provided for in this Agreement shall be taken in accordance with Empire's good faith judgment as to what is in the best interests of MAC. ARTICLE 3: EMPIRE'S SERVICES SECTION 3.01 EFFORT REQUIRED. Empire, under the management of Paul S. Lindsey, Jr. ("Lindsey") as the chief executive officer of Empire, shall devote sufficient time and resources to reasonably assure successful performance by Empire for MAC of the Management Services in accordance with this Agreement. (new) SECTION 3.02 MANAGEMENT FEE. Empire receive a management fee equal to 10% of the amount by which MAC's EBITDA exceeds the following amounts: Year Ended EBITDA June 30, 1996 125% of the budgeted amount under Section 2.2 June 30, 1997 $1,062,500 June 30, 1998 $1,156,250 June 30, 1999 $1,218,750 June 30, 2000 $1,281,250 Each year thereafter $1,312,500 ARTICLE 4: COMPETITION BETWEEN EMPIRE AND MAC SECTION 4.01 NON-COMPETITION; ACQUISITIONS. (a) While this Agreement is in effect and for a period of one year thereafter, Empire and MAC will not solicit customers and employees from each other. (b) Until the end of the term of this Agreement and for a period of two years thereafter, Empire and MAC shall not compete in each others area of interest for new customers within such area. ARTICLE 5: ACCOUNTING SYSTEM; ACCOUNTANTS SECTION 5.01 ACCOUNTING SYSTEM. At all times until the end of term of this Agreement, Empire will: (a) Cause MAC to implement and maintain a system of accounting for the assets, liabilities, operations and cash flows of MAC, and internal controls over accounting and financial matters for MAC, similar to the system and controls maintained by Empire for itself or, if requested by the Board as the Board shall reasonably require; and in connection with the foregoing, Empire shall cause MAC to provide NWPS with such financial statements and reports with respect to assets, liabilities, operations and developments affecting the business or assets of MAC, as NWPS may require (taking into account its accounting and reporting requirements), and (b) Cause MAC to engage a so-called "Big Six" firm of independent public accountants (or whatever, at the time, is the equivalent of the present Big Six) approved by the Board to make annual audits of MAC; but to the most efficient extent possible, Empire shall cause MAC to engage Baird, Kurtz & Dobson ("BK&D") to perform detailed compliance work to assist the designated firm of independent accountants in completing the quarterly reviews and annual audits. SECTION 5.02 AUDIT OR REVIEW. At all times until the end of the term of this Agreement, Empire will allow the Board and its authorized representatives, upon at least seven-days' prior notice to, and in coordination with, the President and Chief Executive Officer of MAC, to audit or review the books of account and records of all kinds kept for MAC, inspect MAC's properties, consult with MAC's personnel and with Empire's personnel involved in Empire's performance of services under this Agreement, and generally to observe and monitor the operation, management and accounting for MAC's business and assets; provided, however, that such review and/or audit shall not last longer than five business days unless Empire is in default under this Agreement. Such reviews shall be restricted to no more than once a month at the home office of MAC, as maintained by Empire, through December 31, 1996 and quarterly thereafter, and unrestricted at all of MAC's retail locations. All reports resulting from these audits or reviews shall be promptly furnished to the Board. ARTICLE 6: INSURANCE FOR MAC At all times while this Agreement is in effect insurance covering liability exposures of MAC and its Board, with types and amounts of coverages as shall be approved by the Board, shall be obtained and maintained for MAC (at MAC's expense, and at no cost to Empire) by Empire as part of the Management Services. Empire and NWPS shall be named as a named insured under such coverages. The cost of such insurance shall be included in each Applicable Budget. Empire shall provide NWPS with certificates of insurance and copies of binders showing NWPS as named insured under such coverages, effective no later than the date of the closing of the Myers Acquisition. ARTICLE 7: MAC BOARD APPROVAL REQUIRED The assets and business of MAC shall be managed as provided herein by Empire while this Agreement remains in effect, subject to the overall direction and super- vision by the Board. However, Empire shall not take for MAC or cause MAC to take, any of the following actions without having obtained the prior approval of the Board: (a) Sell, lease, transfer or otherwise dispose of, or enter into any agreement or arrangement for any sale, lease, transfer or other disposition of assets of MAC, except for (i) a sale, lease, transfer or other disposition specifically provided for in the Applicable Budget, or (ii) the sale of services to customers and the sale or lease of products in the ordinary course of business of MAC; (b) Purchase any goods or services from, or sell any goods or services to, or enter into or amend any agreement or other transaction with, Empire or any affiliate of Empire that is not on an arm's-length basis; (c) Cause MAC to incur any indebtedness for borrowed money (including, without limitation, any capitalized lease obligations) or to enter into an agreement for such borrowing (or leasing) with the exception of seller financing of the purchase of particular assets; (d) Mortgage or otherwise grant a lien upon or security interest in any assets of MAC except liens upon acquired assets to secure seller financing for the acquisition of such assets; (e) Cause MAC to become a surety or guarantor of, or an accommodation party to, or otherwise become or be contingently liable for any indebtedness or obligations of any other party, other than as a result of endorsing to negotiate payment of instruments received from customers in payment for goods and services in the ordinary course of business in amounts less than $25,000; (f) Cause MAC to enter into any joint venture or similar relationship or acquire any stock, debt obligations or other securities of, or loan to or make any investment in or capital contribution to any other party; (g) Institute, defend, or settle any legal proceeding on behalf of MAC, except legal proceedings against MAC shall be defended and if the matter is partially or wholly covered by insurance, it may be settled if the settlement payment to be made by MAC is an amount not exceeding the deductible under such insurance coverage for such matter and all other matters not partially or wholly covered by insurance may be settled if the settlement payment to be made by MAC is an amount not exceeding $10,000 per matter; (h) Enter into any new contract for the leasing, as lessee, of any real or personal property, other than operating leases entered into in the ordinary course of business involving a term of not more than one year total or rental of not more than $2,500, and other than retail location operating leases; (i) File or consent to any petition in bankruptcy, reorganization, liquidation or similar proceeding with respect to MAC, or seek, consent to or acquiesce in the appointment of a trustee, receiver or liquidator of MAC or of all or any part of the assets of MAC, or make an assignment for the benefit of MAC's creditors; (j) Confess a judgment against MAC greater than $2,500; (k) Amend, modify, supplement or waive any provision of any contract, the making of which was approved or required to be approved by the Board; (l) Make any employment, severance, consulting or similar agreement, including any agreement with a labor union, or amend the same, for MAC with any other party involving payments by MAC greater than $2,500, or adopt any employee benefit plan for employees of MAC (new) that is dissimilar from Empire's plan; (m) Open or close a primary office, plant or other business location for MAC, or make an agreement or commitment of any kind to do so; or (n) Take any action in contravention of this Agreement. ARTICLE 8: DIRECTORS AND OFFICERS SECTION 8.01 DIRECTORS AND OFFICERS OF MAC. During the term of this Agreement, the provisions of Section 3 of the Stock Agreement (which are hereby incorporated herein by this reference) shall be carried out by Empire and NWPS even if the Stock Agreement ceases to be in effect for any reason. ARTICLE 9: TERM; TERMINATION SECTION 9.01 TERM OF THIS AGREEMENT; TERMINATION. The term of this Agreement shall be in effect until it expires on June 30, 2000, or at the end of any fiscal year thereafter, if preceded by at least six-months' written notice by MAC or one-year's written notice by Empire of its desire to terminate as of such date, unless sooner terminated at the election of the Board, and upon giving notice to Empire of such election, on any earlier date in the event of any of the following: (a) Upon default by Empire under this Agreement which remains uncured after 30 days written notice of such default has been given to Empire by MAC or NWPS, (b) Upon any change in ownership of Empire which results in Lindsey having less than voting control (as a stockholder) of Empire; (c) Upon the filing or consent to any petition in bankruptcy, reorganization, liquidation or similar proceeding with respect to Empire, or the appointment of a trustee, receiver or liquidator for Empire for all or a substantial part of its assets, or the making of an assignment by Empire for the benefit of its creditors; (new)(d) Upon the failure of MAC to achieve EBITDA results for the period beginning with the Myers' acquisition and ending on June 30, 1996, in amount equal to 85% of the budgeted EBITDA as presented in the budget called for under Section 2.02. (e) Upon the failure of MAC to achieve the following cumulative (consolidated) EBITDA results for the periods beginning with July 1, 1996, and ending on the dates indicated below, as follows; (i) for the period ended June 30, 1997, cumulative EBITDA of at least $850,000; (ii) for the period ended June 30, 1998, cumulative EBITDA of at least $1,775,000; (iii) for the period ended June 30, 1999 cumulative EBITDA of at least $2,750,000; (iv) for the period ended June 30, 2000 cumulative EBITDA of at least $3,775,000; (v) for periods (if any) subsequent to June 30, 2000, cumulative EBITDA at the end of each fiscal year of MAC shall be at least $1,050,000 higher than at the end of the previous fiscal year; (f) If MAC at any time is in default with respect to more than $50,000 of its borrowings; (g) If Empire at any time is in default with respect to its outstanding publicly-held bonds; (h) By mutual agreement of the parties or when required by final court order or final award of arbitrators; or (i) If the stock of MAC, or stock entitling the holder or holders thereof to cast a majority of the votes in the general election of directors of MAC, or substantially all of the assets of MAC, is sold, directly or by merger or consolidation. (j) If Empire defaults under any of its obligation under the Management Agreement among Empire, Northwestern Growth Corporation and SYN, Inc. dated May 17, 1995, as the same may be amended from time to time. The term of this Agreement also may be terminated at the election of Empire and upon giving notice to NWPS and MAC of such election in the event of any of the following: (i) If the stock of MAC, or stock entitling the holder or holders thereof to cast a majority of the votes in the general election of directors of MAC, or substantially all of the assets of MAC, is sold, directly or by merger or consolidation; or (ii) If any of the terms of this Agreement are changed without the consent of Empire. SECTION 9.02 TRANSITION UPON TERMINATION. (a) Upon expiration on or earlier termination of this Agreement, the parties hereto will cooperate to the fullest extent possible to facilitate the creation of a staff of management personnel, and the establishment of facilities owned or leased by MAC or otherwise available for use by MAC on terms acceptable to MAC, to enable MAC to plan and manage its business operations and assets without the services that would have been provided by Empire under this Agreement had this Agreement remained in effect: and until that is accomplished (and the parties hereto shall make a good faith effort to accomplish it promptly), MAC shall have the use of the personnel and facilities of Empire that had been devoted in whole or in part to such planning and management at a cost not to exceed the amount most recently budgeted therefor in the last Applicable Budget, or at Empire's cost in the absence of such budgeted amount. (b) Notwithstanding the foregoing, in the event this Agreement is terminated by Empire, MAC shall have up to 18 months (including the 12-months' notice period) to plan and execute an operational and transition plan for achieving what is provided for in preceding subsection (a). SECTION 9.03 PUTS AND CALLS. (a) In the event this Agreement is terminated by Empire, MAC shall have a call right to purchase Empire's shares of common stock of MAC at a price equal to 100% of fair market value, determined by appraisal, and Empire shall have a put right to sell to MAC Empire's shares of common stock of MAC at a price equal to 90% of fair market value, determined by appraisal, provided that, in case of a put by Empire. MAC has adequate liquidity, as reasonably determined by its Board, to make such purchase. (b) In the event this Agreement is terminated by MAC, MAC shall have a call right to purchase Empire's shares of common stock of MAC at a price equal to 110% of fair market value, determined by appraisal, and Empire shall have a put right to sell to MAC Empire's shares of common stock of MAC at a price equal to 100% of fair market value, determined by appraisal provided that in the case of a put by Empire, MAC has adequate liquidity, as reasonably determined by its Board, to make such purchase. (c) For these purposes, fair market value of the shares of common stock of MAC to be sold and purchased shall be determined by an appraiser or investment banker. ARTICLE 10: MISCELLANEOUS SECTION 10.01 NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered in person,(b) one business day after deposit with a nationally recognized overnight courier service, or (c) the business day on which it is sent and received by facsimile, as follows: If to MAC, to: Myers Acquisition Company c/o Northwestern Public Service Company 33 Third Street, S.E. Huron SD 57350 Fax No. (605) 353-8286 Attn: Rogene Thaden, Treasurer and to Myers Acquisition Company c/o Empire Gas Corporation 1700 South Jefferson Street Lebanon, MO 65536 Fax No. (417) 532-8529 Attn: Valeria Schall, Vice President If to NWPS: Northwestern Public Service Company 33 Third Street, S.E. Huron SD 57350 Fax No. (605) 353-8286 Attn: Daniel K. Newell, Vice President- Finance If to Empire: Empire Gas Corporation PO Box 303 1700 South Jefferson Lebanon, MO 65536 Fax No. (417) 532-8529 Attn: Paul S. Lindsey, Jr., President or to such other person or address as any party hereto shall specify in a notice in writing given to the other parties hereto. SECTION 10.02 ASSIGNMENT RESTRICTED; SUCCESSORS AND ASSIGNS. No party hereto may assign its interest in this Agreement without first obtaining the written consent of the other parties hereto, except that this Agreement may be assigned by MAC, without obtaining such consents, to (and in connection with the closing of the acquisition by) an acquirer of substantially all of the business and assets of MAC, provided that written notice of such assignment is given to the other parties hereto, and except further that this Agreement may be assigned by NWPS to any wholly-owned subsidiary of NWPS, without obtaining such consents, provided written notice of such assignment is given to the other parties hereto. SECTION 10.03 SEVERABILITY. Should any provision of this Agreement for any reason be declared invalid or unenforceable, such decision shall not affect the validity or enforceability of any of the other provisions of this Agreement, which remaining provisions shall remain in full force and effect and the application of such invalid or unenforceable provision to persons or circumstances other than those as to which it is held invalid or unenforceable shall be valid and be enforced to the fullest extent permitted by law. SECTION 10.04 INTERPRETATION. The article and section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. SECTION 10.05 ARBITRATION. Any dispute arising under this Agreement shall be resolved by arbitration. Each of the parties hereto agrees (a) that each such arbitration shall be initiated and conducted in accordance with the rules and procedures of the American Arbitration Association ("AAA"), (b) to submit all such disputes to the office of the AAA in charge of arbitrations conducted in the metropolitan area of the City of Minneapolis, Minnesota, and (c) to have each such arbitration proceeding conducted in the metropolitan area of the City of Minneapolis, Minnesota, and (d) to be subject to the jurisdiction of the arbitrators in the City of Minneapolis, Minnesota upon notice given in accordance with the provisions of this Agreement that a dispute has been submitted to such office of the AAA. SECTION 10.06 GOVERNING LAW. This Agreement shall be governed by the laws of the State of Delaware (regardless of the laws that in might otherwise under applicable principles of conflicts of law) as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies. SECTION 10.07 COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which collectively shall constitute one and the same agreement. IN WITNESS HEREOF, the parties hereto have executed this Agreement as of the date first above written. Empire Gas Corporation Myers Acquisition Company By:/s/ Paul S. Lindsey, Jr. By:/s/ Valeria Schall ________________________ ______________________ Its President Title: Northwestern Public Service Company By:/s/ Daniel K. Newell ________________________ Title: EX-10 10 EXHIBIT 10.27 AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT AND AMENDMENT NO. 2 TO SUPPLEMENT A TO LOAN AND SECURITY AGREEMENT September 28, 1995 Empire Gas Corporation 1700 South Jefferson Street Lebanon, Missouri 65536 Attn: Valeria Schall Ladies and Gentlemen: Reference is made to the Loan and Security Agreement (as amended and supplemented, the "Loan Agreement"), dated as of June 29, 1994 among Empire Gas Corporation ("Borrower"), the Lenders party thereto (the "Lenders") and Bank of America Illinois, f/k/a Continental Bank, f/k/a Continental Bank N.A., as a Lender and as Agent for the Lenders ("BAI"). Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to such terms in the Loan Agreement. Borrower has requested that Lenders agree to retroactively (i) amend Section 5.18(a) of the Loan Agreement to permit advances to certain employees, which advances will be reduced to be in compliance with Section 5.18, as amended hereby, prior to October 31, 1995, (ii) increase the amount of capital expenditures permitted to be made by Borrower during the 1995 Fiscal Year pursuant to Section 6.2 of Supplement A to the Loan Agreement ("Supplement A"), and (iii) amend the Interest Coverage Ratio contained in Section 6.3 of Supplement A. Lenders have agreed to the foregoing on the terms, and pursuant to the conditions, contained herein, including, without limitation, the condition that Borrower agrees to amend the Loan Agreement to require Borrower to obtain the prior written consent of requisite Lenders before consummating any Acquisition. Therefore, the parties hereto agree as follows: A. Amendment to Loan Agreement. The Loan Agreement is hereby amended, retroactively effective as of June 30, 1995, as follows: (i) Section 5.12. Section 5.12 of the Loan Agreement is hereby amended to add a new subsection (d) thereto, which shall be inserted immediately following subsection (c) therein and immediately prior to the semicolon therein, and shall read as follows: "or (d) purchase or otherwise acquire, or agree to purchase or otherwise acquire, any of the stock, assets or business of any Person (including, without limitation, by means of an Acquisition)" (ii) Section 5.15. Subsection (h) of Section 5.15 of the Loan Agreement is hereby amended and restated in its entirety to read as follows: "(h) 'Acquisition Indebtedness' as that term is defined in the Senior Loan Documents in the aggregate principal amount outstanding as of September 28, 1995." (iii) Section 5.18. Subsection (a) of Section 5.18 of the Loan Agreement is amended and restated in its entirety to read as follows: "(a) advances not exceeding $72,000 to each of Jerry Mulligan, Daniel Binning and Kenneth DePrinzio which do not remain outstanding in an amount which exceeds the limits set forth below after October 31, 1995 (the "Agreed Loans") and advances to other employees of Borrower or employees of any of the Subsidiaries for travel or other ordinary business expenses, provided that, the aggregate amount of such advances (other than the Agreed Loans prior to October 31, 1995) outstanding at any one time shall not exceed $25,000 for any single employee and $75,000 in the aggregate for all employees;" B. Amendment to Supplement A. Supplement A is hereby amended, retroactively effective as of June 30, 1995, as follows: (i) Section 6.2. Section 6.2 of Supplement A is hereby amended and restated in its entirety as follows: "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 commit to purchase or otherwise acquire or permit its Subsidiaries 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 a startup or an Acquisition permitted under the Agreement, would exceed the following amounts during the corresponding periods: Period Capital Expenditures 1995 Fiscal Year $4,200,000 1996 Fiscal Year 3,000,000 1997 Fiscal Year 3,000,000" (ii) Section 6.3. The first paragraph of Section 6.3 of Supplement A to the Loan and Security Agreement is hereby amended and restated in its entirety, as follows: "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 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 measured on the last day of any calendar month in any period set forth below, calculated for the 12 months ending on such date, and determined for Borrower and its Subsidiaries on a consolidated basis, and in accordance with GAAP, to be less than the ratio set forth below opposite such period: Interest Coverage Period Ratio June 1, 1995 through and 0.8:1.0 including September 30, 1995 October 1, 1995 through and 1.0:1.0 including December 31, 1995 January 1, 1996 through and 1.1:1.0 including February 29, 1996 March 1, 1996 through and including May 31, 1996 1.2:1.0 June 1, 1996 and thereafter 1.4:1.0 C. Scope. This Amendment No. 1 to Loan and Security Agreement and Amendment No. 2 to Supplement A to Loan and Security Agreement ("Amendment") shall have the effect of amending the Loan Agreement, Supplement A and the Related Agreements as appropriate to express the agreements contained herein. In all other respects, the Loan Agreement, Supplement A and the Related Agreements shall remain in full force and effect in accordance with their respective terms. D. Condition to Effectiveness. This Amendment shall be effective immediately upon (i) receipt by BAI of an amendment fee of $10,000, which fee is fully earned and payable as of the date hereof and (ii) the execution of this Amendment by BAI, on behalf of the Lenders, acceptance hereof by Borrower and each other Obligor, and delivery hereof to BAI at 231 South LaSalle Street, Chicago, Illinois 60690, Attention: Mark Cordes, on or prior to September 28, 1995. Very truly yours, BANK OF AMERICA ILLINOIS, f/k/a CONTINENTAL BANK, f/k/a CONTINENTAL BANK, N.A., ON BEHALF OF THE LENDERS By /s/ John P. Hesselmann _________________________ Its Sr. Vice President Acknowledged and agreed to this 28th day of September, 1995. EMPIRE GAS CORPORATION By /s/ Paul S. Lindsey, Jr. ___________________________ Its President Acknowledgment and Acceptance of Guarantors Each of the undersigned is a party to the Master Corporate Guaranty dated June 29, 1994 in favor of BAI, as Agent for itself and Lenders (the "Guaranty"), pursuant to which each of the undersigned has guaranteed the Obligations of Borrower under the Loan Agreement. Each of the undersigned hereby acknowledges receipt of the foregoing Amendment No. 1 to Loan and Security Agreement and Amendment No. 2 to Supplement A to Loan and Security Agreement ("Amendment"), accepts and agrees to be bound by the terms thereof, ratifies and confirms all of its obligations under the Guaranty, and agrees that the Guaranty shall continue in full force and effect as to it, notwithstanding such Amendment. Acknowledged and Agreed to this 28th day of September, 1995. EACH OF THE SUBSIDIARIES OF EMPIRE GAS CORPORATION LISTED ON EXHIBIT A ATTACHED HERETO By /s/ Valeria Schall __________________________________ Vice President of each Subsidiary EX-10 11 EXHIBIT 10.28 AGREEMENT AMENDING MANAGEMENT AGREEMENT THIS AGREEMENT, dated July 31, 1995, is made and entered into among Empire Gas Corporation, a Missouri corporation ("Empire"), Northwestern Growth Corporation, a South Dakota corporation ("NGC"), and SYN Inc., a Delaware corporation ("SYN"), to amend the Management Agreement, dated May 17, 1995, among such parties. NOW THEREFORE, the parties hereto agree that the above- mentioned Management Agreement is hereby amended to change the definition of the term "Stock Agreement" therein to mean the Amended and Restated Agreement Among Initial Stockholders and SYN Inc., dated as of May 17, 1995, entered into by Empire, NGC and SYN. IN WITNESS HEREOF, the parties hereto have executed this Agreement as of the date first above written. Empire Gas Corporation SYN Inc. By:/s/ Paul S. Lindsey, Jr. By:/s/ Paul S. Lindsey, Jr. ________________________ ________________________ Its President Title:President Northwestern Growth Corporation By:/s/ Richard R. Hylland __________________________ Its President EX-10 12 EXHIBIT 10.29 AGREEMENT AMENDING AND RESTATING AGREEMENT AMONG INITIAL STOCKHOLDERS AND SYN INC. THIS AGREEMENT, dated July 31, 1995, is made and entered into among Empire Gas Corporation, a Missouri corporation ("Empire"), Northwestern Growth Corporation, a South Dakota corporation ("NGC"), and SYN Inc., a Delaware corporation ("SYN"), with respect to the following facts: A. The parties hereto previously entered into that certain agreement, dated May 17, 1995, titled "Agreement Among Initial Stockholders and SYN Inc." B. Such parties now desire to amend said Agreement Among Initial Stockholders and SYN Inc., effective as of its May 17, 1995 date, so as to make changes therein to accommodate the use of certain stock of SYN as collateral to secure financing obtained by or for SYN, and to restate in its entirety the Agreement Among Initial Stockholders and SYN Inc., as thus amended. NOW THEREFORE, the parties hereto agree that said Agreement Among Initial Stockholders and SYN Inc. is hereby amended effective as of its original date of May 17, 1995, and, as thus amended, is restated in its entirety to read as attached hereto as Exhibit I and that the amended and restated agreement in such Exhibit I may be treated as the agreement of the parties thereto without reference to or display of this Agreement. IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement to be executed in its name as of the date first above written. EMPIRE GAS CORPORATION By /s/ Paul S. Lindsey, Jr. __________________________ President NORTHWESTERN GROWTH CORPORATION By /s/ Richard R. Hylland ___________________________ President SYN INC. By /s/ Paul S. Lindsey, Jr. ___________________________ Title President EXHIBIT I AMENDED AND RESTATED AGREEMENT AMONG INITIAL STOCKHOLDERS AND SYN INC. THIS AGREEMENT, dated as of May 17, 1995, is made and entered into among Empire Gas Corporation, a Missouri corporation ("Empire"), Northwestern Growth Corporation, a South Dakota corporation ("NGC"), and SYN Inc., a Delaware corporation ("SYN"), with respect to the following facts: A. Empire currently is engaged in the business of distributing and selling at retail liquified petroleum ("LP") gas and appliances, and has a management experienced in the operation of such business. B. NGC is a wholly-owned subsidiary of Northwestern Public Service Company ("NWPS") and has as one of its objectives the making of investments that could benefit NWPS and its stockholders. C. Empire and NGC, acting together, have made a successful bid to acquire the LP gas distribution and appliance business of Synergy Group Incorporated ("Synergy"; such acquisition being hereinafter called the "Synergy Acquisition"), in what is planned to be the first step in the proposed development by Empire and NGC, on a team basis, of a significant position in the LP gas distribution industry. Empire and NGC have contemplated, in their bidding for the Synergy Acquisition, that they will rely principally on Empire for management expertise and on NGC to provide or arrange the financing for the Synergy Acquisition, and that the success of the Synergy Acquisition will depend in large measure upon the cost savings and operating improvements expected to be achieved by having Empire do the planning and management of the business of Synergy and its subsidiaries, under the direction of the Board of Directors of SYN. D. Empire and NGC have caused SYN to be incorporated to serve as the vehicle (directly or through subsidiaries to be created) for making the Synergy Acquisition. E. Empire and NGC, on behalf of SYN, are concluding the negotiation of the definitive agreement (the "Synergy Acquisition Agreement") for the Synergy Acquisition, and need to provide for (i) the initial capitalization of SYN, (ii) certain loan financing for SYN, (iii) the management of SYN and (iv) for certain matters pertaining to the ownership of shares of stock of SYN. NOW THEREFORE, in consideration of the premises and the agreements exchanged herein, the parties hereto agree as follows: ARTICLE 1: INITIAL CAPITALIZATION OF SYN; STOCK SUBSCRIPTIONS AND RESERVATIONS OF STOCK SECTION 1.01 INITIAL AUTHORIZED STOCK OF SYN. SYN has been incorporated by Empire and NGC with an initial authorized capitalization (as set forth in Article FOURTH of SYN's Certificate of Incorporation, a true and complete copy of which is attached hereto as Exhibit A), consisting of 100,000 shares of common stock, par value 1CENT per share (the "Common Stock"; and the 100,000 shares of Common Stock referred to herein shall only be increased with the prior written agreement of Empire and NGC unless such increased number of shares is to be issued in an arm's length transaction to a party who is not affiliated with any of the parties to this Agreement), and 100,000 shares of preferred stock, par value 1CENT per share, issuable in one or more series (the "Preferred Stock"). Prior to the consummation of the Synergy Acquisition, SYN shall, and Empire and NGC shall cause SYN to, take all action necessary to create and authorize the issuance of a series of the Preferred Stock, namely, the Series A Cumulative Preferred Stock, consisting of 70,500 shares, the terms of which shall be as set forth in Exhibit B attached hereto, with such changes therein as the parties hereto may approve before such series is created (the "Series A Preferred Stock"). SECTION 1.02 SUBSCRIPTIONS AND OPTION FOR STOCK. NGC has previously purchased, and hereby subscribes for, stock of SYN, and NGC has granted Empire an option to purchase certain shares of stock from NGC, as follows: (a) SYN and NGC acknowledge that NGC has purchased from SYN, and SYN has sold and issued to NGC, 1,000 shares of Common Stock for a cash purchase price of $1,000.00 which has been paid by NGC to SYN, and that these shares are the only shares of stock of SYN that are currently outstanding. (b) NGC hereby subscribes for, and agrees to purchase from SYN, and SYN hereby agrees to sell and issue to NGC, an additional 71,500 shares of Common Stock for a cash purchase price of $71,500.00 to be paid at the time of such issuance, with this transaction to be consummated (the "Subscription Closing") at the First Closing, as defined in the Synergy Acquisition Agreement, unless an earlier time for the Subscription Closing is agreed to by the parties hereto. The obligation of NGC under its subscription in this paragraph (b) is subject to the condition (unless waived by NGC) that NGC shall have been able to obtain the funds from the Permanent Financing or the Temporary Financing, as those terms are defined in the Synergy Acquisition Agreement, at or prior to the time of the Subscription Closing. (c) NGC hereby subscribes for, and agrees to purchase, or to cause its parent corporation, NWPS, to purchase from SYN, and SYN hereby agrees to sell and issue to NGC or NWPS, as the case may be, 68,000 shares of Series A Preferred Stock for a cash purchase price of $1,000 per share ($68,000,000.00 total), with this transaction to be consummated at the Subscription Closing. The obligation of NGC under its subscription in this paragraph (c) is subject to the condition (unless waived by NGC) that NGC or NWPS shall have been able to obtain the funds from the Permanent Financing or the Temporary Financing, as those terms are defined in the Synergy Acquisition Agreement, at or prior to the time of the Subscription Closing and that, at the time of the Subscription Closing, the First Closing (as defined in the Synergy Acquisition Agreement) is concurrently occurring or is reasonably assured of being consummated immediately thereafter. (d) Empire hereby subscribes for, and agrees to purchase from SYN, and SYN hereby agrees to issue and sell to Empire, 10,000 shares of Common Stock (which shall represent 10% of the issued and outstanding Common Stock) for a cash purchase price of $10,000 to be paid at the time of such issuance, with this transaction to be consummated at the Subscription Closing. The obligation of Empire under its subscription in this paragraph (d) is subject to the condition (unless waived by Empire) that NGC consummates its purchase of shares of Common Stock under paragraph (b) above in this Section 1.2 at the Subscription Closing. (e) NGC hereby grants to Empire an option to purchase from NGC, at a price of $1.00 per share, up to 20,000 of the shares of Common Stock which shall represent 20% of the issued and outstanding Common Stock, subject to NGC acquiring such shares pursuant to paragraph (b) above in this Section 1.2. Such option may be exercised at any time after September 30, 1995 and prior to September 30, 1997, or the Determination Date (as defined in Section 1.04 herein), whichever is earlier, by Empire's giving written notice of such exercise to NGC. After the giving of such notice, NGC shall assign and deliver to Empire the shares of Common Stock for which the stock option was exercised, as promptly as possible, but in any event within seven days, in exchange for Empire's payment to NGC of the purchase price for such shares; and the shares so assigned and delivered shall then be shares owned by Empire and shall be held by Empire subject to the terms of this Agreement. SECTION 1.03 RESERVATIONS OF STOCK FOR ISSUANCE. SYN shall, and Empire and NGC shall cause SYN to, take all action necessary to reserve for initial issuance, 17,500 shares of Common Stock and 2,500 shares of Series A Preferred Stock to be issued to the Stockholders (as defined in the Synergy Acquisition Agreement) at the Second Closing (also as defined in the Synergy Acquisition Agreement), pursuant to the Synergy Acquisition Agreement. SECTION 1.04 COMMON STOCK RETURN. The following provisions of this Section 1.04 apply in the event Empire exercises the stock option granted to it in Section 1.02(e) herein: (a) The "Common Stock Return" as that term is used herein, shall be the number of shares of Common Stock of SYN which Empire hereby agrees to assign and deliver to NGC, without cost to NGC, in the event that the common equity value at a Determination Date (as defined below) is below levels specified for such date in subparagraph (iii) in this paragraph (a). The Common Stock Return shall be set in accordance with the following formula. (i) The Determination Date shall be the date on which SYN is sold (meaning a sale of substantially all of the assets of SYN and its subsidiaries, the acquisition of SYN by another, non-affiliated entity by merger or consolidation, or the sale of partnership units or shares of stock of SYN which entitle the holder thereof to cast at least a majority of the votes entitled to be cast in the general election of directors of SYN or the date on which the sale of partnership units or shares of SYN's Common Stock is closed in an underwritten public offering, for which the partnership units or shares are registered under the Securities Act of 1933, or the date on which this Agreement expires or is terminated in accordance with Section 7.02 herein, whichever of the foregoing first occurs). (ii) The value of the total outstanding Common Stock of SYN on the Determination Date (the "Value"), shall be determined by the parties hereto on the basis of the sale price for SYN if the sale of SYN is involved, or based upon the price to SYN (or the selling stockholders if SYN is not the seller) in the event an underwritten public offering of partnership units or Common Stock of SYN is involved, or on the basis of the fair market value of the outstanding Common Stock of SYN in every other event, as determined by an appraisal firm or an investment banking firm selected by the parties hereto, with such fair market value to be determined on the basis of the value of SYN and its subsidiaries as a whole, if sold as a going concern. In the event there is a combination of one or more entities with SYN, the value of SYN will be determined by either (x) a fair market value appraisal or (y) in the event there is a public offering within nine months after such combination, the value shall be the initial price to the public of SYN shares of Common Stock or partnership units in such public offering. (iii) For these purposes, "deemed outstanding shares of Common Stock" shall be the total of the number of shares of Common Stock issued and outstanding plus the number that would be issued and outstanding if all outstanding stock options, warrants, conversion rights and other rights to acquire shares of Common Stock were exercised, whether or not exercisable at the time. The number of shares of Common Stock of SYN constituting the Common Stock Return shall be the percentage of the deemed outstanding shares of Common Stock of SYN as of the Determination Date, determined on the basis of the following table and paragraph (b) below, if applicable: ____________________________________________________________________________ Column A Column B Column C Percentage of Percentage of deemed outstanding deemed outstanding shares of Common shares of Common Stock of SYN shall Stock of SYN shall be 0% if the Value be 7.5% if the Fiscal Year of SYN as of the Value as of the in which Determination Date Determination Date Determination Date is at least the is less than the occurs: following amount: following amount: 1996 $24,500,000 $22,250,000 1997 $30,000,000 $24,750,000 1998 $36,750,000 $27,500,000 1999 $45,000,000 $30,600,000 2000 $55,200,000 $34,000,000 After 2000 1.225 times the 1.1125 times the previous year's previous year's amount amount ____________________________________________________________________________ (b) If the Value as of the Determination Date is more than the amount in Column C in Section 1.04(a)(iii) above, but less than the amount in Column B therein, the percentage used to determine the Common Stock Return shall be a figure between 7.5% and 0% which is in proportion to what the Value is to the amounts in the two columns for the particular Determination Date. SECTION 1.05 ACQUISITION FOR INVESTMENT. Empire and NGC each represent and warrant to the other, and to SYN, as follows: It has (through its management personnel) such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its purchase of securities of SYN as provided for in this Agreement; it is acquiring such securities, and will acquire them, for investment and not with a view toward, or with any intention of, distributing or selling any of the securities and it will not sell or offer to sell or otherwise transfer any of the securities in violation of the Securities Act of 1933, as amended. ARTICLE 2: LOAN FINANCING FOR SYN NGC shall make a commercially reasonable effort to arrange for SYN, or provide SYN with, loan financing for SYN, on a fully secured basis, of up to $70,000,000 principal amount needed by SYN for the Synergy Acquisition. ARTICLE 3: LIMIT TO FINANCING OBLIGATIONS Neither Empire nor NGC, nor any of their affiliates, shall have any obligation to provide, or arrange, financing for SYN other than as expressly provided for in Articles 1 and 2 herein. ARTICLE 4: SYNERGY ACQUISITION Each of the parties hereto will make a commercially reasonable effort in cooperation with the other parties hereto, to do those things within its control to consummate the Synergy Acquisition in accordance with the terms of, and subject to the conditions in, the Synergy Acquisition Agreement. Nothing in this Agreement or otherwise shall be construed to give anyone who is not a party to this Agreement, whether under a third party beneficiary legal doctrine or otherwise, a right to enforce the provisions of this Article or to obtain relief for any failure to perform in accordance with the requirements of this Article. ARTICLE 5: MANAGEMENT OF SYN SECTION 5.01 At or before the First Closing (as defined in the Synergy Acquisition Agreement), the parties hereto will enter into a management agreement in substantially the form attached hereto as Exhibit C, or with such changes therein as the parties hereto hereafter agree upon (the "Management Agreement"), pursuant to which the planning and management of the business of SYN subsequent to the Second Closing (as defined in the Synergy Acquisition Agreement) will be conducted by Empire under the direction of the Board of Directors of SYN, as provided therein. SECTION 5.02 DIRECTORS AND OFFICERS OF SYN. (a) For purposes of this Agreement, "Control Period" means the period of time commencing on the date of this Agreement and continuing either (i) until this Agreement is terminated pursuant to Section 7.02 herein because of the termination of the Synergy Acquisition Agreement without the Synergy Acquisition having been completed or (ii) until a time after the First Closing, as defined in the Synergy Acquisition Agreement, when (A) the Control Period is terminated by agreement of the parties hereto, (B) NGC no longer owns a majority of the shares of Common Stock of SYN deemed to be outstanding (determined as provided in Section 1.4 herein), (C) Empire no longer owns at least 20% of the shares of Common Stock of SYN deemed to be outstanding or has an option to acquire at least that amount of shares, or (D) when SYN consummates an underwritten public offering of partnership units or shares of its Common Stock, registered under the Securities Act of 1933, whichever of (A), (B), (C) or (D) first occurs. (b) Throughout the Control Period, NGC and Empire shall vote their voting shares of stock of SYN that are capable of being voting in a general election of directors of SYN (i.e., not including the Series A Preferred Stock or other classes or series of stock which vote only for a limited number of directors if and when a prescribed default in the payments of dividends thereon has continued for a prescribed period of time), and will otherwise use their respective commercially reasonable efforts, to carry out the following: (i) the Board of Directors of SYN shall consist of five members, three of whom shall be nominees of NGC (the "NGC Positions") and two of whom shall be nominees of Empire (the "Empire Positions"); and any vacancies occurring in the NGC Positions will be promptly filled with nominees of NGC and any vacancies occurring in the Empire Positions will be promptly filled with nominees of Empire. (ii) The officers of SYN shall include at all times a Chairman of the Board and a Vice Chairman of the Board, who will be persons nominated by NGC, and a President and Chief Executive Officer, who will be Paul S. Lindsey, Jr., and a Secretary, who will be a person nominated by Empire. The authority and duties of such officers shall be as set forth in the by-laws of SYN, a true and complete copy of which as in effect on the date hereof is attached hereto as Exhibit D. (c) To initiate compliance with preceding paragraph (b), Empire and NGC have caused the following persons to be elected to the positions with SYN indicated by their names, to serve for the period provided in the by-laws of SYN: * Chairman of the Board and director - Merle D. Lewis (an NGC nominee for such positions); * Vice Chairman of the Board and director - Richard R. Hylland (an NGC nominee for such positions); * President and Chief Executive Officer and director -- Paul S. Lindsey, Jr. (an Empire nominee as to the position of director); * Secretary and director -- Douglas A. Brown (an Empire nominee for such positions); with the fifth member of the Board of Directors of SYN (one of the NGC Positions) to be nominated by NGC, and elected, at a future time when NGC has selected the nominee for such position. ARTICLE 6: DISPOSITION OF SYN STOCK BY EMPIRE OR NGC SECTION 6.01 PERMITTED DISPOSITIONS. (a) NGC may at any time or from time to time transfer any of the securities issued by SYN which NGC may own at any time to NWPS or any wholly-owned subsidiary of NWPS, provided that notice of such transfer is given to the other parties to this Agreement and that the transferee becomes a party to this Agreement with respect to the securities so transferred, but all of such transferees and NGC shall collectively act, and be treated, as a single entity with NGC acting as their representative for purposes of this Agreement. (b) Empire may at any time and from time to time transfer any of the securities issued by SYN which Empire may own at any time to any affiliated party, provided that notice of such transfer is given to the other parties to this Agreement and the transferee becomes a party to this Agreement with respect to the securities so transferred, but all such transferees and Empire shall collectively act, and be treated, as a single entity with Empire acting as their representative for purposes of this Agreement. SECTION 6.02 RIGHTS OF FIRST REFUSAL. (a) Except as permitted by Section 1.04 and Section 6.01(b) herein, so long as the Management Agreement is in effect, Empire will not sell or otherwise dispose of any shares of Common Stock of SYN, or any other securities convertible into such shares, to any party without first offering the same for sale to NGC in writing on the same terms as are offered to or by the other party (with full disclosure of such terms to NGC) and allowing not less than 30 days after its receipt of the offer for NGC to accept the offer; and if such offer is accepted by NGC, NGC shall have 90 days in which to complete the purchase on such terms. (b) Except as permitted by Section 1.02(e) and Section 6.01(a) herein, so long as the Management Agreement is in effect, NGC will not sell or otherwise dispose of any shares of Common Stock of SYN, or any other securities convertible into such shares, to any party without first offering the same for sale to Empire in writing on the same terms as are offered to or by the other party (with full disclosure of such terms to Empire) and allowing Empire not less than 30 days after its receipt of the offer for Empire to accept the offer, and if such offer is accepted by Empire, Empire shall have 90 days in which to complete the purchase on such terms, but if Empire declines such offer, then Empire shall have the right to participate on a pro rata basis in the sale of such shares by NGC; provided, however, that the preceding provisions of this paragraph (b) shall not apply to any pledge or granting of a security interest in any shares of Common Stock of SYN, or any other securities convertible into such shares, by NGC to secure loan financing obtained by NWPS, NGC or SYN, or guaranties of such loan financing, or any sale thereof by foreclosure of such pledge or security interest, or any sale thereof in lieu of such foreclosure. ARTICLE 7: MISCELLANEOUS SECTION 7.01 RESTRICTIVE LEGEND. Each certificate issued by SYN to evidence shares of Common Stock, or securities convertible into such shares, owned by either Empire or NGC shall be endorsed with the following legend: "The shares represented by this certificate are subject to the Amended and Restated Agreement among the Corporation and its Initial Stockholders, dated as of May 17, 1995, as the same may be amended, on file with the issuing Corporation at its principal business office and may be transferred or otherwise disposed of only in accordance therewith." SECTION 7.02 TERM OF THIS AGREEMENT. This Agreement, if not sooner terminated by agreement of the parties hereto or pursuant to the next sentence, shall terminate when the Control Period terminates. In the event the Synergy Acquisition Agreement is terminated without the Synergy Acquisition having been completed, the parties hereto will liquidate and dissolve SYN as promptly as possible when all obligations of SYN under, or with respect to, the Synergy Acquisition Agreement have been discharged or provided for; and this Agreement shall then automatically terminate. SECTION 7.03 NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered in person, (b) one business day after deposit with a nationally recognized overnight courier service (c) two business days after being deposited in the United States mail, postage prepaid, first class, registered or certified mail, or (d) the business day on which it is sent and received by facsimile, as follows: (i) If to SYN, to SYN Inc. c/o Northwestern Growth Corporation 33 Third Street, S.E. Huron, South Dakota 57350 Fax No. (605) 353-8286 Attention: Richard R. Hylland, President with a copy to Empire, addressed and sent to it at the place required under this Agreement for giving notice to Empire. (ii) If to Empire, to: Empire Gas Corporation P.O. Box 303 1700 South Jefferson Lebanon, Missouri 65536 Fax No. (417) 532-8529 Attention: Paul S. Lindsey, Jr., President (iii) If the NGC, to: Northwestern Growth Corporation 33 Third Street, S.E. Huron, South Dakota 57350 Fax No. (605) 353-8286 Attention: Richard R. Hylland, President SECTION 7.04 SECTION 351 OF THE CODE. Each of the parties hereto agrees to comply with the requirements of Section 6.28 of the Synergy Acquisition Agreement, both with respect to the transaction referred to therein and with respect to any transaction under this Agreement to the extent necessary to assure the result under Section 351 of the Internal Revenue Code of 1986, as amended, for the transaction referred to in such Section 6.28. SECTION 7.05 CAPTIONS. The captions in this Agreement are included for convenience of reference only and shall be ignored in the construction and interpretation of this Agreement. SECTION 7.06 GOVERNING LAW. This Agreement shall be construed in accordance with and governed by the internal laws of the State of Delaware without regard to the choice of law principles thereof. SECTION 7.07 COUNTERPARTS. Execution of separate copies of this Agreement by each or some of the several parties hereto shall have the same force and effect as though all such parties had executed the original of this Agreement. Further, the parties hereto may execute several counterparts of this Agreement, all of which shall constitute but one and the same agreement. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its name as of the date first above written. EMPIRE GAS CORPORATION By /s/ Paul S. Lindsey, Jr. ____________________________ President NORTHWESTERN GROWTH CORPORATION By /s/ Richard R. Hylland ____________________________ President SYN INC. By /s/ Paul S. Lindsey, Jr. ____________________________ Title President EX-10 13 EXHIBIT 10.30 [Warren Petroleum Company Letterhead] April 09, 1996 Warren Petroleum Company 3900 Lakeland Drive, Suite 502 Jackson, MS 39208-8854 Domestic & Industrial Sales South Central District R.E. (Bob) Siedell, Manager 601-939-0761 Fax: 601-932-2033 Ms. Kris Lindsey Empire Gas Corporation P.O. Box 303 Lebanon, MO 65536 Dear Kris: RE: PSA 25077 - EMPIRE GAS CORPORATION - REVISION 1 By virtue of this letter, PSA 25077 for Empire Gas Corporation dated August 24, 1995, and expiring April 30, 1996, for Hattiesburg is hereby revised as follows: 1. The expiration date is extended to April 30, 1997. 2. Volumes on Attachment A are revised per the enclosed attachment. All other terms and conditions remain the same. ACCEPTED /s/ Kris Lindsey /s/ R.E. Siedell _______________________ _______________________ EMPIRE GAS CORPORATION WARREN PETROLEUM COMPANY DISTRICT MANAGER Enclosures /ed ATTACHMENT A TO PROPANE SALES AGREEMENT NO. 25077 1. TRADEMARK. Buyer acknowledges that the CHEVRON and WARRENGAS Trademarks are valuable property rights belonging to Chevron Corporation and its subsidiaries, including Chevron U.S.A. Inc. and that any use thereof by Buyer in connection with this agreement is solely for the purposes of advertising products obtained from such subsidiaries. Upon termination of this agreement, Buyer agrees that it will make no further use of such trademarks or any other mark, name or designs confusingly similar therewith. 2. QUANTITY. During the term hereof, Buyer agrees to buy the product herein specified in monthly quantities of not less than the minimum set forth below and Warren agrees to sell said quantities to Buyer. Buyer shall purchase such quantities as evenly as possible during each month. If during any period of this agreement the quantity of product Warren is obligated to deliver to Buyer is prescribed for such period and Buyer agrees to buy and Warren agrees to sell such quantity. VOLUME (IN THOUSANDS OF GALLONS) VOLUMES VOLUMES April 1300 ________ October 2000 __________ May 650 ________ November 2000 __________ June 500 ________ December 2900 __________ July 650 ________ January 2800 __________ August 800 ________ February 2400 __________ September 1200 ________ March 2100 __________ For the purpose of determining compliance with the above quantity schedule, purchase of product shall be allocated to the month in which shipment is made. Should either party fail to comply in any amount with the above schedule, the other party may elect to terminate this agreement by mailing notice of such termination on or before the 20th day of the succeeding month. If the Buyer fails to purchase 100% of the above specified minimum monthly quantities during any month or months and Warren does not elect to terminate this agreement, Warren shall not be obligated hereunder to sell to Buyer in any of the succeeding six months more than one and one half times the average monthly quantity which Buyer actually purchased during the preceding six-month period. When delivery is into tank trucks furnished by Buyer, the delivery ticket showing the quantity delivered shall be signed by the loader as the agent of Warren and by the truck driver as the agent of the Buyer; such quantities shall be conclusively presumed to have been delivered to Buyer. On or before the 1st day of each month Buyer shall inform Warren of quantities required during such month, delivery dates, and when applicable, destinations of each shipment. Warren shall not be obligated to ship less than a tank car or tank truck load. 3. METHOD OF DELIVERY: _______ By tank trucks furnished by Buyer. See Storage Agreement 7184 _______ By tank trucks furnished by Warren. _______ By tank cars furnished by with a capacity of _________ gallons each. PRICE INFORMATION Prices in effect as of ____________, 19__ Sales based on (X) Shipping point price of ( ) Destination price Shipping or Price in Pricing Points Destinations Product Cents/Gallons Freight Charges EX-10 14 EXHIBIT 10.31 [PHILLIPS 66 COMPANY LETTERHEAD] A DIVISION OF PHILLIPS PETROLEUM COMPANY REFINING, MARKETING & TRANSPORTATION SALES CONFIRMATION 756 Adams Building Bartlesville, OK 74004 Expire Gas Corp. DATE Aug. 15, 1994 P.O. Box 303 PHILLIPS' SALES CONFIRMATION NO. B-94-0045 Lebanon, MO 65536 CUSTOMER'S PURCHASE CONFIRMATION NO_________ ATTENTION Kris Lindsey THIS CONSTITUTES A CONTRACT BETWEEN OUR RESPECTIVE COMPANIES WHEREBY BOTH PARTIES HAVE AGREED TO THE FOLLOWING TERMS AND CONDITIONS OF THIS SALE. - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- 1. PERIOD: August 1, 1994, through July 31, 1995, and year to year subject to 30-day written notice of cancellation during any summer month (April-September) 2. PRODUCTS: HD-5 Propane 3. QUANTITY: Per Attachment A at Paola, KS; Jeff City, MO; E. St. Louis, Decatur & Kankakee, IL. 4. PRICE: National Accounts Posting on date of loading. 5. F.O.B.: Wire transfer, .5% (one-half percent) 5 days 6. TERMS: EFT 1/2% 5 Days 7. SHIPPING INSTRUCTIONS: ( ) TANK CAR (X) TANK TRUCK ( ) OTHER 8. MATERIAL (X) STENCHED ( ) UNSTENCHED 9. SPECIAL INSTRUCTIONS: During periods of terminal allocation at Phillips Pipe Line Co. terminals, allocation earnings shall be the lesser of: (a) monthly contract volume, (b) total summer deliveries multiplied by three (3) and divided by six (6), (c) a proportionate share of the terminal capacity calculated as a percent (%) of your forecast volume to the total forecast volume for all customers at the terminal. PHILLIPS INVOICES SHOULD BE CUSTOMER INVOICES SHOULD PLEASE FORWARD BILLS OF MAILED TO THE FOLLOWING ADDRESS: BE MAILED TO: LADING TO: ______________________________ ________________________ _______________________ ______________________________ ________________________ _______________________ ______________________________ ________________________ _______________________ __________________________________________________________________________________________ THE GENERAL PROVISIONS AND WARNING APPEARING ON THE REVERSE SIDE HEREOF ARE A PART OF THIS CONTRACT. PLEASE INDICATE YOUR ACCEPTANCE OF THIS AGREEMENT IN THE SPACE PROVIDED BELOW AND RETURN ONE COPY FOR OUR FILES. ACCEPTED AND AGREED TO THIS 22ND PHILLIPS 66 COMPANY DAY OF AUGUST, 1994 A DIVISION OF PHILLIPS PETROLEUM COMPANY BY /s/ Kris Lindsey BY /s/ J. R. Fouts __________________________ ____________________________ TITLE V.P TITLE: WHOLESALE SALES DIRECTOR
EMPIRE GAS CORP. Contract Volume Amendment 1996-1997 (Thousands of Gallons) Sales Forecast APR MAY JUN JUL AUG SEP Paola L388 214 147 0 0 186 841 Jeff City L350 376 310 229 280 487 841 E. St. Louis L330 46 48 15 22 49 95 Denver L322 35 27 18 21 30 30 La Junta L362 76 74 63 60 78 95 Sales Forecast: OCT NOV DEC JAN FEB MAR TOTAL Paola L388 290 387 638 653 508 250 3,549 Jeff City L350 853 1062 1544 1712 1218 824 9,736 E. St. Louis L330 98 111 140 193 174 101 1,092 Denver L322 160 289 343 306 290 220 1,769 La Junta L362 205 294 351 343 315 234 2,188 EX-10 15 EXHIBIT 10.32 [CONOCO LETTERHEAD] DEALER SALE CONTRACT We hereby confirm SALE to: Empire Gas Corporation DATE: April 1, 1996 Attn: Kris Lindsey CONOCO NO.: 30-9009636-0000-A12 P.O. Box 303 SYSTEM CODE: 15 LEBANON, MO 65536 ACCOUNT CODE: 407 Attention: Kristin Lindsey Per conversations between Kristin Lindsey and our Lewis Bradshaw PRODUCT: Propane (Stenched) meeting GPA specifications PRICE: See Remarks TERMS OF PAYMENT: 1% 10 Days/Net 11 Days From Date of Invoice F.O.B. ORIGIN POINT DESTINATION - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Cherokee Pipeline/Wood River - Wood River 30-9014489-0000 Various, Arkansas Cherokee Pipeline/Belle - Bell, MO 30-9009636-0000 Various, Missouri Cherokee Pipeline/Mt. Vernon - Mt. Vernon 30-9035796-0000 Various, Kansas Conoco/Medford Plant - Medford, OK 30-9014489-0000 Various, Arkansas Conoco/Ponca City Refinery - Ponca City, 30-9035796-0000 Various, Oklahoma Williams Pipeline/Carthage Terminal - Car FREIGHT: Origin Collect METHOD OF TRANSPORTATION: Common Carrier and/or Customer Truck TERM OF AGREEMENT: January 21, 1992 through June 30, 1993 and year to year thereafter. QUANTITY: Subject to the terms and conditions on the reverse hereof, seller agrees to sell and deliver, and buyer agrees to purchase and receive the following volumes of product: (000) Gallons MIN MAX MIN MAX MIN MAX MIN MAX JAN 1318 1976 APRIL 386 580 JULY 194 292 OCT 614 920 FEB 1169 1753 MAY 247 371 AUG 378 568 NOV 828 1242 MAR 654 982 JUN 193 289 SEP 662 994 DEC 1195 1793 Q1 3141 4711 Q2 826 1240 Q3 1234 1854 Q4 2637 3955 Year Total 7838 11760 REMARKS: PRICE: Contract amended effective 4/1/96 Contract amended on 1/20/95 to revise contract volumes and to establish Kris Lindsey as Empire Gas contact. Contract amended on 9/1/95 to revise contract volumes and add Carthage as supply point, and Oklahoma, Kansas, and Arkansas as various destination points. Contract amended 4/1/96 to revise volumes. Conoco Inc. invoices Mail Customer should be mailed to invoices to: Mail contracts and the following address: correspondence to: Expire Gas Corporation Conoco Inc. Conoco Inc. Attn: Gwen Hogan Gas Products Accounting Gas Products Division P.O. Box 303 3rd Floor North Tower Humber Building - 1021 Lebanon, MO 65536 P.O. Box 1267 P.O. Box 2197 Ponca City, OK 74602-1267 Houston, TX 77252 1-800-423-4636 ("Buyer") ("Seller") Subject to terms and conditions on reverse side Accepted May 26, 1996 By: /s/ David L. Lugar Empire Gas Corporation ________________________ David L. Lugar Managing-Marketing, Supply & Trading By: /s/ Kris Lindsey ____________________ Kris Lindsey Vice President Please sign and return one copy and retain one copy for your files 1-800-423-4636 EX-10 16 EXHIBIT 10.33 LEASE OF AIRCRAFT Paul S. Lindsey Limited Liability Company, a Delaware limited liability company (hereinafter called "Lessor") enters into the following lease with Empire Gas Corporation, a Missouri corporation (hereinafter called "Lessee"). 1. Lease of Airplane, Term, Rental. Lessor leases to Lessee, subject to the terms and conditions, and for the consideration herein set out, the following described airplane 1983 Dassault Model 10 S/N 187 FAA N 81 TJ (Serial No.), complete with the manufacturer's specified equipment and the following optional equipment: (see attached) for a term of 120 months, commencing on the date of the delivery of the airplane to Lessee. In consideration for the lease of said airplane, Lessee shall pay to Lessor in 36 monthly installments of $23,581.73 per month, with a final monthly installment of remaining principal rental balance rental balance plus interest. The parties shall have the option to renew the lease for an additional 36 month period. ALl payments shall be due and payable at the office of the Lessor on the 1st day of the month, beginning June 1, 1996. A payment default shall occur if any monthly payment is not received by lessor on the first day of each month. 2. Security Deposit. Lessee has this day delivered to Lessor the sum of $200,000 as an initial security deposit to be held by the Lessor as security for the faithful performance of all terms, conditions and agreements of this lease. Lessee acknowledges that Lessor may require an additional $80,000 security deposit during the term of the lease and, if Lessor so requests, Lessee shall pay said security deposit to Lessor upon requests. Said sum, if not applied toward payment of back rent or toward payment of damages suffered by Lessor by reason of any breach hereunder by Lessee, may at Lessor's option, be applied to the final payment due under this lease, or will be returned to Lessee upon the Lessee's full and complete compliance with all terms, conditions and agreements of this lease. In the event of any retaking or repossession of said airplane by Lessor due to Lessee's default hereunder, Lessor may apply the said security upon all damages suffered as a result of said default, and may retain said security to apply on such damages as may be suffered or which accrue thereafter by reason of said default and breach. 3. Location of Airplane. The Lessee and lessor agree that the said airplane shall be permanently based at Floyd Jones Airport, in Lebanon, MO 65536. The Lessee shall not make any change in such permanent base without first notifying the Lessor in writing of said change and receiving the Lessor's approval. 4. Default. In the event that Lessee defaults in any of the provisions or in any of the terms, conditions and covenants to be performed hereunder upon the part of the Lessee, or in the event that Lessee should be the subject of any bankruptcy proceeding or become insolvent, or make an assignment for the benefit of creditors, or consent to the appointment of a receiver or trustee, or if a trustee or receiver is appointed for the Lessee without his consent, or if bankruptcy, reorganization, arrangement, insolvency, or liquidation proceedings are instituted by or against the Lessee, then in such event, Lessor, at its option, may declare this lease as terminated and take immediate possession of the airplane or declare that Lessee has exercised its option to purchase the airplane. Lessee hereby waives all rights under all exemption laws. 5. Right of Repossession. In the event Lessee defaults under this lease, Lessor may take immediate possession of the airplane without the necessity of legal action to recover possession of same, and Lessor is hereby authorized to enter upon the premises where said aircraft may be found without liability for trespassing for so entering, and Lessee shall be liable to Lessor for the payment due upon termination as herein set out as liquidated damages and not as a penalty. 6. Condition of Airplane, Title, Control. Lessee acknowledges receipt of the said airplane in good, safe and serviceable condition, and that it is fit for use. It is understood and agreed between the parties that title to the airplane remains with the Lessor, but that the Lessor shall have no control over the operation of the airplane; however, nothing stated herein shall authorize the Lessee or any other person to operate the airplane or to incur any liability or obligation on behalf of the Lessor. Lessor warrants that it is the absolute owner of the said airplane and that it has the full right to lease the airplane to the Lessee. 7. Return of Airplane. Lessee agrees that upon the termination of this Lease, Lessee will return said airplane to Lessor in the same and as good a condition as when received by Lessee, normal wear and tear excepted. In the event the Lessee does not return the airplane in such condition, the Lessor may make any repairs necessary to restore the airplane to such condition, and the Lessee agrees to reimburse the Lessor for any expense involved for said restoration. 8. License Fees, Taxes. Lessee agrees to pay when due, all license fees and other fees and assessments necessary for the securing of licenses, certificates of title and other similar permits for the operation of said airplane, such certificates showing title in the Lessor, and further agrees to pay when due, all taxes now or hereafter imposed by any state, federal or local government upon said airplane, or upon the leasing, use or operation thereof whether assessed to Lessor or Lessee. Upon the payment of fees, assessments and taxes, Lessee will immediately deliver the receipt for such payment to Lessor. 9. Insurance. Lessee assigns and shall secure and maintain in effect throughout the lease term such insurance policies covering said airplane as follows: Full Hull Coverage, including all risk, both in flight and not in flight in an amount not less than $1,950,000. In the event that repairs are made for damage, Lessee agrees to pay the deductible amount as provided in the policy. Liability Insurance will be obtained by the Lessee and written in the name of the Lessee, the Lessor and the Members of the Lessor. Copies of all insurance policies or certificates are attached to each copy of the lease or will be provided upon request. 10. Loss of or Damage to Airplane. In the event of any loss or damage to the airplane, the Lessee shall immediately report said loss or damage to the Lessor, the insurance company and to any and all applicable governmental agencies, both federal and state, and shall furnish such information and execute such documents as may be required and necessary to collect the proceeds from any insurance policies. In this event, the rights, liabilities and obligations of the parties hereto shall be as follows: (a) In the event that the airplane is lost or is damaged beyond repair, the proceeds of said insurance policy or policies shall be payable to Lessor. If the proceeds of insurance are not sufficient to cover the loss or damage to the airplane, except by reason of the Lessee's failure to procure the amount of insurance specified above, any difference between the proceeds of insurance and the sum remaining to be paid under this lease, shall be the responsibility of the Lessee, and Lessee shall pay said difference to the Lessor. Then and in that event this lease shall terminate. (b) In the event that the airplane is partially damaged, then this lease shall remain in full force and effect. The Lessee shall, at its cost and expense, fully repair the airplane in order that the airplane shall be placed in as good as the same condition as it was in prior to the damage. Upon the damage being repaired and the airplane being in the same condition as prior to the damage, the Lessor shall reimburse Lessee out of any proceeds of insurance covering such damage received Lessor, this payment to be contingent upon the Lessee furnishing to Lessor the necessary information and documents required for the recovery of said insurance proceeds. The payment of this amount is further contingent upon the approval by the Lessor of the repairs made by the Lessee, including the cost thereof, and the airplane placed as nearly as possible in the same condition as before said damage occurred. Any and all risk of loss or damage shall be borne by the Lessee. 11. Restrictions on Use. During the term of this lease, the Lessee shall have complete use of the airplane; however, such use shall be restricted to the ordinary purposes of Lessee's business and pleasure. Lessee will not use, operate, maintain or store the airplane improperly, carelessly or in violation of this lease, or of any applicable law or regulation, federal or state, or any instructions furnished therefor by the Lessor. Lessor shall not operate said airplane for hire. Lessee shall not operate said airplane beyond the geographical limits as defined in the attached insurance policies; nor use the airplane for any purpose other than that stipulated in the insurance policies, unless it first notifies the Lessor in time for the Lessor to approve of said operation and obtain proper insurance coverage for the intended trip. The cost of any additional insurance shall be borne by Lessee. 12. Maintenance, Repairs, Inspection. Lessee agrees at all times to keep the airplane in a fully operative condition and completely airworthy; and further to keep said airplane in mechanical condition adequate to comply with regulations as set forth by the Department of Transportation and the Federal Aviation Administration and any other regulations as set forth by any federal, state or local governing body, domestic or foreign, having power to regulate or supervise the airplane or the Lessee's maintenance, use or operation of said airplane. Lessee agrees that it will make no structural modifications on said airplane without first having been granted written permission to do so by the Lessor. The Lessor or its agent shall have the right at any reasonable times to fully inspect the said airplane and any parts thereof to determine their condition and to further determine whether or not the Lessee is performing according to the covenants and conditions herein contained relative to the proper care and maintenance of said airplane. The parties agree and understand that the manufacturer's warranty is fully applicable to this airplane and that the dealer who will supply any warranty labor under the terms of said warranty is Tyler Jet, Tyler Texas. 13. Operation of Airplane. The Lessee agrees that the subject airplane will at all times during the term of this lease be operated by safe, careful and duly qualified pilots employed and paid or contracted for by the Lessee. The Lessee further agrees that the Lessor may demand the removal of any pilot operating the said airplane provided said demand is based upon sufficient cause. Lessee warrants that each of the pilots who will pilot said airplane shall be a duly qualified pilot whose license is in good standing and who meets the requirements established and specified by the insurance policies attached to and made a part of this lease. Lessee further agrees that the pilots operating said airplane must meet the minimum requirements established by the insurance carrier chosen by Lessee and approved by Lessor. 14. Indemnity of Lessor. The Lessee agrees, as part consideration of this lease, to forever unconditionally indemnify and save harmless the Lessor and its members, agents, representatives, managers, employees, successors and assigns, from and against any and all loss, damage, injury or death claims, demands and liability of every nature at any time and from time to time (including, without limitation, claims involving strict or absolute liability in tort), including all costs and reasonable attorneys' fees, arising directly or indirectly from or in connection with the possession, maintenance, use or operation of the subject airplane. The Lessee further unconditionally agrees to hold Lessor and its successors and assigns harmless from any and all liability arising at any time and from time to time from Lessee's loss of use of said airplane. 15. Indemnity of Members of Lessor. The Lessee agrees, as part consideration of this lease, to forever unconditionally indemnify and save harmless the Members of Lessor and their agents, representatives, employees, successors and assigns, from and against any and all loss, damage, injury or death claims, demands and liability of every nature at any time and from time to time (including, without limitation, claims involving strict or absolute liability in tort), including all costs and reasonable attorney's fees, arising directly or indirectly from or in connection with the possession, maintenance, use or operation of the subject airplane. The Lessee further unconditionally agrees to hold the Members of Lessor and their agents, representatives, employees, successors and assigns harmless from any liability arising from Lessee's loss of use of said airplane. 16. Assignment by Lessee. Lessee agrees not to assign this lease or any interest therein without the prior written consent of Lessor, or to sublet said airplane or to part with the possession of same, either by voluntary act, operation of law or otherwise. In the event that the Lessee sublets or attempts to sublet same, or voluntarily or involuntarily parts with possession of same, or attempts to move said airplane from the airport where it is required to be kept, except while being in the ordinary business of Lessee or for its pleasure, or in any manner violates any of the terms hereof, then in either or any of these events this lease shall at the option of the Lessor immediately terminate and Lessor shall be entitled to immediate possession of said airplane. Lessee agrees to pay all attorneys' fees, collection charges or other expenses, occasioned by Lessee's failure to abide by any of the provisions hereof. 17. Assignment by Lessor. It is understood by the parties hereto that the Lessor may assign this lease and said airplane, and that such assignee may also assign the same. All rights of Lessor hereunder shall be succeeded to by the assignee under any such assignment, and said assignee's title to this lease, to the rental herein provided for and to the said airplane shall be free from all defenses, setoffs or counterclaims which Lessee may be entitled to assess against Lessor; it being understood and agreed that any such assignee does not assume any obligations of the Lessor herein named, and that Lessee may separately claim against Lessor as to any matters which Lessee may be entitled to assert against the Lessor. 18. Entire Agreement, Severability, Successors. Lessee and Lessor hereby agree that no representation, statement or agreement other than those set forth herein shall be binding upon either of the parties hereto unless specified in writing, signed by each and purporting to be an express modification of this lease. Should any provisions of this lease be held invalid, such provisions shall be deemed to be eliminated insofar as it is declared invalid and the balance of the lease shall in no wise be affected thereby. Subject to the terms hereof, the covenants and conditions of this lease shall inure to the benefits of and be binding upon the heirs, executors, administrators, personal representatives, trustees, successors or assigns of the parties hereto. 19. Controlling Law and Jurisdiction. The validity, interpretation and performance of this lease shall be subject to and construed under the laws of Missouri, without regard to principles of conflicts of law. 20. Waiver of Conflict of Interest. Paul S. Lindsey, Limited Company and Empire Gas Corporation have both been represented in the drafting of this lease by the law firm of Watson & Marshall L.C. Paul S. Lindsey, Limited Company and Empire Gas Corporation each hereby agree to the dual representation of them by Watson & Marshall L.C. and each of them waives any present or future claim of conflict of interest. IN WITNESS WHEREOF, the parties hereto have placed their hands and seals on this 1st day of June, 1996. Empire Gas Corporation, a Missouri corporation [SEAL] By:/s/ Paul S. Lindsey, Jr. ____________________________ Paul S. Lindsey, President ATTEST: /s/ Valeria Schall ____________________ Secretary Paul S. Lindsey Limited Liability Company, a Delaware Limited Liability Company /s/ Valeria Schall __________________________________________ Valeria Schall, Manager _________________________________________________________________________ YEAR MANUFACTURER OF MODEL NO. SERIAL NO. MFG. AIRCRAFT _________________________________________________________________________ 1983 Dassault 10 187 _________________________________________________________________________ MFG. OF ENGINE MODEL ENGINE SERIAL FAA HOME ENGINE(S) NO.(S) NO.(s) NO. AIRPORT _________________________________________________________________________ Garrett TFE-731-2-1C P73353C & P73342C N81TJ _________________________________________________________________________ DESCRIBE EXTRA EQUIPMENT: Collins APS-80 Autopilot; Dual Collins FDS-85 Flight Directors; Dual Collins VHF-20 Cons; Dual Collins VIR-30 AGH Navs; Collins ADF-60A ADF; Dual Collins TDR- 90 Transponders; Dual RMIs; ALT-50 Radar Altimeter; Sperry Primus 400 Color Radar; Global GNS-500 V VLF; GA-100 CVR Dual Sperry C-14 Compass Systems; Flitefone IV. _________________________________________________________________________ EX-21 17 EXHIBIT 21.1 EMPIRE GAS CORPORATION SUBSIDIARIES September 17, 1996 ALL STAR GAS CORPORATION SYN INC. ALL STAR FIELD SERVICE CORPORATION MO EMPIRE GAS CORPORATION MO EMPIRE UNDERGROUND STORAGE, INC. KS EMPIRE MARKETING CORPORATION MO UTILITY COLLECTION CORPORATION MO ALL STAR AIRLINES, INCORPORATED MO EMPIREGAS TRANSPORTS, INC. - OREGON OR ALL STAR GAS INC. OF ARIZONA CAMP VERDE AZ FLAGSTAFF AZ EMPIREGAS INC. OF GLOBE AZ ALL STAR GAS INC. OF CALIFORNIA CA NEEDLES CA EMPIREGAS INC. OF ELSINORE CA EMPIREGAS INC. OF ESCONDIDO CA EMPIREGAS INC. OF LOS ANGELES CA EMPIREGAS INC. OF MODESTO CA EMPIREGAS INC. OF PLACERVILLE CA EMPIREGAS INC. OF POMONA CA EMPIREGAS INC. OF SACRAMENTO CA EMPIREGAS INC. OF SUSANVILLE CA EMPIREGAS INC. OF YUCCA VALLEY CA EMPIREGAS INC. OF BOISE ID EMPIREGAS INC. OF OREGON OR ALBANY OR HERMISTON OR MEDFORD OR NORTH BEND OR SANDY OR THE DALLES OR EMPIREGAS INC. OF WASHINGTON WA AUBURN WA CHEHALIS WA SUNNYSIDE WA WENATCHEE WA YAKIMA WA BREMERTON WA ALL STAR GAS INC. OF COLORADO CO GUNNISON CO EMPIREGAS INC. OF COLORADO CO BOULDER CO CANON CITY CO CASTLE ROCK CO COLORADO SPRINGS CO DENVER CO EVERGREEN CO FAIRPLAY CO FORT COLLINS CO GRAND JUNCTION CO LOVELAND CO MONTE VISTA CO PUEBLO CO WOODLAND PARK CO GINCO GAS COMPANY, INC. CO RON'S L.P. GAS, INC. WY EMPIREGAS INC. OF TEXAS TX CANTON TX WILLS POINT TX WACO TX DALLAS TX KEMP TX SAN ANTONIO TX EMPIREGAS OF OKLAHOMA, INC. OK GROVE OK HITCHITA OK STIGLER OK ALL STAR GAS INC. OK BRISTOW OK ALL STAR GAS INC. OF ARKANSAS AR GREENWOOD AR LINCOLN AR SILOAM SPRINGS AR EMPIREGAS INC. OF LOUISIANA LA EUNICE LA LAFAYETTE LA LAKE CHARLES LA EMPIREGAS INC. OF TEXAS TX GALVESTON TX ORANGE COUNTY TX EMPIREGAS INC. OF LOUISIANA LA OAK GROVE LA ALL STAR GAS INC. OF TOLEDO OH EMPIREGAS INC. OF OHIO OH DOVER OH MOUNT VERNON OH MYERS PROPANE GAS COMPANY OH ALL STAR GAS INC. OF MICHIGAN MI GAYLORD MI BIG RAPIDS MI GREENVILLE MI EMPIREGAS INC. OF MICHIGAN MI CHASSELL MI MARQUETTE MI MUNSING MI CHARLOTTE MI COLEMAN MI JACKSON (MICHIGAN) MI KALAMAZOO MI TRAVERSE CITY MI VASSAR MI LSC GAS INC. MI ALL STAR GAS INC. OF MISSOURI MO COLE CAMP MO WARSAW MO EMPIREGAS OF ARMA, INC. KS ALL STAR GAS INC. OF MISSOURI MO KANSAS CITY MO MT. VERNON MO CLINTON MO BUFFALO MO HUMANSVILLE MO BOLIVAR MO ALL STAR GAS INC. OF WHEATLAND MO MARSHALL MO CARROLTON MO ALL STAR GAS INC. OF MISSOURI MO CAMDENTON MO CUBA MO ELSBERRY MO LAURIE MO PALMYRA MO RICHLAND MO ROLLA MO WAYNESVILLE MO WENTZVILLE MO MORGAN COUNTY MO LAKE OZARK MO PARIS MO MID-MISSOURI MO EMPIREGAS INC. OF JACKSONVILLE IL EMPIREGAS INC. OF MISSOURI MO OWENSVILLE MO POTOSI MO ALL STAR GAS INC. OF FLORIDA FL DELRAY FL FT MYERS FL FORT PIERCE FL MIAMI FL ORLANDO FL PALMETTO FL POMPANO BEACH FL SOUTH BAY FL WEST PALM BEACH FL ALL STAR GAS INC. OF SOUTH CAROLINA SC AIKEN SC N. MYRTLE BEACH SC QUEEN LP SC ALL STAR GAS INC. OF NORTH CAROLINA NC DENVER NC GASTONIA NC HENDERSONVILLE NC WILMINGTON NC WILKESBORO NC ALL STAR GAS INC. OF WAYNESVILLE NC ALL STAR GAS INC. OF NORTH CAROLINA NC APEX NC AYDEN NC CARTHAGE NC CREEDMOOR NC DURHAM NC WARRENTON NC WASHINGTON NC WILSON NC ZEBULON NC ALL STAR GAS INC. OF VERMONT VT BENNINGTON VT BRATTLEBORO VT MIDDLEBURY VT EX-27 18 FINANCIAL DATA SCHEDULE
5 12-MOS JUN-30-1996 JUN-30-1996 898,000 0 5,030,000 722,000 6,039,000 16,167,000 97,407,000 29,497,000 102,002,000 21,870,000 115,500,000 14,000 0 0 (44,857,000) 102,002,000 78,997,000 82,702,000 43,318,000 43,318,000 0 889,000 16,133,000 (11,647,000) (3,750,000) (7,897,000) 0 0 0 (7,897,000) (5) (5)
-----END PRIVACY-ENHANCED MESSAGE-----