UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended January 31, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission file numbers: 1-11331
333-06693
Ferrellgas Partners, L.P.
Ferrellgas Partners Finance Corp.
----------------------------------------------------------
(Exact name of registrants as specified in their charters)
Delaware 43-1698480
Delaware 43-1742520
- ---------------------------- -------------------------------
(States or other jurisdictions of (I.R.S. Employer Identification Nos.)
incorporation or organization)
One Liberty Plaza, Liberty, Missouri 64068
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: (816) 792-1600
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 [ ]
At February 18, 1999, the registrants had units or shares outstanding as
follows:
Ferrellgas Partners, L.P. 14,703,298 Common Units
16,593,721 Subordinated Units
Ferrellgas Partners
Finance Corp. 1,000 Common Stock
FERRELLGAS PARTNERS, L.P. and SUBSIDIARIES
FERRELLGAS PARTNERS FINANCE CORP.
Table of Contents
Page
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Ferrellgas Partners, L.P. and Subsidiaries
Consolidated Balance Sheets - January 31,1999
and July 31, 1998 1
Consolidated Statements of Earnings -
Three and six months ended January 31,1999 and 1998 2
Consolidated Statement of Partners' Capital -
Six months ended January 31, 1999 3
Consolidated Statements of Cash Flows -
Six months ended January 31,1999 and 1998 4
Notes to Consolidated Financial Statements 5
Ferrellgas Partners Finance Corp.
Balance Sheets - January 31, 1999 and July 31, 1998 8
Statements of Earnings - Three and six months ended
January 31, 1999 and 1998 8
Statements of Cash Flows - Six months ended
January 31, 1999 and 1998 9
Notes to Financial Statements 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
15
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 16
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
January 31, July 31,
ASSETS 1999 1998
- ------------------------------------------------------------- ------------- --------------
(unaudited)
Current Assets:
Cash and cash equivalents $ 12,655 $ 16,961
Accounts and notes receivable, net 96,558 50,097
Inventories 30,303 34,727
Prepaid expenses and other current assets 11,315 8,706
------------- --------------
Total Current Assets 150,831 110,491
Property, plant and equipment, net 404,532 395,855
Intangible assets, net 110,092 105,655
Other assets, net 8,434 9,222
------------- --------------
Total Assets $673,889 $621,223
============= ==============
LIABILITIES AND PARTNERS' CAPITAL
- -------------------------------------------------------------
Current Liabilities:
Accounts payable $58,131 $48,017
Other current liabilities 44,334 41,767
Short-term borrowings 27,432 21,150
------------- --------------
Total Current Liabilities 129,897 110,934
Long-term debt 552,675 507,222
Other liabilities 14,990 12,640
Contingencies and commitments
Minority interest 1,370 1,510
Partners' Capital:
Common unitholders (14,703,298 units outstanding
in January 1999 and 14,699,678 outstanding in July 1998) 21,531 27,985
Subordinated unitholders (16,593,721 units outstanding
at both January 1999 and July 1998) 12,543 19,908
General partner (59,117) (58,976)
------------- --------------
Total Partners' Capital (25,043) (11,083)
------------- --------------
Total Liabilities and Partners' Capital $673,889 $621,223
============= ==============
See notes to consolidated financial statements
1
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per unit data)
(unaudited)
For the three months ended For the six months ended
--------------------------- ---------------------------
January January January January
31, 1999 31, 1998 31, 1999 31, 1998
--------------------------------------------------------
Revenues:
Gas liquids and related product sales $216,541 $235,993 $334,543 $379,044
Other 13,536 12,818 25,873 22,972
------------ ------------ ------------ ------------
Total revenues 230,077 248,811 360,416 402,016
Cost of product sold (exclusive of
depreciation, shown separately below) 101,328 130,879 160,040 217,495
------------ ------------ ------------ ------------
Gross profit 128,749 117,932 200,376 184,521
Operating expense 56,240 54,887 107,952 104,952
Depreciation and amortization expense 11,806 10,987 23,117 22,524
Employee stock ownership compensation charge 800 - 1,690 -
General and administrative expense 4,197 3,858 8,865 8,279
Vehicle and tank lease expense 3,173 2,499 6,141 4,811
------------ ------------ ------------ ------------
Operating income 52,533 45,701 52,611 43,955
Interest expense (11,960) (12,598) (23,578) (24,722)
Interest income 386 402 544 799
Loss on disposal of assets (598) (372) (512) (306)
------------ ------------ ------------ ------------
Earnings before minority interest and
extraordinary item 40,361 33,133 29,065 19,726
Minority interest 446 374 371 278
------------ ------------ ------------ ------------
Earnings before extraordinary item 39,915 32,759 28,694 19,448
Extraordinary loss on early extinguishment
of debt, net of minority interest of $130 - - (12,786) -
------------ ------------ ------------ ------------
Net earnings 39,915 32,759 15,908 19,448
General partner's interest in net earnings 399 328 159 195
------------ ------------ ------------ ------------
Limited partners' interest in net earnings $39,516 $32,431 $15,749 $19,253
============ ============ ============ ============
Net earnings per limited partner unit:
Earnings before extraordinary item $ 1.26 $ 1.04 $ 0.91 $ 0.62
Extraordinary loss - - 0.41 -
------------ ------------ ------------ ------------
Net earnings $ 1.26 $ 1.04 $ 0.50 $ 0.62
============ ============ ============ ============
Net earnings per limited partner
unit-assuming dilution:
Earnings before extraordinary item $ 1.26 $ 1.03 $ 0.91 $ 0.61
Extraordinary loss - - 0.41 -
------------ ------------ ------------ ------------
Net earnings $ 1.26 $ 1.03 $ 0.50 $ 0.61
============ ============ ============ ============
See notes to consolidated financial statements.
2
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(in thousands)
(unaudited)
Number of units
-----------------------
Sub- Sub- Total
Common ordinated Common ordinated General partners'
unitholders unitholders unitholders unitholders partner capital
----------- ------------ ------------ --------- --------- -------------
July 31, 1998 14,699.7 16,593.7 $27,985 $19,908 $(58,976) ($11,083)
Common units issued in
connection with
acquisitions 3.6 - 70 - 1 71
Contribution from general
partner in connection with
ESOP compensation charge - - 114 1,544 15 1,673
Quarterly distributions - - (14,702) (16,594) (316) (31,612)
Net earnings - - 8,064 7,685 159 15,908
----------- ---------- --------- --------- --------- -------------
January 31, 1999 14,703.3 16,593.7 $21,531 $12,543 $(59,117) $(25,043)
=========== ========== ========= ========= ========= =============
See notes to consolidated financial statements
3
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
For the six months ended
-------------------------
January January
31, 1999 31, 1998
---------------------------
Cash Flows From Operating Activities:
Net earnings $15,908 $19,448
Reconciliation of net earnings to net cash
provided by operating activities:
Depreciation and amortization 23,117 22,524
Extraordinary loss, net of minority interest 12,786 -
Employee stock ownership compensation charge 1,690 -
Other 2,837 2,911
Changes in operating assets and liabilities
net of effects from business
acquisitions:
Accounts and notes receivable (47,393) (39,795)
Inventories 5,084 16,081
Prepaid expenses and other current assets (2,609) (1,544)
Accounts payable 10,114 6,121
Other current liabilities 2,103 (10,537)
Other liabilities 2,350 263
------------ ------------
Net cash provided by operating activities 25,987 15,472
------------ ------------
Cash Flows From Investing Activities:
Business acquisitions (19,480) (3,577)
Capital expenditures (14,739) (10,081)
Other 1,138 1,986
------------ ------------
Net cash used in investing activities (33,081) (11,672)
------------ ------------
Cash Flows From Financing Activities:
Net additions to short-term borrowings 6,282 20,096
Additions to long-term debt 391,713 7,167
Reductions of long-term debt (350,668) (421)
Cash paid for call premiums and debt issuance costs (12,528) -
Distributions (31,612) (31,566)
Other (399) (358)
------------ ------------
Net cash provided by (used in) financing activities 2,788 (5,082)
------------ ------------
Decrease in cash and cash equivalents (4,306) (1,282)
Cash and cash equivalents - beginning of period 16,961 14,788
------------ ------------
Cash and cash equivalents - end of period $12,655 $13,506
============ ============
Cash paid for interest $20,935 $23,822
============ ============
See notes to consolidated financial statements
4
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1999
(unaudited)
A. The financial statements reflect all adjustments which are, in the opinion
of management, necessary for a fair statement of the interim periods
presented. All adjustments to the financial statements were of a normal,
recurring nature.
B. The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from these
estimates.
C. The propane industry is seasonal in nature with peak activity during the
winter months. Therefore, the results of operations for the periods ended
January 31, 1999 and January 31, 1998 are not necessarily indicative of the
results to be expected for a full year.
D. Inventories consist of:
January 31, July 31,
(in thousands) 1999 1998
---------------- --------------
Liquefied propane gas and related products $21,618 $ 26,316
Appliances, parts and supplies 8,685 8,411
---------------- --------------
$30,303 $34,727
================ ==============
In addition to inventories on hand, the Partnership enters into contracts
to buy product for supply purposes. Nearly all such contracts have terms of
less than one year and most call for payment based on market prices at date
of delivery. All fixed price contracts have terms of less than one year. As
of January 31, 1999, the Partnership had not committed to take delivery of
a material amount of gallons at a fixed price for its estimated future
retail propane sales.
Property, plant and equipment, net consist of:
January 31, July 31,
(in thousands) 1999 1998
--------------- ---------------
Property, plant and equipment $640,178 $620,783
Less: accumulated depreciation 235,646 224,928
---------------- --------------
$404,532 $395,855
=============== ===============
Intangible assets, net consist of:
January 31, July 31,
(in thousands) 1999 1998
--------------- ---------------
Intangible assets $241,302 $229,186
Less: accumulated amortization 131,210 123,531
---------------- --------------
$110,092 $105,655
=============== ===============
5
E. Long-Term Debt
Long-term debt consists of:
January 31, July 31,
(in thousands) 1999 1998
---------------- ------------
Senior Notes
Fixed rate, 7.16%, due 2005-2013 $350,000 $ -
Fixed rate, 10%, due 2001 (1) - 200,000
Fixed rate, 9.375%, due 2006 160,000 160,000
Credit Agreement
Term loan, 8.5%, due 2001 - 50,000
Revolving credit loans, 6.1% and 8.5%, due 2001 27,568 85,850
Notes payable, 8.3% and 6.7% weighted average interest rates,
respectively, due 1999 to 2007 17,779 13,558
---------------- ------------
555,347 509,408
Less: current portion 2,672 2,186
---------------- ------------
$552,675 $507,222
================ ============
(1) Ferrellgas, L.P. ("the OLP") fixed rate Senior Notes, issued in
June 1994, were redeemed at the option of the OLP on August 5, 1998
with a 5% premium payable concurrent with the issuance of
$350,000,000 of new unsecured OLP Senior Notes ("New Senior
Notes").
On July 1, 1998, the OLP entered into an agreement for the issuance of $350
million of privately placed fixed rate senior notes ("New Senior Notes")
funded August 4, 1998 in five series with maturities ranging from year 2005
through 2013. The proceeds of the offering were used to redeem the OLP
fixed rate Senior Notes issued in June 1994, and to repay outstanding
indebtedness under the Credit Facility.
The OLP also entered into an agreement on July 2, 1998 with the lenders
under the existing Credit Facility for a New Credit Facility effective
August 4, 1998. The New Credit Facility provides for (i) a $40,000,000
unsecured working capital facility subject to an annual reduction in
borrowings to zero for thirty consecutive days, (ii) a $50,000,000
unsecured working capital and general corporate facility, including a
letter of credit facility, and (iii) a $55,000,000 unsecured general
corporate and acquisition facility. The New Credit Facility matures July 2,
2001.
F. The Partnership is threatened with or named as a defendant in various
lawsuits which, among other items, claim damages for product liability. It
is not possible to determine the ultimate disposition of these matters;
however, management is of the opinion that there are no known claims or
contingent claims that individually or in aggregate are likely to have a
material adverse effect on the results of operations or financial condition
of the Partnership.
G. On September 14, 1998, and December 15, 1998, the Partnership paid a cash
distribution of $0.50 per Common and Subordinated Unit for the quarters
ended July 31, 1998 and October 31, 1998. On February 28, 1999, the
Partnership declared its second-quarter cash distribution of $0.50 per
Common and Subordinated Unit, payable March 15, 1999.
6
H. Below is a calculation of the basic and diluted units used to calculate
earnings per basic and diluted unit on the Statement of Earnings.
(in thousands, except per unit data)
Three months ended Six months ended
------------------ ----------------
January 31, January 31, January 31, January 31,
1999 1998 1999 1997
---- ---- ---- ----
Income available to common and
subordinate unitholders $39,516 $32,431 $15,749 $19,253
Weighted average outstanding units
31,297.02 31,293.40 31,295.54 31,257.42
Basic EPU $1.26 $1.04 $0.50 $0.62
================ ================= ================= ================
Income available to common and
subordinate unitholders $39,516 $32,431 $15,749 $19,253
Weighted average outstanding units
31,297.02 31,293.40 31,295.54 31,257.42
Dilutive securities - options 16.52 81.88 22.65 88.91
---------------- ----------------- ----------------- ----------------
Weighted average outstanding units
+ dilutive 31,313.54 31,375.28 31,318.19 31,346.33
Diluted EPU $1.26 $1.03 $0.50 $0.61
================ ================= ================= ================
7
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly owned subsidiary of Ferrellgas Partners, L.P.)
BALANCE SHEETS
January 31, July 31,
ASSETS 1999 1998
- -------------------------------------------------------------------- ------------------ -------------------
(unaudited)
Cash $1,000 $1,000
------------------ -------------------
Total Assets $1,000 $1,000
================== ===================
STOCKHOLDER'S EQUITY
- --------------------------------------------------------------------
Common stock, $1.00 par value; 2,000 shares
authorized; 1,000 shares issued and outstanding $1,000 $1,000
Additional paid in capital 593 548
Accumulated deficit (593) (548)
------------------ -------------------
Total Stockholder's Equity $1,000 $1,000
================== ===================
STATEMENTS OF EARNINGS
(unaudited)
For the three months ended For the six months ended
--------------------------------------------- ------------------------------------
January 31, January 31 January 31, January 31,
1999 1998 1999 1998
--------------------- --------------------- ------------------ -----------------
General and administrative expense $ 0 $ 115 $ 45 $ 115
--------------------- --------------------- ------------------ -----------------
Net loss $ 0 $(115) $(45) $(115)
===================== ===================== ================== =================
See notes to financial statements.
8
FERRELLGAS PARTNERS FINANCE CORP.
(A wholly owned subsidiary of Ferrellgas Partners, L.P.)
STATEMENTS OF CASH FLOWS
(unaudited)
For the six months ended
-------------------------------------------
January 31, January 31,
1999 1998
-------------------- --------------------
Cash Flows From Operating Activities:
Net loss $ (45) $ (115)
-------------------- --------------------
Cash used in operating activities (45) (115)
-------------------- --------------------
Cash Flows From Financing Activities:
Capital contribution 45 115
-------------------- --------------------
Cash provided by financing activities 45 115
-------------------- --------------------
Increase (decrease) in cash - -
Cash - beginning of period 1,000 1,000
-------------------- --------------------
Cash - end of period $1,000 $1,000
==================== ====================
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
(unaudited)
A. Ferrellgas Partners Finance Corp., a Delaware corporation, was formed on
March 28, 1996, and is a wholly-owned subsidiary of Ferrellgas Partners,
L.P.
B. The financial statements reflect all adjustments which are, in the opinion
of management, necessary for a fair statement of the interim periods
presented. All adjustments to the financial statements were of a normal,
recurring nature.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a discussion of the results of operations and liquidity
and capital resources of Ferrellgas Partners, L.P. (the "Partnership" or "MLP").
Except for the $160,000,000 of 9 3/8% Senior Secured Notes issued in April 1996
by the MLP and the related interest expense, Ferrellgas, L.P. (the "Operating
Partnership" or "OLP") accounts for nearly all of the consolidated assets,
liabilities, sales and earnings of the MLP. When the discussion refers to the
consolidated MLP, the term Partnership will be used.
Ferrellgas Partners Finance Corp. has nominal assets and does not
conduct any operations. Accordingly, a discussion of the results of
operations and liquidity and capital resources is not presented.
Forward-looking statements
Statements included in this report that are not historical facts, including
statements concerning the Partnership's belief that the OLP will have sufficient
funds to meet its obligations to enable it to distribute to the MLP sufficient
funds to permit the MLP to meet its obligations with respect to the MLP Senior
Notes issued in April 1996, and to enable it to distribute the Minimum Quarterly
Distribution ($0.50 per Unit) on all Common Units and Subordinated Units, are
forward-looking statements.
Such statements are subject to risks and uncertainties that could cause
actual results to differ materially from those expressed in or implied by the
statements. The risks and uncertainties include but are not limited to the
following and their effect on the Partnership's operations: a) the effect of
weather conditions on demand for propane, b) price and availability of propane
supplies, c) the availability of capacity to transport propane to market areas,
d) competition from other energy sources and within the propane industry, e)
operating risks incidental to transporting, storing, and distributing propane,
f) changes in interest rates, g) governmental legislation and regulations, h)
energy efficiency and technology trends, i) Year 2000 compliance and j) other
risk factors that are discussed in the Partnership's most recent 1933 Act filing
with the Securities and Exchange Commission, Amendment No. 1 to Form S-3
Registration Statement, as filed February 5, 1999.
Year 2000 Compliance
Many computer systems and applications in use throughout the world today
may not be able to appropriately interpret dates beginning in the year 2000
("Year 2000" issue). As a result, this problem could have adverse consequences
on the operations of companies and the integrity of information processing.
The Partnership began the process in 1997 of identifying and correcting its
computer systems and applications that were exposed to the Year 2000 issue. The
Partnership initially focused on the systems and applications that were
considered critical to its operations and services for supplying propane to its
customers and to its ability to account for those business services accurately.
These critical areas include the retail propane accounting and operations
system, financial accounting and reporting system, local area network and
electronic mail systems. The financial accounting software is considred by the
vendor to be Year 2000 compliant, however, the Partnership will conduct
compliance testing with completion targeted for April 1999. The Partnership
expects that the local and wide area networks will be Year 2000 compliant by
June 1999.The Partnership is curently converting the electronic email and retail
propane operations systems and expects both systems to be Year 2000 compliant
by the beginning of November 1999.
The Partnership has also taken steps to identify other non-critical
applications that may have exposure to the Year 2000 issue. It has established a
test lab for the independent testing of these
10
applications to ensure Year 2000 compatibility. To date, no material Year
2000 issues have been identified as a result of this testing.
The Partnership conducts business with several hundred outside suppliers.
While no single supplier is considered material to the Partnership, a combined
number could constitute a material amount to the Partnership. The Partnership is
currently reviewing its largest suppliers to obtain appropriate assurances that
they are, or will be, Year 2000 compliant. If compliance by the Partnership's
suppliers is not achieved in a timely manner, it is unknown what effect, if any,
the Year 2000 issue could have on the Partnership's operations.
The Partnership has evaluated its Year 2000 issues and does not expect that
the total cost of related modifications and conversions will have a material
effect on its financial position, results of operations or cash flows. Such
costs are being expensed as incurred. To date, the Partnership has incurred
approximately $100,000 to identify and correct its Year 2000 issues. This
expense has been primarily related to its critical systems and applications. It
is estimated that the Partnership will incur an additional $300,000 to $500,000
to identify and correct its Year 2000 issues. The Partnership does not
anticipate significant purchases of computer software or hardware as a result of
its Year 2000 issue and does not believe that the correction of its Year 2000
issues will delay or eliminate other scheduled computer upgrades and
replacements. Despite the Partnership's efforts to address and remediate its
Year 2000 issue, there can be no assurance that all critical areas and
non-critical applications will continue without interruption through January 1,
2000 and beyond.
Results of Operations
The propane industry is seasonal in nature with peak activity during the
winter months. Due to the seasonality of the business, results of operations for
the three and six months ended January 31, 1999 and 1998, are not necessarily
indicative of the results to be expected for a full year. Other factors
affecting the results of operations include competitive conditions, demand for
product, variations in weather and fluctuations in propane prices. As the
Partnership has grown through acquisitions, fixed costs such as personnel costs,
depreciation and interest expense have increased. Over time, these fixed cost
increases have caused variances in losses in the first and fourth quarters and
variances in net income in the second and third quarters to be more pronounced.
Three Months Ended January 31, 1999 vs. January 31, 1998
Total Revenues. Total gas liquids and related product sales decreased 8.2%
to $216,541,000 as compared to $235,993,000 in the second quarter of fiscal
1998, primarily due to decreased sales price per retail and wholesale gallons,
partially offset by an increase in retail sales volume due to the effect of
acquisitions.
Retail and wholesale sales prices per gallon were lower than those in the
same quarter last year due to the lower wholesale cost of propane experienced in
the current year. Retail volumes increased 3.0% to 251,246,000 gallons as
compared to 243,981,000 gallons for the same quarter last year, primarily due to
increased base business residential sales and the effect of acquisitions,
partially offset by the effect of warmer weather than the same period as last
year. Fiscal 1999 winter temperatures, as reported by the American Gas
Association ("AGA"), were 2.6% warmer than the same quarter last year and 9.4%
warmer than normal.
Gross Profit. Gross profit increased 9.2% to $128,749,000 as compared to
$117,932,000 in the second quarter of fiscal 1998, primarily due to increased
retail margins related to favorable wholesale propane costs, and the effect of
acquisitions, partially offset by the effect of warmer temperatures on retail
volumes.
11
Operating Expenses. Operating expenses increased 2.5% to $56,240,000 as
compared to $54,887,000 in the second quarter of fiscal 1998 primarily due to
acquisition related increases in personnel costs, plant and office expenses,
vehicle and other expenses and merit salary increases.
Depreciation and Amortization. Depreciation and amortization expense
increased 7.5% to $11,806,000 as compared to $10,987,000 in the same quarter
last year primarily due to the addition of intangibles and property, plant and
equipment from acquisitions of propane businesses.
Vehicle and Tank Lease Expense. Vehicle and tank lease expense increased by
$674,000 due to the utilization of operating lease financing to fund fleet
upgrades and replacements.
Interest expense. Interest expense decreased 5.1% to $11,960,000 as
compared to $12,598,000 in the second quarter of fiscal 1998. This decrease is
primarily the result of a decrease in the overall average interest rate paid by
the Partnership on its borrowings as a result of the refinancing of the fixed
rate debt and existing revolving credit facility balances (see Financing
Activities below), partially offset by the effect of increased borrowings.
Six Months Ended January 31, 1999 vs. January 31, 1998
Total Revenues. Total gas liquids and related product sales decreased 11.7%
to $334,543,000 as compared to $379,044,000 for the prior period, primarily due
to decreased sales price per retail and wholesale gallons.
Retail and wholesale sales prices per gallon were lower than those during
the prior period due to the lower wholesale cost of propane experienced in the
current period. Retail volumes decreased less than 1% to 395,928,000 gallons as
compared to 398,476,000 gallons for the year ago period, primarily due to the
effect of warmer weather than the prior year, partially offset by increased base
business residential sales volumes and the effect of acquisitions. Fiscal 1999
winter temperatures, as reported by the AGA, were 4.1% warmer than the same
period as last year and 11.7% warmer than normal.
Gross Profit. Gross profit increased 8.6% to $200,376,000 as compared to
$184,521,000 in the year ago period, primarily due to the effect of increased
retail margins related to favorable wholesale propane costs and the effect of
acquisitions, partially offset by the effect of warmer temperatures on retail
volumes.
Operating Expenses. Operating expenses increased 2.9% to $107,952,000 as
compared to $104,952,000 in the first half of fiscal 1998 primarily due to
acquisition related increases in personnel costs, plant and office expenses, and
vehicle and other expenses and merit salary increases.
Depreciation and Amortization. Depreciation and amortization expense
increased 2.6% to $23,117,000 as compared to $22,524,000 for the same period
last year primarily due to the addition of intangibles and property, plant and
equipment from acquisitions of propane businesses.
Vehicle and Tank Lease Expense. Vehicle and tank lease expense increased by
$1,330,000 due to the utilization of operating lease financing to fund fleet
upgrades and replacements.
Interest expense. Interest expense decreased 4.6% to $23,578,000 as
compared to $24,722,000 in the first half of fiscal 1998. This decrease is
primarily the result of a decrease in the overall average interest rate paid by
the Partnership on its borrowings, partially offset by the effect of increased
borrowings.
The extraordinary charge is due primarily to the payment of a $10,000,000
call premium related to the refinancing of $200,000,000 of fixed rate debt on
August 5, 1998. The remaining costs relate to the write off of unamortized debt
issuance costs related to refinancing of the fixed rate debt and revolving
credit facility balances. (see Financing Activities below).
12
Liquidity and Capital Resources
The ability of the MLP to satisfy its obligations is dependent upon future
performance of the OLP, which will be subject to prevailing economic, financial,
business and weather conditions and other factors, many of which are beyond its
control. For the fiscal year ending July 31, 1999, the General Partner believes
that the OLP will have sufficient funds to meet its obligations and enable it to
distribute to the MLP sufficient funds to permit the MLP to meet its obligations
with respect to the $160,000,000 senior secured notes issued in April 1996 ("MLP
Senior Secured Notes").
The MLP Senior Secured Notes, the $350,000,000 OLP senior notes ("New
Senior Notes") and the amended and restated OLP credit facility ("New Credit
Facility") contain several financial tests which restrict the Partnership's
ability to pay distributions, incur indebtedness and engage in certain other
business transactions (See Financing Activities below). These tests, in general,
are based on the ratio of the MLP's and OLP's consolidated cash flow to fixed
charges, primarily interest expense. Because the Partnership is more highly
leveraged at the MLP than at the OLP, the tests related to the MLP Senior
Secured Notes are more sensitive to fluctuations in consolidated cash flows and
fixed charges. The most sensitive of the MLP related tests restricts the
Partnership's ability to make certain Restricted Payments which include, but are
not limited to, the payment of the Minimum Quarterly Distribution ("MQD") to
unitholders.
Although the MLP's financial performance during fiscal 1999 has been
adversely impacted by unseasonably warmer temperatures, the Partnership believes
it will continue to meet the MLP Senior Secured Notes Restricted Payment test
during fiscal 1999, in addition to meeting the other financial tests in the MLP
Senior Secured Notes, New Senior Notes and New Credit Facility. However, if the
OLP were to encounter any unexpected downturns in business operations, it could
result in the Partnership not meeting certain financial tests in future
quarters, including but not limited to, the MLP Senior Secured Notes Restricted
Payment test. Depending on the circumstances, the Partnership would pursue
alternatives to permit the continued payment of MQD to its Common Unitholders.
No assurances can be given, however, that such alternatives will be successful
with respect to any given quarter.
Provided that certain remaining financial tests are satisfied, on August 1,
1999, the subordination period will end and the Subordinated Units will convert
to Common Units. The financial tests, which apply to each of the three
consecutive four quarter periods ending on July 31, 1999, are related to making
the MQD on all Common and Subordinated Units. The Partnership met such financial
tests for the four quarter periods ended July 31, 1997 and July 31, 1998,
respectively and made the Minimum Quarterly Distribution on all Units for the
two quarters ended October 31, 1998 and January 31, 1999, respectively. There
can be no assurance that the Partnership will meet the remaining financial tests
for the four quarter period ending July 31, 1999, and that the Subordinated
Units will convert to Common Units on August 1, 1999.
Future maintenance and working capital needs of the Partnership are
expected to be provided by cash generated from future operations, existing cash
balances and the working capital borrowing facility. In order to fund expansive
capital projects and future acquisitions, the OLP may borrow on existing bank
lines, the MLP or OLP may issue additional debt or the MLP may issue additional
equity securities, including among others, Common Units.
Toward this purpose, on January 25, 1999, the MLP filed a shelf
registration statement with the Securities and Exchange Commission (the
"Commission") for the periodic sale of up to $300,000,000 in debt and/or equity
securities. The registered securities would be available for sale by the
Partnership in the future to fund acquisitions or to pay down existing higher
cost indebtedness. Also, the Partnership maintains a shelf registration
statement with the Commission for 1,800,322 Common Units representing limited
partner interests in the MLP. The Common Units may be issued from time to time
by the MLP in connection with the OLP's acquisition of other businesses,
properties or securities in business combination transactions.
13
Operating Activities. Cash provided by operating activities was $25,987,000
for the six months ended January 31, 1999, compared to $15,472,000 for the prior
period. This increase in cash is primarily due to increased earnings before
extraordinary loss and favorable changes in other current liabilities, including
accrued profit sharing. Beginning in July 1998, profit sharing compensation
costs were replaced by a non-cash employee stock ownership plan compensation
expense.
Investing Activities. During the six months ended January 31, 1999, the
Partnership made total acquisition capital expenditures of $23,847,000. This
amount was funded by $19,480,000 cash payments, $4,295,000 of noncompete notes,
$71,000 of common units issued.
During the six months ended January 31, 1999, the Partnership made growth
and maintenance capital expenditures of $14,739,000 consisting primarily of the
following: 1) relocating and upgrading district plant facilities, 2) additions
to Partnership-owned customer tanks and cylinders, 3) vehicle lease buyouts, and
4) upgrading computer equipment and software. Capital requirements for repair
and maintenance of property, plant and equipment are relatively low since
technological change is limited and the useful lives of propane tanks and
cylinders, the Partnership's principal physical assets, are generally long.
The Partnership meets its vehicle and transportation equipment fleet needs
by leasing light and medium duty trucks and tractors. The General Partner
believes vehicle leasing is a cost effective method for meeting the
Partnership's transportation equipment needs. The Partnership continues seeking
to expand its operations through strategic acquisitions of retail propane
operations located throughout the United States. These acquisitions will be
funded through internal cash flow, external borrowings or the issuance of
additional Partnership interests. The Partnership does not have any material
commitments of funds for capital expenditures other than to support the current
level of operations. In fiscal 1999, the Partnership expects growth and
maintenance capital expenditures to increase slightly over fiscal 1998 levels.
Financing Activities. On August 4, 1998, the OLP issued $350,000,000 of new
privately placed unsecured senior notes ("New Senior Notes") and entered into a
$145,000,000 revolving credit facility ("New Credit Facility") with its existing
banks. The proceeds of the New Senior Notes, which include five series with
maturities ranging from year 2005 through 2013 at an average fixed interest rate
of 7.16%, were used to redeem $200,000,000 of OLP fixed rate Senior Notes
("Senior Notes") issued in July 1994, including a 5% call premium, and to repay
outstanding indebtedness under the existing OLP revolving credit facility
("Credit Facility"). As a result of these financings, the Partnership expects to
realize a decrease in interest expense during fiscal 1999 as compared to the
prior year.
On July 17, 1998, all of the outstanding common stock of Ferrell Companies,
Inc. ("Ferrell") was purchased by a newly established Employee Stock Ownership
Trust. As a result of this change in control in the ownership of Ferrell and
indirectly in the General Partner, the MLP, pursuant to the MLP Senior Secured
Note Indenture, was required to offer to purchase the outstanding notes at a
price of 101% of the principal amount thereof. The offer to purchase was made on
July 27, 1998 and expired August 26, 1998. Upon the expiration of the offer, the
MLP accepted for purchase $65,000 of the notes which were all of the notes
tendered pursuant to the offer. The MLP assigned its right to purchase the notes
to a third party.
During the six months ended January 31, 1999, the Partnership borrowed
$6,282,000 from its Credit Facility to fund working capital, business
acquisitions, and capital expenditure needs. At January 31, 1999, $55,000,000 of
borrowings were outstanding under the revolving portion of the Credit Facility.
Letters of credit outstanding, used primarily to secure obligations under
certain insurance arrangements, totaled $22,915,000. At January 31, 1999, the
Operating Partnership had $67,085,000 available for general corporate,
acquisition and working capital purposes under the Credit Facility. On February
18, 1999, the Partnership declared a cash distribution of $0.50 per Common and
Subordinated Unit, payable March 15, 1999.
14
Adoption of New Accounting Standards. The Financial Accounting Standards
Board recently issued the following new accounting standards: SFAS No. 130
"Reporting Comprehensive Income", SFAS No. 131 "Disclosures About Segments of an
Enterprise and Related Information", SFAS No. 132 "Employers' Disclosures about
Pensions and Other Postretirement Benefits" and SFAS No. 133 "Accounting for
Derivative Instruments and Hedging Activities". SFAS Nos. 130, 131 and 132 are
required to be adopted by the Partnership for the fiscal year ended July 31,
1999. The adoption of SFAS Nos. 130 and 132 are not expected to have a material
effect on the Partnership's financial position or results of operations. The
Partnership is currently assessing the impact of SFAS No. 131 on disclosure
requirements for the next year. SFAS No. 133 is required to be adopted by the
Partnership for the fiscal year ended July 31, 2000. The Partnership is
currently assessing its impact on the Partnership's financial position and
results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk inherent in the Partnership's market risk sensitive
instruments and positions is the potential loss arising from adverse changes in
commodity prices. Additionally, the Partnership seeks to mitigate its interest
rate risk exposure on variable rate debt by entering into interest rate collar
agreements. As of January 31, 1999, the Partnership had only $55,000,000 of
variable rate debt and $25,000,000 notional amount of interest rate collar
agreements effectively outstanding. Thus, assuming a material change in the
variable interest rate to the Partnership, the interest rate risk related to the
variable rate debt and the associated interest rate collar agreements is not
material to the Partnership's financial position.
The Partnership's trading activities utilize certain types of energy
commodity forward contracts and swaps traded on the over-the-counter financial
markets and futures traded on the New York Mercantile Exchange ("NYMEX" or
"Exchange") to anticipate market movements and manage its exposure to the
volatility of floating commodity prices and to protect its inventory positions.
Market risks associated with energy commodities are monitored daily for
compliance with the Partnership's trading policy. This policy includes specific
dollar exposure limits, limits on the term of various contracts and volume
limits for various energy commodities. The Partnership also utilizes loss limits
and daily review of open positions to manage exposures to changing market
prices.
Market and Credit Risk. NYMEX traded futures are guaranteed by the Exchange
and have nominal credit risk. The Partnership is exposed to credit risk
associated with forwards, futures, swaps and option transactions in the event of
nonperformance by counterparties. For each counterparty, the Partnership
analyzes the financial condition prior to entering into an agreement,
establishes credit limits and monitors the appropriateness of each limit. The
change in market value of Exchange-traded futures contracts requires daily cash
settlement in margin accounts with brokers. Forwards and most other
over-the-counter instruments are generally settled at the expiration of the
contract term.
Sensitivity Analysis. The Partnership has prepared a sensitivity analysis
to estimate the exposure to market risk of its energy commodity positions.
Forward contracts, futures, swaps and options were analyzed assuming a
hypothetical 10% change in forward prices for the delivery month for all energy
commodities. The potential loss in future earnings from these positions from a
10% adverse movement in market prices of the underlying energy commodities is
estimated at $1,300,000 as of January 31, 1999. Actual results may differ.
15
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.1 Second Amended and Restated Agreement of Limited
Partnership of Ferrellgas, L.P. dated as of
October 14, 1998.
10.2 First Amendment to the Second Amended and Restated Credit
Agreement dated as of October 9, 1998, among Ferrellgas,
L.P., Ferrellgas, Inc., Bank Of America National Trust And
Savings Association, as agent, and the other financial
institutions party hereto.
27.1 Financial Data Schedule - Ferrellgas Partners, L.P. (filed
in electronic format only)
27.2 Financial Data Schedule-Ferrellgas Partners Finance Corp.
(filed in electronic format only)
(b) Reports on Form 8-K
None filed during quarter ended January 31, 1999.
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrants have duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FERRELLGAS PARTNERS, L.P.
By Ferrellgas, Inc. (General Partner)
Date: March 17, 1999 By /s/ Kevin T. Kelly
-------------------------------------------------
Kevin T. Kelly
Vice President and Chief
Financial Officer (Principal
Financial and Accounting Officer)
FERRELLGAS PARTNERS FINANCE CORP.
Date: March 17, 1999 By /s/ Kevin T. Kelly
-------------------------------------------------
Kevin T. Kelly
Chief Financial Officer (Principal
Financial and Accounting Officer)
17
SECOND AMENDED AND RESTATED
AGREEMENT
OF
LIMITED PARTNERSHIP
OF
FERRELLGAS, L.P.
TABLE OF CONTENTS
Page
ARTICLE I ORGANIZATIONAL MATTERS..................................................................................1
1.1 Formation..........................................................................................1
1.2 Name...............................................................................................1
1.3 Registered Office; Principal Office................................................................1
1.4 Power of Attorney..................................................................................1
1.5 Term...............................................................................................3
1.6 Possible Restrictions on Transfer..................................................................3
ARTICLE II DEFINITIONS............................................................................................3
Acquisition Closing Date.................................................................................3
Acquisition Contribution Agreement.......................................................................3
Acquisition General Partner..............................................................................3
Additional Limited Partner...............................................................................3
Adjusted Capital Account.................................................................................3
Adjusted Property........................................................................................4
Affiliate................................................................................................4
Agreed Allocation........................................................................................4
Agreed Value.............................................................................................4
Agreement................................................................................................4
Audit Committee..........................................................................................4
Available Cash...........................................................................................4
Book-Tax Disparity.......................................................................................5
Business Day.............................................................................................5
Capital Account..........................................................................................5
Capital Contribution.....................................................................................6
Capital Interests........................................................................................6
Carrying Value...........................................................................................6
Certificate of Limited Partnership.......................................................................6
Closing Date.............................................................................................6
Code.....................................................................................................6
Common Unit..............................................................................................6
Contributed Property.....................................................................................6
Contribution Agreement...................................................................................6
Curative Allocation......................................................................................6
Delaware Act.............................................................................................6
Departing Partner........................................................................................7
Economic Risk of Loss....................................................................................7
Event of Withdrawal......................................................................................7
Exchange Act.............................................................................................7
FAC......................................................................................................7
Ferrell..................................................................................................7
Ferrellgas...............................................................................................7
General Partner..........................................................................................7
IDR......................................................................................................7
Indemnitee...............................................................................................7
Initial Limited Partner..................................................................................7
Limited Partner..........................................................................................7
Liquidation Date.........................................................................................7
Liquidator...............................................................................................7
Merger Agreement.........................................................................................7
MLP......................................................................................................8
MLP Agreement............................................................................................8
MLP Offering.............................................................................................8
MLP Registration Statement...............................................................................8
MLP Subsidiary...........................................................................................8
MLP Underwriting Agreement...............................................................................8
National Securities Exchange.............................................................................8
Net Agreed Value.........................................................................................8
Net Income...............................................................................................8
Net Loss.................................................................................................8
Net Termination Gain.....................................................................................9
Net Termination Loss.....................................................................................9
Nonrecourse Built-in Gain................................................................................9
Nonrecourse Deductions...................................................................................9
Nonrecourse Liability....................................................................................9
OLP Offering.............................................................................................9
OLP Registration Statement...............................................................................9
OLP Subsidiary...........................................................................................9
OLP Underwriting Agreement...............................................................................9
Opinion of Counsel......................................................................................10
Partners................................................................................................10
Partner Nonrecourse Debt................................................................................10
Partner Nonrecourse Debt Minimum Gain...................................................................10
Partner Nonrecourse Deductions..........................................................................10
Partnership.............................................................................................10
Partnership Interest....................................................................................10
Partnership Minimum Gain................................................................................10
Percentage Interest.....................................................................................10
Person..................................................................................................10
Quarter.................................................................................................10
Recapture Income........................................................................................10
Registration Statements.................................................................................10
Required Allocations....................................................................................10
Residual Gain or Residual Loss..........................................................................10
Restricted Activities...................................................................................11
Securities Act..........................................................................................11
Senior Notes............................................................................................11
Special Approval........................................................................................11
Subsidiary..............................................................................................11
Substituted Limited Partner.............................................................................11
Surviving Business Entity...............................................................................11
Termination Capital Transactions........................................................................11
Underwriting Agreements.................................................................................11
Unit....................................................................................................11
Unrealized Gain.........................................................................................11
Unrealized Loss.........................................................................................12
Withdrawal Opinion of Counsel...........................................................................12
ARTICLE III PURPOSE..............................................................................................12
3.1 Purpose and Business..............................................................................12
3.2 Powers............................................................................................12
ARTICLE IV CAPITAL CONTRIBUTIONS.................................................................................12
4.1 Initial Contributions.............................................................................12
4.2 Contributions by Ferrellgas, the MLPand the Acquisition General Partner...........................12
4.3 Additional Capital Contributions..................................................................13
4.4 No Preemptive Rights..............................................................................13
4.5 Capital Accounts..................................................................................13
4.6 Interest..........................................................................................16
4.7 No Withdrawal.....................................................................................16
4.8 Loans from Partners...............................................................................16
ARTICLE V ALLOCATIONS AND DISTRIBUTIONS..........................................................................16
5.1 Allocations for Capital Account Purposes..........................................................16
5.2 Allocations for Tax Purposes......................................................................19
5.3 Requirement of Distributions......................................................................21
ARTICLE VI MANAGEMENT AND OPERATION OF BUSINESS..................................................................21
6.1 Management........................................................................................21
6.2 Certificate of Limited Partnership................................................................22
6.3 Restrictions on General Partner's Authority.......................................................23
6.4 Reimbursement of the GeneralPartner...............................................................24
6.5 Outside Activities................................................................................24
6.6 Loans to and from the General Partner; Contracts with Affiliates..................................25
6.7 Indemnification...................................................................................26
6.8 Liability of Indemnitees..........................................................................27
6.9 Resolution of Conflicts of Interest...............................................................28
6.10 Other Matters Concerning theGeneral Partner.......................................................29
6.11 Title to Partnership Assets.......................................................................29
6.12 Reliance by Third Parties........................................................................30
ARTICLE VII RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNER........................................................30
7.1 Limitation of Liability...........................................................................30
7.2 Management ofBusiness.............................................................................30
7.3 Return of Capital.................................................................................30
7.4 Rights of the Limited Partner Relating to the Partnership.........................................30
ARTICLE VIII BOOKS, RECORDS, ACCOUNTING AND REPORTS..............................................................31
8.1 Records and Accounting............................................................................31
8.2 Fiscal Year.......................................................................................31
ARTICLE IX TAX MATTERS...........................................................................................31
9.1 Preparation of Tax Returns........................................................................31
9.2 Tax Elections.....................................................................................32
9.3 Tax Controversies.................................................................................32
9.4 Organizational Expenses...........................................................................32
9.5 Withholding.......................................................................................32
9.6 Opinions of Counsel...............................................................................32
ARTICLE X TRANSFER OF INTERESTS..................................................................................32
10.1 Transfer.........................................................................................32
10.2 Transfer of the General Partner's Partnership Interest...........................................33
10.3 Transfer of the Limited Partner's Partnership Interest...........................................33
10.4 Transfer of the Acquisition General Partner's Partnership Interest...............................33
ARTICLE XI ADMISSION OF PARTNERS.................................................................................33
11.1 Admission of Initial Partners....................................................................33
11.2 Admission of Ferrellgas as a Limited Partner.....................................................33
11.3 Admission of Substituted Limited Partners........................................................34
11.4 Admission of Successor General Partner...........................................................34
11.5 Amendment of Agreement and Certificate of Limited Partnership....................................34
11.6 Admission of Additional Limited Partners.........................................................34
11.7 Admission of FAC as the Acquisition General Partner..............................................34
ARTICLE XII WITHDRAWAL OR REMOVAL OF PARTNERS....................................................................35
12.1 Withdrawal of the General Partner................................................................35
12.2 Removal of the General Partner...................................................................36
12.3 Interest of Departing Partner and Successor General Partner......................................36
12.4 Reimbursement of Departing Partner...............................................................36
12.5 Withdrawal of the Limited Partner................................................................36
12.6 Withdrawal of the Acquisition General Partner....................................................37
ARTICLE XIII DISSOLUTION AND LIQUIDATION.........................................................................37
13.1 Dissolution......................................................................................37
13,2 Continuation of the Business of the Partnership after Dissolution................................37
13.3 Liquidation......................................................................................38
13.4 Distributions in Kind............................................................................39
13.5 Cancellation of Certificate of Limited Partnership...............................................39
13.6 Reasonable Time for Winding Up...................................................................39
13.7 Return of Capital................................................................................39
13.8 Capital Account Restoration......................................................................39
13.9 Waiver of Partition..............................................................................40
ARTICLE XIV AMENDMENT OF PARTNERSHIP AGREEMENT...................................................................40
14.1 Amendment to be Adopted Solely by General Partner................................................40
14.2 Amendment Procedures.............................................................................41
ARTICLE XV MERGER................................................................................................41
15.1 Authority........................................................................................41
15.2 Procedure for Merger or Consolidation............................................................41
15.3 Approval by Limited Partner of Merger or Consolidation...........................................42
15.4 Certificate of Merger............................................................................42
15.5 Effect of Merger.................................................................................42
ARTICLE XVI GENERAL PROVISIONS...................................................................................43
16.1 Addresses and Notices............................................................................43
16.2 References.......................................................................................43
16.3 Pronouns and Plurals.............................................................................43
16.4 Further Action...................................................................................43
16.5 Binding Effect...................................................................................43
16.6 Integration......................................................................................43
16.7 Creditors........................................................................................43
16.8 Waiver...........................................................................................43
16.9 Counterparts.....................................................................................43
16.10 Applicable Law..................................................................................43
16.11 Invalidity of Provisions........................................................................43
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
FERRELLGAS, L.P.
THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF FERRELLGAS, L.P., dated as of October 14, 1998, is entered into
by and among Ferrellgas, Inc., a Delaware corporation, as the General Partner,
Ferrellgas Acquisition Company, LLC, a Delaware limited liability company, as
the Acquisition General Partner, and Ferrellgas Partners, L.P., a Delaware
limited partnership, as the Limited Partner, together with any other Persons who
become Partners in the Partnership as provided herein. The Partnership
previously has been governed by the terms of a First Amended and Restated
Agreement of Limited Partnership dated as of April 23, 1996. The General
Partner, the Acquisition General Partner and the Limited Partner now desire to
amend and restate the First Amended and Restated Agreement of Limited
Partnership in its entirety as set forth herein.
In consideration of the covenants, conditions and agreements
contained herein, the parties hereto hereby agree as follows:
ARTICLE I
ORGANIZATIONAL MATTERS
1.1 Formation. (a) The General Partner and the Initial Limited
Partner have previously formed the Partnership as a limited partnership pursuant
to the provisions of the Delaware Act. Except as expressly provided to the
contrary in this Agreement, the rights and obligations of the Partners and the
administration, dissolution and termination of the Partnership shall be governed
by the Delaware Act. All Partnership Interests shall constitute personal
property of the owner thereof for all purposes.
1.2 Name. The name of the Partnership shall be, and the
business of the Partnership shall be conducted under the name of "Ferrellgas,
L.P" The Partnership's business may be conducted under any other name or names
deemed necessary or appropriate by the General Partner, including, without
limitation, the name of the General Partner or any Affiliate thereof. The words
"Limited Partnership," "L.P.," "Ltd." or similar words or letters shall be
included in the Partnership's name where necessary for the purposes of complying
with the laws of any jurisdiction that so requires. The General Partner in its
sole discretion may change the name of the Partnership at any time and from time
to time and shall notify the Limited Partner of such change in the next regular
communication to the Limited Partner.
1.3 Registered Office; Principal Office. Unless and until
changed by the General Partner, the registered office of the Partnership in the
State of Delaware shall be located at The Corporation Trust Center, 1209 Orange
Street, New Castle County, Wilmington, Delaware 19801, and the registered agent
for service of process on the Partnership in the State of Delaware at such
registered office shall be The Corporation Trust Company. The principal office
of the Partnership and the address of the General Partner shall be One Liberty
Plaza, Liberty, Missouri 64068, or such other place as the General Partner may
from time to time designate by notice to the Limited Partner. The Partnership
may maintain offices at such other place or places within or outside the State
of Delaware as the General Partner deems necessary or appropriate.
1.4 Power of Attorney. (a) Each of the Acquisition General
Partner and the Limited Partner hereby constitutes and appoints each of the
General Partner and, if a Liquidator shall have been selected pursuant to
Section 13.3, the Liquidator severally (and any successor to either thereof by
merger, transfer, assignment, election or otherwise) and each of their
authorized officers and attorneys-in-fact, with full power of substitution, as
its true, and lawful agent and attorney-in-fact, with full power and authority
in its name, place and stead, to:
(i) execute, swear to, acknowledge, deliver, file and
record in the appropriate public offices (A) all certificates,
documents and other instruments (including, without limitation, this
Agreement and the Certificate of Limited Partnership and all amendments
or restatements thereof) that the General Partner or the Liquidator
deems necessary or appropriate to form, qualify or continue the
existence or qualification of the Partnership as a limited partnership
(or a partnership in which the limited partners have limited liability)
in the State of Delaware and in all other jurisdictions in which the
Partnership may conduct business or own property; (B) all certificates,
documents and other instruments that the General Partner or the
Liquidator deems necessary or appropriate to reflect, in accordance
with its terms, any amendment, change, modification or restatement of
this Agreement; (C) all certificates, documents and other instruments
(including, without limitation, conveyances and a certificate of
cancellation) that the General Partner or the Liquidator deems
necessary or appropriate to reflect the dissolution and liquidation of
the Partnership pursuant to the terms of this Agreement; (D) all
certificates, documents and other instruments relating to the
admission, withdrawal, removal or substitution of any Partner pursuant
to, or other events described in, Article X, XI, XII or XIII or the
Capital Contribution of any Partner; (E) all certificates, documents
and other instruments relating to the determination of the rights,
preferences and privileges of any class or series of Partnership
Interests; and (F) all certificates, documents and other instruments
(including, without limitation, agreements and a certificate of merger)
relating to a merger or consolidation of the Partnership pursuant to
Article XV; and
(ii) execute, swear to, acknowledge, deliver, file
and record all ballots, consents, approvals, waivers, certificates,
documents and other instruments necessary or appropriate, in the sole
discretion of the General Partner or the Liquidator, to make, evidence,
give, confirm or ratify any vote, consent, approval, agreement or other
action that is made or given by the Partners hereunder or is consistent
with the terms of this Agreement or is necessary or appropriate, in the
sole discretion of the General Partner or the Liquidator, to effectuate
the terms or intent of this Agreement; provided, that when the consent
or approval of the Limited Partner is required by any provision of this
Agreement, the General Partner or the Liquidator may exercise the power
of attorney made in this Section 1.4(a)(ii) only after the necessary
consent or approval of the Limited Partner is obtained.
Nothing contained in this Section 1.4(a) shall be construed as
authorizing the General Partner to amend this Agreement except in accordance
with Article XIV or as may be otherwise expressly provided for in this
Agreement.
(b) The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, and it shall survive and not
be affected by the subsequent death, incompetency, disability, incapacity,
dissolution, bankruptcy or termination of the Acquisition General Partner or the
Limited Partner and the transfer of all or any portion of the Acquisition
General Partner's or the Limited Partner's Partnership Interest and shall extend
to the Acquisition General Partner's and the Limited Partner's heirs,
successors, assigns and personal representatives. Each of the Acquisition
General Partner and the Limited Partner hereby agrees to be bound by any
representation made by the General Partner or the Liquidator acting in good
faith pursuant to such power of attorney; and each of the Acquisition General
Partner and the Limited Partner hereby waives any and all defenses that may be
available to contest, negate or disaffirm the action of the General Partner or
the Liquidator taken in good faith under such power of attorney. Each of the
Acquisition General Partner and the Limited Partner shall execute and deliver to
the General Partner or the Liquidator, within 15 days after receipt of the
General Partner's or the Liquidator's request therefor, such further
designation, powers of attorney and other instruments as the General Partner or
the Liquidator deems necessary to effectuate this Agreement and the purposes of
the Partnership.
1.5 Term. The Partnership commenced upon the filing of the
Certificate of Limited Partnership in accordance with the Delaware Act and shall
continue in existence until the close of Partnership business on July 31, 2084,
or until the earlier termination of the Partnership in accordance with the
provisions of Article XIII.
1.6 Possible Restrictions on Transfer. Notwithstanding
anything to the contrary contained in this Agreement, in the event of (a) the
enactment (or imminent enactment) of any legislation, (b) the publication of any
temporary or final regulation by the Treasury Department, (c) any ruling by the
Internal Revenue Service or (d) any judicial decision, that, in any such case,
in the Opinion of Counsel, would result in the taxation of the Partnership as an
association taxable as a corporation or would otherwise result in the
Partnership being taxed as an entity for federal income tax purposes, then, the
General Partner may impose such restrictions on the transfer of Partnership
Interests as may be required, in the Opinion of Counsel, to prevent the
Partnership from being taxed as an association taxable as a corporation or
otherwise as an entity for federal income tax purposes, including, without
limitation, making any amendments to this Agreement as the General Partner in
its sole discretion may determine to be necessary or appropriate to impose such
restrictions.
ARTICLE II
DEFINITIONS
The following definitions shall be for all purposes, unless otherwise clearly
indicated to the contrary, applied to the terms used in this Agreement.
"Acquisition Closing Date" means October 14, 1998.
"Acquisition Contribution Agreement" means a
contribution agreement among the Acquisition General Partner, the
Partnership and Ferrellgas pursuant to which the Acquisition General
Partner contributes the assets and properties of a retail propane
business to the Partnership and the Partnership assumes certain
indebtedness and liabilities of the Acquisition General Partner related
to such business or the acquisition thereof.
"Acquisition General Partner" means FAC.
"Additional Limited Partner" means a Person admitted
to the Partnership as a Limited Partner pursuant to Section 11.6 and
who is shown as such on the books and records of the Partnership.
"Adjusted Capital Account" means the Capital Account
maintained for each Partner as of the end of each fiscal year of the
Partnership, (a) increased by any amounts that such Partner is
obligated to restore under the standards set by Treasury Regulation
Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to restore under
Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5)), and (b)
decreased by (i) the amount of all losses and deductions that, as of
the end of such fiscal year, are reasonably expected to be allocated to
such Partner in subsequent years under Sections 704(e)(2) and 706(d) of
the Code and Treasury Regulation Section 1.751-1(b)(2)(ii), and (ii)
the amount of all distributions that, as of the end of such fiscal
year, are reasonably expected to be made to such Partner in subsequent
years in accordance with the terms of this Agreement or otherwise to
the extent they exceed offsetting increases to such Partner's Capital
Account that are reasonably expected to occur during (or prior to) the
year in which such distributions are reasonably expected to be made
(other than increases as a result of a minimum gain chargeback pursuant
to Section 5.1(d)(i) or 5.1(d)(ii)). The foregoing definition of
Adjusted Capital Account is intended to comply with the provisions of
Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"Adjusted Property" means any property the Carrying
Value of which has been adjusted pursuant to Section 4.5(d)(i) or
4.5(d)(ii). Once an Adjusted Property is deemed distributed by, and
recontributed to, the Partnership for federal income tax purposes upon
a termination thereof pursuant to Section 708 of the Code, such
property shall thereafter constitute a Contributed Property until the
Carrying Value of such property is subsequently adjusted pursuant to
Section 4.5(d)(i) or 4.5(d)(ii).
"Affiliate" means, with respect to any Person, any
other Person that directly or indirectly controls, is controlled by or
is under common control with, the Person in question. As used herein,
the term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies
of a Person, whether through ownership of voting securities, by
contract or otherwise.
"Agreed Allocation" means any allocation, other than
a Required Allocation, of an item of income, gain, loss or deduction
pursuant to the provisions of Section 5. 1, including, without
limitation, a Curative Allocation (if appropriate to the context in
which the term "Agreed Allocation" is used).
"Agreed Value" of any Contributed Property means the
fair market value of such property or other consideration at the time
of contribution as determined by the General Partner using such
reasonable method of valuation as it may adopt; provided, however, that
the Agreed Value of any property deemed contributed by the Partnership
for federal income tax purposes upon termination and reconstitution
thereof pursuant to Section 708 of the Code shall be determined in
accordance with Section 4.5(c)(i). Subject to Section 4.5(c)(i), the
General Partner shall, in its sole discretion, use such method as it
deems reasonable and appropriate to allocate the aggregate Agreed Value
of Contributed Properties contributed to the Partnership in a single or
integrated transaction among each separate property on a basis
proportional to the fair market value of each Contributed Property.
"Agreement" means this Second Amended and Restated
Agreement of Limited Partnership of Ferrellgas, L.P., as it may be
amended, supplemented or restated from time to time.
"Audit Committee" means a committee of the Board of
Directors of the General Partner composed entirely of two or more
directors who are neither officers nor employees of the General Partner
or any of its Affiliates.
"Available Cash" means with respect to any period and
without duplication:
(a) the sum of:
(i) all cash receipts of the Partnership during such
period from all sources (including, without limitation, distributions
of cash received by the Partnership from an OLP Subsidiary) plus, in
the case of the Quarter ending October 31, 1994, the cash balance of
the Partnership as of the close of business on the Closing Date; and
(ii) any reduction with respect to such period in a
cash reserve previously established pursuant to clause (b)(ii) below
(either by reversal or utilization) from the level of such reserve at
the end of the prior period;
(b) less the sum of:
(i) all cash disbursements of the Partnership during
such period, including, without limitation, disbursements for operating
expenses, taxes, if any, debt service (including, without limitation,
the payment of principal, premium and interest), redemption of
Partnership Interests, capital expenditures, contributions, if any, to
an OLP Subsidiary and cash distributions to Partners (but only to the
extent that such cash distributions to Partners exceed Available Cash
for the immediately preceding Quarter); and
(ii) any cash reserves established with respect to
such period, and any increase with respect to such period in a cash
reserve previously established pursuant to this clause (b)(ii) from the
level of such reserve at the end of the prior period, in such amounts
as the General Partner determines in its reasonable discretion to be
necessary or appropriate (A) to provide for the proper conduct of the
business of the Partnership (including, without limitation, reserves
for future capital expenditures or capital contributions to an OLP
Subsidiary) or (B) to provide funds for distributions to the Partners
in respect of any one or more of the next four Quarters or (C) because
the distribution of such amounts would be prohibited by applicable law
or by any loan agreement, security agreement, mortgage, debt instrument
or other agreement or obligation to which the Partnership is a party or
by which it is bound or its assets are subject;
provided, however, that for purposes of determining Available Cash for
the Quarter ending October 31, 1994, such Quarter shall be deemed to
commence on the Closing Date. Notwithstanding the foregoing (x)
disbursements (including, without limitation, contributions to an OLP
Subsidiary or disbursements on behalf of an OLP Subsidiary) made or
reserves established, increased or reduced after the end of any Quarter
but on or before the date on which the Partnership makes its
distribution of Available Cash in respect of such Quarter pursuant to
Section 5.3(a) shall be deemed to have been made, established,
increased or reduced, for purposes of determining Available Cash, with
respect to such Quarter if the General Partner so determines and (y)
"Available Cash" with respect to any period shall not include any cash
receipts or reductions in reserves or take into account any
disbursements made or reserves established after the Liquidation Date.
"Book-Tax Disparity" means with respect to any item
of Contributed Property or Adjusted Property, as of the date of any
determination, the difference between the Carrying Value of such
Contributed Property or Adjusted Property and the adjusted basis
thereof for federal income tax purposes as of such date. A Partner's
share of the Partnership's Book-Tax Disparities in all of its
Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained
pursuant to Section 4.5 and the hypothetical balance of such Partner's
Capital Account computed as if it had been maintained strictly in
accordance with federal income tax accounting principles.
"Business Day" means Monday through Friday of each
week, except that a legal holiday recognized as such by the government
of the United States or the states of New York or Missouri shall not be
regarded as a Business Day.
"Capital Account" means the capital account
maintained for a Partner pursuant to Section 4.5.
"Capital Contribution" means any cash, cash
equivalents or the Net Agreed Value of Contributed Property that a
Partner contributes to the Partnership pursuant to Section 4.1, 4.2,
4.3, 4.5(c) or 13.8.
"Capital Interests" means, with respect to any
corporation, any and all shares, participations, rights or other
equivalent interests in the capital of the corporation, and with
respect to any partnership, any and all partnership interests (whether
general or limited) and any other interests or participations that
confer on a Person the right to receive a share of the profits and
losses of, or distributions of assets of, such partnership.
"Carrying Value" means (a) with respect to a
Contributed Property, the Agreed Value of such property reduced (but
not below zero) by all depreciation, amortization and cost recovery
deductions charged to the Partners' Capital Accounts in respect of such
Contributed Property, and (b) with respect to any other Partnership
property, the adjusted basis of such property for federal income tax
purposes, all as of the time of determination. The Carrying Value of
any property shall be adjusted from time to time in accordance with
Sections 4.5(d)(i) and 4.5(d)(ii) and to reflect changes, additions or
other adjustments to the Carrying Value for dispositions and
acquisitions of Partnership properties, as deemed appropriate by the
General Partner.
"Certificate of Limited Partnership" means the
Certificate of Limited Partnership filed with the Secretary of State of
the State of Delaware as referenced in Section 6.2, as such Certificate
of Limited Partnership may be amended, supplemented or restated from
time to time.
"Closing Date" means the first date on which Common
Units are sold by the MLP to the Underwriters pursuant to the
provisions of the MLP Underwriting Agreement.
"Code" means the Internal Revenue Code of 1986, as
amended and in effect from time to time, as interpreted by the
applicable regulations thereunder. Any reference herein to a specific
section or sections of the Code shall be deemed to include a reference
to any corresponding provision of future law.
"Common Unit" has the meaning assigned to such term
in the MLP Agreement.
"Contributed Property" means each property or other
asset, in such form as may be permitted by the Delaware Act, but
excluding cash, contributed to the Partnership (or deemed contributed
to the Partnership on termination and reconstitution thereof pursuant
to Section 708 of the Code). Once the Carrying Value of a Contributed
Property is adjusted pursuant to Section 4.5(d), such property shall no
longer constitute a Contributed Property, but shall be deemed an
Adjusted Property.
"Contribution Agreement" has the meaning assigned to
such term in the MLP Agreement.
"Curative Allocation" means any allocation of an item
of income, gain, deduction, loss or credit pursuant to the provisions
of Section 5.1(d)(ix).
"Delaware Act" means the Delaware Revised Uniform
Limited Partnership Act, 6 Del C. ss. 17-101, et seq., as amended,
supplemented or restated from time to time, and any successor to such
statute.
"Departing Partner" means a former General Partner,
from and after the effective date of any withdrawal or removal of such
former General Partner pursuant to Section 12.1 or Section 12.2.
"Economic Risk of Loss" has the meaning set forth in
Treasury Regulation Section 1.752-2(a).
"Event of Withdrawal" has the meaning assigned to
such term in Section 12.1(a).
"Exchange Act" means the Securities Exchange Act of
1934, as amended supplemented or restated from time to time, and any
successor to such statute.
"FAC" means Ferrellgas Acquisition Company, LLC, a
Delaware limited liability company whose sole member is Ferrellgas.
"Ferrell" means Ferrell Companies, Inc., a Kansas
corporation.
"Ferrellgas" means Ferrellgas, Inc., a Delaware
corporation and a wholly owned subsidiary of Ferrell.
"General Partner" means Ferrellgas,and its successors
as general partner of the Partnership.
"IDR" has the meaning assigned to such term in the
MLP Agreement.
"Indemnitee" means the General Partner, any Departing
Partner, any Person who is or was an Affiliate of the General Partner
or any Departing Partner, any Person who is or was an officer,
director, employee, partner, agent or trustee of the General Partner or
any Departing Partner or any such Affiliate, or any Person who is or
was serving at the request of the General Partner or any Departing
Partner or any such Affiliate as a director, officer, employee,
partner, agent or trustee of another Person.
"Initial Limited Partner" means the MLP.
"Limited Partner" means the Initial Limited Partner,
Ferrellgas pursuant to Section 4.2, each Substituted Limited Partner,
if any, each Additional Limited Partner and any Departing Partner upon
the change of its status from General Partner to Limited Partner
pursuant to Section 12.3, but excluding any such Person from and after
the time it withdraws from the Partnership.
"Liquidation Date" means (a) in the case of an event
giving rise to the dissolution of the Partnership of the type described
in clauses (a) and (b) of the first sentence of Section 13.2, the date
on which the applicable time period during which the Partners have the
right to elect to reconstitute the Partnership and continue its
business has expired without such an election being made, and (b) in
the case of any other event giving rise to the dissolution of the
Partnership, the date on which such event occurs.
"Liquidator" means the General Partner or other
Person approved pursuant to Section 13.3 who performs the functions
described therein.
"Merger Agreement" has the meaning assigned to such
term in Section 15.1.
"MLP" means Ferrellgas Partners, L.P., a Delaware
limited partnership.
"MLP Agreement" means the Agreement of Limited
Partnership of Ferrellgas Partners, L.P., as it may be amended,
supplemented or restated from time to time.
"MLP Offering" means the initial offering of Common
Units to the public, as described in the MLP Registration Statement.
"MLP Registration Statement" means the Registration
Statement on Form S-1 (Registration No. 33-53383), as it has been or as
it may be amended or supplemented from time to time, filed by the MLP
with the Securities and Exchange Commission under the Securities Act to
register the offering and sale of the Common Units in the MLP Offering.
"MLP Subsidiary" means a Subsidiary of the MLP.
"MLP Underwriting Agreement" means the underwriting
agreement dated June 27, 1994, among the MLP, the General Partner,
Ferrell and the Underwriters named in Schedule I thereto providing for
the purchase of Common Units by such Underwriters.
"National Securities Exchange" means an exchange
registered with the Securities and Exchange Commission under Section
6(a) of the Exchange Act.
"Net Agreed Value" means, (a) in the case of any
Contributed Property, the Agreed Value of such property reduced by any
liabilities either assumed by the Partnership upon such contribution or
to which such property is subject when contributed, and (b) in the case
of any property distributed to a Partner by the Partnership, the
Partnership's Carrying Value of such property (as adjusted pursuant to
Section 4.5(d)(ii)) at the time such property is distributed, reduced
by any indebtedness either assumed by such Partner upon such
distribution or to which such property is subject at the time of
distribution, in either case, as determined under Section 752 of the
Code.
"Net Income" means, for any taxable period, the
excess, if any, of the Partnership's items of income and gain (other
than those items attributable to dispositions constituting Termination
Capital Transactions) for such taxable period over the Partnership's
items of loss and deduction (other than those items attributable to
dispositions constituting Termination Capital Transactions) for such
taxable period. The items included in the calculation of Net Income
shall be determined in accordance with Section 4.5(b) and shall not
include any items specially allocated under Section 5.1(d). Once an
item of income, gain, loss or deduction that has been included in the
initial computation of Net Income is subjected to a Required Allocation
or a Curative Allocation, Net Income or Net Loss, whichever the case
may be, shall be recomputed without regard to such item.
"Net Loss" means, for any taxable period, the excess,
if any, of the Partnership's items of loss and deduction (other than
those items attributable to dispositions constituting Termination
Capital Transactions) for such taxable period over the Partnership's
items of income and gain (other than those items attributable to
dispositions constituting Termination Capital Transactions) for such
taxable period. The items included in the calculation of Net Loss shall
be determined in accordance with Section 4.5(b) and shall not include
any items specially allocated under Section 5.1(d). Once an item of
income, gain, loss or deduction that has been included in the initial
computation of Net Loss is subjected to a Required Allocation or a
Curative Allocation, Net Income, or Net Loss, whichever the case may
be, shall be recomputed without regard to such item.
"Net Termination Gain" means, for any taxable period,
the sum, if positive, of all items of income, gain, loss or deduction
recognized by the Partnership (including, without limitation, such
amounts recognized through an OLP Subsidiary, if applicable) from
Termination Capital Transactions occurring in such taxable period. The
items included in the determination of Net Termination Gain shall be
determined in accordance with Section 4.5(b) and shall not include any
items of income, gain or loss specially allocated under Section 5.1(d).
Once an item of income, gain or loss that has been included in the
initial computation of Net Termination Gain is subjected to a Required
Allocation or a Curative Allocation, Net Termination Gain or Net
Termination Loss, whichever the case may be, shall be recomputed
without regard to such item.
"Net Termination Loss" means, for any taxable period,
the sum, if negative, of all items of income, gain, loss or deduction
recognized by the Partnership (including, without limitation, such
amounts recognized through an OLP Subsidiary, if applicable) from
Termination Capital Transactions occurring in such taxable period. The
items included in the determination of Net Termination Loss shall be
determined in accordance with Section 4.5(b) and shall not include any
items of income, gain or loss specially allocated under Section 5.1(d).
Once an item of gain or loss that has been included in the initial
computation of Net Termination Loss is subjected to a Required
Allocation or a Curative Allocation, Net Termination Gain or Net
Termination Loss, whichever the case may be, shall be recomputed
without regard to such item.
"Nonrecourse Built-in Gain" means with respect to any
Contributed Properties or Adjusted Properties that are subject to a
mortgage or pledge securing a Nonrecourse Liability, the amount of any
taxable gain that would be allocated to the Partners pursuant to
Sections 5.2(b)(i)(A), 5.2(b)(ii)(A) or 5.2(b)(iii) if such properties
were disposed of in a taxable transaction in full satisfaction of such
liabilities and for no other consideration.
"Nonrecourse Deductions" means any and all items of
loss, deduction or expenditures (described in Section 705(a)(2)(B) of
the Code) that, in accordance with the principles of Treasury
Regulation Section 1.704-(2)(b), are attributable to a Nonrecourse
Liability.
"Nonrecourse Liability" has the meaning set forth in
Treasury Regulation Section 1.752-1(a)(2).
"OLP Offering" means the initial offering of Senior
Notes to the public, as described in the OLP Registration Statement.
"OLP Registration Statement" means the Registration
Statement on Form S-1 (Registration No. 33-53379), as it has been or as
it may be amended or supplemented from time to time, filed by the
Partnership and Ferrellgas Finance Corp. with the Securities and
Exchange Commission under the Securities Act to register the offering
and sale of the Senior Notes in the OLP Offering.
"OLP Subsidiary" means a Subsidiary of the Partnership.
"OLP Underwriting Agreement" means the underwriting
agreement dated June 27,1994, among the Partnership, Ferrellgas Finance
Corp., the General Partner and the Underwriters named in Schedule A
thereto providing for the purchase of Senior Notes by such
Underwriters.
"Opinion of Counsel" means a written opinion of
counsel (who may be regular counsel to the General Partner, any
Affiliate of the General Partner, or the Partnership) acceptable to the
General Partner.
"Partners" means the General Partner, the Acquisition
General Partner and the Limited Partner.
"Partner Nonrecourse Debt" has the meaning set forth
in Treasury Regulation Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the
meaning set forth in Treasury Regulation Section 1.704-2(i)(2).
"Partner Nonrecourse Deductions" means any and all
items of loss, deduction or expenditure (including, without limitation,
any expenditure described in Section 705(a)(2)(B) of the Code) that, in
accordance with the principles of Treasury Regulation Section
1.704-2(i), are attributable to a Partner Nonrecourse Debt.
"Partnership" means Ferrellgas, L.P., a Delaware
limited partnership, established by the Certificate of Limited
Partnership, and any successor thereto.
"Partnership Interest"means the interest of a Partner
in the Partnership.
"Partnership Minimum Gain" means that amount
determined in accordance with the principles of Treasury Regulation
Section 1.704-2(d).
"Percentage Interest" means (a) as to the General
Partner, in its capacity as such, 1.0101% and (b) as to
the Limited Partner, 98.9899%.
"Person" means an individual or a corporation,
partnership, trust, unincorporated organization, association or other
entity.
"Quarter" means, unless the context requires
otherwise, a three-month period of time ending on October 31, January
31, April 30, or July 31; provided, however, that the General Partner
in its sole discretion may amend such period as it deems necessary or
appropriate in connection with a change in the fiscal year of the
Partnership.
"Recapture Income" means any gain recognized by the
Partnership (computed without regard to any adjustment required by
Sections 734 or 743 of the Code) upon the disposition of any property
or asset of the Partnership, which gain is characterized as ordinary
income because it represents the recapture of deductions previously
taken with respect to such property or asset.
"Registration Statements" means the MLP Registration
Statement and the OLP Registration Statement.
"Required Allocations" means any allocation (or
limitation imposed on any allocation) of an item of income, gain,
deduction or loss pursuant to (a) Section 5.1(b)(i) or (b) Sections
5.1(d)(i)-(vi) and (viii), such allocations (or limitations thereon)
being directly or indirectly required by the Treasury regulations
promulgated under Section 704(b) of the Code.
"Residual Gain" or "Residual Loss" means any item of
gain or loss, as the case may be, of the Partnership recognized for
federal income tax purposes resulting from a sale, exchange or other
disposition of a Contributed Property or Adjusted Property, to the
extent such item of gain or loss is not allocated pursuant to Sections
5.2(b)(i)(A) or 5.2(b)(ii)(A), respectively, to eliminate Book-Tax
Disparities.
"Restricted Activities" means the retail sale of
propane to end users within the continental United States in the manner
engaged in by Ferrellgas immediately prior to the Closing Date.
"Securities Act" means the Securities Act of 1933, as
amended, supplemented or restated from time to time and any successor
to such statute.
"Senior Notes" means, collectively, the $200 million
in aggregate principal amount of 10.0% Fixed Rate Senior Notes due 2001
and $50 million in aggregate principal amount of Floating Rate Senior
Notes due 2001 to be issued by the Partnership and Ferrellgas Finance
Corp. and offered and sold in the OLP Offering.
"Special Approval" means approval by the Audit
Committee.
"Subsidiary" means, with respect to any Person, (i) a
corporation of which more than 50% of the voting power of shares of
Capital Interests entitled (without regard to the occurrence of any
contingency) to vote in the election of directors or other governing
body of such corporation is owned, directly or indirectly, by such
Person, by one or more Subsidiaries of such Person, or a combination
thereof, (ii) a partnership (whether general or limited) in which such
Person or a Subsidiary of such Person is, at the date of determination,
a general or limited partner of such partnership, but only if more than
50% of the Capital Interests of such partnership (considering all of
the Capital Interests of the partnership as a single class) is owned or
controlled, directly or indirectly, by such Person, by one or more
Subsidiaries of such Person, or a combination thereof, or (iii) any
other Person (other than a corporation or a partnership) in which such
Person, directly or indirectly, at the date of determination, has (x)
at least a majority ownership interest or (y) the power to elect or
direct the election of a majority of the directors or other governing
body of such Person.
"Substituted Limited Partner" means a Person who is
admitted as a Limited Partner to the Partnership pursuant to Section
11.3 in place of and with all the rights of a Limited Partner and who
is shown as a Limited Partner on the books and records of the
Partnership.
"Surviving Business Entity" has the meaning assigned
to such term in Section 15.2(b).
"Termination Capital Transactions" means any sale,
transfer or other disposition of property of the Partnership occurring
upon or incident to the liquidation and winding up of the Partnership
pursuant to Article XIII.
"Underwriting Agreements" means the MLP Underwriting
Agreement and the OLP Underwriting Agreement.
"Unit" has the meaning assigned to such term in this
MLP Agreement.
"Unrealized Gain" attributable to any item of
Partnership property means, as of any date of determination, the
excess, if any, of (a) the fair market value of such property as of
such date (as determined under Section 4.5(d)) over (b) the Carrying
Value of such property as of such date (prior to any adjustment to be
made pursuant to Section 4.5(d) as of such date).
"Unrealized Loss" attributable to any item of
Partnership property means, as of any date of determination, the
excess, if any, of (a) the Carrying Value of such property as of such
date (prior to any adjustment to be made pursuant to Section 4.5(d) as
of such date) over (b) the fair market value of such property as of
such date (as determined under Section 4.5(d)).
"Withdrawal Opinion of Counsel" has the meaning
assigned to such term in Section 12.1(b).
ARTICLE I
ARTICLE III
PURPOSE
3.1 Purpose and Business. The purpose and nature of this
business to be conducted by the Partnership shall be (a) to acquire, manage, and
operate the assets described in the Contribution Agreement as being transferred
to the Partnership and any similar assets or properties and to engage directly
in, or to enter into or form any corporation, limited liability company,
partnership, joint venture or other arrangement to engage indirectly in, any
type of business or activity engaged in by Ferrellgas immediately prior to the
Closing Date and, in connection therewith, to exercise all of the rights and
powers conferred upon the Partnership pursuant to the agreements relating to
such assets, (b) to engage directly in, or enter into or form any corporation,
limited liability company, partnership, joint venture or other arrangement to
engage indirectly in, any business activity that is approved by the General
Partner and which may lawfully be conducted by a limited partnership organized
pursuant to the Delaware Act and, in connection therewith, to exercise all of
the rights and powers conferred upon the Partnership pursuant to the agreements
relating to such business activity, and (c) to do anything necessary or
appropriate to the foregoing, including, without limitation, the making of
capital contributions to any OLP Subsidiary or loans to the MLP, an MLP
Subsidiary or an OLP Subsidiary (including, without limitation, those
contributions or loans that may be required in connection with its involvement
in the activities referred to in clause (b) of this sentence). The General
Partner has no obligation or duty to the Partnership or the Limited Partner to
propose or approve, and in its sole discretion may decline to propose or
approve, the conduct by the Partnership of any business.
3.2 Powers. The Partnership shall be empowered to do any and
all acts and things necessary, appropriate, proper, advisable, incidental to or
convenient for the furtherance and accomplishment of the purposes and business
described in Section 3.1 and for the protection and benefit of the Partnership.
ARTICLE IV
CAPITAL CONTRIBUTIONS
4.1 Initial Contributions. In connection with the formation of
the Partnership under the Delaware Act, the General Partner made an initial
Capital Contribution to the Partnership in the amount of $10.10 for an interest
in the Partnership and was admitted as the general partner of the Partnership,
and the Initial Limited Partner made an initial Capital Contribution to the
Partnership in the amount of $989.90 for an interest in the Partnership and was
admitted as a limited partner of the Partnership.
4.2 Contributions by Ferrellgas, the MLP and the Acquisition
General Partner. (a) On the Closing Date, Ferrellgas, as a Capital Contribution,
contributed, transferred, conveyed, assigned and delivered to the Partnership
the property and other rights described in the Contribution Agreement as being
so contributed, transferred, conveyed, assigned and delivered in exchange for
(i) the continuation of its general partner interest in the Partnership
consisting of a Partnership Interest representing a 1.0101% Percentage Interest,
(ii) a limited partner interest in the Partnership, which was contributed,
transferred, conveyed, assigned and delivered by the General Partner to the MLP
as set forth in the Contribution Agreement, and which, together with the
Partnership Interest previously held by the MLP, represents a 98.9899%
Percentage Interest in the Partnership, and (iii) the Partnership's assumption
of, or taking of assets subject to, certain indebtedness and other liabilities,
including, without limitation, the Partnership's assumption of the payment
obligations of certain indebtedness of Ferrellgas, all as provided for in the
Contribution Agreement.
(b) On the Closing Date, the MLP contributed in respect of its
Partnership Interest approximately $255 million out of the net proceeds to the
MLP from the issuance of the Common Units pursuant to the MLP Offering.
(c) On the Acquisition Closing Date, FAC, as a Capital
Contribution, contributed, transferred, conveyed, assigned and delivered to the
Partnership the property and other rights described in an Acquisition
Contribution Agreement dated the Acquisition Closing Date as being so
contributed, transferred, conveyed, assigned and delivered in exchange for (i)
the general partner interest in the Partnership of the Acquisition General
Partner consisting of a Partnership Interest in the amount of $735, and (ii) the
Partnership's assumption of, or taking of assets subject to, certain
indebtedness and other liabilities, including, without limitation, the
Partnership's assumption of the payment obligations of certain indebtedness of
FAC, all as provided for in such Acquisition Contribution Agreement. Immediately
thereafter, FAC assigned the Partnership Interest of the Acquisition General
Partner to Ferrellgas, the general partner interest in the Partnership of
Ferrellgas continued thereafter as a Partnership Interest representing a 1.0101
Percentage Interest, and FAC withdrew from the Partnership.
4.3 Additional Capital Contributions. With the consent of the
General Partner, the Limited Partner may, but shall not be obligated to, make
additional Capital Contributions to the Partnership. Contemporaneously with the
making of any such additional Capital Contributions by the Limited Partner, the
General Partner shall be obligated to make an additional Capital Contribution to
the Partnership in an amount equal to 1.0102% of the additional Capital
Contribution then made by the Limited Partner. Except as set forth in the
immediately preceding sentence and Section 13.8, the General Partner shall not
be obligated to make any additional Capital Contributions to the Partnership.
4.4 No Preemptive Rights. Except as provided in Section 4.3,
no Person shall have any preemptive, preferential or other similar right with
respect to (a) additional Capital Contributions; (b) issuance or sale of any
class or series of Partnership Interests, whether unissued, held in the treasury
or hereafter created; (c) issuance of any obligations, evidences of indebtedness
or other securities of the Partnership convertible into or exchangeable for, or
carrying or accompanied by any rights to receive, purchase or subscribe to, any
such Partnership Interests; (d) issuance of any right of subscription to or
right to receive, or any warrant or option for the purchase of, any such
Partnership Interests; or (e) issuance or sale of any other securities that may
be issued or sold by the Partnership.
4.5 Capital Accounts. (a) The Partnership shall maintain for
each Partner owning a Partnership Interest a separate Capital Account with
respect to such Partnership Interest in accordance with the rules of Treasury
Regulation Section 1.704-1 (b)(2)(iv). Such Capital Account shall be increased
by (i) the amount of all Capital Contributions made to the Partnership with
respect to such Partnership Interest pursuant to this Agreement and (ii) all
items of Partnership income and gain (including, without limitation, income and
gain exempt from tax) computed in accordance with Section 4.5(b) and allocated
with respect to such Partnership Interest pursuant to Section 5. 1, and
decreased by (x) the amount of cash or the Net Agreed Value of all actual and
deemed distributions of cash or property made with respect to such Partnership
Interest pursuant to this Agreement and (y) all items of Partnership deduction
and loss computed in accordance with Section 4.5(b) and allocated with respect
to such Partnership Interest pursuant to Section 5.1.
(b) For purposes of computing the amount of any item of
income, gain, loss or deduction to be reflected in the Partners' Capital
Accounts, the determination, recognition and classification of any such item
shall be the same as its determination, recognition and classification for
federal income tax purposes (including, without limitation, any method of
depreciation, cost recovery or amortization used for that purpose), provided,
that:
(i) Solely for purposes of this Section 4.5, the
Partnership shall be treated as owning directly its proportionate share
(as determined by the General Partner) of all property owned by any OLP
Subsidiary that is classified as a partnership for federal income tax
purposes.
(ii) All fees and other expenses incurred by the
Partnership to promote the sale of (or to sell) a Partnership Interest
that can neither be deducted nor amortized under Section 709 of the
Code, if any, shall, for purposes of Capital Account maintenance, be
treated as an item of deduction at the time such fees and other
expenses are incurred and shall be allocated among the Partners
pursuant to Section 5. 1.
(iii) Except as otherwise provided in Treasury
Regulation Section 1.704-1 (b)(2)(iv)(m), the computation of all items
of income, gain, loss and deduction shall be made without regard to any
election under Section 754 of the Code which may be made by the
Partnership and, as to those items described in Section 705(a)(1)(B) or
705(a)(2)(B) of the Code, without regard to the fact that such items
are not includable in gross income or are neither currently deductible
nor capitalized for federal income tax purposes.
(iv) Any income, gain or loss attributable to the
taxable disposition of any Partnership property shall be determined as
if the adjusted basis of such property as of such date of disposition
were equal in amount to the Partnership's Carrying Value with respect
to such property as of such date.
(v) In accordance with the requirements of Section
704(b) of the Code, any deductions for depreciation, cost recovery or
amortization attributable to any Contributed Property shall be
determined as if the adjusted basis of such property on the date it was
acquired by the Partnership were equal to the Agreed Value of such
property. Upon an adjustment pursuant to Section 4.5(d) to the Carrying
Value of any Partnership property subject to depreciation, cost
recovery or amortization, any further deductions for such depreciation,
cost recovery or amortization attributable to such property shall be
determined (A) as if the adjusted basis of such property were equal to
the Carrying Value of such property immediately following such
adjustment and (B) using a rate of depreciation, cost recovery or
amortization derived from the same method and useful life (or, if
applicable, the remaining useful life) as is applied for federal income
tax purposes; provided, however, that, if the asset has a zero adjusted
basis for federal income tax purposes, depreciation, cost recovery or
amortization deductions shall be determined using any reasonable method
that the General Partner may adopt
(vi) If the Partnership's adjusted basis in a
depreciable or cost recovery property is reduced for federal income tax
purposes pursuant to Section 48(q)(1) or 48(q)(3) of the Code, the
amount of such reduction shall, solely for purposes hereof, be deemed
to be an additional depreciation or cost recovery deduction in the year
such property is placed in service and shall be allocated among the
Partners pursuant to Section 5.1. Any restoration of such basis
pursuant to Section 48(q)(2) of the Code shall, to the extent possible,
be allocated in the same manner to the Partners to whom such deemed
deduction was allocated.
(c) A transferee of a Partnership Interest shall succeed to a
pro rata portion of the Capital Account of the transferor relating to the
Partnership Interest so transferred; provided, however, that, if the transfer
causes a termination of the Partnership under Section 708(b)(1)(B) of the Code,
the Partnership's properties shall be deemed to have been distributed in
liquidation of the Partnership to the Partners (including any transferee of a
Partnership Interest that is a party to the transfer causing such termination)
pursuant to Sections 13.3 and 13.4 and recontributed by such Partners in
reconstitution of the Partnership. Any such deemed distribution shall be treated
as an actual distribution for purposes of this Section 4.5. In such event, the
Carrying Values of the Partnership properties shall be adjusted immediately
prior to such deemed distribution pursuant to Section 4.5(d)(ii) and such
Carrying Values shall then constitute the Agreed Values of such properties upon
such deemed contribution to the reconstituted Partnership. The Capital Accounts
of such reconstituted Partnership shall be maintained in accordance with the
principles of this Section 4.5.
(d) (i) Consistent with the provisions of Treasury
Regulation Section 1.704-1(b)(2)(iv)(f), on an issuance of additional
Partnership Interests for cash or Contributed Property, the Capital
Account of all Partners and the Carrying Value of each Partnership
property immediately prior to such issuance shall be adjusted upward
or downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership property, as if such Unrealized Gain
or Unrealized Loss had been recognized on an actual sale of each such
property immediately prior to such issuance and had been allocated to
the Partners at such time pursuant to Sections 5.1(a) and 5.1(b). In
determining such Unrealized Gain or Unrealized Loss, the aggregate
cash amount and fair market value of all Partnership assets
(including, without limitation, cash or cash equivalents) immediately
prior to the issuance of additional Partnership Interests shall be
determined by the General Partner using such reasonable method of
valuation as it may adopt; provided, however, that the General
Partner, in arriving at such valuation, must take fully into account
the fair market value of the Partnership Interests of all Partners at
such time. The General Partner shall allocate such aggregate value
among the assets of the Partnership (in such manner as it determines
in its sole discretion to be reasonable) to arrive at a fair market
value for individual properties.
(ii) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed
distribution to a Partner of any Partnership property (other than a
distribution of cash that is not in redemption or retirement of a
Partnership Interest), the Capital Accounts of all Partners and the
Carrying Value of such Partnership property shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss attributable
to such Partnership property, as if such Unrealized Gain or Unrealized
Loss had been recognized in a sale of such property immediately prior
to such distribution for an amount equal to its fair market value, and
had been allocated to the Partners, at such time, pursuant to Section
5.1. Any Unrealized Gain or Unrealized Loss attributable to such
property shall be allocated in the same manner as Net Termination Gain
or Net Termination Loss pursuant to Section 5.1(c); provided, however,
that, in making any such allocation, Net Termination Gain or Net
Termination Loss actually realized shall be allocated first. In
determining such Unrealized Gain or Unrealized Loss the aggregate cash
amount and fair market value of all Partnership assets, (including,
without limitation, cash or cash equivalents) immediately prior to a
distribution shall (A) in the case of a deemed distribution occurring
as a result of a termination of the Partnership pursuant to Section 708
of the Code, be determined and allocated in the same manner as that
provided in Section 4.5(d)(i) or (B) in the case of a liquidating
distribution pursuant to Section 14.3 or 14.4, be determined and
allocated by the Liquidator using such reasonable method of valuation
as it may adopt.
4.6 Interest. No interest shall be paid by the Partnership on
Capital Contributions or on balances in Partners' Capital Accounts.
4.7 No Withdrawal. No Partner shall be entitled to withdraw
any part of its Capital Contributions or its Capital Account or to receive any
distribution from the Partnership, except as provided in Articles V, VII, XII
and XIII.
4.8 Loans from Partners. Loans by a Partner to the Partnership
shall not constitute Capital Contributions. If any Partner shall advance funds
to the Partnership in excess of the amounts required hereunder to be contributed
by it to the capital of the Partnership, the making of such excess advances
shall not result in any increase in the amount of the Capital Account of such
Partner. The amount of any such excess advances shall be a debt obligation of
the Partnership to such Partner and shall be payable or collectible only out of
the Partnership assets in accordance with the terms and conditions upon which
such advances are made.
ARTICLE I
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.1 Allocations for Capital Account Purposes. For purposes of
maintaining the Capital Accounts and in determining the rights of the Partners
among themselves, the Partnership's items of income, gain, loss and deduction
(computed in accordance with Section 4.5(b)) shall be allocated among the
Partners in each taxable year (or portion thereof) as provided hereinbelow.
(a) Net Income. After giving effect to the special allocations
set forth in Section 5.1(d), Net Income for each taxable period and all items of
income, gain, loss and deduction taken into account in computing Net Income for
such taxable period shall be allocated as follows:
(i) First, 100% to the General Partner until the
aggregate Net Income allocated to the General Partner pursuant to this
Section 5.1 (a)(i) for the current taxable year and all previous
taxable years is equal to the aggregate Net Losses allocated to the
General Partner pursuant to Section 5.1 (b)(ii) for all previous
taxable years; and
(ii) Second, the balance, if any, 100% to the General
Partner and the Limited Partner in accordance with their respective
Percentage Interests.
(b) Net Losses. After giving effect to the special allocations
set forth in Section 5.1(d), Net Losses for each taxable period and all items of
income, gain, loss and deduction taken into account in computing Net Losses for
such taxable period shall be allocated as follows:
(i) First, 100% to the General Partner and the
Limited Partner in accordance with their respective Percentage
Interests; provided, that Net Losses shall not be allocated pursuant to
this Section 5.1(b)(i) to the extent that such allocation would cause
any Limited Partner to have a deficit balance in its Adjusted Capital.
Account at the end of such taxable year (or increase any existing
deficit balance in its Adjusted Capital Account); and
(ii) Second, the balance, if any, 100% to the General
Partner.
(c) Net Termination Gains and Losses. After giving effect to
the special allocations set forth in Section 5.1(d), all items of income, gain,
loss and deduction taken into account in computing Net Termination Gain or Net
Termination Loss; for such taxable period shall be allocated in the same manner
as such Net Termination Gain or Net Termination Loss is allocated hereunder. All
allocations under this Section 5.1(c) shall be made after Capital Account
balances have been adjusted by all other allocations provided under this Section
5.1(c) after all distributions of Available Cash provided under Section 5.3 have
been made with respect to the taxable period ending on the date of the
Partnership's liquidation pursuant to Section 13.3.
(i) If a Net Termination Gain is recognized (or
deemed recognized pursuant to Section 4.5(d)) from Termination Capital
Transactions, such Net Termination Gain shall be allocated between the
General Partner and the Limited Partner in the following manner (and
the Adjusted Capital Accounts of the Partners shall be increased by the
amount so allocated in each of the following subclauses, in the order
listed, before an allocation is made pursuant to the next succeeding
subclause):
(A) First, to each Partner having a deficit
balance in its Adjusted Capital Account, in the proportion
that such deficit balance bears to the total deficit balances
in the Adjusted Capital Accounts of all Partners, until each
such Partner has been allocated Net Termination Gain equal to
any such deficit balance in its Adjusted Capital Account; and
(B) Second, 100% to the General Partner and
the Limited Partner in accordance with their respective
Percentage Interests.
(ii) If a Net Termination Loss is recognized (or
deemed recognized pursuant to Section 4.5(d)) from Termination Capital
Transactions, such Net Termination Loss shall be allocated to the
Partners in the following manner:
(A) First, 100% to the General Partner and
the Limited Partner in proportion to, and to the extent of,
the positive balances in their respective Adjusted Capital
Accounts; and
(B) Second, the balance, if any, 100% to the
General Partner.
(d) Special Allocations. Notwithstanding any other provision
of this Section 5.1, the following special allocations shall be made for such
taxable period:
(i) Partnership Minimum Gain Chargeback.
Notwithstanding any other provision of this Section 5.1, if there is a
net decrease in Partnership Minimum Gain during any Partnership taxable
period, each Partner shall be allocated items of Partnership income and
gain for such period (and, if necessary, subsequent periods) in the
manner and amounts provided in Treasury Regulation Sections
1.704-2(f)(6), 1.704-2(g)(2) and 1.704-2(j)(2)(i), or any successor
provision. For purposes of this Section 5.1(d), each Partner's Adjusted
Capital Account balance shall be determined, and the allocation of
income or gain required hereunder shall be effected, prior to the
application of any other allocations pursuant to this Section 5.1(d)
with respect to such taxable period (other than an allocation pursuant
to Sections 5.1 (d)(v) and (vi)). This Section 5.1(d)(i) is intended to
comply with the Partnership Minimum Gain chargeback requirement in
Treasury Regulation Section 1.704-2(f) and shall be interpreted
consistently therewith.
(ii) Chargeback of Partner Nonrecourse Debt Minimum
Gain. Notwithstanding the other provisions of this Section 5.1 (other
than Section 5.1(d) (i)), except as provided in Treasury Regulation
Section 1.704-2(i)(4), if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain during any Partnership taxable period,
any Partner with a share of Partner Nonrecourse Debt Minimum Gain at
the beginning of such taxable period shall be allocated items of
Partnership income and gain for such period (and, if necessary,
subsequent periods) in the manner and amounts provided in Treasury
Regulation Sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii), or any
successor provisions. For purposes of this Section 5.1(d), each
Partner's Adjusted Capital Account balance shall be determined, and the
allocation of income or gain required hereunder shall be effected,
prior to the application of any other allocations pursuant to this
Section 5.1(d), other than Section 5.1(d)(i) and other than an
allocation pursuant to Sections 5.1(d)(v) and (vi), with respect to
such taxable period. This Section 5.1(d)(ii) is intended to comply with
the chargeback of items of income and gain requirement in Treasury
Regulation Section 1.7041-2(i)(4) and shall be interpreted consistently
therewith.
(iii) Qualified Income Offset. In the event any
Partner unexpectedly receives any adjustments, allocations or
distributions described in Treasury Regulation Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be
specifically allocated to such Partner in an amount and manner
sufficient to eliminate, to the extent required by the Treasury
Regulations promulgated under Section 704(b) of the Code, the deficit
balance, if any, in its Adjusted Capital Account created by such
adjustments, allocations or distributions as quickly as possible,
unless such deficit balance is otherwise eliminated pursuant to Section
5.1(d)(i) or (ii).
(iv) Gross Income Allocations. In the event any
Partner has a deficit balance in its Adjusted Capital Account at the
end of any Partnership taxable period such Partner shall be specially
allocated items of Partnership gross. income and gain in the amount of
such excess as quickly as possible; provided, that an allocation
pursuant to this Section 5.1(d)(iv) shall be made only if and to the
extent that such Partner would have a deficit balance in its Adjusted
Capital Account after all other allocations provided in this Section
5.1 have been tentatively made as if this Section 5.1(d)(iv) were not
in this Agreement.
(v) Nonrecourse Deductions. Nonrecourse Deductions
for any taxable period shall be allocated to the Partners in accordance
with their respective Percentage Interests. If the General Partner
determines in its good faith discretion that the Partnership's
Nonrecourse Deductions must be allocated in a different ratio to
satisfy the safe harbor requirements of the Treasury Regulations
promulgated under Section 704(b) of the Code, the General Partner is
authorized, upon notice to the Limited Partner, to revise the
prescribed ratio to the numerically closest ratio that does satisfy
such requirements.
(vi) Partner Nonrecourse Deductions. Partner
Nonrecourse Deductions for any taxable period shall be allocated 100%
to the Partner that bears the Economic Risk of Loss with respect to the
Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions
are attributable in accordance with Treasury Regulation Section
1.704-2(i). If more than one Partner bears the Economic Risk of Loss
with respect to a Partner Nonrecourse Debt, such Partner Nonrecourse
Deductions attributable thereto shall be allocated between or among
such Partners in accordance with the ratios in which they share such
Economic Risk of Loss.
(vii) Nonrecourse Liabilities. For purposes of
Treasury Regulation Section 1.752-3(a)(3), the Partners agree that
Nonrecourse Liabilities of the Partnership in excess of the sum of (A)
the amount of Partnership Minimum Gain and (B) the total amount of
Nonrecourse Built-in Gain shall be allocated among the Partners in
accordance with their respective Percentage Interests.
(viii) Code Section 754 Adjustments. To the extent an
adjustment to the adjusted tax basis of any Partnership asset pursuant
to Section 734(b) or 743(b) of the Code is required, pursuant to
Treasury Regulation Section 1.704-1 (b)(2)(iv)(m), to be taken into
account in determining Capital Accounts, the amount of such adjustment
to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such item of gain or loss shall be specially
allocated to the Partners in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted pursuant to
such Section of the Treasury Regulations.
(ix) Curative Allocation.
(A) Notwithstanding any other provision of
this Section 5.1, other than the Required Allocations, the
Required Allocations shall be taken into account in making the
Agreed Allocations so that, to the extent possible, the net
amount of items of income, gain, loss and deduction allocated
to each Partner pursuant to the Required Allocations and the
Agreed Allocations, together, shall be equal to the net amount
of such items that would have been allocated to each such
Partner under the Agreed Allocations had the Required
Allocations and the related Curative Allocation not otherwise
been provided in this Section 5.1. Notwithstanding the
preceding sentence, Required Allocations relating to (1)
Nonrecourse Deductions shall not be taken, into account except
to the extent that there has been a decrease in Partnership
Minimum Gain and (2) Partner Nonrecourse Deductions shall not
be taken into account except to the extent that there has been
a decrease in Partner Nonrecourse Debt Minimum Gain.
Allocations pursuant to this Section 5.1(d)(ix)(A) shall only
be made with respect to Required Allocations to the extent the
General Partner reasonably determines that such allocations
will otherwise be inconsistent with the economic agreement
among the Partners. Further, allocations pursuant to this
Section 5.1(d)(ix)(A) shall be deferred with respect to
allocations pursuant to clauses (1) and (2) hereof to the
extent the General Partner reasonably determines that such
allocations are likely to be offset by subsequent Required
Allocations.
(B) The General Partner shall have
reasonable discretion, with respect to each taxable period, to
(1) apply the provisions of Section 5.1(d)(ix)(A) in whatever
order is most likely to minimize the economic distortions that
might otherwise result from the Required Allocations, and (2)
divide all allocations pursuant to Section 5.1(d)(ix)(A) among
the Partners in a manner that is likely to minimize such
economic distortions.
(e) Allocations to Acquisition General Partner.
Notwithstanding any other provision of this Section 5.1, no items of income,
gain, loss or deduction shall be allocated to the Acquisition General Partner.
5.2 Allocations for Tax Purposes. (a) Except as otherwise
provided herein, for federal income tax purposes, each item of income, gain,
loss and deduction shall be allocated among the Partners in the same manner as
its correlative item of "book" income, gain, loss or deduction is allocated
pursuant to Section 5.1.
(b) In an attempt to eliminate Book-Tax Disparities
attributable to a Contributed Property or Adjusted Property, items of income,
gain, loss, depreciation, amortization and cost recovery deductions shall be
allocated for federal income tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such
items attributable thereto shall be allocated among the Partners in the
manner provided under Section 704(c) of the Code that takes into
account the variation between the Agreed Value of such property and its
adjusted basis at the time of contribution; and (B) except as otherwise
provided in Section 5.2(b)i(iii), any item of Residual Gain or Residual
Loss attributable to a Contributed Property shall be allocated among
the Partners in the same manner as its correlative item of "book" gain
or loss is allocated pursuant to Section 5.1.
(ii) (A) In the case of an Adjusted Property, such
items shall (1) first, be allocated among the Partners in a manner
consistent with the principles of Section 704(c) of the Code to take
into account the Unrealized Gain or Unrealized Loss attributable to
such property and the allocations thereof pursuant to Section 4.5(d)(i)
or (ii), and (2) second, in the event such property was originally a
Contributed Property, be allocated among the Partners in a manner
consistent with Section 5.2(b)(i)(A); and (B) except as otherwise
provided in Section 5.2(b)(iii), any item of Residual Gain or Residual
Loss attributable to an Adjusted Property shall be allocated among the
Partners in the same manner as its correlative item of "book" gain or
loss is allocated pursuant to Section 5.1.
(iii) The General Partner shall apply the principles
of Temporary Regulation Section 1.704-3T to eliminate Book-Tax
Disparities.
(c) For the proper administration of the Partnership and for
the preservation of uniformity of Units of the MLP (or any class or classes
thereof), the General Partner shall have sole discretion to (i) adopt such
conventions as it deems appropriate in determining the amount of depreciation,
amortization and cost recovery deductions; (ii) make special allocations for
federal income tax purposes of income (including, without limitation, gross
income) or deductions; and (iii) amend the provisions of this Agreement as
appropriate (x) to reflect the proposal or promulgation of Treasury Regulations
under Section 704(b) or Section 704(c) of the Code or (y) otherwise to preserve
or achieve uniformity of Units of the MLP (or any class or classes thereof). The
General Partner may adopt such conventions, make such allocations and make such
amendments to this Agreement as provided in this Section 5.2(c) only if such
conventions, allocations or amendments would not have a material adverse effect
on the Partners, the holders of any class or classes of Units of the MLP issued
and outstanding or the Partnership, and if such allocations are consistent with
the principles of Section 704 of the Code.
(d) The General Partner in its sole discretion may determine
to depreciate or amortize the portion of an adjustment under Section 743(b) of
the Code attributable to unrealized appreciation in any Adjusted Property (to
the extent of the unamortized Book-Tax Disparity) using a predetermined rate
derived from the depreciation or amortization method and useful life applied to
the Partnership's common basis of such property, despite the inconsistency of
such approach with Proposed Treasury Regulation Section 1.168-2(n), Treasury
Regulation Section 1.167(c)-1(a)(6) or the legislative history of Section 197 of
the Code. If the General Partner determines that such reporting position cannot
reasonably be taken, the General Partner may adopt depreciation and amortization
conventions under which all purchasers acquiring Units of the MLP in the same
month would receive depreciation and amortization deductions, based upon the
same applicable rate as if they had purchased a direct interest in the
Partnership's property. If the General Partner chooses not to utilize such
aggregate method, the General Partner may use any other reasonable depreciation
and amortization conventions to preserve the uniformity of the intrinsic tax
characteristics of any class or classes of Units of the MLP that would not have
a material adverse effect on the Limited Partner or the holders of any class or
classes of Units of the MLP.
(e) Any gain allocated to the Partners upon the sale or other
taxable disposition of any Partnership asset shall, to the extent possible,
after taking into account other required allocations of gain pursuant to this
Section 5.2, be characterized as Recapture Income in the same proportions and to
the same extent as such Partners (or their predecessors in interest) have been
allocated any deductions directly or indirectly giving rise to the treatment of
such gains as Recapture Income.
(f) All items of income, gain, loss, deduction and credit
recognized by the Partnership for federal income tax purposes and allocated to
the Partners in accordance with the provisions hereof shall be determined
without regard to any election under Section 754 of the Code which may be made
by the Partnership; provided, however, that such allocations, once made, shall
be adjusted as necessary or appropriate to take into account those adjustments
permitted or required by Sections 734 and 743 of the Code.
(g) The General Partner may adopt such methods of allocation
of income, gain, loss or deduction between a transferor and a transferee of a
Partnership Interest as it determines necessary, to the extent permitted or
required by Section 706 of the Code and the regulations or rulings promulgated
thereunder.
5.3 Requirement of Distributions.
(a) Within 45 days following the end of (i) the period
beginning on the Closing Date and ending on October 31, 1994 and (ii) each
Quarter commencing with the Quarter beginning on November 1, 1994, an amount
equal to 100% of Available Cash with respect to such period or Quarter shall be
distributed in accordance with this Article V by the Partnership to the Partners
in accordance with their respective Percentage Interests. The immediately
preceding sentence shall not require any distribution of cash if and to the
extent such distribution would be prohibited by applicable law or by any loan
agreement, security agreement, mortgage, debt instrument or other agreement or
obligation to which the Partnership is a party or by which it is bound or its
assets are subject.
(b) Notwithstanding the foregoing, in the event of the
dissolution and liquidation of the Partnership, all proceeds of such liquidation
shall be applied and distributed in accordance with, and subject to the terms
and conditions of, Sections 13.3 and 13.4.
ARTICLE I
ARTICLE VI
MANAGEMENT AND OPERATION OF BUSINESS
6.1 Management. (a) The General Partner shall conduct, direct
and manage all activities of the Partnership. Except as otherwise expressly
provided in this Agreement, all management powers over the business and affairs
of the Partnership shall be exclusively vested in the General Partner, and
neither the Acquisition General Partner nor the Limited Partner shall have any
right of control or management power over the business and affairs of the
Partnership. In addition to the powers now or hereafter granted a general
partner of a limited partnership under applicable law or which are granted to
the General Partner under any other provision of this Agreement, the General
Partner, subject to Section 6.3, shall have full power and authority to do all
things and on such terms as it, in its sole discretion, may deem necessary or
appropriate to conduct the business of the Partnership, to exercise all powers
set forth in Section 3.2 and to effectuate the purposes set forth in Section
3.1, including, without limitation, (i) the making of any expenditures, the
lending or borrowing of money, the assumption or guarantee of, or other
contracting for, indebtedness and other liabilities, the issuance of evidences
of indebtedness and the incurring of any other obligations; (ii) the making of
tax, regulatory and other filings, or rendering of periodic or other reports to
governmental or other agencies having jurisdiction over the business or assets
of the Partnership; (iii) the acquisition, disposition, mortgage, pledge,
encumbrance, hypothecation or exchange of any or all of the assets of the
Partnership or the merger or other combination of the Partnership with or into
another Person (the matters described in this clause (iii) being subject,
however, to any prior approval that may be required by Section 6.3); (iv) the
use of the assets of the Partnership (including, without limitation, cash on
hand) for any purpose consistent with the terms of this Agreement, including,
without limitation, the financing of the conduct of the operations of the
Partnership, the lending of funds to other Persons (including, without
limitation, an OLP Subsidiary), the repayment of obligations of the Partnership
and the making of capital contributions to an OLP Subsidiary; (v) the
negotiation, execution and performance of any contracts, conveyances or other
instruments (including, without limitation, instruments that limit the liability
of the Partnership under contractual arrangements to all or particular assets of
the Partnership, with the other party to the contract to have no recourse
against the General Partner or its assets other than its interest in the
Partnership, even if same results in the terms of the transaction being less
favorable to the Partnership than would otherwise be the case); (vi) the
distribution of Partnership cash; (vii) the selection and dismissal of employees
and agents (including, without limitation, employees having titles such as
"president," "vice president," "secretary" and "treasurer") and agents, outside
attorneys, accountants, consultants and contractors and the determination of
their compensation and other terms of employment or hiring; (viii) the
maintenance of such insurance for the benefit of the Partnership and the
Partners (including, without limitation, the assets of the Partnership) as it
deems necessary or appropriate; (ix) the formation of, or acquisition of an
interest in, and the contribution of property and the making of loans to, any
further limited or general partnerships, joint ventures, corporations, limited
liability companies or other relationships; (x) the control of any matters
affecting the rights and obligations of the Partnership, including, without
limitation, the bringing and defending of actions at law or in equity and
otherwise engaging in the conduct of litigation and the incurring of legal
expense and the settlement of claims and litigation; and (xi) the
indemnification of any Person against liabilities and contingencies to the
extent permitted by law.
(b) Notwithstanding any other provision of this Agreement, the
MLP Agreement, the Delaware Act or any applicable law, rule or regulation, each
of the Partners hereby (i) approves, ratifies and confirms the execution,
delivery and performance by the parties thereto of the MLP Agreement, the
Underwriting Agreements, the Contribution Agreement, the agreements and other
documents filed as exhibits to the Registration Statements, and the other
agreements described in or filed as a part of the Registration Statements, and
the engaging by any Affiliate of the General Partner in business and activities
(other than Restricted Activities) that are in direct competition with the
business and activities of the MLP, the Partnership, any OLP Subsidiary and any
MLP Subsidiary; (ii) agrees that the General Partner (on its own or through any
officer of the Partnership) is authorized to execute, deliver and perform the
agreements referred to in clause (i) of this sentence and the other agreements,
acts, transactions and matters described in the Registration Statements on
behalf of the Partnership without any further act, approval or vote of the
Partners; and (iii) agrees that the execution, delivery or performance by the
General Partner, the MLP, the Partnership or any Affiliate of any of them of
this Agreement or any agreement authorized or permitted under this Agreement, or
the engaging by any Affiliate of the General Partner in any business and
activities (other than Restricted Activities) that are in direct competition
with the business and activities of the MLP, the Partnership, any OLP Subsidiary
and any MLP Subsidiary, shall not constitute a breach by the General Partner of
any duty that the General Partner may owe the Partnership or the Limited
Partners or any other Persons under this Agreement (or any other agreements) or
of any duty stated or implied by law or equity. The term "Affiliate" when used
in this Section 6.1(b) with respect to the General Partner shall not include the
Partnership, the MLP, any OLP Subsidiary or any MLP Subsidiary.
(c) Notwithstanding any provision of the Delaware Act or other
applicable law, the Acquisition General Partner shall not participate in the
operation, management or control (within the meaning of the Delaware Act) of the
Partnership's business, transact any business in the partnership's name or have
the power to sign documents for other otherwise bind the Partnership.
6.2 Certificate of Limited Partnership. The General Partner
has caused the Certificate of Limited Partnership of Ferrellgas, L.P. to be
filed with the Secretary of State of the State of Delaware as required by the
Delaware Act and shall use all reasonable efforts to cause to be filed such
other certificates or documents as may be determined by the General Partner in
its sole discretion to be reasonable and necessary or appropriate for the
formation, continuation, qualification and operation of a limited partnership
(or a partnership in which the Limited Partner has limited liability) in the
State of Delaware or any other state in which the Partnership may elect to do
business or own property. To the extent that such action is determined by the
General Partner in its sole discretion to be reasonable and necessary or
appropriate, the General Partner shall file amendments to and restatements of
the Certificate of Limited Partnership and do all things to maintain the
Partnership as a limited partnership (or a partnership in which the Limited
Partner has limited liability) under the laws of the State of Delaware or of any
other state in which the Partnership may elect to do business or own property.
Subject to the terms of Section 7.4(a), the General Partner shall not be
required, before or after filing, to deliver or mail a copy of the Certificate
of Limited Partnership, any qualification document or any amendment thereto to
the Limited Partner.
6.3 Restrictions on General Partner's Authority. (a) The
General Partner may not, without written approval of the specific act by the
Limited Partner or by other written instrument executed and delivered by the
Limited Partner subsequent to the date of this Agreement, take any action in
contravention of this Agreement, including, without limitation, (i) any act that
would make it impossible to carry on the ordinary business of the Partnership,
except as otherwise provided in this Agreement; (ii) possess Partnership
property, or assign any rights in specific Partnership property, for other than
a Partnership purpose; (iii) admit a Person as a Partner, except as otherwise
provided in this Agreement; (iv) amend this Agreement in any manner, except as
otherwise provided in this Agreement; or (v) transfer its interest as general
partner of the Partnership, except as otherwise provided in this Agreement.
(b) Except as provided in Articles XIII and XV, the General
Partner may not sell, exchange or otherwise dispose of all or substantially all
of the Partnership's assets in a single transaction or a series of related
transactions without the approval of the Limited Partner; provided, however,
that this provision shall not preclude or limit the General Partner's ability to
mortgage, pledge, hypothecate or grant a security interest in all or
substantially all of the Partnership's assets and shall not apply to any forced
sale of any or all of the Partnership's assets pursuant to the foreclosure of,
or other realization upon, any such encumbrance.
(c) Unless approved by the Limited Partner, the General
Partner shall not take any action or refuse to take any reasonable action the
effect of which, if taken or not taken, as the case may be, would be to cause
the Partnership to be treated as an association taxable as a corporation or
otherwise to be taxed as an entity for federal income tax purposes; provided
that this Section 6.3(c) shall not be construed to apply to amendments to this
Agreement (which are governed by Article XIV) or mergers or consolidations of
the Partnership with any Person (which are governed by Article XV).
(d) At all times while serving as the general partner of the
Partnership, the General Partner shall not (except as provided below) make any
dividend or distribution on, or repurchase any shares of, its stock or take any
other action within its control unless it shall first receive an Opinion of
Counsel that the effect of such dividend, distribution, repurchase or other
action would not reduce its net worth below an amount such that the Partnership
will be treated as an association taxable as a corporation for federal income
tax purposes; provided, however, to the extent the General Partner receives
distributions of cash from the Partnership or any other partnership of which the
Partnership is, directly or indirectly, a partner, the General Partner shall not
use such cash to make any dividend or distribution on, or repurchase any shares
of, its stock or take any other action within its control if the effect of such
dividend, distribution, repurchase or other action would be to reduce its net
worth below an amount necessary to receive an Opinion of Counsel that the
Partnership will be treated as a partnership for federal income tax purposes.
6.4 Reimbursement of the General Partner. (a) Except as
provided in this Section 6.4 and elsewhere in this Agreement, the General
Partner shall not be compensated for its services as general partner of the
Partnership.
(b) The General Partner shall be reimbursed on a monthly
basis, or such other basis as the General Partner may determine in its sole
discretion, for (i) all direct and indirect expenses it incurs or payments it
makes on behalf of the Partnership (including, without limitation, salary,
bonus, incentive compensation and other amounts paid to any Person to perform
services for the Partnership or for the General Partner in the discharge of its
duties to the Partnership) and (ii), all other necessary or appropriate expenses
allocable to the Partnership or otherwise reasonably incurred by the General
Partner in connection with operating the Partnership's business (including,
without limitation, expenses allocated to the General Partner by its
Affiliates). The General Partner shall determine the fees and expenses that are
allocable to the Partnership in any reasonable manner determined by the General
Partner in its sole discretion. Reimbursements pursuant to this Section 6.4
shall be in addition to any reimbursement to the General Partner as a result of
indemnification pursuant to Section 6.7.
6.5 Outside Activities. (a) After the Closing Date, the
General Partner, for so long as it is the general partner of the Partnership,
(i) agrees that its sole business will be to act as the general partner of the
Partnership, the MLP, any OLP Subsidiary and any MLP Subsidiary and to undertake
activities that are ancillary or related thereto (including being a limited
partner in the MLP), (ii) shall not enter into or conduct any business or incur
any debts or liabilities except in connection with or incidental to (A) its
performance of the activities required or authorized by this Agreement or the
MLP Agreement or described in or contemplated by the Registration Statements and
(B) the acquisition, ownership or disposition of partnership interests in the
Partnership, the MLP, any OLP Subsidiary and any MLP Subsidiary, except that,
notwithstanding the foregoing, employees of the General Partner may perform
services for Ferrell and its Affiliates and (iii) shall not and shall cause its
Affiliates not to engage in any Restricted Activities.
(b) Except as described or provided for in the MLP Agreement,
the Registration Statements or Section 6.5(a), no Indemnitee shall be expressly
or implicitly restricted or proscribed pursuant to the MLP Agreement or this
Agreement or the partnership relationship established hereby or thereby from
engaging in other activities for profit, whether in the businesses engaged in by
the Partnership, an OLP Subsidiary, the MLP or an MLP Subsidiary or anticipated
to be engaged in by the Partnership, an OLP Subsidiary, the MLP, an MLP
Subsidiary or otherwise, including, without limitation, in the case of any
Affiliates of the General Partner those businesses and activities (other than
Restricted Activities) in direct competition with the business and activities of
the Partnership, the MLP, an OLP Subsidiary or an MLP Subsidiary or otherwise
described in or contemplated by the Registration Statements. Without limitation
of and subject to the foregoing each Indemnitee (other than the General Partner)
shall have the right to engage in businesses of every type and description and
to engage in and possess an interest in other business ventures of any and every
type or description, independently or with others, including, without
limitation, in the case of any Affiliates of the General Partner, business
interests and activities (other than Restricted Activities) in direct
competition with the business and activities of the Partnership, the MLP, an OLP
Subsidiary or an MLP Subsidiary, and none of the same shall constitute a breach
of this Agreement or any duty to the Partnership, the MLP or any Partners.
Neither the Partnership, the MLP, any Limited Partner nor any other Person shall
have any rights by virtue of this Agreement or the MLP Agreement or the
partnership relationship established hereby or thereby in any business ventures
of any Indemnitee (subject, in the case of the General Partner, to compliance
with Section 6.5(c)) and such Indemnitees shall have no obligation to offer any
interest in any such business ventures to the Partnership, the MLP, any Limited
Partner or any other Person.
(c) Subject to the terms of Sections 6.5(a) and (b) but
otherwise notwithstanding anything to the contrary in this Agreement, (i) the
competitive activities of any Indemnitees (other than the General Partner) are
hereby approved by the Partnership and all Partners and (ii) it shall be deemed
not to be a breach of the General Partner's fiduciary duty or any other
Obligation of any type whatsoever of the General Partner for the General Partner
to permit an Affiliate of the General Partner to engage, or for any such
Affiliate to engage, in business interests or activities (other than Restricted
Activities) in preference to or to the exclusion of the Partnership.
(d) The term "Affiliates" when used in this Section 6.5 with
respect to the General Partner shall not include the Partnership, the MLP, an
OLP Subsidiary or an MLP Subsidiary.
6.6 Loans to and from the General Partner; Contracts with
Affiliates. (a) (i) The General Partner, the Limited Partner, an OLP Subsidiary
or any of their Affiliates may lend to the Partnership, and the Partnership may
borrow, funds needed or desired by the Partnership for such periods of time as
the General Partner may determine and (ii) the General Partner, the Limited
Partner, an OLP Subsidiary or any Affiliate thereof may borrow from the
Partnership, and the Partnership may lend to such Persons, excess funds of the
Partnership for such periods of time and in such amounts as the General Partner
may determine; provided, however, that in either such case the lending party may
not charge the borrowing party interest at a rate greater than the rate that
would be charged the borrowing party (without reference to the lending party's
financial abilities or guarantees) by unrelated lenders on comparable loans. The
borrowing party shall reimburse the lending party for any costs (other than any
additional interest costs) incurred by the lending party in connection with the
borrowing of such funds. For purposes of this Section 6.6(a) and Section 6.6(b),
the term "Partnership" shall include any Affiliate of the Partnership that is
controlled by the Partnership.
(b) The General Partner may itself, or may enter into an
agreement with any of its Affiliates to, render services to the Partnership or
to the General Partner in the discharge of its duties as general partner of the
Partnership. Any service rendered to the Partnership by the General Partner or
any of its Affiliates shall be on terms that are fair and reasonable to the
Partnership; provided, however, that the requirements of this Section 6.6(b)
shall be deemed satisfied as to (i) any transaction approved by Special
Approval, (ii) any transaction the terms of which are no less favorable to the
Partnership than those generally being provided to or available from unrelated
third parties or (iii) any transaction that, taking into account the totality of
the relationships between the parties involved (including other transactions
that may be particularly favorable or advantageous to the Partnership), is
equitable to the Partnership. The provisions of Section 6.4 shall apply to the
rendering of services described in this Section 6.6(b).
(c) The Partnership may transfer assets to joint ventures,
other partnerships, corporations, limited liability companies or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions as are consistent with this Agreement and applicable
law.
(d) Neither the General Partner nor any of its Affiliates
shall sell, transfer or convey any property to, or purchase any property from,
the Partnership, directly or indirectly, except pursuant to transactions that
are fair and reasonable to the Partnership; provided, however, that the
requirements of this Section 6.6(d) shall be deemed to be satisfied as to (i)
the transactions effected pursuant to Sections 4.2, the Contribution Agreement
and any other transactions described in or contemplated by the Registration
Statements, (ii) any transaction approved by Special Approval, (iii) any
transaction the terms of which are no less favorable to the Partnership than
those generally being provided to or available from unrelated third parties or
(iv) any transaction that, taking into account the totality of the relationships
between the parties involved (including other transactions that may be
particularly favorable or advantageous to the Partnership), is equitable to the
Partnership.
(e) The General Partner and its Affiliates will have no
obligation to permit the Partnership, an OLP Subsidiary or the MLP to use any
facilities or assets of the General Partner and its Affiliates, except as may be
provided in contracts entered into from time to time specifically dealing with
such use, nor shall there be any obligation on the part of the General Partner
or its Affiliates to enter into such contracts.
(f) Without limitation of Sections 6.6(a) through 6.6(e), and
notwithstanding anything to the contrary in this Agreement, the existence of the
conflicts of interest described in the Registration Statements are hereby
approved by all Partners.
6.7 Indemnification. (a) To the fullest extent permitted by
law but subject to the limitations expressly provided in this Agreement, the
General Partner, any Departing Partner, any Person who is or was an officer or
director of the Partnership, the General Partner, or any Departing Partner and
all other Indemnitees shall be indemnified and held harmless by the Partnership
from and against any and all losses, claims, damages, liabilities, joint or
several, expenses (including, without limitation, legal fees and expenses),
judgments, fines, penalties, interest, settlements and other amounts arising
from any and all claims, demands, actions, suits or proceedings, whether civil,
criminal, administrative or investigative, in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, by reason of
its status as (i) the General Partner, a Departing Partner or any of their
Affiliates, (ii) an officer, director, employee, partner, agent or trustee of
the Partnership, the General Partner, any Departing Partner or any of their
Affiliates or (iii) a Person serving at the request of the Partnership in
another entity in a similar capacity, provided, that in each case the Indemnitee
acted in good faith and in a manner which such Indemnitee reasonably believed to
be in, or not opposed to, the best interests of the Partnership and, with
respect to any criminal proceeding, had no reasonable cause to believe its
conduct was unlawful; provided, further, no indemnification pursuant to this
Section 6.7 shall be available to the General Partner with respect to its
obligations incurred pursuant to the Contribution Agreement (other than
obligations incurred by the General Partner on behalf of the Partnership or the
MLP). The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere, or its equivalent,
shall not create a presumption that the Indemnitee acted in a manner contrary to
that specified above. Any indemnification pursuant to this Section 6.7 shall be
made only out of the assets of the Partnership, it being agreed that the General
Partner shall not be personally liable for such indemnification and shall have
no obligation to contribute or loan any monies or property to the Partnership to
enable it to effectuate such indemnification.
(b) To the fullest extent permitted by law, expenses
(including, without limitation, legal fees and expenses) incurred by an
Indemnitee who is indemnified pursuant to Section 6.7(a) in defending any claim,
demand, action, suit or proceeding shall, from time to time, be advanced by the
Partnership prior to the final disposition of such claim, demand, action, suit
or proceeding upon receipt by the Partnership of an undertaking by or on behalf
of the Indemnitee to repay such amount if it shall be determined that the
Indemnitee is not entitled to be indemnified as authorized in this Section 6.7.
(c) The indemnification provided by this Section 6.7 shall be
in addition to any other rights to which an Indemnitee may be entitled under any
agreement, pursuant to any vote of the Partners, as a matter of law or
otherwise, both as to actions in the Indemnitee's capacity as (i) the General
Partner, a Departing Partner or an Affiliate thereof, (ii) an officer, director,
employee, partner, agent or trustee of the Partnership, the General Partner, any
Departing Partner or an Affiliate thereof or (iii) a Person serving at the
request of the Partnership in another entity in a similar capacity, and as to
actions in any other capacity (including, without limitation, any capacity under
the Underwriting Agreements), and shall continue as to an Indemnitee who has
ceased to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee.
(d) The Partnership may purchase and maintain (or reimburse
the General Partner or its Affiliates for the cost of) insurance, on behalf of
the General Partner and such other Persons as the General Partner shall
determine, against any liability that may be asserted against or expense that
may be incurred by such Person in connection with the Partnership's activities,
regardless of whether the Partnership would have the power to indemnify such
Person against such liability under the provisions of this Agreement.
(e) For purposes of this Section 6.7, the Partnership shall be
deemed to have requested an Indemnitee to serve as fiduciary of an employee
benefit plan whenever the performance by it of its duties to the Partnership
also imposes duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute "fines" within the meaning of Section 6.7(a); and action taken
or omitted by it with respect to an employee benefit plan in the performance of
its duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is in, or not opposed to, the best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partner
to personal liability by reason of the indemnification provisions set forth in
this Agreement.
(g) An Indemnitee shall not be denied indemnification in whole
or in part under this Section 6.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 6.7 are for the benefit of
the Indemnitees, their heirs, successors, assigns and administrators and shall
not be deemed to create any rights for the benefit of any other Persons.
(i) No amendment, modification or repeal of this Section 6.7
or any provision hereof shall in any manner terminate, reduce or impair the
right of any past, present or future Indemnitee to be indemnified by the
Partnership, nor the obligation of the Partnership to indemnify any such
Indemnitee under and in accordance with the provisions of this Section 6.7 as in
effect immediately prior to such amendment, modification or repeal with respect
to claims arising from or relating to matters occurring, in whole or in part,
prior to such amendment, modification or repeal, regardless of when such claims
may arise or be asserted.
6.8 Liability of Indemnitees. (a) Notwithstanding anything to
the contrary set forth in this Agreement, no Indemnitee shall be liable for
monetary damages to the Partnership, the Limited Partner, or any other Persons
who have acquired interests in the Partnership, for losses sustained or
liabilities incurred as a result of any act or omission if such Indemnitee acted
in good faith.
(b) Subject to its obligations and duties as General Partner
set forth in Section 6.1 (a), the General Partner may exercise any of the powers
granted to it by this Agreement and perform any of the duties imposed upon it
hereunder either directly or by or through its agents, and the General Partner
shall not be responsible for any misconduct or negligence on the part of any
such agent appointed by the General Partner in good faith.
(c) Any amendment, modification or repeal of this Section 6.8
or any provision hereof shall be prospective only and shall not in any way
affect the limitations on the liability to the Partnership and the Limited
Partner of the General Partner, its directors, officers and employees and any
other Indemnitees under this Section 6.8 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.
6.9 Resolution of Conflicts of Interest. (a) Unless otherwise
expressly provided in this Agreement or the MLP Agreement, whenever a potential
conflict of interest exists or arises between the General Partner or any of its
Affiliates, on the one hand, and the Partnership, the MLP or the Limited
Partner, on the other hand, any resolution or course of action in respect of
such conflict of interest shall be permitted and deemed approved by the Limited
Partner, and shall not constitute a breach of this Agreement, of the MLP
Agreement or of any agreement contemplated herein or therein, or of any duty
stated or implied by law or equity, if the resolution or course of action is, or
by operation of this Agreement is deemed to be, fair and reasonable to the
Partnership. The General Partner shall be authorized but not required in
connection with its resolution of such conflict of interest to seek Special
Approval of a resolution of such conflict or course of action. Any conflict of
interest and any resolution of such conflict of interest shall be conclusively
deemed fair and reasonable to the Partnership if such conflict of interest or
resolution is (i) approved by Special Approval, (ii) on terms no less favorable
to the Partnership than those generally being provided to or available from
unrelated third parties or (iii) fair to the Partnership, taking into account
the totality of the relationships between the parties involved (including other
transactions that may be particularly favorable or advantageous to the
Partnership). The General Partner may also adopt a resolution or course of
action that has not received Special Approval. The General Partner (including
the Audit Committee in connection with Special Approval) shall be authorized in
connection with its determination of what is "fair and reasonable" to the
Partnership and in connection with its resolution of any conflict of interest to
consider (A) the relative interests of any party to such conflict, agreement,
transaction or situation and the benefits and burdens relating to such interest;
(B) any customary or accepted industry practices and any customary or historical
dealings with a particular Person; (C) any applicable generally accepted
accounting or engineering practices or principles; and (D) such additional
factors as the General Partner (including such Audit Committee) determines in
its sole discretion to be relevant, reasonable or appropriate under the
circumstances. Nothing contained in this Agreement, however, is intended to nor
shall it be construed to require the General Partner (including such Audit
Committee) to consider the interests of any Person other than the Partnership.
In the absence of bad faith by the General Partner, the resolution, action or
terms so made, taken or provided by the General Partner with respect to such
matter shall not constitute a breach of this Agreement, the MLP Agreement or any
other agreement contemplated herein or a breach of any standard of care or duty
imposed herein or therein or under the Delaware Act or any other law, rule or
regulation.
(b) Whenever this Agreement or any other agreement
contemplated hereby provides that the General Partner or any of its Affiliates
is permitted or required to make a decision (i) in its "sole discretion" or
"discretion," that it deems "necessary or appropriate" or under a grant of
similar authority or latitude, the General Partner or such Affiliate shall be
entitled to consider only such interests and factors as it desires and shall
have no duty or obligation to give any consideration to any interest of, or
factors affecting, the Partnership, the MLP, an OLP Subsidiary, the Limited
Partner or any limited partner in the MLP, (ii) it may make such decision in its
sole discretion (regardless of whether there is a reference to "sole discretion"
or "discretion") unless another express standard is provided for, or (iii) in
"good faith" or under another express standard, the General Partner or such
Affiliate shall act under such express standard and shall not be subject to any
other or different standards imposed by this Agreement, the MLP Agreement, any
other agreement contemplated hereby or under the Delaware Act or any other law,
rule or regulation. In addition, any actions taken by the General Partner or
such Affiliate consistent with the standards of "reasonable discretion" set
forth in the definition of Available Cash shall not constitute a breach of any
duty of the General Partner to the Partnership or the Limited Partner. The
General Partner shall have no duty, express or implied, to sell or otherwise
dispose of any asset of the Partnership or of an OLP Subsidiary, other than in
the ordinary course of business. No borrowing by the Partnership or the approval
thereof by the General Partner shall be deemed to constitute a breach of any
duty of the General Partner to the Partnership or the Limited Partner by reason
of the fact that the purpose or effect of such borrowing is directly or
indirectly to (A) enable the holders of IDRs to receive distributions under the
MLP Agreement or increase the amount of any such distributions, (B) hasten the
termination of the "Subordination Period" under the MLP Agreement or (C) reduce
the "Cumulative Common Unit Arrearage" under the MLP Agreement in order to
hasten the conversion of the "Subordinated Units" in the MLP into Common Units.
(c) Whenever a particular transaction, arrangement or
resolution of a conflict of interest is required under this Agreement to be
"fair and reasonable" to any Person, the fair and reasonable nature of such
transaction, arrangement or resolution shall be considered in the context of all
similar or related transactions.
6.10 Other Matters Concerning the General Partner. (a) The
General Partner may rely and shall be protected in acting or refraining from
acting upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, debenture, or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties.
(b) The General Partner may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants and advisers selected by it, and any act taken or omitted to be
taken in reliance upon the opinion (including, without limitation, an Opinion of
Counsel) of such Persons as to matters that such General Partner reasonably
believes to be within such Person's professional or expert competence shall be
conclusively presumed to have been done or omitted in good faith and in
accordance with such opinion.
(c) The General Partner shall have the right, in respect of
any of its powers or obligations hereunder, to act through any of its duly
authorized officers and a duly appointed attorney or attorneys-in-fact. Each
such attorney shall, to the extent provided by the General Partner in the power
of attorney, have full power and authority to do and perform each and every act
and duty that is permitted or required to be done by the General Partner
hereunder.
(d) Any standard of care and duty imposed by this Agreement or
under the Delaware Act or any applicable law, rule or regulation shall be
modified, waived or limited as required to permit the General Partner to act
under this Agreement or any other agreement contemplated by this Agreement and
to make any decision pursuant to the authority prescribed in this Agreement so
long as such action is not reasonably believed by the General Partner to be in,
or not inconsistent with, the best interests of the Partnership.
6.11 Title to Partnership Assets. Title to Partnership assets,
whether real, personal or mixed and whether tangible or intangible, shall be
deemed to be owned by the Partnership as an entity, and no Partner, individually
or collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the General Partner, one or more of its
Affiliates or one or more nominees, as the General Partner may determine. The
General Partner hereby declares and warrants that any Partnership assets for
which record title is held in the name of the General Partner or one or more of
its Affiliates or one or more nominees shall be held by the General Partner or
such Affiliate or nominee for the use and benefit of the Partnership in
accordance with the provisions of this Agreement; provided, however, that the
General Partner shall use its reasonable efforts to cause record title to such
assets (other than those assets in respect of which the General Partner
determines that the expense and difficulty of conveyancing makes transfer of
record title to the Partnership impracticable) to be vested in the Partnership
as soon as reasonably practicable; provided that, prior to the withdrawal or
removal of the General Partner or as soon thereafter as practicable, the General
Partner shall use reasonable efforts to effect the transfer of record title to
the Partnership and, prior to any such transfer, will provide for the use of
such assets in a manner satisfactory to the Partnership. All Partnership assets
shall be recorded as the property of the Partnership in its books and records,
irrespective of the name in which record title to such Partnership assets is
held.
6.12 Reliance by Third Parties. Notwithstanding anything to
the contrary in this Agreement, any Person dealing with the Partnership shall be
entitled to assume that the General Partner has full power and authority to
encumber, sell or otherwise use in any manner any and all assets of the
Partnership and to enter into any contracts on behalf of the Partnership, and
such Person shall be entitled to deal with the General Partner as if it were the
Partnership's sole party in interest, both legally and beneficially. The Limited
Partner hereby waives any and all defenses or other remedies that may be
available against such Person to contest, negate or disaffirm any action of the
General Partner in connection with any such dealing. In no event shall any
Person dealing with the General Partner or its representatives be obligated to
ascertain that the terms of this Agreement have been complied with or to inquire
into the necessity or expedience of any act or action of the General Partner or
its representatives. Each and every certificate, document or other instrument
executed on behalf of the Partnership by the General Partner or its
representatives shall be conclusive evidence in favor of any and every Person
relying thereon or claiming thereunder that (a) at the time of the execution and
delivery of such certificate, document or instrument, this Agreement was in full
force and effect, (b) the Person executing and delivering such certificate,
document or instrument was duly authorized and empowered to do so for and on
behalf of the Partnership and (c) such certificate, document or instrument was
duly executed and delivered in accordance with the terms and provisions of this
Agreement and is binding upon the Partnership.
ARTICLE I
ARTICLE VII
RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNER
7.1 Limitation of Liability. The Limited Partner shall have no
liability under this Agreement except as expressly provided in this Agreement or
the Delaware Act.
7.2 Management of Business. The Limited Partner, in its
capacity as such, shall not participate in the operation, management or control
(within the meaning of the Delaware Act) of the Partnership's business, transact
any business in the Partnership's name or have the power to sign documents for
or otherwise bind the Partnership. The transaction of any such business by the
Partnership, the General Partner, any of its Affiliates or any officer,
director, employee, partner, agent or trustee of the General Partner or any of
its Affiliates, in its capacity as such, shall not affect, impair or eliminate
the limitations on the liability of the Limited Partner under this Agreement.
7.3 Return of Capital. The Limited Partner shall not be
entitled to the withdrawal or return of its Capital Contribution, except to the
extent, if any, that distributions made pursuant to this Agreement or upon
termination of the Partnership may be considered as such by law and then only to
the extent provided for in this Agreement.
7.4 Rights of the Limited Partner Relating to the Partnership.
(a) In addition to other rights provided by this Agreement or by applicable law,
and except as limited by Section 7.4(b), the Limited Partner shall have the
right, for a purpose reasonably related to the Limited Partner's interest as a
limited partner in the Partnership, upon reasonable demand and at the Limited
Partner's own expense:
(i) to obtain true and full information
regarding the status of the business and financial condition
of the Partnership;
(ii) promptly after becoming available, to obtain a
copy of the Partnership's federal, state and local tax returns for each
year;
(iii) to have furnished to it, upon notification to
the General Partner, a current list of the name and last known
business, residence or mailing address of each Partner;
(iv) to have furnished to it, upon notification to
the General Partner, a copy of this Agreement and the Certificate of
Limited Partnership and all amendments thereto, together with a copy of
the executed copies of all powers of attorney pursuant to which this
Agreement, the Certificate of Limited Partnership and all amendments
thereto have been executed;
(v) to obtain true and full information regarding the
amount of cash and a description and statement of the Agreed Value of
any other Capital Contribution by each Partner and which each Partner
has agreed to contribute in the future, and the date on which each
became a Partner; and
(vi) to obtain such other information regarding the,
affairs of the Partnership as is just and reasonable.
(b) Notwithstanding any other provision of this Agreement, the
General Partner may keep confidential from the Limited Partner for such period
of time as the General Partner deems reasonable, any information that the
General Partner reasonably believes to be in the nature of trade secrets or
other information the disclosure of which the General Partner in good faith
believes is not in the best interests of the Partnership or could damage the
Partnership or that the Partnership is required by law or by agreements with
third parties to keep confidential (other than agreements with Affiliates of the
General Partner the primary purpose of which is to circumvent the obligations
set forth in this Section 7.4).
ARTICLE I
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
8.1 Records and Accounting. The General Partner shall keep or
cause to be kept at the principal office of the Partnership appropriate books
and records with respect to the Partnership's business, including, without
limitation, all books and records necessary to provide to the Limited Partner
any information, lists and copies of documents required to be provided pursuant
to Section 7.4(a). Any books and records maintained by or on behalf of the
Partnership in the regular course of its business, including, without
limitation, books of account and records of Partnership proceedings, may be kept
on, or be in the form of, computer disks, hard drives, punch cards, magnetic
tape, photographs, micrographics or any other information storage device,
provided, that the books and records so maintained are convertible into clearly
legible written form within a reasonable period of time. The books of the
Partnership shall be maintained, for financial reporting purposes, on an accrual
basis in accordance with generally accepted accounting principles.
8.2 Fiscal Year. The fiscal year of the Partnership
shall be August 1 to July 31.
ARTICLE I
ARTICLE IX
TAX MATTERS
9.1 Preparation of Tax Returns. The General Partner shall
arrange for the preparation and timely filing of all returns of Partnership
income, gains, deductions, losses and other items required of the Partnership
for federal and state income tax purposes and shall use all reasonable efforts
to furnish, within 90 days of the close of each calendar year, the tax
information reasonably required by the Partners for federal and state income tax
reporting purposes. The classification, realization and recognition of income,
gain, losses and deductions and other items shall be on the accrual method of
accounting for federal income tax purposes. The taxable year of the Partnership
shall be August 1 to July 31.
9.2 Tax Elections. Except as otherwise provided herein, the
General Partner shall, in its sole discretion, determine whether to make any
available election pursuant to the Code; provided, however, that the General
Partner shall make the election under Section 754 of the Code in accordance with
applicable regulations thereunder. The General Partner shall have the right to
seek to revoke any such election (including, without limitation, the election
under Section 754 of the Code) upon the General Partner's determination in its
sole discretion that such revocation is in the best interests of the Limited
Partner.
9.3 Tax Controversies. Subject to the provisions hereof, the
General Partner is designated the Tax Matters Partner (as defined in Section
6231 of the Code), and is authorized and required to represent the Partnership
(at the Partnership's expense) in connection with all examinations of the
Partnership's affairs by tax authorities, including, without limitation,
resulting administrative and judicial proceedings, and to expend Partnership
funds for professional services and costs associated therewith. The Limited
Partner agrees to cooperate with the General Partner and to do or refrain from
doing any or all things reasonably required by the General Partner to conduct
such proceedings.
9.4 Organizational Expenses. The Partnership shall elect to
deduct expenses, if any, incurred by it in organizing the Partnership ratably
over a 60-month period as provided in Section 709 of the Code.
9.5 Withholding. Notwithstanding any other provision of this
Agreement, the General Partner is authorized to take any action that it
determines in its sole discretion to be necessary or appropriate to cause the
Partnership to comply with any withholding requirements established under the
Code or any other federal, state or local law including, without limitation,
pursuant to Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that
the Partnership is required to withhold and pay over to any taxing authority any
amount resulting from the allocation or distribution of income to any Partner
(including, without limitation, by reason of Section 1446 of the Code), the
amount withheld shall be treated as a distribution of cash pursuant to Section
5.3 in the amount of such withholding from such Partner.
9.6 Opinions of Counsel. Notwithstanding any other provision
of this Agreement, if the Partnership is treated as an association taxable as a
corporation at any time or is otherwise taxable for federal income tax purposes
as an entity at any time and, pursuant to the provisions of this Agreement, an
Opinion of Counsel would otherwise be required to the effect that an action will
not cause the Partnership to become so treated as an association taxable as a
corporation or otherwise taxable as an entity for federal income tax purposes,
such requirement for an Opinion of Counsel shall be deemed automatically waived.
ARTICLE I
ARTICLE X
TRANSFER OF INTERESTS
10.1 Transfer. (a) The term "transfer," when used in this
Article X with respect to a Partnership Interest, shall be deemed to refer to a
transaction by which a Partner disposes of its Partnership Interest to another
Person and includes a sale, assignment, gift, pledge, encumbrance,
hypothecation, mortgage, exchange or any other disposition by law or otherwise,
provided, however, that the term "Transfer" shall not include the pledge,
encumbrance or hypothecation by a Limited Partner of its Partnership Interest.
(b) No Partnership Interest shall be transferred, in whole or
in part, except in accordance with the terms and conditions set forth in this
Article X. Any Transfer or purported transfer of a Partnership Interest not made
in accordance with this Article X shall be null and void.
(c) Nothing contained in this Article X shall be construed to
prevent a disposition by the parent entity of the General Partner of any or all
of the issued and outstanding capital stock of the General Partner.
10.2 Transfer of the General Partner's Partnership Interest.
If the general partner of the MLP transfers its partnership interest as the
general partner therein to any Person in accordance with the provisions of the
MLP Agreement, the General Partner shall contemporaneously therewith transfer
its Partnership Interest as the general partner of the Partnership to such
Person, and the Limited Partner hereby expressly consents to such transfer. A
Limited Partner may not transfer all or any part of its Partnership Interest or
withdraw from the Partnership except for (i) a transfer described in the
immediately preceding sentence, (ii) the transfer by Ferrellgas of its
Partnership Interest as a Limited Partner in the Partnership to the MLP as
provided in the Contribution Agreement and contemplated by Sections 4.2 and
11.2, (iii) the forced sale or other transfer of a Limited Partner's Partnership
Interest pursuant to the foreclosure of, or other realization upon, any lien
resulting from the pledge, encumbrance or hypothecation of such Partnership
Interest, or (iv) any transfer of a Limited Partner's Partnership Interest by a
Person acquiring such Partnership Interest as a result of a sale or other
transfer described in the immediately preceding clause (iii), or any transfer by
a transferee of any such Person.
10.3 Transfer of the Limited Partner's Partnership Interest.
If the Limited Partner merges, consolidates or otherwise combines into any other
Person or transfers all or substantially all of its assets to another Person,
such Person may become a Substituted Limited Partner pursuant to Article XI.
Except as set forth in the immediately preceding sentence and except for the
transfer by Ferrellgas of its Partnership Interest as a limited partner in the
Partnership to the MLP as provided in the Contribution Agreement and
contemplated by Sections 4.2 and 11.2, a Limited Partner may not transfer all or
any part of its Partnership Interest or withdraw from the Partnership.
10.4 Transfer of the Acquisition General Partner's Partnership
Interest. Except for the transfer by FAC of its Partnership Interest in the
Partnership as the Acquisition General Partner to Ferrellgas, FAC may not
transfer all or any part of its Partnership Interest.
ARTICLE I
ARTICLE XI
ADMISSION OF PARTNERS
11.1 Admission of Initial Partners. Upon the formation of the
Partnership pursuant to the filing of the Certificate of Limited Partnership,
Ferrellgas was admitted to the Partnership as the sole general partner and the
MLP was admitted to the Partnership as the sole limited partner.
11.2 Admission of Ferrellgas as a Limited Partner. Upon the
making by Ferrellgas of the Capital Contributions described in Section 4.2,
Ferrellgas was admitted to the Partnership as a limited partner. Upon the
transfer by Ferrellgas of its Partnership Interest as a limited partner to the
MLP as provided in the Contribution Agreement, Ferrellgas ceased to be a limited
partner of the Partnership.
11.3 Admission of Substituted Limited Partners. Any person
that is the successor in interest to a Limited Partner as described in Section
10.3 shall be admitted to the Partnership as a limited partner upon (a)
furnishing to the General Partner (i) acceptance in form satisfactory to the
General Partner of all of the terms and conditions of this Agreement and (ii)
such other documents or instruments as may be required to effect its admission
as a limited partner in the Partnership and (b) obtaining the consent of the
General Partner, which consent may be withheld or granted in the sole discretion
of the General Partner; provided, however, that this clause (b) shall not be
applicable in the case of the admission as a Limited Partner of a Person
acquiring a Limited Partner's Partnership Interest as a result of a transfer
described in clauses (iii) or (iv) of the second sentence of Section 10.3. Such
Person shall be admitted to the Partnership as a limited partner immediately
prior to the transfer of the Partnership Interest, and the business of the
Partnership shall continue without dissolution.
11.4 Admission of Successor General Partner. A successor
General Partner approved pursuant to Section 12.1 or 12.2 or the transferee of
or successor to all of the General Partner's Partnership Interest as the general
partner in the Partnership pursuant to Section 10.2 who is proposed to be
admitted as a successor General Partner shall, subject to compliance with the
terms of Section 12.3, if applicable, be admitted to the Partnership as the
successor General Partner, effective immediately prior to the withdrawal or
removal of the General Partner pursuant to Section 12.1 or 12.2 or the transfer
of the General Partner's Partnership Interest as the general partner of the
Partnership pursuant to Section 10.2. Any such successor shall, subject to the
terms hereof, carry on the business of the Partnership without dissolution. In
each case, the admission of such successor General Partner to the Partnership
shall, subject to the terms hereof, be subject to the successor General Partner
executing and delivering to the Partnership an acceptance of all of the terms
and conditions of this Agreement and such other documents or instruments as may
be required to effect such admission.
11.5 Amendment of Agreement and Certificate of Limited
Partnership. To effect the admission to the Partnership of any Partner, the
General Partner shall take all steps necessary and appropriate under the
Delaware Act to amend the records of the Partnership to reflect such admission
and, if necessary, to prepare as soon as practical an amendment of this
Agreement and, if required by law, to prepare and file an amendment to the
Certificate of Limited Partnership and may for this purpose, among others,
exercise the power of attorney granted pursuant to Section 1.4.
11.6 Admission of Additional Limited Partners. (a) A Person
(other than the General Partner, the Initial Limited Partner or a Substituted
Limited Partner) who makes a Capital Contribution to the Partnership in
accordance with this Agreement shall be admitted to the Partnership as an
Additional Limited Partner only upon furnishing to the General Partner (i)
evidence of acceptance in form satisfactory to the General Partner of all of the
terms and conditions of this Agreement, including, without limitation, the
granting of the power of attorney granted in Section 1.4, and (ii) such other
documents or instruments as may be required in the discretion of the General
Partner to effect such Person's admission as an Additional Limited Partner.
(b) Notwithstanding anything to the contrary in this Section
11.6, no Person shall be admitted as an Additional Limited Partner without the
consent of the General Partner, which consent may be given or withheld in the
General Partner's sole discretion. The admission of any Person as an Additional
Limited Partner shall become effective on the date upon which the name of such
Person is recorded as such in the books and records of the Partnership,
following the consent of the General Partner to such admission.
11.7 Admission of FAC as the Acquisition General Partner. Upon
the making by FAC of the Capital Contribution described in Section 4.2(c), FAC
was admitted to the Partnership as the Acquisition General Partner.
ARTICLE I
ARTICLE XII
WITHDRAWAL OR REMOVAL OF PARTNERS
12.1 Withdrawal of the General Partner. (a) The General
Partner shall be deemed to have withdrawn from the Partnership upon the
occurrence of any one of the following events (each such event herein referred
to as an "Event of Withdrawal");
(i) the General Partner voluntarily withdraws
from the Partnership by giving written notice to the Limited Partner;
(ii) the General Partner transfers all of its rights
as General Partner pursuant to Section 10.2;
(iii) the General Partner is removed pursuant to
Section 12.2;
(iv) the general partner of the MLP withdraws
from the MLP;
(v) the General Partner (A) makes a general
assignment for the benefit of creditors; (B) files a voluntary
bankruptcy petition; (C) files a petition or answer seeking for itself
a reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any law; (D) files an answer or
other pleading admitting or failing to contest the material allegations
of a petition filed against the General Partner in a proceeding of the
type described in clauses (A)-(C) of this Section 12.1(a)(v); or (E)
seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator of the General Partner or of all or any
substantial part of its properties;
(vi) a final and non-appealable judgment is entered
by a court with appropriate jurisdiction ruling that the General
Partner is bankrupt or insolvent, or a final and non-appealable order
for relief is entered by a court with appropriate jurisdiction against
the General Partner, in each case under any federal or state bankruptcy
or insolvency laws as now or hereafter in effect; or
(vii) a certificate of dissolution or its equivalent
is filed for the General Partner, or 90 days expire after the date of
notice to the General Partner of revocation of its charter without a
reinstatement of its charter, under the laws of its state of
incorporation.
If an Event of Withdrawal specified in Section 12.1(a)(v), (vi) or
(vii) occurs, the withdrawing General Partner shall give notice to the Limited
Partner within 30 days after such occurrence. The Partners hereby agree that
only the Events of Withdrawal described in this Section 12.1 shall result in the
withdrawal of the General Partner from the Partnership.
(b) Withdrawal of the General Partner from the Partnership
upon the occurrence of an Event of Withdrawal shall not constitute a breach of
this Agreement under the following circumstances:
(i) at any time during the period beginning on the
Closing Date and ending at 12:00 Midnight, Central Standard Time, on
July 31, 2004 the General Partner voluntarily withdraws by giving at
least 90 days' advance notice of its intention to withdraw to the
Limited Partner, provided, that prior to the effective date of such
withdrawal the Limited Partner approves such withdrawal and the General
Partner delivers to the Partnership an Opinion of Counsel ("Withdrawal
Opinion of Counsel") that such withdrawal (following the selection of
the successor General Partner) would not result in the loss of the
limited liability of the Limited Partner or cause the Partnership to be
treated as an association taxable as a corporation or otherwise to be
taxed as an entity for federal income tax purposes;
(ii) at any time on or after 12:00 Midnight, Central
Standard Time, on July 31, 2004, the General Partner voluntarily
withdraws by giving at least 90 days' advance notice to the Limited
Partner, such withdrawal to take effect on the date specified in such
notice; or
(iii) at any time that the General Partner ceases to
be the General Partner pursuant to Section 12.1(a)(ii), (iii) or (iv).
If the General Partner gives a notice of withdrawal pursuant to Section
12.1(a)(i) or Section 13.1(a)(i) of the MLP Agreement, the Limited
Partner may, prior to the effective date of such withdrawal, elect a
successor General Partner, provided, that such successor shall be the
same Person, if any, that is elected by the limited partners of the MLP
pursuant to Section 13.1 of the MLP Agreement as the successor to the
General Partner in its capacity as general partner of the MLP. If,
prior to the effective date of the General Partner's withdrawal, a
successor is not selected by the Limited Partner as provided herein or
the Partnership does not receive a Withdrawal Opinion of Counsel, the
Partnership shall be dissolved in accordance with Section 13.1. Any
successor General Partner elected in accordance with the terms of this
Section 12.1 shall be subject to the provisions of Section 11.4.
12.2 Removal of the General Partner. The General Partner shall
be removed if such General Partner is removed as a general partner of the MLP
pursuant to Section 13.2 of the MLP Agreement. Such removal shall be effective
concurrently with the effectiveness of the removal of such General Partner as
the general partner of the MLP pursuant to the terms of the MLP Agreement. If a
successor to the General Partner in its capacity as general partner of the MLP
is elected in connection with the removal of such General Partner as general
partner of the MLP, as provided in the MLP Agreement, then the Limited Partner
shall elect such successor as the successor General Partner of the Partnership
and such successor shall, upon admission pursuant to Article XI, automatically
become a successor General Partner of the Partnership. The admission of any such
successor General Partner to the Partnership shall be subject to the provisions
of Section 11.4.
12.3 Interest of Departing Partner and Successor General
Partner. The Partnership Interest of a Departing Partner departing as a result
of withdrawal or removal pursuant to Section 12.1 or 12.2 shall (unless it is
otherwise required to be converted into Common Units pursuant to Section 13.3(b)
of the MLP Agreement) be purchased by the successor to the Departing Partner for
cash in the manner specified in the MLP Agreement. Such purchase (or conversion
into Common Units, as applicable) shall be a condition to the admission to the
Partnership of the successor as the General Partner. Any successor General
Partner shall indemnify the Departing General Partner as to all debts and
liabilities of the Partnership arising on or after the effective date of the
removal of the Departing Partner.
12.4 Reimbursement of Departing Partner. The Departing Partner
shall be entitled to receive all reimbursements due such Departing Partner
pursuant to Section 6.4, including, without limitation, any employee-related
liabilities (including, without limitation, severance liabilities), incurred in
connection with the termination of any employees employed by such departing
Partner for the benefit of the Partnership.
12.5 Withdrawal of the Limited Partner. A Limited Partner
shall not have the right to withdraw from the Partnership without the prior
consent of the General Partner, which may be granted or withheld in its sole
discretion, provided, however, that immediately following a transfer of a
Limited Partner's Partnership Interest permitted under Section 11.3, the
transferring Limited Partner shall cease to be a Limited Partner with respect to
the Partnership Interest so transferred.
12.6 Withdrawal of the Acquisition General Partner. The
Acquisition General Partner shall withdraw from the Partnership immediately
following the assignment of its general partner interest in the Partnership to
Ferrellgas as provided in Section 4.2(c).
ARTICLE I
ARTICLE XIII
DISSOLUTION AND LIQUIDATION
13.1 Dissolution. The Partnership shall not be dissolved by
the admission of Substituted Limited Partners or Additional Limited Partners or
by the admission of a successor General Partner or the withdrawal of the
Acquisition General Partner in accordance with the terms of this Agreement. Upon
the removal or withdrawal of the General Partner any successor General Partner
shall continue the business of the Partnership. The Partnership shall dissolve
and, subject to Section 13.2, its affairs should be wound up, upon:
(a) the expiration of its term as provided in Section 1.5;
(b) an Event of Withdrawal of the General Partner as provided
in Section 12.1(a) (other than Section 12.1(a)(ii)), unless a successor is
elected and an Opinion of Counsel is received as provided in Section 12.1(b) or
12.2 and such successor is admitted to the Partnership pursuant to Section 11.4;
(c) an election to dissolve the Partnership by the General
Partner that is approved by the Limited Partner;
(d) entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Delaware Act;
(e) the sale of all or substantially all of the assets
and properties of the Partnership;
or
(f) the dissolution of the MLP.
13.2 Continuation of the Business of the Partnership after
Dissolution. Upon (a) dissolution of the Partnership following an Event of
Withdrawal caused by the withdrawal or removal of the General Partner as
provided in Section 12.1(a)(i) or (iii) and following a failure of the Limited
Partner to appoint a successor General Partner as provided in Section 12.1 or
12.2, then within 90 days thereafter or (b) dissolution of the Partnership upon
an event constituting an Event of Withdrawal as defined in Section 12.1(a)(v),
(vi) or (vii), then within 180 days thereafter, the Limited Partner may elect to
reconstitute the Partnership and continue its business on the same terms and
conditions set forth in this Agreement by forming a new limited partnership on
terms identical to those set forth in this Agreement and having as a general
partner a Person approved by the Limited Partner. In addition, upon dissolution
of the Partnership pursuant to Section 13.1(f), if the MLP is reconstituted
pursuant to Section 14.2 of the MLP Agreement, the reconstituted MLP may, within
180 days after such event of dissolution, as the Limited Partner, elect to
reconstitute the Partnership in accordance with the immediately preceding
sentence. Upon any such election by the Limited Partner, all Partners shall be
bound thereby and shall be deemed to have approved same. Unless such an election
is made within the applicable time period as set forth above, the Partnership
shall conduct only activities necessary to wind up its affairs. If such an
election is so made, then:
(i) the reconstituted Partnership shall continue
until the end of the term set forth in Section 1.5 unless earlier
dissolved in accordance with this Article XIII;
(ii) if the successor General Partner is not the
former General Partner, then the interest of the former General Partner
shall be purchased by the successor General Partner or converted into
Common Units of the MLP as provided in the MLP Agreement; and
(iii) all necessary steps shall be taken to cancel
this Agreement and the Certificate of Limited Partnership and to enter
into and, as necessary, to file a new partnership agreement and
certificate of limited partnership, and the successor General Partner
may for this purpose exercise the powers of attorney granted the
General Partner pursuant to Section 1.4; provided, that the right to
approve a successor General Partner and to reconstitute and to continue
the business of the Partnership shall not exist and may not be
exercised unless the Partnership has received an Opinion of Counsel
that (x) the exercise of the right would not result in the loss of
limited liability of the Limited Partner and (y) neither the
Partnership nor the reconstituted limited partnership would be treated
as an association taxable as a corporation or otherwise be taxable as
an entity for federal income tax purposes upon the exercise of such
right to continue.
13.3 Liquidation. Upon dissolution of the Partnership, unless
the Partnership is continued under an election to reconstitute and continue the
Partnership pursuant to Section 13.2, the General Partner, or in the event the
General Partner has been dissolved or removed, become bankrupt as set forth in
Section 12.1 or withdrawn from the Partnership, a liquidator or liquidating
committee approved by the Limited Partner, shall be the Liquidator. The
Liquidator (if other than the General Partner) shall be entitled to receive such
compensation for its services as may be approved by the Limited Partner. The
Liquidator shall agree not to resign at any time without 15 days' prior notice
and (if other than the General Partner) may be removed at any time, with or
without cause, by notice of removal approved by the Limited Partner. Upon
dissolution, removal or resignation of the Liquidator, a successor and
substitute Liquidator (who shall have and succeed to all rights, powers and
duties of the original Liquidator) shall within 30 days thereafter be approved
by the Limited Partner. The right to approve a successor or substitute
Liquidator in the manner provided herein shall be deemed to refer also to any
such successor or substitute Liquidator approved in the manner herein provided.
Except as expressly provided in this Article XIII, the Liquidator approved in
the manner provided herein shall have and may exercise, without further
authorization or consent of any of the parties hereto, all of the powers
conferred upon the General Partner under the terms of this Agreement (but
subject to all of the applicable limitations, contractual and otherwise, upon
the exercise of such powers, other than the limitation on sale set forth in
Section 6.3(b)) to the extent necessary or desirable in the good faith judgment
of the Liquidator to carry out the duties and functions of the Liquidator
hereunder for and during such period of time as shall be reasonably required in
the good faith judgment of the Liquidator to complete the winding up and
liquidation of the Partnership as provided for herein. The Liquidator shall
liquidate the assets of the Partnership, and apply and distribute the proceeds
of such liquidation in the following order of priority, unless otherwise
required by mandatory provisions of applicable law:
(a) the payment to creditors of the Partnership, including,
without limitation, Partners who are creditors, in the order of priority
provided by law; and the creation of a reserve of cash or other assets of the
Partnership for contingent liabilities in an amount, if any, determined by the
Liquidator to be appropriate for such purposes; and
(b) to all Partners in accordance with the positive balances
in their respective Capital Accounts, as determined after taking into account
all Capital Account adjustments (other than those made by reason of this clause)
for the taxable year of the Partnership during which the liquidation of the
Partnership occurs (with the date of such occurrence being determined pursuant
to Treasury Regulation Section 1.704-1(b)(2)(ii)(g));and such distribution shall
be made by the end of such taxable year (or, if later, within 90 days after said
date of such occurrence).
13.4 Distributions in Kind. (a) Notwithstanding the provisions
of Section 13.3, which require the liquidation of the assets of the Partnership,
but subject to the order of priorities set forth therein, if prior to or upon
dissolution of the Partnership the Liquidator determines that an immediate sale
of part or all of the Partnership's assets would be impractical or would cause
undue loss to the Partners, the Liquidator may, in its absolute discretion,
defer for a reasonable time the liquidation of any assets except those necessary
to satisfy liabilities of the Partnership (including, without limitation, those
to Partners as creditors) and/or distribute to the Partners or to specific
classes of Partners, in lieu of cash, as tenants in common and in accordance
with the provisions of Section 13.3, undivided interests in such Partnership
assets as the Liquidator deems not suitable for liquidation. Any such
distributions in kind shall be made only if, in the good faith judgment of the
Liquidator, such distributions in kind are in the best interest of the Limited
Partner, and shall be subject to such conditions relating to the disposition and
management of such properties as the Liquidator deems reasonable and equitable
and to any agreements governing the operation of such properties at such time.
The Liquidator shall determine the fair market value of any property distributed
in kind using such reasonable method of valuation as it may adopt.
(b) In accordance with Section 704(c)(1)(B) of the Code, in
the case of any deemed distribution occurring as a result of a termination of
the Partnership pursuant to Section 708(b)(1)(B) of the Code, to the maximum
extent possible consistent with the priorities of Section 13.3, the General
Partner shall have sole discretion to treat the deemed distribution of
Partnership assets to Partners as occurring in a manner that will not cause a
shift of the Book Tax Disparity attributable to a Partnership asset existing
immediately prior to the deemed distribution to another asset upon the deemed
contribution of assets to the reconstituted Partnership, including, without
limitation, deeming the distribution of any Partnership assets to be made either
to the Partner who contributed such assets or to the transferee of such Partner.
13.5 Cancellation of Certificate of Limited Partnership. Upon
the completion of the distribution of Partnership cash and property as provided
in Sections 13.3 and 13.4 in connection with the liquidation of the Partnership,
the Partnership shall be terminated and the Certificate of Limited Partnership
and all qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware shall be cancelled and such other
action as may be necessary to terminate the Partnership shall be taken.
13.6 Reasonable Time for Winding Up. A reasonable time shall
be allowed for the orderly winding up of business and affairs of the Partnership
and the liquidation of its assets pursuant to Section 13.3 in order to minimize
any losses otherwise attendant upon such winding up, and the provisions of this
Agreement shall remain in effect between the Partners during the period of
liquidation.
13.7 Return of Capital. The General Partner shall not be
personally liable for, and shall have no obligation to contribute or loan any
monies or property to the Partnership to enable it to effectuate, the return of
the Capital Contributions of the Limited Partner, or any portion thereof, it
being expressly understood that any such return shall be made solely from
Partnership assets.
13.8 Capital Account Restoration. No Limited Partner shall
have any obligation to restore any negative balance in its Capital Account upon
liquidation of the Partnership. The General Partner shall be obligated to
restore any negative balance in its Capital Account upon liquidation of its
interest in the Partnership by the end of the taxable year of the Partnership
during which such liquidation occurs, or, if later, within 90 days after the
date of such liquidation.
13.9 Waiver of Partition. Each Partner hereby waives any right
to partition of the Partnership property.
ARTICLE I
ARTICLE XIV
AMENDMENT OF PARTNERSHIP AGREEMENT
14.1 Amendment to be Adopted Solely by General Partner. The
Acquisition General Partner and the Limited Partner agree that the General
Partner (pursuant to its powers of attorney from the Acquisition General Partner
and the Limited Partner), without the approval of the Acquisition General
Partner or the Limited Partner, may amend any provision of this Agreement, and
execute, swear to, acknowledge, deliver, file and record whatever documents may
be required in connection therewith, to reflect:
(a) a change in the name of the Partnership, the location of
the principal place of business of the Partnership, the registered agent of the
Partnership or the registered office of the, Partnership;
(b) admission, substitution, withdrawal or removal of Partners
in accordance with this Agreement;
(c) a change that, in the sole discretion of the General
Partner, is necessary or appropriate to qualify or continue the qualification of
the Partnership as a limited partnership or a partnership in which the limited
partners have limited liability under the laws of any state or that is necessary
or advisable in the opinion of the General Partner to ensure that the
Partnership will not be treated as an association taxable as a corporation or
otherwise taxed as an entity for federal income tax purposes;
(d) a change (i) that, in the sole discretion of the General
Partner, does not adversely affect the Acquisition General Partner or the
Limited Partner in any material respect, (ii) that is necessary or desirable to
satisfy any requirements, conditions or guidelines contained in any opinion,
directive, order, ruling or regulation of any federal or state agency or
judicial authority or contained in any federal or state statute (including,
without limitation, the Delaware Act), compliance with any of which the General
Partner determines in its sole discretion to be in the best interests of the
Partnership and the Limited Partner, (iii) that is required to effect the intent
of the provisions of this Agreement or is otherwise contemplated by this
Agreement or (iv) that is required to conform the provisions of this Agreement
with the provisions of the MLP Agreement as the provisions of the MLP Agreement
may be amended, supplemented or restated from time to time;
(e) a change in the fiscal year and taxable year of the
Partnership and any changes that, in the sole discretion of the General Partner,
are necessary or appropriate as a result of a change in the fiscal year and
taxable year of the Partnership including, without limitation, if the General
Partner shall so determine, a change in the definition of "Quarter" and the
dates on which distributions are to be made by the Partnership;
(f) an amendment that is necessary, in the Opinion of Counsel,
to prevent the Partnership or the General Partner or its directors or officers
from in any manner being subjected to the provisions of the Investment Company
Act of 1940, as amended, the Investment Advisers Act of 1940, as amended, or
"plan asset" regulations adopted under the Employee Retirement Income Security
Act of 1974, as amended, whether or not substantially similar to plan asset
regulations currently applied or proposed by the United States Department of
Labor;
(g) any amendment expressly permitted in this Agreement to be
made by the General Partner acting alone;
(h) an amendment effected, necessitated or contemplated by a
Merger Agreement approved in accordance with Section 15.3;
(i) an amendment that, in the sole discretion of the General
Partner, is necessary or desirable to reflect, account for and deal with
appropriately the formation by the Partnership of, or investment by the
Partnership in, any corporation, partnership, joint venture, limited liability
company or other entity, in connection with the conduct by the Partnership of
activities permitted by the terms of Section 3.1; or
(j) any other amendments substantially similar to the
foregoing.
14.2 Amendment Procedures. Except with respect to amendments
of the type described in Section 14.1, all amendments to this Agreement shall be
made in accordance with the following requirements. Amendments to this Agreement
may be proposed only by or with the consent of the General Partner. Each such
proposal shall contain the text of the proposed amendment. A proposed amendment
shall be effective upon its approval by the Limited Partner.
ARTICLE I
ARTICLE XV
MERGER
15.1 Authority. The Partnership may merge or consolidate with
one or more corporations, business trusts or associations, real estate
investment trusts, common law trusts or unincorporated businesses, including,
without limitation, a general partnership or limited partnership, formed under
the laws of the State of Delaware or any other state of the United States of
America, pursuant to a written agreement of merger or consolidation ("Merger
Agreement") in accordance with this Article.
15.2 Procedure for Merger or Consolidation. Merger or
consolidation of the Partnership pursuant to this Article requires the prior
approval of the General Partner. If the General Partner shall determine, in the
exercise of its sole discretion, to consent to the merger or consolidation, the
General Partner shall approve the Merger Agreement, which shall set forth:
(a) The names and jurisdictions of formation or
organization of each of the business entities proposing to
merge or consolidate;
(b) The name and jurisdictions of formation or organization of
the business entity that is to survive the proposed merger or consolidation (the
"Surviving Business Entity");
(c) The terms and conditions of the proposed merger or
consolidation;
(d) The manner and basis of exchanging or converting the
equity securities of each constituent business entity for, or into, cash,
property or general or limited partnership interests, rights, securities or
obligations of the Surviving Business Entity; and (i) if any general or limited
partnership interests, securities or rights of any constituent business entity
are not to be exchanged or converted solely for, or into, cash, property or
general or limited partnership interests, rights, securities or obligations of
the Surviving Business Entity, the cash, property or general or limited
partnership interests, rights, securities or obligations of any limited
partnership, corporation, trust or other entity (other than the Surviving
Business Entity) which the holders of such general or limited partnership
interests, securities or rights are to receive in exchange for, or upon
conversion of, their general or limited partner interests, securities or rights,
and (ii) in the case of securities represented by certificates, upon the
Surrender of such certificates, which cash, property or general or limited
partnership interests, rights, securities or obligations of the Surviving
Business Entity or any general or limited partnership, corporation, trust or
other entity (other than the Surviving Business Entity), or evidences thereof,
are to be delivered;
(e) A statement of any changes in the constituent documents or
the adoption of new constituent documents (the articles or certificate of
incorporation, articles of trust, declaration of trust, certificate or agreement
of limited partnership or other similar charter or governing document) of the
Surviving Business Entity to be effected by such merger or consolidation;
(f) The effective time of the merger, which may be the date of
the filing of the certificate of merger pursuant to Section 15.4 or a later date
specified in or determinable in accordance with the Merger Agreement (provided,
that if the effective time of the merger is to be later than the date of the
filing of the certificate of merger, the effective time shall be fixed no later
than the time of the filing of the certificate of merger and stated therein);
and
(g) Such other provisions with respect to the proposed merger
or consolidation as are deemed necessary or appropriate by the General Partner.
15.3 Approval by Limited Partner of Merger or Consolidation.
(a) The General Partner of the Partnership, upon its approval of the Merger
Agreement, shall direct that a copy or a summary of the Merger Agreement be
submitted to the Limited Partner for its approval.
(b) The Merger Agreement shall be approved upon receiving the
consent of the Limited Partner. After such approval by the Limited Partner, and
at any time prior to the filing of the certificate of merger pursuant to Section
15.4, the merger or consolidation may be abandoned pursuant to provisions
therefor, if any, set forth in the Merger Agreement.
15.4 Certificate of Merger. Upon the required approval by the
General Partner, the Acquisition General Partner and the Limited Partner of a
Merger Agreement, a certificate of merger shall be executed and filed with the
Secretary of State of the State of Delaware in conformity with the requirements
of the Delaware Act.
15.5 Effect of Merger. (a) At the effective time of the
Certificate of merger:
(i) all of the rights, privileges and powers of each
of the business entities that has merged or consolidated, and all
property, real, personal and mixed, and all debts due to any of those
business entities and all other things and causes of action belonging
to each of those business entities shall be vested in the Surviving
Business Entity and after the merger or consolidation shall be the
property of the Surviving Business Entity to the extent they were of
each constituent business entity;
(ii) the title to any real property vested by deed or
otherwise in any of those constituent business entities shall not
revert and is not in any way impaired because of the merger or
consolidation;
(iii) all rights of creditors and all liens on or
security interest in property of any of those constituent business
entities shall be preserved unimpaired; and
(b) all debts, liabilities and duties of those constituent
business entities shall attach to the Surviving Business Entity, and may be
enforced against it to the same extent as if the debts, liabilities and duties
had been incurred or contracted by it.
15.6 A merger or consolidation effected pursuant to
this Article shall not be deemed to result in a transfer or assignment
of assets or liabilities from one entity to another having occurred.
ARTICLE I
ARTICLE XVI
GENERAL PROVISIONS
16.1 Addresses and Notices. Any notice, demand, request or
report required or permitted to be given or made to a Partner under this
Agreement shall be in writing, and shall be deemed given or made when received
by it at the principal office of the Partnership referred to in Section 1.3.
16.2 References. Except as specifically provided otherwise,
references to "Articles" and "Sections" are to Articles and Sections of this
Agreement.
16.3 Pronouns and Plurals. Whenever the context may require,
any pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa,
16.4 Further Action. The parties shall execute and deliver all
documents, provide all information and take or refrain from taking action as may
be necessary or appropriate to achieve the purposes of this Agreement.
16.5 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives and permitted assigns.
16.6 Integration. This Agreement constitutes the entire
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements and understandings pertaining thereto.
16.7 Creditors. None of the provisions of this Agreement shall
be for the benefit of, or shall be enforceable by, any creditor of the
Partnership.
16.8 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
16.9 Counterparts. This Agreement may be executed in
counterparts, all of which together shall constitute an agreement binding on all
the parties hereto, notwithstanding that all such parties are not signatories to
the original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto, independently of the
signature of any other party.
16.10 Applicable Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of law.
16.11 Invalidity of Provisions. If any provision of this
Agreement is or becomes invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
GENERAL PARTNER:
FERRELLGAS, INC.
By:/s/ Kevin T. Kelly
- ----------------------
Kevin T. Kelly
Vice President and
Chief Financial Officer
ACQUISITION GENERAL PARTNER:
FERRELLGAS ACQUISITION COMPANY, LLC
By:/s/ Kevin T. Kelly
- ----------------------
Kevin T. Kelly
Vice President and
Chief Financial Officer
LIMITED PARTNER:
FERRELLGAS PARTNERS, L.P.
By: Ferrellgas, Inc., as general partner
By:/s/ Kevin T. Kelly
- ----------------------
Kevin T. Kelly,
Vice President and
Chief Financial Officer
FIRST AMENDMENT
TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT
AGREEMENT (this "Amendment"), dated as of October 9, 1998, is entered into by
and among FERRELLGAS, L.P., a Delaware limited partnership (the "Borrower"),
FERRELLGAS, INC., a Delaware corporation and the sole general partner of the
Borrower (the "General Partner"), each of the financial institutions that is a
signatory to this Amendment (collectively, the "Banks") and BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for the Banks (in such
capacity, the "Agent"), and amends that certain Second Amended and Restated
Credit Agreement, dated as of July 2, 1998 (as the same is in effect immediately
prior to the effectiveness of this Amendment, the "Existing Credit Agreement"
and as the same may be amended, supplemented or modified and in effect from time
to time, the "Credit Agreement"), by and among the Borrower, the General
Partner, the Agent and the Banks from time to time party to the Credit
Agreement. Capitalized terms used and not otherwise defined in this Amendment
shall have the same meanings in this Amendment as set forth in the Credit
Agreement, and the rules of interpretation set forth in Section 1.02 of the
Credit Agreement shall be applicable to this Amendment.
RECITAL
The Borrower has requested that the Banks amend Section
8.12(d) under the Existing Credit Agreement, and the Banks are willing to agree
to so amend the Existing Credit Agreement on the terms and subject to the
conditions set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements set forth below and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties agree as follows:
SECTION 1. Amendment. On the terms of this Amendment and
subject to the satisfaction of the conditions precedent set forth below in
Section 2, Section 8.12(d) of the Existing Credit Agreement is hereby amended to
read in its entirety as follows:
(d) such Restricted Payment (other than (x) Restricted Payments described
in clause (i) of the first paragraph of this Section 8.12 made during the fiscal
quarter ending January 31, 1997 that do not exceed $26,000,000 in the aggregate
or (y) any Restricted Payments described in clauses (iii) or (iv) of the first
paragraph of this Section 8.12) the amount of which, if made other than with
cash, to be determined in accordance with clause (c) of this Section 8.12, shall
not exceed an amount equal to (1) Consolidated Cash Flow of the Borrower and its
Subsidiaries for the period from and after October 31, 1996 through and
including the last day of the fiscal quarter ending immediately preceding the
date of the proposed Restricted Payment (the "Determination Period"), minus (2)
the sum of Consolidated Interest Expense of the Borrower and its Subsidiaries
for the Determination Period plus all capital expenditures (other than
Growth-Related Capital Expenditures and net of capital asset sales in the
ordinary course of business) made by the Borrower and its Subsidiaries during
the Determination Period plus the aggregate of all other Restricted Payments
(other than (x) Restricted Payments described in clause (i) of the first
paragraph of this Section 8.12 made during the fiscal quarter ending January 31,
1997 that do not exceed $26,000,000 in the aggregate or (y) any Restricted
Payments described in clauses (iii) or (iv) of the first paragraph of this
Section 8.12) made by the Borrower and its Subsidiaries during the period from
and after October 31, 1996 through and including the date of the proposed
Restricted Payment, plus (3) $30,000,000, plus (4) the excess, if any, of
consolidated working capital of the Borrower and its Subsidiaries at July 31,
1996 over consolidated working capital of the Borrower and its Subsidiaries at
the end of the fiscal year immediately preceding the date of the proposed
Restricted Payment, minus (5) the excess, if any, of consolidated working
capital of the Borrower and its Subsidiaries at the end of the fiscal year
immediately preceding the date of the proposed Restricted Payment over
consolidated working capital of the Borrower and its Subsidiaries at July 31,
1996. For purposes of this subsection 8.12(d), the calculation of Consolidated
Cash Flow shall give pro forma effect to Acquisitions (including all mergers and
consolidations), Asset Sales and other dispositions and discontinuances of
businesses or assets that have been made by such Person or any of its
Subsidiaries during the reference period or subsequent to such reference period
and on or prior to the date of calculation of Consolidated Cash Flow assuming
that all such Acquisitions, Asset Sales and other dispositions and
discontinuances of businesses or assets had occurred on the first day of the
reference period.
SECTION 2. Conditions to Effectiveness. The amendment set forth in Section
1 of this Amendment shall become effective only upon the satisfaction of all of
the following conditions precedent (the date of satisfaction of all such
conditions being referred to as the "Amendment Effective Date"):
(a) On or before the Amendment Effective Date, the Agent shall have
received, on behalf of the Banks, this Amendment, duly executed and delivered by
the Borrower, the General Partner, the Majority Banks and the Agent.
(b) On or before the Amendment Effective Date, all corporate, partnership
and other proceedings taken or to be taken in connection with the transactions
contemplated by this Amendment, and all documents incidental thereto, shall be
reasonably satisfactory in form and substance to the Agent and its counsel, and
the Agent and such counsel shall have received all such counterpart originals or
certified copies of such documents as they may reasonably request.
(c) The representations and warranties set forth in this Amendment shall be
true and correct as of the Amendment Effective Date.
SECTION 3. Representations and Warranties. In order to induce the Banks to
enter into this Amendment and to amend the Existing Credit Agreement in the
manner provided in this Amendment, the Borrower and the General Partner
represent and warrant to each Bank as of the Amendment Effective Date as
follows:
(a) Power and Authority. The Borrower and the General Partner have all
requisite corporate or partnership power and authority to enter into this
Amendment and to carry out the transactions contemplated by, and perform their
respective obligations under, the Existing Credit Agreement as amended by this
Amendment (hereafter referred to as the "Amended Credit Agreement").
(b) Authorization of Agreements. The execution and delivery of this
Amendment by the Borrower and the General Partner and the performance of the
Amended Credit Agreement by the Borrower and the General Partner have been duly
authorized by all necessary action, and this Amendment has been duly executed
and delivered by the Borrower and the General Partner.
(c) Enforceability. The Amended Credit Agreement constitutes the legal,
valid and binding obligation of the Borrower and the General Partner enforceable
against the Borrower and the General Partner in accordance with its terms,
except as may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights in general. The enforceability of
the obligations of the Borrower and the General Partner hereunder is subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(d) No Conflict. The execution and delivery by the Borrower and the General
Partner of this Amendment and the performance by the Borrower and the General
Partner of the Amended Credit Agreement do not and will not (i) contravene, in
any material respect, any provision of any law, regulation, decree, ruling,
judgment or order that is applicable to the Borrower or the General Partner, as
the case may be, or their respective properties or other assets, (ii) result in
a breach of or constitute a default under the charter, bylaws or other
organizational documents of the Borrower or the General Partner, as the case may
be, or any material agreement, indenture, lease or instrument binding upon the
Borrower or the General Partner or their respective properties or other assets
or (iii) result in the creation or imposition of any Liens on their respective
properties other than as permitted under the Credit Agreement.
(e) Governmental Consents. No authorization or approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by the Borrower or
the General Partner of this Amendment.
(f) Representations and Warranties in the Credit Agreement. The Borrower
and the General Partner confirm that as of the Amendment Effective Date the
representations and warranties contained in Article VI of the Credit Agreement
are (before and after giving effect to this Amendment) true and correct in all
material respects (except to the extent any such representation and warranty is
expressly stated to have been made as of a specific date, in which case it shall
be true and correct as of such specific date) and that no Default has occurred
and is continuing.
(g) Subsidiaries. As of the Amendment Effective Date, the Borrower has no
Subsidiaries. SECTION 4. Miscellaneous.
(a) Reference to and Effect on the Existing Credit Agreement and the Other
Loan Documents.
(i) Except as specifically amended by this Amendment and the documents
executed and delivered in connection herewith, the Existing Credit Agreement and
the other Loan Documents shall remain in full force and effect and are hereby
ratified and confirmed.
(ii) The execution and delivery of this Amendment and performance of the
Amended Credit Agreement shall not, except as expressly provided herein,
constitute a waiver of any provision of, or operate as a waiver of any right,
power or remedy of the Banks under, the Existing Credit Agreement or any of the
other Loan Documents.
(iii) Upon the conditions precedent set forth herein being satisfied, this
Amendment shall be construed as one with the Existing Credit Agreement, and the
Existing Credit Agreement shall, where the context requires, be read and
construed throughout so as to incorporate this Amendment.
(b) Fees and Expenses. The Borrower and the General Partner acknowledge
that all costs, fees and expenses incurred in connection with this Amendment
will be paid in accordance with Section 11.04 of the Existing Credit Agreement.
(c) Headings. Section and subsection headings in this Amendment are
included for convenience of reference only and shall not constitute a part of
this Amendment for any other purpose or be given any substantive effect.
(d) Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(e) Governing Law. This Amendment shall be governed by and construed
according to the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as
of the date first above written.
FERRELLGAS, L.P., a Delaware limited partnership
By: FERRELLGAS, INC.
Its: General Partner
By:/s/Kevin T. Kelly
- --------------------------------
Name: Kevin T. Kelly
- --------------------------------
Title:Chief Financial Officer
- --------------------------------
FERRELLGAS, INC.
By:/s/Kevin T. Kelly
- --------------------------------
Name: Kevin T. Kelly
- --------------------------------
Title:Chief Financial Officer
- --------------------------------
AGENT
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent
By:/s/Daryl G. Patterson
- --------------------------------
Name: Daryl G. Patterson
- --------------------------------
Title:Vice President
- --------------------------------
BANKS
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
By:/s/Daryl G. Patterson
- --------------------------------
Name: Daryl G. Patterson
- --------------------------------
Title:Vice President
- --------------------------------
NATIONSBANK, N.A.
By:/s/Linda J. Lawrence
- --------------------------------
Name: Linda J. Lawrence
- --------------------------------
Title:Vice President
- --------------------------------
WELLS FARGO BANK, N.A.
By:/s/Charles D. Kirkham
- --------------------------------
Name: Charles D. Kirkham
- --------------------------------
Title:Vice President
- --------------------------------
THE BANK OF NOVA SCOTIA
By:/s/F.C.H. Ashby
- --------------------------------
Name: F.C.H. Ashby
- --------------------------------
Title:Senior Manager Loan Operations
- --------------------------------
PARIBAS
By:/s/Larry Robinson
- --------------------------------
Name: Larry Robinson
- --------------------------------
Title:Vice President
- --------------------------------
By:/s/Rosine K. Matthews
- --------------------------------
Name: Rosine K. Matthews
- --------------------------------
Title:Vice President
- --------------------------------
UNION BANK OF CALIFORNIA, N.A.
By:/s/Dustin Gaspari
- --------------------------------
Name: Dustin Gaspari
- --------------------------------
Title:Assistant Vice President
- --------------------------------
THE BANK OF NEW YORK
By:/s/Richard A. Raffetto
- --------------------------------
Name: Richard A. Raffetto
- --------------------------------
Title:Vice President
- --------------------------------
5
0000922358
Ferrellgas Partners, L.P.
1,000
U.S. Dollars
6-MOS
JUL-31-1999
AUG-01-1998
JAN-31-1999
1
12,655
0
96,558
0
30,303
150,831
640,178
235,646
673,889
129,897
552,675
21,531
0
0
(46,574)
673,889
334,543
360,416
160,040
297,250
0
0
23,578
28,694
0
28,694
0
(12,786)
0
15,908
.50
.50
5
0001012493
Ferrellgas Partners Finance, L.P.
1
U.S. Dollars
6-MOS
JUL-31-1999
AUG-01-1998
JAN-31-1999
1
1,000
0
0
0
0
1,000
0
0
1,000
0
0
1,000
0
0
0
1,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
