UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the fiscal year ended July 31, 2000
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
- ------------------------------ ------------------------------
(State 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)
Registrant's telephone number, including area code: (816) 792-1600
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Units New York Stock Exchange
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value as of October 5, 2000, of the registrant's Common
Units held by nonaffiliates of the registrant, based on the reported closing
price of such units on the New York Stock Exchange on such date, was
approximately $218,305,000.
At October 5, 2000, Ferrellgas Partners, L.P. had units outstanding as follows:
31,307,116 Common Units
4,652,691 Senior Common Units
Documents Incorporated by Reference: None
FERRELLGAS PARTNERS, L.P.
FERRELLGAS PARTNERS FINANCE CORP.
2000 FORM 10-K ANNUAL REPORT
Table of Contents
Page
PART I
ITEM 1. BUSINESS.......................................................................................1
ITEM 2. PROPERTIES.....................................................................................8
ITEM 3. LEGAL PROCEEDINGS..............................................................................9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........................................10
PART II
ITEM 5. MARKET FOR REGISTRANT'S UNITS AND
RELATED UNITHOLDER MATTERS....................................................................10
ITEM 6. SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA..............................................11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................................12
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....................................21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................................................22
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE...........................................................22
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS...........................................22
ITEM 11. EXECUTIVE COMPENSATION........................................................................24
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT................................................................................29
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................................30
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K...........................................................................31
PART I
ITEM 1. BUSINESS.
Business of Ferrellgas Partners, L.P.
Ferrellgas Partners, L.P. is a Delaware limited partnership that was
formed on April 19, 1994. The common units of Ferrellgas Partners are listed on
the New York Stock Exchange and its activities are primarily conducted through
its subsidiary Ferrellgas, L.P. Ferrellgas Partners is the sole limited partner
of Ferrellgas, L.P. with a 99% limited partner interest. Ferrellgas Partners and
Ferrellgas, L.P. are together referred to as the Partnership.
Business of Ferrellgas, L.P.
Ferrellgas, L.P., a Delaware limited partnership, was formed on April 22,
1994, to acquire, own and operate the propane business and assets of Ferrellgas,
Inc. Ferrellgas, L.P. accounts for nearly all of Ferrellgas Partner's
consolidated assets, sales and operating earnings, except for interest expense
related to $160 million of 9 3/8% Senior Secured Notes issued by Ferrellgas
Partners in April 1996 and a related interest rate swap agreement entered into
in April 2000.
Ferrellgas, Inc. owns general partner units that represent a 1%
interest in Ferrellgas Partners and a 1.0101% general partner interest in
Ferrellgas, L.P. The combined ownership represents a 2% general partner interest
in the Partnership. As general partner, Ferrellgas, Inc. performs all management
functions for the Partnership. All historical references prior to July 5, 1994,
relate to operations as conducted by Ferrellgas, Inc. and its predecessors.
General
The Partnership is engaged in the sale, distribution and marketing of
propane and other natural gas liquids. Natural gas liquids are derived from
petroleum products and are sold in compressed or liquefied form. Propane, the
predominant type of natural gas liquid, is typically extracted from natural gas
or separated during crude oil refining. Although propane is gaseous at normal
pressures, it is compressed into liquid form at relatively low pressures for
storage and transportation. Propane is a clean-burning energy source, recognized
for its transportability and ease of use relative to alternative forms of stand
alone energy sources.
In the residential and commercial markets, propane is primarily used for
space heating, water heating and cooking. In the agricultural market, propane is
primarily used for crop drying, space heating, irrigation and weed control. In
addition, propane is used for certain industrial applications, including use as
an engine fuel which is burned in internal combustion engines that power
vehicles and forklifts, and as a heating or energy source in manufacturing and
drying processes.
The Partnership believes that it is the largest retail marketer of propane
in the United States as measured by gallons sold, serving more than 1,100,000
residential, industrial/commercial and agricultural customers in 45 states and
the District of Columbia through 604 retail outlets in 40 states. Some outlets
serve interstate markets. Based upon information contained in industry
publications for calendar year 1999, the Partnership believes that its retail
operations account for approximately 11% of the retail propane gallons sold in
the United States. For the Partnership's fiscal years ended July 31, 2000, 1999,
and 1998, annual retail propane sales volumes were 847 million, 680 million, and
660 million gallons, respectively.
Formation and History
Ferrell Companies, Inc. is the parent entity of Ferrellgas, Inc., was
founded in 1939 as a single retail propane outlet in Atchison, Kansas and was
incorporated in 1954. Ferrellgas, Inc. was formed in 1984 to operate the retail
propane business previously conducted by Ferrell Companies. In July 1994, the
propane business and assets of Ferrellgas, Inc. were contributed to the
Partnership in connection with Ferrellgas Partner's initial public offering of
common units. Ferrell Companies was previously owned primarily by James E.
Ferrell and his family but was sold in July 1998 to the Ferrell Companies, Inc.
Employee Stock Ownership Trust.
Ferrellgas, Inc.'s initial growth largely resulted from small acquisitions
in the rural areas of eastern Kansas, northern and central Missouri, Iowa,
western Illinois, southern Minnesota, South Dakota and Texas. In July 1984,
Ferrellgas, Inc. acquired propane operations with annual retail sales volumes of
approximately 33 million gallons and in December 1986 acquired propane
operations with annual retail sales volumes of approximately 395 million
gallons. These two major acquisitions and many other smaller acquisitions
significantly expanded and diversified Ferrellgas, Inc.'s geographic coverage.
Since 1986, Ferrellgas, Inc. and the Partnership have acquired more than 100
smaller independent propane retailers, the largest of which were Thermogas LLC
acquired in December 1999, Skelgas Propane, Inc. acquired in May 1996 and Vision
Energy Resources, Inc. acquired in November 1994. For the fiscal years ended
July 31, 2000 to 1996, the Partnership invested approximately $310.3 million,
$48.7 million, $13.0 million, $38.8 million, and $108.8 million, respectively,
to acquire operations with annual retail sales of approximately 302.4 million,
21.5 million, 4.4 million, 20.5 million, and 111.8 million gallons of propane,
respectively.
Retail Operations
The retail business of the Partnership consists principally of transporting
propane purchased in the contract and spot markets primarily from major oil
companies to its retail distribution outlets and then to tanks located on its
customers' premises, as well as to portable cylinders.
Business Strategy
The Partnership's business strategy is to continue its historical focus on
residential and commercial retail propane operations. The Partnership
anticipates that its future growth will be achieved primarily through the
acquisition of smaller retail propane operations throughout the United States
and to a lesser extent through the expansion of its existing customer base by
increased competitiveness and investment in internal growth opportunities. The
Partnership believes that it has obtained a competitive advantage by promoting
an entrepreneurial culture that empowers its employees to be responsive to
individual customer needs. In addition, the Partnership believes this culture is
supported and enhanced by the ownership of Ferrell Companies by the Employee
Stock Ownership Trust for the sole benefit of Ferrellgas, Inc.'s employees.
The Partnership intends to concentrate its acquisition activities in
geographical areas in close proximity to the Partnership's existing operations
and to acquire propane retailers that can be efficiently combined with such
existing operations to provide an attractive return on investment after taking
into account the efficiencies which may result from such combination. However,
the Partnership will also pursue acquisitions that broaden its geographic
coverage. The Partnership's goal in any acquisition will be to improve the
operations and profitability of these smaller companies by integrating them into
the Partnership's established supply network. The Partnership regularly
evaluates a number of propane distribution companies that may be candidates for
acquisition. The Partnership believes that there are numerous local retail
propane distribution companies that are possible candidates for acquisition and
that its geographic diversity of operations helps to create many attractive
acquisition opportunities. The Partnership intends to fund acquisitions through
internal cash flow, external borrowings or the issuance of
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additional common units or other securities. The Partnership's ability to
accomplish these goals will be subject to the continued availability of
acquisition candidates at prices attractive to the Partnership and to
availability of funds for that purpose to the Partnership. There is no assurance
the Partnership will be successful in sustaining the recent level of
acquisitions or that any acquisitions that are made will prove beneficial to the
Partnership.
In addition to growth through acquisitions, the Partnership believes
that it may also achieve growth within its existing propane operations. As a
result of its experience in responding to competition and in implementing more
efficient operating standards, the Partnership believes that it has positioned
itself to be successful in direct competition for customers. The Partnership
currently has marketing programs that focus specific resources toward this
effort.
Recent Initiatives
During fiscal 2000, the Partnership began an assessment of its operations
to reduce operating costs to offset the impact of future potential challenges to
its operations such as warmer than normal weather and volatile product cost
environments. This operational assessment resulted in the implementation of
several expense savings and customer satisfaction initiatives, including the
elimination of redundancies in overlapping Thermogas and Ferrellgas, L.P.
operations, the review of staffing and asset utilization levels in the existing
Ferrellgas, L.P. base business, and improvements to the routing and scheduling
of customers' deliveries.
The majority of the integration of the Thermogas acquisition into the
existing Ferrellgas, L.P. operations occurred during the spring and summer of
fiscal 2000. Over 65 of the approximately 180 Thermogas locations were blended
together with existing Ferrellgas, L.P. locations. The Partnership eliminated
duplicate personnel and assets in these locations. The Partnership also
identified cost reduction opportunities in approximately 65 additional locations
in which the Partnership transferred customers and assets between existing
Ferrellgas, L.P. and Thermogas locations in a manner that allowed the customer
to be serviced from a more cost effective location. Since completing the
Thermogas acquisition in December 1999, the Partnership has reduced its
workforce by approximately 180 full time equivalent positions and has eliminated
over 175 excess vehicles from these overlapping locations. A portion of these
cost savings was realized during the integration that occurred in the spring and
summer of fiscal 2000. The Partnership believes these actions will result in
savings of approximately $7 million of expenses during fiscal 2001.
In addition to savings resulting from the integration of Thermogas, the
Partnership reduced additional operating costs by the assessment of its existing
operations. This assessment involved the review of the staffing and asset
utilization levels of the 520 existing Ferrellgas, L.P. locations, through the
using of productivity and benchmark measurements to identify savings
opportunities. The review was similar to the review used to establish optimal
staff and asset levels in the overlapping Ferrellgas, L.P. and Thermogas
locations. As a result, the Partnership reduced its workforce by over 500
additional full time equivalent positions, eliminated over 250 additional excess
vehicles, merged approximately 30 retail locations and divested 2 retail
locations. The majority of these actions were taken throughout the latter half
of fiscal 2000, therefore some of this cost savings was realized during fiscal
2000. The Partnership believes that these actions will result in savings of
approximately $12 million of expenses during fiscal 2001.
During the fourth quarter of fiscal 2000, the Partnership introduced
significant improvements to its existing routing and scheduling process used for
planning customer deliveries. The Partnership expects these improvements to
increase customer satisfaction and also reduce delivery costs. These
improvements resulted from a pilot program that was in place throughout fiscal
2000 that involved several locations in Ohio. This pilot program assisted the
Partnership in the improvement of the technology, training and reporting
associated with the routing and scheduling of customer propane deliveries. The
existing technology has been improved to better predict customer inventory
3
levels and more efficiently plan deliveries. The Partnership's employees were
recently extensively trained on these routing and scheduling improvements. In
addition, incentive programs for fiscal 2001 were modified to encourage
employees to achieve success measurements related to improved routing and
scheduling and improved customer satisfaction. A large portion of the new
incentive program is based on each location reducing operating expenses by 1.5
cents per gallon delivered. The Partnership expects the vast majority of its
locations will utilize these routing and scheduling improvements by the start of
the fiscal 2001 heating season.
Marketing
The retail propane marketing business generally involves large numbers of
small volume deliveries averaging approximately 200 gallons each. The market
areas are generally rural, but also include suburban areas for industrial
applications.
The Partnership utilizes marketing programs targeting both new and existing
customers by emphasizing its efficiency in delivering propane to customers as
well as its employee training and safety programs. The Partnership sells propane
primarily to four markets: residential, industrial/commercial, agricultural and
other, with other being principally to other propane retailers and as engine
fuel. During the fiscal year ended July 31, 2000, sales to residential customers
accounted for 63% of retail gross profit, sales to industrial and other
commercial customers accounted for 27% of retail gross profit, and sales to
agricultural and other customers accounted for 10% of retail gross profit.
Residential sales have a greater profit margin, more stable customer base and
tend to be less sensitive to price changes than the other markets served by the
Partnership. No single customer of the Partnership accounted for 10% or more of
the Partnership's consolidated revenues in fiscal 2000.
Profits in the retail propane business are primarily based on margins, the
cents-per-gallon difference between the purchase price and the sales price of
propane. The Partnership generally purchases propane in the contract and spot
markets. These purchases are primarily from major oil companies and on a
short-term basis. Therefore, the Partnership's supply costs fluctuate with
market price fluctuations that subject the Partnership to price and inventory
risk. Should wholesale propane prices decline in the future, the Partnership's
margins on its retail propane distribution business should increase in the
short-term because retail prices tend to change less rapidly than wholesale
prices. Should the wholesale cost of propane increase, for similar reasons
retail margins and profitability would likely be reduced, at least for the
short-term, until retail prices can be increased. Retail propane customers
typically lease their storage tanks from their propane distributors. Over 70% of
the Partnership's customers lease their tanks from the Partnership. The lease
terms and fire safety regulations in some states require leased tanks to be
filled only by the propane supplier that owns the tank. The cost and
inconvenience of switching tanks minimizes a customer's tendency to switch
suppliers of propane on the basis of minor variations in price.
The retail market for propane is seasonal because propane is used primarily
for heating in residential and commercial buildings. Consequently, sales and
operating profits are concentrated in the second and third fiscal quarters or
November through April. In addition, sales volume traditionally fluctuates from
year to year in response to variations in weather, price and other factors. The
Partnership believes that the broad geographic distribution of its operations
helps to minimize exposure to regional weather or economic patterns. Long-term,
historic weather data from the National Climatic Data Center indicates that the
average annual temperatures have remained relatively constant over the last
thirty years with fluctuations occurring on a year-to-year basis. During times
of colder-than-normal winter weather, the Partnership has been able to take
advantage of its large, efficient distribution network to help avoid supply
disruptions such as those experienced by some of its competitors, thereby
broadening its long-term customer base.
4
Supply, Distribution and Risk Management
The Partnership purchases propane primarily from major domestic oil
companies. Supplies of propane from these sources have traditionally been
readily available, although no assurance can be given that supplies of propane
will be readily available in the future. As a result of the Partnership's
ability to:
o buy large volumes of propane,
o utilize various risk management strategies, and
o utilize its large distribution system and underground storage capacity,
the Partnership believes it is in a position to achieve product cost savings and
avoid shortages during periods of tight supply to an extent not generally
available to other retail propane distributors. The Partnership is not dependent
upon any single supplier or group of suppliers, the loss of which would have a
material adverse effect on the Partnership. For the year ended July 31, 2000, no
supplier provided more than 10% of the Partnership's total propane purchases.
A portion of the Partnership's propane inventory is purchased under supply
contracts that typically have a one-year term and a price that fluctuates based
on the spot market prices. Additionally, the Partnership will enter into fixed
price contracts that have a term of less than one year. Some of the
Partnership's contracts specify minimum and maximum amounts of propane to be
purchased.
The Partnership may purchase and store inventories of propane to avoid
delivery interruptions during periods of increased demand. The Partnership owns
three underground storage facilities with an aggregate capacity of approximately
192 million gallons. Currently, approximately 141 million gallons of this
capacity is leased to third parties. The remaining space is available for the
Partnership's use.
In addition, the Partnership's risk management 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. These activities are utilized to anticipate market movements, manage
and hedge the Partnership's exposure to the volatility of floating commodity
prices and to protect the Partnership's inventory positions. The Partnership
also utilizes certain over-the-counter energy commodity options to limit overall
price risk and to hedge its exposure to inventory price movements.
Propane is generally transported from natural gas processing plants and
refineries, pipeline terminals and storage facilities to retail distribution
outlets and wholesale customers by railroad tank cars leased by the Partnership
and by highway transport trucks owned or leased by the Partnership. Common
carrier transport trucks may be used during the peak delivery season in the
winter months or to provide service in areas where economic considerations favor
common carrier use. Propane is then transported from the Partnership's retail
distribution outlets to customers by the Partnership's fleet of 2,201 bulk
delivery trucks, which are fitted generally with 2,000 to 3,000 gallon propane
tanks. Propane storage tanks located on the customers' premises are then filled
from the delivery truck. Propane is also delivered to customers in portable
cylinders.
Industry and Competition
Industry
Based upon industry publications, propane accounts for approximately 3% to
4% of household energy consumption in the United States, an average level which
has remained relatively constant for the past two decades. Propane competes
primarily with natural gas, electricity and fuel oil as an energy source
principally on the basis of price, availability and portability. Propane serves
as an alternative to natural gas in rural and suburban areas where natural gas
is unavailable or portability of product is required. Propane is generally more
expensive than natural gas on an equivalent British Thermal Unit basis in
locations served by natural gas, although propane is often sold in such areas as
5
a standby fuel for use during peak demands and during interruption in natural
gas service. The expansion of natural gas into traditional propane markets has
historically been inhibited by the capital costs required to expand distribution
and pipeline systems. Although the extension of natural gas pipelines tends to
displace propane distribution in the neighborhoods affected, the Partnership
believes that new opportunities for propane sales arise as more geographically
remote neighborhoods are developed.
Propane is generally less expensive to use than electricity for space
heating, water heating and cooking and competes effectively with electricity in
those parts of the country where propane is cheaper than electricity on an
equivalent BTU basis. Although propane is similar to fuel oil in application,
market demand and price, propane and fuel oil have generally developed their own
distinct geographic markets. Because residential furnaces and appliances that
burn propane will not operate on fuel oil, a conversion from one fuel to the
other requires the installation of new equipment. The Partnership's residential
retail propane customers will have an incentive to switch to fuel oil only if
fuel oil becomes significantly less expensive than propane. Likewise, the
Partnership may be unable to expand its customer base in areas where fuel oil is
widely used, particularly the Northeast United States, unless propane becomes
significantly less expensive than fuel oil. However, many industrial customers
who use propane as a heating fuel have the capacity to switch to other fuels,
such as fuel oil, on the basis of availability or minor variations in price.
Competition
In addition to competing with marketers of other fuels, the Partnership
competes with other companies engaged in the retail propane distribution
business. Competition within the propane distribution industry stems from two
types of participants: the larger multi-state marketers, and the smaller, local
independent marketers, including recent entrants such as certain rural electric
cooperatives. Based upon industry publications, the Partnership believes that
the ten largest multi-state retail marketers of propane, including the
Partnership, account for approximately 45% of the total retail sales of propane
in the United States and that there are approximately 5,000 local or regional
distributors. Based upon information contained in industry publications for
calendar year 1998, the Partnership also believes no single marketer other than
itself has a greater than 10% share of the total market in the United States.
The Partnership believes that it is the largest retail marketer of propane in
the United States with a market share of approximately 11% as measured by volume
of national retail propane sales.
Most of the Partnership's retail distribution outlets compete with three or
more marketers or distributors, the principal factors being price and service.
The Partnership competes with other retail marketers primarily on the basis of
reliability of service and responsiveness to customer needs, safety and price.
Each retail distribution outlet operates in its own competitive environment
because retail marketers locate in close proximity to customers to lower the
cost of providing service. The typical retail distribution outlet has an
effective marketing radius of approximately 25 miles.
Other Operations
The other operations of the Partnership consist principally of wholesale
propane marketing and other smaller operations, e.g., chemical feedstocks
marketing, natural gas liquids storage, a wholesale propane appliance operation,
retail refined fuels sales, truck maintenance centers, tank refurbishment
centers, transport hauling and others.
The Partnership engages in the wholesale marketing and distribution of
propane to other retail propane distributors. During the fiscal years ended July
31, 2000, 1999 and 1998, the Partnership sold 99 million, 103 million and 136
million gallons, respectively, of propane to wholesale customers and had
revenues attributable to such sales of $43.4 million, $33.8 million and $49.9
million, respectively.
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Employees
The Partnership has no employees and is managed by Ferrellgas, Inc.
pursuant to its partnership agreement. At September 30, 2000, Ferrellgas, Inc.
had 4,532 full-time employees and 882 temporary and part-time employees.
Ferrellgas, Inc.'s full-time employees were employed in the following areas:
Retail Locations 3,896
Transportation and Storage 265
Corporate Offices in Liberty, MO and Houston, TX 371
-----------
Total 4,532
===========
Less than one percent of Ferrellgas, Inc.'s employees are represented by four
local labor unions, which are all affiliated with the International Brotherhood
of Teamsters. Ferrellgas, Inc. has not experienced any significant work
stoppages or other labor problems.
The Partnership's supply, risk management, wholesale marketing,
distribution scheduling and product accounting functions are operated primarily
out of the Partnership's offices located in Houston, by a total full-time
corporate staff of 82 people.
Governmental Regulation - Environmental and Safety Matters
The Partnership is not subject to any price or allocation regulation of
propane.
Propane is not a hazardous substance within the meaning of federal and
state environmental laws. In connection with all acquisitions of retail propane
businesses that involve the purchase of real estate, the Partnership conducts a
due diligence investigation to attempt to determine whether any substance other
than propane has been sold from or stored on any such real estate prior to its
purchase. That due diligence includes questioning the sellers, obtaining
representations and warranties concerning the sellers' compliance with
environmental laws and visual inspections of the properties.
With respect to the transportation of propane by truck, the Partnership is
subject to regulations promulgated under the Federal Motor Carrier Safety Act.
These regulations cover the transportation of hazardous materials and are
administered by the United States Department of Transportation. The National
Fire Protection Association has issued Pamphlet No. 58 that established a set of
rules and procedures governing the safe handling of propane. Those rules and
procedures have been adopted as the industry standard in a majority of the
states in which the Partnership operates.
The Partnership believes it is in material compliance with all governmental
regulations and industry standards applicable to environmental and safety
matters. The Department of Transportation established new regulations addressing
emergency discharge control issues that became effective on July 1, 1999 with
various requirements phased in over the next seven years. The Partnership is in
full compliance in all material respects with those current regulatory
requirements and is working with both the Department of Transportation and
outside experts to fully test emergency discharge control systems that comply
with the new requirements as they become effective.
Service Marks and Trademarks
The Partnership markets retail propane under the "Ferrellgas," "Thermogas,"
"Puget Propane," "Seacrist Fuels," and "Elk Grove Gas & Oil" tradenames. The
Partnership uses the tradenames "Ferrell North America" and "American Energy
Incorporated" for its wholesale operations, the tradename "NRG" for its propane
appliance wholesale operation, the tradename "Ferrell Transport" for most of its
third party hauling and oil field services operations and the tradename
"bluebuzz.com" for its internet service provider operations. In addition, the
Partnership has a trademark on the name "FerrellMeter," its patented gas leak
7
detection device. Ferrellgas, Inc. has an option to purchase the tradenames and
trademark that it contributed to the Partnership for a nominal value if
Ferrellgas, Inc. is removed as general partner of the Partnership other than for
cause. If Ferrellgas, Inc. ceases to serve as the general partner of the
Partnership for any other reason, it will have the option to purchase the
tradenames and trademark from the Partnership for fair market value.
Businesses of Other Subsidiaries
Ferrellgas Partners Finance Corp. is a Delaware corporation formed in
1996 and is a wholly-owned subsidiary of Ferrellgas Partners. Ferrellgas
Partners Finance Corp. has nominal assets and does not conduct any operations,
but serves as a co-obligor for securities issued by Ferrellgas Partners.
Accordingly, a discussion of the results of operations, liquidity and capital
resources of Ferrellgas Partners Finance Corp. is not presented. Certain
institutional investors that might otherwise be limited in their ability to
invest in securities issued by Ferrellgas Partners by reasons of the legal
investment laws of their states of organization or their charter documents, may
be able to invest in Ferrellgas Partner's securities because Ferrellgas Partners
Finance Corp. is a co-obligor. See the notes to Ferrellgas Partners Finance
Corp.'s financial statements for a discussion of the securities with respect to
which Ferrellgas Partners Finance Corp. is serving as a co-obligor.
Bluebuzz.com, Inc., is the Partnership's internet service provider and
a wholly-owned subsidiary of Ferrellgas, L.P. Bluebuzz.com was incorporated in
Delaware in April 2000 and provides internet service to subscribers in some of
the locations where Ferrellgas, L.P. has retail propane locations. Bluebuzz.com
currently does not own significant assets, nor has it generated significant
operating income or loss. Accordingly, a discussion of the results of
operations, liquidity and capital resources of Bluebuzz.com is not presented.
Ferrellgas Receivables, LLC is a newly created wholly-owned, special
purpose subsidiary of Ferrellgas, L.P., and was organized in September 2000.
Ferrellgas, L.P., contributed and sold interests in a pool of accounts
receivable to Ferrellgas Receivables. Ferrellgas Receivables then sold the
interests to a commercial paper conduit of Banc One, NA. Ferrellgas Receivables
does not conduct any other activities. In accordance with Statement of Financial
Accounting Standard No. 125 "Accounting for Transfers of Assets," Ferrellgas
Receivables will not be consolidated into the results of the Partnership and
thus will be accounted for using the equity method of accounting.See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
ITEM 2. PROPERTIES.
The Partnership owns or leases the following transportation equipment that
is utilized primarily in retail operations.
Owned Leased Total
Truck tractors ................................................... 107 124 231
Transport trailers................................................ 362 49 411
Bulk delivery trucks.............................................. 1,256 945 2,201
Pickup and service trucks......................................... 1,713 643 2,356
Railroad tank cars................................................ - 222 222
The transport trailers have an average capacity of approximately 9,000
gallons. The bulk delivery trucks are generally fitted with 2,000 to 3,000
gallon propane tanks. Each railroad tank car has a capacity of approximately
30,000 gallons.
A typical retail distribution outlet is located on one to three acres of
land and includes a small office, a workshop, bulk storage capacity of 18,000
gallons to 60,000 gallons and a small inventory of stationary customer storage
tanks and portable propane cylinders that the Partnership provides to its retail
8
customers for propane storage. The Partnership owns the land and buildings in
the applicable local markets of approximately 50% of its retail outlets and
leases the remaining facilities on terms customary in the industry.
Approximately 1,012,000 propane tanks are either owned or leased by the
Partnership, most of which are located on customer property and leased to those
customers. The Partnership also owns approximately 829,000 portable propane
cylinders, most of which are leased to industrial and commercial customers. See
"Management's Discussion and Analysis of Financial Condition - Liquidity and
Capital Resources and Results of Operations" for a discussion of the operating
tank lease involving a portion of the Partnership's customer tanks.
The Partnership owns underground storage facilities at Hutchinson, Kansas;
Adamana, Arizona; and Moab, Utah. At July 31, 2000, the capacity of these
facilities approximated 86 million gallons, 98 million gallons, and 8 million
gallons, respectively for an aggregate of approximately 192 million gallons.
Currently, approximately 141 million gallons of this capacity is leased to third
parties. The remaining space is available for the Partnership's use.
The Partnership owns land and two buildings with 50,245 square feet of
office space and leases 6,250 square feet of office space that together comprise
its corporate headquarters in Liberty, Missouri, and leases 27,696 square feet
of office space in Houston, Texas, where its risk management, supply and
wholesale marketing operations are primarily located.
The Partnership believes that it has satisfactory title to or valid rights
to use all of its material properties. Although some of those properties may be
subject to liabilities and leases, liens for taxes not yet currently due and
payable and immaterial encumbrances, easements and restrictions, the Partnership
does not believe that any such burdens will materially interfere with the
continued use of such properties in its business. The Partnership believes that
it has made, or is in the process of obtaining, all required material:
approvals, authorizations, orders, licenses, permits, franchises, consents of,
registrations, qualifications and filings with, the various state and local
governmental and regulatory authorities which relate to ownership of the
Partnership's properties or the operations of its business.
ITEM 3. LEGAL PROCEEDINGS.
Propane is a flammable, combustible gas. Serious personal injury and
property damage can occur in connection with its transportation, storage or use.
In the ordinary course of business, the Partnership is threatened with or is
named as a defendant in various lawsuits which may seek actual and punitive
damages for product liability, personal injury and property damage. The
Partnership maintains liability insurance policies with insurers in amounts and
with coverages and deductibles as it believes is reasonable and prudent.
However, there can be no assurance that the insurance will be adequate to
protect the Partnership from material expenses related to personal injury or
property damage or that current levels of insurance will continue to be
available in the future at economical prices. It is not possible to determine
the ultimate disposition of these lawsuits. However, management is of the
opinion that there are no known claims or known contingent claims that are
likely to have a material adverse effect on the results of operations, financial
condition or cash flows of the Partnership.
9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
A special meeting of common unitholders was held on June 5, 2000. The
common unitholders voted in favor of two proposals at the special meeting as
follows:
1. A proposal to approve the conversion provisions related to the
Partnership's recently issued senior units to allow the holders of
the senior units to elect to convert into common units upon the
earlier of February 1, 2002 or the occurrence of a material event, as
defined in our partnership agreement:
FOR AGAINST ABSTAIN
22,932,167 254,008 171,954
2. A proposal to amend the definition of "outstanding" in the
partnership agreement to provide that Williams Natural Gas Liquids,
Inc., its successors or The Williams Companies, Inc., as holders of
common units obtained upon the conversion of the senior units, may
vote their common units and shall be entitled to all other rights as
common unitholders:
FOR AGAINST ABSTAIN
22,989,138 209,331 159,660
PART II
ITEM 5. MARKET FOR REGISTRANT'S UNITS AND RELATED UNITHOLDER MATTERS.
The common units representing common limited partner interests in the
Partnership are listed and traded on the New York Stock Exchange under the
symbol FGP. As of October 5, 2000, there were 788 common unitholders of record.
The following table sets forth the high and low sales prices for the common
units on the New York Stock Exchange and the cash distributions declared per
common unit for the periods indicated.
Common Unit Price Distributions
Range Declared
--------------------------------------
High Low Per Unit
1999
---------------------------------------
First Quarter $20.94 $19.13 $0.50
Second Quarter 21.75 17.00 0.50
Third Quarter 18.88 16.00 0.50
Fourth Quarter 17.94 16.69 0.50
2000
---------------------------------------
First Quarter $17.75 $15.06 $0.50
Second Quarter 15.63 12.00 0.50
Third Quarter 14.56 13.25 0.50
Fourth Quarter 14.63 13.31 0.50
During 1994, the Partnership issued subordinated units, all of which were
held by Ferrell Companies for which there was no established public trading
market. Effective August 1, 1999, the subordinated units converted into common
units and were subsequently listed on the New York Stock Exchange. The
subordinated units and the conversion to common units are more fully described
in Note F to the Consolidated Financial Statements provided herein.
10
The Partnership makes quarterly cash distributions of its available cash,
as defined by the applicable partnership agreement. Available cash is generally
defined as consolidated cash receipts less consolidated cash disbursements and
changes in cash reserves established by Ferrellgas, Inc. for future
requirements. To the extent necessary, the Partnership will reserve cash inflows
from the second and third quarters for distribution in the first and fourth
fiscal quarters. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Liquidity and Capital Resources" for a
discussion of the financial tests and covenants which place limits on the amount
of cash that can be used by the Partnership to pay distributions.
The Partnership is not subject to federal income taxes. Instead,
unitholders are required to report their allocable share of the Partnership's
income, gains, losses, deductions and credits, regardless of whether the
Partnership makes distributions.
ITEM 6. SELECTED HISTORICAL FINANCIAL DATA.
The following table presents selected consolidated historical financial
data of the Partnership.
(in thousands, except per unit data)
Ferrellgas Partners, L.P.
-------------------------------------------------------------
Year Ended July 31,
--------------------------------------------------------------
2000 1999 1998 1997 1996
------------ ------------ ------------ ------------ -----------
Income Statement Data:
Total revenues $ 952,199 $ 624,149 $ 667,353 $ 804,298 $ 653,640
Depreciation and amortization 61,633 47,257 45,009 43,789 37,024
ESOP compensation charge 3,733 3,295 350 - -
Operating income 56,735 62,339 52,760 68,819 62,506
Interest expense 58,298 46,621 49,129 45,769 37,983
Earnings before extraordinary loss 860 14,783 4,943 23,218 24,312
Basic and diluted earnings (loss) per
common and subordinated unit
- Earnings (loss) before extraordinary
loss and after paid-in-kind distribution (0.32) 0.47 0.16 0.74 0.77
Cash distributions declared per
common and subordinated unit 2.00 2.00 2.00 2.00 2.00
Balance Sheet Data at end of period:
Working capital $(6,344) $ (4,567) $ (443) $ 18,111 $ 15,294
Total assets 967,907 656,745 621,223 657,076 654,295
Long-term debt 718,118 583,840 507,222 487,334 439,112
Partners' Capital:
Senior Common Unitholder $ 179,786 $ - $ - $ - $ -
Common Unitholders (80,931) 1,215 27,985 52,863 71,323
Subordinated Unitholder - (10,516) 19,908 50,337 71,302
General Partner Unitholder (58,511) (59,553) (58,976) (58,417) (58,016)
Accumulated other comprehensive income - (797) - - -
11
(in thousands)
Ferrellgas Partners, L.P.
-------------------------------------------------------------
Year Ended July 31,
---------------------------------------------------------------
2000 1999 1998 1997 1996
------------ ------------ ------------ ------------ -----------
Operating Data:
Retail propane sales volumes (in 846,664 680,477 659,932 693,995 650,214
gallons)
Capital expenditures:
Maintenance $ 8,917 $ 10,505 $ 10,569 $ 10,137 $ 6,657
Growth 11,838 15,238 10,060 6,055 6,654
Acquisition 310,260 48,749 13,003 38,780 108,803
------------ ------------ ------------ ----------- ------------
Total $331,015 $ 74,492 $ 33,632 $ 54,972 $ 122,114
============ ============ ============ =========== ============
Supplemental Data:
Adjusted earnings before
income taxes, depreciation and $122,101 $112,891 $ 98,119 $112,608 $99,530
amortization:
Net cash provided by operating $53,352 $92,494 $74,337 $75,087 $65,096
activities
The Partnership's capital expenditures fall generally into three categories:
o maintenance capital expenditures, which include capitalized
expenditures for repair and replacement of property, plant and equipment,
o growth capital expenditures, which include expenditures for purchases
of new propane tanks and other equipment to facilitate expansion of the
Partnership's customer base and operating capacity, and
o acquisition capital expenditures, which include expenditures related
to the acquisitions of retail propane operations. Acquisition capital
expenditures represent total cost of acquisition less working capital acquired.
The Partnership acquired Thermogas LLC and Skelgas Propane, Inc. in December
1999 and May 1996, respectively
Adjusted earnings before interest, taxes, depreciation and amortization is:
o calculated as operating income less depreciation and amortization and
an Employee Stock Ownership Plan related non-cash compensation charge,
o not intended to represent cash flow and does not represent the measure
of cash available for distribution,
o a non-generally accepted accounting principle measure, but provides
additional information for evaluating the Partnership's ability to make its
minimum quarterly distribution,
o as defined by the Partnership, may not be comparable to similarly
reported measures reported by other companies,
o not intended as an alternative to earnings from continuing operations
or net earnings, and
o may not be comparable to similarly titled measures reported by
other companies.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following is a discussion of the historical financial condition and
results of operations for Ferrellgas Partners and its subsidiaries and should be
read in conjunction with the historical consolidated financial statements and
accompanying notes thereto included elsewhere in this Form 10-K.
12
Forward-looking statements
Statements included in this report that are not historical facts are
forward-looking statements. These statements include whether or not Ferrellgas,
L.P. will have sufficient funds to meet its obligations and to enable it to
distribute to Ferrellgas Partners sufficient funds to permit Ferrellgas Partners
to meet its obligations with respect to the $160,000,000 of Senior Notes issued
by Ferrellgas Partners in April 1996, and to pay the required distribution on
its senior common units, and to pay the minimum quarterly distribution of $0.50
per common unit.
The forward-looking 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 and their effect on the
Partnership's operations include but are not limited to the following:
o the effect of weather conditions on demand for propane, o price and
availability of propane supplies, o price and inventory risk of propane
supplies,
o the effect of increasing volatility in commodity prices on the Partnership's
liquidity,
o the timing of collection of accounts receivable,
o the availability of capacity to transport propane to market areas,
o competition from other energy sources and within the propane industry,
o operating risks incidental to transporting, storing, and distributing
propane,
o changes in interest rates,
o governmental legislation and regulations,
o energy efficiency and technology trends,
o the condition of the capital markets in the United States,
o the political and economic stability of the oil producing nations,
o the expectation that the senior common units will be redeemed in the
future with proceeds from an offering of equity at a price satisfactory to
the Partnership, and
o expected savings from the integration of the Thermogas acquisition,
reductions made in personnel and assets related to the existing Ferrellgas,
L.P. locations and savings related to the routing and scheduling
improvements, all discussed in "Business - Recent Initiatives".
Selected Quarterly Financial Data
Due to the seasonality of the retail propane business, first and fourth
quarter revenues, gross profit and net earnings are consistently less than the
comparable second and third quarter results. Other factors affecting the results
of operations include competitive conditions, demand for product, timing of
acquisitions, variations in the weather and fluctuations in propane prices.
On December 17, 1999, the Partnership purchased Thermogas LLC from Williams
Natural Gas Liquids, Inc., a subsidiary of The Williams Companies, Inc. Thus the
second, third and fourth quarters of fiscal year 2000 will vary significantly
from those same quarters in fiscal 1999. During the second quarter of fiscal
2000, the Partnership was able to identify the effect of the Thermogas
acquisition on the results of operations, because the Thermogas operations
acquired were being operated separately from the existing Partnership
operations. Beginning in the third quarter of fiscal 2000, the Partnership began
to implement its strategic and operating plans for the integration of Thermogas
into the Partnership's existing operations. These integration actions resulted
in the merging of retail locations and the related customer groups. Due to the
extent of this integration, the Partnership is unable to quantify separately the
effect of the Thermogas acquisition in the discussion of results of operations
in the third quarter of fiscal 2000 and future quarters.
During fiscal 2000, the wholesale cost of propane increased significantly
compared to fiscal 1999. The wholesale market price at one of the major supply
points, Mt. Belvieu, Texas, ranged from a per gallon monthly average low of
$0.405 to a high of $0.597 in fiscal 2000. In fiscal 1999, the per gallon
monthly average low and high price for the same supply point was $0.209 and
13
$0.373, respectively. Other major supply points in the United States experienced
similar increases. This significant cost increase together with the Thermogas
acquisition were the major factors causing the increase in the Partnership's
revenues, accounts receivable, inventory, accounts payable and cost of goods
sold in each quarter of fiscal 2000 as compared to fiscal 1999.
The following presents the Partnership's selected quarterly financial data
for the two years ended July 31, 2000.
Fiscal year ended July 31, 2000
(in thousands, except per unit data)
First Quarter Second Quarter Third Quarter Fourth Quarter
---------------- ---------------- --------------- -----------------
Revenues $162,739 $340,995 $300,240 $148,225
Gross profit 77,414 162,967 123,966 63,697
Net earnings (loss) (14,222) 52,186 5,378 (42,482)
Net earnings (loss) per
limited partner unit - basic
and diluted $(0.45) $1.58 $0.03 $(1.49)
Fiscal year ended July 31, 1999
(in thousands, except per unit data)
First Quarter Second Third Quarter Fourth Quarter
Quarter
----------------- -------------- ----------------- ----------------
Revenues $130,339 $230,077 $169,892 $93,841
Gross profit 71,627 128,749 99,721 50,664
Earnings (loss) before
extraordinary loss (11,221) 39,915 13,629 (27,540)
Earnings (loss) before
extraordinary loss per
limited partners unit - basic
and diluted (0.35) 1.26 0.43 (0.87)
Net earnings (loss) $(24,007) $39,915 $13,629 $(27,540)
The net earnings (loss) for the first quarter of fiscal year ended July 31,
1999, reflects a $12,786 extraordinary loss on early retirement of debt, net of
minority interest of $130.
Results of Operations
Fiscal Year Ended July 31, 2000 versus Fiscal Year Ended July 31, 1999
Total Revenues. Total gas liquids and related product sales increased 50.1%
to $867,779,000 in fiscal 2000 as compared to $578,025,000 for fiscal 1999,
primarily due to the addition of Thermogas sales and increased sales price per
gallon. The fiscal 2000 winter was reported as the warmest winter in recorded
history. For the year, temperatures were 14% warmer than normal and 6% warmer
than last year as reported by the American Gas Association.
Sales price per gallon increased due to the effect of the significant
increase in the wholesale cost of propane as compared to fiscal 1999. Retail
volumes increased 24.4% to 846,664,000 gallons in fiscal 2000 as compared to
680,477,000 gallons for fiscal 1999, primarily due to the acquisition of
14
Thermogas and partially offset by the effect of warmer weather. Other revenues
increased by $38,296,000 primarily due to favorable results from risk management
operations and increased other retail sales. Other retail sales, which includes,
among others, tank rental, service labor, appliance and material sales,
increased primarily due to the acquisition effect of Thermogas.
15
Gross Profit. Gross profit increased 22.0% to $428,044,000 in fiscal 2000
as compared to $350,761,000 during fiscal 1999, primarily due to gross profit
generated from the acquired Thermogas operations and, to a lesser extent,
increased favorable results from the risk management operations, partially
offset by lower retail margins. Fiscal 1999's retail margins benefited
significantly from a low wholesale cost environment. That cost environment was
not repeated during fiscal 2000. In addition, while the wholesale cost of
propane rapidly increased during the year, the retail sales price lagged the
cost increase which caused retail margins to decrease.
Operating Expenses. Operating expenses increased 24.4% to $255,838,000 in
fiscal 2000 as compared to $205,720,000 for fiscal 1999 primarily due to
personnel, plant and office, vehicle and other operating expenses incurred due
to the acquired Thermogas operations.
Depreciation and Amortization. Depreciation and amortization expense
increased 30.4% in fiscal 2000 to $61,633,000 as compared to $47,257,000 for
fiscal 1999 primarily due to the addition of intangibles and property, plant and
equipment from the Thermogas acquisition.
Equipment Lease Expense. Vehicle, tank and computer lease expense increased
by $12,542,000 in fiscal 2000 due primarily to the addition of operating tank
leases, and to a lesser extent to increased operating leases related to new
vehicles and computers acquired for retail locations. See Note H to the
Consolidated Financial Statements included elsewhere in this report for
additional information regarding the operating tank leases.
Interest Expense. Interest expense increased 25.0% to $58,298,000 in fiscal
2000 as compared to $46,621,000 in fiscal 1999. This increase is primarily the
result of increased borrowings related to the Thermogas acquisition and, to a
lesser extent, an increase in the overall average interest rate paid by the
Partnership. As a result of the Thermogas acquisition, Ferrellgas, L.P. assumed
$183,000,000 in debt and also refinanced a portion of its existing revolving
credit facility balances. On February 28, 2000, Ferrellgas, L.P. issued
$184,000,000 of fixed rate senior notes which have maturities ranging from 2006
to 2009 and an average interest rate of 8.8% in order to repay the $183,000,000
in assumed debt. The additional $1,000,000 in borrowings was used to fund debt
issuance costs.
Fiscal Year Ended July 31, 1999 versus Fiscal Year Ended July 31, 1998
Total Revenues. Total gas liquids and related product sales decreased 7.1%
to $578,025,000 in fiscal 1999 as compared to $622,423,000 in fiscal 1998,
primarily due to a decrease in sales price per gallon as a result of the lower
wholesale cost of propane experienced in fiscal 1999, the effects of warmer
weather and a decrease in revenues from wholesale propane marketing, partially
offset by the effect of acquisitions of propane businesses. The winter of fiscal
1999 was reported as the third warmest winter in recorded history. For the year,
temperatures were 9% warmer than normal and 1% warmer than the same period in
1998 as reported by the American Gas Association.
A generally lower wholesale product cost environment experienced during
fiscal 1999 caused a significant decrease in the sales price per gallon as
compared to fiscal 1998. Retail volumes increased by 3.1% or 20,545,000 gallons,
primarily due to acquisitions.
Gross Profit. Gross profit increased 8.0% to $350,761,000 in fiscal 1999 as
compared to $324,753,000 in fiscal 1998. Retail operations results increased
primarily due to increased retail margins and an increase in volumes attributed
to acquisitions, partially offset by decreased volumes attributed to warmer
weather.
Operating Expenses. Operating expenses increased 3.4% to $205,720,000 in
fiscal 1999 as compared to $199,010,000 in fiscal 1998. Fiscal 1999's operating
expenses increased due to acquisition-related increases in personnel costs,
plant and office expenses, vehicle and other expenses and also due to
performance and merit compensation increases.
16
Equipment Lease Expense. Vehicle and tank lease expense increased by
$2,849,000 in fiscal 1999 due to the utilization of operating lease financing to
fund fleet upgrades and replacements.
Interest Expense. Interest expense decreased 5.1% in fiscal 1999 as
compared to the fiscal 1998. This decrease was 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 fixed rate debt and existing
revolving credit facility balances, partially offset by the effect of increased
borrowings for acquisition and growth capital expenditures (see Liquidity and
Capital Resources-Financing Activities following).
Extraordinary item. During fiscal year 1999, the Partnership recognized an
extraordinary loss of $12,786,000 net of a minority interest of $130,000. The
gross extraordinary loss included a payment of a 5% premium and a write-off of
unamortized financing costs of $2,916,000, resulting primarily from the early
extinguishment of $200,000,000 of its fixed rate senior notes.
Liquidity and Capital Resources
The ability of the Partnership to satisfy its obligations is dependent upon
future performance, which will be subject to prevailing economic, financial,
business and weather conditions and other factors, many of which are beyond its
control. Due to the seasonality of the Partnership's retail propane business, a
significant portion of the Partnership's cash flow from operations is typically
generated during the winter heating season and the Partnership's corresponding
second and third fiscal quarters. During the non-peak season and the
Partnership's first and fourth fiscal quarters, it is not unusual for the
Partnership to generate negative cash flow from operations due to lower retail
sales and fixed expenses impact during the non-peak season. As experienced in
previous fiscal years, the next fiscal quarter ending October 31, 2000, is
expected to generate negative cash flows from operations, and is typically the
time period when the Partnership utilizes other sources of funds to meet its
obligations. Subject to meeting certain financial tests discussed below,
Ferrellgas, Inc. believes that Ferrellgas, L.P. will have sufficient funds
available to meet its obligations, to distribute to Ferrellgas Partners
sufficient funds to permit Ferrellgas Partners to meet its obligations with
respect to the $160,000,000 senior secured notes issued in April 1996 and to
distribute to Ferrellgas Partners sufficient funds to distribute the minimum
quarterly distribution on all common units for the fiscal quarter ending October
31, 2000.
The Partnership's credit facilities, public debt, private debt, accounts
receivable securitization facility and operating tank leases contain several
financial tests and covenants which restrict the Partnership's ability to pay
distributions, incur debt and engage in certain other business transactions. In
general, these tests are based on the Partnership's debt to cash flow ratio and
cash flow to interest expense ratio. Ferrellgas, Inc. believes that the most
restrictive of these tests currently are debt incurrence limitations within the
credit facility, tank leases and accounts receivable securitization facility and
limitations on the payment of distributions within the Ferrellgas Partners
senior secured notes. The credit facility, tank leases and accounts receivable
securitization facility limit Ferrellgas, L.P.'s ability to incur debt if
Ferrellgas, L.P. exceeds prescribed ratios of either debt to cash flow or cash
flow to interest expense. The Ferrellgas Partners senior secured notes restrict
payments if a minimum ratio of cash flow to interest expense is not met. This
restriction places limitations on the Partnership's ability to make certain
restricted payments such as the payment of cash distributions to unitholders.
The cash flow used to determine these financial tests generally is based upon
the Partnership's most recent cash flow performance giving pro forma effect for
acquisitions and divestitures made during the test period.
The Partnership's financial performance during the 2000, 1999 and 1998
fiscal years has been adversely impacted by average temperatures that were
reported by the National Oceanic Atmospheric Administration as the warmest in
recorded history. In addition, during fiscal 2000, the Partnership has
experienced high product costs which has negatively impacted retail margins.
Despite these challenges, the Partnership has continued to meet all of its
financial tests and covenants. These include the debt incurrence tests within
17
the credit facility, tank leases and accounts receivable securitization facility
and the Ferrellgas Partners senior secured notes restricted payment test, as
well as other financial tests and covenants in the Ferrellgas Partners senior
secured notes, the $350 million senior notes, the $184 million senior notes, the
credit facility, the tank leases and the accounts receivable securitization
facility.
Based upon current estimates of the Partnership's cash flow, Ferrellgas,
Inc. believes that the Partnership will be able to meet all of the required
financial tests and covenants for the fiscal quarter ending October 31, 2000.
However, due to the lower than expected operating results experienced during
fiscal 2000, if the Partnership were to encounter additional unexpected
downturns in business operations, such as significantly warmer than normal
weather or a volatile cost environment, the Partnership may not meet certain
financial tests during immediate future quarters. These factors could
temporarily restrict the ability of Ferrellgas, L.P. to incur debt or Ferrellgas
Partner's ability to make cash distributions to its common unitholders.
Depending on the circumstances, the Partnership could consider alternatives to
permit the incurrence of debt at Ferrellgas, L.P. or the continued payment by
Ferrellgas Partners of the quarterly cash distribution to its common
unitholders. No assurances can be given, however, that such alternatives can or
will be implemented with respect to any given quarter.
Future maintenance and working capital needs of the Partnership are
expected to be provided by cash generated from future operations, existing cash
balances, the credit facility and the accounts receivable securitization
facility. To fund expansive capital projects and future acquisitions,
Ferrellgas, L.P. may borrow on the existing credit facility, Ferrellgas Partners
or Ferrellgas, L.P. may issue additional debt to the extent permitted under
existing debt agreements or Ferrellgas Partners may issue additional equity
securities, including, among others, common units.
Toward this purpose, on February 5, 1999, Ferrellgas Partners filed a shelf
registration statement with the Securities and Exchange 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, reductions in indebtedness or for general corporate
purposes.
Ferrellgas Partners also maintains an additional shelf registration
statement with the Securities and Exchange Commission for 2,010,484 common
units. These common units may be issued by Ferrellgas Partners in connection
with the Partnership's acquisition of other businesses, properties or securities
in business combination transactions.
On August 1, 1999, the subordination period ended and all subordinated
units converted to common units. This conversion is more fully described in Note
F of the Consolidated Financial Statements provided herein.
Operating Activities. Cash provided by operating activities was $53,352,000
for the twelve months ended July 31, 2000, compared to $92,494,000 for fiscal
1999. This decrease in cash provided from operations is primarily due to the
higher working capital requirements resulting from the increased costs of
propane during fiscal 2000.
Investing Activities. During the twelve months ended July 31, 2000, before
the effect of the Thermogas acquisition, the Partnership made total acquisition
capital expenditures of $7,183,000. This amount was funded by $6,338,000 of cash
payments, $601,000 of noncompete notes, $46,000 of common units issued and
$198,000 of other costs and consideration.
18
On December 17, 1999, the Partnership purchased Thermogas from a subsidiary
of The Williams Companies. At closing the Partnership entered into the following
noncash transactions:
o issued $175,000,000 in senior common units to the seller,
o assumed a $183,000,000 bridge loan, which was refinanced from the proceeds
of the $184,000,000 senior notes issued on February 28, 2000, and
o assumed a $135,000,000 operating tank lease.
As a result of the transaction, the Partnership acquired $61,842,000 of
cash which remained on the Thermogas balance sheet. Since the closing of the
acquisition, the Partnership has paid $15,893,000 in additional costs and fees
related to the transaction between December 17, 1999 and July 31, 2000. The
Partnership reimbursed The Williams Companies $5,652,500 as final settlement of
its working capital reimbursement obligation.
The Partnership has accrued $7,033,000 in exit costs, which it expects to
incur within twelve months from the acquisition date as it implements the
integration of the Thermogas operations. This accrual included $5,870,000 of
termination benefits and $1,163,000 of costs to exit Thermogas activities. Exit
costs are generally those costs incurred to terminate employees pursuant to an
acquisition and to exit an activity of an acquired company. As of July 31, 2000,
the Partnership has paid $1,306,000 for termination benefits and $890,000 for
exit costs. The Partnership does not have any material commitments of funds for
capital expenditures other than to support the current level of operations. In
fiscal 2001, the Partnership does not expect a significant increase in growth
and maintenance capital expenditures resulting from the Thermogas acquisition as
compared to fiscal 2000 levels.
During the twelve months ended July 31, 2000, the Partnership made growth
and maintenance capital expenditures of $20,755,000 consisting primarily of the
following:
o additions to Partnership-owned customer storage tanks and cylinders,
o relocating and upgrading district plant facilities,
o upgrading computer equipment and software, and
o vehicle lease buyouts.
The Partnership's capital requirements for repair and maintenance of
property, plant and equipment are relatively low due to limited technological
change and long useful lives of propane tanks and cylinders.
The Partnership leases light and medium duty trucks, tractors and trailers.
The Partnership believes vehicle leasing is a cost-effective method for meeting
its transportation equipment needs. The Partnership plans to purchase vehicles
at the end of their lease term totaling $1,364,000 in 2001, $203,000 in 2002 and
$143,000 in 2003. The Partnership intends to renew other vehicle leases that
would have had buyouts of $452,000 in 2001, $7,057,000 in 2002, $162,569,000 in
2003, $4,981,000 in 2004 and $4,086,000 in 2005. Historically, the Partnership
has been successful in renewing vehicle leases subject to buyouts. However,
there is no assurance that it will be successful in the future.
The Partnership continues to seek to expand its operations through
strategic acquisitions of smaller 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.
Financing Activities. On August 4, 1998, Ferrellgas, L.P. issued the
privately placed unsecured $350 million senior notes and entered into a credit
facility with its existing banks. The senior notes include five series with
maturities ranging from year 2005 through 2013 at an average fixed interest rate
of 7.16%. The proceeds of the senior notes were used to redeem $200,000,000 of
Ferrellgas, L.P. fixed rate senior notes issued in July 1994, including a 5%
call premium, and to repay outstanding indebtedness under the former Ferrellgas,
L.P. revolving credit facility. On December 17, 1999, Ferrellgas, L.P.
terminated its additional credit facility agreement that it had entered into on
April 30, 1999. This facility had provided for an unsecured facility for
19
acquisitions, capital expenditures, and general corporate purposes. The
outstanding additional credit facility before its termination on December 17,
1999 was $35,000,000.
On December 6, 1999, Ferrellgas, L.P. entered into a $25,000,000 operating
tank lease involving the sale-leaseback of a portion of its customer tanks with
Banc of America Leasing & Capital, LLC. This operating lease has a term that
expires June 30, 2003 and may be extended for two additional one-year periods at
the option of Ferrellgas, L.P., if such extension is approved by the lessor. On
December 17, 1999, immediately prior to the closing of the Thermogas
acquisition, Thermogas entered into a $135,000,000 operating tank lease
involving a portion of its customer tanks, with Banc of America Leasing &
Capital, LLC. In connection with the acquisition of Thermogas, Ferrellgas, L.P.
assumed all obligations under the $135,000,000 operating tank lease, which have
terms and conditions similar to the December 6, 1999, $25,000,000 operating tank
lease discussed above. The Partnership intends to renew both leases for the two
additional one-year periods, subject to lessor approval. Following the renewal
periods, the Partnership intends to refinance these leases, however, there can
be no assurance that the Partnership will be successful in obtaining this
refinancing or lessor approval for the renewals.
On February 28, 2000, Ferrellgas, L.P. issued $184 million of privately
placed unsecured senior notes. The proceeds of the $184 million senior notes,
which include three series with maturities ranging from year 2006 through 2009
and an average fixed interest rate of 8.8%, were used to retire $183,000,000 of
Ferrellgas, L.P. bridge loan financing assumed in connection with the Thermogas
acquisition.
On April 18, 2000, Ferrellgas, L.P. completed the syndication of both the
$25,000,000 and $135,000,000 operating tank lease to a group of banks and other
financial institutions.
On April 18, 2000, Ferrellgas, L.P. entered into an amended and restated
credit facility. This $157,000,000 credit facility, which expires on June 30,
2003, replaces the previous $145,000,000 credit facility.
Ferrellgas, L.P.'s credit facility consists of a $117,000,000 unsecured
working capital, general corporate and acquisition facility, including a letter
of credit facility, and a $40,000,000 revolving working capital facility. This
$40,000,000 facility is subject to an annual reduction in outstanding balances
to zero for thirty consecutive days. All borrowings under the credit facility
bear interest, at the borrower's option, at a rate equal to either London
Interbank Offered Rate plus an applicable margin varying from 1.25 percent to
2.25 percent or the bank's base rate plus an applicable margin varying from 0.25
percent to 1.25 percent. The bank's base rate at July 31, 2000 and 1999 was 9.5%
and 8.0%, respectively. To offset the variable rate characteristic of the credit
facility, Ferrellgas, L.P. entered into a interest rate collar agreement,
expiring January 2001, with a major bank limiting the floating rate portion of
London Interbank Offered Rate -based loan interest rates on a notional amount of
$25,000,000 to between 5.05% and 6.5%. During the year ended July 31, 2000, the
Partnership repaid $48,800,000 to its credit facility as it related to the
funding of working capital, business acquisitions and capital expenditure needs.
Effective April 27, 2000, Ferrellgas Partners entered into an interest rate
swap agreement with Bank of America, related to the semi-annual interest payment
due on the $160,000,000 fixed rate senior secured notes due 2006. The swap
agreement, which expires June 15, 2006, requires Bank of America to pay the
stated fixed interest rate (annual rate 9.375%) pursuant to the $160,000,000
senior secured notes, equaling $7,500,000 every six months due on each June 15
and December 15. In exchange, the Partnership is required to make quarterly
floating interest rate payments on the 15th of March, June, September and
December based on an annual interest rate equal to the 3 month London Interbank
Offered Rate interest rate plus 1.655% applied to the same notional amount of
$160,000,000.
Effective June 2, 2000, Ferrellgas, L.P. entered into an interest rate cap
agreement with Bank of America, related to variable quarterly rent payments due
pursuant to two operating tank lease agreements. The variable quarterly rent
payments are determined based upon a floating London Interbank Offered Rate
based interest rate. The cap agreement, which expires June 30, 2003, requires
Bank of America to pay Ferrellgas, L.P., at the end of each March, June,
20
September and December, the excess, if any, of the applicable 3 month floating
London Interbank Offered Rate interest rate over a cap of 9.3%, applied to the
unamortized amount outstanding each quarter under the two operating tank lease
agreements. The total obligation under these two operating tank lease agreements
as of July 31, 2000 was $159,200,000.
On September 26, 2000, Ferrellgas, L.P. received $20,000,000 in cash in
exchange for the sale and contribution of a $25,000,000 interest in a pool of
its trade accounts receivable to its recently created wholly-owned, special
purpose subsidiary, Ferrellgas Receivables. Ferrellgas Receivables then sold the
interest to a commercial paper conduit of Banc One, NA according to the terms of
a 364-day agreement. The level of funding available from this agreement is
limited to $60,000,000. In accordance with SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
this transaction will be reflected on the Partnership's financial statements as
a sale of accounts receivable and contribution of capital in the first quarter
of fiscal 2001. The proceeds of these sales are less than the face amount of
accounts receivable sold by an amount that approximates the purchaser's
financing cost of issuing its own commercial paper backed by these accounts
receivable. This loss on the September, 2000 transaction will be approximately
$300,000 in the first quarter of fiscal 2001 and represents the difference
between the fair market value and the book value of the receivables contributed
and sold.
At September 30, 2000, $60,000,000 of borrowings and $47,865,000 of letters
of credit were outstanding under the Ferrellgas, L.P. credit facility. These
borrowings currently carry interest rates ranging from 8.88% to 8.94%. At
September 30, 2000, Ferrellgas, L.P. had $89,135,000 available for general
corporate, acquisition and working capital purposes under the credit facility
and the accounts receivable facility. Based on the pricing grid contained in the
credit facility, the current borrowing rate for future borrowings under the
credit facility is London Interbank Offered Rate plus 2.25%. The Partnership
believes that during fiscal 2001 these facilities will be sufficient to meet its
working capital needs. However, if the Partnership were to experience an
unexpected significant increase in working capital requirements, it could cause
the Partnership to exceed its immediately available resources. Events that could
cause increases in working capital requirements include a significant increase
in the cost of propane compared to current levels, a significant delay in the
collections of accounts receivable or increased volatility in commodity prices
related to risk management activities. The Partnership would consider
alternatives to provide increased working capital. No assurances can be given,
however, that such alternatives can or will be implemented.
Although The Williams Companies has the right to convert any outstanding
senior common units into common units at a premium on February 1, 2002 or upon
the occurrence of a material event, the Partnership intends to redeem the senior
common units at par value prior to the date of conversion. No assurances can be
given that the Partnership will be successful in securing the financing to
redeem the senior common units.
On August 17, 2000, the Partnership declared an in-kind distribution of
$1.00 per senior common unit payable by the issuance of additional senior common
units and a cash distribution of $0.50 per common unit, that was paid on
September 14, 2000. See Notes C and F in the Consolidated Financial Statements
included elsewhere in this report for additional information regarding the
in-kind distributions to the senior common unitholders.
New Accounting Pronouncements. The Financial Accounting Standards Board
recently issued Statement of Financial Accounting Standards No. 133 "Accounting
for Derivative Instruments and Hedging Activities." SFAS No. 133, as amended by
SFAS No. 137 and No. 138 is required to be adopted by the Partnership for the
first quarter of fiscal 2001. SFAS No. 133 requires that all derivative
instruments be recorded in the balance sheet at fair value. The provisions of
SFAS No. 133 will impact the Partnership's accounting for certain options
hedging overall purchase price risk. Under the provisions of SFAS No. 133,
changes in the fair value of certain positions qualifying as cash flow hedges
will be recorded in accumulated other comprehensive income. Changes in the fair
value of certain other positions not qualifying as hedges under SFAS No. 133
21
will be recorded in the statement of earnings. As a result of these changes in
classification, the Partnership will recognize in its first quarter of fiscal
2001 gains totaling approximately $709,000 and $299,000 in accumulated other
comprehensive income and the statement of earnings, respectively. In addition,
beginning in the first quarter of fiscal 2001, the Partnership will record
subsequent changes in the fair value of positions qualifying as cash flow hedges
in accumulated other comprehensive income and changes in the fair value of other
positions in the statement of earnings.
In December 1999, the staff of the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 101 entitled "Revenue Recognition". The
bulletin, as amended, is to be adopted, if needed, no later than the fourth
fiscal quarter of fiscal years commencing after December 15, 1999, with
retroactive adjustment to the first fiscal quarter of that year. Management will
implement this bulletin in the first quarter of fiscal 2001 and believes that it
will have no material affect on the Partnership's financial position, results of
operations or cash flows.
ITEM 7A. 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 and operating leases by interest rate
collar and cap agreements. At July 31, 2000, the Partnership had $190,000,000 in
variable rate debt and $25,000,000 notional amount of interest rate collar
agreements outstanding, after considering the effect of the swap transaction.
The variable rate debt increased in fiscal 2000 by $160,000,000 due to the swap
transaction. At July 31, 2000, the Partnership had $159,200,000 outstanding in
variable rate operating leases and $159,200,000 notional amount of interest rate
collar agreements outstanding to mitigate the related variable rate exposure.
Both the operating leases and interest rate collar agreements were entered into
in fiscal 2000. Thus, assuming a 100 basis point increase in the variable
interest rate to the Partnership during fiscal 2001, the interest rate risk
related to the variable rate debt, the operating tank leases, the swap
transaction and the associated interest rate collar and cap agreements would be
an increase of $3,370,000.
The Partnership's risk management 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 to
anticipate market movements, manage and hedge its exposure to the volatility of
floating commodity prices and to protect its inventory positions. The
Partnership also utilizes certain over-the-counter energy commodity options to
limit overall price risk and to hedge its exposure to inventory price movements.
Market risks associated with energy commodities are monitored daily by
senior management for compliance with the Partnership's risk management 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, Credit and Liquidity Risk. New York Mercantile Exchange traded
futures are guaranteed by the New York Mercantile Exchange and have nominal
credit risk. The Partnership is exposed to credit risk associated with futures,
swaps and option transactions in the event of nonperformance by counterparties.
For each counterparty, the Partnership analyzes its 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. The Partnership attempts to
balance favorable and unfavorable positions with counterparties in order to
minimize the risk of collateral requirements for over-the-counter instruments.
22
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 $4,448,000 as of July 31, 2000. The preceding hypothetical analysis
is limited because changes in prices may or may not equal 10%, thus, actual
results may differ.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Partnership's Consolidated Financial Statements and the Independent
Auditors' Reports thereon and the Supplementary Financial Information listed on
the accompanying Index to Financial Statements and Financial Statement Schedules
are hereby incorporated by reference. See Item 7 for Selected Quarterly
Financial Data.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS.
Partnership Management
Ferrellgas, Inc. manages and operates the activities of the
Partnership and anticipates that its activities will be limited to that
management and operation. Unitholders do not directly or indirectly participate
in the management or operation of the Partnership.
Ferrellgas, Inc. has appointed persons who are neither officers nor
employees of Ferrellgas, Inc. or any affiliate of Ferrellgas, Inc. to serve on
its audit committee. At the request of Ferrellgas, Inc., the audit committee has
the authority to review specific matters which Ferrellgas, Inc. believes may be
a conflict of interest with the Partnership. The audit committee determines if
the resolution of that conflict as proposed by Ferrellgas, Inc. is fair and
reasonable to the Partnership. Ferrellgas, Inc. has sole discretion to determine
which matters, if any, to submit to the audit committee. In addition, the audit
committee has the authority and responsibility for selecting the Partnership's
independent public accountants, reviewing the Partnership's annual audit and
resolving accounting policy questions. Any matters approved by the audit
committee are conclusively deemed to be fair and reasonable to the Partnership,
approved by all unitholders of the Partnership and not a breach by Ferrellgas,
Inc. of any duties it may owe the Partnership or its Unitholders.
The Partnership does not directly employ any of the persons responsible for
managing or operating the Partnership. At September 30, 2000, 4,532 full-time
and 882 temporary and part-time individuals were employed by Ferrellgas, Inc.
Directors and Executive Officers of the General Partner
The following table sets forth certain information with respect to the
directors and executive officers of Ferrellgas, Inc. as of October 5, 2000. Each
23
of the persons named below is elected to their respective office or offices
annually. On October 5, 2000, Danley K. Sheldon resigned as the Chief Executive
Officer, President and Director of Ferrellgas, Inc. and affiliates.
Director
Name Age Since Position
James E. Ferrell 61 1984 Chairman of the Board, Chief Executive
Officer, President and a Director of
Ferrellgas, Inc.
Patrick J. Chesterman 50 Executive Vice President and Chief
Operating Officer
James M. Hake 40 Senior Vice President, Corporate
Development
Kevin T. Kelly 35 Senior Vice President , Chief
Financial Officer and Treasurer
Boyd H. McGathey 41 Senior Vice President, Corporate
Administration and Chief Information
Officer
A. Andrew Levison 44 1994 Director of Ferrellgas, Inc.
Elizabeth T. Solberg 61 1998 Director of Ferrellgas, Inc.
Michael F. Morrissey 58 1999 Director of Ferrellgas, Inc.
James E. Ferrell--Mr. Ferrell has been with Ferrell Companies or its
predecessors and its affiliates in various executive capacities since 1965,
including Chairman of the Board of Ferrellgas, Inc. He was named Chief Executive
Officer and President of Ferrellgas, Inc. on October 5, 2000. He previously
served as Ferrellgas, Inc.'s Chief Executive Officer until August 1998 and as
President until October 1996.
Patrick J. Chesterman--Mr. Chesterman was named Executive Vice
President and Chief Operating Officer of Ferrellgas, Inc. in June 2000. He had
been Executive Vice President and Chief Operating Officer, Ferrell North America
since April 1998 after having served as Senior Vice President, Supply since
September 1997. After joining Ferrellgas, Inc. in June, 1994, he had one-year
assignments as Vice President-Retail Operations, Director of Field Support, and
Director of Human Resources. Prior to joining Ferrellgas, Inc., Mr. Chesterman
was Director of Fuels Policy and Operations for the U.S. Air Force.
James M. Hake--Mr. Hake was named Senior Vice President, Corporate
Development in June, 2000. He had been Senior Vice President or Vice President,
Acquisitions of Ferrellgas, Inc. since October, 1994. He joined Ferrellgas, Inc.
in 1986.
Kevin T. Kelly--Mr. Kelly was named Senior Vice President in October
2000, Chief Financial Officer in May 1998 and Treasurer in August 1998. After
joining Ferrellgas, Inc. in June 1996, he served as Director of Finance and
Corporate Controller until May 1998. Prior to joining Ferrellgas, Inc., Mr.
Kelly was Manager of Project Acquisitions with UtiliCorp United, Inc.
Boyd H. McGathey--Mr. McGathey was named Senior Vice President, Corporate
Administration and Chief Information Officer in June 2000, after having served
as Vice President, Chief Operating Officer-Eastern U.S. since August 1998. He
served as Regional Vice President since February 1997. After joining Ferrellgas,
Inc. in 1989, he held District Manager and Area Manager positions.
24
A. Andrew Levison--Mr. Levison was elected a Director of Ferrellgas, Inc.
in September 1994. He is also a member of the Audit Committee. Mr. Levison
retired in 2000 after having been a Managing Director of Donaldson, Lufkin &
Jenrette Securities Corporation since 1989.
Elizabeth T. Solberg--Ms. Solberg was elected a Director of Ferrellgas,
Inc. in July 1998. She is also a member of the Audit Committee. Ms. Solberg is
Regional President and Senior Partner of Fleishman-Hillard, Inc. and has been
with the firm since 1976. She has been a member of the Board of Directors of
Kansas City Life Insurance Company since 1997.
Michael F. Morrissey--Mr. Morrissey was elected a Director of Ferrellgas,
Inc. in November 1999. He is also Chairman of the Audit Committee. Mr. Morrissey
retired as the Managing Partner of Ernst & Young's Kansas City office in the
fall of 1999. He had been with that firm, or its predecessor, since 1975.
Compensation of the General Partner
Ferrellgas, Inc. receives no management fee or similar compensation in
connection with its management of the Partnership and receives no remuneration
other than:
o distributions on its combined 2% general partner interest in the Partnership,
and,
o reimbursement for all direct and indirect costs and expenses incurred on
behalf of the Partnership, all selling, general and administrative expenses
incurred by Ferrellgas, Inc. for or on behalf of the Partnership and all
other expenses necessary or appropriate to the conduct of the business of,
and allocable to, the Partnership. The selling, general and administrative
expenses reimbursed include specific employee benefits and incentive plans
for the benefit of the executive officers and employees of Ferrellgas, Inc.
Compliance With Section 16(a) of the Securities and Exchange Act
Section 16(a) of the Securities and Exchange Act of 1934 requires
Ferrellgas, Inc.'s officers and directors, and persons who own more than 10% of
a registered class of the Partnership's equity securities, to file reports of
beneficial ownership and changes in beneficial ownership with the Commission.
Officers, directors and greater than 10% unitholders are required by the
Commission's regulation to furnish Ferrellgas, Inc. with copies of all Section
16(a) forms.
Based solely on its review of the copies of such forms received by
Ferrellgas, Inc., or written representations from certain reporting persons that
no Annual Statement of Beneficial Ownership of Securities on Form 5 were
required for those persons, Ferrellgas, Inc. believes that during fiscal year
2000 all filing requirements applicable to its officers, directors, and greater
than 10% beneficial owners were met in a timely manner.
ITEM 11. Executive Compensation.
Summary Compensation Table
The following table sets forth the compensation for the past three years of
Ferrellgas, Inc.'s Chief Executive Officer and the four most highly compensated
executive officers other than the Chief Executive Officer, who were serving as
executive officers at the end of the 2000 fiscal year.
25
Long-Term Compensation
-------------------------------
Annual Compensation Awards Pay-outs
------------------------- --------------- ---------------
Long-Term
Stock Incentive All Other
Name and Salary Bonus (1) Options(2) Payouts Compensation
Principal Position Year ($) ($) (#) ($) ($)
------ ------------ ------------ --------------- --------------- -----------------
Danley K. Sheldon (3) 2000 381,261 --- --- --- 13,880 (4)
President and Chief 1999 344,802 123,420 937,500 --- 12,883
Executive Officer 1998 225,000 50,000 --- --- 20,104
Patrick J. Chesterman 2000 212,646 202,125 50,000 --- 13,701 (4)
Executive Vice President, 1999 198,338 110,000 200,000 --- 31,197
And Chief Operating Officer 1998 161,500 25,000 --- --- 15,530
James M. Hake 2000 182,226 75,000 25,000 --- 9,594 (4)
Senior Vice President, 1999 181,667 55,830 200,000 --- 8,140
Corporate Development 1998 120,000 85,000 --- --- 15,887
Kevin T. Kelly 2000 160,319 75,000 75,000 --- 8,184 (4)
Senior Vice President, 1999 142,808 25,000 150,000 --- 5,001
Chief Financial Officer 1998 99,014 50,000 --- --- 9,376
Boyd H. McGathey 2000 153,659 75,000 25,000 --- 7,053 (4)
Senior Vice President, Corp 1999 140,003 24,348 200,000 --- 37,038
Administration and
Chief Information Officer
(1) Mr. Sheldon received a bonus in fiscal 1998 and 1999 pursuant to his
employment agreement. All other named executives participate in the Ferrellgas
Annual Incentive Plan. Awards under both plans are for the year reported,
regardless of the year paid.
(2) The awards are to grants of stock options from the Incentive Compensation
Plan, a non-qualified stock option plan of Ferrell Companies.
(3) On October 5, 2000, Danley K. Sheldon resigned as the Chief Executive
Officer, President and Director of Ferrellgas, Inc. and affiliates.
(4) Includes for Mr. Sheldon contributions of $12,674 to the employee's 401(k)
and profit sharing plans and compensation of $1,206 resulting from the
payment of life insurance premiums. Includes for Mr. Chesterman
contributions of $13,033 to the employee's 401(k) and profit sharing plans
and compensation of $668 resulting from the payment of life insurance
premiums. Includes for Mr. Hake contributions of $9,077 to the employee's
401(k) and profit sharing plans and compensation of $517 resulting from the
payment of life insurance premiums. Includes for Mr. Kelly contributions of
$8,184 to the employee's 401(k) and profit sharing plans. Includes for Mr.
McGathey contributions of $6,513 to the employee's 401(k) and profit
sharing plans and compensation of $540 resulting from the payment of life
insurance premiums.
Unit Options
On October 14, 1994, Ferrellgas, Inc. adopted the Ferrellgas, Inc. Unit
Option Plan pursuant to which key employees are granted options to purchase
Ferrellgas Partner's subordinated units. The purpose of the Unit Option Plan is
to encourage certain employees of Ferrellgas, Inc. to develop a proprietary
interest in the growth and performance of the Partnership, to generate an
increased incentive to contribute to the Partnership's future success and
prosperity, thus enhancing the value of the Partnership for the benefit of its
Unitholders, and to enhance the ability of Ferrellgas, Inc. to attract and
retain key individuals who are essential to progress, growth and profitability
of the Partnership.
Ferrellgas, Inc. has granted options to purchase units, 720,525 of which
26
are outstanding at July 31, 2000, at prices ranging from $16.80 to $21.67 per
unit, which was an estimate of the fair market value of the units at the time of
the grant. The options vest immediately or over a one to five year period, and
expire on the tenth anniversary of the date of the grant. As of July 31, 2000,
720,525 options were outstanding. On July 31, 2000, 546,875 of the unit options
were exercisable. Effective August 1, 1999, with the conversion of the
subordinated units, the units covered by the options are common units.
There were no grants of unit options during the 2000 fiscal year.
The following table lists information on the CEO and named executive
officers' exercised/unexercised unit options as of October 16, 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
Number of
Securities Underlying Value of Unexercised
Unexercised Options In-The-Money Options at
At Fiscal Year-End (#) Fiscal Year-End ($)
------------------------- ---------------------------
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ------------------------------ -------------- -------------- ---------------------- --- -----------------------
Danley K. Sheldon (1) 0 0 88,000/12,000 0/0
Patrick J. Chesterman 0 0 19,200/10,800 0/0
James M. Hake 0 0 45,000/6,000 0/0
Kevin T. Kelly 0 0 6,000/4,000 0/0
Boyd H. McGathey 0 0 7,500/0 0/0
(1) On October 5, 2000, Danley K. Sheldon resigned as the Chief Executive Officer, President and Director of
Ferrellgas, Inc. and affiliates.
Employee Stock Ownership Plan
On July 17, 1998, pursuant to the Ferrell Companies, Inc. Employee
Stock Ownership Plan, an employee stock ownership trust purchased all of the
outstanding common stock of Ferrell. The purpose of the Employee Stock Ownership
Plan is to provide employees of Ferrellgas, Inc. an opportunity for ownership in
Ferrell Companies and indirectly in the Partnership. Ferrell Companies makes
contributions to the Employee Stock Ownership Plan which allows a portion of the
shares of Ferrell Companies owned by the Employee Stock Ownership Plan to be
allocated to employees' accounts over time.
Incentive Compensation Plan
On July 17, 1998, a nonqualified stock option plan was established by
Ferrell Companies to allow upper-middle and senior level managers of Ferrellgas,
Inc. to participate in the equity growth of Ferrell Companies, and indirectly in
the equity growth of the Partnership. The shares underlying the stock options
are common shares of Ferrell Companies. The following table lists information on
the named executive officers' stock options granted in the fiscal year ended
July 31, 2000.
27
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grant
---------------------------------------------------------------------------------------
Number of
Securities % of Total Options
Underlying Granted to Exercise
Options Employees in Price Expiration Grant date
Name Granted Fiscal Year ($/Share) Date Present value $
- -------------------------- ------------- -------------------- ----------- ------------ -----------------------
Patrick J. Chesterman 50,000 8.5 4.12 01-31-18 90,284
James M. Hake 25,000 4.3 4.12 01-31-18 45,142
Kevin T. Kelly 75,000 4.3 4.12-4.75 01-31-18 138,811
Boyd H. McGathey 25,000 12.8 4.12-4.75 01-31-18 47,678
The Ferrell Companies stock options vest ratably in 5% to 10% increments
over 12 years or 100% upon a change of control, death, disability or retirement
of the participant. Vested options are exercisable in increments based on the
timing of the payoff of Ferrell Companies debt, but in no event later than 20
years from the date of issuance.
The grant date present value is based on a binomial option valuation model.
The key input variables used in valuing the options were the following:
risk-free interest rate of 6.4%; dividend amount of $0; Ferrell Companies stock
price volatility of 10.1%; options exercised 25% in 2006, 25% in 2007 and 10% in
years 2009 through 2013, because this is most likely assuming the Ferrell
Companies debt is retired as scheduled. Only two stock values were used in the
computation of volatility as Ferrell Companies common stock is not publicly
traded and has only had two valuations since the grant date. No adjustments for
non-transferability or risk of forfeiture were made. The actual value, if any, a
grantee may realize will depend on the excess of the Ferrell Companies stock
price over the exercise price on the date the option is exercised, so that there
is no assurance the value realized will be at or near the value estimated by the
binomial option valuation model.
The following table lists information on the CEO and named executive
officers' exercised/unexercised nonqualified stock options as of October 16,
2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
Number of
Securities Underlying Value of Unexercised
Unexercised Options In-The-Money Options at
At Fiscal Year-End (#) Fiscal Year-End ($)
------------------------- ---------------------------
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ------------------------------ -------------- -------------- ---------------------- --- -----------------------
Danley K. Sheldon (1) 0 0 0/937,500 0/18,750
Patrick J. Chesterman 0 0 0/250,000 0/4,000
James M. Hake 0 0 0/225,000 0/4,000
Kevin T. Kelly 0 0 0/225,000 0/3,000
Boyd H. McGathey 0 0 0/225,000 0/4,000
(1) On October 5, 2000, Danley K. Sheldon resigned as the Chief Executive Officer, President and Director of
Ferrellgas, Inc. and affiliates.
28
Profit Sharing Plan
The Ferrell Companies, Inc. Profit Sharing and 401(k) Investment Plan is a
qualified defined contribution plan. All full-time employees of Ferrell
Companies or any of its direct or indirect wholly-owned subsidiaries with at
least one year of service are eligible to participate in the profit sharing
plan. The Board of Directors of Ferrell Companies determines the amount of the
annual contribution to the profit sharing plan, which is purely discretionary.
This decision is based on the operating results of Ferrell Companies for the
previous fiscal year and anticipated future cash needs of Ferrellgas, Inc. and
Ferrell Companies. The contributions are allocated to the profit sharing plan
participants based on each participant's wages or salary as compared to the
total of all participants' wages and salaries.
Historically, the annual contribution to the profit sharing plan has been
1% to 7% of each participant's annual wage or salary. With the establishment of
the employee stock ownership plan in July 1998, the Partnership suspended future
contributions to the profit sharing plan beginning with fiscal year 1998. The
profit sharing plan also has a 401(k) feature allowing all full-time employees
to specify a portion of their pre-tax and/or after-tax compensation to be
contributed to the profit sharing plan. The profit sharing plan also provides
for matching contributions under a cash or deferred arrangement based upon
participant salaries and employee contributions to the plan.
Supplemental Savings Plan
The Ferrell Supplemental Savings Plan was established October 1, 1994 in
order to provide certain management or highly compensated employees with
supplemental retirement income which is approximately equal in amount to the
retirement income that would have been provided to members of the select group
of employees under the terms of the 401(k) feature of the profit sharing plan
based on such members' deferral elections thereunder, but which could not be
provided under the 401(k) feature of the profit sharing plan due to the
application of certain IRS rules and regulations.
Employment Agreements
On July 17, 1998, Mr. James E. Ferrell, as Chairman of the Board of
Ferrellgas, Inc., entered into a five year employment agreement with automatic
one year renewals. He receives a monthly salary of not less than $10,000 and a
bonus based on the annual increase in the equity value of Ferrell. In addition
to his compensation, Mr. Ferrell participates in the Partnership's various
employee benefit plans, with the exception of the employee stock ownership plan
and the nonqualified stock option plan of Ferrell.
Pursuant to the terms of Mr. Ferrell's employment agreement, in the event
of a termination without cause, resignation for cause or a change of control of
Ferrell Companies or Ferrellgas, Inc., Mr. Ferrell is entitled to a cash amount
equal to three times the greater of 125% of his current base salary or the
average compensation paid for the prior three fiscal years.
Mr. Ferrell's agreement contains a non-compete provision for the period of
time equal to the greater of five years or the time in which certain outstanding
debt of Ferrell Companies is paid in full. The non-compete provision provides
that he shall not directly or indirectly own, manage, control, or engage in any
business with any person whose business is substantially similar to the business
of the Partnership.
During the first quarter of fiscal 2001, Patrick J. Chesterman, James M. Hake,
Boyd H. McGathey and Kevin T. Kelly each entered into three year employment
agreements. In addition to receiving an annual salary, each are entitled to a
bonus based on the earnings of the Partnership and individual performance.
Pursuant to the terms of each employment agreement, in the event of a
termination without cause or resignation for cause, each are entitled to a cash
amount equal to two times their current base salary. If a change of control of
Ferrell Companies or Ferrellgas, Inc. occurs, each will receive a cash
termination benefit equal to two and a half times the greater of 125% of his
current base salary or the average three year compensation paid. Messrs.
Chesterman, Hake, McGathey and Kelly will receive an annual salary of not less
than $285,000, $192,000, $180,000 and $180,000, respectively.
29
Messrs. Chesterman, Hake, McGathey and Kelly's agreements contain
non-compete provisions for a period of two years following their termination of
employment. The non-compete provisions provide that they shall not directly or
indirectly own, manage, control, or engage in any business with any person whose
business is substantially similar to the business of the Partnership.
On October 5, 2000, Danley K. Sheldon resigned as the Chief Executive Officer,
President and Director of Ferrellgas, Inc. and affiliates. In accordance with
his employment agreement, Mr. Sheldon will receive 60 days pay after the date of
his resignation.
Compensation of Directors
Ferrellgas, Inc. does not pay any additional remuneration to its employees
for serving as directors, except for the monthly salary of not less than $10,000
paid to Mr. Ferrell pursuant to his employment agreement as discussed above in
"Employment Agreements". Beginning in fiscal 1999, directors who are not
employees of Ferrellgas, Inc. receive an annual retainer of $16,000. They also
currently receive a fee per meeting of $1,000 if they attend in person and $500
if they participate by telephone, plus reimbursement for out-of-pocket expenses.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information as of October 5, 2000,
regarding the beneficial ownership of the common units of Ferrellgas Partners by
beneficial owners that are directors and named executive officers of Ferrellgas,
Inc., and all directors and executive officers of Ferrellgas, Inc. as a group.
All subordinated units converted to common units effective August 1, 1999.
Ferrellgas, Inc. knows of no other person beneficially owning more than 5% of
the common units. The senior common units currently are not voting securities of
the Partnership and therefore are not presented in the table below.
Ferrellgas Partners, L.P.
Units
Name and Address of Beneficial Beneficially Percentage of
Title of Class Owner Owned Class
- ------------------------ --------------------------------------------------- ----------------
Common Units Employee Stock Ownership
Trust 17,817,600 56.9
James E. Ferrell 10,000 *
Patrick J. Chesterman 19,400 *
James M. Hake 45,400 *
Kevin T. Kelly 6,265 *
Boyd H. McGathey 7,700 *
Elizabeth T. Solberg 8,200 *
A. Andrew Levison 35,300 *
Michael F. Morrissey 775 *
All Directors and Officers as a
Group 133,040 *
* Less than one percent
30
Beneficial ownership for the purposes of the foregoing table is defined by
Rule 13d-3 under the Securities Exchange Act of 1934. Under that rule, a person
is generally considered to be the beneficial owner of a security if he has or
shares the power to vote or direct the voting thereof or to dispose or direct
the disposition thereof or has the right to acquire either of those powers
within 60 days. See the Aggregated Option Exercises In Last Fiscal Year And
Fiscal Year-End Option Values table above for the number of common units that
could be acquired by named executive officers through exercising common unit
options.
The address for LaSalle National Bank, the trustee for the Ferrell
Companies, Inc. Employee Stock Ownership Trust is 125 S. LaSalle Street, 17th
Floor, Chicago, Illinois, 60603. The common units owned by the Employee Stock
Ownership Trust includes 17,803,883 Common Units owned by Ferrell Companies
which is 100% owned by the Employee Stock Ownership Trust and 13,717 common
units owned by Ferrell Propane, Inc., a wholly-owned subsidiary of Ferrellgas,
Inc.
ITEM 13. Certain Relationships and Related Transactions.
Set forth below is a discussion of certain relationships and related
transactions among affiliates of the Partnership.
The Partnership has no employees and is managed and controlled by
Ferrellgas, Inc. Pursuant to the partnership agreement, Ferrellgas, Inc. is
entitled to reimbursement for all direct and indirect expenses incurred or
payments made on behalf of the Partnership, and all other necessary or
appropriate expenses allocable to the Partnership or otherwise reasonably
incurred by Ferrellgas, Inc. in connection with operating the Partnership's
business. These costs, which totaled $179,033,000 for the year ended July 31,
2000, include compensation and benefits paid to officers and employees of
Ferrellgas, Inc. and general and administrative costs. In addition, the
conveyance of the net assets of Ferrellgas, Inc. to the Partnership upon the
formation of the Partnership included the assumption of specific liabilities
related to employee benefit and incentive plans for the benefit of the officers
and employees of Ferrellgas, Inc.
During fiscal 2000 two affiliates of the Partnership, Ferrell
International Limited. and Ferrell Resources, LLC, which are owned by the
chairman of the board, James E. Ferrell, paid the Partnership a total of
$313,000 for accounting and administration services. In connection with its risk
management activities, the Partnership entered into, with Ferrell International
Limited as a counterparty, certain forward, futures and swaps contracts for
trading purposes and certain option contracts for purposes other than trading.
During fiscal 2000, the Partnership recognized net purchases of $8,508,000,
recorded in other revenue related to these transactions. Amounts due from
Ferrell International Limited at July 31, 2000 were $1,826,000. Amounts due to
Ferrell International Limited at July 31, 2000 were $1,484,000. The Partnership
also leased propane tanks from Ferrell Propane, Inc., a subsidiary of
Ferrellgas, Inc. The Partnership recognized $515,000 of lease expense during
fiscal year 2000. The Partnership believes these transactions were under terms
that were no less favorable to the Partnership than those arranged with third
parties.
During fiscal 2000, The Williams Companies became a related party to the
Partnership due to the Partnership's issuance of senior common units. See
further discussion of senior common units and the Thermogas acquisition in Notes
F and L of the Consolidated Financial Statements provided herein. The
Partnership recognized wholesale sales of $2,091,000 to The Williams Companies
and purchases of $13,175,000 from The Williams Companies and its affiliates
related to the Partnership's wholesale and risk management activity. In
connection with its risk management activities, the Partnership entered into,
with The Williams Companies as a counterparty, certain forward, futures and
swaps contracts for trading purposes and certain option contracts for purposes
other than trading. During fiscal 2000, the Partnership recognized net sales
(purchases) related to these transactions of $9,530,000, which are classified in
other revenue on the statement of earnings. The Partnership believes these
transactions were under terms that were no less favorable to the Partnership
than those arranged with third parties.
31
The Williams Companies provided propane supply and general and
administrative services to the Partnership to assist in the integration of the
acquisition. The Partnership recognized $67,547,000, $4,062,000 and $176,000 to
The Williams Companies in fiscal 2000 and classified these costs in cost of
goods sold, general and administrative expenses and operating expenses,
respectively. The Partnership believes these transactions were under terms that
were no less favorable to the Partnership than those available with other
parties. Amounts due to The Williams Companies at July 31, 2000 was $5,045,000.
Amounts due from The Williams Companies at July 31, 2000 was $13,000.
See Note L to the Consolidated Financial Statements in Item 14 for
discussion of transactions involving acquisitions related to Ferrellgas, Inc.
and the Partnership.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a) 1. Financial Statements.
See "Index to Financial Statements" set forth on page F-1.
2. Financial Statement Schedules.
See "Index to Financial Statement Schedules" set forth on page
S-1.
3. Exhibits.
See "Index to Exhibits" set forth on page E-1.
(b) Reports on Form 8-K.
The Partnership did not file a Form 8-K during the quarter ended July 31, 2000.
32
INDEX TO EXHIBITS
The exhibits listed on the accompanying Exhibit Index are filed as part of
this report. Exhibits required by Item 601 of Regulation S-K, which are not
listed, are not applicable.
Exhibit
Number Description
2.1 Purchase Agreement by and among Ferrellgas Partners, L.P., and
Williams Natural Gas Liquids, Inc., November 7, 1999. Incorporated by
reference to the same numbered Exhibit to the Registrant's Current
Report on Form 8-K filed November 12, 1999.
2.2 Amendment No. 1 to Purchase Agreement by and among Ferrellgas
Partners, L.P., Ferrellgas L.P., and Williams Natural Gas Liquids,
Inc., dated as of December 17, 1999. Incorporated by reference to the
same numbered Exhibit to the Registrant's Current Report on Form 8-K
filed December 29, 1999.
2.3 Amendment No. 2 to Purchase Agreement as of March 14, 2000, by and
among Ferrellgas Partners, L.P., Ferrellgas L.P., and Williams Natural
Gas Liquids, Inc. Incorporated by reference to Exhibit 2.1 to
Registrant's Quarterly Report on Form 10-Q filed March 16, 2000.
3.1 Second Amended and Restated Agreement of Limited Partnership of
Ferrellgas Partners, L.P., dated as of June 5, 2000. Incorporated by
reference to the same numbered Exhibit to Registrant's Quarterly
Report on Form 10-Q filed June 15, 2000.
3.2 Articles of Incorporation for Ferrellgas Partners Finance Corp.
Incorporated by reference to the same numbered Exhibit to Registrant's
Quarterly Report on Form 10-Q filed June 13, 1997.
3.3 Bylaws of Ferrellgas Partners Finance Corp. Incorporated by reference
to the same numbered Exhibit to Registrant's Quarterly Report on Form
10-Q filed June 13, 1997.
4.1 Indenture dated as of April 30, 1996, among Ferrellgas Partners, L.P.,
Ferrellgas Partners Finance Corp., Ferrellgas, L.P. as guarantor, and
American Bank National Association, as Trustee, relating to
$160,000,000 9 3/8% Senior Secured Notes due 2006. Incorporated by
reference to Exhibit 4.1 to Registrant's Current Report on Form 8-K
filed on May 6, 1996.
E-1
4.2 Ferrellgas, L.P., Note Purchase Agreement dated as of July 1, 1998 Re:
$109,000,000 6.99% Senior Notes, Series A, due August 1, 2005,
$37,000,000 7.08% Senior Notes, Series B, due August 1, 2006,
$52,000,000 7.12% Senior Notes, Series C, due August 1, 2008,
$82,000,000 7.24% Senior Notes, Series D, due August 1, 2010,
$70,000,000 7.42% Senior Notes, Series E, due August 1, 2013.
Incorporated by reference to the Exhibit 4.4 to Registrant's Annual
Report on Form 10-K filed October 29, 1998
4.3 Registration Rights Agreement dated as of December 17, 1999 by and
between Ferrellgas Partners, L.P. and Williams Natural Gas Liquids,
Inc. Incorporated by reference to Exhibit 4.2 to Registrant's Current
Report on Form 8-K filed December 29, 2000.
4.4 First Amendment to the Registration Rights Agreement dated as of March
14, 2000, by and between Ferrellgas Partners, L.P. and Williams
Natural Gas Liquids, Inc. Incorporated by reference to Exhibit 4.1 to
Registrant's Quarterly Report on Form 10-Q filed March 16, 2000.
4.5 Ferrellgas, L.P., Note Purchase Agreement dated as of February 28,
2000 Re: $21,000,000 8.68% Senior Notes, Series A, due August 1, 2006,
$70,000,000 8.78% Senior Notes, Series B, due August 1, 2007, and
$93,000,000 8.87% Senior Notes, Series C, due August 1, 2009.
Incorporated by reference to Exhibit 4.2 to Registrant's Quarterly
Report on Form 10-Q filed March 16, 2000.
# 10.1 Ferrell Companies, Inc. Supplemental Savings Plan. Incorporated
by reference to the Exhibit 10.7 to Registrant's Annual Report on Form
10-K filed October 17, 1995.
# 10.2 Amended and Restated Ferrellgas, Inc. Unit Option Plan.
Incorporated by reference to the Exhibit 10.1 to Registrant's
Registration Statement on Form S-8 File No. 333-87633 filed with the
Commission on September 23, 1999.
10.3 Second Amended and Restated Agreement of Limited Partnership of
Ferrellgas, L.P. dated as of October 14, 1998. Incorporated by
reference to Exhibit 10.1 to Registrant's Quarterly Report on Form
10-Q filed March 17, 1999.
10.4 Pledge and Security Agreement dated as of April 26, 1996, among
Ferrellgas Partners, L.P., Ferrellgas, Inc., and American Bank
National Association, as collateral agent. Incorporated by reference
to Exhibit 10.2 to Registrant's Current Report on Form 8-K filed May
6, 1996.
# 10.5 Ferrell Companies, Inc. 1998 Incentive Compensation Plan -
Incorporated by reference to the Exhibit 10.12 to Registrant's Annual
Report on Form 10-K filed October 29, 1998.
# 10.6 Employment agreement between James E. Ferrell and Ferrellgas,
Inc. dated July 31, 1998. Incorporated by reference to the Exhibit
10.13 to Registrant's Annual Report on Form 10-K filed October 29,
1998.
E-2
10.7 Lease Intended as Security dated as of December 1, 1999, between
Ferrellgas, L.P., as Lessee and First Security Bank, National
Association, solely as Certificate Trustee, as Lessor. Incorporated by
reference to Exhibit 10.1 to Registrant's Quarterly Report on Form
10-Q filed December 13, 1999.
10.8 Lease Intended as Security dated as of December 15, 1999, between
Thermogas L.L.C. as Lessee and First Security Bank, National
Association, solely as Certificate Trustee, as Lessor. Incorporated by
reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K
filed December 29, 2000.
10.9 Participation Agreement dated as of December 1, 1999, among
Ferrellgas, L.P., as Lessee, Ferrellgas, Inc. as General Partner,
First Security Bank, National Association, solely as Certificate
Trustee, First Security Trust Company of Nevada, solely as Agent, and
the persons named on Schedule I-B, as Lenders and Appendix I to
Participation Agreement. Incorporated by reference to Exhibit 10.2 to
Registrant's Quarterly Report on Form 10-Q filed December 13, 1999.
10.10 Participation Agreement dated as of December 15, 1999, among Thermogas
L.L.C., as Lessee, The Williams Companies, Inc., First Security Bank,
National Association, solely as Certificate Trustee, First Security
Trust Company of Nevada, solely as Agent, and the purchasers named
therein. Incorporated by reference to Exhibit 10.2 to Registrant's
Current Report on Form 8-K filed December 29, 2000
10.11 Omnibus Amendment Agreement No.2, Dated as of April 18, 2000, In
respect of Ferrellgas, L.P. Trust No. 1999-A Participation Agreement
Lease Intended as Security Loan Agreement each dated as of December 1,
1999. Incorporated by reference to Exhibit 10.3 to Registrant's
Quarterly Report on Form 10-Q filed June 14, 2000.
10.12 Omnibus Amendment Agreement No.2, Dated as of April 18, 2000, In
respect of Ferrellgas, L.P. Trust No. 1999-A Participation Agreement
Lease Intended as Security Loan Agreement each dated as of December
15, 1999. Incorporated by reference to Exhibit 10.4 to Registrant's
Quarterly Report on Form 10-Q filed June 14, 2000.
10.13 Assumption Agreement dated as of December 17, 1999 executed by
Ferrellgas, L.P. and Ferrellgas, Inc., for the benefit of the First
Security Trust Company of Nevada as agent, First Security Bank,
National Association solely as Certificate Trustee and the purchasers
and lenders named therein. Incorporated by reference to Exhibit 10.3
to Registrant's Current Report on Form 8-K filed December 29, 2000.
10.14 First Amendment to the Second Amended and Restated Agreement of
Limited Partnership of Ferrellgas, L.P. Incorporated by reference to
Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q filed June
14, 2000.
10.15 Third Amended and Restated Credit Agreement dated as of April 18,
2000, among Ferrellgas, L.P., Ferrellgas, Inc., Bank of America
National Trust and Savings Association, as agent, and the other
financial institutions party thereto. Incorporated by reference to
Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q filed June
14, 2000
E-3
* 10.17 Receivable Interest Sale Agreement dated as of September 26, 2000
between Ferrellgas, L.P., as Originator, and Ferrellgas Receivables,
L.L.C., as buyer.
* 10.18 Receivables Purchase Agreement dated as of September 26, 2000 among
Ferrellgas Receivables, L.L.C., as seller, Ferrellgas, L.P., as
Servicer, Jupiter Secruritization Corporation, the financial
institutions from time to time party hereto, and Bank One, N.A., main
office Chicago, as agent.
*# 10.19 Employment agreement between Patrick Chesterman and Ferrellgas,
Inc. dated July 31, 2000.
*# 10.20 Employment agreement between James Hake and Ferrellgas, Inc.
dated July 31, 2000.
*# 10.21 Employment agreement between Boyd McGathey and Ferrellgas, Inc.
dated July 31, 2000.
*# 10.22 Employment agreement between Kevin Kelly and Ferrellgas, Inc.
dated July 31, 2000.
*21.1 List of subsidiaries.
*23.1 Consent of Deloitte & Touche, LLP, Independent Auditors.
- ---------------------------------------------------------------------------
# Management contracts or compensatory plans.
* Included herewith.
E-4
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FERRELLGAS PARTNERS, L.P.
By Ferrellgas, Inc. (General Partner)
By /s/ James E. Ferrell
------------------------
James E. Ferrell
Chariman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates indicated:
Signature Title Date
/s/ James E. Ferrell
- -----------------------
James E. Ferrell Chairman, President and 10/23/00
Chief Executive Officer
(Principal Executive Officer)
/s/ A. Andrew Levison
- ------------------------
A. Andrew Levison Director 10/23/00
/s/ Elizabeth T. Solberg Director 10/23/00
- ------------------------
Elizabeth T. Solberg
/s/ Michael F. Morrissey Director 10/23/00
- -----------------------
Michael F. Morrissey
/s/ Kevin T. Kelly Senior Vice President and Chief 10/23/00
- ------------------------ Financial Officer (Principal
Kevin T. Kelly Financial and Accounting Officer)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FERRELLGAS PARTNERS FINANCE CORP.
By /s/ James E. Ferrell
--------------------
James E. Ferrell
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates indicated:
Signature Title Date
/s/ James E. Ferrell Chief Executive Officer and 10/23/00
--------------------- Sole Director (Principal
James E. Ferrell Executive Officer)
/s/ Kevin T. Kelly Chief Financial Officer 10/23/00
- ---------------------- (Principal Financial and
Kevin T. Kelly Accounting Officer)
INDEX TO FINANCIAL STATEMENTS
Page
Ferrellgas Partners, L.P. and Subsidiaries
Independent Auditors' Report..........................................................................F-2
Consolidated Balance Sheets - July 31, 2000 and 1999..................................................F-3
Consolidated Statements of Earnings - Year ended July 31, 2000, 1999 and 1998.........................F-4
Consolidated Statements of Partners' Capital and Other Comprehensive Income
- Year ended July 31, 2000, 1999 and 1998........................................................F-5
Consolidated Statements of Cash Flows - Year ended July 31, 2000, 1999 and 1998.......................F-6
Notes to Consolidated Financial Statements............................................................F-7
Ferrellgas Partners Finance Corp.
Independent Auditors' Report.........................................................................F-23
Balance Sheets - July 31, 2000 and 1999..............................................................F-24
Statements of Earnings - Year ended July 31, 2000, 1999 and 1998.....................................F-25
Statements of Stockholder's Equity - Year ended July 31, 2000, 1999 and 1998.........................F-26
Statements of Cash Flows - Year ended July 31, 2000, 1999 and 1998...................................F-27
Notes to Financial Statements........................................................................F-28
F-1
INDEPENDENT AUDITORS' REPORT
To the Partners of
Ferrellgas Partners, L.P. and Subsidiaries
Liberty, Missouri
We have audited the accompanying consolidated balance sheets of Ferrellgas
Partners, L.P. and subsidiaries ("the Partnership") as of July 31, 2000 and
1999, and the related consolidated statements of earnings, partners' capital and
other comprehensive income and cash flows for each of the three years in the
period ended July 31, 2000. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Ferrellgas Partners, L.P. and
subsidiaries as of July 31, 2000 and 1999, and the results of their operations
and their cash flows for each of the three years in the period ended July 31,
2000, in conformity with accounting principles generally accepted in the United
States of America.
/s/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
Kansas City, Missouri
September 14, 2000
F-2
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
July 31, July 31,
ASSETS 2000 1999
- --------------------------------------------------------- ------------- --------------
Current Assets:
Cash and cash equivalents $ 14,838 $ 35,134
Accounts and notes receivable (net of
allowance for doubtful accounts of $2,388 and
$1,296 in 2000 and 1999, respectively) 89,801 58,380
Inventories 71,979 24,645
Prepaid expenses and other current assets 8,275 6,780
------------- --------------
Total Current Assets 184,893 124,939
Property, plant and equipment, net 516,183 405,292
Intangible assets, net 256,476 118,117
Other assets, net 10,355 8,397
------------- --------------
Total Assets $967,907 $656,745
============= ==============
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------------------------------
Current Liabilities:
Accounts payable $95,264 $60,754
Other current liabilities 77,631 48,266
Short-term borrowings 18,342 20,486
------------- --------------
Total Current Liabilities 191,237 129,506
Long-term debt 718,118 583,840
Other liabilities 16,176 12,144
Contingencies and commitments (Note H) - -
Minority interest 2,032 906
Partners' Capital:
Senior common unitholder (4,652,691 units outstanding
at July 2000 - liquidation preference $186,108) 179,786 -
Common unitholders (31,307,116 and 14,710,765 units
outstanding at July 2000 and 1999, respectively) (80,931) 1,215
Subordinated unitholder (16,593,721 units outstanding
at July 1999) - (10,516)
General partner unitholder(316,233 units outstanding
at July 2000) (58,511) (59,553)
Accumulated other comprehensive income - (797)
------------- --------------
Total Partners' Capital 40,344 (69,651)
------------- --------------
Total Liabilities and Partners' Capital $967,907 $656,745
============= ==============
See notes to consolidated financial statements.
F-3
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per unit data)
For the year ended July 31,
-----------------------------------
2000 1999 1998
----------- ---------- ----------
Revenues:
Gas liquids and related product sales $867,779 $578,025 $622,423
Other 84,420 46,124 44,930
----------- ---------- ----------
Total revenues 952,199 624,149 667,353
Cost of product sold (exclusive of
depreciation, shown separately below) 524,155 273,388 342,600
----------- ---------- ----------
Gross profit 428,044 350,761 324,753
Operating expense 255,838 205,720 199,010
Depreciation and amortization expense 61,633 47,257 45,009
Employee stock ownership plan compensation charge 3,733 3,295 350
General and administrative expense 24,587 19,174 17,497
Equipment lease expense 25,518 12,976 10,127
----------- ---------- ----------
Operating income 56,735 62,339 52,760
Interest expense (58,298) (46,621) (49,129)
Interest income 2,229 1,216 1,695
Gain (loss) on disposal of assets 356 (1,842) (174)
----------- ---------- ----------
Earnings before minority interest
and extraordinary loss 1,022 15,092 5,152
Minority interest 162 309 209
----------- ---------- ----------
Earnings before extraordinary loss 860 14,783 4,943
Extraordinary loss on early extinguishment of debt,
net of minority interest of $130 - (12,786) -
----------- ---------- ----------
Net earnings 860 1,997 4,943
Paid in kind distribution to senior common unitholders 11,108 N/A N/A
General partner's interest in net earnings (loss)
after paid in kind distribution (102) 20 49
----------- ---------- ----------
Common and subordinated unitholder's interest in
net earnings (loss) after paid in kind distribution $(10,146) $ 1,977 $ 4,894
=========== ========== ==========
Basic and diluted earnings (loss) per
common and subordinated unit:
Earnings (loss) before extraordinary loss $ (0.32) $ 0.47 $ 0.16
Extraordinary loss - $ (0.41) -
----------- ---------- ----------
Net earnings (loss) after paid in kind distribution $ (0.32) $ 0.06 $ 0.16
=========== ========== ==========
See notes to consolidated financial statements.
F-4
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL AND OTHER COMPREHENSIVE INCOME
(in thousands)
Number of units Accumulated
------------------------------------------------------ other
Senior Sub- General Senior Common Sub- General compre- Total
common Common ordinated partner common Unit- ordinated partner hensive partners'
unitholder unitholders unitholder unitholder unitholder holders unitholder unitholder income capital
---------- ----------- ----------- ----------- ------- ------ ------------ ------ ------ --------
August 1, 1997 - 14,612.6 16,593.7 - $ - $52,863 $50,337 $(58,417) $ - $44,783
Common units issued in
commection with
acquisitions 87.1 - - - 2,000 - 20 - 2,020
Contribution in
connection with ESOP
compensation-charge - - - - - 23 320 4 - 347
Quarterly distributions - - - - - (29,356) (33,188) (632) - (63,176)
Net earnings - - - - - 2,455 2,439 49 - 4,943
---------- ----------- ----------- ----------- ------- ------ ------------ ------ ------ --------
July 31, 1998 - 14,699.7 16,593.7 27,985 19,908 (58,976) - (11,083)
Common units
issued in connection
with acquisitions 11.1 - - - 197 - 2 - 199
Contribution in
connection with ESOP
compensation-charge - - - - - 219 3,010 33 - 3,262
Quarterly distributions - - - - - (29,409) (33,188) (632) - (63,229)
Other comprehensive
income:
Net earnings - - - - - 2,223 (246) 20 - 1,997
Other comprehensive
income- Pension
liability adjustment - - - - - - - - (797) (797)
------
Comprehensive income 1,200
---------- ----------- ----------- ----------- ------- ------ ------------ -------- ------ ------
July 31, 1999 - 14,710.7 16,593.7 - - 1,215 (10,516) (59,553) (797) (69,651)
Conversion of
subordinated units
into common units - 16,593.7 (16,593.7) - - (10,516) 10,516 - - -
Units issued in
connection with
acquisitions:
Common units - 2.6 - - - 45 - - - 45
Senior common units 4,375.0 - - - 175,000 - - 1,768 - 176,768
Fees paid to issue senior
common units - - - - (8,925) - - - - (8,925)
General partner
interest conversion
to general partner units - - - 316.2 - - - - - -
Accretion of discount
on senior common units - - - - 2,603 (2,575) - (28) - -
Contribution in
connection with ESOP
compensation charge - - - - - 3,661 - 36 - 3,697
Quarterly cash
distribution - - - - - (62,615) - (632) - (63,247)
Accrued paid in kind
distributions 277.7 - - - 11,108 (10,997) - (111) - -
Other comprehensive
income:
Net earnings - - - - - 851 - 9 - 860
Other comprehensive
income-
Pension liability
adjustment - - - - - - - - 797 797
----
Comprehensive income 1657
---------- ----------- ----------- ----------- -------- -------- ----------- ------ ------ -------
July 31, 2000 4,652.7 31,307.1 - 316.2 $179,786 $(80,931) $ - $(58,511) $ - $40,344
========== =========== =========== =========== ======== ======== =========== ====== ====== =======
See notes to consolidated financial statements.
F-5
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the year ended July 31,
------------------------------------------
2000 1999 1998
------------- ------------ -------------
Cash Flows From Operating Activities:
Net earnings $ 860 $ 1,997 $ 4,943
Reconciliation of net earnings to net
cash from operating activities:
Depreciation and amortization 61,633 47,257 45,009
Employee stock ownership plan compensation charge 3,733 3,295 350
Minority interest 162 301 209
Extraordinary loss, net of minority interest - 12,786 -
Other 2,759 4,487 5,236
Changes in operating assets and liabilities,
net of effects from business acquisitions:
Accounts and notes receivable (12,609) (9,565) 9,313
Inventories (25,423) 11,382 8,052
Prepaid expenses and other current assets (731) 1,926 200
Accounts payable 10,418 12,737 8,695
Accrued interest expense 6,594 2,152 (157)
Other current liabilities 7,140 4,235 (7,799)
Other liabilities (1,184) (496) 286
------------- ------------ -------------
Net cash provided by operating activities 53,352 92,494 74,337
------------- ------------ -------------
Cash Flows From Investing Activities:
Business acquisitions, net of cash acquired 47,656 (43,838) (9,839)
Cash paid for acquisition transaction fees (15,893) - -
Capital expenditures (20,755) (25,743) (20,629)
Proceeds from sale leaseback transaction 25,000 - -
Other 5,743 3,286 4,539
------------- ------------ -------------
Net cash provided by (used in) investing activities 41,751 (66,295) (25,929)
------------- ------------ -------------
Cash Flows From Financing Activities:
Distributions (63,247) (63,229) (63,176)
Additions to long-term debt 226,490 408,113 21,094
Reductions of long-term debt (276,111) (338,613) (2,759)
Cash paid for debt and lease financing costs (3,163) (12,827) -
Net reductions to short-term borrowings (2,144) (664) (636)
Minority interest activity 1,008 (810) (798)
Cash contribution from general partner 1,768 - -
Other - 4 40
------------- ------------ -------------
Net cash used in financing activities (115,399) (8,026) (46,235)
------------- ------------ -------------
Increase (decrease) in cash and cash equivalents (20,296) 18,173 2,173
Cash and cash equivalents - beginning of period 35,134 16,961 14,788
------------- ------------ -------------
Cash and cash equivalents - end of period $14,838 $35,134 $16,961
============= ============ =============
Cash paid for interest $49,176 $42,310 $46,546
============= ============ =============
See notes to consolidated financial statements.
F-6
FERRELLGAS PARTNERS, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Partnership Organization and Formation
Ferrellgas Partners, L.P. (the "MLP") was formed April 19, 1994, and is a
publicly traded limited partnership, owning a 99% limited partner interest
in Ferrellgas, L.P. (the "Operating Partnership" or "OLP"). The MLP and the
OLP are both Delaware limited partnerships, and are collectively referred to
as the Partnership. Ferrellgas Partners, L.P. was formed to acquire and hold
a limited partner interest in the Operating Partnership. The Operating
Partnership was formed to acquire, own and operate the propane business and
assets of Ferrellgas, Inc. (the "Company" or "General Partner"), a
wholly-owned subsidiary of Ferrell Companies, Inc. ("Ferrell"). Ferrell has
a 50% limited partnership interest in Ferrellgas Partners, L.P. The Company
has retained a 1% general partner interest in Ferrellgas Partners, L.P. and
also holds a 1.0101% general partner interest in the Operating Partnership,
representing a 2% general partner interest in the Partnership on a combined
basis. As General Partner of the Partnership, the Company performs all
management functions required for the Partnership.
On July 17, 1998, 100% of the outstanding common stock of Ferrell was
purchased primarily from Mr. James E. Ferrell and his family by a newly
established leveraged employee stock ownership trust ("ESOT") established
pursuant to the Ferrell Companies, Inc. Employee Stock Ownership Plan
("ESOP"). The purpose of the ESOP is to provide employees of the Company an
opportunity for ownership in Ferrell and indirectly in the Partnership. As
contributions are made by Ferrell to the ESOP in the future, shares of
Ferrell are allocated to employees' ESOP accounts.
On June 5, 2000, the MLP's Partnership Agreement was amended to allow the
General Partner to have an option in maintaining its 1% general partner
interest concurrent with the issuance of other additional equity.
Additionally, the General Partner's interest in the MLP's Common Units was
converted from a General Partner interest to General Partner units.
B. Summary of Significant Accounting Policies
(1) Nature of operations: The Partnership is engaged primarily in the sale,
distribution, and marketing of propane and other natural gas liquids
throughout the United States. The retail market is seasonal because propane
is used primarily for heating in residential and commercial buildings. The
Partnership serves more than 1,100,000 residential, industrial/commercial
and agricultural customers.
(2) Accounting estimates: The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America ("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. Significant estimates impacting the financial statements include
reserves that have been established for product liability and other claims.
(3) Principles of consolidation: The accompanying consolidated financial
statements present the consolidated financial position, results of
operations and cash flows of the Partnership and its wholly-owned
subsidiaries, Ferrellgas Partners Finance Corp. and Bluebuzz.com, Inc. The
Company's 1.0101% General Partner interest in Ferrellgas, L.P. is accounted
for as a minority interest. All material intercompany profits, transactions
and balances have been eliminated.
F-7
(4) Cash and cash equivalents: For purposes of the Consolidated Statements
of Cash Flows, the Partnership considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be cash
equivalents.
(5) Inventories: Inventories are stated at the lower of cost or market
using average cost and actual cost methods.
(6) Property, plant and equipment and intangible assets: Property, plant and
equipment are stated at cost less accumulated depreciation. Expenditures for
maintenance and routine repairs are expensed as incurred. Depreciation is
calculated using the straight-line method based on the estimated useful
lives of the assets ranging from two to thirty years. Intangible assets,
consisting primarily of customer lists, trademarks, assembled workforce,
goodwill, and noncompete notes, are stated at cost, net of amortization
calculated using the straight-line method over periods ranging from 5 to 40
years. The Partnership, using its best estimates based on reasonable and
supportable assumptions and projections, reviews for impairment of
long-lived assets and certain identifiable intangibles to be held and used
whenever events or changes in circumstances indicate that the carrying
amount of its assets might not be recoverable, and has concluded no
financial statement adjustment is required.
(7) Accounting for derivative commodity contracts: The Partnership enters
into commodity forward and futures purchase/sale agreements and commodity
options involving propane and related products which are used for risk
management purposes in connection with its trading activities. To the extent
such contracts are entered into at fixed prices and thereby subject the
Partnership to market risk, the contracts are accounted for using the fair
value method. Under the fair value method, derivatives are carried on the
balance sheet at fair value with changes in that value recognized in
earnings. The Partnership also enters into commodity options involving
propane and related products to hedge its overall purchase price risk. Any
changes in the fair value of hedge positions are deferred and recognized as
an adjustment to the overall purchase price of product in the settlement
month. The Partnership classifies all earnings from derivative commodity
contracts entered into for trading purposes as other revenue on the
statement of earnings.
(8) Revenue recognition: Sales of propane are recognized by the Partnership
at the time product is delivered or shipped to its customers. Revenue from
the sale of propane appliances and equipment is recognized at the time of
sale or installation. Revenues from repairs and maintenance are recognized
upon completion of the service.
(9) Income taxes: The Partnership is a limited partnership. As a result, the
Partnership's earnings or losses for Federal income tax purposes are
included in the tax returns of the individual partners. Accordingly, no
recognition has been given to income taxes in the accompanying financial
statements of the Partnership. Net earnings for financial statement purposes
may differ significantly from taxable income reportable to unitholders as a
result of differences between the tax basis and financial reporting basis of
assets and liabilities and the taxable income allocation requirements under
the Partnership Agreement.
(10) Net earnings per common and subordinated unit: Net earnings (loss) per
common and subordinated unit is computed by dividing net earnings, after
deducting the General Partner's 1% interest and paid-in-kind distributions,
by the weighted average number of outstanding Common Units, Subordinated
Units and the dilutive effect (if any) of Unit Options. There was no effect
on the earnings per unit calculation due to the assumption of the conversion
of Unit Options in the dilutive per-unit computation.
F-8
(11) Unit and stock-based compensation: The Partnership accounts for
Ferrellgas, Inc.'s Unit Option Plan and the Ferrell Companies Incentive
Compensation Plan under the provisions of Accounting Principles Board
("APB") No. 25, "Accounting for Stock Issued to Employees," and makes the
pro forma information disclosures required under the provisions of SFAS No.
123, "Accounting for Stock-Based Compensation."
(12) Segment information: The Partnership has determined that it has a
single reportable operating segment which engages in the distribution of
propane and related equipment and supplies. No single customer represents
10% or more of consolidated revenues. In addition, all of the Partnership's
revenues are derived from sources within the U.S., and all of its long-lived
assets are located in the U.S.
(13) Adoption of new accounting standards: The Financial Accounting
Standards Board recently issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133, as
amended by SFAS No. 137, and SFAS No. 138 is required to be adopted by the
Partnership beginning in the first quarter of fiscal 2001. SFAS No. 133
requires that all derivative instruments be recorded in the balance sheet
at fair value. The provisions of SFAS No. 133 will impact the Partnership's
accounting for certain options hedging product cost risk. Under the
provisions of SFAS No. 133, changes in the fair value of certain positions
qualifying as cash flow hedges will be recorded in accumulated other
comprehensive income. Changes in the fair value of certain other positions
not qualifying as hedges under SFAS No. 133 will be recorded in the
statement of earnings. As a result of these changes in classification, the
Partnership will recognize in its first quarter of fiscal 2001, gains
totaling approximately $709,000 and $299,000 in accumulated other
comprehensive income and the statement of earnings, respectively. In
addition, beginning in the first quarter of fiscal 2001, the Partnership
will record subsequent changes in the fair value of positions qualifying as
cash flow hedges in accumulated other comprehensive income and changes in
the fair value of other positions in the statement of earnings.
In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101 entitled "Revenue Recognition". The
bulletin, as amended, is to be adopted, if needed, no later than the fourth
fiscal quarter of fiscal years commencing after December 15, 1999, with
retroactive adjustment to the first fiscal quarter of that year. Management
will implement this bulletin in the first quarter of fiscal 2001 and
believes that it will have no material affect on the Partnership's financial
position, results of operations or cash flows.
C. Quarterly Distributions of Available Cash
Ferrellgas Partners, L.P. makes quarterly cash distributions to its Common
Unitholders of all of its "Available Cash", generally defined as consolidated
cash receipts less consolidated cash disbursements and net changes in reserves
established by the General Partner for future requirements. Reserves are
retained in order to provide for the proper conduct of the Partnership business,
or to provide funds for distributions with respect to any one or more of the
next four fiscal quarters. Distributions are made within 45 days after the end
of each fiscal quarter ending January, April, July and October to holders of
record on the applicable record date.
Distributions by the Ferrellgas Partners, L.P. in an amount equal to 100%
of its Available Cash, as defined in its Second Amended and Restated Agreement
of Limited Partnership of Ferrellgas Partners, L.P. (the "Partnership
Agreement"), will be made to the General Partner based upon the number of
General Partner Units held in the Ferrellgas Partners, L.P. and its interest in
Ferrellgas, L.P., currently an aggregate 2%, subject to the
F-9
payment of incentive distributions to the holders of Incentive Distribution
Rights to the extent that certain target levels of cash distributions are
achieved. The remaining Available Cash will be paid to the Senior Common
Unitholder (see Note F for discussion of the in kind distribution paid
to the Senior Common Unitholder) and Common Unitholders (the
"Unitholders"). The Senior Common Units have certain preference rights over
the Common Units. See Note F for additional information about the Senior
Common Units.
D. Supplemental Balance Sheet Information
Inventories consist of:
(in thousands) 2000 1999
-------------- --------------
Liquefied propane gas and related products $50,868 $15,480
Appliances, parts and supplies 21,111 9,165
-------------- --------------
$71,979 $24,645
============== ==============
In addition to inventories on hand, the Partnership enters into contracts
to buy product for supply purposes. Nearly all of these contracts have
terms of less than one year and most call for payment based on market
prices at the date of delivery. All fixed price contracts have terms of
less than one year. As of July 31, 2000, in addition to the inventory on
hand, the Partnership had committed to take delivery of approximately
98,300,000 gallons at a fixed price for its future retail propane sales.
Property, plant and equipment consist of:
(in thousands) 2000 1999
------------- --------------
Land and improvements $40,761 $32,776
Buildings and improvements 54,794 43,577
Vehicles 78,490 50,897
Furniture and fixtures 32,844 28,626
Bulk equipment and district facilities 88,289 71,693
Tanks and customer equipment 482,617 418,598
Other 3,753 4,369
------------- --------------
781,548 650,536
Less: accumulated depreciation 265,365 245,244
------------- --------------
$516,183 $405,292
============= ==============
Depreciation expense totaled $37,941,000, $30,772,000, and $30,034,000
for the years ended July 31, 2000, 1999, and 1998, respectively.
F-10
Intangibles consist of:
(in thousands) 2000 1999
------------- --------------
Customer lists $207,478 $145,200
Goodwill 122,826 55,789
Non-compete agreements 59,905 56,234
Trademark 18,500 -
Assembled workforce 9,600 -
Other 391 167
------------- --------------
418,700 257,390
Less: accumulated amortization 162,224 139,273
------------- --------------
$256,476 $118,117
============= ==============
Amortization expense related to intangibles totaled $22,951,000,
$15,712,000, and $14,375,000 for the years ended July 31, 2000, 1999, and 1998,
respectively.
Other current liabilities consist of:
(in thousands) 2000 1999
-------------- -------------
Accrued interest $21,659 $15,065
Accrued payroll 15,073 11,821
Other 40,899 21,380
-------------- -------------
$77,631 $48,266
============== =============
E. Long-Term Debt
Long-term debt consists of:
(in thousands) 2000 1999
------------- ------------
Senior Notes
Fixed rate, 7.16% due 2005-2013 (1) $350,000 $350,000
Fixed rate, 9.375%, due 2006 (2) 160,000 160,000
Fixed rate, 8.8%, due 2006-2009 (3) 184,000 -
Credit Agreement
Revolving credit loans, 8.9% and 6.0%, respectively, due 2003 (4) 11,658 58,314
Notes payable, 7.5% and 7.3% weighted average interest rates,
respectively, due 2000 to 2010 15,988 18,154
------------- ------------
721,646 586,468
Less: current portion, included in other current liabilities 3,528 2,628
------------- ------------
$718,118 $583,840
============= ============
F-11
(1) The OLP fixed rate Senior Notes ("$350 million Senior Notes"),
issued in August 1998, are general unsecured obligations of the OLP
and rank on an equal basis in right of payment with all senior
indebtedness of the OLP and senior to all subordinated indebtedness
of the OLP. The outstanding principal amount of the Series A, B, C,
D and E Notes shall be due on August 1, 2005, 2006, 2008, 2010, and
2013, respectively. In general, the Notes may not be prepaid prior
to maturity at the option of the Partnership.
(2) The MLP fixed rate Senior Secured Notes ("MLP Senior
Secured Notes"), issued in April 1996, will be redeemable at the
option of the MLP, in whole or in part, at any time on or after June
15, 2001. The notes are secured by the MLP's partnership interest in
the OLP. The MLP Senior Secured Notes bear interest from the date of
issuance, payable semi-annually in arrears on June 15 and December 15
of each year. Due to a change of control in the ownership of the
General Partner on July 17, 1998 as a result of the ESOP transaction
described in Note A, the MLP was required, pursuant to the MLP fixed
rate Senior Secured Note Indenture, to offer to purchase the
outstanding MLP fixed rate Senior Secured Notes at a price of 101% of
the principal amount thereof plus accrued and unpaid interest. 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, thus the notes remain outstanding.
(3) The OLP fixed rate Senior Notes ("$184 million Senior Notes"),
issued in February 2000, are general unsecured obligations of the
OLP and rank on an equal basis in right of payment with all senior
indebtedness of the OLP and senior to all subordinated indebtedness
of the OLP. The outstanding principal amount of the Series A, B and
C Notes shall be due on August 1, 2006, 2007 and 2009,
respectively. In general, the Notes may not be prepaid prior to
maturity at the option of the Partnership.
(4) At July 31, 2000, the unsecured $157,000,000 Credit
Facility (the "Credit Facility"), expiring June 2003, consisted of a
$117,000,000 unsecured working capital, general corporate and
acquisition facility, including a letter of credit facility, and a
$40,000,000 revolving working capital facility. This $40,000,000
facility is subject to an annual reduction in outstanding balances to
zero for thirty consecutive days. All borrowings under the Credit
Facility bear interest, at the borrower's option, at a rate equal to
either a) LIBOR plus an applicable margin varying from 1.25 percent to
2.25 percent or, b) the bank's base rate plus an applicable margin
varying from 0.25 percent to 1.25 percent. The bank's base rate at
July 31, 2000 and 1999 was 9.5% and 8.0%, respectively. To offset the
variable rate characteristic of the Credit Facility, the OLP entered
into a interest rate collar agreement, expiring January 2001, with a
major bank limiting the floating rate portion of LIBOR-based loan
interest rates on a notional amount of $25,000,000 to
between 5.05% and 6.5%.
On December 17, 1999, in connection with the purchase of Thermogas, LLC
("Thermogas acquisition") (see Note L), the OLP assumed a $183,000,000
bridge loan that was originally issued by Thermogas, LLC ("Thermogas") and
had a maturity date of June 30, 2000. On February 28, 2000, the OLP issued
$184,000,000 Senior Notes at an average interest rate of 8.8% in order to
refinance the $183,000,000 bridge loan. The additional $1,000,000 in
borrowings was used to fund debt issuance costs.
On December 17, 1999, in connection with the Thermogas acquisition, the OLP
paid off the balance remaining of $35,000,000 then outstanding on its
$38,000,000 unsecured credit facility used for acquisitions, capital
expenditures, and general corporate purposes. This outstanding credit
facility was then terminated. On April 18, 2000, the OLP entered into an
amended and restated Credit Facility with a group of financial institutions.
F-12
Effective April 27, 2000, the Partnership entered into an interest rate swap
agreement ("Swap Agreement") with Bank of America, related to the
semi-annual interest payment due on the MLP Senior Secured Notes. The Swap
Agreement, which expires June 15, 2006, requires Bank of America to pay an
amount based on the stated fixed interest rate (annual rate 9.375%) pursuant
to the MLP Senior Secured Notes equaling $7,500,000 every six months due on
each June 15 and December 15. In exchange, the Partnership is required to
make quarterly floating interest rate payments on the 15th of March, June,
September and December based on an annual interest rate equal to the 3 month
LIBOR interest rate plus 1.655% applied to the same notional amount of
$160,000,000.
At July 31, 2000 and 1999, $18,342,000 and $20,486,000, respectively, of
short-term borrowings were outstanding under the credit facility and
letters of credit outstanding, used primarily to secure obligations under
certain insurance arrangements, totaled $36,892,000 and $32,178,000,
respectively.
The MLP Senior Secured Notes, the $350 million and $184 million Senior
Notes and the Credit Facility Agreement contain various restrictive
covenants applicable to the MLP and OLP and its subsidiaries, the most
restrictive relating to additional indebtedness, sale and disposition of
assets, and transactions with affiliates. In addition, the Partnership is
prohibited from making cash distributions of the Minimum Quarterly
Distribution if a default or event of default exists or would exist upon
making such distribution, or if the Partnership fails to meet certain
coverage tests. The Partnership is in compliance with all requirements,
tests, limitations and covenants related to the Senior Secured Note
Indenture and the Senior Note Indentures. The Senior Notes and the Credit
Facility agreement have similar restrictive covenants to the Senior Note
Indenture and credit facility agreement that were replaced.
The annual principal payments on long-term debt for each of the next five
fiscal years are $3,528,000 in 2001, $2,126,000 in 2002, $1,943,000 in
2003, $2,086,000 in 2004, $2,234,000 in 2005 and $709,729,000 thereafter.
During fiscal year 1999, the Partnership recognized an extraordinary loss
of $12,786,000 net of minority interest of $130,000. The gross
extraordinary loss included a payment of a 5% premium and a write-off of
unamortized financing costs of $2,916,000, resulting primarily from the
early extinguishment of $200,000,000 of its fixed rate senior notes.
F. Partners' Capital
The Partnership's capital (after including the effect of an aggregate of
277,691 Senior Common Units issued in order to pay the applicable in-kind
quarterly distributions) consists of 4,652,691 Senior Common Units,
31,307,116 Common Units, 316,233 General Partner Units representing a 1%
General Partner interest related to the Common Units, and a 1% General
Partner interest related to the Senior Common Units. The Partnership
Agreement contains specific provisions for the allocation of net earnings
and loss to each of the partners for purposes of maintaining the partner
capital accounts.
In connection with the Thermogas acquisition (See Note L) on December 17,
1999, the Partnership issued 4,375,000 Senior Common Units to Williams
Natural Gas Liquids, Inc.a subsidiary of The Williams Companies, Inc.
("Williams" or "Seller"). As of September 14, 2000, Williams held 4,652,691
Senior Common Units with a liquidation value of approximately $186,108,000
including accrued and unpaid distributions. The Senior Common Units entitle
the holder to quarterly distributions from the MLP equivalent to 10 percent
per annum of the liquidating value. Distributions are payable quarterly,
in-kind, through issuance of
F-13
additional Senior Common Units until the earlier of February 1, 2002 or the
occurrence of a Material Event, as defined in the Partnership Agreement
("Material Event") after which distributions are payable in cash. The
Senior Common Units are redeemable by the Partnership at any time, in whole
or in part, upon payment in cash of the face value of the Senior Common
Units and the amount of any accrued but unpaid distributions.
Williams has the right, subject to certain events and conditions, to
convert any outstanding Senior Common Units into Common Units at the end of
two years or upon the occurrence of a Material Event. Such conversion
rights are contingent upon the Partnership not previously redeeming such
securities, among other conditions. The Partnership also granted Williams
demand registration rights at the end of two years or upon the occurrence
of a Material Event with respect to any outstanding Senior Common Units (or
Common Units into which they may be convertible). On June 5, 2000, at a
special meeting of its common unitholders, the Partnership's common
unitholders approved both the common unit conversion feature and an
exemption under the Partnership Agreement to enable Williams to vote the
Common Units, if such a conversion were to occur.
At July 31, 2000, the Senior Common Units had a discount of $6,321,000,
which includes the original discount of $8,925,000 less the accretion of
the discount of $2,604,000. This discount, which represents the fees paid
by the Partnership related to the issuance of the Senior Common Units, will
be amortized until February 2002.
In connection with the issuance of Senior Common Units to Williams,
Ferrellgas, Inc. contributed $1,768,000 to Ferrellgas Partners, L.P. and
$1,803,000 to Ferrellgas, L.P. in order to maintain its 1% and 1.0101%
general partner interest in each respective entity.
During 1994, the Partnership issued Subordinated Units, all of which were
held by Ferrell for which there was no established public trading market.
Effective August 1, 1999, the Subordinated Units converted to Common Units.
Certain financial tests, which were primarily related to making the Minimum
Quarterly Distribution on all Units, were satisfied for each of the three
consecutive four quarter periods ending July 31, 1999.
The Partnership maintains a shelf registration statement for Common Units
representing limited partner interests in the Partnership. The Common Units
may be issued from time to time by the Partnership in connection with the
Partnership's acquisition of other businesses, properties or securities in
business combination transactions. The Partnership also maintains another
shelf registration statement for the issuance of Common Units, Deferred
Participation Units, Warrants and Debt Securities. The Partnership
Agreement allows the General Partner to issue an unlimited number of
additional Partnership general and limited interests and other equity
securities of the Partnership for such consideration and on such terms and
conditions as shall be established by the General Partner without the
approval of any Unitholders.
G. Transactions with Related Parties
The Partnership has no employees and is managed and controlled by the
General Partner. Pursuant to the Partnership Agreement, the General Partner
is entitled to reimbursement for all direct and indirect expenses incurred
or payments it makes on behalf of the Partnership, and 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. These costs, which totaled $179,033,000,
$143,850,000, and $129,808,000 for the years ended July 31, 2000, 1999 and
1998, respectively, include compensation and benefits paid to officers and
employees of the General Partner, and general and administrative costs.
F-14
During fiscal 2000, Williams became a related party to the Partnership due
to the Partnership's issuance of Senior Common Units to Williams (See Notes
F and L). The Partnership recognized wholesale sales of $2,091,000 to
Williams and purchases of $13,175,000 from Williams related to the
Partnership's wholesale and risk management activity. In connection with
its risk management activities, the Partnership entered into, with Williams
as a counterparty, certain forward, futures and swaps contracts for trading
purposes and certain option contracts for purposes other than trading.
During fiscal 2000 the Partnership recognized net sales (purchases) related
to these transactions of $9,530,000 which are classified in other revenue
on the statement of earnings.
Williams provided propane supply and general and administrative services to
the Partnership to assist in the integration of the acquisition. The
Partnership recognized $67,547,000, $4,062,000 and $176,000 to Williams in
fiscal 2000 and classified these costs in cost of goods sold, general and
administrative expenses and operating expenses, respectively. Amounts due
to Williams at July 31, 2000, was $5,045,000. Amounts due from Williams at
July 31, 2000, was $13,000.
During fiscal 2000 and 1999, Ferrell International Limited and Ferrell
Resources, LLC, two affiliates of the Partnership which are owned by the
General Partner's chairman of the board, president and chief executive
officer, James E. Ferrell, paid the Partnership a total of $313,000 and
$265,000, respectively, for accounting and administration services. In
connection with its risk management activities, the Partnership entered
into, with Ferrell International Limited as a counterparty, certain
forward, futures and swaps contracts for trading purposes and certain
option contracts for purposes other than trading. During fiscal 2000, 1999
and 1998, the Partnership recognized net sales (purchases) of $(8,508,000),
$20,414,000 and $3,106,000, respectively. These net sales (purchases) with
Ferrell International Limited are classified in other revenue. Amounts due
from Ferrell International Limited at July 31, 2000 and 1999 were
$1,826,000 and $2,531,000, respectively. Amounts due to Ferrell
International Limited at July 31, 2000 and 1999 were $1,484,000 and
$3,377,000, respectively.
The Partnership also leased propane tanks from Ferrell Propane, Inc., a
subsidiary of Ferrellgas, Inc. since October 1998. Prior to October 1998,
Ferrell Propane, Inc. was a subsidiary of Ferrell Companies, Inc. The
Partnership recognized $515,000 of lease expense during each of fiscal
years 2000, 1999 and 1998.
Prior to the ESOP transaction completed on July 17, 1998, Ferrell, the
parent of the General Partner and its other wholly-owned subsidiaries,
engaged in various investment activities including, but not limited to,
commodity investments and the trading thereof. The Partnership from time to
time acted as an agent on behalf of Ferrell to purchase and market natural
gas liquids and enter into certain trading activities. The Partnership
charged all direct and indirect expenses incurred in performing this agent
role to Ferrell. During the year ended July 31, 1998, the Partnership, as
Ferrell's agent, marketed and sold 469,820 barrels of propane. The
Partnership charged Ferrell $66,467 for its direct and indirect expenses
related to these transactions. All of the 469,820 barrels of propane sold
were sold to and used by the Partnership at the applicable market prices
(an aggregate of $7,405,200). In addition, during fiscal 1998, the
Partnership sold to Ferrell certain physical and derivative crude oil
commodity contracts totaling 4,120,000 aggregate barrels at a price of
$2,548,927. Subsequent to the close of the ESOP transaction, Ferrell
divested of its wholly-owned subsidiaries that were engaged in these
commodity and trading activities.
F-15
H. Contingencies and Commitments
The Partnership is threatened with or named as a defendant in various
lawsuits that, 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 are likely to have a material adverse effect on the
financial condition, results of operations or cash flows of the
Partnership.
On December 6, 1999, the OLP entered into, with Banc of America Leasing &
Capital LLC, a $25,000,000 operating tank lease involving a portion of the
OLP's customer tanks. This operating lease has a term that expires June 30,
2003 and may be extended for two additional one-year periods at the option
of the OLP, if such extension is approved by the lessor.
On December 17, 1999, immediately prior to the closing of the Thermogas
acquisition (See Note L), Thermogas entered into, with Banc of America
Leasing & Capital LLC, a $135,000,000 operating tank lease involving a
portion of its customer tanks. In connection with the Thermogas
acquisition, the OLP assumed all obligations under the $135,000,000
operating tank lease, which has terms and conditions similar to the
December 6, 1999, $25,000,000 operating tank lease discussed above.
Effective June 2, 2000, the OLP entered into an interest rate cap agreement
("Cap Agreement") with Bank of America, related to variable quarterly rent
payments due pursuant to two operating tank lease agreements. The variable
quarterly rent payments are determined based upon a floating LIBOR based
interest rate. The Cap Agreement, which expires June 30, 2003, requires
Bank of America to pay the OLP at the end of each March, June, September
and December the excess, if any, of the applicable 3 month floating LIBOR
interest rate over 9.3%, the cap, applied to the total obligation due each
quarter under the two operating tank lease agreements. The total obligation
under these two operating tank lease agreements as of July 31, 2000 was
$159,200,000.
Certain property and equipment is leased under noncancellable operating
leases which require fixed monthly rental payments and which expire at
various dates through 2020. Rental expense under these leases totaled
$35,292,000, $19,595,000 and $17,095,000 for the years ended July 31, 2000,
1999 and 1998, respectively. Future minimum lease commitments for such
leases in the next five years, including the aforementioned operating tank
leases, are $37,166,000 in 2001, $33,882,000 in 2002, $28,358,000 in 2003,
$7,431,000 in 2004, and $4,868,000 in 2005.
In addition to the future minimum lease commitments, the Partnership plans
to purchase vehicles at the end of their lease term totaling $1,364,000 in
2001, $203,000 in 2002 and $143,000 in 2003. The Partnership intends to
renew other vehicle and tank leases that would have had buyouts of $452,000
in 2001, $7,057,000 in 2002, $162,569,000 in 2003, $4,981,000 in 2004 and
$4,086,000 in 2005.
I. Employee Benefits
The Partnership has no employees and is managed and controlled by the
General Partner. The Partnership assumes all liabilities, which include
specific liabilities related to the following employee benefit plans for
the benefit of the officers and employees of the General Partner.
Ferrell makes contributions to the ESOT which causes a portion of the
shares of Ferrell owned by the ESOT to be allocated to employees' accounts
over time. The allocation of Ferrell shares to employee accounts causes a
non-cash compensation charge to be incurred by Ferrell, equivalent to the
F-16
fair value of such shares allocated. This non-cash compensation charge is
reported separately on the statement of earnings, and therefore excluded
from operating and general and administative expenses. The Partnership is
not obligated to fund or make contributions to the ESOT. Nevertheless, due
to the benefit received by the Company's employees from participating in
the ESOP, the non-cash compensation charge is also recorded by the
Partnership.
The General Partner and its parent, Ferrell, have a defined contribution
profit-sharing plan which covers substantially all employees with more than
one year of service. Contributions were made to the plan at the discretion
of Ferrell's Board of Directors. With the establishment of the ESOP in July
1998, the Company suspended future contributions to the profit sharing plan
beginning with fiscal year 1998. The profit sharing plan, which qualifies
under section 401(k) of the Internal Revenue Code, also provides for
matching contributions under a cash or deferred arrangement based upon
participant salaries and employee contributions to the plan. These matching
contributions were not affected by the establishment of the ESOP.
Contributions for the years ended July 31, 2000, 1999 and 1998,
respectively, were $2,869,000, $2,110,000, and $1,693,000 under the 401(k)
provision.
J. Unit Options of the Partnership and Stock Options of Ferrell Companies,Inc.
The Ferrellgas, Inc. Unit Option Plan (the "Unit Option Plan") currently
authorizes the issuance of options (the "Unit Options") covering up to
850,000 of the MLP's units to certain officers and employees of the General
Partner. Effective August 1, 1999, with the conversion of the Subordinated
Units, the units covered by the options are Common Units. The Unit Options
are exercisable at exercise prices ranging from $16.80 to $21.67 per unit,
which was an estimate of the fair market value of the Subordinated Units at
the time of the grant. The options vest immediately or over a one to five
year period, and expire on the tenth anniversary of the date of the grant.
Number Weighted Average Weighted
Of Exercise Price Average Fair
Units Value
------------- ------------------- ---------------
Outstanding, July 31, 1997 727,600 $18.09
Granted 118,500 19.47 $0.47
Forfeited (64,100) 19.16
-------------
Outstanding, July 31, 1998 782,000 18.21
Granted 40,000 18.54 0.39
Forfeited (40,975) 18.15
-------------
Outstanding, July 31, 1999 781,025 18.23
Granted - - -
Forfeited (60,500) 19.38
-------------
Outstanding, July 31, 2000 720,525 18.13
-------------
Options exercisable, July 31, 2000 546,875 17.57
-------------
Options Outstanding at July 31, 2000
-------------------------------------------------
Range of option prices at end of year $16.80-$21.67
Weighted average remaining contractual life 5.3 Years
The Ferrell Companies, Inc. nonqualified stock option plan (the "NQP") was
established by Ferrell Companies, Inc. ("Ferrell") to allow upper middle
and senior level managers of the General Partner to participate in the
equity growth of Ferrell and, indirectly in the equity growth of the
Partnership. The shares underlying the stock options are common shares of
Ferrell, therefore, there is no potential dilution of the Partnership. The
Ferrell NQP stock options vest ratably in 5% to 10% increments over 12
years or 100% upon a change of control, death, disability or retirement of
the participant. Vested options are exercisable in increments based on the
timing of the payoff of Ferrell debt, but in no event later than 20 years
from the date of issuance.
F-17
The Partnership accounts for stock-based compensation using the intrinsic
value method prescribed in APB No. 25 and related Interpretations.
Accordingly, no compensation cost has been recognized for the Unit Option
Plan, or for the NQP. Had compensation cost for these plans been determined
based upon the fair value at the grant date for awards under these plans,
consistent with the methodology prescribed under SFAS No. 123, the
Partnership's net income (loss) and earnings (loss) per share would have
been adjusted as noted in the table below:
2000 1999 1998
------------- ------------- -------------
Common and subordinate unitholders' interest
in net earnings (loss) after paid in kind
distribution as reported $(10,146) $1,977 $4,894
Pro forma adjustment (79) (465) (40)
============= ============= =============
Common and subordinate unitholders' interest
in net earnings (loss) after paid in kind
distribution as adjusted $(10,225) $1,512 $4,854
============= ============= =============
Pro forma basic and diluted net earnings
(loss) per common and subordinated unit
after paid in kind distribution $ (0.32) $ 0.05 $ 0.16
============= ============= =============
There were no unit options granted during the 2000 fiscal year. The fair
value of the unit options granted during the 1999 and 1998 fiscal years
were determined using a binomial option valuation model with the following
assumptions: a) distribution amount of $0.50 per unit per quarter for 1999
and 1998, b) average Common Unit price volatilities of 18.1% and 16.2% for
1999 and 1998, respectively, c) the risk-free interest rates used were 5.5%
and 5.7%, for 1999 and 1998, respectively and d) the expected life of the
option used was 5 years for 1999 and 1998. The fair value of the Ferrell
Companies, Inc. NQP stock options granted during the 2000 and 1999 fiscal
years were determined using a binomial option valuation model with the
following assumptions: a) no dividends, b) average stock price volatility
of 10.1% and 10.6% used in 2000 and 1999, respectively, c) the risk-free
interest rate used was 6.4% and 5.5% in 2000 and 1999, respectively and d)
expected life of the options between 7 and 15 years.
K. Disclosures About Off Balance Sheet Risk, Fair Value of Financial
Instruments and Derivatives
The carrying amount of current financial instruments approximates fair
value because of the short maturity of the instruments. The estimated fair
value of the Partnership's long-term debt was $698,082,000 and $568,459,000
as of July 31, 2000 and 1999, respectively. The fair value is estimated
based on quoted market prices.
Interest Rate Collar, Cap and Swap Agreements. The Partnership has entered
into various interest rate collar, cap and swap agreements involving, among
others, the exchange of fixed and floating interest payment obligations
without the exchange of the underlying principal amounts. The
counterparties to these agreements are large financial institutions. The
interest rate collar agreements subject the Partnership to financial risk
that will vary during the life of these agreements in relation to market
interest rates. The fair values for these off-balance sheet financial
instruments at July 31, 2000 are as follows: Interest rate collar -
$43,000; interest rate cap - $(258,000); and interest rate swap -
$(561,000).
F-18
Option Commodity Contracts. The Partnership is a party to certain option
contracts, involving various liquefied petroleum products, for risk
management purposes in connection with its risk management activities.
Certain option contracts held by the Partnership meet the criteria for
classi-fication as hedges of forecasted transactions that will occur in
less than one year. Net gains deferred for option contracts accounted for
as hedges were $1,008,000 for the year ended July 31, 2000. Contracts are
executed with private counterparties and to a lesser extent on national
mercantile exchanges. Open contract positions are summarized below.
Forward, Futures and Swaps Commodity Contracts. In connection with its risk
management activities, the Partnership is a party to certain forward,
futures and swaps contracts for trading purposes. Such contracts do not
meet the criteria for classification as hedge transactions. Net gains from
risk management activities were $28,413,000, $7,699,000, and $7,464,000,
for the years ended July 31, 2000, 1999, and 1998, respectively. Such
contracts permit settlement by delivery of the commodity. Open contract
positions are summarized below (assets are defined as purchases or long
positions and liabilities are sales or short positions).
As of July 31
(In thousands, except price per gallon data)
Derivative Commodity Instruments Held for Derivative Commodity
Purposes Other than Trading Instruments Held for
(Options) Trading Purposes
(Forward, Futures and Swaps)
------------------------------------------- ---------------------------------------------------
-----------------------
2000 1999 2000 1999
-------------------- ------------------- -----------------------
---------- ------------
Asset Liab. Asset Liab. Asset Liab. Asset Liab.
--------- ---------- -------- ---------- ----------- ----------- ---------- ------------
Volume (gallons) 107,069 (50,526) 3,245 (22,648) 6,056,726 (5,903,184) 2,814,698 (2,720,295)
Price ((cent)/gal) 37-62 37-75 23-39 27-55 42-84 45-95 19-49 19-49
Maturity 8/00- 8/00- 8/99-3/00 8/99-3/00 8/00- 8/00-12/01 8/99-12/01 8/99-
Dates 12/01 12/01 12/01 12/01
Contract Amounts
($) 111,688 (63,193) 10,775 (13,973) 4,528,216 (4,476,361) 1,232,209 (1,215,341)
Fair Value ($) 113,728 (64,168) 10,941 (15,850) 4,526,076 (4,474,314) 1,337,924 (1,318,526)
Unrealized gain
(loss) ($) 2,040 (975) 166 (1,877) (2,140) 2,047 105,715 (103,185)
Risks related to these contracts arise from the possible inability of the
counterparties to meet the terms of their contracts and changes in
underlying product prices. The Partnership attempts to minimize market risk
through the enforcement of its trading policies, which include total
inventory limits and loss limits, and attempts to minimize credit risk
through application of its credit policies.
F-19
L. Business Combinations
On December 17, 1999, the Partnership purchased Thermogas LLC from
Williams Natural Gas Liquids, Inc.,a subsidiary of The Williams Companies,
Inc. of At closing the Partnership entered into the following noncash
transactions: a) issued $175,000,000 in Senior Common Units to the seller,
b) assumed a $183,000,000 bridge loan, (see Note E) and c) assumed a
$135,000,000 operating tank lease (see Note H). After the conclusion of
these acquisition-related transactions, including the merger of the OLP and
Thermogas, the Partnership acquired $61,842,000 of cash, which remained on
the Thermogas balance sheet at the acquisition date. The Partnership has
paid $15,893,000 in additional costs and fees related to the acquisition
between December 17, 1999 and July 31, 2000. As part of the Thermogas
acquisition, the OLP agreed to reimburse Williams for the value of working
capital received by the Partnership in excess of $9,147,500. On June 6,
2000, the OLP and Williams agreed upon the amount of working capital that
was acquired by the Partnership on December 17, 1999. The OLP reimbursed
Williams $5,652,500 as final settlement of this working capital
reimbursement obligation.
The total assets contributed to the OLP (at the Partnership's cost basis)
have been preliminarily allocated as follows: (a) working capital of
$14,800,000, (b) property, plant and equipment of $145,711,000, (c)
$60,200,000 to customer list with an estimated useful life of 15 years,
(d) $18,500,000 to trademarks with an estimated useful life of 15 years
(e) $9,600,000 to assembled workforce with an estimated useful life of 15
years, (f) $3,071,000 to non-compete agreements with an estimated useful
life ranging from one to seven years, and (g) $65,589,000 to goodwill at
an estimated useful life of 15 years. The estimated fair values and useful
lives of assets acquired are based on a preliminary valuation and are
subject to final valuation adjustments. The Partnership has accrued
$7,033,000 in involuntary employee termination benefits and exit costs,
which it expects to incur within twelve months from the acquisition date as
it implements the integration of the Thermogas operations. This accrual
included $5,870,000 of termination benefits and $1,163,000 of costs to exit
Thermogas activities. As of July 31, 2000, the Partnership has paid
$1,306,000 for termination benefits and $890,000 for exit costs. The
Partnership intends to continue its analysis of the net assets of Thermogas
to determine the final allocation of the total purchase price to the
various assets acquired. The transaction has been accounted for as a
purchase and, accordingly, the results of operations of Thermogas have been
included in the consolidated financial statements from the date of
acquisition.
The following pro forma financial information assumes that the Thermogas
acquisition occurred as of August 1, 1998 (unaudited):
Pro Forma
--------------------------------
Year Ended
July 31, July 31,
(in thousands, except per unit amounts) 2000 1999
--------------- ----------------
Total revenues $1,048,207 $856,731
Loss before extraordinary item (18,609) (4,358)
Net loss (18,609) (17,144)
Limited partners' interest in net loss (18,423) (16,973)
Basic and diluted loss per limited partner unit before extraordinary item $ (0.59) $ (0.14)
Basic and diluted loss per limited partner unit after extraordinary item $ (0.59) $ (0.54)
During the year ended July 31, 2000, the Partnership made acquisitions of
two other businesses valued at $7,183,000. This amount was funded by
$6,338,000 cash payments, $601,000 of noncompete notes, $46,000 in Common
units and $198,000 in other costs and consideration.
F-20
During the year ended July 31, 1999, the Partnership made acquisitions of
11 businesses valued at $50,049,000. This amount was funded by $43,838,000
cash payments, $199,000 in Common units and noncash transactions totaling
$6,012,000 in the issuance of noncompete notes and other costs and
consideration.
During the year ended July 31, 1998, the Partnership made acquisitions of
four businesses valued at $12,670,000. This amount was funded by $9,839,000
cash payments, $2,000,000 in common units and noncash transactions totaling
$831,000 in the issuance of noncompete notes and other costs and
consideration.
All transactions have been accounted for using the purchase method of
accounting and, accordingly, the results of operations of all acquisitions
have been included in the consolidated financial statements from their
dates of acquisition. The pro forma effect of these transactions, except
those related to the Thermogas acquisition, was not material to the results
of operations.
M. Earnings Per Unit
Below is a calculation of the basic and diluted Common Units (and
Subordinated Units prior to August 1, 1999) used to calculate basic and
diluted earnings per unit on the Statements of Earnings.
(in thousands, except per unit data)
For the year ended July 31,
2000 1999 1998
---------------- ---------------- ----------------
Common and subordinated
unitholders' interest in net
earnings (loss) after paid in kind
distribution $ (10,146) $ 1,977 $ 4,894
---------------- ---------------- ----------------
Weighted average common and
subordinated units outstanding
31,306.7 31,298.7 31,275.3
Basic earnings (loss) per common and
subordinated unit before
extraordinary item
and after paid in kind
distribution
$ (0.32) $ 0.47 $ 0.16
================ ================ ================
Basic earnings (loss) per common
and subordinated unit after paid in
kind distribution
$ (0.32) $ 0.06 $ 0.16
================ ================ ================
For the year ended July 31,
2000 1999 1998
---------------- ---------------- ----------------
Common and subordinated
unitholders' interest in net
earnings (loss) after paid in kind
distribution $ (10,146) $ 1,977 $ 4,894
Weighted average common and
subordinated units outstanding
31,306.7 31,298.7 31,275.3
Dilutive securities - options 0.0 39.5 72.5
---------------- ---------------- -----------------
Weighted average common and
subordinated outstanding units +
dilutive units 31,306.7 31,338.2 31,347.8
Diluted earnings (loss) per
common and subordinated unit
before extraordinary
item and after paid in kind
distribution
$(0.32) $0.47 $0.16
================ ================ =================
Diluted earnings (loss) per common
and subordinated unit after paid in
kind distribution
$(0.32) $0.06 $0.16
================ ================ =================
F-21
For diluted earnings per unit purposes, the Senior Common Units have been
excluded as they are considered contingently issuable Common Units for which all
necessary conditions for their issuance have not been satisfied as of the end of
the reporting period. In fiscal 2000, the Unit Options were antidilutive and
therefore were reported as zero in the table above.
N. Subsequent Event (unaudited)
On September 26, 2000, Ferrellgas, L.P. received $20,000,000 in cash in
exchange for the sale and contribution of a $25,000,000 interest in a pool
of its trade accounts receivable to its newly created, wholly-owned,
special purpose subsidiary, Ferrellgas Receivables, LLC. Ferrellgas
Receivables, LLC then sold the interest to a commercial paper conduit of
Banc One, NA in accordance with the terms of a 364 day agreement. The level
of funding available from this 364 day agreement is limited to $60,000,000.
In accordance with SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities ("SFAS No. 125")," this
transaction will initially be reflected on the financial statements as a
sale of accounts receivable and contribution of capital in the first
quarter of fiscal 2001. Additionally, in accordance with SFAS No. 125,
Ferrellgas Receivables, LLC will not be conslidated into the results of the
partnership and thus will be accounted for using the equity method of
accounting, The proceeds of these sales are less than the face amount of
accounts receivable sold by an amount that approximates the purchaser's
financing cost of issuing its own commercial paper backed by these accounts
receivable. This loss on the September, 2000 transaction will be
approximately $300,000 in the first quarter of fiscal 2001, and represents
the difference between the fair market value and the book value of
the receivable contibuted and sold.
F-22
INDEPENDENT AUDITORS' REPORT
Board of Directors
Ferrellgas Partners Finance Corp.
Liberty, Missouri
We have audited the accompanying balance sheets of Ferrellgas Partners
Finance Corp. (a wholly-owned subsidiary of Ferrellgas Partners, L.P.), as of
July 31, 2000, and 1999 and the related statements of earnings, stockholder's
equity and cash flows for each of the three years in the period ended July 31,
2000. These financial statements are the responsibility of Ferrellgas Partners
Finance Corp.'s management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Ferrellgas Partners Finance Corp. as of July
31, 2000 and 1999, and the results of its operations and its cash flows for each
of the three years in the period ended July 31, 2000 in conformity with
accounting principles generally accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
Kansas City, Missouri
September 14, 2000
F-23
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly owned subsidiary of Ferrellgas Partners, L.P.)
BALANCE SHEETS
July 31, July 31,
ASSETS 2000 1999
------------------------------------------------------- --------------- --------------
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 1,237 774
Accumulated deficit (1,237) (774)
--------------- --------------
Total Stockholder's Equity $1,000 $1,000
=============== ==============
See notes to financial statements
F-24
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly owned subsidiary of Ferrellgas Partners, L.P.)
STATEMENTS OF EARNINGS
For the year ended July 31,
-------------------------------------------------
2000 1999 1998
------------- ------------- -------------
Revenues $ - $ - $ -
General and administrative expense 463 226 221
------------- ------------- -------------
Net loss $ (463) $ (226) $ (221)
============= ============= =============
See notes to financial statements
F-25
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly owned subsidiary of Ferrellgas Partners, L.P.)
STATEMENTS OF STOCKHOLDER'S EQUITY
Common stock Additional Accum Total
------------------------- paid in ulated stockholder's
Shares Dollars capital deficit equity
----------- ---------- -------------- ----------- -----------------
August 1, 1998 1,000 $1,000 $ 548 $ (548) $ 1,000
Capital contribution - - 226 - 226
Net loss - - - (226) (226)
----------- ---------- -------------- ----------- -----------------
July 31, 1999 1,000 1,000 774 (774) 1,000
Capital contribution - - 463 - 463
Net loss - - - (463) (463)
----------- ---------- -------------- ----------- -----------------
July 31, 2000 1,000 $1,000 $ 1,237 $(1,237) $ 1,000
=========== ========== ============== =========== =================
See notes to financial statements
F-26
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly owned subsidiary of Ferrellgas Parnters, L.P.)
STATEMENTS OF CASH FLOWS
From Inception to
For the year ended July 31,
--------------------------------------------
2000 1999 1998
------------- ------------- -------------
Cash Flows From Operating Activities:
Net loss $ (463) $ (226) $ (221)
------------- ------------- -------------
Cash used by operating activities (463) (226) (221)
------------- ------------- -------------
Cash Flows From Financing Activities:
Capital contribution 463 226 221
------------- ------------- -------------
Cash provided by financing activities 463 226 221
------------- ------------- -------------
Change in cash 0 0 0
Cash - beginning of period 1,000 1,000 1,000
------------- ------------- -------------
Cash - end of period $ 1,000 $ 1,000 $ 1,000
============= ============= =============
See notes to financial statements
F-27
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly-owned subsidiary of Ferrellgas Partners, L.P.)
NOTES TO FINANCIAL STATEMENTS
A. Formation
Ferrellgas Partners, Finance Corp. (the "Finance Corp."), a Delaware
corporation, was formed on March 28, 1996 and is a wholly-owned subsidiary of
Ferrellgas Partners, L.P. (the "Partnership").
The Partnership contributed $1,000 to the Finance Corp. on April 8,
1996 in exchange for 1,000 shares of common stock.
B. Commitment
On April 26, 1996, the Partnership issued $160,000,000 of 9 3/8% Senior
Secured Notes due 2006 (the "Senior Notes"). The Senior Notes will be
redeemable at the option of the Partnership, in whole or in part, at
any time on or after June 15, 2001.
Effective April 27, 2000, the Partnership entered into an interest rate
swap agreement ("Swap Agreement") with Bank of America, related to the
semi-annual interest payment due on the Senior Notes. The Swap
Agreement, which expires June 15, 2006, requires Bank of America to pay
the stated fixed interest rate (annual rate 9 3/8%) pursuant to the
Senior Notes equaling $7,500,000 every six months due on each June 15
and December 15. In exchange, the Partnership is required to make
quarterly floating interest rate payments on the 15th of March, June,
September and December based on an annual interest rate equal to the 3
month LIBOR interest rate plus 1.655% applied to the same notional
amount of $160,000,000.
The Finance Corp. serves as a co-obligor for the Senior Notes.
C. Income Taxes
Income taxes have been computed as though the Company files its own
income tax return. Deferred income taxes are provided as a result of
temporary differences between financial and tax reporting using the
asset/liability method. Deferred income taxes are recognized for the
tax consequences of temporary differences between the financial
statement carrying amounts and tax basis of existing assets and
liabilities.
Due to the inability of the Company to utilize the deferred tax benefit
of $500 associated with the current year net operating loss
carryforward of $1,286, which expire at various dates through July 31,
2015, a valuation allowance has been provided on the full amount of the
deferred tax asset. Accordingly, there is no net deferred tax benefit
for the year ended July 31, 2000 or 1999 and there is no net deferred
tax asset as of July 31, 2000 or July 31, 1999.
F-28
ITEM 14(A) 2 INDEX TO FINANCIAL STATEMENT SCHEDULES
Page
Ferrellgas Partners, L.P. and Subsidiaries
Independent Auditors' Report on Schedules......................................................................S-2
Schedule I Parent Company Only Balance Sheets as of July 31, 2000 and
1999 and Statements of Earnings and Cash Flows for the years
ended July 31, 2000,1999 and 1998............................................................S-3
Schedule II Valuation and Qualifying Accounts for the years ended July 31, 2000, 1999
and 1998.....................................................................................S-6
S-1
INDEPENDENT AUDITORS' REPORT
To the Partners of
Ferrellgas Partners, L.P. and Subsidiaries
Liberty, Missouri
We have audited the consolidated financial statements of Ferrellgas Partners,
L.P., and subsidiaries as of July 31, 2000 and 1999, and for each of the three
years in the period ended July 31, 2000, and have issued our report thereon
dated September 14, 2000. Our audit also included the financial statement
schedules listed in Item 14(a)2. These financial statement schedules are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion based on our audits. In our opinion, such financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
/s/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
Kansas City, Missouri
September 14, 2000
S-2
FERRELLGAS PARTNERS, L.P.
PARENT ONLY
BALANCE SHEETS
(in thousands)
ASSETS July 31, 2000 July 31, 1999
- ----------------------------------------------------- ---------------- ----------------
Cash and cash equivalents $ 1 $ 1
Investment in Ferrellgas, L.P. 199,086 88,758
Other assets, net 2,962 3,466
---------------- ----------------
Total Assets $ 202,049 $ 92,225
================ ================
LIABILITIES AND PARTNERS' CAPITAL
- -----------------------------------------------------
Other current liabilities $ 1,705 $ 1,876
Long term debt 160,000 160,000
Partners' Capital
Senior common unitholders 179,786 -
Common unitholders (80,931) 1,215
Subordinated unitholders - (10,516)
General partner (58,511) (59,553)
Accumulated other comprehensive income 0 (797)
---------------- ----------------
Total Partners' Capital 40,344 (69,651)
---------------- ----------------
Total Liabilities and Partners' Capital $ 202,049 $ 92,225
================ ================
S-3
FERRELLGAS PARTNERS, L.P.
PARENT ONLY
STATEMENTS OF EARNINGS
(in thousands)
For the Year Ended July 31
---------------------------------------------------------
2000 1999 1998
---------------- ----------------- -----------------
Equity in earnings of Ferrellgas, L.P. $ 15,907 $ 17,511 $ 20,462
Operating expense - - 5
Interest expense 15,047 15,514 15,514
---------------- ----------------- -----------------
Net earnings $ 860 $ 1,997 $ 4,943
================ ================= =================
S-4
FERRELLGAS PARTNERS, L.P.
PARENT ONLY
STATEMENTS OF CASH FLOWS
(in thousands)
For the Year Ended
-------------------------------------------------------
July 31, 2000 July 31, 1999 July 31, 1998
----------------- ----------------- --------------
Cash Flows From Operating Activities:
Net earnings $ 860 $ 1,997 $ 4,943
Reconciliation of net earnings to
net cash from operating activities:
Amortization of capitalized financing costs 515 513 513
Equity in earnings of Ferrellgas, L.P. (16,069) (17,690) (20,671)
Other current assets (11) (1,201) 3
Distributions received from Ferrellgas, L.P. 77,962 79,430 78,176
Increase (decrease) in other current liabilities (172) 1 (1)
----------------- ----------------- ---------------
Net cash provided by operating activities 63,085 63,050 62,963
----------------- ----------------- ---------------
Cash Flows From Financing Activities:
Distributions to partners (63,247) (63,229) (63,176)
Net advance from affiliate 162 179 213
----------------- ----------------- ---------------
Net cash used by financing activities (63,085) (63,050) (62,963)
----------------- ----------------- ---------------
Increase in cash and cash equivalents - - -
Cash and cash equivalents - beginning of period 1 1 1
----------------- ----------------- ---------------
Cash and cash equivalents - end of period $ 1 $ 1 $ 1
================= ================= ===============
S-5
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Balance at Charged to Deductions Balance
beginning cost/ Other (amounts at end
Description of period expenses Additions charged-off) of period
- ---------------------------------------- -------------- -------------- -------------- --------------- --------------
Year ended July 31, 2000
Allowance for doubtful accounts $1,296 $2,349 $0 $1,257 $2,388
Accumulated amortization:
Intangible assets 139,273 22,951 0 0 162,224
Other assets 5,005 1,906 0 15 6,896
Year ended July 31, 1999
Allowance for doubtful accounts $1,381 $1,627 $75 $1,787 $1,296
Accumulated amortization:
Intangible assets 123,531 15,742 0 0 139,273
Other assets 9,054 1,716 0 5,765 5,005
Year ended July 31, 1998
Allowance for doubtful accounts 1,234 2,997 6 2,856 1,381
Accumulated amortization:
Intangible assets 109,211 14,320 0 0 123,531
Other assets 6,753 2,301 0 0 9,054
S-6
RECEIVABLE INTEREST SALE AGREEMENT
Dated as of September 26, 2000
between
FERRELLGAS, L.P., as Originator,
and
FERRELLGAS RECEIVABLES, LLC, as Buyer
TABLE OF CONTENTS
Page
ARTICLE I.PURCHASE AND CONTRIBUTION...............................................................................1
Section 1.1 Contribution of Contributed Interest............................................................1
Section 1.2 Purchase of the Receivable Interest.............................................................2
Section 1.3 Payment of the Purchase Price...................................................................2
Section 1.4 Deemed Collections..............................................................................3
Section 1.5 Payments and Computations, Etc..................................................................3
Section 1.6 Intention of the Parties........................................................................3
ARTICLE II.PAYMENTS AND COLLECTIONS...............................................................................4
Section 2.1 Collections Prior to Termination................................................................4
Section 2.2 Collections Following Termination...............................................................4
Section 2.3 Payment Recission...............................................................................4
ARTICLE III.REPRESENTATIONS AND WARRANTIES........................................................................5
Section 3.1 Representations and Warranties of the Originator................................................5
(a) Existence and Power...................................................................................5
(b) Power and Authority; Due Authorization, Execution and Delivery........................................5
(c) No Conflict...........................................................................................5
(d) Governmental Authorization............................................................................5
(e) Actions, Suits........................................................................................5
(f) Binding Effect........................................................................................6
(g) Accuracy of Information...............................................................................6
(h) Use of Proceeds.......................................................................................6
(i) Good Title............................................................................................6
(j) Perfection............................................................................................6
(k) Places of Business and Locations of Records...........................................................6
(l) Material Adverse Effect...............................................................................7
(m) Names..............................................................................................7
(n) Ownership of Buyer....................................................................................7
(o) Not a Regulated Entity................................................................................7
(p) Compliance with Law...................................................................................7
(q) Compliance with Credit and Collection Policy..........................................................7
(r) Eligible Receivables..................................................................................7
(s) Payments to Originator................................................................................7
(t) Enforceability of Contracts...........................................................................8
(u) Accounting............................................................................................8
(v) Tax Status............................................................................................8
ARTICLE IV.CONDITIONS OF PURCHASE.................................................................................8
Section 4.1 Conditions Precedent to Purchase................................................................8
ARTICLE V.COVENANTS...............................................................................................8
Section 5.1 Financial Reporting.............................................................................8
(a) Originator's Annual Financial Statements..............................................................8
(b) Originator's Quarterly Financial Statements...........................................................9
(c) General Partner Annual Consolidated Statements........................................................9
Section 5.2 Certificates; Other Information.................................................................9
(a) Independent Auditor's Certificate.....................................................................9
(b) Compliance Certificate................................................................................9
(c) SEC Reports...........................................................................................9
(d) Other Information.....................................................................................9
Section 5.3 Notices........................................................................................10
Section 5.4 Compliance with Laws...........................................................................10
Section 5.5 Preservation of Existence, Etc.................................................................11
Section 5.6 Payment of Obligations.........................................................................11
Section 5.7 Audits.........................................................................................11
Section 5.8 Keeping of Records and Books...................................................................12
Section 5.9 Compliance with Contracts and Credit and Collection Policy.....................................12
Section 5.10 Ownership......................................................................................12
Section 5.11 Purchasers'Reliance............................................................................12
Section 5.12 Collections....................................................................................13
Section 5.13 Negative Covenants of Originator...............................................................13
(a) Name Change, Offices and Records.....................................................................13
(b) Change in Payment Instructions to Obligors...........................................................13
(c) Modifications to Contracts and Credit and Collection Policy..........................................13
(d) Sales, Adverse Claims................................................................................13
(e) Accounting for Purchase..............................................................................14
(f) Change in Business...................................................................................14
(g) Accounting Changes...................................................................................14
ARTICLE VI.ADMINISTRATION AND COLLECTION.........................................................................14
Section 6.1 Designation of Servicer........................................................................14
Section 6.2 Duties of Servicer.............................................................................14
Section 6.3 Servicing Fee..................................................................................15
ARTICLE VII.TERMINATION EVENTS...................................................................................15
Section 7.1 Termination Events.............................................................................15
(a) Non-Payment..........................................................................................15
(b) Representation or Warranty...........................................................................15
(c) Specific Defaults....................................................................................15
(d) Other Defaults.......................................................................................15
(e) Cross-Default........................................................................................15
(f) Insolvency; Voluntary Proceedings....................................................................16
(g) Involuntary Proceedings..............................................................................16
(h) ERISA................................................................................................17
(i) Monetary Judgments...................................................................................17
(j) Non-Monetary Judgments...............................................................................17
(l) Change of Control....................................................................................17
(m) Leverage Ratio....................................................................................17
(n) Interest Coverage Ratio..............................................................................17
(o) Excessive Contribution or Subordinated Note Balance..................................................17
Section 7.2 Remedies.......................................................................................18
ARTICLE VIII.INDEMNIFICATION.....................................................................................18
Section 8.1 Indemnities by Originator......................................................................18
Section 8.2 Other Costs and Expenses.......................................................................20
ARTICLE IX.MISCELLANEOUS.........................................................................................20
Section 9.1 Waivers and Amendments.........................................................................20
Section 9.2 Notices........................................................................................21
Section 9.3 Protection of Ownership Interests of Buyer.....................................................21
Section 9.4 Confidentiality................................................................................22
Section 9.5 Bankruptcy Petition............................................................................22
Section 9.6 Limitation of Liability........................................................................23
Section 9.7 CHOICE OF LAW..................................................................................23
Section 9.8 CONSENT TO JURISDICTION........................................................................23
Section 9.9 WAIVER OF JURY TRIAL...........................................................................24
Section 9.10 Integration; Binding Effect; Survival of Terms.................................................24
PAGE>
RECEIVABLE INTEREST SALE AGREEMENT
This Receivable Interest Sale Agreement dated as of September 26, 2000 is
between Ferrellgas, L.P., a Delaware limited partnership ("Originator"), and
Ferrellgas Receivables, LLC, a Delaware limited liability company ("Buyer").
Unless defined elsewhere herein, capitalized terms used in this Agreement shall
have the meanings assigned to such terms in Exhibit I.
PRELIMINARY STATEMENTS
On the terms and subject to the conditions hereinafter set forth,
Originator desires to sell a Receivable Interest,
and contribute a Contributed Interest to Buyer, and Buyer desires to
purchase such Receivable Interest, and accept the contribution of such
Contributed Interest, from Originator.
Originator and Buyer intend the transactions contemplated hereby to be a
true sale or other outright conveyance of the Receivable Interest and the
Contributed Interest from Originator to Buyer, providing Buyer with the full
benefits of ownership of the Receivable Interest and the Contributed Interest,
and Originator and Buyer do not intend these transactions to be, or for any
purpose to be characterized as, loans from Buyer to Originator.
From time to time after the date hereof, Buyer will sell undivided
interests in the Receivable Interest and the Contributed Interest pursuant to
that certain Receivables Purchase Agreement dated as of September 26, 2000 (as
the same may from time to time hereafter be amended, supplemented, restated or
otherwise modified, the "Purchase Agreement") among Buyer, as seller,
Originator, as initial Servicer, Jupiter Securitization Corporation ("Conduit"),
the financial institutions from time to time party thereto as "Financial
Institutions" (together with Conduit, the "Purchasers"), and Bank One, NA (Main
Office Chicago) or any successor agent appointed pursuant to the terms of the
Purchase Agreement, as agent for Conduit and such Financial Institutions (in
such capacity, the "Agent").
ARTICLE I.
PURCHASE AND CONTRIBUTION
Section 1.1 . Contribution of Contributed Interest. On the date hereof, in
consideration of the issuance of all of Buyer's Equity Interests, Originator
does hereby contribute, assign, transfer, set-over and otherwise convey to
Buyer, without recourse (except to the extent expressly provided herein), and
Buyer does hereby accept from Originator as a contribution to Buyer's capital,
the Contributed Interest. Subject to Section 7.1(o), after the date hereof
through and including the Termination Date, the Contributed Interest shall be
adjusted as of the opening of business on each Business Day on which any
adjustment in the Receivable Interest occurs as provided in Section 1.3(c).
Section 1.2 Purchase of the Receivable Interest. Upon the terms and subject to
the conditions hereof, in consideration of the Purchase Price, effective on the
date hereof, Originator does hereby sell, assign, transfer, set-over and
otherwise convey to Buyer, without recourse (except to the extent expressly
provided herein), and Buyer does hereby purchase from Originator, all of
Originator's right, title and interest in the Receivable Interest. The
Receivable Interest shall be adjusted as of the opening of business on each
Business Day after the date hereof through and including the Termination Date in
accordance with Section 1.3(c).
Section 1.3 Payment of the Purchase Price.
(a) On the date hereof, upon satisfaction of the conditions precedent set forth
in Article IV hereof, Buyer shall pay Originator the initial Purchase Price for
the Receivable Interest computed as of the Initial Computation Date, by (i)
deposit of immediately available funds, no later than 2:00 p.m. (Chicago time),
to Originator's account no. 4518054085 at Wells Fargo Bank, N.A., in San
Francisco, California, ABA No. 121000248 ("Originator's Account"), and (ii)
delivering the Subordinated Note referred to in clause (b) below.
(b) A portion of the Purchase Price to be paid by the Buyer may from time to
time be paid to the Originator after the consummation of the sale of the
Receivable Interest. Such unpaid portion of the Purchase Price may be paid in
immediately available funds or, at Buyer's election, subject to Section 7.1(o),
by increasing the amount outstanding under the Subordinated Note.
(c) The Receivable Interest shall be adjusted on a daily basis because of the
daily changes that occur in respect of the Variable Purchased Percentage.
Notwithstanding such daily adjustments, the Buyer and the Originator agree that
the Buyer shall only be required to re-calculate the Variable Purchased
Percentage (i) on a monthly basis as of the last day of each calendar month (or
if such day is not a Business Day, the next succeeding Business Day), (ii) on
the date of the occurrence of any change in the Funded Amount in accordance with
clause (d) below, and (iii) on the Termination Date. Such redetermined amount of
the Variable Purchased Percentage shall be deemed to be the value of the
Receivable Interest for all purposes under this Agreement until such Receivable
Interest is redetermined pursuant to this clause (c).
(d) If the Funded Amount shall be increased or decreased on any date, the Buyer
shall (i) in the case of an increase in the Funded Amount, pay to the Originator
the proceeds received by it resulting from such increase as consideration for
the purchase of an additional portion of the Receivable Interest, and the
Receivable Interest shall be adjusted accordingly, and (ii) in the case of a
decrease in the Funded Amount, use the proceeds of Collections (and if necessary
to obtain additional proceeds, re-sell to the Originator a portion of the
Receivable Interest) to repay to the Agent for the account of the applicable
Purchaser(s), the amounts required to be repaid pursuant to the Purchase
Agreement, and the Receivable Interest shall be adjusted accordingly. In
addition, if the Variable Purchased Percentage would, but for the limitation
contained in the definition of such term, ever exceed 100%, the Buyer shall
repay to the Agent for the account of the applicable Purchaser(s), such amounts
as may be required to reduce the Variable Purchased Percentage to an amount
equal to or less than 100%.
Section 1.4 Deemed Collections.
(a) If on any day the Outstanding Balance of a Pool Receivable is either (i)
reduced as a result of any defective or rejected goods or services, any cash
discount or any adjustment by Originator, or (ii) reduced or cancelled as a
result of a setoff in respect of any claim by any Person (whether such claim
arises out of the same or a related transaction or an unrelated transaction),
Originator shall be deemed to have received on such day a Collection of such
Pool Receivable in the amount of such reduction or cancellation. If on any day
any of the representations or warranties in Section 3.1(h), (i), (j), (r) or (t)
is no longer true with respect to any Pool Receivable, Originator shall be
deemed to have received on such day a Collection of such Pool Receivable in
full.
(b) If Originator is deemed to receive Collections pursuant to this Section 1.4,
the Receivable Interest shall be adjusted accordingly on the date of such deemed
receipt pursuant to Section 1.3(c).
Section 1.5 Payments and Computations, Etc.
(a) All amounts to be paid or deposited by Buyer hereunder (except amounts
payable by increasing the outstanding principal balance under the Subordinated
Note) shall be paid or deposited to Originator's Account in accordance with the
terms hereof on the day when due in immediately available funds. All amounts to
be paid or deposited by Originator hereunder shall be paid or deposited to the
Facility Account in accordance with the terms hereof on the day when due in
immediately available funds.
(b) In the event that any payment owed by any Person hereunder becomes due on a
day that is not a Business Day, then such payment shall be made on the next
succeeding Business Day.
(c) If any Person fails to pay any amount hereunder when due, such Person agrees
to pay, on demand, the Default Fee in respect thereof until paid in full;
provided, however, that such Default Fee shall not at any time exceed the
maximum rate permitted by applicable law.
Section 1.6 Intention of the Parties. It is the intention of the parties hereto
that the contribution of the Contributed Interest, and the sale of the
Receivable Interest hereunder, shall constitute sales or other outright
conveyances which are absolute and irrevocable and provide Buyer with the full
benefits of ownership of the Contributed Interest and the Receivable Interest.
The sale of the Receivable Interest and contribution of the Contributed Interest
hereunder are made without recourse to Originator; provided, however, that (i)
Originator shall be liable to Buyer for all representations, warranties,
covenants and indemnities made by Originator pursuant to the terms of the
Transaction Documents to which Originator is a party, and (ii) such sale and
contribution do not constitute and are not intended to result in an assumption
by Buyer or any assignee thereof of any obligation of Originator or any other
Person arising in connection with the Pool Receivables, the related Contracts
and/or other Related Security or any other obligations of Originator. In view of
the intention of the parties hereto that the conveyances of the Receivable
Interest and the Contributed Interest made hereunder shall constitute sales or
other outright conveyances thereof rather than loans secured thereby, Originator
agrees that it will, on or prior to the date hereof, mark its master data
processing records relating to the Pool Receivables with a legend acceptable to
Buyer and to the Agent (as Buyer's assignee), evidencing that Buyer owns the
Receivable Interest and the Contributed Interest as provided in this Agreement
and to note in its financial statements that the Receivable Interest has been
sold, and the Contributed Interest has been contributed, to Buyer and have been
further sold or pledged to the Agent. Upon the request of Buyer or the Agent (as
Buyer's assignee), Originator will execute and file such financing or
continuation statements, or amendments thereto or assignments thereof, and such
other instruments or notices, as may be necessary or appropriate to perfect and
maintain the perfection of Buyer's ownership of the Receivable Interest and the
Contributed Interest, or as Buyer or the Agent (as Buyer's assignee) may
reasonably request.
ARTICLE II.
PAYMENTS AND COLLECTIONS
Section 2.1 Collections Prior to Termination. On each Business Day prior to the
Termination Date, after deduction by the Servicer of its Servicing Fee: (i) the
Originator's Percentage of any remaining Collections received by the Servicer on
such Business Day shall be deposited to the Originator's Account, and (ii) the
Buyer's Percentage then in effect of any remaining Collections received by the
Servicer shall be, at the Buyer's option, either applied to payment of any
amounts owing on such Business Day by Buyer to Originator in respect of the
Subordinated Note or deposited to the Facility Account and then transferred to
the Originator's Account as payment of the Purchase Price for the Receivable
Interest.
Section 2.2 Collections Following Termination. On the Termination Date and on
each day thereafter until payment in full of all Aggregate Unpaids, after
deduction of the Servicing Fee: (i) the Originator's Percentage then in effect
of any remaining Collections received by the Servicer on such Business Day shall
be deposited to the Originator's Account, and (ii) the Buyer's Percentage then
in effect of any remaining Collections received by the Servicer shall be
deposited to the Facility Account.
Section 2.3 Payment Recission. No amount due and owing to either party hereunder
shall be considered paid or applied hereunder to the extent that, at any time,
all or any portion of such payment or application is rescinded by application of
law or judicial authority, or must otherwise be returned or refunded for any
reason. The paying party shall remain obligated for the amount of any payment or
application so rescinded, returned or refunded, and shall promptly pay to the
Person who suffered such recission, return or refund) the full amount thereof,
plus interest thereon at the Default Fee from the date of any such recission,
return or refunding.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of the Originator. Originator hereby
represents and warrants to Buyer and its assigns, as of the date hereof and as
of each Business Day hereafter through and including the Termination Date that:
(a) Existence and Power. Originator is a limited partnership, duly organized,
validly existing and in good standing under the laws of Delaware, and is duly
qualified to do business and is in good standing as a foreign partnership, and
has and holds all partnership power and all governmental licenses,
authorizations, consents and approvals required to carry on its business in each
jurisdiction in which its business is conducted except where the failure to so
qualify or so hold could not reasonably be expected to have a Material Adverse
Effect.
(b) Power and Authority; Due Authorization, Execution and Delivery. The
execution and delivery by Originator of this Agreement and each other
Transaction Document to which it is a party, and the performance of its
obligations hereunder and thereunder and, Originator's use of the proceeds of
the Purchase made hereunder, are within its partnership powers and authority and
have been duly authorized by all necessary partnership action on its part. This
Agreement and each other Transaction Document to which Originator is a party has
been duly executed and delivered by Originator.
(c) No Conflict. The execution and delivery by Originator of this Agreement and
each other Transaction Document to which it is a party, and the performance of
its obligations hereunder and thereunder do not contravene or violate (i) its
certificate of formation or partnership agreement, (ii) any law, rule or
regulation applicable to it, (iii) any restrictions under any agreement,
contract or instrument to which it is a party or by which it or any of its
property is bound, or (iv) any order, writ, judgment, award, injunction or
decree binding on or affecting it or its property, and do not result in the
creation or imposition of any Adverse Claim on assets of Originator or its
Subsidiaries (except as created under the Transaction Documents) except, in each
case, where such contravention or violation could not reasonably be expected to
have a Material Adverse Effect; and no transaction contemplated hereby requires
compliance with any bulk sales act or similar law.
(d) Governmental Authorization. Other than the filing of the financing
statements required hereunder, 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 and delivery by Originator of this Agreement
and each other Transaction Document to which it is a party and the performance
of its obligations hereunder and thereunder.
(e) Actions, Suits. There are no actions, suits or proceedings pending, or to
the best of Originator's knowledge, threatened, against or affecting Originator,
or any of its properties, in or before any Governmental Authority, which (a)
purport to affect or pertain to this Agreement or any other Transaction Document
or any of the transactions contemplated hereby or thereby; or (b) if determined
adversely to Originator, would reasonably be expected to have a Material Adverse
Effect. No injunction, writ, temporary restraining order or any order of any
nature has been issued by any court or other Governmental Authority purporting
to enjoin or restrain the execution, delivery or performance of this Agreement
or any other Transaction Document, or directing that the transactions provided
for herein or therein not be consummated as herein or therein provided.
(f) Binding Effect. This Agreement and each other Transaction Document to which
Originator is a party constitute the legal, valid and binding obligations of
Originator enforceable against Originator in accordance with their respective
terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws relating to or limiting
creditors' rights generally and by general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
(g) Accuracy of Information. All information heretofore furnished by Originator
or any of its Affiliates to Buyer (or its assigns) for purposes of or in
connection with this Agreement, any of the other Transaction Documents or any
transaction contemplated hereby or thereby is, and all such information
hereafter furnished by Originator or any of its Affiliates to Buyer (or its
assigns) will be, true and accurate in every material respect on the date such
information is stated or certified and does not and will not contain any untrue
statement of a material fact or omit any material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the time when made
or delivered.
(h) Use of Proceeds. No Purchase Price payment hereunder will be used (i) for a
purpose that violates, or would be inconsistent with, any law, rule or
regulation applicable to Originator or (ii) to acquire any security in any
transaction which is subject to Section 13 or 14 of the Securities Exchange Act
of 1934, as amended. (i) Good Title. On the Initial Computation Date and upon
the creation of each Pool Receivable coming into existence after the Initial
Computation Date, Originator (i) is the legal and beneficial owner of the Pool
Receivables and (ii) is the legal and beneficial owner of the Collections and
Related Security with respect thereto, in each case, free and clear of any
Adverse Claim except as created by the Transaction Documents.
(j) Perfection. This Agreement, together with the filing of the financing
statements contemplated hereby, is effective to transfer to Buyer (and Buyer
shall acquire from Originator) legal and equitable title to, with the right to
sell and encumber, the Receivable Interest and the Contributed Interest, free
and clear of any Adverse Claim, except as created by the Transactions Documents.
There have been duly filed all financing statements or other similar instruments
or documents necessary under the UCC (or any comparable law) of all appropriate
jurisdictions to perfect Buyer's ownership of the Receivable Interest and the
Contributed Interest.
(k) Places of Business and Locations of Records. Originator is organized under
the laws of Delaware. The principal places of business and chief executive
office of Originator and the offices where it keeps all of its records regarding
the Receivable Interest are located at the address(es) listed on Exhibit II, or
such other locations of which Buyer has been notified in accordance with Section
5.13(a) in jurisdictions where all action required by Section 5.13(a) has been
taken and completed. Originator's Federal Employer Identification Number is
correctly set forth on Exhibit II.
(l) Material Adverse Effect. Since April 30, 2000, no event has occurred that
would have a Material Adverse Effect.
(m) Names. In the five (5) years prior to the date of this Agreement, Originator
has not used any partnership names, trade names or assumed names other than the
name in which it has executed this Agreement and as listed on Exhibit II.
(n) Ownership of Buyer. Originator owns, directly or indirectly, 100% of the
issued and outstanding Equity Interests of Buyer, free and clear of any Adverse
Claim. Such Equity Interests are validly issued, fully paid and nonassessable,
and there are no options, warrants or other rights to acquire securities of
Buyer.
(o) Not a Regulated Entity. Originator is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, or any successor
statute. Originator is not subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act,
any state public utilities code, or any other Federal or state statute or
regulation limiting its ability to incur Indebtedness or to sell interests in
the Pool Receivables.
(p) Compliance with Law. Originator has complied with all applicable laws,
rules, regulations, orders, writs, judgments, injunctions, decrees or awards to
which it may be subject, except where the failure to so comply could not
reasonably be expected to have a Material Adverse Effect. Each Pool Receivable,
together with the Contract related thereto, does not contravene any laws, rules
or regulations applicable thereto (including, without limitation, laws, rules
and regulations relating to truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection practices and
privacy), and no part of such Contract is in violation of any such law, rule or
regulation, except where such contravention or violation could not reasonably be
expected to have a Material Adverse Effect.
(q) Compliance with Credit and Collection Policy. Originator has complied in all
material respects with the Credit and Collection Policy with regard to each Pool
Receivable and the related Contract, and has not made any change to such Credit
and Collection Policy, except such material change as to which Buyer (or its
assigns) has been notified in accordance with Section 5.13(a).
(r) Eligible Receivables. Each of the Receivables included as a Pool Receivable
in the Receivable Interest or the Contributed Interest on any day prior to the
Termination Date is an Eligible Receivable.
(s) Payments to Originator. Neither the sale by Originator of the Receivable
Interest, nor the contribution by Originator of the Contributed Interest, is
voidable under any section of the Federal Bankruptcy Code.
(t) Enforceability of Contracts. Each Contract with respect to each Pool
Receivable is effective to create, and has created, a legal, valid and binding
obligation of the related Obligor to pay the Outstanding Balance of the Pool
Receivable created thereunder and any accrued interest thereon, enforceable
against the Obligor in accordance with its terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, reorganization or other similar
laws relating to or limiting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(u) Accounting. The manner in which Originator accounts for the sale of the
Receivable Interest and the contribution of the Contributed Interest does not
jeopardize its characterization as being a true sale or an absolute
contribution, as applicable.
(v) Tax Status. Originator is subject to taxation under the Code only as a
partnership and not as a corporation.
ARTICLE IV.
CONDITIONS OF PURCHASE
Section 4.1 Conditions Precedent to Purchase. The Purchase of the Receivable
Interest under this Agreement is subject to the conditions precedent that (a)
Buyer shall have been capitalized with the initial Contributed Interest, (b) the
Agent shall have received on or before the date of such purchase those documents
listed on Schedule A hereto, (c) all conditions precedent to the initial
purchase under the Purchase Agreement shall have been satisfied, (d) the
representations and warranties set forth in Section 3.1 are true and correct on
and as of the date of the Purchase, and (e) no event has occurred and is
continuing, or would result from the Purchase, that will constitute a
Termination Event, and no event has occurred and is continuing, or would result
from the Purchase, that would constitute a Potential Termination Event.
ARTICLE V.
COVENANTS
Section 5.1 Financial Reporting. Originator shall deliver to the Buyer and the
Agent (as Buyer's assignee), in form and detail satisfactory to the Buyer and
the Agent (as Buyer's assignee) and consistent with the form and detail of
financial statements and projections provided to the Buyer and the Agent (as
Buyer's assignee) by Originator and its Affiliates prior to the date of this
Agreement:
(a) Originator's Annual Financial Statements. As soon as available, but not
later than 100 days after the end of each fiscal year, a copy of the audited
consolidated balance sheet of Originator and its Subsidiaries as at the end of
such year and the related consolidated statements of income or operations,
partners' or shareholders' equity and cash flows for such year, setting forth in
each case in comparative form the figures for the previous fiscal year, and
accompanied by the opinion of a nationally-recognized independent public
accounting firm ("Independent Auditor") which report shall state that such
consolidated financial statements present fairly the financial position for the
periods indicated in conformity with GAAP applied on a basis consistent with
prior years. Such opinion shall not be qualified or limited in any manner,
including on account of any limitation on it because of a restricted or limited
examination by the Independent Auditor of any material portion of the
Originator's or any Subsidiary's records;
(b) Originator's Quarterly Financial Statements. As soon as available, but not
later than 45 days after the end of each of the first three fiscal quarters of
each fiscal year, a copy of the unaudited consolidated balance sheet of
Originator and its Subsidiaries as of the end of such quarter and the related
consolidated statements of income, partners' or shareholders' equity and cash
flows for the period commencing on the first day and ending on the last day of
such quarter, and certified by a Responsible Officer as fairly presenting, in
accordance with GAAP (subject to ordinary, good faith year-end audit
adjustments), the financial position and the results of operations of Originator
and the Subsidiaries; and
(c) General Partner Annual Consolidated Statements. As soon as available, but
not later than 100 days after the end of each fiscal year of the General
Partner, a copy of the unaudited (or audited, if available) consolidated balance
sheets of the General Partner as of the end of such fiscal year and the related
consolidated statements of income, shareholders' equity and cash flows for such
fiscal year, certified by a Responsible Officer as fairly presenting, in
accordance with GAAP, the financial position and the results of operations of
the General Partner and its Subsidiaries (or, if available, accompanied by an
opinion of an Independent Auditor as described in Section 5.1(a) above).
Section 5.2 Certificates; Other Information. Originator shall furnish to
the Buyer and the Agent (as Buyer's assignee):
(a) Independent Auditor's Certificate. Concurrently with the delivery of the
financial statements referred to in Section 5.1(a), a certificate of the
Independent Auditor stating that in making the examination necessary therefor no
knowledge was obtained of any Termination Event or Potential Termination Event,
except as specified in such certificate;
(b) Compliance Certificate. Concurrently with the delivery of the financial
statements referred to in Sections 5.1(a) and (b), a Compliance Certificate
executed by a Responsible Officer with respect to the periods covered by such
financial statements together with supporting calculations and such other
supporting detail as the Buyer and the Agent (as Buyer's assignee) shall
require;
(c) SEC Reports. Promptly, copies of all financial statements and reports that
the MLP sends to its partners, and copies of all financial statements and
regular, periodic or special reports (including Forms 10-K, 10-Q and 8-K) that
Originator or any Affiliate of Originator, the General Partner, the MLP or any
Subsidiary may make to, or file with, the SEC; and
(d) Other Information. Promptly, such additional information regarding the Pool
Receivables or the business, financial or corporate affairs of Originator, the
General Partner, the MLP or any Subsidiary as the Buyer or the Agent (as Buyer's
assignee) may from time to time request.
Section 5.3 Notices. Originator shall promptly notify the Buyer and the
Agent (as Buyer's assignee):
(a) Of the occurrence of any Potential Termination Event or Termination Event;
(b) Of any matter that has resulted or may reasonably be expected to result in a
Material Adverse Effect, including (i) breach or non-performance of, or any
default under, a Contractual Obligation of Originator, the General Partner, the
MLP or any Subsidiary; (ii) any dispute, litigation, investigation, proceeding
or suspension between Originator, the General Partner, the MLP or any Subsidiary
and any Governmental Authority; or (iii) the commencement of, or any material
development in, any litigation or proceeding affecting Originator, the General
Partner, the MLP or any Subsidiary, including pursuant to any applicable
Environmental Laws, in each case to the extent that any of the foregoing has
resulted or may reasonably be expected to result in a Material Adverse Effect;
(c) The occurrence of a default or an event of default under any other financing
arrangement pursuant to which Originator, the General Partner or the MLP is a
debtor or an obligor;
(d) From and after the time, if any, when either Standard and Poor's Ratings
Group or Moody's Investors Service, Inc. rates any Indebtedness of Originator,
any downgrade of which Originator becomes aware in the rating of any such
Indebtedness by either such rating agency, setting forth the Indebtedness
affected and the nature of such change;
(e) At least thirty (30) days prior to the effectiveness of any material change
in or material amendment to the Credit and Collection Policy, a copy of the
Credit and Collection Policy then in effect and a notice (A) indicating such
change or amendment, and (B) if such proposed change or amendment would be
reasonably likely to adversely affect the collectibility of the Pool Receivables
or decrease the credit quality of any newly created Pool Receivables, requesting
Buyer's consent thereto;
(f) Of any material change in accounting policies or financial reporting
practices by Originator or any of its consolidated Subsidiaries; and
(g) If any of the representations and warranties in Article III ceases to be
true and correct.
Each notice under this Section shall be accompanied by a written statement by a
Responsible Officer setting forth details of the occurrence referred to therein,
and stating what action Originator or any affected Affiliate proposes to take
with respect thereto and at what time. Each notice under Section 5.3(a) shall
describe with particularity any and all clauses or provisions of this Agreement
or other Transaction Document that have been breached or violated.
Section 5.4 Compliance with Laws. Originator shall comply with all Requirements
of Law of any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act), except such as may be
contested in good faith or as to which a bona fide dispute may exist or the
failure of which to comply with could not reasonably be expected to have a
Material Adverse Effect.
Section 5.5 Preservation of Existence, Etc. Originator shall:
(a) Preserve and maintain in full force and effect its partnership existence and
good standing under the laws of its state or jurisdiction of organization except
in connection with transactions permitted by the Credit Agreement;
(b) Preserve and maintain in full force and effect all governmental rights,
privileges, qualifications, permits, licenses and franchises necessary or
desirable in the normal conduct of its business except in connection with
transactions permitted by the Credit Agreement, or except where the failure to
so preserve or maintain such governmental rights, privileges, qualifications,
permits, licenses and franchises could not reasonably be expected to have a
Material Adverse Effect;
(c) Preserve its business organization and goodwill, except where the failure to
so preserve its business organization or goodwill could not reasonably be
expected to have a Material Adverse Effect; and
(d) Preserve or renew all of its registered patents, trademarks, trade names and
service marks, the non-preservation of which could reasonably be expected to
have a Material Adverse Effect.
Section 5.6 Payment of Obligations. Originator shall pay and discharge as the
same shall become due and payable (except to the extent the failure to so pay
and discharge could not reasonably be expected to have a Material Adverse
Effect), all of its obligations and liabilities, including:
(a) All tax liabilities, assessments and governmental charges or levies upon it
or its properties or assets, unless the same are being contested in good faith
by appropriate proceedings and adequate reserves in accordance with GAAP are
being maintained by Originator or such Subsidiary; and
(b) All lawful claims which, if unpaid, would by law become a Adverse Claim upon
its property, unless such claims are being contested in good faith by
appropriate proceedings and adequate reserves in accordance with GAAP are being
maintained by Originator or such Subsidiary.
Section 5.7 Audits. Originator will furnish to Buyer (or its assigns) from time
to time such information with respect to it and the Pool Receivables as Buyer
(or its assigns) may reasonably request. Originator will, from time to time
during regular business hours as requested by Buyer (or its assigns), upon
reasonable notice and at the sole cost of Originator, permit Buyer (or its
assigns) or their respective agents or representatives (i) to examine and make
copies of and abstracts from all Records in the possession or under the control
of Originator relating to the Pool Receivables and the Related Security,
including, without limitation, the related Contracts, and (ii) to visit the
offices and properties of Originator for the purpose of examining such materials
described in clause (i) above, and to discuss matters relating to Originator's
financial condition or the Pool Receivables and the Related Security or
Originator's performance under any of the Transaction Documents or Originator's
performance under the Contracts and, in each case, with any of the officers or
employees of Originator having knowledge of such matters.
Section 5.8 Keeping of Records and Books. Originator will maintain and implement
administrative and operating procedures (including, without limitation, an
ability to recreate records evidencing Pool Receivables in the event of the
destruction of the originals thereof), and keep and maintain all documents,
books, records and other information reasonably necessary or advisable for the
collection of all Pool Receivables (including, without limitation, records
adequate to permit the immediate identification of each new Pool Receivable and
all Collections of and adjustments to each existing Pool Receivable). Originator
will give Buyer (or its assigns) notice of any material change in the
administrative and operating procedures referred to in the previous sentence.
Section 5.9 Compliance with Contracts and Credit and Collection Policy.
Originator will timely and fully (i) perform and comply with all provisions,
covenants and other promises required to be observed by it under the Contracts
related to the Pool Receivables, except where the failure to so comply could not
reasonably be expected to have a material adverse impact on the overall
collectibility of the Pool Receivables, and (ii) comply in all respects with the
Credit and Collection Policy in regard to each Pool Receivable and the related
Contract, except where the failure to so comply could not reasonably be expected
to have a material adverse impact on the overall collectibility of the Pool
Receivables.
Section 5.10 Ownership. Originator will take all necessary action to establish
and maintain, irrevocably in Buyer, legal and equitable title to the Receivable
Interest and the Contributed Interest, free and clear of any Adverse Claims
other than Adverse Claims arising under the Transaction Documents (including,
without limitation, the filing of all financing statements or other similar
instruments or documents necessary under the UCC (or any comparable law) of all
appropriate jurisdictions to perfect Buyer's interest in the Receivable Interest
and the Contributed Interest and such other action to perfect, protect or more
fully evidence the interest of Buyer as Buyer (or its assigns) may reasonably
request).
Section 5.11 Purchasers' Reliance. Originator acknowledges that the Agent and
the Purchasers are entering into the transactions contemplated by the Purchase
Agreement in reliance upon Buyer's identity as a legal entity that is separate
from Originator and any Affiliates thereof. Therefore, from and after the date
of execution and delivery of this Agreement, Originator will take all reasonable
steps including, without limitation, all steps that Buyer or any assignee of
Buyer may from time to time reasonably request to maintain Buyer's identity as a
separate legal entity and to make it manifest to third parties that Buyer is an
entity with assets and liabilities distinct from those of Originator and any
Affiliates thereof and not just a division of Originator or any such Affiliate.
Without limiting the generality of the foregoing and in addition to the other
covenants set forth herein, Originator (i) will not hold itself out to third
parties as liable for the debts of Buyer nor purport to own the Receivable
Interest or the Contributed Interest, (ii) will take all other actions necessary
on its part to ensure that Buyer is at all times in compliance with the
covenants set forth in Section 7.10 of the Purchase Agreement and (iii) will
cause all tax liabilities arising in connection with the transactions
contemplated herein or otherwise to be allocated between Originator and Buyer on
an arm's-length basis and in a manner consistent with the procedures set forth
in U.S. Treasury Regulations ss.ss.1.1502-33(d) and 1.1552-1.
Section 5.12 Collections. Originator, individually or as Servicer, will cause
all Collections on the Pool Receivables to be concentrated no less often than
weekly into the Servicer's Concentration Account; provided, however, that upon
written request of Buyer (or its assignee), Originator, individually or as
Servicer, will cause all such Collections to be concentrated each Business Day
into the Servicer's Concentration Account. Originator, individually or as
Servicer, will sweep the Buyer's Percentage of all such Collections from the
Servicer's Concentration Account no less than daily into the Facility Account
and, unless the Termination Date has occurred, immediately thereafter
transferred to the Originator's Account.
Section 5.13 Negative Covenants of Originator. Until the date on which this
Agreement terminates in accordance with its terms, Originator hereby covenants
that:
(a) Name Change, Offices and Records. Originator will not change its name,
identity or legal structure (within the meaning of Article 9 of any applicable
enactment of the UCC) or relocate its chief executive office or any office where
Records are kept unless it shall have: (i) given Buyer (or its assigns) at least
fifteen (15) days' prior written notice thereof and (ii) delivered to Buyer (or
its assigns) all financing statements, instruments and other documents requested
by Buyer (or its assigns) in connection with such change or relocation.
(b) Change in Payment Instructions to Obligors. Originator will not authorize
any Obligor to make payment to any Lock-Box or Collection Account (each, as
defined in the Purchase Agreement) other than one which is swept into the
Servicer's Concentration Account in accordance with Section 5.12.
(c) Modifications to Contracts and Credit and Collection Policy. Originator will
not make any change to the Credit and Collection Policy that could adversely
affect the collectibility of the Pool Receivables or decrease the credit quality
of any newly created Pool Receivables. Except as otherwise permitted in its
capacity as Servicer pursuant to Article VIII of the Purchase Agreement,
Originator will not extend, amend or otherwise modify the terms of any Pool
Receivable or any Contract related thereto other than in accordance with the
Credit and Collection Policy.
(d) Sales, Adverse Claims. Originator will not sell, assign (by operation of law
or otherwise) or otherwise dispose of, or grant any option with respect to, or
create or suffer to exist any Adverse Claim upon (including, without limitation,
the filing of any financing statement) or with respect to, the Receivable
Interest, the Contributed Interest, or the Servicer's Concentration Account, or
assign any right to receive income with respect thereto (other than, in each
case, the creation of the interests therein in favor of Buyer provided for
herein), and Originator will defend the right, title and interest of Buyer in,
to and under any of the foregoing property, against all claims of third parties
claiming through or under Originator.
(e) Accounting for Purchase. Originator will not, and will not permit any
Affiliate to, account for or treat (whether in financial statements or
otherwise) the transactions contemplated hereby in any manner other than the
sale of the Receivable Interest and a contribution of the Contributed Interest
by Originator to Buyer except to the extent that either such transaction is not
recognized on account of consolidated financial reporting in accordance with
generally accepted accounting principles.
(f) Change in Business. Originator shall not engage in any material line of
business substantially different from those lines of business carried on by
Originator and the Restricted Subsidiaries on the date of this Agreement.
(g) Accounting Changes. Originator shall not, and shall not suffer or permit any
Restricted Subsidiary to, make any significant change in accounting treatment or
reporting practices, except as required by GAAP, or change the fiscal year of
Originator or of any Restricted Subsidiary except as required by the Code.
ARTICLE VI.
ADMINISTRATION AND COLLECTION
Section 6.1 Designation of Servicer. The servicing, administration and
collection of the Pool Receivables shall be conducted by such Person (the
"Servicer") so designated from time to time in accordance with this Section 6.1.
Ferrellgas, L.P. is hereby designated as, and hereby agrees to perform the
duties and obligations of, the Servicer pursuant to the terms of this Agreement
and the Purchase Agreement. The Agent (as Buyer's assignee) may at any time
designate as Servicer any Person to succeed Ferrellgas, L.P. or any successor
Servicer; provided, however, that unless a Termination Event has occurred,
replacement of the Servicer shall not result in the occurrence of the
Termination Date.
Section 6.2 Duties of Servicer.
(a) The Servicer shall take or cause to be taken all such actions as may be
necessary or advisable to collect each Pool Receivable from time to time, all in
accordance with applicable laws, rules and regulations, with reasonable care and
diligence, and in accordance with the Credit and Collection Policy.
(b) The Servicer shall administer the Collections in accordance with the
procedures described in this Agreement and the Purchase Agreement.
(c) Any payment by an Obligor in respect of any indebtedness owed by it to
Originator shall, except as otherwise specified by such Obligor or otherwise
required by contract or law and unless otherwise instructed by the Agent, be
applied as a Collection of any Pool Receivable of such Obligor (starting with
the oldest such Pool Receivable) to the extent of any amounts then due and
payable thereunder before being applied to any other receivable or other
obligation of such Obligor.
Section 6.3 Servicing Fee. In consideration of Ferrellgas, L.P.'s agreement to
act as Servicer hereunder and under the Purchase Agreement, the parties hereby
agree that, so long as Ferrellgas, L.P. shall continue to perform as Servicer
hereunder and under the Purchase Agreement, as compensation for its servicing
activities, Ferrellgas, L.P. shall be entitled to a per annum fee (the
"Servicing Fee"), payable monthly in arrears on the 20th day of each month
hereafter (or, if any such date is not a Business Day, on the next succeeding
Business Day), determined between the Servicer and Buyer on an arms'-length
basis at a rate not to exceed 2.0% per annum of the average aggregate
Outstanding Balance of all Pool Receivables during the calendar month then most
recently ended (at any time while Ferrellgas, L.P. or one of its Affiliates is
acting as Servicer).
ARTICLE VII.
TERMINATION EVENTS
Section 7.1 Termination Events. The occurrence of any one or more of the
following events shall constitute a Termination Event:
(a) Non-Payment. Originator fails to pay, within 5 days after the same becomes
due, any interest, fee or any other amount payable under this Agreement or under
any other Transaction Document; or
(b) Representation or Warranty. Any representation or warranty by Originator
made or deemed made in this Agreement, in any other Transaction Document, or
which is contained in any certificate, document or financial or other statement
by Originator or any Responsible Officer furnished at any time under this
Agreement, or in or under any other Transaction Document, is incorrect in any
material respect on or as of the date made or deemed made; or
(c) Specific Defaults. Originator fails to perform or observe any term,
covenant or agreement contained in any of Section 5.3(a), 5.12 or 5.13; or
(d) Other Defaults. Originator fails to perform or observe any other term or
covenant contained in this Agreement or any other Transaction Document, and such
default shall continue unremedied for a period of 30 days after the earlier of
(i) the date upon which a Responsible Officer knew or reasonably should have
known of such failure or (ii) the date upon which written notice thereof is
given to Originator by Buyer or the Agent (as Buyer's assignee); or
(e) Cross-Default. (i) Any Event of Default under and as defined in the Credit
Agreement or the Synthetic Lease Documents shall occur and either (A) the
administrative agent thereunder accelerates the Indebtedness arising pursuant
thereto, or (B) the requisite lenders thereunder shall not have agreed in
writing to waive such Event of Default or to forbear from exercising their
remedies as a result thereof within 30 days after the occurrence thereof; or
(ii) Originator, the General Partner or any Restricted Subsidiary (A) fails to
make any payment in respect of any Indebtedness (other than Indebtedness arising
pursuant to the Credit Agreement), Synthetic Lease Obligation (other than one
arising under the Synthetic Lease Documents) or Contingent Obligation having an
aggregate principal amount (including undrawn committed or available amounts and
including amounts owing to all creditors under any combined or syndicated credit
arrangement) of more than $10,000,000 when due (whether by scheduled maturity,
required prepayment, acceleration, demand, or otherwise) and such failure
continues after the applicable grace or notice period, if any, specified in the
relevant document on the date of such failure; or (B) fails to perform or
observe any other condition or covenant, or any other event (including any
termination or similar event in respect of any Accounts Receivable
Securitization) shall occur or condition exist, under any agreement or
instrument relating to any such Indebtedness (other than Indebtedness pursuant
to the Credit Agreement), Synthetic Lease Obligation (other than one arising
under the Synthetic Lease Documents) or Contingent Obligation, and such failure
continues after the applicable grace or notice period, if any, specified in the
relevant document on the date of such failure if the effect of such failure,
event or condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Indebtedness or such
Synthetic Lease Obligation (or a trustee or agent on behalf of such holder or
holders or beneficiary or beneficiaries) to cause such Indebtedness or such
Synthetic Lease Obligation to be declared to be due and payable prior to its
stated maturity or to cause such Indebtedness, Synthetic Lease Obligation or
Contingent Obligation to be prepaid, purchased or redeemed by Originator, the
General Partner or any Restricted Subsidiary, or such Contingent Obligation to
become payable or cash collateral in respect thereof to be demanded; or
(f) Insolvency; Voluntary Proceedings. The General Partner or Originator (i)
ceases or fails to be solvent, or generally fails to pay, or admits in writing
its inability to pay, its debts as they become due, subject to applicable grace
periods, if any, whether at stated maturity or otherwise; (ii) voluntarily
ceases to conduct its business in the ordinary course; (iii) commences any
Insolvency Proceeding with respect to itself; or (iv) takes any action to
effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary Insolvency Proceeding is
commenced or filed against the General Partner or Originator, or any writ,
judgment, warrant of attachment, execution or similar process, is issued or
levied against a substantial part of any such Person's properties, and any such
proceeding or petition shall not be dismissed, or such writ, judgment, warrant
of attachment, execution or similar process shall not be released, vacated or
fully bonded within 60 days after commencement, filing or levy; (ii) the General
Partner or Originator admits the material allegations of a petition against it
in any Insolvency Proceeding, or an order for relief (or similar order under
non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) the General
Partner or Originator acquiesces in the appointment of a receiver, trustee,
custodian, conservator, liquidator, mortgagee in possession (or agent therefor),
or other similar Person for itself or a substantial portion of its property or
business; or
(h) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan which has
resulted or could reasonably be expected to result in liability of Originator or
the General Partner under Title IV of ERISA to the Pension Plan or the PBGC in
an aggregate amount in excess of $10,000,000; or (ii) the commencement or
increase of contributions to, or the adoption of or the amendment of a Pension
Plan by Originator, the General Partner or any of their Affiliates which has
resulted or could reasonably be expected to result in an increase in Unfunded
Pension Liability among all Pension Plans in an aggregate amount in excess of
$10,000,000; or
(i) Monetary Judgments. One or more judgments, orders, decrees or arbitration
awards is entered against Originator or the General Partner involving in the
aggregate a liability (to the extent not covered by independent third-party
insurance as to which the insurer does not dispute coverage) as to any single or
related series of transactions, incidents or conditions, of more than
$10,000,000; or
(j) Non-Monetary Judgments. Any non-monetary judgment, order or decree is
entered against Originator or the General Partner which does or would reasonably
be expected to have a Material Adverse Effect, and there shall be any period of
60 consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect; or
(k) Adverse Change. There occurs a Material Adverse Effect; or
(l) Change of Control. A Change of Control shall occur; or
(m) Leverage Ratio. Originator shall fail to maintain as of the last day of each
fiscal quarter a Leverage Ratio equal to or less than (i) 5.40 to 1.00 as of the
last day of each fiscal quarter ending after July 31, 2000 and on or prior to
January 31, 2001, and (ii) 4.90 to 1.00 as of the last day of each fiscal
quarter ending after January 31, 2001. For purposes of this Section 7.1(m), (x)
Funded Debt and Synthetic Lease Obligations shall be calculated as of the last
day of such fiscal quarter and (y) Consolidated Cash Flow shall be calculated
for the most recently ended four consecutive fiscal quarters, provided, however,
that prior to or concurrently with each delivery of a Compliance Certificate
pursuant to Section 5.2(b), Originator may elect to calculate Consolidated Cash
Flow for the most recently ended eight consecutive fiscal quarters (in which
case Consolidated Cash Flow shall be divided by two); or
(n) Interest Coverage Ratio. Originator shall fail to maintain, as of the last
day of each fiscal quarter of Originator, an Interest Coverage Ratio for the
fiscal period consisting of such fiscal quarter and the three immediately
preceding fiscal quarters of at least (i) 2.15 to 1.00 for each such period of
four fiscal quarters ending on or prior to January 31, 2001 and (ii) 2.40 to
1.00 each such period of four fiscal quarters ending after January 31, 2001; or
(o) Excessive Contribution or Subordinated Note Balance. The aggregate principal
amount outstanding under the Subordinated Note, plus (ii) the Contributed
Interest, plus (iii) all other Investments that are not Permitted Investments
(each, as defined in the Indenture dated as of April 26, 1996 among the MLP and
Ferrellgas Partners Finance Corp, as obligors, Originator, as guarantor, and
American Bank National Association, as trustee) exceeds $30,000,000 at any one
time outstanding.
Section 7.2 Remedies. Upon the occurrence and during the continuation of a
Termination Event, Buyer may take any of the following actions: (i) declare the
Termination Date to have occurred, whereupon the Termination Date shall
forthwith occur, without demand, protest or further notice of any kind, all of
which are hereby expressly waived by Originator; provided, however, that upon
the occurrence of a Termination Event described in Section 7.1(f) or (g), or of
an actual or deemed entry of an order for relief with respect to Originator
under the Federal Bankruptcy Code, the Termination Date shall automatically
occur, without demand, protest or any notice of any kind, all of which are
hereby expressly waived by Originator and (ii) to the fullest extent permitted
by applicable law, declare that the Default Fee shall accrue with respect to any
amounts then due and owing by Originator to Buyer. The aforementioned rights and
remedies shall be without limitation and shall be in addition to all other
rights and remedies of Buyer and its assigns otherwise available under any other
provision of this Agreement, by operation of law, at equity or otherwise, all of
which are hereby expressly preserved, including, without limitation, all rights
and remedies provided under the UCC, all of which rights shall be cumulative.
ARTICLE VIII.
INDEMNIFICATION
Section 8.1 Indemnities by Originator. Without limiting any other rights that
Buyer may have hereunder or under applicable law, Originator hereby agrees to
indemnify (and pay upon demand to) Buyer and its assigns, officers, directors,
agents and employees (each, an "Indemnified Party") from and against any and all
damages, losses, claims, taxes, liabilities, costs, expenses and for all other
amounts payable, including reasonable attorneys' fees (which attorneys may be
employees of Buyer or any such assign) and disbursements (all of the foregoing
being collectively referred to as "Indemnified Amounts") awarded against or
incurred by any of them arising out of or as a result of this Agreement or the
acquisition, either directly or indirectly, by Buyer of the Receivable Interest
and/or the Contributed Interest, excluding, however:
(a) Indemnified Amounts to the extent that a final judgment of
a court of competent jurisdiction holds that such Indemnified Amounts
resulted from gross negligence or willful misconduct on the part of the
Indemnified Party seeking indemnification;
(b) Indemnified Amounts to the extent the same includes losses
in respect of Pool Receivables that are uncollectible on account of the
insolvency, bankruptcy or lack of creditworthiness of the related
Obligor; or
(c) taxes imposed by the jurisdiction in which such
Indemnified Party's principal executive office is located, on or
measured by the overall net income of such Indemnified Party to the
extent that the computation of such taxes is consistent with the
characterization for income tax purposes of the acquisition by the
Purchasers of Purchaser Interests under the Purchase Agreement as a
loan or loans by the Purchasers to Buyer secured by, among other
things, the Receivable Interest and the Contributed Interest;
provided, however, that nothing contained in this sentence shall limit the
liability of Originator or limit the recourse of Buyer to Originator for amounts
otherwise specifically provided to be paid by Originator under the terms of this
Agreement. Without limiting the generality of the foregoing indemnification,
Originator shall indemnify Buyer for Indemnified Amounts (including, without
limitation, losses in respect of uncollectible Pool Receivables, regardless of
whether reimbursement therefor would constitute recourse to Originator) relating
to or resulting from:
(i) any representation or warranty made by Originator
(or any officers of Originator) under or in connection with
this Agreement, any other Transaction Document or any other
information or report delivered by Originator pursuant hereto
or thereto that shall have been false or incorrect when made
or deemed made;
(ii) the failure by Originator, to comply with any
applicable law, rule or regulation with respect to any Pool Receivable
or Contract related thereto, or the nonconformity of any Pool
Receivable or Contract included therein with any such applicable law,
rule or regulation or any failure of Originator to keep or perform any
of its obligations, express or implied, with respect to any Contract;
(iii) any failure of Originator to perform its
duties, covenants or other obligations in accordance with the
provisions of this Agreement or any other Transaction Document;
(iv) any products liability, personal injury or
damage suit or other similar claim arising out of or in connection with
merchandise, insurance or services that are the subject of any Contract
or any Pool Receivable;
(v) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the payment
of any Pool Receivable (including, without limitation, a defense based
on such Pool Receivable or the related Contract not being a legal,
valid and binding obligation of such Obligor enforceable against it in
accordance with its terms), or any other claim resulting from the sale
of the merchandise or service related to such Pool Receivable or the
furnishing or failure to furnish such merchandise or services;
(vi) the commingling of Collections allocable to the
Receivable Interest or the Contributed Interest at any time with other
funds;
(vii) any investigation, litigation or proceeding
related to or arising from this Agreement or any other Transaction
Document, the transactions contemplated hereby, the use of the proceeds
of any Purchase Price payment, the ownership of the Receivable Interest
or the Contributed Interest or any other investigation, litigation or
proceeding relating to Originator in which any Indemnified Party
becomes involved as a result of any of the transactions contemplated
hereby;
(viii) any inability to litigate any claim against
any Obligor in respect of any Pool Receivable as a result of such
Obligor being immune from civil and commercial law and suit on the
grounds of sovereignty or otherwise from any legal action, suit or
proceeding;
(ix) any Termination Event described in Section 7.1(f) or (g);
(x) any failure to vest and maintain vested in Buyer,
or to transfer to Buyer, legal and equitable title to, and ownership
of, the Receivable Interest and the Contributed Interest free and clear
of any Adverse Claim;
(xi) the failure to have filed, or any delay in
filing, financing statements or other similar instruments or documents
under the UCC of any applicable jurisdiction or other applicable laws
with respect to the Receivable Interest and the Contributed Interest,
and the proceeds of any thereof, whether at the time of the Purchase or
at any subsequent time;
(xii) any action or omission by Originator which
reduces or impairs the rights of Buyer with respect to any Pool
Receivable or the value of any such Pool Receivable; and
(xiii) any attempt by any Person to void the Purchase
hereunder under statutory provisions or common law or equitable action.
Section 8.2 Other Costs and Expenses. Originator shall pay all reasonable costs
and out-of-pocket expenses in connection with the preparation, execution and
delivery of this Agreement. Originator shall pay to Buyer on demand any and all
costs and expenses of Buyer, if any, including reasonable counsel fees and
expenses in connection with the enforcement of this Agreement and the other
documents delivered hereunder and in connection with any restructuring or
workout of this Agreement or such documents, or the administration of this
Agreement following a Termination Event.
ARTICLE IX.
MISCELLANEOUS
Section 9.1 Waivers and Amendments.
(a) No failure or delay on the part of Buyer (or its assigns) in exercising any
power, right or remedy under this Agreement shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power, right or remedy
preclude any other further exercise thereof or the exercise of any other power,
right or remedy. The rights and remedies herein provided shall be cumulative and
nonexclusive of any rights or remedies provided by law. Any waiver of this
Agreement shall be effective only in the specific instance and for the specific
purpose for which given.
(b) No provision of this Agreement or the Subordinated Note may be amended,
supplemented, modified or waived except in writing signed by Originator and
Buyer and, to the extent required under the Purchase Agreement, the Agent and
the Financial Institutions or the Required Financial Institutions.
Section 9.2 Notices. All communications and notices provided for hereunder shall
be in writing (including bank wire, telecopy or electronic facsimile
transmission or similar writing) and shall be given to the other parties hereto
at their respective addresses or telecopy numbers set forth on the signature
pages hereof or at such other address or telecopy number as such Person may
hereafter specify for the purpose of notice to the other party hereto. Each such
notice or other communication shall be effective (a) if given by telecopy, upon
the receipt thereof, (b) if given by mail, three (3) Business Days after the
time such communication is deposited in the mail with first class postage
prepaid or (c) if given by any other means, when received at the address
specified in this Section 7.2.
Section 9.3 Protection of Ownership Interests of Buyer.
(a) Originator agrees that from time to time, at its expense, it will promptly
execute and deliver all instruments and documents, and take all actions, that
may be necessary or desirable, or that Buyer (or its assigns) may request, to
perfect, protect or more fully evidence the interest of Buyer hereunder and the
Receivable Interest and the Contributed Interest, or to enable Buyer (or its
assigns) to exercise and enforce their rights and remedies hereunder. At any
time, Buyer (or its assigns) may, at Originator's sole cost and expense, direct
Originator to notify the Obligors of Pool Receivables of the ownership interests
of Buyer under this Agreement and may also, at any time after the occurrence and
continuation of a Termination Event, direct that payments of all amounts due or
that become due under any or all Pool Receivables be made directly to Buyer or
its designee.
(b) If Originator fails to perform any of its obligations hereunder, Buyer (or
its assigns) may (but shall not be required to) perform, or cause performance
of, such obligations, and Buyer's (or such assigns') costs and expenses incurred
in connection therewith shall be payable by Originator as provided in Section
6.2. Originator irrevocably authorizes Buyer (and its assigns) at any time and
from time to time in the sole discretion of Buyer (or its assigns), and appoints
Buyer (and its assigns) as its attorney(ies)-in-fact, to act on behalf of
Originator (i) to, after the occurrence and continuance of a Termination Event
execute on behalf of Originator as debtor and to file financing statements
necessary or desirable in Buyer's (or its assigns') sole discretion to perfect
and to maintain the perfection and priority of the interest of Buyer in the Pool
Receivables and (ii) after the occurrence and continuance of a Termination
Event, to file a carbon, photographic or other reproduction of this Agreement or
any financing statement with respect to the Receivable Interest and the
Contributed Interest as a financing statement in such offices as Buyer (or its
assigns) in their sole discretion deem necessary or desirable to perfect and to
maintain the perfection and priority of Buyer's interest in the Receivable
Interest and the Contributed Interest. This appointment is coupled with an
interest and is irrevocable.
Section 9.4 Confidentiality.
(a) Originator shall maintain and shall cause each of its employees and officers
to maintain the confidentiality of the Fee Letter and the other confidential or
proprietary information with respect to the Agent and Conduit and their
respective businesses obtained by it or them in connection with the structuring,
negotiating and execution of the transactions contemplated herein, except that
Originator and its officers and employees may disclose such information to
Originator's external accountants and attorneys and as required by any
applicable law or order of any judicial or administrative proceeding.
(b) Originator hereby consents to the disclosure of any nonpublic information
with respect to it (i) to Buyer, the Agent, the Financial Institutions or
Conduit, (ii) to any prospective or actual assignee or participant of any of the
Persons described in clause (i), (iii) to any rating agency, Commercial Paper
dealer or provider of a surety, guaranty or credit or liquidity enhancement to
Conduit or any entity organized for the purpose of purchasing, or making loans
secured by, financial assets for which Bank One acts as the administrative agent
and (iv) to any officers, directors, employees, outside accountants and
attorneys of any of the foregoing, provided each such Person is informed of the
confidential nature of such information and, in the case of a Person described
in clause (ii), agrees in writing to keep such information confidential. In
addition, the Purchasers and the Agent may disclose any such nonpublic
information pursuant to any law, rule, regulation, direction, request or order
of any judicial, administrative or regulatory authority or proceedings (whether
or not having the force or effect of law).
(c) Buyer shall maintain and shall cause each of its employees and officers to
maintain the confidentiality of the confidential or proprietary information with
respect to Originator, the Obligors and their respective businesses obtained by
it in connection with the due diligence evaluations, structuring, negotiating
and execution of the Transaction Documents, and the consummation of the
transactions contemplated herein and any other activities of Buyer arising from
or related to the transactions contemplated herein provided, however, that each
of Buyer and its employees and officers shall be permitted to disclose such
confidential or proprietary information: (i) to the Persons described in clause
(b) above, and (ii) to the extent required pursuant to any applicable law, rule,
regulation, direction, request or order of any judicial, administrative or
regulatory authority or proceedings with competent jurisdiction (whether or not
having the force or effect of law) so long as such required disclosure is made
under seal to the extent permitted by applicable law or by rule of court or
other applicable body.
Section 9.5 Bankruptcy Petition. (a) Originator and Buyer each hereby covenants
and agrees that, prior to the date that is one year and one day after the
payment in full of all outstanding senior indebtedness of Conduit, it will not
institute against, or join any other Person in instituting against Conduit any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other similar proceeding under the laws of the United States or any state of
the United States.
(b) Originator covenants and agrees that, prior to the date
that is one year and one day after the payment in full of all outstanding
obligations of Buyer under the Purchase Agreement, it will not institute
against, or join any other Person in instituting against, Buyer any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceeding under the laws of the United States or any state of the
United States.
Section 9.6 Limitation of Liability. Except with respect to any claim arising
out of the willful misconduct or gross negligence of Conduit, the Agent or any
Financial Institution, no claim may be made by Originator or any other Person
against Conduit, the Agent or any Financial Institution or their respective
Affiliates, directors, officers, employees, attorneys or agents for any special,
indirect, consequential or punitive damages in respect of any claim for breach
of contract or any other theory of liability arising out of or related to the
transactions contemplated by this Agreement, or any act, omission or event
occurring in connection therewith; and Originator hereby waives, releases, and
agrees not to sue upon any claim for any such damages, whether or not accrued
and whether or not known or suspected to exist in its favor.
Section 9.7 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, without regard to the principles
of conflicts of laws thereof (except in the case of the other Transaction
Documents, to the extent otherwise expressly stated therein) AND EXCEPT TO THE
EXTENT THAT THE PERFECTION OF THE OWNERSHIP INTERESTS OR SECURITY INTERESTS OF
BUYER OR THE AGENT IN THE RECEIVABLE INTEREST AND THE CONTRIBUTED INTEREST IS
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF texas.
Section 9.8 CONSENT TO JURISDICTION. NOTWITHSTANDING THE CHOICE OF TEXAS LAW
PURSUANT TO SECTION 9.7, ORIGINATOR HEREBY IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT
SITTING IN NEW YORK COUNTY, NEW YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY ORIGINATOR PURSUANT TO
THIS AGREEMENT AND ORIGINATOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF
BUYER (OR ITS ASSIGNS) TO BRING PROCEEDINGS AGAINST ORIGINATOR IN THE COURTS OF
ANY OTHER JURISDICTION.
Section 9.9 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY
IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT EXECUTED BY
ORIGINATOR PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER
OR THEREUNDER.
Section 9.10 Integration; Binding Effect; Survival of Terms.
(a) This Agreement and each other Transaction Document contain the final and
complete integration of all prior expressions by the parties hereto with respect
to the subject matter hereof and shall constitute the entire agreement among the
parties hereto with respect to the subject matter hereof superseding all prior
oral or written understandings.
(b) This Agreement shall be binding upon and inure to the benefit of Originator,
Buyer and their respective successors and permitted assigns (including any
trustee in bankruptcy). Originator may not assign any of its rights and
obligations hereunder or any interest herein without the prior written consent
of Buyer. Buyer may assign at any time its rights and obligations hereunder and
interests herein to any other Person without the consent of Originator. Without
limiting the foregoing, Originator acknowledges that Buyer, pursuant to the
Purchase Agreement, may assign to the Agent, for the benefit of the Purchasers,
its rights, remedies, powers and privileges hereunder and that the Agent may
further assign such rights, remedies, powers and privileges to the extent
permitted in the Purchase Agreement. Originator agrees that the Agent, as the
assignee of Buyer, shall, subject to the terms of the Purchase Agreement, have
the right to enforce this Agreement and to exercise directly all of Buyer's
rights and remedies under this Agreement (including, without limitation, the
right to give or withhold any consents or approvals of Buyer to be given or
withheld hereunder) and Originator agrees to cooperate fully with the Agent in
the exercise of such rights and remedies. This Agreement shall create and
constitute the continuing obligations of the parties hereto in accordance with
its terms and shall remain in full force and effect until terminated in
accordance with its terms; provided, however, that the rights and remedies with
respect to (i) any breach of any representation and warranty made by Originator
pursuant to Article II; (ii) the indemnification and payment provisions of
Article VIII; and (iii) Section 9.5 shall be continuing and shall survive any
termination of this Agreement.
Section 9.11 Counterparts; Severability; Section References. This Agreement may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
Agreement. Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. Unless otherwise expressly indicated, all references herein
to "Article," "Section," "Schedule" or "Exhibit" shall mean articles and
sections of, and schedules and exhibits to, this Agreement.
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed and delivered by their
duly
authorized officers as of the date hereof.
FERRELLGAS, L.P.
By: Ferrellgas, Inc., its General Partner
By:
Name: Kevin T. Kelly
Title: Chief Financial Officer
Address:
Ferrellgas, L.P.
One Liberty Plaza
Liberty, Missouri 64068
Attention: Chief Financial Officer
Telephone: (816) 792-6901
Facsimile: (816) 792-6979
FERRELLGAS RECEIVABLES, LLC
By:
Name: Kevin T. Kelly
Title: Chief Financial Officer
Address:
One Allen Center
500 Dallas Street, Suite 2700
Houston, TX 77002
Attention: John Briscoe
Phone: (713) 844-6309
Fax: (713) 844-6527
(a)
EXHIBIT I
DEFINITIONS
This is Exhibit I to the Agreement (as hereinafter defined).
As used in the Agreement and the Exhibits, Schedules and Annexes thereto,
capitalized terms have the meanings set forth in this Exhibit I (such meanings
to be equally applicable to the singular and plural forms thereof). If a
capitalized term is used in the Agreement, or any Exhibit, Schedule or Annex
thereto, and not otherwise defined therein or in this Exhibit I, such term shall
have the meaning assigned thereto in Exhibit I to the Purchase Agreement.
"Acquisition" means any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly, in (a) the
acquisition of all or substantially all of the assets of a Person, or of any
business or division of a Person, (b) the acquisition of in excess of 50% of the
capital stock, partnership interests or equity of any Person or otherwise
causing any Person, to become a Subsidiary of the acquiring Person, or (c) a
merger or consolidation or any other combination with another Person (other than
a Person that is a Subsidiary of the acquiring Person) provided that Originator
or the Subsidiary of the acquiring entity is the surviving Person.
"Adjusted Pool Amount" means, on any date of determination, an
amount to equal to the quotient of the Funded Amount divided by 0.80.
"Adverse Claim" means any security interest, mortgage, deed of
trust, pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential arrangement of any kind
or nature whatsoever in respect of any property (including those created by,
arising under or evidenced by any conditional sale or other title retention
agreement, the interest of a lessor under a capital lease, any financing lease
having substantially the same economic effect as any of the foregoing, or the
filing of any financing statement naming the owner of the asset to which such
lien relates as debtor, under the UCC or any comparable law) and any contingent
or other agreement to provide any of the foregoing, but not including the
interest of a lessor under an operating lease.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person. A Person shall be deemed to control another Person if
the controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, by contract, or otherwise.
"Agent" has the meaning set forth in the Preliminary Statements to the
Agreement.
"Aggregate Unpaids" has the meaning set forth in the Purchase Agreement.
"Agreement" means the Receivable Interest Sale Agreement,
dated as of September 26, 2000, between Originator and Buyer, as the same may be
amended, restated or otherwise modified.
"Asset Sale" has the meaning specified in the CreditAgreement.
"Business Day" means any day on which banks are not authorized
or required to close in New York, New York or Chicago, Illinois and The
Depository Trust Company of New York is open for business.
"Buyer" has the meaning set forth in the preamble to the Agreement.
"Buyer's Percentage" means, on any date of determination, the
sum of the Variable Purchased Percentage plus the Variable Contributed
Percentage.
"Calculation Period" means (a) the period beginning on the
date hereof and ending on October 20, 2000, and (b) thereafter, each period
beginning on a Settlement Date and ending on the day preceding the next
succeeding Settlement Date.
"Capital Interests" means (a) with respect to any corporation,
any and all shares, participations, rights or other equivalent interests in the
capital of the corporation, (b) with respect to any partnership or limited
liability company, any and all partnership interests (whether general or
limited) or limited liability company interests, respectively, and 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 or
limited liability company, and (c) with respect to any other Person, ownership
interests of any type in such Person.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease that would at such time be so required to be capitalized on the
balance sheet in accordance with GAAP.
"Change of Control" means (a) the sale, lease, conveyance or
other disposition of all or substantially all of the Originator's assets to any
Person or group (as such term is used in Section 13(d)(3) of the Exchange Act)
other than James E. Ferrell, the Related Parties and any Person of which James
E. Ferrell and the Related Parties beneficially own in the aggregate 51% or more
of the voting Capital Interests (or if such Person is a partnership, 51% or more
of the general partner interests), (b) the liquidation or dissolution of
Originator or the General Partner, and/or (c) the occurrence of any transaction,
the result of which is that James E. Ferrell and the Related Parties
beneficially own in the aggregate, directly or indirectly, less than 51% of the
total voting power entitled to vote for the election of directors of the General
Partner.
"Charged-Off Receivable" means a Receivable: (i) as to which
the Obligor thereof has taken any action, or suffered any event to occur, of the
type described in Section 7.1(f) or (g) (as if references to the Originator
therein refer to such Obligor); (ii) as to which the Obligor thereof, if a
natural person, is deceased, (iii) which, consistent with the Credit and
Collection Policy, would be written off the Originator's books as uncollectible,
or (iv) which has been identified by the Originator, Buyer or Servicer as
uncollectible.
"Code" means the Internal Revenue Code of 1986, as amended,
and regulations promulgated thereunder.
"Collections" means, with respect to any Pool Receivable, all
cash collections and other cash proceeds in respect of such Pool Receivable,
including, without limitation, all Finance Charges or other related amounts
accruing in respect thereof and all cash proceeds of Related Security with
respect to such Pool Receivable.
"Compliance Certificate" means a certificate in the form of
Exhibit III hereto duly executed by a Responsible Officer of Originator.
"Conduit" has the meaning set forth in the Preliminary Statements to the
Agreement.
"Consolidated Cash Flow" means, with respect to Originator and
the Restricted Subsidiaries for any period, the Consolidated Net Income for such
period, plus (a) an amount equal to any extraordinary loss plus any net loss
realized in connection with an asset sale, to the extent such losses were
deducted in computing Consolidated Net Income, plus (b) provision for taxes
based on income or profits of Originator and the Restricted Subsidiaries for
such period, to the extent such provision for taxes was deducted in computing
Consolidated Net Income, plus (c) Consolidated Interest Expense for such period,
whether paid or accrued (including amortization of original issue discount,
non-cash interest payments and the interest component of any payments associated
with Capital Lease Obligations and net payments (if any) pursuant to Hedging
Obligations), to the extent such expense was deducted in computing Consolidated
Net Income, plus (d) depreciation and amortization (including amortization of
goodwill and other intangibles but excluding amortization of prepaid cash
expenses that were paid in a prior period) of Originator and the Restricted
Subsidiaries for such period, to the extent such depreciation and amortization
were deducted in computing Consolidated Net Income, plus (e) non-cash employee
compensation expenses of Originator and the Restricted Subsidiaries for such
period, plus (f) the Synthetic Lease Principal Component of Originator and the
Restricted Subsidiaries for such period; in each case, for such period without
duplication on a consolidated basis and determined in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to
Originator and the Restricted Subsidiaries for any fiscal period, on a
consolidated basis, the sum of (a) all interest, fees (including Letter of
Credit fees), charges and related expenses paid or payable (without duplication)
by Originator and the Restricted Subsidiaries for that fiscal period to the
Banks hereunder or to any other lender in connection with borrowed money or the
deferred purchase price of assets that are considered "interest expense" under
GAAP, plus (b) the portion of rent paid or payable (without duplication) by
Originator and the Restricted Subsidiaries for that fiscal period under Capital
Lease Obligations that should be treated as interest in accordance with
Financial Accounting Standards Board Statement No. 13, on a consolidated basis,
plus (c) the Synthetic Lease Interest Component of Originator and the Restricted
Subsidiaries for that fiscal period.
"Consolidated Net Income" means, with respect to Originator
and the Restricted Subsidiaries for any period, the aggregate of the Net Income
of Originator and the Restricted Subsidiaries for such period, on a consolidated
basis, determined in accordance with GAAP; provided, that (a) the Net Income of
any Person that is not a Restricted Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid to Originator or a Wholly-Owned Subsidiary of
the Originator, (b) the Net Income of any Person that is a Restricted Subsidiary
(other than a Wholly-Owned Subsidiary) shall be included only to the extent of
the amount of dividends or distributions paid to Originator or a Wholly-Owned
Subsidiary of the Originator, (c) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded except to the extent otherwise includable under
clause (a) above and (d) the cumulative effect of a change in accounting
principles shall be excluded.
"Contingent Obligation" means, as to any Person, any direct or
indirect liability of that Person, whether or not contingent, with or without
recourse: (a) with respect to any Indebtedness, lease, dividend, distribution,
letter of credit or other obligation (the "primary obligations") of another
Person (the "primary obligor"), including any obligation of that Person (i) to
purchase, repurchase or otherwise acquire such primary obligations or any
security therefor, (ii) to advance or provide funds for the payment or discharge
of any such primary obligation, or to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet item, level of income or financial condition of the primary
obligor, (iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation, or (iv)
otherwise to assure or hold harmless the holder of any such primary obligation
against loss in respect thereof (each, a "Guaranty Obligation"); (b) with
respect to any Surety Instrument (other than any Letter of Credit) issued for
the account of that Person or as to which that Person is otherwise liable for
reimbursement of drawings or payments; (c) to purchase any materials, supplies
or other property from, or to obtain the services of, another Person if the
relevant contract or other related document or obligation requires that payment
for such materials, supplies or other property, or for such services, shall be
made regardless of whether delivery of such materials, supplies or other
property is ever made or tendered, or such services are ever performed or
tendered; or (d) in respect of any Hedging Obligation. The amount of any
Contingent Obligation shall, in the case of Guaranty Obligations, be deemed
equal to the stated or determinable amount of the primary obligation in respect
of which such Guaranty Obligation is made or, if not stated or if
indeterminable, the maximum reasonably anticipated liability in respect thereof,
and in the case of other Contingent Obligations, shall be equal to the maximum
reasonably anticipated liability in respect thereof.
"Contract" means, with respect to any Pool Receivable, any and
all instruments, agreements, invoices or other writings pursuant to which such
Pool Receivable arises or which evidences such Pool Receivable.
"Contractual Obligation" means, as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other instrument,
document or agreement to which such Person is a party or by which it or any of
its property is bound.
"Contributed Interest" means a specified dollar amount of Pool
Receivables which equates to a variable undivided percentage interest (less than
or equal to 100%) in and to the Pool Receivables, the associated Related
Security and Collections and all proceeds of the foregoing equal to the Variable
Contributed Percentage.
"Credit Agreement" means that certain Third Amended and
Restated Credit Agreement dated as of April 18, 2000, among Originator, as
borrower, the General Partner, the financial institutions from time to time
party thereto, and Bank of America, N.A., as administrative agent and
documentation agent, as amended from time to time in accordance with the terms
thereof.
"Credit and Collection Policy" means Originator's credit and
collection policies and practices relating to Contracts and Receivables existing
on the date hereof and summarized in Exhibit V, as modified from time to time in
accordance with the Agreement.
"Deemed Collections" means Collections deemed to be received by Originator
in accordance with Section 1.4 of the Agreement.
"Default Fee" means a per annum rate of interest equal to the
sum of (i) the Prime Rate, plus (ii) 2% per annum (computed for actual days
elapsed on the basis of a 365/366-day year).
"Defaulted Receivable" means a Receivable as to which any
payment, or part thereof, remains unpaid for 61 or more days from the original
invoice date for such payment.
"Discount Factor" means a percentage calculated to provide
Buyer with a reasonable return on its investment in the Receivable Interest
after taking account of (i) the time value of money based upon the anticipated
dates of collection of the Pool Receivables and the cost to Buyer of financing
its investment in the Receivable Interest during such period and (ii) the risk
of nonpayment by the Obligors. Originator and Buyer may agree from time to time
to change the Discount Factor based on changes in one or more of the items
affecting the calculation thereof, provided that any change to the Discount
Factor shall take effect as of the commencement of a Calculation Period, shall
apply only prospectively and shall not affect the Purchase Price payment made
prior to the Calculation Period during which Originator and Buyer agree to make
such change.
"Dollars," "dollars" and "$" each mean lawful money of the United States.
"Eligible Receivable" means, at any time, a Receivable:
(i) the Obligor of which (a) if a natural person, is a resident of the United
States or, if a corporation or other business organization, is organized under
the laws of the United States or any political subdivision thereof and has its
chief executive office in the United States; (b) is not an Affiliate of any of
the parties hereto; and (c) is not a government or a governmental subdivision or
agency against which assignments of claims may only be assigned in compliance
with the Federal Assignment of Claims Act or similar legislation unless the
aggregate Outstanding Balance of all Pool Receivables from such Obligors is less
than 2% of the aggregate Outstanding Balance of all Pool Receivables,
(ii) the Obligor of which is not the Obligor on Defaulted Receivables, the
aggregate Outstanding Balance of which exceeds 10% of such Obligor's total
Receivables,
(iii) which is not a Defaulted Receivable or a Charged-Off Receivable,
(iv) which by its terms is due and payable within 30 days of the original
billing date therefor and has not had its payment terms extended,
(v) which is an "account" within the meaning of Article 9 of the UCC of all
applicable jurisdictions,
(vi) which is denominated and payable only in United States dollars in the
United States,
(vii) which arises under an invoice, which, together with such Receivable, is in
full force and effect and constitutes the legal, valid and binding obligation of
the related Obligor enforceable against such Obligor in accordance with its
terms subject to no offset, counterclaim or other defense,
(viii) which arises under an invoice which (A) does not require the Obligor
under such invoice to consent to the transfer, sale or assignment of the rights
and duties of Originator or any of its assignees under such invoice and (B) does
not contain a confidentiality provision that purports to restrict the ability of
Buyer or any of its assigns to exercise its rights under the Transaction
Documents, including, without limitation, its right to review such invoice,
(ix) which arises under an invoice that contains an obligation to pay a
specified sum of money, contingent only upon the sale of propane or the
provision of services by Originator,
(x) which, together with the invoice related thereto, does not contravene any
law, rule or regulation applicable thereto (including, without limitation, any
law, rule and regulation relating to truth in lending, fair credit billing, fair
credit reporting, equal credit opportunity, fair debt collection practices and
privacy) and with respect to which no part of the invoice related thereto is in
violation of any such law, rule or regulation,
(xi) which satisfies all material requirements of the Credit and Collection
Policy,
(xii) which was generated in the ordinary course of Originator's business,
(xiii) which arises solely from the sale of propane or the provision of services
to the related Obligor by Originator, and not by any other Person (in whole or
in part),
(xiv) as to which the Agent has not notified Originator or Buyer that the Agent
has determined, in the exercise of its commercially reasonable credit judgment,
that such Receivable or class of Receivables is not acceptable as an Eligible
Receivable,
(xv) which is not subject to any right of rescission, set-off, counterclaim, any
other defense (including defenses arising out of violations of usury laws) of
the applicable Obligor against Originator or any other Adverse Claim, and the
Obligor thereon holds no right as against Originator to cause Originator to
repurchase the propane the sale of which shall have given rise to such
Receivable (except with respect to sale discounts effected pursuant to the
invoice, or defective goods returned in accordance with the terms of the
invoice),
(xvi) as to which Originator has satisfied and fully performed all obligations
on its part with respect to such Receivable required to be fulfilled by it, and
no further action is required to be performed by any Person with respect thereto
other than payment thereon by the applicable Obligor,
(xvii) in which Buyer's undivided ownership interest therein is free and clear
of any Adverse Claim, and
(xviii) of which the Obligor and its Affiliates (considered as if they were one
and the same Obligor) are not the Obligors on more than 2% of the aggregate
Outstanding Balance of all Receivables.
"Environmental Laws" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental
Authorities, in each case relating to environmental, health, safety and land use
matters.
"Equity Interests" means Capital Interests and all warrants,
options or other rights to acquire Capital Interests (but excluding any debt
security that is convertible into, or exchangeable for, Capital Interests).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and regulations promulgated thereunder.
"ERISA Event" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by Originator or the General Partner from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which it was
a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a
cessation of operations which is treated as such a withdrawal under Section
4062(e) of ERISA; (c) the filing of a notice of intent to terminate, the
treatment of a plan amendment as a termination under Section 4041 or 4041A of
ERISA or the commencement of proceedings by the PBGC to terminate a Pension Plan
subject to Title IV of ERISA; (d) a failure by Originator or the General Partner
to make required contributions to a Pension Plan or other Plan subject to
Section 412 of the Code; (e) an event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Pension Plan; (f) the
imposition of any liability under Title IV of ERISA, other than PBGC premiums
due but not delinquent under Section 4007 of ERISA, upon Originator or the
General Partner; or (g) an application for a funding waiver or an extension of
any amortization period pursuant to Section 412 of the Code with respect to any
Pension Plan.
"Event of Default" has the meaning specified in the Credit Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, and
regulations promulgated thereunder.
"Facility Account" means Buyer's account no. 4496823691 at Wells Fargo
Bank, in Dallas, Texas, ABA No. 121000248.
"FCI ESOT" means the employee stock ownership trust of Ferrell Companies,
Inc. organized under Section 4975(e)(7) of the Code.
"Finance Charges" means, with respect to a Contract, any
finance, interest, late payment charges or similar charges owing by an Obligor
pursuant to such Contract.
"Fixed Charge Coverage Ratio" means with respect to Originator
and the Restricted Subsidiaries for any period, the ratio of Consolidated Cash
Flow for such period to Fixed Charges for such period. In the event that
Originator or any of the Restricted Subsidiaries (a) incurs, assumes or
guarantees any Indebtedness or Synthetic Lease Obligations (other than revolving
credit borrowings including, with respect to the Originator, the Loans) or (b)
redeems or repays any Indebtedness or Synthetic Lease Obligations (other than
revolving credit borrowings that are properly classified as a current liability
for GAAP including, with respect to the Originator, the Loans to the extent that
such Loans are so classified and excluding, regardless of classification, any
Loans or other Indebtedness or Synthetic Lease Obligations the proceeds of which
are used for Acquisitions or Growth Related Capital Expenditures), in any case
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date of the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Fixed Charge Ratio
Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, guarantee, redemption or
repayment of Indebtedness or Synthetic Lease Obligations, as if the same had
occurred at the beginning of the applicable reference period. The foregoing
calculation of the Fixed Charge Coverage Ratio shall also 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 Originator or any of the Restricted Subsidiaries during the reference
period or subsequent to such reference period and on or prior to the Fixed
Charge Ratio Calculation Date 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; provided, however, that with respect
to Originator and the Restricted Subsidiaries, (a) Fixed Charges shall be
reduced by amounts attributable to businesses or assets that are so disposed of
or discontinued only to the extent that the obligations giving rise to such
Fixed Charges would no longer be obligations contributing to the Fixed Charges
of Originator or the Restricted Subsidiaries subsequent to Fixed Charge Ratio
Calculation Date and (b) Consolidated Cash Flow generated by an acquired
business or asset of Originator or the Restricted Subsidiaries shall be
determined by the actual gross profit (revenues minus costs of goods sold) of
such acquired business or asset during the immediately preceding number of full
fiscal quarters as are in the reference period minus the pro forma expenses that
would have been incurred by Originator and the Restricted Subsidiaries in the
operation of such acquired business or asset during such period computed on the
basis of (i) personnel expenses for employees retained by Originator and the
Restricted Subsidiaries in the operation of the acquired business or asset and
(ii) non-personnel costs and expenses incurred by Originator and the Restricted
Subsidiaries on a per gallon basis in the operation of the Originator's business
at similarly situated Originator facilities.
"Fixed Charges" means, with respect to Originator and the
Restricted Subsidiaries for any period, the sum, without duplication, of (a)
Consolidated Interest Expense for such period, whether paid or accrued, to the
extent such expense was deducted in computing Consolidated Net Income (including
amortization of original issue discounts, non-cash interest payments, the
interest component of all payments associated with Capital Lease Obligations and
net payments (if any) pursuant to Hedging Obligations permitted under this
Agreement), (b) commissions, discounts and other fees and charges incurred with
respect to letters of credit, (c) any interest expense on Indebtedness of
another Person that is guaranteed by Originator and the Restricted Subsidiaries
or secured by an Adverse Claim on assets of any such Person, and (d) the product
of (i) all cash dividend payments on any series of preferred stock of Originator
and the Restricted Subsidiaries, times (ii) a fraction, the numerator of which
is one and the denominator of which is one minus the then current combined
federal, state and local statutory tax rate of the Originator, expressed as a
decimal, determined, in each case, on a consolidated basis and in accordance
with GAAP.
"Funded Amount" means, as of any date of determination through
and including the Termination Date, the Aggregate Capital (under and as defined
in the Purchase Agreement) then outstanding.
"Funded Debt" means all Indebtedness of Originator and the
Restricted Subsidiaries, excluding all Contingent Obligations of Originator and
the Restricted Subsidiaries under or in connection with Letters of Credit
outstanding from time to time.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of the
date of determination.
"General Partner" means Ferrellgas, Inc., a Delaware
corporation and the sole general partner of Originator.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Growth-Related Capital Expenditures" means, with respect to
any Person, all capital expenditures by such Person made to improve or enhance
the existing capital assets or to increase the customer base of such Person or
to acquire or construct new capital assets (but excluding capital expenditures
made to maintain, up to the level thereof that existed at the time of such
expenditure, the operating capacity of the capital assets of such Person as such
assets existed at the time of such expenditure).
"Guarantor" has the meaning specified in the Credit Agreement.
"Guaranty Obligation" has the meaning specified in the definition of
"Contingent Obligation."
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (a) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (b) other agreements
or arrangements designed to protect such Person against fluctuations in interest
rates.
"Indebtedness" of any Person means, without duplication: (a)
all indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade
payables entered into in the ordinary course of business on ordinary terms); (c)
all non-contingent reimbursement or payment obligations with respect to Surety
Instruments; (d) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses; (e) all indebtedness
created or arising under any conditional sale or other title retention
agreement, or incurred as financing, in either case with respect to property
acquired by the Person (even though the rights and remedies of the seller or
bank under such agreement in the event of default are limited to repossession or
sale of such property); (f) all Capital Lease Obligations; (g) all Hedging
Obligations; (h) all obligations in respect of Accounts Receivable
Securitizations (as defined in the Credit Agreement); (i) all indebtedness
referred to in clauses (a) through (h) above secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Adverse Claim upon or in property (including accounts and
contracts rights) owned by such Person, even though such Person has not assumed
or become liable for the payment of such Indebtedness; and (j) all Guaranty
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (a) through (i) above; provided, however, that
"Indebtedness" shall not include Synthetic Lease Obligations.
"Indemnified Amounts" has the meaning specified in Section 8.1
"Indemnified Party" has the meaning specified in Section 8.1.
"Independent Auditor" has the meaning specified in Section 5.1(a).
"Initial Computation Date" means the close of business on September 25,
2000.
"Insolvency Proceeding" means (a) any case, action or
proceeding before any court or other Governmental Authority relating to
bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the benefit
of creditors, composition, marshalling of assets for creditors, or other similar
arrangement in respect of a Person's creditors generally or any substantial
portion of a Person's creditors; undertaken under U.S. Federal, state or foreign
law, including the Bankruptcy Code.
"Interest Coverage Ratio" means with respect to Originator and
the Restricted Subsidiaries for any period, the ratio of Consolidated Cash for
such period to Consolidated Interest Expense for such period. In the event that
Originator or any of the Restricted Subsidiaries (a) incurs, assumes or
guarantees any Indebtedness or Synthetic Lease Obligations (other than revolving
credit borrowings including, with respect to the Originator, the Loans) or (b)
redeems or repays any Indebtedness or Synthetic Lease Obligations (other than
revolving credit borrowings that are properly classified as a current liability
under GAAP including, with respect to the Originator, the Loans, to the extent
such Loans are so classified and excluding, regardless of classification, any
Loans or other Indebtedness or Synthetic Lease Obligations the proceeds of which
are used for Acquisitions or Growth Related Capital Expenditures), in any case
subsequent to the commencement of the period for which the Interest Coverage
Ratio is being calculated, but prior to the date on which the calculation of the
Interest Coverage Ratio is made (the "Interest Coverage Ratio Calculation
Date"), then the Interest Coverage Ratio shall be calculated giving pro forma
effect to such incurrence, assumption, guarantee, redemption or repayment of
Indebtedness or Synthetic Lease Obligations, as if the same had occurred at the
beginning of the applicable reference period. The foregoing calculation of the
Interest Coverage Ratio shall also 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 Originator or
any of the Restricted Subsidiaries during the reference period or subsequent to
such reference period and on or prior to the Interest Coverage Ratio Calculation
Date 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; provided, however, that with respect to Originator and the
Restricted Subsidiaries, (a) Consolidated Interest Expense shall be reduced by
amounts attributable to businesses or assets that are so disposed of or
discontinued only to the extent that the Indebtedness or Synthetic Lease
Obligations giving rise to such Consolidated Interest Expense would no longer be
Indebtedness or Synthetic Lease Obligations contributing to the Consolidated
Interest Expense of Originator or the Restricted Subsidiaries subsequent to the
Interest Coverage Ratio Calculation Date and (b) Consolidated Cash Flow
generated by an acquired business or asset of Originator and the Restricted
Subsidiaries shall be determined by the actual gross profit (revenues minus
costs of goods sold) of such acquired business or asset during the immediately
preceding number of full fiscal quarters as in the reference period minus the
pro forma expenses that would have been incurred by Originator and the
Restricted Subsidiaries in the operation of such acquired business or asset
during such period computed on the basis of (i) personnel expenses for employees
retained by Originator and the Restricted Subsidiaries in the operation of the
acquired business or asset and (ii) non-personnel costs and expenses incurred by
Originator and the Restricted Subsidiaries on a per gallon basis in the
operation of the Originator's business at similarly situated facilities of the
Originator.
"Letter of Credit" has the meaning provided in the Credit Agreement.
"Leverage Ratio" means, with respect to Originator and the
Restricted Subsidiaries for any period, the ratio of Funded Debt plus Synthetic
Lease Obligations, in each case of Originator and the Restricted Subsidiaries as
of the last day of such period, to Consolidated Cash Flow for such period. In
the event that Originator or any of the Restricted Subsidiaries (a) incurs,
assumes or guarantees any Indebtedness or Synthetic Lease Obligations (other
than revolving credit borrowings including, with respect to the Originator, the
Loans) or (b) redeems or repays any Indebtedness or Synthetic Lease Obligations
(other than revolving credit borrowings that are properly classified as a
current liability under GAAP including, with respect to the Originator, the
Loans to the extent such Loans are so classified and excluding, regardless of
classification, any Loans or other Indebtedness or Synthetic Lease Obligations
the proceeds of which are used for Acquisitions or Growth Related Capital
Expenditures), in any case subsequent to the commencement of the period for
which the Leverage Ratio is being calculated but prior to the date on which the
calculation of the Leverage Ratio is made (the "Leverage Ratio Calculation
Date"), then the Leverage Ratio shall be calculated giving pro forma effect to
such incurrence, assumption, guarantee, redemption or repayment of Indebtedness
or Synthetic Lease Obligations, as if the same had occurred at the beginning of
the applicable reference period. The foregoing calculation of the Leverage Ratio
shall also 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 Originator or any of the Restricted
Subsidiaries during the reference period or subsequent to such reference period
and on or prior to the Leverage Ratio Calculation Date 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;
provided, however, that with respect to Originator and the Restricted
Subsidiaries, (a) Funded Debt and Synthetic Lease Obligations shall be reduced
by amounts attributable to businesses or assets that are so disposed of or
discontinued only to the extent that the Indebtedness or Synthetic Leases
included within such Funded Debt and Synthetic Lease Obligations would no longer
be an obligation of Originator or the Restricted Subsidiaries subsequent to the
Leverage Ratio Calculation Date and (b) Consolidated Cash Flow generated by an
acquired business or asset of Originator or the Restricted Subsidiaries shall be
determined by the actual gross profit (revenues minus costs of goods sold) of
such acquired business or asset during the immediately preceding number of full
fiscal quarters as in the reference period minus the pro forma expenses that
would have been incurred by Originator and the Restricted Subsidiaries in the
operation of such acquired business or asset during such period computed on the
basis of (i) personnel expenses for employees retained by Originator and the
Restricted Subsidiaries in the operation of the acquired business or asset and
(ii) non-personnel costs and expenses incurred by Originator and the Restricted
Subsidiaries on a per gallon basis in the operation of the Originator's business
at similarly situated facilities of the Originator.
"Loan" has the meaning provided in the Credit Agreement.
"Material Adverse Effect" means (i) a material adverse change
in, or a material adverse effect upon, the operations, business, properties,
condition (financial or otherwise) or prospects of Originator; (ii) a material
impairment of the ability of Originator or any Subsidiary to perform under any
Transaction Document to which it is a party; (iii) a material adverse effect
upon the legality, validity, binding effect or enforceability against Originator
or any Subsidiary of any Transaction Document to which it is a party; (iv) a
material adverse effect upon Originator's, Buyer's, the Agent's or any
Purchaser's interest in the Pool Receivables generally or in any significant
portion of the Pool Receivables, or (v) a material adverse effect upon the
collectibility of the Pool Receivables generally or of any material portion of
the Pool Receivables.
"Minimum Receivables Percentage" means, on any date of
determination through and including the Termination Date, a variable undivided
interest in and to the Pool Receivables and the associated Collections and all
proceeds of the foregoing, which interest is equal to the percentage equal to a
fraction, the numerator of which is equal to the Adjusted Pool Amount as of such
date of determination, and the denominator of which is the aggregate Outstanding
Balance of all Pool Receivables as of the close of business on the Business Day
immediately preceding the date of determination.
"MLP" means Ferrellgas Partners, L.P., a Delaware limited
partnership and the sole limited partner of the Originator.
"Net Income" means, with respect to Originator and the
Restricted Subsidiaries, the net income (loss) of such Persons, determined in
accordance with GAAP and before any reduction in respect of preferred stock
dividends, excluding, however, (a) any gain (but not loss), together with any
related provision for taxes on such gain (but not loss), realized in connection
with (i) any asset sale (including, without limitation, dispositions pursuant to
sale and leaseback transactions), or (ii) the disposition of any securities or
the extinguishment of any Indebtedness of Originator or any of the Restricted
Subsidiaries, and (b) any extraordinary gain (but not loss), together with any
related provision for taxes on such extraordinary gain (but not loss); provided,
however, that all costs and expenses with respect to the redemption of the 10%
Series A Fixed Rate Senior Notes due 2001 that were issued by Originator and
Ferrellgas Finance Corp. pursuant to that certain Indenture dated as of July 5,
1994 among the Originator, Ferrellgas Finance Corp. and Norwest Bank Minnesota,
National Association, including, without limitation, cash premiums, tender offer
premiums, consent payments and all fees and expenses in connection therewith,
shall be added back to the Net Income of the Originator, the General Partner or
the Restricted Subsidiaries to the extent that they were deducted from such Net
Income in accordance with GAAP.
"Non-Recourse Subsidiary" has the meaning specified in the Credit
Agreement.
"Obligor" means a Person obligated to make payments pursuant to a Contract.
"Organization Documents" means, (a) for any corporation, the
certificate or articles of incorporation, the bylaws, any certificate of
determination or instrument relating to the rights of preferred shareholders of
such corporation, any shareholder rights agreement, and all applicable
resolutions of the board of directors (or any committee thereof) of such
corporation, (b) for any general or limited partnership, the partnership
agreement of such partnership and all amendments thereto and any agreements
otherwise relating to the rights of the partners thereof, and (c) for any
limited liability company, the limited liability, operating or similar agreement
and all amendments thereto and any agreements otherwise relating to the rights
of the members thereof.
"Originator" has the meaning set forth in the preamble to the Agreement.
"Originator's Account" has the meaning set forth in Section 1.3(a).
"Originator's Percentage" means, on any date of determination,
100% minus the Buyer's Percentage on such date.
"Outstanding Balance" of any Pool Receivable at any time means
the then outstanding principal balance thereof.
"Partnership Agreement" shall mean the Second Amended and
Restated Agreement of Limited Partnership of Originator dated October 14, 1998,
as amended from time to time in accordance with the terms of this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions under ERISA.
"Pension Plan" means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA which Originator or the General
Partner sponsors, maintains, or to which it makes, is making, or is obligated to
make contributions, or in the case of a multiple employer plan (as described in
Section 4064(a) of ERISA) has made contributions at any time during the
immediately preceding five (5) plan years.
"Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which Originator sponsors or maintains or to which Originator or
the General Partner makes, is making, or is obligated to make contributions and
includes any Pension Plan.
"Pool Receivables" means, collectively, all Eligible
Receivables existing on the Initial Computation Date and all Eligible
Receivables arising after the Initial Computation Date through and including the
Termination Date, and "Pool Receivable" means any such Eligible Receivable
individually. For the avoidance of doubt, a Receivable shall cease to be a Pool
Receivable if on any day prior to the Termination Date, such Receivable ceases
to be an Eligible Receivable, but shall continue to be a Pool Receivable if it
ceases to be an Eligible Receivable on or after the Termination Date.
"Potential Termination Event" means an event which, with the
passage of time or the giving of notice, or both, would constitute a Termination
Event.
"Prime Rate" means a rate per annum equal to the prime rate of
interest announced from time to time by Bank One, NA or its Originator (which is
not necessarily the lowest rate charged to any customer), changing when and as
said prime rate changes
"Purchase" means the purchase pursuant to Section 1.2(a) of
the Agreement by Buyer from Originator of the Receivable Interest, together with
all related rights in connection therewith.
"Purchase Agreement" has the meaning set forth in the Preliminary
Statements to the Agreement.
"Purchase Price" means, on any date of determination, the
aggregate price to be paid by Buyer to Originator for the Receivable Interest,
which price shall equal (a) the product of (i) the Variable Purchased Percentage
on such date, multiplied by (ii) the Outstanding Balance of the Pool Receivables
as of the close of business on the Business Day preceding the date of
determination, multiplied by (iii) one minus the Discount Factor in effect on
such date.
"Receivable" means each account receivable owed to Originator
(at the time it arises, and before giving effect to any transfer or conveyance
under the Agreement), arising in connection with the sale of propane or
provision of related services by Originator, including, without limitation, the
obligation to pay any Finance Charges with respect thereto. Accounts receivable
arising from any one transaction, including, without limitation, accounts
receivable represented by a single invoice, shall constitute a Receivable
separate from a Receivable consisting of the accounts arising from any other
transaction; provided, further, that any account receivable referred to in the
immediately preceding sentence shall be a Receivable regardless or whether the
account debtor or Originator treats such obligation as a separate payment
obligation.
"Receivable Interest" means a specified dollar amount of Pool
Receivables which equates to a variable undivided percentage interest (equal to
the Variable Purchased Percentage) in and to the Pool Receivables, the
associated Related Security and Collections and all proceeds of the foregoing.
"Records" means, with respect to any Pool Receivable, (i) any
and all customer information regarding payment history of the applicable
Obligor, propane gallons delivered to the applicable Obligor, timing of propane
gallons delivered to the applicable Obligor, payment terms and prices charged to
the applicable Obligor, and (ii) any and all invoices evidencing all or any
portion of the amount owing under such Pool Receivable, whether each of the
foregoing is in paper or electronic form.
"Related Party" means (a) the spouse or any lineal descendant
of James E. Ferrell, (b) any trust for his benefit or for the benefit of his
spouse or any such lineal descendants, (c) any corporation, partnership or other
entity in which James E. Ferrell and/or such other Persons referred to in the
foregoing clauses (a) and (b) are the direct record and beneficial owners of all
of the voting and nonvoting Equity Interests, (d) the FCI ESOT or (e) any
participant in the FCI ESOT whose ESOT account has been allocated shares of
Ferrell Companies, Inc.
"Related Security" means, with respect to any Pool Receivable:
(i) all Records related to such Pool Receivable, and
(ii) all proceeds of such Pool Receivable or Records.
"Reportable Event" means any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder, other than any such
event for which the 30-day notice requirement under ERISA has been waived in
regulations issued by the PBGC.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or determination of an
arbitrator or of a Governmental Authority, in each case applicable to or binding
upon the Person or any of its property or to which the Person or any of its
property is subject.
"Responsible Officer" means the chief executive officer, the
president, the chief financial officer or the treasurer of the General Partner
or any other officer having substantially the same authority and responsibility
to act for the General Partner on behalf of Originator.
"Restricted Subsidiary" has the meaning provided in the Credit Agreement.
"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
"Servicer" has the meaning specified in Section 6.1.
"Servicer's Concentration Account" means account no. 4496823683 in the name
of the Servicer at Wells Fargo Bank in Dallas, Texas, ABA No. 121000248.
"Servicing Fee" has the meaning set forth in Section 6.3.
"Settlement Date" has the meaning set forth in the Purchase Agreement.
"Subordinated Loan" means a loan from Originator to Buyer of a
portion of the Purchase Price that is evidenced by and payable as provided in
the Subordinated Note.
"Subordinated Note" means a subordinated promissory note of
the Buyer payable to the order of the Originator in substantially the form of
Exhibit V hereto, which promissory note shall evidence that portion of the
Purchase Price owing by the Buyer to the Originator at any time in respect of
the Receivable Interest owned by the Buyer at such time.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which more than 50% of the total voting power of shares of
Capital Interests entitled (without regard to the occurrence of any contingency)
to vote in the election of directors, managers or trustees thereof (or, in the
case of a limited partnership, more than 50% of either the general partners'
Capital Interests or the limited partners' Capital Interests) is at the time
owned or controlled, directly or indirectly, by such Person or one or more of
the other Subsidiaries of that Person or a combination thereof. Unless otherwise
indicated in this Agreement, "Subsidiary" shall mean a Subsidiary of the
Originator. Notwithstanding the foregoing, any Subsidiary of Originator that is
designated a "Non-Recourse Subsidiary" pursuant to the definition thereof in
this Agreement shall, for so long as all of the statements in the definition
thereof remain true, not be deemed a Subsidiary of the Originator.
"Surety Instruments" means all letters of credit (including
standby and commercial), bankers' acceptances, bank guaranties, shipside bonds,
surety bonds and similar instruments.
"Synthetic Lease" means each arrangement, however described,
under which the obligor accounts for its interest in the property covered
thereby under GAAP as lessee of a lease which is not a capital lease under GAAP
and accounts for its interest in the property covered thereby for Federal income
tax purposes as the owner.
"Synthetic Lease Documents" means, collectively, (i) that
certain Lease Intended as Security dated as of December 1, 1999 between
Ferrellgas, LP, as lessee, and First Security Bank, National Association, in its
capacity as Certificate Trustee, a lessor, (ii) that certain Participation
Agreement (Ferrellgas, LP Trust No. 1999-A), dated as of December 1, 1999, among
Ferrellgas, LP, as lessee; Ferrellgas, Inc., as general partner, First Security
Bank, National Association, as certificate trustee; First Security Trust Company
of Nevada, as agent; and various certificate purchasers and lenders named
therein, together with all exhibits, schedules and appendices thereto, and (iii)
each of the "Operative Documents" and "Loan Documents" as defined in the
participation agreement described in clause (ii) above.
"Synthetic Lease Interest Component" means, with respect to
any Person for any period, the portion of rent paid or payable (without
duplication) for such period under Synthetic Leases of such Person that would be
treated as interest in accordance with Financial Accounting Standards Board
Statement No. 13 if such Synthetic Leases were treated as capital leases under
GAAP.
"Synthetic Lease Obligation" means, as to any Person with
respect to any Synthetic Lease at any time of determination, the amount of the
liability of such Person in respect of such Synthetic Lease that would (if such
lease was required to be classified and accounted for as a capital lease on a
balance sheet of such Person in accordance with GAAP) be required to be
capitalized on the balance sheet of such Person at such time.
"Synthetic Lease Principal Component" means, with respect to
any Person for any period, the portion of rent (exclusive of the Synthetic Lease
Interest Component) paid or payable (without duplication) for such period under
Synthetic Leases of such Person that was deducted in calculating Consolidated
Net Income of such Person for such period.
"Termination Date" means the earliest to occur of (i) the
Facility Termination Date under and as defined in the Purchase Agreement, (ii)
the Business Day immediately prior to the occurrence of a Termination Event set
forth in Section 7.1(f) or (g) with respect to Originator, (iii) the Business
Day specified in a written notice from Buyer (or the Agent, as Buyer's assignee)
to Originator following the occurrence of any other Termination Event, and (iv)
the date which is 30 Business Days after receipt by the Agent (as Buyer's
assignee) of written notice from Originator that it wishes to terminate the
facility evidenced by this Agreement.
"Termination Event" has the meaning set forth in Section 7.1 of the
Agreement.
"Transaction Documents" means, collectively, this Agreement,
the Purchase Agreement, and all other instruments, documents and agreements
executed and delivered by Originator in connection herewith or therewith.
"UCC" means the Uniform Commercial Code as from time to time
in effect in the specified jurisdiction.
"Unfunded Pension Liability" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the current value
of that Plan's assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the applicable
plan year.
"Unrestricted Subsidiary" means any Subsidiary which is not a Restricted
Subsidiary.
"Variable Contributed Percentage" means, on any date of
determination through and including the Termination Date, a variable undivided
interest in and to the Pool Receivables and the associated Related Security and
Collections and all proceeds of the foregoing, which interest is equal to the
percentage of the aggregate Outstanding Balance of all Pool Receivables as of
the close of business on the Business Day immediately preceding the date of
determination which has been transferred by the Originator to the Buyer in the
form of an equity capital contribution.
"Variable Purchased Percentage" means, on any date of
determination through and including the Termination Date, the Minimum
Receivables Percentage on such date minus the Variable Contributed Percentage on
such date; provided that, (a) from and after the Termination Date until the
Aggregate Unpaids have been indefeasibly paid in full, the Variable Purchased
Percentage shall be equal to the Variable Purchased Percentage determined as of
the date immediately preceding the Termination Date, (b) from and after the date
on which the Aggregate Unpaids have been indefeasibly paid in full, the Variable
Purchased Percentage shall be zero, and (c) at no time shall the Variable
Purchased Percentage exceed 100%.
"Wholly-Owned Subsidiary" means a Subsidiary of which all of
the outstanding Capital Interests or other ownership interests (other than
directors' qualifying shares) or, in the case of a limited partnership, all of
the partners' Capital Interests (other than up to a 1% general partner
interest), is owned, beneficially and of record, by the Originator, a
Wholly-Owned Subsidiary of Originator or both.
All accounting terms not specifically defined herein shall be
construed in accordance with GAAP. All terms used in Article 9 of the UCC in the
State of New York, and not specifically defined herein, are used herein as
defined in such Article 9.
Exhibit II
Principal Place of Business and Chief Executive Office; Locations of
Records;
Federal Employer Identification Number; Other Names
Chief Executive Office and Principal Place of Business:
One Liberty Plaza
Liberty, Missouri 64068
Location of Records:
.........Same as above
Federal Employer Identification Number:
.........43-1698481
Partnership, Trade and Assumed Names:
Names currently used:...... Ferrellgas, L.P.
.................. Thermogas
.................. Elk Grove Gas & Oil, Inc.
.................. Foothill Propane, Inc.
.................. Puget Propane
Name previously used:......A-One Propane
.................. Folgers Gas
.................. Gas Plus, Inc.
.................. Pacific Propane, Inc.
.................. Propane Service Center
.................. Seacrist Fuels
.................. Tynes Gas & Appliance
Exhibit III
Form of Compliance Certificate
This Compliance Certificate is furnished pursuant to that
certain Receivable Interest Sale Agreement dated as of September 26, 2000,
between Ferrellgas, L.P. ("Originator") and Ferrellgas Receivables, LLC (the
"Agreement"). Capitalized terms used and not otherwise defined herein are used
with the meanings attributed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected ______________ of Originator.
2. I have reviewed the terms of the Agreement and I have made,
or have caused to be made under my supervision, a detailed review of the
transactions and conditions of Originator and its Subsidiaries during the
accounting period covered by the attached financial statements.
3. The examinations described in paragraph 2 did not disclose,
and I have no knowledge of, the existence of any condition or event which
constitutes a Termination Event or a Potential Termination Event, as each such
term is defined under the Agreement, during or at the end of the accounting
period covered by the attached financial statements or as of the date of this
Certificate, except as set forth below.
4. Described below are the exceptions, if any, to paragraph 3
by listing, in detail, the nature of the condition or event, the period during
which it has existed and the action which Originator has taken, is taking, or
proposes to take with respect to each such condition or event:
The foregoing certifications, together with the computations
set forth in Schedule I hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this ____ day of
__________, 20__.
------------------------------
[Name]
Exhibit IV
Credit and Collection Policy
[attached]
Exhibit V
[Form of] Subordinated Note
SUBORDINATED NOTE
1. Note. FOR VALUE RECEIVED, the undersigned, Ferrellgas
Receivables, LLC, a Delaware limited liability company ("Buyer"), hereby
unconditionally promises to pay to the order of Ferrellgas, L.P., a Delaware
limited partnership ("Seller"), in lawful money of the United States of America
and in immediately available funds, on or before the date following the
Termination Date which is one year and one day after the date on which (i) the
Receivables Interest (as defined in the Receivables Interest Sale Agreement
hereinafter described) has been reduced to zero and (ii) all indemnities,
adjustments and other amounts which may be owed thereunder in connection with
the Receivable Interest (as defined in the Receivables Interest Sale Agreement
hereinafter described) have been paid (the "Collection Date"), the aggregate
unpaid principal sum outstanding of all Subordinated Loans (as defined in the
Receivables Interest Sale Agreement hereinafter described) made from time to
time by Seller to Buyer pursuant to and in accordance with the terms of that
certain Receivables Interest Sale Agreement dated as of September 26, 2000,
between Seller and Buyer (as amended, restated, supplemented or otherwise
modified from time to time, the "Receivables Interest Sale Agreement").
Reference to Section 1.3 of the Receivables Interest Sale Agreement is hereby
made for a statement of the terms and conditions under which the loans evidenced
hereby have been and will be made. Capitalized terms used and not otherwise
defined herein shall have the meanings ascribed to such terms in the Receivables
Interest Sale Agreement.
2. Interest. Buyer further promises to pay interest on the
outstanding unpaid principal amount hereof from the date hereof until payment in
full hereof at a rate equal to the one month LIBOR rate published on the first
business day of each month on or after September 1, 2000 in The Wall Street
Journal ("LIBOR"), changing on the first business day of each month; provided,
however, that if Buyer shall default in the payment of any principal hereof,
Buyer promises to pay, on demand, interest at a rate per annum equal to the sum
of LIBOR plus 2.00% per annum on any such unpaid amounts, from the date such
payment is due to the date of actual payment. Interest shall be payable on the
first Business Day of each month in arrears; provided, however, that Buyer may
elect on the date any interest payment is due hereunder to defer such payment
and upon such election the amount of interest due but unpaid on such date shall
constitute principal under this Subordinated Note. The outstanding principal of
any loan made under this Subordinated Note shall be due and payable on the
Collection Date and may be repaid or prepaid at any time without premium or
penalty.
3. Principal Payments. Seller is authorized and directed by
Buyer to enter on the grid attached hereto, or, at its option, in its books and
records, the date and amount of each loan made by it which is evidenced by this
Subordinated Note and the amount of each payment of principal made by Buyer, and
absent manifest error, such entries shall constitute prima facie evidence of the
accuracy of the information so entered; provided that neither the failure of
Seller to make any such entry or any error therein shall expand, limit or affect
the obligations of Buyer hereunder.
4. Subordination. Seller shall have the right to receive, and
Buyer shall have the right to make, any and all payments and prepayments
relating to the loans made under this Subordinated Note; provided that after
giving effect to any such payment or prepayment, the Receivable Interest plus
the Contributed Interest equals or exceeds the Minimum Receivables Percentage.
Seller hereby agrees that at any time during which the conditions set forth in
the proviso of the immediately preceding sentence shall not be satisfied, Seller
shall be subordinate in right of payment to the prior payment of any
indebtedness or obligation of Buyer owing to the Agent or any Purchaser (each,
as defined below) under that certain Receivables Purchase Agreement, dated as of
September 26, 2000, by and among Buyer, Seller, as Servicer, various
"Purchasers" from time to time party thereto, and Bank One, NA (Main Office
Chicago), as the "Agent" (as amended, restated, supplemented or otherwise
modified from time to time, the "Receivables Purchase Agreement"). The
subordination provisions contained herein are for the direct benefit of, and may
be enforced by, the Agent and the Purchasers and/or any of their respective
assignees (collectively, the "Senior Claimants") under the Receivables Purchase
Agreement. Until the date on which the "Aggregate Capital" outstanding under the
Receivables Purchase Agreement has been repaid in full and all obligations of
Buyer and/or the Servicer thereunder and under the "Fee Letter" referenced
therein (all such obligations, collectively, the "Senior Claim") have been
indefeasibly paid and satisfied in full, Seller shall not institute against
Buyer any proceeding of the type described in Section 7.1(f) or (g) of the
Receivables Interest Sale Agreement unless and until the Collection Date has
occurred. Should any payment, distribution or security or proceeds thereof be
received by Seller in violation of this Section 4, Seller agrees that such
payment shall be segregated, received and held in trust for the benefit of, and
deemed to be the property of, and shall be immediately paid over and delivered
to the Agent for the benefit of the Senior Claimants.
5. Bankruptcy; Insolvency. Upon the occurrence of any
proceeding of the type described in Section 7.1(f) or (g) of the Receivables
Interest Sale Agreement involving Buyer as debtor, then and in any such event
the Senior Claimants shall receive payment in full of all amounts due or to
become due on or in respect of the Aggregate Capital and the Senior Claim
(including "CP Costs" and "Yield" as defined and as accruing under the
Receivables Purchase Agreement after the commencement of any such proceeding,
whether or not any or all of such CP Costs or Yield is an allowable claim in any
such proceeding) before Seller is entitled to receive payment on account of this
Subordinated Note, and to that end, any payment or distribution of assets of
Buyer of any kind or character, whether in cash, securities or other property,
in any applicable insolvency proceeding, which would otherwise be payable to or
deliverable upon or with respect to any or all indebtedness under this
Subordinated Note, is hereby assigned to and shall be paid or delivered by the
Person making such payment or delivery (whether a trustee in bankruptcy, a
receiver, custodian or liquidating trustee or otherwise) directly to the Agent
for application to, or as collateral for the payment of, the Senior Claim until
such Senior Claim shall have been paid in full and satisfied.
6. Amendments. The terms of this Subordinated Note may not be
amended or otherwise modified without the prior written consent of the Agent for
the benefit of the Purchasers.
7. GOVERNING LAW. THIS SUBORDINATED NOTE HAS BEEN MADE AND
DELIVERED AT HOUSTON, TEXAS, AND SHALL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS AND
DECISIONS OF THE STATE OF TEXAS. WHEREVER POSSIBLE EACH PROVISION OF THIS
SUBORDINATED NOTE SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND
VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS SUBORDINATED NOTE SHALL
BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE
INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT
INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS
SUBORDINATED NOTE.
8. Waivers. All parties hereto, whether as makers, endorsers,
or otherwise, severally waive presentment for payment, demand, protest and
notice of dishonor. Seller additionally expressly waives all notice of the
acceptance by any Senior Claimant of the subordination and other provisions of
this Subordinated Note and expressly waives reliance by any Senior Claimant upon
the subordination and other provisions herein provided.
9. Assignment. This Subordinated Note may not be assigned,
pledged or otherwise transferred to any party without the prior written consent
of the Agent, and any such attempted transfer shall be void.
FERRELLGAS RECEIVABLES, LLC
By:_____________________________
Name: Kevin T. Kelly
Title:Chief Financial Officer
Schedule to Subordinated Note
SUBORDINATED LOANS AND PAYMENTS OF PRINCIPAL
Amount of Unpaid Principal
Subordinated Loan Amount of Principal Balance Notation Made by
Date Paid
Schedule A
DOCUMENTS TO BE DELIVERED TO BUYER
ON OR PRIOR TO THE PURCHASE
1. Executed copies of the Receivable Interest Sale Agreement, duly executed by
the parties thereto.
2. Certificate of Originator's [Assistant] Secretary certifying the incumbency
and signatures of its officers who are authorized to execute the
Transaction Documents to which it is a party and attaching each of the
following:
(b) Copy of the Resolutions of the Board of Directors of the General
Partner certified by its Secretary, authorizing Originator's execution,
delivery and performance of the Receivable Interest Sale Agreement and
the other documents to be delivered by it thereunder.
(c) Certificate of Limited Partnership of Originator certified by the
Secretary of State of Delaware on or within thirty (30) days prior to
the initial Purchase (as defined in the Receivable Interest Sale
Agreement).
(d) Good Standing Certificates for Originator and the General Partner
issued by the Secretaries of State of its state of organization and
each jurisdiction where it has material operations, each of which is
listed below:
i. Delaware
ii. Missouri
(e) A copy of Originator's Partnership Agreement.
3. Pre-filing state and federal tax lien, judgment lien and UCC lien searches
against Originator from the following jurisdictions:
a. Delaware SOS
b. Missouri SOS
c. Clay County, MO
4. Duly executed financing statements, in form suitable for filing under the
UCC, in all jurisdictions as may be necessary or, in the opinion of Buyer
(or its assigns), desirable, under the UCC of all appropriate jurisdictions
or any comparable law in order to perfect the ownership interests
contemplated by the Receivable Interest Sale Agreement.
5. Time stamped receipt copies of proper UCC termination statements, if any,
necessary to release all security interests and other rights of any Person
in the Pool Receivables, Contracts or Related Security previously granted
by Originator.
6. A favorable opinion of legal counsel for Originator reasonably acceptable
to Buyer (or its assigns) which addresses the following matters and such
other matters as Buyer (or its assigns) may reasonably request:
--Each of Originator and its General Partner is duly
organized, validly existing, and in good standing under the laws of its state of
organization.
--Each of Originator and its General Partner has all requisite
authority to conduct its business in each jurisdiction where failure to be so
qualified would have a material adverse effect on its business.
--The execution and delivery by Originator of the Receivable
Interest Sale Agreement and each other Transaction Document to which it is a
party and its performance of its obligations thereunder have been duly
authorized by all necessary action and proceedings on the part of Originator and
the General Partner and will not:
(a) require any action by or in respect of, or filing with,
any governmental body, agency or official (other than the filing of UCC
financing statements);
(b) contravene, or constitute a default under, any provision
of applicable law or regulation or of its Organization Documents or of
any material agreement, judgment, injunction, order, decree or other
instrument binding upon Originator, the MLP or the General Partner [to
include the Credit Agreement, both Note Purchase Agreements and the
Indenture]; or
(c) result in the creation or imposition of any Adverse Claim
on assets of the General Partner, Originator or any of their respective
Subsidiaries (except as contemplated by the Receivable Interest Sale
Agreement and the Purchase Agreement).
--The Receivable Interest Sale Agreement and each other
Transaction Document to which it is a party has been duly executed and delivered
by Originator and constitutes the legal, valid, and binding obligation of
Originator enforceable in accordance with its terms, except to the extent the
enforcement thereof may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally and subject also to the
availability of equitable remedies if equitable remedies are sought.
--The provisions of the Receivable Interest Sale Agreement are
effective to create a valid security interest in favor of Buyer in all Pool
Receivables and upon the filing of financing statements, Buyer shall acquire a
first priority, perfected security interest in such Receivables.
--To the best of the opinion giver's knowledge, there is no
action, suit or other proceeding against Originator, General Partner or any
Affiliate of Originator or General Partner, which would materially adversely
affect the business or financial condition of Originator and its Affiliates
taken as a whole or which would materially adversely affect the ability of
Originator to perform its obligations under the Transaction Documents to which
it is a party.
7. A "true sale/true contribution" opinion and "substantive consolidation"
opinion of counsel for Originator with respect to the transactions
contemplated by the Receivable Interest Sale Agreement.
8. A Certificate of a Responsible Officer of Originator certifying that no
Termination Event or Potential Termination Event exists as of the date of
the Purchase or will result therefrom, and that each of the representations
and warranties made by Originator in any of the Transaction Documents to
which it is a party is true and correct as of such date.
9. Executed copies of (i) all consents from and authorizations by any Persons
and (ii) all waivers and amendments to existing credit facilities, that are
necessary in connection with the Receivable Interest Sale Agreement.
RECEIVABLES PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 26, 2000
AMONG
FERRELLGAS RECEIVABLES, LLC, AS SELLER,
FERRELLGAS, L.P., AS SERVICER,
JUPITER SECURITIZATION CORPORATION,
THE FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTY HERETO,
AND
BANK ONE, NA (MAIN OFFICE CHICAGO), AS AGENT
RECEIVABLES PURCHASE AGREEMENT
This Receivables Purchase Agreement, dated as of September 26,
2000, is among Ferrellgas Receivables, LLC, a Delaware limited liability company
("Seller"), Ferrellgas, L.P., a Delaware limited partnership ("Ferrellgas"), as
initial Servicer (the Servicer together with Seller, the "Seller Parties" and
each a "Seller Party"), the entities listed on Schedule A to this Agreement
(together with any of their respective successors and assigns hereunder, the
"Financial Institutions"), Jupiter Securitization Corporation ("Conduit"), and
Bank One, NA (Main Office Chicago), as agent for the Purchasers hereunder or any
successor agent hereunder (together with its successors and assigns hereunder,
the "Agent"). Unless defined elsewhere herein, capitalized terms used in this
Agreement shall have the meanings assigned to such terms in Exhibit I and, if
not defined therein, the meanings assigned to such terms in the Receivables
Interest Sale Agreement referenced therein.
PRELIMINARY STATEMENTS
Seller desires to transfer and assign Purchaser Interests to
the Purchasers from time to time.
Conduit may, in its absolute and sole discretion, purchase
Purchaser Interests from Seller from time to time.
In the event that Conduit declines to make any purchase, the
Financial Institutions shall, at the request of Seller, purchase
Purchaser Interests from time to time. In addition, the Financial
Institutions have agreed to provide a liquidity facility to Conduit in
accordance with the terms hereof.
Bank One, NA (Main Office Chicago) has been requested and is
willing to act as Agent on behalf of Conduit and the Financial
Institutions in accordance with the terms hereof.
ARTICLE I.
PURCHASE ARRANGEMENTS
Section 1.1 Purchase Facility.
(a) Upon the terms and subject to the conditions hereof, Seller may, at its
option, sell and assign Purchaser Interests to the Agent for the benefit of one
or more of the Purchasers. In accordance with the terms and conditions set forth
herein, Conduit may, at its option, instruct the Agent to purchase on behalf of
Conduit, or if Conduit shall decline to purchase, the Agent shall purchase, on
behalf of the Financial Institutions, Purchaser Interests from time to time in
an aggregate amount not to exceed at such time the lesser of (i) the Purchase
Limit and (ii) the aggregate amount of the Commitments, in either case, during
the period from the date hereof to but not including the Facility Termination
Date.
(b) Seller may, upon at least 5 Business Days' notice to the Agent, terminate in
whole or reduce in part, ratably among the Financial Institutions, the unused
portion of the Purchase Limit; provided that each partial reduction of the
Purchase Limit shall be in an amount equal to $5,000,000 or an integral multiple
thereof.
Section 1.2 Increases. Seller shall provide the Agent with at least two (2)
Business Days' prior notice in a form set forth as Exhibit II hereto of each
Incremental Purchase (a "Purchase Notice"). Each Purchase Notice shall be
subject to Section 6.2 hereof and, except as set forth below, shall be
irrevocable and shall specify the requested Purchase Price (which shall not be
less than $1,000,000) and date of purchase and, in the case of an Incremental
Purchase to be funded by the Financial Institutions, the requested Discount Rate
and Tranche Period. Following receipt of a Purchase Notice, the Agent will
determine whether Conduit agrees to make the purchase. If Conduit declines to
make a proposed purchase, Seller may cancel the Purchase Notice or, in the
absence of such a cancellation, the Incremental Purchase of the Purchaser
Interest will be made by the Financial Institutions. On the date of each
Incremental Purchase, upon satisfaction of the applicable conditions precedent
set forth in Article VI, Conduit or the Financial Institutions, as applicable,
shall initiate a wire transfer to the Facility Account, of immediately available
funds, no later than 12:00 noon (Chicago time), in an amount equal to (i) in the
case of Conduit, the aggregate Purchase Price of the Purchaser Interests Conduit
is then purchasing or (ii) in the case of a Financial Institution, such
Financial Institution's Pro Rata Share of the aggregate Purchase Price of the
Purchaser Interests the Financial Institutions are purchasing.
Section 1.3 Decreases. Seller shall provide the Agent with prior written notice
in conformity with the Required Notice Period (a "Reduction Notice") of any
proposed reduction of Aggregate Capital from Asset Interest Collections. Such
Reduction Notice shall designate (i) the date (the "Proposed Reduction Date")
upon which any such reduction of Aggregate Capital shall occur (which date shall
give effect to the applicable Required Notice Period), and (ii) the amount of
Aggregate Capital to be reduced which shall be applied ratably to the Purchaser
Interests of Conduit and the Financial Institutions in accordance with the
amount of Capital (if any) owing to Conduit, on the one hand, and the amount of
Capital (if any) owing to the Financial Institutions (ratably, based on their
respective Pro Rata Shares), on the other hand (the "Aggregate Reduction"). Only
one (1) Reduction Notice shall be outstanding at any time.
Section 1.4 Payment Requirements. All amounts to be paid or deposited by any
Seller Party pursuant to any provision of this Agreement shall be paid or
deposited in accordance with the terms hereof no later than 12:00 noon (Chicago
time) on the day when due in immediately available funds, and if not received
before 12:00 noon (Chicago time) shall be deemed to be received on the next
succeeding Business Day. If such amounts are payable to a Purchaser they shall
be paid to the Agent, for the account of such Purchaser, at 1 Bank One Plaza,
Chicago, Illinois 60670 until otherwise notified by the Agent. All computations
of Yield at the LIBO Rate, per annum fees calculated as part of any CP Costs,
per annum fees hereunder and per annum fees under the Fee Letter shall be made
on the basis of a year of 360 days for the actual number of days elapsed. All
computations of Yield at the Prime Rate shall be made on the basis of a year of
365 (or, when appropriate, 366) days for the actual number of days elapsed. If
any amount hereunder shall be payable on a day which is not a Business Day, such
amount shall be payable on the next succeeding Business Day.
ARTICLE II.
PAYMENTS AND ASSET INTEREST COLLECTIONS
Section 2.1 Payments. Notwithstanding any limitation on recourse contained in
this Agreement, Seller shall immediately pay to the Agent when due, for the
account of the relevant Purchaser or Purchasers on a full recourse basis: (i)
such fees as are set forth in the Fee Letter (which fees shall be sufficient to
pay all fees owing to the Financial Institutions), (ii) all CP Costs, (iii) all
amounts payable as Yield, (iv) all amounts payable as Deemed Collections (which
shall be immediately due and payable by Seller and applied to reduce outstanding
Aggregate Capital hereunder in accordance with Sections 2.2 and 2.3 hereof), (v)
all amounts required pursuant to Section 2.6, (vi) all amounts payable pursuant
to Article X, if any, (vii) all Servicer costs and expenses, including the
Servicing Fee, in connection with servicing, administering and collecting the
Pool Receivables, (viii) all Broken Funding Costs and (ix) all Default Fees
(collectively, the "Recourse Obligations"). If Seller fails to pay any of the
Recourse Obligations when due, Seller agrees to pay, on demand, the Default Fee
in respect thereof until paid. Notwithstanding the foregoing, no provision of
this Agreement or the Fee Letter shall require the payment or permit the
collection of any amounts hereunder in excess of the maximum permitted by
applicable law. If at any time Seller receives any Asset Interest Collections or
is deemed to receive any Asset Interest Collections, Seller shall immediately
pay such Asset Interest Collections or Deemed Collections to the Servicer for
application in accordance with the terms and conditions hereof and, at all times
prior to such payment, such Asset Interest Collections or Deemed Collections
shall be held in trust by Seller for the exclusive benefit of the Purchasers and
the Agent.
Section 2.2 Asset Interest Collections Prior to Amortization. Prior to the
Amortization Date, any Asset Interest Collections and Deemed Collections
received by the Servicer and all Asset Interest Collections received by the
Servicer shall be set aside and held in trust by the Servicer for the payment of
any accrued and unpaid Aggregate Unpaids or for a Reinvestment as provided in
this Section 2.2. If at any time any Asset Interest Collections are received by
the Servicer prior to the Amortization Date, (i) the Servicer shall set aside
the Termination Percentage (hereinafter defined) of Asset Interest Collections
evidenced by the Purchaser Interests of each Terminating Financial Institution
and (ii) Seller hereby requests and the Purchasers (other than any Terminating
Financial Institutions) hereby agree to make, simultaneously with such receipt,
a reinvestment (each, a "Reinvestment") with that portion of the balance of each
and every Asset Interest Collection received by the Servicer that is part of any
Purchaser Interest (other than any Purchaser Interests of Terminating Financial
Institutions), such that after giving effect to such Reinvestment, the amount of
Capital of such Purchaser Interest immediately after such receipt and
corresponding Reinvestment shall be equal to the amount of Capital immediately
prior to such receipt. On each Settlement Date prior to the occurrence of the
Amortization Date, the Servicer shall remit to the Agent's account the amounts
set aside during the preceding Settlement Period that have not been subject to a
Reinvestment and apply such amounts (if not previously paid in accordance with
Section 2.1) first, to reduce unpaid CP Costs, Yield and other Recourse
Obligations and second, to reduce the Capital of all Purchaser Interests of
Terminating Financial Institutions, applied ratably to each Terminating
Financial Institution according to its respective Termination Percentage. If
such Capital, CP Costs, Yield and other Recourse Obligations shall be reduced to
zero, any additional Asset Interest Collections received by the Servicer (i) if
applicable, shall be remitted to the Agent's account no later than 12:00 noon
(Chicago time) to the extent required to fund any Aggregate Reduction on such
Settlement Date and (ii) any balance remaining thereafter shall be remitted from
the Servicer to Seller on such Settlement Date. Each Terminating Financial
Institution shall be allocated a ratable portion of Asset Interest Collections
from the date of any assignment by Conduit pursuant to Section 13.6 (the
"Termination Date") until such Terminating Financing Institution's Capital shall
be paid in full. This ratable portion shall be calculated on the Termination
Date of each Terminating Financial Institution as a percentage equal to (i)
Capital of such Terminating Financial Institution outstanding on its Termination
Date, divided by (ii) the Aggregate Capital outstanding on such Termination Date
(the "Termination Percentage"). Each Terminating Financial Institution's
Termination Percentage shall remain constant prior to the Amortization Date. On
and after the Amortization Date, each Termination Percentage shall be
disregarded, and each Terminating Financial Institution's Capital shall be
reduced ratably with all Financial Institutions in accordance with Section 2.3.
Section 2.3 Asset Interest Collections Following Amortization. On the
Amortization Date and on each day thereafter, Seller shall remain liable on a
full-recourse basis to pay the Recourse Obligations pursuant to Section 2.1, and
the Servicer shall set aside and hold in trust, for the holder of each Purchaser
Interest, all Asset Interest Collections received on such day. On and after the
Amortization Date, the Servicer shall, at any time upon the request from time to
time by (or pursuant to standing instructions from) the Agent (i) remit to the
Agent's account the amounts set aside pursuant to the preceding sentence, and
(ii) apply such amounts to reduce the Aggregate Unpaids in accordance with
Section 2.4.
Section 2.4 Application of Asset Interest Collections. If there shall be
insufficient funds on deposit for the Servicer to distribute funds in payment in
full of the aforementioned amounts pursuant to Section 2.2 or 2.3 (as
applicable), the Servicer shall distribute funds:
first, to the payment of the Servicer's reasonable
out-of-pocket costs and expenses in connection with servicing,
administering and collecting the Pool Receivables , including the
Servicing Fee, if Seller or one of its Affiliates is not then acting as
the Servicer,
second, to the reimbursement of the Agent's costs of collection and
enforcement of this Agreement,
third, ratably to the payment of all accrued and unpaid fees under the Fee
Letter, CP Costs and Yield,
fourth, (to the extent applicable) to the ratable reduction of the
Aggregate Capital (without regard to any Termination Percentage),
fifth, for the ratable payment of all other unpaid Recourse
Obligations, provided that to the extent such Recourse Obligations
relate to the payment of Servicer costs and expenses, including the
Servicing Fee, when Seller or one of its Affiliates is acting as the
Servicer, such costs and expenses will not be paid until after the
payment in full of all other Recourse Obligations, and
sixth, after the Aggregate Unpaids have been indefeasibly
reduced to zero, to Seller.
Asset Interest Collections applied to the payment of Aggregate Unpaids shall be
distributed in accordance with the aforementioned provisions, and, giving effect
to each of the priorities set forth above in this Section 2.4, shall be shared
ratably (within each priority) among the Agent and the Purchasers in accordance
with the amount of such Aggregate Unpaids owing to each of them in respect of
each such priority.
Section 2.5 Payment Recission. No payment of any of the Aggregate Unpaids shall
be considered paid or applied hereunder to the extent that, at any time, all or
any portion of such payment or application is rescinded by application of law or
judicial authority, or must otherwise be returned or refunded for any reason.
Seller shall remain obligated for the amount of any payment or application so
rescinded, returned or refunded, and shall promptly pay to the Agent (for
application to the Person or Persons who suffered such recission, return or
refund) the full amount thereof, plus the Default Fee from the date of any such
recission, return or refunding.
Section 2.6 Maximum Purchaser Interests. Seller shall ensure that the Purchaser
Interests of the Purchasers shall at no time exceed in the aggregate 100%. If
the aggregate of the Purchaser Interests of the Purchasers exceeds 100%, Seller
shall pay to the Agent within one (1) Business Day an amount to be applied to
reduce the Aggregate Capital (as allocated by the Agent), such that after giving
effect to such payment the aggregate of the Purchaser Interests equals or is
less than 100%.
Section 2.7 Clean Up Call. In addition to Seller's rights pursuant to Section
1.3, Seller shall have the right (after providing written notice to the Agent in
accordance with the Required Notice Period), at any time following the reduction
of the Aggregate Capital to a level that is less than 10.0% of the original
Purchase Limit, to repurchase from the Purchasers all, but not less than all, of
the then outstanding Purchaser Interests. The purchase price in respect thereof
shall be an amount equal to the Aggregate Unpaids through the date of such
repurchase, payable in immediately available funds. Such repurchase shall be
without representation, warranty or recourse of any kind by, on the part of, or
against any Purchaser or the Agent, except that the Agent and the Purchasers
shall represent and warrant that the Purchasers Interests are free and clear of
any Adverse Claim created by any of them.
ARTICLE III.
CONDUIT FUNDING
Section 3.1 CP Costs. Seller shall pay CP Costs with respect to the Capital
associated with each Purchaser Interest of Conduit for each day that any Capital
in respect of such Purchaser Interest is outstanding. Each Purchaser Interest
funded substantially with Pooled Commercial Paper will accrue CP Costs each day
on a pro rata basis, based upon the percentage share the Capital in respect of
such Purchaser Interest represents in relation to all assets held by Conduit and
funded substantially with related Pooled Commercial Paper.
Section 3.2 CP Costs Payments. On each Settlement Date, Seller shall pay to the
Agent (for the benefit of Conduit) an aggregate amount equal to all accrued and
unpaid CP Costs in respect of the Capital associated with all Purchaser
Interests of Conduit for the immediately preceding Accrual Period in accordance
with Article II.
Section 3.3 Calculation of CP Costs. On the 5th Business Day of each calendar
month hereafter while Conduit has any outstanding Capital, Conduit shall
calculate the aggregate amount of CP Costs allocated to the Capital of its
Purchaser Interests for the applicable Accrual Period and shall notify Seller of
such aggregate amount.
ARTICLE IV.
FINANCIAL INSTITUTION FUNDING
Section 4.1 Financial Institution Funding. Each Purchaser Interest of the
Financial Institutions shall accrue Yield for each day during its Tranche Period
at either the LIBO Rate or the Prime Rate in accordance with the terms and
conditions hereof. Until Seller gives notice to the Agent of another Discount
Rate in accordance with Section 4.4, the initial Discount Rate for any Purchaser
Interest transferred to the Financial Institutions by Conduit pursuant to the
terms and conditions hereof shall be the Prime Rate. If the Financial
Institutions acquire by assignment from Conduit any Purchaser Interest pursuant
to Article XIII, each Purchaser Interest so assigned shall each be deemed to
have a new Tranche Period commencing on the date of any such assignment.
Section 4.2 Yield Payments. On the Settlement Date for each Purchaser Interest
of the Financial Institutions, Seller shall pay to the Agent (for the benefit of
the Financial Institutions) an aggregate amount equal to the accrued and unpaid
Yield for the entire Tranche Period of each such Purchaser Interest in
accordance with Article II.
Section 4.3 Selection and Continuation of Tranche Periods.
(a) With consultation from (and approval by) the Agent, Seller shall from time
to time request Tranche Periods for the Purchaser Interests of the Financial
Institutions, provided that, if at any time the Financial Institutions shall
have a Purchaser Interest, Seller shall always request Tranche Periods such that
at least one Tranche Period shall end on the date specified in clause (A) of the
definition of Settlement Date.
(b) Seller or the Agent, upon notice to and consent by the other received at
least three (3) Business Days prior to the end of a Tranche Period (the
"Terminating Tranche") for any Purchaser Interest, may, effective on the last
day of the Terminating Tranche: (i) divide any such Purchaser Interest into
multiple Purchaser Interests, (ii) combine any such Purchaser Interest with one
or more other Purchaser Interests that have a Terminating Tranche ending on the
same day as such Terminating Tranche or (iii) combine any such Purchaser
Interest with a new Purchaser Interests to be purchased on the day such
Terminating Tranche ends, provided, that in no event may a Purchaser Interest of
Conduit be combined with a Purchaser Interest of the Financial Institutions.
Section 4.4 Financial Institution Discount Rates. Seller may select the LIBO
Rate or the Prime Rate for each Purchaser Interest of the Financial
Institutions. Seller shall by 12:00 noon (Chicago time): (i) at least three (3)
Business Days prior to the expiration of any Terminating Tranche with respect to
which the LIBO Rate is being requested as a new Discount Rate and (ii) at least
one (1) Business Day prior to the expiration of any Terminating Tranche with
respect to which the Prime Rate is being requested as a new Discount Rate, give
the Agent irrevocable notice of the new Discount Rate for the Purchaser Interest
associated with such Terminating Tranche. Until Seller gives notice to the Agent
of another Discount Rate, the initial Discount Rate for any Purchaser Interest
transferred to the Financial Institutions pursuant to the terms and conditions
hereof shall be the Prime Rate.
Section 4.5 Suspension of the LIBO Rate
(a) If any Financial Institution notifies the Agent that it
has determined that funding its Pro Rata Share of the Purchaser Interests of the
Financial Institutions at a LIBO Rate would violate any applicable law, rule,
regulation, or directive of any governmental or regulatory authority, whether or
not having the force of law, or that (i) deposits of a type and maturity
appropriate to match fund its Purchaser Interests at such LIBO Rate are not
available or (ii) such LIBO Rate does not accurately reflect the cost of
acquiring or maintaining a Purchaser Interest at such LIBO Rate, then the Agent
shall suspend the availability of such LIBO Rate and require Seller to select
the Prime Rate for any Purchaser Interest accruing Yield at such LIBO Rate.
(b) If less than all of the Financial Institutions give a
notice to the Agent pursuant to Section 4.5(a), each Financial Institution which
gave such a notice shall be obliged, at the request of Seller, Conduit or the
Agent, to assign all of its rights and obligations hereunder to (i) another
Financial Institution or (ii) another funding entity nominated by Seller or the
Agent that is acceptable to Conduit and willing to participate in this Agreement
through the Liquidity Termination Date in the place of such notifying Financial
Institution; provided that (i) the notifying Financial Institution receives
payment in full, pursuant to an Assignment Agreement, of an amount equal to such
notifying Financial Institution's Pro Rata Share of the Capital and Yield owing
to all of the Financial Institutions and all accrued but unpaid fees and other
costs and expenses payable in respect of its Pro Rata Share of the Purchaser
Interests of the Financial Institutions, and (ii) the replacement Financial
Institution otherwise satisfies the requirements of Section 12.1(b).
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
Section 5.1 Representations and Warranties of the Seller. Each Seller Party
hereby represents and warrants to the Agent and the Purchasers, as to itself, as
of the date hereof and as of the date of each Incremental Purchase and the date
of each Reinvestment that:
(a) Existence and Power. Such Seller Party is duly organized, validly existing
and in good standing under the laws of Delaware, and is duly qualified to do
business and is in good standing as a foreign entity, and has and holds all
organizational power and all governmental licenses, authorizations, consents and
approvals required to carry on its business in each jurisdiction in which its
business is conducted except where the failure to so qualify or so hold could
not reasonably be expected to have a Material Adverse Effect.
(b) Power and Authority; Due Authorization, Execution and Delivery. The
execution and delivery by such Seller Party of this Agreement and each other
Transaction Document to which it is a party, and the performance of its
obligations hereunder and thereunder and, Seller's use of the proceeds of the
purchases made hereunder, are within its organizational powers and authority and
have been duly authorized by all necessary action on its part. This Agreement
and each other Transaction Document to which such Seller Party is a party has
been duly executed and delivered by such Seller Party.
(c) No Conflict. The execution and delivery by such Seller Party of this
Agreement and each other Transaction Document to which it is a party, and the
performance of its obligations hereunder and thereunder do not contravene or
violate (i) its Organization Documents, (ii) any law, rule or regulation
applicable to it, (iii) any restrictions under any agreement, contract or
instrument to which it is a party or by which it or any of its property is
bound, or (iv) any order, writ, judgment, award, injunction or decree binding on
or affecting it or its property, and do not result in the creation or imposition
of any Adverse Claim on assets of such Seller Party (except as created under the
Transaction Documents) except, in each case, where such contravention or
violation could not reasonably be expected to have a Material Adverse Effect;
and no transaction contemplated hereby requires compliance with any bulk sales
act or similar law.
(d) Governmental Authorization. Other than the filing of the financing
statements required hereunder and under the Receivables Interest Sale Agreement,
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 and delivery by such Seller Party of this Agreement and each other
Transaction Document to which it is a party and the performance of its
obligations hereunder and thereunder.
(e) Actions, Suits. There are no actions, suits or proceedings pending, or to
the best of such Seller Party's knowledge, threatened, against or affecting such
Seller Party, or any of its properties, in or before any Governmental Authority,
which (a) purport to affect or pertain to this Agreement or any other
Transaction Document or any of the transactions contemplated hereby or thereby;
or (b) if determined adversely to Originator, would reasonably be expected to
have a Material Adverse Effect. No injunction, writ, temporary restraining order
or any order of any nature has been issued by any court or other Governmental
Authority purporting to enjoin or restrain the execution, delivery or
performance of this Agreement or any other Transaction Document, or directing
that the transactions provided for herein or therein not be consummated as
herein or therein provided.
(f) Binding Effect. This Agreement and each other Transaction Document to which
such Seller Party is a party constitute the legal, valid and binding obligations
of such Seller Party enforceable against such Seller Party in accordance with
their respective terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws relating to or
limiting creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law).
(g) Accuracy of Information. All information heretofore furnished by such Seller
Party or any of its Affiliates to the Agent or any Purchaser for purposes of or
in connection with this Agreement, any of the other Transaction Documents or any
transaction contemplated hereby or thereby is, and all such information
hereafter furnished by such Seller Party or any of its Affiliates to the Agent
or any Purchaser will be, true and accurate in every material respect on the
date such information is stated or certified and does not and will not contain
any untrue statement of a material fact or omit any material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the time when made
or delivered.
(h) Use of Proceeds. No proceeds of any purchase hereunder will be used (i) for
a purpose that violates, or would be inconsistent with, Regulation T, U or X
promulgated by the Board of Governors of the Federal Reserve System from time to
time or (ii) to acquire any security in any transaction which is subject to
Section 12, 13 or 14 of the Securities Exchange Act of 1934, as amended.
(i) Good Title. Immediately prior to each purchase hereunder, Seller shall be
the legal and beneficial owner of the Asset Interest, free and clear of any
Adverse Claim, except as created by the Transaction Documents. There have been
duly filed all financing statements or other similar instruments or documents
necessary under the UCC (or any comparable law) of all appropriate jurisdictions
to perfect Seller's ownership interest in the Asset Interest.
(j) Perfection. This Agreement, together with the filing of the financing
statements contemplated hereby, is effective to, and shall, upon each purchase
hereunder, transfer to the Agent for the benefit of the relevant Purchaser or
Purchasers (and the Agent for the benefit of such Purchaser or Purchasers shall
acquire from Seller) a valid and perfected first priority undivided percentage
ownership or security interest in the Asset Interest, free and clear of any
Adverse Claim, except as created by the Transactions Documents. There have been
duly filed all financing statements or other similar instruments or documents
necessary under the UCC (or any comparable law) of all appropriate jurisdictions
to perfect the Agent's (on behalf of the Purchasers) ownership or security
interest in the Asset Interest.
(k) Places of Business and Locations of Records. The principal places of
business and chief executive office of such Seller Party and the offices where
it keeps all of its records regarding the Purchaser Interests are located at the
address(es) listed on Exhibit III or such other locations of which the Agent has
been notified in accordance with Section 7.2(a) in jurisdictions where all
action required by Section 14.4(a) has been taken and completed. Seller's
Federal Employer Identification Number is correctly set forth on Exhibit III.
(l) Asset Interest Collections. The conditions and requirements set forth in
Section 7.12 and in Section 5.12(a) of the Receivables Interest Sale Agreement
have at all times been satisfied and duly performed. Seller has not granted any
Person, other than the Servicer, dominion and control of any Lock-Box or
Collection Account, or the right to take dominion and control of any such
Lock-Box or Collection Account at a future time or upon the occurrence of a
future event. Servicer has not granted any Person, other than the Agent,
dominion and control of the Servicer's Concentration Account, or the right to
take dominion and control of the Servicer's Concentration Account at a future
time or upon the occurrence of a future event. Seller has not granted any
Person, other than the Agent, dominion and control of the Facility Account, or
the right to take dominion and control of the Facility Account at a future time
or upon the occurrence of a future event.
(m) Material Adverse Effect. (i) The initial Servicer represents and warrants
that since April 30, 2000, no event has occurred that would have a material
adverse effect on the financial condition or operations of the initial Servicer
and its Subsidiaries or the ability of the initial Servicer to perform its
obligations under this Agreement, and (ii) Seller represents and warrants that
since the date of this Agreement, no event has occurred that would have a
material adverse effect on (A) the financial condition or operations of Seller,
(B) the ability of Seller to perform its obligations under the Transaction
Documents, or (C) the collectibility of the Pool Receivables generally or any
material portion of the Pool Receivables.
(n) Names. In the past five (5) years, Seller has not used any legal names,
trade names or assumed names other than the name in which it has executed this
Agreement.
(o) Ownership of Seller. Originator owns, directly or indirectly, 100% of the
issued and outstanding Equity Interests of Seller, free and clear of any Adverse
Claim. Such Equity Interests are validly issued, fully paid and nonassessable,
and there are no options, warrants or other rights to acquire securities of
Seller.
(p) Not a Regulated Entity. Such Seller Party is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, or any
successor statute. Such Seller Party is not subject to regulation under the
Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, any state public utilities code, or any other Federal
or state statute or regulation limiting its ability to incur Indebtedness or to
sell interests in the Pool Receivables or the Asset Interest.
(q) Compliance with Law. Such Seller Party has complied with all applicable
laws, rules, regulations, orders, writs, judgments, injunctions, decrees or
awards to which it may be subject, except where the failure to so comply could
not reasonably be expected to have a Material Adverse Effect. Each Pool
Receivable, together with the Contract related thereto, does not contravene any
laws, rules or regulations applicable thereto (including, without limitation,
laws, rules and regulations relating to truth in lending, fair credit billing,
fair credit reporting, equal credit opportunity, fair debt collection practices
and privacy), and no part of such Contract is in violation of any such law, rule
or regulation, except where such contravention or violation could not reasonably
be expected to have a Material Adverse Effect.
(r) Compliance with Credit and Collection Policy. Such Seller Party has complied
in all material respects with the Credit and Collection Policy with regard to
each Pool Receivable and the related Contract, and has not made any change to
such Credit and Collection Policy, except such material change as to which the
Agent has been notified in accordance with Section 7.2(c) and has consented.
(s) Payments to Originator. Seller has given reasonably equivalent value to
Originator in consideration for the Asset Interest and such transfer was not
made for or on account of an antecedent debt. The transfer by Originator of the
Asset Interest under the Receivables Interest Sale Agreement is not voidable
under any section of the Bankruptcy Reform Act of 1978 (11 U.S.C. ss.ss. 101 et
seq.), as amended.
(t) Enforceability of Contracts. Each Contract with respect to each Pool
Receivable is effective to create, and has created, a legal, valid and binding
obligation of the related Obligor to pay the Outstanding Balance of the Pool
Receivable created thereunder and any accrued interest thereon, enforceable
against the Obligor in accordance with its terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, reorganization or other similar
laws relating to or limiting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(u) Eligible Receivables. Each Receivable included in the Asset Interest
is an Eligible Receivable.
(v) Net Asset Interest Balance. Seller has determined that, immediately after
giving effect to each purchase hereunder, the Net Asset Interest Balance will at
least equal 1.2 times the Aggregate Capital then outstanding.
(w) Accounting. The manner in which such Seller Party accounts for the
transactions contemplated by this Agreement and the Receivables Interest Sale
Agreement does not jeopardize the true sale analysis.
Section 5.2 Financial Institution Representations and Warranties. Each
Financial Institution hereby represents and warrants to the Agent and Conduit
that:
(a) Existence and Power. Such Financial Institution is a corporation or a
banking association duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation or organization, and has all power
to perform its obligations hereunder.
(b) No Conflict. The execution and delivery by such Financial Institution of
this Agreement and the performance of its obligations hereunder are within its
powers, have been duly authorized by all necessary action, do not contravene or
violate (i) its certificate or articles of incorporation or association or
by-laws, (ii) any law, rule or regulation applicable to it, (iii) any
restrictions under any agreement, contract or instrument to which it is a party
or any of its property is bound, or (iv) any order, writ, judgment, award,
injunction or decree binding on or affecting it or its property, and do not
result in the creation or imposition of any Adverse Claim on its assets. This
Agreement has been duly authorized, executed and delivered by such Financial
Institution.
(c) Governmental Authorization. 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 and delivery by such Financial Institution of
this Agreement and the performance of its obligations hereunder.
(d) Binding Effect. This Agreement constitutes the legal, valid and binding
obligation of such Financial Institution enforceable against such Financial
Institution in accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization or other similar
laws relating to or limiting creditors' rights generally and by general
principles of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law).
ARTICLE VI.
CONDITIONS OF PURCHASES
Section 6.1 Conditions Precedent to Initial Incremental Purchase. The initial
Incremental Purchase of a Purchaser Interest under this Agreement is subject to
the conditions precedent that (a) the Agent shall have received on or before the
date of such purchase those documents listed on Schedule B and (b) the Agent
shall have received all fees and expenses required to be paid on such date
pursuant to the terms of this Agreement and the Fee Letter.
Section 6.2 Conditions Precedent to All Purchases and Reinvestments. Each
purchase of a Purchaser Interest (other than pursuant to Section 13.1) and each
Reinvestment shall be subject to the further conditions precedent that (a) the
Servicer shall have delivered to the Agent on or prior to the date of such
purchase or Reinvestment, in form and substance satisfactory to the Agent, all
Monthly Reports and interim reports as and when due under Section 8.5; (b) the
Facility Termination Date shall not have occurred; (c) the Agent shall have
received such other approvals, opinions or documents as it may reasonably
request and (d) on the date of each such Incremental Purchase or Reinvestment,
the following statements shall be true (and acceptance of the proceeds of such
Incremental Purchase or Reinvestment shall be deemed a representation and
warranty by Seller that such statements are then true):
(i) the representations and warranties set forth in Section 5.1 are true
and correct on and as of the date of such Incremental Purchase or
Reinvestment as though made on and as of such date;
(ii) no event has occurred and is continuing, or would result from such
Incremental Purchase or Reinvestment, that will constitute an
Amortization Event, and no event has occurred and is continuing, or
would result from such Incremental Purchase or Reinvestment, that would
constitute a Potential Amortization Event; and
(iii) the Aggregate Capital does not exceed the Purchase Limit and the
aggregate Purchaser Interests do not exceed 100%.
It is expressly understood that each Reinvestment shall, unless otherwise
directed by the Agent or any Purchaser, occur automatically on each day that the
Servicer shall receive any Asset Interest Collections without the requirement
that any further action be taken on the part of any Person and notwithstanding
the failure of Seller to satisfy any of the foregoing conditions precedent in
respect of such Reinvestment. The failure of Seller to satisfy any of the
foregoing conditions precedent in respect of any Reinvestment shall give rise to
a right of the Agent, which right may be exercised at any time on demand of the
Agent, to rescind the related purchase and direct Seller to pay to the Agent for
the benefit of the Purchasers an amount equal to the Asset Interest Collections
prior to the Amortization Date that shall have been applied to the affected
Reinvestment.
ARTICLE VII.
COVENANTS
Until the date on which the Aggregate Unpaids have been
indefeasibly paid in full and this Agreement terminates in accordance with its
terms, each Seller Party hereby covenants, as to itself, as set forth below:
Section 7.1 Financial Reporting. Seller shall deliver to the Agent, in form
and detail satisfactory to the ------------------- Agent:
(a) Annual Financial Statements. As soon as available, but not later than 100
days after the end of each fiscal year of Seller, an unaudited balance sheet of
Seller as at the end of such year and the related statements of income or
operations, members' equity and cash flows for such year, setting forth in each
case in comparative form the figures for the previous fiscal year, and certified
by a Responsible Officer as fairly presenting, in accordance with GAAP, applied,
if applicable, on a basis consistent with prior years, the financial position
and the results of operations of Seller;
(b) Quarterly Financial Statements. As soon as available, but not later than 45
days after the end of each of the first three fiscal quarters of each fiscal
year of Seller, a copy of the unaudited balance sheet of Seller as of the end of
such quarter and the related statements of income, members' equity and cash
flows for the period commencing on the first day and ending on the last day of
such quarter, and certified by a Responsible Officer as fairly presenting, in
accordance with GAAP (subject to ordinary, good faith year-end audit
adjustments), the financial position and the results of operations of Seller;
and
(c) Receivables Interest Sale Agreement Financial Statements. When and as
required under the Receivables Interest Sale Agreement, each of the financial
statements required to be delivered under Section 5.1 thereof.
Section 7.2 Certificates; Other Information. Such Seller Party shall
furnish to the Agent:
(a) Receivables Interest Sale Agreement Certificates. When and as required
under the Receivables Interest Sale Agreement, each of the certificates and
other reports and information required to be delivered under Section 5.2
thereof; and
(b) Compliance Certificate. Concurrently with the delivery of the financial
statements referred to in Sections 5.1(a) and (b), a Compliance Certificate
executed by a Responsible Officer of Seller with respect to the periods covered
by such financial statements together with supporting calculations and such
other supporting detail as the Agent shall require.
Section 7.3 Notices. Such Seller Party shall promptly notify the Agent:
(a) Of the occurrence of any Amortization Event or Potential Amortization
Event;
(b) Of any matter described in Section 5.3(a)-(d), (f) or (g) of the Receivables
Interest Sale Agreement;
(c) At least thirty (30) days prior to the effectiveness of any material change
in or material amendment to the Credit and Collection Policy, a copy of the
Credit and Collection Policy then in effect and a notice (A) indicating such
change or amendment, and (B) if such proposed change or amendment would be
reasonably likely to adversely affect the collectibility of the Pool Receivables
or decrease the credit quality of any newly created Pool Receivables, requesting
the Agent's consent thereto;
(d) Of any material change in accounting policies or financial reporting
practices by Originator or any of its consolidated Subsidiaries;
(e) If any of the representations and warranties in Article V ceases to be
true and correct;
(f) Of the occurrence of any event or condition that has had, or could
reasonably be expected to have, a Material Adverse Effect; and
(g) Of the occurrence of the "Termination Date" under and as defined in the
Receivables Interest Sale Agreement.
Each notice under this Section shall be accompanied by a written statement by a
Responsible Officer of such Seller Party setting forth details of the occurrence
referred to therein, and stating what action such Seller Party or any affected
Affiliate proposes to take with respect thereto and at what time. Each notice
under Section 7.3(a) shall describe with particularity any and all clauses or
provisions of this Agreement or other Transaction Document that have been
breached or violated.
Section 7.4 Compliance with Laws. Such Seller Party shall comply with all
Requirements of Law of any Governmental Authority having jurisdiction over it or
its business (including the Federal Fair Labor Standards Act), except such as
may be contested in good faith or as to which a bona fide dispute may exist or
the failure of which to comply with could not reasonably be expected to have a
Material Adverse Effect.
Section 7.5 Preservation of Existence, Etc. Such Seller Party shall:
(a) Preserve and maintain in full force and effect its legal existence and good
standing under the laws of its state or jurisdiction of organization except in
connection with transactions permitted by the Credit Agreement;
(b) Preserve and maintain in full force and effect all governmental rights,
privileges, qualifications, permits, licenses and franchises necessary or
desirable in the normal conduct of its business except in connection with
transactions permitted by the Credit Agreement, except where the failure to so
preserve or maintain such governmental rights, privileges, qualifications,
permits, licenses and franchises could not reasonably be expected to have a
Material Adverse Effect;
(c) Preserve its business organization and goodwill, except where the failure to
so preserve its business organization or goodwill could not reasonably be
expected to have a Material Adverse Effect; and
(d) Preserve or renew all of its registered patents, trademarks, trade names and
service marks, the non-preservation of which could reasonably be expected to
have a Material Adverse Effect.
Section 7.6 Payment of Obligations. Such Seller Party shall pay and discharge as
the same shall become due and payable (except to the extent the failure to so
pay and discharge could not reasonably be expected to have a Material Adverse
Effect), all of its obligations and liabilities, including:
(a) All tax liabilities, assessments and governmental charges or levies upon it
or its properties or assets, unless the same are being contested in good faith
by appropriate proceedings and adequate reserves in accordance with GAAP are
being maintained by such Seller Party; and
(b) All lawful claims which, if unpaid, would by law become a Adverse Claim upon
its property, unless such claims are being contested in good faith by
appropriate proceedings and adequate reserves in accordance with GAAP are being
maintained by such Seller Party.
Section 7.7 Audits. Such Seller Party will furnish to the Agent from time to
time such information with respect to it and the Pool Receivables as the Agent
may reasonably request. Such Seller Party will, from time to time during regular
business hours as requested by Buyer (or its assigns), upon reasonable notice
and at the sole cost of such Seller Party, permit the Agent and the Purchasers
or their respective agents or representatives (i) to examine and make copies of
and abstracts from all Records in the possession or under the control of such
Seller Party relating to the Pool Receivables and the Related Security,
including, without limitation, the related Contracts, and (ii) to visit the
offices and properties of such Seller Party for the purpose of examining such
materials described in clause (i) above, and to discuss matters relating to such
Seller Party's financial condition or the Pool Receivables and the Related
Security or such Seller Party's performance under any of the Transaction
Documents or Originator's performance under the Contracts and, in each case,
with any of the officers or employees of such Seller Party having knowledge of
such matters.
Section 7.8 Keeping of Records and Books. The Servicer will maintain and
implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing Receivables in the event
of the destruction of the originals thereof), and keep and maintain all
documents, books, records and other information reasonably necessary or
advisable for the collection of all Receivables (including, without limitation,
records adequate to permit the immediate identification of each new Receivable
and all Asset Interest Collections of and adjustments to each existing
Receivable). The Servicer will give the Agent notice of any material change in
the administrative and operating procedures referred to in the previous
sentence. Such Seller Party will on or prior to the date hereof, mark its master
data processing records and other books and records relating to the Purchaser
Interests with a legend, acceptable to the Agent, describing the Purchaser
Interests.
Section 7.9 Compliance with Contracts and Credit and Collection Policy. Such
Seller Party will timely and fully (i) perform and comply with all provisions,
covenants and other promises required to be observed by it under the Contracts
related to the Pool Receivables, except where the failure to so comply could not
reasonably be expected to have a material adverse impact on the overall
collectibility of the Pool Receivables, and (ii) comply in all respects with the
Credit and Collection Policy in regard to each Pool Receivable and the related
Contract, except where the failure to so comply could not reasonably be expected
to have a material adverse impact on the overall collectibility of the Pool
Receivables.
Section 7.10 Purchasers' Reliance. Seller acknowledges that the Purchasers are
entering into the transactions contemplated by this Agreement in reliance upon
Seller's identity as a legal entity that is separate from Originator. Therefore,
from and after the date of execution and delivery of this Agreement, Seller
shall take all reasonable steps, including, without limitation, all steps that
the Agent or any Purchaser may from time to time reasonably request, to maintain
Seller's identity as a separate legal entity and to make it manifest to third
parties that Seller is an entity with assets and liabilities distinct from those
of Originator and any Affiliates thereof and not just a division of Originator
or any such Affiliate. Without limiting the generality of the foregoing and in
addition to the other covenants set forth herein, Seller will:
(A) conduct its own business in its own name and require that all full-time
employees of Seller, if any, identify themselves as such and not as employees of
Originator (including, without limitation, by means of providing appropriate
employees with business or identification cards identifying such employees as
Seller's employees);
(B) compensate all employees, consultants and agents directly, from Seller's own
funds, for services provided to Seller by such employees, consultants and agents
and, to the extent any employee, consultant or agent of Seller is also an
employee, consultant or agent of Originator or any Affiliate thereof, allocate
the compensation of such employee, consultant or agent between Seller and
Originator or such Affiliate, as applicable, on a basis that reflects the
services rendered to Seller and Originator or such Affiliate, as applicable;
(C) clearly identify its offices (by signage or otherwise) as its offices and
allocate to Seller on a reasonable basis the costs of any space shared with the
Originator;
(D) have a separate telephone number, which will be answered only in its name
and separate stationery, invoices and checks in its own name;
(E) conduct all transactions with Originator and the Servicer (including,
without limitation, any delegation of its obligations hereunder as Servicer)
strictly on an arm's-length basis, allocate all overhead expenses (including,
without limitation, telephone and other utility charges) for items shared
between Seller and Originator on the basis of actual use to the extent
practicable and, to the extent such allocation is not practicable, on a basis
reasonably related to actual use;
(F) at all times have a Board of Directors consisting of at least three members,
at least one member of which is an Independent Director;
(G) observe all formalities as a distinct entity, and ensure that all actions
relating to (A) the dissolution or liquidation of Seller or (B) the initiation
of, participation in, acquiescence in or consent to any bankruptcy, insolvency,
reorganization or similar proceeding involving Seller, are duly authorized by
unanimous vote of its Board of Directors (including the Independent Director);
(H) maintain Seller's books and records separate from those of Originator and
any Affiliate thereof and otherwise readily identifiable as its own assets
rather than assets of Originator and any Affiliate thereof;
(I) prepare its financial statements separately from those of Originator and
insure that any consolidated financial statements of Originator or any Affiliate
thereof that include Seller and that are filed with the Securities and Exchange
Commission or any other governmental agency have notes clearly stating that
Seller is a separate entity and that its assets will be available first and
foremost to satisfy the claims of the creditors of Seller;
(J) except as herein specifically otherwise provided, maintain the funds or
other assets of Seller separate from, and not commingled with, those of
Originator or any Affiliate thereof and only maintain bank accounts or other
depository accounts to which Seller alone is the account party, into which
Seller alone makes deposits and from which Seller alone (or the Agent hereunder)
has the power to make withdrawals;
(K) pay all of Seller's operating expenses from Seller's own assets (except for
certain payments by Originator or other Persons pursuant to allocation
arrangements that comply with the requirements of this Section 7.10);
(L) operate its business and activities such that: it does not engage in any
business or activity of any kind, or enter into any transaction or indenture,
mortgage, instrument, agreement, contract, lease or other undertaking, other
than the transactions contemplated and authorized by this Agreement and the
Receivables Interest Sale Agreement; and does not create, incur, guarantee,
assume or suffer to exist any indebtedness or other liabilities, whether direct
or contingent, other than (1) as a result of the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business, (2) the incurrence of obligations under this Agreement, (3)
the incurrence of obligations, as expressly contemplated in the Receivables
Interest Sale Agreement, to make payment to Originator thereunder for the
purchase of Receivables from Originator under the Receivables Interest Sale
Agreement, and (4) the incurrence of operating expenses in the ordinary course
of business of the type otherwise contemplated by this Agreement;
(M) maintain its charter in conformity with this Agreement, such that it does
not amend, restate, supplement or otherwise modify its Organization Documents in
any respect that would impair its ability to comply with the terms or provisions
of any of the Transaction Documents, including, without limitation, this Section
7.10;
(N) maintain the effectiveness of, and continue to perform under the Receivables
Interest Sale Agreement, such that it does not amend, restate, supplement,
cancel, terminate or otherwise modify the Receivables Interest Sale Agreement,
or give any consent, waiver, directive or approval thereunder or waive any
default, action, omission or breach under the Receivables Interest Sale
Agreement or otherwise grant any indulgence thereunder, without (in each case)
the prior written consent of the Agent;
(O) maintain its legal separateness such that it does not merge or consolidate
with or into, or convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions, and except as otherwise contemplated
herein) all or substantially all of its assets (whether now owned or hereafter
acquired) to, or acquire all or substantially all of the assets of, any Person,
nor at any time create, have, acquire, maintain or hold any interest in any
Subsidiary.
(P) maintain at all times adequate capital with which to conduct its business
and to meet its obligations as they come due; and
(Q) take such other actions as are necessary on its part to ensure that the
facts and assumptions set forth in the opinion issued by Bracewell & Patterson,
L.L.P. as counsel for the Seller Parties, in connection with the closing or
initial Incremental Purchase under this Agreement and relating to substantive
consolidation issues, and in the certificates accompanying such opinion, remain
true and correct in all material respects at all times.
Section 7.11 Performance and Enforcement of Receivables Interest Sale Agreement.
Seller will, and will require Originator to, perform each of their respective
obligations and undertakings under and pursuant to the Receivables Interest Sale
Agreement, will purchase Receivables thereunder in strict compliance with the
terms thereof and will vigorously enforce the rights and remedies accorded to
Seller under the Receivables Interest Sale Agreement. Seller will take all
actions to perfect and enforce its rights and interests (and the rights and
interests of the Agent and the Purchasers as assignees of Seller) under the
Receivables Interest Sale Agreement as the Agent may from time to time
reasonably request, including, without limitation, making claims to which it may
be entitled under any indemnity, reimbursement or similar provision contained in
the Receivables Interest Sale Agreement.
Section 7.12 Collections. Each Seller Party will cause all Collections on the
Pool Receivables to be concentrated no less often than weekly into the
Servicer's Concentration Account. The Servicer will sweep the Buyer's Percentage
of all such Collections from the Servicer's Concentration Account no less than
daily into the Facility Account and immediately thereafter transferred to the
Originator's Account; provided, however, that upon written request of the Agent,
each of the Seller Parties will cause all such Collections to be concentrated
each Business Day into the Servicer's Concentration Account. From and after
October 26, 2000: (a) Servicer will cause the Servicer's Concentration Account
to be subject at all times to a Blocked Account Agreement that is in full force
and effect, and (b) Seller will cause the Facility Account to be subject at all
times to a Blocked Account Agreement that is in full force and effect.
Section 7.13 Ownership. Seller will take all necessary action to (i) vest legal
and equitable title to the Asset Interest irrevocably in Seller, free and clear
of any Adverse Claims other than Adverse Claims in favor of the Agent and the
Purchasers (including, without limitation, the filing of all financing
statements or other similar instruments or documents necessary under the UCC (or
any comparable law) of all appropriate jurisdictions to perfect Seller's
interest in the Asset Interest and such other action to perfect, protect or more
fully evidence the interest of Seller therein as the Agent may reasonably
request), and (ii) establish and maintain, in favor of the Agent, for the
benefit of the Purchasers, a valid and perfected first priority undivided
percentage ownership interest (and/or a valid and perfected first priority
security interest) in the Asset Interest to the full extent contemplated herein,
free and clear of any Adverse Claims other than Adverse Claims in favor of the
Agent for the benefit of the Purchasers (including, without limitation, the
filing of all financing statements or other similar instruments or documents
necessary under the UCC (or any comparable law) of all appropriate jurisdictions
to perfect the Agent's (for the benefit of the Purchasers) interest in the Asset
Interest and such other action to perfect, protect or more fully evidence the
interest of the Agent for the benefit of the Purchasers as the Agent may
reasonably request).
Section 7.14 Taxes. Such Seller Party will file all tax returns and reports
required by law to be filed by it and will promptly pay all taxes and
governmental charges at any time owing, except any such taxes which are not yet
delinquent or are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books. Seller will pay when due any taxes payable in
connection with the Pool Receivables, exclusive of taxes on or measured by
income or gross receipts of Conduit, the Agent or any Financial Institution.
Section 7.15 Negative Covenants of the Seller Parties. Until the date on which
the Aggregate Unpaids have been indefeasibly paid in full and this Agreement
terminates in accordance with its terms, each Seller Party hereby covenants, as
to itself, that:
(a) Name Change, Offices and Records. Such Seller Party will not change its
name, identity or legal structure (within the meaning of Article 9 of any
applicable enactment of the UCC) or relocate its chief executive office or any
office where Records are kept unless it shall have: (i) given the Agent at least
15 days' prior written notice thereof and (ii) delivered to the Agent all
financing statements, instruments and other documents requested by the Agent in
connection with such change or relocation.
(b) Change in Payment Instructions to Obligors. Such Seller Party will not
authorize any Obligor to make payment to any Lock-Box or Collection Account
other than one which is swept into the Servicer's Concentration Account in
accordance with Section 7.12.
(c) Modifications to Contracts and Credit and Collection Policy. Such Seller
Party will not make any change to the Credit and Collection Policy that could
adversely affect the collectibility of the Pool Receivables or decrease the
credit quality of any newly created Pool Receivables. Except as otherwise
permitted pursuant to Article VIII hereof, such Seller Party will not extend,
amend or otherwise modify the terms of any Pool Receivable or any Contract
related thereto other than in accordance with the Credit and Collection Policy.
(d) Sales, Adverse Claims. Such Seller Party will not sell, assign (by operation
of law or otherwise) or otherwise dispose of, or grant any option with respect
to, or create or suffer to exist any Adverse Claim upon (including, without
limitation, the filing of any financing statement) or with respect to, the Asset
Interest, the Facility Account or the Servicer's Concentration Account, or
assign any right to receive income with respect thereto (other than, in each
case, the creation of the interests therein in favor of the Agent, for the
benefit of the Purchasers, provided for herein), and such Seller Party will
defend the right, title and interest of the Agent, for the benefit of the
Purchasers, in, to and under any of the foregoing property, against all claims
of third parties claiming through or under such Seller Party. (e) Net Asset
Interest Balance. At no time prior to the Amortization Date shall Seller permit
the Net Asset Interest Balance to be less than 1.2 times the Aggregate Capital
outstanding.
(f) Termination Date Determination. Seller will not designate the Termination
Date (as defined in the Receivables Interest Sale Agreement), or send any
written notice to Originator in respect thereof, without the prior written
consent of the Agent, except with respect to the automatic occurrence of such
Termination Date arising in accordance with the proviso set forth in Section
7.2(i) of the Receivables Interest Sale Agreement.
(g) Restricted Junior Payments. From and after the occurrence of any
Amortization Event, Seller will not make any Restricted Junior Payment if, after
giving effect thereto, Seller would fail to meet its obligations set forth in
Section 7.10(P).
ARTICLE VIII.
ADMINISTRATION AND COLLECTION
Section 8.1 Designation of Servicer.
(a) The servicing, administration and collection of the Pool Receivables shall
be conducted by such Person (the "Servicer") so designated from time to time in
accordance with Article VI of the Receivables Interest Sale Agreement and this
Article VIII. Ferrellgas is hereby designated as, and hereby agrees to perform
the duties and obligations of, the Servicer pursuant to the terms of this
Agreement. The Agent may at any time designate as Servicer any Person to succeed
Ferrellgas or any successor Servicer; provided, however, that unless an
Amortization Event (or another event of the type described in the definition of
"Amortization Date" has occurred), replacement of the Servicer shall not result
in the occurrence of the Amortization Date.
Section 8.2 Certain Duties of Servicer.
(a) The Servicer shall administer the Asset Interest Collections in accordance
with the procedures described herein and in Article II. The Servicer shall set
aside and hold in trust for the account of Seller and the Purchasers their
respective shares of the Asset Interest Collections in accordance with Article
II. The Servicer shall, upon the request of the Agent, segregate, in a manner
acceptable to the Agent, all cash, checks and other instruments received by it
from time to time constituting Asset Interest Collections from the general funds
of the Servicer or Seller prior to the remittance thereof in accordance with
Article II. If the Servicer shall be required to segregate Asset Interest
Collections pursuant to the preceding sentence, the Servicer shall segregate and
deposit with a bank designated by the Agent such allocable share of Asset
Interest Collections of Receivables set aside for the Purchasers on the first
Business Day following receipt by the Servicer of such Asset Interest
Collections, duly endorsed or with duly executed instruments of transfer.
(b) The Servicer may, in accordance with the Credit and Collection Policy,
extend the maturity of any Receivable or adjust the Outstanding Balance of any
Receivable as the Servicer determines to be appropriate to maximize Asset
Interest Collections thereof; provided, however, that such extension or
adjustment shall not alter the status of such Receivable as a Delinquent
Receivable, Defaulted Receivable or Charged-Off Receivable or limit the rights
of the Agent or the Purchasers under this Agreement. Notwithstanding anything to
the contrary contained herein, from and after the occurrence of an Amortization
Event, the Agent shall have the absolute and unlimited right to direct the
Servicer to commence or settle any legal action with respect to any Pool
Receivable or to foreclose upon or repossess any Related Security.
(c) The Servicer shall hold in trust for Seller and the Purchasers all Records
that (i) evidence or relate to the Asset Interest or (ii) are otherwise
necessary or desirable to collect the Asset Interest and shall, as soon as
practicable upon demand of the Agent following the occurrence of an Amortization
Event, deliver or make available to the Agent all such Records, at a place
selected by the Agent. The Servicer shall, from time to time at the request of
any Purchaser, furnish to the Purchasers (promptly after any such request) a
calculation of the amounts set aside for the Purchasers pursuant to Article II.
(d) Any payment by an Obligor in respect of any indebtedness owed by it to
Originator or Seller shall, except as otherwise specified by such Obligor or
otherwise required by contract or law and unless otherwise instructed by the
Agent, be applied as a Collection of any Pool Receivable of such Obligor
(starting with the oldest such Pool Receivable) to the extent of any amounts
then due and payable thereunder before being applied to any other receivable or
other obligation of such Obligor.
Section 8.3 Collection Notices. The Agent is authorized at any time to date and
to deliver to Wells Fargo Bank the Collection Notices; provided, however, that
nothing herein shall be deemed to give the Agent any claim to, Adverse Claim on
or right to retain any amounts deposited into the Servicer's Concentration
Account or the Facility Account which do not constitute Asset Interest
Collections and provided, further, that unless an Amortization Event (or another
event of the type described in the definition of "Amortization Date" has
occurred), delivery of the Collection Notices shall not result in the occurrence
of the Amortization Date. Effective when the Agent delivers such notices,
Servicer hereby transfers to the Agent for the benefit of the Purchasers, the
exclusive control of the Servicer's Concentration Account, and Seller hereby
transfers to the Agent for the benefit of the Purchasers, the exclusive
ownership and control of the Facility Account. Each of the Seller Parties hereby
authorizes the Agent, and agrees that the Agent shall be entitled: (i) at any
time after delivery of the Collections Notices, to endorse such Seller Party's
name on checks and other instruments representing Asset Interest Collections,
(ii) at any time after the earlier to occur of an Amortization Event or
replacement of the Servicer, to enforce the Pool Receivables and the Related
Security, and (iii) at any time after delivery of the Collections Notices, to
take such action as shall be necessary or desirable to cause all cash, checks
and other instruments constituting Asset Interest Collections to come into the
possession of the Agent rather than such Seller Party.
Section 8.4 Responsibilities of Seller. Anything herein to the contrary
notwithstanding, the exercise by the Agent and the Purchasers of their rights
hereunder shall not release the Servicer, Originator or Seller from any of their
duties or obligations with respect to any Receivables or under the related
Contracts. The Purchasers shall have no obligation or liability with respect to
any Receivables or related Contracts, nor shall any of them be obligated to
perform the obligations of Seller.
Section 8.5 Reports. The Servicer shall prepare and forward to the Agent (i) on
the 18th day of each month hereafter or if any such day is not a Business Day,
on the next succeeding Business Day (each, a "Monthly Reporting Date"), a
Monthly Report and (ii) at such times as the Agent shall reasonably request, a
listing by Obligor of all Pool Receivables together with an aging of all Pool
Receivables. Additionally, at such more frequent times as the Agent shall
reasonably request, upon five (5) days' notice, the Servicer will furnish (x) a
report calculating the amount of Eligible Receivables as of such date based on
the information available to determine sales, credits, charge-offs and
collections since the most recent Monthly Report, or (y) such other form of
report in form and substance reasonably satisfactory to the Agent with respect
to the amount of Eligible Receivables based on available information. At any
time that the Agent shall request upon not less than five (5) days' notice, the
Servicer shall prepare and forward to the Agent an interim report setting forth
all of the items covered in a Monthly Report, as of the date of such request,
and in the same format as a Monthly Report.
ARTICLE IX.
AMORTIZATION EVENTS
Section 9.1 Amortization Events. The occurrence of any one or more of the
following events shall constitute an Amortization Event:
(a) Any Seller Party shall fail (i) to make any payment or deposit required
hereunder when due and, for any such payment or deposit which is not in respect
of Capital, such failure continues for two (2) Business Days, or (ii) to perform
or observe any term, covenant or agreement hereunder (other than as referred to
in clause (i) of this paragraph (a) and paragraph 9.1(e)) and such failure shall
continue for five (5) consecutive Business Days.
(b) Any representation, warranty, certification or statement made by any Seller
Party in this Agreement, any other Transaction Document to which it is a party
or in any other document delivered pursuant hereto or thereto shall prove to
have been incorrect when made or deemed made.
(c) Failure of Seller to pay any Indebtedness when due; or the default by Seller
in the performance of any term, provision or condition contained in any
agreement under which any such Indebtedness was created or is governed, the
effect of which is to cause, or to permit the holder or holders of such
Indebtedness to cause, such Indebtedness to become due prior to its stated
maturity; or any such Indebtedness of Seller shall be declared to be due and
payable or required to be prepaid (other than by a regularly scheduled payment)
prior to the date of maturity thereof.
(d) (i) Seller shall generally not pay its debts as such debts become due or
shall admit in writing its inability to pay its debts generally or shall make a
general assignment for the benefit of creditors; or (ii) any proceeding shall be
instituted by or against any Seller Party or any of its Subsidiaries seeking to
adjudicate it bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of it
or its debts under any law relating to bankruptcy, insolvency or reorganization
or relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee or other similar official for it or any
substantial part of its property or (iii) any Seller or any of its Subsidiaries
shall take any action to authorize any of the actions set forth in clauses (i)
or (ii) above in this subsection (d).
(e) Seller shall fail to comply with the terms of Section 2.6 hereof.
(f) As of the last day of any Measurement Period:
(i) the average of the Delinquency Trigger Ratios for the
three Measurement Periods then most recently ended shall exceed 9.10%;
(ii) the average of the Charged-Off Trigger Ratios for the
three Measurement Periods then most recently ended shall exceed 0.90%,
or
(iii) the average of the Dilution Trigger Ratios for the three
Measurement Periods then most recently ended shall exceed 2.40%.
(g) A Change of Control shall occur.
(h) One or more final judgments for the payment of money shall be entered
against Seller on claims not covered by insurance or as to which the insurance
carrier has denied its responsibility, and such judgment shall continue
unsatisfied and in effect for fifteen (15) consecutive days without a stay of
execution.
(i) The occurrence of any Termination Event or the Termination Date under and as
defined in the Receivables Interest Sale Agreement shall occur under the
Receivables Interest Sale Agreement.
(j) This Agreement shall terminate in whole or in part (except in accordance
with its terms), or shall cease to be effective or to be the legally valid,
binding and enforceable obligation of Seller, or any Obligor shall directly or
indirectly contest in any manner such effectiveness, validity, binding nature or
enforceability, or the Agent for the benefit of the Purchasers shall cease to
have a valid and perfected first priority security interest in the Asset
Interest.
Section 9.2 Remedies. Upon the occurrence and during the continuation of an
Amortization Event, the Agent may, or upon the direction of the Required
Financial Institutions shall, take any of the following actions: (i) replace the
Person then acting as Servicer (if not previously replaced), (ii) declare the
Amortization Date to have occurred, whereupon the Amortization Date shall
forthwith occur, without demand, protest or further notice of any kind, all of
which are hereby expressly waived by each Seller Party; provided, however, that
upon the occurrence of an Amortization Event described in Section 9.1(d), or of
an actual or deemed entry of an order for relief with respect to any Seller
Party under the Federal Bankruptcy Code, the Amortization Date shall
automatically occur, without demand, protest or any notice of any kind, all of
which are hereby expressly waived by each Seller Party, (iii) to the fullest
extent permitted by applicable law, declare that the Default Fee shall accrue
with respect to any of the Aggregate Unpaids outstanding at such time, and (iv)
notify Obligors of the Purchasers' interest in the Pool Receivables. The
aforementioned rights and remedies shall be without limitation, and shall be in
addition to all other rights and remedies of the Agent and the Purchasers
otherwise available under any other provision of this Agreement, by operation of
law, at equity or otherwise, all of which are hereby expressly preserved,
including, without limitation, all rights and remedies provided under the UCC,
all of which rights shall be cumulative.
ARTICLE X.
INDEMNIFICATION
Section 10.1 Indemnities by the Seller Parties. Without limiting any other
rights that the Agent or any Purchaser may have hereunder or under applicable
law, (A) Seller hereby agrees to indemnify (and pay upon demand to) the Agent
and each Purchaser and their respective assigns, officers, directors, agents and
employees (each an "Indemnified Party") from and against any and all damages,
losses, claims, taxes, liabilities, costs, expenses and for all other amounts
payable, including reasonable attorneys' fees (which attorneys may be employees
of the Agent or such Purchaser) and disbursements (all of the foregoing being
collectively referred to as "Indemnified Amounts") awarded against or incurred
by any of them arising out of or as a result of this Agreement or the
acquisition, either directly or indirectly, by a Purchaser of an interest in the
Pool Receivables, and (B) the Servicer hereby agrees to indemnify (and pay upon
demand to) each Indemnified Party for Indemnified Amounts awarded against or
incurred by any of them arising out of the Servicer's activities as Servicer
hereunder excluding, however, in all of the foregoing instances under the
preceding clauses (A) and (B):
(a) Indemnified Amounts to the extent a final judgment of a
court of competent jurisdiction holds that such Indemnified Amounts
resulted from gross negligence or willful misconduct on the part of the
Indemnified Party seeking indemnification;
(b) Indemnified Amounts to the extent the same includes losses
in respect of Receivables that are uncollectible on account of the
insolvency, bankruptcy or lack of creditworthiness of the related
Obligor; or
(c) taxes imposed by the jurisdiction in which such
Indemnified Party's principal executive office is located, on or
measured by the overall net income of such Indemnified Party to the
extent that the computation of such taxes is consistent with the
characterization for income tax purposes of the acquisition by the
Purchasers of Purchaser Interests as a loan or loans by the Purchasers
to Seller secured by the Asset Interest;
provided, however, that nothing contained in this sentence shall limit the
liability of any Seller Party or limit the recourse of the Purchasers to any
Seller Party for amounts otherwise specifically provided to be paid by such
Seller Party under the terms of this Agreement. Without limiting the generality
of the foregoing indemnification, Seller shall indemnify the Agent and the
Purchasers for Indemnified Amounts (including, without limitation, losses in
respect of uncollectible receivables, regardless of whether reimbursement
therefor would constitute recourse to Seller or the Servicer) relating to or
resulting from:
(i) any representation or warranty made by any Seller Party or Originator
(or any officers of any such Person) under or in connection with this
Agreement, any other Transaction Document or any other information or
report delivered by any such Person pursuant hereto or thereto, which
shall have been false or incorrect when made or deemed made;
(ii) the failure by Seller, the Servicer or Originator to comply with any
applicable law, rule or regulation with respect to any Receivable or
Contract related thereto, or the nonconformity of any Receivable or
Contract included therein with any such applicable law, rule or
regulation or any failure of Originator to keep or perform any of its
obligations, express or implied, with respect to any Contract;
(iii) any failure of Seller, the Servicer or Originator to perform its
duties, covenants or other obligations in accordance with the
provisions of this Agreement or any other Transaction Document;
(iv) any products liability, personal injury or damage suit, or other
similar claim arising out of or in connection with merchandise,
insurance or services that are the subject of any Contract or any
Receivable;
(v) any dispute, claim, offset or defense (other than discharge in
bankruptcy of the Obligor) of the Obligor to the payment of any
Receivable (including, without limitation, a defense based on such
Receivable or the related Contract not being a legal, valid and binding
obligation of such Obligor enforceable against it in accordance with
its terms), or any other claim resulting from the sale of the
merchandise or service related to such Receivable or the furnishing or
failure to furnish such merchandise or services;
(vi) the commingling of Asset Interest Collections at any time with other funds;
(vii) any investigation, litigation or proceeding related to or arising from
this Agreement or any other Transaction Document, the transactions
contemplated hereby, the use of the proceeds of an Incremental Purchase
or a Reinvestment, the ownership of the Purchaser Interests or any
other investigation, litigation or proceeding relating to Seller, the
Servicer or Originator in which any Indemnified Party becomes involved
as a result of any of the transactions contemplated hereby;
(viii) any inability to litigate any claim against any Obligor in respect of
any Receivable as a result of such Obligor being immune from civil and
commercial law and suit on the grounds of sovereignty or otherwise from
any legal action, suit or proceeding;
(ix) any Amortization Event described in Section 9.1(d);
(x) any failure of Seller to acquire and maintain legal and equitable title
to, and ownership of all or any portion of the Asset Interest from
Originator, free and clear of any Adverse Claim (other than as created
hereunder); or any failure of Seller to give reasonably equivalent
value to Originator under the Receivables Interest Sale Agreement in
consideration of the transfer by Originator of any portion of the Asset
Interest, or any attempt by any Person to void such transfer under
statutory provisions or common law or equitable action;
(xi) any failure to vest and maintain vested in the Agent for the benefit of
the Purchasers, or to transfer to the Agent for the benefit of the
Purchasers, legal and equitable title to, and ownership of, a first
priority perfected undivided percentage ownership interest (to the
extent of the Purchaser Interests contemplated hereunder) or security
interest in the Asset Interest, free and clear of any Adverse Claim
(except as created by the Transaction Documents);
(xii) the failure to have filed, or any delay in filing, financing statements
or other similar instruments or documents under the UCC of any
applicable jurisdiction or other applicable laws with respect to the
Asset Interest, and the proceeds of any thereof, whether at the time of
any Incremental Purchase or Reinvestment or at any subsequent time;
(xiii) any action or omission by any Seller Party which reduces or impairs the
rights of the Agent or the Purchasers with respect to any Receivable or
the value of any such Receivable;
(xiv) any attempt by any Person to void any Incremental Purchase or
Reinvestment hereunder under statutory provisions or common law or
equitable action; and
(xv) the failure of any Pool Receivable included in the calculation of the
Net Asset Interest Balance to be an Eligible Receivable at the time so
included.
Section 10.2 Increased Cost and Reduced Return. If after the date hereof, any
Funding Source shall be charged any fee, expense or increased cost on account of
the adoption of any applicable law, rule or regulation (including any applicable
law, rule or regulation regarding capital adequacy) or any change therein, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance with any request or directive (whether or
not having the force of law) of any such authority, central bank or comparable
agency (a "Regulatory Change"): (i) that subjects any Funding Source to any
charge or withholding on or with respect to any Funding Agreement or a Funding
Source's obligations under a Funding Agreement, or on or with respect to the
Pool Receivables, or changes the basis of taxation of payments to any Funding
Source of any amounts payable under any Funding Agreement (except for changes in
the rate of tax on the overall net income of a Funding Source or taxes excluded
by Section 10.1) or (ii) that imposes, modifies or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of a Funding Source, or credit
extended by a Funding Source pursuant to a Funding Agreement or (iii) that
imposes any other condition the result of which is to increase the cost to a
Funding Source of performing its obligations under a Funding Agreement, or to
reduce the rate of return on a Funding Source's capital as a consequence of its
obligations under a Funding Agreement, or to reduce the amount of any sum
received or receivable by a Funding Source under a Funding Agreement or to
require any payment calculated by reference to the amount of interests or loans
held or interest received by it, then, upon demand by the Agent, Seller shall
pay to the Agent, for the benefit of the relevant Funding Source, such amounts
charged to such Funding Source or such amounts to otherwise compensate such
Funding Source for such increased cost or such reduction.
Section 10.3 Other Costs and Expenses. Seller shall pay to the Agent and Conduit
on demand all costs and out-of-pocket expenses in connection with the
preparation, execution, delivery and administration of this Agreement, the
transactions contemplated hereby and the other documents to be delivered
hereunder, including without limitation, the cost of Conduit's auditors auditing
the books, records and procedures of Seller, reasonable fees and out-of-pocket
expenses of legal counsel for Conduit and the Agent (which such counsel may be
employees of Conduit or the Agent) with respect thereto and with respect to
advising Conduit and the Agent as to their respective rights and remedies under
this Agreement. Seller shall pay to the Agent on demand any and all costs and
expenses of the Agent and the Purchasers, if any, including reasonable counsel
fees and expenses in connection with the enforcement of this Agreement and the
other documents delivered hereunder and in connection with any restructuring or
workout of this Agreement or such documents, or the administration of this
Agreement following an Amortization Event. Seller shall reimburse Conduit on
demand for all other costs and expenses incurred by Conduit ("Other Costs"),
including, without limitation, the cost of auditing Conduit's books by certified
public accountants, the cost of rating the Commercial Paper by independent
financial rating agencies, and the reasonable fees and out-of-pocket expenses of
counsel for Conduit or any counsel for any shareholder of Conduit with respect
to advising Conduit or such shareholder as to matters relating to Conduit's
operations.
Section 10.4 Allocations. Conduit shall allocate the liability for Other Costs
among Seller and other Persons with whom Conduit has entered into agreements to
purchase interests in receivables ("Other Sellers"). If any Other Costs are
attributable to Seller and not attributable to any Other Seller, Seller shall be
solely liable for such Other Costs. However, if Other Costs are attributable to
Other Sellers and not attributable to Seller, such Other Sellers shall be solely
liable for such Other Costs. All allocations to be made pursuant to the
foregoing provisions of this Article X shall be made by Conduit in its sole
discretion and shall be binding on Seller and the Servicer.
ARTICLE XI.
THE AGENT
Section 11.1 Authorization and Action. Each Purchaser hereby designates and
appoints Bank One to act as its agent hereunder and under each other Transaction
Document, and authorizes the Agent to take such actions as agent on its behalf
and to exercise such powers as are delegated to the Agent by the terms of this
Agreement and the other Transaction Documents together with such powers as are
reasonably incidental thereto. The Agent shall not have any duties or
responsibilities, except those expressly set forth herein or in any other
Transaction Document, or any fiduciary relationship with any Purchaser, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities on the part of the Agent shall be read into this Agreement or any
other Transaction Document or otherwise exist for the Agent. In performing its
functions and duties hereunder and under the other Transaction Documents, the
Agent shall act solely as agent for the Purchasers and does not assume nor shall
be deemed to have assumed any obligation or relationship of trust or agency with
or for any Seller Party or any of such Seller Party's successors or assigns. The
Agent shall not be required to take any action that exposes the Agent to
personal liability or that is contrary to this Agreement, any other Transaction
Document or applicable law. The appointment and authority of the Agent hereunder
shall terminate upon the indefeasible payment in full of all Aggregate Unpaids.
Each Purchaser hereby authorizes the Agent to execute each of the UCC financing
statements and the Blocked Account Agreement on behalf of such Purchaser (the
terms of which shall be binding on such Purchaser).
Section 11.2 Delegation of Duties. The Agent may execute any of its duties under
this Agreement and each other Transaction Document by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
Section 11.3 Exculpatory Provisions. Neither the Agent nor any of its directors,
officers, agents or employees shall be (i) liable for any action lawfully taken
or omitted to be taken by it or them under or in connection with this Agreement
or any other Transaction Document (except for its, their or such Person's own
gross negligence or willful misconduct), or (ii) responsible in any manner to
any of the Purchasers for any recitals, statements, representations or
warranties made by any Seller Party contained in this Agreement, any other
Transaction Document or any certificate, report, statement or other document
referred to or provided for in, or received under or in connection with, this
Agreement, or any other Transaction Document or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, or
any other Transaction Document or any other document furnished in connection
herewith or therewith, or for any failure of any Seller Party to perform its
obligations hereunder or thereunder, or for the satisfaction of any condition
specified in Article VI, or for the perfection, priority, condition, value or
sufficiency of any collateral pledged in connection herewith. The Agent shall
not be under any obligation to any Purchaser to ascertain or to inquire as to
the observance or performance of any of the agreements or covenants contained
in, or conditions of, this Agreement or any other Transaction Document, or to
inspect the properties, books or records of the Seller Parties. The Agent shall
not be deemed to have knowledge of any Amortization Event or Potential
Amortization Event unless the Agent has received notice from Seller or a
Purchaser.
Section 11.4 Reliance by Agent. The Agent shall in all cases be entitled to
rely, and shall be fully protected in relying, upon any document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to Seller), independent accountants and
other experts selected by the Agent. The Agent shall in all cases be fully
justified in failing or refusing to take any action under this Agreement or any
other Transaction Document unless it shall first receive such advice or
concurrence of Conduit or the Required Financial Institutions or all of the
Purchasers, as applicable, as it deems appropriate and it shall first be
indemnified to its satisfaction by the Purchasers, provided that unless and
until the Agent shall have received such advice, the Agent may take or refrain
from taking any action, as the Agent shall deem advisable and in the best
interests of the Purchasers. The Agent shall in all cases be fully protected in
acting, or in refraining from acting, in accordance with a request of Conduit or
the Required Financial Institutions or all of the Purchasers, as applicable, and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all the Purchasers.
Section 11.5 Non-Reliance on Agent and Other Purchasers. Each Purchaser
expressly acknowledges that neither the Agent, nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates has made any
representations or warranties to it and that no act by the Agent hereafter
taken, including, without limitation, any review of the affairs of any Seller
Party, shall be deemed to constitute any representation or warranty by the
Agent. Each Purchaser represents and warrants to the Agent that it has and will,
independently and without reliance upon the Agent or any other Purchaser and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, operations, property,
prospects, financial and other conditions and creditworthiness of Seller and
made its own decision to enter into this Agreement, the other Transaction
Documents and all other documents related hereto or thereto.
Section 11.6 Reimbursement and Indemnification. The Financial Institutions agree
to reimburse and indemnify the Agent and its officers, directors, employees,
representatives and agents ratably according to their Pro Rata Shares, to the
extent not paid or reimbursed by the Seller Parties (i) for any amounts for
which the Agent, acting in its capacity as Agent, is entitled to reimbursement
by the Seller Parties hereunder and (ii) for any other expenses incurred by the
Agent, in its capacity as Agent and acting on behalf of the Purchasers, in
connection with the administration and enforcement of this Agreement and the
other Transaction Documents.
Section 11.7 Agent in its Individual Capacity. The Agent and its Affiliates may
make loans to, accept deposits from and generally engage in any kind of business
with Seller or any Affiliate of Seller as though the Agent were not the Agent
hereunder. With respect to the acquisition of Purchaser Interests pursuant to
this Agreement, the Agent shall have the same rights and powers under this
Agreement in its individual capacity as any Purchaser and may exercise the same
as though it were not the Agent, and the terms "Financial Institution,"
"Purchaser," "Financial Institutions" and "Purchasers" shall include the Agent
in its individual capacity.
Section 11.8 Successor Agent. The Agent may, upon five days' notice to Seller
and the Purchasers, and the Agent will, upon the direction of all of the
Purchasers (other than the Agent, in its individual capacity) resign as Agent.
If the Agent shall resign, then the Required Financial Institutions during such
five-day period shall appoint from among the Purchasers a successor agent. If
for any reason no successor Agent is appointed by the Required Financial
Institutions during such five-day period, then effective upon the termination of
such five day period, the Purchasers shall perform all of the duties of the
Agent hereunder and under the other Transaction Documents and Seller and the
Servicer (as applicable) shall make all payments in respect of the Aggregate
Unpaids directly to the applicable Purchasers and for all purposes shall deal
directly with the Purchasers. After the effectiveness of any retiring Agent's
resignation hereunder as Agent, the retiring Agent shall be discharged from its
duties and obligations hereunder and under the other Transaction Documents and
the provisions of this Article XI and Article X shall continue in effect for its
benefit with respect to any actions taken or omitted to be taken by it while it
was Agent under this Agreement and under the other Transaction Documents.
ARTICLE XII.
ASSIGNMENTS; PARTICIPATIONS
Section 12.1 Assignments.
(a) Seller and each Financial Institution hereby agree and consent to the
complete or partial assignment by Conduit of all or any portion of its rights
under, interest in, title to and obligations under this Agreement to the
Financial Institutions pursuant to Section 13.1 or to any other commercial paper
conduit administered by Bank One that issues commercial paper which is rated A-1
or better by Standard & Poor's Ratings Group and P-1 by Moody's Investor
Service, Inc., and upon such assignment, Conduit shall be released from its
obligations so assigned. Further, Seller and each Financial Institution hereby
agree that any assignee of Conduit of this Agreement or all or any of the
Purchaser Interests of Conduit shall have all of the rights and benefits under
this Agreement as if the term "Conduit" explicitly referred to such party, and
no such assignment shall in any way impair the rights and benefits of Conduit
hereunder. Neither Seller nor the Servicer shall have the right to assign its
rights or obligations under this Agreement.
(b) Any Financial Institution may at any time and from time to time assign to
one or more Persons ("Purchasing Financial Institutions") all or any part of its
rights and obligations under this Agreement pursuant to an assignment agreement,
substantially in the form set forth in Exhibit V hereto (the "Assignment
Agreement") executed by such Purchasing Financial Institution and such selling
Financial Institution; provided, however, that the consent of Conduit shall be
required prior to the effectiveness of any such assignment and, unless such
assignment is required under Section 12.1(c), the consent of Seller shall be
required prior to the effectiveness of any such assignment. Each assignee of a
Financial Institution must (i) have a short-term debt rating of A-1 or better by
Standard & Poor's Ratings Group and P-1 by Moody's Investor Service, Inc. and
(ii) agree to deliver to the Agent, promptly following any request therefor by
the Agent or Conduit, an enforceability opinion in form and substance
satisfactory to the Agent and Conduit. Upon delivery of the executed Assignment
Agreement to the Agent, such selling Financial Institution shall be released
from its obligations hereunder to the extent of such assignment. Thereafter the
Purchasing Financial Institution shall for all purposes be a Financial
Institution party to this Agreement and shall have all the rights and
obligations of a Financial Institution under this Agreement to the same extent
as if it were an original party hereto and no further consent or action by
Seller, the Purchasers or the Agent shall be required.
(c) Each of the Financial Institutions agrees that in the event that it shall
cease to have a short-term debt rating of A-1 or better by Standard & Poor's
Ratings Group and P-1 by Moody's Investor Service, Inc. (an "Affected Financial
Institution"), such Affected Financial Institution shall be obliged, at the
request of Conduit or the Agent, to assign all of its rights and obligations
hereunder to (x) another Financial Institution or (y) another funding entity
nominated by the Agent and acceptable to Conduit, and willing to participate in
this Agreement through the Liquidity Termination Date in the place of such
Affected Financial Institution; provided that the Affected Financial Institution
receives payment in full, pursuant to an Assignment Agreement, of an amount
equal to such Financial Institution's Pro Rata Share of the Aggregate Capital
and Yield owing to the Financial Institutions and all accrued but unpaid fees
and other costs and expenses payable in respect of its Pro Rata Share of the
Purchaser Interests of the Financial Institutions.
Section 12.2 Participations. Any Financial Institution may, in the ordinary
course of its business at any time sell to one or more Persons (each, a
"Participant") participating interests in its Pro Rata Share of the Purchaser
Interests of the Financial Institutions, its obligation to pay Conduit its
Acquisition Amounts or any other interest of such Financial Institution
hereunder. Notwithstanding any such sale by a Financial Institution of a
participating interest to a Participant, such Financial Institution's rights and
obligations under this Agreement shall remain unchanged, such Financial
Institution shall remain solely responsible for the performance of its
obligations hereunder, and Seller, Conduit and the Agent shall continue to deal
solely and directly with such Financial Institution in connection with such
Financial Institution's rights and obligations under this Agreement. Each
Financial Institution agrees that any agreement between such Financial
Institution and any such Participant in respect of such participating interest
shall not restrict such Financial Institution's right to agree to any amendment,
supplement, waiver or modification to this Agreement, except for any amendment,
supplement, waiver or modification described in Section 14.1(b)(i).
ARTICLE XIII.
LIQUIDITY FACILITY
Section 13.1 Transfer to Financial Institutions. Each Financial Institution
hereby agrees, subject to Section 13.4, that immediately upon written notice
from Conduit delivered on or prior to the Liquidity Termination Date, it shall
acquire by assignment from Conduit, without recourse or warranty, its Pro Rata
Share of one or more of the Purchaser Interests of Conduit as specified by
Conduit. Each such assignment by Conduit shall be made pro rata among all of the
Financial Institutions, except for pro rata assignments to one or more
Terminating Financial Institutions pursuant to Section 13.6. Each such Financial
Institution shall, no later than 1:00 p.m. (Chicago time) on the date of such
assignment, pay in immediately available funds (unless another form of payment
is otherwise agreed between Conduit and any Financial Institution) to the Agent
at an account designated by the Agent, for the benefit of Conduit, its
Acquisition Amount. Unless a Financial Institution has notified the Agent that
it does not intend to pay its Acquisition Amount, the Agent may assume that such
payment has been made and may, but shall not be obligated to, make the amount of
such payment available to Conduit in reliance upon such assumption. Conduit
hereby sells and assigns to the Agent for the ratable benefit of the Financial
Institutions, and the Agent hereby purchases and assumes from Conduit, effective
upon the receipt by Conduit of the Conduit Transfer Price, the Purchaser
Interests of Conduit which are the subject of any transfer pursuant to this
Article XIII.
Section 13.2 Transfer Price Reduction Yield. If the Adjusted Liquidity Price is
included in the calculation of the Conduit Transfer Price for any Purchaser
Interest, each Financial Institution agrees that the Agent shall pay to Conduit
the Reduction Percentage of any Yield received by the Agent with respect to such
Purchaser Interest.
Section 13.3 Payments to Conduit. In consideration for the reduction of the
Conduit Transfer Prices by the Conduit Transfer Price Reductions, effective only
at such time as the aggregate amount of the Capital of the Purchaser Interests
of the Financial Institutions equals the Conduit Residual, each Financial
Institution hereby agrees that the Agent shall not distribute to the Financial
Institutions and shall immediately remit to Conduit any Yield, Asset Interest
Collections or other payments received by it to be applied pursuant to the terms
hereof or otherwise to reduce the Capital of the Purchaser Interests of the
Financial Institutions.
Section 13.4 Limitation on Commitment to Purchase from Conduit. Notwithstanding
anything to the contrary in this Agreement, no Financial Institution shall have
any obligation to purchase any Purchaser Interest from Conduit, pursuant to
Section 13.1 or otherwise, if:
(i) Conduit shall have voluntarily commenced any proceeding or filed any
petition under any bankruptcy, insolvency or similar law seeking the
dissolution, liquidation or reorganization of Conduit or taken any
action for the purpose of effectuating any of the foregoing; or
(ii) involuntary proceedings or an involuntary petition shall have been
commenced or filed against Conduit by any Person under any bankruptcy,
insolvency or similar law seeking the dissolution, liquidation or
reorganization of Conduit and such proceeding or petition shall have
not been dismissed.
Section 13.5 Defaulting Financial Institutions. If one or more Financial
Institutions defaults in its obligation to pay its Acquisition Amount pursuant
to Section 13.1 (each such Financial Institution shall be called a "Defaulting
Financial Institution" and the aggregate amount of such defaulted obligations
being herein called the "Conduit Transfer Price Deficit"), then upon notice from
the Agent, each Financial Institution other than the Defaulting Financial
Institutions (a "Non-Defaulting Financial Institution") shall promptly pay to
the Agent, in immediately available funds, an amount equal to the lesser of (x)
such Non-Defaulting Financial Institution's proportionate share (based upon the
relative Commitments of the Non-Defaulting Financial Institutions) of the
Conduit Transfer Price Deficit and (y) the unused portion of such Non-Defaulting
Financial Institution's Commitment. A Defaulting Financial Institution shall
forthwith upon demand pay to the Agent for the account of the Non-Defaulting
Financial Institutions all amounts paid by each Non-Defaulting Financial
Institution on behalf of such Defaulting Financial Institution, together with
interest thereon, for each day from the date a payment was made by a
Non-Defaulting Financial Institution until the date such Non-Defaulting
Financial Institution has been paid such amounts in full, at a rate per annum
equal to the Federal Funds Effective Rate plus two percent (2%). In addition,
without prejudice to any other rights that Conduit may have under applicable
law, each Defaulting Financial Institution shall pay to Conduit forthwith upon
demand, the difference between such Defaulting Financial Institution's unpaid
Acquisition Amount and the amount paid with respect thereto by the
Non-Defaulting Financial Institutions, together with interest thereon, for each
day from the date of the Agent's request for such Defaulting Financial
Institution's Acquisition Amount pursuant to Section 13.1 until the date the
requisite amount is paid to Conduit in full, at a rate per annum equal to the
Federal Funds Effective Rate plus two percent (2%).
Section 13.6 Terminating Financial Institutions.
(a) Each Financial Institution hereby agrees to deliver written notice to the
Agent not more than 30 Business Days and not less than 5 Business Days prior to
the Liquidity Termination Date indicating whether such Financial Institution
intends to renew its Commitment hereunder. If any Financial Institution fails to
deliver such notice on or prior to the date that is 5 Business Days prior to the
Liquidity Termination Date, such Financial Institution will be deemed to have
declined to renew its Commitment (each Financial Institution which has declined
or has been deemed to have declined to renew its Commitment hereunder, a
"Non-Renewing Financial Institution"). The Agent shall promptly notify Conduit
of each Non-Renewing Financial Institution and Conduit, in its sole discretion,
may (A) to the extent of Commitment Availability, declare that such Non-Renewing
Financial Institution's Commitment shall, to such extent, automatically
terminate on a date specified by Conduit on or before the Liquidity Termination
Date or (B) upon one (1) Business Days' notice to such Non-Renewing Financial
Institution assign to such Non-Renewing Financial Institution on a date
specified by Conduit its Pro Rata Share of the aggregate Purchaser Interests
then held by Conduit, subject to, and in accordance with, Section 13.1. In
addition, Conduit may, in its sole discretion, at any time (x) to the extent of
Commitment Availability, declare that any Affected Financial Institution's
Commitment shall automatically terminate on a date specified by Conduit or (y)
assign to any Affected Financial Institution on a date specified by Conduit its
Pro Rata Share of the aggregate Purchaser Interests then held by Conduit,
subject to, and in accordance with, Section 13.1 (each Affected Financial
Institution or each Non-Renewing Financial Institution is hereinafter referred
to as a "Terminating Financial Institution"). The parties hereto expressly
acknowledge that any declaration of the termination of any Commitment, any
assignment pursuant to this Section 13.6 and the order of priority of any such
termination or assignment among Terminating Financial Institutions shall be made
by Conduit in its sole and absolute discretion.
(b) Upon any assignment to a Terminating Financial Institution as provided in
this Section 13.6, any remaining Commitment of such Terminating Financial
Institution shall automatically terminate. Upon reduction to zero of the Capital
of all of the Purchaser Interests of a Terminating Financial Institution (after
application of Asset Interest Collections thereto pursuant to Sections 2.2 and
2.3) all rights and obligations of such Terminating Financial Institution
hereunder shall be terminated and such Terminating Financial Institution shall
no longer be a "Financial Institution" hereunder; provided, however, that the
provisions of Article X shall continue in effect for its benefit with respect to
Purchaser Interests held by such Terminating Financial Institution prior to its
termination as a Financial Institution.
ARTICLE XIV.
MISCELLANEOUS
Section 14.1 Waivers and Amendments.
(a) No failure or delay on the part of the Agent or any Purchaser in exercising
any power, right or remedy under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
remedy preclude any other further exercise thereof or the exercise of any other
power, right or remedy. The rights and remedies herein provided shall be
cumulative and nonexclusive of any rights or remedies provided by law. Any
waiver of this Agreement shall be effective only in the specific instance and
for the specific purpose for which given.
(b) No provision of this Agreement may be amended, supplemented, modified or
waived except in writing in accordance with the provisions of this Section
14.1(b). Conduit, Seller and the Agent, at the direction of the Required
Financial Institutions, may enter into written modifications or waivers of any
provisions of this Agreement, provided, however, that no such modification or
waiver shall:
(i) without the consent of each affected Purchaser, (A) extend the Liquidity
Termination Date or the date of any payment or deposit of Asset Interest
Collections by Seller or the Servicer, (B) reduce the rate or extend the time of
payment of Yield or any CP Costs (or any component of Yield or CP Costs), (C)
reduce any fee payable to the Agent for the benefit of the Purchasers, (D)
except pursuant to Article XII hereof, change the amount of the Capital of any
Purchaser, any Financial Institution's Pro Rata Share (except pursuant to
Sections 13.1 or 13.5) or any Financial Institution's Commitment, (E) amend,
modify or waive any provision of the definition of Required Financial
Institutions or this Section 14.1(b), (F) consent to or permit the assignment or
transfer by Seller of any of its rights and obligations under this Agreement,
(G) change the definition of "Eligible Receivable," "Purchase Price," or
"Adjusted Liquidity Price," or (H) amend or modify any defined term (or any
defined term used directly or indirectly in such defined term) used in clauses
(A) through (G) above in a manner that would circumvent the intention of the
restrictions set forth in such clauses; or
(ii) without the written consent of the then Agent, amend, modify or waive
any provision of this Agreement if the effect thereof is to affect the
rights or duties of such Agent.
Notwithstanding the foregoing, (i) without the consent of the Financial
Institutions, but with the consent of Seller, the Agent may amend this Agreement
solely to add additional Persons as Financial Institutions hereunder and (ii)
the Agent, the Required Financial Institutions and Conduit may enter into
amendments to modify any of the terms or provisions of Article XI, Article XII,
Section 14.13 or any other provision of this Agreement without the consent of
Seller, provided that such amendment has no negative impact upon Seller. Any
modification or waiver made in accordance with this Section 14.1 shall apply to
each of the Purchasers equally and shall be binding upon Seller, the Purchasers
and the Agent.
Section 14.2 Notices. Except as provided in this Section 14.2, all
communications and notices provided for hereunder shall be in writing (including
bank wire, telecopy or electronic facsimile transmission or similar writing) and
shall be given to the other parties hereto at their respective addresses or
telecopy numbers set forth on the signature pages hereof or at such other
address or telecopy number as such Person may hereafter specify for the purpose
of notice to each of the other parties hereto. Each such notice or other
communication shall be effective (i) if given by telecopy, upon the receipt
thereof, (ii) if given by mail, three (3) Business Days after the time such
communication is deposited in the mail with first class postage prepaid or (iii)
if given by any other means, when received at the address specified in this
Section 14.2. Seller hereby authorizes the Agent to effect purchases and Tranche
Period and Discount Rate selections based on telephonic notices made by any
Person whom the Agent in good faith believes to be acting on behalf of Seller.
Seller agrees to deliver promptly to the Agent a written confirmation of each
telephonic notice signed by an authorized officer of Seller; provided, however,
the absence of such confirmation shall not affect the validity of such notice.
If the written confirmation differs from the action taken by the Agent, the
records of the Agent shall govern absent manifest error.
Section 14.3 Ratable Payments. If any Purchaser, whether by setoff or otherwise,
has payment made to it with respect to any portion of the Aggregate Unpaids
owing to such Purchaser (other than payments received pursuant to Section 10.2
or 10.3) in a greater proportion than that received by any other Purchaser
entitled to receive a ratable share of such Aggregate Unpaids, such Purchaser
agrees, promptly upon demand, to purchase for cash without recourse or warranty
a portion of such Aggregate Unpaids held by the other Purchasers so that after
such purchase each Purchaser will hold its ratable proportion of such Aggregate
Unpaids; provided that if all or any portion of such excess amount is thereafter
recovered from such Purchaser, such purchase shall be rescinded and the purchase
price restored to the extent of such recovery, but without interest.
Section 14.4 Protection of Ownership Interests of the Purchasers.
(a) Seller agrees that from time to time, at its expense, it will promptly
execute and deliver all instruments and documents, and take all actions, that
may be necessary or desirable, or that the Agent may request, to perfect,
protect or more fully evidence the Purchaser Interests, or to enable the Agent
or the Purchasers to exercise and enforce their rights and remedies hereunder.
At any time after the occurrence of an Amortization Event, the Agent may, or the
Agent may direct Seller or the Servicer to, notify the Obligors of Pool
Receivables, at Seller's expense, of the ownership or security interests of the
Purchasers under this Agreement and may also direct that payments of all amounts
due or that become due under any or all Receivables be made directly to the
Agent or its designee. Seller or the Servicer (as applicable) shall, at any
Purchaser's request, withhold the identity of such Purchaser in any such
notification.
(b) If any Seller Party fails to perform any of its obligations hereunder: (i)
the Agent or any Purchaser may (but shall not be required to) perform, or cause
performance of, such obligations, and the Agent's or such Purchaser's costs and
expenses incurred in connection therewith shall be payable by Seller as provided
in Section 10.3, (ii)each Seller Party irrevocably authorizes the Agent at any
time and from time to time in the sole discretion of the Agent, and appoints the
Agent as its attorney-in-fact, to act on behalf of such Seller Party (A) to
execute on behalf of Seller as debtor and to file financing statements necessary
or desirable in the Agent's sole discretion to perfect and to maintain the
perfection and priority of the interest of the Purchasers in the Pool
Receivables and (B) to file a carbon, photographic or other reproduction of this
Agreement or any financing statement with respect to the Asset Interest as a
financing statement in such offices as the Agent in its sole discretion deems
necessary or desirable to perfect and to maintain the perfection and priority of
the interests of the Purchasers in the Asset Interest. The appointment in the
preceding clause (ii) is coupled with an interest and is irrevocable.
Section 14.5 Confidentiality.
(a) Each Seller Party and each Purchaser shall maintain and shall cause each of
its employees and officers to maintain the confidentiality of the Fee Letter and
the other confidential or proprietary information with respect to the Agent and
Conduit and their respective businesses obtained by it or them in connection
with the structuring, negotiating and execution of the transactions contemplated
herein, except that such Seller Party and such Purchaser and its officers and
employees may disclose such information to such Seller Party's and such
Purchaser's external accountants and attorneys and as required by any applicable
law or order of any judicial or administrative proceeding.
(b) Anything herein to the contrary notwithstanding, each Seller Party hereby
consents to the disclosure of any nonpublic information with respect to it (i)
to the Agent, the Financial Institutions or Conduit by each other, (ii) by the
Agent or the Purchasers to any prospective or actual assignee or participant of
any of them and (iii) by the Agent to any rating agency, Commercial Paper dealer
or provider of a surety, guaranty or credit or liquidity enhancement to Conduit
or any entity organized for the purpose of purchasing, or making loans secured
by, financial assets for which Bank One acts as the administrative agent and to
any officers, directors, employees, outside accountants and attorneys of any of
the foregoing, provided each such Person is informed of the confidential nature
of such information. In addition, the Purchasers and the Agent may disclose any
such nonpublic information pursuant to any law, rule, regulation, direction,
request or order of any judicial, administrative or regulatory authority or
proceedings (whether or not having the force or effect of law).
Section 14.6 Bankruptcy Petition. Seller, the Servicer, the Agent and each
Financial Institution hereby covenants and agrees that, prior to the date that
is one year and one day after the payment in full of all outstanding senior
indebtedness of Conduit, it will not institute against, or join any other Person
in instituting against, Conduit any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other similar proceeding under the laws
of the United States or any state of the United States.
Section 14.7 Limitation of Liability. Except with respect to any claim arising
out of the willful misconduct or gross negligence of Conduit, the Agent or any
Financial Institution, no claim may be made by any Seller Party or any other
Person against Conduit, the Agent or any Financial Institution or their
respective Affiliates, directors, officers, employees, attorneys or agents for
any special, indirect, consequential or punitive damages in respect of any claim
for breach of contract or any other theory of liability arising out of or
related to the transactions contemplated by this Agreement, or any act, omission
or event occurring in connection therewith; and each Seller Party hereby waives,
releases, and agrees not to sue upon any claim for any such damages, whether or
not accrued and whether or not known or suspected to exist in its favor.
Section 14.8 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
NEW YORK.
Section 14.9 CONSENT TO JURISDICTION. EACH SELLER PARTY HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW
YORK STATE COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH
PERSON PURSUANT TO THIS AGREEMENT AND EACH SELLER PARTY HEREBY IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL
LIMIT THE RIGHT OF THE AGENT OR ANY PURCHASER TO BRING PROCEEDINGS AGAINST ANY
SELLER PARTY IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY
ANY SELLER PARTY AGAINST THE AGENT OR ANY PURCHASER OR ANY AFFILIATE OF THE
AGENT OR ANY PURCHASER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT
EXECUTED BY SUCH SELLER PARTY PURSUANT TO THIS AGREEMENT SHALL BE BROUGHT ONLY
IN A COURT IN NEW YORK, NEW YORK.
Section 14.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES TRIAL BY
JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT EXECUTED BY ANY
SELLER PARTY PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED
HEREUNDER OR THEREUNDER.
Section 14.11 Integration; Binding Effect; Survival of Terms.
(a) This Agreement and each other Transaction Document contain the final and
complete integration of all prior expressions by the parties hereto with respect
to the subject matter hereof and shall constitute the entire agreement among the
parties hereto with respect to the subject matter hereof superseding all prior
oral or written understandings.
(b) This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns (including any
trustee in bankruptcy). This Agreement shall create and constitute the
continuing obligations of the parties hereto in accordance with its terms and
shall remain in full force and effect until terminated in accordance with its
terms; provided, however, that the rights and remedies with respect to (i) any
breach of any representation and warranty made by any Seller Party pursuant to
Article V, (ii) the indemnification and payment provisions of Article X, and
Sections 14.5 and 14.6 shall be continuing and shall survive any termination of
this Agreement.
Section 14.12 Counterparts; Severability; Section References. This Agreement may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
Agreement. Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. Unless otherwise expressly indicated, all references herein
to "Article," "Section," "Schedule" or "Exhibit" shall mean articles and
sections of, and schedules and exhibits to, this Agreement.
Section 14.13 Bank One Roles. Each of the Financial Institutions acknowledges
that Bank One acts, or may in the future act, (i) as administrative agent for
Conduit or any Financial Institution, (ii) as issuing and paying agent for the
Commercial Paper, (iii) to provide credit or liquidity enhancement for the
timely payment for the Commercial Paper and (iv) to provide other services from
time to time for Conduit or any Financial Institution (collectively, the "Bank
One Roles"). Without limiting the generality of this Section 14.13, each
Financial Institution hereby acknowledges and consents to any and all Bank One
Roles and agrees that in connection with any Bank One Role, Bank One may take,
or refrain from taking, any action that it, in its discretion, deems
appropriate, including, without limitation, in its role as administrative agent
for Conduit, and the giving of notice to the Agent of a mandatory purchase
pursuant to Section 13.1.
Section 14.14 Characterization.
(a) It is the intention of the parties hereto that each purchase hereunder shall
constitute and be treated as an absolute and irrevocable sale, which purchase
shall provide the applicable Purchaser with the full benefits of ownership of
the applicable Purchaser Interest. Except as specifically provided in this
Agreement, each sale of a Purchaser Interest hereunder is made without recourse
to Seller; provided, however, that (i) Seller shall be liable to each Purchaser
and the Agent for all representations, warranties, covenants and indemnities
made by Seller pursuant to the terms of this Agreement, and (ii) such sale does
not constitute and is not intended to result in an assumption by any Purchaser
or the Agent or any assignee thereof of any obligation of Seller or Originator
or any other person arising in connection with the Asset Interest or any other
obligations of Seller or Originator.
(b) In addition to any ownership interest which the Agent may from time to time
acquire pursuant hereto, to secure the prompt and complete payment of the
Aggregate Unpaids, Seller hereby grants to the Agent for the ratable benefit of
the Purchasers a valid and perfected security interest in all of Seller's right,
title and interest, now existing or hereafter arising, in (i) the Asset
Interest, (ii) the Facility Account, (iii) Seller's rights and remedies under
the Receivables Interest Purchase Agreement, and (iv) all proceeds of any
thereof prior to all other liens on and security interests therein. The Agent
and the Purchasers shall have, in addition to the rights and remedies that they
may have under this Agreement, all other rights and remedies provided to a
secured creditor under the UCC and other applicable law, which rights and
remedies shall be cumulative.
Signature pages follow
(a)
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date hereof.
FERRELLGAS RECEIVABLES, LLC
By:
Name: Kevin T. Kelly
Title: Chief Financial Officer
Address: One Allen Center
500 Dallas Street, Suite 2700
Houston, TX 77002
Attention: John Briscoe
Phone: (713) 844-6309
Fax: (713) 844-6527
FERRELLGAS, L.P.
BY: FERRELLGAS, INC., ITS GENERAL PARTNER
By:
Name: Kevin T. Kelly
Title: Chief Financial Officer
Address: One Liberty Plaza
Liberty, MO 64068
Attention: Ken Heinz
Phone: (816) 792-6907
Fax: (816) 792-6979
JUPITER SECURITIZATION CORPORATION
By:
Leo V. Loughead
Authorized Signatory
Address: c/o Bank One, NA (Main Office Chicago), as Agent
Asset Backed Finance
Suite IL1-0079, 1-19
1 Bank One Plaza
Chicago, Illinois 60670-0079
Attention: Asset Backed Finance
Fax: (312) 732-1844
BANK ONE, NA (MAIN OFFICE CHICAGO),
as a Financial Institution and as Agent
By:
Name: Leo V. Loughead
Title: Vice President
Address: Bank One, NA (Main Office Chicago)
Asset Backed Finance
Suite IL1-0596, 1-21
1 Bank One Plaza
Chicago, Illinois 60670-0596
Attention: Asset Backed Finance
Fax: (312) 732-4487
(a)
EXHIBIT I
DEFINITIONS
As used in this Agreement:
(a) Capitalized terms used and not otherwise defined herein
shall have the meanings attributed thereto in the Receivables Interest Sale
Agreement (hereinafter defined); and
(b) The following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"Accrual Period" means each calendar month, provided that the
initial Accrual Period hereunder means the period from (and including) the date
of the initial purchase hereunder to (and including) the last day of the
calendar month thereafter.
"Acquisition Amount" means, on the date of any purchase from
Conduit of one or more Purchaser Interests pursuant to Section 13.1, with
respect to each Financial Institution, the lesser of (i) such Financial
Institution's Pro Rata Share of the sum of (A) the lesser of (1) the Adjusted
Liquidity Price of each such Purchaser Interest and (2) the Capital of each such
Purchaser Interest and (B) all accrued and unpaid CP Costs for each such
Purchaser Interest and (ii) such Financial Institution's unused Commitment.
"Adjusted Liquidity Price" means, with respect to any
Purchaser Interest transferred from Conduit to the Financial Institutions
pursuant to Article XIII hereof, an amount equal to:
--- -- -- --
P x (i) DC + (ii) NDR
------------------
1.10
--- -- -- --
where:
P = the percentage of the Asset Interest represented by such
Purchaser Interest.
DC = the Deemed Collections.
NDR = the Outstanding Balance of all Receivables included
in the Purchaser Interests (regardless of whether
they are Eligible Receivables on the date of
determination) as to which any payment, or part
thereof, has not remained unpaid for 91 days or more
from the original due date for such payment.
Each of the foregoing shall be determined from the most recent Monthly Report
received from the Servicer.
"Adverse Claim" means a lien, security interest, charge or
encumbrance, or other right or claim in, of or on any Person's assets or
properties in favor of any other Person.
"Affected Financial Institution" has the meaning specified in Section
12.1(c).
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person or any Subsidiary of such Person. A
Person shall be deemed to control another Person if the controlling Person owns
10% or more of any class of voting securities of the controlled Person or
possesses, directly or indirectly, the power to direct or cause the direction of
the management or policies of the controlled Person, whether through ownership
of stock, by contract or otherwise.
"Agent" has the meaning set forth in the preamble to this Agreement.
"Aggregate Capital" means, on any date of determination, the
aggregate amount of Capital of all Purchaser Interests outstanding on such date.
"Aggregate Reduction" has the meaning specified in Section 1.3.
"Aggregate Unpaids" means, at any time, an amount equal to the
sum of all accrued and unpaid fees under the Fee Letter, CP Costs, Yield,
Aggregate Capital and all other unpaid Recourse Obligations (whether due or
accrued) at such time.
"Agreement" means this Receivables Purchase Agreement, as it
may be amended or modified and in effect from time to time.
"Amortization Date" means the earliest to occur of (i) the day
on which any of the conditions precedent set forth in Section 6.2 are not
satisfied, (ii) the Business Day immediately prior to the occurrence of an
Amortization Event set forth in Section 9.1(d)(ii), (iii) the Business Day
specified in a written notice from the Agent following the occurrence of any
other Amortization Event, and (iv) the date which is 5 Business Days after the
Agent's receipt of written notice from Seller that it wishes to terminate the
facility evidenced by this Agreement.
"Amortization Event" has the meaning specified in Article IX.
"Applicable Margin" means the Applicable Margin (as defined in
the Credit Agreement) for Eurodollar Rate Loans (as defined in the Credit
Agreement).
"Asset Interest" means, on any date of determination, the sum
of the Receivables Interest and the Contributed Interest (each, as defined in
the Receivables Interest Sale Agreement).
"Asset Interest Collections" means, on any date of determination, the
Buyer's Percentage of all Collections.
"Assignment Agreement" has the meaning set forth in Section 12.1(b).
"Authorized Officer" means, with respect to any Person, its
president, controller, treasurer or chief financial officer.
"Bank One" means Bank One, NA (Main Office Chicago) in its
individual capacity and its successors.
"Blocked Account Agreement" means an agreement among Servicer
or Seller, as applicable, the Agent and Wells Fargo Bank, N.A. with respect to
the Servicer's Concentration Account or the Facility Account in form and
substance reasonably satisfactory to the parties thereto.
"Broken Funding Costs" means for any Purchaser Interest which:
(i) has its Capital reduced without compliance by Seller with the notice
requirements hereunder or (ii) does not become subject to an Aggregate Reduction
following the delivery of any Reduction Notice or (iii) is assigned under
Article XIII or terminated prior to the date on which it was originally
scheduled to end; an amount equal to the excess, if any, of (A) the CP Costs or
Yield (as applicable) that would have accrued during the remainder of the
Tranche Periods or the tranche periods for Commercial Paper determined by the
Agent to relate to such Purchaser Interest (as applicable) subsequent to the
date of such reduction, assignment or termination (or in respect of clause (ii)
above, the date such Aggregate Reduction was designated to occur pursuant to the
Reduction Notice) of the Capital of such Purchaser Interest if such reduction,
assignment or termination had not occurred or such Reduction Notice had not been
delivered, over (B) the sum of (x) to the extent all or a portion of such
Capital is allocated to another Purchaser Interest, the amount of CP Costs or
Yield actually accrued during the remainder of such period on such Capital for
the new Purchaser Interest, and (y) to the extent such Capital is not allocated
to another Purchaser Interest, the income, if any, actually received during the
remainder of such period by the holder of such Purchaser Interest from investing
the portion of such Capital not so allocated. In the event that the amount
referred to in clause (B) exceeds the amount referred to in clause (A), the
relevant Purchaser or Purchasers agree to pay to Seller the amount of such
excess. All Broken Funding Costs shall be due and payable hereunder upon demand.
"Business Day" means any day on which banks are not authorized
or required to close in New York, New York or Chicago, Illinois and The
Depository Trust Company of New York is open for business, and, if the
applicable Business Day relates to any computation or payment to be made with
respect to the LIBO Rate, any day on which dealings in dollar deposits are
carried on in the London interbank market.
"Capital" of any Purchaser Interest means, at any time, (A)
the Purchase Price of such Purchaser Interest, minus (B) the sum of the
aggregate amount of Asset Interest Collections and other payments received by
the Agent which in each case are applied to reduce such Capital in accordance
with the terms and conditions of this Agreement; provided that such Capital
shall be restored (in accordance with Section 2.5) in the amount of any Asset
Interest Collections or other payments so received and applied if at any time
the distribution of such Asset Interest Collections or payments are rescinded,
returned or refunded for any reason.
"Change of Control" means (a) a Change of Control under and as
defined in the Receivables Interest Sale Agreement, or (b) Ferrellgas ceases to
own 100% of the outstanding Equity Interests of Seller.
"Charged-Off Receivable" means a Receivable: (i) as to which
the Obligor thereof has taken any action, or suffered any event to occur, of the
type described in Section 9.1(d) (as if references to Seller Party therein refer
to such Obligor); (ii) as to which the Obligor thereof, if a natural person, is
deceased, (iii) which, consistent with the Credit and Collection Policy, would
be written off Seller's books as uncollectible, (iv) which has been identified
by Seller as uncollectible or (v) as to which any payment, or part thereof,
remains unpaid for more than 180 days from the original invoice date for such
payment.
"Charged-Off Trigger Ratio" means, as of any Cut-Off Date, the
ratio (expressed as a percentage) computed by dividing (x) the total amount of
Receivables that became Charged-Off Receivables during the Measurement Period
ending on such Cut-Off Date, by (y) the aggregate monthly sales for the 6 months
ending on such Cut-Off Date.
"Collection Account" means each concentration account,
depositary account, lock-box account or similar account in which any Asset
Interest Collections are collected or deposited.
"Collection Notice" means a notice in the form attached to the
Blocked Account Agreements from the Agent to Wells Fargo Bank, N.A. terminating
the Servicer's authority to make withdrawals from the Servicer's Concentration
Account or Seller's authority to make withdrawals from the Facility Account.
"Commercial Paper" means promissory notes of Conduit issued by Conduit in
the commercial paper market.
"Commitment" means, for each Financial Institution, the
commitment of such Financial Institution to purchase Purchaser Interests from
(i) Seller and (ii) Conduit, in an amount not to exceed (i) in the aggregate,
the amount set forth opposite such Financial Institution's name on Schedule A to
this Agreement, as such amount may be modified in accordance with the terms
hereof (including, without limitation, any termination of Commitments pursuant
to Section 13.6 hereof) and (ii) with respect to any individual purchase
hereunder, its Pro Rata Share of the Purchase Price therefor.
"Commitment Availability" means at any time the positive
difference (if any) between (a) an amount equal to the aggregate amount of the
Commitments at such time minus (b) the Aggregate Capital at such time.
"Conduit" has the meaning set forth in the preamble to this Agreement.
"Conduit Residual" means the sum of the Conduit Transfer Price Reductions.
"Conduit Transfer Price" means, with respect to the assignment
by Conduit of one or more Purchaser Interests to the Agent for the benefit of
one or more of the Financial Institutions pursuant to Section 13.1, the sum of
(i) the lesser of (a) the Capital of each such Purchaser Interest and (b) the
Adjusted Liquidity Price of each such Purchaser Interest and (ii) all accrued
and unpaid CP Costs for each such Purchaser Interest.
"Conduit Transfer Price Deficit" has the meaning set forth in Section 13.5.
"Conduit Transfer Price Reduction" means in connection with
the assignment of a Purchaser Interest by Conduit to the Agent for the benefit
of the Financial Institutions, the positive difference (if any) between (i) the
Capital of such Purchaser Interest and (ii) the Adjusted Liquidity Price for
such Purchaser Interest.
"Contingent Obligation" of a Person means any agreement,
undertaking or arrangement by which such Person assumes, guarantees, endorses,
contingently agrees to purchase or provide funds for the payment of, or
otherwise becomes or is contingently liable upon, the obligation or liability of
any other Person, or agrees to maintain the net worth or working capital or
other financial condition of any other Person, or otherwise assures any creditor
of such other Person against loss, including, without limitation, any comfort
letter, operating agreement, take-or-pay contract or application for a letter of
credit.
"CP Costs" means, for each day, the sum of (i) discount or
yield accrued on Pooled Commercial Paper on such day, plus (ii) any and all
accrued commissions in respect of placement agents and Commercial Paper dealers,
and issuing and paying agent fees incurred, in respect of such Pooled Commercial
Paper for such day, plus (iii) other costs associated with funding small or
odd-lot amounts with respect to all receivable purchase facilities which are
funded by Pooled Commercial Paper for such day, minus (iv) any accrual of income
net of expenses received on such day from investment of collections received
under all receivable purchase facilities funded substantially with Pooled
Commercial Paper, minus (v) any payment received on such day net of expenses in
respect of Broken Funding Costs related to the prepayment of any Purchaser
Interest of Conduit pursuant to the terms of any receivable purchase facilities
funded substantially with Pooled Commercial Paper. In addition to the foregoing
costs, if Seller shall request any Incremental Purchase during any period of
time determined by the Agent in its sole discretion to result in incrementally
higher CP Costs applicable to such Incremental Purchase, the Capital associated
with any such Incremental Purchase shall, during such period, be deemed to be
funded by Conduit in a special pool (which may include capital associated with
other receivable purchase facilities) for purposes of determining such
additional CP Costs applicable only to such special pool and charged each day
during such period against such Capital.
"Credit and Collection Policy" means Originator's credit and
collection policies and practices relating to Contracts and Receivables existing
on the date hereof and summarized in Exhibit IV to the Receivables Interest Sale
Agreement, as modified from time to time in accordance with this Agreement.
"Cut-Off Date" means August 31, 2000 and the last day of each
calendar month thereafter.
"Deemed Collections" means the aggregate of all amounts Seller
shall have been deemed to have received as an Asset Interest Collection of a
Receivable. Seller shall be deemed to have received an Asset Interest Collection
in full of a Receivable if at any time (i) the Outstanding Balance of any such
Receivable is either (x) reduced as a result of any defective or rejected goods
or services, any discount or any adjustment or otherwise by Seller (other than
cash Asset Interest Collections on account of the Receivables) or (y) reduced or
canceled as a result of a setoff in respect of any claim by any Person (whether
such claim arises out of the same or a related transaction or an unrelated
transaction) or (ii) any of the representations or warranties in Article V are
no longer true with respect to any Receivable.
"Default Fee" means with respect to any amount due and payable
by Seller in respect of any Aggregate Unpaids, an amount equal to the greater of
(i) $1000 and (ii) interest on any such unpaid Aggregate Unpaids at a rate per
annum equal to 2% above the Prime Rate.
"Defaulting Financial Institution" has the meaning set forth in Section
13.5.
"Delinquency Trigger Ratio" means, as of any Cut-Off Date, the
ratio (expressed as a percentage) computed by dividing (i) the aggregate
Outstanding Balance of all Receivables that are Delinquent Receivables as of
such Cut-Off Date, by (ii) the aggregate Outstanding Balance of all Receivables
as of such Cut-Off Date.
"Delinquent Receivable" means a Receivable as to which any
payment, or part thereof, remains unpaid for more than 60 days from the original
invoice date but not more than 90 days from the original invoice date for such
payment.
"Dilution Trigger Ratio" means a percentage equal to a
fraction, the numerator of which is the total amount of decreases in Outstanding
Balances of the Receivables due to Dilutions during the most recent Measurement
Period, and the denominator of which is the amount of sales generated by the
Originators during the Measurement Period one month prior to the most recent
Measurement Period.
"Dilutions" means, at any time, the aggregate amount of
reductions or cancellations described in clause (i) of the definition of "Deemed
Collections".
"Discount Rate" means, the LIBO Rate or the Prime Rate, as
applicable, with respect to each Purchaser Interest of the Financial
Institutions.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Facility Account" means Seller's account no. 4496823691 at Wells Fargo
Bank, N.A.
"Facility Termination Date" means the earlier of (i) the
Liquidity Termination Date and (ii) the Amortization Date.
"Federal Bankruptcy Code" means Title 11 of the United States
Code entitled "Bankruptcy," as amended and any successor statute thereto.
"Federal Funds Effective Rate" means, for any period, a
fluctuating interest rate per annum for each day during such period equal to (a)
the weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the preceding
Business Day) by the Federal Reserve Bank of New York in the Composite Closing
Quotations for U.S. Government Securities; or (b) if such rate is not so
published for any day which is a Business Day, the average of the quotations at
approximately 10:30 a.m. (Chicago time) for such day on such transactions
received by the Agent from three federal funds brokers of recognized standing
selected by it.
"Fee Letter" means that certain letter agreement dated as of
the date hereof between Seller and the Agent, as it may be amended or modified
and in effect from time to time.
"Ferrellgas" has the meaning set forth in the preamble in this Agreement.
"Financial Institutions" has the meaning set forth in the preamble in this
Agreement.
"Funding Agreement" means this Agreement and any agreement or
instrument executed by any Funding Source with or for the benefit of Conduit.
"Funding Source" means (i) any Financial Institution or (ii)
any insurance company, bank or other funding entity providing liquidity, credit
enhancement or back-up purchase support or facilities to Conduit.
"GAAP" means generally accepted accounting principles in
effect in the United States of America as of the date of this Agreement.
"Incremental Purchase" means a purchase of one or more
Purchaser Interests which increases the total outstanding Aggregate Capital
hereunder.
"Indebtedness" of a Person means such Person's (i) obligations
for borrowed money, (ii) obligations representing the deferred purchase price of
property or services (other than accounts payable arising in the ordinary course
of such Person's business payable on terms customary in the trade), (iii)
obligations, whether or not assumed, secured by liens or payable out of the
proceeds or production from property now or hereafter owned or acquired by such
Person, (iv) obligations which are evidenced by notes, acceptances, or other
instruments, (v) capitalized lease obligations, (vi) net liabilities under
interest rate swap, exchange or cap agreements, (vii) Contingent Obligations and
(viii) liabilities in respect of unfunded vested benefits under plans covered by
Title IV of ERISA.
"Independent Director" shall mean a member of the Board of
Directors of Seller who is not at such time, and has not been at any time during
the preceding five (5) years, (A) a director, officer, employee or affiliate of
Seller, Originator, or any of their respective Subsidiaries or Affiliates, or
(B) the beneficial owner (at the time of such individual's appointment as an
Independent Director or at any time thereafter while serving as an Independent
Director) of any of the outstanding common shares of Seller, Originator, or any
of their respective Subsidiaries or Affiliates, having general voting rights;
"LIBO Rate" means the rate per annum equal to the sum of (i)
(a) the applicable British Bankers' Association Interest Settlement Rate for
deposits in U.S. dollars appearing on Reuters Screen FRBD as of 12:00 noon
(London time) two Business Days prior to the first day of the relevant Tranche
Period, and having a maturity equal to such Tranche Period, provided that, (i)
if Reuters Screen FRBD is not available to the Agent for any reason, the
applicable LIBO Rate for the relevant Tranche Period shall instead be the
applicable British Bankers' Association Interest Settlement Rate for deposits in
U.S. dollars as reported by any other generally recognized financial information
service as of 12:00 noon (London time) two Business Days prior to the first day
of such Tranche Period, and having a maturity equal to such Tranche Period, and
(ii) if no such British Bankers' Association Interest Settlement Rate is
available to the Agent, the applicable LIBO Rate for the relevant Tranche Period
shall instead be the rate determined by the Agent to be the rate at which Bank
One offers to place deposits in U.S. dollars with first-class banks in the
London interbank market at approximately 12:00 noon (London time) two Business
Days prior to the first day of such Tranche Period, in the approximate amount to
be funded at the LIBO Rate and having a maturity equal to such Tranche Period,
divided by (b) one minus the maximum aggregate reserve requirement (including
all basic, supplemental, marginal or other reserves) which is imposed against
the Agent in respect of Eurocurrency liabilities, as defined in Regulation D of
the Board of Governors of the Federal Reserve System as in effect from time to
time (expressed as a decimal), applicable to such Tranche Period plus (ii) the
Applicable Margin. The LIBO Rate shall be rounded, if necessary, to the next
higher 1/16 of 1%.
"Liquidity Termination Date" means September 25, 2001.
"Lock-Box" means each locked postal box with respect to which
a bank has been granted exclusive access for the purpose of retrieving and
processing payments made on the Pool Receivables.
"Material Adverse Effect" means a material adverse effect on
(i) the financial condition or operations of any Seller Party and its
Subsidiaries, (ii) the ability of any Seller Party to perform its obligations
under this Agreement, (iii) the legality, validity or enforceability of this
Agreement or any other Transaction Document, (iv) any Purchaser's interest in
the Pool Receivables generally or in any significant portion of the Pool
Receivables, the Related Security or the Asset Interest Collections with respect
thereto, or (v) the collectibility of the Pool Receivables generally or of any
material portion of the Pool Receivables.
"Measurement Period" means a calendar month.
"Monthly Report" means a report, in substantially the form of
Exhibit VI hereto (appropriately completed), furnished by the Servicer to the
Agent pursuant to Section 8.5.
"Monthly Reporting Date" has the meaning set forth in Section 8.5.
"Net Asset Interest Balance" means, at any time, the Buyer's
Percentage of the aggregate Outstanding Balance of all Pool Receivables that are
Eligible Receivables at such time.
"Non-Defaulting Financial Institution" has the meaning set forth in Section
13.5.
"Non-Renewing Financial Institution" has the meaning set forth in Section
13.6(a).
"Originator" means Ferrellgas, in its capacity as seller under
the Receivables Interest Sale Agreement.
"Participant" has the meaning set forth in Section 12.2.
"Person" means an individual, partnership, corporation
(including a business trust), limited liability company, joint stock company,
trust, unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof.
"Pooled Commercial Paper" means Commercial Paper notes of
Conduit subject to any particular pooling arrangement by Conduit, but excluding
Commercial Paper issued by Conduit for a tenor and in an amount specifically
requested by any Person in connection with any agreement effected by Conduit.
"Potential Amortization Event" means an event which, with the
passage of time or the giving of notice, or both, would constitute an
Amortization Event.
"Prime Rate" means a rate per annum equal to the prime rate of
interest announced from time to time by Bank One or its parent (which is not
necessarily the lowest rate charged to any customer), changing when and as said
prime rate changes.
"Pro Rata Share" means, for each Financial Institution, a
percentage equal to (i) the Commitment of such Financial Institution, divided by
(ii) the aggregate amount of all Commitments of all Financial Institutions
hereunder, adjusted as necessary to give effect to the application of the terms
of Sections 13.5 or 13.6.
"Proposed Reduction Date" has the meaning set forth in Section 1.3.
"Purchase Limit" means $60,000,000.
"Purchase Notice" has the meaning set forth in Section 1.2.
"Purchase Price" means, with respect to any Incremental
Purchase of a Purchaser Interest, the amount paid to Seller for such Purchaser
Interest which shall not exceed the least of (i) the amount requested by Seller
in the applicable Purchase Notice, (ii) the unused portion of the Purchase Limit
on the applicable purchase date and (iii) the excess, if any, of 80% of the Net
Asset Interest Balance on the applicable purchase date over the aggregate
outstanding amount of Aggregate Capital determined as of the date of the most
recent Monthly Report, taking into account such proposed Incremental Purchase.
"Purchasers" means Conduit and the Financial Institutions.
"Purchaser Interest" means, at any time, a portion of an
aggregate undivided 100% ownership interest in the Asset Interest associated
with a designated amount of Capital, selected pursuant to the terms and
conditions hereof.
"Purchasing Financial Institution" has the meaning set forth in Section
12.1(b).
"Receivables Interest Sale Agreement" means that certain
Receivables Interest Sale Agreement, dated as of September 26, 2000, between
Originator and Seller, as the same may be amended, restated or otherwise
modified from time to time.
"Recourse Obligations" shall have the meaning set forth in Section 2.1.
"Reduction Notice" has the meaning set forth in Section 1.3.
"Reduction Percentage" means, for any Purchaser Interest
acquired by the Financial Institutions from Conduit for less than the Capital of
such Purchaser Interest, a percentage equal to a fraction the numerator of which
is the Conduit Transfer Price Reduction for such Purchaser Interest and the
denominator of which is the Capital of such Purchaser Interest.
"Regulatory Change" has the meaning set forth in Section 10.2(a).
"Reinvestment" has the meaning set forth in Section 2.2.
"Required Financial Institutions" means, at any time,
Financial Institutions with Commitments in excess of 66-2/3% of the Purchase
Limit.
"Required Notice Period" means two (2) Business Days.
"Restricted Junior Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
capital stock of Seller now or hereafter outstanding, except a dividend payable
solely in shares of that class of stock or in any junior class of stock of
Seller, (ii) any redemption, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of any shares of
any class of capital stock of Seller now or hereafter outstanding, (iii) any
payment or prepayment of principal of, premium, if any, or interest, fees or
other charges on or with respect to, and any redemption, purchase, retirement,
defeasance, sinking fund or similar payment and any claim for rescission with
respect to the Subordinated Loans (as defined in the Receivables Interest Sale
Agreement), (iv) any payment made to redeem, purchase, repurchase or retire, or
to obtain the surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of capital stock of Seller now or hereafter
outstanding, and (v) any payment of management fees by Seller (except for
reasonable management fees to the Originator or its Affiliates in reimbursement
of actual management services performed).
"Seller" has the meaning set forth in the preamble to this Agreement.
"Seller Parties" has the meaning set forth in the preamble to this
Agreement.
"Servicer" means at any time the Person (which may be the
Agent) then authorized pursuant to Article VIII to service, administer and
collect Receivables.
"Settlement Date" means (A) the second Business Day after each
Monthly Reporting Date, and (B) the last day of the relevant Tranche Period in
respect of each Purchaser Interest of the Financial Institutions.
"Settlement Period" means (A) in respect of each Purchaser
Interest of Conduit, the immediately preceding Accrual Period, and (B) in
respect of each Purchaser Interest of the Financial Institutions, the entire
Tranche Period of such Purchaser Interest.
"Subsidiary" of a Person means (i) any corporation more than
50% of the outstanding securities having ordinary voting power of which shall at
the time be owned or controlled, directly or indirectly, by such Person or by
one or more of its Subsidiaries or by such Person and one or more of its
Subsidiaries, or (ii) any partnership, association, limited liability company,
joint venture or similar business organization more than 50% of the ownership
interests having ordinary voting power of which shall at the time be so owned or
controlled. Unless otherwise expressly provided, all references herein to a
"Subsidiary" shall mean a Subsidiary of Seller.
"Termination Date" has the meaning set forth in Section 2.2.
"Termination Percentage" has the meaning set forth in Section 2.2.
"Terminating Financial Institution" has the meaning set forth in Section
13.6(a).
"Terminating Tranche" has the meaning set forth in Section 4.3(b).
"Tranche Period" means, with respect to any Purchaser Interest
held by a Financial Institution:
(a) if Yield for such Purchaser Interest is calculated on the
basis of the LIBO Rate, a period of one, two, three or six months, or
such other period as may be mutually agreeable to the Agent and Seller,
commencing on a Business Day selected by Seller or the Agent pursuant
to this Agreement. Such Tranche Period shall end on the day in the
applicable succeeding calendar month which corresponds numerically to
the beginning day of such Tranche Period, provided, however, that if
there is no such numerically corresponding day in such succeeding
month, such Tranche Period shall end on the last Business Day of such
succeeding month; or
(b) if Yield for such Purchaser Interest is calculated on the
basis of the Prime Rate, a period commencing on a Business Day selected
by Seller, provided no such period shall exceed one month.
If any Tranche Period would end on a day which is not a Business Day, such
Tranche Period shall end on the next succeeding Business Day, provided, however,
that in the case of Tranche Periods corresponding to the LIBO Rate, if such next
succeeding Business Day falls in a new month, such Tranche Period shall end on
the immediately preceding Business Day. In the case of any Tranche Period for
any Purchaser Interest which commences before the Amortization Date and would
otherwise end on a date occurring after the Amortization Date, such Tranche
Period shall end on the Amortization Date. The duration of each Tranche Period
which commences after the Amortization Date shall be of such duration as
selected by the Agent.
"Transaction Documents" means, collectively, this Agreement,
each Purchase Notice, the Receivables Interest Sale Agreement, the Fee Letter,
the Subordinated Note (as defined in the Receivables Interest Sale Agreement)
and all other instruments, documents and agreements executed and delivered in
connection herewith.
"UCC" means the Uniform Commercial Code as from time to time
in effect in the specified jurisdiction.
"Yield" means for each respective Tranche Period relating to
Purchaser Interests of the Financial Institutions, an amount equal to the
product of the applicable Discount Rate for each Purchaser Interest multiplied
by the Capital of such Purchaser Interest for each day elapsed during such
Tranche Period, annualized on a 360 day basis in the case of Yield computed at a
LIBO Rate and on a 365 (or, when appropriate, 366) day basis in the case of
Yield computed at the Prime Rate.
(c) All accounting terms not specifically defined herein shall
be construed in accordance with GAAP.
(d) All terms used in Article 9 of the UCC in the State of New
York, and not specifically defined herein, are used herein as defined in such
Article 9.
EXHIBIT II
FORM OF PURCHASE NOTICE
[DATE]
Bank One, NA (Main Office Chicago), as Agent
1 Bank One Plaza, 21st Floor
Asset-Backed Finance
Chicago, Illinois 60670-0596
Attention: Conduit Administrator, Jupiter Securitization Corporation
Re: PURCHASE NOTICE
Ladies and Gentlemen:
Reference is hereby made to the Receivables Purchase
Agreement, dated as of September 26, 2000, by and among Ferrellgas Receivables,
LLC, a Delaware limited liability company ("Seller"), between Ferrellgas, L.P.,
a Delaware limited partnership, as Servicer, the Financial Institutions, Jupiter
Securitization Corporation ("Conduit"), and Bank One, NA (Main Office Chicago),
as Agent (the "Receivables Purchase Agreement"). Capitalized terms used herein
shall have the meanings assigned to such terms in the Receivables Purchase
Agreement.
The Agent is hereby notified of the following Incremental
Purchase:
Purchase Price: $
Date of Purchase:
Requested Discount Rate: [LIBO Rate] [Prime Rate] [Pooled Commercial Paper rate]
Please credit the Purchase Price in immediately available
funds to our Facility Account [and then wire-transfer the Purchase Price in
immediately available funds on the above-specified date of purchase to:
[Account Name]
[Account No.]
[Bank Name & Address]
[ABA #]
Reference:
Telephone advice to: [Name] @ tel. No. ( )
Please advise [Name] at telephone no ( ) _________________
if Conduit will not be making this purchase.
In connection with the Incremental Purchase to be made on the
above listed "Date of Purchase" (the "Purchase Date"), the Seller hereby
certifies that the following statements are true on the date hereof, and will be
true on the Purchase Date (before and after giving effect to the proposed
Incremental Purchase):
(i) the representations and warranties of the Seller set forth
in Section 5.1 of the Receivables Purchase Agreement are true and correct on and
as of the Purchase Date as though made on and as of such date;
(ii) no event has occurred and is continuing, or would result
from the proposed Incremental Purchase, that will constitute an Amortization
Event or a Potential Amortization Event;
(iii) the Facility Termination Date has not occurred, the
Aggregate Capital does not exceed the Purchase Limit and the aggregate Purchaser
Interests do not exceed 100%; and
(iv) the amount of Aggregate Capital is $_________ after
giving effect to the Incremental Purchase to be made on the Purchase Date.
Very truly yours,
FERRELLGAS RECEIVABLES, LLC
By:
Name:
Title:
EXHIBIT III
PRINCIPAL PLACES OF BUSINESS AND CHIEF EXECUTIVE OFFICES OF THE SELLER
PARTIES; LOCATIONS OF RECORDS; FEDERAL EMPLOYER IDENTIFICATION NUMBER(S)
Places of Business:
Seller: Principal Place of Business and Chief Executive Office
One Allen Center
500 Dallas Street, Suite 2700
Houston, TX 77002
Servicer: Principal Place of Business and Chief Executive Office
One Liberty Plaza
Liberty, Missouri 64068
Locations of Records:
Seller: Seller's and Servicer's addresses above
Servicer: Seller's and Servicer's addresses above
Federal Employer Identification Numbers:
Seller: 43-1698481
Servicer: 43-1698481
EXHIBIT IV
FORM OF COMPLIANCE CERTIFICATE
To: Bank One, NA (Main Office Chicago), as Agent
This Compliance Certificate is furnished pursuant to that
certain Receivables Purchase Agreement dated as of September 26, 2000, among
Ferrellgas Receivables, LLC (the "Seller"), Ferrellgas, L.P. (the "Servicer"),
the Purchasers party thereto and Bank One, NA (Main Office Chicago), as agent
for such Purchasers (the "Agreement").
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected ________________ of Seller.
2. I have reviewed the terms of the Agreement and I have made,
or have caused to be made under my supervision, a detailed review of the
transactions and conditions of Seller and its Subsidiaries during the accounting
period covered by the attached financial statements.
3. The examinations described in paragraph 2 did not disclose,
and I have no knowledge of, the existence of any condition or event which
constitutes an Amortization Event or Potential Amortization Event, as each such
term is defined under the Agreement, during or at the end of the accounting
period covered by the attached financial statements or as of the date of this
Certificate, except as set forth in paragraph 5 below.
4. Schedule I attached hereto sets forth financial data and
computations evidencing the compliance with certain covenants of the Agreement,
all of which data and computations are true, complete and correct.
5. Described below are the exceptions, if any, to paragraph 3
by listing, in detail, the nature of the condition or event, the period during
which it has existed and the action which Seller has taken, is taking, or
proposes to take with respect to each such condition or event:
THE FOREGOING CERTIFICATIONS, TOGETHER WITH THE COMPUTATIONS SET FORTH IN
SCHEDULE I HERETO AND THE FINANCIAL STATEMENTS DELIVERED WITH THIS CERTIFICATE
IN SUPPORT HEREOF, ARE MADE AND DELIVERED THIS ____ DAY OF _________, __ .
BY:____________________________________
NAME:
TITLE:
SCHEDULE I TO COMPLIANCE CERTIFICATE
A. Schedule of Compliance as of [Date] with Section 9.1(f) of
the Agreement. Unless otherwise defined herein, the terms used in this
Compliance Certificate have the meanings ascribed thereto in the Agreement.
This schedule relates to the month ended: _______________
EXHIBIT V
FORM OF ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT (this "Assignment Agreement") is
entered into as of the ___ day of ____________, ____, by and between
_____________________ ("Assignor") and __________________ ("Assignee").
PRELIMINARY STATEMENTS
A. This Assignment Agreement is being executed and delivered
in accordance with Section 12.1(b) of that certain Receivables Purchase
Agreement dated as of September 26, 2000 by and among Ferrellgas Receivables,
LLC, Ferrellgas, L.P., as Servicer, Jupiter Securitization Corporation, Bank
One, NA (Main Office Chicago), as Agent, and the Financial Institutions party
thereto (as amended, modified or restated from time to time, the "Purchase
Agreement"). Capitalized terms used and not otherwise defined herein are used
with the meanings set forth or incorporated by reference in the Purchase
Agreement.
B. Assignor is a Financial Institution party to the Purchase Agreement, and
Assignee
wishes to become a Financial Institution thereunder; and
C. Assignor is selling and assigning to Assignee an undivided
____________% (the "Transferred Percentage") interest in all of Assignor's
rights and obligations under the Purchase Agreement and the Transaction
Documents, including, without limitation, Assignor's Commitment and (if
applicable) the Capital of Assignor's Purchaser Interests as set forth herein.
AGREEMENT
The parties hereto hereby agree as follows:
1. The sale, transfer and assignment effected by this Assignment Agreement shall
become effective (the "Effective Date") two (2) Business Days (or such other
date selected by the Agent in its sole discretion) following the date on which a
notice substantially in the form of Schedule II to this Assignment Agreement
("Effective Notice") is delivered by the Agent to Conduit, Assignor and
Assignee. From and after the Effective Date, Assignee shall be a Financial
Institution party to the Purchase Agreement for all purposes thereof as if
Assignee were an original party thereto and Assignee agrees to be bound by all
of the terms and provisions contained therein.
2. If Assignor has no outstanding Capital under the Purchase Agreement, on the
Effective Date, Assignor shall be deemed to have hereby transferred and assigned
to Assignee, without recourse, representation or warranty (except as provided in
paragraph 6 below), and the Assignee shall be deemed to have hereby irrevocably
taken, received and assumed from Assignor, the Transferred Percentage of
Assignor's Commitment and all rights and obligations associated therewith under
the terms of the Purchase Agreement, including, without limitation, the
Transferred Percentage of Assignor's future funding obligations under Section
4.1 of the Purchase Agreement.
3. If Assignor has any outstanding Capital under the Purchase Agreement, at or
before 12:00 noon, local time of Assignor, on the Effective Date Assignee shall
pay to Assignor, in immediately available funds, an amount equal to the sum of
(i) the Transferred Percentage of the outstanding Capital of Assignor's
Purchaser Interests (such amount, being hereinafter referred to as the
"Assignee's Capital"); (ii) all accrued but unpaid (whether or not then due)
Yield attributable to Assignee's Capital; and (iii) accruing but unpaid fees and
other costs and expenses payable in respect of Assignee's Capital for the period
commencing upon each date such unpaid amounts commence accruing, to and
including the Effective Date (the "Assignee's Acquisition Cost"); whereupon,
Assignor shall be deemed to have sold, transferred and assigned to Assignee,
without recourse, representation or warranty (except as provided in paragraph 6
below), and Assignee shall be deemed to have hereby irrevocably taken, received
and assumed from Assignor, the Transferred Percentage of Assignor's Commitment
and the Capital of Assignor's Purchaser Interests (if applicable) and all
related rights and obligations under the Purchase Agreement and the Transaction
Documents, including, without limitation, the Transferred Percentage of
Assignor's future funding obligations under Section 4.1 of the Purchase
Agreement.
4. Concurrently with the execution and delivery hereof, Assignor will provide to
Assignee copies of all documents requested by Assignee which were delivered to
Assignor pursuant to the Purchase Agreement.
5. Each of the parties to this Assignment Agreement agrees that at any time and
from time to time upon the written request of any other party, it will execute
and deliver such further documents and do such further acts and things as such
other party may reasonably request in order to effect the purposes of this
Assignment Agreement.
6. By executing and delivering this Assignment Agreement, Assignor and Assignee
confirm to and agree with each other, the Agent and the Financial Institutions
as follows: (a) other than the representation and warranty that it has not
created any Adverse Claim upon any interest being transferred hereunder,
Assignor makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made by any other
Person in or in connection with the Purchase Agreement or the Transaction
Documents or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of Assignee, the Purchase Agreement or any other instrument
or document furnished pursuant thereto or the perfection, priority, condition,
value or sufficiency of any collateral; (b) Assignor makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Seller, any Obligor, any Affiliate of the Seller or the performance or
observance by the Seller, any Obligor, any Affiliate of the Seller of any of
their respective obligations under the Transaction Documents or any other
instrument or document furnished pursuant thereto or in connection therewith;
(c) Assignee confirms that it has received a copy of the Purchase Agreement and
copies of such other Transaction Documents, and other documents and information
as it has requested and deemed appropriate to make its own credit analysis and
decision to enter into this Assignment Agreement; (d) Assignee will,
independently and without reliance upon the Agent, Conduit, the Seller or any
other Financial Institution or Purchaser and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Purchase Agreement and
the Transaction Documents; (e) Assignee appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such powers under the
Transaction Documents as are delegated to the Agent by the terms thereof,
together with such powers as are reasonably incidental thereto; and (f) Assignee
agrees that it will perform in accordance with their terms all of the
obligations which, by the terms of the Purchase Agreement and the other
Transaction Documents, are required to be performed by it as a Financial
Institution or, when applicable, as a Purchaser.
7. Each party hereto represents and warrants to and agrees with the Agent that
it is aware of and will comply with the provisions of the Purchase Agreement,
including, without limitation, Sections 4.1, 13.1 and 14.6 thereof.
8. Schedule I hereto sets forth the revised Commitment of Assignor and the
Commitment of Assignee, as well as administrative information with respect to
Assignee.
9. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
10. Assignee hereby covenants and agrees that, prior to the date which is one
year and one day after the payment in full of all senior indebtedness for
borrowed money of Conduit, it will not institute against, or join any other
Person in instituting against, Conduit any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any state of the United States.
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment Agreement to be executed by their respective duly authorized officers
of the date hereof.
[ASSIGNOR]
By: _________________________
Title:
[ASSIGNEE]
By: __________________________
Title:
SCHEDULE I TO ASSIGNMENT AGREEMENT
LIST OF LENDING OFFICES, ADDRESSES
FOR NOTICES AND COMMITMENT AMOUNTS
Date: _____________, ______
Transferred Percentage: ____________%
A-1 A-2 B-1 B-2
Assignor Commitment (prior to Commitment (after Outstanding Capital Ratable Share of
giving effect to the giving effect to the (if any) Outstanding Capital
Assignment Agreement) Assignment Agreement)
A-2 B-1 B-2
Assignee Commitment (after Outstanding Capital Ratable Share of
giving effect to the (if any) Outstanding Capital
Assignment Agreement)
Address for Notices
Attention:
Phone:
Fax:
SCHEDULE II TO ASSIGNMENT AGREEMENT
EFFECTIVE NOTICE
TO: ________________________, Assignor
------------------------
TO: ________________________, Assignee
------------------------
The undersigned, as Agent under the Receivables Purchase
Agreement dated as of September 26, 2000 by and among Ferrellgas Receivables,
LLC, a Delaware limited liability company ("Seller"), between Ferrellgas, L.P.,
a Delaware limited partnership, as Servicer, Jupiter Securitization Corporation,
Bank One, NA (Main Office Chicago), as Agent, and the Financial Institutions
party thereto, hereby acknowledges receipt of executed counterparts of a
completed Assignment Agreement dated as of ____________, ____ between
__________________, as Assignor, and __________________, as Assignee. Terms
defined in such Assignment Agreement are used herein as therein defined.
1. Pursuant to such Assignment Agreement, you are advised that the
Effective Date will be
- --------------, ----.
2. By its signature below, [each of] Conduit [and Seller]
hereby consents to the Assignment Agreement as required by Section 12.1(b) of
the Receivables Purchase Agreement.
[3. Pursuant to such Assignment Agreement, the Assignee is required to pay
$____________ to Assignor at or before 12:00 noon (local time of Assignor) on
the Effective Date in immediately available funds.]
Very truly yours,
BANK ONE, NA (MAIN OFFICE CHICAGO),
individually and as Agent
By: __________________________
Title:_______________________
JUPITER SECURITIZATION CORPORATION
By: ____________________________
Authorized Signatory
[The foregoing is hereby consented to:
FERRELLGAS RECEIVABLES, LLC
By:
Name:
Title:]
EXHIBIT VI
FORM OF MONTHLY REPORT
Monthly Report as of x/xx/xx
For Month Day, Year
Originator-specific data:
I. Receivables Rollforward
Ferrellgas, L.P.
--------------------
Beginning Receivables 0
--------------------
--------------------
Add: Invoices 0
--------------------
--------------------
Finance Charges 0
--------------------
--------------------
Debit Memos 0
--------------------
--------------------
Less: Cash Collections 0
--------------------
--------------------
Credit Memos (Note 1) 0
--------------------
--------------------
Charge-offs 0
--------------------
--------------------------------------------------------------------------------------------
Total Receivables 0
--------------------------------------------------------------------------------------------
II. Summary Aging Schedule
--------------------------------------------------------------------------------------------
Ferrellgas, L.P.
--------------------------------------------------------------------------------------------
-------- --------------------
Current 0
--------------------
--------------------
30-60 days from invoice 0
--------------------
--------------------
61-90 days from invoice 0
--------------------
> 91 days from invoice 0
--------------------
--------------------------------------------------------------------------------------------
Total Receivables 0
--------------------------------------------------------------------------------------------
--------------------
III. Ending G/L Balance 0
--------------------
IV. Eligible Receivables
--------------------------------------------------------------------------------------------
Ferrellgas, L.P.
--------------------------------------------------------------------------------------------
Total Receivables (Note 2) 0
"Eligible Receivable" definition (Note 3):
--------------------
Less: Non - U.S. Receivables (i) 0
--------------------
--------------------
Receivables of Affiliates (i) 0
--------------------
--------------------
Government Receivables > (i) 0
2% of Outstanding Balance
--------------------
--------------------
Obligors of Defaulted (ii) 0
Receivables (10%) (Note 4)
--------------------
--------------------
Defaulted Receivables > 60 (iii) 0
days from invoice
--------------------
--------------------
Rec.w/ terms > 30 (iv) 0
--------------------
--------------------
Originator Obligations not (xvi) 0
fully performed
--------------------
--------------------
Other Ineligible (v-xv & xvii) 0
--------------------
Excess Concentrations (xviii) 0
(from Section VII below)
--------------------------------------------------------------------------------------------
Pool Receivables Balance 0
--------------------------------------------------------------------------------------------
V. Capital Availability
Pool Receivables $0
Less: Reserve Percentage x Pool 20.00% $0
--
Receivables
Available for Funding $0
Capital Outstanding (cannot exceed $0
$60 million)
Asset Interest (sum of the Receivables Interest and the Contributed $ -
Interest)
Purchaser Interest (cannot exceed 100.00%
100%)
VI. Receivable Interest Sale Agreement
Calculations
% Value $ Value
Adjusted Pool Amount (Capital / $ -
0.80)
Minimum Receivables Percentage
Variable Purchased Percentage $ - Receivable
Interest
Variable Contributed Percentage $ - Contributed
Interest
======================================
Buyer's Percentage (equal to Net Asset Interest $ -
Balance)
Originator's Percentage (100% minus the Buyer's $ -
Percentage)
SCHEDULE A
COMMITMENTS OF FINANCIAL INSTITUTIONS
FINANCIAL INSTITUTION COMMITMENT
Bank One, NA (Main Office Chicago) $61,200,000
SCHEDULE B
DOCUMENTS TO BE DELIVERED TO THE AGENT ON OR PRIOR TO THE
INITIAL PURCHASE 1. The Receivables Interest Sale Agreement and each of the
documents listed on Schedule A thereto.
2. Executed copies of this Agreement, duly executed by the parties thereto.
3. Copy of the Resolutions of the Board of Directors of Seller certified by
its Secretary authorizing Seller's execution, delivery and performance of
this Agreement and the other documents to be delivered by it hereunder.
4. Copy of the Resolutions of the Board of Directors of the General Partner
and the Servicer certified by its Secretary authorizing the Servicer's
execution, delivery and performance of this Agreement and the other
documents to be delivered by it hereunder.
5. Organization Documents of Seller and certified by the Secretary of State of
Delaware on or within thirty (30) days prior to the initial Incremental
Purchase.
6. Good Standing Certificate for Seller issued by the Secretaries of State
of:
a. Delaware
b. Texas
7. A certificate of the Secretary of Seller certifying the names and
signatures of the officers authorized on its behalf to execute this
Agreement and any other documents to be delivered by it hereunder.
8. A certificate of the Secretary of Servicer and the General Partner
certifying the names and signatures of the officers authorized on its
behalf to execute this Agreement and any other documents to be delivered by
it hereunder.
9. UCC financing statements, in form suitable for filing under the UCC in all
jurisdictions as may be necessary or, in the opinion of the Agent,
desirable, under the UCC of all appropriate jurisdictions or any comparable
law in order to perfect the ownership interests contemplated by this
Agreement.
10. Time stamped receipt copies of proper UCC termination statements, if any,
necessary to release all security interests and other rights of any Person
in the Asset Interest previously granted by Seller.
11. A favorable opinion of legal counsel for the Seller Parties reasonably
acceptable to the Agent which addresses the following matters and such
other matters as the Agent may reasonably request:
--Each Seller Party is duly organized, validly existing, and
in good standing under the laws of its state of organization.
--Each Seller Party has all requisite authority to conduct its
business in each jurisdiction where failure to be so qualified would have a
material adverse effect on such Person's business.
--The execution and delivery by each Seller Party of this
Agreement and each other Transaction Document to which it is a party and its
performance of its obligations thereunder have been duly authorized by all
necessary action and proceedings on the part of such Person and will not:
(a) require any action by or in respect of, or filing with,
any governmental body, agency or official (other than the filing of UCC
financing statements);
(b) contravene, or constitute a default under, any provision
of applicable law or regulation or of its Organization Documents or of any
agreement, judgment, injunction, order, decree or other instrument binding upon
such Person; or
(c) result in the creation or imposition of any Adverse Claim
on assets of such Person or any of its Subsidiaries (except as contemplated by
this Agreement).
--This Agreement and each other Transaction Document to which
such Person is a party has been duly executed and delivered by such Person and
constitutes the legal, valid, and binding obligation of such Person, enforceable
in accordance with its terms, except to the extent the enforcement thereof may
be limited by bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally and subject also to the availability of equitable
remedies if equitable remedies are sought.
--The provisions of the Agreement are effective to create a
valid security interest in favor of the Agent for the benefit of the Purchasers
in all Receivables, and upon the filing of financing statements, the Agent for
the benefit of the Purchasers shall acquire a first priority, perfected security
interest in such Receivables.
--To the best of the opinion giver's knowledge, there is no
action, suit or other proceeding against any Seller Party or any of their
respective Affiliates, which would materially adversely affect the business or
financial condition of such Person and its Affiliates taken as a whole or which
would materially adversely affect the ability of such Person to perform its
obligations under any Transaction Document to which it is a party.
12. A Compliance Certificate.
13. The Fee Letter.
14. A Monthly Report as at August 31, 2000.
15. On or before October 26, 2000, a Blocked Account Agreement by and among the
Servicer, Wells Fargo Bank, and the Agent with respect to the Servicer's
Concentration Account, in form and substance satisfactory to the Agent.
16. On or before October 26, 2000, a Blocked Account Agreement by and among
Seller, Wells Fargo Bank, and the Agent with respect to the Facility
Account, in form and substance satisfactory to the Agent.
TABLE OF CONTENTS
PAGE
ARTICLE I.PURCHASE ARRANGEMENTS...................................................................................1
SECTION 1.1 PURCHASE FACILITY...............................................................................1
SECTION 1.2 INCREASES.......................................................................................2
SECTION 1.3 DECREASES.......................................................................................2
SECTION 1.4 PAYMENT REQUIREMENTS............................................................................2
ARTICLE II.PAYMENTS AND ASSET INTEREST COLLECTIONS................................................................3
SECTION 2.1 PAYMENTS........................................................................................3
SECTION 2.2 ASSET INTEREST COLLECTIONS PRIOR TO AMORTIZATION................................................3
SECTION 2.3 ASSET INTEREST COLLECTIONS FOLLOWING AMORTIZATION...............................................4
SECTION 2.3 APPLICATION OF ASSET INTEREST COLLECTIONS.......................................................4
SECTION 2.4 PAYMENT RECISSION...............................................................................5
SECTION 2.5 MAXIMUM PURCHASER INTERESTS.....................................................................5
SECTION 2.6 CLEAN UP CALL...................................................................................5
ARTICLE III.CONDUIT FUNDING.......................................................................................5
SECTION 3.1 CP COSTS........................................................................................5
SECTION 3.2 CP COSTS PAYMENTS...............................................................................6
SECTION 3.3 CALCULATION OF CP COSTS.........................................................................6
ARTICLE IV.FINANCIAL INSTITUTION FUNDING..........................................................................6
SECTION 4.1 FINANCIAL INSTITUTION FUNDING...................................................................6
SECTION 4.2 YIELD PAYMENTS..................................................................................6
SECTION 4.3 SELECTION AND CONTINUATION OF TRANCHE PERIODS...................................................6
SECTION 4.4 FINANCIAL INSTITUTION DISCOUNT RATES............................................................7
SECTION 4.5 SUSPENSION OF THE LIBO RATE.....................................................................7
ARTICLE V.REPRESENTATIONS AND WARRANTIES..........................................................................7
SECTION 5.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER....................................................7
SECTION 5.2 FINANCIAL INSTITUTION REPRESENTATIONS AND WARRANTIES...........................................11
ARTICLE VI.CONDITIONS OF PURCHASES...............................................................................12
SECTION 6.1 CONDITIONS PRECEDENT TO INITIAL INCREMENTAL PURCHASE...........................................12
SECTION 6.2 CONDITIONS PRECEDENT TO ALL PURCHASES AND REINVESTMENTS........................................12
ARTICLE VII.COVENANTS............................................................................................13
SECTION 7.1 FINANCIAL REPORTING............................................................................13
SECTION 7.2 CERTIFICATES; OTHER INFORMATION................................................................13
SECTION 7.3 NOTICES........................................................................................13
SECTION 7.4 COMPLIANCE WITH LAWS...........................................................................14
SECTION 7.5 PRESERVATION OF EXISTENCE, ETC.................................................................14
SECTION 7.6 PAYMENT OF OBLIGATIONS.........................................................................15
SECTION 7.7 AUDITS.........................................................................................15
SECTION 7.8 KEEPING OF RECORDS AND BOOKS. .................................................................15
SECTION 7.9 COMPLIANCE WITH CONTRACTS AND CREDIT AND COLLECTION POLICY. ..................................16
SECTION 7.10 PURCHASERS'RELIANCE............................................................................16
SECTION 7.11 PERFORMANCE AND ENFORCEMENT OF RECEIVABLES INTEREST SALE AGREEMENT.............................18
SECTION 7.12 COLLECTIONS....................................................................................18
SECTION 7.13 OWNERSHIP......................................................................................18
SECTION 7.14 TAXES. .......................................................................................19
SECTION 7.15 NEGATIVE COVENANTS OF THE SELLER PARTIES.......................................................19
ARTICLE VIII.ADMINISTRATION AND COLLECTION.......................................................................20
SECTION 8.1 DESIGNATION OF SERVICER........................................................................20
SECTION 8.2 CERTAIN DUTIES OF SERVICER.....................................................................20
SECTION 8.3 COLLECTION NOTICES.............................................................................21
SECTION 8.4 RESPONSIBILITIES OF SELLER.....................................................................22
SECTION 8.5 REPORTS........................................................................................22
ARTICLE IX.AMORTIZATION EVENTS...................................................................................22
SECTION 9.1 AMORTIZATION EVENTS............................................................................22
SECTION 9.2 REMEDIES.......................................................................................23
ARTICLE X.INDEMNIFICATION........................................................................................24
SECTION 10.1 INDEMNITIES BY THE SELLER PARTIES..............................................................24
SECTION 10.2 INCREASED COST AND REDUCED RETURN..............................................................26
SECTION 10.3 OTHER COSTS AND EXPENSES.......................................................................27
SECTION 10.4 ALLOCATIONS....................................................................................27
ARTICLE XI.THE AGENT.............................................................................................28
SECTION 11.1 AUTHORIZATION AND ACTION.......................................................................28
SECTION 11.2 DELEGATION OF DUTIES...........................................................................28
SECTION 11.3 EXCULPATORY PROVISIONS.........................................................................28
SECTION 11.4 RELIANCE BY AGENT..............................................................................29
SECTION 11.5 NON-RELIANCE ON AGENT AND OTHER PURCHASERS.....................................................29
SECTION 11.6 REIMBURSEMENT AND INDEMNIFICATION..............................................................29
SECTION 11.7 AGENT IN ITS INDIVIDUAL CAPACITY...............................................................29
SECTION 11.8 SUCCESSOR AGENT................................................................................30
ARTICLE XII.ASSIGNMENTS; PARTICIPATIONS..........................................................................30
SECTION 12.1 ASSIGNMENTS....................................................................................30
SECTION 12.2 PARTICIPATIONS.................................................................................31
ARTICLE XIII.LIQUIDITY FACILITY..................................................................................31
SECTION 13.1 TRANSFER TO FINANCIAL INSTITUTIONS.............................................................31
SECTION 13.2 TRANSFER PRICE REDUCTION YIELD.................................................................32
SECTION 13.3 PAYMENTS TO CONDUIT............................................................................32
SECTION 13.4 LIMITATION ON COMMITMENT TO PURCHASE FROM CONDUIT..............................................32
SECTION 13.5 DEFAULTING FINANCIAL INSTITUTIONS..............................................................32
SECTION 13.6 TERMINATING FINANCIAL INSTITUTIONS.............................................................33
ARTICLE XIV.MISCELLANEOUS........................................................................................34
SECTION 14.1 WAIVERS AND AMENDMENTS.........................................................................34
SECTION 14.2 NOTICES........................................................................................35
SECTION 14.3 RATABLE PAYMENTS...............................................................................35
SECTION 14.4 PROTECTION OF OWNERSHIP INTERESTS OF THE PURCHASERS............................................35
SECTION 14.5 CONFIDENTIALITY................................................................................36
SECTION 14.6 BANKRUPTCY PETITION............................................................................36
SECTION 14.7 LIMITATION OF LIABILITY........................................................................36
SECTION 14.8 CHOICE OF LAW..................................................................................37
SECTION 14.9 CONSENT TO JURISDICTION........................................................................37
SECTION 14.10 WAIVER OF JURY TRIAL........................................................................37
SECTION 14.11 INTEGRATION; BINDING EFFECT; SURVIVAL OF TERMS..............................................37
SECTION 14.12 COUNTERPARTS; SEVERABILITY; SECTION REFERENCES..............................................38
SECTION 14.13 BANK ONE ROLES..............................................................................38
SECTION 14.14 CHARACTERIZATION............................................................................38
EXHIBITS AND SCHEDULES
Exhibit I Definitions
Exhibit II Form of Purchase Notice
Exhibit III Principal Places of Business and Chief Executive Offices of the Seller Parties; Locations of
Records; Federal Employer Identification Number(s)
Exhibit IV Form of Compliance Certificate
Exhibit V Form of Assignment Agreement
Exhibit VI Form of Monthly Report
Schedule A Commitments
Schedule B Closing Documents
EMPLOYMENT, CONFIDENTIALITY, AND NONCOMPETE AGREEMENT
This Employment, Confidentiality, and Noncompete Agreement
("Agreement") is made and entered into this ____ day of ____________, 2000 by
and between Ferrellgas, Inc., a Delaware corporation ("FGI") and Patrick J.
Chesterman (the "Executive").
WHEREAS, FGI serves as the general partner of Ferrellgas
Partners, L.P., a Delaware limited partnership ("Ferrellgas Partners") and
Ferrellgas, L.P., a Delaware limited partnership ("Ferrellgas", and referred to
herein jointly and severally with Ferrellgas Partners as the "Partnership" or
"Partnerships" as the context so requires), which are engaged primarily in the
sale, distribution and marketing of propane and other natural gas liquids (the
"Business").
WHEREAS, FGI, through the Partnerships, conducts the Business
throughout the United States.
WHEREAS, FGI, through the Partnerships, has expended a great
deal of time, money, and effort to develop and maintain proprietary Confidential
Information (as defined below) which, if misused or disclosed, could be harmful
to the Business.
WHEREAS, the success of FGI depends to a substantial extent
upon the protection of the Confidential Information and customer goodwill by all
of its employees and the employees of the Partnerships.
WHEREAS, the Executive desires to be employed by FGI as
Executive Vice President and Chief Operating Officer.
WHEREAS, the Executive desires to be eligible for other
opportunities within FGI and/or compensation increases which otherwise would not
be available to the Executive and to be given access to Confidential
Information, of FGI and the Partnerships which is necessary for the Executive to
perform his duties, but which FGI would not make available to the Executive but
for the Executive's signing and agreeing to abide by the terms of this Agreement
as a condition of the Executive's employment and continued employment with FGI.
WHEREAS, the Executive recognizes and acknowledges that the
Executive's position with FGI has provided and/or will continue to provide the
Executive with access to Confidential Information of FGI and the Partnerships.
NOW, THEREFORE, in consideration of the compensation and other
benefits of the Executive's employment by FGI and the recitals, mutual covenants
and agreements hereinbefore and hereinafter set forth, the Executive and FGI
agree as follows:
1. Term. The Executive is hereby employed by FGI, and the Executive hereby
accepts such employment upon the terms and conditions set forth herein. The
Executive's term of employment under this Agreement shall be for a period of
three (3) years, commencing on June 13, 2000, and shall continue for a period
through and including June 13, 2003 (the "Initial Period"), unless earlier
terminated pursuant to the terms and conditions of this Agreement.
Notwithstanding anything herein to the contrary, this Agreement and the term of
employment, unless either FGI or the Executive provides six (6) months written
notice to the other party hereto that the Agreement shall not renew upon
expiration of the then current employment period and, subject to Sections 8 and
9, shall be automatically renewed for one year successive periods following the
Initial Period (each a "Successive Period" and together with the Initial Period,
the "Employment Period").
2. Duties and Responsibilities. During the Employment Period, the Executive
shall be employed as Executive Vice President and Chief Operating Officer of
FGI, with such duties and responsibilities as are customarily incident to such
offices and as set forth on the Retail Chief Operating Officer Job Profile and
Expectations previously provided to the Executive, a copy of which is attached
hereto and incorporated by reference. The precise services of the Executive may
be extended or curtailed at the discretion of FGI, so long as after such
extension or curtailment, the duties of the Executive are consistent with the
duties normally attendant to the aforesaid offices. The Executive will perform
his duties in a diligent, trustworthy, loyal, and business-like manner, all for
the purpose of advancing the Business.
3. Performance of Services. During the Employment Period, the Executive shall
devote his primary time, attention and energies to the Business and shall not
during such time be substantially engaged in any other business activity whether
or not such business activity is pursued for gain, profit, or other pecuniary
advantage; provided, however, that nothing herein shall be construed as
preventing the Executive (i) from being involved in civic, philanthropic or
community service activities, from participating in other businesses and
receiving compensation therefore, to the extent that such involvement and
participation does not involve management or participation in day-to-day
activities thereof and does not detract from the performance by the Executive of
his duties to FGI pursuant hereto; provided, further, that at the request of the
Chief Executive Officer of FGI, the Executive shall disclose such involvement
therein, or (ii) from investing his assets in such form or manner as will not
require any appreciable services on the part of the Executive in the operation
of the affairs of any entity in which such investments are made, so long as such
activities do not substantially interfere or conflict with the Executive's
discharge of his duties and responsibilities hereunder. The Executive agrees to
follow and act in accordance with all of the rules, policies, and procedures of
FGI.
4. Compensation.
(a) During the Employment Period, Executive's base salary shall be not less
than $285,000 per year ("Base Salary"), payable in regular installments
in accordance with FGI's usual payroll practices and subject to review
and increase consistent with practices of FGI in effect from time to
time during the Employment Period, but shall not be reduced.
Executive's Base Salary shall be reviewed annually by the Chief
Executive Officer of FGI with the advice and consent of the
compensation committee.
(b) Performance Bonus. During the Employment Period, the Executive shall be
entitled to an annual bonus as set forth below (collectively, the
"Performance Bonus"):
(i) A percentage of the Base Salary based
on Ferrellgas Partners achieving certain reasonably
budgeted EBITDA (as defined below) targets, which
budgeted EBITDA shall be approved at least annually
by the Board of Directors of FGI, calculated as
follows:
Actual to Bonus as a
Budgeted EBITDA % of Base Salary
--------------- ----------------
Less than 90% 0.0%
90% 15.0%
91% 17.0%
92% 19.0%
93% 21.0%
94% 23.0%
95% 25.0%
96% 27.5%
97% 30.0%
98% 32.5%
99% 35.0%
100% 37.5%
(ii) In the event actual EBITDA exceeds
100% of budgeted EBITDA, the performance bonus
provided above will be increased 1% (of Base
Salary) for each 1% over budgeted EBITDA.
(c) A discretionary bonus of up to 37.5% of base pay may be paid in the
sole discretion of the CEO of FGI, based on core objective accomplishments each
year, as from time to time amended.
(d) "EBITDA" means, for any period, consolidated net income of Ferrellgas
Partners
and its subsidiaries determined in accordance with generally accepted accounting
principles plus (i) provisions for taxes based on income or profits to the
extent included in computing such consolidated net income, plus (ii)
consolidated interest expense (including deferred financing fees and expenses)
and other expenses in respect of indebtedness of Ferrellgas Partners and its
subsidiaries for such period, whether paid or accrued or otherwise allocated, to
the extent any such expense was deducted in computing such consolidated net
income, plus (iii) depreciation, amortization and other non-cash expenses of
Ferrellgas Partners and its subsidiaries for such period (excluding any such
non-cash expenses to the extent it represents an accrual or reserve for cash
expenses in any future period or amortization of a prepaid cash expense paid in
a prior period) to the extent any such expense was deducted in computing such
consolidated net income, and plus (vii) any non-cash employee compensation or
benefit expenses to the extent that such expenses were deducted in computing
consolidated net income for such period.
(e) There shall be a cap of 80% of Base Salary applied to all payments
under Section 4(b)(i), 4(b)(ii) and 4(c).
(f) For FGI's fiscal year ending July 31, 2001, EBITDA shall be the sum of
Retail plus Houston, as the Executive will have substantial oversight and
training responsibilities for hiring and training the Executive's Houston
replacement. For years after fiscal year ending July 31, 2001, EBITDA
performance shall be Retail only.
(g) For fiscal year ending July 31, 2001, notwithstanding the
above, a guaranteed minimum bonus of $100,000 shall be payable.
(h) During the Employment Period, the Performance Bonus shall be payable
within fifteen (15) calendar days following receipt by Ferrellgas Partners' of
its audited financial statements as long as the Executive is employed the day
payment is to be made; provided, however, that notwithstanding anything herein
to the contrary, the Executive's entitlement to and calculation and payment of a
Performance Bonus for the fiscal year ended July 31, 2000 shall be determined
pursuant to his bonus arrangement in effect for his previous position.
5. Benefit Plans. During the Employment Period and as otherwise provided herein,
the Executive shall be entitled to participate in any and all employee welfare
and health benefit plans (including, but not limited to life insurance, health
and medical, dental, and disability plans) and other employee benefit plans
(including, but not limited to qualified pension plans and Ferrell Companies,
Inc. ("FCI") stock incentive plans), established by FGI from time to time for
the benefit of executive employees of FGI. The Executive shall be required to
comply with the conditions attendant to participation in and coverage by such
plans and shall comply with and, except as otherwise provided herein, shall be
entitled to benefits only in accordance with the terms and conditions of such
plans as they may be amended from time to time. Nothing herein contained shall
be construed as requiring FGI to establish or continue any particular benefit
plan in discharge of its obligations under this Agreement.
6. Other Benefits and Reimbursements.
(a) During the Employment Period, the Executive shall be entitled to not
less than four (4) weeks of paid vacation each year of his employment
hereunder, which shall accumulate if not used in any given year.
Pursuant to the provisions of this Agreement, vacation time earned but
unused shall be paid to the Executive upon termination of this
Agreement.
(b) During the Employment Period, the Executive shall be entitled to such
other employment benefits extended or provided to other key executives of FGI,
including, but not limited to, payment or reimbursement of all business expenses
incurred by the Executive in the performance of his duties and other job related
activities set forth in this Agreement or subsequently agreed to by the parties
and in the promotion of the Business in accordance with FGI customary policies
and procedures. The Executive shall submit to FGI periodic statements of all
expenses so incurred. Subject to such audits as FGI may deem necessary, FGI
shall reimburse the Executive the full amount of any such expenses advanced by
him in the ordinary course of business.
7. Deductions from Salary and Benefits. FGI shall withhold from any
compensation, bonus or benefits payable to the Executive all customary federal,
state, local and other withholdings, including, without limitation, federal and
state withholding taxes, social security taxes and state disability insurance.
8. Termination by FGI. FGI may terminate Executive's employment under this
Agreement upon at least sixty (60) calendar days ("Notice Period") written
notice ("Notice") to the Executive of its intent to terminate Executive's
employment:
(a) without Cause (as defined in subsection 8(b) below). The Notice shall
specify that such Termination is without Cause, and upon the expiration of the
Notice Period, FGI shall, on the condition that Executive executes a general
release of claims on terms customarily and normally used by FGI at the time, (i)
pay the Executive in a lump sum an amount equal to twice his then current Base
Salary, (ii) provide to the Executive medical insurance, on the same basis on
which he is receiving such insurance at the time of termination, for a period
ending the earlier of two (2) years from the date of termination of this
Agreement or the date Executive is covered by another medical plan at a cost to
the Executive equal to the amount that would have been charged to the Executive
in accordance with the terms of this Agreement, and (iii) an amount equal to
$75,000 for relocation expenses (the payment or provision of the items in this
Section 8(a) are referred to in this Agreement as the "Executive Payments");
(b) for Cause (as defined below). The Notice shall specify the particulars
of such Cause and shall afford the Executive an opportunity to discuss the
particulars of such Cause with the Chief Executive Officer of FGI and to cure
such Cause. If such Cause shall not be cured accordingly, Executive's employment
shall terminate upon expiration of the Notice Period and no compensation shall
be due to the Executive beyond the date of such termination (other than pursuant
to pension or other plans which by their terms provide payments beyond the date
of termination in such circumstances, including but not limited to, the Ferrell
Companies Inc. Employee Stock Ownership Plan, FGI's non-qualified deferred
compensation plan, the FCI Nonqualified Stock Option Agreement and vacation
earned but not taken ("collectively, the "FGI Benefit Plans")). For purposes of
this Agreement "Cause" means: (i) the conviction of Executive by a ----- court
of competent jurisdiction of, or entry of a plea of nolo contendere with respect
to, a felony or ---- ---------- any other crime, which other crime involves
fraud, dishonesty or moral turpitude which materially interferes with the
performance of Executive's duties, responsibilities or obligations under this
Agreement; (ii) fraud or embezzlement related to FGI or the Partnerships on the
part of Executive; (iii) Executive's chronic abuse of or dependency on alcohol
or drugs (illicit or otherwise) which materially interferes with the performance
of Executive's duties, responsibilities or obligations under this Agreement;
(iv) the material breach by Executive of any of Sections 16, 17 or 18 hereof,
except as permitted pursuant to Section 12 hereof; (v) any act of moral
turpitude or willful misconduct by Executive which (A) results in substantial
personal enrichment of the Executive at the expense of FGI or the Partnerships,
or (B) is reasonably expected to have a material adverse impact on the Business
or reputation of FGI; (vi) gross and willful neglect of material duties and
responsibilities of the Executive pursuant hereto, or an intentional violation
of a material term of this Agreement; or (vii) any material violation of any
statutory or common law fiduciary duty of Executive to FGI or the Partnerships;
or (viii) willful failure by the Executive to comply with a material FGI policy,
which results in a material, adverse impact on the Business, as reasonably
determined by the Chief Executive Officer of FGI, or (ix) repeated gross
insubordination.
9. Termination by the Executive. The Executive may terminate his employment
under this Agreement upon at least thirty (30) calendar days' ("Executive Notice
Period") written notice ("Executive Notice") to FGI of such termination:
(a) without Executive Cause (as defined below), upon expiration of the
Executive Notice Period, in which event no compensation shall be due
him beyond the date of such termination other than pursuant to the FGI
Benefit Plans; or
(b) for Executive Cause. The Executive Notice shall specify the particulars
of such Executive Cause and during the Executive Notice Period, the Executive
shall afford the Chief Executive Officer an opportunity to discuss the
particulars of such Executive Cause with the Executive and to cure such
Executive Cause to the satisfaction of the Executive during the Executive Notice
Period. If such Executive Cause shall not be cured accordingly, Executive's
employment shall terminate upon expiration of the Executive Notice Period. In
all events, Executive shall be paid all payments and benefits due him during the
Employment Period, and FGI shall pay the Executive in a lump sum or provide to
the Executive, as applicable, the Executive Payments on the condition that
Executive executes a general release of claims on terms customarily and normally
used by FGI at the time. "Executive Cause" means any --------------- of the
following to which the Executive does not agree: (i) assignment to the Executive
of duties or responsibilities, or the material diminution of duties or
responsibilities, that are inconsistent with his position, duties,
responsibilities or status as they exist at the commencement of the term of this
Agreement; (ii) material change in the reporting responsibilities of the
Executive; provided, however, that, notwithstanding the effect of changes on the
Board under Section 12 hereof, changes in the identity of persons on the Board
shall not be considered a change in reporting responsibilities for purposes of
this Section, (iii) relocation of the Executive's physical office or of FGI's
corporate offices to a site beyond a fifty (50) mile radius of its current
location of One Liberty Plaza, Liberty, Missouri; (iv) failure by any of FGI's
successors in interest to assume this Agreement in writing simultaneously with
becoming a successor in interest; (v) failure of FGI to maintain Director's and
Officer's insurance; or, (vi) a breach of any provision of this Agreement by
FGI.
10. Nondisparagement. During the term of this Agreement and for a period of two
(2) years after it is terminated, for whatever reason, Executive agrees that he
will not make any statements or provide any information that would tend to
disparage, defame or denigrate FGI, its affiliates, related entities and any of
its or their former or current officers, directors, agents or employees.
11. Cooperation. In the event that FGI or any of its affiliates becomes involved
in any civil or criminal litigation, administrative proceeding or governmental
investigation, Executive shall, upon request, provide reasonable cooperation and
assistance to FGI, including without limitation, furnishing relevant
information, attending meetings and providing statements and testimony. FGI will
reimburse Executive for all reasonable and necessary expenses he incurs in
complying with this Section 11. In addition, at any time more than two (2) years
after the termination of this Agreement for any reason, Executive need not
comply with this Section 11 unless FGI has agreed in writing to reimburse
Executive's employer, if applicable, or to reimburse Executive if self-employed,
for Executive's time at a rate agreed to by the applicable parties.
12. Effect of Certain Transactions; Change in Control.
(a) In the event of a Change in Control (as hereinafter defined) FGI shall
pay the Executive, not later than thirty (30) calendar days after such Change in
Control, a lump cash sum equal to the greater of (A) two and one-half (2.5)
times 125% of his then current Base Salary, or (B) two and one-half (2.5) times
the average actual cash compensation (including, but not limited to, bonuses)
paid for the prior three (3) fiscal years prior to such Change in Control. Such
payment shall reduce any lump sum Executive Payments payable to the Executive
under Sections 8 or 9. In addition, if the Executive's employment is terminated
pursuant to Section 8(a) or 9(b) within eighteen (18) months after such Change
in Control, (i) FGI shall pay the Executive for any vacation earned by the
Executive but not taken and any other amounts earned but unpaid, (ii) FGI shall
pay the Executive a pro rata portion (such proration shall be on the basis that
the number of months of his employment during FGI's then current fiscal year
bears to the number 12, considering the month of termination as a month of full
employment, and in the case of any plan measured over a full year, such
determination and payment shall be made after the close of such year of any
amounts to which he would have otherwise been entitled under any Company
perquisite to which Executive is a participant (excluding any bonus), and (iii)
FGI shall continue the Executive's health, accident and life insurance benefits
at FGI's cost on the same basis on which he is receiving such benefits at the
time of termination, until the earlier of the COBRA period of eighteen (18)
months after the month in which such termination occurs or Executive obtains
coverage under another plan or comparable coverage. For purposes of calculating
any bonus to be paid to the Executive pursuant to this Section 12, the Executive
shall be entitled to the payment of any bonus normally calculated with reference
to a future period based upon the total amount paid for such bonus in the three
(3) previous fiscal years.
(b) For purposes of this Agreement a "Change In Control" shall be deemed to
occur if:
(i) FGI or FCI (FGI and FCI will hereinafter be jointly and severally
referred to as "Company" or the ------- "Companies" as the context so requires)
or either Partnership merges with or is consolidated ---------- into another
corporation or other entity not theretofore affiliated with either Company or
Partnership (i.e., controlled by, controlling or under common control with the
Companies or the Partnerships, as applicable) and the Company or Partnership so
merging or consolidating is not the surviving entity pursuant to such merger or
consolidation (other than a transaction in which the persons who were the equity
owners of the Company or Partnership so merging own more than 50% of the
surviving entity);
(ii) All or substantially all of the assets of either Company or
Partnership are acquired by another corporation or other
entity not theretofore affiliated with either Company or
Partnership in a single transaction or a series of related
transactions, and a majority of the then current Board of
Directors of neither Company does not control the entity that
has made such acquisition;
(iii) There is consummated any transaction or series of transactions
or any event or series of events, the result of which is that
FGI is no longer the sole general partner of either
Partnership;
(iv) There is consummated any transaction or series of transactions
or any event or series of events, the result of which is that
the Board of FGI does not have control of the affairs of
either Partnership;
(v) There is consummated a purchase or other acquisition by any
persons, entity or group of persons, within the meaning of
Section 13(d) or 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (excluding, for this purpose,
either Company or its subsidiaries or any employee benefit
plan of either Company or its subsidiaries), of the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 50% or more of either the
then-outstanding equity securities of either Company or
Partnership or the combined voting power of either Company's
or Partnership's then-outstanding voting securities;
(vi) Individuals who, as of the date hereof, constitute the Board of either
Company (as the date hereof, the "Incumbent Boards") cease for any reason to
constitute at least a majority of the Boards, provided that any person who
becomes a director subsequent to the date hereof whose election, or nomination
for election by either Company's equity owners, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board (other
than an individual whose initial assumption of office is in connection with an
actual or threatened election contest relating to the election of directors of
either Company, as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) shall be, for purposes of this section,
considered as though such person were a member of the applicable Incumbent
Board;
(vii) There is consummated a reorganization, merger or
consolidation, in each case with respect to which persons who
were the equity holders of either Company or Partnership
immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own more than
50% of, respectively, the equity securities and the combined
voting power entitled to vote generally in the elections of
directors or managers of the reorganized, merged or
consolidated entity's then-outstanding voting securities;
(viii) There is a liquidation or dissolution of either Company or
Partnership (other than a liquidation or dissolution where the
equity owners of the surviving Company or Partnership do not
change) or of the sale of all or substantially all of the
assets of either Company or Partnership;
(ix) There is consummated a public sale of a "material" amount of
FCI's equity (with materiality being determined by the
Committee administering the Ferrell Companies Inc. Employee
Stock Ownership Trust ("ESOT"), but with a material amount of
such equity being at least 50% thereof).
13. Mitigation or Reduction of Benefits. Executive shall not be required to
mitigate or reduce the amount of any payment upon termination provided for
herein by seeking other employment or otherwise nor, except as otherwise
specifically set forth herein, shall the amount of any payment or benefits
provided upon termination be reduced by any compensation or other amounts paid
to or earned by Executive as the result of employment by another employer after
such termination or otherwise.
14. Certain Additional Payments by FGI.
(a) Notwithstanding anything in this Agreement to the contrary and except
as set forth below, in the event it shall be determined that any payment,
benefit or distribution (or contribution thereof) from FGI, any affiliate, or
trusts established by FGI or by any affiliate, for the benefit of its employees,
to the Executive or for the Executive's benefit (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section, and with a "Payment" including, without limitation, the
vesting of an option or other non-cash benefit or property) (any of which are
referred to as a "Payment") would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or
any interest or penalties are incurred by the Executive with respect to such
excise tax (such ----- excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
- ---------- --------- Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or ------- penalties imposed with
respect to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the sum of (i) the Excise Tax imposed upon the Payments; plus (ii) an
amount equal to the product of any deductions disallowed to Executive for
federal, state, or local income tax purposes solely because of the inclusion of
the Gross-up Payment in the Executive's adjusted gross income multiplied by the
highest applicable marginal rate of federal, state, or local income taxation,
respectively, for the calendar year in which the Gross-up Payment is to be made.
(b) Subject to the provisions of Section 14(c), all determinations required
to be made under this Section 14, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by a nationally
recognized certified public accounting firm as may be designated by the
Executive (the "Accounting Firm") which shall provide detailed supporting
calculations both to FGI and the Executive ---------------- within fifteen (15)
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by FGI. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting a Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by FGI. Any Gross-Up Payment, as determined pursuant to this Section 14,
shall be paid by FGI to the Executive within five (5) calendar days of the
receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon FGI and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by FGI should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that FGI -------------- exhausts its remedies pursuant
to Section 14(c) and the Executive thereafter is required to make a payment of
any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid
by FGI to or for the benefit of the Executive.
(c) The Executive shall notify FGI in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by FGI of the
Gross-Up Payment. Such notification shall be given as soon as practicable but no
later than thirty (30) business days after the Executive is informed in writing
of such claim and shall apprise FGI of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall not pay such claim
prior to the expiration of the 30-day period following the date on which the
Executive gives such notice to FGI (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If FGI notifies
the Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive shall:
(i) give FGI any information reasonably requested by FGI relating to such
claim,
(ii) take such action in connection with contesting such claim as
FGI shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected
by FGI,
(iii) cooperate with FGI in good faith in order to effectively contest such
claim, and
(iv) permit FGI to participate in any proceedings relating to such claim;
provided, however, that FGI shall bear and pay directly all costs and
expenses (including attorneys' fees and costs and additional interest
and penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis, for
any Excise Tax or income tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment
of costs and expenses. Without limitation on the foregoing provisions
of this Section 14(c), FGI shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may,
at its sole option, either direct the Executive to pay the tax claimed
and sue for a refund or contest the claim in any permissible manner,
and the Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial jurisdiction
and in one or more appellate courts, as FGI shall determine; provided,
however, that if FGI directs the Executive to pay such claim and sue
for a refund, FGI shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, FGI's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
If, after the receipt by the Executive of an amount
advanced by FGI pursuant to Section 14(c), the Executive becomes
entitled to receive any refund with respect to such claim, the
Executive shall (subject to FGI's complying with the requirements of
Section 14(c)) promptly pay to FGI the amount of such refund (together
with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced
by FGI pursuant to Section 14(c), a determination is made that the
Executive shall not be entitled to any refund with respect to such
claim and FGI does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of thirty (30)
calendar days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
15. Indemnification. Executive has executed on _______________ a
Director/Officer Indemnification Agreement which agreement controls the terms of
indemnification between the parties.
16. Confidential Information.
(a) In connection with Executive's employment, FGI will disclose and/or has
disclosed to Executive certain Confidential Information (defined
below). The Confidential Information is not generally known to others
and could have economic value if disclosed to others and/or used by
Executive, directly or indirectly, in competition with FGI or the
Partnerships. Further, Executive will in the future participate in the
development of, have access to, or use in performing Executive's
employment duties, some or all of the Confidential Information. FGI
makes reasonable efforts to keep its Confidential Information secret
and confidential, and Executive has a duty to keep it secret and
confidential.
(b) Executive may have significant contacts with the customers and accounts
of FGI and/or be provided with FGI's confidential customer and
customer-related information, including various customer lists,
analyses, and summaries. These contacts and/or this information could
enable Executive, at FGI's expense, to have access to and establish
favorable relations with, and put Executive in a position to influence,
FGI's customers and accounts.
(c) FGI's customer lists and customer information are trade secrets, and
this Agreement is intended, among other things, to protect FGI's trade
secrets, customer relationships, customer goodwill and other business
interests.
(d) The Executive will not use or reveal Confidential Information to anyone
other than for on or behalf of FGI both during and after Executive's
employment.
(e) Executive shall keep all Confidential Information secret and confidential.
(f) Executive shall return to FGI all Confidential Information and all
property of FGI immediately upon termination of Executive's employment
for any reason and also at any time upon FGI's request.
(g) "Confidential Information" shall mean: (i) Company Information (as
defined below); (ii) Customer Information (as defined below); and (iii) all
other information, whether or not reduced to writing, relating to the
Partnerships, the Business or FGI's customers which gives FGI an advantage over
competitors who do not know or use it, have not compiled the information
themselves, or is otherwise not generally known in the industry, including, but
not limited to, trade secrets, proprietary information, customer lists, route
books, inventions, computer programs and software, and including information
conceived, originated, or developed by Executive. Confidential Information
includes, but is not limited to, originals and copies of all materials
containing such information, regardless of the media used to record such
information, including but not limited to computers, computer disks, CD ROMS, or
other electronic media, microfiche or microfilm.
(h) "Company Information" shall mean: Information that FGI, the Companies
or the Partnerships have developed, acquired, organized, compiled or
maintained regarding FGI's products, services, processes, methods,
operations, proposals, projects, contracts, bids, pricing, costs,
profitability, marketing plans and strategies, revenues and finances to
the extent not subject to public disclosure requirements, business
relationships, correspondence, and other matters related to FGI's
development and operation of the Business.
(i) "Customer Information" shall mean: Information that FGI or the
Partnerships have developed, acquired, organized, compiled, or
maintained by FGI regarding FGI's customers, former customers and
prospective customers while developing and operating the Business,
including, but not limited to, information relating to their identity,
location, personnel, usage of petroleum products, and incidental or
related appliances, equipment and supplies, purchasing experience,
delivery schedules and routing, payment habits, credit experience,
ownership of storage facilities, contract renewal and expiration dates,
pricing, and other terms and conditions contained in their contracts
with FGI or its predecessors.
17. Inventions and Patents. Executive agrees that all inventions, innovations,
improvements, developments, methods, designs, analyses, drawings, reports, and
all similar or related information which relates to the Companies' actual or
anticipated business (to the extent the Executive is aware thereof), research
and development or existing or future products or services and which are
conceived, developed or made by Executive while employed by FGI or any of its
affiliates (whether prior to or during the Employment Period) ("Work Product")
belong to FGI or such other affiliate, and Executive hereby assigns to FGI his
entire right, title and interest in any such Work Product. Executive will
promptly disclose such Work Product to the Chief Executive Officer of FGI and
perform all actions reasonably requested by the Chief Executive Officer of FGI
(whether during or after Executive's Employment Period) to establish and confirm
such ownership (including, without limitation, assignments, consents, powers of
attorney and other instruments).
18. Noncompete; Nonsolicitation.
(a) Executive acknowledges that in the course of his employment with FGI he
will become familiar with Confidential Information and that his services will be
of special, unique and extraordinary value to FGI. Therefore, Executive agrees
that, during the time he is employed by FGI pursuant hereto and for two (2)
years thereafter (the "Noncompete Period"), in the entire United States and any
other countries ----------------- in which the Companies or Partnerships are
providing, or actively planning to provide goods and services, he will not: (i)
compete with the Companies or the Partnerships in the sale of propane or related
competitive products or services; (ii) directly or indirectly, in person or
through others, for the benefit of Executive or another, call upon, solicit,
sell, divert, take away, deliver to, accept business or orders from or otherwise
engage in propane-related business with FGI's Customers (as defined below), nor
shall Executive, in any capacity, assist others to do so; or (iii) directly or
indirectly interfere with the business relationship between FGI and any FGI
Customers. The restrictions in this paragraph apply only to products and
services that are competitive with the Business and/or products and services of
FGI.
(b) While employed by FGI and for two (2) years thereafter, Executive will
not (i) interfere with, disrupt, or attempt to disrupt relations,
contractual or otherwise, between FGI and its employees, vendors or
suppliers, or (ii) hire or take away, directly or indirectly, any FGI
employee.
(c) "Customers" shall mean: (i) all persons, firms, corporations, and other
business enterprises for whom FGI performs or performed services or to whom FGI
sells or sold products, appliances, equipment, or supplies during the two year
period immediately prior to the termination of Executive's employment; and (ii)
all persons, corporations, and other business enterprises actively solicited by
FGI or to whom FGI has furnished a quotation or proposal or estimate for the
sale of products or services within the one year period immediately prior to the
termination of Executive's employment. Customers of FGI shall include, but not
be limited to, those for whom either Executive or anyone under Executive's
supervision provided products or services and those who may have become
customers through the efforts of Executive while employed by FGI.
(d) FGI and Executive agree that: (i) the covenants set forth in Sections
16 and 18 are reasonable in geographical and temporal scope and in all
other respects, (ii) FGI would not have entered into this Agreement but
for these covenants of Executive contained herein, and (iii) these
covenants contained herein have been made in order to induce FGI to
enter into this Agreement.
(e) If, at the time of enforcement of this Section 18, a court or arbiter
shall hold that the duration, scope or area restrictions stated herein
are unreasonable under circumstances then existing, the parties agree
that the maximum duration, scope or area reasonable under such
circumstances shall be substituted for the stated duration, scope or
area and that the court or arbitrator shall be allowed to revise the
restrictions contained herein to cover the maximum period, scope and
area permitted by law.
(f) FGI does not have to enforce all provisions of Sections 16 and 18 of
this Agreement at all times to preserve its rights to enforce any other
provision of Sections 16 and 18 of this Agreement. Executive also
acknowledges FGI does not have to enforce similar agreements with other
employees and/or officers to preserve its rights to enforce Sections 16
and 18 of this Agreement with Executive.
(g) Executive shall provide a copy of this Agreement to any new or
potential employer which competes against the Companies or the
Partnerships.
19. Arbitration.
(a) Except as set forth in Section 19(c), arbitration shall be the sole and
exclusive remedy for any dispute, claim, or controversy of any kind or
nature (a "Claim") arising out of, related to, or connected with
Executive's employment relationship with FGI, or the termination of
Executive's employment relationship with FGI, including any Claim
against any parent, subsidiary, or affiliated entity of FGI, or any
director, officer, general or limited partner, employee or agent of FGI
or of any such parent, subsidiary or affiliated entity.
(b) This agreement to arbitrate specifically includes (without limitation)
any dispute between or among the parties to this Agreement relating to or in
respect of this Agreement, its negotiation, execution, performance, subject
matter, or any course of conduct or dealing or actions under or in respect of
this Agreement, all claims under or relating to any federal, state or local law
or regulation prohibiting discrimination, harassment or retaliation based on
race, color, religion, national origin, sex, age, disability or any other
condition or characteristic protected by law; demotion, discipline, termination
or other adverse action in violation of any contract, law or public policy;
entitlement to wages or other economic compensation; and any claim for personal,
emotional, physical, economic or other injury.
(c) This agreement to arbitrate does not apply to any legal action by FGI
seeking injunctive relief or damages for breach or enforcement of
Sections 16 or 18 of the Agreement. This agreement to arbitrate also
does not apply to any claims by Executive: (a) for workers'
compensation benefits; (b) for unemployment insurance benefits; (c)
under a benefit plan where the plan specifies a separate arbitration
procedure; (d) filed with an administrative agency which are not
legally subject to arbitration under this Agreement; or (e) which are
otherwise expressly prohibited by law from being subject to arbitration
under this Agreement.
(d) Any party may demand arbitration by sending notice to the other party
as set forth in this Agreement. Any Claim submitted to arbitration shall be
decided by a single, neutral arbitrator (the "Arbitrator"). The parties to the
arbitration shall mutually select the Arbitrator not later than 45 days after
service of the demand for arbitration. If the parties for any reason do not
mutually select the Arbitrator within the 45 day period, then any party may
apply to any court of competent jurisdiction to appoint a retired judge as the
Arbitrator. The parties agree that arbitration shall be conducted in accordance
with the American Arbitration Association Rules for the Resolution of Employment
Disputes. The Arbitrator shall apply the substantive federal, state, or local
law and statute of limitations governing any Claim submitted to arbitration. The
arbitration shall take place at a mutually agreeable site in Liberty or Kansas
City, Missouri and shall be conducted within one hundred eighty (180) days of
the receipt by a party of the other party's demand for arbitration. The
Arbitrator, in making his decision, shall be bound to follow the substantive
state and federal laws of jurisprudence as well as the applicable rules of
evidence in arriving at a decision. The decision rendered shall be in writing
and delivered to the parties within thirty (30) days after the conclusion of the
arbitration. The award of the Arbitrator shall be final, and judgment upon the
award rendered may be entered and enforced in any court, state or federal,
having jurisdiction. In ruling on any Claim submitted to arbitration, the
Arbitrator shall have the authority to award only such remedies or forms of
relief as are provided for under the substantive law governing such Claim.
(e) Any fees and costs incurred in the arbitration (e.g., filing fees,
transcript costs and Arbitrator's fees) will be shared equally by
Executive and FGI, except that the Arbitrator may reallocate such fees
among the parties if the Arbitrator determines that an equal allocation
would impose an unreasonable financial burden on Executive. The parties
shall be responsible for their own attorneys' fees and costs, except
that the Arbitrator shall have the authority to award attorneys' fees
and costs to the prevailing party in accordance with the applicable law
governing the dispute.
(f) The Arbitrator, and not any federal or state court, shall have the
exclusive authority to resolve any issue relating to the
interpretation, formation or enforceability of this Agreement, or any
issue relating to whether a Claim is subject to arbitration under this
Agreement, except that any party may bring an action in any court of
competent jurisdiction to compel arbitration in accordance with the
terms of this Agreement.
20. FGI's Right to Injunctive Relief, Tolling. In the event of a breach or
threatened breach of any of the Executive's duties and obligations under the
terms and provisions of Sections 16, 17 or 18 hereof, FGI shall be entitled, in
addition to any other legal or equitable remedies it may have in connection
therewith (including any right to damages that it may suffer), to temporary,
preliminary, and permanent injunctive relief restraining such breach or
threatened breach. The Executive hereby expressly acknowledges that the harm
which might result to the Business as a result of any noncompliance by the
Executive with any of the provisions of sections 16, 17 or 18 hereof would be
largely irreparable.
21. Judicial Enforcement. If any provision of this Agreement is adjudicated to
be invalid or unenforceable under applicable law in any jurisdiction, the
validity or enforceability of the remaining provisions thereof shall be
unaffected as to such jurisdiction and such adjudication shall not affect the
validity or enforceability of such provisions in any other jurisdiction. To the
extent that any provision of this Agreement is adjudicated to be invalid or
unenforceable because it is overbroad, that provision shall not be void but
rather shall be limited only to the extent required by applicable law and
enforced as so limited. The parties expressly acknowledge and agree that this
Section is reasonable in view of the parties' respective interests.
22. Executive Warranties and Representations. The Executive warrants and
represents that the execution and delivery of the Agreement and the Executive's
employment with FGI do not violate any previous employment agreement or other
contractual obligation of the Executive.
23. Survival. The provisions of this Agreement, except as otherwise provided
herein, shall continue in full force in accordance with their terms
notwithstanding any termination of Executive's employment by FGI.
24. Right to Recover Costs and Fees. The Executive and FGI undertake and agree
that if either the Executive or FGI breach or threaten to breach Sections 16 or
18 of this Agreement (the "Breaching Party"), the Breaching Party shall be
liable for any attorneys' fees and costs incurred by the non-Breaching Party in
enforcing the non-Breaching Party's rights hereunder.
25. Executive Right. If the Executive believes that any benefit on account of
the termination of the Executive's service with FGI under this Agreement has not
been paid by FGI within fifteen (15) days after the date on which that benefit
should have been paid to the Executive under the terms of this Agreement, the
Executive may give notice to FGI of that failure and the amount of the benefit
that should have been paid. FGI shall pay the Executive the amount specified in
that notice within thirty (30) days after its receipt of the notice; provided,
however, that the payment shall not preclude FGI from disputing that payment in
accordance with the arbitration provisions of this Agreement.
26. Entire Agreement, Amendments and Modifications. This Agreement constitutes
the entire agreement and understanding of the parties regarding the employment
of Executive by FGI and supersedes all prior agreements and understandings
between the Executive and FGI to the extent that any such agreements or
understandings conflict with the terms of this Agreement. The parties
specifically agree that the Option Grantee Agreement entered into between
Executive and Ferrellgas is hereby terminated. No modification, amendment or
waiver of any of the provisions of this Agreement shall be effective unless in
writing specifically referring hereto, and signed by the parties hereto.
27. Assignments. This Agreement shall be freely assignable by FGI to, and shall
inure to the benefit of and be binding upon, its successors and assigns and/or
any other entity which shall succeed to the business presently being conducted
by FGI or the Partnerships. In that regard, FGI shall assign and shall require
any successor, whether in a Change of Control transaction or not, of either of
the Companies or any of the Partnerships to expressly assume in writing FGI's
obligations under this Agreement simultaneously with the consummation of an
applicable transaction, which assumption shall not relieve FGI of any of its
obligations hereunder. Being a contract for personal services, neither this
Agreement nor any rights hereunder shall be assigned by the Executive; provided,
however that the rights and benefits hereunder shall inure to and be enforceable
by the Executive's estate, heirs, executors, administrators or legal guardians
or representatives.
28. Choice of Forum; Governing Law. In light of FGI's substantial contacts with
the State of Missouri, the parties' interests in ensuring that disputes
regarding the interpretation, validity, and enforceability of this Agreement are
resolved on a uniform basis, and FGI's execution of, and the making of, this
Agreement in Missouri, the parties agree that: (i) any litigation involving this
Agreement shall be filed and conducted in the state or federal courts in the
State of Missouri; and (ii) the Agreement shall be interpreted in accordance
with and governed by the laws of the State of Missouri, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
Missouri or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Missouri.
29. Headings and Interpretation. Section headings are provided in this Agreement
for convenience only and shall not be deemed to substantively alter the content
of such sections. Whenever the words "include", "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation". References to the singular or plural tense of a word shall
also include the plural or singular as the context may require.
30. Neutral Construction. Each party acknowledges that in the negotiation and
drafting of this Agreement, they have been represented by and relied upon the
advice of counsel of their choice. The parties affirm that they and their
counsel have had a substantial role in such negotiation and drafting of this
Agreement, and, therefore, the parties agree that this Agreement shall be deemed
to have been drafted by all the parties hereto and the rule of construction to
the effect that any contract ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of this Agreement or any
exhibit or schedule hereto.
31. Notices. Any notice, request, consent or communication (collectively, a
"Notice") under this Agreement shall be effective only if it is in writing and
(i) personally delivered with written receipt thereof, (ii) sent by certified or
registered mail, return receipt requested, postage prepaid or (iii) sent by a
nationally recognized overnight delivery service, with delivery confirmed,
addressed as follows (or at such other address for a party as shall be specified
by like notice):
(a) If to the Executive, to: Patrick J. Chesterman
[Address]
(b) with a copy to: Bryan Cave LLP
One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105
Attn: Beth Romans Bower
(c) If to FGI, to: Ferrellgas, Inc.
One Liberty Plaza
Liberty, Missouri 64068
Attention: Mr. Danley K. Sheldon
A Notice shall be deemed to have been given as of the date
when (i) personally delivered as indicated by date of receipt, (ii) five (5)
days after the date when deposited with the United States certified mail, return
receipt requested, properly addressed, or (iii) when receipt of a Notice sent by
an overnight delivery service is confirmed by such overnight delivery service,
as the case may be, unless the sending party has actual knowledge that a Notice
was not received by the intended recipient.
32. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and together shall constitute one and
the same Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the day and year first above written.
FERRELLGAS, INC. EXECUTIVE
By: __________________
Name:_________________ Patrick J. Chesterman
Title:___________________
PLEASE NOTE: BY SIGNING THIS AGREEMENT, EXECUTIVE IS HEREBY CERTIFYING THAT
EXECUTIVE (A) HAS RECEIVED A COPY OF THIS AGREEMENT FOR REVIEW AND STUDY BEFORE
EXECUTING IT; (B) HAS READ THIS AGREEMENT CAREFULLY BEFORE SIGNING IT; (C)
UNDERSTANDS THAT THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION; (D)
HAS HAD SUFFICIENT OPPORTUNITY BEFORE SIGNING THE AGREEMENT TO ASK ANY QUESTIONS
EXECUTIVE HAS ABOUT THE AGREEMENT AND HAS RECEIVED SATISFACTORY ANSWERS TO ALL
SUCH QUESTIONS; AND (E) UNDERSTANDS EXECUTIVE'S RIGHTS AND OBLIGATIONS UNDER THE
AGREEMENT.
EMPLOYMENT, CONFIDENTIALITY, AND NONCOMPETE AGREEMENT
This Employment, Confidentiality, and Noncompete Agreement
("Agreement") is made and entered into this ____ day of ____________, 2000 by
and between Ferrellgas, Inc., a Delaware corporation ("FGI") and James M. Hake
(the "Executive").
WHEREAS, FGI serves as the general partner of Ferrellgas
Partners, L.P., a Delaware limited partnership ("Ferrellgas Partners") and
Ferrellgas, L.P., a Delaware limited partnership ("Ferrellgas", and referred to
herein jointly and severally with Ferrellgas Partners as the "Partnership" or
"Partnerships" as the context so requires), which are engaged primarily in the
sale, distribution and marketing of propane and other natural gas liquids (the
"Business").
WHEREAS, FGI, through the Partnerships, conducts the Business
throughout the United States.
WHEREAS, FGI, through the Partnerships, has expended a great
deal of time, money, and effort to develop and maintain proprietary Confidential
Information (as defined below) which, if misused or disclosed, could be harmful
to the Business.
WHEREAS, the success of FGI depends to a substantial extent
upon the protection of the Confidential Information and customer goodwill by all
of its employees and the employees of the Partnerships.
WHEREAS, the Executive desires to be employed by FGI as Senior
Vice President, Acquisitions.
WHEREAS, the Executive desires to be eligible for other
opportunities within FGI and/or compensation increases which otherwise would not
be available to the Executive and to be given access to Confidential
Information, of FGI and the Partnerships which is necessary for the Executive to
perform his duties, but which FGI would not make available to the Executive but
for the Executive's signing and agreeing to abide by the terms of this Agreement
as a condition of the Executive's employment and continued employment with FGI.
WHEREAS, the Executive recognizes and acknowledges that the
Executive's position with FGI has provided and/or will continue to provide the
Executive with access to Confidential Information of FGI and the Partnerships.
NOW, THEREFORE, in consideration of the compensation and other
benefits of the Executive's employment by FGI and the recitals, mutual covenants
and agreements hereinbefore and hereinafter set forth, the Executive and FGI
agree as follows:
1. Term. The Executive is hereby employed by FGI, and the Executive hereby
accepts such employment upon the terms and conditions set forth herein. The
Executive's term of employment under this Agreement shall be for a period of
three (3) years, commencing on July 24, 2000, and shall continue for a period
through and including July 24, 2003 (the "Initial Period"), unless earlier
terminated pursuant to the terms and conditions of this Agreement.
Notwithstanding anything herein to the contrary, this Agreement and the term of
employment, unless either FGI or the Executive provides six (6) months written
notice to the other party hereto that the Agreement shall not renew upon
expiration of the then current employment period and, subject to Sections 8 and
9, shall be automatically renewed for one year successive periods following the
Initial Period (each a "Successive Period" and together with the Initial Period,
the "Employment Period").
2. Duties and Responsibilities. During the Employment Period, the Executive
shall be employed as FGI's Senior Vice President, Acquisitions, with such duties
and responsibilities as are customarily incident to such office. The precise
services of the Executive may be extended or curtailed at the discretion of FGI,
so long as after such extension or curtailment, the duties of the Executive are
consistent with the duties normally attendant to the aforesaid office. The
Executive will perform his duties in a diligent, trustworthy, loyal, and
business-like manner, all for the purpose of advancing the Business.
3. Performance of Services. During the Employment Period, the Executive shall
devote his primary time, attention and energies to the Business and shall not
during such time be substantially engaged in any other business activity whether
or not such business activity is pursued for gain, profit, or other pecuniary
advantage; provided, however, that nothing herein shall be construed as
preventing the Executive (i) from being involved in civic, philanthropic or
community service activities, from participating in other businesses and
receiving compensation therefore, to the extent that such involvement and
participation does not involve management or participation in day-to-day
activities thereof and does not detract from the performance by the Executive of
his duties to FGI pursuant hereto; provided, further, that at the request of the
Chief Executive Officer of FGI, the Executive shall disclose such involvement
therein, or (ii) from investing his assets in such form or manner as will not
require any appreciable services on the part of the Executive in the operation
of the affairs of any entity in which such investments are made, so long as such
activities do not substantially interfere or conflict with the Executive's
discharge of his duties and responsibilities hereunder. The Executive agrees to
follow and act in accordance with all of the rules, policies, and procedures of
FGI.
4. Compensation.
(a) During the Employment Period, Executive's base salary shall be not less
than $192,000 per year ("Base Salary"), payable in regular installments
in accordance with FGI's usual payroll practices and subject to review
and increase consistent with practices of FGI in effect from time to
time during the Employment Period, but shall not be reduced.
Executive's Base Salary shall be reviewed annually by the Chief
Executive Officer of FGI with the advice and consent of the
compensation committee.
(b) Annual Bonus. Executive may be eligible for an annual bonus based on a
target bonus of 50% of base pay. The terms of any such annual bonus
plan shall be at the discretion of the Board of Directors of FGI;
however, the terms of such plan, if any, shall be committed to by FGI,
in writing, within 30 days after the beginning of each fiscal year.
5. Benefit Plans. During the Employment Period and as otherwise provided herein,
the Executive shall be entitled to participate in any and all employee welfare
and health benefit plans (including, but not limited to life insurance, health
and medical, dental, and disability plans) and other employee benefit plans
(including, but not limited to qualified pension plans and Ferrell Companies,
Inc. ("FCI") stock incentive plans), established by FGI from time to time for
the benefit of executive employees of FGI. The Executive shall be required to
comply with the conditions attendant to participation in and coverage by such
plans and shall comply with and, except as otherwise provided herein, shall be
entitled to benefits only in accordance with the terms and conditions of such
plans as they may be amended from time to time. Nothing herein contained shall
be construed as requiring FGI to establish or continue any particular benefit
plan in discharge of its obligations under this Agreement.
6. Other Benefits and Reimbursements.
(a) During the Employment Period, the Executive shall be entitled to not
less than four (4) weeks of paid vacation each year of his employment
hereunder, which shall accumulate if not used in any given year.
Pursuant to the provisions of this Agreement, vacation time earned but
unused shall be paid to the Executive upon termination of this
Agreement.
(b) During the Employment Period, the Executive shall be entitled to such
other employment benefits extended or provided to other key executives
of FGI, including, but not limited to, payment or reimbursement of all
business expenses incurred by the Executive in the performance of his
duties and other job related activities set forth in this Agreement or
subsequently agreed to by the parties and in the promotion of the
Business in accordance with FGI customary policies and procedures. The
Executive shall submit to FGI periodic statements of all expenses so
incurred. Subject to such audits as FGI may deem necessary, FGI shall
reimburse the Executive the full amount of any such expenses advanced
by him in the ordinary course of business.
7. Deductions from Salary and Benefits. FGI shall withhold from any
compensation, bonus or benefits payable to the Executive all customary federal,
state, local and other withholdings, including, without limitation, federal and
state withholding taxes, social security taxes and state disability insurance.
8. Termination by FGI. FGI may terminate Executive's employment under this
Agreement upon at least sixty (60) calendar days ("Notice Period") written
notice ("Notice") to the Executive of its intent to terminate Executive's
employment:
(a) without Cause (as defined in subsection 8(b) below). The Notice shall
specify that such Termination is without Cause, and upon the expiration of the
Notice Period, FGI shall, on the condition that Executive executes a general
release of claims on terms customarily and normally used by FGI at the time, (i)
pay the Executive in a lump sum an amount equal to twice his then current Base
Salary, and (ii) provide to the Executive medical insurance, on the same basis
on which he is receiving such insurance at the time of termination, for a period
ending the earlier of two (2) years from the date of termination of this
Agreement or the date Executive is covered by another medical plan at a cost to
the Executive equal to the amount that would have been charged to the Executive
in accordance with the terms of this Agreement (the payment or provision of the
items in this Section 8(a) are referred to in this Agreement as the "Executive
Payments");
(b) for Cause (as defined below). The Notice shall specify the particulars
of such Cause and shall afford the Executive an opportunity to discuss the
particulars of such Cause with the Chief Executive Officer of FGI and to cure
such Cause. If such Cause shall not be cured accordingly, Executive's employment
shall terminate upon expiration of the Notice Period and no compensation shall
be due to the Executive beyond the date of such termination (other than pursuant
to pension or other plans which by their terms provide payments beyond the date
of termination in such circumstances, including but not limited to, the Ferrell
Companies Inc. Employee Stock Ownership Plan, FGI's non-qualified deferred
compensation plan, the FCI Nonqualified Stock Option Agreement and vacation
earned but not taken ("collectively, the "FGI Benefit Plans")). For purposes of
this Agreement "Cause" means: (i) the conviction of Executive by a court of
competent jurisdiction of, or entry ----- of a plea of nolo contendere with
respect to, a felony or any other crime, which other crime involves fraud,
dishonesty or ---- ---------- moral turpitude which materially interferes with
the performance of Executive's duties, responsibilities or obligations under
this Agreement; (ii) fraud or embezzlement related to FGI or the Partnerships on
the part of Executive; (iii) Executive's chronic abuse of or dependency on
alcohol or drugs (illicit or otherwise) which materially interferes with the
performance of Executive's duties, responsibilities or obligations under this
Agreement; (iv) the material breach by Executive of any of Sections 16, 17 or 18
hereof, except as permitted pursuant to Section 12 hereof; (v) any act of moral
turpitude or willful misconduct by Executive which (A) results in substantial
personal enrichment of the Executive at the expense of FGI or the Partnerships,
or (B) is reasonably expected to have a material adverse impact on the Business
or reputation of FGI; (vi) gross and willful neglect of material duties and
responsibilities of the Executive pursuant hereto, or an intentional violation
of a material term of this Agreement; or (vii) any material violation of any
statutory or common law fiduciary duty of Executive to FGI or the Partnerships;
or (viii) willful failure by the Executive to comply with a material FGI policy,
which results in a material, adverse impact on the Business, as reasonably
determined by the Chief Executive Officer of FGI, or (ix) repeated gross
insubordination.
9. Termination by the Executive. The Executive may terminate his employment
under this Agreement upon at least thirty (30) calendar days' ("Executive Notice
Period") written notice ("Executive Notice") to FGI of such termination:
(a) without Executive Cause (as defined below), upon expiration of the
Executive Notice Period, in which event no compensation shall be due
him beyond the date of such termination other than pursuant to the FGI
Benefit Plans; or
(b) for Executive Cause. The Executive Notice shall specify the particulars
of such Executive Cause and during the Executive Notice Period, the Executive
shall afford the Chief Executive Officer an opportunity to discuss the
particulars of such Executive Cause with the Executive and to cure such
Executive Cause to the satisfaction of the Executive during the Executive Notice
Period. If such Executive Cause shall not be cured accordingly, Executive's
employment shall terminate upon expiration of the Executive Notice Period. In
all events, Executive shall be paid all payments and benefits due him during the
Employment Period, and FGI shall pay the Executive in a lump sum or provide to
the Executive, as applicable, the Executive Payments on the condition that
Executive executes a general release of claims on terms customarily and normally
used by FGI at the time. "Executive Cause" means any of the following to which
the Executive does not agree: (i) assignment --------------- to the Executive of
duties or responsibilities, or the material diminution of duties or
responsibilities, that are inconsistent with his position, duties,
responsibilities or status as they exist at the commencement of the term of this
Agreement; (ii) material change in the reporting responsibilities of the
Executive; provided, however, that, notwithstanding the effect of changes on the
Board under Section 12 hereof, changes in the identity of persons on the Board
shall not be considered a change in reporting responsibilities for purposes of
this Section, (iii) relocation of the Executive's physical office or of FGI's
corporate offices to a site beyond a fifty (50) mile radius of its current
location of One Liberty Plaza, Liberty, Missouri; (iv) failure by any of FGI's
successors in interest to assume this Agreement in writing simultaneously with
becoming a successor in interest; (v) failure of FGI to maintain Director's and
Officer's insurance; or, (vi) a breach of any provision of this Agreement by
FGI.
10. Nondisparagement. During the term of this Agreement and for a period of two
(2) years after it is terminated, for whatever reason, Executive agrees that he
will not make any statements or provide any information that would tend to
disparage, defame or denigrate FGI, its affiliates, related entities and any of
its or their former or current officers, directors, agents or employees.
11. Cooperation. In the event that FGI or any of its affiliates becomes involved
in any civil or criminal litigation, administrative proceeding or governmental
investigation, Executive shall, upon request, provide reasonable cooperation and
assistance to FGI, including without limitation, furnishing relevant
information, attending meetings and providing statements and testimony. FGI will
reimburse Executive for all reasonable and necessary expenses he incurs in
complying with this Section 11. In addition, at any time more than two (2) years
after the termination of this Agreement for any reason, Executive need not
comply with this Section 11 unless FGI has agreed in writing to reimburse
Executive's employer, if applicable, or to reimburse Executive if self-employed,
for Executive's time at a rate agreed to by the applicable parties.
12. Effect of Certain Transactions; Change in Control.
(a) In the event of a Change in Control (as hereinafter defined) FGI shall
pay the Executive, not later than thirty (30) calendar days after such Change in
Control, a lump cash sum equal to the greater of (A) two and one-half (2.5)
times 125% of his then current Base Salary, or (B) two and one-half (2.5) times
the average actual cash compensation (including, but not limited to, bonuses)
paid for the prior three (3) fiscal years prior to such Change in Control. Such
payment shall reduce any lump sum Executive Payments payable to the Executive
under Sections 8 or 9. In addition, if the Executive's employment is terminated
pursuant to Section 8(a) or 9(b) within eighteen (18) months after such Change
in Control, (i) FGI shall pay the Executive for any vacation earned by the
Executive but not taken and any other amounts earned but unpaid, (ii) FGI shall
pay the Executive a pro rata portion (such proration shall be on the basis that
the number of months of his employment during FGI's then current fiscal year
bears to the number 12, considering the month of termination as a month of full
employment, and in the case of any plan measured over a full year, such
determination and payment shall be made after the close of such year of any
amounts to which he would have otherwise been entitled under any Company
perquisite to which Executive is a participant (excluding any bonus), and (iii)
FGI shall continue the Executive's health, accident and life insurance benefits
at FGI's cost on the same basis on which he is receiving such benefits at the
time of termination, until the earlier of the COBRA period of eighteen (18)
months after the month in which such termination occurs or Executive obtains
coverage under another plan or comparable coverage. For purposes of calculating
any bonus to be paid to the Executive pursuant to this Section 12, the Executive
shall be entitled to the payment of any bonus normally calculated with reference
to a future period based upon the total amount paid for such bonus in the three
(3) previous fiscal years.
(b) For purposes of this Agreement a "Change In Control" shall be deemed to
occur if:
(i) FGI or FCI (FGI and FCI will hereinafter be jointly and
severally referred to as "Company" or the "Companies" as the
context so requires) or either Partnership merges with or is
consolidated into another corporation or other entity not
theretofore affiliated with either Company or Partnership
(i.e., controlled by, controlling or under common control with
the Companies or the Partnerships, as applicable) and the
Company or Partnership so merging or consolidating is not the
surviving entity pursuant to such merger or consolidation
(other than a transaction in which the persons who were the
equity owners of the Company or Partnership so merging own
more than 50% of the surviving entity);
(ii) All or substantially all of the assets of either Company or
Partnership are acquired by another corporation or other
entity not theretofore affiliated with either Company or
Partnership in a single transaction or a series of related
transactions, and a majority of the then current Board of
Directors of neither Company does not control the entity that
has made such acquisition;
(iii) There is consummated any transaction or series of transactions
or any event or series of events, the result of which is that
FGI is no longer the sole general partner of either
Partnership;
(iv) There is consummated any transaction or series of transactions
or any event or series of events, the result of which is that
the Board of FGI does not have control of the affairs of
either Partnership;
(v) There is consummated a purchase or other acquisition by any
persons, entity or group of persons, within the meaning of
Section 13(d) or 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (excluding, for this purpose,
either Company or its subsidiaries or any employee benefit
plan of either Company or its subsidiaries), of the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 50% or more of either the
then-outstanding equity securities of either Company or
Partnership or the combined voting power of either Company's
or Partnership's then-outstanding voting securities;
(vi) Individuals who, as of the date hereof, constitute the Board of either
Company (as the date hereof, the "Incumbent Boards") cease for any reason to
constitute at least a majority of the Boards, provided that any person who
becomes a director subsequent to the date hereof whose election, or nomination
for election by either Company's equity owners, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board (other
than an individual whose initial assumption of office is in connection with an
actual or threatened election contest relating to the election of directors of
either Company, as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) shall be, for purposes of this section,
considered as though such person were a member of the applicable Incumbent
Board;
(vii) There is consummated a reorganization, merger or
consolidation, in each case with respect to which persons who
were the equity holders of either Company or Partnership
immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own more than
50% of, respectively, the equity securities and the combined
voting power entitled to vote generally in the elections of
directors or managers of the reorganized, merged or
consolidated entity's then-outstanding voting securities;
(viii) There is a liquidation or dissolution of either Company or
Partnership (other than a liquidation or dissolution where the
equity owners of the surviving Company or Partnership do not
change) or of the sale of all or substantially all of the
assets of either Company or Partnership;
(ix) There is consummated a public sale of a "material" amount of
FCI's equity (with materiality being determined by the
Committee administering the Ferrell Companies Inc. Employee
Stock Ownership Trust ("ESOT"), but with a material amount of
such equity being at least 50% thereof).
13. Mitigation or Reduction of Benefits. Executive shall not be required to
mitigate or reduce the amount of any payment upon termination provided for
herein by seeking other employment or otherwise nor, except as otherwise
specifically set forth herein, shall the amount of any payment or benefits
provided upon termination be reduced by any compensation or other amounts paid
to or earned by Executive as the result of employment by another employer after
such termination or otherwise.
14. Certain Additional Payments by FGI.
(a) Notwithstanding anything in this Agreement to the contrary and except
as set forth below, in the event it shall be determined that any payment,
benefit or distribution (or contribution thereof) from FGI, any affiliate, or
trusts established by FGI or by any affiliate, for the benefit of its employees,
to the Executive or for the Executive's benefit (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section, and with a "Payment" including, without limitation, the
vesting of an option or other non-cash benefit or property) (any of which are
referred to as a "Payment") would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or
any interest or penalties are incurred by the Executive with respect to such
excise tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the sum of (i) the Excise Tax
imposed upon the Payments; plus (ii) an amount equal to the product of any
deductions disallowed to Executive for federal, state, or local income tax
purposes solely because of the inclusion of the Gross-up Payment in the
Executive's adjusted gross income multiplied by the highest applicable marginal
rate of federal, state, or local income taxation, respectively, for the calendar
year in which the Gross-up Payment is to be made.
(b) Subject to the provisions of Section 14(c), all determinations required
to be made under this Section 14, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be
made by a nationally recognized certified public accounting firm as may
be designated by the Executive (the "Accounting Firm") which shall
provide detailed supporting calculations both to FGI and the
---------------
Executive within fifteen (15) business days of the receipt of notice
from the Executive that there has been a Payment, or such earlier time
as is requested by FGI. In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group
effecting a Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as
the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by FGI. Any Gross-Up Payment, as determined
pursuant to this Section 14, shall be paid by FGI to the Executive
within five (5) calendar days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be
binding upon FGI and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by FGI should have been
made ("Underpayment"), consistent with the calculations required to be
made hereunder. In the event that
------------
FGI exhausts its remedies pursuant to Section 14(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by FGI to or
for the benefit of the Executive.
(c) The Executive shall notify FGI in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by FGI
of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than thirty (30) business days after the
Executive is informed in writing of such claim and shall apprise FGI of
the nature of such claim and the date on which such claim is requested
to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which the
Executive gives such notice to FGI (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due).
If FGI notifies the Executive in writing prior to the expiration of
such period that it desires to contest such claim, the Executive shall:
(i) give FGI any information reasonably requested by FGI relating to such
claim,
(ii) take such action in connection with contesting such claim as
FGI shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected
by FGI,
(iii) cooperate with FGI in good faith in order to effectively contest such
claim, and
(iv) permit FGI to participate in any proceedings relating to such claim;
provided, however, that FGI shall bear and pay directly all costs and
expenses (including attorneys' fees and costs and additional interest
and penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis, for
any Excise Tax or income tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment
of costs and expenses. Without limitation on the foregoing provisions
of this Section 14(c), FGI shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may,
at its sole option, either direct the Executive to pay the tax claimed
and sue for a refund or contest the claim in any permissible manner,
and the Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial jurisdiction
and in one or more appellate courts, as FGI shall determine; provided,
however, that if FGI directs the Executive to pay such claim and sue
for a refund, FGI shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, FGI's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
If, after the receipt by the Executive of an amount
advanced by FGI pursuant to Section 14(c), the Executive becomes
entitled to receive any refund with respect to such claim, the
Executive shall (subject to FGI's complying with the requirements of
Section 14(c)) promptly pay to FGI the amount of such refund (together
with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced
by FGI pursuant to Section 14(c), a determination is made that the
Executive shall not be entitled to any refund with respect to such
claim and FGI does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of thirty (30)
calendar days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
15. Indemnification. Executive has executed on _______________ a
Director/Officer Indemnification Agreement which agreement controls the terms of
indemnification between the parties.
16. Confidential Information.
(a) In connection with Executive's employment, FGI will disclose and/or has
disclosed to Executive certain Confidential Information (defined
below). The Confidential Information is not generally known to others
and could have economic value if disclosed to others and/or used by
Executive, directly or indirectly, in competition with FGI or the
Partnerships. Further, Executive will in the future participate in the
development of, have access to, or use in performing Executive's
employment duties, some or all of the Confidential Information. FGI
makes reasonable efforts to keep its Confidential Information secret
and confidential, and Executive has a duty to keep it secret and
confidential.
(b) Executive may have significant contacts with the customers and accounts
of FGI and/or be provided with FGI's confidential customer and
customer-related information, including various customer lists,
analyses, and summaries. These contacts and/or this information could
enable Executive, at FGI's expense, to have access to and establish
favorable relations with, and put Executive in a position to influence,
FGI's customers and accounts.
(c) FGI's customer lists and customer information are trade secrets, and
this Agreement is intended, among other things, to protect FGI's trade
secrets, customer relationships, customer goodwill and other business
interests.
(d) The Executive will not use or reveal Confidential Information to anyone
other than for on or behalf of FGI both during and after Executive's
employment.
(e) Executive shall keep all Confidential Information secret and confidential.
(f) Executive shall return to FGI all Confidential Information and all
property of FGI immediately upon termination of Executive's employment
for any reason and also at any time upon FGI's request.
(g) "Confidential Information" shall mean: (i) Company Information (as
defined below); (ii) Customer Information (as defined below); and (iii) all
other information, whether or not reduced to writing, relating to the
Partnerships, the Business or FGI's customers which gives FGI an advantage over
competitors who do not know or use it, have not compiled the information
themselves, or is otherwise not generally known in the industry, including, but
not limited to, trade secrets, proprietary information, customer lists, route
books, inventions, computer programs and software, and including information
conceived, originated, or developed by Executive. Confidential Information
includes, but is not limited to, originals and copies of all materials
containing such information, regardless of the media used to record such
information, including but not limited to computers, computer disks, CD ROMS, or
other electronic media, microfiche or microfilm.
(h) "Company Information" shall mean: Information that FGI, the Companies
or the Partnerships have developed, acquired, organized, compiled or
maintained regarding FGI's products, services, processes, methods,
operations, proposals, projects, contracts, bids, pricing, costs,
profitability, marketing plans and strategies, revenues and finances to
the extent not subject to public disclosure requirements, business
relationships, correspondence, and other matters related to FGI's
development and operation of the Business.
(i) "Customer Information" shall mean: Information that FGI or the
Partnerships have developed, acquired, organized, compiled, or
maintained by FGI regarding FGI's customers, former customers and
prospective customers while developing and operating the Business,
including, but not limited to, information relating to their identity,
location, personnel, usage of petroleum products, and incidental or
related appliances, equipment and supplies, purchasing experience,
delivery schedules and routing, payment habits, credit experience,
ownership of storage facilities, contract renewal and expiration dates,
pricing, and other terms and conditions contained in their contracts
with FGI or its predecessors.
17. Inventions and Patents. Executive agrees that all inventions, innovations,
improvements, developments, methods, designs, analyses, drawings, reports, and
all similar or related information which relates to the Companies' actual or
anticipated business (to the extent the Executive is aware thereof), research
and development or existing or future products or services and which are
conceived, developed or made by Executive while employed by FGI or any of its
affiliates (whether prior to or during the Employment Period) ("Work Product")
belong to FGI or such other affiliate, and Executive hereby assigns to FGI his
entire right, title and interest in any such Work Product. Executive will
promptly disclose such Work Product to the Chief Executive Officer of FGI and
perform all actions reasonably requested by the Chief Executive Officer of FGI
(whether during or after Executive's Employment Period) to establish and confirm
such ownership (including, without limitation, assignments, consents, powers of
attorney and other instruments).
18. Noncompete; Nonsolicitation.
(a) Executive acknowledges that in the course of his employment with FGI he
will become familiar with Confidential Information and that his
services will be of special, unique and extraordinary value to FGI.
Therefore, Executive agrees that, during the time he is employed by FGI
pursuant hereto and for two (2) years thereafter (the "Noncompete
Period"), in the entire
United States and any other countries in which the Companies or
Partnerships are providing, or actively planning to provide goods and
services, he will not: (i) compete with the Companies or the
Partnerships in the sale of propane or related competitive products or
services; (ii) directly or indirectly, in person or through others, for
the benefit of Executive or another, call upon, solicit, sell, divert,
take away, deliver to, accept business or orders from or otherwise
engage in propane-related business with FGI's Customers (as defined
below), nor shall Executive, in any capacity, assist others to do so;
or (iii) directly or indirectly interfere with the business
relationship between FGI and any FGI Customers. The restrictions in
this paragraph apply only to products and services that are competitive
with the Business and/or products and services of FGI.
(b) While employed by FGI and for two (2) years thereafter, Executive will
not (i) interfere with, disrupt, or attempt to disrupt relations,
contractual or otherwise, between FGI and its employees, vendors or
suppliers, or (ii) hire or take away, directly or indirectly, any FGI
employee.
(c) "Customers" shall mean: (i) all persons, firms, corporations, and other
business enterprises for whom FGI performs or performed services or to
whom FGI sells or sold products, appliances, equipment, or supplies
during the two year period immediately prior to the termination of
Executive's employment; and (ii) all persons, corporations, and other
business enterprises actively solicited by FGI or to whom FGI has
furnished a quotation or proposal or estimate for the sale of products
or services within the one year period immediately prior to the
termination of Executive's employment. Customers of FGI shall include,
but not be limited to, those for whom either Executive or anyone under
Executive's supervision provided products or services and those who may
have become customers through the efforts of Executive while employed
by FGI.
(d) FGI and Executive agree that: (i) the covenants set forth in Sections
16 and 18 are reasonable in geographical and temporal scope and in all
other respects, (ii) FGI would not have entered into this Agreement but
for these covenants of Executive contained herein, and (iii) these
covenants contained herein have been made in order to induce FGI to
enter into this Agreement.
(e) If, at the time of enforcement of this Section 18, a court or arbiter
shall hold that the duration, scope or area restrictions stated herein
are unreasonable under circumstances then existing, the parties agree
that the maximum duration, scope or area reasonable under such
circumstances shall be substituted for the stated duration, scope or
area and that the court or arbitrator shall be allowed to revise the
restrictions contained herein to cover the maximum period, scope and
area permitted by law.
(f) FGI does not have to enforce all provisions of Sections 16 and 18 of
this Agreement at all times to preserve its rights to enforce any other
provision of Sections 16 and 18 of this Agreement. Executive also
acknowledges FGI does not have to enforce similar agreements with other
employees and/or officers to preserve its rights to enforce Sections 16
and 18 of this Agreement with Executive.
(g) Executive shall provide a copy of this Agreement to any new or
potential employer which competes against the Companies or the
Partnerships.
19. Arbitration.
(a) Except as set forth in Section 19(c), arbitration shall be the sole and
exclusive remedy for any dispute, claim, or controversy of any kind or
nature (a "Claim") arising out of, related to, or connected with
Executive's employment relationship with FGI, or the termination of
Executive's employment relationship with FGI, including any Claim
against any parent, subsidiary, or affiliated entity of FGI, or any
director, officer, general or limited partner, employee or agent of FGI
or of any such parent, subsidiary or affiliated entity.
(b) This agreement to arbitrate specifically includes (without limitation)
any dispute between or among the parties to this Agreement relating to
or in respect of this Agreement, its negotiation, execution,
performance, subject matter, or any course of conduct or dealing or
actions under or in respect of this Agreement, all claims under or
relating to any federal, state or local law or regulation prohibiting
discrimination, harassment or retaliation based on race, color,
religion, national origin, sex, age, disability or any other condition
or characteristic protected by law; demotion, discipline, termination
or other adverse action in violation of any contract, law or public
policy; entitlement to wages or other economic compensation; and any
claim for personal, emotional, physical, economic or other injury.
(c) This agreement to arbitrate does not apply to any legal action by FGI
seeking injunctive relief or damages for breach or enforcement of
Sections 16 or 18 of the Agreement. This agreement to arbitrate also
does not apply to any claims by Executive: (a) for workers'
compensation benefits; (b) for unemployment insurance benefits; (c)
under a benefit plan where the plan specifies a separate arbitration
procedure; (d) filed with an administrative agency which are not
legally subject to arbitration under this Agreement; or (e) which are
otherwise expressly prohibited by law from being subject to arbitration
under this Agreement.
(d) Any party may demand arbitration by sending notice to the other party
as set forth in this Agreement. Any Claim submitted to arbitration shall be
decided by a single, neutral arbitrator (the "Arbitrator"). The parties to the
arbitration shall mutually select the Arbitrator not later than 45 days after
service of the demand for arbitration. If the parties for any reason do not
mutually select the Arbitrator within the 45 day period, then any party may
apply to any court of competent jurisdiction to appoint a retired judge as the
Arbitrator. The parties agree that arbitration shall be conducted in accordance
with the American Arbitration Association Rules for the Resolution of Employment
Disputes. The Arbitrator shall apply the substantive federal, state, or local
law and statute of limitations governing any Claim submitted to arbitration. The
arbitration shall take place at a mutually agreeable site in Liberty or Kansas
City, Missouri and shall be conducted within one hundred eighty (180) days of
the receipt by a party of the other party's demand for arbitration. The
Arbitrator, in making his decision, shall be bound to follow the substantive
state and federal laws of jurisprudence as well as the applicable rules of
evidence in arriving at a decision. The decision rendered shall be in writing
and delivered to the parties within thirty (30) days after the conclusion of the
arbitration. The award of the Arbitrator shall be final, and judgment upon the
award rendered may be entered and enforced in any court, state or federal,
having jurisdiction. In ruling on any Claim submitted to arbitration, the
Arbitrator shall have the authority to award only such remedies or forms of
relief as are provided for under the substantive law governing such Claim.
(e) Any fees and costs incurred in the arbitration (e.g., filing fees,
transcript costs and Arbitrator's fees) will be shared equally by
Executive and FGI, except that the Arbitrator may reallocate such fees
among the parties if the Arbitrator determines that an equal allocation
would impose an unreasonable financial burden on Executive. The parties
shall be responsible for their own attorneys' fees and costs, except
that the Arbitrator shall have the authority to award attorneys' fees
and costs to the prevailing party in accordance with the applicable law
governing the dispute.
(f) The Arbitrator, and not any federal or state court, shall have the
exclusive authority to resolve any issue relating to the
interpretation, formation or enforceability of this Agreement, or any
issue relating to whether a Claim is subject to arbitration under this
Agreement, except that any party may bring an action in any court of
competent jurisdiction to compel arbitration in accordance with the
terms of this Agreement.
497817.01 15 20. FGI's Right to Injunctive Relief, Tolling. In the event of a
breach or threatened breach of any of the Executive's duties and obligations
under the terms and provisions of Sections 16, 17 or 18 hereof, FGI shall be
entitled, in addition to any other legal or equitable remedies it may have in
connection therewith (including any right to damages that it may suffer), to
temporary, preliminary, and permanent injunctive relief restraining such breach
or threatened breach. The Executive hereby expressly acknowledges that the harm
which might result to the Business as a result of any noncompliance by the
Executive with any of the provisions of sections 16, 17 or 18 hereof would be
largely irreparable.
21. Judicial Enforcement. If any provision of this Agreement is adjudicated to
be invalid or unenforceable under applicable law in any jurisdiction, the
validity or enforceability of the remaining provisions thereof shall be
unaffected as to such jurisdiction and such adjudication shall not affect the
validity or enforceability of such provisions in any other jurisdiction. To the
extent that any provision of this Agreement is adjudicated to be invalid or
unenforceable because it is overbroad, that provision shall not be void but
rather shall be limited only to the extent required by applicable law and
enforced as so limited. The parties expressly acknowledge and agree that this
Section is reasonable in view of the parties' respective interests.
22. Executive Warranties and Representations. The Executive warrants and
represents that the execution and delivery of the Agreement and the Executive's
employment with FGI do not violate any previous employment agreement or other
contractual obligation of the Executive.
23. Survival. The provisions of this Agreement, except as otherwise provided
herein, shall continue in full force in accordance with their terms
notwithstanding any termination of Executive's employment by FGI.
24. Right to Recover Costs and Fees. The Executive and FGI undertake and agree
that if either the Executive or FGI breach or threaten to breach Sections 16 or
18 of this Agreement (the "Breaching Party"), the Breaching Party shall be
liable for any attorneys' fees and costs incurred by the non-Breaching Party in
enforcing the non-Breaching Party's rights hereunder.
25. Executive Right. If the Executive believes that any benefit on account of
the termination of the Executive's service with FGI under this Agreement has not
been paid by FGI within fifteen (15) days after the date on which that benefit
should have been paid to the Executive under the terms of this Agreement, the
Executive may give notice to FGI of that failure and the amount of the benefit
that should have been paid. FGI shall pay the Executive the amount specified in
that notice within thirty (30) days after its receipt of the notice; provided,
however, that the payment shall not preclude FGI from disputing that payment in
accordance with the arbitration provisions of this Agreement.
26. Entire Agreement, Amendments and Modifications. This Agreement constitutes
the entire agreement and understanding of the parties regarding the employment
of Executive by FGI and supersedes all prior agreements and understandings
between the Executive and FGI to the extent that any such agreements or
understandings conflict with the terms of this Agreement. The parties
specifically agree that the Option Grantee Agreement entered into between
Executive and Ferrellgas is hereby terminated. No modification, amendment or
waiver of any of the provisions of this Agreement shall be effective unless in
writing specifically referring hereto, and signed by the parties hereto.
27. Assignments. This Agreement shall be freely assignable by FGI to, and shall
inure to the benefit of and be binding upon, its successors and assigns and/or
any other entity which shall succeed to the business presently being conducted
by FGI or the Partnerships. In that regard, FGI shall assign and shall require
any successor, whether in a Change of Control transaction or not, of either of
the Companies or any of the Partnerships to expressly assume in writing FGI's
obligations under this Agreement simultaneously with the consummation of an
applicable transaction, which assumption shall not relieve FGI of any of its
obligations hereunder. Being a contract for personal services, neither this
Agreement nor any rights hereunder shall be assigned by the Executive; provided,
however that the rights and benefits hereunder shall inure to and be enforceable
by the Executive's estate, heirs, executors, administrators or legal guardians
or representatives.
28. Choice of Forum; Governing Law. In light of FGI's substantial contacts with
the State of Missouri, the parties' interests in ensuring that disputes
regarding the interpretation, validity, and enforceability of this Agreement are
resolved on a uniform basis, and FGI's execution of, and the making of, this
Agreement in Missouri, the parties agree that: (i) any litigation involving this
Agreement shall be filed and conducted in the state or federal courts in the
State of Missouri; and (ii) the Agreement shall be interpreted in accordance
with and governed by the laws of the State of Missouri, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
Missouri or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Missouri.
29. Headings and Interpretation. Section headings are provided in this Agreement
for convenience only and shall not be deemed to substantively alter the content
of such sections. Whenever the words "include", "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation". References to the singular or plural tense of a word shall
also include the plural or singular as the context may require.
30. Neutral Construction. Each party acknowledges that in the negotiation and
drafting of this Agreement, they have been represented by and relied upon the
advice of counsel of their choice. The parties affirm that they and their
counsel have had a substantial role in such negotiation and drafting of this
Agreement, and, therefore, the parties agree that this Agreement shall be deemed
to have been drafted by all the parties hereto and the rule of construction to
the effect that any contract ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of this Agreement or any
exhibit or schedule hereto.
31. Notices. Any notice, request, consent or communication (collectively, a
"Notice") under this Agreement shall be effective only if it is in writing and
(i) personally delivered with written receipt thereof, (ii) sent by certified or
registered mail, return receipt requested, postage prepaid or (iii) sent by a
nationally recognized overnight delivery service, with delivery confirmed,
addressed as follows (or at such other address for a party as shall be specified
by like notice):
(a) If to the Executive, to: James M. Hake
[Address]
(b) with a copy to: Bryan Cave LLP
One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105
Attn: Beth Romans Bower
(c) If to FGI, to: Ferrellgas, Inc.
One Liberty Plaza
Liberty, Missouri 64068
Attention: Mr. Danley K. Sheldon
A Notice shall be deemed to have been given as of the date
when (i) personally delivered as indicated by date of receipt, (ii) five (5)
days after the date when deposited with the United States certified mail, return
receipt requested, properly addressed, or (iii) when receipt of a Notice sent by
an overnight delivery service is confirmed by such overnight delivery service,
as the case may be, unless the sending party has actual knowledge that a Notice
was not received by the intended recipient.
32. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and together shall constitute one and
the same Agreement.
(The remainder of this page has been left
blank intentionally.)
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the day and year first above written.
FERRELLGAS, INC. EXECUTIVE
By:__________________
Name:________________ James M. Hake
Title:_______________
PLEASE NOTE: BY SIGNING THIS AGREEMENT, EXECUTIVE IS HEREBY CERTIFYING THAT
EXECUTIVE (A) HAS RECEIVED A COPY OF THIS AGREEMENT FOR REVIEW AND STUDY BEFORE
EXECUTING IT; (B) HAS READ THIS AGREEMENT CAREFULLY BEFORE SIGNING IT; (C)
UNDERSTANDS THAT THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION; (D)
HAS HAD SUFFICIENT OPPORTUNITY BEFORE SIGNING THE AGREEMENT TO ASK ANY QUESTIONS
EXECUTIVE HAS ABOUT THE AGREEMENT AND HAS RECEIVED SATISFACTORY ANSWERS TO ALL
SUCH QUESTIONS; AND (E) UNDERSTANDS EXECUTIVE'S RIGHTS AND OBLIGATIONS UNDER THE
AGREEMENT.
EMPLOYMENT, CONFIDENTIALITY, AND NONCOMPETE AGREEMENT
This Employment, Confidentiality, and Noncompete Agreement
("Agreement") is made and entered into this ____ day of ____________, 2000 by
and between Ferrellgas, Inc., a Delaware corporation ("FGI") and Boyd H.
McGathey (the "Executive").
WHEREAS, FGI serves as the general partner of Ferrellgas
Partners, L.P., a Delaware limited partnership ("Ferrellgas Partners") and
Ferrellgas, L.P., a Delaware limited partnership ("Ferrellgas", and referred to
herein jointly and severally with Ferrellgas Partners as the "Partnership" or
"Partnerships" as the context so requires), which are engaged primarily in the
sale, distribution and marketing of propane and other natural gas liquids (the
"Business").
WHEREAS, FGI, through the Partnerships, conducts the Business
throughout the United States.
WHEREAS, FGI, through the Partnerships, has expended a great
deal of time, money, and effort to develop and maintain proprietary Confidential
Information (as defined below) which, if misused or disclosed, could be harmful
to the Business.
WHEREAS, the success of FGI depends to a substantial extent
upon the protection of the Confidential Information and customer goodwill by all
of its employees and the employees of the Partnerships.
WHEREAS, the Executive desires to be employed by FGI as Senior
Vice President Corporate Administration and CIO.
WHEREAS, the Executive desires to be eligible for other
opportunities within FGI and/or compensation increases which otherwise would not
be available to the Executive and to be given access to Confidential
Information, of FGI and the Partnerships which is necessary for the Executive to
perform his duties, but which FGI would not make available to the Executive but
for the Executive's signing and agreeing to abide by the terms of this Agreement
as a condition of the Executive's employment and continued employment with FGI.
WHEREAS, the Executive recognizes and acknowledges that the
Executive's position with FGI has provided and/or will continue to provide the
Executive with access to Confidential Information of FGI and the Partnerships.
NOW, THEREFORE, in consideration of the compensation and other
benefits of the Executive's employment by FGI and the recitals, mutual covenants
and agreements hereinbefore and hereinafter set forth, the Executive and FGI
agree as follows:
1. Term. The Executive is hereby employed by FGI, and the Executive hereby
accepts such employment upon the term s and conditions set forth herein. The
Executive's term of employment under this Agreement shall be for a period of
three (3) years, commencing on July 24, 2000, and shall continue for a period
through and including July 24, 2003 (the "Initial Period"), unless earlier
terminated pursuant to the terms and conditions of this Agreement.
Notwithstanding anything herein to the contrary, this Agreement and the term of
employment, unless either FGI or the Executive provides six (6) months written
notice to the other party hereto that the Agreement shall not renew upon
expiration of the then current employment period and, subject to Sections 8 and
9, shall be automatically renewed for one year successive periods following the
Initial Period (each a "Successive Period" and together with the Initial Period,
the "Employment Period").
2. Duties and Responsibilities. During the Employment Period, the Executive
shall be employed as Senior Vice President Corporate Administration and CIO of
FGI, with such duties and responsibilities as are customarily incident to such
offices. The precise services of the Executive may be extended or curtailed at
the discretion of FGI, so long as after such extension or curtailment, the
duties of the Executive are consistent with the duties normally attendant to the
aforesaid offices. The Executive will perform his duties in a diligent,
trustworthy, loyal, and business-like manner, all for the purpose of advancing
the Business.
3. Performance of Services. During the Employment Period, the Executive shall
devote his primary time, attention and energies to the Business and shall not
during such time be substantially engaged in any other business activity whether
or not such business activity is pursued for gain, profit, or other pecuniary
advantage; provided, however, that nothing herein shall be construed as
preventing the Executive (i) from being involved in civic, philanthropic or
community service activities, from participating in other businesses and
receiving compensation therefore, to the extent that such involvement and
participation does not involve management or participation in day-to-day
activities thereof and does not detract from the performance by the Executive of
his duties to FGI pursuant hereto; provided, further, that at the request of the
Chief Executive Officer of FGI, the Executive shall disclose such involvement
therein, or (ii) from investing his assets in such form or manner as will not
require any appreciable services on the part of the Executive in the operation
of the affairs of any entity in which such investments are made, so long as such
activities do not substantially interfere or conflict with the Executive's
discharge of his duties and responsibilities hereunder. The Executive agrees to
follow and act in accordance with all of the rules, policies, and procedures of
FGI.
4. Compensation.
(a) During the Employment Period, Executive's base salary shall be not less
than $180,000 per year ("Base Salary"), payable in regular installments
in accordance with FGI's usual payroll practices and subject to review
and increase consistent with practices of FGI in effect from time to
time during the Employment Period, but shall not be reduced.
Executive's Base Salary shall be reviewed annually by the Chief
Executive Officer of FGI with the advice and consent of the
compensation committee.
(b) Annual Bonus. Executive may be eligible for an annual bonus based on a
target bonus of 50% of base pay. The terms of any such annual bonus
plan shall be at the discretion of the Board of Directors of FGI;
however, the terms of such plan, if any, shall be committed to by FGI,
in writing, within 30 days after the beginning of each fiscal year.
5. Benefit Plans. During the Employment Period and as otherwise provided herein,
the Executive shall be entitled to participate in any and all employee welfare
and health benefit plans (including, but not limited to life insurance, health
and medical, dental, and disability plans) and other employee benefit plans
(including, but not limited to qualified pension plans and Ferrell Companies,
Inc. ("FCI") stock incentive plans), established by FGI from time to time for
the benefit of executive employees of FGI. The Executive shall be required to
comply with the conditions attendant to participation in and coverage by such
plans and shall comply with and, except as otherwise provided herein, shall be
entitled to benefits only in accordance with the terms and conditions of such
plans as they may be amended from time to time. Nothing herein contained shall
be construed as requiring FGI to establish or continue any particular benefit
plan in discharge of its obligations under this Agreement.
6. Other Benefits and Reimbursements.
(a) During the Employment Period, the Executive shall be entitled to not
less than four (4) weeks of paid vacation each year of his employment
hereunder, which shall accumulate if not used in any given year.
Pursuant to the provisions of this Agreement, vacation time earned but
unused shall be paid to the Executive upon termination of this
Agreement.
(b) During the Employment Period, the Executive shall be entitled to such
other employment benefits extended or provided to other key executives
of FGI, including, but not limited to, payment or reimbursement of all
business expenses incurred by the Executive in the performance of his
duties and other job related activities set forth in this Agreement or
subsequently agreed to by the parties and in the promotion of the
Business in accordance with FGI customary policies and procedures. The
Executive shall submit to FGI periodic statements of all expenses so
incurred. Subject to such audits as FGI may deem necessary, FGI shall
reimburse the Executive the full amount of any such expenses advanced
by him in the ordinary course of business.
7. Deductions from Salary and Benefits. FGI shall withhold from any
compensation, bonus or benefits payable to the Executive all customary federal,
state, local and other withholdings, including, without limitation, federal and
state withholding taxes, social security taxes and state disability insurance.
8. Termination by FGI. FGI may terminate Executive's employment under this
Agreement upon at least sixty (60) calendar days ("Notice Period") written
notice ("Notice") to the Executive of its intent to terminate Executive's
employment:
(a) without Cause (as defined in subsection 8(b) below). The Notice shall
specify that such Termination is without Cause, and upon the expiration of the
Notice Period, FGI shall, on the condition that Executive executes a general
release of claims on terms customarily and normally used by FGI at the time, (i)
pay the Executive in a lump sum an amount equal to twice his then current Base
Salary, (ii) provide to the Executive medical insurance, on the same basis on
which he is receiving such insurance at the time of termination, for a period
ending the earlier of two (2) years from the date of termination of this
Agreement or the date Executive is covered by another medical plan at a cost to
the Executive equal to the amount that would have been charged to the Executive
in accordance with the terms of this Agreement, and (iii) an amount equal to
$50,000 for relocation expenses (the payment or provision of the items in this
Section 8(a) are referred to in this Agreement as the "Executive Payments");
(b) for Cause (as defined below). The Notice shall specify the particulars
of such Cause and shall afford the Executive an opportunity to discuss the
particulars of such Cause with the Chief Executive Officer of FGI and to cure
such Cause. If such Cause shall not be cured accordingly, Executive's employment
shall terminate upon expiration of the Notice Period and no compensation shall
be due to the Executive beyond the date of such termination (other than pursuant
to pension or other plans which by their terms provide payments beyond the date
of termination in such circumstances, including but not limited to, the Ferrell
Companies Inc. Employee Stock Ownership Plan, FGI's non-qualified deferred
compensation plan, the FCI Nonqualified Stock Option Agreement and vacation
earned but not taken ("collectively, the "FGI Benefit Plans")). For purposes of
this Agreement "Cause" means: (i) the conviction of Executive by a court of
competent jurisdiction of, or entry ----- of a plea of nolo contendere with
respect to, a felony or any other crime, which other crime involves fraud,
dishonesty or ---- ---------- moral turpitude which materially interferes with
the performance of Executive's duties, responsibilities or obligations under
this Agreement; (ii) fraud or embezzlement related to FGI or the Partnerships on
the part of Executive; (iii) Executive's chronic abuse of or dependency on
alcohol or drugs (illicit or otherwise) which materially interferes with the
performance of Executive's duties, responsibilities or obligations under this
Agreement; (iv) the material breach by Executive of any of Sections 16, 17 or 18
hereof, except as permitted pursuant to Section 12 hereof; (v) any act of moral
turpitude or willful misconduct by Executive which (A) results in substantial
personal enrichment of the Executive at the expense of FGI or the Partnerships,
or (B) is reasonably expected to have a material adverse impact on the Business
or reputation of FGI; (vi) gross and willful neglect of material duties and
responsibilities of the Executive pursuant hereto, or an intentional violation
of a material term of this Agreement; or (vii) any material violation of any
statutory or common law fiduciary duty of Executive to FGI or the Partnerships;
or (viii) willful failure by the Executive to comply with a material FGI policy,
which results in a material, adverse impact on the Business, as reasonably
determined by the Chief Executive Officer of FGI, or (ix) repeated gross
insubordination.
9. Termination by the Executive. The Executive may terminate his employment
under this Agreement upon at least thirty (30) calendar days' ("Executive Notice
Period") written notice ("Executive Notice") to FGI of such termination:
(a) without Executive Cause (as defined below), upon expiration of the
Executive Notice Period, in which event no compensation shall be due
him beyond the date of such termination other than pursuant to the FGI
Benefit Plans; or
(b) for Executive Cause. The Executive Notice shall specify the particulars
of such Executive Cause and during the Executive Notice Period, the Executive
shall afford the Chief Executive Officer an opportunity to discuss the
particulars of such Executive Cause with the Executive and to cure such
Executive Cause to the satisfaction of the Executive during the Executive Notice
Period. If such Executive Cause shall not be cured accordingly, Executive's
employment shall terminate upon expiration of the Executive Notice Period. In
all events, Executive shall be paid all payments and benefits due him during the
Employment Period, and FGI shall pay the Executive in a lump sum or provide to
the Executive, as applicable, the Executive Payments on the condition that
Executive executes a general release of claims on terms customarily and normally
used by FGI at the time. "Executive Cause" means any of the following to which
the Executive does not agree: (i) assignment --------------- to the Executive of
duties or responsibilities, or the material diminution of duties or
responsibilities, that are inconsistent with his position, duties,
responsibilities or status as they exist at the commencement of the term of this
Agreement; (ii) material change in the reporting responsibilities of the
Executive; provided, however, that, notwithstanding the effect of changes on the
Board under Section 12 hereof, changes in the identity of persons on the Board
shall not be considered a change in reporting responsibilities for purposes of
this Section, (iii) relocation of the Executive's physical office or of FGI's
corporate offices to a site beyond a fifty (50) mile radius of its current
location of One Liberty Plaza, Liberty, Missouri; (iv) failure by any of FGI's
successors in interest to assume this Agreement in writing simultaneously with
becoming a successor in interest; (v) failure of FGI to maintain Director's and
Officer's insurance; or, (vi) a breach of any provision of this Agreement by
FGI.
10. Nondisparagement. During the term of this Agreement and for a period of two
(2) years after it is terminated, for whatever reason, Executive agrees that he
will not make any statements or provide any information that would tend to
disparage, defame or denigrate FGI, its affiliates, related entities and any of
its or their former or current officers, directors, agents or employees.
11. Cooperation. In the event that FGI or any of its affiliates becomes involved
in any civil or criminal litigation, administrative proceeding or governmental
investigation, Executive shall, upon request, provide reasonable cooperation and
assistance to FGI, including without limitation, furnishing relevant
information, attending meetings and providing statements and testimony. FGI will
reimburse Executive for all reasonable and necessary expenses he incurs in
complying with this Section 11. In addition, at any time more than two (2) years
after the termination of this Agreement for any reason, Executive need not
comply with this Section 11 unless FGI has agreed in writing to reimburse
Executive's employer, if applicable, or to reimburse Executive if self-employed,
for Executive's time at a rate agreed to by the applicable parties.
12. Effect of Certain Transactions; Change in Control.
(a) In the event of a Change in Control (as hereinafter defined) FGI shall
pay the Executive, not later than thirty (30) calendar days after such Change in
Control, a lump cash sum equal to the greater of (A) two and one-half (2.5)
times 125% of his then current Base Salary, or (B) two and one-half (2.5) times
the average actual cash compensation (including, but not limited to, bonuses)
paid for the prior three (3) fiscal years prior to such Change in Control. Such
payment shall reduce any lump sum Executive Payments payable to the Executive
under Sections 8 or 9. In addition, if the Executive's employment is terminated
pursuant to Section 8(a) or 9(b) within eighteen (18) months after such Change
in Control, (i) FGI shall pay the Executive for any vacation earned by the
Executive but not taken and any other amounts earned but unpaid, (ii) FGI shall
pay the Executive a pro rata portion (such proration shall be on the basis that
the number of months of his employment during FGI's then current fiscal year
bears to the number 12, considering the month of termination as a month of full
employment, and in the case of any plan measured over a full year, such
determination and payment shall be made after the close of such year of any
amounts to which he would have otherwise been entitled under any Company
perquisite to which Executive is a participant (excluding any bonus), and (iii)
FGI shall continue the Executive's health, accident and life insurance benefits
at FGI's cost on the same basis on which he is receiving such benefits at the
time of termination, until the earlier of the COBRA period of eighteen (18)
months after the month in which such termination occurs or Executive obtains
coverage under another plan or comparable coverage. For purposes of calculating
any bonus to be paid to the Executive pursuant to this Section 12, the Executive
shall be entitled to the payment of any bonus normally calculated with reference
to a future period based upon the total amount paid for such bonus in the three
(3) previous fiscal years.
(b) For purposes of this Agreement a "Change In Control" shall be deemed to
occur if:
(i) FGI or FCI (FGI and FCI will hereinafter be jointly and
severally referred to as "Company" or the "Companies" as the
context so requires) or either Partnership merges with or is
consolidated into another corporation or other entity not
theretofore affiliated with either Company or Partnership
(i.e., controlled by, controlling or under common control with
the Companies or the Partnerships, as applicable) and the
Company or Partnership so merging or consolidating is not the
surviving entity pursuant to such merger or consolidation
(other than a transaction in which the persons who were the
equity owners of the Company or Partnership so merging own
more than 50% of the surviving entity);
(ii) All or substantially all of the assets of either Company or
Partnership are acquired by another corporation or other
entity not theretofore affiliated with either Company or
Partnership in a single transaction or a series of related
transactions, and a majority of the then current Board of
Directors of neither Company does not control the entity that
has made such acquisition;
(iii) There is consummated any transaction or series of transactions
or any event or series of events, the result of which is that
FGI is no longer the sole general partner of either
Partnership;
(iv) There is consummated any transaction or series of transactions
or any event or series of events, the result of which is that
the Board of FGI does not have control of the affairs of
either Partnership;
(v) There is consummated a purchase or other acquisition by any
persons, entity or group of persons, within the meaning of
Section 13(d) or 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (excluding, for this purpose,
either Company or its subsidiaries or any employee benefit
plan of either Company or its subsidiaries), of the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 50% or more of either the
then-outstanding equity securities of either Company or
Partnership or the combined voting power of either Company's
or Partnership's then-outstanding voting securities;
(vi) Individuals who, as of the date hereof, constitute the Board of either
Company (as the date hereof, the "Incumbent Boards") cease for any reason to
constitute at least a majority of the Boards, provided that any person who
becomes a director subsequent to the date hereof whose election, or nomination
for election by either Company's equity owners, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board (other
than an individual whose initial assumption of office is in connection with an
actual or threatened election contest relating to the election of directors of
either Company, as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) shall be, for purposes of this section,
considered as though such person were a member of the applicable Incumbent
Board;
(vii) There is consummated a reorganization, merger or
consolidation, in each case with respect to which persons who
were the equity holders of either Company or Partnership
immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own more than
50% of, respectively, the equity securities and the combined
voting power entitled to vote generally in the elections of
directors or managers of the reorganized, merged or
consolidated entity's then-outstanding voting securities;
(viii) There is a liquidation or dissolution of either Company or
Partnership (other than a liquidation or dissolution where the
equity owners of the surviving Company or Partnership do not
change) or of the sale of all or substantially all of the
assets of either Company or Partnership;
(ix) There is consummated a public sale of a "material" amount of
FCI's equity (with materiality being determined by the
Committee administering the Ferrell Companies Inc. Employee
Stock Ownership Trust ("ESOT"), but with a material amount of
such equity being at least 50% thereof).
13. Mitigation or Reduction of Benefits. Executive shall not be required to
mitigate or reduce the amount of any payment upon termination provided for
herein by seeking other employment or otherwise nor, except as otherwise
specifically set forth herein, shall the amount of any payment or benefits
provided upon termination be reduced by any compensation or other amounts paid
to or earned by Executive as the result of employment by another employer after
such termination or otherwise.
14. Certain Additional Payments by FGI.
(a) Notwithstanding anything in this Agreement to the contrary and except
as set forth below, in the event it shall be determined that any payment,
benefit or distribution (or contribution thereof) from FGI, any affiliate, or
trusts established by FGI or by any affiliate, for the benefit of its employees,
to the Executive or for the Executive's benefit (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section, and with a "Payment" including, without limitation, the
vesting of an option or other non-cash benefit or property) (any of which are
referred to as a "Payment") would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or
- ---- any interest or penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then the
Executive shall be ---------- entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Executive of
- ---------------- all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the sum of (i) the Excise Tax imposed upon the Payments; plus (ii) an
amount equal to the product of any deductions disallowed to Executive for
federal, state, or local income tax purposes solely because of the inclusion of
the Gross-up Payment in the Executive's adjusted gross income multiplied by the
highest applicable marginal rate of federal, state, or local income taxation,
respectively, for the calendar year in which the Gross-up Payment is to be made.
(b) Subject to the provisions of Section 14(c), all determinations required
to be made under this Section 14, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by a nationally
recognized certified public accounting firm as may be designated by the
Executive (the "Accounting Firm") which shall provide detailed supporting
calculations both to FGI and the --------------- Executive within fifteen (15)
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by FGI. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting a Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by FGI. Any Gross-Up Payment, as determined pursuant to this Section 14,
shall be paid by FGI to the Executive within five (5) calendar days of the
receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon FGI and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by FGI should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that ------------ FGI exhausts its remedies pursuant to
Section 14(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by FGI to or
for the benefit of the Executive.
(c) The Executive shall notify FGI in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by FGI
of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than thirty (30) business days after the
Executive is informed in writing of such claim and shall apprise FGI of
the nature of such claim and the date on which such claim is requested
to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which the
Executive gives such notice to FGI (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due).
If FGI notifies the Executive in writing prior to the expiration of
such period that it desires to contest such claim, the Executive shall:
(i) give FGI any information reasonably requested by FGI relating to such
claim,
(ii) take such action in connection with contesting such claim as
FGI shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected
by FGI,
(iii) cooperate with FGI in good faith in order to effectively contest such
claim, and
(iv) permit FGI to participate in any proceedings relating to such claim;
provided, however, that FGI shall bear and pay directly all costs and
expenses (including attorneys' fees and costs and additional interest
and penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis, for
any Excise Tax or income tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment
of costs and expenses. Without limitation on the foregoing provisions
of this Section 14(c), FGI shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may,
at its sole option, either direct the Executive to pay the tax claimed
and sue for a refund or contest the claim in any permissible manner,
and the Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial jurisdiction
and in one or more appellate courts, as FGI shall determine; provided,
however, that if FGI directs the Executive to pay such claim and sue
for a refund, FGI shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, FGI's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
If, after the receipt by the Executive of an amount
advanced by FGI pursuant to Section 14(c), the Executive becomes
entitled to receive any refund with respect to such claim, the
Executive shall (subject to FGI's complying with the requirements of
Section 14(c)) promptly pay to FGI the amount of such refund (together
with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced
by FGI pursuant to Section 14(c), a determination is made that the
Executive shall not be entitled to any refund with respect to such
claim and FGI does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of thirty (30)
calendar days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
15. Indemnification. Executive has executed on _______________ a
Director/Officer Indemnification Agreement which agreement controls the terms of
indemnification between the parties.
16. Confidential Information.
(a) In connection with Executive's employment, FGI will disclose and/or has
disclosed to Executive certain Confidential Information (defined
below). The Confidential Information is not generally known to others
and could have economic value if disclosed to others and/or used by
Executive, directly or indirectly, in competition with FGI or the
Partnerships. Further, Executive will in the future participate in the
development of, have access to, or use in performing Executive's
employment duties, some or all of the Confidential Information. FGI
makes reasonable efforts to keep its Confidential Information secret
and confidential, and Executive has a duty to keep it secret and
confidential.
(b) Executive may have significant contacts with the customers and accounts
of FGI and/or be provided with FGI's confidential customer and
customer-related information, including various customer lists,
analyses, and summaries. These contacts and/or this information could
enable Executive, at FGI's expense, to have access to and establish
favorable relations with, and put Executive in a position to influence,
FGI's customers and accounts.
(c) FGI's customer lists and customer information are trade secrets, and
this Agreement is intended, among other things, to protect FGI's trade
secrets, customer relationships, customer goodwill and other business
interests.
(d) The Executive will not use or reveal Confidential Information to anyone
other than for on or behalf of FGI both during and after Executive's
employment.
(e) Executive shall keep all Confidential Information secret and confidential.
(f) Executive shall return to FGI all Confidential Information and all
property of FGI immediately upon termination of Executive's employment
for any reason and also at any time upon FGI's request.
(g) "Confidential Information" shall mean: (i) Company Information (as
defined below); (ii) Customer Information (as defined below); and (iii) all
other information, whether or not reduced to writing, relating to the
Partnerships, the Business or FGI's customers which gives FGI an advantage over
competitors who do not know or use it, have not compiled the information
themselves, or is otherwise not generally known in the industry, including, but
not limited to, trade secrets, proprietary information, customer lists, route
books, inventions, computer programs and software, and including information
conceived, originated, or developed by Executive. Confidential Information
includes, but is not limited to, originals and copies of all materials
containing such information, regardless of the media used to record such
information, including but not limited to computers, computer disks, CD ROMS, or
other electronic media, microfiche or microfilm.
(h) "Company Information" shall mean: Information that FGI, the Companies
or the Partnerships have developed, acquired, organized, compiled or
maintained regarding FGI's products, services, processes, methods,
operations, proposals, projects, contracts, bids, pricing, costs,
profitability, marketing plans and strategies, revenues and finances to
the extent not subject to public disclosure requirements, business
relationships, correspondence, and other matters related to FGI's
development and operation of the Business.
(i) "Customer Information" shall mean: Information that FGI or the
Partnerships have developed, acquired, organized, compiled, or
maintained by FGI regarding FGI's customers, former customers and
prospective customers while developing and operating the Business,
including, but not limited to, information relating to their identity,
location, personnel, usage of petroleum products, and incidental or
related appliances, equipment and supplies, purchasing experience,
delivery schedules and routing, payment habits, credit experience,
ownership of storage facilities, contract renewal and expiration dates,
pricing, and other terms and conditions contained in their contracts
with FGI or its predecessors.
17. Inventions and Patents. Executive agrees that all inventions, innovations,
improvements, developments, methods, designs, analyses, drawings, reports, and
all similar or related information which relates to the Companies' actual or
anticipated business (to the extent the Executive is aware thereof), research
and development or existing or future products or services and which are
conceived, developed or made by Executive while employed by FGI or any of its
affiliates (whether prior to or during the Employment Period) ("Work Product")
belong to FGI or such other affiliate, and Executive hereby assigns to FGI his
entire right, title and interest in any such Work Product. Executive will
promptly disclose such Work Product to the Chief Executive Officer of FGI and
perform all actions reasonably requested by the Chief Executive Officer of FGI
(whether during or after Executive's Employment Period) to establish and confirm
such ownership (including, without limitation, assignments, consents, powers of
attorney and other instruments).
18. Noncompete; Nonsolicitation.
(a) Executive acknowledges that in the course of his employment with FGI he
will become familiar with Confidential Information and that his services will be
of special, unique and extraordinary value to FGI. Therefore, Executive agrees
that, during the time he is employed by FGI pursuant hereto and for two (2)
years thereafter (the "Noncompete Period"), in the entire -----------------
United States and any other countries in which the Companies or Partnerships are
providing, or actively planning to provide goods and services, he will not: (i)
compete with the Companies or the Partnerships in the sale of propane or related
competitive products or services; (ii) directly or indirectly, in person or
through others, for the benefit of Executive or another, call upon, solicit,
sell, divert, take away, deliver to, accept business or orders from or otherwise
engage in propane-related business with FGI's Customers (as defined below), nor
shall Executive, in any capacity, assist others to do so; or (iii) directly or
indirectly interfere with the business relationship between FGI and any FGI
Customers. The restrictions in this paragraph apply only to products and
services that are competitive with the Business and/or products and services of
FGI.
(b) While employed by FGI and for two (2) years thereafter, Executive will
not (i) interfere with, disrupt, or attempt to disrupt relations,
contractual or otherwise, between FGI and its employees, vendors or
suppliers, or (ii) hire or take away, directly or indirectly, any FGI
employee.
(c) "Customers" shall mean: (i) all persons, firms, corporations, and other
business enterprises for whom FGI performs or performed services or to
whom FGI sells or sold products, appliances, equipment, or supplies
during the two year period immediately prior to the termination of
Executive's employment; and (ii) all persons, corporations, and other
business enterprises actively solicited by FGI or to whom FGI has
furnished a quotation or proposal or estimate for the sale of products
or services within the one year period immediately prior to the
termination of Executive's employment. Customers of FGI shall include,
but not be limited to, those for whom either Executive or anyone under
Executive's supervision provided products or services and those who may
have become customers through the efforts of Executive while employed
by FGI.
(d) FGI and Executive agree that: (i) the covenants set forth in Sections
16 and 18 are reasonable in geographical and temporal scope and in all
other respects, (ii) FGI would not have entered into this Agreement but
for these covenants of Executive contained herein, and (iii) these
covenants contained herein have been made in order to induce FGI to
enter into this Agreement.
(e) If, at the time of enforcement of this Section 18, a court or arbiter
shall hold that the duration, scope or area restrictions stated herein
are unreasonable under circumstances then existing, the parties agree
that the maximum duration, scope or area reasonable under such
circumstances shall be substituted for the stated duration, scope or
area and that the court or arbitrator shall be allowed to revise the
restrictions contained herein to cover the maximum period, scope and
area permitted by law.
(f) FGI does not have to enforce all provisions of Sections 16 and 18 of
this Agreement at all times to preserve its rights to enforce any other
provision of Sections 16 and 18 of this Agreement. Executive also
acknowledges FGI does not have to enforce similar agreements with other
employees and/or officers to preserve its rights to enforce Sections 16
and 18 of this Agreement with Executive.
(g) Executive shall provide a copy of this Agreement to any new or
potential employer which competes against the Companies or the
Partnerships.
19. Arbitration.
(a) Except as set forth in Section 19(c), arbitration shall be the sole and
exclusive remedy for any dispute, claim, or controversy of any kind or
nature (a "Claim") arising out of, related to, or connected with
Executive's employment relationship with FGI, or the termination of
Executive's employment relationship with FGI, including any Claim
against any parent, subsidiary, or affiliated entity of FGI, or any
director, officer, general or limited partner, employee or agent of FGI
or of any such parent, subsidiary or affiliated entity.
(b) This agreement to arbitrate specifically includes (without limitation)
any dispute between or among the parties to this Agreement relating to
or in respect of this Agreement, its negotiation, execution,
performance, subject matter, or any course of conduct or dealing or
actions under or in respect of this Agreement, all claims under or
relating to any federal, state or local law or regulation prohibiting
discrimination, harassment or retaliation based on race, color,
religion, national origin, sex, age, disability or any other condition
or characteristic protected by law; demotion, discipline, termination
or other adverse action in violation of any contract, law or public
policy; entitlement to wages or other economic compensation; and any
claim for personal, emotional, physical, economic or other injury.
(c) This agreement to arbitrate does not apply to any legal action by FGI
seeking injunctive relief or damages for breach or enforcement of
Sections 16 or 18 of the Agreement. This agreement to arbitrate also
does not apply to any claims by Executive: (a) for workers'
compensation benefits; (b) for unemployment insurance benefits; (c)
under a benefit plan where the plan specifies a separate arbitration
procedure; (d) filed with an administrative agency which are not
legally subject to arbitration under this Agreement; or (e) which are
otherwise expressly prohibited by law from being subject to arbitration
under this Agreement.
(d) Any party may demand arbitration by sending notice to the other party
as set forth in this Agreement. Any Claim submitted to arbitration shall be
decided by a single, neutral arbitrator (the "Arbitrator"). The parties to the
arbitration shall mutually select the Arbitrator not later than 45 days after
service of the demand for arbitration. If the parties for any reason do not
mutually select the Arbitrator within the 45 day period, then any party may
apply to any court of competent jurisdiction to appoint a retired judge as the
Arbitrator. The parties agree that arbitration shall be conducted in accordance
with the American Arbitration Association Rules for the Resolution of Employment
Disputes. The Arbitrator shall apply the substantive federal, state, or local
law and statute of limitations governing any Claim submitted to arbitration. The
arbitration shall take place at a mutually agreeable site in Liberty or Kansas
City, Missouri and shall be conducted within one hundred eighty (180) days of
the receipt by a party of the other party's demand for arbitration. The
Arbitrator, in making his decision, shall be bound to follow the substantive
state and federal laws of jurisprudence as well as the applicable rules of
evidence in arriving at a decision. The decision rendered shall be in writing
and delivered to the parties within thirty (30) days after the conclusion of the
arbitration. The award of the Arbitrator shall be final, and judgment upon the
award rendered may be entered and enforced in any court, state or federal,
having jurisdiction. In ruling on any Claim submitted to arbitration, the
Arbitrator shall have the authority to award only such remedies or forms of
relief as are provided for under the substantive law governing such Claim.
(e) Any fees and costs incurred in the arbitration (e.g., filing fees,
transcript costs and Arbitrator's fees) will be shared equally by
Executive and FGI, except that the Arbitrator may reallocate such fees
among the parties if the Arbitrator determines that an equal allocation
would impose an unreasonable financial burden on Executive. The parties
shall be responsible for their own attorneys' fees and costs, except
that the Arbitrator shall have the authority to award attorneys' fees
and costs to the prevailing party in accordance with the applicable law
governing the dispute.
(f) The Arbitrator, and not any federal or state court, shall have the
exclusive authority to resolve any issue relating to the
interpretation, formation or enforceability of this Agreement, or any
issue relating to whether a Claim is subject to arbitration under this
Agreement, except that any party may bring an action in any court of
competent jurisdiction to compel arbitration in accordance with the
terms of this Agreement.
20. FGI's Right to Injunctive Relief, Tolling. In the event of a breach or
threatened breach of any of the Executive's duties and obligations under the
terms and provisions of Sections 16, 17 or 18 hereof, FGI shall be entitled, in
addition to any other legal or equitable remedies it may have in connection
therewith (including any right to damages that it may suffer), to temporary,
preliminary, and permanent injunctive relief restraining such breach or
threatened breach. The Executive hereby expressly acknowledges that the harm
which might result to the Business as a result of any noncompliance by the
Executive with any of the provisions of sections 16, 17 or 18 hereof would be
largely irreparable.
21. Judicial Enforcement. If any provision of this Agreement is adjudicated to
be invalid or unenforceable under applicable law in any jurisdiction, the
validity or enforceability of the remaining provisions thereof shall be
unaffected as to such jurisdiction and such adjudication shall not affect the
validity or enforceability of such provisions in any other jurisdiction. To the
extent that any provision of this Agreement is adjudicated to be invalid or
unenforceable because it is overbroad, that provision shall not be void but
rather shall be limited only to the extent required by applicable law and
enforced as so limited. The parties expressly acknowledge and agree that this
Section is reasonable in view of the parties' respective interests.
22. Executive Warranties and Representations. The Executive warrants and
represents that the execution and delivery of the Agreement and the Executive's
employment with FGI do not violate any previous employment agreement or other
contractual obligation of the Executive.
23. Survival. The provisions of this Agreement, except as otherwise provided
herein, shall continue in full force in accordance with their terms
notwithstanding any termination of Executive's employment by FGI.
24. Right to Recover Costs and Fees. The Executive and FGI undertake and agree
that if either the Executive or FGI breach or threaten to breach Sections 16 or
18 of this Agreement (the "Breaching Party"), the Breaching Party shall be
liable for any attorneys' fees and costs incurred by the non-Breaching Party in
enforcing the non-Breaching Party's rights hereunder.
25. Executive Right. If the Executive believes that any benefit on account of
the termination of the Executive's service with FGI under this Agreement has not
been paid by FGI within fifteen (15) days after the date on which that benefit
should have been paid to the Executive under the terms of this Agreement, the
Executive may give notice to FGI of that failure and the amount of the benefit
that should have been paid. FGI shall pay the Executive the amount specified in
that notice within thirty (30) days after its receipt of the notice; provided,
however, that the payment shall not preclude FGI from disputing that payment in
accordance with the arbitration provisions of this Agreement.
26. Entire Agreement, Amendments and Modifications. This Agreement constitutes
the entire agreement and understanding of the parties regarding the employment
of Executive by FGI and supersedes all prior agreements and understandings
between the Executive and FGI to the extent that any such agreements or
understandings conflict with the terms of this Agreement. The parties
specifically agree that the Option Grantee Agreement entered into between
Executive and Ferrellgas is hereby terminated. No modification, amendment or
waiver of any of the provisions of this Agreement shall be effective unless in
writing specifically referring hereto, and signed by the parties hereto.
27. Assignments. This Agreement shall be freely assignable by FGI to, and shall
inure to the benefit of and be binding upon, its successors and assigns and/or
any other entity which shall succeed to the business presently being conducted
by FGI or the Partnerships. In that regard, FGI shall assign and shall require
any successor, whether in a Change of Control transaction or not, of either of
the Companies or any of the Partnerships to expressly assume in writing FGI's
obligations under this Agreement simultaneously with the consummation of an
applicable transaction, which assumption shall not relieve FGI of any of its
obligations hereunder. Being a contract for personal services, neither this
Agreement nor any rights hereunder shall be assigned by the Executive; provided,
however that the rights and benefits hereunder shall inure to and be enforceable
by the Executive's estate, heirs, executors, administrators or legal guardians
or representatives.
28. Choice of Forum; Governing Law. In light of FGI's substantial contacts with
the State of Missouri, the parties' interests in ensuring that disputes
regarding the interpretation, validity, and enforceability of this Agreement are
resolved on a uniform basis, and FGI's execution of, and the making of, this
Agreement in Missouri, the parties agree that: (i) any litigation involving this
Agreement shall be filed and conducted in the state or federal courts in the
State of Missouri; and (ii) the Agreement shall be interpreted in accordance
with and governed by the laws of the State of Missouri, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
Missouri or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Missouri.
29. Headings and Interpretation. Section headings are provided in this Agreement
for convenience only and shall not be deemed to substantively alter the content
of such sections. Whenever the words "include", "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation". References to the singular or plural tense of a word shall
also include the plural or singular as the context may require.
30. Neutral Construction. Each party acknowledges that in the negotiation and
drafting of this Agreement, they have been represented by and relied upon the
advice of counsel of their choice. The parties affirm that they and their
counsel have had a substantial role in such negotiation and drafting of this
Agreement, and, therefore, the parties agree that this Agreement shall be deemed
to have been drafted by all the parties hereto and the rule of construction to
the effect that any contract ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of this Agreement or any
exhibit or schedule hereto.
31. Notices. Any notice, request, consent or communication (collectively, a
"Notice") under this Agreement shall be effective only if it is in writing and
(i) personally delivered with written receipt thereof, (ii) sent by certified or
registered mail, return receipt requested, postage prepaid or (iii) sent by a
nationally recognized overnight delivery service, with delivery confirmed,
addressed as follows (or at such other address for a party as shall be specified
by like notice):
(a) If to the Executive, to: Boyd H. McGathey
[Address]
(b) with a copy to: Bryan Cave LLP
One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105
Attn: Beth Romans Bower
(c) If to FGI, to: Ferrellgas, Inc.
One Liberty Plaza
Liberty, Missouri 64068
Attention: Mr. Danley K. Sheldon
A Notice shall be deemed to have been given as of the date
when (i) personally delivered as indicated by date of receipt, (ii) five (5)
days after the date when deposited with the United States certified mail, return
receipt requested, properly addressed, or (iii) when receipt of a Notice sent by
an overnight delivery service is confirmed by such overnight delivery service,
as the case may be, unless the sending party has actual knowledge that a Notice
was not received by the intended recipient.
32. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and together shall constitute one and
the same Agreement.
(The remainder of this page has been left
blank intentionally.)
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the day and year first above written.
FERRELLGAS, INC. EXECUTIVE
By:________________
Name:______________ Boyd H. McGathey
Title:_____________
PLEASE NOTE: BY SIGNING THIS AGREEMENT, EXECUTIVE IS HEREBY CERTIFYING THAT
EXECUTIVE (A) HAS RECEIVED A COPY OF THIS AGREEMENT FOR REVIEW AND STUDY BEFORE
EXECUTING IT; (B) HAS READ THIS AGREEMENT CAREFULLY BEFORE SIGNING IT; (C)
UNDERSTANDS THAT THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION; (D)
HAS HAD SUFFICIENT OPPORTUNITY BEFORE SIGNING THE AGREEMENT TO ASK ANY QUESTIONS
EXECUTIVE HAS ABOUT THE AGREEMENT AND HAS RECEIVED SATISFACTORY ANSWERS TO ALL
SUCH QUESTIONS; AND (E) UNDERSTANDS EXECUTIVE'S RIGHTS AND OBLIGATIONS UNDER THE
AGREEMENT.
EMPLOYMENT, CONFIDENTIALITY, AND NONCOMPETE AGREEMENT
This Employment, Confidentiality, and Noncompete Agreement
("Agreement") is made and entered into this ____ day of ____________, 2000 by
and between Ferrellgas, Inc., a Delaware corporation ("FGI") and Kevin T. Kelly
(the "Executive").
WHEREAS, FGI serves as the general partner of Ferrellgas
Partners, L.P., a Delaware limited partnership ("Ferrellgas Partners") and
Ferrellgas, L.P., a Delaware limited partnership ("Ferrellgas", and referred to
herein jointly and severally with Ferrellgas Partners as the "Partnership" or
"Partnerships" as the context so requires), which are engaged primarily in the
sale, distribution and marketing of propane and other natural gas liquids (the
"Business").
WHEREAS, FGI, through the Partnerships, conducts the Business
throughout the United States.
WHEREAS, FGI, through the Partnerships, has expended a great
deal of time, money, and effort to develop and maintain proprietary Confidential
Information (as defined below) which, if misused or disclosed, could be harmful
to the Business.
WHEREAS, the success of FGI depends to a substantial extent
upon the protection of the Confidential Information and customer goodwill by all
of its employees and the employees of the Partnerships.
WHEREAS, the Executive desires to be employed by FGI and
Ferrell Companies, Inc., a Kansas corporation, as Vice President and Chief
Financial Officer.
WHEREAS, the Executive desires to be eligible for other
opportunities within FGI and/or compensation increases which otherwise would not
be available to the Executive and to be given access to Confidential
Information, of FGI and the Partnerships which is necessary for the Executive to
perform his duties, but which FGI would not make available to the Executive but
for the Executive's signing and agreeing to abide by the terms of this Agreement
as a condition of the Executive's employment and continued employment with FGI.
WHEREAS, the Executive recognizes and acknowledges that the
Executive's position with FGI has provided and/or will continue to provide the
Executive with access to Confidential Information of FGI and the Partnerships.
NOW, THEREFORE, in consideration of the compensation and other
benefits of the Executive's employment by FGI and the recitals, mutual covenants
and agreements hereinbefore and hereinafter set forth, the Executive and FGI
agree as follows:
1. Term. The Executive is hereby employed by FGI, and the Executive hereby
accepts such employment upon the terms and conditions set forth herein. The
Executive's term of employment under this Agreement shall be for a period of
three (3) years, commencing on July 24, 2000, and shall continue for a period
through and including July 24, 2003 (the "Initial Period"), unless earlier
terminated pursuant to the terms and conditions of this Agreement.
Notwithstanding anything herein to the contrary, this Agreement and the term of
employment, unless either FGI or the Executive provides six (6) months written
notice to the other party hereto that the Agreement shall not renew upon
expiration of the then current employment period and, subject to Sections 8 and
9, shall be automatically renewed for one year successive periods following the
Initial Period (each a "Successive Period" and together with the Initial Period,
the "Employment Period").
2. Duties and Responsibilities. During the Employment Period, the Executive
shall be employed as Vice President and Chief Financial Officer of FGI, with
such duties and responsibilities as are customarily incident to such offices.
The precise services of the Executive may be extended or curtailed at the
discretion of FGI, so long as after such extension or curtailment, the duties of
the Executive are consistent with the duties normally attendant to the aforesaid
offices. The Executive will perform his duties in a diligent, trustworthy,
loyal, and business-like manner, all for the purpose of advancing the Business.
3. Performance of Services. During the Employment Period, the Executive shall
devote his primary time, attention and energies to the Business and shall not
during such time be substantially engaged in any other business activity whether
or not such business activity is pursued for gain, profit, or other pecuniary
advantage; provided, however, that nothing herein shall be construed as
preventing the Executive (i) from being involved in civic, philanthropic or
community service activities, from participating in other businesses and
receiving compensation therefore, to the extent that such involvement and
participation does not involve management or participation in day-to-day
activities thereof and does not detract from the performance by the Executive of
his duties to FGI pursuant hereto; provided, further, that at the request of the
Chief Executive Officer of FGI, the Executive shall disclose such involvement
therein, or (ii) from investing his assets in such form or manner as will not
require any appreciable services on the part of the Executive in the operation
of the affairs of any entity in which such investments are made, so long as such
activities do not substantially interfere or conflict with the Executive's
discharge of his duties and responsibilities hereunder. The Executive agrees to
follow and act in accordance with all of the rules, policies, and procedures of
FGI.
4. Compensation.
(a) During the Employment Period, Executive's base salary shall be not less
than $180,000 per year ("Base Salary"), payable in regular installments
in accordance with FGI's usual payroll practices and subject to review
and increase consistent with practices of FGI in effect from time to
time during the Employment Period, but shall not be reduced.
Executive's Base Salary shall be reviewed annually by the Chief
Executive Officer of FGI with the advice and consent of the
compensation committee.
(b) Annual Bonus. Executive may be eligible for an annual bonus based on a
target bonus of 50% of base pay. The terms of any such annual bonus
plan shall be at the discretion of the Board of Directors of FGI;
however, the terms of such plan, if any, shall be committed to by FGI,
in writing, within 30 days after the beginning of each fiscal year.
5. Benefit Plans. During the Employment Period and as otherwise provided herein,
the Executive shall be entitled to participate in any and all employee welfare
and health benefit plans (including, but not limited to life insurance, health
and medical, dental, and disability plans) and other employee benefit plans
(including, but not limited to qualified pension plans and Ferrell Companies,
Inc. ("FCI") stock incentive plans), established by FGI and FCI from time to
time for the benefit of executive employees of FGI and FCI. The Executive shall
be required to comply with the conditions attendant to participation in and
coverage by such plans and shall comply with and, except as otherwise provided
herein, shall be entitled to benefits only in accordance with the terms and
conditions of such plans as they may be amended from time to time. Nothing
herein contained shall be construed as requiring FGI to establish or continue
any particular benefit plan in discharge of its obligations under this
Agreement.
6. Other Benefits and Reimbursements.
(a) During the Employment Period, the Executive shall be entitled to not
less than four (4) weeks of paid vacation each year of his employment
hereunder, which shall accumulate if not used in any given year.
Pursuant to the provisions of this Agreement, vacation time earned but
unused shall be paid to the Executive upon termination of this
Agreement.
(b) During the Employment Period, the Executive shall be entitled to such
other employment benefits extended or provided to other key executives
of FGI, including, but not limited to, payment or reimbursement of all
business expenses incurred by the Executive in the performance of his
duties and other job related activities set forth in this Agreement or
subsequently agreed to by the parties and in the promotion of the
Business in accordance with FGI customary policies and procedures. The
Executive shall submit to FGI periodic statements of all expenses so
incurred. Subject to such audits as FGI may deem necessary, FGI shall
reimburse the Executive the full amount of any such expenses advanced
by him in the ordinary course of business.
7. Deductions from Salary and Benefits. FGI shall withhold from any
compensation, bonus or benefits payable to the Executive all customary federal,
state, local and other withholdings, including, without limitation, federal and
state withholding taxes, social security taxes and state disability insurance.
8. Termination by FGI. FGI may terminate Executive's employment under this
Agreement upon at least sixty (60) calendar days ("Notice Period") written
notice ("Notice") to the Executive of its intent to terminate Executive's
employment:
(a) without Cause (as defined in subsection 8(b) below). The Notice shall
specify that such Termination is without Cause, and upon the expiration of the
Notice Period, FGI shall, on the condition that Executive executes a general
release of claims on terms customarily and normally used by FGI at the time, (i)
pay the Executive in a lump sum an amount equal to twice his then current Base
Salary, and (ii) provide to the Executive medical insurance, on the same basis
on which he is receiving such insurance at the time of termination, for a period
ending the earlier of two (2) years from the date of termination of this
Agreement or the date Executive is covered by another medical plan at a cost to
the Executive equal to the amount that would have been charged to the Executive
in accordance with the terms of this Agreement (the payment or provision of the
items in this Section 8(a) are referred to in this Agreement as the "Executive
Payments");
(b) for Cause (as defined below). The Notice shall specify the particulars
of such Cause and shall afford the Executive an opportunity to discuss the
particulars of such Cause with the Chief Executive Officer of FGI and to cure
such Cause. If such Cause shall not be cured accordingly, Executive's employment
shall terminate upon expiration of the Notice Period and no compensation shall
be due to the Executive beyond the date of such termination (other than pursuant
to pension or other plans which by their terms provide payments beyond the date
of termination in such circumstances, including but not limited to, the Ferrell
Companies Inc. Employee Stock Ownership Plan, FGI's non-qualified deferred
compensation plan, the FCI Nonqualified Stock Option Agreement and vacation
earned but not taken ("collectively, the "FGI Benefit Plans")). For purposes of
this Agreement "Cause" means: (i) the conviction of Executive by a court of
competent jurisdiction of, or entry ----- of a plea of nolo contendere with
respect to, a felony or any other crime, which other crime involves fraud,
dishonesty or ---- ---------- moral turpitude which materially interferes with
the performance of Executive's duties, responsibilities or obligations under
this Agreement; (ii) fraud or embezzlement related to FGI or the Partnerships on
the part of Executive; (iii) Executive's chronic abuse of or dependency on
alcohol or drugs (illicit or otherwise) which materially interferes with the
performance of Executive's duties, responsibilities or obligations under this
Agreement; (iv) the material breach by Executive of any of Sections 16, 17 or 18
hereof, except as permitted pursuant to Section 12 hereof; (v) any act of moral
turpitude or willful misconduct by Executive which (A) results in substantial
personal enrichment of the Executive at the expense of FGI or the Partnerships,
or (B) is reasonably expected to have a material adverse impact on the Business
or reputation of FGI; (vi) gross and willful neglect of material duties and
responsibilities of the Executive pursuant hereto, or an intentional violation
of a material term of this Agreement; or (vii) any material violation of any
statutory or common law fiduciary duty of Executive to FGI or the Partnerships;
or (viii) willful failure by the Executive to comply with a material FGI policy,
which results in a material, adverse impact on the Business, as reasonably
determined by the Chief Executive Officer of FGI, or (ix) repeated gross
insubordination.
9. Termination by the Executive. The Executive may terminate his employment
under this Agreement upon at least thirty (30) calendar days' ("Executive Notice
Period") written notice ("Executive Notice") to FGI of such termination:
(a) without Executive Cause (as defined below), upon expiration of the
Executive Notice Period, in which event no compensation shall be due
him beyond the date of such termination other than pursuant to the FGI
Benefit Plans; or
(b) for Executive Cause. The Executive Notice shall specify the particulars
of such Executive Cause and during the Executive Notice Period, the Executive
shall afford the Chief Executive Officer an opportunity to discuss the
particulars of such Executive Cause with the Executive and to cure such
Executive Cause to the satisfaction of the Executive during the Executive Notice
Period. If such Executive Cause shall not be cured accordingly, Executive's
employment shall terminate upon expiration of the Executive Notice Period. In
all events, Executive shall be paid all payments and benefits due him during the
Employment Period, and FGI shall pay the Executive in a lump sum or provide to
the Executive, as applicable, the Executive Payments on the condition that
Executive executes a general release of claims on terms customarily and normally
used by FGI at the time. "Executive Cause" means any of the following to which
the Executive does not agree: (i) assignment --------------- to the Executive of
duties or responsibilities, or the material diminution of duties or
responsibilities, that are inconsistent with his position, duties,
responsibilities or status as they exist at the commencement of the term of this
Agreement; (ii) material change in the reporting responsibilities of the
Executive; provided, however, that, notwithstanding the effect of changes on the
Board under Section 12 hereof, changes in the identity of persons on the Board
shall not be considered a change in reporting responsibilities for purposes of
this Section, (iii) relocation of the Executive's physical office or of FGI's
corporate offices to a site beyond a fifty (50) mile radius of its current
location of One Liberty Plaza, Liberty, Missouri; (iv) failure by any of FGI's
successors in interest to assume this Agreement in writing simultaneously with
becoming a successor in interest; (v) failure of FGI to maintain Director's and
Officer's insurance; or, (vi) a breach of any provision of this Agreement by
FGI.
10. Nondisparagement. During the term of this Agreement and for a period of two
(2) years after it is terminated, for whatever reason, Executive agrees that he
will not make any statements or provide any information that would tend to
disparage, defame or denigrate FGI, its affiliates, related entities and any of
its or their former or current officers, directors, agents or employees.
11. Cooperation. In the event that FGI or any of its affiliates becomes involved
in any civil or criminal litigation, administrative proceeding or governmental
investigation, Executive shall, upon request, provide reasonable cooperation and
assistance to FGI, including without limitation, furnishing relevant
information, attending meetings and providing statements and testimony. FGI will
reimburse Executive for all reasonable and necessary expenses he incurs in
complying with this Section 11. In addition, at any time more than two (2) years
after the termination of this Agreement for any reason, Executive need not
comply with this Section 11 unless FGI has agreed in writing to reimburse
Executive's employer, if applicable, or to reimburse Executive if self-employed,
for Executive's time at a rate agreed to by the applicable parties.
12. Effect of Certain Transactions; Change in Control.
(a) In the event of a Change in Control (as hereinafter defined) FGI shall
pay the Executive, not later than thirty (30) calendar days after such Change in
Control, a lump cash sum equal to the greater of (A) two and one-half (2.5)
times 125% of his then current Base Salary, or (B) two and one-half (2.5) times
the average actual cash compensation (including, but not limited to, bonuses)
paid for the prior three (3) fiscal years prior to such Change in Control. Such
payment shall reduce any lump sum Executive Payments payable to the Executive
under Sections 8 or 9. In addition, if the Executive's employment is terminated
pursuant to Section 8(a) or 9(b) within eighteen (18) months after such Change
in Control, (i) FGI shall pay the Executive for any vacation earned by the
Executive but not taken and any other amounts earned but unpaid, (ii) FGI shall
pay the Executive a pro rata portion (such proration shall be on the basis that
the number of months of his employment during FGI's then current fiscal year
bears to the number 12, considering the month of termination as a month of full
employment, and in the case of any plan measured over a full year, such
determination and payment shall be made after the close of such year of any
amounts to which he would have otherwise been entitled under any Company
perquisite to which Executive is a participant (excluding any bonus), and (iii)
FGI shall continue the Executive's health, accident and life insurance benefits
at FGI's cost on the same basis on which he is receiving such benefits at the
time of termination, until the earlier of the COBRA period of eighteen (18)
months after the month in which such termination occurs or Executive obtains
coverage under another plan or comparable coverage. For purposes of calculating
any bonus to be paid to the Executive pursuant to this Section 12, the Executive
shall be entitled to the payment of any bonus normally calculated with reference
to a future period based upon the total amount paid for such bonus in the three
(3) previous fiscal years.
(b) For purposes of this Agreement a "Change In Control" shall be deemed to
occur if:
(i) FGI or FCI (FGI and FCI will hereinafter be jointly and
severally referred to as "Company" or the "Companies" as the
context so requires) or either Partnership merges with or is
consolidated into another corporation or other entity not
theretofore affiliated with either Company or Partnership
(i.e., controlled by, controlling or under common control with
the Companies or the Partnerships, as applicable) and the
Company or Partnership so merging or consolidating is not the
surviving entity pursuant to such merger or consolidation
(other than a transaction in which the persons who were the
equity owners of the Company or Partnership so merging own
more than 50% of the surviving entity);
(ii) All or substantially all of the assets of either Company or
Partnership are acquired by another corporation or other
entity not theretofore affiliated with either Company or
Partnership in a single transaction or a series of related
transactions, and a majority of the then current Board of
Directors of neither Company does not control the entity that
has made such acquisition;
(iii) There is consummated any transaction or series of transactions
or any event or series of events, the result of which is that
FGI is no longer the sole general partner of either
Partnership;
(iv) There is consummated any transaction or series of transactions
or any event or series of events, the result of which is that
the Board of FGI does not have control of the affairs of
either Partnership;
(v) There is consummated a purchase or other acquisition by any
persons, entity or group of persons, within the meaning of
Section 13(d) or 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (excluding, for this purpose,
either Company or its subsidiaries or any employee benefit
plan of either Company or its subsidiaries), of the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 50% or more of either the
then-outstanding equity securities of either Company or
Partnership or the combined voting power of either Company's
or Partnership's then-outstanding voting securities;
(vi) Individuals who, as of the date hereof, constitute the Board of either
Company (as the date hereof, the "Incumbent Boards") cease for any reason to
constitute at least a majority of the Boards, provided that any person who
becomes a director subsequent to the date hereof whose election, or nomination
for election by either Company's equity owners, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board (other
than an individual whose initial assumption of office is in connection with an
actual or threatened election contest relating to the election of directors of
either Company, as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) shall be, for purposes of this section,
considered as though such person were a member of the applicable Incumbent
Board;
(vii) There is consummated a reorganization, merger or
consolidation, in each case with respect to which persons who
were the equity holders of either Company or Partnership
immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own more than
50% of, respectively, the equity securities and the combined
voting power entitled to vote generally in the elections of
directors or managers of the reorganized, merged or
consolidated entity's then-outstanding voting securities;
(viii) There is a liquidation or dissolution of either Company or
Partnership (other than a liquidation or dissolution where the
equity owners of the surviving Company or Partnership do not
change) or of the sale of all or substantially all of the
assets of either Company or Partnership;
(ix) There is consummated a public sale of a "material" amount of
FCI's equity (with materiality being determined by the
Committee administering the Ferrell Companies Inc. Employee
Stock Ownership Trust ("ESOT"), but with a material amount of
such equity being at least 50% thereof).
13. Mitigation or Reduction of Benefits. Executive shall not be required to
mitigate or reduce the amount of any payment upon termination provided for
herein by seeking other employment or otherwise nor, except as otherwise
specifically set forth herein, shall the amount of any payment or benefits
provided upon termination be reduced by any compensation or other amounts paid
to or earned by Executive as the result of employment by another employer after
such termination or otherwise.
14. Certain Additional Payments by FGI.
(a) Notwithstanding anything in this Agreement to the contrary and except
as set forth below, in the event it shall be determined that any payment,
benefit or distribution (or contribution thereof) from FGI, any affiliate, or
trusts established by FGI or by any affiliate, for the benefit of its employees,
to the Executive or for the Executive's benefit (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section, and with a "Payment" including, without limitation, the
vesting of an option or other non-cash benefit or property) (any of which are
referred to as a "Payment") would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or
- ---- any interest or penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then the
Executive shall be ---------- entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Executive of
- ---------------- all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the sum of (i) the Excise Tax imposed upon the Payments; plus (ii) an
amount equal to the product of any deductions disallowed to Executive for
federal, state, or local income tax purposes solely because of the inclusion of
the Gross-up Payment in the Executive's adjusted gross income multiplied by the
highest applicable marginal rate of federal, state, or local income taxation,
respectively, for the calendar year in which the Gross-up Payment is to be made.
(b) Subject to the provisions of Section 14(c), all determinations required
to be made under this Section 14, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by a nationally
recognized certified public accounting firm as may be designated by the
Executive (the "Accounting Firm") which shall provide detailed supporting
calculations both to FGI and the --------------- Executive within fifteen (15)
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by FGI. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting a Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by FGI. Any Gross-Up Payment, as determined pursuant to this Section 14,
shall be paid by FGI to the Executive within five (5) calendar days of the
receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon FGI and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by FGI should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that ------------ FGI exhausts its remedies pursuant to
Section 14(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by FGI to or
for the benefit of the Executive.
(c) The Executive shall notify FGI in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by FGI
of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than thirty (30) business days after the
Executive is informed in writing of such claim and shall apprise FGI of
the nature of such claim and the date on which such claim is requested
to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which the
Executive gives such notice to FGI (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due).
If FGI notifies the Executive in writing prior to the expiration of
such period that it desires to contest such claim, the Executive shall:
(i) give FGI any information reasonably requested by FGI relating to such
claim,
(ii) take such action in connection with contesting such claim as
FGI shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected
by FGI,
(iii) cooperate with FGI in good faith in order to effectively contest such
claim, and
(iv) permit FGI to participate in any proceedings relating to such claim;
provided, however, that FGI shall bear and pay directly all costs and
expenses (including attorneys' fees and costs and additional interest
and penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis, for
any Excise Tax or income tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment
of costs and expenses. Without limitation on the foregoing provisions
of this Section 14(c), FGI shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may,
at its sole option, either direct the Executive to pay the tax claimed
and sue for a refund or contest the claim in any permissible manner,
and the Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial jurisdiction
and in one or more appellate courts, as FGI shall determine; provided,
however, that if FGI directs the Executive to pay such claim and sue
for a refund, FGI shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, FGI's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
If, after the receipt by the Executive of an amount
advanced by FGI pursuant to Section 14(c), the Executive becomes
entitled to receive any refund with respect to such claim, the
Executive shall (subject to FGI's complying with the requirements of
Section 14(c)) promptly pay to FGI the amount of such refund (together
with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced
by FGI pursuant to Section 14(c), a determination is made that the
Executive shall not be entitled to any refund with respect to such
claim and FGI does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of thirty (30)
calendar days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
15. Indemnification. Executive has executed on _______________ a
Director/Officer Indemnification Agreement which agreement controls the terms of
indemnification between the parties.
16. Confidential Information.
(a) In connection with Executive's employment, FGI will disclose and/or has
disclosed to Executive certain Confidential Information (defined
below). The Confidential Information is not generally known to others
and could have economic value if disclosed to others and/or used by
Executive, directly or indirectly, in competition with FGI or the
Partnerships. Further, Executive will in the future participate in the
development of, have access to, or use in performing Executive's
employment duties, some or all of the Confidential Information. FGI
makes reasonable efforts to keep its Confidential Information secret
and confidential, and Executive has a duty to keep it secret and
confidential.
(b) Executive may have significant contacts with the customers and accounts
of FGI and/or be provided with FGI's confidential customer and
customer-related information, including various customer lists,
analyses, and summaries. These contacts and/or this information could
enable Executive, at FGI's expense, to have access to and establish
favorable relations with, and put Executive in a position to influence,
FGI's customers and accounts.
(c) FGI's customer lists and customer information are trade secrets, and
this Agreement is intended, among other things, to protect FGI's trade
secrets, customer relationships, customer goodwill and other business
interests.
(d) The Executive will not use or reveal Confidential Information to anyone
other than for on or behalf of FGI both during and after Executive's
employment.
(e) Executive shall keep all Confidential Information secret and confidential.
(f) Executive shall return to FGI all Confidential Information and all
property of FGI immediately upon termination of Executive's employment
for any reason and also at any time upon FGI's request.
(g) "Confidential Information" shall mean: (i) Company Information (as
defined below); (ii) Customer Information (as defined below); and (iii) all
other information, whether or not reduced to writing, relating to the
Partnerships, the Business or FGI's customers which gives FGI an advantage over
competitors who do not know or use it, have not compiled the information
themselves, or is otherwise not generally known in the industry, including, but
not limited to, trade secrets, proprietary information, customer lists, route
books, inventions, computer programs and software, and including information
conceived, originated, or developed by Executive. Confidential Information
includes, but is not limited to, originals and copies of all materials
containing such information, regardless of the media used to record such
information, including but not limited to computers, computer disks, CD ROMS, or
other electronic media, microfiche or microfilm.
(h) "Company Information" shall mean: Information that FGI, the Companies
or the Partnerships have developed, acquired, organized, compiled or
maintained regarding FGI's products, services, processes, methods,
operations, proposals, projects, contracts, bids, pricing, costs,
profitability, marketing plans and strategies, revenues and finances to
the extent not subject to public disclosure requirements, business
relationships, correspondence, and other matters related to FGI's
development and operation of the Business.
(i) "Customer Information" shall mean: Information that FGI or the
Partnerships have developed, acquired, organized, compiled, or
maintained by FGI regarding FGI's customers, former customers and
prospective customers while developing and operating the Business,
including, but not limited to, information relating to their identity,
location, personnel, usage of petroleum products, and incidental or
related appliances, equipment and supplies, purchasing experience,
delivery schedules and routing, payment habits, credit experience,
ownership of storage facilities, contract renewal and expiration dates,
pricing, and other terms and conditions contained in their contracts
with FGI or its predecessors.
17. Inventions and Patents. Executive agrees that all inventions, innovations,
improvements, developments, methods, designs, analyses, drawings, reports, and
all similar or related information which relates to the Companies' actual or
anticipated business (to the extent the Executive is aware thereof), research
and development or existing or future products or services and which are
conceived, developed or made by Executive while employed by FGI or any of its
affiliates (whether prior to or during the Employment Period) ("Work Product")
belong to FGI or such other affiliate, and Executive hereby assigns to FGI his
entire right, title and interest in any such Work Product. Executive will
promptly disclose such Work Product to the Chief Executive Officer of FGI and
perform all actions reasonably requested by the Chief Executive Officer of FGI
(whether during or after Executive's Employment Period) to establish and confirm
such ownership (including, without limitation, assignments, consents, powers of
attorney and other instruments).
18. Noncompete; Nonsolicitation.
(a) Executive acknowledges that in the course of his employment with FGI he
will become familiar with Confidential Information and that his services will be
of special, unique and extraordinary value to FGI. Therefore, Executive agrees
that, during the time he is employed by FGI pursuant hereto and for two (2)
years thereafter (the "Noncompete Period"), in the entire -----------------
United States and any other countries in which the Companies or Partnerships are
providing, or actively planning to provide goods and services, he will not: (i)
compete with the Companies or the Partnerships in the sale of propane or related
competitive products or services; (ii) directly or indirectly, in person or
through others, for the benefit of Executive or another, call upon, solicit,
sell, divert, take away, deliver to, accept business or orders from or otherwise
engage in propane-related business with FGI's Customers (as defined below), nor
shall Executive, in any capacity, assist others to do so; or (iii) directly or
indirectly interfere with the business relationship between FGI and any FGI
Customers. The restrictions in this paragraph apply only to products and
services that are competitive with the Business and/or products and services of
FGI.
(b) While employed by FGI and for two (2) years thereafter, Executive will
not (i) interfere with, disrupt, or attempt to disrupt relations,
contractual or otherwise, between FGI and its employees, vendors or
suppliers, or (ii) hire or take away, directly or indirectly, any FGI
employee.
(c) "Customers" shall mean: (i) all persons, firms, corporations, and other
business enterprises for whom FGI performs or performed services or to
whom FGI sells or sold products, appliances, equipment, or supplies
during the two year period immediately prior to the termination of
Executive's employment; and (ii) all persons, corporations, and other
business enterprises actively solicited by FGI or to whom FGI has
furnished a quotation or proposal or estimate for the sale of products
or services within the one year period immediately prior to the
termination of Executive's employment. Customers of FGI shall include,
but not be limited to, those for whom either Executive or anyone under
Executive's supervision provided products or services and those who may
have become customers through the efforts of Executive while employed
by FGI.
(d) FGI and Executive agree that: (i) the covenants set forth in Sections
16 and 18 are reasonable in geographical and temporal scope and in all
other respects, (ii) FGI would not have entered into this Agreement but
for these covenants of Executive contained herein, and (iii) these
covenants contained herein have been made in order to induce FGI to
enter into this Agreement.
(e) If, at the time of enforcement of this Section 18, a court or arbiter
shall hold that the duration, scope or area restrictions stated herein
are unreasonable under circumstances then existing, the parties agree
that the maximum duration, scope or area reasonable under such
circumstances shall be substituted for the stated duration, scope or
area and that the court or arbitrator shall be allowed to revise the
restrictions contained herein to cover the maximum period, scope and
area permitted by law.
(f) FGI does not have to enforce all provisions of Sections 16 and 18 of
this Agreement at all times to preserve its rights to enforce any other
provision of Sections 16 and 18 of this Agreement. Executive also
acknowledges FGI does not have to enforce similar agreements with other
employees and/or officers to preserve its rights to enforce Sections 16
and 18 of this Agreement with Executive.
(g) Executive shall provide a copy of this Agreement to any new or
potential employer which competes against the Companies or the
Partnerships.
19. Arbitration.
(a) Except as set forth in Section 19(c), arbitration shall be the sole and
exclusive remedy for any dispute, claim, or controversy of any kind or
nature (a "Claim") arising out of, related to, or connected with
Executive's employment relationship with FGI, or the termination of
Executive's employment relationship with FGI, including any Claim
against any parent, subsidiary, or affiliated entity of FGI, or any
director, officer, general or limited partner, employee or agent of FGI
or of any such parent, subsidiary or affiliated entity.
(b) This agreement to arbitrate specifically includes (without limitation)
any dispute between or among the parties to this Agreement relating to
or in respect of this Agreement, its negotiation, execution,
performance, subject matter, or any course of conduct or dealing or
actions under or in respect of this Agreement, all claims under or
relating to any federal, state or local law or regulation prohibiting
discrimination, harassment or retaliation based on race, color,
religion, national origin, sex, age, disability or any other condition
or characteristic protected by law; demotion, discipline, termination
or other adverse action in violation of any contract, law or public
policy; entitlement to wages or other economic compensation; and any
claim for personal, emotional, physical, economic or other injury.
(c) This agreement to arbitrate does not apply to any legal action by FGI
seeking injunctive relief or damages for breach or enforcement of
Sections 16 or 18 of the Agreement. This agreement to arbitrate also
does not apply to any claims by Executive: (a) for workers'
compensation benefits; (b) for unemployment insurance benefits; (c)
under a benefit plan where the plan specifies a separate arbitration
procedure; (d) filed with an administrative agency which are not
legally subject to arbitration under this Agreement; or (e) which are
otherwise expressly prohibited by law from being subject to arbitration
under this Agreement.
(d) Any party may demand arbitration by sending notice to the other party
as set forth in this Agreement. Any Claim submitted to arbitration shall be
decided by a single, neutral arbitrator (the "Arbitrator"). The parties to the
arbitration shall mutually select the Arbitrator not later than 45 days after
service of the demand for arbitration. If the parties for any reason do not
mutually select the Arbitrator within the 45 day period, then any party may
apply to any court of competent jurisdiction to appoint a retired judge as the
Arbitrator. The parties agree that arbitration shall be conducted in accordance
with the American Arbitration Association Rules for the Resolution of Employment
Disputes. The Arbitrator shall apply the substantive federal, state, or local
law and statute of limitations governing any Claim submitted to arbitration. The
arbitration shall take place at a mutually agreeable site in Liberty or Kansas
City, Missouri and shall be conducted within one hundred eighty (180) days of
the receipt by a party of the other party's demand for arbitration. The
Arbitrator, in making his decision, shall be bound to follow the substantive
state and federal laws of jurisprudence as well as the applicable rules of
evidence in arriving at a decision. The decision rendered shall be in writing
and delivered to the parties within thirty (30) days after the conclusion of the
arbitration. The award of the Arbitrator shall be final, and judgment upon the
award rendered may be entered and enforced in any court, state or federal,
having jurisdiction. In ruling on any Claim submitted to arbitration, the
Arbitrator shall have the authority to award only such remedies or forms of
relief as are provided for under the substantive law governing such Claim.
(e) Any fees and costs incurred in the arbitration (e.g., filing fees,
transcript costs and Arbitrator's fees) will be shared equally by
Executive and FGI, except that the Arbitrator may reallocate such fees
among the parties if the Arbitrator determines that an equal allocation
would impose an unreasonable financial burden on Executive. The parties
shall be responsible for their own attorneys' fees and costs, except
that the Arbitrator shall have the authority to award attorneys' fees
and costs to the prevailing party in accordance with the applicable law
governing the dispute.
(f) The Arbitrator, and not any federal or state court, shall have the
exclusive authority to resolve any issue relating to the
interpretation, formation or enforceability of this Agreement, or any
issue relating to whether a Claim is subject to arbitration under this
Agreement, except that any party may bring an action in any court of
competent jurisdiction to compel arbitration in accordance with the
terms of this Agreement.
20. FGI's Right to Injunctive Relief, Tolling. In the event of a breach or
threatened breach of any of the Executive's duties and obligations under the
terms and provisions of Sections 16, 17 or 18 hereof, FGI shall be entitled, in
addition to any other legal or equitable remedies it may have in connection
therewith (including any right to damages that it may suffer), to temporary,
preliminary, and permanent injunctive relief restraining such breach or
threatened breach. The Executive hereby expressly acknowledges that the harm
which might result to the Business as a result of any noncompliance by the
Executive with any of the provisions of sections 16, 17 or 18 hereof would be
largely irreparable.
21. Judicial Enforcement. If any provision of this Agreement is adjudicated to
be invalid or unenforceable under applicable law in any jurisdiction, the
validity or enforceability of the remaining provisions thereof shall be
unaffected as to such jurisdiction and such adjudication shall not affect the
validity or enforceability of such provisions in any other jurisdiction. To the
extent that any provision of this Agreement is adjudicated to be invalid or
unenforceable because it is overbroad, that provision shall not be void but
rather shall be limited only to the extent required by applicable law and
enforced as so limited. The parties expressly acknowledge and agree that this
Section is reasonable in view of the parties' respective interests.
22. Executive Warranties and Representations. The Executive warrants and
represents that the execution and delivery of the Agreement and the Executive's
employment with FGI do not violate any previous employment agreement or other
contractual obligation of the Executive.
23. Survival. The provisions of this Agreement, except as otherwise provided
herein, shall continue in full force in accordance with their terms
notwithstanding any termination of Executive's employment by FGI.
24. Right to Recover Costs and Fees. The Executive and FGI undertake and agree
that if either the Executive or FGI breach or threaten to breach Sections 16 or
18 of this Agreement (the "Breaching Party"), the Breaching Party shall be
liable for any attorneys' fees and costs incurred by the non-Breaching Party in
enforcing the non-Breaching Party's rights hereunder.
25. Executive Right. If the Executive believes that any benefit on account of
the termination of the Executive's service with FGI under this Agreement has not
been paid by FGI within fifteen (15) days after the date on which that benefit
should have been paid to the Executive under the terms of this Agreement, the
Executive may give notice to FGI of that failure and the amount of the benefit
that should have been paid. FGI shall pay the Executive the amount specified in
that notice within thirty (30) days after its receipt of the notice; provided,
however, that the payment shall not preclude FGI from disputing that payment in
accordance with the arbitration provisions of this Agreement.
26. Entire Agreement, Amendments and Modifications. This Agreement constitutes
the entire agreement and understanding of the parties regarding the employment
of Executive by FGI and supersedes all prior agreements and understandings
between the Executive and FGI to the extent that any such agreements or
understandings conflict with the terms of this Agreement. The parties
specifically agree that the Option Grantee Agreement entered into between
Executive and Ferrellgas is hereby terminated. No modification, amendment or
waiver of any of the provisions of this Agreement shall be effective unless in
writing specifically referring hereto, and signed by the parties hereto.
27. Assignments. This Agreement shall be freely assignable by FGI to, and shall
inure to the benefit of and be binding upon, its successors and assigns and/or
any other entity which shall succeed to the business presently being conducted
by FGI or the Partnerships. In that regard, FGI shall assign and shall require
any successor, whether in a Change of Control transaction or not, of either of
the Companies or any of the Partnerships to expressly assume in writing FGI's
obligations under this Agreement simultaneously with the consummation of an
applicable transaction, which assumption shall not relieve FGI of any of its
obligations hereunder. Being a contract for personal services, neither this
Agreement nor any rights hereunder shall be assigned by the Executive; provided,
however that the rights and benefits hereunder shall inure to and be enforceable
by the Executive's estate, heirs, executors, administrators or legal guardians
or representatives.
28. Choice of Forum; Governing Law. In light of FGI's substantial contacts with
the State of Missouri, the parties' interests in ensuring that disputes
regarding the interpretation, validity, and enforceability of this Agreement are
resolved on a uniform basis, and FGI's execution of, and the making of, this
Agreement in Missouri, the parties agree that: (i) any litigation involving this
Agreement shall be filed and conducted in the state or federal courts in the
State of Missouri; and (ii) the Agreement shall be interpreted in accordance
with and governed by the laws of the State of Missouri, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
Missouri or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Missouri.
29. Headings and Interpretation. Section headings are provided in this Agreement
for convenience only and shall not be deemed to substantively alter the content
of such sections. Whenever the words "include", "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation". References to the singular or plural tense of a word shall
also include the plural or singular as the context may require.
30. Neutral Construction. Each party acknowledges that in the negotiation and
drafting of this Agreement, they have been represented by and relied upon the
advice of counsel of their choice. The parties affirm that they and their
counsel have had a substantial role in such negotiation and drafting of this
Agreement, and, therefore, the parties agree that this Agreement shall be deemed
to have been drafted by all the parties hereto and the rule of construction to
the effect that any contract ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of this Agreement or any
exhibit or schedule hereto.
31. Notices. Any notice, request, consent or communication (collectively, a
"Notice") under this Agreement shall be effective only if it is in writing and
(i) personally delivered with written receipt thereof, (ii) sent by certified or
registered mail, return receipt requested, postage prepaid or (iii) sent by a
nationally recognized overnight delivery service, with delivery confirmed,
addressed as follows (or at such other address for a party as shall be specified
by like notice):
(a) If to the Executive, to: Kevin T. Kelly
[Address]
(b) with a copy to: Bryan Cave LLP
One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105
Attn: Beth Romans Bower
(c) If to FGI, to: Ferrellgas, Inc.
One Liberty Plaza
Liberty, Missouri 64068
Attention: Mr. Danley K. Sheldon
A Notice shall be deemed to have been given as of the date
when (i) personally delivered as indicated by date of receipt, (ii) five (5)
days after the date when deposited with the United States certified mail, return
receipt requested, properly addressed, or (iii) when receipt of a Notice sent by
an overnight delivery service is confirmed by such overnight delivery service,
as the case may be, unless the sending party has actual knowledge that a Notice
was not received by the intended recipient.
32. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and together shall constitute one and
the same Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the day and year first above written.
FERRELLGAS, INC. EXECUTIVE
By:_______________
Name:_____________ Kevin T. Kelly
Title:____________
PLEASE NOTE: BY SIGNING THIS AGREEMENT, EXECUTIVE IS HEREBY CERTIFYING THAT
EXECUTIVE (A) HAS RECEIVED A COPY OF THIS AGREEMENT FOR REVIEW AND STUDY BEFORE
EXECUTING IT; (B) HAS READ THIS AGREEMENT CAREFULLY BEFORE SIGNING IT; (C)
UNDERSTANDS THAT THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION; (D)
HAS HAD SUFFICIENT OPPORTUNITY BEFORE SIGNING THE AGREEMENT TO ASK ANY QUESTIONS
EXECUTIVE HAS ABOUT THE AGREEMENT AND HAS RECEIVED SATISFACTORY ANSWERS TO ALL
SUCH QUESTIONS; AND (E) UNDERSTANDS EXECUTIVE'S RIGHTS AND OBLIGATIONS UNDER THE
AGREEMENT.
SUBSIDIARIES OF
FERRELLGAS PARTNERS, L.P.
Ferrellgas, L.P., a Delaware limited partnership
Ferrellgas Partners Finance Corp., a Delaware Corporation
SUBSIDIARIES OF
FERRELLGAS, L.P.
bluebuzz.com, Inc., a Delaware Corporation
Ferrellgas Receivables, LLC, a Delaware limited liability company
INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Post-Effective Amendment No. 1 to Registration Statement No. 33-55185 of Ferrellgas Partners, L.P. on Form S-4 to Form S-1, in Amendment No. 1 to Registration Statement No. 333-71111 of Ferrellgas Partners, L.P. and Ferrellgas Partners Finance Corp. on Form S-3, and in Registration Statement No. 333-87633 of Ferrellgas Partners, L.P. on Form S-8 of our reports dated September 14, 2000, appearing in the Annual Report on Form 10-K of Ferrellgas Partners, L.P. and Ferrellgas Partners Finance Corp. for the year ended July 31, 2000. /s/ DELOITTE & TOUCHE LLP - -------------------------- DELOITTE & TOUCHE LLP Kansas City, Missouri October 23, 2000