Exhibit 10.5
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AMENDMENT NO. 2
TO NOTE AGREEMENT FOR
7.54% SENIOR NOTES DUE 2011
SUBURBAN PROPANE, L.P.
March 29, 1999
To each of the Holders of the
7.54% Senior Notes due 2011 of
Suburban Propane,
L.P.
Ladies and Gentlemen:
Suburban Propane, L.P. (the "COMPANY") has heretofore issued its 7.54%
Senior Notes due June 30, 2011 (the "NOTES") in the aggregate principal amount
of $425,000,000 under and pursuant to the Note Agreement, dated as of February
28, 1996, among the Company and the original purchasers of the Notes, as amended
by Amendment No. 1 dated May 5, 1998 (such agreement, as so amended, the "NOTE
AGREEMENT"). Terms used herein which are defined in the Note Agreement are used
herein as so defined.
Suburban Propane Partners, L.P., a Delaware limited partnership (which is
the "Partnership" as defined in the Note Agreement), proposes to enter into a
series of transactions that will include, INTER ALIA, (i) replacing the current
General Partner of the Company (Suburban Propane GP, Inc.) with a new General
Partner (Suburban Energy Services Group LLC) which will be wholly-owned by
members of management of the Partnership and the Company (the "GENERAL PARTNER
CHANGE"), (ii) amending the Partnership Agreement of the Company in certain
respects to admit the new General Partner and delete the requirement in the
Partnership Agreement that the General Partner take no action which would cause
its net worth to be less than $28 million (the "PARTNERSHIP AMENDMENTS"), (iii)
terminating the Distribution Support Agreement dated as of March 6, 1996 (the
"DISTRIBUTION SUPPORT TERMINATION") and (iv) effecting a distribution to the
Partnership of up to $69,000,000 to permit the Partnership to redeem the
Subordinated Units and APU's (each as defined in the Partnership Agreement of
the Partnership) currently held by Suburban Propane Partners, L.P. (the
"REDEMPTION DISTRIBUTION"), each of the General Partner Change, the Partnership
Amendments, the Distribution Support Termination and the Redemption Distribution
being as more particularly described in the Preliminary Proxy Statement of the
Partnership (filed with the Securities and Exchange Commission on March 26,
1999) a copy of which has been delivered to each holder of Notes (the "PROXY
STATEMENT").
In connection with the foregoing the Company is requesting certain
amendments to, and consents and waivers under and in respect of, the Note
Agreement and, subject to the terms and provisions hereof, each undersigned
holder of Notes is agreeable thereto. Accordingly, the Company agrees with you
as follows:
1. CONSENTS AND WAIVERS. Each undersigned holder of Notes hereby
consents to the consummation of (i) the General Partner Change and waives
compliance by the Company with the provisions of paragraph 5K (OPERATIVE
AGREEMENTS) and paragraph 6I (TRANSACTIONS WITH AFFILIATES) of the Note
Agreement in connection therewith, (ii) the Partnership Amendments and
hereby waives compliance by the Company with the provisions of paragraph 5K
(OPERATIVE AGREEMENTS) and paragraph 6I (TRANSACTIONS WITH AFFILIATES) of
the Note Agreement in connection therewith, (iii) the Distribution Support
Termination and hereby waives compliance by the Company with the provisions
of paragraph 6I (TRANSACTIONS WITH AFFILIATES) and paragraph 6M
(MATER/A/AGREEMENTS; TAX STATUS) of the Note Agreement in connection
therewith, and (iv) the Redemption Distribution and hereby waives
compliance by the Company with the provisions of paragraph 6I (TRANSACTIONS
WITH AFFILIATES) and paragraph 6F (RESTRICTED PAYMENTS) of the Note
Agreement in connection therewith (it being understood that the Redemption
Distribution shall not constitute a Restricted Payment within the meaning
of the Note Agreement), PROVIDED that the foregoing transactions shall be
consummated substantially on the terms described in, and in the context of
the consummation of the "Recapitalization" substantially as provided in,
the Proxy Statement. The effectiveness of this Agreement shall not, except
as expressly provided herein, operate as a waiver of any right, power or
remedy of any of the holders of the Notes under this Agreement or the Note
Agreement, nor constitute a waiver of any other provision of this Agreement
or the Note Agreement.
2. ▇▇▇▇▇▇▇▇▇ ▇▇. The Note Agreement is hereby amended by adding a new
paragraph 5U thereto reading as follows:
5U. INCORPORATED DEBT PROVISIONS. If the Company shall enter
into, assume or otherwise be or become liable under (a "Debt
Incurrence") any agreement or instrument executed and delivered in
connection with any outstanding Indebtedness (or pursuant to any
revolving credit or similar arrangement under which Indebtedness may
be outstanding) (herein called an "Other Debt Agreement") containing
one or more Additional Covenants or Additional Defaults (the
"Incorporated Debt Provisions"), such Incorporated Debt Provisions
shall IPSO FACTO be incorporated herein as if fully set forth at this
place with such changes MUTATIS MUTANDIS to make such Incorporated
Debt Provisions applicable to this Agreement and the Notes without any
further requirement for notice or action on the part of the Company or
any holder of a Note. The Company agrees that upon any such Debt
Incurrence it will (x) give notice thereof, together with a copy of
the applicable Incorporated Debt Provisions, to the holders of the
Notes and (y) execute and deliver at its expense (including, without
limitation, the fees and expenses of counsel for the holders of the
Notes) an amendment to this Agreement evidencing the amendment of this
Agreement to include such Incorporated Debt Provisions, PROVIDED that
such execution and delivery shall not be necessary for or a condition
to the incorporation of the Incorporated Debt Provisions as provided
in the preceding sentence. Any amendment or deletion of any Additional
Covenant or Additional Default arising out of any amendment to, or
termination of, the relevant Other Debt Document shall become
effective to effect the same amendment to (or deletion of) such
Additional Covenant or Additional Default, as the case may be, on the
180th day following the Company's giving notice thereof to the holders
of the Notes; PROVIDED, that no Default or Event of Default shall have
occurred and be continuing on such 180th day.
3. PARAGRAPH 6A. Paragraph 6A of the Note Agreement is amended in
its entirety to read as follows:
6A. FINANCIAL RATIOS. The Company will not permit:
(i) ADJUSTED CONSOLIDATED NET WORTH. Adjusted Consolidated
Net Worth at any time to be less than $50,000,000.
(ii) RATIO OF CONSOLIDATED TOTAL INDEBTEDNESS TO EBITDA. The
ratio of Consolidated Total Indebtedness at the end of any fiscal
quarter to exceed (x) 5.10 times Consolidated EBITDA for any
period of four fiscal quarters ending on or prior to March 31,
2001 or (y) 5.00 times Consolidated EBITDA for any period of four
fiscal quarters ending after March 31, 2001.
(iii) RATIO OF EBITDA TO INTEREST EXPENSE. The ratio of
Consolidated EBITDA for any period of four fiscal quarters to
Consolidated Interest Expense for such period (minus interest
income included in Consolidated Net Income for such period) to be
less than 2.50 to 1.0.
Notwithstanding any of the provisions of this Agreement, the
Company will not, and will not permit any Restricted Subsidiary to,
enter into any transaction pursuant to paragraph 50, paragraph 6B,
clauses (vii) and (viii) of ▇▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇, clauses
(i)(b), (i)(c), (ii)(b) and (iii) of paragraph 6G and paragraph 6I, if
the consummation of any such transaction would result in a violation
of clause (ii) or (iii) of this paragraph 6A, calculated for such
purpose as of the date on which such transaction were to be
consummated, both immediately before and after giving effect to the
consummation of such transaction. All such calculations shall be made
on a PRO FORMA basis in accordance with GAAP after giving effect to
any such transaction, with the ratio recomputed as at the last day of
the most recently ended fiscal quarter of the Company as if such
transaction had occurred on the first day of the relevant four quarter
period. In computing Consolidated EBITDA for the purposes of clauses
(ii) and (iii) of this paragraph 6A there shall be added to
Consolidated Net Income (in addition to the other adjustments provided
for in the definition of Consolidated EBITDA) for the relevant period
the sum of all non-recurring charges taken in connection with the
Recapitalization Transaction to the extent such non-recurring charges
were deducted in determining Consolidated Net Income for such period
(but limited to an aggregate amount of not more than $20,000,000 for
all periods of which not more than $7,500,000 of such charges shall be
cash charges).
4. ▇▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇(▇▇) and 6B(iv) of the Note
Agreement are amended in their entirety to read, respectively, as
follows:
(ii) the Company may become and remain liable with respect
to Indebtedness incurred under the Revolving Credit Facility and
for any purpose permitted by the Revolving Credit Facility and
any Indebtedness incurred for any such permitted purpose which
replaces, extends, renews, refunds or refinances any such
Indebtedness, in whole or in part; PROVIDED that (x) the
aggregate principal amount of Indebtedness permitted under this
clause (ii) shall not at any time exceed $75,000,000 and (y)
there shall be a period of 30 consecutive days in the period of
four consecutive fiscal quarters ending on September 30 in each
year when no such Indebtedness shall be outstanding in an amount
exceeding the sum of (x) $15,000,000, (y) amounts borrowed as
permitted under this clause (ii) for the purpose of making
acquisitions (not exceeding $25,000,000 in the aggregate) and (z)
until March 31, 2001, amounts borrowed to finance the minimum
quarterly distributions to the Partnership's limited partnership
unitholders (not exceeding $22,000,000 in the aggregate);
(iv) the Company and any Restricted Subsidiary may become
and remain liable with respect Indebtedness, in addition to that
otherwise permitted by the other clauses of this paragraph 6B, if
on the date the Company or any Restricted Subsidiary becomes
liable with respect to any such additional Indebtedness and
immediately after giving effect thereto and to the substantially
concurrent repayment of any other Indebtedness (a) the ratio of
Consolidated Cash Flow for the period of the four most recent
fiscal quarters ending on or prior to the date of determination
("Measurement Cash Flow") to Consolidated Debt Service is equal
to or greater than 2.50 to 1.0 and (b) the ratio of Measurement
Cash Flow to Consolidated Pro Forma Maximum Debt Service is equal
to or greater than 1.25 to 1.0;
5. PARAGRAPH 7A. Clause (v) of paragraph 7A of the Note Agreement
is hereby amended in its entirety to read as follows:
(v) the Company fails to perform, observe or comply with any
agreement contained in paragraph 6 or in any Additional Covenant
incorporated herein as provided in paragraph 5U, or any event
constituting an Additional Default incorporated herein as
provided in paragraph 5U shall have occurred and be continuing;
6. PARAGRAPH 10B. (a) The definition of General Partner set forth
in paragraph 10B of the Note Agreement is amended in its entirety to
read as follows:
"GENERAL PARTNER" shall mean Suburban Energy Services Group
LLC, a Delaware limited liability company.
(b) Paragraph 10B of the Note Agreement is further amended by adding
thereto the following additional terms in proper alphabetical order:
"ADDITIONAL COVENANT" shall mean any affirmative or negative
covenant or similar restriction applicable to the Company or any
Restricted Subsidiary (regardless of whether such provision is
labeled or otherwise characterized as a covenant) the subject
matter of which either (i) is similar to that of the covenants in
paragraphs 5 and 6 of this Agreement, or related definitions in
paragraph 10 of this Agreement, but contains one or more
percentages, amount or formulas that is more restrictive than
those set forth herein or more beneficial to the holder or
holders of the Indebtedness created or evidenced by the document
in which such covenant or similar restriction is contained (and
such covenant or similar restriction shall be deemed an
"Additional Covenant" only to the extent that it is more
restrictive or more beneficial) or (ii) provides for (x)
restrictions on the incurrence of Indebtedness, sales of assets
or the making of Restricted Payments or (y) the maintenance of
financial ratios or of any balance sheet item at any particular
level in a manner which is different from the subject matter of
the covenants in paragraph 5 and 6 of this Agreement, or related
definitions in paragraph 10 of this Agreement.
"ADDITIONAL DEFAULT" shall mean any provision contained in
any document or instrument creating or evidencing Indebtedness of
the Company which permits the holder or holders of Indebtedness
to accelerate (with the passage of time or giving of notice or
both) the maturity thereof or otherwise requires the Company or
any Restricted Subsidiary to purchase such Indebtedness prior to
the stated maturity thereof and which either (i) is similar to
the Defaults and Events of Default contained in paragraph 7 of
this Agreement, or related definitions in paragraph 10 of this
Agreement, but contains one or more percentages, amounts or
formulas that is more restrictive or has a ▇▇▇▇▇▇▇ ▇▇▇▇▇ period
than those set forth herein or is more beneficial to the holder
or holders of such other Indebtedness (and such provision shall
be deemed an "Additional Default" only to the extent that it is
more restrictive, has a ▇▇▇▇▇▇▇ ▇▇▇▇▇ period or is more
beneficial) or (ii) is different from the subject matter of the
Defaults and Events of Default contained in paragraph 7 of this
Agreement, or related definitions in paragraph 10 of this
Agreement; PROVIDED, HOWEVER that no such provision that arises
solely as the result of a violation of any affirmative or
negative covenant or similar restriction contained in such
document or instrument (whether or not the same is an Additional
Covenant) shall be an Additional Default.
"RECAPITALIZATION TRANSACTION" shall mean and include all
transactions effected in connection with the consummation of the
"Recapitalization" substantially in the manner and substantially
on the terms described in the Preliminary Proxy Statement of the
Partnership filed with the Securities and Exchange Commission on
March 26, 1999.
7. EFFECTIVENESS. The consents and waivers under, and the
amendments to, the Note Agreement set forth above shall become
effective upon (i) receipt by the Company of counterparts of this
letter executed by the Required Holders, (ii) payment by the Company
of a fee to each holder of outstanding Notes in an amount equal to
0.375% of the outstanding principal amount of Notes held by such
holder and (iii) the consummation of the Recapitalization
substantially as described in the Proxy Statement. The Company
represents and warrants to the holders of the Notes that no Default or
Event of Default exists (nor will any such Default or Event of Default
exist after giving effect to the effectiveness of this Agreement and
the consummation of the Recapitalization as described in the Proxy
Statement) and that in connection with this solicitation of the
consents of the holders of the Notes it is in compliance with the
provisions of paragraph 11 C of the Note Agreement. The Company shall
give notice of the effectiveness hereof to all of the holders of the
Notes as provided in the Note Agreement.
8. NOTE AGREEMENT. Except as expressly amended hereby, the Note
Agreement shall continue in full force and effect in accordance with
the provisions thereof.
[Balance of this page is blank. Next page is the signature page.]
If you are in agreement with the foregoing, please sign the
form of acceptance on an enclosed counterpart of this letter and
return the same to the Company, whereupon this letter shall
become a binding agreement between us (subject to effectiveness
as aforesaid).
SUBURBAN PROPANE, L.P.
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Title: Treasurer
The foregoing letter
is hereby accepted:
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(Name of Institution)
By:
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Title: