AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 14, 1997
REGISTRATION NO.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TEXAS PETROCHEMICAL HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 2869 76-0504002
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
<S> <C>
STEPHEN R. WRIGHT
THREE RIVERWAY, SUITE 1500 THREE RIVERWAY, SUITE 1500
HOUSTON, TEXAS 77056 HOUSTON, TEXAS 77056
(713) 627-7474 (713) 627-7474
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S INCLUDING AREA CODE, OF REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICES) AGENT FOR SERVICE OF PROCESS)
</TABLE>
------------------------
COPY TO:
GARY W. ORLOFF
BRACEWELL & PATTERSON, L.L.P.
SOUTH TOWER PENNZOIL PLACE, SUITE 2900
711 LOUISIANA STREET
HOUSTON, TEXAS 77002-2781
(713) 223-2900
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement of the earlier effective registration statement for the
same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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=========================================================================================================================
PROPOSED MAXIMUM PROPOSED AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE MAXIMUM AGGREGATE REGISTRATION
SECURITIES TO BE OFFERED BE REGISTERED PER UNIT(2) OFFERING PRICE(2) FEE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
13.5% Senior Discount Notes due $520.38(3) per
2007................................. $57,650,103.55(1) $1,000(1) $30,000,000 $9,091
=========================================================================================================================
</TABLE>
(1) Principal amount at maturity.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) Represents the initial issue amount.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
******************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR *
* SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH *
* OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR *
* QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. *
* *
******************************************************************************
SUBJECT TO COMPLETION DATED OCTOBER 14, 1997
TEXAS PETROCHEMICAL HOLDINGS, INC.
$57,650,103.55 13.5% SENIOR DISCOUNT NOTES DUE 2007
The 13.5% Senior Discount Notes due 2007 (the "Discount Notes") were
issued by Texas Petrochemical Holdings, Inc. ("Holdings" and together with its
subsidiaries on a consolidated basis, the "Company") pursuant to the Discount
Notes Indenture (as defined under "Description of the Discount
Notes -- General"). As of the date of this Prospectus, there are $57,650,103.55
aggregate principal amount at final maturity of the Discount Notes outstanding.
The Discount Notes are unsecured senior Indebtedness of Holdings ranking
PARI PASSU with other unsecured senior Indebtedness of Holdings. The Discount
Notes are guaranteed by Holdings' subsidiary, TPC Holding Corp. ("TPC
Holding"). The Discount Notes are effectively subordinated to secured
indebtedness of Holdings, including Holdings' guaranty of the Indebtedness of
its subsidiary, Texas Petrochemicals Corporation ("TPC"), under the Bank
Credit Agreement (as defined under "Description of the Bank Credit
Agreement"), and to all indebtedness and other liabilities of TPC and its
subsidiaries. As of June 30, 1997, the aggregate amount of senior Indebtedness
of Holdings (other than the Discount Notes) was $89.8 million, consisting of
Holdings' guaranty of TPC's Indebtedness under the Bank Credit Agreement, and
the aggregate amount of Indebtedness and other obligations of Holdings and its
subsidiaries was approximately $351.9 million. Because the Discount Notes do not
accrue cash interest prior to July 1, 2001, the Discount Notes are not suitable
investments for investors seeking current income.
The initial issue amount of each Discount Note was $520.38 per $1,000
principal amount at maturity (52% of the principal amount at maturity),
representing a yield to maturity of 13.5% (computed on a semi-annual bond
equivalent basis) calculated from July 1, 1996. Cash interest will not accrue on
the Discount Notes prior to July 1, 2001, at which time cash interest will
accrue on the Discount Notes at a rate of 13.5% PER ANNUM. Interest on the
Discount Notes is payable semi-annually on January 1 and July 1 of each year,
commencing January 1, 2002. Except as described below, the Discount Notes are
not redeemable at the option of Holdings prior to July 1, 2001. Thereafter, the
Discount Notes will be redeemable, in whole or in part, at the option of
Holdings, at the redemption prices set forth herein together with accrued and
unpaid interest, if any, to the date of redemption. In addition, up to 30% of
the aggregate Accreted Value (as defined under "Description of the Discount
Notes -- Certain Definitions") of the Discount Notes may be redeemed at any
time prior to July 1, 1998, at the option of Holdings, from the net proceeds of
any Public Equity Offering following which there is a Public Market (as such
terms are defined under "Description of the Discount Notes -- Certain
Definitions") at a redemption price equal to 113.5% of the Accreted Value
thereof, together with accrued and unpaid interest, if any, to the redemption
date. Upon the occurrence of a Change of Control (as defined under "Description
of the Discount Notes -- Certain Definitions"), each holder of Discount Notes
may require Holdings to purchase all or a portion of such holder's Discount
Notes at a purchase price in cash equal to 101% of the principal amount thereof,
together with accrued and unpaid interest, if any, to the date of purchase. For
a more complete description of the Discount Notes, see "Description of the
Discount Notes."
This Prospectus is being used by The Huff Alternative Income Fund, L.P.
(the "Huff Fund") in connection with offers and sales of the Discount Notes in
the over-the-counter market, in private transactions, or otherwise at negotiated
prices related to prevailing market prices at the time of sale. The Company will
not receive any proceeds from the sale of the Discount Notes by the Huff Fund.
See "Plan of Distribution."
Promptly following the Company's filing of quarterly reports or other
documents, pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934 (the "Exchange Act"), the Company will attach such documents as
appendices to include as part of this Prospectus.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE
DISCOUNT NOTES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1997.
<PAGE>
AVAILABLE INFORMATION
Holdings has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (which term shall encompass any and all
amendments thereto) on Form S-1 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to,
among other things, the Discount Notes offered hereby. This Prospectus, which is
part of the Registration Statement, does not contain all the information set
forth in the Registration Statement and the exhibits and schedules thereto,
certain items of which are omitted in accordance with the rules and regulations
of the Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete.
With respect to each such contract, agreement or other document filed as an
exhibit to the Registration Statement, reference is hereby made to the exhibit
for a more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference. For further
information with respect to the Company and the Discount Notes, reference is
hereby made to the Registration Statement and such exhibits and schedules filed
as a part thereof, which may be inspected, without charge, at the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located at
7 World Trade Center, Suite 1300, New York, New York 10048 and at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any
portion of the Registration Statement may be obtained from the Public Reference
Section of the Commission, upon payment of prescribed fees. The Commission
maintains a Web site that contains reports and information regarding registrants
that file electronically with the Commission at Web site (http://www.sec.gov).
Pursuant to the Discount Notes Indenture, so long as any of the Discount
Notes are outstanding, whether or not Holdings is subject to the reporting
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), Holdings is obligated to send to the Huff
Fund and to Fleet National Bank, as trustee under the Discount Notes Indenture,
the annual reports, quarterly reports and other documents that Holdings would
have been required to file with the Commission pursuant to Section 13(a) or
15(d) if Holdings were subject to such reporting requirements.
2
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ
IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS,
INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. FOR THE
PERIODS PRIOR TO JULY 1, 1996, THE FINANCIAL STATEMENTS AND OTHER INFORMATION
SET FORTH HEREIN COMBINE THE HISTORICAL RESULTS OF TEXAS OLEFINS COMPANY, A
TEXAS CORPORATION ("TOC"), ITS SUBSIDIARIES AND CLARKSTON CORPORATION
("CLARKSTON"). UNLESS THE CONTEXT OTHERWISE REQUIRES, AS USED HEREIN THE TERM
"COMPANY" REFERS TO TOC AND ITS SUBSIDIARIES PRIOR TO THE CONSUMMATION OF THE
ACQUISITION (AS DEFINED), AND TO HOLDINGS AND ITS SUBSIDIARIES FOLLOWING THE
CONSUMMATION OF THE ACQUISITION. TOC WAS MERGED WITH AND INTO TEXAS
PETROCHEMICALS CORPORATION, A TEXAS CORPORATION ("TPC"), IN CONNECTION WITH
THE ACQUISITION. TPC IS A WHOLLY-OWNED SUBSIDIARY OF TPC HOLDING CORP., A
DELAWARE CORPORATION ("TPC HOLDING"), WHICH IS A WHOLLY-OWNED SUBSIDIARY OF
HOLDINGS. TPC CONDUCTS THE PRINCIPAL BUSINESS OF THE COMPANY. ALL REFERENCES TO
FISCAL YEARS IN THIS PROSPECTUS UP TO AND INCLUDING FISCAL 1995 REFER TO THE
FISCAL YEARS ENDED MAY 31 IN THE CALENDAR YEARS INDICATED. THE COMPANY HAS
CHANGED ITS FISCAL YEAR END TO JUNE 30 AND INFORMATION FOR FISCAL YEARS ENDED
SUBSEQUENT TO MAY 31, 1995 IS SO PRESENTED. ALL REFERENCES IN THIS PROSPECTUS TO
THE COMPANY'S CAPACITY TO PRODUCE CERTAIN PRODUCTS REFLECT PRODUCTION LEVELS
ACHIEVABLE IF PLANT OPERATIONS ARE DEDICATED TO MAXIMIZING OUTPUT OF THAT
PARTICULAR PRODUCT, WHICH EXCEEDS ACTUAL CAPACITY AVAILABLE UNDER TYPICAL
MULTI-PRODUCT PRODUCTION CONFIGURATIONS. UNLESS OTHERWISE INDICATED, INDUSTRY
DATA CONTAINED HEREIN, OTHER THAN WITH RESPECT TO THE COMPANY, IS DERIVED FROM
PUBLICLY AVAILABLE INDUSTRY TRADE JOURNALS AND OTHER PUBLICLY AVAILABLE INDUSTRY
SOURCES, WHICH THE COMPANY HAS NOT INDEPENDENTLY VERIFIED BUT WHICH THE COMPANY
BELIEVES TO BE RELIABLE.
THE COMPANY
The Company is the largest producer of butadiene and butene-1, and the
third largest producer of methyl tertiary-butyl ether ("MTBE"), in North
America, in terms of production capacity. In addition, the Company is the sole
producer of diisobutylene and isobutylene concentrate in the United States and
the largest domestic merchant supplier of high purity isobutylene to the
chemical market. The Company's products include: (i) butadiene, primarily used
to produce synthetic rubber; (ii) MTBE, used as an oxygenate and octane enhancer
in gasoline; (iii) n-butylenes (butene-1 and butene-2), used in the manufacture
of plastic resins, fuel additives and synthetic alcohols; and (iv) specialty
isobutylenes, primarily used in the production of specialty rubbers, lubricant
additives, detergents and coatings. For the year ended June 30, 1997, and the
twelve months ended May 31, 1996, butadiene represented 27% and 25% of the
Company's total revenues, respectively, MTBE represented 47% and 41%,
respectively, n-butylenes 10% and 11%, respectively, specialty isobutylenes 13%
and 16%, respectively, and other revenues the remaining 3% and 7%, respectively.
The Company's revenues for the year ended June 30, 1997, the twelve months ended
May 31, 1996 and the one month ended June 30, 1996 were $490.2 million, $455.6
million and $41.4 million, respectively, and EBITDA (as defined) for the year
ended June 30, 1997, the twelve months ended May 31, 1996 and the one month
ended June 30, 1996 were $50.4 million, $57.0 million and $3.7 million,
respectively.
Butadiene is the most widely used feedstock for synthetic rubber products
and is also used in the manufacture of engineered plastics, nylon fibers and
other products. The Company sells butadiene to a stable customer base ,
including The Goodyear Tire & Rubber Company, The Dow Chemical Company, American
Synthetic Rubber Inc. and Bridgestone/Firestone, Inc. As the largest producer of
butadiene in North America, the Company believes that many of its customers
place significant value on its ability to provide a reliable domestic supply of
butadiene and as a result have entered into long-term sales contracts with the
Company.
The Company extracts butadiene from crude butadiene, which is generated
from the production of ethylene and is comprised of a number of valuable
components, including butadiene, isobutylene, n-butylenes, isobutane and
n-butane. Many U.S. ethylene producers rely on third parties such as the
3
<PAGE>
Company to process their crude butadiene streams, as the crude butadiene volumes
they produce are not sufficient to justify the construction of on-site butadiene
recovery facilities. The Company estimates that producers accounting for 65% of
U.S. and Canadian ethylene production capacity do not internally process crude
butadiene by-product streams. The Company is the largest non-integrated crude
butadiene processor in North America and as a result of its strategic importance
to ethylene producers, the Company has been able to secure long-term supply
contracts covering the majority of its crude butadiene requirements. Such
contracts provide for a fixed profit based on the Company's selling prices for
butadiene, and account for the relatively stable profitability of the Company's
butadiene operations.
MTBE is a blending stock which reduces carbon monoxide and volatile organic
compound emissions and enhances the octane content of gasoline, and has been one
of the fastest growing petrochemicals, in terms of volume, over the past fifteen
years. Today, MTBE is the preferred oxygenate for, and a major component of,
reformulated gasoline ("RFG") and is used in over 30% of the U.S. gasoline
pool. MTBE is produced by reacting methanol and isobutylene, and the Company's
ability to produce isobutylene by three alternative methods enables it to
produce MTBE by the most economical processes available to the Company. In
addition, the Company has the ability to add incremental capacity to capitalize
on expected future growth, at a significantly lower cost than the cost of adding
new capacity. The Company believes that this incremental capacity gives it a
competitive advantage over other producers who would have to incur greater cost
to increase capacity. The Company sells MTBE to oil refiners and gasoline
producers, including Mobil Oil Corporation, Lyondell Petrochemical Company and
CITGO Petroleum Corporation on both a contract and spot basis at prices linked
to prevailing market prices.
The Company is the leading producer of high margin n-butylenes and
specialty isobutylenes in North America. In recent years, the Company has
increased its sales of these products by increasing its market share in
polyolefin applications and the development of new end-use applications. The
Company's principal customers for n-butylenes include Union Carbide Corporation,
The Dow Chemical Company, NOVA Chemicals Ltd., Shell Chemical Company and
Lyondell Petrochemical Company. The Company's principal customers for specialty
isobutylenes include Bayer Inc., Mobil Chemical Company Inc., Rhone-Poulenc
Inc., The Lubrizol Corporation and Schenectady International, Inc. Historically,
the profitability of the Company's n-butylenes sales has been relatively stable
as the majority of the sales of these products are made under contracts which
link their selling prices to the prices of products (principally gasoline and
butanes) whose prices fluctuate closely with those of the raw materials used to
manufacture n-butylenes and specialty isobutylenes.
The Company's principal feedstocks are crude butadiene, isobutane and
methanol. One of the Company's intermediate feedstocks, isobutylene, is used in
the manufacture of MTBE and specialty isobutylenes. As part of its production
strategy, the Company uses its manufactured isobutylene first to maximize the
production of high margin specialty isobutylenes, second, to satisfy its
contractual MTBE requirements, and finally to produce MTBE for sale in the spot
market. The Company maintains the production flexibility to upgrade n-butylenes
contained in crude butadiene streams to either isobutylene or butene-1 using its
patented skeletal isomerization process ("SKIP"). This flexibility allows the
Company to meet its customers' needs through the most economical process, to
produce additional products and to capitalize on favorable market conditions.
The Company's manufacturing facility, located approximately one mile from
the Houston Ship Channel, provides convenient access to other Gulf Coast
petrochemical producers and is connected to several of its customers and raw
materials suppliers through an extensive pipeline network. In addition, the
Company's facility is serviced by rail, tank truck and barge.
The Company's principal executive offices are located at Three Riverway,
Suite 1500, Houston, Texas 77056. The Company's telephone number is (713)
627-7474.
4
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BACKGROUND INFORMATION
Holdings, TPC Holding, and TPC Finance Corp., a Texas corporation
("Finance Co."), were organized in May 1996 to effect the acquisition (the
"Acquisition") of TOC and its subsidiaries, including TPC, and to assume a raw
materials supply contract from Clarkston. On July 1, 1996, Holdings issued and
sold $43.8 million of its common stock ("Common Stock") to an investor group
led by Gordon A. Cain and The Sterling Group, Inc. ("Sterling"), issued $6.2
million of its Common Stock for the shares contributed by certain shareholders
of TOC and TPC, sold a sufficient amount of the Discount Notes and Common Stock,
as an investment unit (the "Units") to the Huff Fund to raise $30 million in
gross proceeds, and contributed the net proceeds thereof to TPC Holding. Finance
Co. borrowed approximately $140.0 million under the Bank Credit Agreement and
received approximately $169 million in net proceeds from the sale at such time
of $175 million aggregate principal amount of 11 1/8% Senior Subordinated Notes
due 2006 (the "Original Notes") and loaned the combined net proceeds to TPC
Holding. TPC Holding used the capital contributions received from Holdings, cash
on hand and the proceeds of the loan from Finance Co. to effect the Acquisition
pursuant to a stock purchase agreement dated as of May 14, 1996 (the "Stock
Purchase Agreement"), to fund the ESOP (as defined) and pay fees and expenses in
connection with the transactions associated with the Acquisition. TOC and
Finance Co. then merged into TPC.
As a result of the foregoing, Holdings is the primary obligor on the
Discount Notes, and TPC is the primary obligor on the Original Notes and the
loans made pursuant to the Bank Credit Agreement, is a wholly-owned subsidiary
of TPC Holding (which in turn is wholly-owned by Holdings) and operates the
principal business of the Company. Holdings has guaranteed TPC's obligations
under the Bank Credit Agreement. The Discount Notes and the Common Stock which
constituted the Units became separately transferable immediately following the
Acquisition.
On March 13, 1997, TPC issued and sold $50,000,000 aggregate principal
amount of 11 1/8% Series B Senior Subordinated Notes due 2006 (the "Notes"),
the proceeds of which were used to, among other things, reduce TPC's
indebtedness under the Bank Credit Agreement. The Original Notes and the Notes
were issued under indentures referred to herein collectively as the "Notes
Indenture."
This prospectus has been prepared for use by the Huff Fund in connection
with offers and sales of the Discount Notes.
5
<PAGE>
THE DISCOUNT NOTES
Discount Notes....................... $57,650,103.55 aggregate principal amount
at final maturity of 13.5% Senior
Discount Notes due 2007.
Maturity Date........................ July 1, 2007.
Interest Payment Dates............... January 1 and July 1 of each year after
July 1, 2001.
Optional Redemption.................. Except as described below, Holdings may
not redeem the Discount Notes prior to
July 1, 2001. On or after such date,
Holdings may redeem the Discount Notes,
in whole or in part, at any time at the
redemption prices set forth herein plus
accrued interest, if any, to the date of
redemption. In addition, up to 30% of the
aggregate Accreted Value of the Discount
Notes may be redeemed at any time prior
to July 1, 1998, at the option of
Holdings, with the net proceeds of any
Public Equity Offering following which
there is a Public Market at a redemption
price equal to 113.5% of the Accreted
Value thereof, together with accrued andp
unpaid interest, if any, to the date of
redemption.
Change of Control.................... Upon the occurrence of a Change of
Control, each holder will have the right
to require Holdings to make an offer to
purchase the Discount Notes at a price in
cash equal to 101% of the principal
amount thereof to July 1, 2001 and face
principal amount of the Discount Notes
after July 1, 2001, in each case plus
accrued and unpaid interest to the date
of purchase. See "Description of the
Discount Notes -- Change of Control."
Ranking.............................. The Discount Notes are senior unsecured
obligations of Holdings, senior in right
of payment to subordinated Indebtedness
of Holdings, including Holdings'
guarantee of the Notes. The Discount
Notes rank PARI PASSU in right of payment
with other senior unsecured Indebtedness
of Holdings. The Discount Notes are
effectively subordinated to secured
indebtedness of Holdings, including
Holdings' guarantee of Indebtedness of
TPC under the Bank Credit Agreement, as
to the assets of Holdings securing such
Indebtedness, and to all Indebtedness and
other liabilities and commitments
(including trade payables and lease
obligations) of Holdings' subsidiaries.
As of June 30, 1997, (i) Holdings had
approximately $89.8 million of secured
senior Indebtedness outstanding
(consisting of Holdings' guarantee of the
Company's Indebtedness under the Bank
Credit Agreement), $34.2 million of
senior unsecured Indebtedness outstanding
(consisting of the portion of the issue
price of the Units allocated for
accounting purposes to the Discount
Notes) and (ii) Holdings' subsidiaries
had approximately $317.7 million of
Indebtedness outstanding (including the
Notes). Substantially all of the
operations of Holdings will be conducted
through its subsidiaries and, therefore,
Holdings will be dependent upon the cash
flow of its subsidiaries to meet its
obligations, including its obligations
under the Discount Notes. See
"Description of the Discount Notes."
Restrictive Covenants................ The Discount Notes Indenture (as defined
under "Description of the Discount Notes
-- General") contains certain covenants
that, among other things, limit the
ability of Holdings and/or its Restricted
Subsidiaries (as defined) to (i) incur
additional indebtedness, (ii) pay
dividends or make certain other
restricted payments, (iii) make
investments, (iv) enter into transactions
with affiliates, (v) make certain asset
dispositions, and (vi) merge or
consolidate with, or transfer
substantially all of its assets to,
another person. The
6
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Discount Notes Indenture also limits the
ability of Holdings' Re- stricted
Subsidiaries to issue Capital Stock (as
defined) and to create restrictions on
the ability of such Restricted
Subsidiaries to pay dividends or make any
other distributions. In addition,
Holdings is obligated, under certain
circumstances, to offer to repurchase the
Discount Notes at a purchase price equal
to 100% of their Accreted Value (without
premium), plus accrued and unpaid
interest, if any, in accordance with the
procedures set forth in the Discount
Notes Indenture. However, all of these
limitations and prohibitions will be
subject to a number of important
qualifications. See "Description of the
Discount Notes -- Certain Covenants."
RISK FACTORS
Prospective purchasers of the Discount Notes should consider carefully the
information set forth under the caption "Risk Factors" and all other
information set forth in this Prospectus before making any investment in the
Discount Notes.
SUMMARY SELECTED FINANCIAL AND OTHER INFORMATION
The summary selected financial information set forth below has been derived
from the combined financial statements of TOC, its subsidiaries and Clarkston
for the period prior to July 1, 1996 (the "Predecessor") and from the
consolidated financial statements of the Company since July 1, 1996, and should
be read in conjunction with, and is qualified in its entirety by reference to,
financial statements which appear elsewhere in this Prospectus and their
accompanying notes. Such combined financial information is combined to reflect
the assumption by the Company of a raw material supply contract. The combined
financial information set forth below for each of the years in the three-year
period ended May 31, 1995, the twelve month period ended May 31, 1996 and the
one-month period ended June 30, 1996 has been derived from the financial
statements of TOC, its subsidiaries and Clarkston, which were audited by Coopers
& Lybrand L.L.P., independent auditors for such entities. The consolidated
financial statements for the year ended June 30, 1997 were audited by Deloitte &
Touche LLP. The results of the one-month and interim periods are not necessarily
indicative of the results of the entire year or any other period. The
information presented below should be read in conjunction with the consolidated
financial statements of the Company and the related notes thereto,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Selected Financial Information and the related notes
thereto included elsewhere herein.
7
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SUMMARY SELECTED FINANCIAL AND OTHER INFORMATION
<TABLE>
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PREDECESSOR
---------------------------------------------------
TWELVE ONE
MONTHS MONTH COMPANY
ENDED ENDED ----------
YEAR ENDED MAY 31, MAY 31, JUNE 30, YEAR ENDED
------------------------------- ------- -------- JUNE 30,
1993 1994 1995 1996 1996 1997
--------- --------- --------- ------- -------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenues............ $ 410.7 $ 352.4 $ 474.7 $ 455.6 $ 41.4 $490.2
Cost of goods
sold(1)............. 340.8 268.8 396.3 379.5 36.0 433.7
Depreciation and
amortization...... 12.6 13.6 14.3 15.0 1.3 29.8
--------- --------- --------- ------- -------- ----------
Gross profit........ 57.3 70.0 64.1 61.1 4.1 26.7
Selling, general and
administrative
expenses(1)....... 14.4 16.7 16.6 19.1 1.7 8.4
--------- --------- --------- ------- -------- ----------
Income from
operations........ 42.9 53.3 47.5 42.0 2.4 18.3
Interest income
(expense), net.... (0.6) (0.2) 0.7 (1.6) (0.1) (39.4)
Other income
(expense)(2)...... (1.2) (0.8) 1.1 (15.9) (0.3) 2.3
--------- --------- --------- ------- -------- ----------
Income (loss) before
income taxes and
minority
interest.......... 41.1 52.3 49.3 24.5 2.0 (18.8)
Provision (benefit)
for income
taxes............. 13.0 18.4 16.9 7.9 0.8 (4.8)
Extraordinary
loss.............. -- -- -- -- -- 1.5
Minority interest in
net loss of
consolidated
subsidiary........ -- -- 0.1 0.1 -- --
--------- --------- --------- ------- -------- ----------
Net income (loss)... 28.1 33.9 32.5 16.7 1.2 (15.5)
OPERATING DATA:
Revenues by product:
Butadiene(3)... $ 81.3 $ 68.7 $ 106.2 $ 112.6 $ 10.2 $130.9
MTBE........... 211.0 175.2 199.1 187.4 21.0 230.3
n-Butylenes.... 21.7 28.1 42.7 48.2 3.2 49.4
Specialty
Isobutylenes... 54.8 59.9 75.5 74.5 5.5 62.3
Other(4)....... 41.9 20.5 51.2 32.9 1.5 17.3
Sales volumes (in
millions of
pounds):
Butadiene...... 556.2 484.4 580.8 622.6 64.6 750.3
MTBE(5)........ 225.1 194.8 211.1 219.8 26.6 274.1
n-Butylenes.... 114.7 150.8 245.9 284.6 17.1 266.4
Specialty
Isobutylenes... 309.0 312.2 398.0 368.2 23.0 275.7
</TABLE>
<TABLE>
<CAPTION>
COMPANY
PREDECESSOR -------
-----------------------------------------
JUNE
MAY 31, JUNE 30, 30,
------------------------------- -------- -------
1993 1994 1995 1996 1997
--------- --------- --------- -------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD END):
Working capital...................... $ 38.6 $ 50.6 $ 67.3 $ 25.0 $ 12.6
Property, plant and equipment, net... 101.6 95.9 90.1 81.8 240.0
Total assets......................... 194.1 214.6 230.7 167.9 523.0
Long-term debt (including current
portion)........................... 10.9 11.0 -- 13.0 351.9
Total stockholders' equity........... 128.2 140.4 163.3 92.5 22.8
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
8
<PAGE>
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
--------------------------------------------------- --------
TWELVE ONE
MONTHS MONTH YEAR
ENDED ENDED ENDED
YEAR ENDED MAY 31, MAY 31, JUNE 30, JUNE 30,
------------------------------- ------- -------- --------
1993 1994 1995 1996 1996 1997
--------- --------- --------- ------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA(6)............................ $ 55.5 $ 66.9 $ 61.8 $57.0 $3.7 $ 50.4
Employee profit sharing and
bonuses(1)......................... 18.6 23.6 20.9 23.5 1.0 2.7
Capital expenditures................. 12.0 12.5 8.7 5.5 2.0 (7.6)
Net cash provided by (used in)
operating activities............... 44.5 30.2 50.3 44.5 13.9 (1.8)
Net cash provided by (used in)
investing activities............... (7.2) (5.3) (25.9) 8.2 (1.3) (352.3)
Net cash provided by (used in)
financing activities............... (29.9) (17.6) (23.3) (69.0) (9.4) 354.2
Cash dividends....................... 23.7 21.4 6.2 16.5 -- --
</TABLE>
- ------------
(1) Historically, the Company has allocated employee profit sharing and bonuses
to cost of goods sold and selling, general and administrative expenses. For
the period subsequent to July 1, 1996, all profit sharing and bonuses have
been allocated to selling, general and administrative expenses. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations." Employee profit sharing and bonuses
on a pro forma basis are restated to reflect amounts that would have been
paid under new plans to be established as part of the Acquisition.
(2) Includes dividend income, charitable contributions, gain (loss) on disposal
of assets and investment securities, net, and other, net. For the twelve
months ended May 31, 1996, other expense includes an impairment of
investment in land of $12.6 million.
(3) Approximately 95% of the Company's butadiene sales are under fixed profit
contracts with suppliers of crude butadiene.
(4) Includes Clarkston's trading revenues from third parties (for the periods
prior to July 1, 1996), utility revenues, revenues realized from the
Company's terminalling facilities and sales of chemical by-products.
(5) Volumes in millions of gallons.
(6) EBITDA represents income before income taxes, extraordinary loss and
minority interest before taking into consideration interest expense,
depreciation and amortization and certain other non-recurring charges.
EBITDA is presented because it is a widely accepted financial indicator of a
company's ability to incur and service debt. EBITDA should not be construed
by an investor as an alternative to income from operations (as determined in
accordance with generally accepted accounting principles), as an indicator
of the operating performance of the Company or as an alternative to cash
flows from operating activities (as determined in accordance with generally
accepted accounting principles) as a measure of liquidity.
9
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, PURCHASERS OF THE
DISCOUNT NOTES OFFERED HEREBY SHOULD CONSIDER CAREFULLY THE RISK FACTORS SET
FORTH BELOW.
HOLDING COMPANY STRUCTURE
Holdings, through TPC Holding, owns all the outstanding common stock of
TPC. As a holding company without significant assets other than its indirect
ownership of all of the common stock of TPC, Holdings' ability to meet its cash
obligations, including debt service on the Discount Notes, is dependent upon the
cash flow of its subsidiaries and the transfer of funds by its subsidiaries in
the form of loans, dividends or otherwise. In addition, the Bank Credit
Agreement and the Notes Indenture contain limitations on the ability of such
subsidiaries to pay dividends or make loans or advances to Holdings.
Because Holdings is a holding company that conducts its business through
its subsidiaries, the Discount Notes will be effectively subordinated to all
existing and future liabilities of Holdings' subsidiaries, including trade
payables. The Discount Notes Indenture limits, but does not prohibit, the
incurrence of additional indebtedness by Holdings and certain of its
subsidiaries. See "Description of the Discount Notes -- Certain Covenants."
The Discount Notes will not be secured by any of Holdings' assets. Holdings
pledged all of the capital stock of the TPC Holding and TPC to secure borrowings
of TPC under the Bank Credit Agreement. If TPC becomes insolvent or is
liquidated, or if payment under the Bank Credit Agreement is accelerated, the
lenders under the Bank Credit Agreement would be entitled to exercise the
remedies available to a secured lender under applicable law and pursuant to the
Bank Credit Agreement. Accordingly, such lenders will have a prior claim on the
assets of Holdings.
SUBSTANTIAL LEVERAGE
The Company has incurred a significant amount of indebtedness and has
significant debt service requirements. As of June 30, 1997, the Company had
outstanding indebtedness of $351.9 million and the Company's stockholders'
equity was $22.8 million. See "Capitalization" and "Selected Financial
Data." In addition, the Company may incur additional indebtedness in the
future, subject to limitations imposed by its debt instruments including,
without limitation, the Discount Notes Indenture and the Bank Credit Agreement.
TPC is the primary obligor under the Bank Credit Agreement. Holdings has
guaranteed TPC's obligations under the Bank Credit Agreement. TPC also has
additional borrowing capacity on a revolving credit basis under the Bank Credit
Agreement.
The Company's high degree of leverage could have important consequences to
the holders of the Discount Notes, including but not limited to the following:
(i) the Company's ability to obtain additional financing for working capital,
capital expenditures, acquisitions, debt service requirements, general corporate
purposes or other purposes may be impaired in the future; (ii) a substantial
portion of the Company's cash flow from operations must be dedicated to the
payment of principal and interest on its indebtedness, thereby reducing the
funds available to the Company for other purposes, including its operations and
future business opportunities; (iii) certain of TPC's borrowings, including
certain borrowings under the Bank Credit Agreement, are at variable rates of
interest, which expose the Company to the risk of increased interest rates; (iv)
the indebtedness outstanding under the Bank Credit Agreement is secured by
substantially all the assets of the Company and will mature prior to the
maturity of the Discount Notes; and (v) the Company's flexibility to adjust to
changing market conditions and ability to withstand competitive pressures could
be limited by its leveraged position and the covenants contained in its debt
instruments, thus putting the Company at a competitive disadvantage, and the
Company may be more vulnerable to a downturn in general economic conditions or
in its business or be unable to carry out capital spending that is important to
its growth and productivity improvement programs. See "Description of the Bank
Credit Agreement" and "Description of the Discount Notes."
The Company began making scheduled principal payments under the Bank Credit
Agreement commencing on September 30, 1996. See "Description of the Bank Credit
Agreement." The Company's ability
10
<PAGE>
to make scheduled payments or to refinance its obligations with respect to its
indebtedness, including the Discount Notes, will depend on its financial and
operating performance, which is subject to prevailing economic and competitive
conditions and to certain financial, business and other factors beyond its
control, including interest rates, unscheduled plant shutdowns, increased
operating costs, raw material and product prices, and regulatory developments.
There can be no assurance that TPC will maintain a level of cash flow from
operations sufficient to permit it to make payments or dividends to Holdings in
order for Holdings to pay the scheduled payments of interest on the Discount
Notes.
If the Company's cash flow and capital resources are insufficient to fund
its debt service obligations, the Company may be forced to reduce or delay
capital expenditures, sell assets, or seek to obtain additional equity capital
or restructure or refinance its debt (including the Discount Notes). There can
be no assurance that such alternative measures would be successful or would
permit the Company to meet its scheduled debt service obligations. In the
absence of such operating results and resources, the Company could face
substantial liquidity problems and might be required to dispose of material
assets or operations to meet its debt service and other obligations. The Bank
Credit Agreement, the Discount Notes Indenture and the Notes Indenture restrict
the Company's ability to sell assets and use the proceeds therefrom. See
"Description of the Bank Credit Agreement" and "Description of the Discount
Notes." There can be no assurance as to the ability of the Company to
consummate such sales or the proceeds which the Company could realize therefrom
or that such proceeds would be adequate to meet the obligations then due.
In the event that the Company is unable to generate sufficient cash flow
and the Company is otherwise unable to obtain funds necessary to meet required
payments of principal, premium, if any, and interest on its indebtedness, or if
the Company otherwise fails to comply with the various covenants in the
instruments governing such indebtedness, the Company could be in default under
the terms of the agreements governing such indebtedness, including, without
limitation, each of the Discount Notes Indenture and the Bank Credit Agreement.
In the event of such default, the holders of such indebtedness could elect to
declare all of the funds borrowed thereunder to be due and payable together with
accrued and unpaid interest, the lenders under the Bank Credit Agreement could
elect to terminate their commitments thereunder and the Company could be forced
into bankruptcy or liquidation. Any default under the agreements governing the
indebtedness of the Company could have a significant adverse effect on the
Company's ability to pay principal, premium, if any, and interest on the
Discount Notes and on the market value of the Discount Notes. See "Description
of the Discount Notes" and "Description of the Bank Credit Agreement."
RESTRICTIVE FINANCING COVENANTS
The Bank Credit Agreement contains a number of significant covenants that,
among other things, restricts the ability of the Company to dispose of assets or
merge, incur additional indebtedness, incur guarantee obligations, repay certain
outstanding indebtedness or amend the Discount Notes Indenture or the Notes
Indenture, pay dividends, create liens on assets, enter into sale and leaseback
transactions, make investments, loans or advances, make acquisitions, engage in
mergers or consolidations, make capital expenditures or engage in certain
transactions with affiliates, and otherwise restrict corporate activities. The
Bank Credit Agreement allows, however, TPC to make payments or dividends to
Holdings commencing fiscal year 2002 to be used by Holdings solely for scheduled
payments of interest on the Discount Notes. In addition, under the Bank Credit
Agreement, the Company is required to comply with specified financial ratios and
tests, including a limitation on capital expenditures, an EBITDA to fixed
charges ratio, a minimum net worth test, a total debt to EBITDA ratio, and a
current ratio. The Company received waivers of compliance with certain of these
ratios as of December 31, 1996, March 28, 1997 and June 30, 1997. The Company
also obtained amendments to the Bank Credit Agreement as of March 28, 1997 and
June 30, 1997 to update these financial ratios. See "Description of the Bank
Credit Agreement." The Discount Notes Indenture also contains a number of
restrictive covenants. See "Description of the Discount Notes -- Certain
Covenants."
The Company's ability to comply with the covenants and restrictions
contained in the Bank Credit Agreement, the Discount Notes Indenture, or the
Notes Indenture may be affected by events beyond its control, including
prevailing economic, financial and industry conditions. The breach of any such
covenants
11
<PAGE>
or restrictions could result in a default under the Bank Credit Agreement, the
Discount Notes Indenture, or the Notes Indenture, which would permit the lenders
under the Bank Credit Agreement or the holders of Original Notes, Notes or the
Discount Notes, as the case may be, to declare all amounts outstanding
thereunder to be due and payable, together with accrued and unpaid interest, and
the commitments of the lenders under the Bank Credit Agreement to make further
extensions of credit could be terminated. In addition, in the event of a default
under the Bank Credit Agreement, in certain circumstances the lenders under the
Bank Credit Agreement could elect to prevent the Company from making any
payments on the Discount Notes. See "Description of the Discount
Notes -- Ranking." If the Company were unable to repay its indebtedness to the
lenders under the Bank Credit Agreement, such lenders could proceed against the
collateral securing such indebtedness as described under "Description of the
Bank Credit Agreement." There can be no assurance that in the event of any such
default the Company will have adequate resources to repay in full principal,
premium, if any, and interest on the Discount Notes.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control (as defined under "Description
of the Discount Notes -- Certain Definitions"), the Company is required to
offer to purchase all of the outstanding Discount Notes at a price equal to 101%
of the principal amount thereof at the date of purchase plus accrued and unpaid
interest, if any, to the date of purchase. The occurrence of certain of the
events which would constitute a Change of Control constitutes a default under
the Bank Credit Agreement. In addition, the Bank Credit Agreement prohibits the
purchase of the Discount Notes by the Company in the event of a Change of
Control, unless and until such time as the indebtedness under the Bank Credit
Agreement is repaid in full. The Company's failure to purchase the Discount
Notes in such instance would result in a default under the Discount Notes
Indenture and the Bank Credit Agreement. The inability to repay the indebtedness
under the Bank Credit Agreement, if accelerated, would also constitute an event
of default under the Discount Notes Indenture, which could have materially
adverse consequences to the Company and to the holders of the Discount Notes. In
the event of a Change of Control, there can be no assurance that the Company
would have sufficient assets to satisfy all of its obligations under the Bank
Credit Agreement and the Discount Notes. See "Description of the Discount
Notes -- Change of Control" and "Description of the Bank Credit Agreement."
CYCLICAL INDUSTRIES
The Company's primary business consists of the production of butadiene,
MTBE, n-butylenes and specialty isobutylenes. The prices of certain of these
products have historically been cyclical and have been sensitive to overall
production capacity relative to demand, the availability and price of feedstocks
and the level of general business activity. In the past, certain of these
products have experienced market shortages, accompanied by relatively high
prices, and periods of oversupply, accompanied by relatively low prices.
While the Company has achieved relatively stable profitability on its sales
of butadiene due to the nature of the supply contracts under which it purchases
crude butadiene, industry profitability for MTBE has fluctuated considerably
over the past several years. In the early 1990s, considerable additional
production capacity was installed in the U.S. in anticipation of demand for MTBE
created by the Federal Clean Air Act Amendments of 1990 ("CAAA"). This demand
did not completely materialize due to states opting-out of the programs
promulgated by the CAAA as well as less than anticipated demand in states not
required to comply with such programs, resulting in an industry overcapacity
condition that has resulted in lower average selling prices and margins.
HIGHLY COMPETITIVE INDUSTRY
The petrochemical businesses in which the Company operates are highly
competitive. Many of the Company's competitors are larger and have greater
financial resources than the Company. Among the Company's competitors are some
of the world's largest chemical companies and major integrated petroleum
companies that have their own raw material resources. In addition, a significant
portion of the Company's business is based upon widely available technology.
Accordingly, barriers to entry, apart from capital
12
<PAGE>
availability, may be low in the commodity product section of the Company's
business, and the entrance of new competitors into the industry may reduce the
Company's ability to capture improving profit margins in circumstances where
overcapacity in the industry is diminishing. Furthermore, petroleum-rich
countries have recently become more significant participants in the
petrochemical industry and may expand such role significantly in the future. Any
of these developments could have a negative impact on the Company's financial
position, results of operations and cash flows. See "Business -- Competition."
DEPENDENCE ON KEY CUSTOMERS
Certain of the Company's largest customers account for a significant
percentage of the Company's sales. In the year ended June 30, 1997 approximately
41% of the Company's sales were made to four customers. In addition, in the year
ended June 30, 1997 approximately 16.7% of the Company's total revenues were
derived from a single customer and 11.4% of the Company's total revenues were
derived from an additional single customer. Although the Company believes its
relationships with its largest customers are good, the loss of a significant
customer or a number of significant customers would have a material adverse
effect on the Company's financial condition, results of operations and cash
flows. There can be no assurance that the historic levels of business from these
customers or the Company's ability to replace a lost customer will be maintained
in the future.
ENVIRONMENTAL REGULATION
The Company's operations are subject to extensive Federal, state and local
laws, regulations and decrees governing, among other things, emissions to air,
discharges to waters and the generation, handling, storage, transportation,
treatment and disposal of waste materials. The Company's production facilities
require operating permits that are subject to revocation, modification and
renewal, violations of which may provide for substantial fines and civil or
criminal sanctions. The operation of any chemical manufacturing plant entails
risk of adverse environmental effect, including exposure to chemical products
and by-products from the Company's operations, and there can be no assurance
that material costs or liabilities will not be incurred to rectify any such
damage. In addition, potentially significant expenditures could be required in
order to comply with environmental, health and safety laws and regulations that
may be adopted or imposed in the future. To meet changing licensing and
regulatory standards, the Company may be required to make additional significant
site or operational modifications, potentially involving substantial
expenditures or the reduction or suspension of certain operations. See
"-- Dependence on Single Facility" and "Business -- Environmental
Regulation."
PRICE VOLATILITY OF PETROCHEMICAL FEEDSTOCKS
The Company uses large amounts of petrochemical feedstocks in the
manufacturing of its chemical products. While the Company tries to match cost
increases with corresponding price increases, there may be periods of time
during which increases in feedstock prices are not recovered by the Company due
to an inability to increase the selling prices of its products because of
weakness in demand for, or oversupply of, such products.
The principal raw material feedstocks purchased by the Company are crude
butadiene, isobutane and methanol. A number of the Company's raw material
suppliers provide the Company with a significant amount of its raw materials,
and if one significant supplier or a number of significant suppliers were unable
to meet their obligations under present supply arrangements, or if such
arrangements could not be renewed upon expiration, the Company could be required
to incur increased costs for its raw materials. The ability to pass on increases
in raw material prices to the Company's customers is, to a large extent,
dependent on market conditions. There may be periods of time in which increases
in feedstock prices are not recovered by the Company due to an inability to
increase the selling prices of its products because of weakness in demand for,
or oversupply of, such products, and therefore, certain increases in raw
materials prices may have a material adverse effect on the operations of the
Company.
13
<PAGE>
DEPENDENCE ON SINGLE FACILITY
The Company has one major operating facility located approximately one mile
from the Houston Ship Channel. The loss or shutdown of operations over an
extended period of time at such facility would have a material adverse effect on
the Company. The Company's operations are subject to the usual hazards
associated with chemical manufacturing and the related storage and
transportation of feedstocks, products and wastes, including explosions, fires,
inclement weather and natural disasters, mechanical failure, unscheduled
downtime, transportation interruptions, chemical spills, discharges or releases
of toxic or hazardous substances or gases and other environmental risks, such as
required remediation of contamination. These hazards can cause personal injury
and loss of life, severe damage to or destruction of property and equipment and
environmental damage, and may result in suspension of operations and the
imposition of civil or criminal penalties. The Company maintains property,
business interruption and casualty insurance at levels which it believes are in
accordance with customary industry practice, but there can be no assurance that
the Company will not incur losses beyond the limits or outside the coverage of
its insurance.
FACTORS AFFECTING DEMAND FOR MTBE
One of the Company's core products is MTBE, an oxygenate and octane
enhancer used in reformulated gasoline. The CAAA mandates numerous comprehensive
specifications for motor vehicle fuel, including minimum oxygen content and
reduced emissions of ozone precursors. Future demand for MTBE will depend on,
among other things, the degree to which the CAAA is implemented and enforced,
the possible adoption of additional legislation, the degree to which existing
ozone non-attainment areas come into compliance with air quality standards, the
degree to which gasoline suppliers can isolate ozone non-attainment areas where
the use of oxygenates is not required and the results of ongoing and any future
scientific studies regarding the health effects of oxygenates added to gasoline.
In addition, although the Company expects that there will be a continued market
preference and governmental support for MTBE, it is possible that alternative
oxygenates or octane enhancers could make inroads into MTBE's market share. See
"Business -- Industry Overview -- MTBE" and "Business -- Environmental
Regulation."
REGULATION OF EXPOSURE TO BUTADIENE
Butadiene is a known carcinogen in laboratory animals at high doses and is
being studied for its potential adverse health effects. Effective February 1997,
the Occupational Safety and Health Administration lowered substantially the
employee permissible exposure limit for butadiene. Although the Company believes
that it is in compliance with the new regulatory limit and may maintain
compliance without incurring significant costs, there can be no assurance that
future scientific studies regarding the health effects of butadiene or any other
product handled by the Company will not result in more stringent regulations or
in restrictions on the use of, or exposure to, such products. See
"Business -- Environmental Regulation."
ORIGINAL ISSUE DISCOUNT OF DISCOUNT NOTES
The Discount Notes were issued at a substantial discount from their
principal amount at final maturity. Consequently, although cash interest will
not accrue on the Discount Notes prior to July 1, 2001, and there will be no
periodic payments of cash interest on the Discount Notes prior to January 1,
2002, original issue discount will be included as interest on an accrual basis
in the gross income of a holder of Discount Notes, for federal income tax
purposes, in advance of the receipt of cash payments on the Discount Notes. See
"Certain Federal Income Tax Considerations" for a more detailed discussion of
the federal income tax consequences to the holders of the Discount Notes
regarding the purchase, ownership and disposition of the Discount Notes.
If a bankruptcy case is commenced by or against Holdings under the United
States Bankruptcy Code after the issuance of the Discount Notes, the claim of a
holder of Discount Notes with respect to the principal amount thereof may be
limited to an amount equal to the sum of (i) the portion of the initial issue
price of the Units allocated, for federal income tax purposes, to the Discount
Notes and (ii) that portion of the original issue discount which is not deemed
to constitute "unmatured interest" for purposes of the
14
<PAGE>
United States Bankruptcy Code. Any original issue discount that was not
amortized as of any such bankruptcy filing would constitute "unmatured
interest."
LACK OF PUBLIC MARKET FOR THE DISCOUNT NOTES
There is no public market for the Discount Notes. Holdings does not expect
a trading market in the Discount Notes to develop. No broker-dealer presently
intends to make a market in the Discount Notes. No assurances can be given as to
the liquidity of or trading market for the Discount Notes.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of securities
registered under this Prospectus.
15
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1997. The information set forth below should be read in conjunction with the
"Selected Financial Data" and the Company's Consolidated Financial Statements
and related notes thereto included elsewhere herein.
AS OF
JUNE 30, 1997
-------------
Cash and investment securities....... $ 0.1
=============
Long-term debt, including current
maturities:
Discount Notes.................. 34.2
Existing revolving line of
credit......................... 12.0
Tranche A Term Loan............. 25.8
Tranche B Term Loan............. 44.0
ESOP Term Loan.................. 8.0
Original Notes.................. 175.0
Notes........................... 52.9
-------------
Total long-term debt,
including current
maturities.............. 351.9
Common stock held by ESOP............ 8.0
Less -- Note receivable
from ESOP............... (8.0)
Total stockholders'
equity.................. 22.8
-------------
Total
capitalization..... $ 374.7
=============
16
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data set forth below has been derived from the
combined financial statements of TOC, its subsidiaries and Clarkston for periods
prior to July 1, 1996 and from the consolidated financial statements of the
Company since July 1, 1996, and should be read in conjunction with, and is
qualified in its entirety by reference to, financial statements which appear
elsewhere in this Prospectus and their accompanying notes. Such combined
financial information is combined to reflect the assumption by the Company of a
raw material supply contract. The combined financial information set forth below
for each of the years in the three-year period ended May 31, 1995, the
twelve-month period ended May 31, 1996 and the one-month period ended June 30,
1996 has been derived from the financial statements of TOC, its subsidiaries and
Clarkston, which were audited by Coopers & Lybrand L.L.P., independent auditors
for such entities. The consolidated financial information of the Company set
forth below for the year ended June 30, 1997 was audited by Deloitte & Touche
LLP. The results of the one month and interim periods are not necessarily
indicative of the results of the entire year or any other period. The
information presented below should be read in conjunction with the combined
financial statements of TOC, its subsidiaries and Clarkston, the consolidated
financial statements of the Company and the related notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere herein.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
----------------------------------------------------- -----------
TWELVE ONE
MONTHS MONTH YEAR
ENDED ENDED ENDED
YEAR ENDED MAY 31, MAY 31, JUNE 30, JUNE 30,
------------------------------- ------- -------- -----------
1993 1994 1995 1996 1996 1997
--------- --------- --------- ------- -------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................. $ 410.7 $ 352.4 $ 474.7 $455.6 $ 41.4 $ 490.2
Cost of goods sold(1)................ 340.8 268.8 396.3 379.5 36.0 433.7
Depreciation and amortization........ 12.6 13.6 14.3 15.0 1.3 29.8
--------- --------- --------- ------- -------- -----------
Gross profit......................... 57.3 70.0 64.1 61.1 4.1 26.7
Selling, general and administrative
expenses(1)........................ 14.4 16.7 16.6 19.1 1.7 8.4
--------- --------- --------- ------- -------- -----------
Income from operations............... 42.9 53.3 47.5 42.0 2.4 18.3
Interest income (expense), net....... (0.6) (0.2) 0.7 (1.6 ) (0.1) (39.4)
Other income (expense)(2)............ (1.2) (0.8) 1.1 (15.9 ) (0.3) 2.3
--------- --------- --------- ------- -------- -----------
Income (loss) before income taxes and
minority interest.................. 41.1 52.3 49.3 24.5 2.0 (18.8)
Provision (benefit) for income
taxes.............................. 13.0 18.4 16.9 7.9 0.8 (4.8)
Extraordinary loss................... -- -- -- -- -- 1.5
Minority interest in net loss of
consolidated subsidiary............ -- -- 0.1 0.1 -- --
--------- --------- --------- ------- -------- -----------
Net income (loss).................... 28.1 33.9 32.5 16.7 1.2 (15.5)
OPERATING DATA:
Revenues by product:
Butadiene(3).................... $ 81.3 $ 68.7 $ 106.2 $112.6 $ 10.2 $ 130.9
MTBE............................ 211.0 175.2 199.1 187.4 21.0 230.3
n-Butylenes..................... 21.7 28.1 42.7 48.2 3.2 49.4
Specialty Isobutylenes.......... 54.8 59.9 75.5 74.5 5.5 62.3
Other(4)........................ 41.9 20.5 51.2 32.9 1.5 17.3
Sales volumes (in millions of
pounds):
Butadiene....................... 556.2 484.4 580.8 622.6 64.6 750.3
MTBE(5)......................... 225.1 194.8 211.1 219.8 26.6 274.1
n-Butylenes..................... 114.7 150.8 245.9 284.6 17.1 266.4
Specialty Isobutylenes.......... 309.0 312.2 398.0 368.2 23.0 275.7
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
17
<PAGE>
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------------------------ --------
YEAR
MAY 31, ENDED
------------------------------- JUNE 30, JUNE 30,
1993 1994 1995 1996 1997
--------- --------- --------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD END):
Working capital...................... $ 38.6 $ 50.6 $ 67.3 $ 25.0 $ 12.6
Property, plant and equipment, net... 101.6 95.9 90.1 81.8 240.0
Total assets......................... 194.1 214.6 230.7 167.9 523.0
Long-term debt (including current
portion)........................... 10.9 11.0 -- 13.0 351.9
Total stockholders' equity........... 128.2 140.4 163.3 92.5 22.8
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------------------------------------ --------
TWELVE ONE
MONTHS MONTH YEAR
ENDED ENDED ENDED
YEAR ENDED MAY 31, MAY 31, JUNE 30, JUNE 30,
------------------------------- -------- -------- --------
1993 1994 1995 1996 1996 1997
--------- --------- --------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA(6)............................ $ 55.5 $ 66.9 $ 61.8 $ 57.0 $ 3.7 $ 50.4
Employee profit sharing and
bonuses(1)......................... 18.6 23.6 20.9 23.5 1.0 2.7
Capital expenditures................. 12.0 12.5 8.7 5.5 2.0 (7.6)
Net cash provided by operating
activities......................... 44.5 30.2 50.3 44.5 13.9 (1.8)
Net cash provided by (used in)
investing
activities......................... (7.2) (5.3) (25.9) 8.2 (1.3) (352.3)
Net cash used in financing
activities......................... (29.9) (17.6) (23.3) (69.0) (9.4) 354.2
Cash dividends....................... 23.7 21.4 6.2 16.5 -- --
Ratio of earnings to fixed
charges(7)......................... 16.1x 26.0x 26.3x 7.2x 9.4x --
</TABLE>
- ------------
(1) Historically, the Company has allocated employee profit sharing and bonuses
to cost of goods sold and selling, general and administrative expenses. For
the period subsequent to July 1, 1996 all profit sharing and bonuses have
been allocated to selling, general and administrative expenses. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations."
(2) Includes dividend income, charitable contributions, gain (loss) on disposal
of assets and investment securities, net, and other, net. For the twelve
months ended May 31, 1996, other expense includes an impairment of
investment in land of $12.6 million.
(3) Approximately 95% of the Company's butadiene sales are under fixed profit
contracts with suppliers of crude butadiene.
(4) Includes Clarkston's trading revenues from third parties (for the periods
prior to July 1, 1996), utility revenues, revenues realized from the
Company's terminalling facilities and sales of chemical by-products.
(5) Volumes in millions of gallons.
(6) EBITDA represents income before income taxes, extraordinary loss and
minority interest before taking into consideration interest expenses,
depreciation and amortization and certain other non-recurring charges.
EBITDA is presented because it is a widely accepted financial indicator of a
company's ability to incur and service debt. EBITDA should not be construed
by an investor as an alternative to income from operations (as determined in
accordance with generally accepted accounting principles), as an indicator
of the operating performance of the Company or as an alternative to cash
flows from operating activities (as determined in accordance with generally
accepted accounting principles) as a measure of liquidity.
(7) For purposes of this ratio, earnings consist of income before income taxes
and minority interest. Fixed charges consist of interest expense and the
portion of rents representative of an interest factor. For the twelve months
ended May 31, 1996, income before taxes and minority interest includes a
$12.6 million non-cash provision for the impairment of certain non-strategic
properties which TPC intends to sell. For the year ended June 30, 1997,
earnings were insufficient to cover fixed charges by the amount of $18.8
million.
18
<PAGE>
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company's revenues are derived primarily from merchant market sales of
butadiene, MTBE, n-butylenes (butene-1 and butene-2) and specialty isobutylenes
(isobutylene concentrate, high purity isobutylene, and diisobutylene). The
Company's results of operations are affected by a number of factors, including
variations in market demand, production volumes, and the pricing of its products
and primary raw materials. The Company believes that the pricing for its
principal products is primarily dependent on the balance between the global
supply and North American demand for each product, the cost structure of the
various global producers (including their cost of raw materials), and, from time
to time, other external factors, such as the implementation of the CAAA, which
has significantly increased the demand for MTBE. Historically, the Company has
successfully mitigated the cyclicality of the markets for certain of its end
products by entering into contracts with pricing which allows for a fixed profit
by linking prices directly or indirectly to raw material costs. In addition, the
Company has attempted to optimize the use of isobutylene, an intermediate
feedstock produced by the Company, to produce MTBE or higher margin, specialty
products depending on prevailing market conditions.
REVENUES
The Company's revenues are primarily a function of the volume of products
sold by the Company and the prices for such products. The following tables set
forth the Company's: (i) historical revenues and the percentages of historical
revenues by product; (ii) volume of products sold; and (iii) average selling
prices for such products, exclusive of tolling fees, in each case for the year
ended May 31, 1995, the twelve-month period ended May 31, 1996, the one-month
period ended June 30, 1996 and the year-ended June 30, 1997.
REVENUES
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
---------------------------------------------------------------- --------------------
TWELVE MONTHS
ONE MONTH YEAR
YEAR ENDED ENDED ENDED ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30,
-------------------- -------------------- -------------------- --------------------
1995 1996 1996 1997
-------------------- -------------------- -------------------- --------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Butadiene............... $ 106.2 22% $ 112.6 25% $ 10.2 25% $ 130.9 27%
MTBE.................... 199.1 42 187.4 41 21.0 50 230.3 47
n-Butylenes............. 42.7 9 48.2 11 3.2 8 49.4 10
Specialty
Isobutylenes.......... 75.5 16 74.5 16 5.5 13 62.3 13
Other(1)................ 51.2 11 32.9 7 1.5 4 17.3 3
--------- --- --------- --- --------- --- --------- ---
Total.............. $ 474.7 100% $ 455.6 100% $ 41.4 100% $ 490.2 100%
========= === ========= === ========= === ========= ===
</TABLE>
- ------------
(1) Includes Clarkston's trading revenues from third parties, utility revenues,
revenues realized from the Company's terminalling facilities and sales of
chemical by-products to third parties.
SALES VOLUMES
<TABLE>
<CAPTION>
COMPANY
PREDECESSOR --------
-----------------------------------------
TWELVE MONTHS ONE MONTH YEAR
YEAR ENDED ENDED ENDED ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30,
---------- ------------- ---------- --------
1995 1996 1996 1997
---------- ------------- ---------- --------
(MILLIONS OF POUNDS, EXCEPT WHERE NOTED)
<S> <C> <C> <C> <C>
Butadiene............................... 580.8 622.6 64.6 750.3
MTBE(1)................................. 211.1 219.8 26.6 274.1
n-Butylenes............................. 245.9 284.6 17.1 266.4
Specialty Isobutylenes.................. 398.0 368.2 23.0 275.7
</TABLE>
- ------------
(1) Volumes in millions of gallons.
19
<PAGE>
AVERAGE SELLING PRICES
<TABLE>
<CAPTION>
COMPANY
PREDECESSOR --------
-----------------------------------------
TWELVE MONTHS ONE MONTH YEAR
YEAR ENDED ENDED ENDED ENDED
MAY 31, MAY 31, JUNE 30, JUNE 30,
---------- ------------- ---------- --------
1995 1996 1996 1997
---------- ------------- ---------- --------
(DOLLARS PER POUND, EXCEPT WHERE NOTED)
<S> <C> <C> <C> <C>
Butadiene............................ $ 0.21 $0.20 $ 0.18 $ 0.19
MTBE(1).............................. 0.94 0.85 0.80 0.84
n-Butylenes(2)....................... 0.17 0.17 0.19 0.20
Specialty Isobutylenes(2)............ 0.19 0.20 0.24 0.23
</TABLE>
- ------------
(1) Prices in dollars per gallon.
(2) Weighted average of the products under these categories.
RESULTS OF OPERATIONS
The following table sets forth an overview of the Company's results of
operations .
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
---------------------------------------------------------------- --------------------
TWELVE MONTHS ONE MONTH
YEAR ENDED MAY 31, ENDED ENDED YEAR ENDED
MAY 31, JUNE 30, JUNE 30,
-------------------- -------------------- -------------------- --------------------
1995 1996 1996 1997
-------------------- -------------------- -------------------- --------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................................ $ 474.7 100% $ 455.6 100% $ 41.4 100% $ 490.2 100%
Cost of goods sold...................... 396.3 84 379.5 84 36.0 87 433.7 88
Depreciation and amortization........... 14.3 3 15.0 3 1.3 3 29.8 6
--------- --- --------- --- --------- --- --------- ---
Gross profit............................ 64.1 13 61.1 13 4.1 10 26.7 6
Selling, general and administrative
expenses.............................. 16.6 3 19.1 4 1.7 4 8.4 2
--------- --- --------- --- --------- --- --------- ---
Income from operations.................. $ 47.5 10% $ 42.0 9% $ 2.4 6% $ 18.3 4%
========= === ========= === ========= === ========= ===
</TABLE>
- ------------
YEAR ENDED JUNE 30, 1997 COMPARED TO THE TWELVE MONTHS ENDED MAY 31, 1996
REVENUES
The Company's revenues increased by approximately 8%, or $34.6 million, to
$490.2 million for the year ended June 30, 1997 from $455.6 for the twelve
months ended May 31, 1996. The increase was primarily attributable to increased
sales volumes of MTBE and butadiene, partially offset by decreases in sales
volume of specialty isobutylenes.
Butadiene revenues increased by approximately 16%, or $18.3 million, to
$130.9 for the year ended June 30, 1997 from $112.6 million for the twelve
months ended May 31, 1996. The increase was attributable to an increase in sales
volume of approximately 21%, or 127.7 million pounds, as a result of increased
production levels due to the availability of crude butadiene, processing
efficiencies and strong customer demand. The volume increase was partially
offset by a decline in butadiene sales prices. Prices declined slightly in the
current year as a result of the build up of U.S. tire inventory to record levels
in the prior year.
MTBE revenues increased by approximately 23%, or $42.9 million, to $230.3
million for the year ended June 30, 1997 from $187.4 million for the twelve
months ended May 31, 1996. With the decrease in demand for isobutylene
concentrate for the first half of the fiscal year, the Company shifted its
isobutylene production, an intermediate feedstock, to the production of MTBE.
Demand for MBTE in the market remained strong, allowing the Company to supply
increased volumes to its customers.
n-Butylenes revenues increased by approximately 2%, or $1.2 million, to
$49.4 million for the year ended June 30, 1997 from $48.2 million for the twelve
months ended May 31, 1996. Sales volumes and
20
<PAGE>
prices of butene-1 increased in the current year compared to the prior. The
increases were the result of strong demand from polyethylene producers and
successful marketing efforts by the Company. Sales volumes of butene-2 decreased
in the current year as a result of alternative feedstocks entering the market.
Specialty isobutylene revenues decreased by approximately 16%, or 12.2
million, to $62.3 million for the year ended June 30, 1997 from $74.5 million
for the twelve months ended May 31, 1996. The decrease was primarily
attributable to lower sales volumes of isobutylene concentrate. Product demand
was adversely affected in the first half of the year by high isobutane prices.
Significant improvements in isobutane pricing and demand occurred in the latter
half of the year. Sales revenues for high purity isobutylene and diisobutylene
decreased in the current year as a result of lower sales prices and slightly
lower sales volumes due to market competition.
Other revenues decreased by approximately 47%, or $15.6 million, to $17.3
million for the year ended June 30, 1997 from $32.9 million for the twelve
months ended May 31, 1996. The decrease in revenues is due to the elimination of
a former affiliate's trading revenues from third parties. The affiliate was
dissolved in June 1996 as part of the Acquisition.
GROSS PROFIT
Gross profit decreased by approximately 56%, or $34.4 million, to $26.7 for
the year ended June 30, 1997 from $61.1 million for the twelve months ended May
31, 1996. Gross margin during the period decreased to 5.4% from 13.4%. The
decrease was primarily attributable to lower margins on MTBE and specialty
isobutylene sales. MTBE margins were adversely affected by higher feedstock
costs. Average isobutane and methanol prices were approximately 13% and 25%
higher, respectively, than in the prior year. In December 1996, as a result of
the decline in MTBE margins, the Company shut down for 52 days its Dehydro-1
unit which has a production capacity of approximately 9,000 barrels per day of
isobutylene. Additionally, during October 1996, the Company temporarily shut
down Dehydro-1 for 21 days as a result of a scheduled turnaround in order to
install a new waste heat boiler. Higher natural gas prices also contributed to a
lower gross profit during fiscal 1997. Gross profits from sales of butadiene and
butene-1 increased over the prior year and were used to offset partially the
above referenced decrease. Gross profit was also negatively impacted by
increased depreciation and amortization expense during fiscal 1997 as a result
of the increased basis in fixed assets and goodwill from the Acquisition.
INCOME FROM OPERATIONS
Income from operations decreased by approximately 56%, or $23.7 million, to
$18.3 million for the year ended June 30, 1997 from $42.0 million for the twelve
months ended May 31, 1996. Operating margin during the period decreased to 3.7%
from 9.2%. This decrease in income from operations and operating margin was
primarily due to the same factors contributing to the decrease in gross profit
and gross margin described above. The decrease was partially offset by a
decrease in selling, general and administrative costs as a result of cost
savings subsequent to the Acquisition.
INTEREST EXPENSE
Interest expense increased by approximately $37.8 million, to $39.4 million
for the year ended June 30, 1997 from $1.6 million for the twelve months ended
May 31, 1996. The increase in interest expense was associated with long-term
debt incurred by the Company as a result of the Acquisition.
ONE MONTH ENDED JUNE 30, 1996 COMPARED TO ONE MONTH ENDED JUNE 30, 1995
REVENUES
The Company's revenues increased by approximately 14%, or $5.2 million, to
$41.4 million for the one month ended June 30, 1996 from $36.2 million for the
one month ended June 30, 1995. This increase was attributable to increased
volumes for butadiene and MTBE. Volumes for n-butylenes and specialty
isobutylenes were down compared to the prior period. Prices for butadiene were
up slightly and MTBE prices were down. Other product prices remained constant
with the prior period.
21
<PAGE>
GROSS PROFIT
Gross profit decreased by approximately 27%, or $1.5 million, to $4.1
million for the one month ended June 30, 1996 from $5.6 million for the one
month ended June 30, 1995. Gross margin during this period decreased slightly to
9.9% from 15.4%. The decline in gross profit was primarily attributable to the
decreased sales price of MTBE.
INCOME FROM OPERATIONS
Income from operations decreased by approximately 27%, or $0.9 million, to
$2.4 million for the one month ended June 30, 1996 from $3.3 million for the one
month ended June 30, 1995. Operating margin during this period declined to 5.9%
from 9.2%. This decrease in income from operations and operating margin was
primarily due to the same factors contributing to the decrease in gross profit
and gross margin described above.
TWELVE MONTHS ENDED MAY 31, 1996 COMPARED TO YEAR ENDED MAY 31, 1995
REVENUES
The Company's revenues decreased by approximately 4%, or $19.1 million, to
$455.6 million for the twelve months ended May 31, 1996 from $474.7 million for
the year ended May 31, 1995. This decrease was primarily attributable to
decreased selling prices for butadiene, MTBE and n-butylenes, as well as
decreased sales volumes for specialty isobutylenes and a decrease in other
revenues, partially offset by increased selling prices of specialty isobutylenes
as well as increased sales volumes of butadiene, MTBE and n-butylenes.
Butadiene revenues increased by approximately 6%, or $6.4 million, to
$112.6 million for the twelve months ended May 31, 1996 from $106.2 million for
the year ended May 31, 1995. This increase was primarily attributable to an
increase in sales volumes of approximately 7%, or 41.8 million pounds, as a
result of increased contractual volumes sold at then current prices to a major
customer as the Company gained a larger share of this customer's business and as
this customer increased its requirements. In addition, sales prices decreased
slightly due to customers drawing down inventory thereby decreasing overall
product demand.
MTBE revenues decreased by approximately 6%, or $11.7 million, to $187.4
million for the twelve months ended May 31, 1996 from $199.1 million for the
year ended May 31, 1995. This decrease was primarily attributable to a decrease
in selling prices due to the expiration of significant sales contracts in which
pricing was based on a fixed profit above cost, in accordance with industry
trends. In addition, sales volumes increased by approximately 4%, or 8.7 million
gallons, due to the full year implementation of mandated oxygenate requirements.
n-Butylenes revenues increased by approximately 13%, or $5.5 million, to
$48.2 million for the twelve months ended May 31, 1996 from $42.7 million for
the year ended May 31, 1995. This increase was attributable to increased sales
volumes of approximately 16%, or 38.7 million pounds, as the Company expanded
its customer base and increased its contractual volumes to a significant
existing customer. A decrease in average selling prices resulted from the
Company matching competitors' pricing for certain products, which partially
offset the increase in sales volumes.
Specialty isobutylenes revenues decreased by approximately 1%, or $1.0
million, to $74.5 million for the twelve months ended May 31, 1996 from $75.5
million for the year ended May 31, 1995. This decrease was the result of a major
specialty isobutylene customer increasing purchases of a low price specialty
isobutylene product from a competing supplier offering an alternate, lower
purity product during this period. The Company offset a portion of these lower
volumes by sales of higher priced specialty isobutylene products to other
customers at prices which were lower than prevailing contract prices.
Other revenues decreased by approximately 36%, or $18.3 million, to $32.9
million for the twelve months ended May 31, 1996, from $51.2 million for the
year ended May 31, 1995. This decrease was primarily due to a $17.5 million
decrease in sales from Clarkston to third parties due to reduced n-butane and
isobutane trading activity.
22
<PAGE>
GROSS PROFIT
Gross profit decreased by approximately 5%, or $3 million, to $61.1 million
for the twelve months ended May 31, 1996 from $64.1 million for the year ended
May 31, 1995. Gross margin during this period decreased slightly to 13.4% from
13.5%. The decline in gross profit was primarily attributable to a one-time 10%
salary increase for employees included in cost of goods sold, and to an
additional $3 million increase in cost of goods sold resulting from a scheduled
maintenance shutdown on one of the Company's dehydrogenation units and the
write-off of capitalized dehydrogenation catalyst costs, which resulted from an
unscheduled shutdown. In addition, depreciation and amortization increased
slightly related to new capital investments. These cost increases were partially
offset by a decrease in raw material methanol costs and a decrease in costs
associated with Clarkston's third party trading activities during this period.
INCOME FROM OPERATIONS
Income from operations decreased by approximately 12%, or $5.5 million, to
$42.0 million for the twelve months ended May 31, 1996 from $47.5 million for
the year ended May 31, 1995. Operating margin during this period declined to
9.2% from 10.0%. This decrease in income from operations and operating margin
was primarily due to the same factors contributing to the declines in gross
profit and gross margin described above, as well as a $2.5 million increase in
selling, general and administrative expenses primarily attributable to legal and
other expenses related to the repurchase of the Company's stock. See
"-- Liquidity and Capital Resources."
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
YEAR ENDED JUNE 30, 1997 COMPARED TO THE TWELVE MONTHS ENDED MAY 31, 1996
Net cash provided by (used in) operating activities was $(1.8) million for
the year ended June 30, 1997 compared to $44.5 million for the twelve months
ended May 31, 1996. The change of $46.3 million was primarily attributable to
the decrease in overall profitability and changes in working capital. Net cash
provided by (used in) investing activities was $(352.3) million for the year
ended June 30, 1997 compared to $8.2 million for the twelve months ended May 31,
1996. The change of $360.5 million was primarily attributable to the Acquisition
on July 1, 1996, partially offset by proceeds from the sale of non-plant assets
and Company assets and investments. Net cash provided by (used in) financing
activities was $354.2 million for the year ended June 30, 1997 compared to
$(69.0) million for the twelve months ended May 31, 1996. The change of $423.2
million was primarily attributable to the issuance of long-term debt and an
investment from Holdings, in order to finance the Acquisition.
ONE MONTH ENDED JUNE 30, 1996 COMPARED TO ONE MONTH ENDED JUNE 30, 1995
Net cash provided by operating activities was $13.9 million for the one
month ended June 30, 1996 compared to $1.9 million for the one month ended June
30, 1995. This increase of $12.0 million was primarily attributable to changes
in working capital, partially offset by a decrease in net income. Net cash used
in investing activities was $1.3 million for the one month ended June 30, 1996
compared to net cash provided by investing activities of $5.9 million for the
one month ended June 30, 1995. This change of $7.2 million was due to an
increase in capital expenditures and a decrease in proceeds from sales of
investment securities. Net cash used in financing activities was $9.4 million
for the one month ended June 30, 1996 compared to $4.5 million for the one month
ended June 30, 1995. This increase of $4.9 million was primarily due to a
decrease in bank overdrafts partially offset by an increase in borrowings under
revolving credit lines, a decrease in payments of notes payable and a decrease
in dividends paid.
TWELVE MONTHS ENDED MAY 31, 1996 COMPARED TO YEAR ENDED MAY 31, 1995
Net cash provided by operating activities was $44.5 million for the twelve
months ended May 31, 1996 compared to $50.3 million for the year ended May 31,
1995. This decrease of $5.8 million was primarily attributable to a decrease in
net income adjusted for non-cash items and a decrease in changes in working
23
<PAGE>
capital. Net cash provided by investing activities was $8.2 million for the
twelve months ended May 31, 1996 compared to net cash used in investing
activities of $25.9 million for the year ended May 31, 1995. This change of
$34.1 million was due to decreases in capital expenditures, an increase in
proceeds from the sales of investment securities and a decrease in purchases of
investment securities. Net cash used in financing activities was $69.0 million
for the twelve months ended May 31, 1996 compared to $23.3 million for the year
ended May 31, 1995. This increase of $45.7 million was primarily due to the
purchase by the Company of common stock for a total consideration of $95.4
million in August 1995 and an increase in dividends and distributions paid,
partially offset by the sale by the Company of common stock to certain officers
of the Company for $22.6 million and decreased repayments under revolving credit
lines.
LIQUIDITY
The Company's liquidity needs arise primarily from principal and interest
payments under the $140 million Bank Credit Agreement and $175 million principal
amount of Original Notes incurred in connection with the Acquisition, as well as
the $50 million principal amount of Notes, the net proceeds of which were used
to reduce indebtedness under the Bank Credit Agreement. The Company's primary
source of funds to meet debt service requirements is net cash flow provided by
operating activities. Operating cash flow is significantly impacted by raw
materials cost as well as the selling price and volume variances of finished
goods. The Company enters into supply contracts for certain of its products in
order to mitigate the impact of changing prices. Additionally, the Company has a
$40 million Revolving Credit Facility of which only $12 million was in use at
June 30, 1997, to provide adequate funds for ongoing operations, working
capital, planned capital expenditures and debt service during the terms of such
Revolving Credit Facility. The Company believes that the availability of funds
under the Revolving Credit Facility are sufficient to cover any current
liquidity needs which could arise as a result of negative working capital. The
Company's ability to borrow is limited by the terms of the Bank Credit Agreement
and the Notes Indenture and the Discount Notes Indenture. The Bank Credit
Agreement, the Original Notes, the Notes, and the Discount Notes include certain
restrictive covenants which include, but are not limited to, limitations on
capital expenditures, indebtedness, investments and sales of assets and
subsidiary stock. Additionally, the Bank Credit Agreement requires the Company
to maintain certain financial ratios. The Company obtained waivers under the
Bank Credit Agreement for compliance with certain financial ratios relating to
fixed charge coverage, debt to equity, and net worth as of December 31, 1996,
March 28, 1997 and June 30, 1997. The Company also obtained amendments to the
Bank Credit Agreement as of March 28, 1997 and June 30, 1997 to update these
financial ratios. See "Risk Factors -- "Restrictive Financing Covenants,"
"Description of the Bank Credit Agreement" and "Description of the Discount
Notes."
CASH BONUS PLAN
In connection with the Acquisition, the Company established the $35 million
Cash Bonus Plan covering substantially all employees of the Company (or certain
affiliates of the Company) and covering the employees of certain third-party
contractors who have contributed to the success of the Company. All participants
of the plan as of July 2, 1996 were distributed 10% of the cash bonus in August
1996, and the remaining amount is to be paid in sixteen quarterly installments
which began in October 1996.
CAPITAL EXPENDITURES
The Company's capital expenditures for fiscal 1997 related principally to
improving operating efficiencies and maintaining environmental compliance
(including the installation of an environmentally superior waste-heat boiler in
one of the Company's dehydrogenation units). Capital expenditures for the year
ended June 30, 1997 were $7.6 million, compared to $5.5 million for the twelve
months ended May 31, 1996 and $8.7 million for the year ended May 31, 1995. The
Company expenses approximately $20 million annually for plant maintenance. These
maintenance costs are not treated as capital expenditures.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
During 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128 "Earnings per Share," SFAS
No. 129 "Disclosure of Information about
24
<PAGE>
Capital Structure," SFAS No. 130, "Reporting Comprehensive Income," and SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 128 is effective for financial statements for both
interim and annual periods ending after December 15, 1997. SFAS No. 129 is
effective for periods ending after December 15, 1997. SFAS No. 130 and SFAS 131
are effective for fiscal years beginning after December 15, 1997. Adoption of
these pronouncements is not expected to have a material effect on the Company's
financial position, results of operations or cash flows.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
Part 1, Items 1 and 2 of this document include forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. Although the Company believes that the expectations reflected in such
forward looking statements are based upon reasonable assumptions, it can give no
assurance that its expectations will be achieved. Important factors that could
cause actual results to differ materially from the Company's expectations are
disclosed in conjunction with the forward looking statements included herein
("Cautionary Disclosures"). Subsequent written or oral forward looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the Cautionary Disclosures.
25
<PAGE>
BUSINESS
GENERAL
The Company is the largest producer of butadiene and butene-1, and the
third largest producer of MTBE, in North America, in terms of production
capacity. In addition, the Company is the sole producer of diisobutylene and
isobutylene concentrate in the United States and the largest domestic merchant
supplier of high purity isobutylene to the chemical market. The Company's
products include: (i) butadiene, primarily used to produce synthetic rubber;
(ii) MTBE, used as an oxygenate and octane enhancer in gasoline; (iii) n-
butylenes (butene-1 and butene-2), used in the manufacture of plastic resins,
fuel additives and synthetic alcohols; and (iv) specialty isobutylenes,
primarily used in the production of specialty rubbers, lubricant additives,
detergents and coatings. For the year ended June 30, 1997, and the twelve months
ended May 31, 1996, butadiene represented 27% and 25% of the Company's total
revenues, respectively, MTBE represented 47% and 41%, n-butylenes 10% and 11%,
respectively, specialty isobutylenes 13% and 16%, respectively and other
revenues the remaining 3% and 7%, respectively. The Company's revenues for the
year ended June 30, 1997, the twelve months ended May 31, 1996 and the one month
ended June 30, 1996 were $490.2 million, $455.6 million and $41.4 million,
respectively, and EBITDA (as defined) for the year ended June 30, 1997, the
twelve months ended May 31, 1996 and the one month ended June 30, 1996 were
$50.4 million, $57.0 million and $3.7 million, respectively.
Butadiene is the most widely used feedstock for synthetic rubber products
and is also used in the manufacture of engineered plastics, nylon fibers and
other products. The Company sells butadiene to a stable customer base ,
including The Goodyear Tire & Rubber Company, The Dow Chemical Company, American
Synthetic Rubber Inc. and Bridgestone/Firestone, Inc. As the largest producer of
butadiene in North America, the Company believes that many of its customers
place significant value on its ability to provide a reliable domestic supply of
butadiene and as a result have entered into long-term sales contracts with the
Company.
The Company extracts butadiene from crude butadiene, which is generated
from the production of ethylene and is comprised of a number of valuable
components, including butadiene, isobutylene, n-butylenes, isobutane and
n-butane. Many U.S. ethylene producers rely on third parties such as the Company
to process their crude butadiene streams, as the crude butadiene volumes they
produce are not sufficient to justify the construction of on-site butadiene
recovery facilities. The Company estimates that producers accounting for 65% of
U.S. and Canadian ethylene production capacity do not internally process crude
butadiene by-product streams. The Company is the largest non-integrated crude
butadiene processor in North America and as a result of its strategic importance
to ethylene producers, the Company has been able to secure long-term supply
contracts covering the majority of its crude butadiene requirements. Such
contracts provide for a fixed profit based on the Company's selling prices for
butadiene, and account for the relatively stable profitability of the Company's
butadiene operations.
MTBE is a blending stock which reduces carbon monoxide and volatile organic
compound emissions and enhances the octane content of gasoline, and has been one
of the fastest growing petrochemicals, in terms of volume, over the past fifteen
years. Today, MTBE is the preferred oxygenate for, and a major component of, RFG
and is used in over 30% of the U.S. gasoline pool. MTBE is produced by reacting
methanol and isobutylene, and the Company's ability to produce isobutylene by
three alternative methods enables it to produce MTBE by the most economical
processes available to the Company. In addition, the Company has the ability to
add incremental isobutylene capacity to capitalize on expected future growth, at
a significantly lower cost than new grass root, on-purpose capacity. The Company
believes that this incremental capacity gives it a competitive advantage over
other producers who would have to incur greater cost to increase capacity. The
Company sells MTBE to oil refiners and gasoline producers, including Mobil Oil
Corporation, Lyondell Petrochemical Company and CITGO Petroleum Corporation on
both a contract and spot basis at prices linked to prevailing market prices.
The Company is the leading producer of high margin n-butylenes and
specialty isobutylenes in North America. In recent years, the Company has
increased its sales of these products by increasing its market share in
polyolefin applications and the development of new end-use applications. The
Company's principal
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customers for n-butylenes include Union Carbide Corporation, The Dow Chemical
Company, NOVA Chemicals Ltd., Shell Chemical Company and Lyondell Petrochemical
Company. The Company's principal customers for specialty isobutylenes include
Bayer Inc., Mobil Chemical Company Inc., Rhone-Poulenc Inc., The Lubrizol
Corporation and Schenectady International, Inc. Historically, the profitability
of the Company's n-butylenes sales has been relatively stable as the majority of
the sales of these products are made under contracts which link their selling
prices to the prices of products (principally gasoline and butanes) whose prices
fluctuate closely with those of the raw materials used to manufacture
n-butylenes and specialty isobutylenes.
The Company's principal feedstocks are crude butadiene, isobutane and
methanol. One of the Company's intermediate feedstocks, isobutylene, is used in
the manufacture of MTBE and specialty isobutylenes. As part of its production
strategy, the Company uses its manufactured isobutylene first to maximize the
production of high margin specialty isobutylenes, second, to satisfy its
contractual MTBE requirements, and finally, to produce MTBE for sale in the spot
market. In addition, the Company maintains the production flexibility to upgrade
n-butylenes contained in crude butadiene streams to either isobutylene or
butene-1 using its patented SKIP process. This flexibility allows the Company to
meet its customers' needs through the most economical process, to produce
additional products and to capitalize on favorable market conditions.
The Company's manufacturing facility, located approximately one mile from
the Houston Ship Channel, provides convenient access to other Gulf Coast
petrochemical producers and is connected to several of its customers and raw
materials suppliers through an extensive pipeline network. In addition, the
Company's facility is serviced by rail, tank truck and barge.
The Company was founded in 1968, at which time the Company was principally
engaged in the installation of crude butadiene processing facilities. In 1984,
the Company acquired from Tenneco, Inc. the assets (principally comprised of the
Houston facility) of Petro-TexChemical Corporation ("Petro-Tex"), the prior
owner of the Company's manufacturing facility.
COMPANY STRATEGY
The Company believes that it has become the industry leader in the
production of the majority of its products by capitalizing on its production
flexibility, its ability to add significant incremental capacity across its
product lines, the marketing experience of its management team, its competitive
cost position and its customer focus. The Company's strategy is to strengthen
its established presence in its selected markets by focusing on the following
factors:
REDUCE EXPOSURE TO CYCLICAL END-MARKETS -- The markets in which the Company
competes are cyclical. The Company intends to mitigate the effects of this
cyclicality while benefiting from potential upturns in industry profitability by
optimizing the proportion of its sales made under contracts allowing for a fixed
profit or at prices linked directly or indirectly to raw material prices.
CAPITALIZE ON PRODUCTION FLEXIBILITY -- The Company has the ability to
produce a number of its intermediate and finished products (I.E. crude
butadiene, isobutylene and butene-1) by a variety of processes. The Company
intends to capitalize on this ability by shifting production to the most
economical process and production level based upon market conditions, thus
ensuring a reliable source of supply for its customers.
UTILIZE INCREMENTAL CAPACITY -- The Company can increase its capacity to
produce butadiene, isobutylene and its derivatives at significantly lower cost
than that of new construction. While the Company currently has no plans to
increase its production capacity, it continuously evaluates these strategic
options in light of prevailing market conditions. In addition, the Company
believes that its ability to add low-cost incremental capacity acts as a
deterrent to other producers and new entrants considering capacity expansions.
The Company's ability to add incremental butadiene capacity and its
relationships with several North American ethylene producers are expected to
enable it to capture the benefit of increased U.S. crude
27
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butadiene supply. In addition, announced butadiene capacity expansions by other
U.S. producers are minimal. The Company believes that growth in global demand
for butadiene will be consistent with gross domestic product growth based on
increased tire production and potential substitution of synthetic rubber for
natural rubber.
RESPOND TO FAVORABLE INDUSTRY DYNAMICS -- The Company's production
flexibility and its ability to add low-cost capacity are crucial to its
capitalizing on the attractive demand/supply outlook for a number of its
products.
o BUTADIENE. The U.S. supply of crude butadiene is increasing in line
with domestic ethylene production, although it is currently
insufficient to meet U.S. demand. Industry operating rates are
expected to remain at current high levels as the increase in domestic
crude butadiene production is expected to replace imports with
butadiene demand remaining strong in support of derivative businesses.
o MTBE. While the Company expects U.S. demand for MTBE to grow less
quickly than it has over the past fifteen years, it believes that
future growth in foreign demand may be considerable. In addition,
recently announced U.S. MTBE capacity additions are minimal.
o BUTENE-1. Demand for butene-1 is closely linked to polyethylene
production growth. The Company expects global production of
polyethylene to increase at higher than historical rates in the next
four years. In addition, the Company expects demand for butene-1 used
in other applications to be strong.
SUSTAIN CUSTOMER FOCUS -- The Company believes that producing quality
products and providing quality service with dependable supply are key factors in
its ability to compete in the market place for its products. Management believes
that its focus on customer service has resulted in strong customer relationships
and a high degree of customer loyalty. This is evidenced by the fact that
approximately 60% of the Company's current customers have purchased products
from the Company for more than ten years.
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The following table summarizes the Company's products.
<TABLE>
<CAPTION>
REVENUES FOR
YEAR ENDED INTERMEDIATE
COMPANY PRODUCT JUNE 30, 1997 CHEMICAL PRODUCTS PRINCIPAL APPLICATIONS
- ------------------------------------ ---------------------------------------------------------------------
(IN MILLIONS)
<S> <C> <C> <C>
BUTADIENE $ 130.9 Styrene-Butadiene Rubber Tires, gaskets, pipes and hoses
Styrene-Butadiene Latex Paints, adhesives and paper coatings
Acrylonitrile Butadiene Styrene High-performance plastics
Polybutadiene Rubber Tires
Hexamethylenediamine Nylon
MTBE $ 230.3 Reduces automotive emissions and
improves engine performance
N-BUTYLENES $ 49.4
Butene-1 High Density and Linear Low Trash bags, film wrap, pipe and
Density Polyethylene plastic containers
Butylene Oxide Detergent packages used in new
gasoline formulations to improve
engine performance
Butene-2 SEC-Butyl and other Alcohols Used in the production of coatings,
adhesives and plasticizers
SPECIALTY
ISOBUTYLENES $ 62.3
Isobutylene
Concentrate Butyl Rubber High-performance synthetic rubbers
used in tires
Polybutenes Lubricant additives
High Purity
Isobutylene Butyl Rubber High-performance synthetic rubbers
used in tires
Alkylphenols Resins and antioxidants
Agricultural Intermediates Herbicides and insecticides
Hydrocarbon Resins Sealants, paints, coatings and rubber
chemicals
Sulfurized Isobutylene Synthetic lubricant oils
Diisobutylene Alkylphenols Phenolic resins, tackifier and ink
resins, surfactants
Rubber Chemicals Specialty additives
Dispersants Lubricant oil additives
Polycarboxylate Polymers Water treatment, detergent and
mineral processing chemicals
</TABLE>
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INDUSTRY OVERVIEW
BUTADIENE. Butadiene is an important raw material used in the production
of a number of products, including styrene-butadiene rubber ("SBR"),
polybutadiene rubber, styrene-butadiene ("SB") latex, acrylonitrile butadiene
styrene ("ABS") and hexamethylenediamine ("HMDA"). These products are
utilized in the manufacture of tires and other rubber products, engineered
plastics, nylon fibers and other uses.
Demand for butadiene depends to a large extent on trends in the housing and
automotive sectors, principally the replacement tire market. The tire
replacement market has historically been less cyclical than the market for
original equipment tires and accounts for approximately 75% of all U.S. car and
commercial vehicle tire production. The Company expects continued growth in
butadiene end-use demand over the next several years consistent with global
gross domestic product growth. The Company believes that U.S. tire production
could increase as a result of higher volumes of domestic automobile production
due to foreign "transplant" production.
The most important butadiene derivative is SBR, which is primarily used in
the manufacture of tires, gaskets and hoses. Since 1990, the demand for SBR has
increased at a compound annual growth rate of approximately 3%. Although SBR
markets are mature, the Company expects that demand for higher performance tires
and truck tires may contribute to growth in demand for SBR at higher than
historical levels.
Polybutadiene rubber provides higher abrasion resistance than other rubbers
which makes it preferential for high performance tires, plastics applications
and other heavy duty uses. Other types of synthetic rubber produced from
butadiene include polychloroprene rubber, used in wire and cable applications,
and nitrile rubber, which, due to its high tensile strength and abrasion
resistance, is used in specialty applications, such as hoses, tubes and belts.
Butadiene derivatives which are not used to produce synthetic rubber
primarily consist of HMDA, SB latex and ABS. Historically, demand for these
products has generally reflected global gross domestic product growth. HMDA is
an intermediate in the production of nylon fiber. SB latex demand is driven by
its use in paints, adhesives and paper coatings. ABS resins are used in the
production of high-performance plastics with a wide range of applications in the
automotive, appliance and electronics industries.
Butadiene producers are currently operating at historically high rates and
the Company believes that no new capacity is expected to come on-line in the
U.S. in the next five years. Management believes that the Company's existing
capacity and low-cost expansion alternatives act as an effective deterrent to
the construction of new facilities by others in the United States.
The major source of supply for butadiene is extraction from crude
butadiene, a by-product of ethylene production. In the U.S., volumes of crude
butadiene from ethylene facilities are inadequate to meet domestic demand. The
U.S. imports a large portion of its requirements of butadiene and crude
butadiene, especially from Western Europe, where most ethylene facilities use
feedstocks which result in the production of proportionately more crude
butadiene than in the U.S. Historically, the price of butadiene has been
determined by supply, which is influenced by the amount of ethylene produced and
the availability of crude butadiene, and butadiene demand, which is determined
by demand for end-use products, such as tires, engineered plastics and nylon
fibers.
MTBE. MTBE has been one of the fastest growing petrochemicals, in terms of
volume, during the past fifteen years, with global production rising from
approximately 15,000 barrels per day in 1980 to approximately 382,000 barrels
per day in 1995. MTBE's dramatic growth has been a result of two significant
factors. First, MTBE has a high octane rating, which makes it a valuable
gasoline blendstock for adding octane to gasoline. Second, MTBE contains a high
percentage weight (approximately 18%) of oxygen. Its high oxygen level, which
results in improved combustion and reduces the level of carbon monoxide and
ozone-depleting emissions from automobile engines, contributes to MTBE's use as
a blending agent in oxygenated and reformulated gasolines. These properties and
its large scale global production capacity have made it the preferred oxygenate
and a major component of RFG in the U.S.
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The use of lead additives in gasoline declined dramatically during the
1980s as a result of environmental legislation. Following such legislation,
octane needs increased, which increased world MTBE use considerably. The passage
of the CAAA in 1990 in the U.S. has caused another round of MTBE production
capacity additions and blending use increases during the past four years.
The two programs mandated by the CAAA which have the most significant
effect on the MTBE market are the oxygenated gasoline and the RFG programs. The
oxygenated gasoline program was initiated in 1992, with the goal of reducing
winter carbon monoxide emissions. With the implementation of the RFG program in
1995, the use of RFG was required in the nine major urban areas with the most
severe ozone pollution. High RFG prices and public health concerns, particularly
in cold weather climates, kept MTBE use below the levels that had been
anticipated in the industry at the time of the passage of the CAAA. Despite the
problems with the implementation of the CAAA, the Company expects continued
growth in the use of MTBE, although at slower rates than in the 1980s as the
regulations requiring "cleaner" gasoline have, in large measure, gone into
effect in the U.S. The Company anticipates that higher rates of growth in MTBE
use will continue to prevail in certain regions of the U.S. and internationally,
due to consumer preference or where RFG use is now optional but may be required
by state or local governments. For example, California has mandated greater
usage of oxygenates in a gasoline reformulated for use in that state, and the
use of lead in gasoline continues to decline in certain European, South American
and Far Eastern countries. The Company also expects new capacity expansions to
be minimal over the next several years due to current industry overcapacity as a
result of large increases in U.S. production capacity in the early 1990s in
anticipation of the implementation of the CAAA programs.
MTBE pricing is primarily determined by the price of RFG due to its value
as an octane enhancer and as an oxygenate. The price difference between regular
unleaded and higher octane, premium unleaded gasoline provides a valuation for
octane from which the value of MTBE as an octane enhancer can be derived. At
various times, depending on the supply and demand for MTBE, MTBE pricing enjoys
a premium over this octane value, reflecting its value as an oxygenate. MTBE
pricing is relatively volatile. The MTBE market has experienced alternating
periods of tight supply and rising prices and profit margins, followed by
periods of capacity additions resulting in oversupply and declining prices and
margins. Historically, MTBE was sold in the U.S. under sales contracts which
allowed suppliers to recover raw material costs and earn a fixed profit. Sales
prices under these contracts were higher than the then prevailing spot prices.
Prices decreased substantially from 1985 to 1986 based on low gasoline prices.
As gasoline prices recovered in 1988 and 1989, MTBE prices followed. Prices
increased substantially prior to and during the Persian Gulf war beginning in
late 1990, although prices fell back sharply from 1991 to 1993 as supply
outpaced demand. MTBE prices increased in 1994 due to high methanol prices (that
were passed on to users) until methanol prices decreased significantly in the
first quarter of 1995. More recently, MTBE prices have rebounded from their 1995
lows as a result of much higher demands from the RFG program.
There are a number of competing oxygenate products to MTBE, including
ethanol, ethyl TERTIARY-butyl ether (ETBE) and TERTIARY-amyl methyl ether
(TAME). However, management believes that MTBE will continue to be the U.S.
gasoline industry's oxygenate of choice due to a number of factors, including
price, available capacity, chemical properties and the EPA's CAAA rules
regarding minimum oxygen content in fuels.
BUTENE-1. Butene-1 is used as a comonomer in the production of high
density polyethylene ("HDPE") and linear low density polyethylene ("LLDPE").
Both HDPE and LLDPE are raw materials for the production of trash bags, film
wrap, pipe and plastic containers. Comonomers are added to polyethylene to
improve characteristics such as tear and crack resistance. The Company expects
global HDPE and LLDPE demand to increase at an annual compound growth rate of 6%
and 14%, between 1994 and 1999, respectively. In the U.S., butene-1 is facing
increased competition from other comonomers such as hexene-1 which, although
more expensive than butene-1, improves certain properties of polyethylene
resins. The Company believes that butene-1 demand for use in polyethylene will
continue to grow in line with demand for polyethylene. Historically, pricing of
butene-1 has been determined by demand based on its use as a polyethylene
comonomer, and its competitive position with other comonomers such as hexene-1.
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<PAGE>
Butene-1 is also used to produce butylene oxide, a key component of
detergent additive packages used in many gasoline formulations.
BUTENE-2. Butene-2 is recovered as part of the crude butadiene stream that
remains after extraction of butadiene, isobutylene and butene-1. The Company
sells purified butene-2 primarily for use in the production of coatings and
plasticizers. Due to the high quality of the butene-2 produced by the Company,
it has historically received a higher than market price.
ISOBUTYLENE CONCENTRATE. Isobutylene concentrate is similar to high purity
isobutylene in composition, although its purity is 88% isobutylene compared to
99.9% in high purity isobutylene. The Company markets isobutylene concentrate
for use in the growing lubricant additives business as well as for use in the
production of butyl rubber. The Company is the sole U.S. producer of isobutylene
concentrate.
HIGH PURITY ISOBUTYLENE. High purity isobutylene is used in the production
of butyl rubber, which is used to produce tires and in specialty chemical
applications such as in the production of resins, antioxidants, paints and
coatings, synthetic lubricant oils and rubber chemicals. The Company is
currently the largest domestic merchant supplier of high purity isobutylene to
the chemical market and competes with ARCO Chemical Company and Exxon Chemical
Company.
DIISOBUTYLENE. Diisobutylene is used primarily as an intermediate in the
manufacturing of alkylphenols for the surfactant and phenolic resins markets.
Other uses include the production of tackifier and ink resins, dispersants for
lubricant oil additives, and rubber and processing chemicals. The Company is the
sole U.S. producer of diisobutylene.
PRODUCTION PROCESS
The Company's production operations are based on a number of key factors:
(i) UPGRADING BY-PRODUCT STREAMS: The Company has contracted to purchase
certain volumes of crude butadiene from its suppliers. This volume
determines the Company's ability to produce butadiene and n-butylenes
and also provides some isobutylene (typically 10% of total
isobutylene production) for the production of MTBE and specialty
isobutylenes.
(ii) MAXIMIZING USE OF ISOBUTYLENE: Under normal operating conditions,
the Company maximizes isobutylene production from its
dehydrogenation units. The isobutylene processed is first processed
into specialty isobutylenes to satisfy customer demand, secondly
used to produce MTBE to satisfy contractual demand and thirdly, used
to produce MTBE for sale in the spot market.
(iii) INCREMENTAL PRODUCTION CAPABILITY: The Company has the ability to
augment its isobutylene and butene-1 production by the processing of
butene-2 in its SKIP unit, depending on the relative profitability
from additional isobutylene production (for use in either MTBE or
specialty isobutylenes) or butene-1 sales. In addition, "on
purpose" crude butadiene can be produced from butene-2 using the
OXO-D process, as well as from n-butane using dehydrogenation.
BUTADIENE PRODUCTION PROCESS
The Company has the largest butadiene production and finishing facilities
in North America and has an annual production capacity of 840 million pounds of
butadiene, representing approximately 18% of U.S. and Canadian production
capacity. In the year ended June 30, 1997, the Company sold and toll-processed
750 million pounds of butadiene.
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<PAGE>
[CHART SHOWING PRODUCTION OF BUTADIENE]
The Company obtains crude butadiene from three different sources: (i)
purchasing crude butadiene from suppliers; (ii) Oxo-dehydrogenation of
n-butylenes using the Company's patented OXO-D process; and (iii)
dehydrogenation of n-butane.
The Company primarily produces butadiene from purchased crude butadiene,
which is generally the lowest cost method of production. Such crude butadiene is
a by-product of ethylene production.
"On-purpose" crude butadiene production involves the synthesis of crude
butadiene from n-butane and n-butylenes using the Company's OXO-D process and
the Houdry dehydrogenation process. The OXO-D process was developed by the
Company using a proprietary catalyst. The OXO-D unit has an annual capacity to
produce up to 400 million pounds of crude butadiene, which can be processed to
extract butadiene. The Company's dehydrogenation units can produce n-butylenes
(instead of isobutylenes under normal configuration) using the Houdry process,
by switching feedstock from isobutane to n-butane. Such n-butylenes can be used
to produce crude butadiene using the OXO-D process. As this method of production
is relatively expensive and reduces the volume of isobutylene available for MTBE
production, it is used only when butadiene pricing makes it economically
attractive.
The OXO-D unit and its dehydrogenation capabilities give the Company the
only on-purpose butadiene production capability in the U.S. and reinforce the
Company's image with its customers as a reliable source of butadiene under a
wide variety of market conditions.
The Company's manufacturing flexibility is advantageous for two reasons.
First, the Company is not dependent on any particular feedstock to produce
butadiene and it can therefore provide a reliable source of supply under a
variety of market conditions for its customers. Secondly, it permits the Company
to increase butadiene production in favorable market conditions, subject to the
capacity limitations of the Company's finishing facilities.
The Company believes that it is currently the only butadiene producer in
North America with the ability to add significant incremental capacity with
minimal capital expenditures. The Company believes that this acts as a deterrent
to new entrants and other producers considering capacity expansions and will
enable the Company to process increased volumes of crude butadiene from new
ethylene facilities which are currently being built in North America.
The Company also toll processes crude butadiene under contract on behalf of
third parties for a fee which allows the Company to recover its energy
production costs plus a fixed dollar amount. Typically, the Company delivers
finished butadiene to the customer and purchases the other butylenes contained
in the stream, which can be upgraded to higher value uses, such as specialty
isobutylenes, butadiene and n-butylenes.
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<PAGE>
MTBE PRODUCTION PROCESS
The Company owns two MTBE units with a combined capacity to produce 25,000
barrels per day, which represents approximately 9% of North American production
capacity. The Company sold an average of 17,873 barrels per day in the year
ended June 30, 1997.
[CHART SHOWING PRODUCTION OF MTBE]
- ------------
(1) Raffinate-1 is produced after butadiene has been extracted from purchased
crude butadiene.
MTBE is produced by reacting isobutylene and methanol. The Company produces
isobutylene, the principal raw material for MTBE, using any one of three
processes: (i) extraction from raffinate-1, which is produced after butadiene
has been extracted from crude butadiene; (ii) dehydrogenation of purchased
isobutane; and (iii) production from n-butylenes (predominantly butene-2) using
the Company's patented SKIP process. The other primary raw material, methanol,
is purchased from third parties in the spot market and under contract and is
transported to the Company's facility by barge.
Isobutylene is removed from the raffinate-1 stream by processing
raffinate-1 through the Company's MTBE unit. The MTBE reaction is highly
selective and efficiently removes isobutylene from the stream. The stream
remaining is called raffinate-2.
The Company has three dehydrogenation units, two of which have been
completely refurbished and are fully operational. Using these two units, the
Company has the ability to produce a total of 18,000 barrels per day of
isobutylene. The Company estimates that the third dehydrogenation unit, with an
additional capacity of 8,000 barrels per day, could be refurbished at a cost of
approximately $100 million, substantially less than the cost of a new
dehydrogenation unit. This refurbishment would increase the Company's capacity
to produce isobutylene for use either in MTBE or specialty isobutylenes by
approximately one third. The Company currently does not have any plans to
undertake this refurbishment, although this could change depending on market
conditions. The Company has fully paid-up rights to the technology used in its
dehydrogenation units and no royalty or other licensing payments are required.
Isobutane is purchased under long-term contract and supplemented with spot
purchases.
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The Company currently has sufficient additional MTBE capacity to enable it
to take advantage of future expected growth. The Company believes that this
additional capacity gives it a competitive advantage over other producers which
would have to incur greater cost to increase capacity.
The Company's SKIP unit upgrades butene-2 to either butene-1 or isobutylene
depending on requirements. Isobutylene production is normally operated so that a
portion of the isobutylene produced by dehydrogenation is used in the production
of isobutylene concentrate and diisobutylene and the remainder is used to
produce MTBE. In addition, a small amount of MTBE production is used in the
production of high purity isobutylene. The configuration of the plant provides
the flexibility to vary the relative quantities of MTBE and isobutylene products
produced.
N-BUTYLENE PRODUCTION PROCESS
The Company has the largest butene-1 processing capacity in North America
and has an annual production capacity of 275 million pounds of butene-1,
representing approximately 40% of North American production capacity. In the
year ended June 30, 1997 the Company sold 197 million pounds of butene-1 and 34
million pounds of butene-2.
[CHART SHOWING PRODUCTION OF BUTANES, BUTENE-2 AND BUTENE-1]
- ------------
(1) Raffinate-1 is produced after butadiene has been extracted from purchased
crude butadiene.
The Company has the ability to produce butene-1 using two different
processes: (i) fractionation from raffinate-2, which is produced after
isobutylene has been extracted from raffinate-1; and (ii) production from
n-butylenes (predominantly butene-2) using the Company's patented SKIP process.
After the removal of butene-1, the remaining n-butylenes stream (containing
principally butene-2 and n-butane) is either: (i) further purified to butene-2
which the Company sells intermittently based on customer demand; (ii) used as a
feedstock in the Company's SKIP process to produce butene-1 or isobutylene; or
(iii) used as a feedstock in the OXO-D process to produce crude butadiene. The
remaining product stream, containing principally n-butane, is sold to third
parties as a chemical by-product.
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SPECIALTY ISOBUTYLENE PRODUCTION PROCESSES
[CHART SHOWING PRODUCTION OF HIGH PURITY ISOBUTYLENE,
ISOBUTYLENE CONCENTRATE AND DIISOBUTYLENE]
The Company takes advantage of its isobutylene production and extraction
capabilities to produce high purity isobutylene, isobutylene concentrate and
diisobutylene. The Company is currently the only U.S. producer of isobutylene
concentrate and diisobutylene and it is the largest of three U.S. producers of
high purity isobutylene.
High purity isobutylene is manufactured by "back-cracking" a small
portion of the MTBE product stream into its components, isobutylene and
methanol. The isobutylene produced by this method is of extremely high purity
and the methanol is recycled and used in subsequent MTBE production. The Company
has an annual capacity to convert MTBE into 100 million pounds of high purity
isobutylene, and in the twelve months ended June 30, 1997, it sold 68 million
pounds.
The Company uses its patented dimerization process to produce diisobutylene
and has an annual production capacity of 50 million pounds. In the year ended
June 30, 1997 the Company sold 37 million pounds of diisobutylene principally on
a contractual basis.
Some of the isobutylene produced by the Company is sold as concentrate. The
Company has an annual production capacity of 380 million pounds of isobutylene
concentrate and, in the year ended June 30, 1997, it sold 170 million pounds of
isobutylene concentrate. The Company has been successful in working with
customers to demonstrate the viability of concentrate as an alternative to high
purity isobutylene or lower purity raffinate-1 feedstock. The Company sells
isobutylene concentrate under contracts at prices linked to the cost of
isobutane feedstock and including energy costs and other components of
isobutylene concentrate, plus a fixed profit, as well as on the spot market.
While produced in smaller volumes than the Company's more commodity-type
products, specialty isobutylenes have historically had high margins due to the
niche sales markets for their end-use products.
OTHER OPERATIONS
The Company operates a large scale cogeneration power plant that supplies
electricity and processes steam to the facility's chemical processing
operations. Excess capacity of this power plant, as well as steam and boiler
feed water are currently sold to neighboring facilities under contracts at a
price equal to the cost of fuel plus a fixed profit. In addition, the Company
generates revenues from its terminals in Baytown, Texas and Lake Charles,
Louisiana and from chemical by-product sales to third parties.
CONTRACTS
The Company enters into three general types of contracts in connection with
its production processes: feedstock supply contracts, product sales contracts
and, to a lesser extent, toll manufacturing agreements. The majority of these
contracts have terms of two to three years and provide for successive one-year
renewals unless either party objects to such renewal in a timely manner. There
can be no assurance that
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these agreements will remain in effect beyond their current terms or, if
extended, that the same provisions would continue to apply.
FEEDSTOCK SUPPLY. The Company typically purchases its principal feedstock,
crude butadiene, under contracts which require suppliers to deliver a percentage
(varying from 50% to 100%) of their total crude butadiene production. The price
of crude butadiene to the Company is typically based on the price of its
principal components: butadiene, n-butylenes, isobutylene and n-butane. The
price for the butadiene component of crude butadiene is generally set at the
Company's average selling price for butadiene less a fixed dollar amount, which
includes a variable component for energy costs. The prices for the n-butylene
and isobutylene components of crude butadiene are linked to spot gasoline prices
and the n-butane and isobutane components are linked to spot n-butane prices.
The Company typically purchases methanol under contracts which require the
supplier to deliver minimum volumes of methanol. Methanol is generally purchased
at a discount to the prevailing market price, subject to specified minimum and
maximum price ranges.
The majority of the Company's isobutane is purchased under contract from
EPC Venture, Inc. which provides 450,000 barrels per month. This supplier also
provides storage and pipeline transportation. Isobutane is purchased at the
prevailing average market price for each month.
PRODUCT SALES. The Company's sales contracts typically require customers
to purchase minimum volumes expressed either in absolute terms or as a
percentage of the customer's product needs. Pricing for butadiene is generally
set at a small discount to the recognized U.S. Gulf Coast contract market price,
while MTBE pricing is typically based on the average U.S. Gulf Coast spot market
price. Butene-1 is sold under contracts at prices based on formulae which links
the butene-1 selling price to the price of gasoline. Butene-1 is also sold on
the spot market at prevailing prices. Butene-2 is sold at negotiated market
prices. Pricing for isobutylene concentrate is generally linked to the cost of
its principal raw material, isobutane, and fuel plus a transportation fee and
other components, which are linked to relevant average spot market prices.
Pricing for high purity isobutylene and diisobutylene is typically based on
market prices.
TOLL MANUFACTURING AGREEMENTS. The Company toll processes crude butadiene
under contracts on behalf of third parties, including The Dow Chemical Company,
The Goodyear Tire & Rubber Company and Phillips 66 Company. Typically, the
Company returns butadiene to the customer and purchases the other butylenes and
butanes contained in the crude butadiene stream. The toll process fees allow the
Company to recover its energy production costs plus a fixed dollar amount. In
addition, the Company returns purified butene-1 to certain of its crude
butadiene suppliers under similar arrangements.
OTHER. The Company also provides storage and terminalling services under
contract to certain of its customers at its Baytown and Lake Charles facilities.
COMPETITION
The petrochemical businesses in which the Company operates are highly
competitive. Many of the Company's competitors, particularly in the
petrochemical industry, are larger and have greater financial resources than the
Company. Among the Company's competitors are some of the world's largest
chemical companies and major integrated petroleum companies that have their own
raw material resources. In addition, a significant portion of the Company's
business is based upon widely available technology. Accordingly, barriers to
entry, apart from capital availability, may be low in the commodity product
section of the Company's business, and the entrance of new competitors into the
industry may reduce the Company's ability to capture improving profit margins in
circumstances where overcapacity in the industry is diminishing. Further,
petroleum-rich countries have recently become more significant participants in
the petrochemical industry and may continue to expand their role in this
industry in the future. Any of these developments would have a negative impact
on the Company's financial position, results of operations and cash flows.
Given the nature of the markets in which it competes, the Company believes
it has two primary competitive advantages over its competitors. First, the
Company's position as the most significant merchant
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crude butadiene processor in the U.S. has allowed it to secure supply
arrangements for crude butadiene, which provide for a fixed profit based on the
Company's selling prices for the finished product. The Company believes that
this partially limits its exposure to fluctuations in raw materials prices.
Secondly, the Company's flexible production processes enable it to take
advantage of increases in demand for its products at a lower cost than its
competitors, thus allowing the Company to meet its customers' needs through the
most economic processes.
The Company's primary competitors in the sales of butadiene in the U.S. are
Exxon Chemical Company, Shell Chemical Company, Lyondell Petrochemical Company
and the Huntsman Group. With respect to MTBE, the Company competes primarily
with ARCO Chemical Company, Exxon Chemical Company, Valero Energy Corporation,
Texaco Inc. and Enron Corp. For sales of butene-1 the Company competes primarily
with Exxon Chemical Company, Chevron Chemical Company, Amoco Chemical Company,
Shell Chemical Company and Huls AG. For high purity isobutylene, the Company
competes in the U.S. with ARCO Chemical Company and Exxon Chemical Company.
Although the Company is the only North American producer of isobutylene
concentrate and diisobutylene, diisobutylene is also imported from Japan and
Europe.
SALES AND MARKETING
The majority of the Company's sales are made pursuant to long-term sales
contracts with initial terms ranging from one to five years. The Company enjoys
long-standing relationships with its customers and approximately 85% of its
total sales over each of the last three years were made to the same customers.
The Company believes that its ability to maintain long-term customer contracts
has been facilitated by the extensive market knowledge and experience in the
petrochemical industry of its sales executives as well as the Company's emphasis
on customer relationships. The Company's strategy is to continue to increase
sales to existing customers and to attract new customers by providing
reliability of supply, competitive prices and superior customer service.
CUSTOMERS
The Company's products are generally sold to major refining, chemical and
end-user corporations primarily located in the United States and Canada. The
Company believes that its butadiene customers place significant value on its
ability to provide a reliable domestic supply of butadiene due to its raw
material purchase contracts and its ability to produce butadiene through two
alternative methods. As a result, some of the largest and most established users
of butadiene in the industry have contracted to purchase butadiene from the
Company. Typically, the Company's butadiene sales contracts require these
customers to purchase a percentage of their total requirements from the Company
subject to a minimum volume. Pricing is based on prevailing market prices.
The Company's principal butadiene customers include American Synthetic
Rubber Inc., The Dow Chemical Company, The Goodyear Tire & Rubber Company,
Enichem Elastomers Inc., E.I. du Pont de Nemours and Company and
Bridgestone/Firestone, Inc. In the year ended June 30, 1997, The Goodyear Tire &
Rubber Company accounted for approximately 11.4% of the Company's total
revenues.
The Company's principal MTBE customers include Lyondell Petrochemical
Company, CITGO Petroleum Corporation and Mobil Oil Corporation.
The Company's principal butene-1 customers include Union Carbide
Corporation, Shell Chemical Company, Lyondell Petrochemical Company, NOVA
Chemicals Ltd. and The Dow Chemical Company. The Company's principal butene-2
customers include Shell Chemical Company.
The Company's principal specialty isobutylene customers include Bayer Inc.,
The Lubrizol Corporation, Schenectady International, Inc., Rhone-Poulenc Inc.
and Mobil Chemical Company Inc.
PATENTS AND LICENSES
The Company presently owns, controls or holds rights to approximately 21
patents. The Company believes that its patents, particularly its patents
relating to the SKIP, OXO-D and diisobutylene production processes, are
important to its business and provide the Company with certain competitive
advantages. Accordingly, the Company actively protects existing production
process technologies.
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The Company has available for license certain of its patented technologies,
including the SKIP and OXO-D processes, to third parties. In addition, the
Company licenses certain technologies, including the process by which it
extracts butadiene from crude butadiene, from third parties.
ENVIRONMENTAL REGULATION
The Company's policy is to be in compliance with all applicable
environmental laws. The Company is also committed to Responsible CareT, a
chemical industry initiative to enhance the industry's responsible management of
chemicals. The Company's operations are subject to federal, state, and local
laws and regulations administered by the EPA, the U.S. Coast Guard, the Army
Corps of Engineers, the TNRCC, the Texas General Land Office, the Texas
Department of Health and various local regulatory agencies. The Company holds
all required permits and registrations necessary to comply substantially with
all applicable environmental laws and regulations, including permits and
registrations for wastewater discharges, solid and hazardous waste disposal and
air emissions, and management believes that the Company is in substantial
compliance with all such laws and regulations. While management does not expect
that compliance with existing environmental laws will have a material adverse
effect on the Company's financial condition or results of operations, there can
be no assurance that future legislation, regulation or judicial or
administrative decisions will not have such an effect.
Under federal and state environmental laws, companies may be liable for
remediation of contamination at on-site and off-site waste management and
disposal areas. Management believes that the Company is not likely to be
required to incur remediation costs related to its management, transportation
and disposal of solid and hazardous materials and wastes, or to its pipeline
operations. If the Company were to be required to incur such costs, however,
management believes that such costs would not have a material adverse effect on
the Company's results of operations. In addition, under the terms of the 1984
purchase agreement, the prior owner of the Houston facility, Petro-Tex, has
indemnified the Company for liability arising from off-site disposal of any
materials prior to June 1984. Notwithstanding the terms of the indemnity, in
July 1994 Petro-Tex filed a claim for indemnity against the Company for any
costs that may be attributable to Petro-Tex for the cleanup of the Malone
Service Company ("Malone") site in Texas City, Texas. Petro-Tex and many other
companies along the Gulf Coast allegedly sent wastes to the Malone site for
disposal in the 1970s and possibly the early 1980s. Malone has been subject to
several state enforcement actions regarding its waste disposal practices, and
TNRCC has revoked Malone's permits to operate its facilities. It is not known
whether the site will require remediation or at what cost. The Company believes
that it has meritorious defenses to Petro-Tex's claim and intends to contest the
claim vigorously. Although no on-site contamination has been identified as
requiring remediation, management believes that certain areas of the Houston
facility were historically used for waste disposal. Based on limited, currently
available information about these waste disposal areas and their contents, the
Company believes that, if such remediation becomes necessary, any remediation
costs would not have a material adverse effect on the Company's financial
condition or results of operations. The Petro-Tex indemnity does not extend to
these on-site waste disposal areas or their contents.
The day-to-day operations of the Company are subject to extensive
regulation under the Resource Conservation and Recovery Act, the Federal Clean
Water Act, the CAAA and similar requirements of state law. In particular, under
the CAAA, the EPA and TNRCC have promulgated, or are required to promulgate,
numerous regulations which affect or will affect the operations of the Company.
The most significant of these are the so-called Hazardous Organics National
Emission Standard for Hazardous Air Pollutants or HON Rule, the requirements of
Title V of the CAAA and rules relating to the controls of oxides of nitrogen,
which are known as the Nitrogen Oxides Reasonably Available Control Technology
rules ("NOx RACT Rules").
The HON Rule requires additional controls on emissions of certain listed
hazardous air pollutants ("HAPs"). Butadiene, methanol, dimethyl formamide and
MTBE, which are manufactured, used and/or processed by the Company, have been
identified as HAPs for purposes of regulation under the CAAA. Areas of concern
in the Company's operations for HAPs emissions include equipment leaks, process
vents, product storage, transfer operations and emissions from wastewater
streams. The Company has examined each of these areas and believes that it is in
substantial compliance with the HON Rule.
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The NOx RACT Rules require compliance by May 1999. The Company has examined
the rules and believes that the main expenditure required to achieve compliance
will involve purchase and installation of monitoring equipment for NOx
emissions, which can be either continuous emission monitors, predictive emission
monitors or other approved monitoring methods. Based on its preliminary study,
management estimates that the cost to comply with the NOx RACT Rules will be $2
million over the next three years.
The Company's Houston facility is located in Harris County, Texas, which
has been designated as a non-attainment area for ozone under the CAAA.
Accordingly, the State of Texas has developed a State Implementation Plan
("SIP") which requires reductions in emissions of ozone precursors, including
volatile organic compounds and NOx, as well as carbon monoxide, in Harris
County. To comply with the SIP, the Company installed new controls at a cost of
approximately $7.8 million. The Company anticipates that, at some time in the
future, the State of Texas may promulgate rules which will require the Company
to modify existing controls or to install additional controls for fugitive air
emissions. The Company estimates that, if these rules are promulgated, it will
incur costs of between $1 million and $2 million in order to modify or install
such controls over a five- or six-year period.
EPA has recently finalized more stringent standards for ozone and
particulate matter. Moreover, the Texas Legislature recently passed legislation
directing TNRCC to develop a plan to address the permitting of so-called
"grandfathered" emissions sources which are unpermitted sources constructed
prior to promulgation of permitting regulations. Because implementing
regulations for these standards have not yet been proposed, the Company cannot
predict whether their impact on the Company's operations will be material.
Title III of the CAAA requires prevention of accidental releases of certain
listed extremely hazardous substances. The EPA's rules implementing portions of
Title III, promulgated on June 20, 1996, will require the Company to conduct a
hazards assessment and develop a risk management plan by June 1999 for each
extremely hazardous substance that the facility manufactures, uses, generates or
processes.
The regulations under Title V of the CAAA, which will require a
facility-wide inventory of emissions sources at the Houston facility and a
single operating permit for the facility's air emissions, have not been
promulgated. Based on a preliminary review of the draft requirements, however,
the Company believes that it will have to undertake substantial efforts to
conduct an emissions source inventory. It may also be required to upgrade its
on-going monitoring program once it has received its operating permit; however,
the Company does not expect any costs associated therewith to be significant. It
is also possible that the Company may be required to make modifications to some
of its equipment in order to comply with the terms of the facility-wide permit.
The Company has an active program to manage asbestos-containing material at
its Houston facility in accordance with federal and state environmental, health
and safety regulations. The Company does not believe that these materials pose a
hazard to the health of its employees. There is no requirement to remove these
materials, provided they are properly managed. As the plant is reconfigured or
additions are made, asbestos-containing materials are removed or encapsulated by
a certified contractor.
The wastewater treatment system for the Houston facility is 75% owned by
the Company and 25% owned by Bayer Corporation ("Bayer"), the owner of an
adjacent facility. Bayer operates the treatment system, but the federal and
state discharge permits are held jointly by the Company and Bayer. The Company
believes that the system has sufficient capacity for the Company's projected
needs.
In February 1996, the EPA issued an order to the Company and Bayer
requiring the companies to resolve the exceedances of their discharge permit
limits for copper and total suspended solids that had occurred since 1992. The
Company believes that these issues have been resolved by raising the limits in
the new discharge permit and by other corrective actions. No penalties were
assessed.
To meet rules expected to be promulgated concerning stormwater runoff, the
Company has budgeted to spend approximately $500,000 by 2000 for additional
stormwater control and collection. The Company has also budgeted $600,000
through fiscal 1999 to purchase noise barriers for certain equipment.
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The terminals in Baytown and Lake Charles are in substantial compliance
with applicable environmental laws and regulations, and management believes that
no significant expenditures will be required at these facilities to allow them
to continue to comply with such laws and regulations.
MTBE and butadiene are the subject of continuing health effects studies.
While there have been some questions about the health effects of MTBE, a
multi-agency review, released June 30, 1997 by the White House's Office of
Science and Technology Policy ("OSTP"), concluded that health studies have
shown that "persons are not at increased risk of experiencing acute health
effects due to the use of fuels blended with oxygenates like MTBE." In
addition, a study by the Health Effects Institute, commissioned by the EPA and
the Centers for Disease Control and Prevention, reported that adding oxygenates,
including MTBE, to gasoline reduces emissions of carbon monoxide and benzene and
is unlikely to increase substantially the health risks associated with fuel used
in motor vehicles. While the EPA, California and other states are expected to
adopt limits for MTBE levels in drinking water, these limits are not expected to
be overly restrictive since that same OSTP report concluded that drinking water
is "not a major route of exposure" for MTBE. The EPA has also determined that
butadiene is a probable human carcinogen. Effective February 1997, the
Occupational Safety and Health Administration lowered the employee permissible
exposure limit ("PEL") over an 8-hour time-weighted average for butadiene from
1000 parts per million ("ppm") to 1 ppm. The Company has conducted employee
exposure monitoring and believes that it already meets the PEL at most of its
operations. For some operations, the Company anticipates that affected employees
will need to use respirators and that additional emissions controls may be
necessary. The Company does not expect that the current health concerns
regarding MTBE or butadiene will have a material adverse effect on the Company's
financial condition or results of operations, although no assurances can be
given that future studies will not result in more stringent regulation of MTBE
and butadiene.
EMPLOYEES
As of June 30, 1997, the Company had approximately 319 full-time employees,
all of whom were salaried employees. In addition, the Company contracts with a
third party to provide approximately 145 contract employees to perform routine
maintenance on and around its Houston facility. The Company believes its
relationship with its employees is satisfactory.
SAFETY RECORD
The Company maintains one of the best workman's compensation records in
Texas, equivalent to most clerical operations. Over the last seven years, the
Company has experienced only three lost time injuries. The Company believes this
record is accomplished through extensive classroom and on-the-job training as
well as the efforts of its highly trained, 67-member volunteer emergency
response team.
PROPERTIES
The Company's plant is located on a 257-acre tract approximately one mile
from the Houston Ship Channel and near one of the chemical industry's largest
domestic processing facilities. Approximately 230 acres is owned by the Company,
and 25% of the remaining 27 acres is owned by Bayer. The Company leases from the
Port of Houston two ship docks which accommodate barge and ocean-going vessels,
and has the facilities to be served by rail and by truck. In addition, the
facility is connected by pipeline to customers and suppliers of raw materials,
directly and through other major pipelines in the immediate area as well as in
Texas City, and with salt dome storage facilities of other companies located at
both Mont Belvieu and Pierce Junction, Texas. The Company's facility also has a
laboratory for sampling and testing. The Company owns and operates a storage and
terminal facility at Baytown, Texas, leases a storage and terminal facility in
Lake Charles, Louisiana and Linden, New Jersey, and leases tank storage capacity
in Bayonne, New Jersey. The Company also leases office space in Three Riverway
Plaza, Houston, Texas as its principal executive offices. The Company believes
that is has adequate facilities for the conduct of its current and planned
operations.
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LEGAL PROCEEDINGS
In addition to the matters disclosed under "-- Environmental Regulation,"
the Company is a party to various claims and litigation arising in the ordinary
course of its business. Management recognizes the uncertainties of litigation
and the possibility that one or more adverse rulings could materially impact
operating results. However, although no assurances can be given, management
believes that other than as disclosed, based on the nature of and its
understanding of the facts and circumstances which give rise to such claims and
litigation, and after considering appropriate reserves that have been
established, that the ultimate resolution of such issues, individually and in
the aggregate, will not have a material adverse effect on the Company's
statements.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the directors
and executive officers of the Company, TPC Holding and Holdings. Each director
is elected for a one year term or until such person's successor is duly elected
and qualified.
<TABLE>
<CAPTION>
YEARS OF
SERVICE WITH THE
COMPANY
NAME AGE POSITION OR ITS PREDECESSORS
- ------------------------------------- --- ------------------------------------------ -------------------
<S> <C> <C> <C>
Gordon A. Cain....................... 85 Director 13
William R. Huff...................... 47 Director 1
William A. McMinn.................... 67 Director and Chairman 13
Steve A. Nordaker.................... 50 Director 1
Susan O. Rheney...................... 38 Director 1
John T. Shelton...................... 66 Director 13
B. W. Waycaster...................... 58 Director, President and Chief 4
Executive Officer
Claude E. Manning.................... 51 Chief Financial Officer 24
Ronald W. Woliver.................... 57 Vice President, Marketing 28
Stephen R. Wright.................... 49 Vice President and General Counsel 1
Bill R. McNeese...................... 62 Vice President, Operations 9
</TABLE>
Mr. Cain is Chairman of the Board of Agennix, Inc. and Lexicon Genetics,
Inc., biotechnology companies. From August 1982 until his retirement in December
31, 1992, he was Chairman of the Board of Sterling. Mr. Cain was the Chairman of
the Board of Sterling Chemicals, Inc. from 1986 until it was sold in August 1996
and was on the Board of Directors of Arcadian Corporation from May 1989 until it
was sold in April 1997. Prior to organizing The Sterling Group, Inc.
("Sterling"), Mr. Cain was involved in the purchase of a variety of businesses
and provided consulting services to these and other companies. Mr. Cain was also
Chairman of the Board of UltraAir, Inc. from 1991 to 1994, Chairman of the Board
of Cain Chemical Inc. from its organization in March 1987 until its acquisition
by Occidental Petroleum Corporation in May 1988 and the Chairman of the Board of
Vista Chemical Company from 1984 until 1986.
Mr. Huff is President of the General Manager of WRH Partners, L.L.C., the
General Partner of The Huff Alternative Income Fund, L.P. (the "Huff Fund").
He also has been President of one of the general managers of W.R. Huff Asset
Management Co., L.L.C., an investment management firm, since 1984. Mr. Huff
serves on the Board of Directors as the designee of the Huff Fund. See "Related
Transactions."
Mr. McMinn has been Chairman of the Board of the Company since 1996. He was
Corporate Vice President and Manager of the Industrial Chemical Group of FMC
Corporation, a manufacturer of machinery and chemical products, from 1973
through 1985. He became President and Chief Executive Officer of Cain Chemical
Inc., a producer of petrochemicals, in 1987 and served in that capacity until
its acquisition by Occidental Petroleum in May 1988. He became Chairman of the
Board of Directors of Arcadian Corporation in August 1990 and served in that
capacity until it was sold in April 1997.
Mr. Nordaker has been a Managing Director of Chase Securities since August
1995. From 1982 to 1995, he was a Group Manager at Texas Commerce Bank National
Association and, in addition, served in several capacities at Texas Commerce
Bank in the Energy Group, including Section Manager and Division Manager. From
May 1977 to March 1982, Mr. Nordaker was a Manager of Projects for The Frantz
Company, an engineering consulting firm servicing the oil refinery and
petrochemical industry. Prior thereto, he was a chemical engineer with Universal
Oil Products. Mr. Nordaker serves on the Board of Directors as the Designee of
Chase Venture, an affiliate of Chase Securities. See "Related Transactions."
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Ms. Rheney has been a principal of Sterling since February 1992. She worked
as an independent financial consultant from December 1990 to January 1992. Prior
to that time, from June 1987 to November 1990, she was an associate at Sterling.
Ms. Rheney is also a director of Mail-Well, Inc.
Mr. Shelton has been Vice Chairman of the Board, Executive Vice President
and Chief Operations Officer of the Company since 1983. Prior thereto, Mr.
Shelton held various positions in the chemicals industry including Vice
President -- Manufacturing of Oxirane Corporation and
Manager -- Manufacturing/Engineering of Atlantic Richfield Company.
Mr. Waycaster has been President and Chief Executive Officer of the Company
since 1992. Prior thereto, Mr. Waycaster spent 27 years with The Dow Chemical
Company and was serving as Vice President of the Hydro-Carbon and Resources
division when he left to join the Company.
Mr. Manning has been Chief Financial Officer of the Company since 1991. In
1972, he joined Petro-Tex Chemical Corporation (which was the prior owner of the
Company's Houston facility), where he served as Vice President -- Finance, and
Director of Finance and Accounting.
Mr. Woliver has been Vice President -- Marketing of the Company since 1976.
He joined Petro-Tex Chemical Corporation in 1968 and has held various marketing
positions in the United States and in Brussels.
Mr. Wright joined the Company in August 1996 as Vice President and General
Counsel. From January 1996 until he joined the Company, Mr. Wright was engaged
in the private practice of law, either as a sole practitioner or of counsel to
Andrews & Kurth, L.L.P. For over five years prior thereto, Mr. Wright was the
Vice President and General Counsel or the Senior Vice President and General
Counsel of Destec Energy, Inc.
Mr. McNeese has been Vice President -- Operations of the Company since
1992. He joined the Company in 1986 and has held positions in manufacturing,
production and utilities. From 1984 to 1986, Mr. McNeese served as General
Manager -- Operations of Engineering for Paktank Corporation. Prior thereto, Mr.
McNeese held various positions in a number of Atlantic Richfield Company
businesses. Mr. McNeese has over 30 years of experience in the chemicals
industry.
COMPENSATION OF DIRECTORS
Directors of Holdings and the Company who are not employees of the Company
receive an annual retainer of $15,000 and a fee of $500 for each meeting of the
Board or any committee thereof that they attend. Directors who are also
employees of the Company do not receive Director compensation. No compensation
is paid to any directors of TPC Holding for attendance at TPC Holding's board
meetings.
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EXECUTIVE COMPENSATION
The following table sets forth the total value of compensation received by
the Chief Executive Officer and the four most highly compensated executive
officers, other than the Chief Executive Officer, who served as executive
officers of TPC (the "Named Executive Officers") for services rendered in all
capacities to TPC for the year ended June 30, 1997, the twelve months ended May
31, 1996 and the year ended May 31, 1995.
SUMMARY COMPENSATION TABLE
NAME AND PRINCIPAL POSITION YEAR(1) SALARY BONUS(2)
- ------------------------------------- -------- ---------- ------------
B. W. Waycaster, President and Chief
Executive Officer.................. 1997 $ 300,000 $ 326,787
1996 300,000 2,899,100
1995 300,000 565,300
Ronald W. Woliver, Vice President,
Marketing.......................... 1997 $ 180,000 $ 127,393
1996 180,000 1,012,300
1995 180,000 1,084,900
Stephen R. Wright, Vice President,
General Counsel.................... 1997 $ 165,000 $ 50,104
Claude E. Manning, Chief Financial
Officer............................ 1997 $ 148,500 $ 63,649
1996 132,000 72,966
1995 121,000 100,811
Bill R. McNeese, Vice President,
Operations......................... 1997 $ 148,500 $ 63,869
1996 132,000 72,293
1995 121,000 100,133
- ------------
(1) None of the executive officers has received perquisites, the value of which
exceeded the lesser of $50,000 or 10% of the salary and bonus of such
executive officer.
(2) Includes 401(k) contributions in 1996 and 1995 of $21,035 and $24,618,
respectively, for Mr. Manning and $21,149 and $24,440, respectively, for Mr.
McNeese.
EMPLOYMENT AND OTHER AGREEMENTS
In 1992, Mr. Waycaster entered into an employment agreement with TOC and
TPC which provided for an annual base salary of $300,000 and a minimum annual
cash bonus of $300,000. The agreement expired on April 1, 1997. Mr. Waycaster
remains employed with the Company without an employment agreement. In addition,
Mr. Waycaster has entered into a non-competition agreement with TOC and TPC
covering the three-year period following the last date he receives compensation
from the Company.
In connection with his employment, Mr. Waycaster also received a grant of
options to purchase up to 50,000 shares of TPC common stock at a purchase price
of $40 per share. The options were cancelled in connection with the Acquisition.
In 1994, TPC entered into an agreement with each of Mr. Shelton, a director
of the Company, and Mr. Woliver which provides a benefit in the event of death
while an employee of TPC. Provided the individual is survived by his wife, the
death benefit continues monthly for the shorter of the life of the wife (or in
the case of Mr. Woliver, so long as he also has minor children) or 60 months,
and is $10,000 per month with respect to Mr. Shelton and $10,000 per month with
respect to Mr. Woliver. Each agreement terminates on termination of employment
for any reason other than death or disability of the individual.
EMPLOYEE STOCK OWNERSHIP PLAN
In connection with the Acquisition, Finance Co. established an Employee
Stock Ownership Plan (the "ESOP"), covering substantially all full-time
employees, including executive officers, of the Company who satisfy the
requirements described below. The ESOP, which invests primarily in shares of
Common Stock, borrowed $10.0 million from Finance Co. pursuant to a loan (the
"Company ESOP Loan") to
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purchase 100,000 shares of Common Stock. Finance Co. funded the Company ESOP
Loan from the ESOP Term Loan. The Company ESOP Loan matures on June 30, 2001,
and bears interest at interest rates based on the Alternative Base Rate (as
defined) or the LIBOR Rate (as defined). The outstanding principal of the
Company ESOP Loan is payable in twenty equal quarterly installments of $500,000
during the period beginning September 30, 1996 and ending June 30, 2001. The
shares of Common Stock purchased by the ESOP were pledged (the "ESOP Pledge")
as security for the Company ESOP Loan, and such shares will be released and
allocated to ESOP participants' accounts as the Company ESOP Loan is discharged.
The Company may make contributions to the ESOP as determined by the Board of
Directors in an amount anticipated to be equal to a certain percentage of the
total annual earnings of all ESOP participants (the "Discretionary
Contributions"). The Company intends to make Discretionary Contributions in
amounts sufficient to enable the ESOP to discharge its indebtedness under the
Company ESOP Loan; however, the Company has no legal obligation to make
Discretionary Contributions. Shares released under the ESOP Pledge are allocated
to each participant based on such participant's base compensation relative to
total base compensation for all ESOP participants. Until the Company ESOP Loan
is paid in full, Discretionary Contributions will be used to pay the outstanding
principal and interest on the Company ESOP Loan. For employees whose employment
commenced prior to October 1, 1996 and who have attained the age of 21 years,
participation begins as of the later to occur of July 1, 1996 or the date of
commencement of the participant's employment. A participant's ESOP account vests
at the rate of 20% per year. Distributions from the ESOP are made in cash or
Common Stock upon a participant's retirement, death, disability or termination
of employment. In the event of retirement, death or disability, the entire
balance of a participant's ESOP account will become distributable without regard
to the ordinary vesting schedule. In the event of termination of employment for
any other reason, the vested portion of a participant's ESOP account will become
distributable and the remaining portion, if any, will be forfeited. If Common
Stock is distributed to a participant, the participant may, within two 60-day
periods, require the Company to purchase all or a portion of such Common Stock
at the fair market value of the Common Stock as determined under the ESOP (the
"Put Options"). The first 60-day period commences on the date the participant
receives a distribution of Common Stock and the second 60-day period commences a
year from such date. If a participant fails to exercise either of the two Put
Options, the participant may transfer the shares of Common Stock only upon
receipt of a bona fide third party offer and only after first offering the
shares to the ESOP and then to the Company. Employees of the Company own
approximately 20% of the outstanding Common Stock through the ESOP after the
Acquisition.
PROFIT SHARING PLAN
Prior to the date of the Acquisition, TPC maintained a Profit Sharing Plan
(the "Profit Sharing Plan") covering substantially all of its employees,
including executive officers. The Profit Sharing Plan is designed to qualify
under Section 401(k) of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"). Each participant has the option to defer taxation of
a portion of such participant's earnings by directing TPC to contribute a
percentage of such earnings to the Profit Sharing Plan. A participant may direct
a minimum of 1% and a maximum of 10% of eligible earnings to the Profit Sharing
Plan, subject to certain limitations set forth in the Internal Revenue Code. TPC
currently makes a matching contribution monthly equal to 25% of the amount of
compensation deferred by each participant in such month, up to 6% of the
participant's base compensation for such month. TPC may also make a
discretionary contribution to the Profit Sharing Plan. Participants' Profit
Sharing Plan accounts become distributable at retirement, upon disability, death
or termination of employment, or under certain circumstances, upon attainment of
age 59. Participants are fully vested at all times in all amounts deferred by
them to the Profit Sharing Plan, and they become vested in the Company's
matching and discretionary contributions under a five-year graded vesting
schedule.
TPC is continuing the Profit Sharing Plan in substantially the same form as
TPC maintained such plan prior to the Acquisition, provided that the
discretionary contribution will be made only if certain levels of earnings
before interest, taxes, depreciation and amortization are satisfied by the
Company in accordance with the Nonqualified Profit Sharing Incentive Plan (as
described below).
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CASH BONUS PLAN
Prior to the date of the Acquisition, TPC established the Cash Bonus Plan
covering substantially all employees of TPC (or certain affiliates of TPC) and
covering the employees of certain third-party contractors who have contributed
to the success of TPC (or certain affiliates thereof). Upon the occurrence of a
Change of Control (as defined below), an employee participant as of July 2, 1996
will be distributed a portion of $3,200,000 within forty-five days of the date
of the Change of Control and will be distributed a portion of $1,800,000 plus
interest in each of sixteen quarterly installments following the date of the
Change of Control so long as the employee is an employee of TPC (or certain
successors or affiliates of TPC) on the corresponding quarterly installment
date. Upon the occurrence of a Change of Control, an eligible employee of a
third-party contractor who is providing services to TPC (or certain successors
or affiliates thereof) on July 2, 1996 will be distributed a portion of $300,000
within forty-five days of the date of the Change of Control, and will be
distributed a portion of $168,750 plus interest in each of sixteen quarterly
installments following the date of the Change of Control so long as the employee
of the third-party contractor is providing services to TPC on the corresponding
quarterly installment date. Each participant's allocable share of the bonus
payments to be made under the Cash Bonus Plan is based on a formula which
considers a participant's compensation and length of service with TPC. If a
participant retires, dies, becomes disabled, or whose employment is terminated
without cause after July 2, 1996, such participant's beneficiary or
representative will continue to receive a portion of the bonus payments through
the sixteenth installment payment even though such participant is no longer
employed by TPC or the third-party contractor which is providing services to
TPC. Under the Cash Bonus Plan, a "Change of Control" is deemed to occur when
the outstanding stock of TOC is acquired, or more than 50% of the shares of
TPC's common stock is sold, in a cash tender offer, exchange offer, merger,
third-party private purchase or other means of acquisition, or when
substantially all of the assets of TPC are sold to an unrelated third party. The
Acquisition effected a Change of Control and distributions from the Cash Bonus
Plan have commenced.
STOCK OPTION PLAN
Holdings has established a stock option plan (the "Option Plan"). The
Option Plan is administered by a committee (the "Committee") of the Board of
Directors of Holdings. Option grants under the Option Plan will be permitted to
be made to directors and key employees of Holdings and its subsidiaries,
including the Company, selected by the Committee. The Committee may grant
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code and also will be permitted to grant "nonstatutory options," which
are not intended to conform to Section 422 of the Internal Revenue Code. The
Option Plan will provide for the discretionary grant of options to purchase
shares of Common Stock. The exercise price of incentive stock options shall not
be less than the fair market value of a share of Common Stock on the date of
grant, and the exercise price of nonstatutory options shall not be less than 85%
of the fair market value of a share of Common Stock on the date of grant. The
Committee will be permitted to provide that the options will vest immediately or
in increments. No option will be transferable by a grantee other than upon
death. On the termination of employment or disability of any grantee, any
unvested options will either expire or continue to be exercisable as determined
by the Committee, in its sole discretion. The Option Plan will terminate no
later than 10 years after its adoption; however, any options outstanding upon
termination of the Option Plan will remain in effect until exercised or
terminated pursuant to the terms of the agreement under which they were granted.
A participant in the Option Plan may, upon receiving approval from the
Committee, relinquish all or a portion of such participant's options for an
amount in cash equal to the difference between the fair market value of the
Common Stock corresponding to the options being relinquished on the day of
relinquishment, less the total option price for such corresponding shares.
NONQUALIFIED PROFIT SHARING INCENTIVE PLAN
The Company has established two separate Nonqualified Profit Sharing
Incentive Plans, both of which will be administered by the Committee. Amounts
paid to employees in cash under the Nonqualified Profit Sharing Incentive Plans
will constitute taxable income in the year received and will be based on the
Company's financial performance for the period commencing on the first day of
the Company's fiscal year
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and ending on the last day of each fiscal quarter during such year. One of the
Nonqualified Profit Sharing Incentive Plans is only for officers of the Company
who are selected by the Committee (the "Officers' Plan"). If the Company's
EBITDA exceeds certain prescribed levels, the officers participating in the
Officers' Plan will receive distributions in cash from the Company equal to a
certain percentage of EBITDA recommended by the Chief Executive Officer of the
Company and approved by the Committee. Under the other Nonqualified Profit
Sharing Incentive Plan which is for all employees not participating in the
Officers' Plan, if EBITDA exceeds certain prescribed levels, a percentage of
EBITDA will be used: first, to satisfy any required contributions to the ESOP;
second, to satisfy any required matching contributions to the Profit Sharing
Plan; third, to contribute annually to the Profit Sharing Plan for the benefit
of its participants up to the maximum amount allowable under the Internal
Revenue Code for qualification and deduction purposes; fourth, to distribute
cash to employees in an amount equal to $1.00 multiplied by the number of base
hours an employee worked during a fiscal quarter (up to a maximum of 520 hours);
and fifth, to distribute any remaining excess in cash to employees based on
their base compensation for such period. The Nonqualified Profit Sharing
Incentive Plans will not be qualified under Section 401(a) of the Internal
Revenue Code.
THE SELLING SECURITY HOLDER
The Discount Notes are offered for the account of the Huff Fund. The Huff
Fund owns 10.9% of the Common Stock of Holdings. The Huff Fund is a party to a
Voting Agreement with certain other stockholders of Holdings which results in
the Huff Fund controlling one seat on the Board of Directors of the Company. See
"Related Transactions." Mr. William R. Huff is a Director of the Company, as
the designee of the Huff Fund. Mr. Huff is also President of the General Manager
of WRH Partners, L.L.C., the General Partner of the Huff Fund. See
"Management." The Huff Fund is the holder of the entire principal amount of
the Discount Notes. The Huff Fund will sell the Discount Notes for its own
account from time to time pursuant to this Prospectus as it deems appropriate.
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RELATED TRANSACTIONS
TPC historically engaged in certain raw material purchase transactions with
Clarkston, which prior to the consummation of the Acquisition was owned by
several of the same individuals who were stockholders of TOC and/or TPC. In the
twelve months ended May 31, 1996, TPC made purchases of raw materials from
Clarkston of approximately $113.4 million. As part of the Acquisition, TPC
assumed from Clarkston a contract between Clarkston and a certain supplier for
the purchase of isobutane. In connection with the Acquisition, Clarkston was
dissolved and 80% of the outstanding capital stock owned by TOC of The Texas
Falls Corporation was sold to a prior stockholder of TOC and/or TPC. Messrs.
Shelton, Woliver, Waycaster and a prior stockholder of TOC and/or TPC
collectively own the remaining 20% of the outstanding capital stock of The Texas
Falls Corporation.
Sterling entered into an agreement with Holdings and TPC Holding pursuant
to which Sterling provided consulting and advisory services with respect to the
organization of Holdings, TPC Holding and Finance Co., the structuring of the
transactions associated with the Acquisition, employee benefit and compensation
arrangements and other matters. The agreement also provides that Holdings and
TPC Holding, jointly and severally, indemnify Sterling against liabilities
relating to its services. TPC paid Sterling a one-time transaction fee of
approximately $4.0 million for these services, and reimbursed Sterling for its
expenses. In addition, each of Holdings, TPC Holding and TPC has agreed that if
it or any of its subsidiaries determines within two years of the date of the
agreement to dispose of or acquire any assets or business, to offer its
securities for sale or to raise any debt or equity, either Holdings, TPC
Holding, TPC or the relevant subsidiary will retain Sterling as a consultant
with respect to the transaction, provided that Sterling's fees are on terms no
less favorable to Holdings, TPC Holding, TPC or the relevant subsidiary than
would be available from unaffiliated third parties.
Holdings, TPC Holding and Finance Co. were organized by Sterling for the
purpose of effecting the Acquisition. Ms. Susan Rheney, a principal of Sterling,
and Mr. Gordon A. Cain, are directors of Holdings, TPC Holding and TPC. See
"Management." Mr. Cain and Ms. Rheney purchased 76,150 and 5,000 shares of
Common Stock, respectively, in connection with the Acquisition at a price of
$100 per share, the same price at which all shares were sold in connection with
the Acquisition.
As a matter of policy, the agreement between the Company and Sterling is,
and all future transactions between the Company and its respective directors,
officers and affiliates will be, on terms no less favorable to the Company than
those available from unaffiliated third parties.
Certain stockholders of Holdings, representing a majority of the
outstanding capital stock of Holdings entitled to vote for the election of
directors of Holdings, have entered into a Voting Agreement with Holdings
pursuant to which they have agreed to vote for a designee nominated by the Huff
Fund and a designee nominated by Chase Venture for election to the Board of
Directors of Holdings. As a result of the Voting Agreement, each of the Huff
Fund and Chase Venture have the right to control one seat on the Board of
Directors of the Company.
Chase Securities, an affiliate of Chase Venture, acted as the Initial
Purchaser of the Notes, receiving customary fees.
See "-- Employment and Other Agreements" for a description of Mr.
Waycaster's employment agreement.
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BENEFICIAL OWNERSHIP OF HOLDINGS' COMMON STOCK
The following table sets forth as of August 1, 1997, the number and
percentage of the outstanding shares of Common Stock beneficially owned by (a)
each person known by the Company to beneficially own more than 5% of such stock,
(b) each director of the Company, (c) each of the Named Executive Officers of
the Company, and (d) all directors and executive officers of the Company as a
group.
AMOUNT AND NATURE % OF
OF BENEFICIAL OWNERSHIP OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER OF COMMON STOCK COMMON STOCK
- ------------------------------------- ----------------------- ------------
Gordon A. Cain....................... 69,000 13.1%
Eight Greenway Plaza, Suite 702
Houston, Texas 77046
William R. Huff(1)................... -- --
67 Park Place
Morristown, New Jersey 07960
Claude E. Manning.................... 4,000 0.8%
Three Riverway, Suite 1500
Houston, Texas 77056
William A. McMinn.................... 10,000 1.9%
Eight Greenway Plaza, Suite 702
Houston, Texas 77046
Bill R. McNeese...................... 2,000 0.4%
Three Riverway, Suite 1500
Houston, Texas 77056
Steve A. Nordaker(2)................. -- --
707 Travis, 7th Floor
Houston, TX 77002
Susan O. Rheney...................... 5,000 0.9%
Eight Greenway Plaza, Suite 702
Houston, Texas 77046
John T. Shelton...................... 10,000 1.9%
Eight Greenway Plaza, Suite 702
Houston, Texas 77046
B. W. Waycaster...................... 40,000 7.6%
Three Riverway, Suite 1500
Houston, Texas 77056
Ronald W. Woliver.................... 10,000 1.9%
Three Riverway, Suite 1500
Houston, Texas 77056
Stephen R. Wright.................... 1,150 0.2%
Three Riverway, Suite 1500
Houston, Texas 77056
All directors and Named Executive
Officers as a group (11 persons)... 151,150 28.6%
Texas Petrochemicals Corporation
Employee Stock Ownership Plan(3)... 100,000 18.9%
Capital Southwest Corporation........ 30,000 5.7%
12900 Preston Road, Suite 700
Dallas, Texas 75230
Chase Venture Capital Associates,
L.P.(4)(5)......................... 60,000 11.4%
380 Madison Avenue
New York, New York 10017
The Huff Alternative Income Fund,
L.P.(5)............................ 57,778 10.9%
67 Park Place
Morristown, New Jersey 07960
- ------------
(1) Excludes indirect beneficial ownership of 57,778 shares of Common Stock held
by the Huff Fund and reflected elsewhere in the table. Mr. Huff is President
of the general manager of WRH Partners, L.L.C., the general partner of the
Huff Fund.
(2) Mr Nordaker disclaims beneficial ownership of any shares of Common Stock
owned by Chase Venture.
(3) The trustee of the ESOP (the "ESOP Trustee") will vote all shares of
Common Stock held by the ESOP pursuant to the direction of the Plan
Administrative Committee, except that participants are entitled to direct
the ESOP Trustee to vote the shares of Common Stock allocated to their
accounts with respect to the approval or disapproval of any corporate merger
or consolidation, recapitalization, reclassification, liquidation,
dissolution, sale of substantially all assets of a trade or business or such
similar transaction as may be prescribed in regulations under the Internal
Revenue Code. No shares of Common Stock held by the ESOP have yet been
allocated to participant's accounts.
(4) Chase Venture is an affiliate of Chase Securities.
(5) Certain stockholders of Holdings have entered into the Voting Agreement with
Holdings which results in the Huff Fund and Chase Venture controlling one
seat each on the Company's Board of Directors. See "Related Transactions."
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DESCRIPTION OF THE BANK CREDIT AGREEMENT
GENERAL
Finance Co. and TPC entered into the Bank Credit Agreement (the "Bank
Credit Agreement") with a syndicate of lenders (the "Lenders"), and Texas
Commerce Bank National Association, as Agent for such Lenders (the "Agent")
and effected the initial borrowings described below on July 1, 1996. The
following description summarizes certain provisions of the Bank Credit
Agreement, but such description does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, the provisions of the Bank
Credit Agreement, a copy of which is filed as an exhibit to the Registration
Statement. All capitalized terms in this "Description of the Bank Credit
Agreement" section not defined in this Prospectus have the meanings assigned
thereto in the Bank Credit Agreement. Holdings has guaranteed the obligations of
TPC under the Bank Credit Agreement.
The Bank Credit Agreement provides for secured facilities consisting of (i)
a six and one-half year revolving credit facility providing for up to $40.0
million in revolving loans, a specified portion of which was used for letters of
credit (the "Revolving Credit Facility") and (ii) a term loan facility
providing for $140.0 million in term loans consisting of (x) a six and one-half
year term loan of $85.0 million (the "Tranche A Term Loan"), (y) an eight-year
term loan of $45.0 million (the "Tranche B Term Loan," and, together with the
Tranche A Term Loan, the "Senior Term Loans") and (z) a five-year term loan of
$10.0 million (the "ESOP Term Loan," and, together with the Senior Term Loans,
the "Term Loans").
The Revolving Credit Facility permits, at the option of TPC, the issuance
of letters of credit in principal amounts to be determined thereunder. Loans and
letters of credit under the Revolving Credit Facility are subject to a borrowing
base consisting of 85% of Eligible Accounts and 65% of Eligible Inventory
(collectively, the "Borrowing Base"), provided that at no time shall more than
50% of the Borrowing Base be comprised of 65% of Eligible Inventory.
AMORTIZATION; PREPAYMENTS
The Bank Credit Agreement requires the principal amount of the Senior Term
Loans to be reduced in twelve quarterly principal installments of $2.75 million
beginning on September 30, 1996, four quarterly principal installments of $3.25
million beginning on September 30, 1999, four quarterly principal installments
of $4.0 million beginning on September 30, 2000, four quarterly principal
installments of $4.75 million beginning on September 30, 2001, four quarterly
principal installments of $6.0 million beginning on September 30, 2002, and four
quarterly principal installments of $6.25 million beginning on September 30,
2003. The ESOP Term Loan will be amortized in 20 equal quarterly installment
amounts of $0.5 million during its five-year term.
The Senior Term Loans are subject to mandatory prepayment prior to
September 30 of each fiscal year (commencing in fiscal 1997) in which more than
$75.0 million is outstanding on the Senior Term Loans on or before June 30 of
any year, of an amount equal to 75% of the difference between EBITDA (as
defined) for the prior fiscal year and the sum of certain capital expenditures,
taxes, dividends, interest expense, and principal payments made on the Senior
Term Loans during such prior year, and certain distributions made to TPC Holding
for certain expenses (such difference being the "Excess Cash Flow"), and prior
to September 30 of each year after the Senior Term Loans are reduced to $75.0
million or less, a payment in the amount of 50% of the Excess Cash Flow
generated during the prior fiscal year. All mandatory prepayments are required
to be applied pro rata to each Senior Term Loan based on the outstanding
principal amount of the Senior Terms Loans and pro rata to future scheduled
principal installments. In addition, the Senior Term Loans are further subject
to mandatory prepayment in the amount of any cash proceeds received by the
Company from an offering of its Capital Stock.
The Senior Term Loans may be prepaid on notice at any time without premium
or penalty in a minimum amount of $1.0 million. All optional prepayments of the
Term Loans will be applied pro rata to each Senior Term Loan based on the
outstanding principal amount of the Senior Term Loans unless, at the Company's
option, lenders of the Tranche B Term Loan decline to accept such prepayment, in
which case the amount of prepayment declined shall be applied pro rata to the
Tranche A Term Loan and will be applied pro rata to future scheduled principal
installments.
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The amount available under the Revolving Credit Facility is payable in full
on its maturity date. Additionally, if the aggregate amount of borrowings
outstanding under the Revolving Credit Facility, plus the undrawn face amount of
letters of credit plus unreimbursed drawings on letters of credit, exceeds the
Borrowing Base, an immediate prepayment in an amount to eliminate such excess
will be payable.
Prepayments of Eurodollar borrowings on any day other than the last day of
an interest period will be required to be accompanied by a payment to the
Lenders of all costs, expenses or losses, if any, incurred as a result of such
prepayment.
SECURITY; GUARANTEES
Borrowings under the Revolving Credit Facility and the Term Loans are
guaranteed by Holdings and TPC Holding. The obligations of TPC under the
Revolving Credit Facility and the Term Loans and the obligations under the
guarantees are secured by a first priority lien on the capital stock of TPC
Holding and TPC and on substantially all of the assets of TPC.
INTEREST RATES; LETTER OF CREDIT FEES
The Term Loans and the Revolving Credit Facility bear interest at a rate
per annum, at TPC's option, within the range of either (i) the Alternate Base
Rate to the Alternate Base Rate plus 1.5% or (ii) the LIBOR Rate plus .625% to
the LIBOR Rate plus 2.5%, in each case based upon the ratio of Total Debt (as
defined) to EBITDA for the most recent four-quarter period.
Under the Revolving Credit Facility, fees will be charged for letters of
credit as follows: (i) a fronting fee of 1/8% per annum on the undrawn face
amount of the letters of credit plus (ii) the greater of (x) for each letter of
credit outstanding, the applicable margin for LIBOR Rate Loans, and (y) $500.
FEES, EXPENSES AND COSTS; REVOLVING CREDIT FACILITIES
The terms of the Bank Credit Agreement require the Company to pay the
following fees in connection with the maintenance of borrowings under the
Revolving Credit Facility: (i) commitment fees to be paid to the Lenders in
amounts equal to 1/2% per annum, if the Company's ratio of Total Debt to EBITDA
for the most recent four-quarter period is greater than or equal to 3.0 to 1.0,
and 3/8% if the Company's ratio of Total Debt to EBITDA for the most recent
four-quarter period is less than 3.0 to 1.0, in each case with respect to the
unused commitment under the Revolving Credit Facility payable quarterly in
arrears until such time as it is terminated; and (ii) administration fees
payable annually to the Agent. In addition, the Company paid various
underwriting and arrangement fees and closing costs on July 1, 1996 in
connection with the origination and syndication of the Term Loans and the
Revolving Credit Facility.
The Company also is required to reimburse the Agent for all reasonable
out-of-pocket costs and expenses incurred in the preparation, documentation,
syndication and administration of the Bank Credit Agreement and to reimburse the
Lenders for all reasonable costs and expenses incurred in connection with the
enforcement of their rights in connection with a default or the enforcement of
the Bank Credit Agreement. The Company agreed to indemnify the Agent and the
Lenders and their respective officers, directors, shareholders, employees,
agents and attorneys against certain costs, expenses (including fees and
disbursements of counsel) and liabilities arising out of or relating to the Bank
Credit Agreement, the Stock Purchase Agreement and the transactions contemplated
thereby. Furthermore, the Lenders are entitled to be reimbursed for increases in
reserve requirements, changes in law and circumstances, possible future
illegality of interest options, taxes (other than on gross receipts or income),
possible inability to determine market rate, capital adequacy, and consequential
costs.
COVENANTS
The Bank Credit Agreement contains substantial restrictive covenants
limiting the ability of the Company to, among other things: (i) incur
contractual contingent obligations; (ii) pay subordinated debt or amend
subordinated debt documents without the prior consent of the Lenders; (iii)
create or allow to exist liens or other encumbrances; (iv) transfer assets
outside the Company except for sales and other transfers of inventory or
surplus, immaterial or obsolete assets in the ordinary course of business of the
Company; (v) enter into mergers, consolidations and asset dispositions of all or
substantially all of its properties;
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(vi) make investments; (vii) extend credit to any entity; (viii) sell, transfer
or otherwise dispose of any class of stock or the voting rights of any
subsidiary of TPC; (ix) enter into transactions with related parties other than
in the ordinary course of business on an arm's-length basis on terms no less
favorable to the Company than those available from third parties; (x) amend
certain agreements, without the prior consent of the Majority Lenders; (xi) make
any material change in the nature of the business conducted by the Company;
(xii) pay cash dividends or redeem shares of capital stock; (xiii) make capital
expenditures; and (xiv) pay dividends or repurchase stock.
In addition, the Bank Credit Agreement contains covenants that, among other
things and with certain exceptions, require the Company to: (i) maintain the
existence, qualification and good standing of the Company; (ii) comply in all
material respects with all material applicable laws; (iii) maintain material
rights, franchise agreements, business contracts, patents, trademarks, licenses
and Material Contracts; (iv) deliver certain financial and other information;
(v) maintain specified insurance; and (vi) notify the Lenders of any default
under the Loan Documents and of certain other material events.
Under the Bank Credit Agreement, the Company is required to satisfy the
following financial covenants: (1) a ratio of (a) EBITDA minus cash taxes for
the prior four quarter period to (b) the sum of scheduled principal payments on
the Term Loans for such period, cash interest expense for such period, the
lesser of Scheduled Capital Expenditures for such period and actual capital
expenditures for such period, actual Employee Bonuses paid during such period
and certain distributions to Holdings of at least (i) 1.00 to 1.00 through June
30, 1997; (ii) .8 to 1.00 from July 1, 1997 through September 30, 1997; (iii) .9
to 1.00 from October 1, 1997 through December 31, 1997; (iv) 1.00 to 1.00 from
January 1, 1998 through June 30, 1998; (v) 1.05 to 1.00 from July 1, 1998
through June 30, 1999; and (vi) 1.15 to 1.00 thereafter; (2) a ratio of (a)
Total Debt to (b) EBITDA for the prior four quarter period of no greater than
(a) 7.2 to 1.00 from September 30, 1997 through December 30, 1997, (b) 6.25 to
1.00 from December 31, 1997 through March 30, 1998, (c) 5.75 to 1.00 from March
31, 1998 through June 29, 1998, (d) 4.75 to 1.00 from June 30, 1998 through
September 24, 1998, (e) 3.75 to 1.00 from July 1, 1998 through June 30, 1999,
(f) 3.5 to 1.00 from July 1, 1999 through June 30, 2001, and (g) 3.00 to 1.00
thereafter; (3) a minimum Net Worth of $52,000,000.00 plus 75% of cumulative
positive net income from the closing date and 100% of the proceeds of any equity
offering; and (4) a minimum ratio of Current Assets to Current Liabilities of
1.25 to 1.00. The Company received from the Lenders a waiver of compliance with
certain of these ratios as of December 31, 1996, March 28, 1997, and June 30,
1997.
EVENTS OF DEFAULT
Events of Default under the Bank Credit Agreement include, subject to
applicable notice, grace and cure periods, the following: (i) a default in the
payment when due of any principal, interest or fees under the Bank Credit
Agreement; (ii) a default by the Company under any debt instruments in excess of
$5.0 million, or the occurrence of any event or condition that enables the
holder of such debt to accelerate the maturity thereof; (iii) any material
breach of any representation, warranty or statement in, or failure to perform
any duty or covenant under the Bank Credit Agreement or any of the other Loan
Documents; (iv) commencement of voluntary or involuntary bankruptcy, insolvency
or similar proceedings by or against Holdings, TPC Holding, TPC or any
subsidiary thereof; (v) the Term Loans and the Revolving Credit Facility cease
to be secured by substantially all of the assets of the Company; (vi) material
defaults related to employee benefits plans subject to Title I or IV of the
Employee Retirement Income Security Act of 1974, as amended; (vii) any uninsured
judgment or order in excess of $2.0 million remaining undischarged or unstayed
for longer than certain periods; (viii) a default by the Company in the payment
when due of principal of, interest or premium, if any, on the Original Notes or
the Notes, or the failure to observe, perform or comply with any agreement
beyond any grace period with respect thereto that enables the holder of such
debt to accelerate the maturity thereof or the Company becoming obligated to
redeem, repurchase, or repay all or any portion of any principal, interest or
premium on the Original Notes or the Notes prior to its scheduled payment; (ix)
a default by Holdings in the payment when due of principal of, interest or
premium, if any, on the Discount Notes, or the failure to observe, perform or
comply with any agreement beyond any grace period with respect thereto that
enables the holder of such debt to accelerate the maturity thereof; and (x) the
occurrence of any change of control.
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DESCRIPTION OF THE DISCOUNT NOTES
GENERAL
The Discount Notes were issued under an Indenture dated as of July 1, 1996
(the "Discount Notes Indenture"), between the Company and Fleet National Bank,
as Trustee (the "Trustee").
The following is a summary of certain provisions of the Discount Notes
Indenture and the Discount Notes. Upon effectiveness of the Registration
Statement, the Discount Notes Indenture will be subject to the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"). The following summary of
certain provisions of the Discount Notes Indenture and the Discount Notes (i) is
a description of such provisions after giving effect to the consummation of the
transactions associated with the Acquisition, and (ii) does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Discount Notes Indenture and the Discount Notes,
including the definitions of certain terms therein and those terms made a part
thereof by the Trust Indenture Act. The Discount Notes Indenture is filed as an
exhibit to the Registration Statement of which this Prospectus is a part. Any
reference to a "Holder" or a "Noteholder" or a "Securityholder" means the
Holders of the Discount Notes.
Principal of, premium, if any, and interest on the Discount Notes are
payable, and the Discount Notes may be exchanged or transferred, at the office
or agency of the Company in the Borough of Manhattan, The City of New York or
the State of Connecticut (which initially shall be the offices of the Trustee,
at Shawmut Trust Company of New York, c/o First Chicago Trust Co. of N.Y., 14
Wall Street, 8th Floor / Window #2, New York, New York 10005 or at 777 Main
Street, Hartford, Connecticut 06115, respectively), except that, at the option
of Holdings, payment of interest may be made by check mailed to the address of
the Holders as such address appears in the Note register.
The Discount Notes are issuable only in fully registered form, without
coupons, in denominations of $1,000 at final maturity and any integral multiple
thereof. No service charge shall be made for any registration of transfer or
exchange of the Discount Notes, but the Company may require payment of a sum
sufficient to cover any transfer tax or other similar governmental charge
payable in connection therewith.
The Discount Notes will mature on July 1, 2007 and will be limited to
$57,650,103.55 aggregate principal amount at maturity. The Discount Notes are
senior unsecured obligations of Holdings, ranking PARI PASSU in right of payment
with other senior unsecured Indebtedness of Holdings. The Discount Notes are
senior in right of payment to subordinated Indebtedness of Holdings, including
Holdings' guarantee of the Notes. The Discount Notes are effectively
subordinated to secured indebtedness of Holdings, including Holdings' guarantee
of Indebtedness of TPC under the Bank Credit Agreement, as to the assets of
Holdings securing such Indebtedness, and to all Indebtedness and other
liabilities and commitments (including trade payables and lease obligations) of
Holdings' Subsidiaries permitted under the Limitation on Indebtedness covenant
described below. Any right of Holdings to receive assets of any of its
Subsidiaries upon the latter's liquidation or reorganization (and the consequent
right of the Discount Note holders to participate in those assets) will be
effectively subordinated to the claims of that Subsidiary's creditors, except to
the extent that Holdings is itself recognized as a creditor of such Subsidiary,
in which case the claims of Holdings or the Discount Note Holders would still be
subordinated to any Indebtedness secured by the assets of such Subsidiary and to
any Indebtedness of such Subsidiary senior to that held by Holdings. See "Risk
Factors -- Asset Encumbrances," "Description of the Discount Notes" and
"Description of the Bank Credit Agreement." As of June 30, 1997, (i) Holdings
had approximately $89.8 million of secured senior Indebtedness outstanding
(consisting of Holdings' guarantee of the Company's Indebtedness under the Bank
Credit Agreement), $34.2 million of senior unsecured Indebtedness outstanding
(consisting of the portion of the issue price of the Units allocated for
accounting purposes to the Discount Notes) and (ii) Holdings' Subsidiaries would
have had approximately $317.7 million of Indebtedness outstanding (including the
Notes). Substantially all of the operations of Holdings will be conducted
through its Subsidiaries and, therefore, Holdings will be dependent upon the
cash flow of its Subsidiaries to meet its obligations, including its obligations
under the Discount Notes. See "Risk Factors -- Holding Company Structure; Asset
Encumbrances."
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The Discount Notes are being offered at a substantial discount from their
principal amount at maturity. Cash interest will not accrue on the Discount
Notes prior to July 1, 2001. Thereafter, except as otherwise described below,
cash interest on the Discount Notes will be payable at the applicable rate set
forth on the front cover of this Prospectus, semiannually on each January 1 and
July 1, commencing January 1, 2002, to the Person in whose name the Discount
Notes (or any predecessor Discount Note) are registered at the close of business
on the December 15 and June 15 next preceding such interest payment date. Cash
interest will accrue from the most recent interest payment date to which
interest has been paid or duly provided for or, if no interest has been paid or
provided for, from July 1, 2001.
Under the terms of the guarantee executed by Holdings in connection with
the Bank Credit Agreement as in effect on the date of the Discount Notes
Indenture, no payment or distribution of any assets of Holdings of any kind or
character, whether in cash, property or securities (other than Permitted
Securities), may be made by Holdings on account of principal (or premium, if
any) of the Discount Notes or on account of the purchase or redemption or other
acquisition of the Discount Notes prior to the Stated Maturity of the principal
of the Discount Notes until payment in full in cash of all amounts owned under
the Bank Credit Agreement; PROVIDED, HOWEVER, that prior to such payment in full
of all such amounts owed under the Bank Credit Agreement, up to 30% of the
aggregate Accreted Value of the Discount Notes may be redeemed by Holdings on or
prior to July 1, 1998, at the option of Holdings, from the net proceeds of a
Public Equity Offering following which there is a Public Market. See
" -- Redemption -- OPTIONAL REDEMPTION."
REDEMPTION
OPTIONAL REDEMPTION. The Discount Notes are subject to redemption at any
time on or after July 1, 2001, at the option of Holdings, in whole or in part,
upon not less than 30 nor more than 60 days' prior notice in amounts of $1,000
principal amount at final Maturity or an integral multiple thereof at the
following redemption prices (expressed as percentages of the Accreted Value), if
redeemed during the 12-month period beginning July 1 of the year indicated
below:
REDEMPTION
YEAR PRICE
- ------------------------------------- -----------
2001................................. 106.75%
2002................................. 105.75
2003................................. 104.75
2004................................. 103.75
2005 and thereafter.................. 100.00
and thereafter at 100% of the principal amount at final Maturity, in each case
together with accrued and unpaid interest, if any, to the redemption date
(subject to the right of Discount Note Holders on the relevant record dates to
receive interest due on relevant interest payment dates).
Notwithstanding the foregoing, up to 30% of the aggregate Accreted Value of
the Discount Notes are redeemable, at any time, on or prior to July 1, 1998 at
the option of Holdings, within 45 days of the notice of the sale of Qualified
Capital Stock of Holdings or the Company in a Public Equity Offering from the
net proceeds of such sale, following which there is a Public Market, upon not
less than 30 nor more than 60 days' prior notice in amounts of $1,000 principal
amount at final Maturity or an integral multiple thereof at a redemption price
equal to 113.5% of the Accreted Value thereof, together with accrued and unpaid
interest, if any, to the redemption date (subject to the right of Discount Note
Holders on the relevant record date to receive interest due on interest payment
dates). If less than all of the Discount Notes are to be redeemed, the Discount
Notes Trustee shall select the Discount Notes or the portion thereof to be
redeemed pro rata.
The Bank Credit Agreement prohibits Holdings from making any optional or
mandatory payment of principal, or redemption of, the Discount Notes without the
consent of the Banks, other than the redemption of all of the Discount Notes
from the net proceeds of a Public Equity Offering as described above.
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PURCHASE OF DISCOUNT NOTES UPON CHANGE IN CONTROL OR HOLDINGS ASSET SALE.
Each Discount Note Holder will have certain rights to require Holdings to
purchase such Discount Note Holder's Discount Notes upon the occurrence of a
Change in Control. See " -- Purchase of Discount Notes upon a Change in
Control" below. Under certain circumstances, Holdings shall be required to make
an offer to purchase all or a portion of the Discount Notes with proceeds
received in connection with an Asset Sale. See " -- Certain
Covenants -- DISPOSITION OF PROCEEDS OF ASSET SALES" below.
SINKING FUND
The Discount Notes are not entitled to the benefit of any sinking fund.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder shall have the right to require that the Company
repurchase such Holder's Securities at a purchase price in cash equal to 101% of
the Accreted Value thereof plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of holders of record on the relevant record
date to receive interest due on the relevant interest payment date):
(i) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than one or more Permitted Holders, is or
becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that for purposes of this clause (i) such person shall
be deemed to have "beneficial ownership" of all shares that any such
person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of
more than 35% of the total voting power of the then outstanding Voting
Stock of Holdings; PROVIDED, HOWEVER, that the Permitted Holders
beneficially own (for purposes of this clause (i), the Permitted Holders
shall be deemed to beneficially own any Voting Stock of a corporation (the
"specified corporation") held by any other corporation (the "parent
corporation") so long as the Permitted Holders beneficially own (as so
defined), directly or indirectly, in the aggregate a majority of the voting
power of the Voting Stock of the parent corporation), directly or
indirectly, in the aggregate a lesser percentage of the total voting power
of the then outstanding Voting Stock of Holdings than such other person and
do not have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the Board of Directors (for
the purposes of this clause (i), such other person shall be deemed to
beneficially own any Voting Stock of a specified corporation held by a
parent corporation, if such other person is the beneficial owner (as
defined in this clause (i)), directly or indirectly, of more than 35% of
the voting power of the Voting Stock of such parent corporation and the
Permitted Holders beneficially own (as defined above), directly or
indirectly, in the aggregate a lesser percentage of the voting power of the
Voting Stock of such parent corporation and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the board of directors of such parent corporation);
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of
Holdings, TPC Holding or TPC (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
shareholders of Holdings, TPC Holding or TPC, as the case may be, was
approved by a vote of 66 2/3% of the directors of Holdings, TPC Holding or
TPC, as the case may be, then still in office who were either directors at
the beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a majority
of the Board of Directors of Holdings, TPC Holding or TPC, as the case may
be, then in office;
(iii) the merger or consolidation of Holdings, TPC Holding or the
Company with or into another Person or the merger of another Person with or
into Holdings, TPC Holding or the Company, or the sale of all or
substantially all the assets of Holdings, TPC Holding or the Company to
another Person (in each case other than a Person that is controlled by the
Permitted Holders), and, in the case of any such merger or consolidation,
the securities of Holdings, TPC Holding or the Company, as applicable, that
are outstanding immediately prior to such transaction and which represent
100% of the aggregate
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voting power of the Voting Stock of Holdings, TPC Holding or the Company,
as applicable, are changed into or exchanged for cash, securities or
property, unless pursuant to such transaction such securities are changed
into or exchanged for, in addition to any other consideration, securities
of the surviving corporation or a parent corporation that owns all of the
capital stock of such corporation that represent immediately after such
transaction, at least 35% of the aggregate voting power of the Voting Stock
of the surviving corporation or such parent corporation, as the case may
be; or
(iv) Holdings directly or indirectly ceases to own 100% of the Capital
Stock of TPC.
Within 30 days following any Change of Control, the Company shall mail a
notice to the Trustee and to each Holder stating: (1) that a Change of Control
has occurred and that such Holder has the right to require the Company to
purchase such Holder's Discount Notes at a purchase price in cash equal to 101%
of the Accreted Value thereof plus accrued and unpaid interest, if any, to the
date of purchase (subject to the right of holders of record on the relevant
record date to receive interest on the relevant interest payment date); (2) the
circumstances and relevant facts regarding such Change of Control (including
information with respect to pro forma historical income, cash flow and
capitalization after giving effect to such Change of Control); (3) the
repurchase date (which shall be no earlier than 45 days nor later than 60 days
from the date such notice is mailed); and (4) the instructions determined by the
Company, consistent with the covenant described hereunder, that a Holder must
follow in order to have its Discount Notes purchased.
The Company shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Discount Notes pursuant to this
covenant described hereunder. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of the covenant
described hereunder, the Company shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its obligations
under the covenant described hereunder by virtue thereof.
The use of the terms "all or substantially all" and "substantially as an
entirety" in provisions of the Discount Notes Indenture such as clause (iii) of
the definition of "Change in Control" and under "-- Merger and
Consolidation" has no clearly established meaning under New York law (which
governs the Discount Notes Indenture) and has been the subject of limited
judicial interpretation in few jurisdictions. Accordingly, there may be a degree
of uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of a person, or a
disposition of such assets "substantially as an entirety," which uncertainty
should be considered by prospective investors in the Discount Notes.
Subject to the limitations discussed below, TPC, TPC Holding or Holdings
could, in the future, enter into certain transactions, including acquisitions,
refinancings or other recapitalizations, that would not constitute a Change of
Control under the Discount Notes Indenture, but that could increase the amount
of indebtedness outstanding at such time or otherwise affect TPC's, TPC
Holding's or Holdings' capital structure or credit ratings. Restrictions on the
ability of Holdings to incur additional Indebtedness are contained in the
covenants described under "-- Certain Covenants -- Limitation on Indebtedness"
and "-- Limitation on Indebtedness and Preferred Stock of Restricted
Subsidiaries." Such restrictions can only be waived with the consent of the
holders of a majority in principal amount of the Discount Notes, as the case may
be, then outstanding. Except for the limitations contained in such covenants,
however, the Discount Notes Indenture does not contain any covenants or
provisions that may afford holders of the Discount Notes protection in the event
of a highly leveraged transaction.
If a Change of Control offer is made, there can be no assurance that
Holdings will have available funds sufficient to pay the purchase price for all
of the Discount Notes that might be delivered by holders of the Discount Notes
seeking to accept the Change of Control offer. The failure of Holdings to make
or consummate the Change of Control offer or pay the purchase price when due
will give the Discount Notes Trustee and the holders of the Discount Notes the
rights described under "-- Events of Default."
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The existence of a holder's right to require Holdings to offer to
repurchase such holder's Discount Notes upon a Change of Control may deter a
third party from acquiring Holdings in a transaction which constitutes a Change
of Control.
Holdings' guarantee of TPC's obligations under the Bank Credit Agreement,
under certain circumstances, prohibits Holdings from purchasing any Discount
Notes prior to June 30, 2004, and also provides that the occurrence of certain
change of control events with respect to TPC, TPC Holding and Holdings
constitutes a default thereunder. In the event a Change of Control occurs at a
time when Holdings is prohibited from purchasing Discount Notes, Holdings could
seek the consent of its lenders to the purchase of Discount Notes or could
attempt to refinance the borrowings that contain such prohibition. If Holdings
does not obtain such a consent or repay such borrowings, Holdings will remain
prohibited from purchasing Discount Notes. In such case, Holdings' failure to
purchase tendered Discount Notes would constitute an Event of Default under the
Discount Notes Indenture which would, in turn, constitute a default under the
Bank Credit Agreement.
Future indebtedness of Holdings may contain prohibitions on the occurrence
of certain events that would constitute a Change of Control or require such
indebtedness to be repaid or repurchased upon a Change of Control. Moreover, the
exercise by the holders of their right to require Holdings to repurchase the
Discount Notes could cause a default under such indebtedness, even if the Change
of Control itself does not, due to the financial effect of such repurchase on
Holdings. Finally, Holdings' ability to pay cash to the holders of Discount
Notes following the occurrence of a Change of Control may be limited by
Holdings' then existing financial resources. There can be no assurance that
sufficient funds will be available when necessary to make any required
repurchases. The provisions under the Discount Notes Indenture relating to
Holdings' obligation to make an offer to repurchase the Discount Notes as a
result of a Change of Control may be waived or modified with the written consent
of the holders of a majority in principal amount of the Discount Notes.
CERTAIN COVENANTS
The Indentures each covenants including, among others, the following:
LIMITATION ON INDEBTEDNESS. (a) Holdings shall not, and shall not permit
any of its Restricted Subsidiaries to, Incur, directly or indirectly, and
Indetedness unless, on the date of such Incurrence, the Consolidated Coverage
Ratio of Holdings exceeds 1.75 to 1.0 if such Indebtedness is Incurred from the
Issue Date through June 30, 1999, and 2.0 to 1.0 if such Indebtedness is
Incurred thereafter. Notwithstanding the foregoing, Holdings may Guarantee any
Indebtedness permitted to be Incurred by its Subsidiaries pursuant to the Notes
Indenture and TPC Holding may not directly Incur as primary obligor any
Indebtedness.
(b) Notwithstanding the foregoing paragraph (a), TPC or any Subsidiary of
TPC that is a Restricted Subsidiary may Incur, directly or indirectly, any
Indebtedness if, on the date of such Incurrence, the Consolidated Coverage Ratio
of TPC exceeds 2.0 to 1.0 if such Indebtedness is Incurred from the Issue Date
through June 30, 1999, and 2.25 to 1.0 if such Indebtedness is Incurred
thereafter.
(c) Notwithstanding the foregoing paragraphs (a) and (b), Holdings and its
Restricted Subsidiaries may Incur any or all of the following Indebtedness: (1)
Indebtedness Incurred pursuant to the Term Loan Provisions of the Bank Credit
Agreement or any indenture or term loan provisions of any other credit or loan
agreement in an aggregate principal amount which, when taken together with the
principal amount of all other Indebtedness Incurred pursuant to this clause (1)
and then outstanding, does not exceed (A) $140.0 million LESS (B) the aggregate
amount of all principal repayments of any such Indebtedness made after the
Original Issue Date (other than any such principal repayments made as a result
of the Refinancing of any such Indebtedness); (2) Indebtedness Incurred pursuant
to the Revolving Credit Provisions of the Bank Credit Agreement or any other
revolving credit facility in a principal amount which, when taken together with
all letters of credit and the principal amount of all other Indebtedness
Incurred pursuant to this clause (2) and then outstanding does not exceed the
greater of $40.0 million and the sum of (A) 65% of the book value of the
inventory of Holdings and its Restricted Subsidiaries and (B) 85% of the book
value of
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the accounts receivables of Holdings and its Restricted Subsidiaries; (3)
Indebtedness owed to and held by Holdings or a Wholly Owned Subsidiary;
PROVIDED, HOWEVER, that any subsequent issuance or transfer of any Capital Stock
which results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary or any subsequent transfer of such Indebtedness (other than to
Holdings or another Wholly Owned Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Indebtedness by the issurer; (4) the Discount
Notes, the Security Guarantee, the Original Notes, the Notes or any
Indebtedness, the proceeds of which are used to Refinance the Discount Notes,
the Security Guarantee, the Original Notes or the Notes in whole or in part; (5)
Indebtedness outstanding on the Original Issue Date (other than Indebtedness
described in clause (1), (2), (3) or (4) of this paragraph (c)); (6) Refinancing
Indebtedness in respect of Indebtedness Incurred pursuant to paragraph (a) or
(b) or pursuant to clause (4) or (5) or this clause (6) or pursuant to the
covenant described under "-- Limitation on Indebtedness and Preferred Stock of
Restricted Subsidiaries" below; (7) Hedging Obligations consisting of Interest
Rate Agreements directly related to Indebtedness permitted to be Incurred by
Holdings or its Restricted Subsidiaries pursuant to the Indenture; (8)
Indebtedness of Holdings or its Restricted Subsidiaries consisting of
obligations in respect of purchase price adjustments in connection with the
acquisition or disposition of assets by Holdings or any Restricted Subsidiary
permitted under the Indenture; (9) Capital Lease Obligations in an aggregate
principal amount not exceeding $7.5 million at any one time outstanding; and
(10) Indebtedness in an aggregate principal amount which, together with all
other Indebtedness of the Company outstanding on the date of such Incurrence
(other than Indebtedness permitted by clauses (1) through (9) above or paragraph
(a) or (b)) does not exceed $15 million at any one time outstanding.
(d) For purposes of determining compliance with the covenant entitled
"-- Limitation on Indebtedness," (i) in the event that an item of Indebtedness
meets the criteria of more than one of the types of Indebtedness described
above, Holdings, in its sole discretion, will classify such item of Indebtedness
and only be required to include the amount and type of such Indebtedness in one
of the above clauses and (ii) an item of Indebtedness may be divided and
classified in more than one of the types of Indebtedness described above.
LIMITATION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES. Holdings shall
not permit any Restricted Subsidiary to issue any Preferred Stock except:
(a) Preferred Stock issued to and held by Holdings or a Wholly Owned
Subsidiary; PROVIDED, HOWEVER, that any subsequent issuance or transfer of
any Capital Stock which results in any such Wholly Owned Subsidiary ceasing
to be a Wholly Owned Subsidiary or any subsequent transfer of such
Indebtedness or Preferred Stock (other than to Holdings or a Wholly Owned
Subsidiary) shall be deemed, in each case, to constitute the issuance of
such Preferred Stock by the issuer thereof;
(b) Preferred Stock of a Subsidiary outstanding on or prior to the
date on which such Subsidiary was acquired by Holdings or a Subsidiary of
Holdings (other than Preferred Stock issued in connection with, or to
provide all or any portion of the funds utilized to consummate, the
transaction or series of related transactions pursuant to which such
Subsidiary became a Subsidiary or was acquired by Holdings); provided,
however, that on the date of such acquisition and after giving effect
thereto, either (i) Holdings would have been able to Incur at least $1.00
of additional Indebtedness pursuant to clause (a) of the covenant described
under "-- Limitation on Indebtedness," or (ii) if such Subsidiary is a
Subsidiary of TPC, TPC would have been able to Incur at least $1.00 of
additional Indebtebness pursuant to clause (b) of the covenant described
under " -- Limitation on Indebtedness;"
(c) Preferred Stock outstanding on the Issue Date;
(d) Preferred Stock which is not Disqualified Stock; PROVIDED,
HOWEVER, that such Restricted Subsidiary shall not pay cash dividends on
such Preferred Stock.
LIMITATION ON LIENS. Neither Holdings nor TPC Holding shall directly or
indirectly, Incur or permit to exist any Lien on any of its properties
(including Capital Stock of a Restricted Subsidiary), whether owned at the Issue
Date or thereafter acquired, other than Permitted Liens, without effectively
providing that the
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Discount Notes shall be equally and ratably secured with (or prior to in the
case of a Lien securing a Subordinated Obligation of Holdings or TPC Holding)
the obligation so secured.
LIMITATION ON RESTRICTED PAYMENTS. (a) Holdings shall not, and shall not
permit any Restricted Subsidiary to, directly or indirectly, make a Restricted
Payment if at the time of and after giving effect to, the proposed Restricted
Payment: (i) a Default shall have occurred and be continuing (or would result
therefrom); (ii) in the case of a Restricted Payment by Holdings and its
Restricted Subsidiaries other than TPC and its Restricted Subsidiaries, Holdings
is not able to Incur an additional $1.00 of Indebtedness pursuant to paragraph
(a) of the covenant described under "-- Limitation on Indebtedness" and, in
the case of a Restricted Payment by TPC and its Restricted Subsidiaries, TPC is
not able to Incur and an additional $1.00 of Indebtedness pursuant to paragraph
(b) of the covenant described under " -- Limitation on Indebtedness"; or (iii)
the aggregate amount of such Restricted Payment and all other Restricted
Payments since the Issue Date would exceed the sum of: (A) 50% of the
Consolidated Net Income accrued during the period (treated as one accounting
period) from the beginning of the fiscal quarter immediately following the
fiscal quarter during which the Notes are originally issued to the end of the
most recent fiscal quarter ending at least 45 days prior to the date of such
Restricted Payment (or, in case such Consolidated Net Income shall be a deficit,
minus 100% of such deficit); PROVIDED, HOWEVER, that if the Discount Notes
achieve an Investment Grade Rating as of the end of any fiscal quarter, the
percentage for the fiscal quarter after such fiscal quarter (and for any other
fiscal quarter where, on the first day of such fiscal quarter, the Discount
Notes shall have an Investment Grade Rating) will be 100% of Consolidated Net
Income during each fiscal quarter after such fiscal quarter; PROVIDED FURTHER,
HOWEVER, that if such Restricted Payment is to be made in reliance upon an
additional amount permitted pursuant to the immediately preceding proviso, the
Discount Notes must have an Investment Grade Rating at the time such Restricted
Payment is declared or, if not declared, made; (B) the aggregate Net Cash
Proceeds received by Holdings from the issuance or sale of its Capital Stock
(other than Disqualified Stock) subsequent to the Issue Date (other than an
issuance or sale to a Subsidiary of Holdings and other than an issuance or sale
to an employee stock ownership plan or to a trust established by Holdings or any
of its Subsidiaries for the benefit of their employees); (C) the aggregate Net
Cash Proceeds received by Holdings subsequent to the Issue Date from the issue
or sale of its Capital Stock (other than Disqualified Stock) to an employee
stock ownership plan or a trust established by Holdings or any of its
Subsidiaries for the benefit of their employees; PROVIDED, HOWEVER, that with
respect to any such Net Cash Proceeds received from such an employee stock
ownership plan or trust through the Incurrence of Indebtedness in connection
with such issue or sale of Capital Stock, which Indebtedness also constitutes
Indebtedness of Holdings, such aggregate Net Cash Proceeds shall be limited to
an amount equal to any increase in the Consolidated Net Worth of Holdings
resulting from principal repayments made by such employee stock ownership plan
with respect to such Indebtedness; (D) the amount by which Indebtedness of
Holdings or its Subsidiaries is reduced on Holdings' consolidated balance sheet
upon the conversion or exchange (other than by a Subsidiary of Holdings)
subsequent to the Issue Date, of any Indebtedness of Holdings or its
Subsidiaries for Capital Stock (other than Disqualified Stock) of Holdings (less
the amount of any cash, or the fair value of any other property, distributed by
Holdings or its Subsidiaries upon such conversion or exchange), whether pursuant
to the terms of such Indebtedness or pursuant to an agreement with a creditor to
engage in an equity for debt exchange; (E) an amount equal to the sum of (i) the
net reduction in Investments in Unrestricted Subsidiaries resulting from
dividends, repayments of loans or advances or other transfers of assets, in each
case to Holdings or any Restricted Subsidiary from Unrestricted Subsidiaries,
and (ii) the portion (proportionate to Holdings' equity interest in such
Subsidiary) of the fair market value (as determined in good faith by Holdings'
Board of Directors) of the net assets of an Unrestricted Subsidiary at the time
such Unrestricted Subsidiary is designated a Restricted Subsidiary; PROVIDED,
HOWEVER, that the foregoing sum shall not exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously made (and treated
as a Restricted Payment) by Holdings or any Restricted Subsidiary in such
Unrestricted Subsidiary; (F) to the extent not covered in clauses (A) through
(E) above, the aggregate net cash proceeds received after the Issue Date by the
Company as capital contributions (other than from any of its Restricted
Subsidiaries) and (G) $7.5 million.
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(b) The provisions of the foregoing paragraph (a) shall not prohibit: (i)
any purchase or redemption of Capital Stock or Subordinated Obligations of
Holdings made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of Holdings (other than (A) Disqualified
Stock, (B) Capital Stock issued or sold to a Subsidiary of Holdings or (C)
Capital Stock issued or sold to an employee stock ownership plan or to a trust
established by Holdings or any of its Subsidiaries for the benefit of their
employees to the extent that such employee stock ownership plan or trust has
Incurred Indebtedness to finance the purchase of such Capital Stock, which
Indebtedness also constitutes Indebtedness of Holdings); PROVIDED, HOWEVER, that
(A) such purchase or redemption shall be excluded in the calculation of the
amount of Restricted Payments and (B) the Net Cash Proceeds from such sale shall
be excluded from the calculation of amounts under clause (3)(B) of paragraph (a)
above; (ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations (other than
Disqualified Stock) made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Subordinated Obligations of Holdings which is
permitted to be Incurred pursuant to the covenant described under "--
Limitation on Indebtedness;" PROVIDED, HOWEVER, such new Subordinated
Obligations constitute Refinancing Indebtedness PROVIDED, FURTHER, HOWEVER, that
such purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value shall be excluded in the calculation of the amount of
Restricted Payments; (iii) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would have
complied with this covenant; PROVIDED, HOWEVER, that such dividend shall be
included in the calculation of the amount of Restricted Payments; (iv) a payment
by Holdings to TPC Holding, TPC or any Restricted Subsidiary to the ESOP, to be
used to repurchase, redeem, acquire or retire for value any Capital Stock of
Holdings pursuant to any stockholders' agreement, management equity subscription
plan or agreement, stock option plan or agreement, or other employee plan or
agreement or employee benefit plan in effect as of the Issue Date or such
similar employee plan or agreement or employee benefit plan as may be adopted by
Holdings or TPC from time to time; PROVIDED, HOWEVER, that the aggregate price
paid for all such repurchased, redeemed, acquired or retired Capital Stock shall
not exceed $3,000,000 in any fiscal year; PROVIDED FURTHER, HOWEVER, that such
amount shall be excluded in the calculation of Restricted Payments; (v) a
payment by Holdings, TPC Holding, TPC or an Restricted Subsidiary to the ESOP to
be used to repurchase Capital Stock of Holdings pursuant to the requirements of
the ESOP in an aggregate amount in any fiscal year not to exceed the minimum
amount required to be paid in cash under the ESOP as in effect on the Original
Issue Date; PROVIDED, HOWEVER, that such amount shall be excluded in the
calculation of Restricted Payments; and (vi) a payment pursuant to the Tax
Sharing Agreement; PROVIDED, HOWEVER, that such amounts shall be excluded in the
calculation of Restricted Payments.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES. Holdings shall not, and shall not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary (a) to pay dividends or make any other distributions on its Capital
Stock to Holdings or a Restricted Subsidiary or pay any Indebtedness owed to
Holdings, (b) to make any loans or advances to Holdings or (c) to transfer any
of its property or assets to Holdings, except: (i) any encumbrance or
restriction pursuant to an agreement in effect at or entered into on the Issue
Date; (ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by
such Restricted Subsidiary on or prior to the date on which such Restricted
Subsidiary was acquired by Holdings (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary or was acquired by Holdings) and outstanding on such date; (iii) any
encumbrance or restriction pursuant to an agreement effecting a Refinancing of
Indebtedness Incurred pursuant to an agreement referred to in clause (i) or (ii)
of this covenant or this clause (iii) or contained in any amendment to an
agreement referred to in clause (i) or (ii) of this covenant or this clause
(iii); PROVIDED, HOWEVER, that the encumbrances and restrictions with respect to
such Restricted Subsidiary contained in any such refinancing agreement or
amendment are no less favorable to the Securityholders than encumbrances and
restrictions with respect to such Restricted Subsidiary contained in such
agreements; (iv) any such
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encumbrance or restriction consisting of customary non-assignment provisions in
leases to the extent such provisions restrict the transfer of the lease or the
property leased thereunder or in purchase money financings; (v) in the case of
clause (c) above, restrictions contained in security agreements or mortgages
securing Indebtedness of a Restricted Subsidiary to the extent such restrictions
restrict the transfer of the property subject to such security agreements or
mortgages; (vi) encumbrances or restrictions imposed by operation of applicable
law; and (vii) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition.
LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK. (a) Holdings shall
not, and shall not permit any Restricted Subsidiary to, directly or indirectly,
consummate any Asset Disposition unless (i) Holdings or such Restricted
Subsidiary receives consideration at the time of such Asset Disposition at least
equal to the fair market value (including the value of all non-cash
consideration), as determined in good faith by the Board of Directors of
Holdings, of the shares and assets subject to such Asset Disposition, and at
least 85% of the consideration thereof received by Holdings or such Restricted
Subsidiary is in the form of cash or cash equivalents and (ii) an amount equal
to 100% of the Net Available Cash from such Asset Disposition is applied by
Holdings (or such Restricted Subsidiary, as the case may be) (A) FIRST, (1) in
the case of an Asset Disposition by Holdings or a Restricted Subsidiary of
Holdings other than TPC and its Subsidiaries to the extent Holdings (or such
Restricted Subsidiary) elects (or is required by the terms of any Indebtedness),
to prepay, repay, redeem or purchase (I) Indebtedness of Holdings that is PARI
PASSU with the Discount Notes as required by the terms thereof, and to offer
concurrently with such repayment or repurchase to repay or repurchase any
outstanding Discount Note in the manner described in paragraph (b) below;
PROVIDED, HOWEVER, that the principal amount of Discount Notes which Holdings
shall offer to repay or repurchase pursuant to this clause shall be no less than
the product of (x) the Net Cash Proceeds and (y) a fraction the numerator of
which shall be the aggregate outstanding Accreted Value of the Discount Notes on
the date of such offer and the denominator of which shall be the total of the
aggregate outstanding principal amounts or accreted value of all Indebtedness of
Holdings that is PARI PASSU with the Discount Notes and is entitled to be
repurchased upon such Asset Sale and the aggregate Accreted Value of the
Discount Notes or (II) Indebtedness (other than any Disqualified Stock) of a
Wholly Owned Subsidiary or such Restricted Subsidiary in the case of each of the
foregoing clauses (I) and (II) other than Indebtedness owed to Holdings or an
Affiliate of Holdings other than The Huff Alternative Income Fund, L.P. or any
Affiliate thereof) or, (2) in the case of an Asset Disposition by TPC or its
Restricted Subsidiaries, to the extent TPC or such Restricted Subsidiary elects
(or is required by the terms of any Indebtedness of TPC or such Restricted
Subsidiary), to prepay, repay, redeem or purchase Indebtedness (other than
Disqualified Stock) of the Company or such Restricted Subsidiary (in each case
other than Indebtedness owed to TPC or an Affiliate of TPC), in the case of the
foregoing clauses (1) and (2) within one year from the later of the date of such
Asset Disposition or the receipt of such Net Available Cash; (B) SECOND, to the
extent of the balance of such Net Available Cash after application in accordance
with clause (A), to the extent Holdings or a Restricted Subsidiary elects, to
acquire Additional Assets; PROVIDED, HOWEVER, that Holdings or such Restricted
Subsidiary shall be required to commit such Net Available Cash to the
acquisition of Additional Assets within one year from the later of the date of
such Asset Disposition or the receipt of such Net Available Cash (the "Receipt
Date") and shall be required to consummate the acquisition of such Additional
Assets within 18 months from the Receipt Date; (C) THIRD, to the extent of the
balance of such Net Available Cash after application in accordance with clauses
(A) and (B), to make an offer pursuant to paragraph (b) below to the holders of
the Discount Notes pursuant to and subject to the conditions contained in the
Discount Notes Indenture; and (D) FOURTH, to the extent of the balance of such
Net Available Cash after application in accordance with clauses (A), (B) and (C)
to (x) the acquisition by Holdings or any Wholly Owned Subsidiary or such
Restricted Subsidiary of Additional Assets or (y) the prepayment, repayment or
purchase of Indebtedness (other than any Disqualified Stock) of Holdings (other
than Indebtedness owed to an Affiliate of Holdings) or Indebtedness of any
Subsidiary (other than Indebtedness owed to Holdings or an Affiliate of Holdings
other than the Huff Alternative Income Fund, L.P., or any Affiliate thereof), in
each case within one year from the later of the receipt of such Net Available
Cash and
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the date the offer described in clause (b) below is consummated; PROVIDED,
HOWEVER, that in connection with any prepayment, repayment or purchase of
Indebtedness pursuant to clause (A), (C) or (D) above, Holdings or such
Restricted Subsidiary shall retire such Indebtedness and shall cause the related
loan commitment (if any) to be permanently reduced in an amount equal to the
principal amount so prepaid, repaid or purchased. Notwithstanding the foregoing
provisions of this paragraph, Holdings and its Restricted Subsidiaries shall not
be required to apply any Net Available Cash in accordance with this paragraph
except to the extent that the aggregate Net Available Cash from all Asset
Dispositions which are not applied in accordance with this paragraph exceeds
$3.5 million. Pending application of Net Available Cash pursuant to this
covenant, such Net Available Cash shall be invested in Temporary Cash
Investments. Notwithstanding the foregoing, any Asset Disposition which is also
an Asset Disposition governed by the Notes Indenture shall satisfy this
convenant if such Asset Disposition is made, and the Net Available Cash
therefrom applied, in accordance with the terms of the Notes Indenture.
Notwithstanding anything contained in this "-- Certain Covenants" section to
the contrary, the Company shall not sell, convey, pledge, hypothecate or
otherwise transfer the Houston Facility substantially as an entirety in one
transaction or a series of related transactions to any Person (other than a
Restricted Subsidiary), except for (i) pledges or security interests granted in
connection with securing Indebtedness borrowed under the Bank Credit Agreement,
and (ii) transactions that comply with the "-- Merger and Consolidation"
covenant described below.
For the purposes of this covenant, the following are deemed to be cash or
cash equivalents: (x) the express assumption of any Indebtedness of a Restricted
Subsidiary other than TPC Holding and the release of Holdings or such Restricted
Subsidiary from all liability on such Indebtedness in connection with such Asset
Disposition and (y) securities received by Holdings or any Restricted Subsidiary
from the transferee that are converted by the Company or such Restricted
Subsidiary into cash within 90 days of closing the transaction.
(b) In the event of an Asset Disposition that requires the purchase of the
Discount Notes pursuant to clause (a)(ii)(A) or (C) above, Holdings will be
required to purchase Discount Notes tendered pursuant to an offer by Holdings
for the Discount Notes at a purchase price of 100% of their Accreted Value
(without premium) plus accrued but unpaid interest in accordance with the
procedures (including prorating in the event of oversubscription) set forth in
the Discount Notes Indenture. If the aggregate purchase price of the Discount
Notes tendered pursuant to such offer is less than the Net Available Cash
allotted to the purchase thereof, Holdings will be required to apply the
remaining Net Available Cash in accordance with clause (a)(ii)(D) above.
(c) Holdings shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Discount Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, Holdings shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this clause by virtue thereof.
LIMITATION ON AFFILIATE TRANSACTIONS. (a) Holdings shall not, and shall
not permit any Restricted Subsidiary to, enter into any transaction (including
the purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of Holdings (an "Affiliate Transaction") unless
the terms thereof (1) are no less favorable to the Company or such Restricted
Subsidiary than those that could be obtained at the time of such transaction in
a comparable transaction on arm's-length dealings with a Person who is not such
an Affiliate, (2) if such Affiliate Transaction involves an amount in excess of
$2.5 million, (i) are set forth in writing and (ii) have been approved by a
majority of the members of the Board of Directors of Holdings having no material
personal financial stake in such Affiliate Transaction and (3) if such Affiliate
Transaction involves an amount in excess of $5 million, have been determined by
a nationally recognized investment banking firm to be fair, from a financial
standpoint, to Holdings or its Restricted Subsidiary, as the case may be.
(b) The provisions of the foregoing paragraph (a) shall not prohibit (i)
any Restricted Payment permitted to be paid pursuant to the covenant described
under "-- Limitation on Restricted Payments," or any payment or transaction
specifically excepted from the definition of Restricted Payment, (ii) any
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issuance of securities, or other payments, awards or grants in cash, securities
or otherwise pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans approved by the Board of Directors of Holdings
or the board of directors of the relevant Restricted Subsidiary, (iii) the grant
of stock options or similar rights to employees and directors of Holdings
pursuant to plans approved by the Board of Directors of Holdings or the board of
directors of the relevant Restricted Subsidiary, (iv) loans or advances to
officers, directors or employees in the ordinary course of business, (v) the
payment of reasonable fees to directors of Holdings and its Restricted
Subsidiaries who are not employees of Holdings or its Restricted Subsidiaries,
(vi) any Affiliate Transaction between Holdings and a Wholly Owned Subsidiary or
between Wholly Owned Subsidiaries, (vii) the purchase of or the payment of
Indebtedness of or monies owed by Holdings or any of its Restricted Subsidiaries
for goods or materials purchased, or services received, in the ordinary course
of business, (viii) the purchase of or payment of Indebtedness of or monies owed
by Holdings or any of its Restricted Subsidiaries or fees to be paid to Sterling
or any Affiliate of Sterling, in each case pursuant to a written agreement in
existence on the Issue Date, and (ix) the Tax Sharing Agreement and any payments
thereunder, and (x) any Affiliate Transaction among Holdings or any Subsidiary
and The Huff Alternative Income Fund, L.P. or any of its Affiliates pursuant to
agreements in existence on the Issue Date.
LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES. Holdings shall not sell or otherwise dispose of any shares of
Capital Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
shares of its Capital Stock except (i) to Holdings or a Wholly Owned Subsidiary
or (ii) if, immediately after giving effect to such issuance, sale or other
disposition, such Restricted Subsidiary remains a Restricted Subsidiary;
PROVIDED, HOWEVER, that in connection with any such sale or disposition of
Capital Stock Holdings or any such Restricted Subsidiary complies with the
covenant described under "-- Limitation on Sales of Assets and Subsidiary
Stock"; PROVIDED, FURTHER, HOWEVER, that in no event may TPC Holding, Holdings
or any Restricted Subsidiary that owns the Houston Facility dispose of its
Capital Stock pursuant to clause (ii).
MERGER AND CONSOLIDATION. Holdings shall not consolidate with or merge
with or into any other corporation or sell, convey, transfer or lease its
properties and assets, in one transaction or a series of transactions,
substantially as an entirety to any Person or group of affiliated Persons or
permit any of its Restricted Subsidiaries to enter into any such transaction or
series of transactions if such transaction or series of transactions would
result in a sale, conveyance, transfer, or lease substantially as an entirety of
the properties and assets of Holdings and its Restricted Subsidiaries on a
consolidated basis to any Person or any group of affiliated Persons, unless: (i)
the resulting, surviving or transferee Person or Persons (the "Successor
Company") shall be in the case of a transaction in which Holdings is a party, a
corporation and, in the case of a transaction in which any Restricted Subsidiary
is a party, a Person organized and existing under the laws of the United States
of America, any State thereof or the District of Columbia and the Successor
Company in the case of a transaction in which Holdings is a party (if not
Holdings) shall expressly assume, by an indenture supplemental thereto, executed
and delivered to the Discount Notes Trustee, in form satisfactory to the
Discount Notes Trustee, all the obligations of Holdings under the Discount Notes
and the Discount Notes Indenture; (ii) immediately after giving effect to such
transaction on a pro forma basis (and treating any Indebtedness which becomes an
obligation of the Successor Company or any Subsidiary as a result of such
transaction as having been Incurred by such Successor Company or such Subsidiary
at the time of such transaction), no Default shall have occurred and be
continuing; (iii) immediately after giving effect to such transaction, in the
case of a sale, conveyance, transfer, or lease pursuant to which Holdings or any
of its Restricted Subsidiaries other than TPC and its Restricted Subsidiaries is
a party, the Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to the first sentence of paragraph (a) of the covenant
described under " -- Certain Covenants -- Limitation on Indebtedness" or, in
the case of a sale, conveyance, transfer, or lease pursuant to which TPC or any
of its Restricted Subsidiaries is a party, the Successor Company would be able
to Incur an additional $1.00 of Indebtedness pursuant to the first sentence of
paragraph (b) of the covenant described under " -- Certain
Covenants -- Limitation on Indebtedness" (and in each such case treating any
Indebtedness not previously an obligation of Holdings or any Subsidiary which
becomes an obligation of the Successor
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Company or any Subsidiary in connection with or as a result of such transaction
as having been Incurred by such Successor Company or such Subsidiary at the time
of such transaction); (iv) immediately after giving effect to such transaction,
the Successor Company shall have Consolidated Net Worth in an amount that is not
less than the Consolidated Net Worth of Holdings prior to such transaction minus
any costs incurred in connection with such transaction; and (v) Holdings shall
have delivered to the Discount Notes Trustee an officers' certificate and an
Opinion of Counsel, each stating that such consolidation, merger or transfer and
such supplemental indenture (if any) comply with the Discount Notes Indenture.
Notwithstanding the foregoing clauses (ii), (iii) and (iv), any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to TPC and TPC Holding may merge with and into TPC.
TPC Holding shall not consolidate with or merge with or into any other
Person or convey, transfer or lease its properties and assets, in one
transaction or a series of transactions, substantially as an entirety to any
Person or group of affiliated Persons, unless: (i) The resulting, surviving or
transferee Person (the "TPC Holding Successor Company") shall be a corporation
organized and existing under the laws of the United States of America, any State
thereof or the District of Columbia and the Successor Company (if not TPC
Holding) shall expressly assume, by an indenture supplemental thereto, executed
and delivered to the Discount Notes Trustee, in form satisfactory to the
Discount Notes Trustee, all the obligations of TPC Holding under its Guarantee
of the Discount Notes and the Discount Notes Indenture; (ii) immediately after
giving effect to such transaction (and treating any Indebtedness which becomes
an obligation of the TPC Holding Successor Company or any Subsidiary as a result
of such transaction as having been incurred by such Successor Company or such
Subsidiary at the time of such transaction), no Default shall have occurred and
be continuing; and (iii) TPC Holding shall have delivered to the Discount Notes
Trustee an officers' certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and such supplemental indenture (if any)
comply with the Discount Notes Indenture. Notwithstanding the foregoing, TPC
Holding may merge with and into either TPC or Holdings.
SEC REPORTS. Notwithstanding that the Company may not be required to
remain subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, Holdings shall provide the Trustee and Discount Notes Holders with
such annual reports and such information, documents and other reports as are
specified in Sections 13 and 15(d) of the Exchange Act and applicable to a U.S.
corporation subject to such Sections, such information, documents and other
reports to be so filed and provided at the times specified for the filing of
such information, documents and reports under such Sections.
DEFAULTS
An Event of Default is defined in the Discount Notes Indenture as (i) a
default in the payment of interest on any Discount Note, when due, continued for
30 days, (ii) a default in the payment of principal of any Discount Note, when
due at its Stated Maturity, upon optional redemption, upon required repurchase,
upon declaration or otherwise, (iii) the failure by the Company to comply with
its obligations under "-- Certain Covenants -- Merger and Consolidation"
above, (iv) the failure by the Company to comply for 30 days after notice with
any of its obligations in the covenants described above under "Change of
Control" (other than a failure to purchase Discount Notes) or under
"-- Certain Covenants" under "-- Limitation on Indebtedness,"
"-- Limitation on Indebtedness and Preferred Stock of Restricted
Subsidiaries," "-- Limitation on Restricted Payments," "-- Limitation on
Restrictions on Distributions from Restricted Subsidiaries," -- "Limitation on
Sales of Assets and Subsidiary Stock," " -- Limitation on Affiliate
Transactions," "Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries," or "-- SEC Reports," (v) the failure by Holdings to
comply for 60 days after notice with its other agreements contained in the
Discount Notes Indenture, (vi) Indebtedness of Holdings or any Significant
Subsidiary is not paid within any applicable grace period after final maturity
or is accelerated by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $5 million (the
"cross acceleration provision"), (vii) certain events of bankruptcy,
insolvency or reorganization of Holdings, or any Significant Subsidiary (the
"bankruptcy provisions") (viii) any judgment or decree for the payment of
money in excess of $5 million is entered against the Company or any Significant
Subsidiary, remains outstanding for a period of 60 days following such judgment
and is not
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discharged, waived or stayed within 10 days after notice (the "judgment default
provision") or (ix) the Security Guarantee shall cease to be, or be asserted in
writing by Holdings or TPC Holding not to be, in effect. However, a default
under clause (iv) or (v) will not constitute an Event of Default until the
Discount Notes Trustee or the holders of 25% in principal amount at final
maturity of the outstanding Discount Notes notify Holdings of the default and
Holdings does not cure such default within the time specified after receipt of
such notice.
If an Event of Default (other than the bankruptcy provisions relating to
Holdings) occurs and is continuing, the applicable Trustee or the holders of at
least 25% in principal amount at final maturity of the outstanding Discount
Notes may declare the principal of and accrued but unpaid interest on all the
Discount Notes to be due and payable. Upon such a declaration, such principal
and interest shall be due and payable immediately. If an Event of Default
relating to the bankruptcy provisions relating to Holdings occurs and is
continuing, the principal of and interest on all the Discount Notes will IPSO
FACTO become and be immediately due and payable without any declaration or other
act on the part of the Discount Notes Trustee or any holders of the Discount
Notes. Under certain circumstances, the holders of a majority in principal
amount of the outstanding Discount Notes may rescind any such acceleration with
respect to the Discount Notes and its consequences.
Subject to the provisions of the Discount Notes Indenture relating to the
duties of the Discount Notes Trustee, in case an Event of Default occurs and is
continuing, such Discount Notes Trustee will be under no obligation to exercise
any of the rights or powers under the applicable Indenture at the request or
direction of any of the holders of the Discount Notes unless such holders have
offered to the Discount Notes Trustee reasonable indemnity or security against
any loss, liability or expense. Except to enforce the right to receive payment
of principal, premium (if any) or interest when due, no holder of a Discount
Note may pursue any remedy with respect to the Discount Notes Indenture or the
Discount Notes unless (i) such holder has previously given the Discount Notes
Trustee notice that an Event of Default is continuing, (ii) holders of at least
25% in principal amount at final maturity of the outstanding Discount Notes have
requested the Discount Notes Trustee to pursue the remedy, (iii) such holders
have offered the Discount Notes Trustee reasonable security or indemnity against
any loss, liability or expense, (iv) the Discount Notes Trustee has not complied
with such request within 60 days after the receipt thereof and the offer of
security or indemnity and (v) the holders of a majority in principal amount at
final maturity of the outstanding Discount Notes have not given the Discount
Notes Trustee a direction inconsistent with such request within such 60-day
period. Subject to certain restrictions, the holders of a majority in principal
amount at final maturity of the outstanding Discount Notes are given the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Discount Notes Trustee or of exercising any trust or power
conferred on the Discount Notes Trustee. The Discount Notes Trustee, however,
may refuse to follow any direction that conflicts with law or the Discount Notes
Indenture or that the Discount Notes Trustee determines is unduly prejudicial to
the rights of any other holder of a Discount Notes, or that would involve the
Discount Notes Trustee in personal liability.
The Discount Notes Indenture provides that if a Default occurs and is
continuing and is known to the Discount Notes Trustee, such Trustee must mail to
each holder of the Discount Notes notice of the Default within 90 days after it
occurs. Except in the case of a Default in the payment of principal of or
interest on any Discount Notes, the Discount Notes Trustee may withhold notice
if and so long as the board of directors, the executive committee or a committee
of its trust officers determines that withholding notice is not opposed to the
interest of the holders of the Discount Notes. In addition, Holdings is required
to deliver to the Discount Notes Trustee, within 120 days after the end of each
fiscal year, a certificate indicating whether the signers thereof know of any
Default that occurred during the previous year. Holdings also is required to
deliver to the Discount Notes Trustee, within 30 days after the occurrence
thereof, written notice of any event which would constitute certain Defaults,
their status and what action Holdings is taking or proposes to take in respect
thereof.
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AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Discount Notes Indenture may be amended
with the consent of the holders of a majority in principal amount at final
maturity of the Discount Notes then outstanding (including consents obtained in
connection with a tender offer or exchange for the Discount Notes) and any past
default or compliance with any provisions may also be waived with the consent of
the holders of a majority in principal amount at final maturity of the Discount
Notes then outstanding.
Without the consent of each holder of an outstanding Discount Note affected
thereby, no amendment may (i) reduce the amount of Discount Notes whose holders
must consent to an amendment, (ii) reduce the rate of or extend the time for
payment of interest on any Discount Note, (iii) reduce the principal of or
extend the Stated Maturity of any Discount Note, (iv) reduce the premium payable
upon the redemption of any Discount Note or change the time at which any
Discount Note may be redeemed as described under "-- Optional Redemption"
above, (v) make any Discount Note payable in money other than that stated in the
Discount Note, (vi) impair the right of any holder of the Discount Notes to
receive payment of principal of and interest on such holder's Discount Notes on
or after the due dates therefor or to institute suit for the enforcement of any
payment on or with respect to such holder's Discount Notes, (vii) make any
change in the amendment provisions which require each holder's consent or in the
waiver provisions or (viii) make any change to the subordination provisions of
the Discount Notes Indenture that would adversely affect the holders of the
Discount Notes.
Without the consent of any holder of the Discount Notes, Holdings and the
Discount Notes Trustee may amend the Discount Notes Indenture to cure any
ambiguity, omission, defect or inconsistency, to provide for the assumption by a
successor corporation of the obligations of Holdings under the Discount Notes
Indenture, to provide for uncertificated Discount Notes in addition to or in
place of certificated Discount Notes (provided that the uncertificated Discount
Notes are issued in registered form for purposes of Section 163(f) of the Code,
or in a manner such that the uncertificated Discount Notes are described in
Section 163(f)(2)(B) of the Code), to add guarantees with respect to the
Discount Notes, to secure the Discount Notes, to add to the covenants of
Holdings for the benefit of the holders of the Discount Notes or to surrender
any right or power conferred upon Holdings, to make any change that does not
adversely affect the rights of any holder of the Discount Notes or to comply
with any requirement of the SEC in connection with the qualification of the
Discount Notes Indenture under the Trust Indenture Act.
The consent of the holders of the Discount Notes is not necessary under the
Discount Notes Indenture to approve the particular form of any proposed
amendment. It is sufficient if such consent approves the substance of the
proposed amendment.
After an amendment under the Discount Notes Indenture becomes effective,
the Company is required to mail to holders of the Discount Note a notice briefly
describing such amendment. However, the failure to give such notice to all
holders of the Discount Notes, or any defect therein, will not impair or affect
the validity of the amendment.
TRANSFER
The Discount Notes were issued in registered form and will be transferable
only upon the surrender of the Discount Notes being transferred for registration
of transfer. Holdings may require payment of a sum sufficient to cover any tax,
assessment or other governmental charge payable in connection with certain
transfers and exchanges.
DEFEASANCE
Holdings at its option at any time may terminate all its obligations under
the Discount Notes, and the Discount Notes Indenture ("legal defeasance"),
except for certain obligations, including those respecting the defeasance trust
and obligations to register the transfer or exchange of the Discount Notes to
replace mutilated, destroyed, lost or stolen Discount Notes, and to maintain a
registrar and paying agent in respect of the Discount Notes. In addition,
Holdings at its option at any time may terminate its obligations under "Change
of Control" and under the covenants described under "-- Certain Covenants"
(other than the
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covenant described under "-- Merger and Consolidation") (and any omission to
comply with such obligations shall not constitute a Default or Event of Default
with respect to the Discount Notes), the operation of the cross acceleration
provision, the bankruptcy provisions with respect to Significant Subsidiaries
and the judgment default provision described under "-- Defaults" above and the
limitations contained in clauses (iii) and (iv) of the first paragraph under,
"-- Certain Covenants -- Merger and Consolidation" above ("covenant
defeasance").
Holdings may exercise its legal defeasance option notwithstanding its prior
exercise of its covenant defeasance option. If Holdings exercises its legal
defeasance option, payment of the Discount Notes may not be accelerated because
of an Event of Default with respect thereto. If Holdings exercises its covenant
defeasance option, payment of the Discount Notes may not be accelerated because
of an Event of Default specified in clause (iv), (vi), (vii) (with respect only
to Significant Subsidiaries) or (viii) under "-- Defaults" above or because of
the failure of Holdings to comply with clause (iii) or (iv) of the first
paragraph under "-- Certain Covenants -- Merger and Consolidation" above.
In order to exercise either defeasance option, Holdings must irrevocably
deposit in trust (the "defeasance trust") with the Discount Notes Trustee
money or U.S. Government Obligations for the payment of principal of and
interest on the Discount Notes to redemption or maturity, as the case may be,
and must comply with certain other conditions, including delivery to the
Discount Notes Trustee of an Opinion of Counsel to the effect that holders of
the Discount Notes will not recognize income, gain or loss for Federal income
tax purposes as a result of such deposit and defeasance and will be subject to
Federal income tax on the same amount and in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred (and, in the case of legal defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable Federal income tax law).
CONCERNING THE TRUSTEE
Fleet National Bank is the Trustee under the Discount Notes Indenture and
has been appointed by Holdings as Registrar and Paying Agent with regard to the
Discount Notes. Such bank may also act as a depository of funds for or makes
loans to, and performs other services for, Holdings or its affiliates in the
ordinary course of business in the future. The corporate trust office of the
Discount Notes Trustee is located at 777 Main Street, Hartford, Connecticut
06115.
The Holders of a majority in principal amount at final maturity of the
outstanding Discount Notes have the right to direct the time, method and place
of conducting any proceeding for exercising any remedy available to the Discount
Notes Trustee, subject to certain exceptions. The Discount Notes Indenture
provides that if an Event of Default occurs (and is not cured), the Discount
Notes Trustee will be required, in the exercise of its power, to use the degree
of care of a prudent man in the conduct of his own affairs. Subject to such
provisions, the Discount Notes Trustee will be under no obligation to exercise
any of its rights or powers under the Discount Notes Indenture at the request of
any Holder of Discount Notes, unless such Holder shall have offered to the
Discount Notes Trustee security and indemnity satisfactory to it against any
loss, liability or expense and then only to the extent required by the terms of
the the Discount Notes Indenture. The Discount Notes Trustee may resign from its
duties with respect to the Discount Notes at any time or may be removed by
Holdings. If the Discount Notes Trustee resigns, is removed or becomes incapable
of acting as Discount Notes Trustee or if a vacancy occurs in the office of the
Discount Notes Trustee for any cause, a successor Trustee shall be appointed in
accordance with the provisions of the Discount Notes Indenture.
If the Discount Notes Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Discount Notes Trustee shall
either eliminate such interest or resign, to the extent and in the manner
provided by, and subject to the provisions of, the Trust Indenture Act and the
Discount Notes Indenture. The Discount Notes Indenture also contains certain
limitations on the right of the Discount Notes Trustee, as a creditor of
Holdings, to obtain payment of claims in certain cases, or to realize on certain
property received by it in respect of any such claims, as security or otherwise.
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GOVERNING LAW
The Discount Notes Indenture provides that it and the Discount Notes will
be governed by, and construed in accordance with, the laws of the State of New
York without giving effect to applicable principles of conflicts of law to the
extent that the application of the law of another jurisdiction would be required
thereby.
CERTAIN DEFINITIONS
"Accreted Value" as of any date (the "Specified Date") means, with
respect to each $1,000 principal amount at final maturity of Discount Notes:
(i) if the Specified Date is one of the following dates (each a
"Semi-Annual Accrual Date"), the amount set forth opposite such date
below:
SEMI-ANNUAL ACCRUAL DATE ACCRETED VALUE
- ------------------------------------- --------------
July 1, 1996.................... $ 520.38
January 1, 1997................. $ 555.51
July 1, 1997.................... $ 593.00
January 1, 1998................. $ 633.03
July 1, 1998.................... $ 675.76
January 1, 1999................. $ 721.37
July 1, 1999.................... $ 770.07
January 1, 2000................. $ 822.05
July 1, 2000.................... $ 877.53
January 1, 2001................. $ 936.77
July 1, 2001.................... $ 1,000.00
(ii) if the Specified Date occurs between two Semi-Annual Accrual
Dates, the sum of (A) the Accreted Value for the Semi-Annual Accrual Date
immediately preceding the Specified Date and (B) an amount equal to the
product of (i) the Accreted Value for the immediately following Semi-Annual
Accrual Date less the Accreted Value for the immediately preceding
Semi-Annual Accrual Date and (ii) a fraction, the numerator of which is the
number of days from the immediately preceding Semi-Annual Accrual Date to
the Specified Date, using a 360-day year of twelve 30-day months, and the
denominator of which is 180; and
(iii) if the Specified Date occurs after the last Semi-Annual Accrual
Date, $1,000.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business, (ii) the Capital Stock of
a Person that becomes a Restricted Subsidiary as a result of the acquisition of
such Capital Stock by Holdings or another Restricted Subsidiary or (iii) Capital
Stock constituting a minority interest in any Person that at such time is a
Restricted Subsidiary; PROVIDED, HOWEVER, that any such Restricted Subsidiary
described in clauses (ii) or (iii) above is primarily engaged in a Related
Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or other dispositions) by
Holdings or any Restricted Subsidiary, including any disposition by means of a
merger or consolidation (each referred to for the purposes of this definition as
a "disposition"), of (i) any shares of Capital Stock of a Restricted
Subsidiary (other than directors' qualifying shares or shares required by
applicable law to be held by a Person other than Holdings or a
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Restricted Subsidiary), (ii) all or substantially all the assets of any division
or line of business of Holdings or any Restricted Subsidiary or (iii) any other
assets of Holdings or any Restricted Subsidiary outside of the ordinary course
of business of Holdings or such Restricted Subsidiary (other than Holdings, (x)
a disposition of any Excluded Asset, (y) a disposition by a Restricted
Subsidiary to Holdings or by Holdings or a Restricted Subsidiary to a Wholly
Owned Subsidiary and (z) for purposes of the covenant described under
"-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock"
only, a disposition that constitutes a Restricted Payment permitted by the
covenant described under "-- Certain Covenants -- Limitation on Restricted
Payments" or a disposition specifically excepted from the definition of
Restricted Payment).
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as
at the time of determination, the present value (discounted at the interest rate
borne by the Securities, compounded annually) of the total obligations of the
lessee for rental payments during the remaining term of the lease included in
such Sale/Leaseback Transaction (including any period for which such lease has
been extended).
"Average Life" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of the numbers of years from the date of determination to
the dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable by the Company
under or in respect of the Bank Credit Agreement, as amended, refinanced or
replaced from time to time, including principal, premium (if any), interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not a claim
for post-filing interest is allowed in such proceeding), fees, charges,
expenses, reimbursement obligations, Guarantees and all other amounts payable
thereunder or in respect thereof.
"Board of Directors" means the Board of Directors of Holdings, TPC or TPC
Holding, as applicable, or (except for the purposes of clause (ii) of the
covenant described under " -- Certain Covenants -- Change of Control") any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at least 45 days prior to the date of
such determination to (ii) Consolidated Interest Expense for such four fiscal
quarters; PROVIDED, HOWEVER, that (1) if Holdings or any Restricted Subsidiary
has Incurred any Indebtedness since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving effect on a pro forma basis to such Indebtedness as if such Indebtedness
had been Incurred on the first day of such period and the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise discharged with the
proceeds of such new Indebtedness as if such discharge had occurred on the first
day of such period, (2) if since the beginning of such period Holdings or any
Restricted Subsidiary shall have made any Asset Disposition, the
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EBITDA for such period shall be reduced by an amount equal to the EBITDA (if
positive) directly attributable to the assets which are the subject of such
Asset Disposition for such period, or increased by an amount equal to the EBITDA
(if negative), directly attributable thereto for such period and Consolidated
Interest Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Indebtedness of
Holdings or any Restricted Subsidiary repaid, repurchased, defeased or otherwise
discharged with respect to Holdings and its continuing Restricted Subsidiaries
in connection with such Asset Disposition for such period (or, if the Capital
Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense
for such period directly attributable to the Indebtedness of such Restricted
Subsidiary to the extent Holdings and its continuing Restricted Subsidiaries are
no longer liable for such Indebtedness after such sale), (3) if since the
beginning of such period Holdings or any Restricted Subsidiary (by merger or
otherwise) shall have made an Investment in any Restricted Subsidiary (or any
person which becomes a Restricted Subsidiary) or an acquisition of assets,
including any acquisition of assets occurring in connection with a transaction
requiring a calculation to be made hereunder, which constitutes all or
substantially all of an operating unit of a business, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto (including the Incurrence of any Indebtedness) as if such
Investment or acquisition occurred on the first day of such period, and (4) if
since the beginning of such period any Person (that subsequently became a
Restricted Subsidiary or was merged with or into Holdings or any Restricted
Subsidiary since the beginning of such period) shall have made any Asset
Disposition, any Investment or acquisition of assets that would have required an
adjustment pursuant to clause (2) or (3) above if made by Holdings or a
Restricted Subsidiary during such period, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving pro forma effect
thereto as if such Asset Disposition, Investment or acquisition occurred on the
first day of such period. For purposes of this definition, whenever pro forma
effect is to be given to an acquisition of assets, the amount of income or
earnings relating thereto and the amount of Consolidated Interest Expense
associated with any Indebtedness Incurred in connection therewith, the pro forma
calculations shall be determined in good faith by a responsible financial or
accounting officer of Holdings. If any Indebtedness bears a floating rate of
interest and is being given pro forma effect, the interest on such Indebtedness
shall be calculated as if the rate in effect on the date of determination had
been the applicable rate for the entire period (taking into account any Interest
Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement
has a remaining term in excess of 12 months). Notwithstanding the foregoing,
"Consolidated Coverage Ratio", when used with respect to TPC, shall have the
same meaning except that references therein (and in any defined terms contained
therein) to "Holdings" and "Restricted Subsidiary" shall be deemed to refer
to TPC and those Subsidiaries of TPC that are Restricted Subsidiaries.
"Consolidated Interest Expense" means, for any period, the total interest
expense of Holdings and its consolidated Restricted Subsidiaries, without regard
to its deductibility for federal income tax purposes, plus, to the extent not
included in such total interest expense, and to the extent incurred by Holdings
or its Restricted Subsidiaries, (i) interest expense attributable to capital
leases and one-third of the rental expense attributable to operating leases,
(ii) amortization of debt discount and debt issuance cost, (iii) capitalized
interest, (iv) non-cash interest expenses, (v) commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) net costs associated with Hedging Obligations (including
amortization of fees), (vii) Preferred Stock dividends in respect of all
Preferred Stock held by Persons other than Holdings or a Wholly Owned
Subsidiary, (viii) interest incurred in connection with Investments in
discontinued operations, (ix) interest accruing on any Indebtedness of any other
Person to the extent such Indebtedness is Guaranteed by Holdings or any
Restricted Subsidiary, and (x) the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are used by
such plan or trust to pay interest or fees to any Person (other than Holdings)
in connection with Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income of
Holdings and its consolidated Subsidiaries; PROVIDED, HOWEVER, that there shall
not be included in such Consolidated Net Income: (i) any net income of any
Person if such Person is not a Restricted Subsidiary, except that (A) subject to
the exclusion contained in clause (iv) below, Holdings' equity in the net income
of any such Person for such
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period shall be included in such Consolidated Net Income up to the aggregate
amount of cash actually distributed by such Person during such period to
Holdings or a Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution paid to a Restricted
Subsidiary, to the limitations contained in clause (iii) below) and (B)
Holdings' equity in a net loss of any such Person for such period shall be
included in determining such Consolidated Net Income; (ii) any net income (or
loss) of any Person acquired by Holdings or a Subsidiary in a pooling of
interests transaction for any period prior to the date of such acquisition;
(iii) any net income of any Restricted Subsidiary of TPC to the extent that such
Restricted Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (A) subject to
the exclusion contained in clause (iv) below, TPC's equity in the net income of
any such Restricted Subsidiary for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually distributed
by such Restricted Subsidiary during such period to TPC or another Restricted
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution paid to another Restricted Subsidiary, to the
limitation contained in this clause) and (B) TPC's equity in a net loss of any
such Restricted Subsidiary for such period shall be included in determining such
Consolidated Net Income; (iv) any gain (but not loss) realized upon the sale or
other disposition of any assets of TPC or its consolidated Subsidiaries
(including pursuant to any sale-and-leaseback arrangement) which is not sold or
otherwise disposed of in the ordinary course of business and any gain (but not
loss) realized upon the sale or other disposition of any Capital Stock of any
Person; (v) extraordinary gains or losses; and (vi) the cumulative effect of a
change in accounting principles. Notwithstanding the foregoing, for the purposes
of the covenant described under "-- Certain Covenants -- Limitation on
Restricted Payments" only, there shall be excluded from Consolidated Net Income
any dividends, repayments of loans or advances or other transfers of assets from
Unrestricted Subsidiaries to Holdings or a Restricted Subsidiary to the extent
such dividends, repayments or transfers increase the amount of Restricted
Payments permitted under such covenant pursuant to clause (a)(iii)(E) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of Holdings and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of Holdings ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as (i) the par
or stated value of all outstanding Capital Stock of Holdings plus (ii) paid-in
capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit and (B) any
amounts attributable to Disqualified Stock.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Depository" means The Depository Trust Company, its nominees and their
respective successors.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or upon the happening of any event (i) matures
or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise,
(ii) is convertible or exchangeable for Indebtedness or Disqualified Stock or
(iii) is redeemable at the option of the holder thereof, in whole or in part, in
each case on or prior to the first anniversary of the Stated Maturity of the
Notes; PROVIDED, HOWEVER, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to repurchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are not more favorable to the holders of such
Capital Stock than the provisions described under "-- Certain
Covenants -- Limitation on Sales of Assets and Subsidiary Stock" and
"-- Certain Covenants -- Change of Control."
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"EBITDA" for any period means the sum of Consolidated Net Income, plus
Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) all income tax expense of
Holdings, (b) all depreciation expense of Holdings, (c) all amortization expense
of Holdings, and (d) all other non-cash items reducing such Consolidated Net
Income (excluding any non-cash item to the extent it represents an accrual of,
or reserve for, cash disbursement for any subsequent period) less all non-cash
items increasing such Consolidated Net Income (such amount calculated pursuant
to this clause (d) not to be less than zero), in each case for such period.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization of, a Subsidiary of the
Company shall be added to Consolidated Net Income to compute EBITDA only to the
extent (and in the same proportion) that the net income of such Subsidiary was
included in calculating Consolidated Net Income and only if a corresponding
amount would be permitted at the date of determination to be dividended to the
Company by such Subsidiary without prior approval (that has not been obtained),
pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to such
Subsidiary or its stockholders.
"Employee Offering" means the sale of shares of Common Stock by Holdings
to certain employees of Holdings and its Subsidiaries and other investors
following the Acquisition.
"ESOP" means the Company's Employee Stock Ownership Plan.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" means (i) .4547 acres at 145343 Memorial Drive,
Houston, Texas; (ii) 30.007 acres located at Highway 6 and Briarforest, Houston,
Harris County, Texas; (iii) 8.8962 acres located on Richmond and West Hollow
Drive, Houston, Harris County, Texas; (iv) 2.9613 acres located at 8705-8707
Katy Freeway, Houston, Harris County, Texas; (v) a 4.14560 acre tract of land
located at Highway 288 and South MacGregor Drive, Houston, Harris County, Texas;
(vi) lots 11, 12, 13, 14, 15, 16, 17, 18, 19 and 20, Block 133 located at 206
North Kaufman, Ennis, Texas; and (vii) one airplane.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Issue Date consistently applied.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such Person (whether arising by virtue of agreements to
keep-well, to purchase assets, goods, securities or services, to take-or-pay or
to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such Indebtedness
of the payment thereof or to protect such obligee against loss in respect
thereof (in whole or in part); PROVIDED, HOWEVER, that the term "Guarantee"
shall not include endorsements for collection or deposit in the ordinary course
of business. The term "Guarantee" used as a verb has a corresponding meaning.
The term "Guarantor" shall mean any Person Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Securityholder" means the Person in whose name a Discount
Note is registered on the Registrar's books.
"Houston Facility" means TPC's plant located at 8600 Park Place
Boulevard, Houston, Texas 77017, together with all land owned or leased by the
Company adjacent or in proximity thereto, all improvements or additions to such
plant or land, including docks, pipelines and facilities for traincar and truck
service, all equipment, catalysts and other items used in the production,
processing, purification, finishing, extraction, hydrogenation, dehydrogenation,
dimerization, oxo-dehydrogenation, back-cracking, skeletal isomerization or
fractionation of chemical products, feedstocks or intermediaries.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for Indebtedness; PROVIDED, HOWEVER, that any Indebtedness of a Person existing
at the time such Person becomes a Subsidiary (whether
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by merger, consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such Subsidiary at the time it becomes a Subsidiary. The term
"Incurrence" when used as a noun shall have a correlative meaning. The
accretion of principal of a non-interest bearing or other discount security
(other than the Discount Notes) shall be deemed the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable; (ii) all Capital
Lease Obligations of such Person and all Attributable Debt in respect of
Sale/Leaseback Transactions entered into by such Person; (iii) all obligations
of such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such Person and all obligations of such Person
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business); (iv) all obligations of such Person
for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction (other than obligations with respect to
letters of credit securing obligations (other than obligations described in
clauses (i) through (iii) above) entered into in the ordinary course of business
of such Person to the extent such letters of credit are not drawn upon or, if
and to the extent drawn upon, such drawing is reimbursed no later than the tenth
Business Day following receipt by such Person of a demand for reimbursement
following payment on the letter of credit); (v) the amount of all obligations of
such Person with respect to the redemption, repayment or other repurchase of any
Disqualified Stock or, with respect to any Subsidiary of such Person, any
Preferred Stock (but excluding, in each case, any accrued dividends); (vi) all
obligations of the type referred to in clauses (i) through (v) of other Persons
and all dividends of other Persons for the payment of which, in either case,
such Person is responsible or liable, directly or indirectly, as obligor,
guarantor or otherwise, including by means of any Guarantee; (vii) all
obligations of the type referred to in clauses (i) through (vi) of other Persons
secured by any Lien on any property or asset of such Person (whether or not such
obligation is assumed by such Person), the amount of such obligation being
deemed to be the lesser of the value of such property or assets or the amount of
the obligation so secured; and (viii) to the extent not otherwise included in
this definition, Hedging Obligations of such Person. The amount of Indebtedness
of any Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability, upon the
occurrence of the contingency giving rise to the obligation, of any contingent
obligations at such date.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement or other financial agreement or arrangement designed
solely to protect the Company or any Restricted Subsidiary against fluctuations
in interest rates.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the Person making the
advance or loan) or other extensions of credit (including by way of Guarantee or
similar arrangement) or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
Indebtedness or other similar instruments issued by such Person. "Investment"
shall not include payments by Holdings to the ESOP (i) for the purpose of
servicing Indebtedness of the ESOP, (ii) for the purpose of paying
administrative expenses of the ESOP, and (iii) on behalf of employees of
Holdings or its Subsidiaries that do not exceed, during any fiscal year, 10% of
the aggregate compensation expense during such fiscal year attributable to
employees of Holdings and its Subsidiaries who are eligible to participate in
the ESOP. For purposes of the definition of "Unrestricted Subsidiary", the
definition of "Restricted Payment" and the covenant described under
"-- Certain Covenants -- Limitation on Restricted Payments," (i)
"Investment" shall include the portion (proportionate to Holdings' equity
interest in such Subsidiary) of the fair market value of the net assets of any
Subsidiary of Holdings at the time that such Subsidiary is designated an
Unrestricted Subsidiary; PROVIDED, HOWEVER, that if such designation is made in
connection with the acquisition of such Subsidiary or the assets owned by such
Subsidiary, the "Investment" in such Subsidiary shall be deemed to be the
consideration paid in connection with such acquisition; PROVIDED FURTHER,
HOWEVER, that upon a redesignation of such Subsidiary as a
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Restricted Subsidiary, Holdings shall be deemed to continue to have a permanent
"Investment" in an Unrestricted Subsidiary equal to an a mount (if positive)
equal to (x) Holdings' "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to Holdings' equity interest
in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation; and (ii) any property transferred
to or from an Unrestricted Subsidiary shall be valued at its fair market value
at the time of such transfer, in each case as determined in good faith by the
Board of Directors of Holdings.
"Investment Grade Rating" means a rating of BBB - or higher by S&P and
Baa3 or higher by Moody's or the equivalent of such rating by S&P and Moody's or
by any other Rating Agency selected as provided in the definition of Rating
Agency.
"Issue Date" means July 1, 1996.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the State of New York are authorized or required by law to
close. If a payment date is a Legal Holiday, payment shall be made on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period. If a regular record date is a Legal Holiday, the record
shall not be affected.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Moody's" means Moody's Investors Service, Inc.
"Net Available Cash" from an Asset Disposition means cash payments
received therefrom (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to such properties or assets or received in any other
noncash form) in each case net of (i) all legal, title and recording tax
expenses, brokerage commissions, underwriting discounts or commissions or sales
commissions and other reasonable fees and expenses (including, without
limitation, fees and expenses of counsel, accountants and investment bankers)
related to such Asset Disposition or converting to cash any other proceeds
received, and any relocation and severance expenses as a result thereof, and all
Federal, state, provincial, foreign and local taxes required to be accrued as a
liability under GAAP, as a consequence of such Asset Disposition, (ii) all
payments made on any Indebtedness which is secured by any assets subject to such
Asset Disposition or made in order to obtain a necessary consent to such Asset
Disposition or to comply with applicable law, (iii) all distributions and other
payments required to be made to minority interest holders in Subsidiaries or
joint ventures as a result of such Asset Disposition and (iv) appropriate
amounts provided by the seller as a reserve, in accordance with GAAP, against
any liabilities associated with the property or other assets disposed in such
Asset Disposition and retained by Holdings or any Restricted Subsidiary after
such Asset Disposition, including, without limitation, pension and other post-
employment benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Disposition; provided that to the extent any such reserve is reduced in
accordance with GAAP in excess of the amount of cash paid in respect of such
liability underlying such reserve, the amount of Net Available Cash from an
Asset Disposition shall be increased by such excess amount. Further, with
respect to an Asset Disposition by a Subsidiary which is not a wholly-owned
Subsidiary, Net Available Cash shall be reduced pro rata for the portion of the
equity of such Subsidiary which is not owned by Holdings.
"Net Cash Proceeds," with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Permitted Holders" means (i) each Person who owns Capital Stock of
Holdings on the date of issuance of (a) the Discount Notes or (b) the Common
Stock in connection with the Employee Offering, (ii) any Person who on the date
of original issuance of the Discount Notes is or was before such date an
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officer, director, stockholder, employee or consultant of Sterling, (iii) the
ESOP, (iv) any savings or investment plan sponsored by Holdings, (v) with
respect to any Person covered by the preceding clauses (i) through (iv) (A) in
the case of an entity, any Affiliate of such Person, and (B) in the case of an
individual, any spouse, parent, sibling, child or grandchild (in each case,
whether such relationship arises from birth, adoption or through marriage), or
(vi) any trust, limited liability company, corporation, limited or general
partnership or other entity, a majority of interest of the beneficiaries,
stockholders, partners or owners (direct or beneficial) of which are Persons of
the type referred to in the preceding clauses (i) through (v).
"Permitted Investment" means an Investment by Holdings or any Restricted
Subsidiary in (i) a Restricted Subsidiary or a Person that will, upon the making
of such Investment, become a Restricted Subsidiary; PROVIDED, HOWEVER, that the
primary business of such Restricted Subsidiary is a Related Business; (ii)
another Person if as a result of such Investment such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all its
assets to, Holdings or a Restricted Subsidiary; PROVIDED, HOWEVER, that such
Person's primary business is a Related Business; (iii) Temporary Cash
Investments; (iv) receivables owing to Holdings or any Restricted Subsidiary if
created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; PROVIDED, HOWEVER, that
such trade terms may include such concessionary trade terms as Holdings or any
such Restricted Subsidiary deems reasonable under the circumstances; (v)
payroll, travel and similar advances to cover matters that are expected at the
time of such advances ultimately to be treated as expenses for accounting
purposes and that are made in the ordinary course of business; (vi) loans or
advances to employees made in the ordinary course of business consistent with
past practices of Holdings or such Restricted Subsidiary; (vii) stock,
obligations or securities received in settlement of debts created in the
ordinary course of business and owing to Holdings or any Restricted Subsidiary
or in satisfaction of judgments; and (viii) any Person to the extent such
Investment represents the non-cash portion of the consideration received for an
Asset Disposition as permitted pursuant to the covenant described under
"-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock."
"Permitted Liens" means, with respect to any Person, (a) pledges or
deposits by such Person under worker's compensation laws, unemployment insurance
laws or similar legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Indebtedness) or leases to
which such Person is a party, or deposits to secure public or statutory
obligations of such Person or deposits of cash or United States government bonds
to secure surety or appeal bonds to which such Person is a party, or deposits as
security for contested taxes or import duties or for the payment of rent, in
each case Incurred in the ordinary course of business; (b) Liens imposed by law
such as carriers', warehousemen's and mechanics' Liens, in each case for sums
not yet due or being contested in good faith by appropriate proceedings or Liens
arising out of judgments or awards against such Person with respect to which
such Person shall then be proceeding with an appeal or other proceedings for
review; (c) Liens for property taxes not yet subject to penalties for
non-payment or which are being contested in good faith and by appropriate
proceedings; (d) Liens in favor of issuers of surety bonds or letters of credit
issued pursuant to the request of and for the account of such Person in the
ordinary course of business; (e) minor survey exceptions, minor encumbrances,
easements or reservations of, or rights of others for, licenses, rights of way,
sewers, electric lines, telegraph and telephone and telephone lines and other
similar purposes, or zoning or other restrictions as to the use of real property
or Liens incidental to the conduct of business of such Person or to the
ownership of its properties which were not Incurred in connection with
Indebtedness and which do not in the aggregate materially adversely affect the
value of said properties or materially impair their use in the operation of the
business of such Person; (f) Liens securing Indebtedness Incurred to the finance
the construction, purchase or lease of, or repairs, improvements or addition to,
property of such Person; PROVIDED, HOWEVER, that the Lien may not extend to any
other property owned by such Person or any of its Subsidiaries at the time the
Lien is Incurred, and the Indebtedness secured by the Lien may not be Incurred
more than 180 days after the later of the acquisition, completion of
construction, repair, improvement, addition or commencement of full operation of
the property subject to the Lien the Indebtedness secured by such Lien shall
have otherwise been permitted to be issued under this Indenture and, at the time
incurred, the aggregate principal amount of Indebtedness secured by such Liens
shall not exceed the lesser of cost or
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fair market value of the assets or property so acquired or constructed; (g)
Liens to secure Indebtedness permitted under the provisions described in clauses
(b) or (c)(1),(2), or (6) (except for Indebtedness of Holdings or TPC Holding)
of the convenant described under " -- Certain Covenants --Limitation on
Indebtedness;" (h) Liens existing on the Issue Date; (i) Liens on property or
shares of Capital Stock of another Person at the time such other Person becomes
a Subsidiary of such Person; PROVIDED, HOWEVER, that such Liens are not created,
Incurred, or assumed in connection with, or in contemplation of, such other
Person becoming a Subsidiary, PROVIDED, FURTHER, HOWEVER, that such Lien may not
extend to any other property owned by such Person or any of its Subsidiaries or
Holdings and its Subsidiaries; (j) Liens on property at the time such Person or
any of its Subsidiaries acquires the property, including any acquisition by
means of a merger or consolidation with or into such Person or a Subsidiary of
such Person PROVIDED, HOWEVER, that such Liens are not created, Incurred or
assumed in connection with, or in contemplation of, such acquisition; PROVIDED,
FURTHER, HOWEVER, that the Liens may not extend to any other property owned by
such Person or any of its Subsidiaries or Holdings and its Subsidiaries; (k)
Liens securing Indebtedness or other obligations of a Subsidiary of such Person
owing to such Person or a wholly owned Subsidiary of such Person; (l) Liens
securing Hedging Obligations so long as such Hedging Obligations relate to
Indebtedness that is, and is permitted to be incurred under this Indenture,
secured by a Lien on the same property securing such Hedging Obligations; (m)
rights of setoff; (n) any interest or title of a lessor in assets or property
subject to Capital Lease Obligations; (o) Liens to secure any Refinancing (or
successive Refinancings) as a whole, or in part, of any Indebtedness secured by
any Lien referred to in the foregoing clauses (f), (g), (h), (i) and (j);
PROVIDED, HOWEVER, that (x) such new Lien shall be limited to all or part of the
same property that secured the original Lien (plus improvements to or on such
property) and (y) that Indebtedness secured by such Lien at such time is not
increased to any amount greater than the sum of (A) the outstanding principal
amount or, if greater, committed amount of the Indebtedness described under
clauses (f), (h), (i), or (j) at the time the original Lien became a Permitted
Lien and (B) an amount necessary to pay any fees and expenses, including
premiums, related to such refinancing, refunding, extension, renewal or
replacement; (p) any renewal or extension of any of the Liens referred to in the
foregoing clauses (a) through (o); and (q) Liens in addition to the Liens
referred to in the foregoing clauses (a) through (p) securing Indebtedness of
not more than $5,000,000 at any one time outstanding.
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Public Equity Offering" means an underwritten primary public offering of
common stock of Holdings pursuant to an effective registration statement under
the Securities Act.
"Public Market" means any time after (x) a Public Equity Offering has
been consummated and (y) at least 15% of the total issued and outstanding common
stock of Holdings has been distributed by means of an effective registration
statement under the Securities Act or sales pursuant to Rule 144 under the
Securities Act.
"Rating Agency" means S&P and Moody's, or if S&P or Moody's or both shall
not make a rating on the Securities publicly available, a nationally recognized
statistical rating agency or agencies, as the case may be, selected by the
Company (as certified by a resolution of the Board of Directors) which shall be
substituted for S&P or Moody's or both, as the case may be.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such indebtedness. "Refinanced"
and "Refinancing" shall have correlative meanings.
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"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of Holdings or any Restricted Subsidiary existing on the Issue Date
or Incurred in compliance with the Indenture including Indebtedness that
Refinances Refinancing Indebtedness; PROVIDED, HOWEVER, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; PROVIDED FURTHER,
HOWEVER, that Refinancing Indebtedness shall not include (x) Indebtedness of a
Subsidiary that Refinances Indebtedness of Holdings or (y) Indebtedness of
Holdings or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary.
"Related Business" means any business related, ancillary or complementary
to the businesses of Holdings, TPC Holdings or TPC on the Issue Date.
"Restricted Payment" with respect to any Person means (i) the declaration
or payment of any dividends or any other distributions of any sort in respect of
its Capital Stock (including any payment in connection with any merger or
consolidation involving such Person), other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to Holdings or a Restricted
Subsidiary, and other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or
owners of an equivalent interest in the case of a Subsidiary that is an entity
other than a corporation), (ii) the purchase, redemption or other acquisition or
retirement for value of any Capital Stock of Holdings held by any Person or of
any Capital Stock of a Restricted Subsidiary held by any Affiliate of Holdings
(other than a Restricted Subsidiary or The Huff Alternative Fund, L.P. or any
Affiliate thereof), including the exercise of any option to exchange any Capital
Stock (other than into Capital Stock of Holdings that is not Disqualified
Stock), (iii) the purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment of any Subordinated Obligations
(other than the purchase, repurchase or other acquisition of Subordinated
Obligations purchased in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year of the
date of acquisition), or (iv) the making of any Investment in any Person (other
than a Permitted Investment).
"Restricted Subsidiary" means any Subsidiary of Holdings that is not an
Unrestricted Subsidiary.
"Revolving Credit Provisions" means the provisions in the Bank Credit
Agreement pursuant to which the lenders have committed to make available to the
Company a revolving credit facility in a maximum principal amount of $40
million.
"Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby Holdings or a Restricted Subsidiary
transfers such property to a Person and Holdings or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Security Guarantee" means the guaranty of TPC Holding pursuant to the
Discount Notes Indenture.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of Holdings within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"S&P" means Standard & Poor's Ratings Group.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has
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occurred). "Stated Maturity" means, with respect to any installment of
interest on the Discount Notes, the date specified in the Discount Notes as the
fixed date on which such installment of interest is due and payable.
"Stock Purchase Agreement" means the stock purchase agreement dated as of
May 14, 1996, by and among TPC Holding, Holdings, certain shareholders of TOC,
and certain shareholders of TPC.
"Subordinated Obligation" means any Indebtedness of Holdings (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Discount Notes or the Security Guarantee, as
the case may be, pursuant to a written agreement to that effect.
"Subsidiary" means, in respect of any Person, any corporation,
association, limited liability company, limited or general partnership or other
business entity of which more than 50% of the total voting power of shares of
Capital Stock or other interests (including partnership interests) entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) such Person, (ii) such Person and one or more
Subsidiaries of such Person or (iii) one or more Subsidiaries of such Person.
"Tax Sharing Agreement" means any tax sharing agreement between TPC, TPC
Holding and Holdings or any other person with which any Subsidiary of Holdings
is required to, or is permitted to, file a consolidated tax return or with which
Holdings is or could be part of a consolidated group for tax purposes.
"Temporary Cash Investments" means: (i) any investment in direct
obligations of the United States of America or any agency thereof or obligations
guaranteed by the United States of America or any agency thereof, (ii)
investments in time deposit accounts, certificates of deposit and money market
deposits maturing within 180 days of the date of acquisition thereof issued by a
bank or trust company which is organized under the laws of the United States of
America, any state thereof or any foreign country recognized by the United
States, and which bank or trust company has capital, surplus and undivided
profits aggregating in excess of $50,000,000 (or the foreign currency equivalent
thereof) and has outstanding debt which is rated "A" (or such similar
equivalent rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act) or
investments in any security issued by an investment company registered under
Section 8 of the Investment Company Act of 1940 that is a money market fund in
compliance with all applicable requirements of SEC Rule 2a-7, or (iii)
repurchase obligations with a term of not more than 30 days for underlying
securities of the types described in clause (i) above entered into with a bank
meeting the qualifications described in clause (ii) above, (iv) investments in
commercial paper, maturing not more than 90 days after the date of acquisition,
issued by a corporation (other than an Affiliate of the Company) organized and
in existence under the laws of the United States of America or any foreign
country recognized by the United States of America with a rating at the time as
of which any investment therein is made of "P-1" (or higher) according to
Moody's or "A-1" (or higher) according to S&P, and (v) investments in
securities with maturities of 12 months or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the United
States of America, or by any political subdivision or taxing authority thereof,
and rated at least "A" by S&P or "A" by Moody's.
"Term Loan Provisions" means the provisions in the Bank Credit Agreement
pursuant to which the lenders have committed to make available to the Company
$140 million of credit facilities in the form of amortizing term loans.
"TOC" means Texas Olefins Company, a Texas Corporation.
"TPC Holding" means TPC Holding Corp., a Delaware corporation.
"Unrestricted Subsidiary" means (i) any Subsidiary of Holdings that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors of Holdings in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors of Holdings may
designate any Subsidiary of Holdings (including any newly acquired or newly
formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or
any of its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any
Lien on any property of, Holdings or any other Subsidiary of Holdings that is
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not a Subsidiary of the Subsidiary to be so designated; PROVIDED, HOWEVER, that
TPC and TPC Holding or any Subsidiary which owns the Houston Facility may not be
designated an Unrestricted Subsidiary; PROVIDED, FURTHER, HOWEVER, that either
(A) the Subsidiary to be so designated has total assets of $1,000 or less or (B)
if such Subsidiary has assets greater than $1,000, such designation would be
permitted under the covenant described under "-- Certain
Covenants -- Limitation on Restricted Payments." The Board of Directors of
Holdings may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; PROVIDED, HOWEVER, that immediately after giving effect to such
designation (x) if such Unrestricted Subsidiary at such time has Indebtedness,
Holdings could Incur $1.00 of additional Indebtedness under paragraph (a) of the
covenant described under "-- Certain Covenants -- Limitation on Indebtedness"
and (y) no Default shall have occurred and be continuing. Any such designation
by the Board of Directors of Holdings shall be by Holdings to the Discount Notes
Trustee by promptly filing with the Discount Notes Trustee a copy of the board
resolution giving effect to such designation and an officers' certificate
certifying that such designation complied with the foregoing provisions.
"U.S. Government Obligations" means securities that are (x) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act), as custodian with respect to any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of principal
of or interest on the U.S. Government Obligation evidenced by such depository
receipt.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares and shares held by other
Persons to the extent such shares are required by applicable law to be held by a
Person other than Holdings or a Restricted Subsidiary) is owned by Holdings or
one or more Wholly Owned Subsidiaries.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain material United States federal
income tax consequences relevant to the purchase, ownership and disposition of
the Discount Notes. This discussion is for general information only and does not
address all aspects of federal income taxation that may be relevant to
particular investors in light of their personal investment circumstances, nor
does it address the federal income tax consequences which may be relevant to
certain types of investors subject to special treatment under the federal income
tax laws (for example, certain financial institutions, insurance companies, tax-
exempt entities, broker-dealers, and taxpayers subject to the alternative
minimum tax). In addition, this discussion does not discuss any aspects of
state, local, or foreign tax laws. This discussion assumes that investors will
hold their Discount Notes as "capital assets" (generally, property held for
investment), within the meaning of Section 1221 of the Code.
No ruling from the Internal Revenue Service (the "IRS") will be requested
with respect to any of the matters discussed herein. There can be no assurance
that the IRS will not take a different position concerning the matters discussed
below and that such positions would not be sustained. BECAUSE INDIVIDUAL
CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF DISCOUNT NOTES SHOULD CONSULT HIS OR
HER OWN TAX ADVISOR WITH RESPECT TO HIS OR HER PARTICULAR TAX SITUATION AND AS
TO ANY FEDERAL, FOREIGN, STATE, LOCAL OR OTHER TAX
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CONSIDERATIONS (INCLUDING ANY POSSIBLE CHANGES IN TAX LAW) AFFECTING THE
PURCHASE, OWNERSHIP AND DISPOSITION OF THE DISCOUNT NOTES.
This discussion is based on the provisions of the Code, existing and
proposed Treasury regulations promulgated thereunder (the "Regulations"),
judicial authority interpreting the Code, and current administrative rulings and
pronouncements of the IRS now in effect, all of which are subject to change at
any time by legislative, judicial or administrative action. Any such changes may
be retroactively applied in a manner that could result in federal income tax
consequences different from those discussed below and could adversely affect a
holder of Discount Notes.
UNITED STATES FEDERAL INCOME TAXATION OF UNITED STATES HOLDERS
As used herein, the term "United States Holder" means a holder of
Discount Notes that is for United States federal income tax purposes (a) a
citizen or resident of the United States, (b) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, or (c) an estate or trust the income of
which is subject to United States federal income taxation regardless of source.
CLASSIFICATION OF DISCOUNT NOTES. Holdings intends to take the position
that the Discount Notes are indebtedness for tax purposes, and to adopt the
positions described below with respect to the appropriate federal income tax
treatment of the Discount Notes. The IRS, however, could assert that the
positions taken by Holdings are improper. If so, a substantial portion of the
discussion set forth below would be inapplicable, and the tax consequences to
the holders of the Discount Notes would change, possibly with adverse tax
consequences.
Pursuant to Section 385(c) of the Code, a United States Holder of a
Discount Note is required to treat such note as indebtedness for all United
States federal tax purposes unless such holder discloses any such inconsistent
treatment on his or her tax return. Section 385(c) is not binding on the IRS.
AMOUNT OF ORIGINAL ISSUE DISCOUNT. The Discount Notes were issued with
original issue discount within the meaning of Section 1273 of the Code. As a
result, a United States Holder of a Discount Note generally is required to
include such original issue discount in his or her gross income as interest
income on a constant yield to maturity basis, in advance of the receipt of cash
payments to which such income is attributable (regardless of whether the United
States Holder is a cash or accrual taxpayer) and generally in increasing amounts
over the life of the Discount Notes.
The total amount of original issue discount with respect to a Discount Note
will be equal to the excess of the "stated redemption price at maturity" of
such Discount Note over the "issue price" of such Discount Note. The "issue
price" of the Discount Note is discussed in detail below. The "stated
redemption price at maturity" of a Discount Note will be equal to the sum of
all payments, whether denominated as interest or principal, required to be made
on such Discount Note other than payments of "qualified stated interest." A
qualified stated interest payment is generally any one of a series of stated
interest payments that are unconditionally payable at least annually at a single
fixed rate (with certain exceptions for lower rates paid during some periods)
applied to the outstanding principal amount of the debt instrument. Because
interest is not payable on the Discount Notes until January 1, 2002, none of the
interest payments will be payments of qualified stated interest and all such
payments will be included in the stated redemption price at maturity.
Because the initial purchaser of the Discount Notes acquired these
securities only by purchasing Units (which included Common Stock), the Discount
Notes were treated as having been issued as an investment unit for federal
income tax purposes. The issue price of a Unit was equal to the first price at
which a substantial amount of Units was sold for money (excluding sales to bond
houses, brokers or similar persons or organizations acting in the capacity of
underwriters or wholesalers). The issue price for a Unit as so determined was
allocated between the Discount Note and the Common Stock that comprised the Unit
based on their relative fair market values at the time of issuance. Pursuant to
these rules, of the purchase price for each Unit, Holdings allocated $520.38 to
each Discount Note. This allocation, however, is not binding on the IRS, and
there can be no assurance that the IRS will not challenge Holding's
determination of the issue
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<PAGE>
price of the Discount Notes. In addition, Holdings determination of the issue
price of the Discount Notes is not necessarily indicative of the prices at which
the Discount Notes may actually trade.
TAXATION OF ORIGINAL ISSUE DISCOUNT. The amount of original issue discount
to be included in a holder's gross income for any taxable year (regardless of
whether the holder uses the cash or accrual method of accounting) is the sum of
the "daily portions" of original issue discount with respect to the Discount
Notes for each day during the taxable year or portion of the taxable year in
which the holder holds such Discount Note ("accrued original issue discount").
The daily portion is determined by allocating to each day in any "accrual
period" a pro rata portion of the original issue discount allocable to that
accrual period. Accrual periods with respect to a Discount Note may be of any
length selected by the holder and may vary in length over the term of the
Discount Note as long as (i) no accrual period is longer than one year and (ii)
each scheduled payment of interest or principal on the Discount Note occurs on
either the first or final day of an accrual period. The amount of original issue
discount allocable to each accrual period will be equal to the excess of (a) the
product of the "adjusted issue price" of the Discount Note at the beginning of
an accrual period and the yield to maturity of such Discount Note (determined on
the basis of a compounding assumption that reflects the length of the accrual
period) over (b) the sum of the payments of qualified stated interest on the
Discount Note allocable to the accrual period. The "adjusted issue price" of a
Discount Note at the beginning of an accrual period will be equal to its
original issue price increased by all previously accrued original issue discount
(disregarding any reduction on account of acquisition premium described below)
and reduced by the amount of all previous cash payments on the Discount Note.
The yield to maturity is the interest rate, expressed as a constant annual
interest rate, that when used in computing the present value of all payments of
principal and interest to be paid in connection with the Discount Notes produces
an amount equal to the issue price of the Discount Notes.
Holdings will provide certain information to the IRS, and will furnish
annually to record holders of the Discount Notes information with respect to
original issue discount during the calendar year. Because this information is
based upon the adjusted issue price of the Discount Note as if the holder were
the original holder of the instrument, subsequent holders who purchase the
Discount Notes for an amount other than the adjusted issue price and/or on a
date other than the end of an accrual period will be required to determine for
themselves the amount of original issue discount.
A subsequent purchaser of a Discount Note having original issue discount
also will be required to include annual accruals of original issue discount in
gross income, for United States federal income tax purposes, in accordance with
the rules described above, but the amount of the original issue discount may
vary depending upon the amount paid for the debt instrument by the subsequent
purchasers.
In the event of a Change in Control, Holdings will be required to offer to
redeem all of the Discount Notes. Based on the Regulations, the right of holders
of the Discount Notes to require redemption of the Discount Notes upon the
occurrence of a Change in Control will not affect the yield to maturity or the
accrual of original issue discount of the Discount Notes unless, based on all
the facts and circumstances as of the issue date, it is more likely than not
that a Change in Control giving rise to the redemption will occur. Holdings has
no present intention to treat the redemption provisions of the Discount Notes as
affecting the computation of the yield to maturity or the accrual of original
issue discount of any Discount Notes.
ACQUISITION PREMIUM ON DISCOUNT NOTES. If a United States Holder purchases
a Discount Note for an amount that is greater than its adjusted issue price as
of the purchase date but less than its stated redemption price at maturity, the
holder will be considered to have purchased such Discount Note at an
"acquisition premium." Under the acquisition premium rules of the Code and
Regulations promulgated thereunder, the amount of original issue discount that
such holder must include in its gross income with respect to such Discount Note
for any taxable year is generally reduced by the portion of such acquisition
premium properly allocable to such year.
MARKET DISCOUNT. If a United States Holder purchases a Discount Note,
subsequent to its initial issuance, for an amount that is less than the
"revised issue price" of the Discount Note as of the time of acquisition, the
amount of such difference will generally be treated as "market discount" for
United States federal income tax purposes, unless such difference is less than a
specified de minimis amount. The Code
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provides that the "revised issue price" is the original issue price of a
Discount Note plus the aggregate amount of previously accrued original issue
discount, without regard to any reductions for acquisition premium, less
payments other than qualified stated interest. Under the market discount rules,
a holder will be required to treat any principal payment on, or any gain on the
sale, exchange, retirement or other disposition of Discount Notes as ordinary
income to the extent of the accrued market discount that has accrued while the
instrument was held by such holder and that has not previously been included in
income. In addition, the holder may be required to defer, until the maturity
date of the Discount Note or its earlier disposition in a taxable transaction,
the deduction of all or a portion of the interest expense on any indebtedness
incurred or maintained to purchase or carry such Discount Note.
The Discount Notes provide for optional redemption and (in the case of a
Change in Control) mandatory offers to purchase, in whole or in part, prior to
maturity. If the Discount Notes were redeemed, a United States Holder generally
would be required to include in gross income as ordinary income the portion of
the gain recognized on the redemption attributable to accrued market discount,
if any.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Discount Note, unless
the holder elects to accrue market discount on a constant yield basis. In
addition, a holder of a Discount Note may elect to include market discount in
income currently as it accrues (under either a ratable or constant yield
method). This election to include currently, once made, applies to all market
discount obligations acquired in or after the first taxable year to which the
election applies and may not be revoked without the consent of the IRS. If a
holder of Discount Notes makes such an election, the foregoing rules with
respect to the recognition of ordinary income on sales and other dispositions of
instruments, and with respect to the deferral of interest deductions incurred or
maintained to purchase or carry such debt instruments, would not apply.
AMORTIZABLE BOND PREMIUM. If a United States Holder purchases a Discount
Note for an amount that is greater than the sum of all payments payable on the
Discount Note after the purchase date, other than qualified stated interest,
such holder will be considered to have purchased such Discount Note with
"amortizable bond premium" equal in amount to such excess, and may elect to
amortize such premium, using a constant yield method, over the remaining term of
the Discount Note. The amount amortized in any year will be treated as a
reduction of the United States Holder's interest income (including original
issue discount) from the Discount Note in such year. An election to amortize
bond premium applies to all taxable debt obligations then owned and thereafter
acquired by the United States Holder and may be revoked only with the consent of
the IRS. The holder should consult with his or her tax advisor with respect to
the general applicability of the amortizable bond premium rules of Section 171
of the Code to such holder, and whether the holder should make an election under
these rules.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT. A holder of a
Discount Note may elect to include all interest that accrues on the Discount
Note in gross income on a constant yield basis. For purposes of this election,
interest includes stated interest, original issue discount, market discount, de
minimis market discount and unstated interest, as adjusted by any amortizable
bond premium or acquisition premium.
In applying the constant yield method to a Discount Note with respect to
which this election has been made, the issue price of the Discount Note will
equal the holder's basis in the Discount Note immediately after its acquisition,
the issue date of the Discount Note will be the date of its acquisition by the
holder, and no payments on the Discount Note will be treated as payments of
qualified stated interest. The election will generally apply only to the
Discount Note with respect to which it is made and may not be revoked without
the consent of the IRS.
If this election is made with respect to a Discount Note with amortizable
bond premium, the electing holder will be deemed to have elected to apply
amortizable bond premium against interest with respect to all debt instruments
with amortizable bond premium (other than debt instruments the interest on which
is excludable from gross income) held by the electing holder as of the beginning
of the taxable year in which the Discount Note with respect to which the
election is made is acquired. The deemed election with respect to amortizable
bond premium may not be revoked without the consent of the IRS.
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If the election to apply the constant yield method to all interest on a
Discount Note is made with respect to a Discount Note on which there is market
discount, the electing holder will be treated as having made the election
described above under "-- Market Discount" to include market discount in
income currently over the life of all debt instruments held or thereafter
acquired by such holder.
SALE, EXCHANGE, REDEMPTION, RETIREMENT, OR OTHER DISPOSITION. In general,
the United States Holder of a Discount Note will recognize gain or loss upon the
sale, exchange, redemption, retirement, or other disposition of such debt
instrument measured by the difference between (i) the amount of cash and the
fair market value of property received in exchange therefor (less any portion of
such amount that is allocable to accrued interest or original issue discount,
which amount generally will be taxable as ordinary income) and (ii) the United
States Holder's adjusted tax basis in such debt instrument.
The initial tax basis in a Discount Note purchased by a United States
Holder on the original issuance of such security will be equal to the portion of
the issue price paid for the Unit allocable to the Discount Note, as discussed
in "-- Amount of Original Issue Discount." The United States Holder's initial
tax basis in the Discount Note will be increased by any accrued original issue
discount (net of all amortized acquisition premium) and any market discount
includable in such United States Holder's gross income, and decreased by the
amount of any cash payments received by such United States Holder, regardless of
whether such payments are denominated as principal or interest (other than
payments of qualified stated interest), and amortizable bond premium, if any,
deducted over the term of the Discount Notes.
Any gain or loss on the sale, exchange, redemption, retirement, or other
disposition of a Discount Note should generally be capital gain or loss (except
as discussed in "-- Market Discount"), provided the Discount Note was a
capital asset in the hands of the United States Holder. Any capital gain or loss
will be long-term capital gain or loss or short-term capital gain or loss
depending on the amount of time the debt instrument has been held.
CLASSIFICATION OF DISCOUNT NOTES AND APPLICABLE HIGH YIELD DISCOUNT
OBLIGATIONS. Section 163 of the Code provides that all of the original issue
discount with respect to certain "applicable high yield discount obligations"
will be bifurcated into two elements -- (i) an interest element that is
deductible by the issuer only when paid and (ii) a disqualified portion for
which the issuer receives no deduction (the "disqualified portion"). The
United States Holder of an applicable high yield discount obligation must
continue to include original issue discount on the obligation as it accrues. A
corporate United States Holder of an applicable high yield discount obligation,
however, is allowed a dividends-received deduction for the part of the
disqualified portion of the original issue discount that would have been treated
as a dividend had it been distributed by the issuing corporation with respect to
its stock.
The deduction by Holdings of original issue discount on the Discount Notes
will be limited because the Discount Notes constitute applicable high yield
discount obligations. Further, since the Discount Notes are applicable high
yield debt obligations, the disqualified portion of original issue discount will
equal the lesser of such original issue discount or the product of the total
original issue discount under the Discount Notes times the ratio of (a) the
excess of the yield to maturity over the sum of the applicable federal rate plus
six percentage points to (b) the yield to maturity.
Corporate United States Holders will generally be eligible for the 70%
dividends received deduction with respect to the disqualified portion of
original issue discount on a Discount Note to the extent of Holdings'
accumulated or current earnings and profits. There can be no assurance that
Holdings will have any earnings and profits. In any year in which Holdings has
no earnings and profits, the disqualified portion of any original issue discount
would not be eligible for the dividends received deduction.
BACKUP WITHHOLDING
Certain non-corporate United States Holders of Discount Notes may be
subject to backup withholding at the rate of 31% with respect to interest
(including original issue discount) and cash received in certain circumstances
upon the disposition of such securities. Generally, backup withholding is
applied only when the taxpayer (i) fails to furnish or certify its correct
taxpayer identification number to the payor in the manner required, (ii) is
notified by the IRS that it has failed to report payments of interest and
dividends
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properly, or (iii) under certain circumstances, fails to certify that it has not
been notified by the IRS that it is subject to backup withholding for failure to
report interest and dividend payments. Any amounts withheld under the backup
withholding rules will be allowed as a refund or credit against a United States
Holders's United States federal income tax liability, provided that such United
States Holder furnished the required information to the IRS.
UNITED STATES FEDERAL TAXATION OF NON-UNITED STATES HOLDERS
This section discusses certain special rules applicable to a holder of
Discount Notes that is a Non-United States Holder. For purposes of this
discussion, a "Non-United States Holder" means a holder of Discount Notes that
is not (i) an individual who is a citizen or resident of the United States; (ii)
a corporation or partnership created or organized in the United States or under
the laws of the United States or any political subdivision thereof; or (iii) an
estate or trust whose income is includable in gross income for United States
federal income tax purposes regardless of its source.
INTEREST AND ORIGINAL ISSUE DISCOUNT ATTRIBUTABLE TO THE DISCOUNT
NOTES. Subject to the discussion of backup withholding set forth below,
payments of interest (including original issue discount) on the Discount Notes
to a Non-United States Holder who is the beneficial owner of a Discount Note
generally will not be subject to the 30% U.S. withholding tax under the
portfolio interest exemption of the Code; provided, that (i) the beneficial
owner of the Discount Note does not actually or constructively own 10% or more
of the total combined voting power of all classes of stock of Holdings entitled
to vote within the meaning of Section 871(h)(3) of the Code and the regulations
thereunder; (ii) such beneficial owner is not a controlled foreign corporation
that is related to Holdings through stock ownership; (iii) such beneficial owner
is not a bank whose receipt of interest on a Discount Note is described in
Section 881(c)(3)(A) of the Code; and (iv) such beneficial owner satisfies the
certification requirement (described generally below) set forth in Section
871(h) (in the case of individuals) or Section 881(c) (in the case of foreign
corporations) of the Code and the Regulations thereunder.
To satisfy the certification requirement referred to in (iv) above, the
beneficial owner of a Discount Note, or a financial institution holding the
Discount Note on behalf of such owner, must provide, in accordance with
specified procedures, Holdings or its paying agent, as the case may be, with a
statement to the effect that the beneficial owner is a Non-United States Holder.
Such requirement generally will be met if (1) the beneficial owner provides his
name and address, signs under penalties of perjury, and certifies that he is
Non-United States Holder (which certification may be made on IRS Form W-8 (or
substitute Form W-8)) or (2) a securities clearing organization, a bank or other
financial institution holding the Discount Note on behalf of the beneficial
owner certifies, under penalties of perjury, that such statement has been
received by it and furnishes Holdings or its paying agent, as the case may be,
with a copy thereof.
Recently proposed Regulations would provide alternative methods for
satisfying the certification requirement described above. The Proposed
Regulations also would require, in the case of Discount Notes held by a foreign
partnership, that (i) the certification be provided by the partners rather than
by the foreign partnership, and (ii) the partnership provide certain
information, including a United States taxpayer identification number. The
Proposed Regulations are proposed to be effective for payments made after
December 31, 1997. There can be no assurances that the Proposed Regulations will
be adopted or as to the provisions that they will include if and when adopted in
temporary or final form.
If the Non-United States Holder cannot satisfy the requirements of the
"portfolio interest" exception described above, payments of premium, if any,
and interest (including original issue discount) made to Non-United States
Holders with respect to the Discount Notes will be subject to a 30% United
States withholding tax unless the beneficial owner of the Discount Note provides
Holdings or its paying agent, as the case may be, with, and keeps current (i) a
properly executed IRS Form 1001 (or successor form) claiming an exemption from
United States withholding tax under a United States income tax treaty, or (ii) a
properly executed IRS Form 4224 (or successor form) claiming such premium and/or
interest is exempt from United States withholding tax because such premium
and/or interest is effectively connected with the conduct of a United States
trade or business by the Non-United States Holder, in which case the premium
and/or interest
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will be subject to the United States federal income tax on net income at the
rates applicable to United States persons generally (and with respect to
corporate holders and under certain circumstances, the 30% branch profits tax).
INFORMATION REPORTING AND BACKUP WITHHOLDING. In general, there is no
United States information reporting or backup withholding tax on payments to
Non-United States Holders who provide the appropriate certification described
above regarding qualifying for the portfolio interest exemption from United
States federal income tax for payments of principal or interest (including
original issue discount) on the Discount Notes.
Payment by Holdings of principal on the Discount Notes or payment by a
United States office of a broker of the proceeds of a sale of the Discount Notes
is subject to both backup withholding and information reporting unless the
beneficial owner provides a completed IRS Form W-8 which certifies under
penalties of perjury that such owner is a Non-United States Holder who meets all
of the requirements for exemption from United States federal income tax on any
gain from the sale, exchange, or retirement of the Discount Notes.
In general, backup withholding and information reporting will not apply to
a payment of the gross proceeds of a sale of Discount Notes effected at the
foreign office of a broker. If, however, such broker is, for United States
federal income tax purposes a United States person, or a foreign controlled
corporation, or a foreign person 50% or more of whose gross income for certain
periods is derived from activities that are effectively connected with the
conduct of a trade or business in the United States, such payments will not be
subject to backup withholding, but will be subject to information reporting
unless (i) such broker has documentary evidence in its records that the
beneficial owner is a Non-United States Holder and certain other conditions are
met, or (ii) the beneficial owner otherwise established an exemption, provided
such broker does not have actual knowledge that the payee is a United States
person. Non-United States Holders should consult their tax advisors regarding
the application of these rules to their particular situations, the availability
of an exemption therefrom and the procedure for obtaining such an exemption, if
available.
Any amounts withheld under backup withholding will be allowed as a credit
against such holder's United States federal income tax liability and may entitle
such holder to a refund, provided the required information is furnished to the
IRS.
GAIN ON DISPOSITION OF DISCOUNT NOTES. A Non-United States Holder will
generally not be subject to United States federal income tax with respect to
gain recognized on disposition of the Discount Notes unless (i) the gain is
effectively connected with a trade or business of the Non-United States Holder
in the United States, or (ii) in the case of a Non-United States Holder that is
an individual, such holder is present in the United States for 183 or more days
in the taxable year of the disposition and certain other requirements are met.
UNITED STATES FEDERAL ESTATE TAXES. Subject to applicable treaty
provisions, the Discount Notes held at the time of death (or theretofore
transferred subject to certain retained rights or powers) by an individual who
at the time of death is not a United States citizen or domiciliary of the United
States at the date of death generally will not be included in such person's
gross estate for United States federal estate tax purposes provided that (a) the
decedent is not a 10% shareholder of Holdings, and (b) the decedent does not
hold the Discount Notes in connection with a trade or business within the United
States.
PLAN OF DISTRIBUTION
This Prospectus is being used by the Huff Fund in connection with offers
and sales of the Discount Notes in the over-the-counter market, in private
transactions, or otherwise at negotiated prices related to prevailing market
prices at the time of sale. The Company will not receive any proceeds from the
sale of the Discount Notes. The Company has agreed to indemnify the Huff Fund
against certain liabilities, including liabilities under the Securities Act, and
to contribute to payments which the Huff Fund might be required to make in
respect thereof.
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The Huff Fund owns approximately 10.9% of the Common Stock of Holdings.
Under the terms of the Voting Agreement, the Huff Fund may cause Holdings to
nominate a director to the Board of Directors of Holdings. See "Related
Transactions."
LEGAL MATTERS
Certain legal matters with respect to the original issuance and sale of the
Discount Notes are being passed upon for the Company by Bracewell & Patterson,
L.L.P., Houston, Texas. Certain members of Bracewell & Patterson, L.L.P. own
less than .5% of the outstanding Common Stock of Holdings.
EXPERTS
The combined financial statements of TOC, its subsidiaries and Clarkston as
of May 31, 1995 and as of June 30, 1996, for the years ended May 31, 1994 and
1995, the twelve months ended May 31, 1996 and the one month ended June 30, 1996
included in this Prospectus and Registration Statement have been audited by
Coopers & Lybrand L.L.P. ("C&L"), independent public accountants, as stated in
their report included herein and are included in reliance upon the reports of
such firm given upon their authority as experts in accounting and auditing.
The financial statements of the Company as of June 30, 1997 and for the
year then ended included in this Prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report included herein and
are included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
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INDEX TO FINANCIAL STATEMENTS
PAGE
---
Reports of Independent Accountants ........................................ F-2
Financial Statements
Consolidated Balance Sheet ........................................... F-4
Consolidated Statement of Operations ................................. F-5
Consolidated Statement of Stockholders' Equity ....................... F-6
Consolidated Statement of Cash Flows ................................. F-7
Notes to Consolidated Financial Statements ........................... F-8
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Texas Petrochemical Holdings, Inc.:
We have audited the accompanying consolidated balance sheet of Texas
Petrochemical Holdings, Inc. as of June 30, 1997, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at June 30, 1997, and the
results of its operations and its cash flows for the year then ended, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Houston, Texas
August 1, 1997
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Texas Petrochemical Holdings, Inc.:
We have audited the accompanying combined balance sheet of Texas Olefins
Company, its subsidiaries and affiliate (Predecessor to Texas Petrochemical
Holdings, Inc.) as of June 30, 1996, and the related combined statements of
operations, stockholders' equity, and cash flows for the one month period ended
June 30, 1996, the twelve month period ended May 31, 1996 and for the year ended
May 31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects the combined financial position of Texas
Olefins Company, subsidiaries and affiliate as of June 30, 1996, and the
combined results of their operations and their cash flows for the one month
period ended June 30, 1996, the twelve month period May 31, 1996 and for the
year ended May 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in Note 3 to the combined financial statements, effective June
1, 1994 and June 1, 1995, the Company changed its method of accounting for
investment securities and its method of accounting for impairment of long-lived
assets, respectively.
COOPERS & LYBRAND L.L.P.
Houston, Texas
August 16, 1996
F-3
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC. (AND PREDECESSOR)
CONSOLIDATED BALANCE SHEET
(IN THOUSAND OF DOLLARS, EXCEPT SHARE AMOUNTS)
COMPANY PREDECESSOR
-------- ------------
JUNE 30, JUNE 30,
1997 1996
-------- ------------
ASSETS
Current assets:
Cash and cash equivalents.......... $ 101 $ 4,780
Investment securities.............. -- 6,794
Accounts receivable -- trade....... 44,662 35,280
Inventories........................ 17,926 11,933
Other current assets............... 21,157 11,753
-------- ------------
Total current assets.......... 83,846 70,540
Property, plant and equipment, net...... 239,959 81,814
Investments in land held for sale....... 3,886 6,181
Investment in and advances to limited
partnership........................... 2,969 2,824
Goodwill, net of accumulated
amortization of $4,887................ 179,598 --
Other assets, net....................... 12,748 6,523
-------- ------------
Total assets.................. $523,006 $167,882
======== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft..................... $ 10,157 $ --
Accounts payable -- trade.......... 29,942 40,131
Accrued expenses................... 16,917 4,383
Current portion of cash bonus plan
liability......................... 7,811 --
Current portion of long-term
debt.............................. 6,438 --
Dividends payable.................. -- 677
-------- ------------
Total current liabilities..... 71,265 45,191
Revolving line of credit................ 12,000 13,000
Long-term debt.......................... 333,423 --
Cash bonus plan liability............... 17,573 --
Deferred income taxes and other......... 65,959 16,107
Minority interest in net assets of
consolidated subsidiary............... -- 1,107
Commitments and contingencies (Note 10)
Stockholders' equity:
Common stock, $0.01 par value,
527,778 shares authorized and
outstanding....................... 5 --
Additional paid in capital......... 46,264 --
Accumulated deficit................ (15,483) --
Note receivable from ESOP.......... (8,000) --
Net equity of Predecessor.......... -- 92,477
-------- ------------
Total stockholders' equity.... 22,786 92,477
-------- ------------
Total liabilities and
stockholders'
equity................ $523,006 $167,882
======== ============
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC. (AND PREDECESSOR)
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSAND OF DOLLARS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY ---------------------------------
---------- ONE TWELVE
YEAR MONTH MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, MAY 31, MAY 31,
1997 1996 1996 1995
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues................................ $ 490,246 $ 41,384 $ 455,585 $ 474,677
Cost of goods sold...................... 433,685 35,992 379,468 396,360
Depreciation and amortization........... 29,876 1,277 14,982 14,298
---------- --------- ---------- ----------
Gross profit....................... 26,685 4,115 61,135 64,019
Selling, general and administrative
expenses.............................. 8,420 1,683 19,070 16,571
---------- --------- ---------- ----------
Income from operations........ 18,265 2,432 42,065 47,448
Interest expense (income)............... 39,386 76 1,630 (720)
Other income (expense)
Gain (loss) on disposal of assets
and investment securities, net... -- (280) (3,099) 1,112
Impairment of investment in land... -- -- (12,592) --
Other, net......................... 2,271 (88) (236) (12)
---------- --------- ---------- ----------
2,271 (368) (15,927) 1,100
---------- --------- ---------- ----------
Income (loss) before income
taxes, extraordinary loss
and minority interest...... (18,850) 1,988 24,508 49,268
Provision (benefit) for income taxes.... (4,823) 761 7,903 16,880
---------- --------- ---------- ----------
Income (loss) before
extraordinary loss and
minority interest.......... (14,027) 1,227 16,605 32,388
Extraordinary loss from early
extinguishment of debt, net of tax
benefit of $784....................... 1,456 -- -- --
Minority interest in net loss of
consolidated subsidiary............... -- 9 143 129
---------- --------- ---------- ----------
Net income (loss)............. $ (15,483) $ 1,236 $ 16,748 $ 32,517
========== ========= ========== ==========
Pro Forma net income to reflect income
taxes for Affiliate (Note 7).......... $ 1,236 $ 15,098 $ 30,448
========= ========== ==========
Loss per common share:
Before extraordinary loss..... $ (26.58)
Extraordinary loss............ (2.76)
----------
$ (29.34)
==========
Weighted average shares outstanding..... 527,778
==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC. (AND PREDECESSOR)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
RETAINED
ADDITIONAL NOTE CLASS A CLASS B AFFILIATE EARNINGS
COMMON PAID IN RECEIVABLE COMMON COMMON COMMON (ACCUMULATED)
STOCK CAPITAL FROM ESOP STOCK STOCK STOCK (DEFICIT)
------- ----------- ---------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
PREDECESSOR COMPANY:
Balance, May 31, 1994................ $ 200 $5,028 $1,000 $135,367
Net Income........................... 32,517
Dividends (6,253)
Sale of treasury stock...............
Cancellation of Class B Common....... (7) (461)
Unrealized loss on investment
investment securities..............
------- ------- ------- --------------
Balance, May 31, 1995................ 200 5,021 1,000 161,170
Net income........................... 16,749
Redemption of Class A & B Common.....
Sale of treasury stock...............
Dividends............................ (16,526)
Net change in unrealized loss on
investment securities..............
Cancellation of Class B Common....... (1,214) (71,626)
Cancellation of Class B Common....... (7) (461)
Redemption and cancellation of
Affiliate common stock............. (1,000)
------- ------- ------- --------------
Balance, May 31, 1996................ 200 3,800 -- 89,306
Net income........................... 1,236
Net change in unrealized loss on
investment securities..............
Liquidating dividend to affiliate
shareholders....................... (677)
------- ------- ------- --------------
Balance, June 30, 1996............... 200 3,800 -- 89,865
POST ACQUISITION:
Adjustments due to Acquisition....... $ 5 $46,264 $(10,000) (200) (3,800) -- (89,865)
Net loss............................. (15,483)
Reduction in ESOP Note............... 2,000
------- ----------- ---------- ------- ------- ------- --------------
Balance, June 30, 1997............... $ 5 $46,264 $ (8,000) $ -- $ -- $ -- $(15,483)
======= =========== ========== ======= ======= ======= ==============
</TABLE>
UNREALIZED
LOSS ON
INVESTMENT TREASURY
SECURITIES STOCK TOTAL
----------- --------- --------
PREDECESSOR COMPANY:
Balance, May 31, 1994................ $ (1,187) $140,408
Net Income........................... 32,517
Dividends (6,253)
Sale of treasury stock............... 251 251
Cancellation of Class B Common....... 468
Unrealized loss on investment
investment securities.............. $(3,651) (3,651)
----------- --------- --------
Balance, May 31, 1995................ (3,651) (468) 163,272
Net income........................... 16,749
Redemption of Class A & B Common..... (95,440) (95,440)
Sale of treasury stock............... 22,600 22,600
Dividends............................ (16,526)
Net change in unrealized loss on
investment securities.............. 3,007 3,007
Cancellation of Class B Common....... 72,840
Cancellation of Class B Common....... 468
Redemption and cancellation of
Affiliate common stock............. (1,000)
----------- --------- --------
Balance, May 31, 1996................ (644) -- 92,662
Net income........................... 1,236
Net change in unrealized loss on
investment securities.............. (744) (744)
Liquidating dividend to affiliate
shareholders....................... (677)
----------- --------- --------
Balance, June 30, 1996............... (1,388) -- 92,477
POST ACQUISITION:
Adjustments due to Acquisition....... 1,388 -- (56,208)
Net loss............................. (15,483)
Reduction in ESOP Note............... 2,000
----------- --------- --------
Balance, June 30, 1997............... $-- $ -- $ 22,786
=========== ========= ========
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC. (AND PREDECESSOR)
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY ----------------------------------
--------- ONE TWELVE
YEAR MONTH MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, MAY 31, MAY 31,
1997 1996 1996 1995
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................. $ (15,483) $ 1,236 $ 16,748 $ 32,517
Adjustments to reconcile net income
(loss) to cash flow from
operating activities:
Extraordinary loss................. 1,456 -- -- --
Impairment of investment in land... -- -- 12,592 --
Depreciation of fixed assets....... 24,810 1,259 14,768 14,072
Amortization of intangibles........ 5,066 18 214 226
Amortization of debt issue costs
and discount..................... 5,664 -- -- --
Deferred income taxes.............. (2,897) (237) (5,829) 818
Earnings from limited
partnership...................... (670) 190 202 (260)
Change in:
Accounts receivable........... (9,382) 7,723 1,593 (18,100)
Inventories................... (5,993) 3,069 2,230 12,954
Other assets.................. (6,381) 1,424 (3,616) (852)
Accounts payable, accrueds and
other...................... 2,051 (768) 5,597 8,927
--------- -------- -------- --------
Net cash provided by
(used in) operating
activities............ (1,759) 13,914 44,499 50,302
Cash flows from investing activities:
Capital expenditures............... (7,634) (1,997) (5,462) (8,680)
Proceeds from asset sales.......... 4,754 --
Acquisition of the Company,net of
cash acquired.................... (366,277) --
Distribution received from
partnership...................... 525 --
Purchase of investment
securities....................... -- -- (19,138) (33,998)
Proceeds from sale of Predecessor
assets........................... 16,288 702 32,821 16,778
--------- -------- -------- --------
Net cash used in
investing
activities............ (352,344) (1,295) 8,221 (25,900)
Cash flows from financing activities:
Bank overdraft..................... 10,157 (12,382) 12,382 --
Net borrowings revolving line of
credit........................... (1,000) 3,000 10,000 (11,000)
Proceeds from issuance of long-term
debt............................. 398,000 -- -- 1,000
Payments on long-term debt......... (62,219) -- (1,022) (4,697)
Cash bonus plan payments........... (9,406) -- -- --
Debt issuance and organizational
costs............................ (16,304) -- -- --
Proceeds from sale of Common Stock,
net.............................. 32,976 -- -- --
Reduction in note receivable from
ESOP............................. 2,000 -- -- --
Dividends paid..................... -- -- (16,526) (9,085)
Predecessor common stock
transactions..................... -- -- (73,840) 451
--------- -------- -------- --------
Net cash provided by
(used in) financing
activities............ 354,204 (9,382) (69,006) (23,331)
--------- -------- -------- --------
Net increase (decrease) in cash and cash
equivalents........................... 101 3,237 (16,286) 1,071
Cash and cash equivalents, beginning.... -- 1,543 17,829 16,758
--------- -------- -------- --------
Cash and cash equivalents, ending....... $ 101 $ 4,780 $ 1,543 $ 17,829
========= ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC. (AND PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE ACQUISITION
On July 1, 1996, Texas Olefins Company ("TOC") and a raw material supply
contract of Clarkston Corporation (defined within these financial statements and
related notes as the "Affiliate") were acquired for approximately $371 million
in a series of transactions in connection with the Acquisition. After the
transactions, TOC was merged with and into Texas Petrochemicals Corporation
becoming a 100% owned subsidiary of Texas Petrochemical Holdings, Inc. In
connection with the Acquisition, the Texas Petrochemicals Corporation issued
$175 million aggregate principal amount of Original Notes and borrowed $140
million under the Bank Credit Agreement. Texas Petrochemical Holdings, Inc.
issued $57.7 million in Discount Notes due 2007 (the "Discount Notes") for net
proceeds of $30 million and sold $43.8 million in common stock, $10 million of
which was financed under the Bank Credit Agreement. The combined proceeds from
the issuance of debt and common stock were used to finance the Acquisition. On
the closing date of the Acquisition, prior to closing, TOC sold to the previous
majority shareholder of TOC for $7.8 million in cash a ranch of approximately
1,900 acres and the livestock and personalty thereon (the "Ranch") and 80% of
the outstanding capital stock of Texas Falls Corporation ("The Falls") owned
by TOC. In June 1996, the Affiliate was dissolved and a $677,000 liquidating
dividend was declared to its shareholders.
The sources and applications of funds required to consummate the
Acquisition are summarized below.
AMOUNT
(IN
MILLIONS)
------------
Sources of Funds:
Bank Credit Agreement.............. $ 140
Original Notes..................... 175
Discount Notes..................... 30
Sale of Common Stock............... 34
------------
Total......................... $ 379
============
Uses of Funds:
Acquisition(1)..................... $ 363
Fees and expenses(2)............... 16
------------
Total......................... $ 379
============
- ------------
(1) Acquisition cost is net of cash received from the sale of The Falls and the
Ranch for combined proceeds of $7.8 million.
(2) Represents underwriting fees, legal, accounting and other professional fees
payable in connection with the financing of the Acquisition.
The Acquisition was accounted for using the purchase method of accounting
and, therefore, the consolidated financial statements for the year ended June
30, 1997 reflect the purchase price allocated to the net assets acquired based
on their estimated fair values as of July 1, 1996. The fair value of tangible
assets acquired, net of liabilities assumed, was $179 million. The balance of
the purchase price, $184 million, was recorded as goodwill and is being
amortized over 40 years utilizing the straight-line method.
F-8
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC. (AND PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following unaudited pro forma combined statement of income assumes the
Acquisition occurred on June 1, 1995. The pro forma combined statement of income
reflects several adjusting entries, including but not limited to, increased
depreciation and amortization as a result of the increased basis in fixed assets
and goodwill and increased interest expense from the incurrance of additional
debt. The results are not necessarily indicative of the results which would
actually have occurred if the purchase had taken place at June 1, 1995. Amounts
are in millions, except share amounts.
TWELVE
MONTHS ENDED
MAY 31, 1996
------------
Revenues................................ $ 454.2
Cost of goods sold...................... 367.3
Depreciation and amortization........... 36.3
------------
Gross profit....................... 50.6
Selling, general and administrative..... 12.7
------------
Income from operations........ 37.9
Interest expense........................ 36.1
Other expense:
Loss on disposal of assets and
investment securities, net....... (3.1)
Impairment of investment in land... (12.6)
Other, net......................... 0.1
------------
(15.6)
------------
Loss before income taxes...... (13.8)
Provision for income taxes.............. --
------------
Net loss...................... $ (13.8)
============
Loss per share................ $(26.15)
============
Weighted average shares
outstanding................ 527,778
============
2. NATURE OF OPERATIONS
The Company through its facility in Houston, Texas is the largest producer
of butadiene and butene-1, and the third largest producer of MTBE, in North
America, in terms of production capacity. In addition, the Company is the sole
producer of diisobutylene and isobutylene concentrate in the United States and
is the largest domestic merchant supplier of high purity isobutylene to the
chemical market. The Company's products include: (i) butadiene, primarily used
to produce synthetic rubber; (ii) MTBE, used as an oxygenate and octane enhancer
in gasoline; (iii) n-butylenes (butene-1 and butene-2), used in the manufacture
of plastic resins, fuel additives and synthetic alcohols; and (iv) specialty
isobutylenes, primarily used in the production of specialty rubbers, lubricant
additives, detergents and coatings.
The Company's principal feedstocks are crude butadiene, isobutane and
methanol. The Company purchases a significant portion of its crude butadiene
requirements at prices, which are adjusted based on the Company's selling price
of butadiene as well as the cost of natural gas used to produce butadiene,
thereby providing the Company with a fixed profit on such sales. Methanol and
isobutane are purchased at prices linked to prevailing market prices.
F-9
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC. (AND PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements as of and for the year ended June 30,
1997 include the accounts of Texas Petrochemical Holdings, Inc. and its wholly
owned subsidiary, Texas Petrochemicals Corporation and its wholly owned
subsidiary, Texas Butylene Chemical Company. The financial statements for the
periods prior to July 1, 1996 include the combined presentation of the accounts
of TOC, Texas Petrochemicals Corporation, The Falls and the Affiliate,
collectively referred to in these financial statements and related notes as the
"Predecessor". TOC was merged with and into TPC in conjunction with the
Acquisition as described in Note 1. The minority interest reflected in the
accompanying Predecessor financial statements reflects approximately 20% of the
common stock of The Falls not owned by the Company.
CHANGE IN FISCAL YEAR END
In June 1996 the Company's Board of Directors approved a change in the
Company's fiscal year end to June 30 from May 31. Accordingly, the accompanying
combined financial statements include results of operations and cash flows for
the one month transition period.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less at the date of purchase to be cash equivalents.
INVESTMENT SECURITIES
The Company accounts for investment securities in accordance with Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," (SFAS 115). Management has classified all
investments as available-for-sale. Cost is determined by specific
identification. Purchases and sales are reflected on a trade date basis.
Investment securities are carried at fair value with any unrealized gains or
losses reported as a component of stockholders' equity, net of tax.
INVENTORIES
Inventories consist of raw materials, finished goods and chemicals used in
processing and are valued at the lower of average cost or market.
The Company may enter into product exchange agreements with suppliers
whereby certain inventories are exchanged for raw materials. These exchanges are
recorded at the lower of cost or market. Any resulting gains or losses from the
utilization of these exchanges are reflected in cost of chemical products sold.
Balances related to quantities due to or payable by the Company are included in
inventory.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Turnaround costs and
other maintenance and repairs are charged to expense as incurred while
significant improvements are capitalized. Upon retirement or sale of an asset,
the asset and the related accumulated depreciation are removed from the accounts
and any resulting gain or loss is reflected in operations.
DEPRECIATION
Depreciation of property, plant and equipment is computed using the
straight-line method over their estimated useful lives ranging from 3 to 31
years, with the plants being depreciated over 10 years.
F-10
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC. (AND PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DEBT ISSUE COSTS AND OTHER
Debt issue costs relating to the Company's long-term debt are amortized to
interest expense over the scheduled maturity of debt utilizing the interest
method. Unamortized debt issue costs relating to long-term debt retired prior to
its scheduled maturity are charged off as an extraordinary item. Other assets
include patents and catalysts, which are amortized using the straight-line
method over their useful lives ranging from 2 to 7 years.
IMPAIRMENT OF ASSETS
Prior to June 1, 1995, the Company recognized impairment of investments in
land and property, plant and equipment at the time when a decline in value of an
asset was determined to be permanent. Effective June 1, 1995, the Company
adopted SFAS No. 121, "Impairment of Long-Lived Assets and Assets to be
Disposed of." During the twelve months ended May 31, 1996, the Company
evaluated the carrying value of its investment in land in light of the possible
sale of these assets in the foreseeable future and considering the criteria of
SFAS No. 121, determined that an impairment write-down was necessary. As a
result, the Company recorded a provision for estimated impairment of $12.6
million, with an associated tax benefit of $4.7 million, to write-down certain
investments in land to estimated fair market value. Actual sales proceeds from
investments in land may differ from the carrying amounts.
REVENUE RECOGNITION
The Company recognizes revenue from sales of refined products in the period
of delivery.
INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes," which requires that deferred taxes be provided
at enacted tax rates on temporary differences between the carrying amounts of
assets and liabilities for financial and tax reporting purposes.
The Affiliate of the Predecessor has elected for federal tax purposes to be
taxed under provisions of Subchapter S of the Internal Revenue Code. This
election requires the stockholders to include the Affiliate's net earnings,
losses and credits in their own income for tax purposes. Accordingly, the
Affiliate generally is not liable for federal income taxes and no provision for
federal income taxes is included in the accompanying financial statements. For
the periods prior to July 1, 1996, pro forma net income reflects the effect on
the combined company as if the Affiliate was a taxable entity for income tax
purposes. The Affiliate's articles of incorporation require its board of
directors to declare a payment of a cash dividend to its shareholders of no less
than 110% of the maximum individual federal income tax rate under the Internal
Revenue Code for each calendar year, payable within 30 days after the Affiliate
files its tax return.
EMPLOYEE STOCK OWNERSHIP PLAN
The balance of the note receivable from the Employee Stock Ownership Plan
(see Note 11), is recorded as a contra account in the stockholder's equity
section of the balance sheet.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
During 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128 "Earnings per Share," SFAS
No. 129 "Disclosure of Information about
F-11
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC. (AND PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Capital Structure," SFAS No. 130, "Reporting Comprehensive Income," and SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 128 is effective for financial statements for both
interim and annual periods ending after December 15, 1997. SFAS No. 129 is
effective for periods ending after December 15, 1997. SFAS No. 130 and SFAS 131
are effective for fiscal years beginning after December 15, 1997. Adoption of
these pronouncements is not expected to have a material effect on the Company's
financial position, results of operations or cash flows.
RECLASSIFICATIONS
Certain reclassifications have been made to previously issued financial
statements to conform to the current presentation. There is no resulting impact
on stockholders' equity or net income (loss).
4. INVESTMENT SECURITIES
On July 1, 1996 in connection with the Acquisition, all of the
Predecessor's equity securities were sold at their unamortized cost. As of June
30, 1996 the Predecessor held $6.8 million of equity securities with an
unamortized cost of $9.0 million and gross unrealized losses of $2.2 million.
Unrealized losses of $0.6 million and $1.4 million (net of deferred tax) related
to these securities is recorded as a component of stockholders' equity for the
twelve months ended May 31, 1996 and the one month ended June 30, 1996,
respectively. During the twelve months ended May 31, 1996 and the one month
ended June 30, 1996, gross realized gains of approximately $1.9 million and $0,
respectively, and gross realized losses of approximately $5.0 million and $0.3
million, respectively, were recognized on the sale of securities.
The Predecessor held $3.7 million of bankers acceptance notes at May 31,
1995, with scheduled maturities of less than one year. The Predecessor also held
approximately $17.4 million of equity securities at May 31, 1995. Unrealized
losses of $3.6 million (net of deferred tax) related to these securities are
recorded as a component of stockholders' equity for the year ended May 31, 1995.
During the year ended May 31, 1995, gross realized gains of approximately $1.2
million and gross realized losses of approximately $0.05 million were recognized
on the sale of securities.
5. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS (IN THOUSANDS OF DOLLARS)
INVENTORIES:
COMPANY PREDECESSOR
-------- ------------
JUNE 30, JUNE 30,
1997 1996
-------- ------------
Finished goods.......................... $ 8,500 $ 5,480
Raw materials........................... 7,504 4,533
Chemicals and supplies.................. 1,922 1,920
-------- ------------
$ 17,926 $ 11,933
======== ============
F-12
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC. (AND PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT:
COMPANY PREDECESSOR
-------- ------------
JUNE 30, JUNE 30,
1997 1996
-------- ------------
Chemical plants......................... $259,293 $173,369
Construction in progress................ 3,047 5,378
Other................................... 1,934 13,812
-------- ------------
264,274 192,559
Less accumulated depreciation, depletion
and amortization...................... 24,315 110,745
-------- ------------
$239,959 $ 81,814
======== ============
OTHER ASSETS:
COMPANY PREDECESSOR
-------- -----------
JUNE 30, JUNE 30,
1997 1996
-------- -----------
Debt issue costs........................ $ 13,491 $ --
Organizational costs.................... 573 --
Intangibles and other................... 2,000 7,934
-------- -----------
16,064 7,934
Less accumulated amortization........... 3,316 1,411
-------- -----------
$ 12,748 $ 6,523
======== ===========
ACCRUED EXPENSES:
COMPANY PREDECESSOR
-------- -----------
JUNE 30, JUNE 30,
1997 1996
-------- -----------
Accrued interest........................ $ 13,203 $ 81
Property and sales taxes................ 2,866 2,370
Federal and state taxes................. 135 959
Other................................... 713 973
-------- -----------
$ 16,917 $ 4,383
======== ===========
F-13
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC. (AND PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LONG-TERM DEBT
COMPANY PREDECESSOR
---------- -----------
JUNE 30, JUNE 30,
1997 1996
---------- -----------
Bank Credit Agreement
Term A Loan........................ $ 25,781 $ --
Term B Loan........................ 44,000 --
ESOP Loan.......................... 8,000 --
Revolving Credit Loans............. 12,000 13,000
Original Notes and Notes................ 225,000 --
Discount Notes.......................... 34,187 --
Deferred premium on Securities.......... 2,893 --
---------- -----------
351,861 13,000
Less current maturities................. 6,438 --
---------- -----------
Long-term debt.......................... $ 345,423 $13,000
========== ===========
The Bank Credit Agreement provided for term loans in the amount of $130
million, an ESOP loan of $10 million, and a revolving credit facility of up to
$40 million. Quarterly principal and interest payments are made under the Bank
Credit Agreement. The final payments under the ESOP Loan, Term A Loan and Term B
Loan are due on June 30, 2001, December 31, 2002 and June 30, 2004,
respectively. The Revolving Credit Loan Facility is currently scheduled to
expire on December 31, 2002. The debt under the Bank Credit Agreement bears
interest, at the option of the borrower, based on the LIBOR rate plus a margin
(2.5% and 3% at June 30, 1997) or the greater of the prime rate and the federal
funds rate plus 1/2% plus a margin (1.5% at June 30, 1997). Substantially all
assets of the Company are pledged as collateral under the Bank Credit Agreement.
The Original Notes and Notes are due 2006 and bear interest at 11 1/8% payable
semiannually on January 1 and July 1. The Discount Notes are due 2007 and bear
interest at 13 1/2% payable semi-annually on January 1 and July 1, beginning in
2002. The Bank Credit Agreement and the Indentures include certain restrictive
covenants, which include but are not limited to, limitations on capital
expenditures, indebtedness, investments and sales of assets and subsidiary
stock. Additionally, the Bank Credit Agreement requires the Company to maintain
certain financial ratios. As of June 30, 1997 the Company obtained an amendment
to the Bank Credit Agreement to waive the debt to EBITDA ratio at June 30, 1997
and to update the financial ratios relating to fixed charge coverage and debt to
EBITDA for fiscal 1998.
On March 13, 1997 the Company closed on the sale of $50 million aggregate
principal amount of Notes in a Rule 144A offering. The terms of the Notes were
identical, except as to the offering price, to the terms of the Original Notes
issued by the Company in July 1996. The Company applied the net proceeds
received from the offering to reduce the Term A Loan. The Company subsequently
completed an exchange offer to exchange the unregistered securities for
identical securities, which have been registered under the Securities Act.
The fair value of the Original Notes and Notes in the aggregate, based on
quoted market prices, was approximately $242 million as of June 30, 1997. The
long-term debt under the Bank Credit Agreement carries a floating interest rate,
therefore, the Company estimates that the carrying amount of such debt was not
materially different from its fair value as of June 30, 1997. There currently is
not an active market for the Discount Notes, therefore, the Company estimates
that the fair value, based on current interest rates available to the Company
for similar debt instruments, was approximately $37 million as of June 30, 1997.
F-14
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC. (AND PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The aggregate scheduled maturities outstanding debt for the succeeding five
years are as follows:
FISCAL YEAR
- ----------------------------------------
1998.................................. $ 6,438
1999.................................. 6,438
2000.................................. 7,125
2001.................................. 8,156
2002.................................. 7,188
7. FEDERAL AND STATE INCOME TAXES
Significant components of the Company's deferred tax assets and liability
at June 30, 1997 and June 30, 1996 are as follows (in thousands of dollars):
JUNE 30, JUNE 30,
1997 1996
-------- --------
Deferred tax asset
(liability) -- current:
Net operating loss carryforward.... $ 2,773 $ --
Cash bonus plan.................... 2,756 --
Accrued liabilities................ (446) --
Unrealized loss on investment
securities........................ -- 815
-------- --------
$ 5,083 $ 815
======== ========
Deferred tax asset
(liability) -- noncurrent:
Investment in land................. $ 4,660 $ 4,660
Cash bonus plan.................... 6,200 --
Property, plant and equipment...... (76,819) (20,423)
-------- --------
$(65,959) $(15,763)
======== ========
The current deferred tax asset is included in other current assets in the
accompanying balance sheet. As of June 30, 1997 the Company had estimated net
operating loss carryforwards for income tax reporting purposes of approximately
$7.9 million which expire on June 30, 2017.
The provision for federal and state income taxes is comprised of the
following (in thousand of dollars):
<TABLE>
<CAPTION>
ONE TWELVE
YEAR MONTH MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, MAY 31, MAY 31,
1997 1996 1996 1995
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Current:
Federal............................ $ (1,989) $ 880 $12,150 $14,314
State.............................. 63 118 1,582 1,748
-------- -------- ------- -------
(1,926) 998 13,732 16,062
-------- -------- ------- -------
Deferred:
Federal............................ (2,897) (210) (5,461) 895
State.............................. -- (27) (368) (77)
-------- -------- ------- -------
(2,897) (237) (5,829) 818
-------- -------- ------- -------
Total provision (benefit) for
income taxes............... $ (4,823) $ 761 $ 7,903 $16,880
======== ======== ======= =======
Pro Forma income tax
provision.................. $ 761 $ 9,553 $18,949
======== ======= =======
</TABLE>
F-15
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC. (AND PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pro Forma income tax provision assumes that the income of the Affiliate,
which is a Subchapter S Corporation and accordingly pays no federal income tax,
was taxable to the Predecessor based on the Predecessor's effective tax rate.
The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate to income from continuing operations. The
reasons for this difference are as follows:
<TABLE>
<CAPTION>
ONE TWELVE
YEAR MONTH MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, MAY 31, MAY 31,
1997 1996 1996 1995
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Statutory federal income tax rate....... 35% 35% 35% 35%
Computed "expected" federal income
tax................................... $ (6,596) $ 696 $ 8,578 $17,438
Increase (decrease) in tax resulting
from:
Affiliate earnings not subject to
federal income tax............... -- -- (1,651) (2,069)
State income taxes, net of federal
benefit.......................... 41 59 789 1,086
Other, net......................... 22 6 280 518
Amortization of goodwill and
other............................ 1,710 -- (93) (93)
-------- -------- ------- -------
Provision (benefit) for income taxes.... $ (4,823) $ 761 $ 7,903 $16,880
======== ======== ======= =======
</TABLE>
8. INVESTMENT IN AND ADVANCES TO LIMITED PARTNERSHIP
The Company and Hollywood Marine, Inc. formed a limited partnership,
Hollywood/Texas Olefins, Ltd., to operate four barges capable of transporting
chemicals. The Company is a 50% limited partner in the limited partnership. The
Company accounts for this investment under the equity method and records its
portion of the limited partnership's net income as other income in the
accompanying statement of operations. Summarized financial information of the
partnership has not been presented because the Company's investment in and its
proportionate share of the partnership's operations are not material.
9. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest and income taxes are as follows (in thousands of
dollars):
ONE TWELVE
YEAR MONTH MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, MAY 31, MAY 31,
1997 1996 1996 1995
-------- -------- ------- -------
Interest................... $ 20,600 $ 62 $ 2,330 $ 527
Income taxes............... 967 877 14,756 14,740
10. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Company leases tank cars under noncancelable operating leases. Under
the terms of the lease agreements, the Company is reimbursed by customers at a
fixed rate per mile, based on the distance the tank cars travel. Reimbursements
were approximately $0.8 million, $0.04 million, $0.8 million and $0.7 million,
for the year ended June 30, 1997, for the one month period ended June 30, 1996,
for the twelve months ended May 31, 1996 and for the year ended May 31, 1995,
respectively. The Company is also obligated under an operating lease to
Hollywood/Texas Olefins, Ltd. for the rental of two barges.
Total rent expense was approximately $3.9 million, $0.4 million, $4.8
million and $4.4 million (net of reimbursements described above and including
$1.8 million, $0.2 million, $2.0 million and $2.0 million for
F-16
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC. (AND PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the rental of four barges) for the year ended June 30, 1997, for the one month
period ended June 30, 1996, for the twelve months ended May 31, 1996 and for the
year ended May 31, 1995, respectively.
Future minimum lease payments at June 30, 1997 are as follows (in thousands
of dollars):
FISCAL YEAR
- ----------------------------------------
1998.................................. $ 3,993
1999.................................. 2,994
2000.................................. 2,307
2001.................................. 1,783
2002.................................. 814
PURCHASE COMMITMENTS
The Company has purchase commitments incident to the ordinary conduct of
business. The prices of such purchase commitments are based on formulas, which
are determined from the prevailing market rate for such products. These
commitments generally have cancellation provisions given proper notification.
LITIGATION
The Company is involved in various routine legal proceedings which are
incidental to the business. Management of the Company is vigorously defending
such matters and is of the opinion that their ultimate resolution will not have
a material adverse impact on the Company.
STOCKHOLDER ACTION
Effective July 28, 1995 the Predecessor's Board of Directors approved the
redemption of 25,000 shares of Class A common stock and 1,565,670 shares of
Class B common stock from certain stockholders for total consideration of
approximately $95,000,000. The redemption was paid with cash of approximately
$80,000,000 and with the issuance to a former stockholder of a $15,000,000
promissory note due November 1, 1995 collateralized by 915,000 shares of Class B
common stock and the personal guarantee of an officer of the Predecessor. In
connection with the above redemption the Predecessor's Board of Directors
approved the sale of (1) 351,670 shares of Class B treasury stock to certain
officers of the Predecessor and to a trust at the price of $60 per share, and
(2) 25,000 shares to Class A treasury stock to an officer of the Predecessor at
a price of $60 per share. On September 12, 1995, the Predecessor's stockholders
did not ratify the stock redemption and other transactions described above.
These items were not ratified due to the abstention of the trustee representing
a majority of Class B common stock. The abstaining stockholder has the right,
for up to two years from September 12, 1995, to vote in favor of or against the
aforementioned transaction or take other action on behalf of the trust
beneficiaries. The Company cannot predict what action the abstaining stockholder
will take. Accordingly, the Company cannot determine the effect, if any, of this
uncertainty on its financial position, results of operations or cash flows.
ENVIRONMENTAL REGULATION
The Company's operations are subject to federal, state and local laws and
regulations administered by the U.S. Environmental Protection Agency, the U.S.
Coast Guard, the Army Corps of engineers, the Texas Natural Resource
Conservation Commission, the Texas General Land Office, the Texas Department of
Health and various local regulatory agencies. The Company holds all required
permits and registrations necessary to comply substantially with all applicable
environmental laws and regulations, including permits and registrations for
wastewater discharges, solid and hazardous waste disposal and air emissions, and
management believes that the Company is in substantial compliance with all such
laws and regulations. While management does not expect the cost of compliance
with existing environmental laws will have a material adverse effect on the
Company's financial condition, results of operations or cash flows, there can
F-17
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC. (AND PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
be no assurance that future legislation, regulation or judicial or
administrative decisions will not have such an effect.
Under federal and state environmental laws, companies may be liable for
remediation of contamination at on-site and off-site waste management and
disposal areas. Management believes that the Company is not likely to be
required to incur remediation costs related to its management, transportation
and disposal of solid and hazardous materials and wastes, or to its pipeline
operations. If the Company were to be required to incur such costs, however,
management believes that such costs would not have a material adverse effect on
the Company's results of operations. In addition, under the terms of the 1984
purchase agreement, the prior owner of the Houston facility, Petro-Tex, has
indemnified the Company for liability arising from off-site disposal of any
materials prior to June 1984. Notwithstanding the terms of the indemnity, in
July 1994 Petro-Tex filed a claim for indemnity against the Company for any
costs that may be attributable to Petro-Tex for the cleanup of the Malone site
in Texas City, Texas. Petro-Tex and many other companies along the Gulf Coast
allegedly sent wastes to the Malone site for disposal in the 1970s and possibly
the early 1980s. Malone has been subject to several state enforcement actions
regarding its waste disposal practices, and TNRCC has revoked Malone's permits
to operate its facilities. It is not known whether the site will require
remediation or at what cost. The Company believes that it has meritorious
defenses to Petro-Tex's claim and intends to contest the claim vigorously.
Although no on-site contamination has been identified as requiring remediation,
management believes that certain areas of the Houston facility were historically
used for waste disposal. Based on limited, currently available information about
these waste disposal areas and their contents, the Company believes that, if
such remediation becomes necessary, any remediation costs would not have a
material adverse effect on the Company's financial condition or results of
operations. The Petro-Tex indemnity does not extend to these on-site waste
disposal areas or their contents.
PREDECESSOR COMMITMENTS
During 1996, the Predecessor's Board of Directors approved the cancellation
of all of the following stock purchase agreements, stock option agreements and
salary continuation agreements in anticipation of the Acquisition.
STOCK PURCHASE AGREEMENTS
The Predecessor's Board of Directors approved a stock purchase agreement
with certain officers who own 185,000 shares of the Predecessor's outstanding
Class A common stock and 1,081,670 shares of the Predecessor's outstanding Class
B common stock. Under the terms of this agreement in the event any of these
officers ceases full time employment with the Predecessor or in the event of the
stockholder's death, the Predecessor must redeem all of the stockholder's shares
at a redemption price of $60 per share. This agreement superseded the previous
stock purchase agreements of the Predecessor which are described in the
following paragraphs.
The Predecessor entered into a stock purchase agreement with a certain
minority stockholder who owns 20,000 shares of the Predecessor's outstanding
Class A common stock and 80,000 shares of the Predecessor's outstanding Class B
common stock. Under the terms of this agreement, in the event of the
stockholder's death, the Predecessor must redeem all shares owned by the
deceased stockholder at a formula price, which is adjusted annually. At May 31,
1995, the formula price per share was approximately $58.
The Predecessor entered into a death benefit agreement with an officer of
the Predecessor who owns 660,000 shares of Class B common stock of the
Predecessor. This agreement provides that in the event of the death of the
officer, the Predecessor is obligated to redeem the shares at a price of $60 per
share with twenty-five percent of the purchase price payable at closing and the
balance payable in five equal annual installments plus interest at the rate of
eight percent per annum. This agreement replaces a previous
F-18
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC. (AND PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
agreement that obligated the Predecessor to redeem the shares in the event of
the death of the officer at a price of $80 per share.
The Predecessor entered into a stock purchase agreement with certain of its
minority stockholders who own 171,000 shares of the Predecessor's outstanding
common stock. Under the terms of this agreement, such stockholders may sell
their shares to the Predecessor at a formula price, which is adjusted annually.
Under this agreement, the Predecessor is obligated to redeem the shares in the
event of the death of the stockholder at the formula price. At May 31, 1995, the
formula price per share was approximately $54.
The Predecessor also entered into a Section 303 stock purchase agreement
with an officer of the Predecessor who owns 85,000 shares of the Predecessor's
outstanding common stock. This agreement allows for the officer's estate to
require the Predecessor to redeem the necessary shares so as to pay estate taxes
and funeral and administrative expenses upon the death of the officer. Under the
terms of this agreement, the redemption price per share will be based upon the
value of the shares as reflected on the federal estate tax return.
Additionally, the Predecessor entered into separate stock purchase
agreements with an officer of the Predecessor and his spouse who own 500,000
shares of the Predecessor's outstanding common stock as part of a community
estate. The agreement with the officer requires the Predecessor to redeem
250,000 shares from the community estate upon the officer's death at a price of
$90 per share with twenty five percent of the redemption price payable at
closing and the balance payable in five annual installments plus interest at the
rate of eight percent per annum. The agreement with the officer's spouse allows
her to require the Predecessor to redeem the 250,000 shares from the community
estate not redeemed as part of the officer's agreement for a period of one year
subsequent to the officer's death at the same price and payable in the same
manner as set forth in the officer's agreement. Additionally, the spouse's
agreement requires the Predecessor to redeem 250,000 shares of the stock from
the community estate in the event that she predeceases the officer at a price of
$90 per share with sixty percent of the redemption price payable at closing and
the balance payable in thirty-six equal monthly installments plus interest at
the rate of eight percent per annum.
All of the Affiliate's common stock is subject to a stock purchase
agreement. Under the terms of the stock purchase agreement, the Affiliate is
obligated to redeem all of a stockholder's shares in the event of death and has
an option to redeem all of a stockholder's shares in certain other instances.
The redemption price is equal to the Affiliate's adjusted book value, as defined
in the agreement, divided by the number of outstanding shares. At May 31, 1995,
the redemption price per share was $8.15. Of the total redemption amount, 25% is
to be paid in cash with the remaining balance to be paid in 42 equal monthly
installments as evidenced by an interest bearing promissory note.
STOCK OPTION AGREEMENTS
The Predecessor entered into stock option agreements with two of its
officers, which granted them the option to purchase 100,000 shares of common
stock. The option purchase price for the shares is $40 per share. At May 31,
1995, 30,000 shares were exercisable. During the fiscal year ended May 31, 1994,
one of the officers forfeited his option to purchase 50,000 shares of common
stock. In the event the option is exercised, the Predecessor and the officers
will enter into stock purchase agreements. Under the terms of the agreement,
transfer of the stock is restricted and only the Predecessor, at its option, may
redeem the stock. However, upon death of the officer, the Predecessor is
obligated to redeem the officer's shares. In all instances the redemption price
will be the greater of the formula price in the agreement or $40 per share. At
May 31, 1995 the formula price was approximately $54 per share.
F-19
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC. (AND PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SALARY CONTINUATION AGREEMENTS
The Predecessor entered into salary continuation agreements with three of
its officers. The agreements provide that if the officer is an employee of the
Predecessor upon death, an amount ranging from $10,000 to $25,000 would be
payable monthly to his estate for a period of five years.
11. EMPLOYEE BENEFITS
PROFIT SHARING PLAN
The Company has a noncontributory profit sharing plan that covers all
full-time employees that have completed one year or more of service. Employees
can contribute up to 10% of their base compensation to a tax deferred fund which
is matched by the Company at the rate of $.25 per one dollar contributed by the
employee up to 6% of the employee's base compensation. The Company's expense to
match employee contributions was $169,591, $14,786, $195,627 and $180,000 for
the year ended June 30, 1997, for the one month period ended June 30, 1996, for
the twelve month period ended May 31, 1996 and for the year ended May 31, 1995,
respectively. Additionally, the Company made additional discretionary
contributions to the plan which amounted to approximately $1.1 million, $0.2
million, $2.4 million and $2.6 million for the year ended June 30, 1997, for the
one month period ended June 30, 1996, for the twelve month period ended May 31,
1996 and for the year ended May 31, 1995, respectively. The Company's
contributions vest with the employee at a rate of 20% per year.
EMPLOYEE STOCK OWNERSHIP PLAN
In connection with the Acquisition, the Company established an Employee
Stock Ownership Plan (the "ESOP"), covering substantially all full-time
employees of the Company. The ESOP borrowed $10 million under the Bank Credit
Agreement to purchase 100,000 shares of the Company's Common Stock at the
closing of the Acquisition. The shares of Common Stock purchased by the ESOP
were pledged as security for the ESOP Loan, and such shares will be released and
allocated to ESOP participants' accounts as the ESOP Loan is discharged. For
employees whose employment commenced prior to October 1, 1996 and who have
attained 21 years, participation begins as of the Acquisition date or the date
of commencement of the participant's employment. A participant's ESOP account
vests at the rate of 20% per year. The Company's contributions to the ESOP,
which are used to retire principal and interest on the loan is reported as
compensation expense. Principal and interest payments made for the year ended
June 30, 1997 amounted to $2.7 million.
CASH BONUS PLAN LIABILITY
In connection with the Acquisition, the Predecessor established the $35
million Cash Bonus Plan covering substantially all employees of the Predecessor
(or certain affiliates of the Predecessor) and covering the employees of certain
third-party contractors who have contributed to the success of the Predecessor.
All participants of the plan as of July 2, 1996 were distributed 10% of the cash
bonus in August 1996, and the remaining amount is to be paid in sixteen
quarterly installments which began in October 1996.
12. RELATED PARTY TRANSACTIONS
Prior to the Acquisition, the Predecessor made contributions from time to
time to a charitable organization that is an affiliate of the Predecessor.
13. CONCENTRATION OF CREDIT RISK
The Company sells its products primarily to chemical and petroleum based
companies in North America. For the year ended June 30, 1997, the one month
period ended June 30, 1996, the twelve month period ended May 31, 1996 and the
year ended May 31, 1995 approximately 41%, 46%, 50%, and 35%, respectively, of
the Company's sales were to four customers. The Company had two customers, which
F-20
<PAGE>
represented 11% and 17% of sales during the year ended June 30, 1997, 14% and
16% of sales during the one month period ended June 30, 1996, and 16% and 19% of
sales during the twelve months ended May 31, 1996. The Company had one customer,
which represented 12% of sales during the year ended May 31, 1995. The Company
performs ongoing credit evaluations of its customers and generally does not
require collateral for accounts receivable. The Company's credit losses have
been minimal.
The Company maintains its cash deposits and short-term investments with a
major bank and a financial services company which at certain times exceed the
federally insured limits. Management assesses the financial condition of these
institutions and believes that any possible credit loss is minimal.
14. FINANCIAL INSTRUMENTS
At June 30, 1997 the Company estimated that the carrying value and fair
value of its financial instruments, other than long-term debt (See Note 6), were
approximately equal due to the short-term nature of the instruments. Such
instruments include cash and cash equivalents, accounts receivable and accounts
payable.
F-21
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH
DATE.
------------------
TABLE OF CONTENTS
PAGE
----
Available Information .............................................. 2
Summary ............................................................ 3
Risk Factors ....................................................... 10
Use of Proceeds .................................................... 15
Capitalization ..................................................... 16
Selected Financial Data ............................................ 17
Management's Discussion and Analysis of Financial
Condition and Results of Operations .............................. 19
Business ........................................................... 26
Management ......................................................... 43
The Selling Security Holder ........................................ 48
Related Transactions ............................................... 49
Beneficial Ownership of Holdings' Common Stock ..................... 50
Description of the Bank Credit Agreement ........................... 51
Description of the Discount Notes .................................. 54
Certain Federal Income Tax Considerations .......................... 80
Plan of Distribution ............................................... 86
Legal Matters ...................................................... 87
Experts ............................................................ 87
Index to Financial Statements ...................................... F-1
[LOGO]
Texas Petrochemical Holdings, Inc.
PROSPECTUS
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Not Applicable.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Holding's Certificate of Incorporation, as amended, and Bylaws incorporate
substantially the provisions of the Delaware General Corporation Law ("DGCL")
providing for indemnification of directors and officers of Holdings against
expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with any proceeding arising by reason of the
fact that such person is or was an officer or director of Holdings or is or was
serving at the request of Holdings as a director, officer or employee of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise.
As permitted by Section 102 of the DGCL, Holding's Certificate of
Incorporation, as amended, contains provisions eliminating a director's personal
liability for monetary damages to Holdings and its stockholders arising from a
breach of a director's fiduciary duty except for liability (a) for any breach of
the director's duty of loyalty to Holdings or its stockholders, (b) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 174 of the DGCL, or (d) for any transaction
from which the director derived an improper personal benefit.
Section 145 of the DGCL provides generally that a person sued as a
director, officer, employee or agent of a corporation may be indemnified by the
corporation for reasonable expenses, including attorneys' fees, if in the case
of other than derivative suits such person has acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation (and, in the case of a criminal proceeding, had no
reasonable cause to believe that such person's conduct was unlawful). In the
case of a derivative suit, an officer, employee or agent of the corporation
which is not protected by the Certificate of Incorporation may be indemnifed by
the corporation for reasonable expenses, including attorneys' fees, if such
person has acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation, except that no
indemnification shall be made in the case of a derivative suit in respect of any
claim as to which an officer, employee or agent has been adjudged to be liable
to the corporation unless that person is fairly and reasonably entitled to
indemnity for proper expenses. Indemnification is mandatory in the case of a
director or officer who is successful on the merits in defense of a suit against
such person.
Pursuant to policies of Directors and Officers Liability and Company
Reimbursement insurance with total limits of $10,000,000, the Directors and
Officers of Holdings are insured, subject to the limits, retention, exceptions
and other terms and conditions of such policies, against liability for any
actual or alleged error or misstatement or misleading statement or act or
omission or neglect or breach of duty while acting in their capacities as
Directors or Officers of Holdings.
Holdings has entered into Indemnity Agreements with its directors and
certain officers pursuant to which Holdings generally is obligated to indemnify
its directors and such officers to the full extent permitted by the DGCL, as
described above.
ITEM 15. SALE OF UNREGISTERED SECURITIES.
In connection with the Acquisition, on July 1, 1996 Holdings (i) sold
$57,650,103.55 principal amount of Discount Notes for $30,000,000 cash to the
Huff Fund, (ii) sold $43.8 million of its Common Stock for cash to an investor
group led by Gordon A. Cain and Sterling, and (iii) issued $6.2 million of its
Common Stock for the shares contributed by certain shareholders of TOC and TPC
in connection with the transactions associated with the Acquisition. The offer
and sale of the Discount Notes and Common Stock for cash were exempt from
registration pursuant to Section 4(2) of the Securities Act. The offer and sale
of
II-1
<PAGE>
$6.2 million in Common Stock in a share exchange was exempt from registration
pursuant to Section 4(2) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
3.1* -- Certificate of Incorporation of Holdings, as amended.
3.2* -- Bylaws of Holdings.
4.1 -- Indenture dated as of July 1, 1996 by and between TPC and
Fleet National Bank, as Trustee, with respect to the 11 1/8%
Senior Subordinated Notes due 2006, including the form of the
Note (incorporated by reference to Exhibit 4.1 to TPC's
Registration Statement on Form S-4, File No. 333-11569).
4.2 -- Indenture dated as of March 1, 1997 by and between the
Company and Fleet National Bank, as Trustee, with respect to
the 11 1/8% Series B Senior Subordinated Notes due 2006,
including the form of Note (incorporated by reference to
Exhibit 4.1 to TPC's Registration Statement on Form S-4, File
No. 333-24589).
4.3* -- Indenture dated as of July 1, 1996 by and among Holdings, TPC
Holding and Fleet National Bank, as Trustee, with respect to
the Discount Notes, including the form of Note.
5* -- Opinion of Bracewell & Patterson, L.L.P. as to the validity
of the Discount Notes.
8* -- Opinion of Bracewell & Patterson, L.L.P. as to certain
federal income tax matters.
10.1 -- Holdings' 1996 Stock Option Plan (incorporated by reference
to Exhibit 10.1 to TPC's Registration Statement on Form S-4,
File No. 333-11569).
10.2 -- TPC Employee Stock Ownership Plan (incorporated by reference
to Exhibit 10.2 to TPC's Registration Statement on Form S-4,
File No. 333-11569).
10.3 -- TPC Employee Stock Ownership Plan Trust Agreement
(incorporated by reference to Exhibit 10.3 to TPC's
Registration Statement on Form S-4, File No. 333-11569).
10.4 -- TPC Cash Bonus Plan (incorporated by reference to Exhibit
10.4 to TPC's Registration Statement on Form S-4, File No.
333-11569).
10.5 -- Security Agreement by and between Boatmen's Trust Company of
Texas and TPC (incorporated by reference to Exhibit 10.5 to
TPC's Registration Statement on Form S-4, File No.
333-11569).
10.6 -- TPC Profit Sharing Plan (incorporated by reference to Exhibit
10.6 to TPC's Registration Statement on Form S-4, File No.
333-11569).
10.7 -- Lease for Calcasieu Parish, Louisiana (incorporated by
reference to Exhibit 10.7 to TPC's Registration Statement on
Form S-4, File No. 333-11569).
10.8 -- Credit Agreement dated as of July 1, 1996 among the Company,
Texas Commerce Bank, National Association, ABN AMRO North
America, Inc., and The Bank of Nova Scotia (incorporated by
reference to Exhibit 10.8 to TPC's Registration Statement on
Form S-4, File No. 333-11569).
10.9 -- Security Agreement dated as of July 1, 1996 by and between
TPC and Texas Commerce Bank, National Association
(incorporated by reference to Exhibit 10.9 to TPC's
Registration Statement on Form S-4, File No. 333-11569).
10.10 -- Pledge Agreement dated as of July 1, 1996 by and between TPC
and Texas Commerce Bank, National Association (incorporated
by reference to Exhibit 10.10 to TPC's Registration Statement
on Form S-4, File No. 333-11569).
10.11 -- Letter Agreement dated May 6, 1996, by and among The Sterling
Group, Inc., Holdings, TPC Holding, and TPC (incorporated by
reference to Exhibit 10.11 to TPC's Registration Statement on
Form S-4, File No. 333-11569).
10.12 -- Form of Indemnity Agreement between TPC and each of its
officers and directors (incorporated by reference to Exhibit
10.12 to TPC's Registration Statement on Form S-4, File No.
333-11569).
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<PAGE>
10.13 -- Form of Tax Sharing Agreement among Holdings, TPC Holding,
TPC and Texas Butylene Chemical Corporation (incorporated by
reference to Exhibit 10.13 to TPC's Registration Statement on
Form S-4, File No. 333-11569).
10.14 -- Employment Agreement with Bill W. Waycaster (incorporated by
reference to Exhibit 10.14 to the Company's Registration
Statement on Form S-4, File No. 333-11569).
10.15* -- Form of Indemnity Agreement between Holdings and each of its
officers and directors.
12* -- Statement re Computation of Ratio of Earnings to Fixed
Charges.
21* -- Subsidiaries of Holdings.
23.1* -- Consent of Coopers & Lybrand L.L.P.
23.2* -- Consent of Bracewell & Patterson, L.L.P. (included in their
opinion filed as Exhibit 5 hereto).
23.3* -- Consent of Deloitte & Touche LLP
24* -- Powers of Attorney.
25.1 -- Statement of Eligibility and Qualification on Form T-1 of
Fleet National Bank as Trustee under the Indenture dated as
of July 1, 1996 (incorporated by reference to Exhibit 25 to
TPC's Registration Statement on Form S-4, File No.
333-11569).
25.2 -- Statement of Eligibility and Qualification on Form T-1 of
Fleet National Bank as Trustee under the Indenture dated as
of March 1, 1997 (incorporated by reference to Exhibit 25 to
TPC's Registration Statement on Form S-4, File No.
333-24589).
25.3* -- Statement of Eligibility and Qualification on Form T-1 of
Fleet National Bank as Trustee under the Indenture dated as
of July 1, 1996 with respect to the Discount Notes.
- ------------
* Filed herewith.
(b) Financial Statement Schedules
None.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
II-3
<PAGE>
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than payment by the registrant
of expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer of controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
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<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, TEXAS
PETROCHEMICAL HOLDINGS, INC. HAS DULY CAUSED THIS REGISTRATION STATEMENT OR
AMENDMENT THERETO TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF HOUSTON, STATE OF TEXAS, ON OCTOBER 14, 1997.
TEXAS PETROCHEMICAL HOLDINGS, INC.
By: /s/ B. W. WAYCASTER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT OR AMENDMENT THERETO HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS IN THE INDICATED CAPACITIES ON OCTOBER 14, 1997.
SIGNATURE TITLE
- ------------------------------------------- -----------------------------------
WILLIAM A. McMINN* Chairman
WILLIAM A. MCMINN
/s/B. W. WAYCASTER Director, President and Chief
B. W. WAYCASTER Executive Officer (principal
executive officer)
/s/CLAUDE E. MANNING Chief Financial Officer
CLAUDE E. MANNING (principal financial and
accounting officer)
GORDON A. CAIN* Director
GORDON A. CAIN
STEVE A. NORDAKER* Director
STEVE A. NORDAKER
WILLIAM R. HUFF* Director
WILLIAM R. HUFF
SUSAN O. RHENEY* Director
SUSAN O. RHENEY
JOHN T. SHELTON* Director
JOHN T. SHELTON
*By: /s/CLAUDE E. MANNING
CLAUDE E. MANNING
(ATTORNEY-IN-FACT FOR PERSONS INDICATED)
II-5
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
TEXAS PETROCHEMICAL HOLDINGS, INC.
ARTICLE I
The name of the corporation is Texas Petrochemical Holdings, Inc.
ARTICLE II
The registered office of the corporation in the State of Delaware is
located at 1209 Orange Street in the City of Wilmington, County of New Castle.
The name of its registered agent is The Corporation Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by the
corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of Delaware.
ARTICLE IV
The total number of shares of stock which the corporation shall have
authority to issue is 1,000 shares of common stock, par value $0.01 per share.
ARTICLE V
The name and mailing address of the incorporator is as follows:
NAME MAILING ADDRESS
Leslie S. White 711 Louisiana, Suite 2900
Houston, TX 77002
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<PAGE>
ARTICLE VI
The powers of the incorporator shall terminate upon the filing of this
Certificate of Incorporation. The names and mailing addresses of the persons who
are to serve as directors until the first annual meeting of stockholders or
until their successors are elected and qualify are:
NAME MAILING ADDRESS
William C. Oehmig Eight Greenway Plaza, Suite 702
Houston, Texas 77046
Susan O. Rheney Eight Greenway Plaza, Suite 702
Houston, Texas 77046
John M. Sullivan Eight Greenway Plaza, Suite 702
Houston, Texas 77046
ARTICLE VII
The number of directors of the corporation shall be as specified in, or
determined in the manner provided in, the Bylaws of the corporation, and such
number may be increased or decreased from time to time in such manner as may be
prescribed in the Bylaws.
ARTICLE VIII
In furtherance and not in limitation of the powers conferred by the laws
of the State of Delaware, the Board of Directors is expressly authorized and
empowered to adopt, amend and repeal the Bylaws of the corporation, subject to
the power of the stockholders of the corporation to adopt, amend or repeal any
bylaw made by the Board of Directors.
ARTICLE IX
Unless and except to the extent that the bylaws of the corporation shall
so require, the election of directors of the corporation need not be by written
ballot.
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<PAGE>
ARTICLE X
A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended. Any amendment,
modification or repeal of the foregoing sentence shall not adversely affect any
right or protection of a director of the corporation existing hereunder with
respect to any act or omission occurring prior to such amendment, modification
or repeal.
IN WITNESS WHEREOF, the undersigned, being the incorporator hereinbefore
named, for the purpose of forming a corporation pursuant to the General
Corporation Law of the State of Delaware, does hereby make and file this
Certificate of Incorporation, hereby declaring and certifying that the facts
herein stated are true, and accordingly has hereunto set the incorporator's hand
this 2nd day of May, 1996.
/s/ LESLIE S. WHITE
Leslie S. White, Incorporator
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<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TEXAS PETROCHEMICAL HOLDINGS, INC.
Texas Petrochemical Holdings, Inc., a corporation duly organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware ("Company"), does hereby certify:
FIRST: That the Board of Directors of the Company, pursuant to a unanimous
written consent signed by all directors of the Company and effective as of June
25, 1996, adopted the following resolutions, proposing and declaring advisable
and in the best interests of the Company the amendment to the Certificate of
Incorporation of the Company as set forth in such resolutions, and directed that
the same be submitted to a vote of the stockholders of the Company:
RESOLVED, that the Certificate of Incorporation of the Company (the
"Certificate of Incorporation"), be amended by deleting Article IV in its
entirety and substituting the following therefor:
The total number of shares of stock of all classes that the corporation
shall have the authority to issue is one million one hundred thousand
(1,100,000) shares, of which one million (1,000,000) shares are to be
shares of common stock, par value $0.01 per share ("Common Stock"), and
one hundred thousand (100,000) shares are to be shares of Non-Voting
Convertible Common Stock, par value $0.01 per share ("Non-Voting Common
Stock"). The number of authorized shares, Common Stock and Non-Voting
Common Stock may be increased or decreased (but not below the number of
shares thereof then outstanding) by the affirmative vote of a majority of
the stock of the corporation entitled to vote thereon irrespective of the
provisions of Section 242(b)(2) of the General Corporation Law of the
State of Delaware.
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<PAGE>
COMMON STOCK
Except as otherwise specifically required by law or as otherwise
specifically provided herein, the exclusive voting power of the
corporation shall be vested in the Common Stock. Each share of Common
Stock shall entitle the holder thereof to one vote on all matters to be
voted on by the stockholders of the corporation.
NON-VOTING CONVERTIBLE COMMON STOCK
(1) GENERAL. Except as otherwise provided in this Article IV, all
shares of Common Stock and Non-Voting Common Stock shall be identical and
shall entitle the holders thereof to the same rights, qualifications,
limitations, restrictions and privileges.
(2) VOTING RIGHTS. Except as otherwise required by law, the holders
of shares of Non-Voting Common Stock shall have no right whatsoever to
vote on any matters to be voted on by the corporation's stockholders,
including, without limitation, any right to vote on any dissolution, sale
of assets, merger or consolidation of the corporation.
(3) DIVIDENDS. When and as dividends are declared thereon, whether
payable in cash, property or securities of the corporation, the holders of
Common Stock and the holders of Non-Voting Common Stock shall be entitled
to share equally, share for share, in such dividends; provided that if
dividends are declared which are payable in shares of stock, (i) such
dividends shall be declared which are payable at the same rate on both
classes of stock, and (ii) any dividends payable to holders of Common
Stock shall be payable in shares of Common Stock and any dividends payable
to holders of Non-Voting Common Stock shall be payable in shares of
Non-Voting Common Stock.
(4) CONVERSION.
(i) Subject to and upon compliance with the provisions hereof,
in connection with (a) any Initial Public Offering or Qualified
Registration (as both such terms are defined in the Registration Rights
Agreement, as it may be amended from time to time, by and among the
corporation and the holders of Qualified Registrable Securities (as
defined
-2-
<PAGE>
therein) who are parties to the Registration Rights Agreement) or (b) the
sale to a third party of securities which possess, in the aggregate, the
ordinary voting power to elect a majority of the corporation's directors
(provided that such sale has been approved by corporation's Board of
Directors or a committee thereof), each record holder of Non-Voting Common
Stock shall be entitled to convert into the same number of shares of
Common Stock any or all of such holder's shares of Non-Voting Common Stock
actually being distributed to the public, sold to an underwriter,
broker-dealer or market maker for actual sale to the public or sold to the
third-party purchaser.
(ii) In addition to the conversion rights contained in the
immediately preceding paragraph, subject to and upon compliance with the
provisions hereof, shares of the Non-Voting Common Stock may, at the
election of the holder thereof, be converted into shares of Common Stock
at any time if, and only if, (a) such holder is not a bank holding company
registered under the Bank Holding Company Act of 1956 ("Bank Holding
Company") or an affiliate of a Bank Holding Company or (b) if such holder
is a Bank Holding Company or an affiliate of a Bank Holding Company, such
holder does not hold, and as a result of the conversion would not hold,
more than five percent (5%) of the outstanding shares of Common Stock.
(iii) The ratio at which shares of Non-Voting Common Stock may
be converted into shares of Common Stock in accordance with the provisions
hereof shall be one (1) share of Common Stock per share of Non-Voting
Common Stock so converted.
(iv) Each conversion of shares of Non-Voting Common Stock into
shares of Common Stock shall be effected by the surrender of the
certificate or certificates representing the shares to be converted at the
principal office of the corporation at any time during normal business
hours, in proper form for conversion, duly endorsed or accompanied by duly
executed stock powers, with signatures guaranteed by a state or national
bank or a member firm of a national securities exchange, together with
written notice by the holder of such Non-Voting Common Stock (a) stating
(x) that such holder desires to convert the shares, or a stated number of
shares, of Non-Voting Common Stock represented by such certificate or
certificates into Common Stock and that (y) upon such conversion such
holder and its affiliates will not directly or indirectly own, control or
have the power to vote or dispose of a greater quantity of securities of
any kind issued by the
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<PAGE>
corporation than such holder and its affiliates are permitted to own,
control or have the power to vote or dispose of under any applicable law,
regulation, rule or other governmental requirement; and (b) containing
such representations and warranties as are, in the opinion of the
corporation and its legal counsel, required for the lawful conversion and
issuance by the corporation of Common Stock. Such conversion shall be
deemed to have been effected at the close of business on the date on which
such certificate or certificates have been surrendered and such notice has
been received, and at such time the rights of the holder of the converted
Non-Voting Common Stock as such holder shall cease and the person or
persons in whose name or names the certificate or certificates for shares
of Common Stock are to be issued upon such conversion shall be deemed to
have become the holder or holders of record of the shares of Common Stock
represented thereby.
(v) Promptly after such surrender and the receipt of such
written notice, provided that the conditions contained herein have been
met, the corporation shall issue and deliver in accordance with the
surrendering holder's instructions (a) the certificate or certificates for
the Common Stock issuable upon such conversion and (b) a certificate
representing any Non-Voting Common Stock which was represented by the
certificate or certificates delivered to the corporation in connection
with such conversion but which was not converted.
(vi) If the corporation in any manner subdivides or combines
the outstanding shares of the Common Stock, the outstanding shares of the
Non-Voting Common Stock shall be proportionately subdivided or combined.
(vii) The issuance of certificates for Common Stock upon
conversion of Non-Voting Common Stock shall be made without charge to the
holders of such shares for any issuance tax in respect thereof or other
cost incurred by the corporation in connection with such conversion and
the related issuance of Common Stock; provided that, if such conversion is
made in connection with a transfer of such shares, then the holder shall
pay such transfer fees and taxes, if any, as are normally paid in
connection with such a transfer.
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<PAGE>
(viii) The corporation shall not close its books against the
transfer of Non-Voting Common Stock or of Common Stock issued or issuable
upon conversion of Non-Voting Common Stock in any manner which would
interfere with the timely conversion of Non-Voting Common Stock as
permitted herein.
(ix) The corporation will at all times reserve and keep
available, out of its authorized and unissued Common Stock, solely for the
purpose of issuance upon conversion of the Non-Voting Common Stock as
herein provided, free from preemptive rights, such number of shares of
Common Stock as shall then be issuable upon the conversion of all of the
outstanding shares of Non-Voting Common Stock. All shares of Common Stock
so issuable shall be deemed, when issued upon conversion of the NonVoting
Common Stock, to be duly and validly issued and fully paid and
non-assessable.
(5) MISCELLANEOUS PROVISIONS. Nothing herein shall be construed to
prevent the corporation from creating or issuing at any time or from time
to time classes or series of securities enjoying preferences and rights
superior to those of the Non-Voting Common Stock.
SECOND: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Section 242 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, Texas Petrochemical Holdings, Inc. has caused this
Certificate of Amendment to be signed by Susan O. Rheney as President this 28th
day of June, 1996.
TEXAS PETROCHEMICAL HOLDINGS, INC.
By: /s/ SUSAN O. RHENEY
Susan O. Rheney
President
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EXHIBIT 3.2
BYLAWS
OF
TEXAS PETROCHEMICAL HOLDINGS, INC.
A DELAWARE CORPORATION
Date of Adoption
May 2, 1996
<PAGE>
TABLE OF CONTENTS
Page
Article 1
Offices
Section 1.1. Registered Office..........................................1
Section 1.2. Other Offices..............................................1
Article 2
Stockholders
Section 2.1. Place of Meetings..........................................1
Section 2.2. Quorum; Adjournment of Meetings
Section 2.3. Annual Meetings............................................2
Section 2.4. Special Meetings...........................................2
Section 2.5. Record Date................................................2
Section 2.6. Notice of Meetings.........................................3
Section 2.7. Stockholder List...........................................3
Section 2.8. Proxies....................................................4
Section 2.9. Voting; Election; Inspectors...............................4
Section 2.10. Conduct of Meetings.......................................5
Section 2.11. Treasury Stock............................................5
Section 2.12. Action Without Meeting....................................5
Article 3
Board of Directors
Section 3.1. Power; Number; Term of Office..............................6
Section 3.2. Quorum; Voting.............................................6
Section 3.3. Place of Meetings; Order of Business.......................7
Section 3.4. First Meeting..............................................7
Section 3.5. Regular Meetings...........................................7
Section 3.6. Special Meetings...........................................7
Section 3.7. Removal....................................................7
Section 3.8. Vacancies; Increases in the Number of Directors............7
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Section 3.9. Compensation...............................................8
Section 3.10. Action Without a Meeting; Telephone Conference Meeting....8
Section 3.11. Approval or Ratification of Acts or Contracts by
Stockholders..............................................8
Article 4
Committees
Section 4.1. Designation; Powers........................................9
Section 4.2. Procedure; Meetings; Quorum................................9
Section 4.3. Substitution and Removal of Members; Vacancies.............9
Article 5
Officers
Section 5.1. Number, Titles and Term of Office.........................10
Section 5.2. Powers and Duties of the President........................10
Section 5.3. Vice Presidents...........................................10
Section 5.4. Secretary.................................................10
Section 5.5. Assistant Secretaries.....................................11
Section 5.6. Treasurer.................................................11
Section 5.7. Assistant Treasurers......................................11
Section 5.8. Action with Respect to Securities of Other Corporations...11
Section 5.9. Delegation................................................11
Article 6
Capital Stock
Section 6.1. Certificates of Stock.....................................12
Section 6.2. Transfer of Shares........................................12
Section 6.3. Ownership of Shares.......................................12
Section 6.4. Regulations Regarding Certificates........................13
Section 6.5. Lost or Destroyed Certificates............................13
Article 7
Miscellaneous Provisions
Section 7.1. Fiscal Year...............................................13
Section 7.2. Corporate Seal............................................13
Section 7.3. Notice and Waiver of Notice...............................13
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<PAGE>
Section 7.4. Facsimile Signatures......................................14
Section 7.5. Reliance upon Books, Reports and Records..................14
Section 7.6. Application of Bylaws.....................................14
Article 8
Indemnification of Officers and Directors
Section 8.1. Indemnification...........................................14
Section 8.2. Claims and Defenses.......................................15
Section 8.3. Nonexclusivity............................................16
Section 8.4. Insurance.................................................16
Article 9
Amendments
Section 9.1. Amendments................................................16
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<PAGE>
BYLAWS
OF
TEXAS PETROCHEMICAL HOLDINGS, INC.
Article 1
OFFICES
SECTION 1.1. REGISTERED OFFICE. The registered office of the Corporation
which is required by the state of Delaware to be maintained in the state of
Delaware shall be the registered office named in the charter documents of the
Corporation, or such other office as may be designated from time to time by the
Board of Directors in the manner provided by law.
SECTION 1.2. OTHER OFFICES. The Corporation may also have offices at such
other places both within and without the state of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
Article 2
STOCKHOLDERS
SECTION 2.1. PLACE OF MEETINGS. All meetings of the stockholders shall be
held at the principal office of the Corporation, or at such other place within
or without the state of Delaware as shall be specified or fixed in the notices
or waivers of notice thereof.
SECTION 2.2. QUORUM; ADJOURNMENT OF MEETINGS. Unless otherwise required by
law or provided in the charter documents of the Corporation or these Bylaws, (i)
the holders of a majority of the stock issued and outstanding and entitled to
vote thereat, present in person or represented by proxy, shall constitute a
quorum at any meeting of stockholders for the transaction of business, (ii) in
all matters other than election of directors, the affirmative vote of the
holders of a majority of such stock so present or represented at any meeting of
stockholders at which a quorum is present shall constitute the act of the
stockholders, and (iii) where a separate vote by a class or classes is required,
a majority of the outstanding shares of such class or classes, present in person
or represented by proxy shall constitute a quorum entitled to take action with
respect to that vote on that matter and the affirmative vote of the majority of
the shares of such class or classes present in person or represented by proxy at
the meeting shall be the act of such class. The stockholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum, subject to the provisions of clauses (ii) and (iii) above.
Directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors.
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<PAGE>
Notwithstanding the other provisions of the charter documents of the
Corporation or these Bylaws, the chairman of the meeting or the holders of a
majority of the issued and outstanding stock, present in person or represented
by proxy and entitled to vote thereat, at any meeting of stockholders, whether
or not a quorum is present, shall have the power to adjourn such meeting from
time to time, without any notice other than announcement at the meeting of the
time and place of the holding of the adjourned meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at such meeting. At such
adjourned meeting at which a quorum shall be present or represented any business
may be transacted which might have been transacted at the meeting as originally
called.
SECTION 2.3. ANNUAL MEETINGS. An annual meeting of the stockholders, for
the election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place (within or without the state of Delaware), on such
date, and at such time as the Board of Directors shall fix and set forth in the
notice of the meeting, which date shall be within thirteen (13) months
subsequent to the last annual meeting of stockholders.
SECTION 2.4. SPECIAL MEETINGS. Unless otherwise provided in the charter
documents of the Corporation, special meetings of the stockholders for any
purpose or purposes may be called at any time by the President, by a majority of
the Board of Directors, or by a majority of the executive committee (if any), at
such time and at such place as may be stated in the notice of the meeting.
Business transacted at a special meeting shall be confined to the purpose(s)
stated in the notice of such meeting.
SECTION 2.5. RECORD DATE. For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders, or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors of the Corporation may fix a date as
the record date for any such determination of stockholders, which record date
shall not precede the date on which the resolutions fixing the record date are
adopted and which record date shall not be more than sixty (60) days nor less
than ten (10) days before the date of such meeting of stockholders, nor more
than sixty (60) days prior to any other action to which such record date
relates.
If the Board of Directors does not fix a record date for any meeting of
the stockholders, the record date for determining stockholders entitled to
notice of or to vote at such meeting shall be at the close of business on the
day next preceding the day on which notice is given, or, if in accordance with
Article 7, Section 7.3 of these Bylaws notice is waived, at the close of
business on the day next
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<PAGE>
preceding the day on which the meeting is held. The record date for determining
stockholders for any other purpose (other than the consenting to corporate
action in writing without a meeting) shall be at the close of business on the
day on which the Board of Directors adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
For the purpose of determining the stockholders entitled to consent to
corporate action in writing without a meeting, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than ten (10) days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If the
Board of Directors does not fix the record date, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is necessary, shall be
the first date on which a signed written consent setting forth the action taken
or proposed to be taken is delivered to the Corporation at its registered office
in the state of incorporation of the Corporation or at its principal place of
business. If the Board of Directors does not fix the record date, and prior
action by the Board of Directors is necessary, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
SECTION 2.6. NOTICE OF MEETINGS. Written notice of the place, date and
hour of all meetings, and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be given by or at the direction of the
President, the Secretary or the other person(s) calling the meeting to each
stockholder entitled to vote thereat not less than ten (10) nor more than sixty
(60) days before the date of the meeting. Such notice may be delivered either
personally or by mail. If mailed, notice is given when deposited in the United
States mail, postage prepaid, directed to the stockholder at such stockholder's
address as it appears on the records of the Corporation.
SECTION 2.7. STOCKHOLDER LIST. A complete list of stockholders entitled to
vote at any meeting of stockholders, arranged in alphabetical order for each
class of stock and showing the address of each such stockholder and the number
of shares registered in the name of such stockholder, shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The stockholder list
shall also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
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SECTION 2.8. PROXIES. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to a corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy. Proxies for use at any meeting of stockholders shall be filed with the
Secretary, or such other officer as the Board of Directors may from time to time
determine by resolution, before or at the time of the meeting. All proxies shall
be received and taken charge of and all ballots shall be received and canvassed
by the secretary of the meeting, who shall decide all questions touching upon
the qualification of voters, the validity of the proxies, and the acceptance or
rejection of votes, unless an inspector or inspectors shall have been appointed
by the chairman of the meeting, in which event such inspector or inspectors
shall decide all such questions.
No proxy shall be valid after three (3) years from its date, unless the
proxy provides for a longer period. Each proxy shall be revocable unless
expressly provided therein to be irrevocable and coupled with an interest
sufficient in law to support an irrevocable power.
Should a proxy designate two or more persons to act as proxies, unless
such instrument shall provide the contrary, a majority of such persons present
at any meeting at which their powers thereunder are to be exercised shall have
and may exercise all the powers of voting or giving consents thereby conferred,
or if only one be present, then such powers may be exercised by that one; or, if
an even number attend and a majority do not agree on any particular issue, each
proxy so attending shall be entitled to exercise such powers in respect of such
portion of the shares as is equal to the reciprocal of the fraction equal to the
number of proxies representing such shares divided by the total number of shares
represented by such proxies.
SECTION 2.9. VOTING; ELECTION; INSPECTORS. Unless otherwise required by
law or provided in the charter documents of the Corporation, each stockholder
shall on each matter submitted to a vote at a meeting of stockholders have one
vote for each share of the stock entitled to vote which is registered in his
name on the record date for the meeting. For the purposes hereof, each election
to fill a directorship shall constitute a separate matter. Shares registered in
the name of another corporation, domestic or foreign, may be voted by such
officer, agent or proxy as the bylaws (or comparable body) of such corporation
may determine. Shares registered in the name of a deceased person may be voted
by the executor or administrator of such person's estate, either in person or by
proxy.
All voting, except as required by the charter documents of the Corporation
or where otherwise required by law, may be by a voice vote; provided, however,
upon request of the chairman of the meeting or upon demand therefor by
stockholders holding a majority of the issued and outstanding stock present in
person or by proxy at any meeting a stock vote shall be taken. Every stock vote
shall be taken by written ballots, each of which shall state the name of the
stockholder or proxy voting and such other information as may be required under
the procedure established for the
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meeting. All elections of directors shall be by written ballots, unless
otherwise provided in the charter documents of the Corporation.
At any meeting at which a vote is taken by written ballots, the chairman
of the meeting may appoint one or more inspectors, each of whom shall subscribe
an oath or affirmation to execute faithfully the duties of inspector at such
meeting with strict impartiality and according to the best of such inspector's
ability. Such inspector shall receive the written ballots, count the votes, and
make and sign a certificate of the result thereof. The chairman of the meeting
may appoint any person to serve as inspector, except no candidate for the office
of director shall be appointed as an inspector.
Unless otherwise provided in the charter documents of the Corporation,
cumulative voting for the election of directors shall be prohibited.
SECTION 2.10. CONDUCT OF MEETINGS. The meetings of the stockholders shall
be presided over by the President, or, if the President is not present, by a
chairman elected at the meeting. The Secretary of the Corporation, if present,
shall act as secretary of such meetings, or, if the Secretary is not present, an
Assistant Secretary shall so act; if neither the Secretary or an Assistant
Secretary is present, then a secretary shall be appointed by the chairman of the
meeting.
The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to the chairman in order.
SECTION 2.11. TREASURY STOCK. The Corporation shall not vote, directly or
indirectly, shares of its own stock owned by it and such shares shall not be
counted for quorum purposes. Nothing in this Section 2.11 shall be construed as
limiting the right of the Corporation to vote stock, including but not limited
to its own stock, held by it in a fiduciary capacity.
SECTION 2.12. ACTION WITHOUT MEETING. Unless otherwise provided in the
charter documents of the Corporation, any action permitted or required by law,
the charter documents of the Corporation or these Bylaws to be taken at a
meeting of stockholders, may be taken without a meeting, without prior notice
and without a vote, if a consent or consents in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted and shall be delivered to the Corporation by delivery to its
registered office in the state of incorporation, its principal place of
business, or an officer or agent of the Corporation having custody of the book
in which proceedings of meetings of stockholders are recorded. Delivery made to
the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
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Every written consent shall bear the date of signature of each stockholder
who signs the consent, and no written consent shall be effective to take the
corporate action referred to therein unless, within sixty (60) days of the
earliest dated consent delivered in the manner required by this Section to the
Corporation, written consents signed by a sufficient number of holders to take
action are delivered to the Corporation by delivery to its registered office in
the state of incorporation, its principal place of business, or an officer or
agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery made to the Corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested.
Prompt notice of the taking of corporation action without a meeting by
less than a unanimous written consent shall be given by the Secretary to those
stockholders who have not consented in writing.
Article 3
BOARD OF DIRECTORS
SECTION 3.1. POWER; NUMBER; TERM OF OFFICE. The business and affairs of
the Corporation shall be managed by or under the direction of the Board of
Directors, and, subject to the restrictions imposed by law or the charter
documents of the Corporation, the Board of Directors may exercise all the powers
of the Corporation.
The number of directors which shall constitute the whole Board of
Directors shall be determined from time to time by the Board of Directors
(provided that no decrease in the number of directors which would have the
effect of shortening the term of an incumbent director may be made by the Board
of Directors). If the Board of Directors makes no such determination, the number
of directors shall be three. Each director shall hold office for the term for
which such director is elected, and until such director's successor shall have
been elected and qualified or until such director's earlier death, resignation
or removal.
Unless otherwise provided in the charter documents of the Corporation,
directors need not be stockholders nor residents of the state of Delaware.
SECTION 3.2. QUORUM; VOTING. Unless otherwise provided in the charter
documents of the Corporation, a majority of the number of directors fixed in
accordance with Section 3.1 shall constitute a quorum for the transaction of
business of the Board of Directors and the vote of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
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SECTION 3.3. PLACE OF MEETINGS; ORDER OF BUSINESS. The directors may hold
their meetings and may have an office and keep the books of the Corporation,
except as otherwise provided by law, in such place or places, within or without
the state of incorporation of the Corporation, as the Board of Directors may
from time to time determine. At all meetings of the Board of Directors business
shall be transacted in such order as shall from time to time be determined by
the President or by the Board of Directors.
SECTION 3.4. FIRST MEETING. Each newly elected Board of Directors may hold
its first meeting for the purpose of organization and the transaction of
business, if a quorum is present, immediately after and at the same place as the
annual meeting of the stockholders. Notice of such meeting shall not be
required. At the first meeting of the Board of Directors in each year at which a
quorum shall be present, held after the annual meeting of stockholders, the
Board of Directors shall elect the officers of the Corporation.
SECTION 3.5. REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held at such times and places as shall be designated from time to time
by the President, or in the President's absence, by another officer of the
Corporation. Notice of such regular meetings shall not be required.
SECTION 3.6. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the President, or, on the written request of any director, by
the Secretary, in each case on at least twenty-four (24) hours' personal,
written, telegraphic, cable or wireless notice to each director. Such notice, or
any waiver thereof pursuant to Article 7, Section 7.3 hereof, need not state the
purpose or purposes of such meeting, except as may otherwise be required by law
or provided for in the charter documents of the Corporation or these Bylaws.
Meetings may be held at any time without notice if all the directors are present
or if those not present waive notice of the meeting in writing.
SECTION 3.7. REMOVAL. Any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
SECTION 3.8. VACANCIES; INCREASES IN THE NUMBER OF DIRECTORS. Unless
otherwise provided in the charter documents of the Corporation, vacancies
existing on the Board of Directors for any reason and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by the affirmative vote of a majority of the directors then in
office, although less than a quorum, or by a sole remaining director; and any
director so chosen shall hold office until the next annual election and until
such director's successor shall have been elected and qualified, or until such
director's earlier death, resignation or removal.
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SECTION 3.9. COMPENSATION. Directors and members of standing committees
may receive such compensation as the Board of Directors from time to time shall
determine to be appropriate, and shall be reimbursed for all reasonable expenses
incurred in attending and returning from meetings of the Board of Directors.
SECTION 3.10. ACTION WITHOUT A MEETING; TELEPHONE CONFERENCE MEETING.
Unless otherwise restricted by the charter documents of the Corporation, any
action required or permitted to be taken at any meeting of the Board of
Directors or any committee designated by the Board of Directors may be taken
without a meeting if all members of the Board of Directors or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board of Directors or committee. Such
consent shall have the same force and effect as a unanimous vote at a meeting,
and may be stated as such in any document or instrument filed with the Secretary
of State of the state of incorporation of the Corporation.
Unless otherwise restricted by the charter documents of the Corporation,
subject to the requirement for notice of meetings, members of the Board of
Directors, or members of any committee designated by the Board of Directors, may
participate in a meeting of such Board of Directors or committee, as the case
may be, by means of a conference telephone connection or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in such a meeting shall constitute presence in
person at such meeting, except where a person participates in the meeting for
the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
SECTION 3.11. APPROVAL OR RATIFICATION OF ACTS OR CONTRACTS BY
STOCKHOLDERS. The Board of Directors in its discretion may submit any act or
contract for approval or ratification at any annual meeting of the stockholders,
or at any special meeting of the stockholders called for the purpose of
considering any such act or contract, and any act or contract that shall be
approved or be ratified by the vote of the stockholders holding a majority of
the issued and outstanding shares of stock of the Corporation entitled to vote
and present in person or by proxy at such meeting (provided that a quorum is
present) shall be as valid and as binding upon the Corporation and upon all the
stockholders as if it has been approved or ratified by every stockholder of the
Corporation. In addition, any such act or contract may be approved or ratified
by the written consent of stockholders holding a majority of the issued and
outstanding shares of capital stock of the Corporation entitled to vote, and
such consent shall be as valid and binding upon the Corporation and upon all the
stockholders as if it had been approved or ratified by every stockholder of the
Corporation.
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Article 4
COMMITTEES
SECTION 4.1. DESIGNATION; POWERS. The Board of Directors may, by
resolution passed by a majority of the whole board, designate one or more
committees, including, if they shall so determine, an executive committee, with
each such committee to consist of one or more of the directors of the
Corporation. Any such designated committee shall have and may exercise such of
the powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation as may be provided in such resolution,
except that no such committee shall have the power or authority of the Board of
Directors in reference to amending the charter documents of the Corporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution of the
Corporation, or amending, altering or repealing these Bylaws or adopting new
bylaws for the Corporation. Any such designated committee may authorize the seal
of the Corporation to be affixed to all papers which may require it. In addition
to the above, such committee or committees shall have such other powers and
limitations of authority as may be determined from time to time by the Board of
Directors.
SECTION 4.2. PROCEDURE; MEETINGS; QUORUM. Any committee designated
pursuant to this Article 4 shall keep regular minutes of its actions and
proceedings in a book provided for that purpose and report the same to the Board
of Directors at its meeting next succeeding such action, shall fix its own rules
or procedures, and shall meet at such times and at such place or places as may
be provided by such rules, or by such committee or the Board of Directors.
Should a committee fail to fix its own rules, the provisions of these Bylaws,
pertaining to the calling of meetings and conduct of business by the Board of
Directors, shall apply as nearly as may be possible. At every meeting of any
such committee, the presence of a majority of all the members thereof shall
constitute a quorum, except as provided in Section 4.3 of this Article 4, and
the affirmative vote of a majority of the members present shall be necessary for
the adoption by it of any resolution.
SECTION 4.3. SUBSTITUTION AND REMOVAL OF MEMBERS; VACANCIES. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
such committee. In the absence or disqualification of a member of a committee,
the member or members present at any meeting and not disqualified from voting,
whether or not constituting a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of the absent or
disqualified member. The Board of Directors shall have the power at any time to
remove any member(s) of a committee and to appoint other directors in lieu of
the person(s) so removed and shall also have the power to fill vacancies in a
committee.
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Article 5
OFFICERS
SECTION 5.1. NUMBER, TITLES AND TERM OF OFFICE. The officers of the
Corporation shall be a President, Treasurer, a Secretary, and such other
officers as the Board of Directors may from time to time elect or appoint
(including, but not limited to, a Chairman of the Board, and or more Vice
Presidents, (anyone or more of whom may be designated Executive Vice President
or Senior Vice President) Vice Chairman of the Board, one or more Assistant
Secretaries and one or more Assistant Treasurers). Each officer shall hold
office until such officer's successor shall be duly elected and shall qualify or
until such officer's death or until such officer shall resign or shall have been
removed. Any number of offices may be held by the same person, unless the
Articles of Incorporation of the Corporation provide otherwise. Except for the
Chairman of the Board and the Vice Chairman of the Board, no officer need be a
director.
SECTION 5.2. POWERS AND DUTIES OF THE PRESIDENT. The President shall be
the chief executive officer of the Corporation. Subject to the control of the
Board of Directors and the Executive Committee (if any), the President shall
have general executive charge, management and control of the properties,
business and operations of the Corporation with all such powers as may be
reasonably incident to such responsibilities; may agree upon and execute all
leases, contracts, evidences of indebtedness and other obligations in the name
of the Corporation and may sign all certificates for shares of capital stock of
the Corporation; and shall have such other powers and duties as designated in
accordance with these Bylaws and as from time to time may be assigned to the
President by the Board of Directors. The President shall preside at all meetings
of the stockholders and of the Board of Directors.
SECTION 5.3. VICE PRESIDENTS. Each Vice President shall at all times
possess power to sign all certificates, contracts and other instruments of the
Corporation, except as otherwise limited in writing by the Chairman of the
Board, the President or the Vice Chairman of the Board of the Corporation. Each
Vice President shall have such other powers and duties as from time to time may
be assigned to such Vice President by the Board of Directors, the Chairman of
the Board, the President or the Vice Chairman of the Board.
SECTION 5.4. SECRETARY. The Secretary shall keep the minutes of all
meetings of the Board of Directors, committees of the Board of Directors and the
stockholders, in books provided for that purpose; shall attend to the giving and
serving of all notices; may in the name of the Corporation affix the seal of the
Corporation to all contracts and attest the affixation of the seal of the
Corporation thereto; may sign with the other appointed officers all certificates
for shares of capital
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stock of the Corporation; shall have charge of the certificate books, transfer
books and stock ledgers, and such other books and papers as the Board of
Directors may direct, all of which shall at all reasonable times be open to
inspection of any director upon application at the office of the Corporation
during business hours; shall have such other powers and duties as designated in
these Bylaws and as from time to time may be assigned to the Secretary by the
Board of Directors, the Chairman of the Board, the President or the Vice
Chairman of the Board; and shall in general perform all acts incident to the
office of Secretary, subject to the control of the Board of Directors, the
Chairman of the Board, the President or the Vice Chairman of the Board.
SECTION 5.5. ASSISTANT SECRETARIES. Each Assistant Secretary shall have
the usual powers and duties pertaining to such offices, together with such other
powers and duties as designated in these Bylaws and as from time to time may be
assigned to an Assistant Secretary by the Board of Directors, the President, or
the Secretary. The Assistant Secretaries shall exercise the powers of the
Secretary during that officer's absence or inability or refusal to act.
SECTION 5.6. TREASURER. The Treasurer shall have responsibility for the
custody and control of all the funds and securities of the Corporation, and
shall have such other powers and duties as designated in these Bylaws and as
from time to time may be assigned to the Treasurer by the Board of Directors or
the President. The Treasurer shall perform all acts incident to the position of
Treasurer, subject to the control of the Board of Directors or the President;
and the Treasurer shall, if required by the Board of Directors, give such bond
for the faithful discharge of the Treasurer's duties in such form as the Board
of Directors may require.
SECTION 5.7. ASSISTANT TREASURERS. Each Assistant Treasurer shall have the
usual powers and duties pertaining to such office, together with such other
powers and duties as designated in these Bylaws and as from time to time may be
assigned to each Assistant Treasurer by the Board of Directors, the President,
or the Treasurer. The Assistant Treasurers shall exercise the powers of the
Treasurer during that officer's absence or inability or refusal to act.
SECTION 5.8. ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS.
Unless otherwise directed by the Board of Directors, the President, together
with the Secretary or any Assistant Secretary shall have power to vote and
otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of security holders of or with respect to any action of security holders
of any other corporation in which this Corporation may hold securities and
otherwise to exercise any and all rights and powers which this Corporation may
possess by reason of its ownership of securities in such other corporation.
SECTION 5.9. DELEGATION. For any reason that the Board of Directors may
deem sufficient, the Board of Directors may, except where otherwise provided by
statute, delegate the powers or
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duties of any officer to any other person, and may authorize any officer to
delegate specified duties of such office to any other person. Any such
delegation or authorization by the Board shall be effected from time to time by
resolution of the Board of Directors.
Article 6
CAPITAL STOCK
SECTION 6.1. CERTIFICATES OF STOCK. The certificates for shares of the
capital stock of the Corporation shall be in such form, not inconsistent with
that required by law and the charter documents of the Corporation, as shall be
approved by the Board of Directors. Every holder of stock represented by
certificates shall be entitled to have a certificate signed by or in the name of
the Corporation by the President or a Vice President and the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer of the
Corporation representing the number of shares (and, if the stock of the
Corporation shall be divided into classes or series, certifying the class and
series of such shares) owned by such stockholder which are registered in
certified form; provided, however, that any of or all the signatures on the
certificate may be facsimile. The stock record books and the blank stock
certificate books shall be kept by the Secretary or at the office of such
transfer agent or transfer agents as the Board of Directors may from time to
time determine. In case any officer, transfer agent or registrar who shall have
signed or whose facsimile signature or signatures shall have been placed upon
any such certificate or certificates shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued by the
Corporation, such certificate may nevertheless be issued by the Corporation with
the same effect as if such person were such officer, transfer agent or registrar
at the date of issue. The stock certificates shall be consecutively numbered and
shall be entered in the books of the Corporation as they are issued and shall
exhibit the holder's name and number of shares.
SECTION 6.2. TRANSFER OF SHARES. The shares of stock of the Corporation
shall be transferable only on the books of the Corporation by the holders
thereof in person or by their duly authorized attorneys or legal representatives
upon surrender and cancellation of certificates for a like number of shares.
Upon surrender to the Corporation or a transfer agent of the Corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
SECTION 6.3. OWNERSHIP OF SHARES. The Corporation shall be entitled to
treat the holder of record of any share or shares of capital stock of the
Corporation as the holder in fact thereof and, accordingly, shall not be bound
to recognize any equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the state of
Delaware.
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SECTION 6.4. REGULATIONS REGARDING CERTIFICATES. The Board of Directors
shall have the power and authority to make all such rules and regulations as
they may deem expedient concerning the issue, transfer and registration or the
replacement of certificates for shares of capital stock of the Corporation.
SECTION 6.5. LOST OR DESTROYED CERTIFICATES. The Board of Directors may
determine the conditions upon which the Corporation may issue a new certificate
of stock in place of a certificate theretofore issued by it which is alleged to
have been lost, stolen or destroyed and may require the owner of such
certificate or such owner's legal representative to give bond, with surety
sufficient to indemnify the Corporation and each transfer agent and registrar
against any and all losses or claims which may arise by reason of the alleged
loss, theft or destruction of any such certificate or the issuance of such new
certificate in the place of the one so lost, stolen or destroyed.
Article 7
MISCELLANEOUS PROVISIONS
SECTION 7.1. FISCAL YEAR. The fiscal year of the Corporation shall begin
on the first day of January of each year.
SECTION 7.2. CORPORATE SEAL. The corporate seal shall be circular in form
and shall have inscribed thereon the name of the Corporation and the state of
its incorporation, which seal shall be in the charge of the Secretary and shall
be affixed to certificates of stock, debentures, bonds, and other documents, in
accordance with the direction of the Board of Directors or a committee thereof,
and as may be required by law; however, the Secretary may, if the Secretary
deems it expedient, have a facsimile of the corporate seal inscribed on any such
certificates of stock, debentures, bonds, contract or other documents.
Duplicates of the seal may be kept for use by any Assistant Secretary.
SECTION 7.3. NOTICE AND WAIVER OF NOTICE. Whenever any notice is required
to be given by law, the charter documents of the Corporation or under the
provisions of these Bylaws, said notice shall be deemed to be sufficient if
given (i) by telegraphic, cable or wireless transmission (including by telecopy
or facsimile transmission) or (ii) by deposit of the same in a post office box
or by delivery to an overnight courier service company in a sealed prepaid
wrapper addressed to the person entitled thereto at such person's post office
address, as it appears on the records of the Corporation, and such notice shall
be deemed to have been given on the day of such transmission or mailing or
delivery to courier, as the case may be.
Whenever notice is required to be given by law, the charter documents of
the Corporation or under any of the provisions of these Bylaws, a written waiver
thereof, signed by the person
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entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person, including without
limitation a director, at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice unless so required by the charter
documents of the Corporation or these Bylaws.
SECTION 7.4. FACSIMILE SIGNATURES. In addition to the provisions for the
use of facsimile signatures elsewhere specifically authorized in these Bylaws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors.
SECTION 7.5. RELIANCE UPON BOOKS, REPORTS AND RECORDS. A member of the
Board of Directors, or a member of any committee designated by the Board of
Directors, shall, in the performance of such person's duties, be protected to
the fullest extent permitted by law in relying upon the records of the
Corporation and upon information, opinion, reports or statements presented to
the Corporation.
SECTION 7.6. APPLICATION OF BYLAWS. In the event that any provisions of
these Bylaws is or may be in conflict with any law of the United States, of the
state of Delaware, or of any other governmental body or power having
jurisdiction over this Corporation, or over the subject matter to which such
provision of these Bylaws applies, or may apply, such provision of these Bylaws
shall be inoperative to the extent only that the operation thereof unavoidably
conflicts with such law, and shall in all other respects be in full force and
effect.
Article 8
INDEMNIFICATION OF OFFICERS AND DIRECTORS
SECTION 8.1. INDEMNIFICATION. Each person who was, is or is threatened to
be made a named defendant or respondent in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director or officer, of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
-14-
<PAGE>
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by such person in connection
therewith, and such indemnification shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit of
his or her heirs, executors and administrators. Further, the Corporation shall
pay the expenses (including attorneys' fees) incurred by an officer or director
in defending any proceeding, the subject matter for which indemnification is
sought herewith, in advance of its final disposition; provided, however, that,
if the Delaware General Corporation Law requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of such
proceeding, shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director or officer, to repay all amounts
so advanced if it shall ultimately be determined that such director or officer
is not entitled to be indemnified under this Section or otherwise. The
Corporation may, by action of its Board of Directors, provide indemnification to
employees and agents of the Corporation with the same scope and effect as the
foregoing indemnification of directors and officers.
SECTION 8.2. CLAIMS AND DEFENSES. If a claim under Section 8.1 of this
Article 8 is not paid in full by the Corporation within thirty days after a
written claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be entitled
to be paid also the expense of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standards of conduct which make
it permissible under the Delaware General Corporation Law for the Corporation to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
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<PAGE>
SECTION 8.3. NONEXCLUSIVITY. The right to indemnification and the payment
of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
SECTION 8.4. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
Article 9
AMENDMENTS
SECTION 9.1. AMENDMENTS. The Board of Directors shall have the power to
adopt, amend and repeal from time to time Bylaws of the Corporation, subject to
the right of the stockholders entitled to vote with respect thereto to amend or
repeal such Bylaws as adopted or amended by the Board of Directors.
-16-
EXHIBIT 4.3
[Execution Copy]
Indenture
$57,650,103.55
Senior Discount Notes due 2007
and
Series B Senior Discount Notes due 2007
Among
TEXAS PETROCHEMICAL HOLDINGS, INC.,
TPC HOLDING CORPORATION
and
FLEET NATIONAL BANK, Trustee
Dated as of July 1, 1996
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC.
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of July 1, 1996
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
ss. 310(a)(1) ....................................................6.07
(a)(2) ......................................................6.07
(b) .........................................................6.08
ss. 312(c) .......................................................7.01
ss. 314(a) .......................................................7.03
(a)(4) ..................................................10.04(a)
(c)(1) ......................................................1.02
(c)(2) ......................................................1.02
(e) .........................................................1.02
ss. 315(b) .......................................................6.01
ss. 316(a)(last sentence) .......................1.01 ("Outstanding ")
(a)(1)(A) . ...........................................5.02, 5.12
(a)(1)(B) ...................................................5.13
(b) .........................................................5.08
(c) ......................................................1.04(d)
ss. 317(a)(1) ....................................................5.03
(a)(2) ......................................................5.04
(b) ........................................................10.03
ss. 318(a) .......................................................1.11
- --------------
Note: This reconciliation and tie shall not, for any purpose, be deemed
to be a part of the Indenture.
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<PAGE>
TABLE OF CONTENTS*
PAGE
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.01 DEFINITIONS.......................................2
Accreted Value..................................................2
Acquisition.....................................................3
Act .........................................................3
Additional Assets...............................................3
Affiliate.......................................................3
Asset Disposition...............................................3
Attributable Debt...............................................4
Average Life....................................................4
Bank Indebtedness...............................................4
Board of Directors..............................................4
Board Resolution................................................4
Business Day....................................................4
Capital Lease Obligations.......................................4
Capital Stock...................................................4
Change of Control...............................................5
Closing Date....................................................6
Code .........................................................6
Company.........................................................6
Company Indenture...............................................6
Company Notes...................................................6
Company Request.................................................6
Company Order...................................................6
Consolidated Coverage Ratio.....................................7
Consolidated Interest Expense...................................8
Consolidated Net Income.........................................8
Consolidated Net Worth..........................................9
Corporate Trust Office..........................................9
Credit Agreement...............................................10
- --------
* Note: This Table of Contents shall not, for any purpose, be deemed
to be a part of the Indenture.
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<PAGE>
Currency Agreement.............................................10
Default........................................................10
Defaulted Interest.............................................10
Depository.....................................................10
Disqualified Stock.............................................10
EBITDA ........................................................10
Employee Offering..............................................11
Event of Default...............................................11
Exchange Act...................................................11
Excluded Assets................................................11
Exchange Offer.................................................11
Exchange Securities............................................11
Federal Bankruptcy Code........................................12
GAAP ........................................................12
Guarantee......................................................12
Hedging Obligations............................................12
Holder ........................................................12
Securityholder.................................................12
Holdings.......................................................12
Houston Facility...............................................12
Incur ........................................................12
Indebtedness...................................................13
Indenture......................................................13
Initial Securities.............................................13
Interest Payment Date..........................................14
Interest Rate Agreement........................................14
Investment.....................................................14
Investment Grade Rating........................................14
Issue Date.....................................................14
Legal Holiday..................................................15
Lien ........................................................15
Moody's........................................................15
Net Available Cash.............................................15
Net Cash Proceeds..............................................15
Officers' Certificate..........................................16
Opinion of Counsel.............................................16
Outstanding....................................................16
Paying Agent...................................................17
Permitted Holders..............................................17
Permitted Investment...........................................17
Permitted Liens................................................18
Person ........................................................19
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Predecessor Security...........................................19
Preferred Stock................................................19
QIB ........................................................20
Rating Agency..................................................20
Redemption Date................................................20
Redemption Price...............................................20
Refinance......................................................20
Refinancing Indebtedness.......................................20
Registration Rights Agreement..................................21
Registration Statement.........................................21
Regular Record Date............................................21
Regulation S...................................................21
Related Business...............................................21
Responsible Officer............................................21
Restricted Payment.............................................21
Restricted Subsidiary..........................................22
Revolving Credit Provisions....................................22
Sale/Leaseback Transaction.....................................22
SEC ........................................................22
Securities.....................................................22
Securities Act.................................................22
Security Guarantee.............................................22
Security Register..............................................22
Security Registrar.............................................22
Significant Subsidiary.........................................22
S&P ........................................................22
Special Record Date............................................23
Stated Maturity................................................23
Sterling.......................................................23
Stock Purchase Agreement.......................................23
Subordinated Obligation........................................23
Subsidiary.....................................................23
Tax Sharing Agreement..........................................23
Temporary Cash Investments.....................................23
Term Loan Provisions...........................................24
Trust Indenture Act............................................24
TIA ........................................................24
Trustee........................................................24
Unrestricted Subsidiary........................................24
U.S. Government Obligations....................................25
Vice President.................................................25
Voting Stock...................................................25
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<PAGE>
Wholly Owned Subsidiary........................................25
SECTION 1.02 OTHER DEFINITIONS.......................................26
SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.......26
SECTION 1.04 RULES OF CONSTRUCTION...................................27
SECTION 1.05 COMPLIANCE CERTIFICATES AND OPINIONS....................27
SECTION 1.06 FORM OF DOCUMENTS DELIVERED TO TRUSTEE..................28
SECTION 1.07 ACTS OF HOLDERS.........................................29
SECTION 1.08 NOTICES, ETC., TO TRUSTEE, HOLDINGS AND TPC HOLDING.....30
SECTION 1.09 NOTICE TO HOLDERS; WAIVER...............................31
SECTION 1.10 EFFECT OF HEADINGS AND TABLE OF CONTENTS................32
SECTION 1.11 SUCCESSORS AND ASSIGNS..................................32
SECTION 1.12 SEPARABILITY CLAUSE.....................................32
SECTION 1.13 BENEFITS OF INDENTURE...................................32
SECTION 1.14 GOVERNING LAW; TRUST INDENTURE ACT......................32
SECTION 1.15 LEGAL HOLIDAYS..........................................33
ARTICLE TWO
SECURITY FORMS
SECTION 2.01 FORMS GENERALLY.........................................33
SECTION 2.02 RESTRICTIVE LEGENDS.....................................34
ARTICLE THREE
THE SECURITIES
SECTION 3.01 TERMS...................................................37
SECTION 3.02 DENOMINATIONS...........................................37
SECTION 3.03 EXECUTION, AUTHENTICATION, DELIVERY AND DATING..........38
SECTION 3.04 TEMPORARY SECURITIES....................................39
SECTION 3.05 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.....40
SECTION 3.06 BOOK-ENTRY PROVISIONS FOR U.S. GLOBAL SECURITY..........41
SECTION 3.07 SPECIAL TRANSFER PROVISIONS.............................42
SECTION 3.08 MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES........47
SECTION 3.09 PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED..........48
SECTION 3.10 PERSONS DEEMED OWNERS...................................49
SECTION 3.11 CANCELLATION............................................49
SECTION 3.12 COMPUTATION OF INTEREST.................................50
SECTION 3.13 CUSIP NUMBERS...........................................50
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<PAGE>
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 4.01 SATISFACTION AND DISCHARGE OF INDENTURE.................50
SECTION 4.02 APPLICATION OF TRUST MONEY..............................51
ARTICLE FIVE
REMEDIES
SECTION 5.01 EVENTS OF DEFAULT.......................................52
SECTION 5.02 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT......54
SECTION 5.03 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE.................................................55
SECTION 5.04 TRUSTEE MAY FILE PROOFS OF CLAIM........................56
SECTION 5.05 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES..............................................57
SECTION 5.06 APPLICATION OF MONEY COLLECTED..........................57
SECTION 5.07 LIMITATION ON SUITS.....................................57
SECTION 5.09 RESTORATION OF RIGHTS AND REMEDIES......................59
SECTION 5.10 RIGHTS AND REMEDIES CUMULATIVE..........................59
SECTION 5.11 DELAY OR OMISSION NOT WAIVER............................59
SECTION 5.12 CONTROL BY HOLDERS......................................59
SECTION 5.13 WAIVER OF PAST DEFAULTS.................................60
SECTION 5.14 WAIVER OF STAY OR EXTENSION LAWS........................60
SECTION 5.15 UNDERTAKING FOR COSTS...................................60
ARTICLE SIX
THE TRUSTEE
SECTION 6.01 NOTICE OF DEFAULTS......................................61
SECTION 6.02 CERTAIN RIGHTS OF TRUSTEE...............................61
SECTION 6.03 TRUSTEE NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
SECURITIES..............................................63
SECTION 6.04 MAY HOLD SECURITIES.....................................63
SECTION 6.05 MONEY HELD IN TRUST.....................................63
SECTION 6.06 COMPENSATION AND REIMBURSEMENT..........................63
SECTION 6.07 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.................64
SECTION 6.08 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.......64
SECTION 6.09 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR..................66
SECTION 6.10 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS................................................66
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<PAGE>
SECTION 6.11 CERTAIN DUTIES AND RESPONSIBILITIES.....................67
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.01 DISCLOSURE OF NAMES AND ADDRESSES OF HOLDERS............68
SECTION 7.02 REPORTS BY TRUSTEE......................................69
SECTION 7.03 REPORTS BY COMPANY......................................69
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER, OR LEASE
SECTION 8.01 HOLDINGS MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS...70
SECTION 8.02 SUCCESSOR SUBSTITUTED...................................72
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 9.01 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS......73
SECTION 9.02 SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.........73
SECTION 9.03 EXECUTION OF SUPPLEMENTAL INDENTURES....................75
SECTION 9.04 EFFECT OF SUPPLEMENTAL INDENTURES.......................75
SECTION 9.05 CONFORMITY WITH TRUST INDENTURE ACT.....................75
SECTION 9.06 REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES......75
ARTICLE TEN
COVENANTS
SECTION 10.01 PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST.....76
SECTION 10.02 MAINTENANCE OF OFFICE OR AGENCY.........................76
SECTION 10.03 MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST.........76
SECTION 10.04 STATEMENT BY OFFICERS AS TO DEFAULT.....................78
........................................................78
SECTION 10.05 PURCHASE OF SECURITIES UPON CHANGE IN CONTROL...........78
SECTION 10.06 LIMITATION ON INDEBTEDNESS..............................80
SECTION 10.07 LIMITATION ON PREFERRED STOCK OF RESTRICTED
SUBSIDIARIES............................................82
SECTION 10.08 LIMITATION ON LIENS.....................................82
SECTION 10.09 LIMITATION ON RESTRICTED PAYMENTS.......................82
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<PAGE>
SECTION 10.10 LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM
RESTRICTED SUBSIDIARIES.................................86
SECTION 10.11 LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK......87
SECTION 10.12 LIMITATION ON AFFILIATE TRANSACTIONS. ..................89
SECTION 10.13 LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF
RESTRICTED SUBSIDIARIES.................................90
SECTION 10.14 PROVISION OF FINANCIAL STATEMENTS.......................91
SECTION 10.15 WAIVER OF CERTAIN COVENANTS.............................91
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 11.01 RIGHT OF REDEMPTION.....................................91
SECTION 11.02 APPLICABILITY OF ARTICLE................................91
SECTION 11.03 ELECTION TO REDEEM; NOTICE TO TRUSTEE...................92
SECTION 11.04 SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED.......92
SECTION 11.05 NOTICE OF REDEMPTION....................................92
SECTION 11.06 DEPOSIT OF REDEMPTION PRICE.............................93
SECTION 11.07 SECURITIES PAYABLE ON REDEMPTION DATE...................93
SECTION 11.08 SECURITIES REDEEMED IN PART.............................94
ARTICLE TWELVE
GUARANTEE
SECTION 12.01 TPC HOLDING GUARANTEE...................................94
SECTION 12.02 CONTINUING GUARANTEE; NO RIGHT OF SET-OFF; INDEPENDENT
OBLIGATION..............................................95
SECTION 12.03 GUARANTEE ABSOLUTE......................................96
SECTION 12.04 RIGHT TO DEMAND FULL PERFORMANCE........................98
SECTION 12.05 WAIVERS.................................................99
SECTION 12.06 TPC HOLDING REMAINS OBLIGATED IN EVENT HOLDINGS IS NO
LONGER OBLIGATED TO DISCHARGE INDENTURE OBLIGATIONS....100
SECTION 12.07 FRAUDULENT CONVEYANCE; SUBROGATION.....................100
SECTION 12.08 GUARANTEE IS IN ADDITION TO OTHER SECURITY.............100
SECTION 12.09 RELEASE OF SECURITY INTERESTS..........................101
SECTION 12.10 NO BAR TO FURTHER ACTIONS..............................101
SECTION 12.11 FAILURE TO EXERCISE RIGHTS SHALL NOT OPERATE AS A
WAIVER; NO SUSPENSION OF REMEDIES......................101
SECTION 12.12 TRUSTEE'S DUTIES; NOTICE TO TRUSTEE....................102
SECTION 12.13 SUCCESSORS AND ASSIGNS.................................102
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<PAGE>
SECTION 12.14 RELEASE OF GUARANTEE...................................102
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 13.01 HOLDINGS COMPANY'S OPTION TO EFFECT DEFEASANCE OR
COVENANT DEFEASANCE....................................103
SECTION 13.02 LEGAL DEFEASANCE AND DISCHARGE.........................103
SECTION 13.03 COVENANT DEFEASANCE....................................103
SECTION 13.04 CONDITIONS TO LEGAL DEFEASANCE OR COVENANT DEFEASANCE..104
SECTION 13.05 DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE
HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS..........106
SECTION 13.06 REINSTATEMENT..........................................106
ARTICLE FOURTEEN
[RESERVED]
ARTICLE FIFTEEN
IMMUNITY OF INCORPORATORS,
STOCKHOLDERS, OFFICERS AND DIRECTORS
SECTION 15.01 LIABILITY SOLELY CORPORATE.............................107
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<PAGE>
EXHIBITS
EXHIBIT A Form of Securities, Trustee's Certificate of Authentication
EXHIBIT B Form of Certificate to be Delivered upon Termination of
Restricted Period
EXHIBIT C Form of Certificate to be Delivered in Connection with Transfers
to Non-QIB Institutional Accredited Investors
EXHIBIT D Form of Certificate to be Delivered in Connection with Transfers
pursuant to Regulation S
-x-
<PAGE>
INDENTURE, dated as of July 1, 1996 among TEXAS PETROCHEMICAL HOLDINGS,
INC., a corporation duly organized and existing under the laws of the State of
Delaware (herein called "Holdings"), and TPC HOLDING CORPORATION, a corporation
duly organized and existing under the laws of the State of Delaware (herein
called, "TPC Holding"), and FLEET NATIONAL BANK, a national banking association
duly organized and existing under the laws of the United States, Trustee (herein
called the "Trustee").
RECITALS OF THE COMPANY
Holdings has duly authorized the creation of an issue of Senior Discount
Notes due 2007 (the "Initial Securities") and Series B Senior Discount Notes due
2007 (the "Exchange Securities," and together with the Initial Securities, the
"Securities") of substantially the tenor and amount hereinafter set forth, and
to provide therefor Holdings has duly authorized the execution and delivery of
this Indenture.
Upon the issuance of the Exchange Securities or the effectiveness of a
Registration Statement filed in connection with the Exchange Offer (as defined
herein), this Indenture will be subject to the provisions of the Trust Indenture
Act of 1939, as amended, that are required to be part of this Indenture and
shall, to the extent applicable, be governed by such provisions.
TPC Holding has authorized the making of the guarantee pursuant to this
Indenture (the "Security Guarantee").
All things necessary have been done to make the Securities, when executed
by Holdings and authenticated and delivered hereunder and duly issued by
Holdings, the valid obligations of Holdings and to make this Indenture a valid
agreement of Holdings and TPC Holding, in accordance with their and its terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
-1-
<PAGE>
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.01 DEFINITIONS.
"Accreted Value" as of any date (the "Specified Date") means, with respect
to each $1,000 principal amount at final maturity of Securities:
(i) if the Specified Date is one of the following dates (each a
"Semi-Annual Accrual Date"), the amount set forth opposite such date
below:
SEMI-ANNUAL ACCRUAL DATE ACCRETED VALUE
July 1, 1996 $520.38
January 1, 1997 $555.51
July 1, 1997 $593.00
January 1, 1998 $633.03
July 1, 1998 $675.76
January 1, 1999 $721.37
July 1, 1999 $770.07
January 1, 2000 $822.05
July 1, 2000 $877.53
January 1, 2001 $936.77
July 1, 2001 $1,000.00
==================================== ====================================
(ii) if the Specified Date occurs between two Semi-Annual Accrual
Dates, the sum of (A) the Accreted Value for the Semi-Annual Accrual Date
immediately preceding the Specified Date and (B) an amount equal to the
product of (i) the Accreted Value for the immediately following
Semi-Annual Accrual Date less the Accreted Value for the immediately
preceding Semi-Annual Accrual Date and (ii) a fraction, the numerator of
which is the number of days from the immediately preceding Semi-Annual
Accrual Date to the
-2-
<PAGE>
Specified Date, using a 360-day year of twelve 30-day months, and the
denominator of which is 180; and
(iii) if the Specified Date occurs after the last Semi-Annual
Accrual Date, $1,000.
"Acquisition" means the acquisition of Texas Olefins Company, a Texas
corporation, and its subsidiaries, including Texas Petrochemicals Corporation,
and the assumption of a raw materials supply contract from Clarkston
Corporation.
"Act," when used with respect to any Holder, has the meaning specified in
Section 1.07.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business, (ii) the Capital Stock of
a Person that becomes a Restricted Subsidiary as a result of the acquisition of
such Capital Stock by the Holdings or another Restricted Subsidiary or (iii)
Capital Stock constituting a minority interest in any Person that at such time
is a Restricted Subsidiary; PROVIDED, HOWEVER, that any such Restricted
Subsidiary described in clauses (ii) or (iii) above is primarily engaged in a
Related Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or other dispositions) by
Holdings or any Restricted Subsidiary, including any disposition by means of a
merger or consolidation (each referred to for the purposes of this definition as
a "disposition"), of (i) any shares of Capital Stock of a Restricted Subsidiary
(other than directors' qualifying shares or shares required by applicable law to
be held by a Person other than Holdings or a Restricted Subsidiary), (ii) all or
substantially all the assets of any division or line of business of Holdings or
any Restricted Subsidiary or (iii) any other assets of Holdings or any
Restricted Subsidiary outside of the ordinary course of business of Holdings or
such Restricted Subsidiary (other than (x) a disposition of any Excluded Asset,
(y) a disposition by a Restricted Subsidiary to Holdings or by Holdings or a
Restricted Subsidiary to a Wholly Owned Subsidiary and (z) for purposes of
Section 10.11 only, a disposition that constitutes a Restricted Payment
permitted by the covenant described under Section 10.09 or a disposition
specifically excepted from the definition of Restricted Payment).
-3-
<PAGE>
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as
at the time of determination, the present value (discounted at the interest rate
borne by the Securities, compounded annually) of the total obligations of the
lessee for rental payments during the remaining term of the lease included in
such Sale/Leaseback Transaction (including any period for which such lease has
been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable by the Company under
or in respect of the Credit Agreement, as amended, refinanced or replaced from
time to time, including principal, premium (if any), interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company whether or not a claim for post-filing
interest is allowed in such proceeding), fees, charges, expenses, reimbursement
obligations, Guarantees and all other amounts payable thereunder or in respect
thereof.
"Board of Directors" means the Board of Directors of Holdings, the
Company, or TPC Holding, as applicable, or (except for purposes of clause (ii)
of the definition of "Change of Control") any committee thereof duly authorized
to act on behalf of any such Board, as applicable.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of Holdings to have been duly adopted by the Board of
Directors of Holdings and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity
-4-
<PAGE>
of such Person, including any Preferred Stock, but excluding any debt securities
convertible into such equity.
"Change of Control" means the occurrence of any of the following events:
(i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than one or more Permitted
Holders, is or becomes the beneficial owner (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that for purposes of
this clause (i) such person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 35% of
the total voting power of the then outstanding Voting Stock of
Holdings; PROVIDED, HOWEVER, that the Permitted Holders beneficially
own (for purposes of this clause (i), the Permitted Holders shall be
deemed to beneficially own any Voting Stock of a corporation (the
"specified corporation") held by any other corporation (the "parent
corporation") so long as the Permitted Holders beneficially own (as
so defined), directly or indirectly, in the aggregate a majority of
the voting power of the Voting Stock of the parent corporation),
directly or indirectly, in the aggregate a lesser percentage of the
total voting power of the then outstanding Voting Stock of Holdings
than such other person and do not have the right or ability by
voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors (for the purposes of
this clause (i), such other person shall be deemed to beneficially
own any Voting Stock of a specified corporation held by a parent
corporation, if such other person is the beneficial owner (as
defined in this clause (i)), directly or indirectly, of more than
35% of the voting power of the Voting Stock of such parent
corporation and the Permitted Holders beneficially own (as defined
above), directly or indirectly, in the aggregate a lesser percentage
of the voting power of the Voting Stock of such parent corporation
and do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the board
of directors of such parent corporation);
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of
Directors of Holdings, TPC Holding, or the Company (together with
any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of Holdings, TPC
Holding, or the Company, as the case may be, was approved by a vote
of 66- 2/3% of the directors of Holdings, TPC Holding, or the
Company, as the case may be, then still in office who were either
directors at the beginning of such period or
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whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board
of Directors of Holdings, TPC Holding, or the Company, as the case
may be, then in office;
(iii) the merger or consolidation of Holdings, TPC Holding or
the Company with or into another Person or the merger of another
Person with or into Holdings, TPC Holding or the Company, or the
sale of all or substantially all the assets of Holdings, TPC Holding
or the Company to another Person (in each case other than a Person
that is controlled by the Permitted Holders), and, in the case of
any such merger or consolidation, the securities of Holdings, TPC
Holding or the Company, as applicable, that are outstanding
immediately prior to such transaction and which represent 100% of
the aggregate voting power of the Voting Stock of Holdings, TPC
Holding or the Company, as applicable, are changed into or exchanged
for cash, securities or property, unless pursuant to such
transaction such securities are changed into or exchanged for, in
addition to any other consideration, securities of the surviving
corporation or a parent corporation that owns all of the capital
stock of such corporation that represent immediately after such
transaction, at least 35% of the aggregate voting power of the
Voting Stock of the surviving corporation or such parent
corporation, as the case may be; or
(iv) Holdings directly or indirectly ceases to own 100% of the
Capital Stock of the Company.
"Closing Date" means the actual date of closing the transaction
contemplated by the Stock Purchase Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Texas Petrochemicals Corporation, a Texas corporation.
"Company Indenture" means the Indenture pursuant to which the Company
Notes are issued.
"Company Notes" means the 11 1/8% Senior Subordinated Notes Due 2006 of
the Company issued on or about the Issue Date and any exchange notes issued in
exchange therefor.
"Company Request" or "Company Order" means a written request or order
signed in the name of Holdings by its Chairman, a Vice Chairman, its President,
or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary
or an Assistant Secretary, and delivered to the Trustee.
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"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at least 45 days prior to the date of
such determination to (ii) Consolidated Interest Expense for such four fiscal
quarters; PROVIDED, HOWEVER, that (1) if Holdings or any Restricted Subsidiary
has Incurred any Indebtedness since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving effect on a pro forma basis to such Indebtedness as if such Indebtedness
had been Incurred on the first day of such period and the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise discharged with the
proceeds of such new Indebtedness as if such discharge had occurred on the first
day of such period, (2) if since the beginning of such period Holdings or any
Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive) directly
attributable to the assets which are the subject of such Asset Disposition for
such period, or increased by an amount equal to the EBITDA (if negative),
directly attributable thereto for such period and Consolidated Interest Expense
for such period shall be reduced by an amount equal to the Consolidated Interest
Expense directly attributable to any Indebtedness of Holdings or any Restricted
Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to
Holdings and its continuing Restricted Subsidiaries in connection with such
Asset Disposition for such period (or, if the Capital Stock of any Restricted
Subsidiary is sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary to the extent
Holdings and its continuing Restricted Subsidiaries are no longer liable for
such Indebtedness after such sale), (3) if since the beginning of such period
Holdings or any Restricted Subsidiary (by merger or otherwise) shall have made
an Investment in any Restricted Subsidiary (or any person which becomes a
Restricted Subsidiary) or an acquisition of assets, including any acquisition of
assets occurring in connection with a transaction requiring a calculation to be
made hereunder, which constitutes all or substantially all of an operating unit
of a business, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto (including the Incurrence of
any Indebtedness) as if such Investment or acquisition occurred on the first day
of such period, (4) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into Holdings
or any Restricted Subsidiary since the beginning of such period) shall have made
any Asset Disposition, any Investment or acquisition of assets that would have
required an adjustment pursuant to clause (2) or (3) above if made by Holdings
or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving pro forma effect
thereto as if such Asset Disposition, Investment or acquisition occurred on the
first day of such period, and (5) in calculating EBITDA and Consolidated
Interest Expense for any period prior to the Issue Date for the purposes of
calculating the Consolidated Coverage Ratio, without duplicating adjustments
made pursuant to clauses (1) through (4) above, EBITDA and Consolidated Interest
Expense for such period shall be calculated giving
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effect to the pro forma adjustments calculated in connection with the
Acquisition and to a one-time employee compensation expense incurred in
connection with the Acquisition. For purposes of this definition, whenever pro
forma effect is to be given to an acquisition of assets, the amount of income or
earnings relating thereto and the amount of Consolidated Interest Expense
associated with any Indebtedness Incurred in connection therewith, the pro forma
calculations shall be determined in good faith by a responsible financial or
accounting officer of Holdings. If any Indebtedness bears a floating rate of
interest and is being given pro forma effect, the interest on such Indebtedness
shall be calculated as if the rate in effect on the date of determination had
been the applicable rate for the entire period (taking into account any Interest
Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement
has a remaining term in excess of 12 months). Notwithstanding the foregoing,
"Consolidated Coverage Ratio", when used with respect to the Company, shall have
the same meaning except that all references therein (and in any defined terms
contained therein) to "Holdings" and "Restricted Subsidiary" shall be deemed to
refer to the Company and those Subsidiaries of the Company that are Restricted
Subsidiaries.
"Consolidated Interest Expense" means, for any period, the total interest
expense of Holdings and its consolidated Restricted Subsidiaries, without regard
to its deductibility for federal income tax purposes, plus, to the extent not
included in such total interest expense, and to the extent incurred by Holdings
or its Restricted Subsidiaries, (i) interest expense attributable to capital
leases and one-third of the rental expense attributable to operating leases,
(ii) amortization of debt discount and debt issuance cost, (iii) capitalized
interest, (iv) non-cash interest expenses, (v) commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) net costs associated with Hedging Obligations (including
amortization of fees), (vii) Preferred Stock dividends in respect of all
Preferred Stock held by Persons other than Holdings or a Wholly Owned
Subsidiary, (viii) interest incurred in connection with Investments in
discontinued operations, (ix) interest accruing on any Indebtedness of any other
Person to the extent such Indebtedness is Guaranteed by Holdings or any
Restricted Subsidiary, and (x) the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are used by
such plan or trust to pay interest or fees to any Person (other than Holdings)
in connection with Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income of
Holdings and its consolidated Subsidiaries; PROVIDED, HOWEVER, that there shall
not be included in such Consolidated Net Income: (i) any net income of any
Person if such Person is not a Restricted Subsidiary, except that (A) subject to
the exclusion contained in clause (iv) below, Holdings' equity in the net income
of any such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such Person
during such period to Holdings or a Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution paid to a
Restricted Subsidiary, to the limitations contained in clause (iii) below) and
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(B) Holdings' equity in a net loss of any such Person for such period shall be
included in determining such Consolidated Net Income; (ii) any net income (or
loss) of any Person acquired by Holdings or a Subsidiary in a pooling of
interests transaction for any period prior to the date of such acquisition;
(iii) any net income of any Restricted Subsidiary of the Company to the extent
that such Restricted Subsidiary is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to the Company, except that (A)
subject to the exclusion contained in clause (iv) below, the Company's equity in
the net income of any such Restricted Subsidiary for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Restricted Subsidiary during such period to the
Company or another such Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution paid to
another such Restricted Subsidiary, to the limitation contained in this clause)
and (B) the Company's equity in a net loss of any such Restricted Subsidiary for
such period shall be included in determining such Consolidated Net Income; (but
not loss) realized upon the sale or other disposition of any assets of Holdings
or its consolidated Subsidiaries (including pursuant to any sale-and-leaseback
arrangement) which is not sold or otherwise disposed of in the ordinary course
of business and any gain (but not loss) realized upon the sale or other
disposition of any Capital Stock of any Person; (v) extraordinary gains or
losses; and (vi) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of Section 10.09 only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or other transfers of assets from Unrestricted Subsidiaries to
Holdings or a Restricted Subsidiary to the extent such dividends, repayments or
transfers increase the amount of Restricted Payments permitted under such
covenant pursuant to clause (a)(iii)(E) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of Holdings and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of Holdings ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as (i) the par
or stated value of all outstanding Capital Stock of Holdings plus (ii) paid-in
capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit and (B) any
amounts attributable to Disqualified Stock.
"Corporate Trust Office" means the principal corporate trust office of the
Trustee, at which at any particular time its corporate trust business shall be
administered, which office at the date of execution of this Indenture is located
at 777 Main Street, Hartford, Connecticut 06115, except that with respect to
presentation of Securities for payment or for registration of transfer or
exchange, such term shall mean the office or agency of the Trustee at which, at
any particular time, its corporate agency business shall be conducted.
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"Credit Agreement" means the Credit Agreement, dated as of the date of the
Indenture, among the Company, as successor to TPC Finance Corp., Texas Commerce
Bank National Association, as agent, and the lenders party thereto, as such
agreement, in whole or in part, may be amended, renewed, extended, increased
(but only so long as such increase is permitted under the terms of the
Indenture), substituted, refinanced, restructured, replaced (including, without
limitation, any successive renewals, extensions, increases, substitutions,
refinancings, restructurings, replacements, supplements or other modifications
of the foregoing). Subsequent to the date of the Indenture, there may be
multiple Credit Agreements and the term "Credit Agreement" shall mean all such
Credit Agreements.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 3.09.
"Depository" means The Depository Trust Company, its nominees and their
respective successors.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or upon the happening of any event (i) matures
or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise,
(ii) is convertible or exchangeable for Indebtedness or Disqualified Stock or
(iii) is redeemable at the option of the holder thereof, in whole or in part, in
each case on or prior to the first anniversary of the Stated Maturity of the
Securities; PROVIDED, HOWEVER, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to repurchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the Stated Maturity of the Securities shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are not more favorable to the holders of such
Capital Stock than the provisions described in Section 10.05 and Section 10.11.
"Dollars" or "$" means United States Dollars.
"EBITDA" for any period means the sum of Consolidated Net Income, plus
Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) all income tax expense of
Holdings, (b) all depreciation expense of Holdings, (c) all
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amortization expense of Holdings, and (d) all other non-cash items reducing such
Consolidated Net Income (excluding any non-cash item to the extent it represents
an accrual of, or reserve for, cash disbursement for any subsequent period) less
all non-cash items increasing such Consolidated Net Income (such amount
calculated pursuant to this clause (d) not to be less than zero), in each case
for such period. Notwithstanding the foregoing, the provision for taxes based on
the income or profits of, and the depreciation and amortization of, a Subsidiary
of the Company shall be added to Consolidated Net Income to compute EBITDA only
to the extent (and in the same proportion) that the net income of such
Subsidiary was included in calculating Consolidated Net Income and only if a
corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Subsidiary without prior approval (that has
not been obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to such Subsidiary or its stockholders.
"Employee Offering" means the sale of shares of Common Stock by Holdings
to certain employees of Holdings and its Subsidiaries of Holdings and other
investors following the Acquisition.
"ESOP" means the Company's Employee Stock Ownership Plan.
"Event of Default" has the meaning specified in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" means (i) .4547 acres at 145343 Memorial Drive, Houston,
Texas; (ii) 30.007 acres located at Highway 6 and Briarforest, Houston, Harris
County, Texas; (iii) 8.8962 acres located on Richmond and West Hollow Drive,
Houston, Harris County, Texas; (iv) 2.9613 acres located at 8705-8707 Katy
Freeway, Houston, Harris County, Texas; (v) a 4.14560 acre tract of land located
at Highway 288 and South MacGregor Drive, Houston, Harris County, Texas; (vi)
lots 11, 12, 13, 14, 15, 16, 17, 18, 19 and 20, Block 133 located at 206 North
Kaufman, Ennis, Texas; and (vii) one airplane.
"Exchange Offer" means the exchange offer which may be effected pursuant
to the Registration Rights Agreement.
"Exchange Securities" has the meaning stated in the first recital of this
Indenture and refers to any Exchange Securities containing terms substantially
identical to the Initial Securities (except that such Exchange Securities shall
be registered under the Securities Act) that are issued and exchanged for the
Initial Securities pursuant to the Registration Rights Agreement and this
Indenture.
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"Federal Bankruptcy Code" means the Bankruptcy Act or Title 11 of the
United States Code, as amended from time to time.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date consistently applied.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such Person (whether arising by virtue of agreements to
keep-well, to purchase assets, goods, securities or services, to take-or-pay or
to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such Indebtedness
of the payment thereof or to protect such obligee against loss in respect
thereof (in whole or in part); PROVIDED, HOWEVER, that the term "Guarantee"
shall not include endorsements for collection or deposit in the ordinary course
of business. The term "Guarantee" used as a verb has a corresponding meaning.
The term "Guarantor" shall mean any Person Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Securityholder" means the Person in whose name a Security is
registered in the Security Registrar.
"Holdings" means the Person named as "Holdings" in the first paragraph of
this Indenture, until a successor Person shall have become such pursuant to the
applicable provisions of the Indenture, and thereafter "Holdings" shall mean
such successor Person.
"Houston Facility" means the Company's plant located at 8600 Park Place
Boulevard, Houston, Texas 77017, together with all land owned or leased by the
Company adjacent or in proximity thereto, all improvements or additions to such
plant or land, including docks, pipelines and facilities for traincar and truck
service, all equipment, catalysts and other items used in the production,
processing, purification, finishing, extraction, hydrogenation, dehydrogenation,
dimerization, oxo-dehydrogenation, back-cracking, skeletal isomerization or
fractionation of chemical products, feedstocks or intermediaries.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for Indebtedness; PROVIDED, HOWEVER, that any Indebtedness of a Person existing
at the time such Person becomes a Subsidiary (whether by merger, consolidation,
acquisition or otherwise) shall be deemed to be
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Incurred by such Subsidiary at the time it becomes a Subsidiary. The term
"Incurrence" when used as a noun shall have a correlative meaning. The accretion
of principal of a non-interest bearing or other discount security (other than
the Securities) shall be deemed the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable; (ii) all Capital
Lease Obligations of such Person and all Attributable Debt in respect of
Sale/Leaseback Transactions entered into by such Person; (iii) all obligations
of such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such Person and all obligations of such Person
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business); (iv) all obligations of such Person
for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction (other than obligations with respect to
letters of credit securing obligations (other than obligations described in
clauses (i) through (iii) above) entered into in the ordinary course of business
of such Person to the extent such letters of credit are not drawn upon or, if
and to the extent drawn upon, such drawing is reimbursed no later than the tenth
Business Day following receipt by such Person of a demand for reimburse ment
following payment on the letter of credit); (v) the amount of all obligations of
such Person with respect to the redemption, repayment or other repurchase of any
Disqualified Stock or, with respect to any Subsidiary of such Person, any
Preferred Stock (but excluding, in each case, any accrued dividends); (vi) all
obligations of the type referred to in clauses (i) through (v) of other Persons
and all dividends of other Persons for the payment of which, in either case,
such Person is responsible or liable, directly or indirectly, as obligor,
guarantor or otherwise, including by means of any Guarantee; (vii) all
obligations of the type referred to in clauses (i) through (vi) of other Persons
secured by any Lien on any property or asset of such Person (whether or not such
obligation is assumed by such Person), the amount of such obligation being
deemed to be the lesser of the value of such property or assets or the amount of
the obligation so secured; and (viii) to the extent not otherwise included in
this definition, Hedging Obligations of such Person. The amount of Indebtedness
of any Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability, upon the
occurrence of the contingency giving rise to the obligation, of any contingent
obligations at such date.
"Indenture" means this instrument as originally executed and as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Initial Securities" has the meaning stated in the first recital of this
Indenture.
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"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement or other financial agreement or arrangement designed solely
to protect the Company or any Restricted Subsidiary against fluctuations in
interest rates.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the Person making the
advance or loan) or other extensions of credit (including by way of Guarantee or
similar arrangement) or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
Indebtedness or other similar instruments issued by such Person. "Investment"
shall not include payments by Holdings or the Company to the ESOP (i) for the
purpose of servicing Indebtedness of the ESOP, (ii) for the purpose of paying
administrative expenses of the ESOP, and (iii) on behalf of employees of
Holdings or its Subsidiaries that do not exceed, during any fiscal year, 10% of
the aggregate compensation expense during such fiscal year attributable to
employees of Holdings and its Subsidiaries who are eligible to participate in
the ESOP. For purposes of the definition of "Unrestricted Subsidiary", the
definition of "Restricted Payment" and Section 10.09, (i) "Investment" shall
include the portion (proportionate to Holdings' equity interest in such
Subsidiary) of the fair market value of the net assets of any Subsidiary of
Holdings at the time that such Subsidiary is designated an Unrestricted
Subsidiary; PROVIDED, HOWEVER, that if such designation is made in connection
with the acquisition of such Subsidiary or the assets owned by such Subsidiary,
the "Investment" in such Subsidiary shall be deemed to be the consideration paid
in connection with such acquisition; PROVIDED FURTHER, HOWEVER, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, Holdings shall be
deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (x) Holdings' "Investment"
in such Subsidiary at the time of such redesignation less (y) the portion
(proportionate to Holdings' equity interest in such Subsidiary) of the fair
market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors of
Holdings.
"Investment Grade Rating" means a rating of BBB- or higher by S&P and Baa3
or higher by Moody's or the equivalent of such rating by S&P and Moody's or by
any other Rating Agency selected as provided in the definition of Rating Agency.
"Issue Date" means the date on which the Securities are originally issued.
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"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the States of New York and Connecticut are authorized or
required by law to close.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Moody's" means Moody's Investors Service, Inc.
"Net Available Cash" from an Asset Disposition means cash payments
received therefrom (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to such properties or assets or received in any other
noncash form) in each case net of (i) all legal, title and recording tax
expenses, brokerage commissions, underwriting discounts or commissions or sales
commissions and other reasonable fees and expenses (including, without
limitation, fees and expenses of counsel, accountants and investment bankers)
related to such Asset Disposition or converting to cash any other proceeds
received, and any relocation and severance expenses as a result thereof, and all
Federal, state, provincial, foreign and local taxes required to be accrued as a
liability under GAAP, as a consequence of such Asset Disposition, (ii) all
payments made on any Indebtedness which is secured by any assets subject to such
Asset Disposition or made in order to obtain a necessary consent to such Asset
Disposition or to comply with applicable law, (iii) all distributions and other
payments required to be made to minority interest holders in Sub sidiaries or
joint ventures as a result of such Asset Disposition and (iv) appropriate
amounts provided by the seller as a reserve, in accordance with GAAP, against
any liabilities associated with the property or other assets disposed in such
Asset Disposition and retained by Holdings or any Restricted Subsidiary after
such Asset Disposition, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Disposition; provided that to the extent any such reserve is reduced
in accordance with GAAP in excess of the amount of cash paid in respect of such
liability underlying such reserve, the amount of Net Available Cash from an
Asset Disposition shall be increased by such excess amount. Further, with
respect to an Asset Disposition by a Restricted Subsidiary which is not a Wholly
Owned Subsidiary, Net Available Cash shall be reduced pro rata for the portion
of the equity of such Subsidiary which is not owned by Holdings.
"Net Cash Proceeds," with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
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"Officers' Certificate" means a certificate signed by the Chairman, a Vice
Chairman, the President or a Vice President, and by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of Holdings, and delivered to
the Trustee. Any one individual holding the requisite titles may sign and
deliver an Officers' Certificate without cosignature of another individual with
a requisite title.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for Holdings, including an employee of Holdings, and who shall be
acceptable to the Trustee.
"Outstanding," when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, EXCEPT:
(i) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or
redemption money in the necessary amount has been theretofore
deposited with the Trustee or any Paying Agent (other than Holdings)
in trust or set aside and segregated in trust by Holdings (if
Holdings shall act as its own Paying Agent) for the Holders of such
Securities; PROVIDED that, if such Securities are to be redeemed,
notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has been
made;
(iii) Securities, except to the extent provided in Sections
13.02 and 13.03, with respect to which Holdings has effected
defeasance and/or covenant defeasance as provided in Article
Thirteen; and
(iv) Securities which have been paid pursuant to Section 3.08
or in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than
any such Securities in respect of which there shall have been
presented to the Trustee proof satisfactory to it that such
Securities are held by a bona fide purchaser in whose hands the
Securities are valid obligations of Holdings;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by TIA Sections 316 and 315(d),
Securities owned by Holdings or any other obligor upon the Securities or any
Affiliate of Holdings (except as required by TIA Sections 316 and 315(d), other
than The Huff Alternative
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Income Fund, L.P. or any Affiliate thereof) or such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in making such calculation or in relying
upon any such request, demand, authorization, direction, consent, notice or
waiver, only Securities which a Responsible Officer of the Trustee knows to be
so owned shall be so disregarded. Securities so owned which have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not Holdings or any other obligor upon the
Securities or any Affiliate of Holdings or such other obligor.
"Paying Agent" means any Person (including Holdings acting as Paying
Agent) authorized by Holdings to pay the principal of (and premium, if any, on)
or interest on any Securities on behalf of Holdings.
"Permitted Holders" means (i) each Person who owns Capital Stock of
Holdings on the date of issuance of (a) the Initial Securities or (b) the Common
Stock in connection with the Employee Offering, (ii) any Person who on the date
of issuance of the Initial Securities is or was before such date an officer,
director, stockholder, employee or consultant of Sterling, (iii) the ESOP, (iv)
any savings or investment plan sponsored by Holdings or the Company, (v) with
respect to any Person covered by the preceding clauses (i) through (iv) (A) in
the case of an entity, any Affiliate of such Person, and (B) in the case of an
individual, any spouse, parent, sibling, child or grandchild (in each case,
whether such relationship arises from birth, adoption or through marriage), or
(vi) any trust, limited liability company, corporation, limited or general
partnership or other entity, a majority of interest of the beneficiaries,
stockholders, partners or owners (direct or beneficial) of which are Persons of
the type referred to in the preceding clauses (i) through (v).
"Permitted Investment" means an Investment by Holdings or any Restricted
Subsidiary in (i) a Restricted Subsidiary or a Person that will, upon the making
of such Investment, become a Restricted Subsidiary; PROVIDED, HOWEVER, that the
primary business of such Restricted Subsidiary is a Related Business; (ii)
another Person if as a result of such Investment such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all its
assets to, Holdings or a Restricted Subsidiary; PROVIDED, HOWEVER, that such
Person's primary business is a Related Business; (iii) Temporary Cash
Investments; (iv) receivables owing to Holdings or any Restricted Subsidiary if
created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; PROVIDED, HOWEVER, that
such trade terms may include such concessionary trade terms as Holdings or any
such Restricted Subsidiary deems reasonable under the circumstances; (v)
payroll, travel and similar advances to cover matters that are expected at the
time of such advances ultimately to be treated as expenses for accounting
purposes and that are made in the ordinary course of business; (vi) loans or
advances to employees made in the ordinary course of business consistent with
past practices of Holdings or such Restricted
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Subsidiary; (vii) stock, obligations or securities received in settlement of
debts created in the ordinary course of business and owing to Holdings or any
Restricted Subsidiary or in satisfaction of judgments; and (viii) any Person to
the extent such Investment represents the non-cash portion of the consideration
received for an Asset Disposition as permitted pursuant to the Section 10.11.
"Permitted Liens" means, with respect to any Person, (a) pledges or
deposits by such Person under worker's compensation laws, unemployment insurance
laws or similar legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Indebtedness) or leases to
which such Person is a party, or deposits to secure public or statutory
obligations of such Person or deposits of cash or United States government bonds
to secure surety or appeal bonds to which such Person is a party, or deposits as
security for contested taxes or import duties or for the payment of rent, in
each case Incurred in the ordinary course of business; (b) Liens imposed by law
such as carriers', warehousemen's and mechanics' Liens, in each case for sums
not yet due or being contested in good faith by appropriate proceedings or Liens
arising out of judgments or awards against such Person with respect to which
such Person shall then be proceeding with an appeal or other proceedings for
review; (c) Liens for property taxes not yet subject to penalties for
non-payment or which are being contested in good faith and by appropriate
proceedings; (d) Liens in favor of issuers of surety bonds or letters of credit
issued pursuant to the request of and for the account of such Person in the
ordinary course of business; (e) minor survey exceptions, minor encumbrances,
easements or reservations of, or rights of others for, licenses, rights of way,
sewers, electric lines, telegraph and telephone lines and other similar
purposes, or zoning or other restrictions as to the use of real property or
Liens incidental to the conduct of the business of such Person or to the
ownership of its properties which were not Incurred in connection with
Indebtedness and which do not in the aggregate materially adversely affect the
value of said properties or materially impair their use in the operation of the
business of such Person; (f) Liens securing Indebtedness Incurred to finance the
construction, purchase or lease of, or repairs, improvements or additions to,
property of such Person; PROVIDED, HOWEVER, that the Lien may not extend to any
other property owned by such Person or any of its Subsidiaries at the time the
Lien is Incurred, and the Indebtedness secured by the Lien may not be Incurred
more than 180 days after the later of the acquisition, completion of
construction, repair, improvement, addition or commencement of full operation of
the property subject to the Lien the Indebtedness secured by such Lien shall
have otherwise been permitted to be issued under this Indenture and, at the time
incurred, the aggregate principal amount of Indebtedness secured by such Liens
shall not exceed the lesser of cost or fair market value of the assets or
property so acquired or constructed; (g) Liens to secure Indebtedness permitted
under the provisions described in clauses (b) or (c)(1), (2), or (6) (except for
Indebtedness of Holdings or TPC Holding) of Section 10.06; (h) Liens existing on
the Issue Date; (i) Liens on property or shares of Capital Stock of another
Person at the time such other Person becomes a Subsidiary of such Person;
PROVIDED, HOWEVER, that such Liens are not created, Incurred, or assumed in
connection with, or in contemplation of, such other Person becoming a
Subsidiary, PROVIDED, FURTHER, HOWEVER, that such
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Lien may not extend to any other property owned by such Person or any of its
Subsidiaries or Holdings and its Subsidiaries; (j) Liens on property at the time
such Person or any of its Subsidiaries acquires the property, including any
acquisition by means of a merger or consolidation with or into such Person or a
Subsidiary of such Person PROVIDED, HOWEVER, that such Liens are not created,
Incurred or assumed in connection with, or in contemplation of, such
acquisition; PROVIDED, FURTHER, HOWEVER, that the Liens may not extend to any
other property owned by such Person or any of its Subsidiaries or Holdings and
its Subsidiaries; (k) Liens securing Indebtedness or other obligations of a
Subsidiary of such Person owing to such Person or a wholly owned Subsidiary of
such Person; (l) Liens securing Hedging Obligations so long as such Hedging
Obligations relate to Indebtedness that is, and is permitted to be incurred
under this Indenture, secured by a Lien on the same property securing such
Hedging Obligations; (m) rights of setoff; (n) any interest or title of a lessor
in assets or property subject to Capital Lease Obligations; (o) Liens to secure
any Refinancing (or successive Refinancings) as a whole, or in part, of any
Indebtedness secured by any Lien referred to in the foregoing clauses (f), (g),
(h), (i) and (j); PROVIDED, HOWEVER, that (x) such new Lien shall be limited to
all or part of the same property that secured the original Lien (plus
improvements to or on such property) and (y) that Indebtedness secured by such
Lien at such time is not increased to any amount greater than the sum of (A) the
outstanding principal amount or, if greater, committed amount of the
Indebtedness described under clauses (f), (h), (i), or (j) at the time the
original Lien became a Permitted Lien and (B) an amount necessary to pay any
fees and expenses, including premiums, related to such refinancing, refunding,
extension, renewal or replacement; (p) any renewal or extension of any of the
Liens referred to in the foregoing clauses (a) through (o); and (q) Liens in
addition to the Liens referred to in the foregoing clauses (a) through (p)
securing Indebtedness of not more than $5,000,000 at any one time outstanding.
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 3.08 in exchange for or in lieu of a
mutilated, lost, destroyed or stolen Security shall be deemed to evidence the
same debt as the mutilated, lost, destroyed or stolen Security.
"Preferred Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
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"QIB" means "qualified institutional buyer" as defined in Rule 144A under
the Securities Act.
"Public Equity Offering" means an underwritten primary public offering of
common stock of Holdings pursuant to an effective registration statement under
the Securities Act.
"Public Market" means any time after (x) a Public Equity Offering has been
consummated and (y) at least 15% of the total issued and outstanding common
stock of Holdings has been distributed by means of an effective registration
statement under the Securities Act or sales pursuant to Rule 144 under the
Securities Act.
"Rating Agency" means S&P and Moody's, or if S&P or Moody's or both shall
not make a rating on the Securities publicly available, a nationally recognized
statistical rating agency or agencies as the case may be, selected by the
Company (as certified by a resolution of the Board of Directors of Holdings)
which shall be substituted for S&P or Moody's or both, as the case may be.
"Redemption Date," when used with respect to any Security to be redeemed,
in whole or in part, means the date fixed for such redemption by or pursuant to
this Indenture.
"Redemption Price," when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of Holdings or any Restricted Subsidiary existing on the Issue Date
or Incurred in compliance with the Indenture including Indebtedness that
Refinances Refinancing Indebtedness; PROVIDED, HOWEVER, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; PROVIDED FURTHER
HOWEVER, that Refinancing Indebtedness shall not include (x) Indebtedness of a
Subsidiary that Refinances
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Indebtedness of Holdings or (y) Indebtedness of Holdings or a Restricted
Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary.
"Registration Rights Agreement" means the Registration Rights Agreement
between Holdings and The Huff Alternative Income Fund, L.P., dated as of the
date of this Indenture, relating to the Securities, as such agreement may be
amended from time to time.
"Registration Statement" means the Registration Statement as defined in
the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the 15th day of a calendar month immediately preceding the month in
which such Interest Payment Date occurs.
"Regulation S" means Regulation S under the Securities Act.
"Related Business" means any business related, ancillary or complementary
to the businesses of Holdings, TPC Holding or the Company on the Issue Date.
"Responsible Officer," when used with respect to the Trustee, means any
trust officer or assistant trust officer or any other officer of the Trustee
customarily performing functions similar to those performed by any of the
above-designated officers, and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.
"Restricted Payment" with respect to any Person means (i) the declaration
or payment of any dividends or any other distributions of any sort in respect of
its Capital Stock (including any payment in connection with any merger or
consolidation involving such Person), other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to Holdings or a Restricted
Subsidiary, and other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or
owners of an equivalent interest in the case of a Subsidiary that is an entity
other than a corporation), (ii) the purchase, redemption or other acquisition or
retirement for value of any Capital Stock of Holdings held by any Person or of
any Capital Stock of a Restricted Subsidiary held by any Affiliate of Holdings
(other than a Restricted Subsidiary or The Huff Alternative Income Fund, L.P. or
any Affiliate thereof), including the exercise of any option to exchange any
Capital Stock (other than into Capital Stock of Holdings that is not
Disqualified Stock), (iii) the purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value, prior to scheduled maturity,
scheduled repayment or scheduled sinking fund payment of any
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Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of satisfying
a sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of acquisition), or (iv) the making of any
Investment in any Person (other than a Permitted Investment).
"Restricted Subsidiary" means any Subsidiary of Holdings that is not an
Unrestricted Subsidiary.
"Revolving Credit Provisions" means the provisions in the Credit Agreement
pursuant to which the lenders have committed to make available to the Company a
revolving credit facility in a maximum principal amount of $40 million.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby Holdings or a Restricted Subsidiary
transfers such property to a Person and Holdings or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission, as from time to time
constituted, created under the Securities Exchange Act of 1934, or, if at any
time after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Securities" has the meaning stated in the first recital of this Indenture
and more particularly means any Securities authenticated and delivered under
this Indenture. For all purposes of this Indenture, the term "Securities" shall
include any Exchange Securities to be issued and exchanged for any Initial
Securities pursuant to the Registration Rights Agreement and this Indenture and,
for purposes of this Indenture, all Initial Securities and Exchange Securities
shall vote together as one series of Securities under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Guarantee" means the guarantee of TPC Holding under Article VII
of this Indenture.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 3.05.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of Holdings within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
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"S&P" means Standard & Poor's Ratings Group.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.09.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred). "Stated Maturity" means, with
respect to any installment of interest on the Securities, the date specified in
the Securities as the fixed date on which such installment of interest is due
and payable.
"Sterling" means The Sterling Group, Inc.
"Stock Purchase Agreement" means the agreement dated May 14, 1996, by TPC
Holding Corp., Holdings, the shareholders of Texas Olefins Company, and the
shareholders other than Texas Olefins Company of Texas Petrochemicals
Corporation.
"Subordinated Obligation" means any Indebtedness of Holdings or TPC
Holding, as the case may be, (whether outstanding on the Issue Date or
thereafter Incurred) which is subordinate or junior in right of payment to the
Securities or the Security Guarantee, as the case may be, pursuant to a written
agreement to that effect.
"Subsidiary" means, in respect of any Person, any corporation,
association, limited liability company, limited or general partnership or other
business entity of which more than 50% of the total voting power of shares of
Capital Stock or other interests (including partnership interests) entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) such Person, (ii) such Person and one or more
Subsidiaries of such Person or (iii) one or more Subsidiaries of such Person.
"Tax Sharing Agreement" means any tax sharing agreement between Holdings
and the Company or TPC Holding or any other person with which any Subsidiary of
Holdings is required to, or is permitted to, file a consolidated tax return or
with which Holdings is or could be part of a consolidated group for tax
purposes.
"Temporary Cash Investments" means: (i) any investment in direct
obligations of the United States of America or any agency thereof or obligations
guaranteed by the United States of America
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or any agency thereof, (ii) investments in time deposit accounts, certificates
of deposit and money market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company which is organized under
the laws of the United States of America, any state thereof or any foreign
country recognized by the United States, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $50,000,000 (or
the foreign currency equivalent thereof) and has outstanding debt which is rated
"A" (or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act) or investments in any security issued by an investment company
registered under Section 8 of the Investment Company Act of 1940 (15 U.S.C.
80a-8) that is a money market fund in compliance with all applicable
requirements of SEC Rule 2a-7 (17 CFR 270.2a-7), or (iii) repurchase obligations
with a term of not more than 30 days for underlying securities of the types
described in clause (i) above entered into with a bank meeting the
qualifications described in clause (ii) above, (iv) investments in commercial
paper, maturing not more than 90 days after the date of acquisition, issued by a
corporation (other than an Affiliate of the Company) organized and in existence
under the laws of the United States of America or any foreign country recognized
by the United States of America with a rating at the time as of which any
investment therein is made of "P-1" (or higher) according to Moody's or "A-1"
(or higher) according to S&P, and (v) investments in securities with maturities
of 12 months or less from the date of acquisition issued or fully guaranteed by
any state, commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by
S&P, or "A" by Moody's.
"Term Loan Provisions" means the provisions in the Credit Agreement
pursuant to which the lenders have committed to make available to the Company
$140 million of credit facilities in the form of amortizing term loans.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, as
amended.
"Trustee" means the Person named as the "Trustee" in the first paragraph
of this Indenture until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Trustee.
"Unrestricted Subsidiary" means (i) any Subsidiary of Holdings that at the
time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors of Holdings in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors of Holdings may
designate any Subsidiary of Holdings (including any newly acquired or newly
formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or
any of its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any
Lien on any property of, Holdings or any other Subsidiary of Holdings that is
not a Subsidiary of the Subsidiary to be so
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designated; PROVIDED, HOWEVER, that the Company and TPC Holding or any
Subsidiary which owns the Houston Facility may not be designated an Unrestricted
Subsidiary; PROVIDED, FURTHER, HOWEVER, that either (A) the Subsidiary to be so
designated has total assets of $1,000 or less or (B) if such Subsidiary has
assets greater than $1,000, such designation would be permitted under Section
10.09. The Board of Directors of Holdings may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; PROVIDED, HOWEVER, that immediately
after giving effect to such designation (x) if such Unrestricted Subsidiary at
such time has Indebtedness, Holdings could Incur $1.00 of additional
Indebtedness under paragraph (a) of Section 10.06 and (y) no Default shall have
occurred and be continuing. Any such designation by the Board of Directors of
Holdings shall be by Holdings to the Trustee by promptly filing with the Trustee
a copy of the board resolution giving effect to such designation and an
officers' certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligations" means securities that are (x) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act), as custodian with respect to any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt, PROVIDED that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of principal
of or interest on the U.S. Government Obligation evidenced by such depository
receipt.
"Vice President," when used with respect to Holdings or the Trustee, means
any vice president, whether or not designated by a number or a word or words
added before or after the title "vice president."
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares and shares held by other
Persons to the extent such shares are required by applicable law to be held by a
Person other than Holdings or a Restricted Subsidiary) is owned by Holdings or
one or more Wholly Owned Subsidiaries.
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SECTION 1.02 OTHER DEFINITIONS.
TERM DEFINED IN SECTION
Agent Members 3.06
Bankruptcy Law 5.01
Covenant Defeasance 13.03
Custodian 5.01
Defaulted Interest 3.09
Indenture Obligations 12.01
Legal Defeasance 13.02
Notice 1.08
Offshore Securities Exchange Date 2.01
Permanent Offshore Physical Securities 2.01
Physical Securities 2.01
Purchase Date 10.05
Purchase Price 10.05
Receipt Date 10.11
Successor Company 8.01
Temporary Offshore Physical Securities 2.01
U.S. Global Security 2.01
U.S. Government Obligations 13.04
U.S. Physical Securities 2.01
SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the Trust Indenture Act,
the provision is incorporated by reference in and made a part of this Indenture.
The following Trust Indenture Act terms used in this Indenture have the
following meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means Holdings or any other obligor
on the Securities.
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All other Trust Indenture Act terms used in this Indenture that are
defined by the Trust Indenture Act, defined by reference in the Trust Indenture
Act to another statute or defined by a rule of the Commission and not otherwise
defined herein shall have the meanings assigned to them therein.
SECTION 1.04 RULES OF CONSTRUCTION.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
(c) all ratios and computations based on GAAP contained in this
Indenture shall be computed in accordance with the definition of GAAP set
forth above;
(d) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision of this Indenture;
(e) "or" is not exclusive;
(f) all references to $, US$, dollars or United States dollars shall
refer to the lawful currency of the United States of America;
(g) provisions apply to successive events and transactions; and
(h) all references to Sections or Articles refer to Sections or
Articles of this Indenture unless otherwise indicated.
SECTION 1.05 COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by Holdings to the Trustee to take any
action under any provision of this Indenture, Holdings shall, with respect to
any application or request to make an optional redemption or prepayment of the
Securities and, upon the request of the Trustee with respect to any other
application or request, furnish to the Trustee an Officers' Certificate stating
that
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all conditions precedent, if any, provided for in this Indenture (including any
covenant compliance with which constitutes a condition precedent) relating to
the proposed action have been complied with and an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any, have
been complied with, except that in the case of any such application or request
as to which the furnishing of such documents is specifically required by any
provision of this Indenture relating to such particular application or request,
no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
such individual has made such examination or investigation as is necessary
to enable such individual to express an informed opinion as to whether or
not such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 1.06 FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of Holdings may be based, insofar
as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such officer's certificate or opinion is
based are erroneous.
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Any such certificate or Opinion of Counsel may be based, insofar as it relates
to factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of Holdings stating that the information with respect to
such factual matters is in the possession of Holdings, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.07 ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction, declaration,
notice, consent, waiver or other action provided by this Indenture to be
given or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed or approved by such
Holders in person or by agents duly appointed in writing; and, except as
herein otherwise expressly provided, such action shall become effective
when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to Holdings. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are
herein sometimes referred to as the "Act" of the Holders signing such
instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of
this Indenture and conclusive in favor of the Trustee and Holdings, if
made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to such
witness, notary public or other such officer the execution thereof. Where
such execution is by a signer acting in a capacity other than such
signer's individual capacity, such certificate or affidavit shall also
constitute sufficient proof of authority. The fact and date of the
execution of any such instrument or writing, or the authority of the
Person executing the same, may also be proved in any other manner which
the Trustee deems sufficient.
(c) The principal amount and serial numbers of Securities held by
any Person and the date of holding the same, shall be proved by the
Security Register.
(d) If Holdings shall solicit from the Holders of Securities any
request, demand, authorization, direction, notice, consent, waiver or
other Act, Holdings may, at its option by
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or pursuant to Board Resolution, fix in advance a record date for the
determination of Holders entitled to give such request, demand,
authorization, direction, declaration, notice, consent, waiver or other
Act, but Holdings shall have no obligation to do so. Notwithstanding TIA
Section 316(c), such record date shall be the record date specified in or
pursuant to such Board Resolution, which shall be a date not earlier than
the date 30 days prior to the first solicitation of Holders generally in
connection therewith and not later than the date such solicitation is
completed. If such a record date is fixed, such request, demand,
authorization, declaration, direction, notice, consent, waiver or other
Act may be given before or after such record date, but only the Holders of
record at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Securities have authorized or agreed or
consented to such request, demand, authorization, direction, declaration,
notice, consent, waiver or other Act, and for that purpose the Outstanding
Securities shall be computed as of such record date; PROVIDED that no such
authorization, agreement or consent by the Holders on such record date
shall be deemed effective unless it shall become effective pursuant to the
provisions of this Indenture not later than eleven months after the record
date.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future
Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu
thereof in respect of anything done, omitted or suffered to be done by the
Trustee or Holdings in reliance thereon, whether or not notation of such
action is made upon such Security.
(f) To the extent permitted by law, in the event the Securities are
held in global form with the Depository acts, taken by the Holders and
delivered electronically pursuant to the regular and customary practices
of the Depository shall be deemed to satisfy the requirement for writings
hereunder provided the Trustee is satisfied with the mechanics of such
electronic act.
SECTION 1.08 NOTICES, ETC., TO TRUSTEE, HOLDINGS AND TPC HOLDING.
Any request, demand, authorization, direction, declaration, notice,
consent, waiver or Act of Holders or other document provided by or pertaining to
this Indenture (herein collectively called "Notice") to be made upon, given or
furnished to, or filed with,
(1) the Trustee by any Holder or by Holdings shall be
sufficient for every purpose hereunder if made, given, furnished or filed
in writing to or with the Trustee at its
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Corporate Trust Office, Attention: Corporate Trust Administrative, or at
any other address previously furnished in writing to the Holders and the
Company by the Trustee, or
(2) Holdings and TPC Holding by the Trustee or by any Holder
shall be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if made, given, furnished or filed in writing to or
with Holdings and TPC Holding addressed to them c/o Holdings at the
address of Holdings' principal office, Attention: Chief Financial Officer,
which shall initially be Texas Petrochemical Holdings, Inc., 8600 Park
Place Boulevard, Houston, Texas 77017.
Any Notice to be given hereunder by any party to another shall be in
writing and delivered in person or by courier service requiring
acknowledgment of delivery, mailed by first class mail, postage prepaid,
or telecopied to the addressee (including telecopier number, if
applicable) set forth herein. Notice given by personal delivery or courier
service shall be effective upon actual receipt. Notice given by mail shall
be effective five days after deposit with the United States postage
service. Notice given by telecopier shall be confirmed by appropriate
answer-back and shall be effective upon actual receipt if received during
the recipient's normal business hours or at the beginning of the
recipient's next Business Day after receipt if not received during the
recipient's normal business hours. All Notices by telecopier shall be
confirmed promptly after transmission in writing by mail or personal
delivery. A party may change any address to which Notice is to be given to
it by giving Notice as provided above of such change of address. The
initial telecopier number for the Trustee is (860) 986-7920; the initial
telecopier number for Holdings and TPC Holding is (713) 475-7761.
SECTION 1.09 NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice of any event to Holders by
Holdings or the Trustee, such notice shall be sufficiently given (unless
otherwise herein expressly provided) if in writing and mailed, first-class
postage prepaid, or delivered by recognized overnight courier to each Holder
affected by such event, at such Holder's address as it appears in the Security
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice nor any defect
in any notice so mailed, to any particular Holder shall affect the sufficiency
of such notice with respect to other Holders. Any notice mailed to a Holder in
the manner herein prescribed shall be conclusively deemed to have been received
by such Holder, whether or not such Holder actually receives such notice. Where
this Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with
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the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of or irregularities in regular mail
service or by reason of any other cause it shall be impracticable to mail notice
of any event to Holders when such notice is required to be given pursuant to any
provision of this Indenture, then any manner of giving such notice as shall be
satisfactory to the Trustee shall constitute a sufficient notification for every
purpose hereunder.
SECTION 1.10 EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 1.11 SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by Holdings shall bind its
successors and assigns, whether so expressed or not.
SECTION 1.12 SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions, to the extent permitted by law, shall not in any way
be affected or impaired thereby.
SECTION 1.13 BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person, other than the parties hereto, any Paying Agent, any
Securities Registrar and their respective successors hereunder and the Holders,
any benefit or any legal or equitable right, remedy or claim under this
Indenture.
SECTION 1.14 GOVERNING LAW; TRUST INDENTURE ACT.
This Indenture and the Securities shall be governed by, and construed in
accordance with, the law of the State of New York without giving effect to the
conflicts of laws principles thereof. Upon the issuance of the Exchange
Securities or the effectiveness of a Registration Statement, this Indenture is
subject to the provisions of the Trust Indenture Act that are required to be
part of this Indenture and shall, to the extent applicable, be governed by such
provisions.
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SECTION 1.15 LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity or Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or Accreted Value or principal (and premium, if any) need
not be made on such date, but may be made on the next succeeding Business Day
with the same force and effect as if made on the Interest Payment Date or
Redemption Date, or at the Stated Maturity or Maturity.
ARTICLE TWO
SECURITY FORMS
SECTION 2.01 FORMS GENERALLY.
The Securities and the Trustee's certificate of authentication shall be in
substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required by applicable law or rules or regulations thereunder, to comply with
the rules of any securities exchange or as may, consistently herewith, be
determined by the officers executing such Securities, as evidenced by their
execution of the Securities. Any portion of the text of any Security may be set
forth on the reverse thereof.
The definitive Securities shall be typed, printed, lithographed or
engraved on steel-engraved borders or may be produced in any other manner
permitted by the rules of any securities exchange on which the Securities may be
listed, all as determined by the officers of Holdings executing such Securities,
as evidenced by their execution of such Securities.
The Initial Securities shall be known as the "Senior Discount Notes due
2007" and the Exchange Securities shall be known as the "Series B Senior
Discount Notes due 2007," in each case, of Holdings. The Securities and the
Trustee's certificate of authentication shall be in substantially the form
annexed hereto as Exhibit A. Holdings shall approve the form of the Securities
and any notation, legend or endorsement on the Securities. Each Security shall
be dated the date of its authentication.
The terms and provisions contained in the form of the Securities annexed
hereto as Exhibit A shall constitute, and are hereby expressly made, a part of
this Indenture. To the extent applicable,
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Holdings and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.
Initial Securities offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more permanent global Securities
substantially in the form set forth in Exhibit A (the "U.S. Global Security")
deposited with the Trustee, as custodian for the Depository, duly executed by
Holdings and authenticated by the Trustee as hereinafter provided. The aggregate
principal amount of the U.S. Global Security may from time to time be increased
or decreased by adjustments made on the records of the Trustee, as custodian for
the Depository or its nominee, as hereinafter provided.
Initial Securities offered and sold in reliance on Regulation S shall be
issued initially in the form of temporary certificated Securities in registered
form substantially in the form set forth in Exhibit A (the "Temporary Offshore
Physical Securities"). The Temporary Offshore Physical Securities, if any, will
be registered in the name of, and held by, a temporary certificate holder
designated by the Holders or a representative thereof until the later of the
completion of the distribution of the Initial Securities and the termination of
the "restricted period" (as defined in Regulation S) with respect to the offer
and sale of the Initial Securities (the "Offshore Securities Exchange Date"). At
any time following the Offshore Securities Exchange Date, upon receipt by the
Trustee and Holdings of a certificate substantially in the form of Exhibit B
hereto, Holdings shall execute, and the Trustee shall authenticate and deliver,
one or more permanent certificated Securities in registered form substantially
in the form set forth in Exhibit A (the "Permanent Offshore Physical
Securities"), in exchange for the surrender of Temporary Offshore Physical
Securities of like tenor and amount.
Initial Securities offered and sold other than as described in the
preceding two paragraphs shall be issued in the form of permanent certificated
Securities in registered form in substantially the form set forth in Exhibit A
(the "U.S. Physical Securities").
The Temporary Offshore Physical Securities, Permanent Offshore Physical
Securities and U.S. Physical Securities are sometimes collectively herein
referred to as the "Physical Securities".
SECTION 2.02 RESTRICTIVE LEGENDS.
Unless and until an Initial Security is exchanged for an Exchange Security
in connection with an effective Registration Statement pursuant to the
Registration Rights Agreement or sold pursuant to a shelf registration pursuant
to the Registration Rights Agreement or such Security has been transferred
pursuant to Rule 144 under the Securities Act or any successor provision
(collectively,
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an "Unrestricted Event"), each such U.S. Global Security, Temporary Offshore
Physical Security and each U.S. Physical Security shall bear the following
legend on the face thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH HOLDINGS, OR ANY
AFFILIATE OF HOLDINGS WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR
OF THIS SECURITY) ONLY (A) TO THE ISSUER OF THIS SECURITY, (B) PURSUANT TO
A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT,
(E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPHS (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT
THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF
SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO HOLDINGS' AND THE TRUSTEE'S RIGHT PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D), (E) OR (F) TO
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REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO THE ISSUER OF THIS SECURITY AND THE TRUSTEE,
AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED
BY THE TRANSFEROR TO THE TRUSTEE.
THE NOTE REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE PROVISIONS OF A
REGISTRATION RIGHTS AGREEMENT BY AND BETWEEN HOLDINGS AND THE HUFF
ALTERNATIVE INCOME FUND, L.P. HOLDINGS WILL FURNISH A COPY OF SUCH
AGREEMENT TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE UPON
WRITTEN REQUEST TO HOLDINGS AT ITS PRINCIPAL PLACE OF BUSINESS OR
REGISTERED OFFICE.
Upon the effectiveness of the Registration Statement or the occurrence of
an Unrestricted Event, the Trustee shall at the request of any Holder remove the
first legend set forth above from the Securities held by such Holder or issue
such holder a new Security in the same principal amount without such legend;
PROVIDED THAT the Trustee shall have received an Opinion of Counsel reasonably
satisfactory to it to the effect that the legend may be removed under such
circumstances.
Each U.S. Global Security, whether or not an Initial Security, shall also
bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO HOLDINGS OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. ), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
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TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTION 3.07 OF THE INDENTURE.
ARTICLE THREE
THE SECURITIES
SECTION 3.01 TERMS.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is limited to $57,650,103.53 aggregate
principal amount at final maturity, except for Securities authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu of,
other Securities pursuant to Section 3.03, 3.04, 3.05, 3.06, 3.07, 3.08, 9.06,
10.05, 10.11 or 11.08. Their Stated Maturity shall be July 1, 2007, and, except
as may be otherwise provided for in the Securities, they shall bear interest at
the rate per annum specified therein from July 1, 2001 or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
payable in arrears, and thereafter as provided in the Securities and at said
Stated Maturity, until the principal thereof is paid or duly provided for.
The principal of (and premium, if any, on) and interest on the Securities
shall be payable at the office or agency of Holdings maintained for such purpose
in The City of New York, or at such other office or agency of Holdings as may be
maintained for such purpose; PROVIDED, HOWEVER, that, at the option of Holdings,
interest may be paid by check mailed to addresses of the Persons entitled
thereto as such addresses shall appear on the Security Register.
The Securities shall be redeemable as provided in Article Eleven and in
the Securities.
SECTION 3.02 DENOMINATIONS.
The Securities shall be issuable only in fully registered form without
coupons and in such denominations as shall be specified as contemplated by
Section 3.01. In the absence of such specifications, the Securities shall be
issuable only in denominations at final maturity of $1,000 and any integral
multiple thereof.
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SECTION 3.03 EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Securities shall be executed on behalf of Holdings by its Chairman, a
Vice Chairman, its President or a Vice President. The signature of any of these
officers on the Securities may be manual or facsimile signatures of the present
or any future such authorized officer and may be imprinted or otherwise
reproduced on the Securities.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of Holdings shall bind Holdings,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of this
Indenture, Holdings may deliver Initial Securities executed by Holdings to the
Trustee for authentication, together with a Company Order for the authentication
and delivery of such Initial Securities, and the Trustee or an authenticating
agent in accordance with such Company Order shall authenticate and deliver such
Initial Securities. On Company Order, the Trustee or an authenticating agent
shall authenticate for original issue Exchange Securities in an aggregate
principal amount not to exceed $57,650,103.55 aggregate principal amount at
final maturity; PROVIDED that such Exchange Securities shall be issuable only
upon the valid surrender for cancellation of Initial Securities of a like
aggregate principal amount in accordance with an Exchange Offer (as defined in
the Registration Rights Agreement) pursuant to the Registration Rights
Agreement. In each case, the Trustee shall be entitled to receive an Officers'
Certificate and an Opinion of Counsel of Holdings that it may reasonably request
in connection with such authentication of Securities. Such Company Order shall
specify the amount of Securities to be authenticated and the date on which the
original issue of Initial Securities or Exchange Securities is to be
authenticated. The aggregate principal amount of Securities outstanding at any
time may not exceed $57,650,103.55 aggregate principal amount at final maturity
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section
3.07, 3.08, or 3.04.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for in Exhibit
A duly executed by the Trustee by manual signature of an authorized officer, and
such certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered hereunder
and is entitled to the benefits of this Indenture.
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In case Holdings, pursuant to Article Eight, shall be consolidated or
merged with or into any other Person or shall convey, transfer, lease or
otherwise dispose of its properties and assets substantially as an entirety to
any Person, and the successor Person resulting from such consolidation, or
surviving such merger, or into which Holdings shall have been merged, or the
Person which shall have received a conveyance, transfer, lease or other
disposition as aforesaid, shall have executed an indenture supplemental hereto
with the Trustee pursuant to Article Eight, any of the Securities authenticated
or delivered prior to such consolidation, merger, conveyance, transfer, lease or
other disposition may, from time to time, at the request of the successor
Person, be exchanged for other Securities executed in the name of the successor
Person with such changes in phraseology and form as may be appropriate, but
otherwise in substance of like tenor as the Securities surrendered for such
exchange and of like principal amount; and the Trustee, upon Company Request of
the successor Person, shall authenticate and deliver Securities as specified in
such request for the purpose of such exchange. If Securities shall at any time
be authenticated and delivered in any new name of a successor Person pursuant to
this Section 3.03 in exchange or substitution for or upon registration of
transfer of any Securities, such successor Person, at the option of the Holders
but without expense to them, shall provide for the exchange of all Securities at
the time Outstanding for Securities authenticated and delivered in such new
name.
SECTION 3.04 TEMPORARY SECURITIES.
Pending the preparation of definitive Securities, Holdings may execute,
and upon Company Order the Trustee shall authenticate and deliver, temporary
Securities which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially of the tenor
of the definitive Securities in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Securities may determine, as conclusively evidenced by
their execution of such Securities.
If temporary Securities are issued, Holdings will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of Holdings designated for such purpose pursuant to Section 10.02,
without charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities, Holdings shall execute and the Trustee shall authenticate
and deliver in exchange therefor a like principal amount of definitive
Securities of authorized denominations. Until so exchanged, the temporary
Securities shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities.
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SECTION 3.05 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
Holdings shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 10.02 being herein sometimes
referred to as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, Holdings shall provide for the registration of
Securities and of transfers of Securities. The Security Register shall be in
written form or any other form capable of being converted into written form
within a reasonable time. At all reasonable times, the Security Register shall
be open to inspection by the Trustee. The Trustee is hereby initially appointed
as security registrar (the "Security Registrar") for the purpose of registering
Securities and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at the office
or agency of Holdings designated pursuant to Section 10.02, Holdings shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities of any
authorized denomination or denominations of a like aggregate principal amount.
Furthermore, any Holder of the U.S. Global Security shall, by acceptance
of such Global Security, agree that transfers of beneficial interest in such
Global Security may be effected only through a book-entry system maintained by
the Holder of such Global Security (or its agent), and that ownership of a
beneficial interest in the Security shall be required to be reflected in a book
entry.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange (including an
exchange of Initial Securities for Exchange Securities), Holdings shall execute,
and the Trustee shall authenticate and deliver, the Securities which the Holder
making the exchange is entitled to receive; PROVIDED that no exchange of Initial
Securities for Exchange Securities shall occur until a Registration Statement
shall have been declared effective by the Commission and that the Initial
Securities to be exchanged for the Exchange Securities shall be canceled by the
Trustee.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of Holdings, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by Holdings or the Security Registrar) be
duly endorsed, or be accompanied by a written instrument of transfer, in form
satisfactory to Holdings and the Security Registrar, duly executed by the Holder
thereof or such Holder's attorney duly authorized in writing.
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No service charge shall be made for any registration of transfer, exchange
or redemption of Securities, but Holdings may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 3.03, 3.04, 9.06, 10.05, 10.11 or 11.08 not
involving any transfer.
Holdings shall not be required (i) to issue, register the transfer of or
exchange any Security during a period beginning at the opening of business 15
days before the selection of Securities to be redeemed under Section 11.04 and
ending at the close of business on the day of such mailing of the relevant
notice of redemption, or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
SECTION 3.06 BOOK-ENTRY PROVISIONS FOR U.S. GLOBAL SECURITY.
(a) The U.S. Global Security initially shall (i) be registered in
the name of the Depository for such Global Security or the nominee of such
Depository, (ii) be delivered with, or on behalf of, the Depository or
with the Trustee as custodian for such Depository and (iii) bear legends
as set forth in Section 2.02.
Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Indenture with respect to any U.S. Global
Security held on their behalf by the Depository, or the Trustee as its
custodian, or under the U.S. Global Security, and the Depository may be
treated by Holdings, the Trustee and any agent of Holdings or the Trustee
as the absolute owner of such U.S. Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent
Holdings, the Trustee or any agent of Holdings or the Trustee, from giving
effect to any written certification, proxy or other authorization
furnished by the Depository or shall impair, as between the Depository and
its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Security and the obtaining of
any authorizations pursuant thereto.
(b) Transfers of the U.S. Global Security shall be limited to
transfers of such U.S. Global Security in whole, but not in part, to the
Depository, its successors or their respective nominees. Interests of
beneficial owners in the U.S. Global Security may be transferred in
accordance with the rules and procedures of the Depository and the
provisions of Section 3.07. Beneficial owners may obtain U.S. Physical
Securities in exchange for their beneficial interests in the U.S. Global
Security upon request in accordance with the Depository's and the
Registrar's procedures. In addition, U.S. Physical Securities shall be
transferred to all beneficial owners in exchange for their beneficial
interests in the U.S. Global Security if (i)
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the Depository notifies Holdings that it is unwilling or unable to
continue as Depository for the U.S. Global Security and a successor
depository is not appointed by Holdings within 90 days of such notice or
(ii) an Event of Default has occurred and is continuing and the Registrar
has received a request from the Depository.
(c) In connection with any transfer of a portion of the beneficial
interest in the U.S. Global Security to beneficial owners pursuant to
subsection (b) of this Section, the Registrar shall reflect on its books
and records the date and a decrease in the principal amount of the U.S.
Global Security in an amount equal to the principal amount of the
beneficial interest in the U.S. Global Security to be transferred, and
Holdings shall execute, and the Trustee shall authenticate and deliver,
one or more U.S. Physical Securities of like tenor and amount.
(d) In connection with the transfer of the entire U.S. Global
Security to beneficial owners pursuant to subsection (b) of this Section,
the U.S. Global Security shall be deemed to be surrendered to the Trustee
for cancellation, and Holdings shall execute, and the Trustee shall
authenticate and deliver, to each beneficial owner identified by the
Depository in exchange for its beneficial interest in the U.S. Global
Security, an equal aggregate principal amount of U.S. Physical Securities
of authorized denominations.
(e) Any U.S. Physical Security delivered in exchange for an interest
in the U.S. Global Security pursuant to subsection (b) or subsection (c)
of this Section shall, except as otherwise provided by paragraph (a)(i)(x)
and paragraph (f) of Section 3.07, bear the applicable legend regarding
transfer restrictions applicable to the U.S. Physical Security set forth
in Section 2.02.
(f) The registered holder of the U.S. Global Security may grant
proxies and otherwise authorize any person, including Agent Members and
Persons that may hold interests through Agent Members, to take any action
which a Holder is entitled to take under this Indenture or the Securities.
SECTION 3.07 SPECIAL TRANSFER PROVISIONS.
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Unless and until (i) an Initial Security is sold under an effective
Registration Statement or pursuant to Rule 144 under the Securities Act or any
successor provision, or (ii) an Initial Security is exchanged for an Exchange
Security in connection with an effective Registration Statement, in each case
pursuant to the Registration Rights Agreement, the following provisions shall
apply:
(a) Transfers to Non-QIB Institutional Accredited Investors. The
following provisions shall apply with respect to the registration of any
proposed transfer of an Initial Security to any institutional "accredited
investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D
Under the Securities Act) which is not a QIB (excluding Non-U.S.
Persons):
(i) The Registrar shall register the transfer of any Initial
Security, whether or not such Initial Security bears the private
placement legend, if (x) the requested transfer is at least three
years after the original issue date of the Initial Securities or (y)
the proposed transferee has delivered to the Registrar a certificate
substantially in the form of Exhibit C hereto.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Security, upon receipt by the
Registrar of (x) the documents, if any, required by paragraph (i)
and (y) instructions given in accordance with the Depository's and
the Registrar's procedures therefor, the Registrar shall reflect on
its books and records the date and a decrease in the principal
amount of the U.S. Global Security in an amount equal to the
principal amount of the beneficial interest in the U.S. Global
Security to be transferred, and Holdings shall execute, and the
Trustee shall authenticate and deliver, one or more U.S. Physical
Certificates of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of an Initial
Security to a QIB (excluding Non-U.S. Persons):
(i) If the Security to be transferred consists of U.S.
Physical Securities, Temporary Offshore Global Securities or
Permanent Offshore Physical Securities, the Registrar shall register
the transfer if such transfer is being made by a proposed transferor
who has checked the box provided for on the form of Initial Security
stating, or has otherwise advised Holdings and the Registrar in
writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Initial Security stating,
or has otherwise advised Holdings and the Registrar in writing, that
it is purchasing the
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Initial Security for its own account or an account with respect to
which it exercises sole investment discretion and that it, or the
person on whose behalf it is acting with respect to any such
account, is a QIB within the meaning of Rule 144A, and is aware that
the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding
Holdings as it has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the
transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, and the
Initial Security to be transferred consists of U.S. Physical
Securities, Temporary Offshore Physical Securities or Permanent
Offshore Physical Securities, upon receipt by the Registrar of
instructions given in accordance with the Depository's and the
Registrar's procedures therefor, the Registrar shall reflect on its
books and records the date and an increase in the principal amount
of the U.S. Global Security in an amount equal to the principal
amount of the U.S. Physical Securities, Temporary Offshore Physical
Securities or Permanent Offshore Physical Securities, as the case
may be, to be transferred, and the Trustee shall cancel the Physical
Security so transferred.
(c) The following provisions shall apply with respect to
registration of any proposed transfer of an Initial Security by a Non-U.S.
Person prior to the expiration of the applicable period required by law
with respect to the Securities:
(i) The Registrar shall register the transfer of any Initial
Security (x) if the proposed transferee is a Non-U.S. Person and the
proposed transferor has delivered to the Registrar a certificate
substantially in the form of Exhibit D hereto or (y) if the proposed
transferee is a QIB and the proposed transferor has checked the box
provided for on the form of Initial Security stating, or has
otherwise advised Holdings and the Registrar in writing, that the
sale has been made in compliance with the provisions of Rule 144A to
a transferee who has signed the certification provided for on the
form of Initial Security stating, or has otherwise advised Holdings
and the Registrar in writing, that it is purchasing the Initial
Security for its own account or an account with respect to which it
exercises sole investment discretion and that it, or the person on
whose behalf it is acting with respect to any such account, is a QIB
within the meaning of Rule 144A, and is aware that the sale to it is
being made in reliance on Rule 144A and acknowledges that it has
received such information regarding Holdings as it has requested
pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided
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by Rule 144A. Unless clause (ii) below is applicable, Holdings shall
execute, and the Trustee shall authenticate and deliver, one or more
Temporary Offshore Physical Securities of like tenor and amount.
(ii) If the proposed transferee is an Agent Member, upon
receipt by the Registrar of instructions given in accordance with
the Depository's and the Registrar's procedures therefor, the
Registrar shall reflect on its books and records the date and an
increase in the principal amount of the U.S. Global Security in an
amount equal to the principal amount of the Temporary Offshore
Physical Security to be transferred, ,and the Trustee shall cancel
the Temporary Offshore Physical Security so transferred.
(d) The following provisions shall apply with respect to any
transfer of an Initial Security by a Non-U.S. Person on or after the
expiration of the applicable period required by law with respect to the
Securities:
(i) (x) If the Initial Security to be transferred is a
Permanent Offshore Physical Security, the Registrar shall register
such transfer, (y) if the Initial Security to be transferred is a
Temporary Offshore Physical Security, upon receipt of a certificate
substantially in the form of Exhibit D from the proposed transferor,
the Registrar shall register such transfer and (z) in the case of
either clause (x) or (y), unless clause (ii) below is applicable,
Holdings shall execute, and the Trustee shall authenticate and
deliver, one or more Permanent Offshore Physical Securities of like
tenor and amount.
(ii) If the proposed transferee is an Agent Member, upon
receipt by the Registrar of instructions given in accordance with
the Depository's and the Registrar's procedures therefor, the
Registrar shall reflect on its books and records the date and an
increase in the principal amount of the U.S. Global Security in an
amount equal to the principal amount of the Temporary Offshore
Physical Security or Permanent Offshore Physical Security to be
transferred, and the Trustee shall cancel the Physical Security so
transferred.
(e) The following provisions shall apply with respect to any
transfer of an Initial Security to a Non-U.S. Person after the expiration
of the applicable period required by law with respect to the Securities:
(i) Prior to the expiration of the applicable period required
by law with respect to the Securities, the Registrar shall register
any proposed transfer of an
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Initial Security to a Non-U.S. Person upon receipt of a certificate
substantially in the form of Exhibit D hereto from the proposed
transferor and Holdings shall execute, and the Trustee shall
authenticate and deliver, one or more Temporary Offshore Physical
Securities of like tenor and amount.
(ii) On and after expiration of the applicable period required
by law with respect to the Securities, the Registrar shall register
any proposed transfer to any Non-U.S. Person (w) if the Initial
Security to be transferred is a Permanent Offshore Physical
Security, (x) if the Initial Security to be transferred is a
Temporary Offshore Physical Security, upon receipt of a certificate
substantially in the form of Exhibit D from the proposed transferor,
(y) if the Initial Security to be transferred is a U.S. Physical
Security or an interest in the U.S. Global Security, upon receipt of
a certificate substantially in the form of Exhibit D from the
proposed transferor and (z) in the case of either clause (w), (x) or
(y), Holdings shall execute, and the Trustee shall authenticate and
deliver, one or more Permanent Offshore Physical Securities of like
tenor and amount.
(iii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Security, upon receipt by the
Registrar of (x) the document, if any, required by paragraph (i) or
paragraph (ii) and, as the case may be, (y) instructions in
accordance with the Depository's and the Registrar's procedures
therefor, the Registrar shall reflect on its books and records the
date and a decrease in the principal amount of the U.S. Global
Security in an amount equal to the principal amount of the
beneficial interest in the U.S. Global Security to be transferred,
and if the transfer is made on or after the applicable period
required by law with respect to the Securities, Holdings shall
execute, and the Trustee shall authenticate and deliver, one or more
Temporary Offshore Physical Securities or Permanent Offshore
Physical Securities, as applicable, of like tenor and amount.
(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the private placement legend, the
Registrar shall deliver Securities that do not bear the private placement
legend. Upon the transfer, exchange or replacement of Securities bearing
the private placement legend, the Registrar shall deliver only Securities
that bear the private placement legend unless either (i) the circumstances
for removal of such legend contemplated by Section 2.02 or paragraph
(a)(i)(x), (d)(i) or (e)(ii) of this Section 3.07 exist or (ii) there is
delivered to the Registrar an Opinion of Counsel reasonably satisfactory
to Holdings and the Trustee to the effect that neither such legend nor the
related restrictions on transfer are required in order to maintain
compliance with the provisions of the Securities Act.
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(g) General. By its acceptance of any Security bearing the private
placement legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture and
in the private placement legend and agrees that it will transfer such
Security only as provided in this Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 3.06 or this Section 3.07.
Holdings shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
SECTION 3.08 MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.
If (i) any mutilated Security is surrendered to the Trustee, or (ii)
Holdings and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, and there is delivered to Holdings
and the Trustee such security or indemnity as may be required by them to save
each of them harmless, then, in the absence of notice to Holdings or the Trustee
that such Security has been acquired by a bona fide purchaser, Holdings shall
execute and upon Company Order the Trustee shall authenticate and deliver, in
exchange for any such mutilated Security or in lieu of any such destroyed, lost
or stolen Security, a new Security of like tenor and principal amount, bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, Holdings in its discretion may, instead
of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, Holdings may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of Holdings, whether or not the destroyed, lost or stolen
Security shall be at any time enforceable by anyone, and shall be entitled to
all benefits of this Indenture equally and proportionately with any and all
other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
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SECTION 3.09 PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name such Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest at the office or
agency of Holdings maintained for such purpose pursuant to Section 10.02;
PROVIDED, HOWEVER, that each installment of interest may at Holdings' option be
paid by (i) mailing a check for such interest, payable to or upon the written
order of the Person entitled thereto pursuant to Section 3.08, to the address of
such Person as it appears in the Security Register or (ii) transfer to an
account maintained by the payee located in the United States.
Any interest on any Security which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date shall forthwith cease to be
payable to the Holder on the relevant Regular Record Date by virtue of having
been such Holder, and such defaulted interest ("Defaulted Interest") may be paid
by Holdings, at its election in each case, as provided in clause (1) or (2)
below:
(1) Holdings may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. Holdings shall notify the Trustee
in writing of the amount of Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment, and at the same time
Holdings shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be
held in trust for the benefit of the Persons entitled to such Defaulted
Interest as in this clause provided. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which shall
be not more than 15 days and not less than 10 days prior to the date of
the proposed payment and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall promptly
notify Holdings of such Special Record Date, and in the name and at the
expense of Holdings, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be given in the
manner provided for in Section 1.09, not less than 10 days prior to such
Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so given, such
Defaulted Interest shall be paid to the Persons in whose names the
Securities (or their respective Predecessor Securities) are registered at
the close of business on such Special Record Date and shall no longer be
payable pursuant to the following clause (2).
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(2) Holdings may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by
Holdings to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 3.10 PERSONS DEEMED OWNERS.
Prior to the due presentment of a Security for registration of transfer,
Holdings, the Trustee and any agent of Holdings or the Trustee may treat the
Person in whose name such Security is registered as the owner of such Security
for the purpose of receiving payment of principal of (and premium, if any, on)
and (subject to Section 3.09) interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and none of
Holdings, the Trustee or any agent of Holdings or the Trustee shall be affected
by notice to the contrary.
SECTION 3.11 CANCELLATION.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund shall be delivered
to the Trustee and shall be promptly canceled by it. Holdings may at any time
deliver to the Trustee for cancellation any Securities previously authenticated
and delivered hereunder which Holdings may have acquired in any manner
whatsoever, and may deliver to the Trustee (or to any other Person for delivery
to the Trustee) for cancellation any Securities previously authenticated
hereunder which Holdings has not issued and sold, and all Securities so
delivered shall be promptly canceled by the Trustee. If Holdings shall so
acquire any of the Securities, however, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Securities
unless and until the same are surrendered to the Trustee for cancellation. No
Securities shall be authenticated in lieu of or in exchange for any Securities
canceled as provided in this Section, except as expressly permitted by this
Indenture. All canceled Securities held by the Trustee shall be disposed of by
the Trustee in accordance with its customary procedures and certification of
their disposal delivered to Holdings unless by Company Order Holdings shall
direct that canceled Securities be returned to it.
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SECTION 3.12 COMPUTATION OF INTEREST.
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
SECTION 3.13 CUSIP NUMBERS.
Holdings in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and the Trustee shall use CUSIP numbers in notices of
redemption or exchange as a convenience to Holders; PROVIDED that any such
notice shall state that no representation is made as to the correctness of such
numbers either as printed on the Securities or as contained in any notice of
redemption or exchange and that reliance may be placed only on the other
identification numbers printed on the Securities.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 4.01 SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall upon Company Request cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of
Securities herein expressly provided for) and the Trustee, at the expense of
Holdings, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture when
(a) either
(1) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen and
which have been replaced or paid as provided in Section 3.08 and (ii)
Securities for whose payment in Dollars has theretofore been deposited in
trust with the Trustee or any Paying Agent or segregated and held in trust
by Holdings and thereafter repaid to Holdings or discharged from such
trust, as provided in Section 10.03) have been delivered to the Trustee
for cancellation; or
(2) all such Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
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(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of
Holdings,
and Holdings, in the case of (i), (ii) or (iii) above, has irrevocably
deposited or caused to be deposited with the Trustee as trust funds in
trust for the purpose an amount sufficient to pay and discharge the entire
indebtedness on such Securities not theretofore delivered to the Trustee
for cancellation, for principal (and premium, if any) and interest to the
date of such deposit (in the case of Securities which have become due and
payable) or to the Stated Maturity or Redemption Date, as the case may be;
(b) Holdings has paid or caused to be paid all other sums payable
hereunder by Holdings; and
(c) Holdings has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of Holdings to the Trustee under Section 6.06 and, if Dollars shall
have been deposited with the Trustee pursuant to subclause (ii) of clause (1) of
this Section, the obligations of the Trustee under Section 4.02 and the last
paragraph of Section 10.03 shall survive.
SECTION 4.02 APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 10.03, all
Dollars deposited with the Trustee pursuant to Section 4.01 shall be held in
trust and applied by it, in accordance with the provisions of the Securities and
this Indenture, to the payment, either directly or through any Paying Agent
(including Holdings acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee; but such money need not be segregated from other funds except to the
extent required by law.
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ARTICLE FIVE
REMEDIES
SECTION 5.01 EVENTS OF DEFAULT.
"Event of Default," wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body) which shall have occurred and is
continuing:
(1) Holdings shall default in the payment of any interest on
any Security when the same becomes due and payable, and such default
continues for a period of 30 days;
(2) Holdings (i) defaults in the payment of the principal of,
or premium, if any, any Security when the same becomes due and payable at
its Stated Maturity, upon optional redemption, upon declaration or
otherwise, or (ii) fails to redeem or purchase Securities when required
pursuant to this Indenture or the Securities;
(3) Holdings or TPC Holding fails to comply with Section 8.01;
(4) Holdings fails to comply with Section 10.05, 10.06, 10.07,
10.08, 10.09, 10.10, 10.11, 10.12, 10.13, or 10.14 (other than a failure
to purchase Securities) and such failure continues for 30 days after the
occurrence of such failure;
(5) Holdings fails to comply with any of its agreements in the
Securities or this Indenture (other than those referred to in (1), (2),
(3) or (4) above) and such failure continues for 60 days after the
occurrence of such failure;
(6) Indebtedness of Holdings or any Significant Subsidiary is
not paid within any applicable grace period after final maturity or is
accelerated by the holders thereof because of default and the total amount
of such Indebtedness unpaid or accelerated exceeds $5,000,000 or its
foreign currency equivalent at the time;
(7) The Security Guarantee shall for any reason cease to be,
or be asserted in writing by Holdings or TPC Holding not to be, in full
force and effect, except to the extent contemplated by Article Twelve of
this Indenture.
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(8) Holdings or any Significant Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against
it in an involuntary case;
(C) consents to the appointment of a Custodian of it or
for any substantial part of its property; or
(D) makes a general assignment for the benefit of its
creditors; or takes any comparable action under any foreign laws relating to
insolvency;
(9) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against Holdings or any Significant
Subsidiary in an involuntary case;
(B) appoints a Custodian of Holdings or any Significant
Subsidiary or for any substantial part of its property; or
(C) orders the winding up or liquidation of Holdings or
any Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days; or
(10) any judgment or decree for the payment of money in excess
of $5,000,000 or its foreign currency equivalent at the time is entered
against Holdings or any Significant Subsidiary and is not discharged and
either (A) an enforcement proceeding has been commenced by any creditor
upon such judgment or decree or (B) there is a period of 60 days following
the entry of such judgment or decree during which such judgment or decree
is not discharged, waived or the execution thereof stayed within 10 days
after the notice specified below.
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The term "Bankruptcy Law" means the Federal Bankruptcy Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator, custodian or similar official under any
Bankruptcy Law.
SECTION 5.02 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default specified in
Section 5.01(8) or 5.01(9)) occurs and is continuing, then and in every such
case the Trustee or the Holders of not less than 25% in principal amount at
final maturity of the Outstanding Securities may, and the Trustee upon the
request of the Holders of not less than 25% in principal amount at final
maturity of the Outstanding Securities shall, declare the Securities to be due
and payable immediately, by a notice in writing to Holdings (and to the Trustee
if given by Holders), and upon any such declaration such an amount described in
the final paragraph of this Section 5.02 shall become immediately due and
payable. If an Event of Default-specified in Section 5.01(8) or 5.01(9) occurs
and is continuing, then all the Securities shall IPSO FACTO become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder.
At any time after a declaration of acceleration has been made and before a
judgment or decree for payment of the money due has been obtained by the Trustee
as hereinafter in this Article provided, the Holders of a majority in principal
amount at final maturity of the Securities Outstanding, by written notice to
Holdings and the Trustee, may rescind and annul such declaration and its
consequences if
(1) Holdings has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Outstanding Securities,
(B) all unpaid principal of (and premium, if any, on)
any Outstanding Securities which has become due otherwise than by
such declaration of acceleration, and interest on such unpaid
principal at the rate prescribed therefor in the Securities,
(C) to the extent that payment of such interest is
legally enforceable, interest on overdue interest at the rate
prescribed therefor in the Securities, and
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(D) all sums paid or advanced by the Trustee hereunder
and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel; and
(2) all Events of Default, other than the non-payment of
amounts of Accreted Value or principal of (or premium, if any, on) or
interest on Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 5.13.
In the event that the maturity of the Securities is accelerated pursuant
to this Section 5.02 on or after July 1, 2001, 100% of the principal amount
thereof shall become due and payable plus accrued and unpaid interest, if any,
to the date of payment. In the event that the maturity of the Securities is
accelerated pursuant to this Section 5.02 prior to July 1, 2001, an amount shall
become due and payable equal to 100% of the Accreted Value of the outstanding
Securities on the date of such acceleration plus an amount equal to the increase
in Accreted Value, if any, to the date of payment, and the accrued interest, if
any, from and after July 1, 2001, to the date of payment.
SECTION 5.03 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE.
Holdings covenants that if
(a) default is made in the payment of any installment of interest on
any Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(b) default is made in the payment of the principal of (or premium,
if any, on) any Security at the maturity thereof,
Holdings will, upon demand of the Trustee, pay to the Trustee for the benefit of
the Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and interest on any
overdue principal (and premium, if any) and, to the extent that payment of such
interest shall be legally enforceable, upon any overdue installment of interest,
at the rate prescribed therefor in the Securities, and, in addition thereto,
such further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
If Holdings fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may
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enforce the same against Holdings or any other obligor upon the Securities and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of Holdings or any other obligor upon the Securities,
wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 5.04 TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to Holdings or any other obligor upon the
Securities or the property of Holdings or of such other obligor or their
creditors, the Trustee (irrespective of whether the Accreted Value or principal
of the Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have made
any demand on Holdings for the payment of overdue Accreted Value or principal,
premium, if any, or interest) shall be entitled and empowered, by intervention
in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of Accreted
Value or principal (and premium, if any) and interest owing and
unpaid in respect of the Securities and to file such other papers or
documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel) and of the Holders allowed in such judicial
proceeding, and
(ii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the
same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.06.
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Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 5.05 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.
All rights of action and claims under this Indenture or the Securities may
be prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name and
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 5.06 APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal (or premium,
if any) or interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
6.06;
SECOND: To the payment of the amounts then due and unpaid for
Accreted Value or principal of (and premium, if any, on,) and interest on
the Securities in respect of which or for the benefit of which such money
has been collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for Accreted
Value or principal (and premium, if any) and interest, respectively; and
THIRD: The balance, if any, to the Person or Persons entitled
thereto; provided that all sums due and owing to the Holders and the
Trustee have been paid in full as required by this Indenture.
SECTION 5.07 LIMITATION ON SUITS.
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No Holder of any Securities shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount at
final maturity of the Outstanding Securities shall have made written
request to the Trustee to institute proceedings in respect of such Event
of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 30 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 30-day period by the Holders of a
majority or more in principal amount at final maturity of the Outstanding
Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 5.08 UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM
AND INTEREST.
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment, as provided herein (including, if applicable, Article Thirteen) and in
such Security of the principal of (and premium, if any, on) and (subject to
Section 3.09) interest on, such Security on the respective Stated Maturity or
Maturities expressed in such Security (or, in the case of redemption, on the
Redemption Date) and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired without the consent of such Holder.
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SECTION 5.09 RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then and in every such case, subject to any determination in
such proceeding, Holdings, the Trustee and the Holders shall be restored
severally and respectively to their former positions hereunder and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.
SECTION 5.10 RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities in the last paragraph of Section
3.08, no right or remedy herein conferred upon or reserved to the Trustee or to
the Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 5.11 DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any Security to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
SECTION 5.12 CONTROL BY HOLDERS.
The Holders of not less than a majority in aggregate principal amount at
final maturity of the Outstanding Securities shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee, PROVIDED
that in each case
(1) such direction shall not be in conflict with any rule of
law or with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
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(3) the Trustee need not take any action which might involve
it in personal liability or be unjustly prejudicial to the Holders not
joining in such direction.
SECTION 5.13 WAIVER OF PAST DEFAULTS.
Subject to Section 5.02, the Holders of not less than a majority in
principal amount at final maturity of the Outstanding Securities may on behalf
of the Holders of all the Securities waive any past default hereunder and its
consequences, except a default
(1) in respect of the payment of the principal of (or
premium, if any, on) or interest on any Security, or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.
SECTION 5.14 WAIVER OF STAY OR EXTENSION LAWS.
Holdings covenants (to the extent that it may lawfully do so) that it will
not at any time insist upon, or plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay or extension law or any usury or other law
wherever enacted, now or at any time hereafter in force, which would prohibit or
forgive Holdings from paying all as any portion of the principal, premium, if
any, or interest on the Securities, or which may affect the covenants or the
performance of this Indenture; and Holdings (to the extent that it may lawfully
do so) hereby expressly waives all benefit or advantage of any such law and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
SECTION 5.15 UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Security by
such Holder's acceptance thereof shall be deemed to have agreed, that any court
may in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the
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Trustee for any action taken, suffered or omitted by it as Trustee, the filing
by any party litigant in such suit of an undertaking to pay the costs of such
suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant but the provisions of this Section shall not apply to any
suit instituted by the Trustee, to any suit instituted by any Holder, or group
of Holders, holding in the aggregate more than 25% in principal amount of the
Outstanding Securities, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of, premium, if any, or interest on
any Security on or after the respective Stated Maturities expressed in such
Security (or in the case of redemption, on or after the Redemption Date); but
neither the provisions of this Section nor the Trust Indenture Act shall be
deemed to require any court to require an undertaking or to make such an
assessment in any suit instituted by Holdings except against the Trustee.
ARTICLE SIX
THE TRUSTEE
SECTION 6.01 NOTICE OF DEFAULTS.
Within 90 days after the occurrence of any Default hereunder, the Trustee
shall transmit in the manner and to the extent provided in TIA Section 313(c)
notice of such Default hereunder known to the Trustee, unless such Default shall
have been cured or waived; PROVIDED, HOWEVER, that, except in the case of a
Default in the payment of the principal of (or premium, if any, on) or interest
on any Security, the Trustee shall be protected in withholding such notice if
and so long as the board of directors, the executive committee or a trust
committee of directors and/or Responsible Officers of the Trustee in good faith
determines that the withholding of such notice is in the interest of the
Holders.
SECTION 6.02 CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of TIA Sections 315(a) through 315(d) which are
incorporated herein by reference:
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
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(2) any request or direction of Holdings mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order and
any resolution of the Board of Directors of Holdings may be sufficiently
evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the Trustee
(unless other evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses (including reasonable fees of Trustee's
counsel), and liabilities which might be incurred by it in compliance with
such request or direction;
(6) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or
other paper or document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see
fit, and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and
premises of Holdings, personally or by agent or attorney;
(7) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed
with due care by it hereunder; and
(8) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon it
by this Indenture.
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The Trustee shall not be required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
SECTION 6.03 TRUSTEE NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
SECURITIES.
The recitals contained herein and in the Securities, except for the
Trustee's certificates of authentication, shall be taken as the statements of
Holdings, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities, except that the Trustee represents that it is
duly authorized to execute and deliver this Indenture, authenticate the
Securities and perform its obligations hereunder and that the statements made by
it in any Statement of Eligibility and Qualification of Form T-1 supplied to
Holdings are true and accurate, subject to the qualifications set forth therein.
The Trustee shall not be accountable for the use or application by Holdings of
Securities or the proceeds thereof.
SECTION 6.04 MAY HOLD SECURITIES.
The Trustee, any Paying Agent, any Security Registrar or any other agent
of Holdings or of the Trustee, in its individual or any other capacity, may
become the owner or pledgee of Securities and, subject to TIA Sections 310(b)
and 311, may otherwise deal with Holdings with the same rights it would have if
it were not Trustee, Paying Agent, Security Registrar or such other agent.
SECTION 6.05 MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with Holdings.
SECTION 6.06 COMPENSATION AND REIMBURSEMENT.
Holdings agrees:
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation
of a trustee of an express trust);
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(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance
with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or bad
faith on its part, arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder.
As security for the performance of the obligations of Holdings under this
Section, the Trustee shall have a claim prior to the Securities upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the payment of principal of (and premium, if any, on) or interest
on the Securities.
SECTION 6.07 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be eligible to
act as Trustee under TIA Section 310(a)(1) and shall have a combined capital and
surplus of at least $50,000,000. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of federal,
state, territorial or District of Columbia supervising or examining authority,
then for the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect hereinafter specified
in this Article.
SECTION 6.08 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until
the acceptance of appointment by the successor Trustee in accordance with
the applicable requirements of Section 6.09.
(b) The Trustee may resign at any time by giving written notice
thereof to Holdings. If the instrument of acceptance by a successor
Trustee required by Section 6.09 shall not have been delivered to the
Trustee within 30 days after the giving of such notice of
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resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of
not less than a majority in principal amount at final maturity of the
Outstanding Securities, delivered to the Trustee and to Holdings.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of
TIA Section 310(b) after written request therefor by Holdings or by any
Holder who has been a bona fide Holder of a Security for at least six
months, or
(2) the Trustee shall cease to be eligible under Section 6.07
and shall fail to resign after written request therefor by Holdings or by
any Holder who has been a bona fide Holder of a Security for at least six
months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) Holdings, by a Board Resolution, may remove
the Trustee, or (ii) subject to TIA Section 315(e), any Holder who has
been a bona fide Holder of a Security for at least six months may, on
behalf of such Holder and all others similarly situated, petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any
reason, Holdings, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall
be appointed by Act of the Holders of a majority in principal amount at
final maturity of the Outstanding Securities delivered to Holdings and the
retiring Trustee, the successor Trustee so appointed shall, forthwith upon
its acceptance of such appointment, become the successor Trustee and
supersede the successor Trustee appointed by Holdings. If no successor
Trustee shall have been so appointed by Holdings or the Holders and
accepted appointment in the manner hereinafter provided, any Holder who
has been a bona fide Holder of a Security for at least six months may, on
behalf of such Holder and all others
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similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(f) Holdings shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee to the Holders
of Securities in the manner provided for in Section 1.09. Each notice
shall include the name of the successor Trustee and the address of its
Corporate Trust Office.
Notwithstanding the replacement of the Trustee pursuant to this Section,
Holdings' obligations under Section 6.06 shall continue for the benefit of the
retiring trustee.
SECTION 6.09 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Every successor Trustee appointed hereunder shall execute, acknowledge and
deliver to Holdings and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on request of Holdings or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder. Upon request of any such successor Trustee, Holdings shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 6.10 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself
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authenticated such Securities; and in case at that time any of the Securities
shall not have been authenticated, any successor Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor Trustee; and in all such cases such certificates shall have the full
force which it is anywhere in the Securities or in this Indenture provided that
the certificate of the Trustee shall have; PROVIDED, HOWEVER, that the right to
adopt the certificate of authentication of any predecessor Trustee or to
authenticate Securities in the name of any predecessor Trustee shall apply only
to its successor or successors by merger, conversion or consolidation.
SECTION 6.11 CERTAIN DUTIES AND RESPONSIBILITIES.
(a) Except during the continuance of an Event of Default with
respect to the Securities,
(1) the Trustee undertakes to perform such duties and only
such duties with respect to the Securities as are specifically set forth
in this Indenture, and no implied covenants or obligations with respect to
the Securities shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, with respect to the Securities, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture; but in the case of any such certificates
or opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to examine the
same to determine whether or not they conform to the requirements of this
Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture with respect to the Securities, and use the same degree of care
and skill in their exercise, as a prudent person would exercise or use
under the circumstances in the conduct of such person's own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent
failure to act, or its own wilful misconduct, except that
(1) this Subsection shall not be construed to limit the effect
of Subsection (a) of this Section;
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(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved
that the Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders, given as provided in Section 5.12, relating to
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred upon
the Trustee, under this Indenture; and
(4) no provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder, or in the exercise of
any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of
this Section.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.01 DISCLOSURE OF NAMES AND ADDRESSES OF HOLDERS.
Holders may communicate pursuant to Trust Indenture Act Section 312(b)
with other Holders with respect to their rights under this Indenture or the
Securities, and the Trustee shall comply with Trust Indenture Act Section
312(b).
Every Holder of Securities, by receiving and holding the same, agrees with
Holdings and the Trustee that none of Holdings or the Trustee or any agent of
either of them shall be held accountable by reason of the disclosure of any
information as to the names and addresses of the Holders in accordance with TIA
Section 312, regardless of the source from which such information was derived,
and that the Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under TIA Section 312(b). The Trustee shall
also transmit by mail to all Holders, in the manner and to the extent provided
in Trust Indenture Act Section 313(c), a brief report in accordance with and
with respect to the matters required by Trust Indenture Act Section 313(b)(2).
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SECTION 7.02 REPORTS BY TRUSTEE.
Within 60 days after May 15 of each year commencing with the first May 15
after the first issuance of Securities, the Trustee shall transmit to the
Holders, in the manner and to the extent provided in TIA Section 313(c), a
report dated as of such May 15 if required by TIA Section 313(a). A copy of each
such required report shall, at the time of transmission to Holders, be filed by
the Trustee with each stock exchange, if any, upon which Securities are listed.
SECTION 7.03 REPORTS BY COMPANY.
Holdings shall:
(1) file with the Trustee, within 15 days after Holdings is
required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies of
such portions of any of the foregoing as the Commission may from time to
time by rules and regulations prescribe) which Holdings may be required to
file with the Commission pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934;
(2) file with the Trustee and send to the Commission, in
accordance with rules and regulations prescribed from time to time by the
Commission, such additional information, documents and reports with
respect to compliance by Holdings with the conditions and covenants of
this Indenture as may be required from time to time by such rules and
regulations; and
(3) transmit by mail to all Holders of the Exchange Securities
or all Holders of the Initial Securities after the effectiveness of a
shelf registration statement, in the manner and to the extent provided in
TIA Section 313(c), within 30 days after the filing thereof with the
Trustee, such summaries of any information, documents and reports required
to be filed or sent by Holdings pursuant to paragraphs (1) and (2) of this
Section as may be required by rules and regulations prescribed from time
to time by the Commission;
PROVIDED, HOWEVER, if Holdings is not required to file information, documents or
reports pursuant to either Section 13 or 15(d) of the Exchange Act, then
Holdings shall, within 15 days after it would have been required to file with
the Commission, transmit by mail to the Trustees and the Holders such annual
reports, information, documents and reports as if Holdings were subject to the
requirements of such Section 13 or 15(d) of the Exchange Act.
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Holdings will promptly notify the Trustee when the Securities are listed
on any stock exchange.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER, OR LEASE
SECTION 8.01 HOLDINGS MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
Holdings shall not consolidate with or merge with or into any other
corporation or sell, convey, transfer or lease its properties and assets, in one
transaction or a series of transactions, substantially as an entirety to any
Person or group of affiliated Persons or permit any of its Restricted
Subsidiaries to enter into any such transaction or series of transactions if
such transaction or series or transactions would result in a sale, conveyance,
transfer, or lease substantially as an entirety of the properties and assets of
Holdings and its Restricted Subsidiaries on a consolidated basis to any Person
or any group of affiliated Persons, unless:
(i) the resulting, surviving or transferee Person or Persons
(the "Successor Company") shall be in the case of a transaction in
which Holdings is a party, a corporation and, in the case of a
transaction in which any Restricted Subsidiary is a party, a Person
organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia and the
Successor Company in the case of a transaction in which Holdings is
a party (if not Holdings) shall expressly assume, by an indenture
supplemental thereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of Holdings under
the Securities and the Indenture;
(ii) immediately after giving effect to such transaction on a
pro forma basis (and treating any Indebtedness which becomes an
obligation of the Successor Company or any Subsidiary as a result of
such transaction as having been Incurred by such Successor Company
or such Subsidiary at the time of such transaction), no Default
shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction, in
the case of a sale, conveyance, transfer, or lease pursuant to which
Holdings or any of its Restricted Subsidiaries other than the
Company and its Restricted Subsidiaries is a party, the Successor
Company would be able to Incur an additional $1.00 of Indebtedness
pursuant to the first sentence of paragraph (a) of Section 10.06 or,
in the case of a sale, conveyance, transfer, or lease pursuant to
which the Company or any of its Restricted Subsidiaries is a party,
the Successor Company would be able
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to Incur an additional $1.00 of Indebtedness pursuant to the first
sentence of paragraph (b) of Section 10.06 (and in each such case
treating any Indebtedness not previously an obligation or Holdings
or any Subsidiary which becomes an obligation of the Successor
Company or any Subsidiary in connection with or as a result of such
transaction as having been Incurred by such Successor Company or
such Subsidiary at the time of such transaction);
(iv) immediately after giving effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount
that is not less than the Consolidated Net Worth of Holdings prior
to such transaction minus any costs incurred in connection with such
transaction; and
(v) Holdings shall have delivered to the Trustee an officers'
certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture
(if any) comply with the Indenture.
Notwithstanding the foregoing clauses (ii), (iii) and (iv), any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to the Company and TPC Holding may merge with and into the
Company.
TPC Holding shall not consolidate with or merge with or into any other
Person or convey, transfer or lease its properties and assets, in one
transaction or a series of transactions, substantially as an entirety to any
Person or group of affiliated Persons, unless:
(i) The resulting, surviving or transferee Person (the "TPC
Holding Successor Company") shall be a corporation organized and
existing under the laws of the United States of America, any State
thereof or the District of Columbia and the Successor Company (if
not TPC Holding) shall expressly assume, by an indenture
supplemental thereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of TPC Holding
under its Guarantee of the Securities and the Indenture;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the TPC
Holding Successor Company or any Subsidiary as a result of such
transaction as having been incurred by such Successor Company or
such Subsidiary at the time of such transaction), no Default shall
have occurred and be continuing; and
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(iii) TPC Holding shall have delivered to the Trustee an
officers' certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the Indenture.
Notwithstanding the foregoing, TPC Holding may merge with and into either the
Company or Holdings.
SECTION 8.02 SUCCESSOR SUBSTITUTED.
(a) Upon any consolidation of Holdings with or merger of Holdings
with or into any other Person or any sale conveyance, transfer, lease or
disposition of all or substantially all of the properties and assets of
Holdings substantially as an entirety to any Person in accordance with
Section 8.01, the successor Person formed by such consolidation or into
which Holdings is merged or to which such sale conveyance, transfer, lease
or disposition is made shall succeed to, and be substituted for, and may
exercise every right and power of, Holdings under this Indenture with the
same effect as if such successor Person had been named as Holdings herein,
and in the event of any such conveyance or transfer, Holdings (which term
shall for this purpose mean the Person named as "Holdings" in the first
paragraph of this Indenture or any successor Person which shall
theretofore become such in the manner described in Section 8.01), except
in the case of a lease, shall be discharged of all obligations and
covenants under this Indenture and the Securities and may be dissolved and
liquidated.
(b) Upon any consolidation of TPC Holding with or merger of TPC
Holding with or into any other Person or any sale conveyance, transfer,
lease or disposition of all or substantially all of the properties and
assets of TPC Holding substantially as an entirety to any Person in
accordance with Section 8.01, the successor Person formed by such
consolidation or into which TPC Holding is merged or to which such sale
conveyance, transfer, lease or disposition is made shall succeed to, and
be substituted for, and may exercise every right and power of, TPC Holding
under this Indenture with the same effect as if such successor Person had
been named as TPC Holding herein, and in the event of any such conveyance
or transfer, TPC Holding (which term shall for this purpose mean the
Person named as "TPC Holding" in the first paragraph of this Indenture or
any successor Person which shall theretofore become such in the manner
described in Section 8.01), except in the case of a lease, shall be
discharged of all obligations and covenants under this Indenture and the
Securities and may be dissolved and liquidated.
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ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 9.01 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, Holdings, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form and substance satisfactory
to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to Holdings
and the assumption by any such successor of the covenants of Holdings
contained herein and in the Securities; or
(2) to add to the covenants of Holdings for the benefit of the
Holders or to surrender any right or power herein conferred upon Holdings;
or
(3) to add any additional Events of Default; or
(4) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of Section
6.09; or
(5) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture; PROVIDED that such action shall
not adversely affect the interests of the Holders.
SECTION 9.02 SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in principal
amount at final maturity of the Outstanding Securities, by Act of said Holders
delivered to Holdings and the Trustee, Holdings, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or the
Securities or of modifying in any manner the rights of the Holders under this
Indenture or the Securities; PROVIDED, HOWEVER, that no
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such supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby:
(1) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Security, or reduce the
principal amount thereof or the rate of interest thereon or any premium
payable upon the redemption thereof, or change the coin or currency in
which any Security or any premium or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any such payment
after the Stated Maturity thereof (or, in the case of redemption, on or
after the Redemption Date), or
(2) reduce the percentage in principal amount at final
maturity of the Outstanding Securities, the consent of whose Holders is
required for any such supplemental indenture, or the consent of whose
Holders is required for any waiver of compliance with certain provisions
of this Indenture or certain defaults hereunder and their consequences
provided for in this Indenture, or
(3) modify any of the provisions of this Section or Sections
5.13 and 10.15, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby; PROVIDED, HOWEVER, that this clause shall not be deemed to
require the consent of any Holder with respect to changes in the
references to "the Trustee" and concomitant changes in this Section and
elsewhere, or the deletion of this proviso, in accordance with the
requirements of Section 6.09 and 9.01(4), or
(4) affect the ranking of the Securities in any way, or
(5) amend, change or modify the obligation of Holdings to make
and consummate a Change in Control Offer in the event of a Change in
Control or modify any of the provisions or definitions with respect
thereto, or
(6) except as otherwise permitted under Article Eight, consent
to the assignment or transfer by Holdings or TPC Holding of any of its
rights and obligations under this Indenture; or
(7) amend or modify any of the provisions of Article Twelve in
any manner adverse to the Holders.
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It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 9.03 EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 6.11) shall be fully protected in relying upon, an
Opinion of Counsel or an Officer's Certificate stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
SECTION 9.04 EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article, this
Indenture and the Securities shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 9.05 CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to the Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 9.06 REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If Holdings shall so determine, new
Securities so modified as to conform, in the opinion of the Trustee and
Holdings, to any such supplemental indenture may be prepared and executed by
Holdings and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
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ARTICLE TEN
COVENANTS
SECTION 10.01 PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST.
Holdings covenants and agrees for the benefit of the Holders that it will
duly and punctually pay the principal of (and premium, if any, on) and interest
on the Securities in accordance with the terms of the Securities and this
Indenture.
SECTION 10.02 MAINTENANCE OF OFFICE OR AGENCY.
Holdings will maintain in the Borough of Manhattan, The City of New York,
an office or agency where Securities may be presented or surrendered for
payment, where Securities may be surrendered for registration of transfer or
exchange and where notices and demands to or upon Holdings in respect of the
Securities and this Indenture may be served. The corporate trust office of the
Trustee at c/o First Chicago Trust Co. of New York, 14 Wall Street, 8th Floor,
Window No. 2, New York, New York 10005 shall be such office or agency of
Holdings, unless Holdings shall designate and maintain some other office or
agency for one or more of such purposes. Holdings will give prompt written
notice to the Trustee of any change in the location of any such office or
agency. If at any time Holdings shall fail to maintain any such required office
or agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and Holdings hereby appoints the Trustee
as its agent to receive all such presentations, surrenders, notices and demands.
Holdings may also from time to time designate one or more other offices or
agencies (in or outside of The City of New York) where the Securities may be
presented or surrendered for any or all such purposes and may from time to time
rescind any such designation; PROVIDED, HOWEVER, that no such designation or
rescission shall in any manner relieve Holdings of its obligation to maintain an
office or agency in The City of New York for such purposes. Holdings will give
prompt written notice to the Trustee of any such designation or rescission and
any change in the location of any such other office or agency.
SECTION 10.03 MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST.
If Holdings shall at any time act as its own Paying Agent, it will, on or
before each due date of the principal of (and premium, if any, on) or interest
on any of the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal (and premium, if
any) or interest so becoming due until such sums shall be paid to such Persons
or
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otherwise disposed of as herein provided and will promptly notify the Trustee of
its action or failure so to act.
Whenever Holdings shall have one or more Paying Agents for the Securities,
it will, on or before 11:00 a.m. (New York City time) on each due date of the
principal of (and premium, if any, on), or interest on, any Securities, deposit
with a Paying Agent a sum sufficient to pay the principal (and premium, if any)
or interest so becoming due, such sum to be held in trust for the benefit of the
Persons entitled to such principal, premium or interest, and (unless such Paying
Agent is the Trustee) Holdings will promptly notify the Trustee of such action
or any failure so to act.
Holdings will cause each Paying Agent (other than the Trustee) to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee, subject to the provisions of this Section, that such Paying
Agent will:
(1) hold all sums held by it for the payment of the principal
of (and premium, if any, on) or interest on Securities in trust for the
benefit of the Persons entitled thereto until such sums shall be paid to
such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by Holdings (or any
other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee all
sums so held in trust by such Paying Agent.
Holdings may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
Holdings or such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by Holdings or such Paying Agent;
and, upon such payment by any Paying Agent to the Trustee, such Paying Agent
shall be released from all further liability with respect to such sums.
Any money deposited with the Trustee or any Paying Agent, or then held by
Holdings, in trust for the payment of the principal of (and premium, if any, on)
or interest on any Security and remaining unclaimed for two years after such
principal (and premium, if any) or interest has become due and payable shall be
paid to Holdings on Company Request, or (if then held by Holdings) shall be
discharged from such trust; and the Holder of such Security shall thereafter, as
an unsecured
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general creditor, look only to Holdings for payment thereof, and all liability
of the Trustee or such Paying Agent with respect to such trust money, and all
liability of Holdings as trustee thereof, shall thereupon cease; PROVIDED,
HOWEVER, that the Trustee or such Paying Agent, before being required to make
any such repayment, may at the expense of Holdings cause to be published once,
in a newspaper published in the English language, customarily published on each
Business Day and of general circulation in the Borough of Manhattan, The City of
New York, notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
publication, any unclaimed balance of such money then remaining will be repaid
to Holdings.
SECTION 10.04 STATEMENT BY OFFICERS AS TO DEFAULT.
(a) Holdings will deliver to the Trustee, within 120 days after the
end of each fiscal year, a brief certificate from the principal executive
officer, principal financial officer or principal accounting officer as to
such officer's knowledge of Holdings' compliance with all conditions and
covenants under this Indenture. For purposes of this Section 10.04, such
compliance shall be determined without regard to any period of grace or
requirement of notice under this Indenture.
(b) When any Default or Event of Default has occurred and is
continuing, or if the Trustee or any Holder or the trustee for or the
holder of any other evidence of Indebtedness of Holdings or any Subsidiary
gives any notice or takes any other action with respect to a claimed
default, Holdings shall deliver to the Trustee by registered or certified
mail or facsimile transmission followed by hard copy an Officers'
Certificate specifying such Default, Event of Default, notice or other
action, the status thereof and what actions the Company is taking or
proposes to take with respect thereto, as soon as practicable after the
occurrence of the event giving rise to such notice, but in no event later
than five Business Days after its occurrence.
SECTION 10.05 PURCHASE OF SECURITIES UPON CHANGE IN CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder shall
have the right to require that Holdings repurchase such Holder's
Securities at a purchase price (the "Purchase Price") in cash equal to
101% of the Accreted Value thereof plus accrued and unpaid interest, if
any, to the date of purchase (subject to the right of holders of record on
the relevant record date to receive interest due on the relevant interest
payment date) in accordance with the procedures set forth below in this
Section 10.05.
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(b) In the event that at the time of such Change of Control the
terms of the Bank Indebtedness restrict or prohibit the repurchase of the
Securities pursuant to this Section, then within 30 days following the
Change of Control and prior to the mailing of the notice to Holders
provided for in paragraph (c) below, Holdings shall either (1) repay in
full all Bank Indebtedness or offer to repay in full all such Indebtedness
and repay the Indebtedness of each lender who has accepted such offer or
(2) obtain the requisite consent under the Bank Credit Agreement to permit
the mailing of the notice to Holders provided for in (c) below and the
repurchase of the Securities as provided for in this Section 10.05.
Holdings shall first comply with the provisions of this paragraph (b)
before it shall be required to repurchase the Securities pursuant to this
Section 10.05 but any failure to comply with the covenant in this
paragraph (b) or paragraph (c) or (e) below within the time period
provided shall constitute an Event of Default hereunder.
(c) Within 30 days following any Change of Control, Holdings shall
mail to each Holder of the Securities in the manner provided in Section
1.09 a notice stating:
(1) that a Change of Control has occurred and that such Holder
has the right to require Holdings to repurchase such Holder's Securities
at the Purchase Price;
(2) the circumstances and relevant facts regarding such Change
of Control (including but not limited to, if applicable, information with
respect to pro forma historical income, cash flow and capitalization after
giving effect to such Change of Control);
(3) a purchase date (the "Purchase Date") which shall be a
Business Day no earlier than 45 days nor later than 60 days from the date
such notice is mailed;
(4) the instructions a Holder must follow in order to have its
Securities repurchased in accordance with paragraph (d) of this Section;
(5) that any Securities not tendered pursuant to this Section
10.05 will continue to, accrete principal or accrue interest, as the case
may be; and
(6) that any Securities tendered pursuant to this Section
10.05 shall cease to accrete principal or accrue interest after the
Purchase Date, unless Holdings defaults in payment of the Purchase Price.
(d) Holders electing to have Securities purchased will be required
to surrender such Securities to Holdings at the address specified in the
notice at least five Business Days prior to the Purchase Date. Holders
will be entitled to withdraw their election if Holdings
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receives, not later than three Business Days prior to the Purchase Date, a
telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the Securities delivered for
purchase by the Holder as to which such Holder's election is to be
withdrawn and a statement that such Holder is withdrawing such Holder's
election to have such Securities purchased. Holders whose Securities are
purchased only in part will be issued new Securities equal in principal
amount to the unpurchased portion of the Securities surrendered.
(e) Holdings shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities
pursuant to this Section 10.05. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of this
Section 10.05, Holdings shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations
under this Section 10.05 by virtue thereof.
SECTION 10.06 LIMITATION ON INDEBTEDNESS.
(a) Holdings shall not, and shall not permit any of its Restricted
Subsidiaries to, Incur, directly or indirectly, any Indebtedness unless,
on the date of such Incurrence, the Consolidated Coverage Ratio of
Holdings exceeds 1.75 to 1.0 if such Indebtedness is Incurred from the
Issue Date through June 30, 1999, and 2.0 to 1.0 if such Indebtedness is
Incurred thereafter. Notwithstanding the foregoing, Holdings may Guarantee
any Indebtedness permitted to be Incurred by its Subsidiaries pursuant to
the Indenture and TPC Holding may not directly Incur as primary obligor
any Indebtedness.
(b) Notwithstanding the foregoing paragraph (a), the Company or any
Subsidiary of the Company that is a Restricted Subsidiary may Incur,
directly or indirectly, any Indebtedness if, on the date of such
Incurrence, the Consolidated Coverage Ratio of the Company exceeds 2.0 to
1.0 if such Indebtedness is Incurred from the Issue Date through June 30,
1999, and 2.25 to 1.0 if such Indebtedness is Incurred thereafter.
(c) Notwithstanding the foregoing paragraphs (a) and (b), Holdings
and its Restricted Subsidiaries may Incur any or all of the following
Indebtedness: (1) Indebtedness Incurred pursuant to the Term Loan
Provisions of the Credit Agreement or any indenture or term loan
provisions of any other credit or loan agreement in an aggregate principal
amount which, when taken together with the principal amount of all other
Indebtedness Incurred pursuant to this clause (1) and then outstanding,
does not exceed (A) $140 million LESS (B) the aggregate amount of all
principal repayments of any such Indebtedness made after the
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Issue Date (other than any such principal repayments made as a result of
the Refinancing of any such Indebtedness); (2) Indebtedness Incurred
pursuant to the Revolving Credit Provisions of the Credit Agreement or any
other revolving credit facility in a principal amount which, when taken
together with all letters of credit and the principal amount of all other
Indebtedness Incurred pursuant to this clause (2) and then outstanding
does not exceed the greater of $40 million and the sum of (A) 65% of the
book value of the inventory of Holdings and its Restricted Subsidiaries
and (B) 85% of the book value of the accounts receivable of Holdings and
its Restricted Subsidiaries; (3) Indebtedness owed to and held by Holdings
or a Wholly Owned Subsidiary; PROVIDED, HOWEVER, that any subsequent
issuance or transfer of any Capital Stock which results in any such Wholly
Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent
transfer of such Indebtedness (other than to Holdings or another Wholly
Owned Subsidiary) shall be deemed, in each case, to constitute the
Incurrence of such Indebtedness by the issuer; (4) the Securities, the
Security Guarantee, the Company Notes or any Indebtedness, the proceeds of
which are used to Refinance the Securities, the Security Guarantee or the
Company Notes in whole or in part; (5) Indebtedness outstanding on the
Issue Date (other than Indebtedness described in clause (1), (2), (3) or
(4) of this paragraph (c) of Section 10.06); (6) Refinancing Indebtedness
in respect of Indebtedness Incurred pursuant to paragraphs (a) or (b) of
this Section 10.06 or pursuant to clause (4) or (5) or this clause (6) of
this paragraph (c) of Section 10.06 or pursuant to Section 10.07; (7)
Hedging Obligations consisting of Interest Rate Agreements directly
related to Indebtedness permitted to be Incurred by Holdings or its
Restricted Subsidiaries pursuant to this Indenture; (8) Indebtedness of
Holdings or its Restricted Subsidiaries consisting of obligations in
respect of purchase price adjustments in connection with the acquisition
or disposition of assets by Holdings or any Restricted Subsidiary
permitted under this Indenture; (9) Capital Lease Obligations in an
aggregate principal amount not exceeding $7.5 million at any one time
outstanding; and (10) Indebtedness in an aggregate principal amount which,
together with all other Indebtedness of Holdings and its Restricted
Subsidiaries outstanding on the date of such Incurrence (other than
Indebtedness permitted by clauses (1) through (9) above or paragraphs (a)
or (b) of this Section 10.06) does not exceed $15 million at any one time
outstanding.
(d) For purposes of determining compliance with Section 10.06, (i)
in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described above, Holdings, in its sole
discretion, will classify such item of Indebtedness and only be required
to include the amount and type of such Indebtedness in one of the above
clauses and (ii) an item of Indebtedness may be divided and classified in
more than one of the types of Indebtedness described above.
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SECTION 10.07 LIMITATION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES.
Holdings shall not permit any Restricted Subsidiary to issue any Preferred
Stock, except:
(a) Preferred Stock issued to and held by Holdings or a Wholly Owned
Subsidiary; PROVIDED, HOWEVER, that any subsequent issuance or transfer of
any Capital Stock which results in any such Wholly Owned Subsidiary
ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of such
Preferred Stock (other than to Holdings or a Wholly Owned Subsidiary)
shall be deemed, in each case, to constitute the issuance of such
Preferred Stock by the issuer thereof;
(b) Preferred Stock of a Subsidiary outstanding on or prior to the
date on which such Subsidiary was acquired by Holdings or a Subsidiary of
Holdings (other than Preferred Stock issued in connection with, or to
provide all or any portion of the funds utilized to consummate, the
transaction or series of related transactions pursuant to which such
Subsidiary became a Subsidiary or was acquired by Holdings); PROVIDED,
HOWEVER, that on the date of such acquisition and after giving effect
thereto, either (i) Holdings would have been able to Incur at least $1.00
of additional Indebtedness pursuant to the first sentence of clause (a) of
Section 10.06, or, (ii) if such Subsidiary is a Subsidiary of the Company,
the Company would have been able to Incur at least $1.00 of additional
Indebtedness pursuant to clause (b) of Section 10.06;
(c) Preferred Stock outstanding on the Issue Date; and
(d) Preferred Stock which is not Disqualified Stock; PROVIDED,
HOWEVER, that such Restricted Subsidiary shall not pay cash dividends on
such Preferred Stock.
SECTION 10.08 LIMITATION ON LIENS.
Neither Holdings nor TPC Holding shall directly or indirectly, Incur or
permit to exist any Lien on any of its properties (including Capital Stock of a
Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired,
other than Permitted Liens, without effectively providing that the Securities
shall be equally and ratably secured with (or prior to in the case of a Lien
securing a Subordinated Obligation of Holdings or TPC Holding) the obligation so
secured.
SECTION 10.09 LIMITATION ON RESTRICTED PAYMENTS.
(a) Holdings shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, make a Restricted Payment if at the
time of and after giving effect to the
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proposed Restricted Payment:
(i) a Default shall have occurred and be continuing (or would
result therefrom);
(ii) in the case of a Restricted Payment by Holdings and its
Restricted Subsidiaries other than the Company and its Restricted
Subsidiaries, Holdings is not able to Incur an additional $1.00 of
Indebtedness pursuant to the first sentence of paragraph (a) of
Section 10.06 and, in the case of a Restricted Payment by the
Company and its Restricted Subsidiaries, the Company is not able to
Incur an additional $1.00 of Indebtedness pursuant to the first
sentence of paragraph (b) of Section 10.06; or
(iii) the aggregate amount of such Restricted Payment and all
other Restricted Payments since the Issue Date would exceed the sum
of: (A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal
quarter immediately following the fiscal quarter during which the
Securities are originally issued to the end of the most recent
fiscal quarter ending at least 45 days prior to the date of such
Restricted Payment (or, in case such Consolidated Net Income shall
be a deficit, minus 100% of such deficit); PROVIDED, HOWEVER, that
if the Securities achieve an Investment Grade Rating as of the end
of any fiscal quarter, the percentage for the fiscal quarter after
such fiscal quarter (and for any other fiscal quarter where, on the
first day of such fiscal quarter, the Securities shall have an
Investment Grade Rating) will be 100% of Consolidated Net Income
during each fiscal quarter after such fiscal quarter; PROVIDED
FURTHER, HOWEVER, that if such Restricted Payment is to be made in
reliance upon an additional amount permitted pursuant to the
immediately preceding proviso, the Securities must have an
Investment Grade Rating at the time such Restricted Payment is
declared or, if not declared, made; (B) the aggregate Net Cash
Proceeds received by Holdings from the issuance or sale of its
Capital Stock (other than Disqualified Stock) subsequent to the
Issue Date (other than an issuance or sale to a Subsidiary of
Holdings and other than an issuance or sale to an employee stock
ownership plan or to a trust established by Holdings or any of its
Subsidiaries for the benefit of their employees); (C) the aggregate
Net Cash Proceeds received by Holdings subsequent to the Issue Date
from the issue or sale of its Capital Stock (other than Disqualified
Stock) to an employee stock ownership plan or a trust established by
Holdings or any of its Subsidiaries for the benefit of their
employees; PROVIDED, HOWEVER, that with respect to any such Net Cash
Proceeds received from such an employee stock ownership plan or
trust through the Incurrence of Indebtedness in connection with
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such issue or sale of Capital Stock, which Indebtedness also
constitutes Indebtedness of Holdings, such aggregate Net Cash
Proceeds shall be limited to an amount equal to any increase in the
Consolidated Net Worth of Holdings resulting from principal
repayments made by such employee stock ownership plan with respect
to such Indebtedness; (D) the amount by which Indebtedness of
Holdings or its Subsidiaries is reduced on Holdings' consolidated
balance sheet upon the conversion or exchange (other than by a
Subsidiary of Holdings) subsequent to the Issue Date, of any
Indebtedness of Holdings or its Subsidiaries for Capital Stock
(other than Disqualified Stock) of Holdings (less the amount of any
cash, or the fair value of any other property, distributed by
Holdings or its Subsidiaries upon such conversion or exchange),
whether pursuant to the terms of such Indebtedness or pursuant to an
agreement with a creditor to engage in an equity for debt exchange;
(E) an amount equal to the sum of (i) the net reduction in
Investments in Unrestricted Subsidiaries resulting from dividends,
repayments of loans or advances or other transfers of assets, in
each case to Holdings or any Restricted Subsidiary from Unrestricted
Subsidiaries, and (ii) the portion (proportionate to Holdings'
equity interest in such Subsidiary) of the fair market value (as
determined in good faith by Holdings' Board of Directors) of the net
assets of an Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary; PROVIDED, HOWEVER,
that the foregoing sum shall not exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously made
(and treated as a Restricted Payment) by Holdings or any Restricted
Subsidiary in such Unrestricted Subsidiary; (F) to the extent not
covered in clauses (A) through (E) above, the aggregate net cash
proceeds received after the date of the Indenture by Holdings as
capital contributions (other than from any of its Restricted
Subsidiaries) and (G) $7.5 million.
(b) The provisions of the foregoing paragraph (a) shall not
prohibit:
(i) any purchase or redemption of Capital Stock or
Subordinated Obligations of Holdings made by exchange for, or out of
the proceeds of the substan tially concurrent sale of, Capital Stock
of Holdings (other than (A) Disqualified Stock, (B) Capital Stock
issued or sold to a Subsidiary of Holdings or (C) Capital Stock
issued or sold to an employee stock ownership plan or to a trust
established by Holdings or any of its Subsidiaries for the benefit
of their employees to the extent that such employee stock ownership
plan or trust has Incurred Indebtedness to finance the purchase of
such Capital Stock, which Indebtedness also constitutes Indebtedness
of Holdings); PROVIDED, HOWEVER, that (A) such purchase or
redemption shall be excluded in the calculation of the amount of
Restricted Payments and (B) the
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Net Cash Proceeds from such sale shall be excluded from the
calculation of amounts under clause (iii)(B) of paragraph (a) above;
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations
(other than Disqualified Stock) made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Subordinated
Obligations of Holdings which is permitted to be Incurred pursuant
to Section 10.06; PROVIDED, HOWEVER, such new Subordinated
Obligations constitute Refinancing Indebtedness PROVIDED, FURTHER,
HOWEVER, that such purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value shall be excluded in the
calculation of the amount of Restricted Payments;
(iii) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend
would have complied with this covenant; PROVIDED, HOWEVER, that such
dividend shall be included in the calculation of the amount of
Restricted Payments;
(iv) a payment by Holdings, TPC Holding, the Company or any
Restricted Subsidiary to the ESOP, to be used to repurchase, redeem,
acquire or retire for value any Capital Stock of Holdings or
pursuant to any stockholders' agreement, management equity
subscription plan or agreement, stock option plan or agreement, or
other employee plan or agreement or employee benefit plan in effect
as of the Issue Date or such similar employee plan or agreement or
employee benefit plan as may be adopted by Holdings or the Company
from time to time; PROVIDED, HOWEVER, that the aggregate price paid
for all such repurchased, redeemed, acquired or retired Capital
Stock shall not exceed $3,000,000 in any fiscal year; PROVIDED
FURTHER, HOWEVER, that such amount shall be excluded in the
calculation of Restricted Payments;
(v) a payment by Holdings, TPC Holding, the Company or any
Restricted Subsidiary to the ESOP to be used to repurchase Capital
Stock of Holdings pursuant to the requirements of the ESOP in an
aggregate amount in any fiscal year not to exceed the minimum amount
required to be paid in cash under the ESOP as in effect on the Issue
Date; PROVIDED, HOWEVER, that such amount shall be excluded in the
calculation of Restricted Payments; and
(vi) any payment pursuant to the Tax Sharing Agreement;
PROVIDED, HOWEVER, that such amounts shall be excluded in the
calculation of Restricted Payments.
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SECTION 10.10 LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES.
Holdings shall not, and shall not permit any Restricted Subsidiary to,
create or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary (a) to
pay dividends or make any other distributions on its Capital Stock to Holdings
or a Restricted Subsidiary or pay any Indebtedness owed to Holdings, (b) to make
any loans or advances to Holdings or (c) to transfer any of its property or
assets to Holdings, except:
(i) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date Credit Agreement;
(ii) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement relating to any
Indebtedness Incurred by such Restricted Subsidiary on or prior to
the date on which such Restricted Subsidiary was acquired by
Holdings (other than Indebtedness Incurred as consideration in, or
to provide all or any portion of the funds or credit support
utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by Holdings) and outstanding
on such date;
(iii) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an
agreement referred to in clause (i) or (ii) of this covenant or this
clause (iii) or contained in any amendment to an agreement referred
to in clause (i) or (ii) of this covenant or this clause (iii);
PROVIDED, HOWEVER, that the encumbrances and restrictions with
respect to such Restricted Subsidiary contained in any such
refinancing agreement or amendment are no less favorable to the
Securityholders than encumbrances and restrictions with respect to
such Restricted Subsidiary contained in such agreements;
(iv) any such encumbrance or restriction consisting of
customary non-assignment provisions in leases to the extent such
provisions restrict the transfer of the lease or the property leased
thereunder or in purchase money financings;
(v) in the case of clause (c) above, restrictions contained in
security agreements or mortgages securing Indebtedness of a
Restricted Subsidiary to the extent such restrictions restrict the
transfer of the property subject to such security agreements or
mortgages;
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(vi) encumbrances or restrictions imposed by operation of
applicable law; and
(vii) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or assets
of such Restricted Subsidiary pending the closing of such sale or
disposition.
SECTION 10.11 LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK.
(a) Holdings shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, consummate any Asset Disposition
unless (i) Holdings or such Restricted Subsidiary receives consideration
at the time of such Asset Disposition at least equal to the fair market
value (including the value of all non-cash consideration), as determined
in good faith by the Board of Directors of Holdings, of the shares and
assets subject to such Asset Disposition, and at least 85% of the
consideration thereof received by Holdings or such Restricted Subsidiary
is in the form of cash or cash equivalents and (ii) an amount equal to
100% of the Net Available Cash from such Asset Disposition is applied by
Holdings (or such Restricted Subsidiary, as the case may be) (A) FIRST,
(1) in the case of an Asset Disposition by Holdings or a Restricted
Subsidiary of Holdings other than the Company and its Subsidiaries to the
extent Holdings (or such Restricted Subsidiary) elects (or is required by
the terms of any Indebtedness), to prepay, repay, redeem or purchase (I)
Indebtedness of Holdings that is PARI PASSU with the Securities as
required by the terms thereof, and to offer concurrently with such
repayment or repurchase to repay or repurchase any outstanding Security in
the manner described in paragraph (b) below; PROVIDED, HOWEVER, that the
principal amount of Securities which Holdings shall offer to repay or
repurchase pursuant to this clause shall be no less than the product of
(x) the Net Cash Proceeds and (y) a fraction the numerator of which shall
be the aggregate outstanding Accreted Value of the Securities on the date
of such offer and the denominator of which shall be the total of the
aggregate outstanding principal amounts or accreted value of all
Indebtedness of Holdings that is PARI PASSU with the Securities and is
entitled to be repurchased upon such Asset Sale and the aggregate Accreted
Value of the Securities or (II) Indebtedness (other than any Disqualified
Stock) of a Wholly Owned Subsidiary or such Restricted Subsidiary (in the
case of each of the foregoing clauses (I) and (II) other than Indebtedness
owed to Holdings or an Affiliate of Holdings other than The Huff
Alternative Income Fund, L.P. or any Affiliate thereof) or, (2) in the
case of an Asset Disposition by the Company or its Restricted
Subsidiaries, to the extent the Company or such Restricted Subsidiary
elects (or is required by the terms of any Indebtedness of the Company or
such Restricted Subsidiary), to prepay, repay, redeem or purchase
Indebtedness (other than Disqualified Stock) of the Company or such
Restricted
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Subsidiary (in each case other than Indebtedness owed to the Company or an
Affiliate of the Company), in the case of the foregoing clauses (1) and
(2) within one year from the later of the date of such Asset Disposition
or the receipt of such Net Available Cash; (B) SECOND, to the extent of
the balance of such Net Available Cash after application in accordance
with clause (A), to the extent Holdings or a Restricted Subsidiary elects,
to acquire Additional Assets; PROVIDED, HOWEVER, that Holdings or such
Restricted Subsidiary shall be required to commit such Net Available Cash
to the acquisition of Additional Assets within one year from the later of
the date of such Asset Disposition or the receipt of such Net Available
Cash (the "Receipt Date") and shall be required to consummate the
acquisition of such Additional Assets within 18 months from the Receipt
Date; (C) THIRD, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A) and (B), to make an offer
pursuant to paragraph (b) below to the holders of the Securities pursuant
to and subject to the conditions contained in the Indenture; and (D)
FOURTH, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A), (B) and (C) to (x) the
acquisition by Holdings or any Wholly Owned Subsidiary or such Restricted
Subsidiary of Additional Assets or (y) the prepayment, repayment or
purchase of Indebtedness (other than any Disqualified Stock) of Holdings
(other than Indebtedness owed to an Affiliate of Holdings) or Indebtedness
of any Subsidiary (other than Indebtedness owed to Holdings or an
Affiliate of Holdings other than The Huff Alternative Income Fund, L.P. or
any Affiliate thereof), in each case within one year from the later of the
receipt of such Net Available Cash and the date the offer described in
clause (b) below is consummated; PROVIDED, HOWEVER, that in connection
with any prepayment, repayment or purchase of Indebtedness pursuant to
clause (A), (C) or (D) above, Holdings or such Restricted Subsidiary shall
retire such Indebtedness and shall cause the related loan commitment (if
any) to be permanently reduced in an amount equal to the principal amount
so prepaid, repaid or purchased. Notwithstanding the foregoing provisions
of this paragraph, Holdings and its Restricted Subsidiaries shall not be
required to apply any Net Available Cash in accordance with this paragraph
except to the extent that the aggregate Net Available Cash from all Asset
Dispositions which are not applied in accordance with this paragraph
exceeds $3.5 million. Pending application of Net Available Cash pursuant
to this covenant, such Net Available Cash shall be invested in Temporary
Cash Investments. Notwithstanding the foregoing, any Asset Disposition
which is also an Asset Disposition governed by the Company Indenture shall
satisfy this covenant if such Asset Disposition is made, and the Net
Available Cash therefrom applied, in accordance with the terms of the
Company Indenture. Notwithstanding anything contained in this Indenture to
the contrary, Holdings or the Company shall not sell, convey, pledge,
hypothecate or otherwise transfer the Houston Facility substantially as an
entirety in one transaction or a series of related transactions to any
Person (other than a Restricted Subsidiary) except for (i) pledges or
security interests granted
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in connection with securing Indebtedness borrowed under the Credit
Agreement, and (ii) transactions that comply with Article Eight.
For the purposes of this covenant, the following are deemed to be
cash or cash equivalents: (x) the express assumption of any Indebtedness
of a Restricted Subsidiary other than TPC Holding and the release of
Holdings or such Restricted Subsidiary from all liability on such
Indebtedness in connection with such Asset Disposition and (y) securities
received by Holdings or any Restricted Subsidiary from the transferee that
are converted by Holdings or such Restricted Subsidiary into cash within
90 days of closing the transaction.
(b) In the event of an Asset Disposition that requires the purchase
of the Securities pursuant to clause (a)(ii)(A) or (C) above, Holdings
will be required to purchase Securities tendered pursuant to an offer by
Holdings for the Securities at a purchase price of 100% of their Accreted
Value (without premium) plus accrued but unpaid interest in accordance
with the procedures (including prorating in the event of oversubscription)
set forth in this Indenture. If the aggregate purchase price of Securities
tendered pursuant to such offer is less than the Net Available Cash
allotted to the purchase thereof, Holdings will be required to apply the
remaining Net Available Cash in accordance with clause (a)(ii)(D) above.
(c) Holdings shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities
pursuant to this covenant. To the extent that the provisions of any
securities laws or regulations conflict with provisions of this covenant,
Holdings shall comply with the applicable securities laws and regulations
and shall not be deemed to have breached its obligations under this clause
by virtue thereof.
SECTION 10.12 LIMITATION ON AFFILIATE TRANSACTIONS.
(a) Holdings shall not, and shall not permit any Restricted
Subsidiary to, enter into any transaction (including the purchase, sale,
lease or exchange of any property or the rendering of any service) with
any Affiliate of Holdings (an "Affiliate Transaction") unless the terms
thereof (1) are no less favorable to Holdings or such Restricted
Subsidiary than those that could be obtained at the time of such
transaction in a comparable transaction on arm's-length dealings with a
Person who is not such an Affiliate, (2) if such Affiliate Transaction
involves an amount in excess of $2.5 million, (i) are set forth in writing
and (ii) have been approved by a majority of the members of the Board of
Directors of Holdings having no material personal financial stake in such
Affiliate Transaction and (3) if such Affiliate Transaction involves an
amount in excess of $5 million, have been determined by
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a nationally recognized investment banking firm to be fair, from a
financial standpoint to Holdings or its Restricted Subsidiary, as the case
may be.
(b) The provisions of the foregoing paragraph (a) shall not prohibit
(i) any Restricted Payment permitted to be paid pursuant to Section 10.09
or any payment or transaction specifically excepted from the definition of
Restricted Payment, (ii) any issuance of securities, or other payments,
awards or grants in cash, securities or otherwise pursuant to, or the
funding of, employment arrangements, stock options and stock ownership
plans approved by the Board of Directors of Holdings or the board of
directors of the relevant Restricted Subsidiary, (iii) the grant of stock
options or similar rights to employees and directors of Holdings pursuant
to plans approved by the Board of Directors of Holdings or the board of
directors of the relevant Restricted Subsidiary, (iv) loans or advances to
officers, directors or employees in the ordinary course of business, (v)
the payment of reasonable fees to directors of Holdings and its Restricted
Subsidiaries who are not employees of Holdings or its Restricted
Subsidiaries, (vi) any Affiliate Transaction between Holdings and a Wholly
Owned Subsidiary or between Wholly Owned Subsidiaries, (vii) the purchase
of or payment of Indebtedness of or monies owed by Holdings or any of its
Restricted Subsidiaries for goods or materials purchased, or services
received, in the ordinary course of business, (viii) the purchase of or
payment of Indebtedness of or monies owed by Holdings or any of its
Restricted Subsidiaries or fees to be paid to Sterling or any Affiliate of
Sterling, in each case pursuant to a written agreement in existence on the
date of this Indenture, (ix) the Tax Sharing Agreement and any payments or
transactions thereunder, and (x) any Affiliate Transaction among Holdings
or any Subsidiary and The Huff Alternative Income Fund, L.P. or any of its
Affiliates pursuant to agreements in existence of the date of this
Indenture.
SECTION 10.13 LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF
RESTRICTED SUBSIDIARIES.
Holdings shall not sell or otherwise dispose of any shares of Capital
Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
shares of its Capital Stock except (i) to Holdings or a Wholly Owned Subsidiary
or (ii) if, immediately after giving effect to such issuance, sale or other
disposition, such Restricted Subsidiary remains a Restricted Subsidiary;
PROVIDED, HOWEVER, that in connection with any such sale or disposition of
Capital Stock Holdings or any such Restricted Subsidiary complies with Section
10.11; PROVIDED, FURTHER, HOWEVER, that in no event may TPC Holding, the
Company, or any Restricted Subsidiary that owns the Houston Facility dispose of
its Capital Stock pursuant to clause (ii).
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SECTION 10.14 PROVISION OF FINANCIAL STATEMENTS.
Holdings will (i) transmit by mail to all holders, as their names and
addresses appear in the security register, without cost to such holders and (ii)
file with the Trustee copies of the annual reports, quarterly reports and other
documents which Holdings would have been required to file with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act if Holdings were subject
to either of such Sections (provided that such annual reports, quarterly reports
and other documents shall contain at least the information that is required by
Section 13(a) or 15(d) of the Exchange Act as of the date of this Indenture) and
promptly upon written request and payment of the reasonable cost of duplication
and delivery, supply copies of such documents to any prospective holder at
Holdings' cost.
SECTION 10.15 WAIVER OF CERTAIN COVENANTS.
Holdings may omit in any particular instance to comply with any term,
provision or condition set forth in Section 8.03 or Sections 10.06 through 10.09
or 10.11 or 10.12 or 10.14 if before or after the time for such compliance the
Holders of at least a majority in principal amount at final maturity of the
Outstanding Securities, by Act of such Holders, waive such compliance in such
instance with such term, provision or condition, but no such waiver shall extend
to or affect such term, provision or condition except to the extent so expressly
waived, and, until such waiver shall become effective, the obligations of
Holdings and the duties of the Trustee in respect of any such term, provision or
condition shall remain in full force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 11.01 RIGHT OF REDEMPTION.
The Securities may be redeemed, at the election of Holdings, as a whole or
from time to time in part, as provided in the Securities.
SECTION 11.02 APPLICABILITY OF ARTICLE.
Redemption of Securities at the election of Holdings or otherwise, as
permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
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SECTION 11.03 ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of Holdings to redeem any Securities pursuant to Section
11.01 shall be evidenced by a Board Resolution. In case of any redemption
pursuant to Section 11.01, Holdings shall, at least 45, but no more than 60 days
prior to the Redemption Date fixed by Holdings (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date and of
the principal amount of Securities to be redeemed and shall deliver to the
Trustee such documentation and records as shall enable the Trustee to select the
Securities to be redeemed pursuant to Section 11.04.
SECTION 11.04 SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED.
If less than all the Securities are to be redeemed, the particular
Securities or portion thereof to be redeemed shall be selected not more than 60
days prior to the Redemption Date by the Trustee, from the Outstanding
Securities not previously called for redemption so that such redemption shall be
made pro rata among such outstanding Securities; PROVIDED, HOWEVER, that no such
partial redemption shall reduce the portion of the principal amount at final
maturity of a Security not redeemed to less than $1,000.
The Trustee shall promptly notify Holdings in writing of the Securities
selected for redemption and, in the case of any Securities selected for partial
redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to redemption of Securities shall relate, in the case of
any Security redeemed or to be redeemed only in part, to the portion of the
principal amount of such Security which has been or is to be redeemed.
If Holdings shall so direct, Securities registered in the name of Holdings
or any Affiliates shall not be included in the Securities selected for
redemption.
SECTION 11.05 NOTICE OF REDEMPTION.
Notice of redemption shall be given in the manner provided for in Section
1.09 not less than 30 nor more than 60 days prior to the Redemption Date, to
each Holder of Securities to be redeemed.
All notices of redemption shall state:
(1) the Redemption Date,
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(2) the Redemption Price,
(3) if less than all Outstanding Securities are to be
redeemed, the identification (and, in the case of a partial redemption,
the principal amounts) of the particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price (together
with accrued interest, if any, to the Redemption Date payable as provided
in Section 11.07) will become due and payable upon each such Security, or
the portion thereof, to be redeemed, and that (unless the Company shall
default in payment of the redemption price) interest thereon will cease to
accrue on and after said date,
(5) the place or places where such Securities are to be
surrendered for payment of the Redemption Price,
(6) in the case of a Security to be redeemed in part, the
principal amount of such Security to be redeemed and that after the
Redemption Date upon surrender of such Security, new Security or
Securities in the aggregate principal amount equal to the unredeemed
portion thereof will issued; and
(7) that the redemption is for a sinking fund, if such is the
case.
Notice of redemption of Securities to be redeemed at the election of
Holdings shall be given by Holdings or, at Holdings' request, by the Trustee in
the name and at the expense of Holdings.
SECTION 11.06 DEPOSIT OF REDEMPTION PRICE.
On or prior to any Redemption Date, Holdings shall deposit with the
Trustee or with a Paying Agent (or, if Holdings is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 10.03) an amount of
Dollars sufficient to pay the Redemption Price of, and accrued interest on, all
the Securities which are to be redeemed on that date.
SECTION 11.07 SECURITIES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Securities so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified (together with accrued interest, if any, to
the Redemption Date), and from and after such date (unless Holdings shall
default in the payment of the Redemption Price and accrued interest) such
Securities
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shall cease to bear interest and principal thereon shall cease to accrete. Upon
surrender of any such Security for redemption in accordance with said notice,
such Security shall be paid by Holdings at the Redemption Price, together with
accrued interest, if any, to the Redemption Date; PROVIDED, HOWEVER, that
installments of interest whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of Section
3.07.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
continue to accrete principal or bear interest from the Redemption Date at the
rate prescribed therefor in the Securities.
SECTION 11.08 SECURITIES REDEEMED IN PART.
Any Security which is to be redeemed only in part shall be surrendered at
the office or agency of Holdings maintained for such purpose pursuant to Section
10.02 (with, if Holdings or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to Holdings and the Trustee
duly executed by, the Holder thereof or such Holder's attorney duly authorized
in writing), and Holdings shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge, a new Security or
Securities, of any authorized denomination as requested by such Holder, in
aggregate principal amount at final maturity equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.
ARTICLE TWELVE
GUARANTEE
SECTION 12.01 TPC HOLDING GUARANTEE.
For value received, TPC Holding, in accordance with this Article Twelve,
hereby absolutely, unconditionally and irrevocably guarantees, to the Trustee
and the Holders, as if TPC Holding were the principal debtor, the punctual
payment and performance when due of all obligations of Holdings under this
Indenture to pay principal of, premium, if any, and interest when due and
payable, and all other amounts due or to become due under or in connection with
this Indenture, the Securities and the performance of all other obligations to
the Trustee and the Holders under this Indenture (the "Indenture Obligations")
(which for purposes of this Security Guarantee shall also be deemed to include
all commissions, fees, charges, costs and other expenses (including reasonable
legal fees and disbursements of one counsel) arising out of or incurred by the
Trustee or the Holders in connection with the enforcement of this Security
Guarantee).
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SECTION 12.02 CONTINUING GUARANTEE; NO RIGHT OF SET-OFF; INDEPENDENT
OBLIGATION.
(a) This Security Guarantee shall be a continuing guarantee of the
payment and performance of all Indenture Obligations and shall remain in
full force and effect until the payment in full of all of the Indenture
Obligations and shall apply to and secure any ultimate balance due or
remaining unpaid to the Trustee or the Holders; and this Security
Guarantee shall not be considered as wholly or partially satisfied by the
payment or liquidation at any time or from time to time of any sum of
money for the time being due or remaining unpaid to the Trustee or the
Holders. TPC Holding covenants and agrees to comply with all obligations,
covenants, agreements and provisions applicable to it in this Indenture
including those set forth in Article Eight. Without limiting the
generality of the foregoing, TPC Holding's liability shall extend to all
amounts which constitute part of the Indenture Obligations and would be
owed by Holdings under this Indenture and the Securities but for the fact
that they are unenforceable, reduced, limited, impaired, suspended or not
allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving Holdings.
(b) TPC Holding hereby guarantees that the Indenture Obligations
will be paid to the Trustee without set-off or counterclaim or other
reduction whatsoever (whether for taxes, withholding or otherwise) in
lawful currency of the United States of America.
(c) TPC Holding guarantees that the Indenture Obligations shall be
paid strictly in accordance with their terms regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the holders of the
Securities.
(d) TPC Holding's liability to pay or perform or cause the
performance of the Indenture Obligations under this Security Guarantee
shall arise forthwith after demand for payment or performance by the
Trustee has been given to TPC Holding in the manner prescribed in the
Indenture.
(e) Except as provided herein, the provisions of this Article Twelve
cover all agreements between the parties hereto relative to this Security
Guarantee and none of the parties shall be bound by any representation,
warranty or promise made by any Person relative thereto which is not
embodied herein; and it is specifically acknowledged and agreed that this
Security Guarantee has been delivered by TPC Holding free of any
conditions whatsoever and that no representations, warranties or promises
have been made to TPC Holding affecting its liabilities hereunder, and
that the Trustee shall not be bound by any
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representations, warranties or promises now or at any time hereafter made
by Holdings to TPC Holding.
(f) This Security Guarantee is a guarantee of payment, performance
and compliance and not of collectibility and is in no way conditioned or
contingent upon any attempt to collect from or enforce performance or
compliance by Holding or upon any event or condition whatsoever.
(g) The obligations of TPC Holding set forth herein constitute the
full recourse obligations of TPC Holding enforceable against TPC Holding
to the full extent of all its assets and properties.
SECTION 12.03 GUARANTEE ABSOLUTE.
The obligations of TPC Holding hereunder are independent of the
obligations of Holding under the Securities and this Indenture and a separate
action or actions may be brought and prosecuted against TPC Holding whether or
not an action or proceeding is brought against Holdings and whether or not
Holdings is joined in any such action or proceeding. The liability of TPC
Holding hereunder is irrevocable, absolute and unconditional and (to the extent
permitted by law) the liability and obligations of TPC Holding hereunder shall
not be released, discharged, mitigated, waived, impaired or affected in whole or
in part by:
(a) any defect or lack of validity or enforceability in respect of
any Indebtedness or other obligation of Holdings, any other obligor under
the Securities or any other Person under this Indenture or the Securities,
or any agreement or instrument relating to any of the foregoing;
(b) any grants of time, renewals, extensions, indulgences, releases,
discharges or modifications which the Trustee or the Holders may extend
to, or make with, Holdings, any other obligor under the Securities or any
other Person, or any change in the time, manner or place of payment of, or
in any other term of, all or any of the Indenture Obligations, or any
other amendment or waiver of, or any consent to or departure from, this
Indenture or the Securities, including any increase or decrease in the
Indenture Obligations;
(c) the taking of security from Holdings or any other Person, and
the release, discharge or alteration of, or other dealing with, such
security;
(d) the occurrence of any change in the laws, rules, regulations or
ordinances of any jurisdiction by any present or future action of any
governmental authority or court
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amending, varying, reducing or otherwise affecting, or purporting to
amend, vary, reduce or otherwise affect, any of the Indenture Obligations
and the obligations of Holdings or of any other obligor under the
Securities hereunder;
(e) the abstention from taking security from Holdings, any other
obligor under the Securities or any other Person or from perfecting,
continuing to keep perfected or taking advantage of any security;
(f) any loss, diminution of value or lack of enforceability of any
security received from Holdings, any other obligor under the Securities or
any other Person, and including any other guarantees received by the
Trustee;
(g) any other dealings with Holdings, any other obligor under the
Securities or any other Person, or with any security;
(h) the application by the Holders or the Trustee of all monies at
any time and from time to time received from Holdings, any other obligor
under the Securities or any other Person on account of any indebtedness
and liabilities owing by Holdings or any other obligor under the
Securities to the Trustee or the Holders, in such manner as the Trustee or
the Holders deem best and the changing of such application in whole or in
part and at any time or from time to time, or any manner of application of
collateral, or proceeds thereof, to all or any of the Indenture
Obligations, or the manner of sale of any collateral;
(i) the release or discharge of Holdings or any other obligor under
the Securities or of any Person liable directly as surety or otherwise by
operation of law or otherwise for the Securities, other than an express
release in writing given by the Trustee, on behalf of the Holders, of the
liability and obligations of TPC Holding hereunder;
(j) any change in the name, business, capital structure or governing
instrument of Holdings or TPC Holding or any refinancing or restructuring
of any of the Indenture Obligations;
(k) the sale of Holdings or TPC Holding's business or any part
thereof;
(l) subject to Section 12.14, any merger or consolidation,
arrangement or reorganization of Holdings, TPC Holding, any Person
resulting from the merger or consolidation of Holding or TPC Holding with
any other Person or any other successor to such Person or merged or
consolidated Person or any other change in the corporate existence,
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structure or ownership of Holdings or TPC Holding or any change in the
corporate relationship between Holding and TPC Holding, or any termination
of such relationship;
(m) the insolvency, bankruptcy, liquidation, winding-up,
dissolution, receivership, arrangement, readjustment, assignment for the
benefit of creditors or distribution of the assets of Holdings or TPC
Holding or their assets or any resulting discharge of any obligations of
Holdings (whether voluntary or involuntary) or of TPC Holding (whether
voluntary or involuntary) or the loss of corporate existence;
(n) subject to Section 12.14, any arrangement or plan of
reorganization affecting Holdings or TPC Holding or any other obligor
under the Securities;
(o) any failure, omission or delay on the part of Holdings to
conform or comply with any term of this Indenture;
(p) any limitation on the liability or obligations of Holdings or
any other Person under this Indenture, or any discharge, termination,
cancellation, distribution, irregularity, invalidity or unenforceability
in whole or in part of this Indenture;
(q) any other circumstance (including any statute of limitations)
that might otherwise constitute a defense available to, or discharge of,
Holdings or TPC Holding or any other obligor under the Securities; or
(r) any modification, compromise, settlement or release by the
Trustee, or by operation of law or otherwise, of the Indenture Obligations
or the liability of Holdings or any other obligor under the Securities, in
whole or in part, and any refusal of payment by the Trustee, in whole or
in part, from any other obligor or other TPC Holding in connection with
any of the Indenture Obligations, whether or not with notice to, or
further assent by, or any reservation of rights against, TPC Holding.
SECTION 12.04 RIGHT TO DEMAND FULL PERFORMANCE.
In the event of any demand for payment or performance by the Trustee from
TPC Holding hereunder, the Trustee or the Holders shall have the right to demand
its full claim and to receive all dividends or other payments in respect thereof
until the Indenture Obligations have been paid in full, and TPC Holding shall
continue to be liable hereunder for any balance which may be owing to the
Trustee or the Holders by Holdings under this Indenture and the Securities. The
retention by the Trustee or the Holders of any security, prior to the
realization by the Trustee or the Holders of its rights to such security upon
foreclosure thereon, shall not, as between the Trustee and TPC Holding,
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be considered as a purchase of such security, or as payment, satisfaction or
reduction of the Indenture Obligations due to the Trustee or the Holders by
Holdings or any part thereof. TPC Holding, promptly after demand, will reimburse
the Trustee and the Holders for all costs and expenses of collecting such amount
under, or enforcing this Security Guarantee, including, without limitation, the
reasonable fees and expenses of counsel.
SECTION 12.05 WAIVERS.
(a) TPC Holding hereby expressly waives (to the extent permitted by
law) notice of the acceptance of this Security Guarantee and notice of the
existence, renewal, extension or the non-performance, non-payment, or
non-observance on the part of Holdings of any of the terms, covenants,
conditions and provisions of this Indenture or the Securities or any other
notice whatsoever to or upon Holdings or TPC Holding with respect to the
Indenture Obligations, whether by statute, rule of law or otherwise. TPC
Holding hereby acknowledges communication to it of the terms of this
Indenture and the Securities and all of the provisions therein contained
and consents to and approves the same. TPC Holding hereby expressly waives
(to the extent permitted by law) diligence, presentment, protest and
demand for payment with respect to (i) any notice of sale, transfer or
other disposition of any right, title to or interest in the Securities by
the Holders or in this Indenture, (ii) any release of any other obligor
under the Securities from its obligations hereunder resulting from any
loss by it of its rights of subrogation hereunder and (iii) any other
circumstances whatsoever that might otherwise constitute a legal or
equitable discharge, release or defense of TPC Holding or surety or that
might otherwise limit recourse against TPC Holding.
(b) Without prejudice to any of the rights or recourse which the
Trustee or the Holders may have against Holdings, TPC Holding hereby
expressly waives (to the extent permitted by law) any right to require the
Trustee or the Holders to:
(i) enforce, assert, exercise, initiate or exhaust any rights,
remedies or recourse against Holdings, any other obligor under the
Securities or any other Person under this Indenture or otherwise;
(ii) value, realize upon, or dispose of any security of
Holdings or any other Person held by the Trustee or the Holders;
(iii) initiate or exhaust any other remedy which the Trustee
or the Holders may have in law or equity; or
(iv) mitigate the damages resulting from any default under
this Indenture;
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before requiring or becoming entitled to demand payment from TPC Holding under
this Security Guarantee.
SECTION 12.06 TPC HOLDING REMAINS OBLIGATED IN EVENT HOLDINGS IS NO LONGER
OBLIGATED TO DISCHARGE INDENTURE OBLIGATIONS.
It is the express intention of the Trustee and TPC Holding that if for any
reason Holdings has no legal existence, is or becomes under no legal obligation
to discharge the Indenture Obligations owing to the Trustee or the Holders by
Holding or if any of the Indenture Obligations owing by Holdings to the Trustee
or the Holders becomes irrecoverable from Holdings by operation of law or for
any reason whatsoever, this Security Guarantee and the covenants, agreements and
obligations of TPC Holding contained in this Article Twelve shall nevertheless
be binding upon TPC Holding, as principal debtor, until such time as all such
Indenture Obligations have been paid in full to the Trustee and all Indenture
Obligations owing to the Trustee or the Holders by Holdings have been
discharged, or such earlier time as Article Thirteen shall apply to the
Securities and TPC Holding shall be responsible for the payment thereof to the
Trustee or the Holders upon demand.
SECTION 12.07 FRAUDULENT CONVEYANCE; SUBROGATION.
(a) Any term or provision of this Security Guarantee to the contrary
notwithstanding, the aggregate amount of the Indenture Obligations
guaranteed hereunder shall be reduced to the extent necessary to prevent
this Security Guarantee from violating or becoming voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally.
(b) TPC Holding hereby agrees (to the extent permitted by law) that
it will not in any manner whatsoever take the benefit or advantage of, any
rights of reimbursement, exoneration, contribution, indemnity, subrogation
or contribution, whether arising by contract or operation of law
(including, without limitation, any such right arising under federal
bankruptcy law) or any similar rights or claims otherwise by reason of any
payment by it pursuant to the provisions of this Article Twelve until the
Indenture Obligations have been repaid in full.
SECTION 12.08 GUARANTEE IS IN ADDITION TO OTHER SECURITY.
This Security Guarantee shall be in addition to and not in substitution
for any other guarantees or other security which the Trustee may now or
hereafter hold in respect of the Indenture Obligations owing to the Trustee or
the Holders by Holdings and (except as may be required by law)
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the Trustee shall be under no obligation to marshal in favor of TPC Holding any
other guarantees or other security or any moneys or other assets which the
Trustee may be entitled to receive or upon which the Trustee or the Holders may
have a claim.
SECTION 12.09 RELEASE OF SECURITY INTERESTS.
Without limiting the generality of the foregoing and except as otherwise
provided in this Indenture, TPC Holding hereby consents and agrees, to the
fullest extent permitted by applicable law, that the rights of the Trustee
hereunder, and the liability of TPC Holding hereunder, shall not be affected by
any and all releases for any purpose of any collateral, if any, from the Liens
and security interests created by any collateral document and that this Security
Guarantee shall continue to be effective or be reinstated, as the case may be,
if at any time any payment of any of the Indenture Obligations is rescinded or
must otherwise be returned by the Trustee upon the insolvency, bankruptcy or
reorganization of Holdings or otherwise, all as though such payment had not been
made.
SECTION 12.10 NO BAR TO FURTHER ACTIONS.
Except as provided by law, no action or proceeding brought or instituted
under Article Twelve and this Security Guarantee and no recovery or judgment in
pursuance thereof shall be a bar or defense to any further action or proceeding
which may be brought under Article Twelve and this Security Guarantee by reason
of any further default or defaults under Article Twelve and this Security
Guarantee or in the payment of any of the Indenture Obligations owing by
Holdings.
SECTION 12.11 FAILURE TO EXERCISE RIGHTS SHALL NOT OPERATE AS A WAIVER; NO
SUSPENSION OF REMEDIES.
(a) No failure to exercise and no delay in exercising, on the part
of the Trustee or the Holders, any right, power, privilege or remedy under
this Article Twelve and this Security Guarantee shall operate as a waiver
thereof, nor shall any single or partial exercise of any rights, power,
privilege or remedy preclude any other or further exercise thereof, or the
exercise of any other rights, powers, privileges or remedies. The rights
and remedies herein provided for are cumulative and not exclusive of any
rights or remedies provided in law or equity.
(b) Nothing contained in this Article Twelve shall limit the right
of the Trustee or the Holders to take any action to accelerate the
maturity of the Securities pursuant to Article Five or to pursue any
rights or remedies hereunder or under applicable law.
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SECTION 12.12 TRUSTEE'S DUTIES; NOTICE TO TRUSTEE.
(a) Any provision in this Article Twelve or elsewhere in this
Indenture allowing the Trustee to request any information or to take any
action authorized by, or on behalf of TPC Holding, shall be permissive and
shall not be obligatory on the Trustee except as the Holders may direct in
accordance with the provisions of this Indenture or where the failure of
the Trustee to request any such information or to take any such action
arises from the Trustee's negligence, bad faith or willful misconduct.
(b) The Trustee shall not be required to inquire into the existence,
powers or capacities of Holdings, TPC Holding or the officers, directors
or agents acting or purporting to act on their respective behalf.
SECTION 12.13 SUCCESSORS AND ASSIGNS.
Subject to Section 12.14 all terms, agreements and conditions of this
Article Twelve shall extend to and be binding upon TPC Holding and its
successors and permitted assigns and shall ensure to the benefit of and may be
enforced by the Trustee and its successors and assigns; PROVIDED, HOWEVER, that
TPC Holding may not assign any of their rights or obligations hereunder other
than in accordance with Article Eight.
SECTION 12.14 RELEASE OF GUARANTEE.
Concurrently with the payment in full of all of the Indenture Obligations
or the merger of TPC Holding with and into Holdings or the Company or the sale
or transfer of the assets of TPC Holding substantially as an entirety to
Holdings or the Company, TPC Holding and its successors shall be released from
and relieved of their obligations under this Article Twelve without further act
or deed provided such action is in accordance with the terms of this Indenture.
Upon the delivery by Holdings to the Trustee of an Officers' Certificate and, if
requested by the Trustee, an Opinion of Counsel to the effect that the
transaction giving rise to the release of this Security Guarantee was made by
Holdings in accordance with the provisions of this Indenture and the Securities,
the Trustee shall execute any documents reasonably required in order to evidence
the release of TPC Holding from their obligations under this Security Guarantee.
If any of the Indenture Obligations are revived and reinstated after the
termination of this Security Guarantee which termination was due to the payment
in full of the Indenture Obligations, then all of the obligations of TPC Holding
under this Security Guarantee shall be revived and reinstated as if this
Security Guarantee had not been terminated until such time as the Indenture
Obligations are paid in full, and TPC Holding shall enter into an amendment to
this Security Guarantee, reasonably satisfactory to the Trustee, evidencing such
revival and reinstatement.
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ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 13.01 HOLDINGS COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT
DEFEASANCE.
Holdings may, at its option by Board Resolution, at any time, with respect
to the Securities, elect to have either Section 13.02 or Section 13.03 be
applied to all Outstanding Securities upon compliance with the conditions set
forth below in this Article Thirteen.
SECTION 13.02 LEGAL DEFEASANCE AND DISCHARGE.
Upon Holdings' exercise under Section 13.01 of the option applicable to
this Section 13.02, Holdings and TPC Holding shall be deemed to have been
discharged from its obligations with respect to all Outstanding Securities on
the date the conditions set forth in Section 13.04 are satisfied (hereinafter,
"legal defeasance"). For this purpose, such legal defeasance means that Holdings
shall be deemed to have paid and discharged the entire indebtedness represented
by the Outstanding Securities, which shall thereafter be deemed to be
"Outstanding" only for the purposes of Section 13.05 and the other Sections of
this Indenture referred to in (A) and (B) below, and to have satisfied all its
other obligations under such Securities and this Indenture insofar as such
Securities are concerned (and the Trustee, at the expense of Holdings, shall
execute proper instruments acknowledging the same), except for the following
which shall survive until otherwise terminated or discharged hereunder: (A) the
rights of Holders of Outstanding Securities to receive, solely from the trust
fund described in Section 13.04 and as more fully set forth in such Section,
payments in respect of the principal of (and premium, if any, on) and interest
on such Securities when such payments are due, (B) Holdings' obligations with
respect to such Securities under Sections 3.04, 3.05, 3.08, 10.02 and 10.03 and
with respect to the Trustee under Section 6.06, (C) the rights, powers, trusts,
duties and immunities of the Trustee hereunder and (D) this Article Thirteen.
Subject to compliance with this Article Thirteen, Holdings may exercise its
option under this Section 13.02 notwithstanding the prior exercise of its option
under Section 13.03 with respect to the Securities.
SECTION 13.03 COVENANT DEFEASANCE.
Upon Holdings' exercise under Section 13.01 of the option applicable to
this Section 13.03, Holdings shall be released from its obligations under any
covenant contained in Section 8.01(4), and in Sections 10.04 through 10.14 and
11.01 with respect to the Outstanding Securities on and after the date the
conditions set forth in Section 13.04 are satisfied (hereinafter, "covenant
defeasance"), and the Securities shall thereafter be deemed not to be
"Outstanding" for the purposes of any request,
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demand, authorization, direction, declaration, notice, consent, waiver or Act of
Holders (and the consequences of any thereof) in connection with such covenants,
but shall continue to be deemed "Outstanding" for all other purposes hereunder.
For this purpose, such covenant defeasance means that, with respect to the
Outstanding Securities, Holdings may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section
5.01(4), but, except as specified above, the remainder of this Indenture and
such Securities shall be unaffected thereby.
SECTION 13.04 CONDITIONS TO LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions to application of either Section
13.02 or Section 13.03 to the Outstanding Securities:
(1) Holdings shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 6.07 who shall agree to comply with the provisions of this
Article Thirteen applicable to it) as trust funds in trust for the purpose
of making the following payments, specifically pledged as security for,
and dedicated solely to, the benefit of the Holders of such Securities,
(A) money in an amount, or (B) U.S. Government Obligations which through
the scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day before
the due date of any payment, money in an amount, or (C) a combination
thereof, sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which shall be
applied by the Trustee (or other qualifying trustee) to pay and discharge,
the principal of (and premium, if any, on) and interest on the Outstanding
Securities on the Stated Maturity (or Redemption Date, if applicable) of
such principal (and premium, if any) or installment of interest; PROVIDED
that the Trustee shall have been irrevocably instructed to apply such
money or the proceeds of such U.S. Government Obligations to said payments
with respect to the Securities. Before or after such a deposit, Holdings
may give to the Trustee, in accordance with Section 11.03 hereof, a notice
of its election to redeem all of the Outstanding Securities at a future
date in accordance with Article Eleven hereof, which notice shall be
irrevocable. Such irrevocable redemption notice, if given, shall be given
effect in applying the foregoing. For this purpose, "U.S. Government
Obligations" means securities that are (x) direct obligations of the
United States of America for the timely payment of which its full faith
and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or
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instrumentality of the United States of America the timely payment of
which is unconditionally guaranteed as a full faith and credit obligation
by the United States of America, which, in either case, are not callable
or redeemable at the option of the issuer thereof, and shall also include
a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act of 1933, as amended), as custodian with respect to any
such U.S. Government Obligation or a specific payment of principal of or
interest on any such U.S. Government Obligation held by such custodian for
the account of the holder of such depository receipt, PROVIDED that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt
from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of principal of or interest
on the U.S. Government Obligation evidenced by such depository receipt.
(2) No Default or Event of Default with respect to the
Securities shall have occurred and be continuing on the date of such
deposit or, insofar as paragraphs (7) and (8) of Section 5.01 hereof are
concerned, at any time during the period ending on the 91st day after the
date of such deposit (it being understood that this condition shall not be
deemed satisfied until the expiration of such period).
(3) Such legal defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a default under any
material agreement or instrument to which Holdings is a party or by which
it is bound.
(4) In the case of an election under Section 13.02, Holdings
shall have delivered to the Trustee an Opinion of Counsel stating that (x)
Holdings has received from, or there has been published by, the Internal
Revenue Service a ruling, or (y) since the date of this Indenture, there
has been a change in the applicable federal income tax law, in either case
to the effect that, and based thereon such opinion shall confirm that, the
Holders of the Outstanding Securities will not recognize income, gain or
loss for federal income tax purposes as a result of such defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
defeasance had not occurred.
(5) Holdings shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the legal defeasance under
Section 13.02 or the covenant defeasance under Section 13.03 (as the case
may be) have been complied with.
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SECTION 13.05 DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD
IN TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to the provisions of the last paragraph of Section 10.03, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee (or other qualifying trustee--collectively for purposes of this
Section 13.05, the "Trustee") pursuant to Section 13.04 in respect of the
Outstanding Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including Holdings acting
as its own Paying Agent) as the Trustee may determine, to the Holders of such
Securities of all sums due and to become due thereon in respect of principal
(and premium, if any) and interest, but such money and U.S. Government
Obligations need not be segregated from other funds except to the extent
required by law.
Holdings shall pay and indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against the U.S. Government Obligations deposited
pursuant to Section 13.04 or the principal and interest received in respect
thereof other than any such tax, fee or other charge which by law is for the
account of the Holders of the Outstanding Securities.
Anything in this Article Thirteen to the contrary notwithstanding, the
Trustee shall deliver or pay to Holdings from time to time upon Company Request
any money or U.S. Government Obligations held by it as provided in Section 13.04
which, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, are in excess of the amount thereof which would then be required to be
deposited to effect an equivalent legal defeasance or covenant defeasance, as
applicable, in accordance with this Article.
SECTION 13.06 REINSTATEMENT.
If the Trustee or any Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 13.05 by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, then Holdings' obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to Section 13.02 or 13.03, as the case may be,
until such time as the Trustee or Paying Agent is permitted to apply all such
money or U.S. Government Obligations in accordance with Section 13.05; PROVIDED,
HOWEVER, that no action taken in good faith by Holdings after a deposit of money
or U.S. Government Obligations or both pursuant to Section 13.05 and prior to
the revival and reinstatement of obligations under this Indenture and the
Securities pursuant to this Section 13.06 shall constitute the basis for the
assertion of an Event of Default pursuant to Section 5.01; and PROVIDED,
FURTHER, that if Holdings makes any payment of principal of (or premium, if any,
on) or interest on any Security following the reinstatement of its obligations,
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<PAGE>
Holdings shall be subrogated to the rights of the Holders of such Securities to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
ARTICLE FOURTEEN
[RESERVED]
ARTICLE FIFTEEN
IMMUNITY OF INCORPORATORS,
STOCKHOLDERS, OFFICERS AND DIRECTORS
SECTION 15.01 LIABILITY SOLELY CORPORATE.
No recourse shall be had for the payment of the principal of (or premium,
if any) or interest on any Securities or any part thereof, or for any claim
based thereon or otherwise in respect thereof, or of the indebtedness
represented thereby, or upon any obligation, covenant or agreement of this
Indenture, against any incorporator, or against any stockholder, officer or
director, as such, past, present or future, of Holdings, or of any predecessor
or successor Person, either directly or through Holdings or any such predecessor
or successor Person, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise, it being
expressly agreed and understood that this Indenture and all the Securities are
solely corporate obligations, and that no personal liability whatsoever shall
attach to, or be insured by, any such incorporator, stockholder, officer or
director, as such, past, present or future, of Holdings or of any predecessor or
successor Person, either directly or through Holdings or any such predecessor or
successor Person, because of the indebtedness hereby authorized or under or by
reason of any of the obligations, covenants, promises or agreements contained in
this Indenture or in any of the Securities or to be implied herefrom or
therefrom; and that any such personal liability is hereby expressly waived and
released as a condition of, and as part of the consideration for, the execution
of this Indenture and the issue of the Securities; PROVIDED, HOWEVER, that
nothing herein or in the Securities contained shall be taken to prevent recourse
to and the enforcement of the liability, if any, of any stockholder or
subscriber to capital stock of Holdings upon or in respect of shares of capital
stock not fully paid up.
This Indenture may be signed in any number of counterparts each of which
so executed shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same Indenture.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the day and year first above written.
TEXAS PETROCHEMICAL HOLDINGS, INC.
By: /s/ SUSAN O. RHENEY
Name: Susan O. Rheney
Title: President
TPC HOLDING CORPORATION
By: /s/ SUSAN O. RHENEY
Name: Susan O. Rheney
Title: President
FLEET NATIONAL BANK, as Trustee
By: /s/ STEVEN CIMALORE
Name: Steven Cimalore
Title: Vice President
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<PAGE>
EXHIBIT A
[FACE OF NOTE]
TEXAS PETROCHEMICAL HOLDINGS, INC.
[Series B]* Senior Discount Notes due 2007
CUSIP [ ]
No._______ $____________
TEXAS PETROCHEMICAL HOLDINGS, INC., a Delaware corporation ("Holdings,"
which term includes any successor under the Indenture hereinafter referred to),
for value received, promises to pay to___________________, or registered
assigns, the principal sum of _________________________ United States Dollars
($________), on July 1, 2007.
This Security is entitled to the benefits of the Guarantee of TPC Holding
Corporation, a Delaware corporation. Reference is hereby made to Article Twelve
of the Indenture for a statement of the respective rights, duties and
obligations under the Guarantee.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
IN WITNESS WHEREOF, Holdings has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
Date:_____________ TEXAS PETROCHEMICAL HOLDINGS, INC.
By:
Name:
Title:
- --------
* Include only for Exchange Securities.
<PAGE>
(Form of Trustee's Certificate of Authentication)
This is one of the Securities described in the within-mentioned Indenture.
FLEET NATIONAL BANK,
as Trustee
By:
Authorized Signatory
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<PAGE>
[REVERSE SIDE OF NOTE]
TEXAS PETROCHEMICAL HOLDINGS, INC.
[Series B]* Senior Discount Notes due 2007
1. PRINCIPAL AND INTEREST.
Holdings will pay the principal of this Note on July 1, 2007.
Holdings promises to pay interest on the principal amount of this Note on
each Interest Payment Date, as set forth below, [at the rate of 13.5% per annum
(subject to adjustment as provided below)]** [at the rate of 13.5% per annum,
except that interest accrued on this Note (or the predecessor Note hereto)
pursuant to the penultimate paragraph of this Section 1 for periods prior to the
applicable Exchange Date (as such term is defined in the Registration Rights
Agreement referred to below) will accrue at the rate or rates borne by the
predecessor Note hereto from time to time during such periods pursuant to the
Registration Rights Agreement as set forth below].*
Interest will be payable semiannually (to the holders of record of the
Notes (or any predecessor Notes) at the close of business on the December 15 or
June 15 immediately preceding the Interest Payment Date) on each Interest
Payment Date, commencing January 1, 2002; PROVIDED that no interest shall accrue
on the principal amount of this Note prior to July 1, 2001 and no interest shall
be paid on this Note prior to January 1, 2002 except as provided in the next
paragraph. Interest Payment Dates shall be each January 1 and July 1 after July
1, 2001.
The Holder of this Security is entitled to the benefits of the
Registration Rights Agreement, dated July 1, 1996, between Holdings and The Huff
Alternative Income Fund, L.P. (the "Registration Rights Agreement"), and
interest shall accrue on and be payable on this Note in certain circumstances as
described in the Registration Rights Agreement**
From and after July 1, 2001, interest on this Note will accrue from the
most recent date to which interest has been paid [on this Note or the Note
surrendered in Exchange herefor]* or, if no interest has been paid, from July 1,
2001; PROVIDED that, if there is no existing default in the payment of interest
and if this Note is authenticated between a Regular Record Date referred to on
the face
- -------------------
* Include only for Exchange Securities.
** Include only for Initial Securities.
A-3
<PAGE>
hereof and the next succeeding Interest Payment Date, interest shall accrue from
such Interest Payment Date. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
Holdings shall pay interest on overdue principal and premium, if any, and
interest on overdue installments of interest, to the extent lawful, at a rate
per annum equal to 1% over the rate of interest otherwise applicable to the
Securities.
2. METHOD OF PAYMENT.
Holdings will pay interest (except Defaulted Interest) on the principal
amount of the Securities to the persons who are Holders (as reflected in the
Security Register at the close of business on the 15th day of the calendar month
immediately preceding the Interest Payment Date), in each case, even if the
Security is canceled on registration of transfer or registration of exchange
after such record date; PROVIDED that, with respect to the payment of principal,
Holdings will make payment to the Holder that surrenders this Security to any
Paying Agent on or after July 1, 2007.
Holdings will pay principal, premium, if any, and interest in money of the
United States that at the time of payment is legal tender for payment of public
and private debts. However, Holdings may pay principal, premium, if any, and
interest by its check payable in such money. Holdings may mail an interest check
to a Holder's registered address (as reflected in the Security Register). If a
payment date is a date other than a Business Day, payment may be made on the
next succeeding day that is a Business Day and no interest shall accrue for the
intervening period.
3. PAYING AGENT AND REGISTRAR.
Initially, the Trustee will act as authenticating agent, Paying Agent and
Registrar. Holdings may change any authenticating agent, Paying Agent or
Registrar upon written notice thereto. Holdings, any Subsidiary or any Affiliate
of any of them may act as Paying Agent, Registrar or co-registrar.
4. INDENTURE; LIMITATIONS.
Holdings issued the Securities under an Indenture dated as of July 1, 1996
(the "Indenture"), between Holdings and Fleet National Bank, as trustee (the
"Trustee"). Capitalized terms herein are used as defined in the Indenture unless
otherwise indicated. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act. The Securities are subject to all such terms, and Holders are
referred to the Indenture and the Trust Indenture Act for a statement of all
such terms. To the extent permitted by applicable law, in the event of any
inconsistency between the terms of this Security and the terms of the Indenture,
the terms of the Indenture shall control.
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<PAGE>
The Securities are general unsecured obligations of Holdings. The
Indenture limits the aggregate principal amount of the Securities to
$57,650,103.55 at final maturity.
5. REDEMPTION.
Except as set forth in the next paragraph, the Securities may not be
redeemed prior to July 1, 2001. On and after that date, Holdings may redeem the
Securities in whole or in part at any time or from time to time, upon not less
than 30 nor more than 60 days prior notice mailed by first-class mail to each
Holder's registered address, at the following redemption prices (expressed in
percentages of Accreted Value), plus accrued interest to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the related interest payment date), if redeemed during
the 12-month period commencing on July 1 of the years set forth below:
REDEMPTION
PERIOD PRICE
------ ----------
2001 106.75%
2002 104.50%
2003 102.25%
2004 and thereafter 100.00%
[In addition, at any time prior to July 1, 1999, Holdings may redeem in
the aggregate up to 100% of the aggregate Accreted Value of the Securities with
the proceeds of one or more Public Equity Offerings following which there is a
Public Market, at a redemption price (expressed as a percentage of principal
amount) of ___% of the Accreted Value plus accrued interest, if any, to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the related interest payment date).]
Notice of a redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each Holder of Securities to be redeemed
at such Holder's last address as it appears in the Security Register. Securities
in original denominations larger than $1,000 at final maturity may be redeemed
in part in integral multiples of $1,000 at final maturity. On and after the
Redemption Date, interest ceases to accrue on Securities or portions of
Securities called for redemption, unless Holdings defaults in the payment of the
Redemption Price.
6. REPURCHASE UPON A CHANGE IN CONTROL OR UPON CERTAIN ASSET SALES.
Subject to the terms and conditions in the Indenture, upon the occurrence
of a Change of Control, each Holder shall have the right to require that
Holdings repurchase such Holder's Securities, in whole or in part, in integral
multiples of $1,000, at a purchase price in cash in an amount equal to 101% of
the principal amount thereof, plus accrued interest (if any) to the date of
purchase (the "Change of Control Payment Date").
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<PAGE>
A notice of each Change of Control will be mailed within 30 days after
such Change of Control occurs to each Holder at such Holder's last address as it
appears in the Security Register. Securities in original denominations larger
than $1,000 may be sold to Holdings in part. On and after the Change of Control
Payment Date, interest ceases to accrue on Securities or portions of Securities
surrendered for purchase by Holdings, unless Holdings defaults in the payment of
the Change of Control payment.
Subject to the terms and conditions in the Indenture, within 30 days after
the date on which the aggregate amount of Net Available Cash from all Asset
Dispositions which are not applied in accordance with Section 10.11 of the
Indenture exceeds $3.5 million, Holdings will be required to offer to repurchase
Securities with such Net Available Cash, at a purchase price in cash equal to
100% of the Accreted Value thereof, plus accrued and unpaid interest, if any, to
the date of purchase. A notice of redemption will be mailed within 30 days after
the date on which aggregate Net Available Cash from all Asset Dispositions which
are not applied in accordance with Section 10.11 of the Indenture exceeds $3.5
million to each Holder at such Holder's last address as it appears on the
Security Register. If the aggregate principal amount of Securities surrendered
by Holders exceeds the amount of Excess Proceeds required to be used to purchase
Securities, Holdings shall select the Securities to be purchased on a pro rata
basis, so that only Securities in denominations of $1,000 principal amount at
final maturity or integral multiples thereof, shall be purchased.
7. DENOMINATIONS; TRANSFER; EXCHANGE.
The Securities are in registered form without coupons, in denominations of
$1,000 principal amount at final maturity and multiples of $1,000 in excess
thereof. A Holder may register the transfer or exchange of Securities in
accordance with the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
need not register the transfer or exchange of any Securities selected for
redemption (except the unredeemed portion of any Security being redeemed in
part). Also, it need not register the transfer or exchange of any Securities for
a period of 15 days before a selection of Securities to be redeemed is made.
8. PERSONS DEEMED OWNERS.
A Holder may be treated as the owner of a Security for all purposes.
9. UNCLAIMED MONEY.
If money for the payment of principal, premium, if any, or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to Holdings at its request. After that, Holders entitled to the money
must look to Holdings for payment, unless an abandoned
A-6
<PAGE>
property law designates another Person, and all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
10. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the consent of the Holders of at least a majority
in aggregate principal amount of the Securities then outstanding, and any
existing default or compliance with any provision may be waived with the consent
of the Holders of a majority in aggregate principal amount of the Securities
then outstanding. Without notice to or the consent of any Holder, the parties
thereto may amend or supplement the Indenture or the Securities to, among other
things, cure any ambiguity, or inconsistency provided such change does not
materially adversely affect the rights of any Holder.
11. RESTRICTIVE COVENANTS.
The Indenture imposes certain limitations on the ability of Holdings and
its Subsidiaries, among other things, to incur additional Indebtedness, grant
Liens, make Restricted Payments, issue Preferred Stock, guarantee Indebtedness,
use the proceeds from Asset Dispositions, engage in transactions with Affiliates
or merge, consolidate or transfer substantially all of its assets. At the end of
each fiscal year, Holdings must report to the Trustee on compliance with such
limitations.
12. SUCCESSOR PERSONS.
When a successor person or other entity assumes all the obligations of its
predecessor under the Securities and the Indenture, the predecessor person will
be released from those obligations.
13. DEFAULTS AND REMEDIES.
The following events constitute "Events of Default" under the Indenture:
(a) Holdings shall default in the payment of any interest on any Security when
the same becomes due and payable and such default continues for a period of 30
days; (b) Holdings (i) defaults in the payment of the principal of any Security
when the same becomes due and payable at its Stated Maturity, upon optional
redemption, upon declaration or otherwise, or (ii) fails to redeem or purchase
Securities when required pursuant to this Indenture or the Securities; (c)
Holdings or TPC Holding fails to comply with Section 8.01; (d) Holdings fails to
comply with Section 10.05, 10.06, 10.07, 10.08, 10.09, 10.10, 10.11, 10.12,
10.13, or 10.14 (other than a failure to purchase Securities) and such failure
continues for 30 days after the notice specified below; (e) Holdings fails to
comply with any of its agreements in the Securities or this Indenture (other
than those referred to in (1), (2), (3) or (4) above) and such failure continues
for 60 days after the notice specified below; (f) Indebtedness of Holdings or
any Significant Subsidiary is not paid within any applicable grace period after
final maturity or is accelerated by the holders thereof because of default and
the total amount of such
A-7
<PAGE>
Indebtedness unpaid or accelerated exceeds $5,000,000 or its foreign currency
equivalent at the time; (g) the TPC Holding Guarantee shall for any reason cease
to be, or be asserted in writing by Holdings or TPC Holding not to be, in full
force and effect, enforceable in accordance with its terms, except to the extent
contemplated by the Indenture and the TPC Holding Guarantee any judgment or
decree for the payment of money in excess of $5,000,000 or its foreign currency
equivalent at the time is entered against Holdings or any Significant Subsidiary
and is not discharged and either (A) an enforcement proceeding has been
commenced by any creditor upon such judgment or decree of (B) there is a period
of 60 days following the entry of such judgment or decree during which such
judgment or decree is not discharged, waived or the execution thereof stayed
within 10 days after the notice specified below; or (i) the occurrence of
certain events of bankruptcy, insolvency or reorganization with respect to the
Company or any Restricted Subsidiary which is a Significant Subsidiary thereof.
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee or the Holders of at least 25 % in principal amount of
the Securities then outstanding may declare all the Securities to be immediately
due and payable. If a bankruptcy or insolvency default with respect to Holdings
or any of its Significant Subsidiaries occurs and is continuing, the Securities
automatically become immediately due and payable. Holders may not enforce the
Indenture or the Securities except as provided in the Indenture. The Trustee may
require indemnity satisfactory to it before it enforces the Indenture or the
Securities. Subject to certain limitations, Holders of at least a majority in
principal amount of the Securities then outstanding may direct the Trustee in
its exercise of any trust or power.
14. TRUSTEE DEALINGS WITH HOLDINGS.
The Trustee under the Indenture, in its individual or any other capacity,
may become the owner or pledgee of Securities and may make loans to, accept
deposits from, perform services for, and otherwise deal with, Holdings and its
Affiliates as if it were not the Trustee.
15. AUTHENTICATION.
This Security shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on the other side of this Security.
16. DEFEASANCE.
The Indenture contains provisions for defeasance, at any time, of the
Indebtedness represented by this Security or the covenants governing the
Indebtedness represented by this Security, upon compliance by Holdings with
certain conditions set forth in the Indenture.
A-8
<PAGE>
17. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
Holdings will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to Texas Petrochemical
Holdings, Inc., 8600 Park Place Boulevard, Houston, Texas 77017, Attention:
Chief Financial Officer.
A-9
<PAGE>
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
INSERT TAXPAYER IDENTIFICATION NO.
(Please print or typewrite name and address including zip code of assignee)
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing
attorney to transfer such Security on the books of Holdings with full power of
substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES
EXCEPT PERMANENT OFFSHORE
PHYSICAL CERTIFICATES]
In connection with any transfer of this Security occurring prior to the
date which is the earlier of the date of an effective Registration Statement or
___________, 1999, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[CHECK ONE]
[ ] (a) this Security is being transferred in compliance with the
exemption from registration under the Securities Act of 1933, as
amended, provided by Rule 144A thereunder.
or
[ ] (b) this Security is being transferred other than in accordance
with (a) above and documents are being furnished which comply with
the conditions of transfer set forth in this Security and the
Indenture.
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Security in the name of any Person other than
the Holder hereof unless and until the
A-10
<PAGE>
conditions to any such transfer of registration set forth herein and in Section
3.07 of the Indenture shall have been satisfied.
Date:______________
NOTICE: The signature to this assignment must
correspond with the name as written upon the face
of the within-mentioned instrument in every
particular, without alteration or any change
whatsoever.
Signature Guarantee*:
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding
Holdings as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated:____________
NOTICE: To be executed by an executive
officer
- --------
* Guarantor must be a member of the Securities Transfer Agents Medallion
Program ("STAMP"), the New York Stock Exchange Medallion Signature Program
("MSP") or the Stock Exchange Medallion Program ("SEMP").
A-11
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by Holdings pursuant to
Section 10.05 or Section 10.11 of the Indenture, check the Box: [ ].
If you wish to have a portion of this Security purchased by Holdings
pursuant to Section 10.11 of the Indenture, state the amount (in original
principal amount) below:
$_____________
Date: ______________
Your Signature*: ________________________________________
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee:___________________________________
________
* Guarantor must be a member of the Securities Transfer Agents Medallion
Program ("STAMP"), the New York Stock Exchange Medallion Signature Program
("MSP") or the Stock Exchange Medallion Program ("SEMP").
A-12
<PAGE>
EXHIBIT B
Form of Certificate
to be Delivered Upon
TERMINATION OF RESTRICTED PERIOD
[On or after August 9], 1996
Fleet National Bank, Trustee
777 Main Street
Hartford, CT 06115
Re: Texas Petrochemical Holdings, Inc. ("Holdings") [Series B]* Senior
Discount Notes due 2007 (the "Securities")
Ladies and Gentlemen:
This letter relates to U.S. $___________ principal amount at final maturity of
Securities represented by the temporary global note certificate (the "Temporary
Certificate"). Pursuant to Section 2.01 of the Indenture dated as of July 1,
1996 relating to the Securities (the "Indenture"), we hereby certify that (1) we
are the beneficial owner of such principal amount of Securities represented by
the Temporary Certificate and (2) we are a person outside the United States to
whom the Securities could be transferred in accordance with Rule 904 of
Regulation S promulgated under the U.S. Securities Act of 1933, as amended.
Accordingly, you are hereby requested to issue a Certificated Note representing
the undersigned's interest in the principal amount of Securities represented by
the Temporary Certificate, all in the manner provided by the Indenture.
You and Holdings are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby. Terms used in this certificate have the meanings set
forth in Regulation S.
Very truly yours,
[Name of Holder]
By:
Authorized Signature
- --------
* Include only for Exchange Securities.
B-1
<PAGE>
EXHIBIT C
Form of Certificate to Be
Delivered in Connection with
TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS
Fleet National Bank, Trustee
777 Main Street
Hartford, CT 06115
Re: Texas Petrochemical Holdings, Inc. ("Holdings") Senior Discount
Notes due 2007 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed purchase of $_________ aggregate principal
amount of the Securities:
1. We understand that the sale of the Securities has not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), and may not
be offered or sold except as permitted in the following sentence. We agree on
our own behalf and on behalf of any investor account for which we are purchasing
the Securities, that if we should sell any securities, to offer, sell or
otherwise transfer such Securities prior to the date which is three years after
the later of the date of original issue and the last date on which Holdings or
any affiliate of Holdings was the owner of such Securities, or any predecessor
thereto (the "Resale Restriction Termination Date") only (a) to Holdings, (b)
pursuant to a registration statement which has been declared effective under the
Securities Act, (c) for so long as the Securities are eligible for resale
pursuant to Rule 144A under the Securities Act, to a person we reasonably
believe is a qualified institutional buyer under Rule 144A (a "QIB") that
purchases for its own account or for the account of a QIB and to whom notice is
given that the transfer is being made in reliance on Rule 144A, (d) pursuant to
offers and sales to non-U.S. persons that occur outside the United States within
the meaning of Regulations S under the Securities Act, (e) to an institutional
"accredited investor" within the meaning of subparagraph (a)(1), (2), (3) or (7)
of Rule 501 under the Securities Act that is acquiring the Securities for its
own account or for the account of such an institutional "accredited investor"
for investment purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities Act or (f)
pursuant to any other available exemption from the registration requirements of
the Securities Act, subject in each of the foregoing cases to any requirement of
law that the disposition of our property or the property of such investor
account or accounts be at all times within our or their control and to
compliance with any applicable state securities laws. The foregoing restrictions
on resale will not apply subsequent to the Resale Restriction Termination Date.
If any
<PAGE>
resale or other transfer of the Securities is proposed to be made pursuant to
clause (e) above prior to the Resale Restriction Termination Date, the
transferor shall deliver a letter from the transferee substantially in the form
of this letter to the Trustee, which shall provide, among other things, that the
transferee is an institutional "accredited investor" within the meaning of
subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act and
that it is acquiring such Securities for investment purposes and not for
distribution in violation of the Securities Act. Each purchaser acknowledges
that Holdings and the Trustee reserve the right prior to any offer, sale or
other transfer prior to the Resale Restriction Termination Date of the
Securities pursuant to clauses (d), (e) and (f) above to require the delivery of
an opinion of counsel, certifications and/or other information satisfactory to
Holdings and the Trustee.
2. We are an institutional "accredited investor" (as defined in Rule 501
(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) purchasing for
our own account or for the account of such an institutional "accredited
investor," and we are acquiring the Securities for investment purposes and not
with a view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act and we have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of our investment in the Securities, and we and any accounts for which we
are acting are each able to bear the economic risk of our or its investment.
3. We are acquiring the Securities purchased by us for our own account or
for one or more accounts as to each of which we exercise sole investment
discretion.
4. You and Holdings are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
By:
(NAME OF PURCHASER)
Date:
C-2
<PAGE>
Upon transfer, the Notes should be registered in the name of the new
beneficial owner as follows:
Name:________________________________
Address:______________________________
Taxpayer ID Number:___________________
C-3
<PAGE>
EXHIBIT D
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
_________, ____
Fleet National Bank, Trustee
777 Main Street
Hartford, CT 06115
Re: Texas Petrochemical Holdings, Inc. (the "Company") Senior Discount
Notes due 2007 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of $________ aggregate principal
amount of the Securities, we confirm that such sale has been effected pursuant
to and in accordance with Regulation S under the Securities Act of 1933, as
amended, and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person in the
United States;
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933, as amended,
and we have advised the transferee of the transfer restrictions applicable
to the Securities. In addition, if the sale is made during a restricted
period and the provisions of Rule 903(c)(3) or Rule 904(c)(1) of
<PAGE>
Regulation S are applicable thereto, we confirm that such sale has been
made in accordance with the applicable provisions of Rule 903(c)(3) or
Rule 904(c)(1), as the case may be.
You and Holdings are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby. Terms used in this certificate have the meanings set
forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
Authorized Signature
D-2
EXHIBIT 5
October 14, 1997
Texas Petrochemical Holdings, Inc.
Three Riverway, Suite 1500
Houston, TX 77056
Ladies and Gentlemen:
We have acted as counsel to Texas Petrochemical Holdings, Inc., a Delaware
corporation (the "Company"), in connection with the issuance by the Company of
$57,650,103.55 aggregate principal amount at final maturity of 13.5% Senior
Discount Notes due 2007 (the "Discount Notes"). The Company has agreed to file
with the Securities and Exchange Commission (the "Commission") a registration
statement on Form S-1 (the "Registration Statement"), under the Securities Act
of 1933, as amended (the "Securities Act"), to be used by The Huff Alternative
Income Fund, L.P., the sole holder of the Discount Notes, in connection with its
sale from time to time of the Discount Notes.
We have examined originals or copies certified by officers of the Company of (a)
the Indenture dated as of July 1, 1996 (the "Indenture"), by and between the
Company, TPC Holding Corp. and Fleet National Bank, as Trustee (the "Trustee"),
pursuant to which the Discount Notes were issued, (b) the Certificate of
Incorporation, as amended, of the Company, (c) the Bylaws, as amended, of the
Company, (d) certain resolutions adopted by the Board of Directors of the
Company, and (e) such other documents and records as we have deemed necessary
and relevant for the purposes hereof. In addition, we have relied on
certificates of officers of the Company and of public officials and others as to
certain matters of fact relating to this opinion and have made such
investigations of law as we have deemed necessary and relevant as a basis
hereof. In such examination and investigation, we have assumed the genuineness
of all signatures, the authenticity of all documents and records submitted to us
as copies, the conformity to authentic original documents and records of all
documents and records submitted to us as copies, and the truthfulness of all
statements of fact contained therein. We have also assumed the due
authorization, execution and delivery of the Indenture by a duly authorized
officer of the Trustee.
<PAGE>
Texas Petrochemical Holdings, Inc.
October 14, 1997
Page 2
Based on the foregoing, subject to the limitations, assumptions and
qualifications set forth herein, and having due regard for such legal
considerations as we deem relevant, we are of the opinion that:
1. the Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware; and
2. the Discount Notes have been validly authorized and issued, and are
legally binding obligations of the Company entitled to the benefits
of the Indenture.
We advise you that members of this firm own less than 0.5% of the outstanding
common stock of the Company.
We hereby consent to the filing of this opinion with the Commission as Exhibit 5
to the Registration Statement and to the references to our firm under the
heading "Legal Matters" in the Prospectus included in the Registration
Statement. By giving such consent, we do not admit that we are experts with
respect to any part of the Registration Statement, including this Exhibit,
within the meaning of the term "expert" as used in the Securities Act or the
rules and regulations issued thereunder.
Very truly yours,
Bracewell & Patterson, L.L.P.
EXHIBIT 8
October 14, 1997
Texas Petrochemical Holdings, Inc.
Three Riverway, Suite 1500
Houston, Texas 77056
Ladies and Gentlemen:
We have acted as counsel to Texas Petrochemical Holdings, Inc., a Delaware
corporation (the "Company"), in connection with the registration by the Company
of its 13.5% Senior Discount Notes due 2007 (the "Discount Notes"). The Company
has filed with the Securities and Exchange Commission (the "Commission") a
registration statement on Form S-1 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act").
We have examined originals or copies of the Registration Statement and of (a)
the Indenture dated as of July 1, 1996 (the "Indenture") by and between the
Company, TPC Holding Corp. and Fleet National Bank, as Trustee (the "Trustee"),
pursuant to which the Discount Notes were issued, (b) the Certificate of
Incorporation, as amended, and the Bylaws, as amended, of the Company, (c)
certain resolutions of the Board of Directors of the Company, and (d) such other
documents and records as we have deemed necessary and relevant for the purposes
hereof. In addition, we have relied on certificates of officers of the Company
and of public officials and others as to certain matters of fact relating to
this opinion and have made such investigations of law as we have deemed
necessary and relevant as a basis hereof. In such examination and investigation,
we have assumed the genuineness of all signatures, the authenticity of all
documents and records submitted to us as originals, the conformity to authentic
original documents and records of all documents and records submitted to us as
copies and the truthfulness of all statements of fact contained therein. We have
also assumed the due authorization, execution and delivery of the Indenture by a
duly authorized officer of the Trustee.
Based upon and subject to the foregoing, and having regard for legal
considerations which we deem relevant, we hereby confirm, and adopt as our
opinion, the statements of legal
<PAGE>
Texas Petrochemical Holdings, Inc.
October 14, 1997
Page 2
matters contained in the Prospectus included in the Registration Statement under
the caption "Certain Federal Income Tax Considerations."
We hereby consent to the filing of this opinion with the Commission as Exhibit 8
to the Registration Statement and to the references to our firm under the
caption "Certain Federal Income Tax Considerations" in the Prospectus included
in the Registration Statement. By giving such consent, we do not admit that we
are experts with respect to any part of the Registration Statement, including
this Exhibit, within the meaning of the term "expert" as used in the Securities
Act or the rules and regulations issued thereunder.
Very truly yours,
Bracewell & Patterson, L.L.P.
EXHIBIT 10.15
INDEMNITY AGREEMENT
This Indemnity Agreement ("Agreement") is made and entered into by and
between TEXAS PETROCHEMICAL HOLDINGS, INC., a Delaware corporation ("Company"),
and _______________ ("Indemnitee").
INTRODUCTION
Indemnitee is a director, officer or employee of the Company. The parties
desire that the Company provide indemnification (including advancement of
expenses) to Indemnitee against any and all liabilities asserted against
Indemnitee to the fullest extent permitted by the Delaware General Corporation
Law ("Act"), as the Act presently exists and may be expanded from time to time.
Based on such premise, and for certain good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. CONTINUED SERVICE. Indemnitee will serve at the will of the Company or
under separate contract, if such exists, as a director and/or officer of the
Company for so long as Indemnitee is duly elected and qualified in accordance
with the Bylaws of the Company or until Indemnitee tenders her resignation to
the Company, or as an employee for so long as she is employed by the Company.
2. INDEMNIFICATION. The Company shall indemnify Indemnitee as follows:
2.1. The Company shall indemnify Indemnitee when Indemnitee was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company), by
reason of the fact that Indemnitee is or was a director, officer, employee or
agent of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by Indemnitee in connection with such action, suit or proceeding if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in or not opposed to the best interests of the Company, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe that
Indemnitee's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement or conviction or upon a plea of nolo
contendere or its equivalent shall not, of itself, create a presumption that
Indemnitee did not act in good faith
<PAGE>
and in a manner which Indemnitee reasonably believed to be in or not opposed to
the best interests of the Company, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that Indemnitee's conduct was
unlawful.
2.2. The Company shall indemnify Indemnitee when Indemnitee was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Company to procure a judgment
in its favor by reason of the fact that Indemnitee is or was a director,
officer, employee or agent of the Company, or is or was serving at the request
of the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by Indemnitee in
connection with the defense or settlement of such action or suit if Indemnitee
acted in good faith and in a manner that Indemnitee reasonably believed to be in
or not opposed to the best interests of the Company and except that no
indemnification pursuant to this Agreement shall be made in respect of any
claim, issue or matter as to which Indemnitee shall have been adjudged to be
liable to the Company unless and only to the extent that the Court of Chancery
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
2.3. Any indemnification under Sections 2.1 and 2.2 (unless ordered
by a court) shall be made by the Company only as authorized in the specific case
upon a determination, in accordance with the procedures set forth in Section 3,
that indemnification of Indemnitee is proper in the circumstances because
Indemnitee has met the applicable standard of conduct set forth in such Sections
2.1 and 2.2. Such determination shall be made (1) by the board of directors of
the Company by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (2) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders of the Company.
2.4. Expenses (including attorneys' fees) incurred by Indemnitee in
defending any civil, criminal, administrative, or investigative action, suit or
proceeding shall be paid by the Company in advance of the final disposition of
such action, suit or proceeding, as authorized in the manner provided in Section
2.3, within 14 days after the receipt by the Company from Indemnitee of a
Statement of Undertaking in substantially the form set forth in Exhibit A, in
which Indemnitee (1) states that Indemnitee has reasonably incurred actual
expenses in defending a civil, criminal, administrative, or investigative
action, suit or proceeding and (2) undertakes to repay such amount
-2-
<PAGE>
if it shall ultimately be determined that Indemnitee is not entitled to be
indemnified by the Company as authorized in this Section 2.
2.5. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 2 shall not be deemed exclusive of any other
rights to which Indemnitee may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
Indemnitee's official capacity and as to action in another capacity while
holding such office, shall continue after Indemnitee has ceased to be a
director, officer, employee or agent of the Company, and shall inure to the
benefit of the heirs, executors and administrators of Indemnitee.
3. DETERMINATION OF RIGHT TO INDEMNIFICATION. For the purpose of making
the determination of whether to indemnify Indemnitee in a specific case under
Section 2.3, the board of directors of the Company, independent legal counsel or
stockholders, as the case may be, shall make the determination in accordance
with the following procedures:
3.1. Indemnitee shall submit to the board of directors a Statement
of Request for Indemnification in substantially the form set forth in Exhibit B,
in which Indemnitee states that Indemnitee has met the applicable standard of
conduct set forth in Sections 2.1 and 2.2.
3.2. Indemnitee's submission of a Statement of Request for
Indemnification to the board of directors shall create a rebuttable presumption
that Indemnitee has met the applicable standard of conduct set forth in Sections
2.1 and 2.2 and, therefore, is entitled to indemnification under Section 2. The
board of directors, independent legal counsel or stockholders, as the case may
be, shall determine, within 30 days after submission of the Statement of Request
for Indemnification, specifically that Indemnitee is so entitled, unless it or
they shall possess clear and convincing evidence to rebut the foregoing
presumption, which evidence shall be disclosed to Indemnitee with particularity
in a sworn written statement signed by all persons who participated in the
determination and voted to deny indemnification.
4. MERGER, CONSOLIDATION OR CHANGE IN CONTROL. If the Company is a
constituent corporation in a merger or consolidation, whether the Company is the
resulting or surviving corporation or is absorbed as a result thereof, or if
there is a change in control of the Company, Indemnitee shall stand in the same
position under this Agreement with respect to the resulting, surviving or
changed corporation as Indemnitee would have with respect to the Company if its
separate existence had continued or if there had been no change in the control
of the Company.
-3-
<PAGE>
5. CERTAIN DEFINITIONS. For the purposes of this Agreement, the following
terms shall have the indicated meanings and understandings:
5.1. The term "other enterprise" shall include, among others,
employee benefit plans and civic, non-profit and charitable organizations,
whether or not incorporated.
5.2. The term "fines" shall include any excise taxes assessed on
Indemnitee with respect to any employee benefit plan.
5.3. The term "serving at the request of the Company" shall include
any service, at the request or with the express or implied authorization of the
Company, as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, which service imposes
duties on, or involves services by, Indemnitee with respect to such corporation,
partnership, joint venture, trust or other enterprise, its participants or
beneficiaries. If Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of such other
enterprise, its participants or beneficiaries, Indemnitee shall be deemed to
have acted in a manner not opposed to the best interests of the Company.
5.4. The term "change of control" shall include any change in the
ownership of a majority of the outstanding voting securities of the Company or
in the composition of a majority of the members of the board of directors of the
Company.
6. ATTORNEYS' FEES. If Indemnitee institutes any legal action to enforce
Indemnitee's rights under this Agreement, or to recover damages for breach of
this Agreement, Indemnitee, if Indemnitee prevails in whole or in part, shall be
entitled to recover from the Company all fees and expenses (including attorneys'
fees) incurred by Indemnitee in connection therewith.
7. DEPOSIT OF FUNDS IN TRUST. If the Company voluntarily decides to
dissolve or to file a petition for relief under the applicable bankruptcy,
moratorium or similar laws, then not later than 10 days prior to such
dissolution or filing, the Company shall deposit in trust for the sole and
exclusive benefit of Indemnitee a cash amount equal to all amounts previously
authorized to be paid to Indemnitee hereunder, such amounts to be used to
discharge the Company's obligations to Indemnitee hereunder. Any amounts in such
trust not required for such purpose shall be returned to the Company. This
Section 7 shall not apply to the dissolution of the Company in connection with a
transaction as to which Section 4 applies.
8. AMENDMENTS TO ACT. This Agreement is intended to provide indemnity to
Indemnitee to the fullest extent allowed under Delaware law. Accordingly, to the
extent permitted by law, if the
-4-
<PAGE>
Act permits greater indemnity than the indemnity set forth herein, or if any
amendment is made to the Act expanding the indemnity permissible under Delaware
law, the indemnity obligations contained herein automatically shall be expanded,
without the necessity of action on the part of any party, to the extent
necessary to provide to Indemnitee the fullest indemnity permissible under
Delaware law.
9. MISCELLANEOUS PROVISIONS.
9.1. SURVIVAL. The provisions of this Agreement shall survive the
termination of Indemnitee's service as a director, officer or employee of the
Company.
9.2. ENTIRE AGREEMENT. This Agreement constitutes the full
understanding of the parties and a complete and exclusive statement of the terms
and conditions of their agreement relating to the subject matter hereof and
supersedes all prior negotiations, understandings and agree ments, whether
written or oral, between the parties, their affiliates, and their respective
principals, shareholders, directors, officers, employees, consultants and agents
with respect thereto.
9.3. AMENDMENTS AND WAIVERS. No alteration, modification, amendment,
change or waiver of any provision of this Agreement shall be effective or
binding on any party hereto unless the same is in writing and is executed by all
parties hereto.
9.4. MODIFICATION AND SEVERABILITY. If a court of competent
jurisdiction declares that any provision of this Agreement is illegal, invalid
or unenforceable, then such provision shall be modified automatically to the
extent necessary to make such provision fully legal, valid or enforceable. If
such court does not modify any such provision as contemplated herein, but
instead declares it to be wholly illegal, invalid or unenforceable, then such
provision shall be severed from this Agreement, this Agreement and the rights
and obligations of the parties hereto shall be construed as if this Agreement
did not contain such severed provision, and this Agreement otherwise shall
remain in full force and effect.
9.5. ENFORCEABILITY. This Agreement shall be enforceable by and
against the Company, the Indemnitee and their respective executors, legal
representatives, administrators, heirs, successors and assignees.
9.6. GOVERNING LAW. This Agreement shall be governed by, construed
under, and enforce in accordance with the laws of the State of Delaware without
reference to the conflict-of-laws provisions thereof.
-5-
<PAGE>
9.7. MULTIPLE COUNTERPARTS. This Agreement may be executed by the
parties hereto in multiple counterparts, each of which shall be deemed an
original for all purposes, and all of which together shall constitute one and
the same instrument.
The parties hereto have executed this Agreement effective as of ______,
199_.
COMPANY:
By:_________________________
B.W. WAYCASTER, PRESIDENT
INDEMNITEE:
By:_________________________
-6-
<PAGE>
EXHIBIT A
STATEMENT OF UNDERTAKING
STATE OF __________________ ss.
ss.
COUNTY OF _________________ ss.
I, __________________________________, being first duly sworn, depose and
say as follows:
1. This Statement of Undertaking is submitted pursuant to the Indemnity
Agreement dated ______________, between _____________________, a Delaware
corporation ("Company"), and me.
2. I am requesting the advancement of certain actual expenses which I have
reasonably incurred in defending a civil or criminal action, suit or proceeding
by reason of the fact that I am or was a director, officer or employee of the
Company.
3. I hereby undertake to repay this advancement of expenses if it is
ultimately determined that I am not entitled to be indemnified by the Company.
4. I am requesting the advancement of expenses in connection with the
following action, suit or proceeding:
I have executed this Statement of Undertaking on _______________________.
_______________________________
Signature
_______________________________
Print Name
Subscribed and sworn to before me on ___________________.
_______________________________
Notary Public in and for
said state and county
My commission expires:_________
<PAGE>
EXHIBIT B
STATEMENT OF REQUEST FOR INDEMNIFICATION
STATE OF __________________ ss.
ss.
COUNTY OF _________________ ss.
I, ___________________________________, being first duly sworn, depose and
say as follows:
1. This Statement of Request for Indemnification is submitted pursuant to
the Indemnity Agreement dated _________________, between ____________________, a
Delaware corporation ("Company"), and me.
2. I am requesting indemnification against expenses (including attorneys'
fees) and, with respect to any action not by or in the right of the Company,
judgments, fines and amounts paid in settlement, all of which have been actually
and reasonably incurred by me in connection with a certain action, suit or
proceeding to which I am a party or am threatened to be made a party by reason
of the fact that I am or was a director, officer or employee of the Company.
3. With respect to all matters related to any such action, suit or
proceeding, I acted in good faith and in a manner I reasonably believed to be in
or not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, I had no reason to believe that my conduct was
unlawful.
4. I am requesting indemnification in connection with the following suit,
action or proceeding:
I have executed this Statement of Request for Indemnification on
______________________.
_______________________________
Signature
_______________________________
Print Name
Subscribed and sworn to before me on ___________________.
_______________________________
Notary Public in and for
said state and county
My Commission expires:_________
EXHIBIT 12
TEXAS PETROCHEMICAL HOLDINGS, INC. (AND PREDECESSOR)
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS, EXCEPT RATIO)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED MAY 31, TWELVE ONE MONTH
------------------------------- MONTHS ENDED ENDED YEAR ENDED
1993 1994 1995 MAY 31, 1996 JUNE 30, 1996 JUNE 30, 1997
--------- --------- --------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before income taxes and
minority interest.................. $ 41,081 $ 52,303 $ 49,268 $24,508 $ 1,988 $ (18,850)
Interest expense..................... 1,087 663 475 2,343 98 39,386
Interest portion of rental expense... 1,630 1,430 1,470 1,600 140 1,600
--------- --------- --------- ------------- ------------- -------------
Earnings....................... $ 43,798 $ 54,396 $ 51,213 $28,451 $ 2,226 $ 22,136
========= ========= ========= ============= ============= =============
Fixed Charges:
Interest expense................... $ 1,087 $ 663 $ 475 $ 2,343 $ 98 $ 39,386
Interest portion of rental
expense.......................... 1,630 1,430 1,470 1,600 140 1,600
--------- --------- --------- ------------- ------------- -------------
Total fixed charges............ $ 2,717 $ 2,093 $ 1,945 $ 3,943 $ 238 $ 40,986(1)
========= ========= ========= ============= ============= =============
Ratio of earnings to fixed
charges.......................... 16.1x 26.0x 26.3x 7.2x(3) 9.4x --
<CAPTION>
PRO FORMA PRO FORMA
TWELVE ONE MONTH
MONTHS ENDED ENDED
MAY 31, 1996 JUNE 30, 1996
------------ -------------
<S> <C> <C>
Loss before income taxes and minority
interest........................... $ (13,800) $(1,950)
Interest expense..................... 36,100 2,850
Interest portion of rental expense... 1,600 140
------------ -------------
Earnings...................... $ 23,900 $ 1,040
============ =============
Fixed Charges:
Interest expense................... $ 36,100 $ 2,850
Interest portion of rental
expense......................... 1,600 140
------------ -------------
Total fixed charges........... $ 37,700 $ 2,990
============ =============
Ratio of earnings to fixed
charges......................... -- (2) -- (2)
============ =============
</TABLE>
- ------------
(1) For the year ended June 30, 1997, earnings were insufficient to cover fixed
charges by the amount of $18.8 million.
(2) For the pro forma twelve months ended May 31, 1996 and the one month ended
June 30, 1996, earnings were insufficient to cover fixed charges in the
amount of $13.8 million and $1.9 million, respectively.
(3) For the twelve months ended May 31, 1996, income before taxes and minority
interest includes a $12.6 million non-cash provision for the impairment of
certain non-strategic properties which TPC intends to sell.
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
TPC Holding Corp., a Delaware corporation, is a subsidiary of the
registrant.
Texas Petrochemicals Corporation, a Texas corporation, is a subsidiary of
TPC Holding Corp.
Texas Butylene Chemical Corporation, a Texas corporation, is a subsidiary of
Texas Petrochemicals Corporation.
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our reports dated August 16, 1996, on our audits of the financial statements of
Texas Olefins Company, subsidiaries and affiliate (predecessor to Texas
Petrochemical Holdings, Inc.), which includes an explanatory paragraph relating
to changes in accounting principles. We also consent to the reference to our
firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Houston, Texas
October 14, 1997
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Texas Petrochemical
Holdings, Inc. on Form S-1 of our report dated August 1, 1997 appearing in the
Prospectus, which is a part of such Registration Statement, and to the reference
to us under the headings "Selected Financial Data" and "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
Houston, Texas
October 14, 1997
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Texas Petrochemical Holdings, Inc., a Delaware Corporation (the
"Company"), of its 13.5% Senior Discount Notes due 2007, the undersigned officer
or director of the Company, hereby constitutes and appoints Stephen R. Wright
and Claude E. Manning, and each of them (with full power to each of them to act
alone), the undersigned's true and lawful attorney-in-fact and agent, for the
undersigned and on the undersigned's behalf and in the undersigned's name, place
and stead, in any and all capacities, to sign, execute and file with the
Securities and Exchange Commission the Company's Registration Statement on Form
S-1 (or other appropriate form), together with all amendments or supplements
thereto, with all exhibits and any and all documents required to be filed with
respect thereto with any regulatory authority, granting unto said attorneys, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or either of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 30th of September, 1997.
/S/ WILLIAM A. MCMINN
William A. McMinn
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Texas Petrochemical Holdings, Inc., a Delaware Corporation (the
"Company"), of its 13.5% Senior Discount Notes due 2007, the undersigned officer
or director of the Company, hereby constitutes and appoints Stephen R. Wright
and Claude E. Manning, and each of them (with full power to each of them to act
alone), the undersigned's true and lawful attorney-in-fact and agent, for the
undersigned and on the undersigned's behalf and in the undersigned's name, place
and stead, in any and all capacities, to sign, execute and file with the
Securities and Exchange Commission the Company's Registration Statement on Form
S-1 (or other appropriate form), together with all amendments or supplements
thereto, with all exhibits and any and all documents required to be filed with
respect thereto with any regulatory authority, granting unto said attorneys, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or either of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 30th day of September, 1997.
/S/ GORDON A. CAIN
Gordon A. Cain
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Texas Petrochemical Holdings, Inc., a Delaware Corporation (the
"Company"), of its 13.5% Senior Discount Notes due 2007, the undersigned officer
or director of the Company, hereby constitutes and appoints Stephen R. Wright
and Claude E. Manning, and each of them (with full power to each of them to act
alone), the undersigned's true and lawful attorney-in-fact and agent, for the
undersigned and on the undersigned's behalf and in the undersigned's name, place
and stead, in any and all capacities, to sign, execute and file with the
Securities and Exchange Commission the Company's Registration Statement on Form
S-1 (or other appropriate form), together with all amendments or supplements
thereto, with all exhibits and any and all documents required to be filed with
respect thereto with any regulatory authority, granting unto said attorneys, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or either of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 30th day of September, 1997.
/S/ STEVE A. NORDAKER
Steve A. Nordaker
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Texas Petrochemical Holdings, Inc., a Delaware Corporation (the
"Company"), of its 13.5% Senior Discount Notes due 2007, the undersigned officer
or director of the Company, hereby constitutes and appoints Stephen R. Wright
and Claude E. Manning, and each of them (with full power to each of them to act
alone), the undersigned's true and lawful attorney-in-fact and agent, for the
undersigned and on the undersigned's behalf and in the undersigned's name, place
and stead, in any and all capacities, to sign, execute and file with the
Securities and Exchange Commission the Company's Registration Statement on Form
S-1 (or other appropriate form), together with all amendments or supplements
thereto, with all exhibits and any and all documents required to be filed with
respect thereto with any regulatory authority, granting unto said attorneys, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or either of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 30th day of September, 1997.
/S/ WILLIAM R. HUFF
William R. Huff
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Texas Petrochemical Holdings, Inc., a Delaware Corporation (the
"Company"), of its 13.5% Senior Discount Notes due 2007, the undersigned officer
or director of the Company, hereby constitutes and appoints Stephen R. Wright
and Claude E. Manning, and each of them (with full power to each of them to act
alone), the undersigned's true and lawful attorney-in-fact and agent, for the
undersigned and on the undersigned's behalf and in the undersigned's name, place
and stead, in any and all capacities, to sign, execute and file with the
Securities and Exchange Commission the Company's Registration Statement on Form
S-1 (or other appropriate form), together with all amendments or supplements
thereto, with all exhibits and any and all documents required to be filed with
respect thereto with any regulatory authority, granting unto said attorneys, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or either of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 30th day of September, 1997.
/S/ JOHN T. SHELTON
John T. Shelton
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Texas Petrochemical Holdings, Inc., a Delaware Corporation (the
"Company"), of its 13.5% Senior Discount Notes due 2007, the undersigned officer
or director of the Company, hereby constitutes and appoints Stephen R. Wright
and Claude E. Manning, and each of them (with full power to each of them to act
alone), the undersigned's true and lawful attorney-in-fact and agent, for the
undersigned and on the undersigned's behalf and in the undersigned's name, place
and stead, in any and all capacities, to sign, execute and file with the
Securities and Exchange Commission the Company's Registration Statement on Form
S-1 (or other appropriate form), together with all amendments or supplements
thereto, with all exhibits and any and all documents required to be filed with
respect thereto with any regulatory authority, granting unto said attorneys, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or either of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this 30th day of September, 1997.
/S/ SUSAN O. RHENEY
Susan O. Rheney
EXHIBIT 25.3
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) __
STATE STREET BANK AND TRUST COMPANY
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
Massachusetts 04-1867445
(JURISDICTION OF INCORPORATION OR
ORGANIZATION IF NOT A U.S. NATIONAL (I.R.S. EMPLOYER
BANK) IDENTIFICATION NO.)
225 Franklin Street, Boston, Massachusetts 02110
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
John R. Towers, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617)654-3253
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
---------------------
TEXAS PETROCHEMICAL HOLDINGS, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0504002
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
THREE RIVERWAY, SUITE 1500
HOUSTON, TX 77056
(Address of principal executive offices) (Zip Code)
13.5% SENIOR DISCOUNT NOTES DUE 2007
(TITLE OF INDENTURE SECURITIES)
<PAGE>
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH
IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington, D.C.,
Federal Deposit Insurance Corporation, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent,
State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee to
commence business was necessary or issued is on file with the
Securities and Exchange Commission as Exhibit 2 to Amendment No. 1
to the Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Morse Shoe, Inc. (File
No. 22-17940) and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST
POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED
IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate
trust powers is on file with the Securities and Exchange Commission
as Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on file
with the Securities and Exchange Commission as Exhibit 4 to the
Statement of Eligibility and Qualification of Trustee (Form T-1)
filed with the Registration Statement of Eastern Edison Company
(File No. 33-37823) and is incorporated herein by reference thereto.
1
<PAGE>
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act is
annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee published pursuant
to law or the requirements of its supervising or examining authority is
annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Hartford and The
State of Connecticut, on the 10th of October 1997.
STATE STREET BANK AND TRUST COMPANY
By: /s/ MICHAEL M. HOPKINS
NAME: MICHAEL M. HOPKINS
TITLE: VICE PRESIDENT
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the proposed issuance by TEXAS
PETROCHEMICAL HOLDINGS, INC. of its 13.5% SENIOR DISCOUNT NOTES, we hereby
consent that reports of examination by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ MICHAEL M. HOPKINS
NAME: MICHAEL M. HOPKINS
TITLE: VICE PRESIDENT
DATED: OCTOBER 10, 1997
3
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business MARCH 31, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ................... 1,665,142
Interest-bearing balances ............................................ 8,193,292
Securities ................................................................. 10,238,113
Federal funds sold and securities purchased under
agreements to resell in domestic offices of
the bank and its Edge subsidiary ..................................... 5,853,144
Loans and lease financing receivables:
Loans and leases, net of unearned income ............ 4,936,454
Allowance for loan and lease losses ................. 70,307
Allocated transfer risk reserve ..................... 0
Loans and leases, net of unearned income and allowances .............. 4,866,147
Assets held in trading accounts ............................................ 957,478
Premises and fixed assets .................................................. 380,117
Other real estate owned .................................................... 884
Investments in unconsolidated subsidiaries ................................. 25,835
Customers' liability to this bank on acceptances outstanding ............... 45,548
Intangible assets .......................................................... 158,080
Other assets ............................................................... 1,066,957
-----------
Total assets ............................................................... 33,450,737
===========
LIABILITIES
Deposits:
In domestic offices .................................................. 8,270,845
Noninterest-bearing ........................... 6,318,360
Interest-bearing .............................. 1,952,485
In foreign offices and Edge subsidiary ............................... 12,760,086
Noninterest-bearing ........................... 53,052
Interest-bearing .............................. 12,707,034
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary .................................. 8,216,641
Demand notes issued to the U.S. Treasury and Trading Liabilities ........... 926,821
Other borrowed money ....................................................... 671,164
Subordinated notes and debentures .......................................... 0
Bank's liability on acceptances executed and outstanding ................... 46,137
Other liabilities .......................................................... 745,529
Total liabilities .......................................................... 31,637,223
-----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus .............................. 0
Common stock ............................................................... 29,931
Surplus .................................................................... 360,717
Undivided profits and capital reserves/Net unrealized holding gains (losses) 1,426,881
Cumulative foreign currency translation adjustments ........................ (4,015)
Total equity capital ....................................................... 1,813,514
-----------
Total liabilities and equity capital ....................................... 33,450,737
===========
</TABLE>
4
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Charles F. Kaye
5
